Government Has A God Complex

Welcome, my son
Welcome to the machine.
Where have you been?
It’s alright; we know where you’ve been.
—Pink Floyd, Welcome to the Machine
Back on September 8, President Obama summoned both houses of Congress for a joint session during which he browbeat them about the urgent need to take action to create jobs.  He spent the next several weeks traveling the country repeatedly pushing what has morphed into a simple mantra that we’ll no doubt hear throughout the campaign:
We can’t wait.
Which is really funny, because even as he was at the podium lecturing Congress on the need to act on jobs and do it right now, the Keystone Pipeline XL project—a shovel-ready, cost-free project that would have created thousands of jobs at no cost to taxpayers—had been on his desk for two weeks waiting for his OK to move forward.  Today, 145 days later, despite efforts by Congressional Republicans to force action, the White House has done nothing to permit this project to proceed.
It’s a classic case of government-knows-best regulation and red tape getting in the way of natural market engines.  Following this theme, the Houston Chronicle reported on Saturday that the Energy Information Administration is expected to issue a report next week and another in March on the effect of U.S. companies exporting natural gas on jobs and domestic energy prices.  The Energy Department then will presumably be relying in part on those reports in making decisions on pending applications for export permits. 
By way of background, newer technology has made it economical to extract gas from tight shale formations, unlocking vast reserves.  This boost in supply has resulted in a dramatic drop in the cost of gas to consumers, from in excess of $15/mmbtu in 2005, to a current price of less than $3.  But in Asia and Europe, it can fetch between $12 and $18.
That is, if you can get it there.
Producers, not surprisingly, would like to utilize LNG (liquefied natural gas) facilities on the Gulf Coast to convert natural gas to liquid, which can then be shipped via tanker to markets where it can be sold at a much higher price than can be realized domestically.  That’s how markets work, and in the process, the increased profit encourages more drilling, which means more jobs.  That’s in addition to jobs at the LNG facility, jobs in shipping, etc.
There’s just one problem.
“Consumer advocates” object to the issuance of permits to allow producers to export the gas, because they are concerned that effectively increasing demand will increase the price of natural gas domestically.  Which, of course, is also how markets work: more people want to buy the product, so the supplier of that product can command a higher price.  These “advocates” want to prevent this effect, so they insist that the government erect barriers to the producers’ ability to access these other markets, essentially imposing a kind of indirect price control by artificially limiting demand. 
 
I have to ask the question why is government involved in this in the first place?  With the exception of gas produced from government land, natural gas (or the right to extract it) is the private property of the owner of the mineral rights.  Typically it is extracted by a producer who has entered into a lease—a private contract—with the mineral rights owner, whereby the producer pays the owner an agreed price—“royalty”—for the gas he extracts, effectively purchasing the gas from the owner.  Once extracted, the gas is the private property of the producer.  So we’re talking about private property, acquired via a private contractual arrangement.  Why isn’t the producer free to dispose of it as he will?
Somewhere along the way, people seem to have gotten the idea that government always has to govern.  As long as it keeps ahold of the marionette strings it can tweak this and nudge that and everything will be better.  After all, anything that’s artificially manipulated by a human being has to be better than what natural forces can create on their own, right? 
A little Brawndo, anyone? 
There’s always something for the government to stick its nose in and alter the natural result of market forces, because it knows better what markets crave.  It can keep grain prices artificially high for farmers by paying them not to grow wheat and by stockpiling what they do grow, thus cutting supply.  It can keep labor prices artificially high by enforcing minimum wage laws.  It can keep rents artificially low by enforcing rent controls.
The problem is that, like any drug, every one of these moves to manipulate and manage the market has consequences.  You can boost profits for farmers, but that will also result in higher food prices and inefficient use of land resources (not to mention the waste of grain stockpiled in government silos, never to be seen again).  You can raise wages, but at the cost of jobs where businesses would have been willing to hire—and workers willing to work—for less, if only they were permitted to do so.  You can create cheap housing, but that will remove the incentive and capital ability for landlords to make improvements, or often even to keep up with basic maintenance; rent’ll be cheap, but the apartment will be an endlessly-deteriorating slum.
Politicians and their appointed bureaucrats who enact these policies are typically not equipped with the expertise to appreciate the potential consequences of market manipulations, much less control those forces.  But their ego and hubris get the better of them.  They’ve been told all their lives that they’re the smartest folks in the room, so it’s only natural that they should take control.    It’s a problem as old as Adam.  Man can improve his circumstances through his labor.  But the minute he thinks he knows everything, the minute he thinks he can control and improve upon nature, he screws it up.  Every time.
Perhaps someone should introduce our government to Mary Shelley’s Frankenstein.
The worst of all possible political sins is to be perceived as doing nothing.  But sometimes that’s the best course of action.  Markets will take care of themselves.  Left alone, free enterprise will get capital and resources directed to their most efficient use.  Prices and wages will level at the point where they naturally should be; that which the supplier is willing to accept and the consumer is willing to pay.  Rent may be more expensive, but that is offset by cheaper and more abundant food.  Fuel may cost more, but more people have a job and can afford it.  And so on.
If only government would get the hell out of the way.

Greedy “Big Oil”

One way, or another,
I’m gonna find ya,
I’m gonna gitcha gitcha gitcha gitcha
—Blondie, One Way or Another
Here we are, some 60 days after the State Department issued its final report favoring approval of the Keystone XL Pipeline, and as predicted still no action from the White House.
You should pass it right away.
Meanwhile, the patently unconstitutional “super-committee” ostensibly charged with finding $1.5 billion in budget cuts continues to consider targeting “Big Oil” to achieve at least part of that goal.  So, at a time of chronic high unemployment/underemployment, a stagnant economy, and increasing dependence on imported petroleum, we’re going to punish the oil industry.  Bear in mind that this is an industry that employs literally hundreds of thousands of people, and has been begging the government to allow it to tap more of our vast reserves, which would not only increase employment but also increase domestic supply (thus reducing dependence on foreign imports and reducing costs to the consumer).  Never mind that the energy industry—and sorry, Greenies, but in 2011 that still means oil and gas—is the unquestioned driver of the economy both domestically and globally.
As the Guinness boys would say, “Brilliant!”
Big Oil makes for an easy target.  It’s a faceless, dehumanized collection of corporations—inherently evil in and of themselves, just ask any hippie-wannabe down on Wall Street.  With $3.50/gallon gasoline, the charges of “greed” gain ready traction with the media and public.  Witness USA Today last Friday running a story on how consumers are “unable to escape” the high cost of gasoline, and lamenting its impact on the middle class.  And, of course, anything associated with fossil fuels whips the Leftist base into a frenzy.
Driving this discussion is the idea that oil companies don’t pay sufficient taxes because of “subsidies” and “loopholes,” while at the same time they are making record profits by unfairly gouging consumers.  But let’s consider a few specifics.
First, those advocating targeting Big Oil like to make it sound as though oil companies don’t pay any taxes at all.  The truth is that oil companies pay more taxes than almost anyone.  Between 2005 and 2009, the U.S. producers paid over $98 billion in federal income taxes alone.  That’s nearly $86 million a day, more than virtually any other industry.  The effective global tax rate on the oil and gas industry is 40%, which is higher than both the federal rate of 35%, and the average rate for manufacturers of 26.5%.  And these companies are never going to receive Social Security benefits or food stamps.  All the while, these companies are also voluntarily giving back additional millions in charitable cash donations—as I reported here, the three largest domestic oil companies between them gave away over $412,000,000 in charitable donations in 2009 alone.
Second, the “subsidies” proponents of the get-the-oil-companies approach like to attack actually consist of tax deductions that are of a nature common to virtually all business taxes.  Corporations are taxed on profits, not revenue, which means they are taxed on income after deducting the costs of doing business.  The specific items at issue include things like the deduction of intangible drilling costs such as drillsite preparation and engineering (similar to the R&D costs deducted by pharmaceutical firms), and tax credits for foreign taxes that are designed to keep corporations with international operations from being double taxed (the same credit available to individuals). 
Further, plenty of other industries do receive actual federal subsidies.  A prime example is the ethanol industry—a sacred cow of the Green Energy Left and, regrettably, both Bush administrations—which for decades has actually been given a $0.40/gallon tax credit in order to make the product economically viable.  In the open market without that tax credit, ethanol is not economically competitive with other fuel additives  (of course, the irony is that “green” ethanol requires more energy to produce than it provides, is less efficient than other clean air additives, and its production consumes gigantic amounts of water and causes untold environmental impacts due to fertilizer runoff, etc., but that’s another discussion for another time).
Lost in the Leftist’s sleight-of-hand is the 100% certainty that if the tax treatment of oil companies is changed to eliminate deductions and credits—tax treatments that, as noted above, are identical or similar to those available to other businesses and individuals—that expense will be passed through to the final cost of a gallon of gasoline.  Proponents are telling a gullible public that they’re going to continue funding out-of-control government programs by increasing taxes on these evil oil companies, when in reality it’s the public itself that will ultimately bear that cost.
Also lost in the at least implicit suggestion that oil companies are profiting by unfairly gouging consumers at the pump is the fact that Big Oil doesn’t control the price of gasoline, or the price of crude (which is actually where the bulk of their profits are generated).  Nearly 70% of the price of a gallon of gasoline is the cost of crude oil, which is determined in the global commodities market, where emerging economies in China and India are skyrocketing demand.  Now, while those who want to demonize the oil companies like to talk about their size, the truth is the five companies that are commonly included within “Big Oil”—ExxonMobil, BP, Chevron, Shell, and ConocoPhillips—are relatively small players in the global market, which is actually dominated by the national oil companies in the Middle East and Venezuela.  To put it in perspective, according to Petrostrategies.org the world’s largest oil company, Saudi Arabian Oil Company, had 2007 reserves of over 303 BILLION barrels of oil equivalent.  Of the five companies making up “Big Oil,” only ExxonMobil at #17—with 2007 reserves of just over 13 billion barrels, just 10% or less of the reserves of each of the top five, and less than 5% of the reserves of the top two—even cracks the top 20 globally.  COMBINED the five “Big Oil” companies have about 45 billion barrels, barely good enough for 10th globally.  The simple fact is “Big Oil” has essentially no control over the cost of crude oil or gasoline.
The really sick part of this whole debate is the fact that the one profiting on the price of gasoline is really the very government that is now pointing the finger of blame at the oil companies.  On a $3.50 gallon of gas, the government gets, on average (depending on where you live), about $0.46, or approximately 13%.  The oil company gets between $0.02 and around $0.15, and that’s before corporate income tax on its profit.  So once again, we have government regulation creating or contributing to a problem—in this case, drilling restrictions limiting domestic supply, thus increasing the cost of crude—and government bloating itself on tax revenues, then blaming the consumer impact on the very industry being regulated and taxed.
Flogging the golden goose may make good short-term politics, but how long can we continue like this?
 
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Bonus:
 
Childhood friend of mine posted the newspaper clipping below on Facebook.  I have no reason to believe it’s a mockup.  Discuss.
 

Obama And Action On Jobs

With the coming of the Second World War, many eyes in imprisoned Europe turned hopefully, or desperately, toward the freedom of the Americas.  Lisbon became the great embarkation point. But not everybody could get to Lisbon directly, and so a tortuous, roundabout refugee trail sprang up: Paris to Marseilles, across the Mediterranean to Oran, then by train, or auto, or foot across the rim of Africa, to Casablanca in French Morocco.  Here, the fortunate ones through money, or influence, or luck, might obtain exit visas and scurry to Lisbon; and from Lisbon, to the New World.  But the others wait in Casablanca . . . and wait . . . and wait . . . and wait . . .
—Opening narration, Casablanca
You should pass it right away.

We are given to understand that the President thinks there is some urgency behind the need to take action to create jobs.  And you know the campaign pitch that’s coming:  It’s the Tea Party Republicans holding everything up.  Obama can’t run on his record, so he’s going to have to run on the straw man of what his record “would have been” but for the stonewalling from the do-nothing Right.

Can’t these people say “yes” to anything?
But where has this urgency been during the 28 months since May 2009 when—despite assurances that Stimulus I would guarantee unemployment stayed below 8%—unemployment first passed 9%, cresting at 10.1% in October of that year; a time, by the way, at which the Democrats held the White House and overwhelming majorities in both houses of Congress?  They could have passed anything they wanted, and there would have been nothing the Tea Party or anyone else could have done to stop it.  But instead of acting on jobs, they chose to use that time and their effective supermajority—curiously always behind closed doors, in the middle of the night, and at the last minute—to ram through Obamacare and attempt to ram through Cap-and-Trade.
Where was that urgency in April of this year, when after a temporary dip to 8.8, unemployment shot back above 9%, yet there was no plan from Obama?
Where was that urgency in June when Debbie Wasserman-Schultz said the Democrats “own the economy,” and unemployment was at its 2011 high of 9.2%, yet there was no plan from Obama?
Where was that urgency during the entire month of August—a month during which the economy generated zero net jobs—while the President was so busy on the golf course he couldn’t be bothered to send a draft of his “jobs plan” for Congress to review in advance of his petulant and, frankly, childish tongue-lashing?
Where is that urgency now as Harry Reid and the Democrat-controlled Senate sit on the proposal it took Obama 966 days in office to publish because even he and the Leftists in Congress can’t get behind it?
Obama and the Left continue to dream about the hypothetical jobs of the green future—or at least funneling hundreds of millions in taxpayer dollars to their billionaire friends (see Solyndra).  But they can’t manage to grasp that there’s a very real need for very real jobs right now.  And there is action that can be taken right now that will allow private industry to create jobs without costing a single taxpayer cent. 
Case in point:  The Keystone Pipeline.
As I discussed in a post last month, the Keystone XL Pipeline extension is a proposed project to extend the existing Keystone Pipeline from oil-rich sands in Canada to refineries in Texas.  This project would significantly increase the volume of available crude, and create thousands of construction, transportation, and refining jobs, all without federal “stimulus” money.  It’s been held up in bureaucratic red tape due to alleged environmental concerns—recall that Daryl Hannah, one of the great minds of our time, was arrested at a protest outside the White House (one wonders how she got there from her off-the-grid Colorado bungalow; betcha dollars-to-donuts it involved flying in one of those private jets the Left so hate)—and was awaiting a revised State Department report on the potential environmental impact.  The State Department issued its final report August 26, stating that the project would have “no significant impacts” to the environment if proper practices were followed.  All the project needs is Obama’s go-ahead.  Yet now a month later, while we’ve heard endless browbeating from Obama about the need to act now on jobs, he has done absolutely nothing on this project; a project that actually is “shovel ready,” actually will create jobs, and actually will not cost U.S. taxpayers. 
It is worth noting that one of the environmentalists’ core objections isn’t with the pipeline itself, but with the fact that it is transporting oil developed from so-called “tar sands” that represent a huge boost in reserves.  In a report published two Sundays ago in the Houston Chronicle, it appears that Chinese firms are spending billions to gobble up large segments of these Canadian sands, and will surely develop them regardless of whether Keystone XL gets built.  The only question is whether we will participate.  At a time when the White House and Congressional Left are so concerned about ceding industries to the Chinese, this seems like a no-brainer.  “Green” energy may ultimately prove to be the industry of the future, but oil and natural gas are in indisputable fact the industry of right now.  News reports continually say that his approval is “expected by the end of 2011,” but if the need to act on jobs is so urgent, and this project actually does create jobs, why not act now?
The answer is Keystone is part of Obama’s continuing political war on the oil industry.  The American Petroleum Institute—yes, it’s an oil industry lobby group, but its proposals have been echoed by the U.S. Chamber of Commerce—has suggested that programs to increase leasing and open drilling areas in places like the Gulf of Mexico and Alaska could create between a half-million and a million jobs, and would do so not only without costing the taxpayer, but would generate billions in revenue through additional royalties and lease rentals as well as additional excise and other taxes.  But Obama—who can’t stop lecturing on the need to stop playing politics and take action—can’t bring himself to go along with these, either. 
The truth is Obama isn’t the least bit interested in creating jobs.  He’s interested in creating the illusion of action, while punishing those the Left perceives as their enemies, and redistributing what wealth is left in this country.  It is more politically expedient to him to pander to the environmental zealots and anti-industry wackos in his base by holding up projects like Keystone, preventing domestic drilling, and pursuing industry-specific tax increases, than it is for him to take action that will actually create jobs in the real world.  So vast reserves continue to go untapped, and thousands who could be employed continue to sit idle.
At least everyone comes to Rick’s.

Pipeline Has Obama’s Fanny Caught In A Crack

Torn between two lovers,

Branded a fool,
Loving both of you
Is breaking all the rules.

—Mary MacGregor/Peter Yarrow, Torn Between Two Lovers

This could get tasty.

It’s not as though President Obama doesn’t have enough going wrong, what with the economy in the toilet, Arab states swapping tyrannical dictators for unpredictable mob rule, GOP presidential hopefuls circling like sharks in a feeding frenzy, and his Left base growing increasingly feral with impatience over his shocking failure to deliver on, I don’t know, any of his various promises of change.  Now it appears that some of Obama’s most reliable supporters—major labor unions—are taking up opposite sides leaving Obama caught in the middle of an issue he basically cannot resolve without possibly irretrievably alienating one group or the other.
When you are forever promising all things to all people, one wonders why this doesn’t happen more often.
At issue is TransCanada Corporation’s proposed Keystone XL Pipeline, which would stretch 1,700 miles from oil rich sands in Calgary all the way to Texas Gulf Coast refineries in Houston and Port Arthur.  The project would double the existing pipeline capacity, adding over a half-million barrels of crude per day at a time when political unrest threatening Middle East crude supplies has the price of gasoline still hovering around $3.50 a gallon.  Because the project crosses an international boundary, TransCanada needs White House approval (actually through the State Department) before work can proceed.  Although Canada gave its approval last March, the  project continues to be held up by the Obama administration as it attempts to deal with competing special interests.
In one corner we have the International Brotherhood of Teamsters—you may have heard of them—clearly a heavyweight among the labor unions, and an Obama backer.  The Teamsters support the Keystone XL project, arguing that it will create upwards of 1,500 jobs for its members, in addition to thousands of construction jobs.  An American Petroleum Institute representative has said “This is the largest shovel-ready project in the United States[.]”
Wow, and it didn’t even take a federal “stimulus” subsidy to create it.
Not so fast, say opponents.  In the other corner, predictably, we have the usual cast of environmental zealots.  But joining them on Friday in opposition to the Keystone XL project were two major unions purporting to represent bus drivers, and railroad and subway workers.  There is the Transport Workers Union, a group with historical ties to the U.S. Communist Party.  And we also have the Amalgamated Transit Union, which–not coincidentally–is also a partner with the Sierra Club in the Blue Green Alliance along with a number of other unions, notably the SEIU.  The complaint from all of them is that the project is an environmental threat due to greenhouse gases and possible leaks.  Of course, they make it sound as though the Keystone project brings some new and dire risk to the American experience, conveniently ignoring the fact that for decades there have been hundreds of thousands of miles of pipelines carrying billions of barrels of crude oil a year throughout the U.S.  And the so-called “dirty sands” in Alberta from which TransCanada is extracting the crude that would be shipped through the Keystone XL project are going to be developed whether this pipeline gets built or not.
The bigger question is what this environmental issue has to do with the collective bargaining rights of bus drivers and subway workers.  The TWU and ATU are labor unions; they collect forced dues from their members ostensibly for the purpose negotiating on their collective behalf with their respective management groups.  Environmental lobbying would seem to be well beyond their purview.  Unless, I suppose, the argument is that expanding crude supply to U.S. refineries would result in lower gasoline prices, thus reducing bus and subway ridership.
Yes, artificially propping up gasoline prices by preventing increased supply; I’m sure that’s the way to get the economy back on track and create jobs.  Maybe we can subsidize other producers like farmers not to produce while we’re at it.  Oh, wait . . .
This puts Obama in a nice political hot box.  With unemployment stagnated above 9%, jobs being a constant theme in his public addresses over the last month, and increasing vitriol from the Left for him to do something, the Keystone XL project presents a clear program that, while we can debate the exact numbers, will undoubtedly result in the creation of at least some jobs.  Contrast that with Obama’s vague platitudes about “green jobs” that have proven to be such a demonstrable failure (h/t Walter Russell Mead at The American Interest) that even the New York Times has been forced to concede them for the disaster that they’ve been.  Tea Party budget hawks should like this one, too, as it doesn’t involve a dime of federal money.  And Obama has to know that if he withholds approval, all he’s going to hear for the next 14 months is that for all his talk about compromise and the need to put country ahead of party and focus on jobs, when he was presented with a real opportunity to do just that, he said no.  With the backing of the Teamsters, which endorsed him in 2008, and has contributed over $20 million to Democrats over the last 20+ years, there’s got to be real pragmatic appeal to allowing the Keystone XL project to go forward. 
Yet granting approval would be a slap in the face for the environmentalists that form such a core part of Obama’s base.  Obama campaigned endlessly on his intent to move America to a “green economy.”   He’s so heavily invested in the idea personally and politically, one suspects he will in the end be unable to back away from that position.  And he has to know that if he grants approval, he going to hear nothing but even more hysteria from the Left that he has once again caved in to the Right and sold out the ideals upon which he campaigned.
It’s enough to make Al Gore jump in his SUV and head for the hills.
Forced to choose between pragmatism and idealism, I’ll bet he can’t do it.  A dollar here says he votes “present,” and delays it until after 2012 elections.  Whew, glad that’s settled; let’s go play golf.