Liberally Conservative

"Freedom is never more than one generation away from extinction. We didn't pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children and our children's children what it was once like in the United States where men were free....... ~Ronald Reagan~

Tuesday, November 15, 2005

Rep. Dennis Kucinich Doesn't Get It!

"I do not advocate an excise tax, which increases the price of oil because both cost of production and profit are taxed. The preferred approach is a windfall profit tax, because it is constructed to tax only excess profit, leaving production costs and reasonable profits unaffected.
xxx A true windfall profits tax raises little revenue because it sends a signal to the industry that price gouging will not be rewarded. Therefore prices quickly return to a reasonable level. Any minor revenue raised gets returned back to the consumer via tax credits."
This was Mr. Kucinich's (D-OH) response to the Wall Street Journal against their argument of the poor economics a windfall profits tax would impose on oil companies and business in general. First, the left-wing nut from Ohio doesn't compensate for years in which oil companies lose money (yes Dennis, this occurs). Secondly, Kucinich demonstrates why he and his liberal colleagues, in the tradition of FDR, wish to punish business success and refuse to recognize free market economics.
Here's how it works, particularly in your own state of Ohio, Dennis. Gas prices are rising in direct correlation of world oil market, per barrel prices. When these prices began to fall below $60 a barrel, pump prices slowly declined.
Enter Hurricane Katrina and the left-wing blame game. In a natural market response to potential stoppage of oil drilling and refining on the Gulf Coast, pump prices rose, a natural market response to hold back a run on cheap fuel. As the hurricane passed, damage was repaired, imports of oil increased and refining slowly increased. As this took place oil prices in Ohio slowly declined from $3.15 per gal., below $3.00 per gal. and now below $2.00 per gal.
While politicians are a day late and dollar short attacking "big oil" so they can grandstand before the camera's, the economically illiterate like Representative Kucinich write to a conservative, business savvy publication and attempt to teach us about the results of taxing business.
Here's an easy lesson, even liberal tax mongers like Dennis Kucinich will understand, maybe. Prices go up naturally to discourage purchasing a commodity to maintain a natural balance of inventories. When inventories are threatened, prices go up until new goods can be made available. As new inventories come to market prices decline.
The excise taxes Representative Kucinich mentions will not go away as they are several layers of state and federal subsidies thick. A "Windfall Profits" taxes is punishment for being successful and would discourage re-investment into further exploration. It would also send private and institutional investors scurrying to find other stocks to purchase.
The final result would be increased gasoline prices, hurting consumers and allowing Kucinich and company to blame President Bush. Mr. Kucinich, can you say, "Macro Economics?"

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