The president is at it again. Misrepresentation and economic ignorance… Taking advantage of the ignorance of his diehard followers.

His subject is now demonizing oil companies by decrying the “subsidies” they are given. This is a complete misrepresentation deliberately done to anger people. “Subsidies” are generally (and rightly) thought of as checks written to various enterprise–government revenue collected from taxpayers and sent out to a particular company or industry. Like subsidies for light rail, where checks are sent from general tax revenue to support the operating costs of the trains. Obama is deliberately conflating “subsidies” and “tax deductions” to elicit an angry response from people who will think that not only are they paying for gas at the pump, but checks are being written with their tax dollars to the oil companies.

Of course, the truth is that far more taxes are being collected by government at the pump as a portion of the cost of a gallon of gas than is being taken as profit by oil companies. This is from 2011, but I’m certain it hasn’t changed much:

According to this post on Exxon Mobil’s Perspective Blog , “For every gallon of gasoline, diesel or finished products we manufactured and sold in the United States in the last three months of 2010, we earned a little more than 2 cents per gallon. That’s not a typo. Two cents.”

The average tax per gallon of gas in the United states is 48.1 cents, of which 18.4 cents is federal tax. That, of course, would mean that Exxon is profiting two cents per gallon (those profits are then taxed) and the federal government is making nine times more per gallon.

My point, however, is that what Obama is doing is misrepresenting tax deductions as subsidies. The truth is that the oil companies have the same business tax deductions as every other business in the United States, plus one pertaining only to that industry (which allows them, as a group, to retain less than a billion dollars per year). Conservatives on Fire and LD Jackson led me to this article at American Thinker (read it to see the tax deductions oil companies get that Obama is now referring to disingenuously as subsidies).

The only reasons to use the word “subsidy” (assuming you know the difference between a subsidy and a tax deduction given to every business in the United States) is to get people angry, and to make it seem that a tax deduction given to a profitable business (oil companies) is the same exact thing as writing checks out of the treasury (with borrowed money) to subsidize green technology. He knows his base is dumb enough to believe it, but he’s hoping the rest of us are that ignorant as well.

Now we get to the other half: economic ignorance. Obama seems to think that we will either be so angry at oil companies that we’ll want to smack them with more taxes, or that we’ll somehow believe that hitting oil companies with more taxes will somehow lower the price of gasoline. The tricky thing that Obama does not seem to understand (and hopes we don’t understand either) is that when taxes go up, prices go up. That is why someone who understands economics, like Paul Ryan, wants to lower the tax rates before closing the tax loopholes. The best you can hope for when raising the taxes on a business is that the business will absorb the hit itself in which case there is less money available for dividends to investors (keeping that money out of private hands–where it is taxed!–and where it circulates as private spending, savings, or investment, and giving it to the government instead), or there will be less money for buying new equipment or hiring, or less money for expansion of operations. The worst that will happen is that the increased tax rate will be reflected in the price of the product (which is why, for the most part, the consumer pays all taxes, corporations don’t really pay them because the eventual tax is built into pricing just like other costs of doing business). In either case, nothing particularly good happens, and if the increased taxes are incorporated into the price, our price at the pump goes up further as a result of Obama’s desire to demonize and punish the oil companies.

Again, he relies on people’s ignorance to garner support for his policies. Fortunately, last week enough Senators weren’t ignorant (mostly Republicans) and his policy of punishing oil companies didn’t pass. But that doesn’t mean he’ll stop making the same misrepresentations, the same economically ignorant statements, while trying to deflect blame and lead us into an unworkable utopian future (for which the technology is simply not ready).

UPDATE: I wonder if it ever occurs to anyone in the Obama administration that driving up the price of gasoline (through lack of domestic production, or through tax policy) to get people to drive less also results in fewer tax dollars collected per gallon (fewer gallons purchased = fewer taxes received for the feds and states). Those taxes are supposedly for infrastructure, to pay for highways, bridges, and the things necessary to keep the transportation system running and improving. Driving up prices, which drives down use, results in less revenue, which they then make up for (supposedly) by borrowing money and spending that borrowed money on (supposedly shovel ready) infrastructure projects. Do you see the insanity of that scenario? (No one in this administration does.)