Republicans are reacting to public outrage over high gasoline prices by dusting off the Carter-era “windfall profits” idea:
President Bush, faced with rising public discontent over high fuel prices, today directed his administration to help investigate possible price gouging and ordered a temporary halt to deposits in the Strategic Petroleum Reserve. In a speech in Washington to the Renewable Fuels Association, Bush also promoted a variety of measures aimed at reducing U.S. dependence on foreign oil, which accounts for 60 percent of domestic consumption. But he ruled out any “price fixing” or tax increases, policies he attributed to Democrats in the past and that he said have not worked.
[…]
The combination of rising gas prices and Bush’s declining popularity have contributed to worries among Republicans about this November’s midterm elections. In a letter to Bush yesterday, House Speaker J. Dennis Hastert (R-Ill.) and Senate Majority Leader Bill Frist (R-Tenn.) urged Bush to order a federal investigation into any price gouging or market manipulation.
[…]
Saying that Americans “will not accept . . . manipulation of the market, and neither will I,” Bush said he was directing the Justice Department, the Federal Trade Commission and the Energy Department to contact the attorneys general of the 50 states “to offer technical assistance to urge them to investigate possible illegal price manipulation within their jurisdictions.” He also called on energy companies to reinvest their “large cash flows” into expansion of refinery capacity and energy production. “We expect there to be strong reinvestment,” he said.
While opposing any tax hikes, Bush said energy companies today “don’t need unnecessary tax breaks” or subsidies, and he called on Congress to take $2 billion worth of such benefits out of the budget over 10 years. He described these benefits as “the write-offs of certain geological or geophysical expenditures or the use of taxpayers’ money to subsidize energy companies’ research into deep-water drilling.”
Meanwhile the Democrats are reportedly considering a Reaganesque policy of cutting gas taxes.
Democrats are set to introduce a measure that would create a “federal gas tax holiday” by eliminating the federal tax on gas and diesel for sixty days, RAW STORY has learned. The measure, proposed by Sen. Bob Menendez (D-NJ), would reduce the cost of gas by $0.184 per gallon and the cost of diesel by $0.244 per gallon. The move, aides say, will provide $100 million dollars per day in relief.
Democrats say the money will be made up by cutting six billion dollars in tax breaks to oil firms. Currently, the money from the federal gas tax goes to the Highway Trust fund.
Something seems wrong about this picture but I can’t quite put my finger on it.
Elsewhere, Jason Smith wonders why it’s price gouging when the oil companies make 8% profits but not when other industries do.
Henry Payne points out that government’s share of the responsibility for high fuel prices includes substantial regulatory costs in addition to high gas taxes.
Pejman Yousefzadeh sees this is a case study in the inexorable growth of government.
When government refrains from acting because either (a) intervention would only serve to make the problem worse or (b) because intervention will do nothing to actually solve the problem, the government officials behind the decision to refrain from action will be accused of not caring about the problem at hand. This will cause them to panic at the prospect of being on the wrong side of public opinion, and then engage in fruitless busybody behavior so that they can transmit a “Message: I Care” image to the public at large.
Quite right. Nixon imposed wage and price controls fully knowing they would not stop inflation. Bush feels he has to give the appearance of “doing something” and is doing something silly and counterproductive.
