Tag Archives: energy

The Biden and Ryan Debate: Energy and Taxes

by Raymond J. Keating

The vice presidential debate between Congressman Paul Ryan and Vice President Joe Biden was a lively affair. Though it often was difficult getting by the many interruptions served up by Biden, and Martha Raddatz’s bias as a moderator, in order to get at the substance.

But some clear themes did emerge that warrant the attention of entrepreneurs and small businesses.

First, this was a debate overwhelmingly about foreign policy, in particular about the Middle East and North Africa. Of course, Afghanistan, Iran, Libya and the rest of the general region rank as the immediate hotspots in terms of U.S. national security. And given the role played in oil markets, it’s a huge economic factor.

In the end, given the Obama administration’s mixed messages and general pulling back from the region, Congressman Ryan was justified in hitting the White House hard on their strategy, or lack thereof. There is no doubt that tumult and uncertainty in the region, including the role of the U.S., has been one of the key reasons for oil prices remaining high.

It also should be pointed out that Ryan mentioned greater North American energy independence. To the degree that is achieved will depend on U.S. policymaking, such as the extent of U.S. domestic exploration and production, as well as moving ahead with projects such as the Keystone XL pipeline. Unfortunately, the Obama administration has been hostile to carbon-based energy in general, raised barriers to domestic production, and blocked the Keystone XL pipeline.

Second, a big difference emerged on the tax front.

Vice President Biden was unrelenting in pushing a class warfare agenda. He spoke of a fictional tax cut for the “middle class.” In fact, the Obama agenda offers no tax relief for middle-income earners. Rather, it proposes leaving today’s tax policies in effect for middle and low-income earners, while jacking up taxes on everyone else.

Meanwhile, Congressman Ryan pointed out that the Obama tax plan rests on a major tax hike on “successful small businesses.” He contrasted the Obama plan with the Romney plan by noting that the top income tax rate on small businesses would be nearly 45 percent under Obama, while it would be 28 percent under Romney. That’s a profound and economically substantive difference on tax rates.

Ryan also pointed out that 53 percent of small business income would be hit by the Obama tax increases.

For good measure, Ryan noted that this top Obama tax rate would make U.S. businesses far less competitive internationally. That’s very important. While President Obama, to his credit, has called for reducing the corporate income tax rate, he has pushed and pushed to increase the personal income tax rate, without mentioning that some 93 percent of businesses pay personal, rather than corporate, income taxes.

In the end, it needs to be understood that any kind of tax increase, especially in a tough economy, makes no sense whatsoever. No economists – no matter what school of economic thought they belong to – would advocate tax increases in this environment. Their reasoning surely would differ, but not their bottom line conclusion. And any economist pushing for a tax increase right now is playing politics, and not thinking as an economist.

And make no mistake, economics makes clear that tax increases on upper incomes – as included in ObamaCare and in terms of the additional hikes advocated by Obama – will hurt everyone, not just higher income earners. Biden asserted that the, as he put it, “super wealthy” can afford to pay more in taxes. What Biden misses in his class warfare hysteria is that the Obama-Biden tax increases mean reduced incentives and resources for entrepreneurship and investment. That means bad news throughout the economy – for everyone.

If we want to get economic growth back on track, experience rising incomes, and create more jobs, then taxes cannot be increased on the entrepreneurs and investors that are critical to making this happen.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His article was first published by the SBE Council, 12 October, 2012, http://www.sbecouncil.org/2012/10/12/the-biden-and-ryan-debate-energy-and-taxes.

Access to Energy Reserves Could Change a Lot of Things

by Gary Palmer

For the last three years, the federal government has been in mad pursuit of green energy alternatives to redefine our economy and improve job markets. In the process, billions of taxpayer dollars were wasted on green energy companies that didn’t produce reliable alternative energy resources, economic growth or new jobs.

Meanwhile, the Environmental Protection Agency (EPA) has issued thousands of pages of regulations that threaten existing energy producers with catastrophic fines and industry-killing regulations that smother the U.S. economy and force energy prices higher. Among these are regulations that are shutting down on coal-fired power facilities because power companies cannot afford compliance costs.

The resulting loss of 26,000 megawatts of coal-based power could power 20-26 million homes.

As the EPA continues its crusade, the Federal Energy Regulatory Commission estimates that another 55,000 megawatts of coal-generated electricity will be shut down in the next six years. The loss of that much of our power grid combined with billions of dollars in new compliance costs will force American households to pay more for electricity at a time when the net worth of the average American household has declined by 40% since 2007.

Moreover, as a percentage of disposable income, energy costs hit lower-income households the hardest. In 2001, households earning below $50,000 annually were allocating 12 percent of disposable income to pay for energy. In 2011, households in that same income range spent 20 percent. Households with annual incomes between $10,000 and $30,000 spent 23 percent of their disposable income just to pay their energy bills, creating a significant burden for low-income elderly, black, and Hispanic households who are disproportionately in this income bracket.

In 2009, there were 25.3 million senior citizen households with median earnings of $31,354. Expanding access to America’s abundant reserves of oil, natural gas and coal would be of significant help to elderly Americans with fixed incomes. In many respects, it would be equivalent to an increase in Social Security benefits.

The United States has billions of barrels of recoverable oil that could jump start our economy, virtually eliminate our need to buy oil from hostile nations and reduce the cost of energy for all American households and businesses. According to the U.S. Department of the Interior and the Bureau of Land Management, there are 800 billion barrels of recoverable oil in the Green River Formation in Colorado, Utah and Wyoming with the richest deposits located in areas owned by the federal government.

The latest estimates from the federal government indicate proven reserves of over 280 trillion cubic feet of natural gas which is enough to meet the needs of the United States for 90 years. And U.S. coal reserves that are recoverable with current mining technology are sufficient to meet our needs for 249 years. When it comes to energy resources-oil, natural gas, and coal-the U.S. is one of the wealthiest nations in the world. The royalties from the federally-owned energy reserves would be in the trillions of dollars.

In other words, we are not broke, we are stupid.

Accessing federally-owned energy reserves must be a major part of our economic recovery plan. This will provide energy security not seen in decades as well as decrease energy costs for Americans who have seen their energy costs double over the last decade.

By allowing access to these reserves, the United States could become an energy exporter to major energy consumers like China and India. Over time, royalties would be in the trillions, some of which could be used to help ensure the viability of Social Security and Medicare.

New extraction technologies for recoverable energy resources will provide the opportunity to go from dependence on foreign energy to energy independence. Accessing these rich resources will be good for our national security and our economy and for elderly and low-income families whose disposable income is being depleted by high energy costs.

Gary Palmer is president of the Alabama Policy Institute, a non-partisan, non-profit research and education organization dedicated to the preservation of free markets, limited government and strong families, which are indispensable to a prosperous society.

Higher Energy Prices Dominate Legislative Activity

With higher gas prices undermining small business growth and potentially the economic recovery, various approaches addressing the issue are being pursued in the U.S. House and Senate.

Senate Majority Leader Harry Reid (D-Nev.) Senate Majority Leader Reid will open floor debate this week on the Democrats’ bill to raise taxes on the largest oil/gas companies. As the Congressional Research Service has reported, hiking energy taxes will only translate into higher prices and less supply. SBE Council adds “fewer jobs” to the list of ills. So, raising energy taxes will increase business costs even more as SBE Council President & CEO Karen Kerrigan noted at a May 9 media briefing at the National Press Club.

“Proposals that hike energy taxes are unthinkable given the fragile state of the economy. Small business owners continue to struggle with weak sales while their business costs tick higher. Raising taxes on energy will exacerbate uncertainty, and the real challenge that many small businesses face in regard to their ability to compete in and survive the tough economy. Higher energy taxes mean higher costs for small businesses, and it’s irrational for Washington to inflict more pain on our nation’s struggling entrepreneurs,” said Kerrigan. SBE Council has urged the Senate to reject these tax hike proposals and focus on solutions that increase supply and will help make energy costs more affordable.

“Washington needs to pursue and enact policies that promote business confidence, investment, certainty and growth for small businesses – indeed for all sectors and industries,” said Kerrigan. “Policies that encourage energy exploration and development, while promoting investment, will lead to a more reliable supply and lower energy prices. Raising energy taxes is the wrong approach.”

Meanwhile, over in the House, SBE Council is supporting two pieces of legislation that will be voted on this week. SBE Council sent letters to all members of the House communicating support for H.R. 1229, “Putting the Gulf Back to Work Act” and H.R. 1231, “Reversing President Obama’s Offshore Moratorium Act.” Both of these bills will help move energy policy in a positive direction by encouraging domestic exploration and development, which will bring more certainty to energy supply and foster affordability. For the thousands of small business owners and millions of employees whose livelihoods are tied to a vibrant energy sector, these two bills are also critically important.

The latest SBE Council Energy & Entrepreneurs analysis reviews why some politicians are pursuing vindictive policies against the energy sector in light of recent profit reports. “As sure as the sun rises in the east and sets in the west, no doubt existed as to what the reaction would be in certain political circles to recent reports on oil industry profits,” SBE Council chief economist Ray Keating writes. He sorts out the politics, the policies and the economics in the piece “Bonus Resource: Why Gas Prices are Rising – Let’s Investigate,” by SBE Council’s Keating.

SBE Council Urges Senators to Vote for McConnell Amendment to Stop EPA Overreach

Congress is currently on break, but the House and Senate return next week where the Senate will pick up where it left off on small business legislation. There are several key amendments to the legislation that SBE Council is weighing in on, one of which is the McConnell amendment that would nullify EPA’s intrusive greenhouse gas (GHG) regulations. SBE Council is strongly supporting the McConnell amendment and will KEY VOTE the amendment next week as a vote for small business for our forthcoming Ratings of the 112th Congress.

The EPA regulations will have a significant impact on businesses, driving energy costs higher. Various studies have found EPA’s GHG regulations could destroy 800,000 to 7 million jobs over the next several decades. As SBE Council has told Congress on many occasions, unelected bureaucrats should not be determining the fate of our economy, and EPA does not have the authority to regulate GHGs under the Clean Air Act.

In a March 16 media release, SBE Council President Karen Kerrigan said American businesses must be given “a fighting chance to stage an economic recovery and compete in the global economy.” Higher energy costs will not allow firms to fully rebound. “We must remove uncertainties and burdens in order to spark needed investment, and the vote on the McConnell amendment offers the opportunity to take a major step in the right direction,” she added.
Senator Jay Rockefeller (D-WV) has offered an amendment to delay implementation of the EPA rules for two years, which will also be voted upon. The delay only creates additional uncertainties for businesses of all sizes. With a delay, we anticipate that businesses will start preparing for eventual implementation of the costly EPA rules, which means less investment, less job growth and more businesses looking overseas to expand. A mere delay of the regulations does nothing to address the core problems – higher energy costs and the fact that the EPA does not have the authority to regulate GHGs under the Clean Air Act.

Only a vote for the McConnell amendment will protect small business!

In another piece of related news, the SBEC came out in support of Energy Tax Prevention Act of 2011 (H.R. 910).
As stated in a letter to both houses of Congress, “If this regulatory initiative moves forward, energy prices will continue to move higher undermining U.S. economic strength and competitiveness. Small businesses will be disproportionately impacted by EPA’s regulation, as our ability to create jobs and compete will be permanently impaired.”

Ohio Transportation and Energy ; Federal Reserve Beige Book of Economic Conditions

The Federal Reserve published its recent Beige Book Report covering economic conditions of each banking district. During the past two days, the retail and manufacturing sectors of Cleveland Federal Reserve report were posted. Today, the following post covers economic conditions of Ohio freight transportation and energy industries.

Freight transport executives reported that shipping volume was stable during the past six weeks. Looking ahead to 2011, most carriers expect growth to be somewhat stronger than they experienced in 2010. They also expect that activity will be more in line with normal seasonal patterns. Almost all of our contacts reported rising prices for diesel fuel, some of which are being passed through to customers via a surcharge. Capital outlays remain at relatively low levels. Spending in 2011 is expected to rise modestly as freight carriers are forced to replace aging equipment. However, some carriers are considering leasing new equipment versus buying, as rising prices for new tractors constrain purchases. Hiring is for replacement only. Two of our contacts noted that they would like to begin hiring additional drivers, but it is difficult to find qualified applicants. Wage pressures are beginning to emerge due to a growing problem with driver turnover and a tightening of the driver pool.

Although energy production is more in-line with manufacturing process, energy is consists of modes of transportation and distribution, which utilizes the Ohio trucking sector. That is why the report on energy continues below.

Reports indicate that oil and gas output from conventional wells was fairly steady during the past six weeks. A small increase in gas production is expected if very cold weather persists. Production from Marcellus shale was somewhat higher and is expected to continue to increase. Spot prices for natural gas have increased slightly with the onset of winter, while wellhead prices paid to independent oil producers were fairly stable. Coal production has been steady since our last report, with little change anticipated in the near term. Spot and contract prices for coal were generally stable; however, the price of metallurgical coal increased slightly. Other than a rise in diesel fuel prices, equipment and material costs have been flat. Staffing has not changed, and it is expected to remain at current levels for the near term.

Obama’s State of the Union Address: Economic Plans Only Problem Causers Believe In

Last Tuesday, Obama presented his “let’s get the party agenda done” speech. Like his campaign rhetoric, it was long on feel good sales hype and short real substance.

While blaming all of the nation’s economic woes on Wall Street, he proclaimed our economic salvation is to be found in spending more money. The core of his spending plan was focused on three areas: The first is developing clean energy because it will save us from the impending catastrophe of climate change. The second is spending more money on health care because it will supposedly save us all money. The third is spending more money on education so that the next generation will be able to afford more loans in the global economy. Before Obama can increase spending on those three areas, money must be spent on getting banks to lend more money because credit (meaning more debt) is the lifeblood of the American [corporate] economy.

Ramussen recently published the results of its national survey of American opinions about government spending and the economy. The results make it clear that Obama and congressional Democrats are out of touch with the nation, which is to say Obama only hears the cheering choir of the elite liberal and socialist Left.

About 53 percent of Americans told Ramussen reduced government spending would help the economy. Sixty-one percent (61%) said cutting taxes is a better way of helping the economy than increased spending. One of Obama’s save the nation initiatives, heath care reform, is opposed by 61 percent of the nation. Americans want it dropped. Apparently, American fail to believe the presidential sales hype that health care reform will save money or do much to create good paying jobs.

Will Obama’s federal spending freeze help the economy? If temporarily halting the rate of spending 17 percent after increasing it by 20 percent in a single year, then yes it will help. Financial advisors like John Mauldin also say such a gesture is laughable. It’s laughable because the freeze covers only a small part of the federal budget and consequently maintains the 20 percent increase in discretionary, social security, military, stimulus, health care spending, according to the Independent Institute.

Obama’s statement that he is not for big government is as laughable as the spending freeze, but his placing the sole blame for the economic crisis on Wall Street and banks is not.

Remember, the economic crisis began with the collapse of the housing market. The mortgage industry bubble burst because Washington lawmakers made it possible for cheap loans to unqualified buyers continued unabated. Big banks held very large portfolios in those types of loans. We should not forget that the SEC is the federal regulator of Wall Street as Ben Bernanke’s Federal Reserve is of the banking system. The Bush administration appealed to the various oversight committee of Congress to correct the mortgage problems evident at Sallie Mae and Freddie Mac, but the Democrats refused, and it gets even better. The legal counsel of ACORN who was the main player in forcing banks to lend to the unqualified home buyers was none other than Barak Obama, whose Treasury Secretary Tim Geithner is a federal reserve insider, a previous Fannie Mae executive, and a reputed bailout king of Wall Street. It is Obama who selected Geithner and fought for Bernanke’s return the Fed to continue wrecking our national economy. As the old saying goes, point one finger and three are pointing back at you, Mr. Obama.

In a May 2009 article, Independent Institute Senior Fellow Ivan Eland points out the practices of the Federal Reserve that produced the housing bubble and financial industry meltdown. To soothe Wall Street jitters after 9/11, the Federal Reserve lowered the federal fund rate, printed huge sums of new money, flooded the credit market making easy loans the norm, which led to overly inflated housing values, inflated costs of consumer goods, and decreased spending.

Those are a few likely reasons why 72 percent of Americans surveyed by Ramussen expect Obama and congressional Democrats to increase spending and the national debt. In other words, most Americans realize elected and unelected bureaucrats are expected to continue the same policies of spending our way out of debt. Those who have suffered bankruptcy know it will not work.

Okay, but, what about energy and education? Surely, spending more on developing new forms of energy and related technologies as well as improving education will surely create more jobs. According to the Ramussen survey, about 60 percent of Americans believe government spending less will result in the creation of more jobs.

The issue is who should pay for the development and marketing of new energy and related technologies? Loaning taxpayer money to businesses developing new types of energy or new related technologies would benefit society. However, investors and banks exist for that purpose–not government. Increasing taxes or taxpayer debt to spur profitable businesses is a misuse of taxpayer money. Let the private sector invest in and profit from new forms of energy and related technologies. That is how capitalism works. Government’s job is to ensure it benefits all citizens, consumers, groups, industries, businesses, and employees.

Obama’s rhetoric about spending more taxpayer dollars to make all of America’s children globally competitive is the same old sales baloney regurgitated since the passage of the Elementary and Secondary Education Act (ESEA). The poor still are dropping out of school in alarming numbers, students still to not do as well as others in the world, the gaps between poor and non-poor student still (and is not actually expected to cease to) exist, and more money is being spent to solve the problem they do not solve. Why spend more on failed policy and practice? In her book Dependent on DC, Economic professor and lawyer Charolette Twight explains how ESEA spending was never meant to solve the problems of education. The purpose of ESEA (now, NCLB) is to expand federal power over state and local education. Federal spending on education means more dependency of local school for funding on unaccountable elites in Washington D.C.

Congressman Steve Austria on Cap and Trade

On June 26, the House of Representatives approved an unprecedented climate change bill, also referred to as “cap and trade”, by a vote of 219 to 212. While we all want clean air and policies that promote cleaner, more efficient energy sources, I voted against this bill due to my concerns surrounding the negative impact this legislation could have, particularly on the state of Ohio.

If enacted into law, this bill would have major implications for almost every sector of our nation’s economy. The bill places a “cap” on U.S. carbon dioxide (CO2) emissions, and ultimately amounts to a new energy tax on everything we consume from gasoline to electricity. As may you know, Ohio derives almost 90 percent of its energy production from coal, which will be heavily taxed under this proposal. This energy tax will be passed along to families and small businesses already struggling in the midst of the harsh economic climate. Anyone who turns on the lights and uses electricity, heats their homes with natural gas or puts gasoline in their car will see an increase in the cost of energy.

In addition, this bill will make U.S. businesses less competitive globally as they are forced to compete with businesses in countries, which do not have similar restrictions, such as China and India. Ohio’s economy relies heavily on manufacturing and this new tax could result in signficant job losses as businesses, which can not afford to meet the cap, will be forced to shut down or move operations overseas.

I was also disappointed with the process by which this legislation was considered. The bill was changed significantly at 3 a.m. the day of the vote, which I believe gave members insufficient time to read its 1,400 pages. Additionally, few amendments were permitted to be considered – amendments that may have improved the bill. In my view, when Congress is considering an issue as important as fundamentally changing out nation’s energy policy, we need to do it thoughtfully and correctly. I hope that when the Senate considers the bill, it is given the time and diligent attention it deserves.