PRAGMATIC TAX MOVE TRAPS U.S. INDUSTRY

Sometimes it pays to be ideological. Sometimes it hurts not to be. The oil industry soon may suffer for its inclination to embrace pragmatism when ideology beckons.

May 3, 1993

3 min read

Sometimes it pays to be ideological. Sometimes it hurts not to be. The oil industry soon may suffer for its inclination to embrace pragmatism when ideology beckons.

It is a keen, maybe even sophisticated, sense of pragmatic politics that leads industry groups and a number of oil companies to counter the Clinton administration's proposed BTU tax with a preferred alternative. American Petroleum Institute has spearheaded the strategy, asserting that if the government really must raise taxes, a value-added tax would be better than the BTU levy. National Petroleum Refiners Association and a number of individual oil companies have taken similar positions.

LOOKS CONSTRUCTIVE

Through the lens of pragmatic politics, the approach indeed looks constructive. Instead of just opposing a BTU tax, the industry is acknowledging a possible need for what President Clinton once called sacrifice, raising just a teeny question or two about form. But Treasury Sec. Lloyd Bentsen, point man for the BTU tax knows opposition when he sees it and scolds API at every opportunity. The olive branch hasn't worked. Furthermore, hypothetical qualifiers don't count much in pragmatic politics, which means the oil industry is on record in support of higher taxes.

Problems with this position soon will become clear. Senate Republicans last month successfully used a filibuster to block $16 billion/year worth of government spending advertised as economic stimulus. They didn't indulge in pragmatic politics, compromising for the sake of bargaining position, settling for a program cut to $10 billion or $12 billion and thereby assenting, however grudgingly, to the need for more spending.

To their everlasting credit, the Republicans made an ideological statement: An over-indebted government cannot stimulate the economy by spending more borrowed money. They thus staked out important territory for the battles that lie ahead. Unlike industry pragmatists, they recognize that the political struggle under way in the U.S. is not over a particular tax or a particular spending bill. The political struggle is over an ideology having to do with the size of government and its reach into private affairs.

Why should the nuts-and-bolts petroleum industry care about abstractions like these? Because unbridled governments impose taxes and inefficiencies that hurt economies and therefore energy markets. Because unbridled governments intrude into fuel choices, usually to the detriment of petroleum. Because unbridled governments let phantom science block activities that would serve national interests, such as development of federal oil and gas resources. Contrary ideologies have practical, harmful consequences. Ideologies never yield to the compromises of pragmatic politics.

TAX FIGHT LOOMS

Thanks to Senate Republicans, the fight is on over the big-government agenda President Clinton has espoused since inauguration day. Soon it will center on taxes. The opposition argument must be that government should not raise taxes at least until it acknowledges its limits and musters the discipline to live within them. In the absence of such responsibility, the deficit will grow no matter how many new claims Congress makes on the nation's wealth.

For pragmatic reasons, the petroleum industry must participate in all of this patently ideological struggle. But it will have to jettison its support, however grudging, of a value-added tax. Clinton has been willing in the past to abandon ideologies that proved politically unacceptable. The industry must help show how thoroughly unacceptable his current ideology is.