President Barack Obama addressed more about oil and gas than he seemed to in his State of the Union speech Jan. 20.
The president boasted about "booming energy production," falling reliance on foreign oil, and recently low gasoline prices. Presidents enjoy the privilege of claiming credit for improvements to the national condition that occur during their terms in office, whether or not they contribute anything to the progress. Obama also tried to sweep his stonewalling of the Keystone XL pipeline project under the rug during an appeal for an "infrastructure plan," calling on lawmakers to "set our sights higher than a single oil pipeline." The statement is outrageous. That Obama has no intention of approving a globally important project opposed mainly by a noisy minority has long been obvious.
From an administration that has mass-produced energy outrages for 6 years, however, a State of the Union speech that contains only one seems tame.
Broader framework
The broader framework of the speech is more troubling. Mindful of presidential elections in 2016, Obama turned his attention to the middle class. There, after all, is where most votes reside. So it is to the middle class, if the president has his way, that federal benefactions must flow.
In his speech, Obama proposed to ease the burden of childcare in middle-class and low-income families with "more slots and a new tax cut of up to $3,000/child/year." He called for legislation guaranteeing sick leave for workers and raising the minimum wage. He offered to make community college education available at no cost to students.
Tax cuts and freebies, of course, must be compensated. So must those new ports and bridges that would, in Obama's view, yield more goodness than is achievable with a piddling 1,180-mile pipeline able to optimize North American oil logistics, further cut reliance on foreign oil, and fortify relations with an historically friendly and lately indulgent neighbor.
Who, then, will pay? The "super-rich" and companies exploiting "loopholes" in the tax code, of course. "Let's close the loopholes that lead to inequality by allowing the top one percent to avoid paying taxes on their accumulated wealth," Obama said. "Then we can use that money to help more families pay for childcare and send their kids to college."
Governance, here, seems easy. To pay for a new program, the state simply transfers money from sources deemed suspect to recipients deemed righteous. The formula generates political support if beneficiaries sufficiently outnumber donors.
Yet government isn't a pattern of discrete transactions. It's a homogeneous mechanism for collecting money from the governed and spending it on programs never genuinely connected to whatever funding schemes may have been touted at their creation, which most quickly outgrow. With few exceptions, promises to raise funds in one place to pay for activities elsewhere represent salesmanship and nothing more.
Of that enterprise, Obama is an enthusiastic practitioner. Although he provided no specifics about funding in his speech to Congress beyond raising rates on the super-rich and closing loopholes, earlier communications from his administration floated ideas such as raising the capital-gains tax rate. Populist tax hikes thus are in prospect. Details will follow. "In 2 weeks," the president said, "I will send this Congress a budget filled with ideas that are practical, not partisan."
The energy formula
For the oil and gas industry, this is ominous. Every budget Obama has proposed so far employed the tax-here-spend-there formula for energy. Every budget sought to raise taxes on fossil fuels, claiming to be ending "subsidies," and to spend the supposed savings on renewable energy through tax credits, loan guarantees, and consumption mandates. Congress has spurned the idea and will do so again.
The ephemeral formula, though, with its embedded intent to raise costs of commercial energy and subsidize alternatives, drives policy-making. Whether applied to energy policy, or to community college tuition, or to anything else, therefore, it's a contrivance deserving the industry's whole-hearted condemnation.
