US politicians make a great show of concerning
themselves with the level of unemployment. And so they bluster about the need
for this new program or that new program – in fact, about any new idea except
for the one that will actually be effective. Namely, stop the meddling.
Recently there have been some interesting developments
that merely confirm the government's intentions are to continue doing exactly
the opposite of what they should be doing.
For starters, we had the news that President Obama
announced his administration was going to block the Keystone XL pipeline,
blaming the decision on the Republicans and foisting responsibility for the
call onto the back of Hillary Clinton's State Department.
The story has received quite a bit of coverage, so I
won't repeat it here. However, I will mention a Reuters
column by John Kemp, titled Keystone symbolizes what is wrong with US
policy. As he points out, the initial permit application for Keystone XL
was filed in 2008 – and yet here we are, going on four years later, and
the president is complaining about the "rushed and arbitrary
deadline" imposed by the Republicans as part of the latest round of
The actual fact of the matter is that the United States
is becoming increasingly unfriendly toward businesses that actually produce
anything tangible, despite our politicians constantly carping about the evil
capitalists sending American jobs overseas.
On that front, there's a great series that Bloomberg
has just kicked off, titled America's Dirty War Against
Manufacturing, on why US manufacturing is expatriating itself. Here's a relevant quote:
Those industries left the U.S. in search not of cheaper
workers, but of more supportive governments. If the U.S. lost manufacturing
due to high wages (or unions, labor laws, regulation – the other
commonly cited villains), how do you explain the manufacturing success of
Germany and Japan? Germany, the world's pre-eminent high-end manufacturing
economy, has higher wages, stronger unions and stricter labor laws than the
U.S. Japan, too, is a high-wage competitor, yet Toyota Motor Corp. still
makes 60 percent of its vehicles there. General Motors Co. makes only about
30 percent in North America.
So if wages aren't to blame, what is?
Policy. But is US government policy really hostile to
While the government may make life hard for the
manufacturing sector, it positively detests the extractive industries –
the Keystone XL pipeline being just one of many recent examples. This week,
for instance, the outlook for new mineral exploration and mining in the
geological treasure-chest state of Nevada was cast into doubt by new
regulations related to protecting the habitat of the sage grouse.
I have nothing against the sage grouse personally, or
any other bird, for that matter. I am simply trying to make the point that if
you are trying to attract capital investment, create jobs and reduce
dependence on foreign producers of the tangibles our economy relies on,
surprising businesses with ever more regulations is not helpful.
But the story my friend Porter Stansberry
sent me takes the cake – it is a proposal to establish a "Reasonable
Profits Board" whose sole purpose will be to control how much companies
in the oil and gas business will be able to earn going forward.
A relevant quote from the article:
The Democrats, worried about higher gas prices, want to
set up a board that would apply a "windfall profit tax" as high as 100
percent on the sale of oil and gas, according to their legislation. The bill
provides no specific guidance for how the board would determine what
constitutes a reasonable profit.
The Gas Price Spike Act, H.R. 3784, would apply
a windfall tax on the sale of oil and gas that ranges from 50 percent to 100
percent on all surplus earnings exceeding "a reasonable profit." It
would set up a Reasonable Profits Board made up of three presidential
nominees that will serve three-year terms. Unlike other bills setting up
advisory boards, the Reasonable Profits Board would not be made up of any
nominees from Congress.
would also seem to exclude industry representatives from the board, as it
says members "shall have no financial interests in any of the businesses
for which reasonable profits are determined by the Board."
Dan Ferris, the editor of Stansberry's
Extreme Value newsletter, was on the same email string and on
reading the article wrote back the following note, which I thought worth
So... just to recap, then...
Selling gasoline is a crap, low (if any) margin
business. If you don't attach a convenience store to it, you make nothing.
Refining gasoline has a margin between something like 1% and negative
infinity, except every now and then when it almost looks like it's not
another crappy business.
And Congress says they make too much money. If they
could guarantee a reasonable profit, they'd be subsidizing it, not taxing it.
People who lend out your deposits (ten times over) and
forbid Walmart from entering their business because
Walmart's model would only benefit customers, not
cronies, aren't making too much money.
People who get money from the government to keep the
price of sugar double the global price aren't making too much money.
People who get money from government to grow corn so
they can do the most expensive possible thing with it – turn it into
ethanol – aren't making too much money.
Al Gore's carbon credit trading operation isn't making
too much money.
College professors who don't teach, who drink fine
wine, live in Tudor McMansions and drive Volvos
while writing papers on the oppression of women in the workforce aren't
making too much money.
But people who sell gasoline... one of the skinniest
margins on Earth... a product without which life as we know it comes to a
grinding halt... they're making too much money.
This is what you get when you vote, people trying to
make good sound bites for ignoramuses who vote, as if the political process
had all the depth and meaning of a Disney movie trailer. "Coming soon:
Hope, Change and Reasonable Profits!"
And, finally, to put this all in perspective, the
following is a quote that Reason magazine ran from Eric Schmidt of
Q: You recently testified before Congress in an
antitrust hearing about Google. What are your reflections on the experience?
Were the leaders there asking the right questions?
Eric Schmidt: So we get hauled in front of the Congress
for developing a product that's free, that serves a billion people. Okay? I
mean, I don't know how to say it any clearer. I mean, it's
fine. It's their job. But it's not like we raised prices. We could lower
prices from free to… lower than free? You see what I'm saying?
I've said it before, I'll say it again here – if
you want to fix the economy, stop government meddling!
high unemployment is just one thread in the American debt crisis tapestry.
Yet there are ways you can protect yourself – and even profit
– during these troubling times.]