Experts Weigh Obama Windfall Profits Proposal

The Washington Post's E.J. Dionne says Barack Obama's call for a windfall profit tax on oil firms is an answer to the GOP's emphasis on offshore drilling. David Brooks of The New York Times says though a windfall tax may be good politics, it's bad economics.

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MICHELE NORRIS, host:

We have our political commentators with us here in the studio now. David Brooks of the New York Times and E.J. Dionne of the Washington Post and the Brookings Institution, welcome to both of you.

DAVID BROOKS: Good to be here.

E.J. DIONNE: Great to be here.

NORRIS: And I want to start by asking each of you to quickly weigh in with your reaction to Obama's economic stimulus package: windfall profits tax on oil companies, rebates, $50 billion funneled to states for infrastructure and to help ward off budget cuts. E.J.?

DIONNE: Well, first of all, I think that the two parts of it are classic stimulus, and they make sense, I think, to a lot of people. State budgets are being slashed, and in this kind of situation, many states have to balance their budgets, so they either have to raise taxes or cut spending. That doesn't help the economy. The other part, to improve infrastructure, that's a classic way to boost the economy.

The unusual one is the windfalls profits tax, and I think what Obama's trying to do is to say Republicans want to drill offshore, and that's their answer. I'm going to put some money in your pocket. A lot of people will say, as you suggested in your interview, windfall profits taxes don't work, but I would challenge somebody to say, no, we think the money should stay with the oil companies instead of going into the pockets of people who think they're paying too much for gas. So I think he's finally found some answer to the Republicans' emphasis on drilling.

NORRIS: David, even after all this time, the polls suggest that a lot of voters still aren't sure what exactly Barack Obama stands for when it comes to economic relief. Do the specifics that he's putting forth today help fill that picture out?

BROOKS: No, I think that he remains elusive. I don't think he believes in most of this stuff. This is a political document. Gas prices bring out the worst in politicians. Hillary Clinton and John McCain had that idiotic gas tax holiday a few months ago. This is slightly better, but only slightly.

The idea that a stimulus package is going to stimulate the economy is extremely dubious. There's been a history of stimulus packages. They almost never stimulate the economy. We just had one; that doesn't seem to have worked, though I did see a study suggesting the stimulus package, the old one, raised online porn subscriptions.

But this windfall profits tax, it's politics. It's terrible economics. I mean, it's been tried before. Jimmy Carter tried a windfall profits tax. It drove down domestic production, it increased imports from OPEC. It's just bad economics.

So this is a good political document. As an economic document, it's something politicians do.

NORRIS: Now, on this issue of race, which we also spoke with Senator Obama about, we just heard him respond to these back-and-forth charges about who actually played the race card. This is an issue that's often described - race is an issue that's often described as a distraction, but this year it seems like it's almost unavoidable. To the extent that it does surface in this campaign again and again, who does it help, who does it hurt?

DIONNE: Well, I think that first of all, I hope someday somebody says something other than playing the race card off the bottom of the deck. It's like the Ten Commandments of political cliches. It always has to come from the bottom of the deck.

I think that the race issue - Obama was right in what he said when it comes to the fact that they have questioned his patriotism, they meaning his opponents, people online, you know, this idea that he's a secret Muslim, and some people have mentioned that two blondes on the ad, Britney Spears and Paris Hilton, carried a subtext. We can argue about whether that's true or not.

So clearly race is here, and the Democrats are worried that where this will hurt them is among middle class, lower middle class whites. They've done badly in Appalachia, Obama has, did during the primaries. Maybe there's a racial component there.

I think the mistake Obama made this week is putting John McCain's name in that statement, where he made it easy for the McCain people, who are really under siege for these trivial, puerile, negative ads, suddenly to be able to lash out and say, well, John McCain isn't playing the race card, and Obama himself had to back off.

I think in the long run, what the McCain people did this week is a net small win for them. They put this in circulation, they hit Obama back, but it only raises the standard that they're going to have to meet later on.

NORRIS: We're going to continue our conversation in just a moment. David, I'd like to hear your thoughts on this as well, but we're first going to go to a quick break. We'll continue our conversation with David Brooks of the New York Times and E.J. Dionne of the Washington Post and the Brookings Institution in just a moment.

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Obama On Energy Rebates And The 'Race Card'

Talking With McCain

NPR also recently spoke to Arizona Sen. John McCain from the campaign trail. Click here to listen to or read a transcript of that interview.

Democratic presidential candidate Barack Obama says the recent spate of attack ads from Republican John McCain's campaign distracts from the pressing issues facing Americans.

"You know, that, I think, is an indication that they don't have many good ideas in terms of actually solving problems for the American people," Obama told NPR's Michele Norris. "And my goal is to keep talking about the issues that matter."

Obama spoke to Norris from St. Petersburg, Fla., where earlier on Friday he unveiled a proposal for a new $50 billion economic stimulus package, which would be funded by deficit spending and through a new tax on oil company profits.

"If you continue to see an economic slide, that is going to cost far more in terms of tax revenues, because businesses aren't selling, taxes aren't being collected," Obama said. "And what we're going to end up with is a much worse situation."

Obama's economic plan would send $1,000 "emergency" rebate checks to consumers struggling with increased energy costs. The goal, he said, is to offset the cost of gasoline and heating bills over a four-month period.

Obama and Norris discussed the details of his short-term stimulus plan. The Illinois senator also addressed charges recently leveied by the McCain campaign that he is "playing the race card." Below are excerpts from their conversation.

MICHELE NORRIS: This morning you announced a new emergency economic plan. It includes a $50 billion package. Can you promise to pay for all that without increasing our debt? Where will this money come from?

BARACK OBAMA: When it comes to a stimulus package, typically you are not looking at offsets, because what you are trying to do is to prevent the economy from going into a further tailspin, which will cut tax revenues. So hopefully, just by stimulating the economy, the stimulus is paying for itself.

On the short term, this is $50 billion that is financed by the deficit. But what I've said is that we need a short-term stimulus and then we need a long-term policy for fiscal restraint, and that means eliminating waste in government. It means rolling back the Bush tax cuts on the wealthiest Americans. It means beginning to wind down the war in Iraq, where we're spending $10 billion every single month. But when it comes to short-term stimulus, the key is just making sure that we avoid the economy going into a further tailspin.

But with the deficit as high as it is right now, is it responsible to propose something that is likely to increase deficit spending?

Well, Michele, understand that if we continue on the trends we're on right now, where unemployment keeps on going up -– I'm in Florida, where they are in recession for the first time in 16 years — if you continue to see an economic slide, that is going to cost far more in terms of tax revenues, because businesses aren't selling, taxes aren't being collected. And what we're going to end up with is a much worse situation when it comes to our deficit.

You know because of the timing of our program that many of our listeners are in their cars. And so I want to ask you about your proposal to force big oil companies to share their record-breaking windfall profits. It's hard to find an economist who supports the idea of a windfall profits tax. Most argue that this would stifle investment in oil discovery and oil production precisely at the moment when the U.S. should be encouraging more.

Classic economic theory says you don't meddle in the markets. Look, I mean, most economists buy into that approach. Exxon Mobil made $12 billion last quarter. They made $11 billion before that, and $11 billion before that, and not all of this is going into research and development — and families need some relief.

Now, I am the first to admit that what we need is a comprehensive plan, and that's what I've been putting forward for the last 18 months — making sure that we're increasing fuel-efficiency standards on cars drastically, investing in the retooling so that we can have plug-in hybrids. I have set a goal that we reduce our oil consumption by 30 percent over the next 20 years. So that's the long-term answer to rising gas prices.

But in the short term, the notion that oil companies that have been making record profits, hand over fist, can't give a little bit of that back to make sure that not just drivers but senior citizens on fixed income are going to have the ability to pay for heating this winter, which is going to be a huge potential problem — I don't think that's too much to ask.

Before I let you go, senator, I just want to ask you about this sparring that's been going on back and forth between the two campaigns. Yesterday, the John McCain campaign accused you of playing the race card. This morning, one of your top strategists, David Axelrod, acknowledged that you were referring to race among other things when you talked about how you present a different image than the faces that we now see on our currency, on our $1 bills and on our $5 bills. I just want to be clear about what you were trying to say in that comment. How has the GOP or the McCain campaign been using scare tactics, particularly when it comes to race?

This notion that somehow I was playing the race card is ridiculous. What I said in front of a 98 percent conservative, rural, white audience in Missouri is nothing that I haven't said before, which is, I don't come out of central casting when it comes to what presidential candidates typically look like. And it doesn't just have to do with race. It has to do with my name. It has to do with my biography and my background. It has to do with our message of change.

And so in no ways do I think that the McCain campaign has targeted race issues — although I will say that the way that they've amplified this, you know, has been troublesome. And the eagerness with which they've done it indicates they think they can exploit this politically, but in fact, what I have said – and there's not doubt about this, they've said it themselves — is that they want to make me appear risky to the American people. I don't think there's any doubt that people are still trying to figure out what's this young guy doing running for president. Our job is to make sure that they understand that the changes we are promoting are changes that have to be made — that if we don't make them, that's the riskier course.

Because race is such a tricky thing –- you yourself acknowledged that in your speech in Philadelphia — to the extent that they do try to exploit this, how do you inoculate against that? How do you, as a candidate in a historical position, given that some Americans may feel some discomfort about crossing that historical threshold, how do you deal with that?

You know, I have great confidence in the American people. I mean, if you look at the campaign that John McCain has run over the last month, it's been "Paris Hilton, Britney Spears." This latest episode just recently, the false accusation that I refused to visit troops [during Obama's recent trip to Germany] because the cameras weren't with me, suggesting that I would rather lose a war so I could win a political campaign. You know, there have been a — just a sustained caricature of me and character attacks against me.

You know, that, I think, is an indication that they don't have many good ideas in terms of actually solving problems for the American people. And my goal is to keep talking about the issues that matter.

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