The Democrats think the American people are stupid. Throughout the debt ceiling imbroglio, Obama and every single elected Democrat have regurgitated their talking points about a balanced solution to the debt crisis. They have insulted the intelligence of every voter by intimating that the budget can be balanced by eliminating a few tax credits. No, they don't want to talk about the tens of trillions in unfunded liabilities to Medicare and Social Security. They refuse to confront the ballooning cost of all the welfare programs. The only thing they want to discuss is eliminating a few tax credits for oil companies and corporate jets.
In May, the Senate took up a bill to eliminate $2 billion worth of tax credits for the gas and oil industry. Let's overlook their fallacious charges that these are unique handouts to the industry - and treat them as if they are expenditures. We are slated to spend over $3.7 trillion this year, yet the Democrats are obsessing over $2 billion in tax credits. Here are some of the major expenditures for this fiscal year, including the so-called handouts to big oil (in billions):
Yes, these tax credits barely register among our major expenses.
During the debate over the oil tax credits, Democrats tossed around the $21 billion figure that we will supposedly gain from increased revenues, if these credits are eliminated. Again, let's assume they are correct. Using a 10-year budget frame, we are expected to spend another $46 trillion. Democrats claim that their bill would have saved us $21 billion over 10 years. That amounts to .00045% of our estimated outlays.
What about the much beleaguered corporate jet tax deduction? That would save $3 billion over ten years!
So in the spirit of bipartisanship, let's forge a deficit reduction deal that will truly achieve balance. Since the Democrats hold these tax loopholes on the same level as the largest expenditures, let's agree to terminate them. In return for our acquiescence to "revenue increases," they must accede to our demands for free market healthcare reform, private Social Security accounts, and welfare reform.
But there is one more component to the deal.
If logic dictates that we should cut subsidies to a profitable industry which delivers a product that is the lifeblood of our prosperity, shouldn’t we cut the billions in subsidies to industries that produce ineffectual energy that barely registers on our energy consumption map? We should implement a full balanced approach to revenue by eliminating all green credits, both to consumers and producers. Here are some points to consider:
1) If we are looking to save $2-3 billion in revenue from tax breaks to oil and natural gas companies, we should save much more from ending our life support for the so-called green energy companies. According to a brand new EIA study, commissioned by three conservative congressmen, the renewable energy sector received $14.6 billion in direct subsidies, tax credits, research, and loan guarantees in 2010. This is an astronomical increase from the $5.1 billion they received in the pre-stimulus year of 2007. The study doesn't even include the egregious $5.7 billion Volumetric Ethanol Excise Tax Credit (VEETC) because it only accounted for those fuels used for electricity. I'm wondering how much we can save over 10-years, if we would apply the balanced approach to the third rail of energy policy?
2) The green energy sector is even more parasitic when scrutinized by performance. Consider this chart detailing our energy usage by source for 2009; solar, wind, and biomass are barely on the map, even though they are almost completely subsidized. Here is a chart from the Institute for Energy Research comparing federal subsidies per unit of production of different energy sources:
As you can see, Solar is being subsidized by over 1200 times more than fossil fuels, while Wind enjoys over 80 times more in taxpayer cash. The reality is that no amount of subsidy can compensate for the impotence of green energy.
3) While most of the government's investments in green energy are in the form of direct subsidies, Oil and Gas companies don't receive subsidies; they enjoy universal credits and deductions that are afforded to all businesses. Moreover, the oil industry generates almost $100 million of revenue per day in income taxes, excises, and royalties for the federal government. Additionally, oil and gas companies pay an effective corporate tax rate about 55% higher than that of most other industries. All the while, the renewable-energy sector is ostensibly kept afloat by the taxpayer, offering nothing in terms of revenue.
4) Renewable-energy companies are subsidized, even though they benefit from the tailwinds of government mandates and consumer tax credits for patronizing their services. Oil and Gas exploration, on the other hand, incur the full wrath of government headwinds daily. They spend billions of dollars complying with analysis, paperwork, planning, and development of potential drilling wells, in order to satisfy the EPA and DOI. They must risk large sums of capital, even before a drop of oil is recovered and pumped into the hungry markets. And in the case of Shell Oil's attempt to drill in the Arctic, they were rebuffed by the federal government, thereby losing everything from their investment. It is a no-brainer that they should be able to utilize some tax deductions for well production and exploration.
Nevertheless, in the spirit of Tea Party compromise, Republicans should call Obama's bluff on a balanced approach - and demand dollar-for-dollar cuts to green energy subsidies, in exchange for elimination of oil tax credits. Then, once we have settled the revenue issue, there will be no excuses for shirking their responsibilities on the expenditure side of the ledger. We should reboot Cut, Cap, and Balance. Or, is a single-level downgrade not a sufficient motivator to get serious about cutting spending?