FRONT PAGE CONTRIBUTOR
Let’s Nail Democrats on Their Duplicity with Energy Subsidies
Close down the DOE and eliminate all energy 'tax cuts' for the (green) rich in one great big compromise.
“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”~ President Ronald Reagan
Democrats (and the Maine Republicans ladies) are agog to demonize oil companies and punish them with punitive tax increases. Their effort was defeat yesterday 52-48, but they plan to continue wasting time on it today. Aside for the fact that a punitive tax is unconstitutional, and a tax originating in the Senate is…also unconstitutional, the Democrats are providing Republicans with the ammo to eradicate their green empire of corporate cronyism once and for all.
Harry Reid and Bob Menendez are claiming that profitable oil companies don’t need subsidies, and the repeal of those tax credits, which they call subsidies, will save us $20 billion over 10 years. Let’s ignore the fact that the $4 billion annual tax credits are near universal deductions which are afforded to almost every other industry. We’ll agree to use the spurious “oil subsidies” label for the purpose of comparing similar terms. But if they want to discuss the repeal of energy subsidies, that is a dialogue we should embrace.
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? If it is condign to eliminate $4 billion in tax credits for an industry that brings in hundreds of billions in taxes and royalties, shouldn’t we eliminate the subsidies for wind, solar, and ethanol, which are a net loss for the treasury and consumer alike?
Instead of Senate Republicans introducing harmful amendments which accept the Democrats’ premise and mandate onerous drilling regulations and liabilities, they should utilize Democrats’ hypocrisy and offer real consequential amendments. In that spirit, I propose a quintessential Washington style compromise and call for the Bipartisan Comprehensive Energy Reform Act of 2011. It would end all tax credits for the oil and gas industry. But, you know what? It would eliminate all subsidies, mandates, and (or) tariffs for wind, solar, and ethanol (incorporating the goals of Mike Pompeo’s H.Res. 267). In addition, it would completely abolish the Department of Energy (DOE), along with the ethanol programs at the USDA. How’s that for a compromise?
The Democrats are hyping the fact that the oil “subsidies” cost $20 billion over 10 years. Well, the DOE costs taxpayers $26 billion annually and hundreds of billions over a ten-year budget frame. However, it is more than just the $26 billion in lost revenue to the treasury that we should factor. The DOE uses those funds to regulate, depredate, and impound our potent sources of energy, while subsidizing the impotence of the green energy boondoggle for rich lobbyists; all the while destroying jobs, diminishing income, and raising the cost of vital goods and services on every American.
Venturing off on a tangent for a moment; there are too many Republicans who deemphasize the importance of cutting discretionary spending in light of the superior profligacy of entitlement spending that we are facing. However, DOE appropriations is a classic example of discretionary spending that funds a department which costs the economy a sum incalculably more than its own operating budget and possibly more than some entitlements. Another is example is the EPA. They operate on a $10 billion budget, but environmental regulations, many of which originate from the EPA, cost the economy $1.75 trillion annually. The arcane Keynesian might refer to it as the consummate “multiplying factor.”
If Republicans would have the temerity to offer such a bold compromise, they would be able to shine light on the inscrutable and unaccountable green energy industry. If Democrats want to focus on big oil, let’s take up the challenge and contrast the oil and gas industry with the big green monster.
Fulfilling our Energy Needs
If we are going to “subsidize” an energy source, shouldn’t we offer the rewards to the sources that actually fulfill our needs? 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.
Who are the Real Taxpayers?
According to the American Petroleum Institute (API), 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. While they don’t enjoy some of the credits and loopholes of other companies, Democrats are egregiously seeking to deny them some universal tax credits.
Electricity Rates for Gas, Coal, and Nuclear vs. Green Energy
There is no level of public funding for green energy that can spur the requisite innovations to make their usage economical for the consumer. The Institute for Energy Research cites government data which illuminate the wide gulf between the cost of green energy on real energy per kWh:
Green energy- Photovoltaic solar technology-$0.21 per kilowatt hour (kWh), solar thermal technology-$0.31 per kWh, and offshore wind-$0.24 per kWh.
Real energy- $0.07 per kWh for natural gas-fired combined cycle, $0.10 per kWh for conventional coal, and $0.11 per kWh for advanced nuclear.
Oil and Gas as Public Investments
In addition to providing revenue for federal and local governments, and delivering the economic lifeline to consumers and producers, oil and gas companies help create wealth for American investors in the form of stocks, mutual funds, pensions, and retirement accounts. Mutual funds and pensions hold almost 30% oil stocks; private investors hold 23% in oil stocks. Nobody aside for Obama’s rich friends benefit from green energy investments in any meaningful way.
Subsidies and Job Creation
Obama offered a whopping $30 billion in handouts to “clean energy” in the stimulus bill; $3 billion of which went to Big Wind in the form of a block grant to subsidize 30% of their production costs. Also, many states offered the wind industry their own tax breaks. In Texas, the property tax alone cost the state $1.6 million per job created. The left is complaining about $.60 per barrel worth of tax credits to the oil industry, while we are subsidizing almost one-third of Big Wind’s operating expenses?! The Heritage Foundation estimates that if the oil industry received a commensurate subsidy, they would get a $30 dollar check for every barrel produced. So what are the results of this behemoth subsidy? Here is what the Wall Street Journal reported last December:
According to an analysis by Chris Horner, an energy expert at the Competitive Enterprise Institute, the stimulus bill’s subsidies for renewable energy cost taxpayers about $475,000 for every job generated. That’s at least four times what it costs a nonsubsidized private firm to create a job—a lousy return on investment even for government.
The wind industry claims to employ 85,000 Americans. That’s almost certainly an exaggeration, but if it is true it compares with roughly 140,000 miners and others directly employed by the coal industry. Wind accounts for a little more than 1% of electricity generation and coal almost 50%. So it takes at least 25 times more workers to produce a kilowatt of electricity from wind as from coal.
Given this level of inefficiency, it’s no wonder that wind and solar energy require at least 20 times more in government subsidies per unit of electricity generated than the average for coal and natural gas, according to a 2007 study by the Energy Information Administration.
The solar industry is no better. Solar energy also receives the 30% tax credit and has nothing to show for it in terms of job creation. According to the Heritage Foundation, in 2010, solar energy received roughly 52 times more subsidy money per megawatt hour of electricity than coal and 92 times more than natural gas. Yet, the Energy Information Agency (EIA) still predicts that by 2016, electricity from solar cells will cost nearly 5 times as much as electricity from gas-fired power plants.
The Volumetric Ethanol Excise Tax Credit (VEETC) is the most egregious of all subsidies. The American people effectively subsidize their own demise by offering $6 billion to rich corn producer to plant 40% of their crop for the odious ethanol fuel. Yes, the fuel source that drives up the cost of food and energy, all the while enriching the farm lobby. It certainly creates jobs in a hand full of states, but destroys jobs for the rest of us by raising the cost of productivity. I guess the Democrats support water boarding when it is applied to the American consumer and when it is down with Ethanol.
What about big, bad oil? The oil and natural gas industry employs 9.2 million Americans, even though they receive a much smaller subsidy.
Let’s just recap the score for a moment. The oil and gas industry employs millions, creates vital investments for everyone, provides-either directly or indirectly-almost every indispensable product to consumers and producers in the most efficient and economical way, and generates hundreds of billions in revenue for the government. Green energy produces few jobs, generates a net loss for taxpayers and the federal treasury, offers no meaningful investments, and through the power of mandates (and tariffs, in the case of ethanol), distorts the market and drives up the cost of energy (and just about everything else) for job creators and consumers, while benefiting Democrat donors.
Yet, Democrats want to eliminate standard tax deductions from the oil companies, while leaving the pure handouts and mandates for the inept green energy in tact. The road to green hell is truly paved with our jobs, income, taxes, and freedoms.
Some might call this flagrant hypocrisy, however, in a purely insidious way, it is actually quite consistent. When confronted with a choice between individual liberty and prosperity on the one hand, and corporate socialism on the other, they will invariably choose the latter.
This is not the time for muddled ideological distinctions on the part of the GOP; it is time for bold colors. It is a time for Republican leaders in the Senate and presidential candidates to distinguish themselves and their conservative ideology to the American people. Oil is the lifeblood of our economy; the free market is the lifeblood of our individual liberty. They both offer the most freedom and prosperity to the broadest amount of non-special interest Americans.
Tell the Democrats that when it comes to cutting subsidies and corporate cronyism, we’re game.
Cross-posted to Red Meat Conservative