Link if video does not play: Hypocrisy Over Oil
Caroline Baum on "Obama the Omniscient"
Inquiring minds are reading Bloomberg columnist Caroline Baum's article President Scapegoat Can’t Stop Picking on Big Oil
Barack Obama isn’t the first U.S. president to conjure up scapegoats to serve his political ends. The Roosevelts, both Teddy and Franklin, were masters at the game. TR decided the trusts were an enemy of the people and busted the likes of Standard Oil and Northern Securities, which controlled the railroads in the northwest. FDR demonized just about anyone who had money.Why Are Oil Prices High?
Harry Truman seized the steel companies to avert a nationwide strike, noting that “the steel industry has never been so profitable as it is today.” When U.S. Steel and other large steel producers raised prices, John F. Kennedy chided them for pursuing “private power and profit” at the expense of 185 million Americans.
Sound familiar? Substitute Obama for Truman, and oil for steel, and the tactics are quite similar.
Obama has elevated scapegoating to a new level. He has his usual suspects -- the “millionaires and billionaires” who serve as foils at campaign events -- as well as temporary targets that come and go as the situation warrants.
Listen to Give ’em Hell Harry in 1952: “Steel industry profits are now running at the rate of about $2.5 billion a year. The steel companies are now making a profit of about $19.50 on every ton of steel they produce. They don’t need this,” Truman said of a $3-a-ton price increase.
I agree with Obama that oil companies don’t “need” subsidies, some of which have been in place since 1916. But the reason isn’t their profitability. It’s that preferential treatment creates its own incentives, distortions and economic inefficiencies.
Does Obama understand that one reason profits are so big is that the companies are big? Other better measures, such as profit margins (net income divided by sales), show energy producers underperforming other kinds of companies. For example, the average profit margin for the six largest U.S. integrated oil and gas companies was about 11 percent last year, compared with almost 14 percent for the Standard & Poor’s 500 companies.
There are lots of other industries and special-interest groups that don’t “need” subsidies and/or tax breaks. But they have them because of mutual back-scratching by members of Congress, who are much better at catering to their corporate clients than to their constituents.
I would venture to say that if a business isn’t viable on its own, it isn’t viable.
Obama the Omniscient
“Instead of taxpayer giveaways to an industry that’s never been more profitable, we should be using that money to double- down on investments in clean energy technologies that have never been more promising -- investments in wind power and solar power and biofuels; investments in fuel-efficient cars and trucks, and energy-efficient homes and buildings,” Obama said. “That’s the future.”
He knows this.
Singling out oil and gas companies for punishment may solidify his populist credentials, but Obama knows that repealing $4 billion of deductions is a drop in the bucket compared with an annual $1 trillion of tax breaks and loopholes in the federal budget.
Besides, with Obama it’s never really about the cost savings. If it comes down to a choice between good economics and sound policy on the one hand and “fairness” -- fairness as defined by Obama -- on the other, we know which one our president will choose.
Singling out specific industries as scapegoats for his political purposes doesn’t strike me as particularly fair. I guess it depends on what the meaning of fairness is.
- President Obama should look in a mirror and blame his inept Mideast policy. Of course President Bush could do the same. Mitt Romney promises to be worse than either of them.
- The second reason gas prices are high is inept policy by central bankers around the globe, in particular the Fed. Liquidity did not go where central bankers are desperate for it to go (housing), instead it went into food, energy, and the stock market. The president and members of Congress blame speculators.
- The third reason gas prices are so high is the US is in a constant state of war for 10 years. Iraq, Afghanistan, and next up Iran. The amount of jet fuel wasted in these endeavors is staggering, so is the amount of gasoline and diesel transporting troops to 140 countries around the globe.
Obama does not want to admit any of the above, so instead he blames the energy companies.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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