An axiom of economics is “if you want more of something, subsidize it; if you want less, tax it.” As near as I can tell, that pretty much sums up Barack Obama’s upside-down energy policy. He wants to punish the hydrocarbon industry that supplies 85% of our energy needs, while throwing billions at green technology ideas like bankrupt Solyndra and the newly unplugged Chevy Volt. But, exactly why he wants to inflict more pain on every single American along the way, particularly at a time when so very many are struggling is beyond me. The dots simply don’t connect.
Gas prices at the pump are more than twice what they were three years ago when Obama came into office. And, if history is a guide, prices will soar another 20-25 percent by the time the heavy driving season arrives in about 60 days. Given that reality – and the laws of simple economics – it defies common-sense why the President would be suggesting further disincentives for more production of badly needed gasoline supplies, but that’s his plan.
On several occasions just this past week he unleashed his fury at the energy industry. “I am asking Congress to eliminate this oil industry giveaway right away,” Obama said in New Hampshire. “You can either stand up for the oil companies, or you can stand up for the American people,” he said. The same animus was in full force in a Miami speech.
Complete revision of the tax code is a legitimate debate to have, but that’s not what he’s suggesting. The majority of tax credits and incentives that are available to the energy industry are the same ones available to just about every other American industry. But, the President aims his punishment only at the one industry that he should want to increase production to benefit all those Americans the President says he is standing up for – at least, if one understands that increased supply of any commodity is the quickest and surest way to reduce consumer prices.
The President’s paradoxical recommendation is not only refuted by backyard common-sense. The non-partisan Congressional Research Service issued a report just last year that said ending the existing tax breaks would result in even higher gas prices in the short term. “On what would likely be a small scale, the proposals also would make oil and natural gas more expensive for U.S. consumers and likely increase foreign dependence,” the CRS determined.
Various reports suggest Obama’s punitive policies would end between $2 billion to $4 billion in tax credits for the hydrocarbon energy companies. Further confounding any semblance of good judgment, Obama wants to direct the “found revenue” to even more subsidies of green energy companies like Solyndra – nascent technologies that already got $80 billion from his Stimulus, already enjoy massive tax credits as well as direct subsidies, will have negligible short-term impact for consumers, and have an most uncertain future to substantially contribute to America’s total energy demands.
For the record, as we have previously documented, the hydrocarbon energy industry pays an average of 41.1% of net income in taxes compared to 26.5% for all other S&P industrials. Every single day of the year, the oil and gas industry pays $85 million in taxes and fees to the U.S. Treasury. In 2008, the year before Obama came into office, annual payments for royalties, rents and leases to the federal government from oil and gas companies added $23.3 billion to the treasury. With the dramatic decrease in permitting, cancelling of leases, and moratoriums imposed by this Administration, those payments declined to just $8.6 billion in 2010. The industry also directly employs over 9 million people and invests about $300 billion each year in capital projects that benefit local communities and the national economy.
While production on private lands is up, output from federal lands directly controlled by the government is down 11% and permitting of new wells is happening at barely one-third the rate pre-Obama.
Obama’s perverted economic policies continually want to punish success while simultaneously squandering billions on dreams. That would be a sure-fired plan for quick failure in the real world; a place that Barack Obama has never experienced. I’m all for Obama being free to follow whatever misguided personal strategy he chooses for himself, but I don’t want him to take the rest of us along with him. November can’t come soon enough.