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David versus Goliath... again...
May 11, 2012 11:58 AM   Subscribe

Big oil companies make more than $300 million every day. "Why should Americans prop up these companies with tax dollars and have to pay ridiculous fuel prices?" Self-described 'Democratic socialist' Bernie Sanders (Vermont) introduces a bill to cut $113B of fossil fuel subsidies.

Activist Bill McKibben notes that these companies receive $59 back for every $1 spent lobbying whilst other citizens groups find further insult in that many of the largest recipients of subsidies do not pay Federal taxes.

A 2012 Yale study found that 70% of Americans across political party lines oppose Federal subsidies for oil, coal, and natural gas. However, this is not a new battle. As early as 1986, fossil fuel subsidies were attacked by Ronald Reagan and pared back as part of the Tax Reform Act (TRA) of 1986.
posted by nickrussell (146 comments total) 33 users marked this as a favorite

 
Well... good.
posted by jeffamaphone at 11:59 AM on May 11, 2012 [3 favorites]


"But then our gaaaaaaaaaas prices might go up," whined the American public.
posted by infinitywaltz at 12:00 PM on May 11, 2012 [5 favorites]


I love Bernie Sanders. I love this idea. I honestly think that most subsidies are harmful.

This will never pass.
posted by Hactar at 12:02 PM on May 11, 2012 [20 favorites]


This should be a cross party issue. No more subsidies for oil (or agriculture.)
posted by lstanley at 12:02 PM on May 11, 2012 [6 favorites]


Isn't it weird when the actual socialist is trying to pair back government intervention in the economy?
posted by Chekhovian at 12:02 PM on May 11, 2012 [110 favorites]


Dear Bernie,

You are the greatest.

Sincerely,

Everyone who knows WTF is up
posted by that's candlepin at 12:02 PM on May 11, 2012 [44 favorites]


Let's start with agricultural subsidies. The oil will still be in the ground where we can drill for it. But I hate the idea that we're paying money to people to not grow corn.
posted by Cool Papa Bell at 12:03 PM on May 11, 2012 [5 favorites]


To be spun as a business tax increase by the Republicans in 3...2...1...
posted by Thorzdad at 12:04 PM on May 11, 2012 [4 favorites]


agri subsidies will never go. that's "attacking the farmers" which are often shown as a poor family, just trying to make ends meet - but the reality is that big business has edged most of them out and are collecting most of the profits and subsidies.
posted by nadawi at 12:04 PM on May 11, 2012 [3 favorites]


You're not going to side with a SOCIALIST, are you? Those guys want to REDISTRIBUTE WEALTH.
posted by Sing Or Swim at 12:05 PM on May 11, 2012 [2 favorites]


I wonder if pairing this with a reduction/removal of the federal gas tax would make it more politically feasible.
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 12:07 PM on May 11, 2012 [2 favorites]


I don't even live in Vermont and I have given Bernie Sanders money.
posted by The Whelk at 12:08 PM on May 11, 2012 [5 favorites]


Go Bernie, go!
posted by stagewhisper at 12:08 PM on May 11, 2012 [1 favorite]


Cue Joe Wilson shouting "You lie!" like a trained parrot in 3...2...1...
posted by IAmBroom at 12:09 PM on May 11, 2012


This should be a cross party issue. No more subsidies for oil (or agriculture.)

Oil yes, agriculture... not so sure. Those subsidies result in HFCS in all the food, but my feeling is that their real purpose is to ensure that farmland stays in productive use regardless of whether the market supports it, thus when disaster strikes (here or elsewhere in the world) causing disruption to markets or transport or crops, there is a reserve of food production on hand. Kind of like the national strategic oil reserve.

That kind of safety net may be worth the cost and market disruption it causes.
posted by -harlequin- at 12:12 PM on May 11, 2012 [15 favorites]


About damn time, although it's kind of sad that a proposal that was heartily embraced by Ronald Reagan, the second most right-wing president of the postwar era (except for Dubya), is so untouchable these days that a socialist is the only Senator willing to step forward on this issue.
posted by jonp72 at 12:13 PM on May 11, 2012 [2 favorites]


(Ok, their real purpose secondary to and other than lobbying and corruption :-) )
posted by -harlequin- at 12:14 PM on May 11, 2012


To be spun as a business tax increase by the Republicans in 3...2...1...
The measure appears to try to punish the oil and gas industry by taking away basic business expense deductions, said Republican Senator Jim DeMint and Republican Representative Mike Pompeo.

"It should be the same regardless of what business you're in," DeMint said.

Pompeo and DeMint want to end expiring tax incentives for wind and solar energy production, tax credits that are supported by Obama.

The American Petroleum Institute, an oil industry group, denies the industry receives any subsidies or makes current use of any special tax credits or deductions. The industry pays more of its profits in taxes than other manufacturing companies, the API said.
tada
posted by crayz at 12:15 PM on May 11, 2012 [6 favorites]


a socialist is the only Senator willing to step forward on this issue.

There have been several bills introduced this session of Congress to end oil and gas tax subsidies. There have even been votes on them.
posted by ultraviolet catastrophe at 12:16 PM on May 11, 2012 [1 favorite]


Devil's Advocacy Warning: the subsidies are coming from (progressive) income taxes, and the elimination of them will cause the energy companies to raise prices to maintain profitability. Since the poor presumably spend a higher proportion of their income on energy than the rich, won't elimination of these subsidies will hurt the poor more that the rich?

(I am, in principal, against government subsidies for profitable industries... but I'm not sure eliminating these subsidies equates to a win for the average taxpayer.)
posted by enkd at 12:16 PM on May 11, 2012


As if the oil companies are simply going to give up the margins. Any subsidies, tax breaks, etc. taken away will just be rolled into price increases to maintain the same profit margins. Or probably more, as punishment for daring to mess with Big Oil.
posted by xedrik at 12:18 PM on May 11, 2012 [1 favorite]


"The $113 billion in taxpayer handouts that oil, gas, and coal companies receive should be used to invest in green jobs. It's time for this corporate welfare to end."

If I read this correctly, it seems Sanders is not really saying corporate welfare should end. He's saying THIS corporate welfare should end and that THIS kind of corporate welfare be replaced with THAT kind of corporate welfare.

I guess that's a progressive view, but it seems terribly like the other guy's point.
posted by three blind mice at 12:21 PM on May 11, 2012 [2 favorites]


S. 2204, the Repeal Big Oil Tax Subsidies Act, defeated in the Senate March 29 on a 51-47 vote (didn't get the 60 to overcome filibuster).
posted by ultraviolet catastrophe at 12:21 PM on May 11, 2012 [1 favorite]


...and the elimination of them will cause the energy companies to raise prices to maintain profitability.

It's a bit misleading to infer they would lose profitability. I suspect they will remain very profitable. Just not at as high a margin as they enjoy with the subsidies. Businesses need to get it through their heads that they need to do more with less profitability. Just like the rest of us.
posted by Thorzdad at 12:22 PM on May 11, 2012 [5 favorites]


Seconding -harlequin- that agricultural subsidies are complicated and not always a bad idea. Yes, a lot of what we do in the US is misguided (my favorite story is how we subsidize Brazilian cotton) but there are some sound reasons to want to cushion agriculture against the market. Europe is a prime example: the Common Agricultural Policy has a lot of wackiness in there, but at it's core it was born out of a committment to Europe never again facing the widespread famine and starvation that followed both world wars.

The oil industry is so insanely and consistently profitable that I don't think the same argument applies, though I'd be interested to hear otherwise.
posted by Wretch729 at 12:23 PM on May 11, 2012


the elimination of them will cause the energy companies to raise prices to maintain profitability

Well, no, they'll raise the prices because they can, same as they have for years. Profit margins are higher today than they were when prices are low.
posted by Holy Zarquon's Singing Fish at 12:24 PM on May 11, 2012 [1 favorite]


arrrrg why do I always put in the stupid apostrophe? If a mod happens to see this please fix it.
posted by Wretch729 at 12:25 PM on May 11, 2012


If I read this correctly, it seems Sanders is not really saying corporate welfare should end. He's saying THIS corporate welfare should end and that THIS kind of corporate welfare be replaced with THAT kind of corporate welfare.

I guess that's a progressive view, but it seems terribly like the other guy's point.


He wants to spend tax money on one thing instead of a different, worse thing? HYPOCRITE
posted by theodolite at 12:29 PM on May 11, 2012 [7 favorites]


the subsidies are coming from (progressive) income taxes, and the elimination of them will cause the energy companies to raise prices to maintain profitability.

A company like Exxon/Mobil with a US$9.45B profit last quarter shouldn't be raising prices. Shareholders (and I say this as someone who undoubtedly has a small slice somewhere in his 401(k) funds) should have a somewhat lower dividend when the subsidy teat is removed from E/M'd greedy lips.
posted by aught at 12:30 PM on May 11, 2012 [2 favorites]


"But then our gaaaaaaaaaas prices might go up," whined the American public.

So happy for you that you can afford higher gas prices.
posted by Malice at 12:30 PM on May 11, 2012 [2 favorites]


In the unlikely event that big oil loses its subsidies, it should raise prices to maintain profitability, until people stop paying for oil. That's one of the main arguments for not subsidizing oil.
posted by 2N2222 at 12:31 PM on May 11, 2012 [6 favorites]


I hope it passes. This is one area where conservatives of both parties can definitely agree, and have been agreeing for years.
posted by michaelh at 12:32 PM on May 11, 2012


That's one of the main arguments for not subsidizing oil.

They did this to Lasik a couple of years ago. Insurance companies refused to cover them under standard medical policies... the end result is that the prices lowered and then eventually normalized. They still do lasik, people still pay for it, and people understand what they're paying for.

I'm not sure if that's a jab at medical insurance or subsidies. But in my head somewhere it's the same argument.
posted by Blue_Villain at 12:34 PM on May 11, 2012


my feeling is that their real purpose is to ensure that farmland stays in productive use regardless of whether the market supports it

This is remarkably incorrect. The role of subsidizes was originally to guarantee a minimum price for crops, because otherwise farmers grew too many and thus it became too cheap, and then the farmers went out of business. Paying people not to grow is to prevent a glut on the market.
posted by Chekhovian at 12:34 PM on May 11, 2012 [4 favorites]


I find that I'm absolutely OK with this.
posted by jquinby at 12:34 PM on May 11, 2012


Those subsidies result in HFCS in all the food, but my feeling is that their real purpose is to ensure that farmland stays in productive use regardless of whether the market supports it, thus when disaster strikes (here or elsewhere in the world) causing disruption to markets or transport or crops, there is a reserve of food production on hand.

I'm not a huge fan of these subsidies either, but all you have to do is Google Earth a bit around rural China (or go there) and see the vast tracts of fallow farmland as the population flees to the cities for industrial work. Knowing that China's one and a half billion already live on the brink of a food crisis and have a long history of famines so deep parents actually ate their children, this just seems like a bad thing waiting to happen.
posted by The 10th Regiment of Foot at 12:35 PM on May 11, 2012


The argument that oil companies will just pass this on to consumers through price increases doesn't add up. If there's room in the energy market for higher prices then what's stopping them from being raised right now?
posted by rocket88 at 12:35 PM on May 11, 2012 [2 favorites]


the gop has consistently opposed dumping subsidies. But note this: when gas prices went up and up, we had a host of explanations, including instability because of possible conflict with Iran, insufficient supplies, lack of refineries , more travel, etc etc...the prices stay up and rose daily. Then one day Obama announced he would appoint a lot more people to monitor oil speculation. The very next day prices began to go down and have been going down daily ...nothing though changed with potential conflict, refineries, travel, etc etc
posted by Postroad at 12:37 PM on May 11, 2012


On the flip side...

Subsidies Aid Rebirth in U.S. Manufacturing

“If we simply shut down today,” Mr. O’Shaughnessy said, “I could sell the inventory and the machinery, which could be moved elsewhere in the world, and pay off our debts and walk away with $35 million to $40 million.”

What staves off those alternatives are labor concessions and a substantial government subsidy, something he and others in the United States say is increasingly important to fuel a nascent recovery in manufacturing. The labor concessions at Revere, in a contract endorsed by the United Automobile Workers, are much like those unions are giving to other manufacturers. The subsidy comes from New York State, which supplies, at cost, the electric power that Revere uses to produce copper sheets and slabs. Mr. O’Shaughnessy says it accounts for half of Revere’s profit.

posted by Blazecock Pileon at 12:38 PM on May 11, 2012


If there's room in the energy market for higher prices then what's stopping them from being raised right now?

The market is stabilized by supply and demand. Currently with subsidies being one of the things tipping the scale. Without tax subsidies, the market is still stabilized pretty much by supply and demand.
posted by 2N2222 at 12:38 PM on May 11, 2012


Also, plausible deniability. When the cost of raw materials, labor, transportation and refining stays the same but the price of the finished product triples, people look at you funny.
posted by Holy Zarquon's Singing Fish at 12:41 PM on May 11, 2012 [1 favorite]


Wow, so my photography business can get a tax deduction for drilling a hole in the ground, whether or not it produces anything!
posted by seanmpuckett at 12:41 PM on May 11, 2012 [2 favorites]


This is remarkably incorrect. The role of subsidizes was originally to guarantee a minimum price for crops, because otherwise farmers grew too many and thus it became too cheap, and then the farmers went out of business. Paying people not to grow is to prevent a glut on the market.

I think you may have this a bit backwards, subsidies guarantee a minimum price. You are thinking of the Conservation Reserve Program portions of the farm bill and not the subsidies that prop up crop prices.
posted by The 10th Regiment of Foot at 12:42 PM on May 11, 2012


The measure appears to try to punish the oil and gas industry by taking away basic business expense deductions, said Republican Senator Jim DeMint and Republican Representative Mike Pompeo.

"It should be the same regardless of what business you're in," DeMint said.

Pompeo and DeMint want to end expiring tax incentives for wind and solar energy production, tax credits that are supported by Obama.

The American Petroleum Institute, an oil industry group, denies the industry receives any subsidies or makes current use of any special tax credits or deductions. The industry pays more of its profits in taxes than other manufacturing companies, the API said.


Christ. How long will we watch our elected representatives make bad decisions, disingenuous decisions, harmful decisions, corrupt decisions? At what point do we intervene in what is clearly a crisis of regulatory capture?
posted by clockzero at 12:43 PM on May 11, 2012 [2 favorites]


So, ECON101 says the price is at the equilibrium point of supply/demand that maximizes profits, and those profits just happen to be obscenely lucrative.
If subsidies are removed there will probably be an effect on the supply side that shifts prices upwards, lowering demand until a new equilibrium is established. Isn't it almost guaranteed that the resulting industry profit point will be lower?
posted by rocket88 at 12:45 PM on May 11, 2012


The pull quote in the FPP is from House sponsor Kieth Ellison, not from Sen. Sanders.

I noted this specifically because it makes me really, really happy to have voted for Rep. Ellison. Not every House member from Minnesota is a loon.
posted by caution live frogs at 12:46 PM on May 11, 2012 [1 favorite]


You are thinking of the Conservation Reserve Program portions of the farm bill and not the subsidies that prop up crop prices.

Well I tend to sleep through talks on farm subsidies, so I'm probably futzing up a lot of things, but I thought that whole story of american agriculture was that farmers always wanted to make more money, so they'd grow more crops, but everyone grew more crops, so then the price for everyone dropped and no one was better off than when they started. Wasn't that the story up until FDR?
posted by Chekhovian at 12:47 PM on May 11, 2012


So happy for you that you can afford higher gas prices.

Yes, all the extra money I have had to spend on living in an urban area with public transportation has finally paid off!
posted by The 10th Regiment of Foot at 12:49 PM on May 11, 2012 [3 favorites]


rocket88 - depends how inelastic demand for petroleum products is. Economists love to fight about that.
posted by Wretch729 at 12:51 PM on May 11, 2012


Wasn't that the story up until FDR?

Farm subsidies predate the depression. The idea is that fixing a price floor prevents having to bail out farmers later. The CRP provisions came in with the dust bowl days and have been smeared by Republicans that hated all New Deal programs as a "subsidy" for letting fields go fallow, when really it's a means of incentivising the prevention of another dust bowl.
posted by The 10th Regiment of Foot at 12:52 PM on May 11, 2012


In the unlikely event that big oil loses its subsidies, it should raise prices to maintain profitability, until people stop paying for oil. That's one of the main arguments for not subsidizing oil.

Hmm. The question is "where is the point at which people stop paying for oil". Look at Europe, where in many places the price of gas is twice what it is in the U.S., even in countries that actually have excess oil for export (Norway). Of course, most of that price differential is down to taxes. And the European public is comparatively less dependent on the automobile for basic transportation (well developed public transit, shorter distances, more trains etc., denser population centers, all are factors). So you would think, with prices twice as high, and the need not as great (the U.S. is far more dependent on trucks and cars), there would be no demand - but the demand is there, so big, that many cities are still trying to find ways of limiting traffic, taking vehicles off the road etc.. So now you are saying that the American public will not pay more for gas, the same public that's held hostage because the alternative transportation systems are so weak?

I suspect that the American public would pay for $12 a gallon - and not significantly change their driving habits. I remember how much squawking there was when gas went from Clintonian $1/gal to $2/gal... "OH MY GOD, $2 per GALLON!!!UNO!111". So what happened? People kept driving. Gas went to $3, there was a brief flurry of a movement to Priuses, gas went to $4, and in due time, the big trucks came back, people still sit in driveways along my street yakking on the phone, engine running in their Suburbans for half an hour, stenching up the freakin' neighborhood - at $4/gal. I suspect you could go to $20/gal and the same would obtain.

Logically, I know that at some point demand must respond to price pressure. But I'll be damned if I know where that point is.
posted by VikingSword at 12:53 PM on May 11, 2012 [13 favorites]


Christ. How long will we watch our elected representatives make bad decisions, disingenuous decisions, harmful decisions, corrupt decisions?

As long as the people who elect him are prone to making bad decisions, disingenuous decisions, harmful decisions, corrupt decisions.

Given the past few thousand years of human history, I expect it to be a problem for...at least the next few thousand years.

/sad
posted by darkstar at 1:01 PM on May 11, 2012


Sorry, a correction, the CRP came in in the 1950's as an additional program, but it was tied back to the establishment of land reserves such as the Wildlife Preserves that were the legacy of the dust bowl.
posted by The 10th Regiment of Foot at 1:02 PM on May 11, 2012 [1 favorite]


Hmm. The question is "where is the point at which people stop paying for oil".

I didn't mean to sound like I'm crusading against oil use. My point is that subsidies encourage oil use by spreading the costs among taxpayers because the industry has powerful political allies, not because oil consumption is deemed some kind of national goal.

Supply and demand in the petroleum industry is easily witnessed everyday whether by the barrel or at the gas pump, and fluctuates as necessary.
posted by 2N2222 at 1:07 PM on May 11, 2012


I'm very much in support of this idea, but I have to take issue with this:

It's a bit misleading to infer they would lose profitability. I suspect they will remain very profitable.

Actually... they might not. ExxonMobil posted a $47 billion profit in 2011. Chevron was at $27 billion. ConocoPhillips was at $12 billion. There's another few that rack up single-digit billions.

Basically, as far as I can tell, $116 billion might actually represent the entire annual profitability of the industry. It's certainly a huge chunk of it.

The reason oil company profits seem so outlandish isn't because they're charging a ridiculous price for their products, but because they're just outlandishly large. Yes, ExxonMobil posted more profitability in billions than most Americans earn in thousands, but they sold over $486 billion in product last year, so their actual margin is only like 8.4%. Which is healthy but by no means spectacular. Finance companies are the only companies that reliably make more than that, largely because there's no marginal cost to them selling more product the way there is for manufacturing companies.

Logically, I know that at some point demand must respond to price pressure. But I'll be damned if I know where that point is.

No kidding. This is probably because increases in energy costs are such a big part of the economy that they show up as inflation as much as price pressure. When gas costs more, everything costs more.
posted by valkyryn at 1:13 PM on May 11, 2012 [1 favorite]


That being said, I think that taxing the American people $116 billion, routing that through Congress and the IRS, and giving it to the oil companies, is probably a lot less efficient than just paying more for gas. We can give money to oil companies just fine on our own, thank you very much. Let Congress stick to spending money on things we can't do for ourselves very well.
posted by valkyryn at 1:15 PM on May 11, 2012 [10 favorites]


Logically, I know that at some point demand must respond to price pressure. But I'll be damned if I know where that point is.

You're not the only one. Rising gas prices haven't affected driving behavior or spending on gas relative to other spending.

This paper [pdf] suggests that people are more sensitive to increases in gasoline taxes than increases in the tax-exclusive price, perhaps because consumers assume the tax increase will be permanent but think that the tax-exclusive price may drop. We need a significant increase in fuel taxation in this country, coupled with an across-the-board refundable tax credit to avoid regressive effects. Our fuel taxation level is a joke compared to other OECD countries (data from April 2011).

Eliminating oil industry subsidies is a good idea (and while we're at it, ag subsidies for large corporations), but taxation is the only way to significantly curb gasoline consumption, with the added benefit of providing funding for public transportation.
posted by jedicus at 1:18 PM on May 11, 2012 [2 favorites]


One last thing about farm subsidies ... when you're tossing out $20 billion a year in subsidies, you get a knock-on effect of getting a huge administration to go with it.

In the U.S., there are only about 960,000 persons claiming farming as their principal occupation.

There are more than 100,000 employees of the Department of Agriculture. There are thousands more employees of various state agriculture commissions (e.g. California, the biggest state, has 2,300 employees).

So, for every 9 farmers out there, there's a bureaucrat.

We'd be better off if they left their desks and went out pulling weeds.
posted by Cool Papa Bell at 1:19 PM on May 11, 2012 [6 favorites]


So happy for you that you can afford higher gas prices. -Malice

Malice's comment brings up the complexities of this issue. You can (and I do) argue that the US needs to wean itself off of oil. Anyone who takes that position though has to be aware that outside of a few major metropolitan areas, you more or less NEED a car to function in modern America. Sure there are things you can do to conserve fuel, but that only goes so far, not to mention that the required sacrifices fall largely on those least able to afford them. This isn't to say we should just give up and keep spending tax money on oil subsidies, but you have to be prepared to defend the "gas should cost more" argument.
posted by Wretch729 at 1:21 PM on May 11, 2012 [2 favorites]


Neither Profit margin nor dollar profits are a particularly good way to have a discussion about the profitability of a business. For an extractive business like xom even aggregate return on capital doesn't tell you a ton of info. Really it's about their marginal return on capital - what they earn in profits for each new dollar the spend on new assets.
posted by JPD at 1:21 PM on May 11, 2012 [1 favorite]


Put it another way: given that the total US oil industry does about $1.83 trillion in revenue, making up that $116 billion--about 6.3% of the total--means spending an extra 6.3% at the pump, on average. This works out to an extra quarter on gas which would otherwise be $3.85 a gallon. Heck, I've spent more than that just straight up in the past year.

Yes, there are some people who would find that hard to deal with, but it's within the range that they've already dealt with in the past.

Cut the subsidy.
posted by valkyryn at 1:22 PM on May 11, 2012


Goddammit, I love Bernie Sanders. My family visited Vermont for the first time this winter, and as we came across the lake to Burlington on the ferry, it was (no lie) like our souls just went "AHHHHH" and then everything. about. Vermont. seemed exactly calculated to make people like us go "HOW THE HELL CAN WE MOVE HERE IMMEDIATELY." So now we have to keep reminding ourselves that it's a tiny economy and that the winters there want to kill you.
posted by thehmsbeagle at 1:23 PM on May 11, 2012 [2 favorites]


in other news, the price of gasoline is about to jump $113B
posted by quonsar II: smock fishpants and the temple of foon at 1:24 PM on May 11, 2012


There are more than 100,000 employees of the Department of Agriculture. ... We'd be better off if they left their desks and went out pulling weeds.

The USDA also regulates slaughterhouses. I'm happy to pay a small tax to avoid food poisoning from unregulated agribusiness.
posted by exogenous at 1:24 PM on May 11, 2012 [6 favorites]


And per jedicus up there, it's not entirely fair to compare the US to the other OECD countries because of our size and the historical decisions that pushed us to be a automobile-based society. Countries that are similarly large and have a low population density like Canada or Australia are pretty simiar to us on that OECD chart.
posted by Wretch729 at 1:26 PM on May 11, 2012


given that the total US oil industry does about $1.83 trillion in revenue

valkyryn, the $1.83 trillion figure you cite is for one year while the $113 billion for the fossil fuel subsidies is over 10 years.
posted by ultraviolet catastrophe at 1:28 PM on May 11, 2012 [1 favorite]


In the U.S., there are about 1,430,000 persons claiming soldiering (or sailoring) as their principal occupation, with an additional 848,000 in reserve.

There are more than 700,000 employees of the Department of Defense.

$20 Billion is about 6% of what it cost to develop the F-35.
posted by The 10th Regiment of Foot at 1:28 PM on May 11, 2012 [2 favorites]


valkyryn, the $1.83 trillion figure you cite is for one year while the $113 billion for the fossil fuel subsidies is over 10 years.

Well geez. I was already prepared to pay the extra quarter. Now just don't see any reason at all to maintain the subsidies.
posted by valkyryn at 1:32 PM on May 11, 2012


...the elimination of them will cause the energy companies to raise prices to maintain profitability.

If the oil companies can raise prices anytime they like in order to maintain profitability, then what's stopping them from jacking prices to the max right now, in order to enhance profitability?
posted by steambadger at 1:36 PM on May 11, 2012


then what's stopping them from jacking prices to the max right now, in order to enhance profitability?

Why, steambadger, you wouldn't accuse the poor, widdle, innocent oil companies of illegal price gouging would you?
posted by The 10th Regiment of Foot at 1:39 PM on May 11, 2012 [1 favorite]


And I'm posting too much, so I'll shut up now, but I can't emphasize enough how important the size difference is. you might look at jedicus' OECD chart and think" yeah but Germany is a big country and gas is very expensive there." Yes it's a large economy but population density-wise it's a different universe. Germany is roughly half the size of Texas. It has 1/4 the US population living in an area 1/26 the size of the US.

Again none of this means the US should not change. It's just going to hurt people to do so, and people need to incorporate that uncomfortable truth into their argument for doing so. (Valkyryn gives a great example of actually doing the math on this specific example of the subsidies and making a case that it wouldn't hurt too badly.)
posted by Wretch729 at 1:39 PM on May 11, 2012 [2 favorites]


Devil's Advocacy Warning: the subsidies are coming from (progressive) income taxes, and the elimination of them will cause the energy companies to raise prices to maintain profitability. Since the poor presumably spend a higher proportion of their income on energy than the rich, won't elimination of these subsidies will hurt the poor more that the rich?


The subsidies are coming from American income taxes, subsidizing a fungible product that is sold on the international market, where it's sale price set by international factors.

If the US government could influence the price that oil companies charge taxpayers, it would be doing so. But it can't.

Subsidizing a random German's gas purchase is not in the interest of US taxpayers.
posted by -harlequin- at 1:46 PM on May 11, 2012 [3 favorites]


Price demand for gas is very inelastic. If someone has a house that they can't sell, lives 50 miles from work, can only get to work by car and can't carpool then they will pay whatever they have to to get to work. Car trips to Disneyworld might take a hit, though.

IANAEconomist
posted by double block and bleed at 1:49 PM on May 11, 2012 [1 favorite]


it's not entirely fair to compare the US to the other OECD countries because of our size

...

I can't emphasize enough how important the size difference is


Piffle. It's not very important at all. The vast majority of driving consists of short trips, even in rural areas. It's not like people in rural Wyoming all have hundred mile commutes or something. Further, the lowest population density states also tend to have the lowest populations. Most people in the US live in urban areas with population densities similar to other cities around the world. The existence of large tracts of essentially uninhabited territory has little effect on most people's daily driving habits.

And with the Schengen Agreement, Europeans can easily drive similar long distances without being hassled at a border crossing.

For some hard numbers: the average commute in the US in 2009 was 12 miles (Table 27) [pdf]. In the UK in 2005 it was 8.7 miles (p. 2) [pdf]. A 37% difference between two countries with an 700% difference in population density and a 125% difference in fuel price.
posted by jedicus at 1:49 PM on May 11, 2012 [5 favorites]


It has 1/4 the US population living in an area 1/26 the size of the US.

Or roughly half the population density of New Jersey.
posted by The 10th Regiment of Foot at 1:52 PM on May 11, 2012


>my feeling is that their real purpose is to ensure that farmland
>stays in productive use regardless of whether the market supports it

This is remarkably incorrect. The role of subsidizes was originally to guarantee a minimum price for crops, because otherwise farmers grew too many and thus it became too cheap, and then the farmers went out of business. Paying people not to grow is to prevent a glut on the market.


Our thoughts about of the methods may vary, but it sounds very much like you're saying that the purpose of the subsidies is to keep farmers in business (by limiting the destabilizing influences of the market), and I'm saying that the purpose of the subsidies is to keep farmers in business, (by limiting the destabilizing influences of the market).
posted by -harlequin- at 1:52 PM on May 11, 2012


Price demand for gas is very inelastic. If someone has a house that they can't sell, lives 50 miles from work, can only get to work by car and can't carpool then they will pay whatever they have to to get to work. Car trips to Disneyworld might take a hit, though.

Pro tip: Don't be that guy.
posted by -harlequin- at 1:55 PM on May 11, 2012


And with the Schengen Agreement, Europeans can easily drive similar long distances without being hassled at a border crossing.

Well, don't forget that in Europe you can also walk out of your door to the nearest bus stop, which will take you via bus, streetcar, and subway to the main train station, and from there you can BASICALLY GET ANYWHERE ELSE IN EUROPE by rail and local mass transit.

That's a major difference between Europe and the US, and one which probably helps balance out the higher fuel prices for private automobile use. When I was living there in 1986/87 (admittedly a long time ago), automobiles in the families I lived with were used for short drives and large shopping, transit was used for getting around in the city and travel.
posted by hippybear at 1:56 PM on May 11, 2012


the purpose of the subsidies is to keep farmers in business....that farmland stays in productive use

To my understanding, the point of the subsidies is generally to limit the actual amount of farming done. Either by guaranting that crops fetch some minimum price so farmers don't have to desperately plant more crops, or by actively paying them not to farm. So you're correct if by "productive use" you mean "not actually being used".
posted by Chekhovian at 1:56 PM on May 11, 2012


So you're correct if by "productive use" you mean "not actually being used".

Possibly. By productive use, I mean the land is there, the infrastructure to farm it is already set up, so it can produce food as needed, ie not necessarily that it is producing food right now.

Ie a hedge against a situation where food prices being through the roof, and there is plenty of wild savannah, but it'll take several years to build farms and get that land to start producing food.
posted by -harlequin- at 2:01 PM on May 11, 2012


“If we simply shut down today,” Mr. O’Shaughnessy said, “I could sell the inventory and the machinery, which could be moved elsewhere in the world, and pay off our debts and walk away with $35 million to $40 million.”

This is the kind of horseshit that drives me up the wall. It is a threat. Nothing more, nothing less. The need to throw in "which could be moved elsewhere in the world" is a bullying move. We've bought into that argument for 40+ years, and that cowering response has killed our economy.

The proper response:
Gonna take your manufacturing elsewhere? Fine. Fucking do it already. Regardless of what we do, you'll move for a nickel, anyway. Just heed this warning: If you move your manufacturing elsewhere and then try to sell your wares here, we are gonna tax and tariff your ass so hard, you (and anyone else looking to follow your lead) will think twice next time.
posted by Benny Andajetz at 2:06 PM on May 11, 2012 [9 favorites]


Ie a hedge against a situation where food prices being through the roof

Hmm, actually, I think (even ignoring corruption) this assumes too much sense on the part of planners. The motivator is more likely something like "We must not allow a situation where if there is a war, we can be starved and held hostage to the whims of other countries."

It wouldn't surprise me if the pentagon was an influence in keeping the agri subsidies. Maybe the oil subsidies too (keep refineries inside the borders?)
posted by -harlequin- at 2:08 PM on May 11, 2012


It wouldn't surprise me if the pentagon was an influence in keeping the agri subsidies.

I think you're still overthinking this issue.
posted by Chekhovian at 2:10 PM on May 11, 2012


I'm ok with this raising the price on gas I'm not buying.
posted by danl at 2:11 PM on May 11, 2012


jedicus, per those sources you cited 89.4% of Americans commute by car vs 5.1% by public transit (as of 2009). Compare that to the UK, where 69% commute by car and 12% by public transit (as of 2007). I don't doubt that the higher gas prices in the UK are at least partially responsible for the lower use of cars. I don't disagree that most Americans live in urban areas. But the public transit available in most American urban areas is vastly different from that available in most European urban areas.

The significant hike in fuel taxes you argue for would probably push us in the direction of those other OECD countries, and that would in my opinion be a good thing, but it will be expensive for America's local, state, and federal governments to shift infrastructure from cars to public transit, and in the interim period it will have serious consequences for the average American commuter.
posted by Wretch729 at 2:11 PM on May 11, 2012 [1 favorite]


Wouldn't it be nice.

It always depresses me how much technology, innovation, and efficiency-- all perfectly within our grasp, abilities, and resources-- is never pursued or developed because of "profits" or greed. I swear sometimes living in America is like having rich parents who keep a fleet of Bentleys and tell you that they can't afford to send you to college.
posted by Uther Bentrazor at 2:12 PM on May 11, 2012 [6 favorites]


Hmm, actually, I think (even ignoring corruption) this assumes too much sense on the part of planners. The motivator is more likely something like "We must not allow a situation where if there is a war, we can be starved and held hostage to the whims of other countries."


Not even. The motivator is "If I don't deliver on those subsidies to my constituents, they'll find some other whore willing to do the deed."
posted by 2N2222 at 2:15 PM on May 11, 2012 [1 favorite]


All we are doing is lowering the price to the supplier. They have no incentive to actually put more oil on the market. The result is that we probably incentivize them to work less hard to make their millions.
posted by humanfont at 2:16 PM on May 11, 2012 [2 favorites]


That's nice, but obviously this bill won't pass.
Let's start with agricultural subsidies. The oil will still be in the ground where we can drill for it. But I hate the idea that we're paying money to people to not grow corn.
I'm not really sure that's the case anymore, rather at least with corn they actually pay you more based on how much you grow.
Oil yes, agriculture... not so sure. Those subsidies result in HFCS in all the food, but my feeling is that their real purpose is to ensure that farmland stays in productive use regardless of whether the market supports it, thus when disaster strikes (here or elsewhere in the world) causing disruption to markets or transport or crops, there is a reserve of food production on hand. Kind of like the national strategic oil reserve.
Right, the government obviously has an interest in keeping the food system working well. It also has an interest in supplying energy, but at this point funding more oil discovery is counterproductive. We should be putting that money into solar/biofuel/advanced grids and so on. We are, but not to the same extent, which is ridiculous.
Devil's Advocacy Warning: the subsidies are coming from (progressive) income taxes, and the elimination of them will cause the energy companies to raise prices to maintain profitability. Since the poor presumably spend a higher proportion of their income on energy than the rich, won't elimination of these subsidies will hurt the poor more that the rich?
It will hurt rich oil executives more the anyone. Rich people who are invested in clean energy will benefit greatly, which is exactly what we want.

If we want to subsidize energy use by the poor, we should do it directly with vouchers or something, just like how we have food stamps for the poor to subsidize their food consumption. Subsidizing oil for everyone to benefit the poor is moronic.

Especially when you consider it's the poor who are much more likely to be screwed over by extreme weather caused by global warming. If they're house gets damaged in a flood or tornado, they're going to have less resources to recover. This even more true when you look at poor people globally. People in bangladesh, or various island countries are extra screwed.

In the long run, global warming will have a far bigger impact on the poor.
In the U.S., there are only about 960,000 persons claiming farming as their principal occupation.

There are more than 100,000 employees of the Department of Agriculture. There are thousands more employees of various state agriculture commissions (e.g. California, the biggest state, has 2,300 employees).
Somehow I doubt that figure counts all the migrant farm workers. Also, 100,000 people pulling weeds wouldn't do much of anything Assuming one person can weed 1 square foot in 10 seconds (fairly optimistic), and working 2080 a year, one person could weed 17.1 acres a year. The U.S has 445 million acres of farmland. Those bureaucrats could cover 1.7 million in total, or about 0.38%.

But, of course if you knew anything about farming, you'd know you actually have to pull weeds all the time, so if you assume you need to weed every week, you'd basically get about 0.07% of america's cropland weeded.

Farming is highly mechanized. (or where it's not, it's done by migrant workers who don't exactly file taxes. There were supposedly about 4 million or so in 1990). One person (or at least one 'official' worker) does a huge amount of work, compared to a farm worker in 1900 (when 30% of the population was involved in agriculture)
And I'm posting too much, so I'll shut up now, but I can't emphasize enough how important the size difference is. you might look at jedicus' OECD chart and think" yeah but Germany is a big country and gas is very expensive there." Yes it's a large economy but population density-wise it's a different universe. Germany is roughly half the size of Texas. It has 1/4 the US population living in an area 1/26 the size of the US.
This absolute physical size of the US is completely irrelevant. It's actually amazing to me that people would bring it up at all. First of all, people drive all over Europe, not just in their own countries. Secondly, people don't generally commute from NY to LA, and if they do they fly. The physical distance between metro areas makes no difference at all how much gas is used in those metro areas. And if it did NY to LA is no different then Berlin to Paris, not Berlin to Hambug
posted by delmoi at 2:20 PM on May 11, 2012


Ok delmoi, maybe I could have framed it better, but my point about relative size was to underline the difference in population density and how that effects one's transportation options which absolutely does matter and which has been discussed above. It's much easier to build a public transit network to cover Germany (610 people/sq mi) than to cover, for example, Texas (~94 people/sq mi). (235/km^2 vs 36/km^2) This is especially true given that Texas is (roughly) twice as big as Germany, and you still have to cover the whole state. That's why absolute physical size matters.

I do agree that subsidizing energy use for the poor would seem to be a better use of money than subsidizing oil companies (assuming it was done rationally). Several states already offer heating fuel benefits programs. I don't know what exists for gasoline.
posted by Wretch729 at 2:34 PM on May 11, 2012


The significant hike in fuel taxes you argue for would probably push us in the direction of those other OECD countries, and that would in my opinion be a good thing, but it will be expensive for America's local, state, and federal governments to shift infrastructure from cars to public transit, and in the interim period it will have serious consequences for the average American commuter.

Expensive, yes, but paid for by the fuel tax increase. Serious consequences? Eh, that's why you phase the fuel tax in over 10 years or so to give people plenty of time to buy more fuel efficient cars, switch to public transportation, switch jobs, form car pools, make telecommuting arrangements, move closer to work, etc. That's also why you include an across-the-board refundable tax credit to take the pressure off of the poor and lower middle class and avoid regressive effects.

It's much easier to build a public transit network to cover Germany (610 people/sq mi) than to cover, for example, Texas (~94 people/sq mi). (235/km^2 vs 36/km^2)

Not as dramatically different as those figures would suggest. For long distances you only have to connect city centers, and distances between cities are similar. For example, the two most populous cities in Texas (Houston and San Antonio) are 199 miles apart by road. The two most populous cities in Germany (Berlin and Hamburg) are 179 miles apart by road.

For light rail within cities, the densities are similar. For example, Hamburg is comparable to Dallas in terms of both city and metro area population, and it's only twice as dense as Dallas, not the factor of 6.5 suggested by the state-wide population density.
posted by jedicus at 2:44 PM on May 11, 2012 [1 favorite]


but it will be expensive for America's local, state, and federal governments to shift infrastructure from cars to public transit

Not as expensive as it is to maintain the existing pattern of sprawl.
posted by Reasonably Everything Happens at 2:54 PM on May 11, 2012 [3 favorites]


If done the way you describe jedicus then I don't disagree with you. My objection was to people who just say "well we should just raise the gas tax" without articulating the steps to protect people who such a move would hurt and who can't help that they live in a car dependent area and without having patience for the political compromise such a move would require. I think the plan you lay out would be great!

I would quibble with your take on the Texas analogy. Sure your plan works for the urban corridor you discuss, but what about the other people who create that average population density? Certainly they are a minority, and maybe the bigger picture justfies forcing them to pay more for gas when it's unlikely they'll get access to public transit. But vocal motivated minorities can be very powerful and will fight for their cheap gas unless given an alternative.
posted by Wretch729 at 3:05 PM on May 11, 2012




I noted this specifically because it makes me really, really happy to have voted for Rep. Ellison. Not every House member from Minnesota is a loon.

Every time I see a thread about Michele Bachmann, I wish it was about Ellison instead. He is as busy politically, but he actually accomplishes things, they are good things, and they deserve to be noted. After he was arrested protesting outside the Sudanese embassy, I wrote him a letter to tell him that I was proud to have him as my representative. It's the only time in my life I have ever written a letter like that to a politician.
posted by Bunny Ultramod at 3:40 PM on May 11, 2012


Well, don't forget that in Europe you can also walk out of your door to the nearest bus stop, which will take you via bus, streetcar, and subway to the main train station, and from there you can BASICALLY GET ANYWHERE ELSE IN EUROPE by rail and local mass transit.

I may be wrong on this, but I believe the high taxes on gas go to pay for the much better public transit systems in Europe. That may be what happens with gas taxes and the enormous taxes on vehicles in Denmark. Better public transport has to be paid for, of course, and the way to pay for it may be from taxes on the less desirable alternatives. Jeff Rubin (same link) points to some obvious political problems in applying this solution in North America, but my point is that we have chosen to have bad public transportation and to subsidize the private vehicle (which is itself a form of subsidy to the oil industry). It doesn't have to be that way.

Back to the topic, though: free marketeers would ask how you make rational decisions if you subsidize the product (oil) and transfer its costs to the entire population, regardless of usage. Evidently the oil industry doesn't much like the free market after all. Who would have guessed. Here in Canuckistan we have the social democratic party (NDP) arguing for the free market solution (no subsidies, full cost accounting for environmental imacts) and the rightwing wankers arguing for enormous subsidies to the oil industry (ignore environmental costs and let everybody pay that price; i.e., socialize them).

So Bernie Sanders seems to have got the free-market religion, the way I see it. It is getting harder and harder to see who is over here on the left, but if it includes Shell & Co., I am getting a little twitchy about my neighbours.
posted by dmayhood at 3:44 PM on May 11, 2012 [2 favorites]


I can't emphasize enough how important the size difference is

Piffle. It's not very important at all. The vast majority of driving consists of short trips, even in rural areas...


You're forgetting all the driving that is necessarily over long distances. I'm thinking of the trucks that transport goods and raw materials around the country. When fuel costs go up, the cost of these deliveries goes up, and that results in increased prices for goods, even in densely-populated urban areas.
posted by twoleftfeet at 3:47 PM on May 11, 2012 [1 favorite]


If you move your manufacturing elsewhere and then try to sell your wares here, we are gonna tax and tariff your ass so hard, you (and anyone else looking to follow your lead) will think twice next time.

Interesting idea, even if it might be tough to get off the ground with restrictions via NAFTA and, globally, the GATT, both to which the US is legally bound. Behind subsidies, taxes and tariffs is a whole machine of competing interests inside and outside the United States.

Politically, I doubt most people would be interested in paying higher taxes or tariffs if gasoline production were moved outside the country, at least given the economy in the shape it is in. The oil companies have a captive market and they know it'll stay that way, when there's no real push for alternative energy.
posted by Blazecock Pileon at 3:51 PM on May 11, 2012


So, ECON101 says [...]

I've always wondered why economics is subjected to this treatment, but nothing else seems to be. Nobody ever says "That's just CompSci 101" or "That's just Art History 101", and anyone who did try to apply a first-year-undergraduate level of insight to a real world problem would correctly be regarded as a pig-ignorant clown, too dumb to realize how dumb they are.

But somehow, the phrase "That's just econ 101" survives. Despite the fact that everyone, as in every single person with any degree of insight or experience, knows that 101-level courses are the most dumbed-down introductory courses imaginable in those fields, giving people who don't care a whit about the subject matter enough of a grip on the basic terminology to just barely fake it in casual conversation, provided their conversing with somebody else who knows even less.

Econ 101 is not the whole story. It's not on the same continent in which some country is home to a city whose local ballpark is hosting an away game for part of the story's farm team. Nothing, not a single thing, that you're taught in Econ 101 actually exists in the wild. That's why it's called Econ 101 and not, say, "Econ 983D (Prereq. Stats 339 and Stochastics 522)".

People need to quit saying that, is my point.
posted by mhoye at 4:12 PM on May 11, 2012 [6 favorites]


double block and bleed: "Price demand for gas is very inelastic. If someone has a house that they can't sell, lives 50 miles from work, can only get to work by car and can't carpool then they will pay whatever they have to to get to work."

And/or find another job, and/or lobby for better transit service, etc.

And for all those stuck on the agriculture subsidies, I suggest you watch the documentary "King Corn". In addition to talking about how much corn we eat, it gets into the nitty gritty of the subsidies for a while. As I recall, there are in fact support payments for growing corn. (as in you get paid a little extra for every acre you grow up to a point)
posted by wierdo at 4:18 PM on May 11, 2012


This should be a cross party issue. No more subsidies for oil (or agriculture.)
posted by lstanley at 12:02 on May 11 [4 favorites +] [!]
One of the more welcome -- and long-overdue, IMHO -- items in the new Farm Bill would replace virtually all price support programs with crop insurance. That makes a lot more sense, while still providing farmers with needed income protection in the case of catastrophic weather, etc.
posted by wintermind at 4:21 PM on May 11, 2012


So, for every 9 farmers out there, there's a bureaucrat.

We'd be better off if they left their desks and went out pulling weeds.
posted by Cool Papa Bell at 13:19 on May 11 [2 favorites +] [!]
Cool Papa Bell, a few thousand of us USDA employees are scientists. We help ensure that there is an affordable supply of safe foodstuffs.
posted by wintermind at 4:32 PM on May 11, 2012 [4 favorites]


You're forgetting all the driving that is necessarily over long distances. I'm thinking of the trucks that transport goods and raw materials around the country.

Long-haul trucking doesn't really have to exist at all. If we took a more "socialist" approach and spent our taxes on beefing up rail (which is really ideal for large areas), then all the long-haul transport could be by train to more local rail/truck transfer stations.

This is, like most of our problems, not a "we can't" situation, it's a "we won't" one.
posted by Benny Andajetz at 4:47 PM on May 11, 2012


Long-haul trucking doesn't really have to exist at all. If we took a more "socialist" approach and spent our taxes on beefing up rail (which is really ideal for large areas), then all the long-haul transport could be by train to more local rail/truck transfer stations.

Several years ago, I would have agreed. But then I read this Economist article in 2010:
America’s system of rail freight is the world’s best...

America’s railways are the mirror image of Europe’s. Europe has an impressive and growing network of high-speed passenger links, many of them international, like the Thalys service between Paris and Brussels or the Eurostar connecting London to the French and Belgian capitals. These are successful—although once the (off-balance-sheet) costs of building the tracks are counted, they need subsidies of billions of dollars a year. But, outside Germany and Switzerland, Europe’s freight rail services are a fragmented, lossmaking mess.

Amtrak’s passenger services are sparse compared with Europe’s. But America’s freight railways are one of the unsung transport successes of the past 30 years. They are universally recognised in the industry as the best in the world.
posted by nickrussell at 5:01 PM on May 11, 2012 [1 favorite]


Long-haul trucking doesn't really have to exist at all. If we took a more "socialist" approach and spent our taxes on beefing up rail...

Rail uses fuel too. We could do away with long-haul trucking if we just consumed products created close to us. In that scenario, urban centers would suffer the most. When was the last time you ate an orange grown in a huge metropolitan area? Does your major city have huge manufacturing plants? Ones that only rely on locally harvested resources?
posted by twoleftfeet at 5:03 PM on May 11, 2012 [2 favorites]


I'm thinking of the trucks that transport goods and raw materials around the country.

I don't think this is a big problem. For a start, when the topic is fuel price rises due to fuel taxes, then there is obvious capability to provide fuel tax breaks to long-haul industry if this is really a problem. And I don't think that's even necessary - the inflation it adds to goods is not large and it incentives other goods to compete on price by avoiding that inflation.
But more importantly, long-haul goods transport is just not a reason to avoid investment in better transit solutions for the vast majority.

I think the future of rail in the USA could be high-speed rail that cuts dependence on aircraft fuel, or else probably the same future we already have today. I agree that we don't really see rail replacing trucks - the dollar savings from fuel efficiency are probably not that great (for the people using trucks) next to the dollar savings of door-to-door delivery in one step, higher speed (not waiting for the right train, needing to be loaded, unloaded, etc), simpler logistics, etc.
posted by -harlequin- at 5:03 PM on May 11, 2012


dmayhood: we have chosen to have bad public transportation and to subsidize the private vehicle (which is itself a form of subsidy to the oil industry). It doesn't have to be that way.

No, it doesn't, but it's a complicated problem.

In Road to Ruin, A.Q. Mowbray, (sorry I can't find a reference with even a description) argued in 1969 (!) that it's not just subsidies to the auto manufacturing and oil industries, but a whole network of state-level funding for road-building, involving state legislatures and political support for job-creation projects throughout the US (I imagine it's similar here in Canada). In other words, these interrelated subsidies are so pervasive, and have such close ties to pork-barrel politics, that they're almost impossible to get rid of.

I don't even think that fixing this problem is "socialism", it's sensible budgeting for afford transportation.
posted by sneebler at 5:06 PM on May 11, 2012


A company like Exxon/Mobil with a US$9.45B profit last quarter shouldn't be raising prices. Shareholders (and I say this as someone who undoubtedly has a small slice somewhere in his 401(k) funds) should have a somewhat lower dividend when the subsidy teat is removed from E/M'd greedy lips.

Price is how supply and demand balance. The demand for energy is essentially infinite, while the supply is quite limited. Price is how the available supply is allocated into the economy.

You can force down prices, but if you do, there will be shortages. Right now, you can always get gas, you'll just pay more than you want to. If the oil companies dropped prices, even voluntarily, that would bring new buyers into the market, and some existing buyers would no longer be able to get gasoline. Supplies would become less consistent. The further the prices dropped, the harder gas would be to find, as more and more of it went to other countries that didn't have price caps.

The oil company profits are irrelevant. If you want prices to drop, you either need to decrease demand, or increase supply.

Stopping subsidies to the oil companies wouldn't do a damn thing to the price, either plus or minus, because supply and demand would still balance at the same point it does now. Giving them money, when they're already wildly profitable, is 100% pure stupidity.
posted by Malor at 5:13 PM on May 11, 2012


Eliminating subsidies would decrease profits for the oil companies, but they'd still be profitable. No one gives up a profitable industry. It's not like everyone won't do business unless profits are obscene.
posted by twoleftfeet at 5:25 PM on May 11, 2012


Rail uses fuel too. We could do away with long-haul trucking if we just consumed products created close to us.

Rail is much more economical than a bajillion tractor-trailers. And, yes, we have a very good freight rail system - it's actually been undergoing a bit of a renaissance the last few decades. But that doesn't mean it can't be vastly improved.
posted by Benny Andajetz at 5:43 PM on May 11, 2012


Cool Papa Bell: So, for every 9 farmers out there, there's a bureaucrat.

What, are you channeling Rush Limbaugh now?

First, your number of 960,000 farmers means people who own farms and claim that as their primary business. However that doesn't include farmers who also have other income nor corporations that produce about half of all food. The actual number of farms is more like 2 million and the number of people employed in farming is about 2.6 million.

Second is your bogus number of 100,000 bureaucrats. Are all USDA workers bureaucrats? One third of USDA workers are forest service employees who manage the 200 million acres of national forest and have nothing to do with farmers. Another large chunk manages the $78 billion SNAP Food Stamp program. Then there are the animal and plant inspectors that work the borders for imports. And also Food and Safety inspectors for meat and poultry.

So what about the Farm Service Agency that has offices around the country and are the people who actually deal directly with farmers -- about 5000. These are the "bureaucrats" you snidely talk about should be picking weeds. So really there are 5000 "bureaucrats" for 2 million farms or one for every 400.
posted by JackFlash at 6:33 PM on May 11, 2012 [14 favorites]


What about the argument that oil industry is one of the last few industries that actually keeps lots of high-quality, high-paying, and frequently union jobs in America?

Already the biggest growth markets for energy are in the emerging world, and of course labor is far cheaper there. Are subsidies worth it to keep energy companies invested in and creating jobs in the US?
posted by shivohum at 6:37 PM on May 11, 2012


then all the long-haul transport could be by train to more local rail/truck transfer stations

The problem there is that link from the rail line to the store. Most Walmarts aren't next to a railroad. So first you load your stuff into a truck, take it to station, wait for the train, load it onto the train, then from the destination load it into a second truck, then take the truck to the actual destination?

A bad idea, too slow and complex. A single truck can just take it from A to B.

I fucking love trains, but they're shit for consumer goods and food.
posted by Chekhovian at 6:43 PM on May 11, 2012


Thanks for the Mowbray link, sneebler. I found a brief description in Kirkus Reviews here. I will have to run the book down, along with several more recent books along the same lines.

I don't want to leave the impression that I am against Bernie Sanders' initiative. I agree with you that the appropriate response is complicated, and I certainly don't have the answer. I can only suggest, quite tentatively, the correct direction.

I think Sanders' approach definitely moves in the right direction, unless there is an overwhelming socially beneficial reason that we really do want the Koch brothers and their kind to have as much economic and political power as they do. I just find it wonderfully ironic that the left so often ends up demanding that the right live up to its own free market principles by acting more like free marketeers. It's kinda cute, if you think of it that way.

Still, I think it would be better politically, more intellectually honest, and far more helpful, for my side to propose a program that actually would deal in a more coherent way with the socially undesirable distortions of allowing oil companies to be so much richer than they need to be. We need done the job that they do (even acknowledging that we need to greatly reduce CO2 emissions), but I think we are paying far too high a price to them to do it.

I suspect that Sanders has no illusions that his initiative will pass. More likely, he will be satisfied just to draw attention to the hypocrisy of the US right in protecting subsidies to the petroleum industry. A win for him would have to be a surprise, and a damn good excuse for a great party. The kind with drinks and funny hats.
posted by dmayhood at 6:49 PM on May 11, 2012 [1 favorite]


Allow me to introduce you to the intermodal freight container

You don't have to load, unload and reload the freight itself. You load and unload the whole container from the train to the truck. Trains are capable of 500 ton-miles per gallon of diesel. Trucks can't come close to that.

I love the idea of an America with less sprawl, excellent public transportation and non-polluting local farms and factories making environmentally friendly food and widgets from locally sourced raw materials. Unfortunately, I've never seen any realistic plans for making any of these things happen that don't fall within the realm of pipe-dreams.

I also think its naive to think that Americans will completely uproot what most of them see as a comfortable way of living merely to ward off an environmental disaster that half of them don't believe in. Especially when it would require new taxes in an environment where most of our lawmakers have sworn undying fealty to their liege lord, Grover Norquist.
posted by double block and bleed at 7:20 PM on May 11, 2012 [1 favorite]


I don't want to leave the impression that I am against Bernie Sanders' initiative. I agree with you that the appropriate response is complicated, and I certainly don't have the answer.

Me neither. I'm pretty much for anything Bernie Sanders is for, and I think he's a great polititian. I just wanted to add my $0.02 about Mowbray because it speaks to why people like the Koch Bros. and the auto industry have so much real power in our society.
posted by sneebler at 7:31 PM on May 11, 2012


Chekhovian: " then all the long-haul transport could be by train to more local rail/truck transfer stations

The problem there is that link from the rail line to the store. Most Walmarts aren't next to a railroad. So first you load your stuff into a truck, take it to station, wait for the train, load it onto the train, then from the destination load it into a second truck, then take the truck to the actual destination?

A bad idea, too slow and complex. A single truck can just take it from A to B.

I fucking love trains, but they're shit for consumer goods and food.
"

How the hell do you think the stuff gets to the Wal-Mart distribution center? Thus far I have seen no evidence of Chinese magic causing the containers to appear in a puff of smoke at the regional distribution centers, ready to load onto trucks. What do you think is in those 20 mile long trains of double stacked containers constantly heading east?

Claiming that we can't do more of that is just asinine.

Also, long distance rail lines can easily be electrified, making it much easier to cut back even further on their carbon emissions. And relatively short distances from intermodal point to final destination makes electric delivery vehicles more practical.
posted by wierdo at 7:46 PM on May 11, 2012 [1 favorite]


db&b: I love the idea of an America with less sprawl, excellent public transportation and non-polluting local farms and factories making environmentally friendly food and widgets from locally sourced raw materials. Unfortunately, I've never seen any realistic plans for making any of these things happen that don't fall within the realm of pipe-dreams.

Yes, several of the transport-related arguments have been going on for years. I remember this exact discussion in the late 80's about rail vs. trucks, for example. And again, there are larger forces at work.
posted by sneebler at 7:48 PM on May 11, 2012


How the hell do you think the stuff gets to the Wal-Mart distribution center?

The cheapest way possible. When it involves moving lots of stuff for long distances, freight train is the choice. Up to that tipping point, it's truck.

Claiming that we can't do more of that is just asinine.

The problem with subsidies is that they're full of reasons why "we" must fund someone's pet projects. Thus, "we" all get to fund corn, sugar, petroleum and who knows what else.
posted by 2N2222 at 8:08 PM on May 11, 2012 [1 favorite]


This is flat out un-American. It only make sense that we should prop up polluting, multi-billion dollar industries with our tax dollars. If we don't gas prices might go up, and our lefty government would just waste the funds on schools, infrastructure, social security and health care. What a load of bunk! Why, many of our newly poor can barely afford to fill up their SUVs for the 3 hour commute to their minimum wage job as it is! We must give these handouts to the oil barons or our whole economy will suffer!

I'm so suck of stupid American politics. This country has lost both it's head and it's cojones. The principles this country was founded on today have become hollow lies people trot out to obscure the truth: the vultures are in control, and there's probably not a goddam thing anyone can, or will, do about it.
posted by nowhere man at 8:22 PM on May 11, 2012 [1 favorite]


Rail uses fuel too. We could do away with long-haul trucking if we just consumed products created close to us. In that scenario, urban centers would suffer the most. When was the last time you ate an orange grown in a huge metropolitan area? Does your major city have huge manufacturing plants? Ones that only rely on locally harvested resources?

Rail uses an order of magnitude less fuel per weight of freight than trucks. It isn't always practical, since the freight can only go where the rails go. But it is about as efficient as possible for what it does.

The eat local thing sound nice on one hand, but it is terrible on another. There aren't many places in the world where a variety of foods can be produced locally. And even then, you can only get those foods when they are in season.
posted by gjc at 7:44 AM on May 12, 2012


When was the last time you ate an orange grown in a huge metropolitan area? Does your major city have huge manufacturing plants? Ones that only rely on locally harvested resources?

Are you suggesting there are local communities that, using their own natural resources, could reproduce a modicum of our standard of living? Between my house, car and computer, I see natural resources from all over the world that are required to reproduce them.

Locally sourced food is one thing, but if you don't have copper or local oil, you're pretty limited in terms of what you're going to be able to manufacture locally.
posted by Rodrigo Lamaitre at 12:12 PM on May 12, 2012


What Sanders lists in his own PDF are not subsidies, they are tax deductions. Nearly all are absolutely legitimate tax deductions as used by other businesses in their own way. Accelerated depreciation is not a subsidy. Deducting unarguably legitimate costs of doing business is not a subsidy. I see a thing or three in there that I would eliminate, but nothing to work up any anger about.

The oil industry pays more in taxes, Federal, State, and Local, than it counts as profits.

I would like to see Sanders and actual voters go after and kill actual subsidies - government handouts of taxpayer money - thrown at "green companies" which collapse even before the companies receive all of the committed handout.

But since Sanders doesn't know the difference between a "subsidy" and a "corrupt handout of taxpayer money to fake companies which will collapse in months", I write Sanders off as a crackpot at least and possibly totally corrupt and/or insane. His total of "All fossil fuel subsidies - $115.355 Billion over ten years", falsely labeled subsidies, is just laughable, in the state of this country $15.7 Trillion in debt right this second.
posted by caclwmr4 at 9:01 PM on May 12, 2012


What Sanders lists in his own PDF are not subsidies, they are tax deductions. Nearly all are absolutely legitimate tax deductions as used by other businesses in their own way

Everyone can click and read the PDF and consider for themselves, but most of these appear to be ending deductions, grants, credits or loopholes in the royalty arrangements paid for use of public land, specifically for oil, coal and fossil fuel exploration, extraction and use. They have no inherent claim to be "absolutely legitimate"

Why again do want to spend another $100 billion over the next 10 years investing public money in getting more carbon dioxide up into the atmosphere?
posted by crayz at 10:07 PM on May 12, 2012 [1 favorite]


caclwmr4: But since Sanders doesn't know the difference between a "subsidy" and a "corrupt handout of taxpayer money to fake companies which will collapse in months"

I think Sanders knows very well what a subsidy is. Unfortunately you do not know the difference between a tax deduction and a tax credit. Most of these subsidies are tax credits. A tax credit is very valuable because it is a direct reduction of taxes. A tax deduction is a reduction of income which then reduces your taxes by a fraction that is equal to your tax rate, which is the normal way expenses are credited to a company.

These are not "legitimate tax deductions used by businesses in their own way." If only they were just deductions. Instead they are tax credits which are much more valuable and definitely not business as usual. Most businesses do not get tax credits for their expenses. Tax credits are direct subsidies to oil companies.

Before you start calling someone else a crackpot you should learn a little about the tax system instead of making a fool of yourself demonstrating your ignorance. Sanders understands the difference between a tax deduction and a tax credit, but you obviously do not.
posted by JackFlash at 10:38 PM on May 12, 2012 [2 favorites]


What an insanely corrupt country. Grossly speaking, not per capita.
posted by Twang at 11:47 PM on May 12, 2012 [1 favorite]


Wretch729 writes "you have to be prepared to defend the 'gas should cost more' argument."

I'll defend it; oil production is peaking while demand is increasing from emerging markets. It's a lot better to force the changes to stuff like sprawl while we've got a bunch of cheap energy to fund and smooth out the trnsition than it will be to experience the undamped shocks that will be forced on the system if we just let things proceed at their own whim.

exogenous writes "The USDA also regulates slaughterhouses. I'm happy to pay a small tax to avoid food poisoning from unregulated agribusiness."

The USDA is also quite willing to help people who don't have farm income as their primary income. And stuff like research into plant diseases help even the back yard gardener.

Chekhovian writes "The problem there is that link from the rail line to the store. Most Walmarts aren't next to a railroad. So first you load your stuff into a truck, take it to station, wait for the train, load it onto the train, then from the destination load it into a second truck, then take the truck to the actual destination?"A bad idea, too slow and complex. A single truck can just take it from A to B."I fucking love trains, but they're shit for consumer goods and food."

Walmarts et. al. not being next to rail lines is definitely a problem but not an insurmountable one. Increasing trucking costs are going to move them back to the system we had a 100 years ago where anyone doing serious shipping had their own spur either private or shared with others. That was the only sane way to do warehousing and places that didn't have rail access had increased cost of living. The redevelopment of industrial and commercial areas for residential use in places with easy to develop rail lines is going to seen as a crazy blunder.
posted by Mitheral at 12:53 AM on May 13, 2012


A "tax deduction" is not a subsidy. A "tax credit" is not a subsidy.

JackFlash, if you had any purpose in your message other than to ignorantly attack me, I do not see it.

You should learn a definition of a subsidy, which I, helpfully, did provide in my first message here. Read it. Learn it.

And Sanders is a crackpot.
posted by caclwmr4 at 1:56 PM on May 13, 2012


caclwmr4: "A "tax deduction" is not a subsidy. A "tax credit" is not a subsidy."

Many tax credits are essentially subsidies. Congress often describes them as such when they're being debated. I'm sorry your ideology doesn't allow you to see the real world, but that doesn't mean the rest of us have to live in fantasy land with you.

There are also programs that pay subsidies independently of the tax code, but that doesn't make the subsidies in the tax code any less of a subsidy. If you really can't see that we live in a country that practices socialism for the top end of the income distribution, you must be willfully blind. "Socialize the losses and privatize the gains" isn't just some thing OWSers say to rile each other up. It's what actually happens.
posted by wierdo at 2:18 PM on May 13, 2012


caclwmr4, I will use simple numbers so that maybe even you can understand. Assume a company earns $200, has expenses of $100 and a tax rate of 35%.

The normal way that is handled is by a tax deduction of expenses. The expenses are subtracted from earnings to give a net profit of $100 which results in an income tax of $35. This is the way most companies pay their taxes.

Now consider an oil company with a tax credit. Expenses are not deducted from earnings so that net profit is $200 resulting in a tax of $70. But instead expenses are now a tax credit refund of $100. So with taxes of $70 and a refund of $100, the taxpayers actually end up paying the oil company $30. Yes the taxpayers pay oil companies to drill wells.

So with the exact same income and expenses, a normal company, using the normal tax deduction, would pay $35 in taxes and the oil company, because of the special tax credit, gets refunded $30. The $65 difference is a direct subsidy of the oil company by taxpayers.

I hope you have learned something about the difference between tax deductions and tax credits and why a tax credit is a subsidy.

And now you owe Mr. Sanders an apology.
posted by JackFlash at 4:57 PM on May 13, 2012 [2 favorites]


FFS

I used to fear for this country. But, since some time before I started participating here, I decided the country is doomed, and right here came even more proof.

And Sanders is a crackpot.
posted by caclwmr4 at 10:06 PM on May 13, 2012


I used to fear for this country. But, since some time before I started participating here, I decided the country is doomed, and right here came even more proof.

So you don't have an argument. Please explain why tax credits, as opposed to deductions, are not subsidies, or else admit that you were wrong.
posted by shivohum at 6:53 AM on May 14, 2012 [1 favorite]


Does anyone know a way for a non-subscriber to see the WSJ article caclwmr4 linked to? I'd be interested to read it.
posted by Wretch729 at 8:15 AM on May 14, 2012


Sorry about that. You can go to google, type or paste exactly in the search box

Big Oil, Bigger Taxes wall street journal

and that should bring up the whole article for anyone. I can't link to it that way directly.
posted by caclwmr4 at 3:06 PM on May 14, 2012


A subsidy is the government taking someone else's money (taxpayer money) and giving it to someone else who never earned it and probably never could.

A tax credit is a company keeping ITS OWN MONEY THAT IT COLLECTED ITSELF through various tax laws or shenanigans or even corruption. I might kill some of those tax credits myself if I could. Which doesn't change the fact that it starts as the company's own money.

With this government and its crackpots calling tax deductions and tax credits "subsidies", and calling unproductive subsidies "investments", and calling a job that existed before and still exists a "saved job!!", I understand that many people are misled and indoctrinated.

It is a shame.
posted by caclwmr4 at 3:18 PM on May 14, 2012


Its a little weird though to think of it in terms that simple. After all shouldn't the government being clawing back nearly all of the returns above the E&P industry's cost of capital?

It might no be a direct subsidy, but a tax code that incentivizes a certain set of behaviors is not the free market at work.
posted by JPD at 3:38 PM on May 14, 2012 [1 favorite]


For the oil companies, the oil company "taxes" claimed by crackpots conveniently never include the Federal, State, and sometimes Local taxes collected right at the pump or on delivery. Only IRS-collected taxes are considered. It is all just an accounting fiction, by the way the oil industry evolved from its beginnings in the US. If you are paying $3.999 at the gasoline pump, 48.9 cents of that (average) is Fed, State and possibly Local taxes right off the top that the oil companies don't even count as revenue.

The oil companies could collect the full pump price directly to them, then be taxed per gallon at headquarters and pay those taxes through the IRS. All prices would be the same. I hope this is clear enough?

Considering that if oil/energy/gasoline taxes were collected that usual way, the oil companies pay over 50% taxes, right now.

Someone should be paying "their fair share" but the oil energy companies are profitable and are paying more than "their fair share".

Crackpots need to be exposed and thrown out.
posted by caclwmr4 at 3:54 PM on May 14, 2012


Dude you are sounding like the crackpot here. The reason why those taxes are so high is because the assets are held by the state in the common good. You shouldn't be able to earn a 20% ROC pumping oil out of the ground. The E&P industry should be a cost of capital business.

It doesn't matter what the total sum of taxes is, the only thing that matters is that the marginal return on capital is kept at an appropriate level.
posted by JPD at 4:02 PM on May 14, 2012


If you are paying $3.999 at the gasoline pump, 48.9 cents of that (average) is Fed, State and possibly Local taxes right off the top that the oil companies don't even count as revenue.

Considering the cost of our foreign policy in the middle east, including two wars with Iraq, it seems fair to me that the government apply a tax directly to oil/gasoline usage. It probably should be much higher than $.49 considering what is actually spent by the U.S. government to keep the price of oil down, and to invest in more sustainably sources of energy.
posted by Golden Eternity at 4:04 PM on May 14, 2012 [1 favorite]


For the oil companies, the oil company "taxes" claimed by crackpots conveniently never include the Federal, State, and sometimes Local taxes collected right at the pump or on delivery.

Those are sales taxes paid by consumers; why the smeg would we credit the oil companies with paying them anymore than we'd credit walmart or the 7-11 with paying sales tax.
posted by Mitheral at 4:51 PM on May 14, 2012 [1 favorite]


JPG, not sure exactly what you mean. The leases and royalties are or should be bid on the open market, and Uncle gets what they are worth. Or should. Corruption in government affecting such things is a different at least equal issue. Or, if you mean domestic E&P should be regulated on a cost-plus basis, well, until the 1970s, that is what kept domestic prices down, drained out the easy oil in the US, and led directly to huge land yachts, then to US gasoline "shortages" and odd/even gas lines. (There's no such thing as a shortage, the domestic price was government cost-plus/price-controlled and was not allowed to rise to supply/demand when the world price skyrocketed.)

GE, we don't have to spend a penny in the Middle East. Those countries are not our responsibility. Whatever dictator runs through the region would sell the oil on the open market as fast as he could to build more monuments to himself and whatever. And, it would be far easier for US to deal with a single dictator for the whole region, or whichever one assassinates the last every couple months as they fight over the oil riches. Yes, it is that simple. We saw a pilot show with Kuwait. The reasons we are still there are other things, which could - should - be a different thread. If we just simply left the ME, the world oil price would fall 25% in a week and more in a few months. But it is not about oil. Uncle Government should not be making "investments" in energy, the private market always has and always will.

M, the at-pump taxes were allegedly user fees for building the roads and road infrastructure. Those taxes were designed for and used to be used only for that, but more and more that money is used for general purposes. Some States are trying to add the general State sales tax onto pump prices.

A.S.i.a.c.
posted by caclwmr4 at 5:32 PM on May 14, 2012 [1 favorite]


Those are sales taxes paid by consumers; why the smeg would we credit the oil companies with paying them anymore than we'd credit walmart or the 7-11 with paying sales tax.

That's not the half of it. In addition to sales taxes they don't even pay, caclwmr4's goofy Wall Street Journal article even counts royalties paid to drill on land they don't own as taxes. I guess this means that if I lease a truck for my business I should count that as a tax.
posted by JackFlash at 5:35 PM on May 14, 2012


caclwmr4 writes "the at-pump taxes were allegedly user fees for building the roads and road infrastructure. Those taxes were designed for and used to be used only for that, but more and more that money is used for general purposes. Some States are trying to add the general State sales tax onto pump prices."

Be that as it may it's still consumers paying it not the oil companies.
posted by Mitheral at 6:40 PM on May 14, 2012


M, yes, and tell that to Sanders.
posted by caclwmr4 at 9:58 PM on May 14, 2012


Good grief, what a ridiculous argument. You have to do some pretty amazing semantic gymnastics to try to seriously argue that tax credits aren't government subsidies and that Senator Sanders is somehow so ignorant of how the tax code works that his ideas can be dismissed as crackpottery.

If the tax code incentivizes activity by getting other people to bear the tax burden so you are not required to pay as much taxes, and you are thereby able to claim a tax deduction or, even more, a CREDIT, that further reduces the cost (and therefore increases your profit) of your business activity, then yes, it's a freaking subsidy, already.


Crackpots need to be exposed and thrown out.

Well, there, at least, we are in agreement.
posted by darkstar at 5:03 PM on May 15, 2012




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