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Violate
an economic law and face the punishment.
Economic laws, like the laws of physics, have
no court of appeals. The law itself is police,
Commonwealth’s Attorney, jury, judge and
executioner. Test the law of gravity and you
will fall. Toy with the law of supply and
demand and prices will go up. Ignorance of the
laws of physics or economics is no defense.
When
you step off a building, you fall to the
ground. The sudden rise in the price of
gasoline and natural gas should not be any
more surprising. When demand increases faster
than supply, the cost goes up.
Supply
is down with terrorists in Nigeria, Katrina-
damaged oil rigs in the Gulf of Mexico,
disruptions in Iraq, the summer swap to
ethanol and changing additives. Demand is up
and going to stay up for the rest of the
century, unless there is a huge catastrophe,
with growing economies in China and India. The
price of petroleum products is going to go up,
up, up until the supply increases.
This
is an almost perfect example of economic laws
at work. There are about 1,000 petroleum
producers. There is no monopoly. The "Big
Oil" companies make less than nine cents
profit per gallon. No matter what. If the
price per gallon is one, two, three or four
dollars, the oil distribution companies make
nine cents on each gallon. The federal
Government makes 18.4 cents per gallon. The
Commonwealth makes 17.5 cents per gallon.
Virginia’s tax was raised in 1986 – for a
"permanent" solution to
transportation funding.
Virginia’s
Republican Senators want to raise the gas tax
another 6 cents for another, more permanent,
"permanent" solution.
If
a one dollar increase in gas equals about $25
more a week for the "average" family
or $100 a month ($1,200 @ year), then half of
Virginia’s families pay more, often much
more. If there are 3 million Virginia
households (2.7 million in 2000 census), then
$3.6 billion is drained from the Virginia
economy. Also, the additional costs contribute
to inflation. Inflation is a tax. Inflation
robs the middle class and punishes the poor.
In
2004 Virginia’s Republican Senate majority
and 17 Republicans in the House of Delegates
voted to take $1.4 billion out of the economy
in new taxes. Meanwhile, property taxes are
increasing. The economic law at work here
dictates that “every dollar that government
spent on public works [equals] one less dollar
was spent by the taxpayers to meet their own
wants.” Likewise,
for “every public job created, one private
job was destroyed.” (1)
Good
economic law and order dictates increasing
supply. Virginia’s single oil refinery, near
Yorktown, can double its capacity. The
Governor and the General Assembly should be
working with the company to move on the
construction. Look at building new refineries.
Explore for oil and natural gas in the
Atlantic. Provide tax cuts for alternative
fuels research, development, production and
distribution. Encourage zoning for higher
density and mixed housing and business to
reduce the need for vehicles – and some
demand for oil.
Likewise,
better economic law and order would be served
by a roll back of the surplus-producing tax
increase of 2004. Get the money back to
Virginia’s families and pumping through the
economy.
The
economic laws aren’t lax. Price controls
create shortages. Windfall-profits taxes raise
prices. Taxes kill jobs. Public sector jobs
kill private sector jobs. Minimum wage
increases kill jobs. Inflation is the worst
tax. Lowering taxes creates jobs. Lowering
taxes increases tax revenues.
Look
at what happened after the Kennedy-Reagan-
Bush II tax cuts. Long periods of economic
growth followed. New jobs and real wealth were
created. The rich got richer and poor got a
much higher standard of poverty – by every
measure. Our economy is still cooking because
of the Bush tax cuts.
Lest
anyone doubt the validity of economic laws,
let them be made subject to the laws. Put a 6
percent tax on every newspaper that advocates
higher taxes. Slap a 6 percent tax on legal
services for all the legislators who love
taxes and are lawyers. For our
retired-from-real-day-jobs legislators, tax
their retirement income and property an
additional 6 percent. Explain to these tax and
spenders that the tax represents stable,
long-term "investment" source for
infrastructure building. See, then, if they
think taxes don't have consequences.
The
only way for our Republican legislators to
learn the Rule of Economic Law is through the
ballot box. They will learn by our votes when
they have violated the rules good economic law
and order, or not. Next exam is the 2007
primaries.
--
May 1, 2006
(1)
Economics in One Lesson, Henry Hazlitt
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