FreedomTalks

Steven Malanga takes on the “free-ride for business” myth at RealClearMarkets. Check it.

Many businesses we regard as successful operate on small profit margins. After paying $5.8 billion in taxes in 2005, Wal-Mart earned $11.7 billion—a nice chunk of change. But those earnings were on revenues of $312 billion, a mere 3.4 percent net profit margin. Exxon Mobil earned $36 billion in 2005 after paying $23.3 billion in taxes on revenues of $371 billion. Looking at that result you realize that in America today, a ‘windfall’ profit is one that amounts to less than 10 percent of revenues.

With profit earning companies vilified so much in the media, and threats of increased rates always on the horizon, it’s easy to forget that we have the second highest corporate tax rate among OECD nations.

On their way out the door for August vacation, Congressional leadership threatened all kinds of windfall profit taxes aimed at oil companies - as if taking more money from a business would result in lower prices, especially ones who are already paying record taxes in keeping with their profits.

This Wall Street Journal article also sheds some light on “windfall profits,” pointing out that compared to other industries, oil has one of the lowest profit margins.

Maybe they have in mind profit margins as a percentage of sales. Yet by that standard Exxon’s profits don’t seem so large. Exxon’s profit margin stood at 10% for 2007, which is hardly out of line with the oil and gas industry average of 8.3%, or the 8.9% for U.S. manufacturing (excluding the sputtering auto makers).

If that’s what constitutes windfall profits, most of corporate America would qualify. Take aerospace or machinery — both 8.2% in 2007. Chemicals had an average margin of 12.7%. Computers: 13.7%. Electronics and appliances: 14.5%. Pharmaceuticals (18.4%) and beverages and tobacco (19.1%) round out the Census Bureau’s industry rankings.

Reason is up to their usual brilliance with their latest on ethanol.

Says gentleman at a gas station in Texas in this video. Congressman Jeb Hensarling (TX) went home to collect signatures from constituents asking for a vote on energy.

Colorado Congressman Mark Udall has apparently seen the light of elections and  reversed his opposition to off shore drilling, The Denver Post has the story.

Battered on the energy issue for weeks, Democratic Senate candidate Rep. Mark Udall moved Wednesday to close the distance with his Republican opponent on the issue, calling for more domestic drilling and reversing his long-standing opposition to drilling off America’s shores.

Still no word if Udall will come around on the vast reserves of oil shale in his own state.

Here’s an interesting article from the Philadelphia Inquirer about oil off the New Jersey shore.  The article talks about the new technology we have to pinpoint oil, making it a more exact science than ever and about the billions of barrels just off our own coasts.

One of things that stood out to me most was the fact that New Jersey’s Governor and Senator Lautenberg both oppose off shore drilling  (and Rep. Zimmerman, a Republican senatorial candidate was opposed as well but tempered his stance by saying states should get to choose which is true) despite the fact that a majority of the people they supposedly represent disagree.

A 62 percent majority of likely New Jersey voters polled this month by Quinnipiac University Polling Institute said they favored drilling in protected offshore areas.

An even higher percentage of Jersey Shore voters - 70 percent - supported lifting the ban, polling spokesman Pat Smith said.

It’s pretty clear this is a national message leaders are ignoring.

FreedomWorks popped in to hear the speeches that are still going on over on the House floor today, the dogged determination to see this issue through is amazing.  Here’s what we heard:

Rep. Michael Ferguson (NJ): urged Americans to call the switchboard, (202) 224-3121. to speak to their Congressperson and demand a vote.  He said that people should “raise their voice and act, regardless of opinion.”

Rep. John Shimkus (IL): was running the show today, introducing speakers, welcoming visitors to the floor.  He spoke repeatedly about today’s theme: American energy means American jobs, saying “No to new energy is no to new production” noting all the jobs at every point in energy production.  Shimkus also read a letter from an Illinois Democrat judge who wrote in a letter to Speaker Pelosi that her refusal to allow a vote on drilling and relieving prices at the pump was “a despicable act” and that she hopes when Pelosi flies over the heartland she takes “time to reflect on all the citizens below who need real leadership in the house…this won’t make you the first woman president.”

Rep. Trent Franks (AZ): started by saying what a sacrifice it was for him to be there today - his wife just gave birth to twins only last week. However, he feels they make it all the more imperative he come to the floor and fight for their future.  It is easy to forget why you came to Congress in the first place, but it is to protect lives and the constitutional rights of those to come.  Franks went on to talk about the two major implications of high gas prices: first economical and second security.   Importing so much of our energy means a huge transfer of wealth from our nation to others that aren’t good allies.    Government needs to unleash people to do “all of the above” (drilling in OCS and ANWR, LNG, wind, solar, etc) instead of deliberately tying hands.  Government shouldn’t be “choosing winners and losers, but letting the market and American enterprise” solve the problem.  Already, Franks noted, Americans are doing a great job at conservation and efficiency.  While we burn 20% of the world’s oil and gas, we produce 1/3 of the goods because we have mastered efficiency and production and this will solve the energy problem, not government.

Rep. Geoff Davis (KY): said that we have so many resources of our own, at our very feet that we should be able to use responsibly.  We need to  pass legislation that lets us tap known resources like in the OCS and ANWR, followed by extracting fuel from oil shale, tar sands, and coal to liquids while technology continues to improve for alternative, non-fossil fuels.

Rep. Tom Davis (VA): started off by saying Congress was supposed to pass 11 appropriations bills this year to fund government, but so far only 1 has been brought to the floor because Speaker Pelosi is avoiding any amendments that could force a vote on drilling in the OCS.  And that although the Speaker had started to weaken on her stance as of late, it would probably be loaded down with pork barrel spending.  Davis said we needed a comprehensive policy and then read some of the OCS drilling myths the WaPo dispelled this morning.  Davis concluded, “Whether or not you agree on drilling in the OCS or not, we deserve a debate.”

Energy and food prices have risen at an astonishing clip. That means the U.S. economy is in inflation, right?

But the price of a key asset class, housing, is declining at 15 percent annual rate. That means deflation, right?

So what’s the word for an economic condition that contains relatively disruptive levels of both inflation and deflation simultaneously in different sectors of the economy?

Lousy public policies are a major driver of our current problems, of course. In particular, the Federal Reserve, led by Chairman Ben Bernanke, has cut interest rates far below the real cost of capital, weakening the dollar and causing a significant part of the increase in commodity prices.

Congress, not to be outdone, recklessly expanded the ethanol fuel mandate and continues to limit energy production, putting further upward pressure on both food and fuel prices.

In housing, a combination of tax breaks, conflicted ratings agencies, and government backstops for reckless (and in some cases fraudulent) lenders like Countrywide and Indymac Bank helped spur a bubble that is now correcting.

So some of the folks at FreedomWorks kicked around a few possible names for this unhappy outcome that seems different from traditional inflation or deflation (at least so far…).

Multiflation
Dumbflation (nod to bad policy)
Bailflation (nod to the bailout)
Fedflation (for our friends at the Federal Reserve)
Bearflation
Schizoflation
Scareflation
Badflation
Sadflation
WTF-flation

If you want to lay it at Bernanke’s feet, “Benflation” has a nice ring.

Biflation
Dissflation
Price Dissonance (already has microeconomic meaning though)
Greenflation (nod to former Fed Chairman Alan Greenspan’s role)
Coflation
Simulflation
Fragflation
Chipflation
Dieflation

I rather like Conflation, which captures both the conflated nature of the current economy, the role Congress plays, and the “con” involved in shifting housing market losses to the taxpayer.

What do you think? Share your own ideas in the comments below!

It’s easy to forget how real people live and what they care about outside the DC bubble - this is such an unnatural city, growing up around government and not industry, transportation, or any kind of port like most cities historically are.

On the floor, one conservative congressperson after another had been able to hold up their constituent mail full of sad stories of lost jobs, and opportunities on hold due to skyrocketing energy costs.

Here’s how fuel prices are affecting one person close to FreedomWorks.

My brother, Davis - 17, is a drum major for the Williamsport Area High School Marching Millionaires - an ironic name given that they are rapidly running out of funds.  Years before he reached high school, he watched me march with my saxaphone and dreamed of being in the band, and on that podium conducting a field of over 100 musicians.  He took up the drums and later the tuba and mellophone.  A dedicated band member, he rapidly rose through the ranks in this competitive band to become section leader, and now at the end of his high school career - drum major.

Davis has put years of time and practice into achieving this dream.  Now, his final season is threatened because of high gas prices.

Here, from the keyboard of Davis, is the story of how high gas prices are impacting his life:

After a successful marching season in the fall of ‘07 we received several fuel surcharges from our busing  and trucking companies.  These charges were well over $10, 000, a staggering figure for a program that receives no help from the school district and relies primarily on fundraising done by the students and parents.  Add to that disappointing concession stand revenue thanks to a poor attendance at football games , a nationally ranked indoor drumline season also requiring expensive buses and a rained out fundraising carnival, the band was scraping the bottom of the barrel for funds.

This upcoming season we have had to schedule competitions closer to home to avoid long distance travel, losing the high profile appearances required for an impact on the national level.  This makes for a disappointing season for the seniors who will leave the program with a less than fulfilling experience.

We have had to up our fundraising to a point where the students are getting burned out selling sandwiches, washing cars, etc.  all for  nickels and dimes.  I have been sending letters to local leaders and people of influence asking for financial assistance and others have been looking for corporate sponsors to help take the gas burden  off our minds.   Unfortunately, with all of our work, we are still faced with the decision of which competitions to drop from our competitive schedule and still live up to the overwhelming tradition held by the Marching Millionaires.

There are tons of stories like that out there, most far more dire than Davis’s disappointing senior year.  Yesterday, Rep. Garrett from NJ urged people to send their stories to PainAtThePump@mail.house.gov.

On Tuesday FreedomWorks joined with area allies to counter MoveOn’s demonstration for an “Oil-Free Presidency.” Try Economy-Free. At any rate, the whole write-up will be on up over at FreedomWorks.org soon as part of our weekly campaign update.

In the meantime, I wanted to make sure you got to see these great links to other people who wrote, took pictures, and great video.

Enjoy.

• Jon has a great roundup at This Ain’t Hell - MoveOn Won’t Part II

• Here’s one of the videos - I Didn’t Do That - MoveOn tries to tear down signs.

• MoveOn MorOns Protest Against Lower Gas Prices

• Moveon.org Counter-Rally a Success!

• Greetings from the Counter Counter Protest

Here’s how it went down while I was there:

Rep. Adam Putnam (FL): Ran the show, introducing speakers and keeping tourists who were coming in and out of the room apprised of the issue.  Putnam said that we need all kinds of energy to reduce dependence on foreign oil.  Congressmen were still calling for a vote, addressing the process - but expanded the message from “Drill” to the emphasis on a variety of types of energy as addressed in the American Energy Act.  Putnam went on to say there would be a “bi-partisan recipe” to “pass an all-of-the-above, comprehensive approach to energy.”  We missed opportunities in the past, but it’s time to address things once and for all.

Rep. Virginia Foxx (NC): Was thrilled to speak in front of a packed room of people from across the country, “This is the people’s house,” and got a standing ovation at “We live in the greatest country in the world.”  Foxx said we need American energy and that some colleagues were anti-American energy.  She reminded visitors that your Congressman is your REPRESENTATIVE and that right now the House was not representing what the people want.  Foxx concluded with the story of Marie Antoinette’s famous “Let them eat cake” solution to people starving, likening it to the Democrats solution for energy - drive smaller cars and wait for the wind.  Foxx said she didn’t like to say “Democratic leadership anymore” because “It’s not leadership when you let the American people suffer the way they are now.

At the door, visitors received a copy of the open-letter a group of Representatives sent to Speaker Pelosi, and were asked to take it to their Congressman.

Rep. Scott Garrett (NJ): Talked about how this was a bipartisan issue, and he knew many Dems were supporting a pro-energy policy and he would welcome them there on the floor.  Garrett also unveiled a new way to tell your member about how you are dealing with high gas prices - PainAtThePump@mail.house.gov.  Garrett also told the crowd about a man from Maine who had to take a second job to afford high fuel costs and as a result barely saw his family.  A student in Florida had to attend a local community college, not the university of his choice because he couldn’t afford gas and the university had discontinued bus service due to costs.  He reminded everyone that it’s not just at the pump people are hurting - it’s the cost of milk, of bread, and stocks that are all hurting.  The same stocks that comprise your retirement plan, mutual funds, and pensions - all are tied up in the issue.  Garrett ended, “Pelosi wants to save the planet, but we need her to come here and save the American family, the American taxpayer, the middleclass, and the poor.”

Rep. Frank Wolf (VA): wished that Congress could be here to see everyone in the seats [it was amazing].  Wolf went on to point out the international consequences of our current energy plan.  That, while we sat on our hands, Cuba awarded drilling rights to China - a nation with an abhorrent human rights record.  Wolf described how China plundered Tibet and ignored the atrocities occurring under their nose in Darfur.

Rep. Patrick McHenry (NC): brought up the fact that while they were fighting for energy freedom, and while people around the country were suffering, Speaker Pelosi was on her book tour.  “If Nancy Pelosi truly wanted to save the planet, she would allow for American energy production” because it is the cleanest in the world - others pollute far more extracting oil and it pollutes to transport it here.  McHenry pointed out that in Nigeria, from 1976-2001, oil production averaged a spill a day.  He went on to describe how new nuclear plants had zero emissions as he called for a balanced energy plan that included investing in alternatives like wind, solar, and nuclear.

Rep. Christopher Shays (CT): said this was one of the most moving things he has seen in the 20 years he has served in the House.  He said it was too bad they couldn’t even vote on energy policy because “If you tell the American people the truth, they’ll do the right thing, but we can’t even talk about this.”  Shays noted that the twenty representatives from New England didn’t stay for this, even though New England has the highest energy costs and natural gas to heat over 1 million homes had to be piped all the way down from Canada while deposits of natural gas sat just off their own coast.  He went on to describe how Congress had passed 279 bills, but 105 of those were to rename post offices after someone.

Judy Biggert (IL): called for OCS truth - you can’t see the rigs from shore, and they are safer than ever withstanding hurricanes.  Biggert pointed out that spills had been from ships transporting the crude and that domestic drilling would mean less far to travel.  She also made reference to the actual impact of drilling in ANWR - that the little bit that would be drilled on, on the entire 19.6 million acres, would be like a postage stamp on a football field.

Then, came the piece de resistance.  An utterly, jaw-droppingly amazing speech from Rep. Rob Bishop of Utah.

Bishop said this was a truly unique and amazing issue.  They were here on the floor defending an issue that was not driven by special interests, by special groups, or even by other members, but by the American people were were experiencing real pain.  This was a “people-driven issue”.  Bishop went on, “Energy is the way we get out of poverty, it is the great equalizer.”  As an aside, he mentioned that he has a son getting married next week and another leaving for a two year mission - he needed to be home with his sons, getting ready!  A local paper wrote about what was going on and calls came from constituents who volunteered to help out while he was in Washington doing the people’s work.

Bishop went on to say that government shouldn’t determine winners and losers through mandates, subsidies, and legislation - people can take care of themselves.  “Relying on American creativity and ingenuity [not the government] is a real solution.”  Bishop then listed a huge number of American inventions throughout history - bifocals, airplanes, vaccines that had improved the lives of countless people the world over without a government mandate or grant.  He said that “We have the ability and creativity to solve our problems,” speaking  of the competitive prizes that had made history like Lindbergh’s Atlantic flight and the idea of longitude and latitude to map the globe and the same kind of prizes that were included in the American Energy Act legislation.

Bishop concluded by saying that “Americans should be rewarded for doing great” and then we all stood to clap.