The Horrors! Dems Propose Spending to End Dependence on Foreign Oil

The fiscal conservatism frequently trumpeted by the mainstream media mixes incurious stupidity with gross hypocrisy.

The anger that led to this diatribe began Thursday while listening to NPR and hearing its correspondent describe Sen. Barack Obama's "green jobs" program as costing "$150 billion -- that billion with a B."

Then came Washington Post columnist David Ignatius this morning with a column fretting that Obama had "called for a $150 billion program to develop 'green collar' jobs and new energy sources. Meanwhile, to fix all the highways and bridges of our automotive society, he proposed a National Infrastructure Reinvestment Bank that would spend $60 billion over 10 years. Obama," sniffed Ignatius, "should be pressed on whether these big programs are affordable for an economy that appears to be in a tailspin."

Forget for a moment that there are only two time-tested ways to manage an economy in recession: either lower interest rates to encourage investment (monetary policy) or stimulate demand directly through government spending (fiscal policy). Ben Bernanke's Fed is belatedly doing the former. Is Ignatius suggesting a return to fiscal probity as the antidote to hard times? That was Herbert Hoover's position, and even FDR's in the run-up to the 1932 election, but it has been generally conceded in the intervening years that those views were outmoded. President Bush and Congress just agreed on giving cash grants to consumers to help pull the economy out of its tailspin. As Richard Nixon put it in the early 1970s, "we're all Keynesians now."

But let's put these particular proposals -- green jobs and infrastructure (which are really two sides of the same coin if the infrastructure program is properly designed) -- in perspective. These are ten-year programs, so their annual cost would be $21 billion combined. Let's compare that to what President Bush is spending in Iraq. For readers edification over the next nine months (until election day), I have added the National Priorities Project's "Cost of the War in Iraq" clock to my website. Within a few weeks, the total will surpass $500 billion or about $100 billion per year.

May I suggest to media pundits and reporters that the next time they are motivated to complain about the high cost of Democratic programs to end our reliance on foreign oil or repair our deteriorated infrastructure (remember that Minnesota bridge across the Mississippi that fell down?), the proper comparison is the war, and that a mere 20 percent reduction in the cost of the war will "pay" for it without any increase in taxes.

But, hey, I'm a fiscal conservative, too. I think we should raise money to pay for war or infrastructure investments (and I think a green jobs program properly structured should be considered one: investment in solar cell, windmill, hydroelectric and geothermal electricity production through tax credits and grants will reduce electricity costs over the long run).

As with any investment whose payback comes over a long period of time (like owning a home), the proper way to pay for these programs is debt. A $210 billion program over 10 years will cost about $2 billion a year in bond payments in the first year rising gradually to $20 billion a year by year 10 and then continuing for the next 20 years before gradually declining.

How might we pay for this? Here's a suggestion. The federal gasoline tax, now at 18.4 cents a gallon (state taxes vary but the combined tax rate on average is 45.9 cents a gallon) raised $39.4 billion last year for the highway trust fund. Without canceling a single bridge to nowhere, a two-cent increase in the federal gas tax would raise over $4 billion a year -- more than enough to pay for both programs plus give a $20 annual rebate to low- and moderate-income households that might be unduly burdened by this new tax (20 gallons per week times two cents times 50 weeks a year equals $20). In a market where the $3-per-gallon gasoline price fluctuates by a dime or more each week, how fiscally irresponsible is a two-cent federal add-on?

Or, we could peer a little harder at that $3 price. Earlier this month, ExxonMobil reported that it earned over $40 billion in 2007, shattering all previous oil industry records. Profits for the entire industry last year soared over $100 billion. During the late 1970s energy "crisis," the government slapped a windfall profits tax on industry that in today's dollars raised a peak of $23 billion in 1981. A windfall profits tax of comparable size (about 20 percent of profits) would raise enough money to fund both programs.

The windfall profits tax was phased out by President Reagan in 1987, and the course to our current predicament -- foreign oil dependence, endless wars in the Middle East, and collapsing infrastructure -- was set. Yet the presidential candidates who would propose faint half-measures to deal with these realities (like Obama's 10-year, $210 billion program aimed at energy independence and infrastructure repair) are scorned by the pundits for their fiscal irresponsibility.

Who's really the irresponsible one here?

Posted by gooznews at February 17, 2008 08:54 AM