Obama speech on windfall profits and saving jobs
Topics: Campaign2008
27 Oct 2008
From: Ervan Darnell
Regarding:
> Remarks of Senator Barack Obama: Town Hall on the Economy
> St. Petersburg, FL | August 01, 2008 [1]:
Some of Obama's spending proposals in his speech were not that bad (like
the highway transportation budget), and I don't want to chop at the
whole thing. But the following points stood out at me as related to
recent posts on Ragnar.
>
> [Obama:] As we provide relief, we must also be mindful of the swelling
> budget deficit. That is why I am proposing that we pay for this rebate
> by taxing the windfall profits of oil companies like Exxon Mobil - a
> company that announced yesterday that it made nearly $12 billion last
> quarter, more than any U.S. corporation has ever made in a single
> quarter. It's time we used some of their record profits to help you
> pay record prices.
>
There are at least three things wrong this this.
First, Exxon made "record profits" not because they made record profits,
in the sense of a percentage profit, but because they are a big
company. We could just cut it in two and make him happy? Google made
record profits, but he doesn't have anything to say about them. He's
not going after highly profitable companies, he's going after money
wherever he can find it, even if the profit margin is ordinary. Oil
companies made 7.6% last year, good, but nothing extraordinary [2] .
Here are some numbers from 2006 for comparison [3]:
> And Exxon's profit margins are below-average compared with others that
> have triggered no outcry. Exxon's first-quarter profit margin was
> 9.4%, meaning it kept 9.4 cents of every $1 in revenue. Microsoft kept
> 27.3 cents of every $1 in revenue in its most recent quarter; General
> Electric, 11.4 cents and McDonald's, 12.3 cents. In fact, Exxon is
> below the 11-cent average of Standard & Poor's 500 companies, says
> analyst Howard Silverblatt.
Second, oil exploration is very expensive and risky. Profits are
essential to use for that. If Congress passes a windfall profits tax,
it will drive up the price of oil directly in the short run and
indirectly in the long run as there is lower supply, and at the very
least make us more dependent on foreign sources. Interestingly, Obama's
making the same mistake with drugs. He wants Medicare to "negotiate"
drug prices. Yes, when the entity buying half the drugs demands
marginal production pricing, it will get it, but there will be no profit
left over to finance research into new drugs.
Third, and most serious, is the idea that corporations are persons and
that by taxing them it has no impact. This is a misunderstanding of how
the economy works. Taxing corporations is either a sales tax, a payroll
tax, or a dividend tax. A corporate tax is just an individual tax
levied in a funny way. If Obama's logic really held, we should
eliminate the personal income tax and just tax corporations.
> [Obama:] The second part of my plan is a $50 billion stimulus to help
> jump-start job creation and help local communities that are struggling
> due to our economic downturn. Half of this stimulus will go to state
> governments that are facing big budget shortfalls.
>
His idea of job stimulus is to preserve the existing bloated
bureaucracy? And to preserve it in exactly those cities that are the
most poorly managed? If the rest of are taking a cut, so should the
government. But, no, preserving government jobs is essential.
> [Obama:] When state governments are forced to cut spending on
> essential services like police or firefighters, it doesn't just
> undermine the safety of our communities, it makes our economic
> problems even worse.
>
Nice sleight of hand trick by arguing about the things people want to
cut last, as an excuse to preserve the whole.
> [Obama:] By offering $25 billion to state governments, we can help
> ensure that they don't have to let workers go or freeze their salaries
> or raise property taxes on families who are hurting.
>
It's a bad thing to freeze government salaries during a recession?
Wow. I'd start there. Letting now un-affordable city workers go makes
sense too. If local residents want to pay for it, fine. But if not,
subsidizing them from some other community's tax hardly makes sense, but
that's the effect of his proposal.
----------------------------------------------------
[1]
http://www.barackobama.com/2008/08/01/remarks_of_senator_barack_obam_100.php
[2]
http://www.usnews.com/articles/business/economy/2008/02/01/exxons-profits-measuring-a-record-windfall.html
[3] http://www.usatoday.com/money/industries/energy/2006-04-27-xom_x.htm
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