Friday, February 02, 2007

See The Beast For What She Is

In this clip form a speech broadcast on C-Span, presidential candidate (eek!) Hillary Clinton discusses her desire to strip the oil production companies of their profits. She says she wants to take those profits and put them into "strategic energy fund" to fund research and technologies to move the U.S. toward energy independence.

Like the little Socialist she is, she feels it's perfectly fine for the government to confiscate the profits of a private company and redistribute them as the government sees fit. The anit-capitalist wing of the Democratic Party seems to see corporate profits as immoral. Hillary calls for the confiscation of oil company profits. That wouldn't be the first time such an approach was tried:

In 1980, President Carter signed into law the Crude Oil Windfall Profit Tax Act, enacted in concert with the gradual dismantling of domestic oil price controls that were in effect throughout the 1970s. The law, which was repealed in the late 1980s, established excise taxes as high as 70 percent on the difference between the selling price and a price set by law.

Economic theory suggests that such a measure would discourage exploration. Drilling for oil is very risky, and investors will take that risk only if they believe there is some chance they will make great profits. Take away the profits, and drilling will stop...

In 1990, the U.S. Congressional Research Service studied the effects of the 1980s tax, and found that it had exactly the predicted effect. U.S. production was reduced, and reliance on foreign oil increased sharply. Reinstating the tax would, Congress's research agency concluded, "make the U.S. more dependent upon foreign oil."

The way the tax worked was simple. The government set a mandated price-per-barrel on oil. Anytime the cost went above that government limit, additional taxes were imposed. It failed miserably. The result was a financially depressed domestic oil industry, increased foreign imports and raised little revenue for the government. It also led, by 1990, to a 100% increase in foreign imports. Oh, and lots of people who had been making good salaries in the oil business were suddenly unemployeed.

Earlier price control efforts in the 1970s had the same effect. Domestic production dropped significantly. That lost production, coupled with increasing demand, led to an increase of about 13.5% in world crude prices. And more hard-working Americans were laid off.

Oh, and did you know???

Since 1977, more than twice as much money has been collected by governments in gasoline tax revenues than the oil companies have made in profits?