Wedge issues show political hucksterism at its finest, just like the old-time snake-oil salesmen who took advantage of people’s ignorance to get them to buy bottles of elixir that supposedly cured all ailments. Conservatives and liberals each make use of wedge issues. The former’s wedge issues tend to revolve around patriotism and the latter’s tend to revolve around “social justice.”
Government does not make good deciscions when considering tradeoffs in the uses of government land. The political process seems to generate all-or-nothing competition among interest groups rather than carefully balanced multiple uses. For example:
Closer to home it looks like the tradeoffs for Otero Mesa and Valle Vidal will be decided by political opportunists rather than by private market participants who have the incentives to encourage wise stewardship:
Richardson and state Attorney General Patricia Madrid, a fellow Democrat, have filed a lawsuit to limit oil and gas drilling at Otero Mesa in southern New Mexico.
Another battle is being waged over proposed methane gas drilling on the Valle Vidal in the Carson National Forest in northern New Mexico.
Democratic insiders have raised from “possible” to “probable” the prospect of presidential candidacies in 2008 by New Mexico Gov. Bill Richardson and Sen. Joseph Biden of Delaware.
Richardson has said he will await his 2006 re-election campaign in New Mexico before making a presidential decision. But party insiders say now he is preparing the groundwork for a national campaign, assuming that his second term as governor is likely. Richardson is a former member of Congress, U.S. ambassador to the United Nations and secretary of energy.
Would you like to know how to easily reduce the likelihood of future scandals? See our research director’s recommended reforms here.
The problem is not merely some sticky fingered officials, but rather the way the operation ignores some obvious lessons of economics. Incentives really do matter.
Check it out.
According to the Albuquerque Journal today (subscription) New Mexico’s two senators are not in favor of implementing a “windfall” profits tax on oil companies. This is good news. Our senators are not joining the illiteracy stampede.
I nonetheless sent them both a letter today. Here it is:
I encourage you not to make matters worse for oil and gasoline consumers by imposing a “windfall” profits tax on oil production. I am a consumer of gasoline; and I am as unhappy as anyone else about higher prices. But a windfall profits tax would make me unhappier, since it would insure that oil and gasoline prices would be higher than without such a tax. The reason: it would undermine the roll of profits in that sector of our market economy.
Seeking profits (and avoiding losses) is what drives all sectors of our prosperous economy; and it is why we are prosperous. When we see rising profits we can be sure that more resources will be devoted to the profit generating activity. It may come about a bit slower in the case of oil and gasoline (compared, say, to Microsoft) because of the difficulties of bringing new wells into production or of building and expanding refineries. The high prices associated with high profits should be viewed as our friend. This friend encourages economizing on the part of buyers and more production on the part of sellers. That is just what we want to reduce the scarcity of oil and gasoline and what we cannot accomplish with windfall profits taxes and price gouging laws. Unfortunately we seem to forget how bad the results were when government last felt it had to do something about prices. The roll of price in making good things happen in a market economy seems to be universally misunderstood by the public; and I am always amazed by the vilification of profits.
Profits have recently been analyzed and compared by my good friends at the Tax Foundation. They have found that oil companies’ profits may be a little higher than their long-term average; but those profits are not unreasonable compared to other industries. They have a good point that helps put recent energy trends in perspective; but that point tends to deflect attention from the crucial roll of profits (and prices) in guiding the behavior of buyers and sellers in energy (or any other) markets.
There is a change in energy policy that would be helpful. It seems to me that you could strike a better balance between benefits and costs when it comes to regulation. Why not allow the building of new refineries? Why not allow transportation of gasoline between geographic areas of the country? Why not relax restrictions on drilling and exploration for oil? All of these actions would reduce the costs and risks for producers, benefiting us all.
Harry Messenheimer, Ph.D.
President and Co-Founder, Rio Grande Foundation
Our site has been down for most of the last two weeks so that we could install some updates. Also, we have a new webmaster.
Thanks to Wayne Klick for the improvements he has made over the last 3 years. He has been responsible for the RGF website; and he helped launch our blog some 18 months ago. We wish Wayne well in his new endeavors in Lawrence, Kansas.