The War on Profit

Bill Murchison

2/15/2011 12:01:00 AM - Bill Murchison

Something there is -- to paraphrase Robert Frost -- that doesn't love an oil company. That, in fact, wants to Shake Fat Cat Oilmen Till Their Teeth Rattle, then Make 'Em Pay for Polluting the Skies and the Oceans!! Then ... ah, well, that'll do for starters. Whatever that "something" may be, Barack Obama has at least a mild case of it: his new budget being case in point.

Any federal budget, a political document as much as an economic one, is complex, but from it, you get simple hints as to what's on the minds of those who propose it. The Obama budget -- all $3.7 trillion of it -- signals chiefly a desire to achieve political traction by sidestepping cuts that would anger Democratic constituencies; it likewise signals a dismal understanding of how to create jobs and growth -- for instance, by making energy cheaper.

The same administration, which earlier shut down new deepwater drilling for a time, wants oil companies to pay new fees and royalty rates (about $3 billion over five years) and to repeal a dozen "special interest loopholes" now benefiting Big Oil (about $46 billion over the next decade). We may assume the intent here isn't to increase U.S. oil production and reduce imports now running at 50 percent of our consumption.

We may assume this because it's not customary in the real world to work harder and invest more so as to pay higher taxes. Rather, it's customary to look for opportunities providing high rates of return. A government that wanted oilmen to find and produce more oil would be offering, at a minimum, stability in the regulatory environment and a chance to find new energy supplies that might keep oil prices from rising above the $93 a barrel level forecast for 2012 by the government itself.

The unfortunate truth is that the oil industry -- thanks in part to last year's spill in the Gulf of Mexico -- is valued more highly in Washington as a target for political attacks than as a major prop of the American economy. And doesn't it sound good to talk about narrowing the deficit by taking money from people who have too much of it anyway, due to marketing a product that blackens the skies and kills the fish?

This thing isn't about oil as such, though it helps to have at the center of the conversation a product you wouldn't want the kids tracking into the house, assuming they found a 42 gallon barrel of West Texas crude in the front yard.

The disappearance of jobs in the U.S. economy -- these last two years especially -- and their failure to reappear has to do in large part with the failure in Washington, D.C., to acknowledge that jobs and economic progress proceed from the quest for profit.

Public spirit doesn't drive men to invest their money, if they have any, in oil or steel or cars or high-tech. The desire to make a few bucks is what drives them. For affording these men the rule of law and other vital protections and benefits, government is entitled to ask for a cut of the profits. That's where the trouble starts in certain quarters. A certain kind of politician finds political profit -- a different commodity from economic profit -- in insinuating to voters that people who have more "too much money" need to pass it around in the interest of "fairness."

The tax code might be better and stronger, shorn of special interest loopholes, but a desire to strengthen the tax code is rarely the motive behind attacks on "special favors" for business. The idea, more often, is the scoring of particular points with particular constituencies in the quest for political power (not to be confused with the kind of power that keeps your lights on).

So the 2012 budget arrives. It won't pass with tax increases for oil in it. The administration knows this. It kind of lies there, reminding us why employment hasn't recovered yet and may not for a while. Wonder why? Write your congressman.