"Senate Democrats are watching closely—and already working on a windfall profits tax," Sen. Liz Warren (D - Mass.) tweeted last week. Democrats working on a new tax, this time on oil and gas, what a shocking surprise.
Putin's war is causing gas prices to rise, but this is no excuse for large oil companies to pad their bottom line with war-fueled profits.— Elizabeth Warren (@SenWarren) March 8, 2022
Senate Democrats are watching closely — and already working on a windfall profits tax. pic.twitter.com/J5pwkLrgrd
If you’re like me, there might be a handful of people who, despite your best efforts, you find just “aren’t in your tribe.” They’re the kinds of unctuous, nefarious characters whom you wouldn’t trust to sit beside you for a powwow and “smoke the proverbial peace pipe” (something I literally wouldn't do, anyway.) They’re the kinds of people for whom one feels a compelling, natural, dare I say, “native,” vibe of distrust.
Far be it from me to guess that you, too, feel this way about Massachusetts Senator and famous “Native American Indian” Liz Warren, but perhaps this story will nail down that vibe.
As Reason’s Ronald Bailey points out, the schoolmarmish tribeswoman has taken to the airwaves to, again, spout elitist economic nonsense, this time, in part to respond to populist complaints of high gasoline and energy costs, and in part to deflect from the Biden Administration and Congress's responsibility for these high prices.
Appearing on MSNBC with the sycophantic Andrea Mitchell, and Tweeting about it so that lots of masochists can torture themselves by watching, Warren first made sure she injected the fallacy that these many months of high prices are Vladimir Putin’s fault:
Putin's war is causing gas prices to rise, but this is no excuse for large oil companies to pad their bottom line with war-fueled profits.
And in the video, she tells Andrea:
Look, we get it -- supply and demand – that prices go up. But profit margins should not go up.
As I have discussed in economics classes – the kinds of "basic" classes that, evidently, Senator Warren never attended – not only is this not her call to make on a moral level, as far as economics is concerned, higher profits are the essential signal potential entrepreneurs need to enter certain fields, to increase supply, to increase competition, invest in research and development, and, eventually, bring down prices through things like productivity gains.
But the Biden Administration has strangled oil and natural gas supply and dashed hopes for greater supply -- first, by killing the extension of the Keystone XL Pipeline project on his very first day, then, shortly thereafter, halting new federal drilling leases on lands the feds aren’t constitutionally supposed to own, THEN by mandating that all truckers and ocean shippers entering or reentering the US must be jabbed with an mRNA injection.
Couple that with the “printing” of so many worthless Federal Reserve Notes (erroneously called “Dollars”) since the start of the 2020 “pandemic mania” that 80 percent of all US currency in circulation today was created in the last two years (total in circulation as of November, 2021 was $20.354 trillion) and Liz has a potent recipe for explosive prices.
But, based on her statements, she wants to make things far, far worse. Almost as if she and her leftist pals want to jack up the cost of fuel oil and natural gas to a level that will make wasteful wind and solar “power sources” look price-competitive.
Warren’s powwow with Mitchell continued, with Warren telling the “journalist” hostess:
That’s just oil companies gouging.
Really? Is this tax-fed parasite going to tell ANYONE what "gouging" is?
Again, as I have mentioned to students, the term “price gouging” is not only subtly slanderous, it is inapplicable in economics, because supply and demand always fluctuate, prices are measured by new market participants according to their subjective goals and values (meaning that each person determines what is a lot to pay, or a little), and then, those higher profit margins, as mentioned earlier, signal providers to bring in more supply or signal consumers to use less and/or turn to an alternative (again, the possibility that these leftists WANT fuel prices to rise comes to mind.)
In Warren's projection of "greed," and her knee-jerk plan to tax, one can learn important lessons. The first is the phenomenon one does NOT see when a demonized company LOWERS its price. Unless that company is favored by politicians, we don’t see people like Liz saying that consumers who are paying less are somehow “gouging” the seller and his or her employees. Of course, if the business IS a pet of the politicians, not only will people like Liz work to create “subsidies” and favor them with legislation, some politicians actually pay businesses to DESTROY their products in order to keep prices artificially high!
I wrote about such a program in July of 2002, for the Foundation for Economic Education, FEE.org, a site Liz might want to visit in order to learn about economics.
At the time, the Bush Administration (not much better at economics than Liz and her leftist pals) was about to “fight a glut of plums causing low prices for their growers” by, yep, you got it, paying plum growers to destroy their trees.
Does that make any sense at all?
Not only was the federal government making it HARDER to get plums -- running contrary to the entire reason we invent and save: which is to get more for our toil, not less -- they were TAKING our tax cash to do it!
What Liz doesn’t grasp is that market exchanges are voluntary, two-way streets, and she has no place trying to tell others how to conduct their private, voluntary affairs.
Now, she wants to repeat the idiocy of the late 1970s, hurting people with the “virtue-signaling” attack on consumers called a “Windfall Profits” tax.
In other words, she will decide whether people make “too much” over her arbitrarily determined "time period."
As Reason’s Bailey writes:
As part (of) his administration's response to the Iran oil shock that tripled the price of petroleum in 1979, President Jimmy Carter championed the Crude Oil Windfall Profit Tax of 1980.
‘The main purpose of the tax was to recoup for the federal government much of the revenue that would have otherwise gone to the oil industry as a result of the decontrol of oil prices,’ noted a 2009 Congressional Research Service (CRS) report. That report found that the windfall profits tax (WPT) raised far less money than projected by the Carter administration while simultaneously reducing the amount of domestic oil that would have otherwise been supplied…
Indeed, there’s a maxim in political-economics:
If you want less of something, tax it.
And, of course, you will see prices for it continue to rise, and prices for things reliant on it rise on the margins, as well.
When I talk to students about minimum wage mandates, price controls, taxes, tariffs (another kind of tax) or any number of political interventions in what SHOULD be voluntary needs assessments and voluntary exchange, I sometimes offer an analogy to them. I ask them to imagine a politician to be like a “Buying Buddy.”
The Buddy will travel everywhere with them, threatening the seller to lower his or her price, or the employer to raise his or her wage.
What will that tend to do to the behavior of the seller or employer? Will it incentivize him or her to engage more, or engage less, in exchanges?
And then I ask the student to flip the perspective, to realize that he or she also is a seller (of his offered cash) and/or an employer, and that the “Buying Buddy” could turn the firepower of the state against the student.
How would the student feel if, when going into a shop, the Buying Buddy commanded that he or she pay MORE, just to be “fair,” according to the Buddy?
How would the student feel if, when offering labor services to a buyer, the Buddy told him or her he must sell for less, or that he was going to charge the student a “windfall profits” tax if he got paid "too much" (again, as defined by the Buddy)?
Would the student bother engaging in those transactions, or engaging in them as much as originally planned?
And, to bring it back to Liz Warren, would the student possibly stop seeing this self-styled “Buddy” as much of a friend?
In fact, government never is our friend. Friends are made voluntarily.
Politicians, like Warren, impose themselves on us. We should be free to reject them and their foolish, disastrous, plans for our lives, not just try to cross the border into Mexico (as many southerners are doing) to get gas without the average 56 cent per gallon additional tax the feds and states already impose on us, and not just resisting by placing stickers on gas pumps -- stickers featuring images of Joe Biden pointing at the price and saying, "I did that."
Liz can appear next to him, and people can vent by flouting the laws forbidding stickers that tell gas customers how much of the price is tax, but until people understand the dark immorality of Warren and Biden's ideas, real progress will be difficult to achieve in America.