Republicans call Democrats bluff on oil tax deductions. Will Kaine change his tune?

The Senate overwhelmingly agreed yesterday to take up debate on a proposal to eliminate the federal tax deductions of five integrated oil companies. While this might please Tim Kaine, who thinks such a bill will “…reduce our reliance [sic] on high oil prices,” even the New York Times called it a case of Republicans calling the Democrats’ bluff:

The Republican decision to vote for debating the bill, written by Senator Robert Menendez, Democrat of New Jersey, actually put the Democrats into a tricky position. Assuming that the oil tax bill would not be taken up, Mr. Reid also called for a vote on Tuesday to proceed to a politically tricky bill to overhaul the postal system and save it from insolvency. Now it will be Democrats who have to decide whether to drop the Menendez bill they brought up and move to a bill that calls for eliminating Saturday mail service and closing scores of postal facilities – or to stay on oil and keep Republican attacks in the spotlight.

So the oil tax bill was really just theater — scripted in large part, according to the Times, by John Podesta of the Center for American Progress and pollster Geoff Garin:

A memo circulated this weekend by John Podesta, a Democratic strategist, and Geoff Garin, a Democratic pollster, said Democrats could win the energy debate by focusing on “the oil companies’ efforts to manipulate the price and supply of gasoline” and by playing offense with bills to end tax subsidies, crack down on speculation, improve vehicle efficiency and prevent oil companies from exporting oil pumped out of public land and waters.

Echoing the Podesta-Garin memo almost verbatim, the Senate majority leader, Harry Reid of Nevada, said Monday: “Oil companies are making money hand over fist. When the price of a gallon of gas goes up by a single penny, quarterly profits for the five major oil companies go up by $200 million. Yet this country continues to give taxpayer dollars to some of the most profitable corporations in the world – corporations that don’t need our help. It’s time to end this careless corporate welfare.”

Poll tested, focused-grouped and carefully tailored. That Harry Reid would regurgitate the Podest-Garin talking points is not a shock. That Tim Kaine eagerly parrots them as well tells us exactly what sort of senator he would be: obedient, if not supine, to his master’s voice.

While this mummery was playing out on Capitol Hill yesterday, I was taking part in a conference call with the American Petroleum Institute’s Tax Policy Manager Stephen Comstock on the subject of gas prices. I asked about the big oil tax bill, and Mr. Kaine’s eager endorsement of it. The response I got takes up most of this post-conference post. Snip:

“There’s a simple answer to getting more government revenue from the oil and natural gas industry – allow us to produce more of the energy our nation and our economy will need for decades to come right here at home. Not only will this create jobs and generate government revenue, it will send a strong signal to energy markets that could put downward pressure on fuel prices.”

Now I realize this runs counter to the oft-cited AP story that purports to show that increased domestic production has no effect on oil prices. That’s a neat trick, considering if the U.S. stopped producing any oil at home, the global price would…yes, rise. Probably substantially.

Then we also have this report from a Citi that predicts the domestic fossil fuel boom is on our doorstep. Under their “good case” scenario:

* Citi analysts expect real GDP to increase by 2.0 to 3.3 percent—$370 to $624 billion—as a consequence of new production, a decline in energy consumption, and the economic activity generated along with this.

* 3.6 million new jobs could be created by 2020 as a consequence of increased energy production. Of those new jobs, some 600,000 would probably be devoted to oil and gas extraction while 1.1 million would be generated to meet demand in related industrial and manufacturing sectors. National unemployment could subsequently decline by up to 1.1 percent.

* The current account deficit could shrink by 80 to 90 percent due to energy exports at an already low level of production. Citi analysts predict that the current account balance could move from -3.0 percent of GDP to -0.6 percent of GDP by 2020.

* The value of the dollar could jump by 1.6 to 5.4 percent, primarily based on changes in the current account balance.

* What’s more, risks to the U.S.—in particular, geopolitical risks—would dramatically decrease. A domestic or continental energy boom would diminish the importance of conflict within and tensions involving the Middle East, as the U.S. would become significantly more energy independent.

* Finally, Citi analysts note that this could lead to a considerable decline in oil prices.

There’s that pesky price decline thing again. And while these are just predictions, they could become certainties if the political class is willing to allow the oil industry to get even busier. Instead, we have a Democratic Senate playing charades on oil company tax policy, with Tim Kaine happily joining in the fun.

Then again, Mr. Kaine is merely being the good understudy, following the script as written and hitting his marks without question. With the Democrats’ bluff called, we’ll see whether he continues to stick to his assigned lines, or asks for rewrite.

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