Written by: Patrick Kelly
For most in the US, Africa is a far-off and exotic continent that only really enters our collective attention when a natural disaster or terrorist attack occurs in the region. To a degree, the US government shares this sentiment, with the State Department expressing little interest in developing long-term relations with African states centered on issues other than humanitarian initiatives or combating terrorist organizations. Private investment by US businesses still remains relatively limited as well.
Nevertheless, other nations, most notably China, are taking quite an active interest in Africa. In fact, one only has to look to the southern African nation of Zambia – where most of the copper, cobalt, and nickel mines have been bought up (or are heavily influenced) by Chinese firms – to see China’s vested interest. Between 2009 and 2010 China invested over $400 million into Zambia’s mining industry. Besides mining, China also has an increasingly visible presence in the trade industry. There are now about 300 Chinese companies operating in Zambia, with more appearing each year. Zambia also hosts two of China’s Special Economic Zones located in Africa and the Bank of China recently opened a new branch in the Zambian capital, Lusaka, the first to offer Chinese currency-based banking services on the continent. Sino-Zambian trade has increased dramatically, growing from just $100 million in 2000 to near $2.8 billion in 2010. This scenario has been repeated in a number of other African countries including: Egypt, Algeria, Ethiopia, Mauritius, and Angola. For example, the state-owned China National Petroleum Corporation (CNPC) has invested nearly $6 billion within the Sudanese oil sector. In 2009, China surpassed the US and became Africa’s biggest trade partner. Chinese investment in Africa exceeded $40 billion in 2011, with at least $14.7 billion coming in the form of foreign direct investment. Signs of China’s influence can likewise be seen elsewhere, such as in South Africa where an increasing number of schools (and tutoring services) have begun teaching Mandarin. China also has a growing presence within the African Union (AU); the new AU headquarters located in the Ethiopian capital of Addis Ababa, was entirely paid for with Chinese funds ($200 million) and constructed by Chinese laborers.
India is another nation that is increasingly eyeing Africa with interest. The Indian Prime Minister, Manmohan Singh, recently promised over $5 billion in loans to African nations in order to develop greater trading relations. Another $1 billion was offered to pay for education, railways, infrastructure development, and peacekeeping operations. This is a considerable increase in aid, with India only pledging $25 million to Africa in 2010, and marks a noticeable shift in India’s involvement on the continent. Trade between India and Africa has risen steadily over the years, though much of this currently centers on oil exports. However, India has other interests in Africa as well. In South Africa, Indian firms are increasingly involved in the diamond and gold industry. Furthermore, India is helping develop a number of coal-fueled power stations and exploring hydrocarbon projects in Mozambique. India is also seeking to develop uranium mines in Malawi and Niger to satisfy its growing nuclear energy needs. Other nations like Brazil, Russia, Saudi Arabia, and Turkey have likewise begun to heavily invest in various projects throughout the African continent.
So what should the US do? Our current policy of pouring large amounts of foreign aid into Africa has failed completely and we cannot afford to continue in this manner. Rather, the US should seek to develop long-term relations with the African people through foreign direct investment. This is similar to what China and India are doing and, most significantly, it bypasses one of the major flaws of conventional financial aid. In the conventional model, aid is delivered to the government or military of said country, little if any ever trickles down to the people or the general economy. China and India have bypassed this flaw by directly investing in the infrastructure, industrial, and economic apparatuses of various African states.
Africa’s strategic importance for America will only continue to increase in the 21st century. The continent is rich in natural resources like oil, gold, copper, uranium, timber, coal, and has great geo-political importance. If America wants to rebuild its economy and maintain its international interests, investing in Africa is an option it should certainly consider.
Views expressed are not endorsed or put forward by Turning Point USA
By: Charlie Kirk
I was in high school during Barack Obama’s 2008 presidential campaign and remember the energy bouncing off the walls as we neared Election Day. I remember random students holding up the signs “Hope” and “Change” as people drove by the school and the Obama bumper strips the “cool” kids had on their cars.
I was asked numerous times to go and make calls and knock on doors for Mr. Obama, then a senator. My teachers were unapologetic in wearing Obama shirts and giving out Obama stickers. Our own student council made posters saying “Vote Obama!” The enthusiasm was unparalleled and the energy unmatched. I realize now that my generation elevated Mr. Obama to celebrity-rockstar-superman status. He was the embodiment of all our hopes and in him we beheld the one the person we believed would fix the problems we faced.
The Inefficiency of Government Intervention in the Context of the 2013 Farm Bill
Policy Director, Turning Point USA
Abstract: This paper addresses the issues of poverty and falling prices in the farm industry within the context of the Austrian economic framework. I argue that falling prices are due to technological progress as well as oversaturation of the industry and that manipulating them by the means of the 2013 Farm Bill creates distortions that reverberate through the economy and affect the least fortunate. The solution to the problem is not intervention but elimination of both farm subsidies and benefits for the poor.
Since the time of the Great Depression the government has played an increasingly active role in the economy. While it is true that present intervention is not as intense as the historically high periods of war socialism(that is the central planning, rationing, and heavy manipulation of the economy that occurred during World War I and World War II), the State has accumulated a myriad of laws, rules, and regulations over the years, and as a result is becoming ever more present in our lives. To this day, some industries remain heavily controlled by government, one of which is the United States farm industry; over the years it has also become more apparent that government does not belong there. The sheer amount of distortions within the economy that result from the government’s intervention in this industry should make it clear that government should separate from agriculture. In the following paragraphs I will analyze the history of government intervention in the farm industry and specifically focus on why it intervened in the first place. The majority of this paper however, shall be devoted to analyzing the 2013 farm bill (farm subsidies and SNAP) within the context of the Austrian economic framework.
Circa 1860, America, and some European countries, began to industrialize rapidly (second industrial revolution). Innovations made during this time period significantly increased productivity. Savings rates as high as 18%-20% shifted investment towards capital goods (including new technology), which exponentially increased employment and aggregate output (Woods 2013). Eventually this investment put downward pressure on prices vis-à-vis wages, and the value of the national currency rose. Indeed, the late 19th and early 20th century was a period of deflation; it was also a period of great efficiency as less efficient firms began to be weeded out of the economy. Dan McLaughlin from the Mises Institute explains in his piece “Farm Bill Follies”, “Advances in crops, methods, machines and other technology produced a situation where fewer farmers were needed to feed the population. Farm prices should decline as productivity increases, as would be expected in every industry, in every time” (McLaughlin 2007). Smaller farms perceived that larger more efficient firms were putting downward pressure on the prices of their outputs. Economies of scale caused a decrease in the optimal number of producers for any particular commodity therefore the economy looked like it was becoming more monopolized, but in fact it was not. Small agrarians, as a result, sought out antitrust legislation to protect their local markets from lower priced goods. From 1867-1893 twenty-four states (with large agrarian populations) passed antitrust legislation and as a result many of the smaller, less efficient farms were allowed to stay in business (Bordeaux & DiLorenzo 1993). The mistakes made during this time period made agribusiness inefficient thus turning agriculture into an industry that could only survive on government coercion.
It wasn’t until Franklin Delano Roosevelt assumed office that the State began to actively subsidize agribusiness. Despite the inflationary policies and antitrust legislation aimed at pushing farm prices up the economy continued to work against the government’s coercion.
In the 1930s, legislation was enacted to alter the inevitable economic consequences of progress. Politicians wanted to help poor farmers who were being squeezed by the increase in productivity and fall in prices. A whole raft of measures was concocted to keep farm prices high. The correct understanding was that, if supply can be artificially restricted, prices would be propped up. The various methods included the destruction of massive quantities of crops and millions of head of livestock. While it effectively reduced the supply, it was kind of embarrassing for the government to be seen destroying good food at a time when millions of people were starving in the Great Depression (McLaughlin 2007).
Roosevelt’s price supports further distorted the industry and inefficiency continued to pervade agribusiness; in fact, this same inefficiency continues to this day. It was this very intervention that eventually evolved into the quinquennial farm bill, the most recent of which being passed in 2013. The farm programs entailed in this new bill include: price supports, conservation and credit subsidies, subsidized crop insurance, and food assistance programs (today referred to as the Supplemental Nutrition Assistance Program, or more colloquially, SNAP).
Perhaps the bigger question now is ‘what exactly is wrong with these programs if they are helping farmers?’ The answer to that lies in Austrian economic theory. It is generally understood in the field of economics that subsidies are placed on activities which society deems beneficial. In the farm industry that means supporting firms that produce food & natural non-food products. However, by its very nature, a subsidy is a distortion in the economy. Friedrich Hayek said in his essay, “Economics of Abundance,” (1960) “Now if there is a well-established fact which dominates economic life, it is the incessant, even hourly, variation in the prices of most of the important raw materials and the wholesale prices of nearly all food stuffs” (Hayek 1960). What this means is that when the government subsidizes either the supply or demand of a product it distorts natural price fluctuations in producer markets and as a result prevents prices from reaching market-clearing level (most efficient price) in consumer markets. Austrian economist Murray Rothbard further expanded on this view in his treatise Man, Economy, and State:
Transfer spending or subsidies distort the market by coercively penalizing the efficient for the benefit of the inefficient. (And it does so even if the firm or individual is efficient without a subsidy, for its activities are then being encouraged beyond their most economic point.) Subsidies prolong the life of inefficient firms and prevent the flexibility of the market from fully satisfying consumer wants. The greater the extent of government subsidy the more resources are frozen in inefficient ways, and the lower will be the standard of living for everyone (Rothbard 1962).
If there is one thing that should be taken away from what Rothbard said, it is that the existence of inefficient firms prevents the market from fully satisfying consumer wants and furthermore freezes resources, which consequentially lowers the standard of living for everyone. His argument is certainly supported historically; McLaughlin mentioned in his piece, “Before the age of efficient transportation and refrigeration, computers, and advanced technology, prices were relatively high, and local family-owned stores could make an adequate profit. Those high prices that gave the small shops the ability to thrive, however, were the same high prices that burdened every other family in the economy and kept standards of living relatively low” (McLaughlin 2007). In other words, inefficient firms squandered resources, which thereby drove up prices and made it more difficult for consumers to obtain farm products.
Likewise, there is also something to be said about scarcity. The study of economics is, by definition, the study of scarcity and choice. In absolute abundance, prices would not exist; everything would be free because every individual’s wants would be satisfied. Economists refer to this as the Garden of Eden model. High prices indicate that a given product is scarcer vis-à-vis others. In the late 19th century, due to new technology, prices were dropping because products were becoming more abundant. E.C. Pasour, an economics professor at North Carolina State University, and agricultural policy expert, argues that, “Falling prices of farm products is not a new phenomenon. Through the years mechanization, improved seeds, the development of new pesticides and herbicides, and other increases in technology have resulted in the substitution of capital for labor” (Pasour 1987). This appears to raise the question, what happens to the disemployed? In absolute abundance, jobs would also be redundant; there would be no need to work because every want would already be satisfied. In regards to 19th century farmers, technology was forcing prices down, which reduced farm incomes. The least efficient farmers came under financial distress, but this was not necessarily indicative of an unhealthy economy; in fact, it was exactly the opposite. This showed that the farm industry was oversaturated and that there were fewer producers necessary to supply the population. Pasour mentions, “For example, the U.S. farm population decreased from 25 per cent of the total population in 1929 to little more than 2 per cent in 1985. During this period however, output per hour of farm work increased more than 15 times” (Pasour 1987). Despite the various legislative measures implemented to keep inefficient farmers operating the progression of technology still displaced a large portion of inefficient farmers.
In 1973, the government’s approach to subsidizing farms completely changed. Earl “Rusty” Butz, President Nixon’s USDA chief, eliminated many of the New Deal price support programs and only kept them in place for commodities, like corn. Today, the prices of most food products are kept below market level, by means of input subsidies. E.C. Pasour states, “An increase in the supply of prices puts downward pressure on consumer prices for food products. The USDA estimates the taxpayer outlay for these input subsidies in 2008 at $7.5 billion. Since input subsidies reduce product prices – domestic taxpayers – not consumers bear the cost” (Pasour 2008). In other words, the burden of price manipulation is simply shifted from consumers to taxpayers (with a smaller diffusion of the cost burden among the two). Moreover, the simple fact that prices are kept high for commodities affects other areas of the economy. Commodities are used in the production of other goods. If prices are kept high in producer markets, they will necessarily be high in consumer markets. Even though prices are kept low for some food products, any benefit to the consumer is negligible simply due to the fact that the cost of subsidizing is shifted from prices to taxes and commodities are still being held above market clearing level.
What does this mean in the context of the 2013 Farm Bill? Pasour argues, “The more product prices decrease, the higher the taxpayer cost of supporting agricultural prices at any given level” (Pasour 1987). As technology continues to progress the economy will naturally continue to push prices down. No matter how many government programs are implemented to keep prices high, prices will continue to trend downward and as a result more money will need to be spent to keep inefficient farmers operating. Pasour mentioned in his article that, “Government programs have not solved the farm problem. Indeed, the level of financial stress on U.S farms is the highest since the Great Depression of the 1930s even though federal outlays on farm programs in 1986 were at record high levels” (Pasour 1987). This, of course, was in 1986 and has only been increasing since (even though many farmers are now well off); the most recent farm bill was estimated to have a price tag of half a trillion dollars (Nathaniel 2013). Congress members decided that the cost of this bill is too high and as a result have agreed to cut certain programs; the only question is by how much? Veronique De Rugy, a senior research fellow at the Mercatus Center at George Mason University says, “When you are talking $4 billion in reductions out of $800 billion in the next decade, I wouldn’t really say that is a big act of fiscal responsibility, even $20 billion out of more than $800 billion is really minor. That is a 2.5 percent reduction. That is nothing” (Fox 2013). Unfortunately it has gotten to the point where any sort of cut seems like a massive reduction in benefits to farmers, and in effect should (theoretically) be a rather substantial blow to the economy. The bill that the Senate finally passed in June of 2013 is said to cut spending $24 billion over 10 years with a $4 billion cut to SNAP but will cost nearly $955 billion.
All of this is not to mention the efficiency of the American bureaucracy in implementing this bill. As is true with all government action, there is a stark contrast between intent and result. Special interests, especially for Big Ag, have already influenced this bill. Lauren Fox from U.S. News declares in her op-ed “The Farm Bill Food Fight Over Food Stamps,” “There should be no scenario where 10% of subsidized farms receive 74% of all subsidy payments” (Fox 2013). Due to the fact that the government subsidizes per unit, that is subsidies are tied into the volume of farm sales, larger farmers get the majority of subsidy payments. Therefore the top 10% of farms receive 74% of subsidy payments.
As it can be seen, farm programs are not only harmful to consumers but they promote inefficiency within the economy. There is, however, another portion of the Farm Bill dedicated to the issue of poverty, another highly contentious issue that is not as easily addressed from an Austrian perspective. Due to the emotional nature of the debate, it is difficult to argue for cuts in the Supplemental Nutrition Assistance Program (SNAP) or for a complete elimination of it, for that matter. Economics, however, is not an emotional science. Even though the behaviorist will disagree, any sort of incorporation of emotion into economic arguments or economic analysis necessarily leads to the wrong conclusions and in effect, the wrong decisions.
It is perhaps best to look at SNAP in the context of something as simple as incentives. One of the first rules of economics is that humans are motivated by incentives. As mentioned before, subsidies and benefits promote certain behavior, which means that they are incentives by their very nature. It appears that taxing and subsidizing are more or less the government’s only methods to addressing issues. Indeed SNAP is based on the same premise; they only problem is the actions that are being incentivized are not socially beneficial. Lawrence Reed, argues in his article “Incentives and Disincentives: They Really Do Matter!” (2000), “A half century of welfarism produced substantial “behavioral poverty” because it subsidized illegitimacy, divorce, and idleness” (Reed 2000). That is not to say that people want to be poor because the benefits are so great, that simply isn’t the case. In fact, many claim that what the government provides is not much, certainly not enough to live comfortably. However, it cannot be said that it is easy to get off government benefits once one is on them. For example, Reed mentions in his article, “We also discovered how counterproductive it was to cut a dollar of welfare benefits for each dollar of earned income in effect imposing a 100 percent marginal tax rate on welfare recipients who found jobs. Clearly, we had to stop penalizing work and rewarding nonwork!” (Reed 2000). Obviously, Reed is talking about welfare benefits and not SNAP, however the same principle applies. Forrest Laws, a writer for DeltaFarmPress.com says, “Proponents of nearly $40 billion in cuts in the SNAP and other nutrition programs claim that something’s wrong with the program because the number of recipients has risen to 48 million people. That the number of recipients has steadily increased during one of the worst recessions since the 1930s surely shouldn’t be a surprise to anyone” (Laws 2013). Laws, however, makes two mistakes. He claims that the increase in individuals on SNAP is due to the recession, which prima facie seems logical, however if we are to believe what most economists have been claiming since 2009, that is that we are now in a recovery period, that number should be decreasing, not increasing. Indeed many individuals are still paid less than before the recession but that is partially due to minimum wage laws preventing the optimal distribution of wage payments. The second mistake Laws makes is he ignores the fact that 48 million people are on SNAP. There is absolutely no reason why 48 million individuals living in a country as expansive as the United States, with some of the most productive soil on the planet should have trouble affording food. Perhaps if the government stopped manipulating food prices, SNAP would become redundant.
Due to the government promoting inefficiency and making the less fortunate worse off, it should be clear that both subsidies to farmers and the poor should be eliminated. Most individuals, and even some economists however are hesitant to cut subsidies. Mark Bittman from The New York Times says, “Yet-like so many government programs-what subsidies need is not the ax, but reform that moves them forward” (Bittman 2011). While that may sound fair and pragmatic, it is not addressing the issue. Through reform the government will still be promoting inefficiency, just to a lesser extent. That is, if the reforms actually do what they are meant to do. Reed clearly articulates, “As long as government is taking from some and giving to others, “reforming” the system in any fashion still leaves a relatively indifferent and unaccountable public bureaucracy spending other people’s money on behalf of people who need something much more fulfilling than a government check. They need the uplifting effects of thoughtful and efficient private initiative-either their own or others who really care about them” (Reed 2000). Reed makes an interesting point here. Whatever happened to helping thy neighbor? It appears most people have turned their back on charity because they feel that the government will do it for them. Even if people wanted to help the less fortunate the State has taken resources away from charities, churches, and private individuals under the guise of altruism, and squandered them through its own inefficiency. It is true that charities receive tax breaks depending on their 501(c) status, but the amount of work it takes to get approval from the IRS, and the amount of taxes individuals themselves must pay, not only makes it difficult for charities to thrive, but be created in the first place.
It appears that today most people have an instinctive response to look towards government whenever there is a problem that cannot be solved on the individual level. More likely than not, the government will only perpetuate the problem, if it didn’t create it in the first place. This has certainly been the case in the American farm industry. The government stepped in during a period of great efficiency in the economy and promoted inefficiency within agribusiness. As a result, the distortions it created within the economy warranted more and more intervention. Today, the government takes resources from the private sector in order to keep promoting inefficiency within it. Due to this, the most logical course of action would be for the government to stop intervening in the economy, especially in the farm industry.
Bittman, M. (2011). Don’t End Agricultural Subsidies Fix Them. The New York Times.
Boudreaux, D., DiLorenzo, T. (1993).The Review of Austrian Economics, Volume 6, Number 2
Fox, L. (2013). The Farm Bill Food Fight Over Food Stamps. U.S. News.
Hayek, FA. (1960). The Economics of Abundance. Mises Daily. Ludwig von Mises Institute.
Laws, F. (2013). If farm bill doesn’t address hunger, what’s it for?. Southeast Farm Press, 40(23), 4.
McLaughlin, D. (2007). Farm Bill Follies. Mises Daily. Ludwig von Mises Institute.
Nathaniel, J. (2013). Farm Bill 2013: An Inside Look at the Most Important Bill You’ve Never Heard of. Policy Mic.
Pasour, E.C. (1987) The Farm Problem and Government Farm Programs. Foundation for Economic Education.
Pasour, E.C. (2008). U.S. Agricultural Programs: Who Pays?. The Independent Institute.
Reed, L. (2000). Incentives and Disincentives: They Really Do Matter!. Foundation for Economic Education.
Rothbard, M. (1962). Man, Economy, and State. Auburn, AL. Mises Institute.
Woods, T. Episodes in Labor History. (2013). Lecture presented on libertyclassroom.com.
Turn on the news for a few minutes, and you’ll become quite familiar with the challenges facing our nation. Debates over our Constitution rights, crony budget deals, and the horrific implementation of Obamacare are just a few of the issues facing America this holiday season.
It’s easy to believe that America’s best days are behind us, but there’s one corner of the country that is moving in the right direction. It’s called the Palmetto State, and it’s led by one of the most courageous, fearless, and results-driven Governors in the nation, Nikki Haley.
In the words of Governor Nikki Haley, known across the country as the “Jobs Governor” for her 40,000+ new jobs record, “South Carolina is open for business!” Unlike many states that add red tape for companies of all sizes, South Carolina rolls out the red carpet for entrepreneurs and business owners. During the Haley Administration the tax rate for small businesses was reduced from 5% to 3%, making it easier for companies to hire new employees and get to work.
South Carolina has enacted right-to-work legislation, as well as voter ID laws and ethics reform. Rather than expanding entitlements and increasing debt, Governor Haley has lead a welfare-to-work initiative, which currently has a 94% job retention rate for former welfare recipients.
When it comes to standing up to Washington, D.C., no one does it better than Nikki Haley. When the Obama Administration tried to overturn South Carolina’s decision to enforce illegal immigration reform laws, the Governor stood up to the president and protected those reforms. Not only is Nikki Haley results-driven, but she leads with courage and conviction.
Big things are happening in South Carolina, but perhaps the best is yet to come. The South Carolina House and Senate recently passed a bill to make Obamacare illegal across the state, and Governor Haley is expected to sign that bill into law very soon.
Many are pessimistic about the future of America, but states like South Carolina are leading the charge to preserve our great nation, adhere to the Constitution, and find real solutions to the problems we face.
If you’re looking for a blueprint for America, or a nice place to work, live, and play, look no further than the beautiful Palmetto State. As the Governor always says, “It’s a great day in South Carolina!”
Views expressed are not endorsed or put forward by Turning Point USA.
Bill Ayers is writing textbooks at Marquette University. Students are DISGUSTED when they find out who Bill Ayers really is!
Bill Ayers was part of the “weather underground” movement during the anti-war protests in the late 1960′s and early 1970′s. His radicalism manifested itself into acts of domestic terrorism where he tried to bomb police stations, federal buildings, and even the US Capitol. A self proclaimed radical and vigilante Bill Ayers now has a firm grasp on higher education. His work and books are used in lecture halls all across the country.
Turning Point USA is working to spread awareness about the truth behind Bill Ayers, and trying to shed light that he has no place in academia or influencing the youth of America.
See the video HERE: https://www.youtube.com/watch?v=WVP4–PJKa0
By Benjamin Fox, Carthage College
Unlike college students, corrupt political agendas don’t take breaks this time of year; in fact, this season all but encourages politics in the shadows. At a time when Americans want to be thankful at home with their families (away from politics), one can almost be certain this corrupt administration has something up its sleeve. President Obama will soon begin his “conversations” of “a balanced approach” to reduce the deficit. He will mask his agenda under the phrase “closing tax loopholes,” a phrase we know all too well, a phrase that does not create jobs. In early November, the President addressed the nation saying, “Congress should pass a budget that cuts things we don’t need, and closes wasteful tax loopholes that don’t help create jobs so that we can free up resources for the things that actually do create jobs and growth.”
You don’t have to have a college degree to recognize this overused ploy. If President Obama was really concerned about tax loopholes and job growth he would have had a real “conversation” with Congress over the numerous tax reform bills in the House. President Obama is obsessed with raising taxes and his fantasy of taxing America out of despair. You may wonder what targets are in his sights now? How about an industry that most Americans are heavily dependent on? How about an industry that the Obama Administration already botched and could use a redo? This is no other than the booming energy industry, or as the administration would like you to focus on, “Big Oil.” This is more than just speculation—it was even one of his 2008 campaign promises. His campaign pledged to end “special tax breaks for oil and gas companies, including repealing special expensing rules, foreign tax credit benefits, and manufacturing deductions for oil and gas firms.” He has tried for years to put this plan into law. It was part of his 2013 budget, and now he is trying to revive it. Resurrecting this plan would be dreadful for young Americans searching for jobs that become their career, and here is why.
The U.S. unemployment rate is 7.6 percent, but it would be much higher if so many people had not stopped looking for jobs. But the youth unemployment rate is more than double that—16.2 percent. In bad times, the younger, lower-skilled people in the labor market are going to have a tougher time getting hired. The last thing young Americans need now is another blow to the economy (Happy Holidays from President Obama). But that is just what this tax increase would deliver.
What the President will not tell you is that American energy producers employ nearly 10 million Americans. Microeconomics 101 teaches the law of supply and demand. An educated high school student could come to the conclusion that by reducing demand (aka raising prices) you encounter a surplus. In the labor market we call this UNEMPLOYMENT. In a labor pool this large it’s not just the rich that are hurt, or even the young Americans, it’s everyone. The entire U.S. economy is dependent on affordable oil and gas, and it benefits from plentiful, inexpensive energy. So what exactly might President Obama try to do, you ask?
In its last budget, the administration proposed two vindictive tax hikes for “Big Oil”: 1) making the companies pay federal taxes on taxes they already paid overseas, and 2) eliminating a tax credit for investments made in energy exploration. President Obama thinks this will raise money for him to spend, but Louisiana State University economist Joseph Mason found that it would cost the federal government $53 billion. The economy would lose $341 million in economic output and 155,000 jobs.
Legislation to increase cost to Americans, reduce innovation and development, and discourage energy independence is ludicrous. In a rapidly growing world, an increasingly unstable Middle East, and a growing domestic financial crisis, increasing the cost of domestic oil makes the least amount of sense. In what way, exactly, does that create jobs, Mr. President? He just assumes that companies will happily take losses in profit if the government increases expenses. Capitalism doesn’t work that way; government intervention destroys wealth all across the board. Also, higher oil and gas prices put a drag on the economy and raise prices for anything that has to be transported, from food to computers. That reduces job opportunities for everyone, but especially those just starting their careers. With an economy that has produced a youth unemployment rate of more than 16 percent, we cannot afford any measure that would make it even harder for us to find jobs.
Growing up one often hears the aphorism, “If you play with fire you will get burned.” Mr. President, you are playing with fire, and there is always one rule that comes along with playing with fire: Never have contact with gasoline.
Benjamin Fox, Carthage College 2016
Views expressed are not endorsed or put forward by Turning Point USA.
Check out the video here:
Editorial by Jack Rafuse
At nearly 74,000 pages, the U.S. Tax Code is a bloated, destructive and unwieldy mess.
It demands fear and inspires loathing more than respect. Accidentally violate it, and you encounter bureaucratic revenge and pay a debilitating fine; do so willfully, and you also serve prison time.
It answers unasked questions: “What happens to citizens when Congress exercises nearly unlimited authority to enact creative and continuous financing schemes to support its insatiable appetite for spending?” And, “Why are not Congress and congressional staff members treated the same way as every other citizen under the tax laws they enact?”
To individual Americans — and to the large and small businesses that employ them — the tax code is no joke. Even most politicians admit a major overhaul is past due — and they have powerful incentives to act.
For the fourth consecutive year, no budget is in place and the fiscal year starts in days. With elections looming and its ability to borrow presently curtailed for having once again reached its “debt ceiling,” Congress has powerful incentives but do the members have the political will?
And, just as importantly, do they have the intellectual restraint to carry out this debate productively and politically honest manner?
Reforming the U.S. Tax Code will be a long, hard process featuring heated and boisterous debate. Given the generational import at stake — and the healthy deliberation our democracy demands — this is perfectly appropriate; at its best, it would be reminiscent of the debate over adoption of the U.S. Constitution. We can only hope that both sides argue skillfully and truthfully about their positions.
The foundational principles upon which the tax reform movement is based must be simple to articulate and easy to defend.
The following goals — missions — should guarantee appeal: simplify the law; apply it fairly; broaden the tax base; stabilize the deficit and ensure that the United States remains (or regains its position) as a desirable place to create, encourage and maintain business.
Once, those were sacrosanct principles. Be independent, not tempted by political bias and motivation and never wield taxes as a punitive weapon in a war of ideologies.
Now, however, they must be reiterated, fought for and prayed for. Otherwise in the coming debates the oil and natural gas industry will continue as the target of choice for politicians of all stripes.
The energy sector is where lawmakers on both sides of the aisle delight in misdefining and taking creative liberty with the definition and applicability of certain tax terms.
“Subsidy,” “deduction” and “credit” are the three most frequent victims of this practice, which is attributable either to simple ignorance or political convenience. To be certain, this dynamic is most evident in the long-running effort to increase taxes on U.S. oil and companies by referring to their deductions and cost recovery measures as “subsidies.”
At the same time, tax-law subsidies go to “green” companies by the billions of dollars, and are labeled “investments.” According to the law, a subsidy is a direct payment from the government to an entity to increase its economic viability (think of the wind, solar and electric car industries).
A deduction spelled out in the tax code, on the other hand, is intended to ensure that a U.S. firm is taxed only on its actual income earned in the United States and not double-taxed after paying taxes to other countries in which it does business.
One absurd example of definition-twisting in which some advocates identify and call out oil industry “subsidies,” is The Environmental Law Institute’s recent categorization of the Low Income Heating Energy Assistance Program as a subsidy to oil and natural gas companies.
This is absurd; LIHEAP has long been a sacred cow to lawmakers on both sides of the aisle — because it subsidizes individuals seeking to heat their homes.
In an equally far reach, Oil Change International, meanwhile, singles out a large section of the Pentagon budget directed to defense of oil overseas as, again, a subsidy paid to U.S. oil companies.
These are gross mischaracterizations not just of these individual provisions, but of the general concept of a subsidy. It is flexible semantics at its worst and it is toxic to any earnest effort to enact worthwhile tax policy.
While a subsidy is characterized by a direct payment from the government to an entity designed to increase its economic viability — as seen in the wind, solar and electric car industries — a deduction is intended to ensure that a U.S. firm is taxed only on its actual income.
Tax Code provisions include deductions for both U.S. businesses and American individuals; deductions recognize and take account of legitimate expenses and are key to calculating tax liability, preventing double-payment with its anti-competitive implications and ensuring that a company can rely on a predictable investment environment as it seeks to compete both at home and abroad.
Assailing legitimate business accounting formulas — like Section 199 manufacturing credits or protections for dual capacity taxpayers — as “oil subsidies” is, as I have pointed out in the past, factually inaccurate. It’s also deleterious to the U.S. energy industry, its job-creation power and our economy as a whole, given the manner in which such rhetoric undermines the vital mechanisms that make the arcane U.S. tax code navigable.
It is vital, as Congress engages in tax reform and seeks to fund the U.S. government beyond the looming fiscal deadlines, that policymakers resist the strained rhetoric that has for so long plagued the debate over corporate taxation in the United States.
If Congress wants an honest and informed debate about the future of energy tax policy, it must accurately portray the tax treatments in question. And, rather than penalize, it should be thinking of ways to help U.S. companies be more effective, economical, and competitive. Only that approach will add high-paying jobs and new resources to boost the nation’s economy.
Dr. Jack Rafuse is principal of the Rafuse Organization and served as a White House energy advisor