Obama’s Emergency Economic Plan
We have until January 20, 2009 before Obama takes office so I thought I’d examine his plan in detail in the interim. Feel free to download his Blueprint for Change to verify his positions and his plan.
|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.
Exactly what is a windfall profits tax anyway? Here’s the definition I found on Wikipedia:
A windfall profits tax is a higher tax rate on profits that ensue from a sudden windfall gain to a particular company or industry.
Wikipedia defines a windfall gain as unexpected income, but I haven’t found any evidence where the Democrats were pinned down on their definition. The August 4, 2008 article in the Wall Street Journal, “What is a ‘Windfall’ Profit?“, offers some interesting reading on this topic. According to the article, Exxon-Mobil would be the primary target of this tax though its profit margin is a reasonable 10%. Most Americans have been outraged by the run-up in prices at the pump, but a 10% profit margin certainly shouldn’t qualify as unreasonable. This part of the plan seems targeted to take full advantage of Americans’ ire and sets a dangerous precedent. What will be the next industry targeted for windfall profits?
Now, with oil prices dropping sharply, it appears this measure would accomplish very little anyway. Wait a minute…isn’t that what happened the last time we had a tax like this? Did you know that we had one before and it didn’t work?
Sure enough. In 1980 the Crude Oil Windfall Profit Tax Act was enacted in response to a sharp increase in oil prices. Though the 1980 act differs from the version proposed by Obama, the impetus for both are quite similar. The 1980 tax was predicted to load the governments coffers with almost $400 billion by the time it was repealed. Actual proceeds of less than $100 billion fell far short of that estimate. Why? Because the free market did what it’s doing now–corrected itself. This initiative is long on promise, but will no doubt fall short on the predicted government revenue. You can read the report by the Congressional Budget Office here.
I felt cheated every time I filled my tank with gas and even boycotted Exxon-Mobil stations as a personal protest, but I’m not ready to give the federal government the right to set limits on profits of private industry. Who pays for taxes on corporations anyway? Consumers, that’s who! Any increased operating costs (including taxes) will be passed on to you and I. This part of Obama’s plan will likely result in higher expenditures for energy on everyday Americans.
That was more involved than I thought it would be, so I’ll try not to be so long-winded on this next part!
|$50 Billion To Turn our Economy Around and Prevent More than 1 Million Americans from Losing Their Jobs
State Growth Fund: $25 billion in a State Growth Fund to prevent state and local cuts in health, education and housing assistance or counterproductive increases in property taxes, tolls or fees. The fund will also ensure sufficient funding for home heating and weatherization assistance as we move into the fall and winter months.Jobs and Growth Fund: $25 billion in a Jobs and Growth Fund to replenish the Highway Trust Fund; prevent cutbacks in road and bridge maintenance and fund new, fast-tracked projects to repair schools – all to save more than 1 million jobs in danger of being cut.
Let’s see, $25 billion is $500 million per state but of course it won’t be evenly distributed so let’s just look at it on a per capita basis. Assuming a population of 300 million Americans, we’re talking about $83 per person. Do you know anyone who can stretch that amount so far to keep crises in health care, education, housing, etc.?
And take a look at the second part too. Where did the money from the Highway Trust Fund go anyway? If our government spent this money wisely in the first place, it might not need this infusion of cash. According to the September 6, 2008 Washington Post article, “Highway Trust Fund is Nearly Out of Gas“, Congress loaded the last transportation bill with 6,000 earmarks costing us $24 billion.
Obama’s emergency economic plan promises a lot, but are those promises realistic? I don’t think they will be. Right now our economy has a wound that will heal itself if left alone. The remedies he proposes have potential side-effects that are worse than the illness.
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