By Institute for Energy Research ——Bio and Archives--April 12, 2013
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Over the past few years, Democrats and Republicans have cut the deficit by more than $2.5 trillion through a mix of spending cuts and tax reform, including more than $1.4 trillion in spending cuts…and over $600 billion in new revenue in the American Taxpayer Relief Act (ATRA) from raising income tax rates on the highest income Americans. [Bold added.]George Orwell would be proud to read that $600 billion in new revenue was raised through the “American Taxpayer Relief Act.” We would hate to see the amount of revenue extracted from a “American Taxpayer Grief Act.” Incidentally, there are many conservative, free-market economists who champion the idea of reforming the tax code through broadening the base—i.e. “closing loopholes.” But if the point is to promote economic efficiency, then broadening the base needs to be in conjunction with eliminating tax brackets and lowering the top marginal rate, so that total revenues don’t go up. The White House’s notion of “tax reform” is nothing like that recommended by a fiscal conservative interested in supply-side incentives. Yet it gets worse. Even with the massive tax hikes—both already enacted and now being proposed—look at the White House’s own projection of the fiscal situation over the next decade (from Table S-1, page 183, in this Appendix): Even on paper—in their own unrealistic, back-patting, rosy scenario—the White House projects that under its Budget Proposal, the lowest the federal deficit will be over the next decade is $439 billion, and that low point doesn’t happen till 2023. Over the whole period, the plan calls for a cumulative $5.3 trillion to be added to the federal debt. But wait, might it be misleading to focus just on the absolute numbers? Shouldn’t we look at the size of the economy too? Sure thing. The standard figure that economists use is “Debt held by the public as a share of GDP.” And as the White House’s own forecast shows, by 2023 that measure is still worse (at 73.0%) than it was in 2012 (72.6%). Remember that Obama officials explained during the first term that the massive deficits were a “temporary emergency measure” due to the financial crisis. And yet, they don’t even pretend to make progress on the debt over the next ten years. Of course, in practice the debt situation is much worse than what the table above suggests. For one thing, look closely at the nominal (not inflation-adjusted) GDP figures. They constantly grow over the entire decade, averaging about 5 percent per year. Does anyone really think the U.S. economy is in shape right now for such a rapid recovery, and then it will be smooth sailing for a full decade?
Proposed changes include royalty reforms and incentives to diligently develop leases, such as shorter primary lease terms, stricter enforcement of lease terms, and monetary incentives to get leases into production through a new per-acre fee on nonproducing leases. Revenue collection improvements include simplification of the royalty valuation process, elimination of interest accruals on company overpayments of royalties, and permanent repeal of DOI’s authority to accept in-kind royalty payments. States will also be asked to help pay for the costs of administering energy and mineral receipts…Collectively, these reforms will generate over $3 billion in net revenue to the Treasury over 10 years.As this description makes clear, they are planning on tightening the screws on the leasing process, in order to squeeze out a little more money, rather than opening the floodgates by fast-tracking the development of U.S. energy resources. In Joseph Mason’s recent study, he found that in the first 7 years a change in leasing policy could bring in $36 billion in additional federal receipts. Compare that to the $3 billion over 10 years proposed by the Obama Budget. Here’s a nice link to remind us of the Obama Administration’s leasing policies: With the embarrassing bankruptcies of Solyndra, Beacon Power, et al., and with the obvious solution of bountiful energy deposits staring them in the face, one might have supposed that the Obama Administration would seriously cut the deficit by eliminating funding for energy boondoggles, and letting more energy companies pay the Treasury for the privilege of bringing down gasoline prices for American motorists. Alas, the Obama 2014 Budget proposes the exact opposite: Even on its own, rosy scenario terms, it merely treads water on the debt, while raising taxes on the very people and firms who are producing the most in today’s weak economy. At the same time, it drastically increases spending on support for “green” energy plans that make little sense in theory, let alone in practice.
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The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.