Summaries of Important Research
Edited By Brandon Bosworth

Unprofitable Ideas on Energy
Sterling Burnett and Christa Bieker, "Taxing Profits, Draining Energy," National Center for Policy Analysis, March 2006 (ncpa.org)

Recent surges in the cost of oil, coupled with the oil industry's record profits, have led some politicians to call for some form of a windfall profits tax. Such a tax is not needed and would just make matters worse, according to National Center for Policy Analysis senior fellow Sterling Burnett and intern Christa Bieker.

The idea for a windfall profits tax arises from the fact that many Americans seem to believe oil companies conspire to keep prices artificially high. However, recent spikes in the cost of oil are traceable to outside factors such as "strong demand in the United States and several developing nations, production and refining decisions by the Organization of Petroleum Exporting Countries (OPEC), and political instability in a number of oil exporting countries." There is no evidence of collusion on the part of the oil industry. It is actually global energy markets that determine the price at which oil is bought and sold. Even large companies such as Exxon-Mobil are beholden to prices set by "trading on commodities exchanges in London, Hong Kong and Chicago."

While oil company profits were indeed impressive in 2005, between 1970 and 2003 they tended to lag behind the rest of the economy. Even with the current record profits, other industries--such as the food, beverage, and tobacco sectors, banking, and the semiconductor industry--have seen greater percentage increases in profits than the oil industry.

Besides being unnecessary, a windfall profits tax would have negative effects. Jimmy Carter launched the "Crude Oil Windfall Profits Tax" in 1980, and the results were not impressive. The tax was expected to raise $227 billion in revenue, but only generated $40 billion. At one point the tax ceased to generate revenue altogether. The tax led to a decrease in domestic oil production of between 3 and 6 percent due to the increase in investment risk. At the same time, imports increased from 8 percent to 16 percent.

Instead of extra taxes on oil company profits, Congress should look to encourage new sources of oil, such as by allowing drilling in Alaska's Arctic National Wildlife Refuge, and lifting restrictions on new production off the coasts of California, the East Coast, and Florida.

Children, With Marriage
Andrea Kane and Daniel Lichter, "Reducing Unwed Childbearing," The Brookings Institution, April 2006 (brook.edu)

A record 1.5 million babies were born to unmarried women in the U.S. in 2004. Recognizing the negative aspects of this trend, Congress has approved funding for the Bush administration's "Healthy Marriage Initiative" to promote marriage through education and public advertising campaigns. Andrea Kane, with the National Campaign to Prevent Teen Pregnancy, and Daniel Lichter, of Cornell University, contend it is important not only to promote marriage, but also to discourage unwed childbearing.

Take the issue of births to unwed teenagers. Nearly half of all illegitimate births are to adolescent mothers. While the teen birth rate has declined, it is much higher than many other industrialized nations. Teenagers are "not good candidates for marriage," and have divorce rates much higher than those who delay marriage, even if they have children. Thus, Kane and Lichter believe the focus should be on teen birth prevention, noting that "community service and intensive youth development activities coupled with information about delaying sex and avoiding pregnancy have produced significant reductions in risky sexual activity and teen pregnancy."

While policies to reduce divorce rates and to encourage unwed parents to marry are worthy endeavors, say the authors, more emphasis needs to be placed on reducing illegitimacy. "It is also imperative to make postponing early, unwed childbearing a priority--particularly among teens, where we have strong evidence of success."

War Myths
Frederick Kagan, "Myths of the Current War," AEI National Security Outlook, March 2006 (aei.org)

Debate about American policy in Iraq has been needlessly distorted by several myths about the war, argues AEI resident scholar Frederick Kagan.

For example, it is argued that setting a timetable for U.S. withdrawal would force the Iraqis to take greater responsibility for their own national security. This is the position often promoted by Representative John Murtha (D-PA). The thinking is that Iraqis will soon be capable of taking full responsibility for their nation, and that they are not doing so now because they have no reason to.

But the reality of what is happening in Iraq contradicts these assumptions. The Iraqi government has so far been unable to manage its state, and neither the Iraqi Security Forces nor the police have the ability at present to adequately fight the insurgency. So far, counterinsurgency operations have "required between 130,000 and 160,000 American troops in addition to...Iraqis to maintain the current unacceptably low level of security and stability in the country." Iraqis have shown great willingness to fight for their country, and hundreds of thousands have volunteered to fight the insurgents. They have the incentive, but still need training and assistance from the U.S.

The desire to set a timetable for withdrawal ties in to another myth: The Bush administration plans to keep U.S. forces in Iraq indefinitely. In truth, from the very beginning, the American strategy has been to remove all of our forces from the country as soon as possible. This is why the U.S sent in a fairly small number of troops during the initial invasion, and why the military pursues a strategy aimed at avoiding an increase in troops whenever possible. The administration knows that our military presence there is "an irritant, that it should be kept as small as possible, and that it should be withdrawn as quickly as possible."

These and other distortions about the war in Iraq have interfered with honest debate about how to proceed in this conflict. Returning to "an objective and rational discourse is the only hope of avoiding disaster."

The Tax-Free Economy
Scott Hodge, "Who Really Benefits from the Extended Tax Cut?" The Tax Foundation, May 2006 (taxfoundation.org)

In the wake of the latest tax bill signed by President Bush, the media have focused on the alleged regressive nature of his tax cuts. Citing data from the Tax Policy Center, the claim is made that the average American earning over $1 million will save $43,000 in taxes, while someone making between $10,000 and $20,000 will save only $3. These data do not tell the whole story, according to Tax Foundation president Scott Hodge.

It is important to bear in mind that "the Tax Policy Center is comparing the tax relief going to people who pay income taxes with millions of people who either do not file a tax return or do not owe income taxes.... Simply put, you cannot give income tax relief to people who pay no income taxes, and the number of Americans outside of the tax code has exploded in recent years."

The Tax Policy Center's estimates on tax relief include the 20 million Americans at the bottom of the income scale who don't file tax returns. Individuals in this income group actually end up with a negative tax burden of 1.4 percent, as they get back all the income tax withheld from their paychecks and then receive additional funds from the "IRS through programs such as the Earned Income Tax Credit (EITC)." Those in the income group second up from the bottom have an even greater negative tax liability of 1.9 percent. Together, these two income groups account for 58 million Americans for whom the IRS is "a dispenser of cash, not a place to send their tax payments." It is "remarkable" to conclude that these individuals would receive $3 in benefits from the latest tax cuts, as they are not paying taxes to begin with.

As the number of Americans who pay no federal income tax grows, it is important that analysis of tax policy focuses only on those who pay income taxes. "Only then will the public get a true sense of how real 'taxpayers' will benefit from the changes in tax laws."

Chemical Checklist
James Carafano, "Congressional Checklist for Chemical Security," Heritage Foundation Executive Memorandum, May 2006 (heritage.org)

Congress is considering legislation to secure America's chemical infrastructure against terrorism. To be effective, argues Heritage Foundation fellow James Carafano, such legislation would need to follow certain guidelines.

First, legislation should avoid mandates for "safer" chemical-making technologies. That form of regulation does not fall in the realm of homeland security, and does not belong in an antiterrorism bill. Second, criminal penalties should not be imposed on private sector businesses that fail to comply with new chemical laws. Such steps would "overcriminalize federal regulatory codes" in an area in which civil penalties have proven effective.

Third, facilities already regulated by the Maritime Transportation Security Act (MTSA) should not be burdened with additional federal requirements. Fourth, to audit compliance and review security, it will be necessary for the Department of Homeland Security to obtain sensitive proprietary information from chemical companies. Congress must establish protections to ensure companies can safeguard their trade secrets, and ensure "that terrorists are not given access to security-related information under the Freedom of Information Act."

Lastly, some level of liability protection in the event of a terror act should be extended to companies that act in "good faith" to comply with new security provisions.