The Purpose of This Bl;og

By and large, liberals are very decent, kind, and compassionate people who genuinely want what is best. This should be kept in mind as we explore the Law of Unintended Negative Consequences near invariably resulting from Leftist big-hearted solutions to societal problems.

Monday, August 5, 2013

Obama Energy - "Subsidizing Big Oil"

Obama and others on the Left have long railed against the government subsidizing big oil companies making obscene profits, and they have vowed to put an end to those subsidies. Obama is quoted as saying: "“And because billions of your tax dollars continue to still subsidize some of the most profitable corporations in the history of the world, my budget once again calls for Congress to end the tax breaks for big oil companies..." (See HERE)

A popular version of their argument is set forth in the White House blog, dated 3/28/2012, with the title of, "It is Time to End the Taxpayer Subsidies of Big Oil." (See HERE) It states:
"The United States has been subsidizing the oil industry for a century. President Obama believes that’s long enough. In fact, some of the oldest tax breaks for the oil companies date back to 1913 – a time when there were only 48 states in the Union and Ford was still producing the Model T.

After 100 years, there’s no reason for Congress to keep these subsidies on the books, especially right now. Today, as American families all across the country are feeling pain at the pump, the oil industry is posting record profits. In 2011 alone, the three largest American oil companies made a combined profit of more than $80 billion, or more than $200 million per day.

Now, we don’t begrudge companies for being successful in America. We want them to thrive and grow. But we also have to get our priorities straight. We have to invest in our future, not subsidize the past...."

On the surface this makes a lot of sense. If so-called "big oil" companies are experiencing windfall profits, it would be asinine for the government to give them billions of dollars (i.e. subsidies), particularly when we as a nation are suffering hard economic times and mounting debts.

In fact, during a campaign speech in 2012, Obama said: "Right now, $4 billion of your tax dollars—$4 billion—subsidizes the oil industry every year”. He continued: “Four billion dollars. Now, these companies are making record profits right now—tens of billions of dollars a year. Every time you go to the gas tank or fill up your gas tank, they’re making money. Every time.  Now, does anyone really think that Congress should give them another $4 billion this year?...Of course not — it’s outrageous.” (Reported HERE)

Yet, this isn't what has happened. Of course the major oil firms are making money each time we go to the pump. They make a profit of between $.04 and $.07 per gallon as compared with $.24 to $.27 a gallon that the government takes--speaking of who is really profiting. (See HERE and HERE)

However, oil companies aren't receiving a dime from the government to do anything--which is what "subsidy" means. So-called "big oil" isn't being subsidized. Rather, they have utilized legitimate tax expenses (see HERE and HERE and HERE), which are similar in principle to itemized deductions for personal income as well as depreciation of equipment and off-setting capital gains with capital loses in business.

Calling this a "subsidy" is purely propagandistic word-play intended to mislead and politically manipulate.

And, it is a semantic game that is at risk of causing Leftist LUNCs.

This is illustrated perfectly, in part, in a NY Times article, dated July 2010, that deviously misapplied the term "subsidy," evidently in the hopes of garnering support for increasing taxes on the oil industry, while unwittingly telegraphing unintended consequences in doing so. (See HERE)  The article takes great pains in drawing loose comparisons in relation to "effective tax rates," and talked on about the billions in dollars in oil "tax breaks," so as to advance the deceptive point that: “There is no reason for these corporations to shortchange the American taxpayer.” Yet, without grasping the stunning implications, the author also pointed out how various oil corporations had moved their headquarters out of the U.S., and were utilizing clever leasing strategies, to avoid paying higher taxes. In other words, the very oil taxes that the leftist author (as well as Obama and other Democrats) was arguing for, would, unbeknown to him, cause corporate flight from the U.S. and thus the loss of tax revenues and much-needed jobs. Utterly brilliant!

Let's look at the articles own figures (ibid): the tax breaks amount to about $4 billion each year. whereas the oil companies pay about $140 billion in taxes annually and provide about 9.2 million jobs (which likewise generate annual income tax revenues and stimulate the economy). The Leftist LUNCs here, then, is that the liberals are ultimately asking us to, proportionately, put several hundred dollars at risk to gain three cents. Does that make sense to you?

This is not to say that the government isn't subsidizing energy at all. Larry Bell reported: "Since 2009 we have shelled out $14 billion in cash payments to solar, wind and other renewable energy project developers. This includes $9.2 billion to 748 small and large wind projects, and $2.7 billion to more than 44,000 solar projects, which will add just 48 terawatt hours of electricity. Yet according to EIA figures, wind accounted for 3.4 percent of electricity in 2012, while solar accounted for only 0.11 percent." (See HERE)

So, if a person is looking to complain about government subsidizing energy companies, don't look at "big oil." Instead, look to President Obama and his liberal friends. I will examine how well these actual subsidies have panned out when I complete my article on Obama Energy - Green.

For an explanation as to why these Leftist energy LUNCs occur, please see: Gov: Wrong Tool for the Right Job - Introduction and Cold Nanny as well as The Politics of Compassion, Emotions, Ignorance, Denial, Blame-Shifting, and Victimization

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