"A government's view of the economy can be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."
- Ronald Reagan, 40th US President, Republican
On Wednesday, November 9th, 2005 the captains of America's oil industry stepped foot in US congress to give testimony on their bountiful income statements and record profits. The unforseen earnings call was perhaps a little too well timed as Exxon Mobil reported quarterly earnings of nearly $9 billion (around $100 million per day) one week prior. Rather than applauding the firm's impressive performance, the raft of government intervention set sail towards piles of money earned by the sevensisters of big oil. At the same time, in the news there were reports of pirates in Somalia attacking a cruise ship in search of loot, plunder and hostages--sometimes the parallel draws itself.
Paying higher pump prices and struggling manufacturing sector's rising energy costs had provided the impetus for excitable Democrats and even Republicans to salivate at the prospect of free money. Stealing from the poor and giving to the rich was passe, so why not steal from the rich and misappropriate the money to the detriment of the poor? And so, legislators began with the sound premise: some people have too much money--enough to create their own virtual realities, buy expensive endangered species, and fly around in company jets and they begin to insert a needle of cyanide into the bulky arm of American capitalism.
If ever in doubt about a government plan, program or thought, I rest comfortably in the truth that less is more and nothing is even better. My experience has taught me in particular that when governments start to meddle in affairs where they have no business it's where the plot falls into tragedy. In the early 80s under a similarly well intentioned pretense, the Liberals found objection in Alberta's resource wealth. We all remember how that turned out.
When the manipulation by US a senators in appealing to the short term gain of a tax windfall on corporate profits lies precariously on a wobbly premise (they did nothing wrong to obtain those profits, they simply have too much) is when you know something is amiss. This is dangerous thinking and the road of ambition of trying to tinker with the oil industry will surely only have disastrous results for investors, employees and eventually citizens.
Several times in the past 25 years, the oil business has been in trouble: Oil trading at $10 a barrel in 1988, new discoveries at abysmal lows and production costs soaring to name a few. In those days, Uncle Sam was nowhere to be found. Not rushing to the aid of the companies and engaging in selective market capitalism, the government acknowledged that market forces were a cure-all, and the market would take care of itself. That seems to have changed.
Economies have ways that deal with people and corporations that chronically overspend: bankruptcy. With countries, it's a devaluation of currency and the current US administration has demonstrated that it has a despicable FICO score, is a high risk of default and deserves a credit card with a 45 per cent APR. Accordingly, when I look at the success of the oil industry and its antithesis in government, I am rather reluctant to hand over the reins. Even if the windfall tax was a good idea--which it isn't--no one should bank on the current administration to execute it properly.
Incoming Federal Reserve Chairman Ben Bernake noted that "managing the US economy is like trying to fix a car while the engine is running."
I could not agree with him more.