Free Markets, Free People

Daily Archives: May 9, 2011


Here are a few questions for you …

Call it a little thought exercise.

If you are an industry that has gotten tax breaks related to the cost of your production since there’s been an IRS and those tax breaks are the same sort of tax breaks every other producer or manufacturer in the country gets (well, except in some cases they single your industry out for less of a break than the others) and now the Congress wants to selectively punish your industry (for whatever reason – oh, yeah, making too much money) and no other (we’re not talking across the board cuts – just “Big Oil”) by removing all such breaks, what would you do?

Linking two of the politically volatile issues of the moment, Senate Democrats say they will move forward this week with a plan that would eliminate tax breaks for big oil companies and divert the savings to offset the deficit.

Now, I’m on record for removing subsidies for all businesses, and it is argued by some that a tax break is a form of subsidy.  But only if you believe all money belongs to government.  Instead a tax break lets a company (or individual) keep more of the money it (he or she) has earned.  A subsidy, on the other hand, or at least as I define it, is a payment from government to a company (or individual) which has been taken in taxes from other companies (or individuals).  I.e. it isn’t earned.

So, back to the point – if you’re an oil company, like ExxonMobil, for instance, and you’re thinking about building a refinery, would an antagonistic government and their tax policy focused on only stripping your industry of tax breaks other industries get figure into your decision?

Well of course it would.  Why?  Because your job is to give the best possible return to your shareholders’ investment.  So you are obviously going to make a decision to build that refinery somewhere that will help fulfill that goal.  Most likely, all things being equal, tax rates, business climate and a non-hostile governmental atmosphere are going to factor heavily in that decision.

If you had the whole world from which to choose a location  – and for the most part ExxonMobil does – would you build it here given your primary goal and given the above nonsense from Congress?

I bring all this up now just to have you think about it a bit.  More – and more specifics about my point – later in the week.

~McQ

Twitter: @McQandO


Pakistan has some explaining to do

It’s going to be interesting to see how Pakistan attempts to weasel its way out of the obvious “someone there was helping bin Laden”  meme.

Here’s their first shot at it:

A senior official in Pakistan’s civilian government told ABC News, "Elements of Pakistan intelligence — probably rogue or retired — were involved in aiding, abetting and sheltering the leader of al Qaeda," the strongest public statement yet from the Pakistani government after the raid on Osama bin Laden’s compound.

This is based on the government’s judgment that the number of years bin Laden spent in Abbottabad — and it now appears in a village outside the city of Haripur — would have been impossible without help, possibly from someone in the middle tier of ISI, Pakistan’s intelligence agency, who grew up fighting alongside the mujahidin against the Soviets, said the official.

Ummm.  Yeah, it has to go a little deeper than that, unless someone is going to claim that the ISI – not rogue or retired – was totally asleep at the switch.  Some others (other than just a “rogue element”) that are still on active duty and at pretty high levels had to be complicit.  Waiving it off as “rogue elements” just isn’t going to be good enough.

For bin Laden to stay, safely for up to 7 years within Pakistan and apparently able to moving from one village to another, a whole bunch of people had to turn blind eyes.  Especially with the ISI’s reputation of knowing all that goes on within its borders.

It’s the impression of some in the government that the United States is giving Pakistan some space in the wake of the raid, but only for a limited time — and that if Pakistan doesn’t act in a way that satisfies the United States, there will be consequences.

One of the consequences could be a cut off or sharp reduction in the billions of aid we give them each year for their military and for the fight against al Qaeda and the Taliban.  At the moment, given this bin Laden story, it doesn’t appear to have been well spent.

That said, Pakistan is very important to us in other ways than just fighting terrorists.   It is the main staging base for the bulk of our logistical support for the effort in Afghanistan. 

Tricky diplomacy ahead.  Pakistan has been embarrassed by the US raid (rightfully so).   Also, although it has never been said openly, they’re seen as so unreliable an ally that we chose not to tell them we were going to do what we did for fear bin Laden would escape.

The US is going to have to move carefully here, but bottom line, Pakistan – at a minimum – is going to have to cough up those who were responsible for making it possible for bin Laden to stay in Pakistan for all those years and punish them.

~McQ

Twitter: @McQandO


Meanwhile, back to the mundane but very important stuff–the economy

I think Bob Gorrell’s cartoon fairly represents what we should be talking about now after a week of bin Ladanpalooza.

 

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As Dale said in the podcast last night, it seems much more likely we’re in the 2nd year of a “lost decade” than any real recovery.  You get the feeling, or at least I do, that our so-called economic experts at the tiller of the ship have absolutely no clue as to how to proceed.    Dale also mentions that if we were calculating unemployment and inflation like we used too in the ‘80s we’d most likely be looking at about 18% unemployment and 10% inflation and wearing our “Whip Inflation Now” buttons already.

In the meantime you can literally see the steam escaping the GOP push to trim the budget, cut spending and downsize government.   It’s like everyone in government (and many voters) are still in denial.

If we were to resurrect the Misery Index, I’d dare say we’d be in new territory speaking of misery.  And, as I stated on the podcast, I’m surprised there aren’t those out there asking Ronald Reagan’s favorite questions – “Are you better off today than you were 4 years ago?”

My intent isn’t to sound alarmist, but maybe it’s time to be more than just a little alarmed.  Commodities are rising, wages are flat, and while we did see over 200,000 jobs created this past cycle, 60,000 of them were at McDonalds – literally – and we saw over 400,000 initial claims for unemployment registered.  “Unexpected”, of course.

In fact, it seems that we’re getting sunshine pumped up our skirts with weekly pronouncements that it is “getting better” out there.  Well, I for one am not seeing that.

You?

~McQ

Twitter: @McQandO

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