Posted by
Always To The Right on Wednesday, October 15, 2008 1:13:57 PM
One of the few bright spots in the current financial debacle has been
the rapid decline of oil prices. Earlier this year, oil hit an
all-time high of $147 per barrel. As of this morning, however, oil dropped below $76 per barrel — almost half of what it cost just a few weeks ago
However, one aspect of low oil prices has not received much
attention. Barack Obama plans to spend hundreds of billions of dollars
if elected President on a wide range of government initiatives. He
claims to have the resources to spend that money responsibly, in part by imposing windfall-profits taxes on Big Oil:
- Enact a Windfall Profits Tax to Provide a $1,000 Emergency Energy Rebate to American Families:Barack
Obama and Joe Biden will enact a windfall profits tax on excessive oil
company profits to give American families an immediate $1,000 emergency
energy rebate to help families pay rising bills. This relief would be a
down payment on the Obama-Biden long-term plan to provide middle-class
families with at least $1,000 per year in permanent tax relief.
- Provide $50 billion to Jumpstart the Economy and Prevent 1 Million Americans from Losing Their Jobs:
This relief would include a $25 billion State Growth Fund to prevent
state and local cuts in health, education, housing, and heating
assistance or counterproductive increases in property taxes, tolls or
fees. The Obama-Biden relief plan will also include $25 billion in a
Jobs and Growth Fund to prevent cutbacks in road and bridge maintenance
and fund school repair - all to save more than 1 million jobs in
danger of being cut.
That option seems off the table now. The “windfall profits” tax —
always a bit of a misnomer, since the average margin for American oil
companies has been around a modest 8% — can’t get applied when the
supposed windfall disappears. Obama can’t redistribute wealth that
doesn’t exist.
So now how does Obama pay for all of these programs, if elected
President? Taxing the rich won’t generate the kind of money he
envisions in his ambitious, big-government spending spree. Even if a
capital-gains tax-rate hike actually produced more revenue, one would
have to have capital gains in order to pay the tax. After
the debacle this year on the markets and in the real-estate industry,
Obama won’t be seeing those kinds of revenues for years.
Either Obama will have to cancel these big-spending proposals, or he
will have to impose big tax hikes on the middle class. Even if Obama
closed the Department of Defense, he couldn’t pay for the bailout
package and the massive new spending he’s proposed,
especially not without the hundreds of billions he predicted he would
get from a windfall-profits tax on oil companies.
Obama has another option. He could act in such a manner as to make
the price of oil skyrocket again in order to claim those
windfall-profits taxes. It would produce massive stagflation in the
midst of a recession and would benefit the Russians and Iranians most,
but it would produce on paper the conditions Obama would need to impose his taxes and his spending programs.