Blumenthal’s Gas Bag

Blumenthal

“I believe in capitalism” – Blumenthal on the campaign stump

U.S. Senator Dick Blumenthal is on the road again, this time making a pit stop at a Hartford gas station to unveil his legislative assault on Big Oil.

The front page above the fold headline in a Hartford Paper read: “As gas prices in Connecticut hit $5 a gallon, Sen. Blumenthal targets oil companies’ billion-dollar profits.

“I’m angry,” Blumenthal said, “just as every driver in the state is.” And “The big oil companies are profiteering. They are making record profits causing consumers unprecedented pain.” And oil company buybacks “…are benefiting shareholders, but not consumers.” And “Those buybacks help the people who own the companies, but not consumers.”

In addition to reaping obscene profits, the oil companies also are cutting back on job production.

The solution to this obscene profit taking is, Connecticut’s consumer protection senator has said, a “Big Oil windfall profits tax,” fifty percent of which Blumenthal proposes to return to consumers in the form of a rebate.

The thrust of Blumenthal’s proposed legislation – which hasn’t a snowball’s chance of surviving the fiery furnace in the U.S Capitol – differs not at all from similar proposals made by extreme leftists in the Democrat Party such as Vermont's socialist Senator Bernie Sanders and President Joe Biden, whose chief ambition it is to put an end to fossil fuel production, the sooner the better.

Towards this end, Biden has shut down the Keystone XL pipeline running from Canada to Nebraska and forbidden greedy, profit taking Big Oil CEOs from tapping into federal lands rich in oil. Early in his campaign for president, Biden, attempting to hustle votes from leftists within his party, roughly sketched his proposal to drive Big Oil from energy production in the United States. In a still free market economy supply constriction drives prices up. And inordinately high prices, fossil fuel slayers hope, should drive fossil fuel production from the energy market.

The price gas consumers in Connecticut now see on gas pumps everywhere, hovering around $5 a gallon, is testimony to the success of the Biden/Blumenthal assault on fossil fuel production.

This is the way a free market works: If the production of goods and services is constricted, prices increase. They increase because a balance between the cost of production and the price of goods and services must be preserved if the producers of goods and services are to remain in business.

This is one of the enduring lessons politicians in Connecticut should have drawn from the late – one hopes – COVID pandemic. When politicians in Connecticut shut down businesses and schools during the pandemic, students failed to learn and a good many businesses went out of business.

Why so?

Answer: Businesses, shut down during the pandemic -- some may argue unnecessarily – were not permitted to answer a demand for products and services that had been severely constricted, their profit lines disappeared, and the businesses consequently disappeared. A profit is to a business what the heart’s blood is to bodily survival.

Blumenthal’s Bernie Sanders notion is a profit transferal scheme. Biden/Blumenthal are to decide what a proper profit line should be -- a determination made in a free market economy by purchases of goods and services – then, if the profit exceeds Biden/Blumenthal’s permissible profit, federal price regulators will confiscate the excess and transfer it to purchasers by means of a consumer rebate.

Put it this way: The Biden/Blumenthal administration first constricts the production of goods and services by means of dubious presidential executive orders; the producers of goods and services then recover diminishing profits through price increases that the Biden/Blumenthal administration deems excessive; the price regulators then impose an additional tax on energy producers intending -- so they say -- to return half of the collected tax to consumers.

But of course there is are difficulties. In a free market, capitalist – e.g. non-Bernie Sanders – economy, producers of goods and services are never tax payers. They are, instead, tax collectors who pass along tax impositions to consumers of goods and services. The Biden/Blumenthal obscene profits tax will provide a 50% profit to the Biden/Blumenthal tax collectors to do with as they choose. The 50% returned to consumers in the form of a rebate will soon be spent by energy consumers in the form of product and services cost increases.

Qui Bono? Who then, in this intentionally confusing and complex transaction, are the real winners and losers?

The Biden/Blumenthal scheme imposes an additional “profit” tax on energy producers, which the energy producer will recover by passing along an equivalent cost increase to energy consumers. The Biden/Blumenthal scheme has therefore imposed upon the energy consumer the whole profit tax, half of which will be, so federal regulators say, remitted to the consumer in the form of an energy rebate.

Would it not be simpler and more efficient for all concerned to first increase fossil fuel supplies by removing federal restrictions on production?  As production increases, the price of gas at the pump will be reduced, leaving in the pockets of taxpaying consumers of goods and services money they might use to revive businesses in Connecticut crippled by political COVID restrictions.

Reporters familiar with how the private marketplace really works might consider advising Blumenthal, sometime before voters go to the polls to reelect him to Congress, that the price of fuel in his home state may be further reduced by a permanent reduction in Connecticut’s double whammy taxes – Connecticut imposes state taxes twice on gas, once at the port of delivery and again at the gas pump -- leaving more money in the pocketbooks of mothers in Connecticut who no doubt will be paying increased prices for baby formula, once the single factory in the U.S that had produced about 40% of all baby formula consumed in the United States recovers from an unfortunate shutdown imposed upon the company by federal consumption regulators oblivious to predictable consequences.