Obama and Palin on Taxing Oil Companies

George Reisman has written a great article titled, Barack Obama and Sarah Palin on Taxing Oil Companies and Giving the Money to Others. The following quote shows a basic lack of economic understanding from both sides of the aisle:

A major consequence that both Obama’s and Palin’s plans overlook is that even insofar as the oil companies are presently prevented by drilling restrictions from using their funds for expanding oil production, their funds still perform a valuable economic function. Namely, they provide the capital for carrying on production elsewhere in the economic system. To the extent that the oil companies simply put their funds in the bank, buy Treasury bills, repurchase their own stock, or pay out extraordinary dividends, those funds are then available in the financial markets, all of which are interconnected. Their presence makes it easier for other businesses to obtain loans or sell stock and thereby have the funds to carry on their business activities.

Sarah Palin probably never thought of this when she dipped her hand into the oil companies’ till and withdrew $1,200 for every Alaskan. What she was actually doing in her ignorance was helping to make the credit crunch that the United States has been experiencing that much worse. She was helping to deprive businesses around the country of capital they would have had, if that capital had not been made available to be consumed to the extent of $1,200 for each and every Alaskan.

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