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News :: Political-Economy |
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A Complete Waste Of Energy |
Current rating: 0 |
by Jerry Taylor and Dan Becker
(No verified email address) |
29 Oct 2003
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This 1,700-page Bill Fails to Address the Fuel and Power Needs of the Average American
Pork Barrel Politics, Archer-Daniels-Midland, and the Electric Industry -- Which Way Will U.S. Representative Tim Johnson Vote?
Follow the smell of money (i.e. campaign contributions) and you'll likely have your answer. Yet, both the Right and the Left agree that this bill should be killed off as the lame boondoggle it is. |
A House-Senate energy conference committee is about to disgorge a 1,700-page legislative abomination that should cause both the left and right to choke. Although the bill has yet to be released, enough is known to conclude that it will be three parts corporate welfare and one part cynical politics. The bill is a shocking abdication of the administration and Congress' responsibility.
The centerpiece of the bill is a $16-billion package of tax breaks and production subsidies designed to further rig the market to favor well-connected energy producers (almost all of which enjoy plenty of federal handouts) at the expense of others.
The biggest winners will include nuclear power, small domestic oil producers (which dispense some of the highest-cost oil in the world market today), "clean coal" technology (which has yet to produce a commercially operable plant despite billions in public subsidies) and various exotic energy technologies that can't attract much private capital from skeptical investors.
In an unrigged market, a technology with economic merit needs no subsidy. Likewise, if a technology were without economic merit, no public subsidy no matter how large would turn an ugly market duckling into a beautiful economic swan.
Ethanol producers are another bunch that will make out like thieves. Ethanol, for the uninitiated, is distilled grain alcohol generally blended with various amounts of gasoline, ostensibly to reduce oil consumption. Apparently, the lavish subsidies bestowed on that industry over the last couple of decades haven't been enough to placate farmers. So Congress and the administration are preparing to further artificially increase demand for corn the main ingredient for ethanol today with new ethanol subsidies and preferences.
Make no mistake, the ethanol program is about nothing other than fattening ethanol producers with agribusiness giant Archer Daniels Midland being the biggest corporate winner at the expense of others. And ADM counts on the farmers who grow the corn to provide the political muscle. Ethanol does nothing to improve air quality. Making ethanol requires almost as much energy as you get from burning it, and using it increases smog-forming emissions.
Still, the Midwest is a region that throws its presidential and congressional votes to those who promise farmers the biggest sack of federal loot, so ethanol we shall have, regardless of its merit as a fuel source.
Various energy fads also find their way to the federal trough. The example with the highest profile is President Bush's $1.2-billion "Freedom Car" initiative, which promises commercially viable hydrogen-powered fuel cells in a couple of decades, though it fails to require Detroit to actually make any vehicles with such engines. This initiative is surprising given the president's opposition to requiring auto manufacturers to adopt conventional off-the-shelf technologies to clean up cars.
Is it a bold new idea? Hardly. The same initiative, accompanied by the same promises, was part of President Nixon's "Project Independence." Unfortunately, hydrogen-powered fuel cells are only marginally closer to commercial viability today than they were 30 years ago.
Finally, the bill forces the restructuring of the electricity sector by requiring utilities to fully integrate into a centralized, interstate electricity system. This despite the fact that the deterioration of the transmission grid is directly related to botched deregulation. So the bill establishes a new regulatory scheme that won't solve the system's problems and won't prevent blackouts.
In sum, this bill will not substantially increase energy supplies, will not reduce dependence on foreign oil and will not accelerate the development of viable new technologies. It will, however, provide a politically useful but ultimately dishonest symbolic action while dispensing a stunning amount of pork for the well-connected at taxpayer expense.
A good energy bill would remove subsidies and market distortions so that energy technologies could compete based on their merits, not political expediency. Unfortunately, that's asking more than either political party seems willing to deliver. That's what leads us two odd bedfellows who rarely agree on anything to call for Congress and the White House to start over.
Jerry Taylor is director of natural resource studies at the Cato Institute. Dan Becker is director for the Sierra Club's global warming and energy program.
Copyright 2003 Los Angeles Times
http://www.latimes.com/ |
Comments
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Even More Pork |
by Edmund L. Andrews
(No verified email address) |
Current rating: 0
29 Oct 2003
|
The battle cry of the corporate lobbyists is that this will create jobs. Then why doesn't this bill tie its benifits DIRECTLY to job creation? Better watch how Tim Johnson votes on this one, too.
"How in the hell do you reach $128 billion from $4 billion?"
Corporate Plea on Tax Breaks: Ours Come First
ASHINGTON, Oct. 29 It has been promoted as a bill to create jobs, to enhance American competitiveness and to level the playing field for companies overseas.
But as House lawmakers pushed ahead this week with the biggest overhaul of corporate taxes in two decades, they found themselves briefly fixated on bows and arrows.
"U.S. manufacturers of bows and arrows are fleeing in droves for Korea and China," said Representative Paul D. Ryan, Republican of Wisconsin. The problem, he told members of the House Ways and Means Committee, is that American arrows are hit with a 12.4 percent excise tax, but imported arrows are not.
So it was that members of the tax-writing committee agreed to drop the excise tax on arrows, along with excise taxes for fishing tackle boxes and fish-finding devices that use sonar. Liquor and wine distributors were given a four-year tax break worth $234 million and movie studios received a break on foreign royalties worth $600 million over 10 years.
These and other special-interest nuggets were little more than pocket change in a bill that would offer corporations $128 billion in new tax relief over the next decade.
But they are indicative of the trade-offs that have been necessary to win support for what began as a fairly modest goal last year: to repeal a long-standing tax subsidy for exporters, worth about $55 billion, which has been declared illegal under international law, and replace it with new tax breaks of comparable value.
The bill that passed the House tax-writing committee would fulfill that goal, to the satisfaction of manufacturing companies, oil and gas refineries, farmers, movie studios and engineering conglomerates like the Bechtel Corporation and Halliburton.
Scores of competing business groups have been pushing for their own piece of the pie, and the conflicts among them became so intense that it looked for months as though lawmakers would never be able to reach agreement.
But now they seem to be getting closer, and they are doing it in the most politically popular way, by giving something to almost everybody.
The lobbying rush is far from over. The bill moving through the House will have to be reconciled with a similar but more modest bill in the Senate. The Senate bill aims at pay for itself, by offsetting the cost of $70 billion in new tax breaks with money from repealing the old export subsidy and an assortment of other measures.
Though House and Senate leaders are determined to pass a bill of some kind, lawmakers say the fight may well drag into next year.
At least four large and well-financed business coalitions are each lobbying for a separate agenda.
One group consists mainly of companies that benefited most directly from the old export tax break and want to hold on to as much of their old relief as possible.
Led by Boeing, Microsoft and Caterpillar, that group has banded together as the Coalition for U.S.-Based Employment and has hired the Alexander Strategy Group to lobby its cause. The Alexander Group's lead lobbyist is Karl Gallant, the former executive director of a fund-raising group called Americans for a Republican Majority.
The Boeing-led group has been pushing to replace the subsidy with a basic tax reduction for manufacturing done in the United States. And it has been successful: both the House and Senate bills would gradually reduce the corporate tax rate for domestic manufacturing to 32 percent from 35 percent a move worth about $61 billion over 10 years.
A rival business coalition consists of multinational corporations that range from General Electric and Electronic Data Systems to Time Warner. That group, known has the Coalition for Fair International Taxation, is pushing for tax relief on the profits that companies earn outside the United States.
Among this group's top lobbyists is Kenneth Kies, a former staff director of the Congressional Joint Committee on Taxation. Mr. Kies has been among the most vocal champions of measures that would reduce what companies charge is the double-taxation of foreign earnings by foreign governments and then by the United States as well.
Mr. Kies has gone to bat for shipping companies, winning support from House Republicans for a provision in the bill that would let shippers defer taxes on profits they earn outside the United States. Representing Disney, Viacom and Time Warner, he also helped persuade the House lawmakers to let movie studios exclude a part of their foreign royalty income from taxation.
As a group, the far-flung multinationals are not as successful as manufacturers based in the United States. The House bill would give them almost $30 billion in tax breaks on foreign profits over the next 10 years, but the Senate bill is much more limited.
Yet another coalition of companies, led by Hewlett-Packard, is pushing for a special one-year tax holiday on foreign earnings. This coalition is seeking a provision that would let companies bring up to $400 billion in untaxed foreign profits back into the United States at about one-seventh of the 35 percent corporate tax rate.
Known as the Homeland Reinvestment Coalition, this group's lobbying is being led by Bill Archer, formerly the Republican chairman of the House Ways and Means Committee.
Earlier this month, the Senate Finance Committee voted to include a "repatriation" provision in its tax bill. House Republicans dropped the provision from their bill, but they have also let it be known they are willing to go along with the Senate provision in a House-Senate conference committee.
Supporters of the rapidly expanding tax package say it will provide the first significant reform in four decades of the tax law on foreign corporate earnings. And they say the tax cuts aimed directly at manufacturers will help create jobs. American manufacturers have shed more than two million jobs in the last three years.
The net cost of the bill after repealing the old subsidy and raising money from higher customs duties and other measures would be about $60 billion. "Everybody is wringing their hands about $60 billion in tax cuts over 10 years, but that is not something I would take too seriously, " Mr. Kies said. "When you look at a tax system that collects $2.3 trillion in revenue a year, this gets almost to the point of being modest."
As with all tax legislation, the fine points can be worth a lot of money. House Republicans included language that would extend their tax cut for manufacturers to oil and gas drillers, loggers and engineering companies. As originally drafted last week, the law would have given tax breaks even on construction work and movies made overseas a provision hastily trimmed back after protests from the committee's ranking Democrat, Representative Charles Rangel of New York.
Another provision, supported by Exxon Mobil, would offer about $160 million in tax relief on profits from oil and gas pipelines.
"It's hard to believe that this started out as a potential $4 billion problem," said Mr. Rangel, referring to the current annual value of the old export subsidy that is being repealed. "How in the hell do you reach $128 billion from $4 billion?"
Senate Republicans may force House Republicans to trim back their generosity. But even so, many business lobbyists are betting their clients will end up with more than they had before.
Copyright 2003 The New York Times Company |
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