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Rex in Regno suo superiores habet Deum et Legem.

The King in his Realm hath two superiors: God and the Law. -- Henry Care (1646-1688) on English liberties and the Magna Carta


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Ancient History

|eCOnoMICS | Prudence Potpourri

Flashback: Big Movie v. Tax-Happy Congress

The debt ceiling negotiations are falling apart because Obama and the Democrats are demanding tax hikes—and not just tax hikes on “the rich,” which includes thousands of small businesses, but also on corporations—instead of solving the reason why we have such a debt crisis: Washington can’t stop binge spending and making promises to spend even more.

A couple days ago, Glenn Reynolds, aka Instapundit, suggested Republicans ought to propose tax hikes on a solidly liberal industry and listen to the ensuing squawking of the plucked chickens:

WANT NEW SOURCES OF REVENUE? If I were a Republican member of Congress, I’d be proposing big excise taxes on movie tickets, DVDs, CDs, digitial movie and music downloads, etc. Then let Hollywood scream about how the tax increase would destroy American jobs. . . .

The Professor might not be aware that Congress already tried it before, and it nearly destroyed Big Movie. It’s a prime example of how Washington’s insatiable thirst for money ruins private industry, eliminates jobs and ultimately, reduces the amount of tax revenue they would have received if they would have just left everyone alone.

Amazingly, Big Movie suffered under a heavy tax burden for six long years before they came out fighting with this excellent piece of propaganda in 1953:

After WWII, Congress was hungry for money, and they slapped a 20% admissions excise tax on the gross revenues of movie theaters. (That’s skimming right off the top before anyone else gets paid.) As illustrated in the film, this had an immediate and pernicious effect on the industry, just as they were struggling to learn to compete with the burgeoning television industry.

When they’d finally had enough, they produced this film. Note how they call out to individual Congressmen and cite how many lost theaters they have in their districts. [Rep. Dingell! That Michigan district has never learned.]

Got to love the humble “picture exhibitor” that details his meager salary in comparison to the excise tax being taken right out of the mouths of his family. The widow struggling to keep the theater going after her husband died.

The whole film is filled with folksy, down-to-earth people no central casting could ever find. Just good folks wanting to run their business without having to carry Washington on their backs.

Now when you hear your congressman or Senator or President talking about how certain industries deserve to have to pay more, think of this film and all the real-life people down the line that those new taxes are going to hurt.

Update 7/23/11

Welcome, Instapundit readers! (Thanks for the link, Professor.)

Update 7/18/12: The eagle-eyed and tax-adverse Professor Glenn Reynolds, aka Instapundit, called it to my attention that the above video had been removed. After a little research with the ever-excellent Media Research Center, I found the removal was due to a technical error. MRC quickly restored the video so we can once again shine the bright light on the “unintended” consequences of congressional meddling in business.

(Special thanks to Stephen Gutowski, aka @collegepolitico, for his help. MRC does great work—not only in keeping an eye on American journalism, but also in offering a video service alternative to YouTube and its evil overlord Google.)

|eCOnoMICS | Prudence Potpourri

Gas vs. Hot Air

Recent news is filled with stories on gas prices and the Obama administration’s laughable claims to be trying to prevent the rise instead of causing it.

The Business and Media Institute finds that:

The average price for a gallon of unleaded gasoline hit $3.86 on April 25, more than $1-a-gallon higher than a year earlier and less than 25 cents away from the record high price of gasoline set in July 2008. In fact, per gallon prices are more than $2 higher than when Obama took office Jan. 20, 2009. [emphasis mine]

Yet, despite this doubling of the hit on the American pocketbook, the Business and Media Institute also finds that:

…out of the 280 oil price stories the network evening shows have aired since the 2010 Deepwater Horizon oil spill, only 1 percent (3 stories) mentioned Obama’s drilling ban or other anti-oil actions in connection with gasoline prices.

Such devoted protection permits Obama to maintain a straight face as he devotes his weekly YouTube address to his administrations war on high gas prices, during which he said:

On Thursday, my Attorney General also launched a task force with just one job: rooting out cases of fraud or manipulation in the oil markets that might affect gas prices, including any illegal activity by traders and speculators. We’re going to make sure that no one is taking advantage of the American people for their own short-term gain. And another step we need to take is to finally end the $4 billion in taxpayer subsidies we give to the oil and gas companies each year. That’s $4 billion of your money going to these companies when they’re making record profits and you’re paying near record prices at the pump. It has to stop.

While we’re at it, Mr. President, let’s also end all subsidies to ethanol and pie-in-the-sky technologies. The title of Obama’s address was “Instead of Subsidizing Yesterday’s Energy Sources, We Need to Invest in Tomorrow’s,” in which he chastises us, saying we need to move away from that nasty old ancient oil energy and into “clean, renewable energy.” We’ve heard it all before, yammer yammer yammer, but what, pray tell, is a renewable energy source that would power a car? If someone’s got an idea, let them develop it. Quit throwing away taxpayer dollars in an effort to fulfill the left’s ill-formed, economy-crushing fantasies.

The bold text in the partial speech transcript above is my emphasis. The very fact that he dared to use that language at all is clear evidence of his gob-stopping hubris and firm confidence in the suckerhood of the American people. If anyone is trying to manipulate the gas price crisis for short-term gain, it is Mr. Obama himself. He’ll apparently say anything (but do nothing effective) to secure his short-term goal of reelection—especially since a new Washington Post-ABC News poll showed that:

…60 percent of independents who say they’ve been hit hard by surging gas prices also say they definitely won’t support Obama in his bid for reelection.

In a hypothetical matchup with former Massachusetts governor Mitt Romney, the top GOP performer in the Post-ABC poll, Romney wins by 24 points among the independents who have taken a severe financial hit because of gas prices, and the president is up 7 percentage points among other independents.

Jennifer Rubin at the Washington Post hit the nail on the head when she compared Obama to O.J. Simpson, a man obviously guilty of the crime he committed, but pledging to forever spend his days searching for the cocaine cartel killers that are behind what he pretends is the inexplicable rise of gas prices:

The president’s search for the bad guys reminds me of O.J. Simpson’s search for his ex-wife’s “real killer.” In fact, there is no bogeyman in the oil industry; to the extent there is market distortion it is of the administration’s own making.

In his American Thinker essay “Gasoline Prices and Speculators: They Think You Are Stupid,” Joseph Svetlic explains the sleight of hand that Obama and Holder are using to obfuscate the identity of the true perpetrators of the crime while claiming to hunt for the spy-novelesque ones:

This spendthrift, loose (and reckless) policy [of running up $4 trillion in deficits and monetizing our debt] is also reflected in the price of gold and silver, which are historical safe harbors from inflation because (as precious metals) they store value and are never worthless. Gold as of this writing was over $1,500/oz, silver over $46/oz. Gold at the beginning of the Obama Administration was just over $850/oz, silver at under $11.50/oz. Just this month, the price of silver skyrocketed from $40/oz to $45/oz in only 12 days. The loss of confidence in the dollar has been striking.

So, they are hoping that you don’t pay attention to their fiscal and monetary policy. They want you to blame nameless, faceless “speculators” for the rise in the price of gas, even though everything else has risen, thanks to their loose monetary policy and spendthrift fiscal policy. They want you to ignore the rise in commodity prices and the drastic hike in gold and silver. They think you’ll go after the nameless, faceless “speculators” because they think you are stupid.

Put another way, our dollar “Federal Reserve notes [have] collapsed to less than a 1,500th of an ounce of gold.”

The Gateway Pundit points to another factor in “As Gas Prices Reach $4 Per Gallon, the Obama EPA Forces Shell to Abandon Arctic Drilling”:

In December the Obama Administration issued a massive new ban on offshore oil drilling in the eastern Gulf of Mexico or off the Atlantic and Pacific coasts. Now Shell Oil has announced that due to Obama’s radical EPA, they will be forced to stop drilling off the coast of Alaska. A village of 250 people 70 miles away may be harmed by emissions.

Gateway’s post quotes a Fox News story that says “Shell has spent five years and nearly $4 billion dollars on plans to explore for oil in the Beaufort and Chukchi Seas. The leases alone cost $2.2 billion.” The story concludes:

The EPA’s appeals board ruled that Shell had not taken into consideration emissions from an ice-breaking vessel when calculating overall greenhouse gas emissions from the project. Environmental groups were thrilled by the ruling.

America will lose all that oil production because of the greenhouse gas emissions from an ice-breaking vessel? Oh my. How masochistic and self-loathing we are acting.

But Victor Davis Hanson, in a must-read round-up of the spectacularly abysmal failures of the first two years of the Obama administration, points out the real person to blame for our gas prices:

If one were to collate Obama’s campaign rhetoric (bad coal companies would be “bankrupt” under his envisioned cap and trade plans, energy prices would “sky-rocket”) with that of Secretary Chu’s (“somehow” American gas prices should climb to European levels; we should be worried about our abundant fossil fuel resources that can “cook” us), then the present climb to near $5 a gallon gas is what the president and his energy secretary once thought would be salutary — a sort of Europe U.S.A. After all, we Americans in our ridiculous pick-ups and SUVs (remember the president’s advice to the questioner concerned about fuel prices to trade in his gas-guzzler, or perhaps his earlier advice to inflate our tires in lieu of off-shore drilling) sort of got what we deserved.

Well, we got what we deserved by daring to think we could maintain our current standard of living (and our current beloved vehicles) and vote for Barack Obama for president.

Who Profits More From a Gallon of Gas? Source: Obama and Energy Secretary Stephen Cho

We only have to turn to the Obama administration itself, the U.S. Energy Information Agency (EIA), to learn that, actually, it’s not evil Big Oil that makes the most profit off of a gallon of gasoline. Their sliver of profit can’t compare to the pure profit, no-risk, straight-off-the-top profit that the federal and state governments take.

According to the EIA, in February 2011, “Federal excise taxes were 18.4 cents per gallon and State excise taxes averaged 22.44 cents per gallon.”

To obtain that hefty share, the governments don’t have hunt for oil or drill, and they they don’t have to transport it or market it or operate the gas stations or withstand the abuse that President Obama himself heaps on Big Oil for simply bringing a much-demanded product to market.

No, government simply has to stick its hand out. Voila! Profits skimmed. The companies get to risk everything, work hard, pay employees and suppliers and the IRS to earn their 7% share of a gallon of gas—before any of their expenses are deducted to arrive at these “massive, unfair” greedy profits the Left bellyaches about. The government gets to waltz in and barely lift a finger to sweep 12% off the table. Exactly how did they determine that this is their “fair share”?

This government-produced fact annoys the Left. Even the “non-partisan” (wink, wink) Annenberg tries to beat back the exoneration of Big Oil, but at best, in response to their own question “Does the government really make more in taxes from the sale of a gallon of gasoline than the oil companies do?” they could only say “Possibly.” And even that is a biased waffle.

Annenberg’s fact check scours the resources to find damning evidence against Big Oil. The most they can come up with is to quibble over semantics:

A publication from the American Petroleum Institute, the industry’s principal lobbying arm, displays a graphic stating that “taxes” made up 15 percent of the price of gasoline at the pump in 2007 (that figure comes from EIA) and showing a figure for “earnings” (a measurement API prefers to straight “profit”) of 8.3 percent. This figure is the average earnings for the industry per dollar of sales. [emphasis mine.]

Notice how Annenberg prefers the greed-laden liberal code word “profit” over the more neutral, unbiased term “earnings.” And then they climb out further on a rotten limb:

On closer examination, however, that 8.3 percent earnings figure turns out to be after-tax income. The pre-tax profit margin would be considerably higher.

Source: and Congressional Research Service

Clearly this “fact check” wasn’t written or edited or approved by anyone with any business experience. Why would they insinuate that the oil companies are hiding profit by trying to use the actual profit amount, which includes the portion that they can actually put in their shareholders’ pockets (including many union pension plans and liberal IRAs)? Who would say they have to use the profit margin before the government forcibly removes part of the profit? Why not say they should use gross profit? If we are trying to make oil companies look bad, who cares that they have to pay expenses. They made money to pay those expenses, or so the Annenberg argument goes. That is the argument of an accounting illiterate.

They do, however, concede that the government take is even larger than the infographic makes out:

And even these figures don’t account for income taxes that the companies pay on their profits. Those taxes would drive the tax total higher yet, but we know of no authoritative source that has attempted to break down how much income tax should be allocated to each gallon of gasoline.

And more bad news when assessing just who is more evil, Big Oil or Big Government:

State and federal excise taxes are generally fixed at a certain number of pennies per gallon, so as the price of gasoline rises, the percentage paid in excise taxes goes down. As shown in this breakdown, state and federal excise taxes made up 32 percent of what motorists paid at the pump in January 2000, when the average price for regular was only $1.29.

Despite the Obama administration’s best efforts to appear to be combating rather than producing high gas prices, the Washington Post–ABC News’ latest poll (referenced earlier) finds that Americans are not buying it:

About six in 10 respondents said they had cut back on driving because of rising fuel prices, and seven in 10 said that high pump prices are causing financial hardship.

Obama, like previous presidents in times of high oil prices, is taking a hit. Only 39 percent of those who call gas prices a “serious financial hardship” approve of the way he is doing his job, and 33 percent of them say he’s doing a good job on the economy.

Brian Johnson, a senior tax advisor at the American Petroleum Institute (API), says that the oil and gas industry makes only about 5.7 cents for every dollar of sales, whereas all U.S. manufacturing earns a higher average of 8.5 cents. In this era of Obama claiming to be singularly focused on “jobs, jobs, jobs” while doing his best to slash them in every industry, Johnson sums up the critical contributions the oil and gas industry makes to our economy and our livelihoods thusly:

U.S. oil and natural gas operations are intricate and complex, but the facts are simple: America’s oil and natural gas industry supports 9.2 million jobs throughout the economy and 7.5 percent of our GDP. Its companies provide higher-than-average wages — approximately $98,000 a year for an upstream job — and help ensure our nation’s energy security. In the process, they generate tax revenues from operations and sales of products that contribute billions every year to federal, state and local governments.

And yet, Johnson notes that the price the oil and gas industry pays to make these contributions to American jobs, energy and security is grossly underreported:

Further, U.S. oil and natural gas companies pay considerably more in taxes than the average manufacturing company. According to data found in the Standard & Poor’s Compustat North American Database, the industry’s 2009 net income tax expenses — essentially their effective marginal income tax rate — averaged 41 percent, compared to 26 percent for the S&P Industrial companies. The Energy Information Administration (EIA) concludes that, as an additional part of their tax obligation, the major energy-producing companies paid or incurred over $280 billion of income tax expenses between 2006 and 2008.

The U.S. oil and natural gas industry also pays the federal government significant rents, royalties and lease payments for production access — totaling more than $100 billion since 2000. In fact, U.S. oil and natural gas companies pay more than $86 million to the federal government in both income taxes and production fees every single day. In addition, since 2000, the industry has invested almost $1.7 trillion in U.S. capital projects to advance all forms of energy, including alternatives, while reducing the industry’s environmental footprint.

I’m not one to promote lobbyist information, but as American consumers are unlikely to hear much of the oil and gas industry’s perspective in the mainstream media, see their website.

So, I say, enough already, Mr. President. Quit attacking Big Oil. End the moratoriums on drilling. Make it easy for America to exploit its vast resources, including oil. Don’t let Cuba and Brazil go and suck up our oil. Get out of the way of American self-reliance. Quit killing jobs and raising prices.

In the meantime, until President Obama wakes up (not likely in our lifetime) or we get a change in administrations, Americans can do their duty by refusing to let lefty tactics intimidate them into driving Flintstone-era vehicles.

Iowahawk shows one way to celebrate the proper burning of fossil fuels and production of CO2 with photos from his annual Earth Day Cruise-In. Check it out for some cherry rides rumbling across the heartland. [Hey, David: I celebrated by getting new spark plugs, wires and ignition coils so I can guzzle that much more refined petroleum in my big V-8. No more of that sputtering conservation for me! (Don’t worry, lefties. I also had my tires properly inflated.)]

Best of all, Greg Hedgepath at has come up with a brilliant conservative guerrilla Gas Economics Awareness campaign: what he likes to call the The Gas Pump Hope and Change Sticky Note Campaign. No red-blooded American vehicle should be without a sticky-note pad and bold marker at the ready.

Atten-hut, troops. Forward, drive!

UPDATE: A link I’d meant to work in from Sweetness and LIght from last year: “Cuba to Drill for Oil Off of Key West, Florida”