Politics: The pressure is growing for futile, self-defeating solutions to high gas prices
Many moons ago, I created a post called “Peoria Pundit’s list of almost-always true observations.” I add observations as I go through life and, well, observe them. My second original observation was this:
2. Rich people don’t pay taxes. Working-class people pay taxes. Rich people pass along the costs through lower wages, poorer service and higher prices and rent.
So I’m afraid I am going to have to concur with C.J. Summers on this one: 18th District Congressional candidate Colleen Callahan’s plan to cut the federal gasoline tax in half, and replace it with hikes in taxes on oil company profits would probably be a zero-sum gain for most Americans. It might even mean a net loss to taxpayers:
Callahan estimated the gas-tax cut would amount to about $12.5 billion per year, while she would increase the tax on oil companies by about $15 billion — $12.5 billion to fund road construction and maintenance, and $2.5 billion for alternative-fuel research and development.
Which means that direct taxes would be cut by $12.5 billion, but the oil companies would pass along a $15 billion tax to consumers.
The real cure for rising fuel prices will be achieved by new technology. We’ll either come up with a form of ethanol that’s so cheap to create it won’t need government subsidies OR take farm land out of the business of producing food for a hungry world, or we’ll wise up and rekindle out nuclear power industry and we can start using all-electric vehicles.
But Americans are impatient. There’s a magic price out there that’s just high enough to create just enough political pressure to make Congress take the sorts of anti-competitive actions that really will hurt American consumers.
Unfortunately, feel good-measures like this are inevitable. I was thinking about this today as rode the bus and looked at the gas prices. I recall that the price of a gallon used to hover around 69 cents. I saw prices of about $3.49 today — and a rumor was going around that stations were expected to pass along a 20-cent-per-gallon increase sometime tonight.
Billy Dennis is a former reporter and editor at small daily and weekly newspapers in Illinois and Missouri. He comments on media, news and politics. He also owns and operates 
Bill sez: “zero-sum gain ”
I sez: The phrase is “zero-sum GAME”
It is not only economic ignorance, but accounting stupidity to assert that corporations pass along corporate income taxes to consumers. Corporate income is the residual revenue that remains after all direct and indirect expenses are deducted from net sales. At worst the economic counter argument should be that an increase in corporate income tax reduces the incentive for new corporate investment. Given that the price of a barrel of Oil has increased by a factor of 8 since the failed Texas oilman became President, oil companies have plenty of incentive to invest and a sur-tax on oil companies is long overdue. The more appropriate response to high gas prices isn’t cutting the federal gas tax, but instead, establishing an aggressive foreign policy to persuade the OPEC Cartel to increase oil production. Long term we need to reduce OPEC’s inflationary bias on world oil prices.
You want to reduce our dependence on OPEC and reduce the price of a barrel of oil? Allow our oil companies to drill on our land and on our shores. Depriving the American people of our own much need natural resources is terrible. This is not only an economic issue, its a national security issue.
I agree that a reasonable expansion of America’s natural resources should be part of the solution.
Actually it’s more like a factor of 6, since gas was hovering around $20/barrel back then.
Why does everyone seem to be ignoring the elephant in the room? These prices aren’t caused by phantom phenomena like consumer confidence or political unease, this is greed. If these prices were created by the market alone, these companies should be posting ZERO profit.
Greed is what this is, and the only way to solve it is by starting at the top and working your way down. I’m talking about Congressional hearings and criminal charges against these companies, as well as a blanket policy of taking 100% of their yearly profits while prices at the pump are so high, then using those profits to provide price relief to consumers and a portion of it for alternate fuel development as well as new engine technology R&D.
OPEC needs to either be disbanded or reformed, because right now it is a bucket of corruption.
Like many economic arguments, it depends upon the base year and calculation method. In 1999 a barrel of Oil was around $10 (see today’s Nytimes-Paul Krugman). So the factor could be as high as 12….The current Oil price is ridiculous and NOT “free market” determined no matter how it’s calculated.
I guess I’m naive. Can someone explain what is driving oil prices? The factors that I am aware are the declining dollar, unprecedented demand in China and India, political uncertainty in the middle east and Venezuela. Oil company profits are certainly high but so are drug company profits, Caterpillar profits and John Deere profits. Do you suggest that we strip all these companies of their profit to reduce prices for the consumer? My guess is that it’d be pretty hard to find a job in Peoria if we did.
Considering the fact that we get around 80% of our oil from places other than the middle east, it shouldn’t affect our prices the way it has. Venezuela doesn’t have political uncertainty, just a loudmouth hothead for a leader.
Declining dollar, that’s a valid economic reason. High demand in China and India, also a valid reason.
What I’m suggesting is when a company or group of companies post record profits while the economy is suffering and people are struggling partly because of their high prices, they ought to A) be ethical and lower their rates or B) have it taken from them.
I don’t see large portions of the population suffering as a result of Caterpillar’s and John Deere’s profits. It’s not the best comparison, really. But since you mentioned it, I would definitely hit the drug companies. There’s no good reason to someone to have $50,000 in monthly prescription expenses (I know some who do, but fortunately are insured) for a genetic condition.
Profit doesn’t make a company evil. Profit gained by contributing to the suffering of others? Yeah, that would make a pretty good case for it.