Assigned Reading today will be the transcript of President Barack Obama’s budget speech from yesterday. It’s absolutely a necessary read, especially if you were fortunate enough not to catch it on television, as it frames exactly where this president is when it comes to matters of leadership and adherence to partisan politics.
On leadership, it strikes me as equal parts cowardly and telling that the president waited for Rep. Paul Ryan to come forth with his plan before setting out to attack the plan in the context of purportedly unveiling a plan of his own. Like with health care reform, President Obama has no true plan with regard to the budget, a reality evidenced by the fact that the only concrete proposals coming out of his budget speech was an increase in taxes and a cut in defense spending.
On partisan politics, I wish I were more surprised when I heard Obama pin this issue square on the Bush administration.
Anyway, here’s the link to the speech: SPEECH TRANSCRIPT.
And, for your reading pleasure, here’s a response I received from Pete Sepp of the National Taxpayers Union:
In his speech about the budget deficit today, the President laid out a series of proposals that include raising taxes on the oil and gas industry – at a time of economic uncertainty and rising energy prices. His proposals amount to a tax on energy consumers. Unfortunately, these proposals, which have been rejected before, would actually undermine three of the President’s recent policy goals – reducing US oil imports 30% by 2025; reducing the deficit and creating jobs. Following are some key facts about these plans:
Reducing US oil imports
- According to 2011 analysis by the highly respected energy research firm of Wood Mackenzie, it found that if the government were to increase taxes on the oil and gas industry by $5 billion, it would reduce domestic production by 400,000 bpd by 2025, with an additional 1.2 million bpd at risk. This tax increase would increase, not decrease our reliance on foreign sources of oil.
- Under current estimates, without increasing access to domestic sources of oil, the President’s plan to reduce foreign imports of oil still leaves us 1 million barrels per day short of reaching his goal of a 30% reduction.
- The US has tremendous potential to unlock vast energy resources that are currently off limits. According to the Congressional Research Service (CRS), America is endowed with 163 billion barrels of recoverable oil. That’s enough to maintain current rates of production and replace Middle East oil for over 50 years. CRS places America’s natural gas potential at 2,047 trillion cubic feet; this is enough to meet demand for 90 years. The Department of Energy estimates that oil shale from the Green River Formation, in northeastern Utah, has 1.38 trillion barrels of recoverable oil. That’s more than five times the oil reserves of Saudi Arabia.
Potential federal revenue impact
- While the President – and congressional leaders – are focused on trying to reduce the deficit, higher taxes on oil and gas production would do the exact opposite. According to the Wood Mackenzie study, these energy tax increases proposed by the White House earlier this year would result in a net loss of $128 billion to the government from 2011-2025.
- Allowing greater access to domestic oil and gas resources, rather than tax increases, could result in a surge in revenue – and greater economic activity. “In fact,” according to The Wall Street Journal on September 12, 2008, “liberating publicly owned resources could net the Treasury as much as $2.6 trillion* in lease payments, royalties and corporate taxes, according to one estimate currently knocking around Capitol Hill. The returns wouldn’t roll in overnight, but that’s almost a full year of spending even for this spendthrift Congress.” According to the MMS, offshore royalty payments from offshore and onshore oil and gas exploration constitute one of the federal government’s greatest sources of nontax revenue, totaling approximately $7 billion in 2007
- In fact, according to API data, from 1980 through 2008, U.S.-based major energy producers paid or accrued more than one trillion dollars in total income taxes.
- While the President is rightly focused on improving the economy and creating jobs, higher taxes on one of the leading industries fueling our economy, would only harm the economy and cost jobs. According to the Wood Mackenzie analysis, the increased taxes on the industry would cost some 170,000 direct and indirect jobs by 2014.
- PricewaterhouseCoopers estimates that at the national level, each job in the oil and natural gas industry supported more than two jobs elsewhere in the U.S. economy.
- Rolling back some of the existing barriers to domestic exploration on the other hand, would create vast economic activity and create jobs. New projects will create new high paying jobs. Opening access of off limits areas could create 160,000 jobs by 2030.
Industry Earnings & Investments
- According to a January 2011 earnings report by the American Petroleum Institute (API), the latest published data for third quarter 2010 shows the oil and natural gas industry earned 6 cents for every dollar of sales in comparison with all manufacturing, which earned 8.6 cents for every dollar of sales. Between 1996 and 2007, the U.S. industry invested more than $1.2 trillion in a range of long-term energy initiatives compared to net income or earnings of $974 billion.
Today a President who has been devoted to ‘Winning the Future’ seemed determined to rehash the past. There was very little in his speech that was new, or has been proven effective. The President continued his intimidated campaign against American business by proposing a series of tax increases, particularly those on the oil and gas industry – even as working families beset by an ongoing recession are paying $4 a gallon for gas. If the President is serious about reforming the deficit and improving our fiscal standing, he should cut government spending, work with Congress toward serious entitlement reform and keep his promise to remove the shackles of red tape around American innovation. Until he embraces serious reforms like these, he’ll continue ‘spending the future’ instead of winning it.