Until this February, I had no idea that we had an "assistant secretary of energy for fossil energy," although it turns out there's been one for decades. What does an ASOEFFE do? The current and ninth occupant of this position, Carl Michael Smith, helpfully provided a job description in a January 30 speech to the Independent Oil and Gas Association of West Virginia. His role, he said, is to figure out "how best to utilize taxpayer dollars to the benefit of industry."
Like so many Bush appointees, Smith has a long résumé of prior service -- president of the Oklahoma Independent Petroleum Association, oil driller, chairman of the Southern States Energy Board's Coal and Advanced Power Systems Committee, secretary of energy for Oklahoma, and lawyer for oil companies. He also has some notably counterfactual views.
"Our tax code is not real favorable to the petroleum and pipeline sector of our industry," Smith told his West Virginia audience. That's a real whopper. The unsurprising truth is that the petroleum and pipeline industry is the lowest-taxed industry in America. A study of corporate annual reports by the Institute on Taxation and Economic Policy found that in 1998 oil and pipeline companies paid only 5.7 percent of their U.S. profits in federal income taxes. In fact, half of the oil and pipeline companies surveyed, including Enron, paid no income tax at all and instead received outright tax rebates.
A former Enron manager recently had this to say about his company to The Washington Post: "The ingrained philosophy was, me first, money counts and the government should eliminate my taxes. That's all they cared about." In calling for what he oddly styles a "good, sane tax policy," our assistant secretary of energy for fossil energy seems to agree.
Bush's "What, Me Worry?" Budget
Last year, President Bush persuaded a majority in Congress and much of the press and public that supposedly huge looming budget surpluses offered the opportunity to enact a massive tax cut and nevertheless provide for expanded public services and elimination of the national debt. Of course, almost anybody with even half a brain knew that this was a pipe dream. This column, for example, went so far as to point out that under plausible predictions about spending and revenues there would be "hardly any surplus left at all outside of Social Security and Medicare" over the upcoming decade -- even without a tax cut.
Well, taxes were cut anyway and now the morning-after headache has set in. Even assuming big reductions in domestic programs (other than homeland security) and no new tax cuts beyond those already passed, the administration concedes that, leaving aside Social Security and Medicare, we face $1.3 trillion in deficits from fiscal 2002 through fiscal 2012. Obviously, last year's $1.3-trillion tax cut, along with the $400 billion or so in interest that will be racked up because of new debt, explains more than all of that.
So what does President Bush propose in the face of these gigantic deficit projections? Should we reconsider last year's tax reductions? Certainly not. Instead, Bush's budget calls for still more tax cuts, to the tune of $730 billion over the next decade. These include a corporate "stimulus" package, resurrection of some expired or soon-to-expire corporate tax loopholes, a potpourri of new tax breaks for various activities, and, most important, $343 billion to extend last year's tax cuts past their 2010 "sunset." By the way, that's essentially just the one-year cost of going beyond the sunset; the price tag over the following decade is about $4 trillion.
Counting its new tax-cut proposals and the added interest payments they will require, the administration predicts that from 2002 to 2012 the federal government will spend a staggering $2.2 trillion more than it takes in, outside of Social Security and Medicare -- an estimate that's almost certainly optimistic. But don't worry, we're told. We can cover the shortfall by raiding the senior citizens' trust funds. After all, Social Security and Medicare over the next decade will have a surplus of $3.2 trillion that's ripe for the picking.
The administration makes no bones about the fact that it wants to raid the trust funds to pay for its tax cuts. Indeed, it boldly argues that betraying its promise not to do so simply buttresses the case for Social Security privatization. "The only truly effective way to preserve a Social Security surplus is to put it safely beyond the grasp of those who would spend it for other purposes, by depositing it into personal accounts," says the administration's latest economic report.
Mortgaging our future and shifting how we pay for government -- away from the progressive income tax and toward the regressive payroll tax -- are the essence of the administration's budget. Will the public actually tolerate this?