there's someone collecting the sacrificial offerings.
Where there's service, there is someone being served.
The man who speaks to you of sacrifice is speaking of slaves
and masters, and intends to be the master.
--Ayn Rand, The Fountainhead
Congress called oil company executives to a "show" hearing on Friday. The hearing was intended to make it look like Congress is "doing something" about the high price of gasoline at the pump. The show was also intended to assuage the fears of some members of Congress, who are "terrified" of the massive budget cuts that will be required to return the federal budget to fiscal sanity. The new buzz phrase out of the administration and the Democractic Party is "shared sacrifice"; the oil companies should "sacrifice" what is being called 'subsidies" in order to bring down the price of gasoline at the pump.
There are so many things wrong with that last statement that I could easily write several in-depth blog entries about what is happening in Congress and to the oil industry. I could write about the "terror" that certain members of Congress are feeling about the need for fiscal sanity. I could write about economics, and the law of supply and demand, and Gresham's Law. And I could write about the fact that Congress produces nothing (except perhaps excessive CO2) and therefore has no power to do anything to create wealth, create jobs, or lower prices except to get the hell out of the way. And maybe by the time I finish this entry, I will have written about all of the above. However, I am going to focus on two words in the sentence above: subsidies and sacrifices.
I don't know if you have noticed, but the Obama Administration, certain members of Congress, and the press have been very busy redefining words and concepts related to the tax code lately. For example, we have heard a great deal about how they intend to 'reduce spending' though the tax code. In plain English what this means is that they want to take more of your money (and mine) by force in order to continue spending because they are "terrified" of the change in their spending habits that must inevitably come. Conceptually, what this means is that they believe that they own you and your wealth; it is all theirs to dispose of as they see fit, and thus it is "cutting spending" to let you keep less of what is theirs. Politically what this means is that the people they call "taxpayers" are their cash cows. Frankly, in their eyes, we are slaves put on G-d's Green Earth to provide them with the means to continue the fantasy that the piper never need be paid.
In the show hearings of oil executives before Congress, the same redefinition is being accomplished for the word "subsidy." In plain English, a subsidy is money that a government pays out to some favored class in order to support some favored project or end. In this case, a subsidy of the oil companies would mean that a check is drawn on funds in the US treasury and sent to the oil companies in return for some action or restraint of action on the part of the latter. But what Congress is actually talking about is an increase in the taxes that actually paid by the oil companies to the US Treasury. In other words, certain tax deductions--namely those dealing with the depreciation of the value of oil wells as they are drained, and on the equipment used--will be removed, and the oil companies, rather than giving up a check from the government, will be sending a larger check to it. These tax deductions for depreciation are common to all businesses, because much of the capital that must be acquired to begin production depreciates in value with time and must eventually be replaced. Because the oil companies would be singled out with respect to losing these deductions. This is unconstitutional, but since the federal government has sneered at the Constitution with respect to taxes since 1913, this is hardly a concern for them. And it has become depressingly clear that all three branches of the federal government consider themselves to be above the law in any case, as they do not bother to even find out what the Constitution says about any matter that concerns them. Some of them even laugh at the idea that they should consider the duties that Constitution demands of them. Remember Pelosi?
Conceptually, the redefinition of the word subsidy by Congress has the same effect as the redefinition of spending cuts does as explained above. It puts all companies that have been taking depreciation deductions on notice that the United States considers all profits earned to belong to itself. Again, it is Congress claiming that private businesses are slaves to itself and its spendthrift ways. We are all serfs, with respect to our businesses, and with respect to our personal wealth. Congress has, through a clever redefinition of terms, annulled our right to our own property.
To make a sacrifice means to give up something of greater value for the sake of something of lesser value. It means for example, the total destruction of a food animal in order to appease an angry god, rather than using all of the hours of work and all of the energy put into the animal in order to feed one's family and increase one's health, wealth and well being. By this definition, a sacrifice is never a moral good. With this in mind, consider this exchange between Senator Jay Rockefeller and John Watson, Chairman of the Board and CEO of Chevron Oil:
Rockefeller begins this exchange by telling five oil executives, including Watson, that their companies are "out of touch" and that they must be willing to participate in a "shared sacrifice" in order to reduce the budget deficit.
Watson then says: "I don't think Americans want shared sacrifice. I think they want shared prosperity."
Rockefeller: "Do you understand how out of touch that is? We don't get to shared prosperity until we get to shared sacrifice."
First, notice how adroitly Rockefeller shifts responsibility for the federal deficit from himself and the federal government to the private businesses whose profits he wants to consume in order to continue deficit spending. The oil companies, being private concerns, have no power to reduce government spending, nor can they lower the federal deficit. Both houses of Congress must do those things. But Congress is "terrified" to do so, according to Rockefeller.
Frankly, I am more terrified of the 10% inflation, calculated by the traditional formula, that we are now seeing, and the increase of inflation that must occur as the dollar is devalued as a direct consequence of deficit spending at record levels. But I digress . . .
Rockefeller calls for "shared sacrifice." Of course he is lying. What he is really calling for is that the oil companies, and soon every company, and finally every individual, sacrifice profits and wealth in order that he, the Senate, and the House do not need to lose their power and prestige (earned as it is through promises and pork) by making the tough choices. Ultimately, since he believes that the United States owns all of us, and all of our productivity and our wealth, he need not "share" the sacrifice at all. He, and the Congress and the Administration--none of them--have any intention of sharing the sacrifice of wealth to dissolute spending. Rather than lose his power and prestige, he is willing to pour the wealth of others, wealth he does not own, down the toilet. This is known as "eating the rich."
This is the problem with "eating the rich." Once they are consumed, who do you "eat" next? The slightly less rich? The comfortably well-off? The middle class? The working poor? And once that wealth is gone, who is going to be creating wealth at all? It is the investment of wealth that drives productivity, and productivity that makes profits and pays on the investment two, ten and a hundredfold. Eating the rich is a sacrifice indeed; it is a race to the bottom, and will produce nothing.
The show is being put on in order to convince us non-corporate types that it is "us against them." But we do own pieces of those companies, or other companies that produce other products in other markets. Millions of us have our retirement funds invested in many different companies. The return on our investment comes when the companies make profits for us by producing value used by human beings. The wealth that is created by profits is indeed the "shared prosperity" that Watson was talking about in his testimony. It would be a terrible sacrifice indeed--and a moral evil--for the federal government to steal that wealth and pour it down the unproductive maw of the federal deficit just to delay their own day of reckoning.
It is very likely indeed that Americans are going to have to make hard choices, demanding that Congress make extreme cuts in spending and we will have to become more self-reliant in order to do so. But this is not a sacrifice on our part. We would be reducing our reliance on government and reducing our consumption temporarily because we wish to preserve a greater value: future prosperity for ourselves and our children. And we would be doing it in order to preserve the greatest values of all--life, liberty and property. These values make possible the great engine of wealth that America once was and may yet be again--should we so choose.
I cannot know what choices others might make, but as for me and my family, we will pay for our future prosperity and happiness with the coin of self-discipline and self-reliance, knowing that this entails a change in our own financial habits. And we must demand that the federal government do the same. You can keep your sacrifice, Mr. Rockefeller, and we will keep our wealth. We choose prosperity.