In the sleight-of-hand on display throughout the US showdown over fiscal policy, no one has performed the rhetorical dodge better than President Barack Obama.
“Before we stop funding clean energy research, let’s ask oil companies and corporate jet owners to give up the tax breaks that other companies don’t get,” he said July 22 at the University of Maryland. “I mean, these are special tax breaks.”
No, they’re not special tax breaks if what Obama means to imply—as he surely does—that they let oil companies pay effective tax rates lower than those of other companies. Those “special” tax mechanisms just accommodate the oil and gas industry’s unique activities. Effective tax rates of big oil companies are, in fact, relatively high (OGJ, July 4, 2011, p. 22).
Beyond that, the president’s counterpoint misfires.
Funding for “clean energy research” isn’t under threat. What should be but isn’t under threat is heavy subsidization of the nonhydrocarbon energy forms politicians love and markets hate.
Under a bewildering variety of programs, the federal government spends tens of billions of dollars each year on tax credits and other favors for uncompetitive fuels and the means to use them. It spends far more squeezing exotic fuels into the energy market than it does researching ways to make them competitive.
Anyone concerned about federal fiscal health should look hard at not only the amount of money flowing into uneconomic fuels but also the open-ended nature of the spending.
From the oil and gas industry’s perspective, problems here don’t include a competitive threat from wind, solar, and biofuels. No matter how much money the government spends on nonfossil energy, the market for oil and gas will remain huge.
The problems are the level of expenditure, lack of control over that spending, and very low amount of energy that results in relation to the outlay.
Exotic energy has become a sinkhole for taxpayer dollars. By focusing on research, Obama diverted attention away from this increasingly painful reality.
An over-indebted nation should be ending rather than camouflaging its wasteful habits.
(Online July 29, 2011; author’s e-mail: [email protected])