Modern Political Demagoguery: Making Poverty More Expensive.

Who wouldn’t jump on the bandwagon to soak the rich? I mean, when the economy is sour and scads of people are out of work, those who seem to still be doing just fine ought to be made to contribute a little (or even a lot) more, right? It’s good social justice to force those who have to fork over more, right?

Happily, we’re finally seeing that in states like Wisconsin, Ohio, New Jersey, and even Massachusetts(!), as they have taken steps to force public sector (as in, employed and paid by every tax payer, whether the tax payer can really afford the taxes or not) employees to share some of the hurt of this awful economy.

Now we hear about a proposal to end “subsidies” of the big oil companies. This exceptional move, one which can be lauded by all, apparently, will bring to the government an additional, whopping… $18 billion. Over 5 years. That breaks down to $3.6 billion per year. For perspective, the federal government borrows $28 billion (that’s “billion” with a “b”) every week, which extrapolates over 52 weeks to $1.46 TRILLION per year. Which makes the “savings” from this brave stand against big oil work out to a budget deficit reduction by 0.0025%. Brave.

But that doesn’t mean this brave stand will have no impact on the nation. Oh no: that would be too easy. It will make gasoline more expensive.

See, the “subsidy” isn’t a hand-out to the industry like so many farm subsidies: it is a tax break, which simply means that the company has to fork over to the government more of the money it rightfully earned when consumers freely chose to buy the product the oil company was selling. If this passes, the oil companies will have to send more money to the federal government.

Simple market principles dictate that the oil companies, who have been making modest 7% to 8% profits the last number of years, will not just absorb the $3.6 billion per year as though they are beneficent providers of gasoline to drivers and money to the government. They will pass along the cost of the additional outlay to the consumer. No problem there at all: that’s how business works.

The problem is twofold: first, those whom this will hit hardest are those with less money to spend in the first place on necessities like fuel for their car. The average struggling consumer will not automatically get a raise to compensate for the hike in already-ridiculous prices at the pump. The average unemployed person will find it that much more difficult to seek jobs that are a distance from their home, since gasoline will eat up so much of their income. Thus unemployment numbers will not improve and may even suffer.

And all this adds up to a de facto regressive tax—one which harms the poor at a higher rate than the wealthy.

The second problem is the promised programs that will result from this paltry sum. If the President and the bill’s sponsors get their way, not only will the money *not* be used to reduce the deficit by 0.0025% (guffaw, chortle) but it *will* be used to advance the still-ridiculous “green” agenda that still has only succeeded in making life more expensive for everyone.

What has the government got against poor people? Throttling domestic oil production thus driving up the cost of moving about, continuing the counter-productive ethanol, milk, and farm subsidies that drive up food costs, and consigning their kids to failing schools in so many areas just to satisfy the teachers’ unions…

Makes one long for a more humane, more market-based system where those with the coercive power of government are not also empowered to dictate prices and lifestyles based on their own Marxist ideological, green-religious (or atheistic), sexually deviant ways of seeing the world…

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19 thoughts on “Modern Political Demagoguery: Making Poverty More Expensive.

  1. Walter says:

    We need to follow Ronald Reagan’s lead and lower taxes for ALL corporations, the guy always knew what he was doing! The bigger they are, like oil, the fewer taxes they should have to pay, because they are more important. We owe our daily standard of living to them and raising taxes (or lowering subsidy) is simply being ungrateful. Of course, many people argue that this will increase the tax burden on the poor, but (1) charities will help them if they deserve it, not a blind government handout to anyone who gets in line, and (2) as mentioned above, the stock/retirement portfolios of the poor will SOAR, giving them a hidden raise in income! I have been around long enough to know that not taxing the poor simply spoils them. They benefit more than anyone else from social(ist) programs like public transit and welfare, that means they should pay more in. Plus if we tax the rich too much, the government decides where all their money should go, usually to liberal pet projects. Everyone knows that liberals are tight fisted and give much less to charity than conservatives, except for the evil George Soros but he is only one man. Let the “free market” decide charitable contributions and it will overwhelmingly go to conservative causes.

  2. GREG SMITH says:

    Dear Tom ~ Given that my small business had a just under 4% profit in 2010, I can’t feel too badly for the oil companies. Maybe it’s my fault for not getting on the bandwagon and lobbying for a government subsidy. ~ Best rgards, Greg Smith

    1. Joe says:

      So, if you personally did better in 2010, you would then be ok with the subsidy?

      1. greg smith says:

        Sure, as long as every business got the same deal. Might get a little expensive though. What will the oil companies profit margin need to be before they don’t need a subsidy? 10%? 15%? More?

        1. Tom Crowe says:

          GREG SMITH– You keep using the word “subsidy.” Please explain how a tax cut is a subsidy. In your explanation, include a discussion of how corporations take in revenue, how a government takes in revenue, the difference between the two; and please discuss the ramifications for not paying one’s corporate taxes.

        2. Joe says:

          Greg Smith. I like your new argument much better than the first one.

    2. Tom Crowe says:

      GREG SMITH– No one’s asking you to “feel too badly” for the oil companies, so I’m not sure why you brought that up. I’m not lobbying for any government subsidies either, merely pointing out the idiocy of the rationale for the intended removal of a tax break. (Note: pointing out the idiocy of the rationale for the action is not the same as supporting the tax break itself—I’m in favor of tax breaks across the board.)

    3. Tom Crowe says:

      Additionally, GREG SMITH, congrats on your profit. It’s better than a loss. I am familiar enough with living on the income provided by a fledgling small business—my dad started his the year I was born and it’s still going strong these 30-something years later. But it wasn’t always so. If you’re able to make a legitimate profit in this economy, consider yourself a success. Now, let’s all start lobbying for across-the-board tax cuts so you and my dad and countless others have more of *your own money* to re-invest in jobs, equipment, facilities, healthcare, etc. … … Or would you consider that a “subsidy”?

  3. tz1 says:

    The tax code is an open sewer of corruption, and I would include this tax break as part of the fecal matter swirling in the cesspool.

    So the argument on both sides misses the point in that they concede the utter corruption and that we can’t do anything more about it than we do about the deficit, but only on the distribution of the corruption.

    It is not righteousness to argue for exchanging which cardinal one is going to commit, participate in, or encourage today.

    As long as the tax code is used to play social engineering games instead of raising revenue in the most economically neutral way possible, you have no point. Subsidies are at least more visibly corrupt.

    1. Tom Crowe says:

      Actually, tz1, I didn’t miss any point: merely pointed out the idiocy of the proposed “solution.” You make a habit of assuming too much. I said nothing about what I believe would be the best case scenario. But I will go on the record saying that the sorts of mass upheavals you have hinted at in previous posts are not in any way a healthy means to what would be a legitimately good place.

    2. Joe says:

      tz1. Are you arguing for the Fair Tax Act?

  4. beez says:

    The thing is, demagogues don’t understand market forces… They never have.

    They always laugh when someone says, “I never received a paycheck from a poor person,” because, of course, that’s simply because we haven’t re-distributed enough wealth to the poor. Because as soon as we do, then everything will be perfect!

    Did you ever notice, by the way, that whenever politicians and bureaucrats “re-distribute the wealth,” they always seem to take a cut? It’s like a finder’s fee or something.

  5. Joe says:

    This Tom Crowe and I seem to be reading from the same books.

    If I may only add that who corporations are is often somehow forgotten or misunderstood. As publicly traded companies, oil company profits and losses are being realized by shareholders of all income levels. If a person has a run-of-the-mill 401k retirement fund, there is a pretty good chance that they have an investment in one oil company or another.

    However, based on the way this type of thing is commonly framed, many people would apparently be surprised to learn that those losing their “greedy subsidy”, for the most part, are more like Homer Simpson than Monty Burns.

    1. Tom Crowe says:

      That is another oh-so-important angle which people don’t realize. I forgot about it, or else I would have included it in my post. Thanks for mentioning it in the comments.

    2. tz1 says:

      You assume that there is something proper and normal about forcing people to speculate in the stock market and maybe avoid poverty in their old age. Gordon Gekko’s “Greed is good” is not “Greed is mandatory”, given inflation and the other monetary games.

      I expect the whole lot to resume the collapse that was briefly interrupted, and have no sympathy for those who would join with the financial equivalent of Lot’s wife if not worse.

      Corporations are undead bodies animated by government. They have no soul. Because Dr. Frankenstate can create such monsters, the state can do whatever they want to their undead creature, though the creature often ends up destroying (or worse, corrupting) their creator. You find nowhere in the catechism that a corp(se)oration is given any dignity.

      1. Tom Crowe says:

        “Corporations are undead bodies animated by government.” ?!!? Wow. Just wow.

      2. Joe says:

        tz1. A few points.

        A) Nobody is forced to invest in stocks. If you don’t like them, you could invest in bonds, gold, or any number of other types of investments. People choose to invest in stocks because they have a very good historical record in the long run. Even the “collapse” you apparently celebrate was brief and most stocks have already re-gained their value.

        B) Can you please name which corporation was created by a state?

        C) Actually, the Catechism does seem to recognize the importance of business: “Profits are necessary, however. They make possible the investments that ensure the future of a business and they guarantee employment.” The value of the free market and importance of people to freely join together to do business is further supported in several encyclicals.

  6. Anthony S. Layne says:

    Frankly, I’d like to hear of some form of spending cut or tax whose burden won’t be shifted to the poor and the consumer. At this point, there’s really no question who’s gonna get the shaft; now we’re just debating from which angle the shaft is gonna enter.

    1. Tom Crowe says:

      Spending cuts are indeed the answer. Any tax increase forces the one paying more in taxes to find ways to cover the shortfall, which in the business world means upping prices.

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