Hamilton, Madison, and Jay

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Location: Mesa, Arizona, United States

Who are we? We're a married couple who has a passion for politics and current events. That's what this site is about. If you read us, you know what we stand for.

Wednesday, August 6, 2008

Gimmicks Galore But Nothing Of Substance

Senator Barack Obama has quite a few gimmicks this election cycle. A lot of those were exposed in Europe and the Middle East as he tried to make himself look as presidential as possible. The WaPo praises Senator Obama on his energy policy, initially, then it hammers him on his foolishness:

Modifying his previous opposition to tapping the reserve, Mr. Obama would swap more-expensive light crude held there for cheaper heavy crude "with the goal of bringing down prices at the pump." President Bill Clinton did such a swap in September 2000 -- yes, just before another presidential election -- and President Bush released oil in 2005 after Hurricane Katrina. Both moves led to drops in the spot price of crude but not the sort of relief at the pump that Mr. Obama promises. Even if they had, any relief from Mr. Obama's plan would be temporary while compromising a reserve intended to protect against disruptions in supply caused by wars, boycotts and the like.

The WaPo and Senator Obama miss the point on the release from the SPR in the wake of Hurricane Katrina. The hurricane shut down the drilling rigs in the Gulf, and the release was designed to offset the shut down of those rigs. You cannot drill and pump oil on derricks in the middle of a category five hurricane. The release made sense then, and it led to a slight dip in gas prices, but the WaPo is correct to state that it was only short term relief.

Meanwhile, thanks to high crude oil prices, energy companies are, indeed, reaping immense profits. In the second quarter of 2008, Exxon and Shell each made over $11.5 billion. However, Mr. Obama's proposal to take some of this money from Big Oil and distribute it, like Robin Hood, to hard-pressed American families doesn't make economic sense. To be sure, Mr. Obama would not copy the tax enacted under President Jimmy Carter in 1980, which netted $40 billion before its repeal in 1988 while imposing huge administrative burdens -- and retarding domestic oil production. Mr. Carter's tax was levied per-barrel, so it directly increased the marginal cost of producing crude -- and made figuring out which barrels to tax ridiculously complicated. Mr. Obama wants a surtax on net oil company profits above a "reasonable" level. The tax would be set high enough to raise $65 billion over the next five years, and the revenue would fund a one-shot tax rebate that Mr. Obama would like to give to families and individuals this year.

$11.5 billion dollars in profits, and at least half of it is already going to the government. Senator Obama wants to seize more of their profits in an effort to pass off what, literally, equates to a bribe. The WaPo calls it a "Robin Hood" moment, but to describe it that way, they equate the profits to be what belongs to us to begin with. This is not so. Despite what his wife said about the stimulus checks we received (which was essentially an election year bribe) many people put those checks to good use paying down bills, or helping them with a vacation they were planning. But his stimulus check is literally a gimmick, and it is precisely the same as a bribe.

Furthermore, an attempt to seize even more of their profits hurts their ability in research and development. Here is a little business info for the senator from Illinois. Profits for a business, especially companies like Exxon-Mobil, go into the pockets of: shareholders, executives, employees, and research and development. A good majority of the profits go back into the company. Senator Obama is making it out to be like the executives are reaping all the benefits of those profits, which simply is not true.

Much of his foolishness comes because Senator Obama has never worked in the private sector. His days at Sidley Austin were few, and his work as a community organizer, and as a lecturer at the University of Chicago do not help him understand business. That is the biggest problem he faces when he talks about things like this. It might help him if someone has his ear and counsels him not to make himself out to be such a rube.



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