Rhinocrisy

bang.^*

Late update: N. Korea appears to have flunked its test. Maybe less Song of Experience, more the last lines of The Hollow Men. Or, as the news networks delighted in reminding us today, like this.

^*I remember when George Bush was elected and I thought, `well, if we can just drift through the next four years without any major crises, how much harm can he do?’

I’m only three years late discovering this - maybe I heard it before and it slipped my memory. Yes, yes, that will do nicely.

Anyway, it was a bit about Iran offering a fairly comprehensive negotiation with the U.S., including ending support for armed groups, recognizing the state of Israel, and accepting much tighter IAEA controls, in exchange for access to “peaceful nuclear technology”, normalization of the relationship between the U.S. and Iran, and a two-state solution for Palestine. Some more detail is here, including the incredible U.S. response:

But in 2003, Bush refused to allow any response to the Iranian offer to negotiate an agreement that would have accepted the existence of Israel. Flynt Leverett, then the senior specialist on the Middle East on the National Security Council staff, recalled in an interview with IPS that it was “literally a few days” between the receipt of the Iranian proposal and the dispatch of a message to the Swiss ambassador expressing displeasure that he had forwarded it to Washington.

Astounding. I think my blood is actually boiling - steam is coming out of my ears.

Some Democrat Senators are trying to get a windfall profits tax put in place on oil companies, and alarm bells are ringing. Especially since some Republican senators are apparently discontented as well, recognizing that high gasoline prices are going to be a significant electoral issue this year. Chris Dodd (D-Connecticut) tried to put an amendment onto the latest megalithic spending bill winding its way through Congress^* taxing profits 50% on oil revenues over $40/barrel. Punishing bloated capitalists^† is an easy way to earn yourself points when consumers are suffering. The bill currently in play is sponsored by Byron Dorgan of North Dakota, who has tried to get such a bill passed before, post-Katrina, and includes exemptions for money reinvested in further exploration. Even Arlen Specter says it’s “worth considering” a windfall tax amongst “a number of options”.^‡

A windfall profit tax is fine by me, although I do think if people are suddenly going to start taking anti-capitalist positions because of obvious market failure, they should at least have the decency to stay that way.^§ And lest you have any doubts about how this is being played, there’s little or no talk about oil shortage or how global demand is going to grow; that sort of talk would lead to talk of “conservation”, which during an election year is verboten. Senate Democrats (e.g. Harry Reid) are talking about removing the gas tax to ease the burden on consumers. Removing the gas tax. Anything to allow Americans to continue gassing up without worry. This is bad medicine: treat the symptoms, not the disease.

Anyhow, all this talk of a windfall profit tax is bringing up the last time there was a windfall profits tax, in the early 1980s. Like the unfortunately named House Majority Leader, John Boehner (R-Ohio):

“The windfall profits [tax], when it was tried in the ’80s, failed miserably because it led to less discovery. It led to less production and was a failure,” Boehner said. “There is no reason for us . . . to go there again.”

There’s also a whole slew of papers and talking points reiterating the above line, like this Heritage Foundation article. These make basically two claims: first, that a windfall profits tax would not generate much revenue, since the one in the 1980s didn’t, and second, that the tax sets an unnecessary burden on domestic producers and would depress production.

The former claim is perhaps true, since the 80s tax made a paltry $40 billion net, as opposed to the projected $369 billion. This is because the price of oil crashed in the 80s as a result of extremely good conservation measures, and eventually OPEC ramping up production again; after 1986, the price of oil dropped below the floor set for the windfall profit tax; after this point there was no more windfall to tax, and even before then declining prices made the tax untenable. If such a situation were to repeat itself, we’d have little cause for complaint - if the revenue vanishes because of a collapse in the price of oil, well and good. This, however, should be no reason not to pass the tax by itself.

The latter claim usually cites a Congressional Research Service study from 1990; in light of recent events the author (Salvatore Lazzari) published an update, available here. His argument is this: since the price of oil is determined on a global market, a windfall profits tax imposed on domestic producers means that the effective price per barrel of oil is reduced by the amount of the tax, per barrel. We may then compute, based on what we think is the price elasticity of supply for oil, the effective reduction in oil output this must have precipitated. Based on that, the study concludes that there was (depending on what the price elasticity actually was) somewhere between a 3 and 6% reduction in domestic production in the 1980s.

I’ll make the caveat that my economics is for shit, here; the study’s calculations are reasonable, although one might debate the price elasticity figures employed. In the original study, the lower-bound was 0.5, while in the 2006 update the author acknowledges that lower figures might be correct. I’m not qualified to debate this matter.

But what I do take issue with is the study’s assumption that the full value of the tax should be deducted from the price per barrel. Lee Raymond is adequate evidence of this: capitalists eat profit. Not all of the profit is reinvested, and so we needn’t assume that in the absence of a windfall productivity would suffer. It would just mean some rich people would be a little less filthy fucking rich than they otherwise would have been. This is a key assumption made by proponents of the tax and one that the study fails to acknowledge.

All of that said, I think this tax is a waste of time. And as a political dodge, it’s worse than ineffective, since it distracts from actual measures that would promote real reductions in the price of oil. Giving rebates from tax revenues to customers would certainly be a popular measure, but it’s, first, not going to have any impact on the price of oil, and second, couldn’t possibly provide substantial relief from high gasoline prices - probably 1 or 2% at most. And since we’re unlikely to see drastic increases in output from any major producers (all of whom are running basically at capacity), we’re not going to see a drop in gasoline prices unless we force conservation. Anything that detracts from that is pointless.

^* Which apparently has gotten George Bush’s knickers all in a twist. After spending us $8 trillion into debt, he and the Senate Republic leadership have suddenly decided they are fiscal conservatives again and want to cut the porky bill from $105.6 billion down to a lean $92.2 billion. Ah, election year!

Quimby: Demand? Who are you to demand anything? I run this town! You’re just a bunch of low-income nobodies!
Aide [whispering]: Election in November! Election in November!
Quimby: What? Again!? This stupid country.


^§ In other words, I’m bitter because I was on the “dispossess the ruling class” wagon way before these ruling-class jerks showed up on it.

I woke up to NPR’s Morning Edition. Evil, demonstrated.

It would be evil to contemplate aggressive war, which violates the most basic international law. It would be really evil to discuss it as if it were no big deal. No big deal at all. Not only that, but to ignore other options other than about 10 words at the beginning of the story referring to vague “diplomatic options.” And at the same time to ignore the fact that diplomacy can not work while nuclear states get respect and non-nuclear states get invaded.

It would be evil to discuss how to reduce the horrors faced by coal mine workers while offering cures that still essentially place all responsibility for safety on individual workers, rather than on mine managers. Rather than enforcing mine safety laws that already exist — the Sago mine had over 200 violations in the year before 12 workers died there — so the cure is to provide more oxygen tanks and electronic tags to keep track of exactly where miners are. Electronic tags, of course, will also help bosses fire people they think are lollygagging. And oxygen tanks? Yeah, that will do a hell of a lot of good against fires and collapses. Relegate structural solutions to silence. What’s good for the mine owners is good for America.

And most of all, it would be evil to wake up millions of Americans with a 7 a.m. newscast that spouts so much sinister nonsense. Time to go walk in front of a bus.