Don't know much about economics--Obama-McCain edition

Karl Rove:

Barack Obama and John McCain are busy demonstrating that in close elections during tough economic times, candidates for president can be economically illiterate and irresponsibly populist.

In Raleigh, N.C., last week, Sen. Obama promised, "I'll make oil companies like Exxon pay a tax on their windfall profits, and we'll use the money to help families pay for their skyrocketing energy costs and other bills."

Set aside for a minute that Jimmy Carter passed a "windfall profits tax" to devastating effect, putting American oil companies at a competitive disadvantage to foreign competitors, virtually ending domestic energy exploration, and making the U.S. more dependent on foreign sources of oil and gas.

Instead ask this: Why should we stop with oil companies? They make about 8.3 cents in gross profit per dollar of sales. Why doesn't Mr. Obama slap a windfall profits tax on sectors of the economy that have fatter margins? Electronics make 14.5 cents per dollar and computer equipment makers take in 13.7 cents per dollar, according to the Census Bureau. Microsoft's margin is 27.5 cents per dollar of sales. Call out Mr. Obama's Windfall Profits Police!

It's not the profit margin, but the total number of dollars earned that is the problem, Mr. Obama might say. But if that were the case, why isn't he targeting other industries? Oil and gas companies made $86.5 billion in profits last year. At the same time, the financial services industry took in $498.5 billion in profits, the retail industry walked away with $137.5 billion, and information technology companies made off with $103.4 billion. What kind of special outrage does Mr. Obama have for these companies?

Sen. McCain doesn't support the windfall profits tax, but he can be as hostile to profits as Mr. Obama. "[W]e should look at any incentives that we are giving," Mr. McCain said in May, even as he talked up a gas tax "holiday" that would give drivers incentives to burn more gasoline.

This past Thursday, Mr. McCain came close to advocating a form of industrial policy, saying, "I'm very angry, frankly, at the oil companies not only because of the obscene profits they've made, but their failure to invest in alternate energy."

But oil and gas companies report that they have invested heavily in alternative energy. Out of the $46 billion spent researching alternative energy in North America from 2000 to 2005, $12 billion came from oil and gas companies, making the industry one of the nation's largest backers of wind and solar power, biofuels, lithium-ion batteries and fuel-cell technology.

Such investments, however, are not as important as money spent on technologies that help find and extract more oil. Because oil companies invested in innovation and technology, they are now tapping reserves that were formerly thought to be unrecoverable. Maybe we are all better off when oil companies invest in what they know, not what they don't.

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Now you know why Democrats hate Karl Rove. He has the ability to cut through the BS and expose it in a way that every voter can understand. For Democrats that is scary. It is why they want to criminalize their political differences with him.

When Democrats keep restating their policy as if it were fact, "We can't drill our way out of the problem," they are either being dishonest or exposing their ignorance of economics and the oil business. It could be a combination of all, but the fact is that if we increase the supply prices will fall. If we limit production they will increase.

It has been Democrat policy to limit production of all forms of energy over the last 30 years. Other than the anemic solar energy business there has been no source of energy they have not aggressively tried to limit, be it oil, gas, coal, nuclear or wind. They hate energy production. That is why all energy is more expensive than it should be.

The dirty secret that is slipping out now is that Democrats like high prices for energy because they beleive it will produce more conservation which is their preferred "source" of energy.