RSS Feed MenuThere’s a case for taxing oil consumption. If oil costs consumers more, consumers would presumably use less.
Given that the United States imports more than half its oil – and will continue to import the majority of its oil under any likely future scenario — less use = more energy independence. And both Republicans and Democrats are committed to promoting energy independence.
The new Obama budget does impose oil taxes – but not on consumers. It taxes oil exploration instead, by slowing the depreciation schedule for oil exploration costs. This policy change won’t reduce consumption any. What it will do is discourage oil exploration by U.S. oil companies, tilting the competitive field in favor of foreign producers. There’s no energy logic to that. It looks instead like the Obama administration has got itself a new revenue policy: demonize an industry (banking, oil) and hit them with an opportunistic tax to squeeze a few extra hundred million out of them.
Likewise, there’s a case for incentivizing green energy production. Just about everybody wants to move away from oil, and despite this year’s Climategate scandals, the preponderance of the evidence suggests that coal presents serious environmental concerns.
Again there’s a right way and a wrong way to do it. The right way is to raise a cost umbrella over all forms of green energy via, for example, a carbon tax – and then let the technologies battle it out in the marketplace. Let private investors direct capital to its best use. (As I write, I am at a conference in Montana to introduce a very promising new solar technology to venture capital funds.)
Government has a role as a funder of basic research. Beyond that, though, government historically makes a very bad energy investor. Yet the Obama plan will expand government’s investment in energy development. Worse still, the Obama plan continues to sprinkle tax credits and other benefits on favored industries: wind, solar, and now nuclear. The playing field, already uneven, is being tilted even more.
Here’s the crazy thing about energy policy: If you want off oil, the only way to preserve free markets is by raising energy taxes. If you seek to quit oil without raising taxes, you plunge into a welter of subsidies and special favors. And that, sorry to say, is the course the Obama administration has chosen.
LauraNo // Feb 1, 2010 at 9:07 pm
You can’t really think the administration could get a tax on oil – to consumers – through the Congress, can you? They couldn’t even get it introduced because GOP will demagogue the bejeebus out of it. Have a look at what you all have to say about cap and trade. It is very nearly impossible to solve any problem anymore. As it is, it will still become a tax to consumers and you know it. Big business does not pay tax and it’s not about to start.
Danny_K // Feb 1, 2010 at 9:13 pm
Cutting tax breaks equals tax hikes now?
ltoro1 // Feb 1, 2010 at 10:17 pm
Danny if you lost your standard deduction would that be a tax increase? Making an oil company deduct certain cost, including labor, over 20 years instead of the year that the cost were incurred is, when including the time value of money, effectively a tax increase. It also reduces the after tax cash flows to investors which will reduce the the amount of capital invested in oil production.
This is definitely not a rational decision if you actually want unemployment to get back below 10%.
balconesfault // Feb 1, 2010 at 10:54 pm
Beyond that, though, government historically makes a very bad energy investor.
Seriously?
You want to tell that to the millions and millions of Americans getting hydroelectric power from the Tennessee Valley Authority? From the Bonneville PowerAuthority? From the LCRA in Texas? From Hoover Dam? The Robert Moses Niagara Power Plant in NY?
Actually, the Federal record on investing in power generating capacityis far better than our record of investing in energy research – funding for the latter too often has been inconsistent as one Congress or Administration will suddenly change direction from the previous and defund ongoing programs before they can generate results.
Danny_K // Feb 2, 2010 at 2:22 am
So corporate welfare is sacred. Looks like the deficit is safe for now.
GOProud // Feb 2, 2010 at 9:38 am
David points out: “Beyond that, though, government historically makes a very bad energy investor.”
And it makes a bad regulator of energy too… just look at the costly, wasteful, over-regulation of nuke power facilities in the late 70s and all thru the 90s… it was so bad, it took a generation of rising energy costs to make the over-regulation containable and find a way to finance it. Does anyone think the “investment” by all of America in the TVA or Depression Era works projects was worth the displacement of capital? The largest money-maker of the TVA today is land speculation –off land seized by the federal govt in the 1930s from private households and land holders.
Bad investor in energy? Try the ethanol “solution” that drove up food prices, milk, meat and nearly all commodities… and we still have ethanol that costs more to produce and ship than it is worth at the gas pumps… same is true with solar and wind farms –we can’t afford this kind of investment by govt who seemingly contends it knows better than all the markets and investors.
Green energy investments by govt are a scam. Just like Gore’s Carbon Offset schemes and the global warming hoax… it’s redistribution of our tax dollars to political constituencies of the Democrats. Same old, same old by the Democrats… no wonder they run toward the comparison to Roosevelt and the 1930s whenever their proposed policies are subject to reasonable examination. Epic failures.
GOProud // Feb 2, 2010 at 9:42 am
balcones offers: “Actually, the Federal record on investing in power generating capacityis far better than our record of investing in energy research…”
Oh yeah, you go with that one, girlfriend. Two words: power grid. What were you saying???
Obama#39;s Oil Taxes: Revenue Grab, Not Energy Policy « Earth4energy // Feb 2, 2010 at 9:50 am
[...] Today found this great post, here is a quick excerpt : Given that the United States imports more than half its oil – and will continue to import the majority of its oil under any likely future scenario — less use = more energy independence. And both Republicans and Democrats are committed … Read the rest of this great post Here [...]
sinz54 // Feb 2, 2010 at 10:01 am
Frum: The right way is to raise a cost umbrella over all forms of green energy via, for example, a carbon tax – and then let the technologies battle it out in the marketplace.
True.
Because despite what “GOProud” claims, global warming is NOT a “hoax” but a scientific truth, whose consequences are sufficiently catastrophic to make us do something about it. (The chance that you will be killed in a commercial airline flight is far less–0.0001%–but passengers still purchase flight insurance. Because the mathematical expectation–this small probability multiplied by an enormous consequence–is still significant.)
But there’s no point criticizing Obama from this perspective. So far, the GOP has proven itself allergic to raising any tax, for any purpose. To them, taxes can only go down, never up, no matter what type of tax. So it’s not a winning issue for the GOP.
What’s more alarming to me is the willingness of some conservatives to politicize scientific theories whose economic or philosophical consequences they don’t like. We used to pride ourselves on not subordinating scientific truth to politics, as the Nazis did with their insane racial theories and as the Communists did with Lysenkoism.
Whether anthropogenic global warming (AGW) is occurring is a scientific question, to be answered by scientists. Non-scientists and political pundits should not be playing amateur scientist, cherry-picking isolated data or focusing on the very few skeptical climatologists just to attack those many scientists who agree that AGW is real.
GOProud // Feb 2, 2010 at 10:04 am
You know it’s a bad omen for the Obama Administration when quasi-liberal blogs like FF begin to frame Obama “policy initatives” as revenue grabs.
A whole lot of someone, somehow, somewhere has to pay for the outrageous expansion of the federal govt under the Democrats and Obama –revenue grabs will be the main purpose behind nearly everything now until 2012. Political payoffs to constituencies vital to Obama’s re-election will be the distant 2nd, but equally inescapable, rationale for new “policy initiatives”.
GOProud // Feb 2, 2010 at 10:05 am
Sinz 54, get back on the short yellow bus: a name and a phrase to show how silly this claim is “To them, taxes can only go down, never up, no matter what type of tax.”
Bush 41 and Read My Lips.
JJWFromME // Feb 2, 2010 at 10:44 am
“despite this year’s Climategate scandals, the preponderance of the evidence suggests that coal presents serious environmental concerns.”
No doubt about it, there are some deeply creepy elements in the conservative movement:
http://www.desmogblog.com/cru-hack-was-highly-sophisticated-spy-job-prominent-british-scientist-says
CO Independent // Feb 2, 2010 at 11:17 am
Wow. Just wow. It is difficult to decide where to start with this post, so let’s just start with the first sentence: “There’s a case for taxing oil consumption.” No, there isn’t. Cheap energy is the lifeblood of an industrial economy. Rising energy prices costs jobs and eats into the already-strained budgets of working Americans–not that Frum would care.
“Given that the United States imports more than half its oil – and will continue to import the majority of its oil under any likely future scenario — less use = more energy independence.” No, it doesn’t. In fact, perversely, less use always results in greater dependence of foreign oil. Oil trades in global markets. Less use results in lower global prices. News flash: the cheap oil is in the Middle East, not in the U.S. When global oil prices drop domestic production dies, resulting in an increase in the percentage of imported oil used by the U.S. Thus, less use = less energy independence. This statement exposes Frum’s complete lack of understanding of energy markets.
“Likewise, there’s a case for incentivizing green energy production. ” No, there isn’t. Green energy is inefficient, expensive, and unreliable. Read about Spain’s experience with green energy–hundreds of thousands of jobs lost due to increased energy costs.
“The right way is to raise a cost umbrella over all forms of green energy via, for example, a carbon tax – and then let the technologies battle it out in the marketplace. Let private investors direct capital to its best use.” A carbon tax is a horrific idea that will raise energy costs, kill jobs, and strain energy costs for consumers. It is indefensible in a strong economy and insane in the current environment. Again, cf: Spain.
“(As I write, I am at a conference in Montana to introduce a very promising new solar technology to venture capital funds.)” Suddenly a light is cast upon Frum’s positions. Why in God’s name would anyone hire Frum to pitch solar technology? He has no scientific or technical credentials–Frum wouldn’t know a p-n junction from P-Diddy. Further, he has no background or formal training in economics or energy policy, which is more than evident from the shockingly stupid statements in this post. The only thing Frum has to offer is access to politicians, which is what matters most when you’re pitching an energy source that requires massive government subsidies to compete.
“If you want off oil, the only way to preserve free markets is by raising energy taxes.” This would be comical if it weren’t so destructive–an economic Ben Tre moment. We have to destroy free markets in order to preserve free markets.
Drop the pretense and switch parties, Frum. You’re a Democrat through and through.
CO Independent // Feb 2, 2010 at 11:38 am
Balconesfault, your statement begs a response. If you read your economic history you would know that the various New Deal electricity programs were simply massive subsidy programs which used the coercive power of the government to drive the private sector out of electricity generation in rural areas, many of which the private sector could not easily reach anyway. After all, only the Feds can easily dam a navigable waterway.
Having said that, the role of government in expanding electricity production in the 1930s is completely opposite the role of government that Frum is advocating. For better or worse, FDR used the coercive power of government to REDUCE energy costs delivered to the consumer, which in turn increases economic activity. By contrast, a carbon tax uses the coercive power of government to INCREASE energy costs delivered to the consumer, which decreases economic activity. It’s apples and oranges–government enforced bounty versus government enforced scarcity.
balconesfault // Feb 2, 2010 at 12:33 pm
MIGoper
Oh yeah, you go with that one, girlfriend. Two words: power grid. What were you saying???
Sorry dude. I ain’t your girlfriend. I don’t swing that way, not that there’s anything wrong with it.
Second – power grid? Tell me what has been wrong with the portions of our power grid that are constructed and operated by the Federal Government.
Read about Spain’s experience with green energy–hundreds of thousands of jobs lost due to increased energy costs.
Point us to the reputable source.
CO Independent
used the coercive power of the government to drive the private sector out of electricity generation in rural areas, many of which the private sector could not easily reach anyway.
So it was bad that government drove the private sector out of markets which the private sector was underserving due to difficulty (unprofitability) in access. OK.
only the Feds can easily dam a navigable waterway.
It’s no easier for the Feds to do, than for a private entity. Both public and private sectors need to show a compelling public need for the project, and an assessment of public and environmental impacts.
Having said that, the role of government in expanding electricity production in the 1930s is completely opposite the role of government that Frum is advocating.
Both FDRs projects and the modern call for carbon taxes are both aimed at the same thing – government actively ensuring that the short-term fixation of the marketplace doesn’t prevent us as a society from keeping our eyes on what’s best for us in the long term.
If you don’t believe that government has a role in planning anything – just come out and say it. Run on it – in every election, your selected candidate should declare that there should not be any government investment in anything except for defense technologies. Let’s have that public debate, rather than nibbling around the edges of it.
climateguy // Feb 2, 2010 at 1:39 pm
Republicans don’t want to get “off oil”. Its “drill baby drill”, isn’t it? Otherwise, its block anything and everything the Democratic Party wants to do with what it any other developed country would be called a mandate to govern, waiting for Americans to blame Obama for the economic problems eight years of Bush caused. Or are you one of those who buy in to the line that the main force driving deregulation in the US since Reagan actually came from those calling themselves the “progressive left”?
The Republicans are welcoming to their tent those who would call the President of the US a Nazi who has no legitimacy because he was not born here who oppose anyone who is trying to deal with the “non-existent problem” of climate change, while you pretend Republicans would actually put forth the policy you advocate if they were to get into power again.
balconesfault // Feb 2, 2010 at 2:47 pm
The Republicans are welcoming to their tent those who would call the President of the US a Nazi who has no legitimacy
It’s not just welcoming into their tent.
Right now, that’s the centerpole that’s holding the tent up.
A recent poll of Republicans (commissioned by Kos, admittedly – but I’d like to see anyone else conduct a poll challenges its results):
Should Barack Obama be impeached, or not?
Research 2000 for Daily Kos. 1/20-31. Self-identified Republicans. MoE 2%
Yes 39%
No 32%
Not Sure 29%
teabag // Feb 2, 2010 at 4:09 pm
balcones
The pollster research 200 has already received 2 death threats on publishing that devastating inditement of Right wing thinking.
2 death threats, must be Sinz with the shoot them cheap and quick approach
balconesfault // Feb 2, 2010 at 4:16 pm
The pollster research 200 has already received 2 death threats on publishing that devastating inditement of Right wing thinking.
I don’t know why there would be death threats … because the only people who be making the threats should logically be the people who are happy with the outcomes of the poll.
Or is this like narco-terrorists who kill newspaper editors in Latin America just for publishing articles that show narco-terrorists actually exist?
teabag // Feb 2, 2010 at 4:37 pm
Balcon, you got it,
They can have stupid beliefs but heaven help those that actually demonstrate those beliefs to the American people. Death is the answer to that situation.
ltoro1 // Feb 2, 2010 at 6:55 pm
Danny_K since when is keeping your own money welfare.
CTF // Feb 2, 2010 at 8:05 pm
A revenue-neutral carbon tax would absolutely avoid the pitfalls inherent to cap and trade, reduce emissions, incentivize the creation of green technology and return the revenue to the people. It’s a win for the environment and a win for the economy.
Carbon Tax Center » Revenue Grab, Not Energy Policy // Feb 3, 2010 at 12:42 pm
[...] Grab, Not Energy Policy (Frum Forum) Filed under Carbon Tax, News, Technology Comments [...]
Daily Forecast: Today’s Online Buzz on Environmental Issues « Climate Task Force // Feb 3, 2010 at 1:50 pm
[...] criticizes the administration’s energy [...]