Joe Biden entered the United States Senate in January 1973, five decades ago.
He served during the “malaise” economy of the 1970s, a period of “stagflation” — stagnation and inflation — similar to what we’re now going through. He made policy when drivers queued in long lines at the gas pump.
So it doesn’t make sense he’s advancing one of the worst policies of that time, a windfall profits tax on the oil companies.
Depending on what Congress might enact, it would tax away some of the high profits that, for example, have driven up Exxon’s share price 81% this year, even as the S&P 500 has dropped 19%.
Gov. Gavin Newsom also has called a special session of the California Legislature for Dec. 5 to consider a similar tax.
“Record profits today are not because they’re doing something new or innovative,” President Biden charged. “The profits are a windfall of war,” meaning the Ukraine War’s disruption of global energy supplies.
The 1970s oil crisis also partly was due to “war,” in that case the OPEC oil embargo during the 1973 Yom Kippur War and later the 1979 the Iranian Revolution.
But then as now, other factors were at work.
Today a major culprit is Biden’s delays in approving new drilling and general posturing against domestic production. In August, Biden did sign a bill advancing some new leases. But also that month, an appeals court in New Orleans upheld the president’s 2021 pause on new gas leases on federal lands.
Oil companies don’t know whether their drilling investments will pay off, or be banned in the future, with profits taxed away. And the general inflation from the trillions in excess spending also gooses oil prices. It’s truly basic economics, and President Biden and Gov. Newsom have failed to grasp this.
“I’m not sure [I] understand the argument for a windfall profits tax on energy companies,” tweeted Larry Summers, the treasury secretary under Democrat President Clinton. “If you reduce profitability, you will discourage investment which is the opposite of our objective.”
Precisely. The Biden and Newsom windfall profits tax proposals should be dropped into a deep oil well.