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Cheeky Chavez: Stealing From The Poor To Give To The Rich

By Evariste | discarded lies

Originally published September 12, 2005 | The Left's favorite new Robin Hood has his wires crossed-have they noticed? And do they care? The petty South American demagogue Chavez* made headlines recently with his plan to distribute cut-rate heating oil to poor Americans this winter, as well as 150,000 free eye surgeries a year for same. I had to wonder just how wasteful of a use of Venezuela's sorely-needed money this was, so I did a little math. I like numbers, they can tell you all kinds of interesting stuff. Forget the eye surgeries. Let's talk about heating oil.

Chavez claims to plan to provide heating oil to 8 million poor Americans at 40% off market rates. One interesting fact is that only 8.1 million households in the entire USA use heating oil in the winter; the rest heat their houses by other means. With a poverty rate of 12.7%, and an average US household size of 2.6 persons, there are at most 2.67 million poor Americans who depend on heating oil in the winter to keep their homes warm. In other words, there just aren't

8 million poor Americans who could use these heating oil subsidies. Chavez is planning on giving subsidies to 5.33 million rich Americans who don't need them, while his own people starve with a 79% official poverty rate-25 of that 79% live on less than a single lousy dollar a day.

Now, how much, exactly, of poor Venezuelans' money is Chavez promising to give away to fat, rich Americans?

Your average Northeastern homeowner uses 650-1000 gallons of heating oil in a winter. The vast majority (78%) of heating oil users are Northeasterners, so we can take them as representative. Let's take the average of that range: 825 gallons.

How much is heating oil expected to cost this winter? The government's best official guesstimate is $2.09/gallon in 2005 and $2.26/gallon in 2006.

Since winter spans both years, I'll take the average of that number, too, which is $2.175/gallon. Chavez promises a 40% discount, so of the 825 gallons the average household will buy this winter, 330 gallons will be free, courtesy of the generous Venezuelan poor. Note that I'm not bothering to estimate how much extra heating oil will be used because it's so cheap-when price goes down, demand goes up. I'm not bothering because heating oil demand is fairly inelastic-people have to stay warm in the winter, they don't exactly have much choice. And most people have tanks that can store one quarter to one fifth of their winter's consumption, so they have to refill them three or four times a year. There isn't a lot of excess storage capacity there; at best, maybe demand will go up 20% if every single household filled their tank to take advantage of cheap prices even though winter was over. I'm also ignoring speculators who will buy heating oil in order to sell it at market prices. Let's pretend Chavez has a really good plan for making sure only the 8 million people he has in mind will get the heating oil, and no one else, and let's pretend they won't take advantage of the cheap price to stock up on more than they will use this winter.

Now let's say all 8 million people to whom Chavez promises to sell cheap heating oil take advantage of the deal-and why wouldn't they? It's a good deal. The total cost to Venezuela of this will be 330 free gallons per household per winter x $2.175/gallon x 8,000,000 people / 2.6 people per household, or 2 billion, 208 million dollars.

You read that right.

Venezuela has a per-capita Gross Domestic Product of $2978, and a population of 25 million. That means every Venezuelan is giving those 8 million Americans $88.33.

If the "Bolivarian revolution" to help the poor of Venezuela was actually helping the poor, that $2.208 billion would go to Venezuela's poorest, that 25% of the population that lives on less than a dollar a day. That's $353.35 that each Venezuelan who lives on less than a dollar a day could be getting from Chavez. Instead, Chavez is giving it to Americans who don't need it.

He could double the income of 25% of his population by selling the oil to Americans at market price, and improve their lives vastly. Imagine how miserable these people's lives are. Unbelievable.

The income of the average poor American is $2700 below the poverty line, which is something like $18000 for a family of four. So for our average household size of 2.6 people, the average income of a below-the-poverty-line US household is something like $4700. Caveat: I believe that this number is actually much higher, but I'm just going on the quickest figures I can find. I blog on a time limit, you know. Chavez is giving them a gift of about $717.75 per household this winter, which is as if he raised their income 15.2%

(I believe it's much less than that, but let's go with it). What's better, to raise the income of already relatively wealthy Americans 15%, or to raise the income of desperately poor Venezuelans 100% (doubling it)? The trouble with this portion of the calculation, of course, is that only a small fraction of the US households that use heating oil are poor, much less than 8 million of them. Another factor I'm ignoring in these calculations is that poor US households get large government subsidies for their heating oil expenses, so they're not exactly depending on Chavez to keep them warm in his creepy embrace.

If, as I suspect, the population of Americans that actually gets the Venezuelan heating oil subsidy is a cross-section of the population rather than just the poor, for the simple reason that there aren't 8 million poor Americans who use heating oil, Chavez's reverse-Robin-Hood act gets even more obscene. Median US household income in 2005 is $60570. That means Chavez's stolen "gift" of $717.75 per household is a 1.18% increase in the standard of living for 8 million Americans.

Pop quiz.

You're the benevolent (humor me) dictator of an impoverished, oil-rich South American country, let's call it "Venezuela". "Venezuela" has a staggering 79% poverty rate, and 6.25 million of your people struggle to survive on less than a dollar a day. The mantra, the selling point, the hallmark, the talking point, the main reason for existence of your government is the reduction of poverty through social spending. You have $2.2 billion dollars to spend.

Should you:

A. Give 8 million Americans the $2.2 billion as a subsidy on one of your chief exports. The effectiveness of this tactic in reducing poverty is uncertain. In the worst-case scenario, your subsidy is worth 1.18% of their income, which they may or may not notice. In the very best-case scenario, the subsidy is worth 15.2% of their income. Even in the best-case scenario, their own government already gives them a decent subsidy for their expenditure on your exported goods.

B. Charge the Americans the full fair-market price, and give 6.25 million starving Venezuelan paupers the money, which will double their income and reduce their unimaginable plight?

You make the call.

* I would have just earned a 6 to 30 month prison sentence for insulting the President, if I was a Venezuelan.



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