Saturday, December 28, 2013

Cutting Deficits: Limits on Oil Corporation Subsidies & Tax Breaks

Deficit Stop Loss: $4 Bn Annually
Mechanism: Reduce Oil Subsidies
2012 Federal Deficit: $1.1 Tn 
[$1,100 Bn]
Ryan-Murray Deal Deficit Reduction
 $21 Bn

 Investing in Old Energy and Investing in New Energy

To introduce the issues covered in this MeanMesa post, let's start with this 8 minute video of President Obama.  He is addressing the country concerning a Democratic Senate proposal designed to cut $24 Bn in tax exemptions from federal subsidies to American oil corporations.

The following introduces the video on the Bloomberg site.

March 29 (Bloomberg) -- President Barack Obama talks about U.S. oil company profits and federal tax subsidies. The U.S. Senate later rejected a Democratic bill to repeal about $24 billion in tax breaks to oil companies and use the money to pay for clean energy development and deficit reduction. The president speaks in the White House Rose Garden. 

[Link to the Bloomberg site to see the President speaking video.]

[A Note on Sources: MeanMesa intentionally chose both Bloomberg and Mother Jones for this post.  It is, perhaps, too easy to retrieve reporting which is blankly critical of oil corporation subsidies, tax exemptions and tax expenditures, and -- in the interest of fairness -- we can assemble this post quite comfortably with information from this point of view.  The Mother Jones article, although a year old, offers an insightful glimpse of the politics involved.]

Although the proposed Senate bill called for $24 Bn in subsidy reductions for the five largest oil companies,  the full deficit relief -- accumulated in savings over ten years -- would amount to $41 Bn, so MeanMesa uses this figure in the recap of deficit reductions for this post.

All links in the content remain enabled.


Obama Says Oil Profits Justify Ending U.S. Tax Breaks

March 29 (Bloomberg) -- Bloomberg's Hans Nichols reports that President Barack Obama said oil company profits justify abolishing $4 billion in annual oil and natural gas subsidies and shifting those savings to research on clean-energy fuels. He speaks on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg)

President Barack Obama said oil company profits justify abolishing $4 billion in annual oil and natural gas subsidies and shifting those savings to research on clean-energy fuels. 

With the Senate scheduled to vote on the matter later today, Obama again urged Congress to repeal the tax breaks. The measure is opposed by Republicans, who have the votes to block the legislation. 

“It’s not like these are companies that can’t stand on their own,” Obama said in prepared remarks delivered in the White House Rose Garden. Last year, the three biggest U.S. oil companies took home more than $80 billion in profit, with Exxon Mobil Corp. collecting almost $4.7 million each hour, he said. 

“And when the price of oil goes up, prices at the pump go up, and so do these companies’ profits,” he said. “Meanwhile, these companies pay a lower tax rate than most other companies on their investments -- partly because we’re giving them billions in tax giveaways every year.” 

Energy company subsidies are a staple of Obama’s re- election campaign rhetoric, meant to highlight the differences between himself and Republican presidential candidates and cast them as defenders of such spending as they propose cuts in health and other social programs to reduce a deficit forecast at $1.3 trillion this year. 

In his Feb. 13 budget, Obama said existing tax “loopholes and expenditures” for the oil and natural gas companies amount to an unwarranted “preference” of these industries over others.

Criticism of Republicans

At Ohio State University March 22, Obama ridiculed Republican presidential candidates as the “flat Earth crowd,” who’d “rather give $4 billion in taxpayer subsidies to oil companies this year than to invest in clean energy.” 

We have been subsidizing oil companies for a century. That’s long enough,” he said. 

Republicans today cited a March 3 Congressional Research Service report that found repealing $22.8 billion in tax breaks over five years would reduce the tax breaks for independent companies and, on a small scale, “would make oil and natural gas more expensive for U.S. consumers and likely increase foreign dependence.” 

Senate Republican Leader Mitch McConnell of Kentucky, in an e-mailed statement, said Obama’s proposal is a political gambit in an election year and called the plan a “tax hike on American energy manufacturers” that he’d oppose. 

Brendan Buck, a spokesman for House Republican Speaker John Boehner, said today in an e-mail that the president is giving a speech “with gas prices at $3.92 per gallon, calling for policy that would make gas more expensive and increase foreign dependence on oil. You wouldn’t believe it, right? Yet this is happening.” 

Ending such breaks would reduce the deficit by $41 billion over a decade, according to Obama’s budget for fiscal 2013. 

Subsidies were worth $24 billion for the five largest oil companies operating in the U.S., including Irving, Texas’s Exxon Mobil Corp. (XOM) and Chevron Corp. in San Ramon, California, Senate Democrats said. 

To contact the reporter on this story: Roger Runningen in Washington at
To contact the editor responsible for this story: Steven Komarow at

The Politics of Cutting Off the Tax Money

We have to remember that some of the largest figures for tax payer support to the oil corporations actually include an expensive collection of other items -- items which are generally more attractive to the subsidy cutting crowd than the cash that makes its way directly from the general fund to oil corporation share holders.

These "attached items" include things such as some energy research projects -- especially concerning automobile mileage and climate change, the popular LIHEAP program for low income home heating assistance, the maintenance and management of the Strategic Petroleum Reserve and a significant effort to regulate the financial part of the otherwise "wild west" free enterprise.

The cost of all these things is painlessly -- but not necessarily reasonably -- "stitched" into calculations which, subsequently, show "Big Oil Subsidies" in the 100's of Bns.

Nonetheless, as the Mother Jones article points out, every dollar of tax payer provided subsidy, whether spent as a legitimate service to Americans or spent at the behest of oil corporation lobbyists and think tanks, has its own clutch of protective "friends" in the US Congress.

It turns out that MeanMesa's choice of around $4 Bn in annual cuts fits pretty well with the "middle ground" approach -- if such a place actually exists with the gigantic oil corporations on the other side of that "middle."

The article, excerpted below, was written at around the time of one of the debt ceiling and credit default episodes during Republican 2012 hostage tantrums. The links from the original article are left enabled in article excerpts in this post. [Read the whole Mother Jones article here. ]

Mother Jones

Will Big Oil Keep Its Subsidies in a Fiscal-Cliff Deal?

One of America's most profitable industries banks billions in subsidies—but there's little talk in Washington of putting these handouts on the chopping block.

  Fri Dec. 7, 2012
Democrats and Republicans are duking it out in Washington over a deal to avert the slew of spending cuts and tax increases—the so-called "fiscal cliff" you've heard so much about—that will take start to effect on January 1. Lawmakers on both sides of the aisle have argued that "everything should be on the table" in negotiations toward a deal that trims the nation's debt and avoids the cliff. Yet notably absent from the debate over what to cut and what to spare in a deal are the tens of billions of dollars in subsidies, tax breaks, and other perks for the hugely profitable oil industry.

That silence begs the question: Will Big Oil's subsidies go untouched in the fight over a fiscal-cliff deal?

In news stories and public remarks by leading Democrats and Republicans, there's been scant discussion of oil subsidies as a potential source of revenue. The proposals floated by the White House and by congressional Republicans have not delved into enough detail to know whether subsidies would be included in their proposed changes. And multiple aides to Senate Democrats say that, while they believe the subsidies are on the table, there hasn't been much of a push behind the scenes to include them in a fiscal-cliff deal.

Despite such staggering windfalls, the federal government continues to subsidize oil companies large and small. Taxpayers for Common Sense, a nonpartisan government watchdog that wants to cut all energy subsidies, estimates that oil companies will receive $78 billion in industry-specific and broader business subsidies from 2012 to 2017. President Obama's budget plan for the 2012 fiscal year called for eliminating 13 subsidies or perks for oil companies, which will save taxpayers $4.6 billion a year over the next decade.

Experts of all stripes agree with Taxpayers for Common Sense's demand that Big Oil's "gravy train" come to an end. The libertarian Cato Institute, cofounded by Charles Koch, lauded Obama's plan to slash certain oil subsidies. A Sierra Club official compared subsidizing Big Oil to investing in the future of VCRs or typewriters: "It's a technology that is on its way out. It doesn't make a whole lot of sense." The lefty Center for American Progress think tank says it's time to "turn off the oil subsidy spigot."

In Congress, lawmakers ranging from hardline conservatives like Rep. Paul Ryan (R-Wis.) to dyed-in-the-wool liberals like Sen. Bernie Sanders (I-Vt.), and plenty more in between, have called for eliminating oil subsidies. Even oil executives themselves have said in years past that they don't need the subsidies.

ConocoPhillips CEO Jim Mulva told Congress in 2010 that, "with respect to oil and gas exploration and production, we do not need incentives." And former Shell CEO John Hofmeister once testified, "My point of view is that with high oil prices such subsidies are not necessary."

The American Petroleum Institute, the oil industry's top trade group, has launched an advertising campaign pressuring seven senators in states with ties to oil and gas companies—Senate Democrats Tom Udall of New Mexico, Mark Udall of Colorado, Mary Landrieu of Louisiana, Kay Hagen of North Carolina, Mark Pryor of Arkansas, Mark Warner of Virginia, and Mark Begich of Alaska—to not cut subsidies. In the three weeks after Election Day, API spent $3 million on TV ads, according to a ThinkProgress review of Kantar Media's CMAG data.

[except omitted]

One senior Senate Democratic aide says it's more likely that oil subsidies will be trimmed if Democrats and Republicans agree to a sweeping deal—say, one with spending cuts and new revenues totaling $1 trillion. That way cutting $24 billion in oil subsidies doesn't seem punitive and so is more politically palatable. "But if we do a short-term deal…so it's a hundred-billion-plus [toward reducing the deficit], then $24 billion is an awful big chunk of that, and politically it gets more difficult," the aide says.

Another senior Democratic aide says he thinks it's more likely that Congress will touch oil subsidies in 2013. "We're more likely to see the Senate take up this issue after the new year, maybe as part of comprehensive tax reform," this aide says. "But even then I'm not optimistic."
How We Can Do This

Probably the first requirement will be the most difficult one.  Stupid won't work.  Neither will the typical approach of sold-out Congressmen "just throw together something we got from the lobbyists and put a ribbon on it."

However, even given the likelihood that the Congress is in no danger of being blessed with any particularly noticeable "constituent interest" any time soon, there remains the last avenue still available for Americans in the 99% -- politics.  Deficit reduction -- through rational courses -- has to become the political bully.

Even the tea bag half wits from the "ultra safe" gerrymandered districts are vulnerable to voter demands for rational deficit management.  In fact, this is precisely the kind of "political problem" or "political solution" that even the brain dead hill billies in the Republican base will find unavoidably attractive, and that means the concept may have traction even in the elections where voters suffer a deep infestation with raw FOXisms.

So federal fiscal management must become a campaign necessity.  This does not mean privatizing Social Security, cutting food stamps, crippling the economy or a final autopsy on the USPS to extract the phony pension fund.

Instead, these campaigns are going to have include a bunch of proposals that are politically saleable because voters will think that they might actually work.  It's pretty clear to everyone not in the "Mitt Romney FOX-thrall" that hair-on-fire, racist hate campaigns have ceased working.

We can assume that just about all the GOP political creatures -- and some unusable Democrats, too -- will not be eager to so much as touch this idea with a stick.  More than likely, the ridicule will sound something like this:

"Heh, heh, heh.  Shore we wanna' fix thu budget, but them "__[fill in the blank]___" ain't gonna' ever dew ennythin' tu hep us."

However, right at this moment some of the voters in that town hall meeting can pull out the list of deficit reducing proposals from these MeanMesa posts and make some suggestions.

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