FRONT PAGE CONTRIBUTOR
Geithner on Energy: ‘What, Me Worry?’
Back in May, Treasury Secretary Tim Geithner penned a letter that lays out in glorious detail the misconceptions and wrong-headed thinking that pervade the Obama Administration’s approach to energy and the environment, taxation and to the economy in general.
The letter was a response to one written by Rep. Charles Boustany (R-LA7) (a member of the Ways and Means Committee), expressing his concern for the Obama Administration’s plan to rescind certain oil and gas tax deductions which they characterize as “loopholes”. The economy of Louisiana’s Seventh District, in the southwest part of the state, is heavily dependent on the oil and gas, oil service and petrochemical industries. To paraphrase Boustany’s basic question: How many jobs will my district lose, Mr. Secretary, when you “close the tax loopholes” on oil and gas drilling and production?
Secretary Geithner’s reply belies the Obama Administration’s hostility to oil and gas and their willful ignorance in the realm of energy policy.
Garden variety stupidity might be observed in a statement or point of view that is merely ignorant, misinformed or ill-considered; stupidity of this type occasionally affects us all. It is one-dimensional and generally benign in the long run.
But the transcendently stupid statement is a true gem, like a highly flawed diamond; it is multifaceted and multidimensional; it may even tease with glimmers of brilliance. The more you study it, though, the more glaring the flaws.
Ladies and gentlemen, behold the transcendent stupidity of Sec. Geithner’s response to Rep. Boustany, along with your humble correspondent’s examination of the flaws:
The Administration believes that oil and gas preferences distort markets by encouraging more investment in the oil and gas industry than would occur under a neutral system.
Starting 80 to 100 years ago, Democrats and Republicans alike decided that the country needed a strong domestic oil and gas production base; the “carrot” they used to encourage it was tax policy. That’s when and why the particular tax preferences you’re targeting were created, and whether or not one thinks they’re justified, removing those preferences is the same as raising taxes on oil and gas activity.
More investment = more supply = lower prices to the consumer + less dependence on foreign sources. That’s a bad thing? By declaring “neutrality”, the Obama Administration officially votes “PRESENT” on a strong domestic energy resource base.
To the extent the credit encourages overproduction of oil, it is detrimental to long-term energy security and is also inconsistent with the Administration’s policy of reducing carbon emissions and encouraging the use of renewable energy sources through a cap-and-trade program.
Credits? They’re not credits, they’re deductions. I’m an engineer and even I know the difference. You are in charge of the IRS and … oh, yeah, I forgot about your problems with Turbo Tax, Tim. Never mind.
Most shocking of all, “overproduction of oil“? What are you talking about? The U.S. imports 70% of the oil it consumes. One may choose to believe that we consume too much oil, but the concept of “overproduction” is ludicrous, given the amount we buy from foreigners.
In round numbers, domestic production is 5 million barrels a day, versus consumption of 17 million barrels. People are still driving like crazy, and even those fuel-stingy Government Motors vehicles need gasoline. Domestic oil drilling can never replace imports, but we can and should attempt to stem the rate of decline of production.
And you think this “overproduction” lessens our long-term energy security? Wow. Just wow. Seventy to eighty percent of the world’s known oil supply is controlled by national oil companies, mostly in states hostile to U.S. interests. By actively discouraging domestic oil production we are exacerbating an already critical short-term supply problem. The long-term alternative “solutions” the Administration envisions are speculative and cannot possibly make a meaningful impact in the next five to ten years, at least.
Furthermore, fully 80% of domestic drilling targets natural gas, not oil. Natural gas is cleaner than both oil and coal, and today is about one-third the cost of oil on an energy basis. We have an abundant, secure, 100% American supply that will last decades. We could even use it as a vehicle fuel if we wanted. Natural gas could solve many of our problems in the short- to medium-term, but you just want to turn your back on it?
Moreover, the credit must ultimately be financed with taxes that result in underinvestment in other, potentially more productive, areas of the economy.
There you go again with “credit”. Financed with taxes? Sorry, my view of a tax deduction is so fundamentally different from yours as to be irreconcilable. I view a deduction as my money which the IRS doesn’t take. You view it as an expenditure of the Government’s money.
And would pi**ing $30 billion into a GM rushing headlong into bankruptcy be considered an example of investment in “other, potentially more productive, areas of the economy”?
Our proposals work hand in hand with the private sector to double the amount of renewable energy generated.
It’s hard to figure out what you mean. Ethanol? Corn ethanol is an environmental and economic disaster for all concerned, except for the direct recipients of Government subsidies. Other ethanol feedstocks are purely speculative on a large scale. Wind and solar? Those are for generating electricity, not transportation, so they won’t displace oil. And you may double their 1% contribution to electrical generation and it won’t be enough to keep up with population growth. Other renewables? Nobody’s talking about doubling hydro or geothermal.
On the broader energy and environmental front, we propose a cap-and-trade system, a tested policy that has dramatically reduced acid rain at much lower costs than the traditional Government regulations and mandates.
Acid rain? Now you’re peeing down my leg, Mr. Secretary. This is the first I’ve heard of acid rain as a justification of cap-and-trade. Once again, the goalposts have been moved, but move them you must, because nobody even attempts to sell cap-and-trade based on reduction of carbon emissions. Tested policy? Like it’s working so well in Europe? Please.
The smart way to achieve your stated environmental and energy security goals would be to push a combined strategy of natural gas and nukes over the next thirty years. That time frame would give us a chance to concurrently research alternatives (hopefully, ones that are justifiable in the marketplace on their own merits, without a continuous IV of Government funds).
The receipts from the program will fund vital investments throughout the country totaling $150 billion in 10 years, starting in 2012. All other funds will be used to support families, communities, and businesses in your district and in the nation to help the transition to a clean energy economy.
May I paraphrase? “We know that cap-and-trade is going to gut the economy, but that’s OK because Government will have enough increased tax revenue from it to handle all of your displaced workers and their families.” Well, that’s mighty comforting.
I appreciate the leading role that Louisiana business has played in developing and deploying these technologies and look forward to working with you to ensure the best outcome for your constitiuents.
So, is the Obama Administration’s approach to energy policy better described as naivete, or callous disregard? Whether it’s either or both, the end result means disaster for the country. Do they not realize that it is energy that makes things go, keeps the lights on, and keeps us cool in the summer and warm in the winter? And that 93% of the energy we use comes from oil, gas, coal and nukes? And that it’s impossible for alternatives to radically resize the slices of that pie chart in just a few years?
Remember what a scandal it was when Dick Cheney met (behind closed doors!) with energy company execs? At least the previous Administration was open to advice from grownups that knew how to make things work. The country has been turned over to a bunch of grad students and their radical-Leftist faculty. One wonders just how badly they can screw things up in four years.