Windfall Profits for Dummies

Remember this simple truth -- To decrease price of an item you increase supply of that item, regardless what it is. Doubly true of a commodity like oil.

In case you missed Democrat Jimmy Carter I, here is a preview. Jimmy Carter was the original 'windfall profits' taxes will fix everything guy. He put them in, took those evil oil companies money and then ... well then he had to put the federal government in the gas distribution business, then the refining business, then the rationing business. Before long nothing worked. Everything depended on oil, and ole Jimmy he got it so screwed up, nothing in the economy worked anymore. Interest rates shot up to 20+%, no one was borrowing because they couldn't pay it back -- If you couldn't get to your job and your customers couldn't get to your goods, what was there to do -- But wait in long lines for your five gallons gas rations, at least as long as your designated station had gas.

Here is the WSJ preview of what next for America -- Everything that is old is now new again. Yeah sure it is.

This is one strange debate the candidates are having on energy policy. With gas prices close to $4 a gallon, Hillary Clinton and John McCain say they'll bring relief with a moratorium on the 18.4-cent federal gas tax. Barack Obama opposes that but prefers a 1970s-style windfall profits tax (as does Mrs. Clinton).

Mr. Obama is right to oppose the gas-tax gimmick, but his idea is even worse. Neither proposal addresses the problem of energy supply, especially the lack of domestic oil and gas thanks to decades of Congressional restrictions on U.S. production. Mr. Obama supports most of those "no drilling" rules, but that hasn't stopped him from denouncing high gas prices on the campaign trail. He is running TV ads in North Carolina that show him walking through a gas station and declaring that he'll slap a tax on the $40 billion in "excess profits" of Exxon Mobil.
[Barack Obama]

The idea is catching on. Last week Pennsylvania Congressman Paul Kanjorski introduced a windfall profits tax as part of what he called the "Consumer Reasonable Energy Price Protection Act of 2008." So now we have Congress threatening to help itself to business profits even though Washington already takes 35% right off the top with the corporate income tax.

You may also be wondering how a higher tax on energy will lower gas prices. Normally, when you tax something, you get less of it, but Mr. Obama seems to think he can repeal the laws of economics. We tried this windfall profits scheme in 1980. It backfired. The Congressional Research Service found in a 1990 analysis that the tax reduced domestic oil production by 3% to 6% and increased oil imports from OPEC by 8% to 16%. Mr. Obama nonetheless pledges to lessen our dependence on foreign oil, which he says "costs America $800 million a day." Someone should tell him that oil imports would soar if his tax plan becomes law. The biggest beneficiaries would be OPEC oil ministers

Oh yeah, in case you don't know, it's called by a proper name, Marxism -- Government control over the means of production. This includes healthcare.

Enjoy.

And this picture, for the reading challeneged is all you need to know. Add it up.