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3/1/2006 2:52:08 PM

Updated 02/24/06
 


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$4B Tax a ‘Hill of Beans’ to CNN’s Serwer
Business reporter also sees spending ‘cuts’ though spending is still growing.

By Ken Shepherd
Free Market Project

Nov. 18, 2005

Send this page to a friend! (click here)     Andy Serwer’s economic reporting brings to mind the “Saturday Night Live” skits portraying Sean Connery as a contestant in “Celebrity Jeopardy” – he’s often providing answers that don’t correspond with reality.

     On the November 18 edition of CNN’s “American Morning,” Serwer, a business reporter, labeled a spending measure narrowly passed hours earlier in a late-night session of the House of Representatives as a “spending-cut bill,” when spending actually continued to grow.

     Serwer also scoffed that a $4-billion oil tax the Senate passed around the same time “amounted to a hill of beans,” even though a study by a former Clinton/Gore economic advisor showed it would discourage production of domestic oil and harm retirement savings for millions of investors.

     On November 16, The Wall Street Journal pointed out the House budget plan had no spending cuts, only reductions in the rate of spending. “The GOP plan reduces the increase in the federal budget by a microscopic 0.25% over the next five years,” noted the Journal, adding that “the new prescription drug bill by itself adds some $300 billion to the budget over this same five years.”

     Far from being cut, the Journal noted, “Medicaid, which provides health care for the poor, is scheduled to grow by 7.9% a year, and under the GOP plan it would grow by 7.5% a year.”

     In the end, the reduction in spending growth wasn’t even that much. The Washington Post reported on November 18 that passage of the spending bill was narrowly secured after drilling in the Arctic National Wildlife Refuge (ANWR) was removed and $4 billion was added to planned Medicaid spending.

     Meanwhile, the not-so-small $4-billion “windfall profits tax” passed by the Senate has been criticized soundly by economists – and not just free-market ones – for the harm it would bring the economy. Robert J. Shapiro, a former economic policy advisor for Bill Clinton and Al Gore, estimated that an “additional 50 percent tax on U.S. domestic producers for selling oil at the world price, applied to revenues that exceed $40 per barrel, would discourage domestic oil production and increase U.S. dependence on imports from the Persian Gulf.”

     What’s more, Shapiro added, “such a tax would impose an economic burden on American savers and retirees, whose pension plans and retirement accounts typically include significant investments, direct or indirect, in oil company shares.”

     The bottom line for American stockholders is no hill of beans. “By reducing both the market value of those shares and the dividends they pay,” concluded Shapiro and study co-author Nam Pham, “a windfall profits tax would affect the value of most people’s retirement savings.”

 


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