Be sure to watch your mail. Barack Obama is hoping to send you $1,000. He’s calling his donation to your family exchequer a fuel rebate. With this little bonus for the voters, one supposes, he thinks the country can go back to gas guzzling, at least until the money runs out. Then what? Another check for another grand?
In this year’s presidential campaign, the advocates and defenders of both the Rock Star and the White-Haired Dude argue for their respective champions by assuring us that they don’t mean what they are saying, this is just stuff candidates promise to get elected. Even so, Obama’s thousand-dollar gift certificate idea is one a lot of people will like.
They like it because he says he will pay for it by taxing the oil industry’s excess or windfall profits. He does not say when a profit becomes an excess or windfall profit. He does not tell us where that line is, perhaps because the line is “let’s tax the hell out of whatever industry we don’t like at the moment” or because George Bush and Dick Cheney are oil men. Emotionally satisfying, but deleterious.
Exactly how much the Obama rebate will cost has yet to be calculated with precision, but the recent “economic stimulus” rebate is coming in at over $120 billion. It seems that since the oil companies are going to pay the bill for this one, there will be no negative consequences.
But there will be. The cost of the rebate would just about deprive the industry of all its profits, which would be OK if all their stock and all their dividends were owned by Bush and Cheney. But much of oil company stock is owned by pension funds and millions of people with 401(k) retirement accounts, by colleges and universities and who knows how many other nonprofit organizations.
These individual and institutional investors will lose their dividends–and that’s not all. The instant it appears that such a punitive tax law stands a chance of enactment, the bottom will drop out of oil stocks. The same people who will lose dividend income will also lose capital, as they see the value of their oil stocks plummet.
If the rebate money is spent on gasoline, the net effect will be to drive up the price of gasoline at the pump which, by Obama’s reasoning, would be the occasion for yet another fuel rebate. If he truly thinks that way, he may want to consider choosing Hugo Chávez as his running mate.
The right way to tax the windfall profiteers is via the income tax. Raise the taxes on people earning more than $250,000 a year. Such an increase would probably not net the government $120 billion, but any single tax increase that can bring in that much new money in a single blow would have unpleasant repercussions on the economy.
Whether these gifts are named an economic stimulus or a fuel rebate for families, they put the government in the position of giving money to people who have not earned it. Some of the recipients of this indiscriminate gift-giving are in need and some are not but we do not know who is and who isn’t.
From the time of republican Rome, elected officials and dictatorial types have delighted in using the public fisc to win the affections of the populace, which may be good for the politicians but is ruinous for state and society. No good comes of bailing out corporations or bribing voters.
Even under the wackiest forms of socialism people are supposed to work for a living–and there is plenty of work needing to be done. The highways are crumbling, the bridges are rusting, the schools are falling apart. States, counties and cities are cutting back on services. There is no lack of projects for any politician able to scare up an extra $100 billion. It’s almost enough to pay for one of our wars.
Judging from their speeches, neither the White-Haired Dude nor the Rock Star have processed how serious our country’s economic situation is. While they puzzle it out, they should stop the showy, vote-cadging proposals. Our economic situation grows more desperate each day. Somebody had better get real–and soon.