Jan
11
Please Lord Set My Economy Free
January 11, 2011 | Leave a Comment
Considering the state of the economy a little divine intervention might be worthwhile. In view of the trends in politics a little divine intervention might be worthwhile, too. Believer or not, a little introspection can’t hurt. A driver or an idea to light off something big for the economy doesn’t seem to be out there in obvious view. Regulations, new taxes, ObamaCare and a load of stuff the left in the administration has in store for the coming months has yet to be seen in detail, and the press is out somewhere missing the main stories.
Yet opportunity abounds for an economic recovery. At the basics, raw materials and energy the U.S. is sitting on vast wealth. Rare earth elements can be mined here, precious metals, too. The U.S. remains the biggest food resource on the planet always there for disasters everywhere else. One bright spot is in agriculture, pointing out the farmer’s political sophistication, but don’t overlook the food processors and the grocers groups. There might be something to learn there. (Export!)
A week ago saw your writer in D.C. as a travel, food and lodging paid guest of the American Petroleum Institute to hear the API president deliver a speech (PDF Download). In a panorama room looking out on the U.S. capital and mall atop the Newseum about 200 to 300 press personnel and less than 10 bloggers watched and listened. The speech certainly puts the pressure on, if it gets covered and enrolled into the thoughts of the media and the citizenry. Lets roll some knowledge in, OK?
It seems that the economy is going to have to wrench itself up while the government drags along the ball and chain of debt. Many expect with good reason that soon some state governments may fail. It might be a good thing for all the government bodies in the U.S. to get a terrifying wake up call.
We’re going to have to maximize the work of the segments of the economy starting with the basics, obviously. From the view here that would be oil and gas. The administration seems to think that old style blood letting of the business is some smart move robbing the cash flow out from capital investment, construction and long term employment. Sometimes one has to wonder if the tax mavens are really fifth columnists trying to destroy the American way of life.
Garard’s speech was a kind of situation report and encouragement to consider the situation with an eye to the long term. In a nutshell, lets not tax a basic industry into the hospital and let human energy run a little freer. There’s a lot at stake on these points.
The oil and gas industry is paying some $95 million dollars a day into the U.S. treasury, well, the money is in the price you pay and winds up in the government coffers. History shows the oil and gas business has channeled from consumers a Trillion Dollars in oil business income taxes since 1980 plus $187 billion in rents and royalties from U.S public lands production. That’s just the direct money.
The API membership provides 2.1 million jobs on the payroll. They know they’re indirectly employing another 7.1 million jobs with suppliers, servicers, and subcontractors. Granted the business demands a high level of either education or training or both, so the jobs pay better than double the national average. A few of these jobs are at a little risk if the tax attack takes place. The tax attack truth is the customers would wind up paying anyway – if anyone is any clearer that taxes pass through to the consumer, who would it be? Follow the money back and it comes from us.
On the other hand, the API isn’t asking for any new tax breaks anywhere in the speech or in the research study they bought from a research group.
The second and more important point is all that opportunity for more oil and gas production and the jobs that come with it.
The oil and natural gas industry claims it could generate another $1.7 trillion in government revenue if it were to explore for and produce those oil and natural gas resources in the areas that government currently has set off-limits. Wouldn’t that actually be not importing from OPEC and the Axis of Oil Countries and keeping the money here? Jobs, investment, taxes and by the way more oil production for the world market likely lowering prices?
Doesn’t it make sense for the U.S. to encourage policies that simply allow the industry to do what it does best – produce energy from all sources for Americans and at the same time build up some high paying job creation?
The situation today is government taking actions that discourages our domestic energy production.
The Wood Mackenzie study the API bought for public use (a scribd page- icon on the right) compares the impacts of two fundamental scenarios. The first would raise revenues for the government from fees and payments associated with increased access and industry working in those areas now off-limits. The second would raise government revenue through a quick and dirty additional $5 billion in direct taxes on the industry.
The results show that not all tax revenue is created equal. When you compare the total government revenue impact from the two scenarios, the increased business activity in the now off-limits areas scenario generates an estimated $149 billion in additional government revenue. That’s money taken right out of the nation’s imported oil bill. However, under an increased taxation scenario, those net revenues are estimated to decrease by $128 billion with a higher imported oil bill.
You have to give Big Oil its due for being patriotic to the citizens, the families, friends and neighbors. Mr. Garard isn’t asking for a tax break, an incentive deal, or some special treatment, only to be allowed to work.
After the BP oil spill in the Gulf last spring a lot of problems for the environment floated up and spread around. Damages aplenty, lessons learned, BP had a brush with corporate death – it’s a good thing it’s a huge company, and lot less huge now. But the U.S has to grow up and get a grip on its emotions, being angry and pouring money out for imported oil might be the first response, but before long it will be a very costly choice that dwarfs the problem of the spilled oil. And makes the oil exporters who don’t like us even richer.
The Wood Mackenzie study suggests the total additional direct, indirect and induced jobs could exceed 400,000; that would about cover a month’s worth of job losses back at the start of the recession. That would prompt some more jobs, better incomes across the country and take some of the pressure off the state and local governments. The oil and gas business saturates the whole economy.
It would sure be a better deal than those Trillion Dollar stimulus programs that can’t seem to get anything done but maybe keep the economy treading water and are funded with borrowed money.
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