Time Mag Sniffs At Obama's Economic Plan
One of the most annoying habits of journalists who write about public policy is to pooh-pooh ideas that aren't new, even if those ideas have proven to be effective in the past. Time magazine's Justin Fox mails in the latest such dismissal of Barack Obama's proposal to strengthen the economy by extending unemployment insurance benefits, funnelling money to hemorrhaging state governments, and shifting the tax burden upward -- ideas that have all worked well before.
These add up to what you could call the stock Democratic response to tough times. They're not necessarily bad ideas, but they're not what you could call new or transformative either. Obama throws in a few populist panders -- he favors a windfall profits tax on oil companies (which could discourage investment in new energy resources), and says he would oppose raising the Social Security retirement age (which if phased in over a long enough period would be the fairest, most sensible way to ease some of the system's long-run funding challenges). Near the end of the speech, there was a hint of Obama's "yes, we can" vision: a plan to give $4,000 a year in tuition aid to college students who pledge themselves to community or national service after graduation.
Why do policies have to be "new and transformative?" If they have proven be effective in the past, doesn't that make them "good" as opposed to "not necessarily bad." The conservative movement pushed for all kinds of new and transformative ideas that led to one disaster after another. Enough with that.
As for the windfall profits tax, what evidence would Fox cite beyond oil industry press releases that investment in new energy sources would decline? Amy Myers Jaffe, a fellow in energy studies at the James A. Baker III Institute for Public Policy (no left-wing outpost, that!) just finished a two-year study looking at oil companies and how they spend their money. The study found that for the five big international oil companies - ExxonMobil, Royal Dutch Shell, BP, Chevron and ConocoPhillips - spending on share buybacks went from under $10 billion a year in 2003 to nearly $60 billion a year in 2006. Spending on developing their existing oil fields, however, went from about $35 to $50 billion, while spending on finding new oil fields went from about $6 billion to $10 billion.
"These companies are spending a very small amount of their operating cash flow on exploration," she said. "They are spending the majority of their funds buying back stock."
Also, does Time's Justin Fox know that the retirement age for Social Security is already scheduled to increase to 67 by 2022? Most wonks are actually much more supportive of Obama's idea of raising the ceiling on Social Security payroll taxes than increasing the retirement age even further.
A little less knee-jerking and a lot more homework isn't too much to ask.
thanks for posting about the Time article. I think we're going to hear a lot of "that's not new" or "not changing politics like Obama said" rhetoric.
I agree that policies don't have to be new to be effective.
Effective government as a whole represents a huge change from the last eight years and another four under Bush/McCain.
June 10, 2008 11:08 AM | Reply | Permalink
I agree. I would also add that Obama does not claim that his actual policies are brand new ideas. He talked a lot in the primary campaign about how there is no shortage of good policy ideas that have already been developed. His message and claim is that he will be successful in actually accomplishing and implementing policies because of his transformative way of doing politics. A subtle but important difference.
June 10, 2008 12:21 PM | Reply | Permalink
Why does a measly $4,000 tuition grant warrant asking people to pledge to commit public service? A college education costs way more than that. If we're going to demand service in exchange for tuition assistance, the grant should be much larger.
June 10, 2008 11:09 AM | Reply | Permalink
Strikes me that way, too. I would think like 2 in 100,000 would take the government up on it. And 1 of those would be someone desperately poor and trying to take that course at the local shitty community college, and the other 1 would be an ivy league liberal trust fund baby whose parents would think, heck take the 4k, we're entitled to it, she's gonna be doing volunteer work after college anyways.
June 10, 2008 12:44 PM | Reply | Permalink
Well, it's $4000 a YEAR, so it could total up to $16000 total. A year or two of service in exchange seems fair, especially when you consider that to pay off that amount as a student loan would cost $133 a month for 10 years (before you even add on interest).
And, $4000 a year is nothing to sneeze at - that's close to a full-year's in-state tuition at a state run school (tuition only, not room, board, books or fees). Still, that takes a big chunk out of a family's financial obligation and makes it clear to the student that there are no handouts - you have to earn the leg up you get. But it also helps them fulfill their obligation in such a way that they're not burdened with it well into their adult years.
I have friends whose parents couldn't help pay for their kids' college tuition because they were still drowning in their OWN student loan debt.
My loans are sucking a fair chunk of my current salary - you better believe I'd have taken Obama up on this offer to get the debt cleared in a year or two.
June 10, 2008 1:40 PM | Reply | Permalink
Would you work, full-time, for a year for $16,000? It's barely minimum wage.
June 10, 2008 2:57 PM | Reply | Permalink
And... by the way... you get the $4,000 grants over 4 years but you have to pay them off, at barely over minimum wage, in a shorter time than that. Doesn't strike me as a fair deal. If you want to trade me $4,000 a year, then expect to be paid back part time and with low skill, low effort work. The grants have to be viewed in the context of wages. As it stands you have to work for less than a living wage just for a tuition discount. Heck, I'm not even sure how you find time to work off the discount and still pay the remaining bills, much less the bills that will accrue during the service year or years. This really seems horrible.
June 10, 2008 6:00 PM | Reply | Permalink
One would not be working full time for a year for a mere $16,000.
Community service would be something akin to the Peace Corps or Vista. You work full time, doing something worthwhile, get paid enough to live on, and are forgiven the $16,000 on top of that.
Granted, you don't start getting rich right out of school, but anyone looking for that would be a poor candidate for community servive anyway.
June 10, 2008 7:31 PM | Reply | Permalink
right. Not that a person works to pay off their loan at minimum wage as destor claims, like some sort of indentured servant, and clearly doesn't know what he's talking about.
June 11, 2008 2:59 AM | Reply | Permalink
Minimum wage is a little less than $11,000. And, yes, I have worked for that. I would probably still be working for about $16-17k if I were in the workforce at the moment. My husband doesn't make much more than that.
I'm not arguing with you whether or not the grant is enough or as much as it might be. Just reminding you that a lot of us out here *do* work for very little. It doesn't do anyone any good to sneer at that, suck as it might.
June 10, 2008 7:33 PM | Reply | Permalink
I'm not sneering. I see 16K a year as an insufficient wage for a full time worker, no matter the profession. That less than that is legal is, frankly, a problem.
But, the issue here is what the government will give in exchange for service. If the government will give 16K for a year of service then I say the government is taking advantage of a citizen. And yes, even if it's for 16K of debt forgiveness plus whatever the government thinks is "room and board" which will no doubt be a low-balled figure.
We're a rich country. We should be federally subsidizing college educations without demanding servitude in exchange.
June 10, 2008 8:09 PM | Reply | Permalink
Nobody said it would be a year of F/T community service for $16K. This is entirely a concoction of your imagination.
It could for example be P/T community work while in college. Jimmy Carter, habitat for humanity type stuff. The point is that we should #1 try to increase colledge graduation rates and help disadvantaged people receive an education, for many reasons, #2 that community service is a good thing for the work that is done and also for the lessons learned and the betterment of communities.
June 10, 2008 10:59 PM | Reply | Permalink
I've also noticed Destor23 makes a regular habit of erecting these straw men and distorting the policies of Democratic candidates he's ostensibly for, and then spreading his misunderstanding to others.
June 10, 2008 11:14 PM | Reply | Permalink
No, I find that Destor23 raises good and legitimate questions like this one.
June 11, 2008 1:46 AM | Reply | Permalink
Really? Can you substantiate that?
How is this complete fabrication of Destor's imagination, the $16K F/T year of service MYTH, a "good question."
Show me anywhere where Obama's plan is a $16K college loan equating to one year of FT public service as Destor claims. What is Destor even talking about?
June 11, 2008 2:57 AM | Reply | Permalink
He started off thinking it was a year of FT service for $4K, showing he really didn't know a thing about it. Yeah, great question. :rolleyes:
June 11, 2008 3:03 AM | Reply | Permalink
Thanks, Kozmik's just ticked off at me for some reason. I never thought it was $4,000 for 4 years, btw. I just do think that $4,000 a year isn't as generous as the government should be, especially if the government is asking for service in return. I'm sure we can do better.
June 11, 2008 7:55 AM | Reply | Permalink
In this sort of program, I think you'd need to set it at that at first, and then if it works well, increase the funding for the program.
Can you imagine how ridiculous people would think Obama (wrongly, but they would) if he was offering 20k/year for service? The military basically has a deal like that, but I think you'd be hard pressed at first to convince americans that the community service is of equal value, even though it might very well be.
June 11, 2008 11:38 PM | Reply | Permalink
It's also worth noting that Federal Pell Grants can be up to 3-4k per year for low-income students. Between that and Obama's 4k/year plan, I think that's pretty reasonable if you're a student whose family can't afford to send you to college (it's about the cost of attendance at a state school if you live at home/live cheaply).
June 11, 2008 11:41 PM | Reply | Permalink
Obama does need to start talking price tag here for all these things. There is not enough money in all the millionaire bank accounts to pay for every one of these initiatives. He's in great danger of overreaching. Just getting a health care plan in place will be a huge political battle to fight and win, and it's going to be very expensive. With a $ 9 trillion debt, we don't have much room to maneuver on populist programs -- no matter how much they might help today's Americans, if they make tommorrow's generation pay for them. Obama needs to appeal to the independents in the center to not only win but govern effectively.
June 10, 2008 11:48 AM | Reply | Permalink
We cannot afford social programs, how ever measly, but war is never sent to the budget examiner.
June 10, 2008 12:30 PM | Reply | Permalink
Thank you for that comment. The idea that the Gov't has no money for social programs is ridiculous. We are spending $100K/minute in Iraq. You would think we could allocate that money in a slightly more meaningful way.
June 10, 2008 2:19 PM | Reply | Permalink
no, the iraq money is borrowed too. how do you think we got to $ 9 trillion debt? Social Security and Medicare will take up 100% of the budget by 2025, if there is not decisive reform. We better wake up to reality here, folks.
June 11, 2008 8:14 AM | Reply | Permalink
We could pay for 10 wars in Iraq with the upcoming liability of Social Security and Medicare.. If you think the war is expensive, and use that as an argument for us being in a fiscal bind, you'd better be crying about the sky falling with entitlements coming due..
The issue isn't new social spending (or anythign else) not working.. it is that we can't afford our current spending..combined with a need to reform the AMT (which targets blue state wage earners, mostly), stick with Obama's promise not to tax earners under $250k, and reform healthcare.
Most presidents get 1 big thing, if they try move the masses.. Reagan had taxes, Bush 1 the Gulf War, Clinton tried Healthcare and failed, Bush had the Iraq War.. Obama would be lucky if healthcare is his remembered achievement. Nothing will get done tax-wise in the first year if we are in recession. Healthcare itself would take a year to argue, and 2-3 years to implement, and no one is going to mess with entitlements till they see how that's working..
June 12, 2008 12:47 PM | Reply | Permalink
That seems rather deliberately obtuse and straight out of supply side talking points. In the real world it's pretty simple:
1) windfall tax against enormous profits from oil and dirty technologies.
2) Tax breaks and even some subsidy for investment in green technology, renewable energy, and energy independence.
It's called an energy policy.
It's to prevent future oil crises, oil wars, counteract global climate change, and reduce smog and pollution.
Those who've become accustomed to decades of laissez faire may be unaccustomed to the notion of government actually having an energy policy for the long term good of the nation and world.
I'm sure the Carlyle group, Halliburton and such will continue business as usual in Dubai where such pesky things as energy policy and human rights aren't really an issue.
June 10, 2008 12:05 PM | Reply | Permalink
"It's called an energy policy."
It's also called corporate welfare. Let's just be real clear here: you want the government to give money to corporations - big, evil, exploitative corporations - to spend on "green" technologies. As opposed to the government giving money to big, evil, exploitative corporations for current petroleum-based technology. Guess who's going to sign up for these subsidies - you got it, the oil companies, the ones who are investing in green technologies right now. Because they qualify. So the government is going to end up subsidizing the ones whom you don't think they should.
By the way, if you are serious about energy independence, then you should favor drilling for oil in this country, as well as things like nuclear power, clean coal, coal tar sands technology, etc. Like it or not, it is going to take time for the transformation from an oil-based economy, and in this transitionary time, we are going to need oil. The transition itself is jeopardized by remaining dependent on foreign sources for oil. Just imagine if the Saudis or whomever decided to open the floodgates to oil right now. We would be back to where we were in the 90's - dirt cheap gas and no economic incentive to do anything else.
June 10, 2008 2:38 PM | Reply | Permalink
Exactly. The essence of Obama's transformation is moving beyond finger pointing and working together to solve real problems.
We get proper behavior from our kids by punishing bad behavior and rewarding good. If we put aside the euphenism that energy companies are evil and use their considerable resources and energy to solve today's problems we have a win-win situation.
Of course a bit of "due-diligence" oversight wouldn't be a bad idea. But that's not new or transformative either -- just smart.
June 10, 2008 4:42 PM | Reply | Permalink
I'm personally for safe nuclear technology, but it's politically radioactive. It's a tough sell because neither side, pro or con, know squat about nuclear technology. Both are pro/con for irrational reasons.
Basically the hippies don't like it because they think of 3 mile island and nuclear weapons, and the hicks like it because it pisses off the hippies. Morons all around.
It's also difficult in that environment to be certain the government would properly regulate the safety of new reactors, as they do in France for example. The record of US companies on cost cutting, everything from bomb hardening to on site security and maintenance, is poor.
In a perfect and rational world, there would be hicks or hippes, pro/con. In a more perfect world we could have a rational and well regulated nuclear program such as France has.
There are reactors developed in Germany during the late 90's using ceramic coated fuel beads that can't melt down, even if the coolant is entirely stopped. So they're safe from melt down even in catastrophic failure.
It's also possible now to reprocess spent fuel, using it again, and more fully depleting it beneath weapon's grade material, and producing less radioactive waste. So there's much less waste and it's not weapon grade.
It would also be possible, if we were willing to spend enough to do it, to store waste safely and securely without it leeching into ground water or posing a security risk. But, there is a political deadlock, NIMBY on waste disposal.
In the real world, nuclear energy is an ideological litmus test for ignorant morons on both sides. The hippies don't want it at all, and the hicks want it but would do it poorly, on the cheap, and probably create another Chernobyl.
In even the best scenario, nuclear energy isn't really economic unless we consider the vast military resources we're already devoting to securing oil. Safe nuclear power is very expensive to build, secure, and dispose of waste. So the only way it could happen is if it's seen as a subsidized national security issue.
It's possible there will be a miracle and we a nuclear program run by reasonable people, neither hicks nor hippies. A program that's actually built on safe technology, highly regulated for public safety, militarily secured, and disposing of waste in expensive and secure locations.
I'm not holding my breath though. Both sides would sabotage it by NIMBY, cost and security cutting, trying to make it profitable, etc.
June 10, 2008 6:57 PM | Reply | Permalink
oops, correction:
"In a perfect and rational world, there would be NO hicks or hippes, pro/con."
June 10, 2008 6:58 PM | Reply | Permalink
Nonsense. You're just trolling. You're either incredibly young and naive, or a Republican troll, to suggest any governmental incentive in industry is "corporate welfare." Quit being an idiot.
There have always been governmental incentive of R&D and investment in pioneering fields which are legitimately in the public good and which government would like to accelerate. Done right it goes entirely into R&D and construction, not profit. Then, once an industry is established and business is able to become profitable, there is a transition to ending incentives, and eventually taxing the profitable industry, and recouping expenditure.
It's not "corporate welfare" to for example offer tax breaks to companies producing solar cells to help jump start the industry until they're producing in enough quantity to be profitable and self sustaining. Or wind turbines, and so on. those are industries which benefit the public and which we would do well to see accelerated.
"Corporate welfare" is giving huge breaks to companies like EXXON that are already hugely profitable and just investing in the same dirty technologies and perpetuating a bad situation. In fact, it's the oil companies who should be more heavily taxed, and the green companies receiving incentives.
Read about the deployment of the South Korean internet. That's a great example of smart governmental incentives and strict regulation to ensure it all went towards providing internet service to the public at *highly* competitive prices and building one of the world's best internet infrastructure. Companies weren't profitable for several years but are now profitable, generating enormous tax revenue, and deployed an internet 10x faster than ours, to nearly 100% of homes, in only several short years.
That's how governmental incentives are supposed to work.
June 10, 2008 6:09 PM | Reply | Permalink
The problem is when those subsidies 1) are politically motivated rather than based on facts and 2) become politically untouchable.
Sugar subsidies are a good example of the former - is there some reason we have to protect a domestic sugar industry by paying twice what the rest of the world pays for the white stuff?
Ethanol is an example of #2 - the industry was subsidized to get it off the ground, and now that it is sucking up more and more corn, those who have invested in it are demanding its continuation from politicians, even with record oil prices that SHOULD have made the industry self-sufficient soon..
And not to mention union subsidies - e.g. subsidies to labor through Davis-Bacon requirements, trial bar subsidies (allowing tax expensing of up front class-action research)..
Overall, government has a key role with some regulation, watching for exernalities (pollution, or example), but aside from those, the question is who picks the best use of money - the free market, or the government, recognizing that a government of politicians can be as capricious or ineffective as anything in the free market. \
We for 30 years as a stated goals tried to encourage the Big Three to build smaller cars and for Americans to buy them. Government regulation did bupkiss, but $4 gasoline got those 4-cylinder models moving off the lot..
June 12, 2008 1:07 PM | Reply | Permalink
Yep, a Republican troll. I knew it.
Goofball,
There isn't enough oil in the US to make much difference. What little oil there still is, is of low quality that's expensive to refine. Regardless, it's still dirty and producing climate change which is unacceptable domestically and internationally. You're probably a denier there too, which is another way people like you are increasingly irrelevant. Fossils for fossils.
We need to develop renewable clean technologies such as Europe and parts of Asia already are. It's been a great boon to countries adopting green energy technology, from the top to the bottom of the economy, as it requires entrepreneurialism, engineering, and labor.
The only reason we haven't done so in the US is we have our energy policies run by a lot of old crooks sitting atop their oil empires, and don't want it to change. They know their time is done, and don't want to go.
If it weren't for these short sighted, pudgy old farts and incompetents running so many US industries, GM wouldn't be closing plants, they'd be selling hybrid technology to Toyota and making blockbuster profits and expanding market share, instead of the other way around.
If it weren't for fools like Lee Raymond we'd have invested in clean technology long ago, and companies like ExxonMobil could have pivoted towards renewable energy in partnership with manufacturing giants like GE, and be rolling solar cells out of shiny new factories, employing tens of thousands, as global pioneers.
Republicans like you need to get a clue, wake up, and smell the coffee. The era of dirty technology, pollution, climate devastation and unsustainable practices is over. Oil for fuel is eventually going out of business.
You can get with it, or get left behind with the other fossils.
June 10, 2008 6:26 PM | Reply | Permalink
Also, the notion we can drill our way out of this mess is moronic. The people who espouse that are universally uninformed hicks. You clearly don't know what you're talking about.
The notion that drilling ANWAR of someplace is going to change the equation, is just goofy. A hick fantasy. A drop in the bucket that won't even produce for a decade.
The world's oil industry was developed over a century. It's not going to change overnight.
OPEC, Nigeria, Venezuela, Kazakhstan, etc are still going to produce the vast majority of the world's oil during the transition to renewable energy and independence. They all are problematic and will continue to be until we can finally be done with them.
We can't drill our way out of the problem.
June 10, 2008 6:37 PM | Reply | Permalink
kozmik,
I have to wonder, did you even read what I wrote, or did you just project your stereotype of ignorant hick Republican troll strawman onto me and respond to that?
First, to give tax breaks to solar cell companies IS corporate welfare. Even wikipedia agrees with me. You've simply defined corporate welfare to be giving money to "bad" corporations. That is a cute rhetorical device but it's not accurate. It is the bestowal of tax breaks or other favorable treatment onto any corporation, whether you happen to agree with it or not. Corporate welfare, even this type which seems benevolent enough, is bad for a number of reasons:
1. You can't really control how the corporation spends the money. Even if government dictates that it be used for a particular purpose, then the corporation will simply shift money arond to meet other goals that it wouldn't have been able to without the welfare; in essence the government money would end up being used to subsidize something completely different than what's intended.
2. It is a corrupting influence on government. Which solar cell makers should government favor? It should come as no surprise, then, if the ones that are favored just happen to reside in areas represented by the politically powerful. And you can be sure that these corporations will make sure that their benefactors will remain politically powerful.
3. Government ends up propping up failing businesses. If a certain solar cell maker finds itself in tough economic times (perhaps due to poor business decisions that it made), what should happen IMO is that the corporation should go bankrupt. Instead, it can simply apply for some more of that solar cell subsidy money to keep itself afloat despite its poor management.
In short, subsidies to corporations, even well-intentioned ones to "good" corporations, are a lazy form of corporatism. If government truly wants to direct a particular outcome in a particular market, then government should nationalize the industry and do it itself.
About energy security: I said what I mean, if we are serious about energy security we should do what we can to increase our energy supply at home. And, right now, in the real world, as of today, the world runs on oil. We are in a transitionary time, and I am personally excited to see what types of new energy sources we will discover now that the economic incentives are there to pursue them. But we aren't at the fully solar or fully hydrogen economy yet and hence we are still vulnerable to the machinations of foreign dictators with their reserves of oil. You are right, burning oil adversely affects the climate. So it appears that at least in the short term, we have a trade-off to make: either increase energy security at the expense of the climate, or vice-versa. You appear to be at the far end of the "protect the climate" extreme, and that's fine, but then don't talk to me about how much you are in favor of energy security, because at least in the short term, your priorites dictate otherwise. I don't think we can drill our way to energy independence and, frankly, that's just a strawman: no sane conservative, not even Bush, thinks we can. But finding more oil here at home will definitely help and we should do what we can.
About climate change: Of course I think the climate is changing for the worse, and that mankind has had a role in its change. Do I believe the hysterical gloom-and-doom predictions? No. But IMO that does not obviate the moral obligation of all of us to do what we ought to do to change our personal habits to more directly benefit the environment. I am all in favor of developing renewable energies. (In fact my research program ties in directly with renewable fuels.) But that is a long-term proposition. Naturally I disagree with your assessment that we have an energy policy run by a "bunch of crooks". To be quite honest, I don't think we have much of an energy policy at all. We have scattershot subsidies all over the place benefitting constituent groups here and there, but no coherent strategy.
Incidentally, I disagree that "the era of dirty technology is over." How do you think solar cells are made in the first place? I'll give you a hint: it's not a particularly clean process. Everything is a trade-off.
June 10, 2008 8:54 PM | Reply | Permalink
Yes, and I also read your profile, that you're a self described Republican Conservative, and that you're spouting ignorant Republican talking points, such as the notion that drilling for more oil would help us towards energy independence. Which is a complete fallacy.
Sorry I don't have patience for Republican trolls who clearly have no interest in informing themselves and are just going to spout a lot of disinformation. Fossils for fossil fuel.
June 10, 2008 11:02 PM | Reply | Permalink
"First, to give tax breaks to solar cell companies IS corporate welfare. "
No it's an incentive for R&D and to jump start a new industry which is good for our economy and national security. You're just trolling and being an idiot.
Piss off troll.
June 10, 2008 11:05 PM | Reply | Permalink
Oh, you read my profile. Good for you. Is that where you read that I enjoy kicking puppies, turning grandma out onto the street, invading foreign nations for sport, and starving children? Because that is the stereotypical view that you have of me. I suppose it's the mark of a good argument when your opponent can only respond with namecalling.
Incidentally: you DO realize that every corporation that receives corporate welfare justifies it on the ground that it's "important for the economy" and "vital for national security", right?
June 10, 2008 11:28 PM | Reply | Permalink
You and people like you deserve derision. You're no different than the kind of morons in the former USSR who were the biggest advocates of communism. Mirror images in fact.
They ran around with little red scarves and an utterly irrational fear of markets, bloviating at every oppurtunity about how communism must be kept pure and how Marxism was the solution to everything. None of them every having the faintest clue what they're talking about.
People like you run around wrapped in the flag all over you and have an utterly irrational fear of any and all government and never miss an oppurtunity to bloviate on how we must keep laissez faire pure as it's the solution to everything. None of your type every having the faintest clue what you're talking about.
You're just zealous idiots. Every civilization has them.
If you were alive in ancient Aztec civilization, you'd be calling for more human sacrifices to the gods to bring in the crops. If you were alive in Salem you'd be calling for more witch burning. In Jonestown you'd be found face down in the koolaid punch bowl, heading there for seconds.
June 11, 2008 12:08 AM | Reply | Permalink
btw, the rest of your arguments are just ignorant, uneconomic, nonsense.
For example, targeted incentives for solar cells have already been adopted. Tax credits have been offered to people buying and installing solar cells. Before solar cells similar programs were used to incentivize energy efficient appliances, like replacing water heaters.
It helps defer the costs of a long term investment which ultimatly produces great value and is good social and economic policy.
Again, you're just some goofball Republican troll. This stuff is straightforward. Only a moron needs it explained to them.
June 10, 2008 11:30 PM | Reply | Permalink
"If government truly wants to direct a particular outcome in a particular market, then government should nationalize the industry and do it itself."
Right, there's nothing inbetween laissez faire and communism.
for example, offering an incentive to buy a new energy efficient water heater or solar panel, may as well be communism with the government nationalizing the water heater and solar cell industries. Suuuure. All those people with energy star washers and dryers they received incentives on, they may as well be commies.
:rolleyes:
You're a pathetically transparent troll. A real goon.
June 10, 2008 11:34 PM | Reply | Permalink
Ad hominen attacks, coupled with poor grammar, is usually the sign of a zealot and a weak argument.
Like it or not, kozmik, we're going to burning oil for a long time into the future.. hopefully sequestering the carbon, if it makes sense, but there no way to change the infrastructure. Look around you:
* Airplanes require aviation gas and the lifecyle of an airframe is over 30 years
* Most of our logistics network is based on trucks, burning diesel, locomotives, burning diesel, and ships, burning marine diesel. Our cities, our companies, their suppliers, are all based geographically far enough apart that stuff has to be moved. People life 10-30 miles from work. All that took 2-3 generations to build after WWII - it will take a generation to change. Even the simplest actions, buying a new car, moving closer to work, take years.
* Alternative energies are exciting - I would cover Kansas with windmills if I could, but we can't even build a small windfarm off the coast here in Massachusetts without John Kerry and Edward Kennedy rising up in arms.
* I've worked for Toyota - trust me, they like the Prius, but they don't love it.. its not that profitable of a vehicle, and cost-wise, its a bear - you have to build in both the infrastructure for an internal combustion engine (fuel, coolant, oil) and an electric drivetrain (batteries, inverter). The true answer is an electric vehicle, which GM is starting to build, but will people buy it? Hopefully, if gas stays expensive..
We have simple solutions to some of these issues.. we don't like carbon, TAX IT.. HEAVILY - its simple, and will encourage people to REDUCE CARBON EMISSIONS! - drivers, energy companies, manufacturers- EVERYONE!. But we end up twisting ourselves around with subsidies, taxes, regulations, political posturing, all to cover our tails from what might be considered unpopular. And both candidates seem unwilling to break that paradigm..
June 12, 2008 1:23 PM | Reply | Permalink
How about competence, and using experts in a given field instead of political ideologues? That's not new, but it's what we need. WE need people who know a thing or two about economics.
As with the restoration of the right of habeas corpus. That's not new either, but I never thought it would be a radical lefty notion to provide the basics of justice.
June 10, 2008 12:08 PM | Reply | Permalink
Bush/Cheney and Co. would happily restore Habeas Corpus, as long as you mean actually "delivering up the body", as in the dead body of whoever you are talking about.
June 10, 2008 2:21 PM | Reply | Permalink
Compared to Obama, McCain's economic plans are smoke and mirrors. McCain has no sense of where money can come from and what works and what doesn't when it comes to economics. The mess, the pile of dung left behind by the Bush administration will make it very hard for anyone, let alone a clear thinker, to unearth Americans from the economic havoc wreaked upon them by Bush & Co. Anyone can, and probably will, criticize Obama; the alternative is to look at what will work and back it. Main stream media pundits are notoriously irresponsible, even towards their own interests, and like to criticize rather than analyze; and if they propose solutions it is without any sense of responsibility to seeing such solutions implemented. That's generally why we need to continue to ignore them, and marginalize them.
June 10, 2008 12:08 PM | Reply | Permalink
I disagree. McCain knows that money comes from his wife's bank account. And that works for him.
June 10, 2008 12:35 PM | Reply | Permalink
Obama should come up with something new and transformative. Double income tax for pet owners. Free cheese for senior citizens. A monthly tax rebate for Americans who consume more than 12 cases of American made beer every month. Something really great like that.
Not this standard Democrat "sane" economic policy shit. Who needs boring crap like that.
June 10, 2008 12:29 PM | Reply | Permalink
Excellent point about the constant stress on "newness" in the media. They also do voters a terrible disservice by not recognizing that the average person needs things to be constantly repeated before he or she understands. A LOT is at stake in this election, and we should figure out a way to pound the media on this, to insist that they repeat and clarify and explain the distributive effects honestly. Since when, after all, are tax cuts for the rich a "new idea" -- yet the media never seem to bash Republicans for repeating the idea endlessly.
Another HUGE problem just displayed at CNN: Media anchors and pundits all seem to think that people who make hundreds of thousands per year are "not rich." They never convey what the typical family income is -- or how many people would get TAX CUTS and benefit increases from Obama, and how few would have to pay more. They just follow conservative talking points about any and all tax increases.
Is there a way for TPM and others to intervene now to force more honest and informed commentary on economics in this election? A lot is at stake.
Theda Skocpol Cambridge, MA
June 10, 2008 12:29 PM | Reply | Permalink
Indeed. The tone seems to imply that Obama is somehow being hypocritical when he offers "old" ideas. But that's not true: his theme is change. New Ideas was Gary Hart's slogan.
While new often sells well in American politics, change doesn't have to be new, it just has to be different from what we're currently doing. And Obama's proposals certainly do differ quite a bit from Bush's policies.
June 10, 2008 12:49 PM | Reply | Permalink
Here is something "transformative" that is well within the range of the possible... TOTALLY exempt income below the MEDIAN household income in the US. Taxes begin above the median.
June 10, 2008 12:33 PM | Reply | Permalink
That's communism you're talkin' about there, pard. It would lead to anarchy. How would we keep track of all those poor people if they didn't file something at least once a year?
Personally, I'm for a flat minimum deduction that's much higher than what we have now. I'd like to see something closer to what they have in Japan. Americans should be able to save for a house in 5-10 years instead of having to take out a 30-year mortgage. To offset the costs of a plan like that, taxable income would need to be taxed at a much higher rate, of course. But I think it would be worth it. I think it would provide an incentive for people to be more fiscally responsible, it could encourage entrepreneurship, and it could give ordinary Americans the chance to bump themselves up a class or two. It'll never happen, of course, but it should.
June 10, 2008 12:56 PM | Reply | Permalink
That's pretty much how it is today - the top 1% pays like 35% of income tax revenue, the top 5% pays in the 60% range, and the bottom 50% pays about 3-4%.
FICA might not be in those numbers, but FICA is social insurance, so you technically are paying into a fund (even though the govt has emptied that fund for the past 50 years).
June 12, 2008 1:33 PM | Reply | Permalink
Economics talk is the surest way to put tv viewers to sleep. Hopefully Obama will be shrewd enough to keep it short and sweet, at least what ends up on the network News Hours.
As long as he keeps hammering back at McLame with "Bush was crazy irresponsible" and "Bush spent WITHOUT taxing, look at our debt!" and "McCain wants to continue the irresponsible tax cuts", he should be okay.
June 10, 2008 12:43 PM | Reply | Permalink
I hope Obama puts an end to McCain's latest attack that "Obama wants to take us back to the economic policies of the '60s and '70s." It's such a load of hogwash that McCain believes he can just skip over the '90s. Inconvenient truth, Senator McCain: Bill Clinton was a Democrat too.
June 10, 2008 12:59 PM | Reply | Permalink
Bill Clinton was a moderate Democrat with a Republican Congress. Obama and his cohorts could have absolute power, but for a few filibustering Republicans that might force them to govern as moderates. Otherwise, this will be a left-wing (public sector unions, trial lawyers) free-for-all..
June 12, 2008 12:41 PM | Reply | Permalink
John McCain may be older than dirt, but you'll never find him embracing those old ideas that worked. Just the other old ones.
June 10, 2008 1:00 PM | Reply | Permalink
Cutest avatar award!
June 10, 2008 2:25 PM | Reply | Permalink
Wait - Time's calling that a news story?
If it's supposed to be considered an opinion piece, it's not labeled as such.
Wow. I suppose the interesting thing is that I can still be shocked by something like this. I guess that's a good thing.
June 10, 2008 1:35 PM | Reply | Permalink
Here's the "new" idea embedded in Obama's plan: implement policies that work! For the last 7 years the so-called plan has been to get the most $ to the wealthiest people, wage war to increase their wealth, short-change and stifle every government program or agency that actually does good or helps the most vulnerable among us.
So making government work and repealing big give-aways to the rich seems pretty "new" to me.
June 10, 2008 1:47 PM | Reply | Permalink
...raising the Social Security retirement age (which if phased in over a long enough period would be the fairest, most sensible way to ease some of the system's long-run funding challenges.
Funny, I would have said that raising the wage cap would be the fairest and easiest thing. Right now, the cap is $97,500. To me, it doesn't seem sensible or fair that someone earning 3x or 4x the mean annual wage (about $41K) gets a 12% tax discount on $20K or $40K of income. When you consider that an executive with $1,000,000 in wage compensation gets a 12% discount on 90% of their gross cash income, their marginal tax rates don't seem all that burdensome.
Of course, once SS starts calling in what it's owed to pay benefits this is all a moot point because the funds are coming out of general revenues anyway. In that case, I think returning capital gains tax rates to pre-Bush levels would be preferable to any tax increases that affect wages.
June 10, 2008 1:54 PM | Reply | Permalink
They don't get a "discount" - FICA has nothing to do with income tax, the IRS just collects it for the SS administration. The earner just stops paying an extra 12.4% on every dollar earned above that cap, and their benefits are capped as well. A person who makes $500k a year gets the same SS benefits as a person who makes $102K per year, the cap limit.
However, if you raise the cap, they get hit with an enormous tax increase. Income in that range will be taxed at 36/39% per dollar when the Bush tax cuts expire. Add on 12.4% additioanl plus 3-6% state income tax, and those people will be taxed in the 50-60% range on that income. That's enough to discourage working/investing, or if you are talented, moving to the U.S. The economic impact will hit us, in lower growth..
June 12, 2008 1:55 PM | Reply | Permalink
While Fox does dismiss Obama’s proposals somewhat as moderate, centrist golden-oldies, and they are, he dismisses McCain’s Bushonomics more. He uses “new’ in the sense of progressive transformative ideas not just previously unseen policies. New politics or post-partisanship is meaningless if it produces the same old regressive policies or just hones the edges. Obama ran somewhat to the left in the primary but without committing too much to progressive programs (many of his more liberal policies were adopted from the Clinton camp) and it’s natural to try to suss out where the ideological center of his program would be. As the GE unfolds and Obama gets more specific on policy, many on the left are going to be disappointed by his centrism (see recent speech to the AIPAC).
Of course, MHO, windfall taxes on big oil, though not new, is a good idea politically and economically (Big Oil is getting $30+ billion in tax breaks now and, as you say, are not using it to explore or develop new refineries). But it is a pander because it was labeled a pander by all when Clinton proposed it with her gas holiday, part of a larger package dismissed out of hand. Almost any campaign proposal can be called pandering. My point is just that it is more about how they spin the proposals and media cheerleading than the merits of them and Fox is making this same point. Hell, McCain is running on change! The question for Obama is does he just want to change the faces in D.C. and half-ass return everything to pre-Bush or does he really want to change the whole corrupt corporate system?
June 10, 2008 2:45 PM | Reply | Permalink
Sorry, but the Time article has substantial merit. Obama himself has built his whole campaign on "change and hope" and it is noteworthy that the only thing that really is new about his campaign is his rhetoric. His policies are down-the-line rigorously liberal. That's great if you are already a liberal but less than 1/3 of the country identify themselves that way. If he wants to distinguish himself as really differnet then he will have to propose something that truly is different. Obama himself said, in reference to Clinton's economic policies of the 90's, that we should not look backwards for inspiration, we should look to the future. In his policies, however, he is only looking backwards farther than the 90's.
June 10, 2008 2:46 PM | Reply | Permalink
Oh, speaking of "windfall profits". It may surprise you to learn that in the first quarter, ExxonMobil's profit margin was about 11%. This is a typical corporate value and is less than PepsiCo's and Wells Fargo (two examples that came first to my head). ExxonMobil's profits are large in magnitude but not large when compared to its expenses. This windfall profits idea is populist nonsense, is one step further along the creeping socialist path, and will only serve to kill the golden goose.
June 10, 2008 2:51 PM | Reply | Permalink
Oil companies aren't the golden goose.
June 10, 2008 2:55 PM | Reply | Permalink
If taxing the record profits of price-gouging and profiteering big oil is socialism, what is universal health care? But you’re right. This godless socialism has been creeping up on us since FDR. By the time my grand-kids’ grand-kids are ready to retire, there might not be any socialist social security for those commie-pinkos to retire on!
June 10, 2008 3:22 PM | Reply | Permalink
Why even propose a windfall profit tax? Congress could end the subsidies the oil & gas industry currently enjoys and get a similar result. Back when oil was going for $20/bbl US oil companies got a break on royalty payments in an effort to encourage exploration and extraction in the Gulf of Mexico. Well, it's $132/bbl now and they're still getting the subsidy.
Call me crazy, but I don't think you would find many people who would disagree that this would be a great time to stop giving away public funds to the oil companies.
June 10, 2008 3:57 PM | Reply | Permalink
I completely agree with elimiating subsidies for oil companies.
June 10, 2008 9:40 PM | Reply | Permalink
Chemjeff is your basic Republican troll with a horribly ignorant view of economics. Some mix of supply side laissez faire nonsense no doubt. The type of guy who thinks Bush's economics policies were great, and just needed more tax cuts and more cuts to programs, like FEMA, the sciences, etc. Typical rt wing moron.
June 10, 2008 11:10 PM | Reply | Permalink
A windfall profit tax will actually cause energy companies to look for new growth oppurtunities.
Increase research and development which is an expense will decrease corporate profit which will cause them to pay less taxes.
June 10, 2008 2:54 PM | Reply | Permalink
not to be too tangential, but why is that? What's the percentage in buying your own stock at what's got to be a fairly inflated price?
My only guesses are 1) a hedge against future dividend payouts, or 2) less charitably, a kickback to execs & board members cashing in their stock options.
Am I missing something?
June 10, 2008 3:32 PM | Reply | Permalink
Agreed.
Note: The integrated oil companies are -- and for the past several years have been -- engaged in a stealth liquidation. Ten years from now they'll have gone private bought out by sovereign wealth funds and hedge funds.
June 10, 2008 4:06 PM | Reply | Permalink
not clear what you're "agreeing" with -- I'm truly puzzled by this & hoping to be educated here. My guesses are really just wild ones -- the biz pages & shows generally leave me mystified.
So you're saying their calculation is that their profit margins are sustainable to the point that they won't need market capital any more?
June 10, 2008 4:31 PM | Reply | Permalink
Not (just) exec and board members, but also hedge fund operators and other takeover specialists. Some call it "greenmail". In general, one can use stock buybacks (which create demand-side pressure) to goose stock prices temporarily, because of the way that the market tends to overreact to news. (Or, as the old analogy goes, Mr Market suffers from bipolar disorder. He gets way too excited, and way too depressed, over specific events.)
In this particular case, though, one can argue that major oil companies are simply bowing to the inevitable: if Peak Oil really is upon us, the gradual decrease in oil production means that new capacity (especially refining capacity) will go unused, and is thus a waste of money. There's no point building a big new refinery if there's no raw product for it to refine! Might as well buy back the stock instead.
June 10, 2008 4:52 PM | Reply | Permalink
Couldn't that backfire though? I mean, if I were a shareholder, shouldn't I take that as a cue to cash out at an artificially inflated price (thus driving prices back down)?
I can see your point about refining capacity, but wouldn't Peak Oil suggest the opposite wrt crude-production capacity?
June 10, 2008 5:35 PM | Reply | Permalink
Reducing the amount of outstanding stock has the effect of increasing earnings per share. And even better, it will likely increase the P/E ratio awarded to the stock by the market, because the y-o-y percentage growth in EPS will also be goosed, automatically.*
* Yes; it's an artifact, but who ever said market participants worried about reality.
June 10, 2008 8:03 PM | Reply | Permalink
They buy back stock because they have nothing else to do with the profits.. there is no other activity they can engage in with an acceptable rate of return, so they give it back to the stockholders by buying back their shares..
June 12, 2008 1:50 PM | Reply | Permalink
> These add up to what you could call the stock Democratic response to tough times.
Well, Time could say exactly the same thing about McCain's proposals, at least to the extent that he has issued any, or at least any that are internally consistent.
What's instructive, however, isn't that Time couldn't say the same thing, not that it doesn't.
June 10, 2008 5:10 PM | Reply | Permalink
Republican rebuttal to any and all programs and/or solutions put forth by Democrats having to do with the economy consist of "taxes" and "up."
In order to combat those fright words, Democrats have to get specific, have to create hypothetical situations that will spell out how an increase in (my) taxes can end up as an economic plus for me.
Say I pay out $1000/month for health insurance to cover me and mine. With a single-payer health care plan in place, that amount would be reduced by $800/month. What accounts for other $200? I pay it out in federal income tax.
It's really time for Dems to wipe out the stale and meaningless Republican tax-and-spend myth.
June 10, 2008 5:21 PM | Reply | Permalink
Chemjeff, you have been rebukked on here twice! I am just curious, it would seem your point is that Obama is liberal and that his ideas are neither new nor that transformative! Right! So what do you like about Obama or any of the Democrats proposals?
June 10, 2008 6:48 PM | Reply | Permalink
What do I like about Obama? Well, I think he is a talented and ambitious young man and a gifted speaker. But, that's about it.
June 10, 2008 9:35 PM | Reply | Permalink
The Republicans “blocked” a windfall profits tax bill today. It looks like they’ll get their telecom immunity soon. I know this is kind of OT, but why is it so easy for Republicans to block or rewrite initiatives and so hard for Dems to get anything through? Why do they never pay politically for opposing something that the public overwhelmingly supports? When the Republicans had a slight majority, why were the Dems often portrayed as obstructionist though they vigorously fought against only a few bills and had public support on those?
June 10, 2008 6:53 PM | Reply | Permalink
More on the "windfall profits tax" idiocy:
If you take the 30 components of the Dow Jones Industrial Average and you ranked them in order of smallest to largest profit margin for the first quarter, where do you think ExxonMobil would fall?
It would be #16. Right in the middle. ExxonMobil's profit margin was 10.85%.
Some DJIA companies that had profit margins larger than ExxonMobil:
- American Express
- McDonald's
- GE
- Proctor & Gamble
- 3M
- Coca-Cola
- Bank of America
- Intel
- Microsoft
In fact, Microsoft is at the top of the list, with a 28.33% profit margin. You don't hear Obama campaigning to impose a "windfall profits tax" on Microsoft, do you?
This isn't about windfall profits at all. This is about scapegoating the oil industry. It is pure populist political nonsense designed to play on people's selfishness, getting them to think they had been swindled.
June 10, 2008 9:33 PM | Reply | Permalink
Why do you keep talking about marginal profit? Margins only matter to investors. Let's talk real dollars, not marginal increases. Exxon posted the largest profit in 2007 - $40.61 billion. That was twice the size of number 2, GE.
Combine that with your 10.85% "profit margin" for a single quarter, and we're talking some real money!
June 11, 2008 12:31 AM | Reply | Permalink
Diamondjoe,
I'm not referring to marginal profit, but profit margin. And I refer to profit margins because they represent revenue minus expenses. Which type of business would you rather receive the profits from - a business that had revenues of $1,000,000 but a profit margin of 1%, or a business that had revenues of $100,000 but a profit margin of 20%? Yes the magnitude of the profit is large. But the magnitude of their expenses is also larger - in fact, much larger.
June 12, 2008 12:45 AM | Reply | Permalink
There's no risk in oil as it's a vital commodity, and it's secured via US foreign policy meaning it's subsidized and obtained via the blood and treasure of the American public.
Oil should not be as profitable as companies that actually require innovation and risk and which are not so utterly dependent on the state to secure. Real laissez faire in oil would be OPEC and other major oil providers charging whatever they want and people paying $10 gallon of gas.
Oil is a racket and oil men are crooks and have been since the beginning of the oil industry. Oil has always been tied to war, dictatorships, and crooks.
June 11, 2008 3:13 AM | Reply | Permalink
chemjeff,
Of course, you're aware that utilities, that is energy providers, are highly regulated, right? Gas, water, electricity, are commodities that are essential to functioning in modern society and are highly controlled from state to state. In many places utilities are publicly run; if not, they are highly regulated. In places even an alternative low-cost phone service must be provided to consumers because it is considered a fundamental need. The same is true of oil. Our reliance on oil may be a quirk of history, but access is a real necessity in America. Consider a major electrical blackout. Obviously, it is a requirement that government would try to ensure a sound system. I can't even imagine the catastrophe a blackout of gasoline would wreak on this country. OTOH, Big Macs and Windows XP are not essentials in our communities and so, are allowed market freedoms, though still subject to restrictions for in community interest (i.e. monopoly controls, etc.).
June 10, 2008 11:56 PM | Reply | Permalink
The guys is a tool. Upthread he's saying that if the government wants to incentivize something they may as well just nationalize the industry. So for example, anyone with a water and energy efficient washer and dryer that received an incentive, may as well be a commie. The government may as well have nationalized Sears and Kenmore to make more energy efficient appliances. And let's not even get started on light bulbs.
:rolleyes:
I don't think he understands even the most rudimentary basics. Guys like that are always way behind the curve. Idiots.
June 11, 2008 12:27 AM | Reply | Permalink
First, let the record show: I'm not the one calling people names around here.
Second, you conveniently ignore the large bulk of my argument, about the dangers of government subsidies to any corporation for any purpose: the corrupting influence they have on government, the unreliability of being able to target the government subsidy to precisely the desired governmental outcome, the propensity they have to reward bad corporate behavior. You haven't addressed any of these. Instead you blithely argue that subsidies to "good" corporations are desirable while subsidies to "bad" corporations are undesirable, while simultaneously changing the subject away from subsidies to corporations, to subsidies to individuals. EnergyStar isn't a subsidy system, it's an energy efficiency rating system. Ergo that's not even part of the discussion. And obviously I don't agree that encouraging people to buy energy efficient appliances is tantamount to communism. You clearly have this stereotypical vision of a conservative in your head and you are bound and determined to apply that stereotype to me, and who knows how many other conservatives you encounter on the Internet (and maybe even in real life too). Instead of arguing against a stereotype, I encourage you to argue against me.
But, let's suppose for the sake of argument that I agree that government should subsidize everyone - corporations, individuals, whatever - to pursue energy efficient technologies. Fine. How much do we subsidize each? Do we emphasize solar over wind? Wind over geothermal? Geothermal over nuclear? How do you decide how much to subsidize each one? At this point in time, we don't really know what mix of new technologies is the optimal strategy to pursue. Let us suppose we had a crystal ball that could permit us to look into the future and conclude that solar power is the best strategy to pursue. But back in today's world, by subsidizing things OTHER than solar power, government will be pursuing a suboptimal strategy. In fact these other subsidies are actually harmful, as they delay the time at which we can fully move past the petroleum-based economy - since, by pursuing a suboptimal strategy, we will have to rely on current oil-based technologies for a longer period of time.
But I know how you are going to respond already - you are going to say "nonsense", call me a troll, compare me to Aztecs who engage in human sacrifice (now that was a new one), or some such nonsense, and ignore my argument completely. Have fun living in your world where you only encounter comic-book conservatives and liberal ideas are always true, noble and correct.
June 12, 2008 12:32 AM | Reply | Permalink
Don Key,
Actually, the actual necessity here, that I think you are referring to, is gasoline, not oil per se. If I gave you a gallon of oil, you most likely still wouldn't be able to run your car. I get the impression that you think gasoline should be treated like water, in the context of a public utility? If so, then you should follow suit with what's done with many utilities, as you point out - have them run by the state. Nationalize ExxonMobil. Although, if you do that, then I can guarantee that the price of gas will become a political football.
Also I find your language interesting - you talk about companies being "permitted market freedoms". That is the completely opposite way that I look at things. I'm curious, do you think running a business should be something that requires permission from the government?
June 12, 2008 12:53 AM | Reply | Permalink
How is this complete fabrication of Destor's imagination, the $16K F/T year of service MYTH, a "good question."
Show me anywhere where Obama's plan is a $16K college loan equating to one year of FT public service. So what is Destor even talking about?
June 11, 2008 2:55 AM | Reply | Permalink
I think the frustration with Obama's plans is not the new versus old thing - its that much of the plans are the traditional obfuscation of politicians who are afraid to do what makes sense..
Lets take the windfall profits tax. We did that already - 1980 to 1988. It brought in far less than projected ($80bil versus $300bil), and contributed to a decline in jobs and production in the U.S. oil industry. We even insist on calling Big Oil "Big" - we have 5 companies that pump from 6% of the world's proven reserves. Big oil is Gazprom, Pemex, Citgo, Aramco - the nationalized oil companies of foreign countries.
As for stock buybacks, companies buy back stock for 1 main reason - they have cash they can't find an acceptable return for, so they return it to their investors. Since we prohibit exploration and drilling in much of the U.S., and building a new refinery is a regulatory nightmare, what other option do they have? If they found options, they would then resell that stock to raise capital. The government can swoop in at some point and take those profits, basically cut in line front of the investors, but that will make oil companies about as popular with investors as airlines, and will lead to less $$ being available when they really need it.
If one is SERIOUS about reducing CO2 emissions, encouraging conservation, and reducing our gas consumption, propose a CARBON TAX - not this windfall profits/cap-and-trade charade.
On the retirement side, sure retirement is going up to 67 (a legacy of the LAST major SS comprimise under Reagan), America's are still living even longer.
As for most 'wonks' - most wonks support a comprimise solution - some changes to retirement age, benefits, perhaps means testing, AND and increase in the cap. If you just raise the cap - in effect, a 12.4% increase in the marginal rates of wage earners making more than $102k (placing marginal rates at that income in the 40% range) - you have a massive tax increase, one that will most likley hit wage earners in urban industrial states like Cali or NY. Do you also increase their SS benefits to match? I think the answer is no, and at that point, you expose SS as a pure senior welfare program rather than as a social insurance program.
What we want is ideas that show a governance in the NATIONAL interest, not a rehash of Great Society or Carter Energy-crisis programs that worked in some ways but failed miserably in others..
June 12, 2008 11:52 AM | Reply | Permalink
All this comparison to regulated utilities is off the point.. regulated utilities have 2 things in common - 1, they are essential, and 2, they are EXTREMLY difficult to have competing channels. You aren't going to run 2 water lines or 2 electrical lines into your house. Companies are in essence a monopoly, and because of that, are regulated to some extent.
Oil companies are far different - there 5 big ones in the U.S. (more than there are for public accounting, operating systems, and airplanes), and if they overcharged, there's no reason someone can't pull a tanker of gasoline up to NY Harbor and start pumping it to local independant stations. You can buy your gas from a lot of outlets, and in fact, gas stations has a lot of excess capacity (how often do you wait for a pump?, so they wish to sell gas as cheaply as possible to gain customers. But the best example of a regulated market is Venezuela, where profits are regulated, with the monies being used to subsidize social spending. Anyone notice high inflation and falling production in Venezuela lately?
As for return, the whole talk about the horros of their scale of returns/profits comes from those who haven't studied finance much. Do they make a lot? Yes - but have you looked at how much capital they have to invest. If a company is debating spending $10 billion on a refinery, that project better return 10-15%, otherwise it can put the money in risk free investments like government bonds and make 6-7%, or return it to the stockholders and let them do what they wish with it. Any analysis that starts with "They are making so much money!" better begin with discussing Return on Equity and Return on Sales, and end with what do you do if Exxon in a decade starts loosing money - do you give them a windfall bailout?
If you heartfelt belief is that oil companies are shafting us, is that belief based on the facts out there, or are you seeing what you want because your belief is overpowering it?
June 12, 2008 12:36 PM | Reply | Permalink
Profit margin v/ total profit is a red herring.
Your example is totally off topic as to the discussion of whether to tax wind fall profits.
A rational argument would be to point out that corporations use the issuing of stock as a way to raise money for expansion, retooling, acquisition or other "major projects" as we call it in my company.
Therefore repurchasing of stock is equivalent to paying off debt. Stocks are to large corporations as credit cards are to consumers with dividends being equivalents to APR.
Unfortunately your specious arguments deflect the fact that corporations are being financially responsible by paying off their debt and reducing the negative side of their balance sheet allowing them to, yes pay higher dividends to not just stock holders but pension companies or municipalities that have bought in as part of their 401k.
And if companies truly want to avoid paying a wind fall tax on PROFITS, they'd reinvest into Operations and Maintenance, R&D, or other areas of their business so there are no profits only corporate investments.
June 13, 2008 8:44 PM | Reply | Permalink