CNN Barks up Wrong Tree on Oil Profits
Anchor chases ‘fat cat’ executives, but free-market professor tugs on the leash.
By Ken Shepherd
Free Market Project
Nov. 14, 2005
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CNN’s Jack Cafferty and Andy Serwer attempted to use the November 12 “In the Money” to bash “fat cat” corporate bosses raking in big profits. But while Cafferty and crew stayed on message skewering Big Oil on Saturday, their guest, Russell Roberts of the free market-oriented Mercatus Center at George Mason University, placed the blame on politicians hindering the free market from generating solutions to high energy prices.
Â Â Â Â Cafferty set up the interview with a swipe at the oil companies following Senate Commerce Committee hearings with oil executives: “Watching some oil company fat cat getting grilled in Congress this week might have made you just warm and fuzzy all over.”
Â Â Â Â But grand-standing politicians, even when skewering “fat cat” oil executives, didn’t make the fussy Cafferty feel fuzzy either: “The hypocrisy of these hearings is absolutely mind-boggling. If you think these profits are about greed, our next guest thinks maybe we should all think about it again.”
Â Â Â Â Cafferty opened the interview by slamming the Senate committee for browbeating the oil industry while at the same time voting for oil company tax breaks: “This is the same bunch of senators that vote on an energy bill that made no effort to address gasoline consumption in this country at all. And now they are all sitting there posturing for the cameras saying, ‘How come the companies are making so much money. I mean what’s wrong with this picture?’”
Â Â Â Â There was something wrong with that picture, and as Roberts explained later in the broadcast, it was the energy bill:Â
“The last energy bill is just a grab bag of goodies for various lobbies... [a] lot of that has a lot of political payoff and doesn’t really help us as consumers. I don’t think we want to discourage people from consuming gasoline artificially... We want to make sure there’s a stable supply of energy down the road. Who’s best at doing that? I think it is the companies with that profit motive rather than the halls of Congress...[b]ecause when you give out special goodies, what that does is tell oil producers and those ethanol producers and farmers, spend more time in the halls of Congress and less time finding energy.”
Â Â Â Â Roberts agreed with Cafferty that the Senate hearings amounted only to blustery political theater, and Serwer asked Roberts if there was no “chance in heck” that a “windfall profits tax” would pass Congress. Roberts reminded him that the country tried it before and it had negative effects on production. “And it's the last thing we want to do is discourage companies from going out and finding more energy,” he said. “Down the road, a windfall profits tax is going to punish consumers rather than helping them down the road. It is a bad idea.”
Â Â Â Â Co-host Susan Lisovicz tentatively agreed with Roberts, but feared CNN viewers might think she was too cozy with oil companies for stating the economic facts: “Professor, what about those very tough questions about the profit margins that oil industries make? I don't want to get a lot of hate mail from viewers that I'm a defender of Big Oil. On the other hand, wouldn't that be a slippery slope?”
Â Â Â Â Roberts agreed and went further, saying high oil profits help the consumer in the long term by financing investment. “There’s a lot of industries that are more profitable than oil,” Roberts answered, adding, “I don't think we want to go after any of them, and we don't want to give handouts to companies and industries that have low rates of return. You have to remember that high profits are good for consumers.”Â
Â Â Â Â Despite Roberts’ solid explanations of the market, including the fact that gas prices have been trending downward, Cafferty was unfazed from his anti-Big Oil script. He continued to push for some sort of market manipulation: “What should be done if we are serious about addressing the compensation of Big Oil ... where is the national political will to make some serious effort at curbing consumption, at developing alternative energy sources, at doing something besides sitting around whining ...?”