Today, the CEOs of five major oil companies testified before the Senate Energy Committee. Why? To respond to allegations that they're gouging the American public.
Collectively, these five companies -- ExxonMobil, Chevron, ConocoPhillips, BP America, and Shell Oil -- earned more than $25 billion in profits in the last quarter.
Some Senators have proposed a "windfall profits tax" on the oil companies as a way to pay American consumers back for record high prices at the pump. The tax could be a great idea, but, as the New York Times editorial board pointed out this morning, it should help people move away from oil, not just buy more of it.
I'm not sure where the aversion to profit derives from. When someone succeeds at something, they deserve to make money. Aversion to oil company profits is a different story for historical reasons, but not a very different story.
I can't say I like the idea of a "windfall profits tax," but record profits in an entire industry should result in serious questions about anticompetitive practices.
This is especially true of an industry trading in total interchangeable commodities, since it ought to be easy for each company to undercut the others' prices. Record profits mean that they aren't working toward a market that's as efficient as possible.
All of which is well and good and is corroborated by past observations. But that's not what I want to debate.
I want to say that a windfall tax is bad policy and good politics. It's bad economic policy because it directly discourages successful businesses. It's bad environmental policy because from an environmental standpoint, cheap gas is a bad idea. And it's good politics because the gas companies are profiteering, and no one ever lost popularity by taking on profiteers. The question is how you take them on, and a windfall tax is not the right way.
For a long time, people have been hoping that Congressional Democrats would start proposing some bold ideas that would be fairly popular, but would never clear the Republican leadership. This is a power peculiar to a minority party, and a wonderful tool. It's an odd test case for such a thing, but not bad. By proposing such ideas, you establish what you'd like to accomplish (cheap gas in this case) and paint the opposing party as obstructionist when they kill your (potentially unworkable) idea.
I'd rather see this approach applied to health care or Iraq. Take some principled stands on issues that won't change much, and start a public debate. Attacking profits comes off as a little petty and a little anti-commerce, not a good attitude.