Tuesday, October 18, 2005

Harry Reid's dearth or intentional disregard of economic knowledge

Check this out Senate Minority leader Harry Reid plans to solve our energy "crisis" by taxing oil companies and banning "price gouging." I have discussed price gouging laws before, even in times of disaster as being counterproductive. I guess the likes of Reid do not see my point. As for the "windfall profits tax" (WPT) I made a cartoon on such a policy here. Again, he probably didn't see it. Now, some might say that the WPT is legit because it provides exemption for "Profits used to build new refining capacity and alternative energy programs," but we must think about this. The same people who propose this tax are the people who oppose building new refineries. Oh sure they agree with building more in the abstract, but then everytime one starts to be designed they bog down the oil companies in environmental paper work and other bureaucratic messes. In other words, Reid and his ilk aren't going to allow the oil companies to perform the necessary tax exempting actions.

Also, when firms in an industry run huge profits that serves as an incentive to other firms to enter the market. Granted there are numerous barriers to entry in the energy market, but if the profits surge high enough new firms will come. When you take away these profits you are taking away the incentive to produce.

Finally "
He [Reid] criticized the [Bush] administration for not using its industry ties to persuade oil companies to lower prices." HELLO!!!! That my friends would be illegal. Such an action would require all the oil companies to agree to bring prices down together. We believe in competitive markets in the USA and that means NO COLLUSION. Seems like Reid wants the oil companies to conspire against themselves. Oh well, when his claim that they conspire against everyone else turns up false at least he has a fall back plan.

Oh and i believe the term is "hat tip" to
Duane D. Freese at TECH CENTRAL STATION in THIS article

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