And he’s prepared to double down on them. The Washington Post starts its editorial praising Barack Obama’s cap-and-trade proposals, which would cripple American energy production and manufacturing through burdensome quasi-taxation. The essay then focuses on Obama’s windfall-profits tax and draining the Strategic Petroleum Reserve:
To be sure, Mr. Obama would not copy the tax enacted under President Jimmy Carter in 1980, which netted $40 billion before its repeal in 1988 while imposing huge administrative burdens — and retarding domestic oil production. Mr. Carter’s tax was levied per-barrel, so it directly increased the marginal cost of producing crude — and made figuring out which barrels to tax ridiculously complicated. Mr. Obama wants a surtax on net oil company profits above a “reasonable” level. The tax would be set high enough to raise $65 billion over the next five years, and the revenue would fund a one-shot tax rebate that Mr. Obama would like to give to families and individuals this year.
Making Exxon surrender money that is now falling into its lap would not necessarily affect its longer-term plans or incentives. Indeed, some of Big Oil’s “windfall” already will go to the government: The more profit the companies earn, the more corporate income tax they pay. But to add a five-year tax increase on top of that to pay for a one-year gift to voters would, indeed, increase the cost of doing business. That cost would be passed along in forgone investment in new production, lower dividends for pension funds and other shareholders, and higher prices at the pump — thus socking it to the consumers whom the plan is supposed to help. If oil prices fall, there might be no windfall profits to tax. Then the Obama rebate would have to be paid for through spending cuts, taxes on something else or borrowing.
And on the SPR release:
President Bill Clinton did such a swap in September 2000 — yes, just before another presidential election — and President Bush released oil in 2005 after Hurricane Katrina. Both moves led to drops in the spot price of crude but not the sort of relief at the pump that Mr. Obama promises. Even if they had, any relief from Mr. Obama’s plan would be temporary while compromising a reserve intended to protect against disruptions in supply caused by wars, boycotts and the like.
The Post reminds Obama that he rightly called John McCain’s gas-tax holiday a gimmick that had no relation to a real long-term solution on energy, one of the few times I’ve actually agreed with Obama this cycle. What has Obama presented in return? “[T]wo gimmicks of his own,” one of which would decrease our energy security and the other which would compound the problem Obama purports to solve.
Oil companies realize large profits today in part because they have few options for investment in long-term supply. They can’t drill where the oil is, and even the leases they hold that show promise generate obstacles from environmental groups through lawsuits and regulatory complaints. They can’t build refineries for the same reasons, and now we have to import a significant percentage of our refined gasoline as well as crude oil. Money that would create American jobs now winds up as dividends to shareholders because it can’t go anywhere else.
Want to see oil company profits put to better use? Allow them to drill in the OCS and interior. It will create hundreds of thousands of jobs now, and will produce oil within two to three years. That will produce long-term energy security while we continue to pursue energy alternatives. Those are real solutions, not gimmicks.
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