Cato Daily Dispatch for November 10, 2005
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Big Oil SubpoenaedU.S. Trade Talks Stall
Amtrak President Fired
Big Oil Subpoenaed
"The Federal Trade Commission has sent subpoenas to Big Oil companies in its investigation of gasoline price manipulation and oil refining capacity constraints, and hopes to complete the probe next spring, the agency's head told a U.S. Senate hearing on Wednesday," Reuters reports.
In "Economic Amnesia: The Case against Oil Price Controls and Windfall Profit Taxes," Cato senior fellows Jerry Taylor and Peter Van Doren write: "Proponents of intervention contend that gasoline markets are not competitive (with some accusing producers of price collusion), that fat profit margins induce little more supply than might otherwise be induced by healthy but 'reasonable' profit margins, and that the gasoline profits are largely unanticipated and unearned. As a result, oil companies are reaping very large profits at the expense of consumers. Price controls and/or windfall profit taxes, they maintain, would simply redistribute wealth from producers to consumers without any significant effect on supply."
In "Gouge On," Taylor also argues: "'[P]rofiteering' strikes most of us as unsavory. But it depends on the context. After all, were we serious about criminalizing price gouging, we would throw every member of the National Association of Realtors behind bars."
U.S. Trade Talks Stall
"Any hope of advancing a global trade pact this year all but evaporated on Wednesday, as negotiators from around the world said that they were at an impasse over agriculture. The immediate cause of the breakdown was the refusal of European leaders to offer more than modest reductions in their tariffs on farm products ranging from beef and sugar to dairy products and fruit," the New York Times reports.
In "Ripe for Reform: Six Good Reasons to Reduce U.S. Farm Subsidies and Trade Barriers," Daniel Griswold, Cato's director of the Center for Trade Policy Studies, Stephen Slivinski, Cato's director of budget studies, and Christopher Preble, Cato's director of foreign policy studies, urge the U.S. government to seize the opportunities presented by the Doha Round negotiations of the World Trade Organization and the next reauthorization of the farm bill to reform fundamentally U.S. agricultural policy: "For the sake of our broader national interest, Congress and the president should reduce, with the ultimate goal of eliminating, all agricultural trade barriers and production subsides," the Cato scholars write. "The long-term interests of Americans as consumers, producers, taxpayers, and citizens of the world should not be continually sacrificed to the short-term interests of a small minority of agricultural producers."
The Cato Handbook's chapter on Agricultural Policy urges Congress to "phase down and terminate all crop subsidies, a process that was supposed to begin with passage of the 1996 Freedom to Farm law; move farmers toward use of market-based insurance and other financial instruments to protect against price and weather fluctuations; eliminate federal controls that create producer cartels in the dairy, tobacco, and sugar markets; and eliminate trade protections on agricultural goods while working through the World Trade Organization to pursue liberalization in global markets."
Amtrak President Fired
"Amtrak's board fired the company's president on Wednesday morning, widening a divide between the Bush administration and Congress over the future of the railroad. Mr. Laney said Mr. Gunn had failed to move forward on simpler initiatives, like outsourcing maintenance and catering in a way that would cut expenses," the New York Times reports.
In "Put Amtrak in Hands of Private Company," Edward Hudgins, a Cato Institute adjunct scholar, writes: "Each year since its creation as a passenger railroad owned and operated by the federal government, Amtrak has promised it would break even, with its revenues covering its costs. It never has. Instead, American taxpayers have had to waste at least $25 billion to cover all its deficits. And what has the public received for its money? Not much.
"Amtrak should be privatized. Putting it officially into bankruptcy at least would allow a trustee to untangle its books. And a number of companies, including Britain's Virgin, which has boosted ridership in that country to high post-World War II levels, have expressed interest in the Northeast Corridor."
Kristen Kestner, editor, kkestner@cato.org