(Alexandria, VA) - Soaking the private sector with oil price controls or windfall profits taxes will only dampen the economy and dry up domestic production, a diverse group of 257 economists (including two Nobel Laureates) warned in an open letter to Congress today. The joint statement, organized by the 350,000-member National Taxpayers Union (NTU), hit Capitol Hill just as lawmakers were poised to consider new proposals to tax and regulate energy markets.
"When the oil shocks of the 1970s hit, Milton Friedman and many other economists warned of the dangers of petroleum price controls and excessive energy taxes, which were then being advocated by some," the economists noted. "Unfortunately, this wise counsel was not taken."
Prominent on the impressive list of signatories to the open letter were Nobel Laureates Milton Friedman and Edward C. Prescott. However, other distinguished economists from Ivy League schools, respected research firms, think tanks, and academic institutions known for their top-flight economics departments also participated.
The letter cited powerful evidence from America's past economic history to show why enacting price controls or windfall profits taxes would be "a mistake." The Nixon Administration's clampdown on oil costs proved to be a "debacle," and Nixon himself later acknowledged that "there was an unquestionably high price for tampering with the orthodox economic mechanisms." After enactment of a "temporary" tax on oil companies' "excessive" profits in 1980, the adverse result, according to the Congressional Research Service, was a measurable decline in domestic production and a rise in imports (the tax was repealed in 1988).
"Sadly, the recent clamoring by some for price controls or for new energy taxes indicates that the lessons of the 1970s were not learned," the letter concluded. "We urge you to reject these measures and instead adopt policies that will allow our economy to grow and will not curtail domestic energy production and investment."
NTU is a non-profit, non-partisan citizen group working for lower taxes and smaller government at all levels. Note: The full text of the letter listing all signatories is available online at www.ntu.org.