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Even before gas prices started to inch near the $4.00 mark, one of the hot items in Washington has been a Democrat-pushed effort to try and pass a “windfall profit tax” on big oil companies.

If you work on the Hill or read the news regularly, odds are you’ve heard the concept of this tax tossed around dozens of times. However, one thing that you never hear when this is discussed is what does “windfall profits” actually mean?

Yes, I know that this effort has been blocked by Republicans in the Senate (thanks, guys), however I’m quite confident that this isn’t the last you’re going to see of this, or something similar. Take note that Harry Reid voted against this bill, just so they would have the issue back on the floor.

So the question what are “windfall profits?”

Instead of me trying to explain it, I think the Economist does it best:

A controversial concept, often used by politicians to justify imposing a tax on profit that in theory is earned unexpectedly, through circumstances beyond the control of the company concerned, and is thus deemed undeserved and ripe for the taking by the tax authorities. As the profits were neither expected nor a result of the efforts of the firm, taxing them should not harm the firm’s incentives to maximize future profits.

The problem comes when greedy politicians start claiming that profits are windfalls when in fact they are deserved and expected. Then taxing them sends a signal to firms that they should not try too hard to make profits, as if they do too well they will not get to keep the profits anyway. If this became widely believed, effort would probably decline and economic growth would be slower.

Why on earth would the government ever want to present a proposal that would suggest that if something happens beyond your control and you make money on it, you should be taxed more excessively than if they were planned occurrences? Since when was America about the government telling you what profit is reasonable?

To make this issue resonate and make it more comfortable amongst constituents, Democrats paint a nice picture of these tax dollars going towards advancements in energy independence. They make it sound like taxing evil big oil is going to save the world and reduce our dependence on foreign oil.

If it wasn’t so ridiculous, their logic would be funny to me. From what I gather, the Democrats model to energy independence runs something like this:

1. Excessively tax oil companies who happen to make a profit off of selling a product to American consumers.
2. Prevent any attempts to tap into American oil reserves
3. Propose some ridiculous new government program
4. Blame the Republicans for our current energy and economic problems
5. Take a long recess

Both House and Senate Democrats (and even a few Republicans) need to get together and take a crash course in basic economic concepts. The principles of supply and demand are very powerful, and it should be no surprise to anyone that they play more of a factor in the price of oil than any executive.

Instead of listening to what the pundits are saying about the price of oil, I recommend that anyone who is interested in this issue start following what the business news channels are saying. For example, here is what you won’t hear the pundits talk about:

Citigroup raised its 2008 oil price forecast to $117 from $95 a barrel, and boosted its estimate for 2009 to $122 from $88 a barrel, citing fundamental reasons for the upward trend, driven by continued erosion of non-OPEC supply estimates, and the fact that demand, while softening, is by no means falling low enough to materially offset tightening supply. (Source: BusinessWeek.com)

When you follow the business side of the news, you often see things from a different perspective than what is being presented to you by the network news. Furthermore, if you follow international headlines, like this one from two weeks ago:

Nigerian militants warn of attacks on oil facilities

You’ll start to get a better glimpse into why we’re in the position we’re in today, as well as a better argument for why we should start tapping into some of the oil that we have here as a means to offset these unpredictable situations that are increasing the price we pay at the pump.

I know that there is a lot more to this issue; however, I’ve noticed that there are a lot of people, including many Hill staffers and Members of Congress who have resorted to simply using the talking points that the majority leadership has put together, without addressing the real issues we’re facing.

Sadly, the only reason that their talking points are able to work is because the American public is so uninformed, and reliant on news outlets to digest complex stories for them.

Maybe $5.00 per gallon gasoline will lead people to start doing their homework?

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Of course, I can’t write about oil and gas prices without providing a shameless plug to a great petition that I urge you all to sign: GasPriceProtest.com

Odds are, if you’re a commuter, there is one thing that is more painful these days than any traffic jam - gas prices.

Obviously, you’re not alone when it comes to resenting these extremely high fuel costs. However for most folks, it’s just assumed that there is nothing that they can do to lower these costs.

For some, people have changed their routines to make their drive times as efficient as possible. For others, they have decided to take public transportation to work instead of driving. Then there are those who simply want to avoid the stress and cost altogether and give up driving completely.

It’s not just a small handful of people who are making these various adjustments to save a buck either, just check out these statistics from CNN.com:

The Department of Transportation said Monday it had seen the sharpest monthly drop in driving since it began keeping records. In March, Americans drove 11 billion fewer miles than in March of 2007.

I have no doubt that when the data is released for April and May, the number of miles driven will continue to decline significantly.

While I think it’s great that Americans are driving less, there are many who simply can’t make these adjustments, whether that be due to location, schedule, etc. What about these people? How do they fight the pain at the pump?

The truth is, the American people DO have the ability to lobby their members of Congress to fight more aggressively to reduce the price we pay at the pump.

Just today, a new website was launched serving that very purpose - giving Americans the ability to sign a petition that urges Congress to suspend the federal gas tax, increase American oil production, and expand U.S. refineries.

If you’re tired of high gas prices, and want those you have elected to take action, you should sign this petition.

I’m confident that this petition will take off soon, and hopefully, instead of Congress spending hours questioning oil executives, they will use their power and creativity to pass legislation that eases gas prices immediately.

It seems like $300,000,000,000 is the magic number these days in Washington.

First Congress wanted to allocate $300billion for a mortgage bailout, and now they want allocate another $300billion of YOUR money to subsidizing farmers and a variety of other state pet-projects.

Even though President Bush had promised a veto on this legislation, the House continued to charge ahead at full speed, passing the Farm Bill and all the pork attached.

From CNN.com:

“This bill has been under consideration for a long, long time, and yet still we have earmarks that have been ‘air dropped’ into the legislation,” said Arizona GOP Rep. Jeff Flake.

So what exactly is included in this package? Here is just a taste:

The bill also contains a few home-state projects, including tax breaks for Kentucky racehorse owners, extra help for farmers in Hawaii and Alaska and dollars for salmon fishermen in the Pacific Northwest.

Sadly, this is only the tip of the iceberg.

In the coming days, I’ll try to get a more complete list of some of the additional pet-projects that are included in this enormous package, as well as who requested them.

Unfortunately, the vote in the House was 318-106, which means that there is already enough likely-’yays’ for a veto override. However, if 28 of the 100 Republicans who voted for the Farm Bill would grow a pair and focus on principle, and not the outcome in November, then maybe people would start to see the Republican Party as one that is actually unified behind a set of core values.

Welcome to campaign 2008.

I’ve made many posts here regarding my opposition to an alarming trend that I’ve seen growing rampantly here in Washington, a trend that all Americans will pay for, but only a few will reap the benefits of - government bailouts.

While the unorthodox treatment that Bear Stearns got from the Federal Reserve a few weeks ago was enough to cause short-term chaos in financial markets across the globe, the more troubling bailout, without a doubt, is one aimed at the mortgage markets.

Anyone who has received some sort of formal education understands that you shouldn’t borrow more money than you can afford, and more importantly shouldn’t sign a contract where you aren’t 100% confident of the specified terms and/or rates.

Even so, the government has felt the need to take responsibility for the actions of these irresponsible borrowers, and seems to think that using taxpayer money to stabilize these loans is going to be the best approach to preventing more long-term economic turmoil.

While I haven’t seen seen one good bailout proposal, I’m pleased to see that there are concerned citizens who are rallying against this showing of fiscal irresponsibility by both a select group consumers and the government.

What’s even more pleasing is that many of these people who are rallying against these bailouts aren’t usual suspects.

The impressive part of this movement isn’t the families with the 2.5 kids, white picket fence in the suburbs, etc, who have made smart financial decisions and are usually the first to rally against foolish government intervention. Sure, many of them are on board with opposing these bailouts, as they should be, but the really impressive thing is the number of renters who are following what is happening and realizing that they are getting screwed more than any other group of people.

A few weeks ago, FreedomWorks launched a site called AngryRenter.com, with the goal of bringing attention to how renters are being affected by these ridiculous bailouts.

Keep in mind that renters, for a variety of reasons, have chosen not to buy homes. For many, they are waiting for the market to get better, for others they are waiting until they have more money and for some, they just don’t want to deal with the responsibility.

(here is a great video by Peter Suderman summing things up)

Regardless of their rationale, is their any argument that can justify sticking the burden of covering these bad mortgages on people who don’t even have them? There is absolutely no argument for that.

Of course, the early results of AngryRenter.com clearly show that this is now an issue that has upset many, and if Congress wants to prevent their less than stellar approval rating from reaching new depths, they might want to pay attention.

In only a few weeks, AngryRenter.com has already gathered nearly 12,000 signers to their petition, and I don’t see any reason why that number wont grow exponentially in the near future.

I urge everyone to check out the site, sign the petition and even forward it on to your friends.

It’s tough to get Congress to pay attention to even the biggest issues sometimes, but when you present them with tens of thousands of names, they usually wake up… at least the good ones do.

Despite the fact that I’m not a homeowner, I’ve become more and more troubled by the proposals I’ve heard buzzing around the Hill, all aimed at trying save those homeowners who are having a hard time making payments on their sub-prime mortgage loans.

While I think it’s unfortunate when people don’t have the money they need to pay down their debts, it’s almost impossible for me to feel sorry for those who are in trouble because they cant afford their mortgage payments.

These loans were initiated by the homeowner, with terms that were clearly spelled out and agreed to. Just like when you open a credit card, you know exactly what interest rate you’re going to get. The same holds true with any home loan, before you sign on the dotted line, the terms are clearly laid out. If you don’t understand, or something seems fishy, it’s your responsibility to get clarification.

Yes, even for those who borrowed sub-prime loans.

People who took out these loans knew that their teaser rate would only be temporary or else it wouldn’t have been called a “teaser” or “introductory” rates. Even with these temporary (teaser) rates, these people knew that there would come a time down the road when their payments would increase and they would be held responsible for ensuring those payments were made. Just like any contract, if you don’t meet the terms, there are consequences and penalties.

I was always told that part of being an adult was living up to your responsibilities and making sure you never take on more debt than you can handle. However, if you do, you have to pay the consequences and live with your mistake and learn a lesson for the future.

I guess it’s that logic that is making the latest housing stimulus proposal so difficult for me to comprehend and accept.

Here are some of the details of what it could contain if passed (via cnn.com) :

* $4 billion in community block grants for states and local governments to buy and refurbish foreclosed properties
* New bond authority for states that can be used to refinance subprime mortgages
* Tax credits for people who buy and occupy homes in or near foreclosure. Sen. Johnny Isakson, R-Georgia, has proposed a $15,000 credit, but no dollar amount has been agreed on so far
* Tax benefits for homebuilders to reclaim past taxes paid
* New disclosure and transparency requirements for loans
* New money for foreclosure counseling
* New Federal Housing Administration rules that would reduce down payments on FHA loans and an increase in the size of a mortgage the FHA can insure

What happened to holding people responsible for their action? Are people no longer required to live with the consequences of bad decisions? Is the government going to bail out everyone when they have a problem?

While these are all questions that need to be addressed, the more important question that needs to be asked is why are responsible people, those who decided to rent, or take on fixed-rate mortgages, being penalized because of the actions of those who didn’t do their homework? Why should I have to pay for people who made a bad decision?

Do people not realize that government bailouts only provide a temporary fix, but more importantly as I just mentioned, cause responsible people to have to take on the burden of those who weren’t prudent. This seems worse than welfare!

If it wasn’t an election year, I can guarantee that no conservative Republican would be supporting measures that had these terms. However, since it is an election year, it seems that ideology and party platform are commonly thrown aside to win points back in their states.

But what about those in the district who are being responsible, those who did their research and planned ahead? Are each of these members willing to go back home and say, “I’m glad you’re responsible, but because your neighbor isn’t, we’ll pass their bill on to you?”

Unfortunately, the congressional spin machine will deliver this bill as if it was a cure-all to cancer and nobody will have to break down the cost or long-term consequences.

The media will tout this as a great accomplishment, and the House and Senate leadership will receive many accolades. Getting credit for promoting responsibility, I guess it’s that logic that gives Congress its high approval ratings.

Once the final bill is passed, I hope to go through it and get a breakdown of how much this will cost per taxpayer so people can get a better understanding of just how much money the government is throwing away on these rediculous bailout efforts.

Beyond the dollar amount, the reality is that none of these bailouts are going to last long. People will still be irresponsible. Companies will still find themselves in debt. However, thats will always be a concern and things have gotten better over time.

Instead of the government fixing everything, maybe we should just sit back and let the market make its necessary corrections and see what happens from there. For those who made the poor decision of taking out these loans, I guarantee that they will be the first to Google “financial responsibility” and make sure everyone they know does the same. If not, let them learn the hard way.

I’ve noticed that every time there is a panic, at least $1billion (thats $1,000,000,000) is guaranteed to come out of Washington to try and solve the problem. However, these problems always seem to keep coming back in some form.

Maybe its Washington, not the economy thats really the problem. Thoughts?

Looks like Monday is going to be without a doubt, an interesting day in the global markets, due to an extremely troubling course of events on Sunday that will trip up investor confidence.

The first of this chain of events happened on Sunday evening when the Federal Reserve decided to cut its lending rate by .25% (from 3.50 to 3.25%) to once again help ease the “credit crunch.” This happening only a few days after the Fed already took similar action to address the same problem.

While many people think that cutting these rates is good for the economy, the reality is that these cuts make certain items more expensive for consumers. Gasoline prices for example, will rise on this news, because when these rates are cut, investment leaves the United States to go to countries where they have a higher interest rate and a stronger currency. When countries pull out, the dollar becomes weaker and gas prices need to adjust to accommodate to the change in real value of the US Dollar.

The second factor playing in on this the late evening acquisition of Bear Stearns to JPMorgan Chase & Company on Sunday evening.

For those who have been following this story, it’s not surprising that this sale was made. However, what was surprising was the fact that the final valuation from JPMorgan Chase & Co. put Bear Stearns at a measly $2 per share. It’s important to note that on Friday the stock was in the $30 range, and earlier in the week was in the $60 range.

So what does this mean for the US and Global Markets?

Well, if you’re a Gold investor, you can sit back and relax because you’ll continue making a lot of money.

However, if you have money spread out across the US markets and globally, depending on the diversification of your portfolio, you’re probably going to see things lower on Monday.

But, the reason for this post isn’t to necessarily highlight concerns for investors on Monday morning, they’ll see these without my insight. Instead, the reason I comment on this is because this is going to be a major issue in the 2008 Presidential Campaigns in the next few days.

With Barack Obama and Hillary Clinton still fighting it out, they have a unique opportunity now to go after the Republicans and blame them for the condition of the economy, the oncoming recession, the loss of jobs, etc, etc.

Furthermore, while all this was happening, John McCain was in Iraq, boosting the morale of the troops, and getting updates on the latest progress (It’s good to see one Senator still doing his day job). While I would hope that the Democrats have more class than this, I wouldn’t be surprised if one of the two Dems, or someone on their behalf made a statement suggesting that instead of focusing on what is happening at home (i.e. the economy), McCain is focusing on staying longer in Iraq.

However, this could also create a good opportunity for John McCain to show off some of the minds that he would bring into the White House if he were elected, particularly Phil Gramm, and have him discuss some of his thoughts on what needs to be done with the economy and tie those suggestions into McCain’s overall stump speech.

The Democrats have and will continue to use the economy as an attack mechanism as the election draws near, which is why I am hopeful that John McCain will select a strong running mate, someone like Mitt Romney to handle these questions and answer them using real world scenarios and applications instead theories that sound good to voters, despite their lack of practicality.

I think I better go fill my tank tonight… $3.50 p/gallon… ughhh…

It’s a sad day for the conservative movement, one of the great ones has passed.

From the New York Times:

William F. Buckley Jr., who marshaled polysyllabic exuberance, famously arched eyebrows and a refined, perspicacious mind to elevate conservatism to the center of American political discourse, died Wednesday at his home in Stamford, Conn.

Mr Buckley, 82, suffered from diabetes and emphysema, his son Christopher said, although the exact cause of death was not immediately known. He was found at his desk in the study of his home, his son said. “He might have been working on a column,” Mr. Buckley said.

Mr. Buckley’s winningly capricious personality, replete with ten-dollar words and a darting tongue writers loved to compare with an anteater’s, hosted one of television’s longest-running programs, “Firing Line,” and founded and shepherded the influential conservative magazine, “National Review.”

He also found time to write 45 books, ranging from sailing odysseys to spy novels to celebrations of his own dashing daily life, and edit five more. Two more books, one a political novel, and the other a history of the magazine called “Cancel Your Own Goddam Subscription” are scheduled to be published in 2007.

The more than 4.5 million words of his 5,600 biweekly newspaper columns, “On the Right,” would fill 45 more medium-sized books.

Mr. Buckley’s greatest achievement was making conservatism — not just electoral Republicanism, but conservatism as a system of ideas — respectable in liberal post-World War II America. He mobilized the young enthusiasts who helped nominate Barry Goldwater in 1964, and saw his dreams fulfilled when Reagan and the Bushes captured the Oval Office.

I know I’ve tagged this with a lot of categories, but its almost impossible to limit someone so dynamic to just one tag. I hope to post more on this later.

In the meantime, here are a few respected blogs that are covering this:

http://newsbusters.org/blogs/nb-staff/2008/02/27/william-f-buckley-jr-passes-away

http://hoosieraccess.com/blog/2008/02/27/bulletin-columnist-william-f-buckley-jr-has-died/

http://time-blog.com/real_clear_politics/2008/02/william_f_buckley_jr.html

http://authentic-connecticut-republican.blogspot.com/2008/02/william-f-buckley-1925-2008.html

http://www.politico.com/news/stories/0208/8720.html

http://www.observer.com/2008/william-f-buckley-jr-dead-82

http://www.poliblogger.com/?p=13321

http://www.primezero.com/blog/2008/02/27/william-f-buckley-dies-at-82-a-critical-thinker-from-a-more-civilized-age/

http://wigdersonlibrarypub.blogspot.com/2008/02/rip-william-f-buckley-jr.html

Update: It looks like the left waited no time to lash out on WFB

For those of you follow news on the hill regularly will be familiar with the latest piece of legislation introduced by Congressman Eric Cantor, the Middle Class Jobs Protection Act (H.R. 4995).

For those of you who aren’t familiar with the legislation, if passed in its current form, will essentially reduce the corporate tax rate from its current level of 35% to 25%.

Beyond the rate cut, this proposal will also allow a variety of other perks for business owners, such as allowing a five year carry back of Net Operating Losses as well as a carry back of tax credits for three years.

If delivered the right way, this is a proposal that I think could make serious progress in the House. With the economy in its current state, this legislation is almost certainly going to be well received by economists who have been informing congress for awhile now that action needs to be taken.

Furthermore, this seems like a decent compromise to the varying proposals that were floating around the Hill just before the Alternative Minimum Tax (AMT) was to expire.

This legislation already has some strong support on the Republican side, including Jeb Hensarling, Kay Granger, Jim Jordan, Michele Bachman and John Campbell.

While Cantor has some strong, fiscally sound conservatives on board, I think they are going to need other champions of conservative fiscal policy, as well as leaders who can help deliver this legislation better.

To really beef this up, I think that having a young gun like Paul Ryan and/or Jeff Flake added to the mix will really give this some legs. Paul Ryan to be the smart, young, nice guy who everyone likes to get the signatures and Jeff Flake to get in the faces of people Paul Ryan isn’t successful with. The killer combo

Speaking of Jeff Flake, if you haven’t done so already, please visit makeitflake.com and add your name to the growing list of Americans who believe that Jeff Flake will bring the earmark cutting leadership that the GOP needs on the Appropriations Committee.