Wednesday, May 23, 2007

 

Another problem only Steve Pearlstein can solve

As some might have guessed, my respect for the economic and business acumen of Post Business writer Steven Pearlstein knows no bottom. He continues his ongoing justification of my disdain with today’s entry: A Government Standard - washingtonpost.com

“Instead, I lay on the table a modest proposal: Put the government into the oil business.”

Mind you, he doesn’t want the government to take over the business; he just wants them to be a competitor in the business.

“The charter would require the company to operate at only a modest profit, while doing everything in its power to expand supply, smooth prices and expose collusive behavior.”

He’s even got capitalization of this enterprise solved:

“To capitalize Standard Oil, I propose raising the federal gasoline tax by a penny or two. I won't try here to lay out the economic arguments, but trust me, the burden of this tax would fall mostly on refiners, not consumers.”

Well, I suspect the real reason he won’t lay out the economic arguments is because someone else hasn’t (literally) drawn them for him. In business, the end user ALWAYS pays for the underlying costs…or else the underlying costs aren’t incurred. And he’s been in Washington long enough to know that few things have a longer shelf life than a federal tax.

Here’s where Mr. Pearlstein is coming from:

“But how should we respond to complaints about market fairness from an industry that has earned windfall profits for three decades by free-riding on the activities of an international price-fixing cartel?”

You can tell this guy is a serious reporter because he uses precise terms such as “windfall profits” and (earlier) “modest profit”. But the inconvenient truth about all this is that government (Federal & State) has consistently outperformed Big Oil in terms of collections vice profits.

He follows up with a snark worthy of Air America (a good Rorschach test: is that a compliment or an insult):

“And if the government is really as stupid and inept as industry executives have always claimed, why should they worry?”

They should worry because any competitor with a deep-pocket backer (the reluctant, nonvoting share-owning taxpayer) and a mission statement that reads like a Kumbaya stanza has the potential to skew the market in unrealistic ways. And we should all worry because no-one benefits when the government proves itself “stupid and inept” by implementing a “stupid and inept” proposal.

I know there is a certain tongue-in-cheek aspect to Steven Pearlstein’s proposal. I suspect he wrote it, in part, to once again affirm his liberal street cred with his peeps. Still, it displays an economic ignorance that should disturb his bosses at the Post.

Comments:
He and the poseurs on Capitol Hill feed on each other. It's a shame that outfits like the Post can't be counted on to deliver insightful analysis of an issue that has just about everyone on the wrong bandwagon.
 
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