Third Party & Independents: Archives

Misha

I would go further. It was in the public interest to raise prices in the face of an interuption of supply and head off a shortage. They are dropping down again. It is a good example of how things are supposed to work.

Many have tried, but no government in the history of the world has succeeded in repealing the law of supply and demand.

Misha, I could not disagree more. Look, Republicans just handed these CEO’s oodles of tax dollar subsidies. I am glad they are upset that these companies are not diverting their profits back into R&D instead of lavishing the huge profits on themselves and their stockholders.

One or the other here. If they want subsidies, they damn well should be expected to invest windfall profits back into areas where they now recieve subsidies. Otherwise, they should have the subsidies pulled and granted no more.

I commend the Republicans for wanting an explanation. What is short sighted by Congress though, is their expectation of receiving an answer from the CEO’s that would give them a clear decision to make one way or the other. Republicans I fear are just putting up a show. If they were serious about representing the public, they would rescind all those subsidies immediately and refuse these companies anymore feeding at the public trough.

But, you see, they aren’t serious. They know which side of their reelection bread is buttered by the energy industry. It’s all a big show, and I am sure the CEO’s don’t mind playing their part to keep the taxpayers and consumers supporting their lofty lifestyles.

David, did you miss the part of the hearings where the execs “surprised lawmakers at a Senate hearing by saying they didn’t need the billions of dollars in tax breaks and energy incentives recently approved by Congress”? For example, Lee Raymand, CEO of Exxon said: “When you add it all up, that energy legislation is zero on how it affects Exxon Mobil.” Exxon made nearly 10 billion dollars worth of profit in the last quarter alone, those taxbreaks and incentives were more to make congressmen feel better by “encouraging” R and D.

So lets take the oil execs. at their word- take away their tax breaks and subsedies and let them charge as much as they want for gas. Also, the government should stop trying to mess with the free market by dropping its completely irrational ban on drilling in ANWR. Symbolism is not a good enough reason to stiffle economic progress.

As for CEO salaries- I do wonder if the Boards of Directors are paying them too much. But even if CEO salaries are reduced by the Boards, the money that is saved (1) will be so negilible that it wont affect gas prices even one cent; (2) should go 100% to the shareholders of these companies and not to consumers.

Misha makes good points (as usual)

Sometimes the government reminds me of that old story of the rabbit and the tar baby. You remember, as he tries to get loose, he just gets stuck.

The government subsides something, which causes it a market distortion. Then it regulates or taxes to bring it into line. Then it has to give a tax break. Then it has to create a surtax then it …

We should just give up subsides and leave the oil firms alone. Absent illegal activities, it is none of the government’s business.

The biggest problem is that our government has a bias toward keeping prices low. Their efforts have worked. That means gas is cheap in the U.S. People have little incentive to conserve. People talk a lot about conservation and the environment. But most people ACT only when it costs them something.

I’m not exactly sure why (other than political allegiance) our leaders have decided that the oil companies are the ones who should receive subsides for developing alternative energy sources. Kind of like putting the fox in charge of finding alternative dinner options. They might bring a few new things to the table, the main course is always going to be chicken (… fossil fuels.)

I like the high gas prices - it immediately creates the demand for other options - new energy alternatives, mass transit, redefining what travel is needed, etc. However, I make enough money to pay higher prices, many others out there don’t…

Another concern I have is that I see the new viable energy source as the economic engine for the next 50 years or more. If we get on the stick quickly, then America will remain an economic superpower. If we wait - and let the oil companies dictate our energy future - then Japan or India or China, maybe Europe will own the new technologies, and they will become the next Middle East (as far as influence in the world) and we will become that latest ‘used to be.’

Drilling in ANWR is not a solution or even a part of a solution. It would take about 10 years for the fields to be productive and at that point even at full capacity would account for only about 2% of consumption. Let prices rise. Even tax gasoline more to encourage conservation. Look north to our neighbor Canada where recent studies have indicated that they have the second largest reserves of crude oil. Help them with research on extraction of the oil from the oil sands areas and lets sponsor a collective to compete with OPEC. We need to conserve. The only way we will is if we are “incented” to conserve. That incent is to make prices high enough where it becomes a positive action to drive less or in car pool or use public transportation. At the same time, if we are going to use government incentives, use them government to government. Have the feds incent states, counties and municipalities to convert fleet vehicles to compressed natural gass or liguified natural gas and invest in hybrid technologies. Like No Child Left Behind, federal highway and transportation funds would be apportioned by compliance. All poorer states time to ramp up, but incent higher populated states for early compliance and adoption of more mass transit. Launch a R&D initiative for development of alternative fuel technologies as well as distribution infrastructure that would reward companies who do so with federal contracts. This would allow the market to continue to work and focus incentive based activies internally to the governmental bureacracies.

As to the oil executives, certainly, they are doing their jobs by increasing earnings per share. You can’t say they are doing something wrong by doing their jobs. Being successful is not against the law as long as you don’t break the law while gaining your success. However, I would remove every subsidy and tax loop-hole they receive. We are funding profits through our lack of attention to their tax holidays. From 2001 - 2003, Exxon, the largest petroleum company in the nation, and highly profitable, received tax breaks cutting 57% of their tax burden. This amounted to approximately $4.5B in tax relief. This is effectively 3 tims the amount of money President Bush pledged in his State of The Union Address for 2003. This is only one company. Conoco Phillips, over the same time, saw their tax burden drop by about $1.9B. The Oil and Gas industry, while cyclical, has achieved strong earnings of at least 7.7% annually.

oops, missed a qualifier..

I said “This is effectively 3 tims the amount of money President Bush pledged in his State of The Union Address for 2003.” I should have addded: “3 times the amount of money President Bush pledge for hydrogen fuel cell research in his State of The Union Address in 2003.”

Not enough coffee yet.

What exactly should these execs have done in the face of a rise in demand for their product?

As I recall, it wasn’t a rise in demand, it was a perceived shortfall in supply of gasoline brought on by the shutdown of oil refineries. Theoretically in such a situation the oil companies are raising prices to compensate for lost profits, so they shouldn’t be making higher profits.

Misha asked: “David, did you miss the part of the hearings where the execs “surprised lawmakers at a Senate hearing by saying they didn’t need the billions of dollars in tax breaks and energy incentives recently approved by Congress”?”

Nope! I saw that as the highlight of the C-Span coverage. All part of the show. Makes the CEO’s appear responsible toward tax payers, while Senators conducting the hearing also appear responsible to the taxpayers for conducting the hearings. Did you notice the absence of any of our Republican representatives shouting “FINE! Then we will rescind all the subsidies”. Not a single one willing to bite the hand that feeds.

Like I said, it was all a big show designed to confuse and obfuscate the real issue, which is that Incumbents insist on maintaining the bribery relationship with Energy companies where reelection donations are concerned. Democrats, who have seen their Energy industry campaign donations dwindle with each election cycle since 1992, have little to lose, thus, Feinstein was willing to approach the issue head on of cutting the subsidies altogether. Not that Feinstein is altruistic. It’s just that her constituents and campaign donors are still smarting from the Enron debacle that ripped Californians off again and again with costs that just kept growing.

Jack, your intent is in the right place taking the Libertarian “leave em alone” position. The problem with that however, is as Tony said, our future depends upon the actions of these mighty giants whose actions can halt or speed our nation’s growth in the future. In light of the fungible nature of energy products and world markets, are you really so trusting of energy companies to decide in favor of America’s future growth and well being when so many incentives potentially exist to make decisions that would work in the opposite direction?

Chevron/Texaco, Shell, BP, and the others are suppliers to the world, they have global customers, suppliers, distribution companies and shareholders. Can they (BP excepted) be trusted to remain American, watching out for Amerian interests and America’s future when shareholder interests dictate otherwise? The stockmarket crash of 1929 would indicate otherwise.

David

Many things caused the depression following the stock market crash of 1929. The stock market crash was an indicator, not a cause.

The treaty of Versailles, with its reparations clause was the biggest cause. It set up an unrealistic financial regime. Then we had protectionist legislation (Hawley-Smoot tariff) that interfered with free trade and investment. Finally, the Federal Reserve tightened money at time when we needed liquidity. In those days of the gold standard, we kept the gold in the vaults backing less money. You’ll notice that none of these factors have to do with the greed of shareholders or the actions of private firms.

Jack, and if it weren’t for the first amoeba, there would be no human race either. Yeah, yeah, for any event in history we all know there are many “Connections” and a host of variables. Clever dodge of the issue, Jack.

The fact remains, we saw a tech bubble in 1999 and 2000 that replicated what happened in 1929. Greed is the prime mover of stock markets as well as sharefholders who hold the keys to CEO’s keeping their jobs. Greed, not patriotism, Greed, not long term national planning, Greed, not concern for fellow citizens, underpin the actions of the energy companies and the stock markets. And I suspect you damn well know that was the point I was making. Like I said, clever dodge of my point.

Jack and Misha above, define why I could never support a Libertarian majority in government. Their views are premised on the belief that greed should be the ultimate determinant of what America is, and how it should be run.

As if that wasn’t already so true as to be damaging our future already. Just look at greed as the prime mover between politicians and special interests which undermine America’s present and future. They won’t admit it, but, Jack and Misha’s arguments indicate that this is a good thing!

I guess the libertarians wouldn’t mind if collusion was occuring between the handful of global oil companies that have a stranglehold on the world’s energy. It might be a good way to explain the massive profits across the board for these companies, but doing anything to prevent it would violate the goals of a libertarian, eh?

David

One or the other here. If they want subsidies, they damn well should be expected to invest windfall profits back into areas where they now recieve subsidies. Otherwise, they should have the subsidies pulled and granted no more.

How about they just pull subsidies?

If they were serious about representing the public, they would rescind all those subsidies immediately and refuse these companies anymore feeding at the public trough.

But then they wouldn’t get their campaign donations.

The business of government ISNOT business. The governments role in this country is outlined in the Constitution. I haven’t seen one thing in it that says that the government should be involved in business. That means no subsidies, regulaton, or other meddling with business.
It’s time for the government to get out of business and get down to the business that the Constitution gives it.

David

Our country has been the most successful in history because it takes people as they are, not as we want them to be. When we are realistic, we actually get people to do a lot of good things (like Bill Gates, as I wrote on the other page). The idealists get people killed (Stalin, Hitler, Pol Pot were all idealists.)

I don’t believe greed is good, but I know it exists. When we take people as they are, we match greed against greed and ambition against ambition and we come up with a workable system.

The tech bubble was a good example. I lost little. I never understood how it was possible to make money with some of those firms, so I didn’t buy them. It turns out the reason I couldn’t understand them was that there was nothing there to be understood. Greedy people bought in even though they must have come to similar conclusions. When the thing went south, they lost their money. Too bad for them. The economy did not collapse. Some people (we hope) emerged sadder but wiser.

And in all the tech bubble were some good firms with good ideas. The alternative to letting this work itself out would be to regulate it. Then you get a France (if you are lucky) and a Soviet Union (if you are not).

The trouble is that it is near impossible for government to tell what is greed and what is innovation. ALl it can do is stop both.

Ron, how about the commerce clause?

Burt, you hit the nail on the head.

Jack, pit greed against greed, etc.? Sounds like a prescription for anarchy. Adam Smith talked about greed, and he separated the concept of greed from another he called “enlightened self-interest”. Enlightened meant not killing the society from whence one receives one’s gains.

Sorry, Jack, your laissez faire language sounds like anarchy to me, as does so much of Libertarian and Republican philosophy based on top dog gets the spoils and everyone else eats …, well, you know.

The whole concept of laissez faire has one inescapable flaw. Modern corporate America is driven by short term returns, and abhors long term investments. Yet, our society and technological advancements absolutely require long-term planning and strategy in order to surmount many of the difficult problems we face, and have been facing for a very long time.

Globalization effects on American workers, security, and retirement being just one for example. There are no solutions, because laissez faire rules the Congress, Whitehouse, and corporate America. Little long term planning, just short term investments, hedges, and profits governing our future. GM, Ford, and Chrysler are all in or headed for bankruptcy, renigging on their pension plans, and why? No long term planning and investment, which is allowing foreign corporations which have learned the lessons of long term planning and investments as in Japan, S. Korea, India, Malaysia, and China to clean up on market share when American corporations like the Big3 utterly fail to anticipate future trends, for chasing their short term plans and profits.

Ok, you got me there David.
Would you agree that there’s to much regulation? When the government starts to try micromanage commerce, they’re going to far.

Ron, I don’t see how the government can set any hard, fast, and lasting rules about regulation of commerce and industry, especially in these times of such rapid changes in the economy, markets, and private enterprise corruption and abuse of public investors.

I think regulation must balance the need for as free a capitalism and enterprise as the public trust, shifting economic conditions, and justice will allow. When Ford refuses to recall Pintos which are known to burn their occupants to death upon rear end collision, preferring to pay the lesser cost of settlements with survivors, then yes, the Government needs to step in.

When Enron bilks the entire W. Coast populations out of manipulated and artificially created higher energy costs, then yes, the Government needs to step in and regulate.

There are many such examples, Savings & Loan debacle, dangerously marketed pharmaceuticals, and environmental degradation which impairs whole communities health for just a few more.

The Consumer cannot be expected in today’s complex markets, and advertising culture, to observe caveat emptor with each and every purchase they make. There is just too much that can and too often is, deliberately hidden from the public regarding business products and practices.

It is one helluva job to try to balance the Greed that drives enterprise against regulation which increases costs of living for consumers and tax payers. But, there is no other entity with the power to try to manage that balance than the Federal Government. It’s like asking trapped victim in building fire if they would like to choose to die, or breath the smoke filled air for awhile until they can be rescued. When there are no other alternatives that would present a better result, one has to accept the limitations of the situation.

In this case, regulation by federal government will always be out of step with the needs of the business and consumer communities, but, monitored regulation is a damn site better than none at all, which would seed reprisals by consumers in the name of justice of the violent kind seen in India in response to the American Chemical Plant Explosions. American consumers didn’t blow up Ford Motor Co, or burn Savings & Loan buildings precisely because the Government acted in their stead to halt the abuses, bring those responsible to justice, and regulate the industry in a fashion that would prevent people from losing their life’s savings at the hands of speculators and greedy S&L officers and owners.

I wish gas was $10 a gallon. The demand for fuel efficient vehicles would increase, fostering a cleaner environment.

I’d appreciate if someone could explain the economics of Oil prices to me.

This is my understanding of it, based on my rapidly diminishing knowledge of Econ 101. So when there’s a supply shock, the supply curve moves to the left, which means higher prices and lower output. Profits may either increase or decrease depending on whether or not the additional income from higher prices outweighs the decreased income from lower output/consumption.

My take on the Katrina shock is this: it *appears* that the Oil companies took advantage of the public and got away with raising prices more than was appropriate in the short term simply because they had an excuse to do so. For at least a few weeks, they knew they could get away with much higher prices and just explain it away with “uhhh, Katrina made me do it.” It was this short term gouging that led to record quarterly profits.

Now I’m not just some whackjob socialist liberal, and I do believe in the theory behind free market economics, but the fact is that the market is not “free” when it is being supported by the government. If an industry is government supported, I believe that support comes with certain strings attached (i.e. an obligation to the public).

My feeling is that during a shock, Oil companies should not be able to gain excess profits. They should attempt to raise prices to a level that will return normal profits. Any additional profits ought to then be re-invested in infrastructure. Wouldn’t this be a reasonable solution? Can’t someone introduce a bill along these lines?

I understand that businesses have a right to make a profit, but when that business is government supported I don’t believe it’s too much to ask to control their short term ability to turn bigger profits during a shock. They reap major profits much of the year — they should be willing to yield to the public interest in times of need.

Is the economic theory behind my argument correct, or am I off base?

elected politicians. Trying to respond to the public clamor over high gas prices,

It isn’t the public clamoring over high gas prices.
They have aready come down below 2 bucks a gal.
it is the media trying to improve their ratings and way behind the public as usual.

Andrew:

I’m either as dumb as you are or as smart as you are. What you said makes sense to me. I’m willing to those who are either dumber or smarter than us to see if they have a different take on it. But I’m with ya, man.

As for CEO salaries- I do wonder if the Boards of Directors are paying them too much. But even if CEO salaries are reduced by the Boards, the money that is saved (1) will be so negilible that it wont affect gas prices even one cent; (2) should go 100% to the shareholders of these companies and not to consumers.

Into the pockets of the workers breaking their backs would be more noble.

I wish gas was $10 a gallon. The demand for fuel efficient vehicles would increase, fostering a cleaner environment.

Might be a little extreme, but I agree, we are long overdue to become a more energy efficient nation. What’s up with the Hummer sales anyhow?

it is the media trying to improve their ratings and way behind the public as usual.

Huh? I just don’t follow this.

Andrew & Joebagodonuts,
Close; however, it is the Market that sets the price at the pump. My take on Katrina was that the Market went nuts when the first reports came out about the damage to the pipe line. Without any real information speculation and hording began to occur. This unchecked behavior from the federal regulators by the Market and the unknown damage to their American System jammed the Oil Executives. Keep the price low and run out; this, creating an oil shortage or rapidly raise the prices until the demand curved to a manageable condition. Bad idea especially if you are old enough to remember the oil embargos of the 70’s to lose supply of a commodity. My question is were was the federal oversight of the Market to keep speculation at bay. A proper timely response from the Fed would have been to shut down trading until the damage on the market could have been accessed. Although not a perfect solution, if anyone should take the heat for exercising caution on the impact to the Market it should be the Fed.

True, “We the People” need to have a serious talk to the oil companies as well as the rest of the market and the Congressional Hearings is only the beginning. It should serve as a wake up call for all Americans that times are once again a changing and this time we need to have everybody getting their head involved in the game of life.

David, terrific posts — all of them.
AndrewL — excellent points.

Has anyone noticed how quickly and wildly gas prices change. Day to day and gas station to gas station?

That’s because each company has a supercomputer that’s been programmed to maximize the profit seen by that company. That means they survey what’s being charged by the stations, how much is being sold by the stations, and what’s being charged by the company to the station. Put that into a massive simultaneous equation, combine it with historical data, and you get some of the most accurate price-profit curves ever created.

The price increases were similar to a massive computer generated sell on Wall Street. It was a “naturally” occuring event. Prices went up, profits went up, prices went up more, people still bought gas, profits up more, prices up more… until..BooM! $10B later someone pulled the plug on Collosis. For a little while, anyway.

HAD THE GOVERNMENT imposed a $1 a gallon additional tax on gasoline prior to the sharp rise in prices, it would have (a) wiped out the effect of the Bush tax breaks and resultant deficits, and (b) would have also pre-empted the gas companies from imposing more and more price hikes because then gas would have been obscenely high and consumers would have revolted, causing Congress to force the gas companies to back down. But Congress doesn’t even dare discuss this option.

Yes, because higher taxes on products bought primarily by individual consumers would not harm them at all. To give an easy refresher course on why these hearings and all this outcry is a total sham- let me quote this great exchange between Senator Domenici and Exxon CEO Lee Raymond:

Domenici:
“I expect the witnesses to answer whether you think your current profits are excessive and to talk about what they intend to do with the reserves and the profit accumulations that they have.”

Raymond:
“The price is set on the world market by willing buyers and sellers, as to what willing sellers are willing to sell it for and willing buyers are willing to pay for it.”

I cant believe this actually goes on in our Senate. What a sham- both the Republicans and Demcorats should be ashamed of themselves.

And Domenici is a Republican. I guess they have surrendered too. Long live big government!

Misha, I can believe it. Been watching this crap on C-Span for years.

Time to vote the incumbents out, and keep voting them out until those remaining and the freshman get the message. Americans are buying it anymore. We want real life solutions, not lip service at election time.

All this discussion about the economics and politics of oil, price-gouging and made-for-TV-drama via the Senate is all well and good. David’s point about the unreliablity of capitalism’s planning for the mid and long-term future is what concerns me. Whether free markets are really free when they’re so heavily subsidized by the government is perhaps a point worth discussing further. I’m no economist, but I am a reader, and there are respected voices in petroleum geology and elsewhere that are convinced that we may be going through peak oil; not the end of oil, but the end of cheap oil. A number of people I’ve read (James Kunstler and Walter Youngquist among others) believe there is no soft landing from our dependence on oil to some other alternative fuel—ANY other alternative fuel. We have not done the necessary research, made the hard choices and made the necessary sacrifices to make that soft landing possible. We have taken the easy way out, without making any real hard choices about our future energy needs and how we can realistically meet them. The world’s expoential hunger for oil is unsustainable. Period. And the potential for economic crisis of catastrophic proportions is looming. That there will be wars over resources seems a given—and perhaps Iraq is a preview of coming attractions. Everyone of any consequence that has looked into this issue agrees. The window of time for doing anything realistic about this potential civilization-ending problem is fast closing, and indeed, may have already closed. Fit that into your capitalist, free-market portfolio.

Excellent comments and observations Tim Crow. We have a mixed economy, one in which capitalism drives creativity and economic activity, and social policy enacted by government helps insure that all citizens of the nation are not dropped and lost between the cracks of capitalism’s latest zig or zag toward new profitability or entrepreneurial activity. This mix was the paradigm that created the largest middle class of consumers in a society ever known in human history, and accounted for the US becoming the most prosperous and dominant economy in the world today.

It was an optimal balancing act between social policy and regulated capitalism that accounted for the greatness that was the latter half of the 20th century. But, today, Conservatives want to destroy that balance in favor of unregulated capitalism and Democrats want to destroy that balance in favor of greater and bigger government assistance and intervention into the public sector.

The polarization of these two dominant parties is as you adroitly point to, leading America down the path toward its own demise. Voters can change this self destructive scenario by restoring humility upon both parties by voting their incumbents out of office election after election until the parties come to their senses. Nothing so motivates a politician to serve the people’s interests as the threat of not being reelected.

But with more 90% of incumbents being reelected because 1/2 to 2/3 of the eligible voters won’t show up to vote them out, they have no fear of the voters and therefore, no respect for the needs and demands of the American citizenry. It can be changed. Register, vote, and make absolutely sure your vote is for anyone BUT the person running for reelection. Vote Out Incumbents for Democracy restoration and put an end to government by and for the highest bidder.