Really, Rep. Yarmuth? This sounds like the most hair-brained idea we’ve heard in quite a while and we frankly had higher expectations of our local leadership. John Yarmuth announced this week that he’s introducing a bill in Congress to end federal subsidies to oil companies that are approaching $40 billion a year. Now while this might be something we could get behind, it’s how he plans to use the American taxpayer’s money wrestled back from big oil that really makes no sense.
According to LEO Weekly‘s Fatlip blog (a newspaper the Congressman founded many years ago), Yarmuth gathered supporters and the press at a picturesque local gas station to detail his plan. There’s a lot that could be done with $40 billion in this country, but Yarmuth decided its highest and best use would be to send it to the cars of America.
He proposed that each of the 250 million or so vehicles in this country be the beneficiary of the subsidy savings to the tune of a one-time payment of $160 per registered vehicle. Not the American taxpayers who have paid the subsidy, not American families, but the cars that some of those taxpayers choose to drive. If you don’t own a car, too bad.
According to Fatlip:
The legislation would instruct the Internal Revenue Service and the Secretary of the Treasury to work with states to oversee and distribute the rebates to individuals and businesses for each vehicle owned or leased for over one year.
Instead of pandering to motorist’s fears of rising gas prices with a free cash handout, perhaps our leaders should be offering real leadership in addressing America’s addiction to oil instead of wasting our time and money with ideas like subsidizing car ownership that are only going to make solving the problem more difficult.
Agreed. Not very good progressive public policy. Period.
Good post. It is amazing how many politicians aren’t able to put it all together, the relationship between supply and demand of a resource that is finite. Oil is getting more expensive to extract, this is due to all the cheap stuff being pumped already. So in a supply and demand curve, if you give everyone money for gas, it will increase demand. Since our resource is finite and has little short term swing (referred to the ability to increase production which Saudi Arabia used to do), the price will go up.
The way out of this is better land use planning making our lives closer to the things we need to transport ourselves to, improve transit service, build safe streets for people to walk and bike. Easy until you try and pry the steering wheel out of someones cold dead hands and politics sets in, mucking up everything.
Oh I believe Yarmuth can put it all together and understands everything at play here. I just have to assume that it is an unfortunate, quasi-populist pander which he must see as politically necessary to help end the oil company subsidies. It would put those opposed to ending the subsidies in a tigher spot for opposition–how could one oppose ending giveaways to oil companies in exchange for giving cash to ordinary Americans especially in times of economic hardship?!
His proposal would get no traction politically if he were to suggest earmarking $ saved for sustainable infrastructure projects, alternative energy etc. Then he would be an anti-business (they’re the job creators afterall!!!ha), tree-hugging lefty undeserving of serious consideration.
But, to propose giving it directly to (just) car owners, ostensibly to put right in their gas tanks is just silly. Thanks, but no thanks John. That’s just a slightly more indirect handout to the oil companies.
I’m sure I am going to start some arguments about this, but I don’t understand why Oil Companies are any less deserving of tax breaks than any other company in America? Is it because of the “Record Profits”? Does that mean ANY company that is profitable should not be allowed Tax Incentives? What do you think the companies are doing with those profits? Putting them in a pile and lighting them on fire? They give them as dividends to their shareholder who spend the dividends on other things (boosting the economy). Also, how much do the oil companies make on a gallon of gas? Last I checked, the worst case scenario was about 10-12 cents per gallon. Government (in Kentucky at least) adds about 45-50 cents per gallon. Want to help the consumer? Lower the taxes on gas! What has made Oil Companies so much more evil than any other corporation (which probably 85% of working Americans work for)?
@Rob – The crux is that oil’s days are numbered. It is going to only get more expensive. It’s dirty environmentally. If we are going to be supporting companies, it should be with an aim towards achieving efficiency goals, creating less waste, less pollution.
We shouldn’t be subsidizing bad. If those companies wanted to come up with a way to make cleaner energy, then lets seed some R&D investment. I have no problem subsidizing that. I think there is a place for incentives and subsidies, just not for business as usual, especially when it isn’t working out as planned.
@Scott – I think calling it a subsidy is a misnomer. It sounds like the government is cutting a check to oil companies. In fact, all they are doing is letting them keep money they already made.
Can you imagine if the government told you that they were going to do you a favor, they decided not to raise your taxes this year, then announced that they were subsidizing you by doing so. The government didn’t do a darn thing to help you, they just chose not to hurt you and called it a “subsidy”.
Maybe I read this wrong but this is a stimulus to the 250 million cars’ owners paid for by ending a subsidy to the oil companies. In this fledgling economy is it bad to inject even a small amount of money into people’s wallet at the expense of the oil companies?
@Nick C – Is it bad? No. Will it do anything? No. If the subsidies are taken away, do you think the oil companies will just say “Oh darn! There went some of our money.” and leave it at that? No. They will just pass the cost on to all refining and then everything you have that depends on petroleum (not just gas) will go up in price. All for about an extra 150.00 in your pocket one time.
@Rob – That $150 give-away would be better spent trying to wean us off oil, either through better transit which will reduce demand, or through cleaner sources of energy, which requires R&D money. $150 bucks barely pays for some people’s cable bill for a month or a week of groceries for a family. It might rescue someone for a bit, but the oil companies will pass that cost on as Rob implied.
I think we as a country ALREADY subsidize automobile use, given that road work already costs far more than our government takes in in vehicle-specific taxes (keep in mind that there is no revenue stream labeled “road tax,” although there is a segment of the fuel taxation that is earmarked specifically for the construction and maintenance of Interstate-level roads–which, again, falls short of being enough to do the job).
By subsidizing individuals instead of oil companies, we are just making it more direct.
If we as a country withdraw the tax breaks, the oil companies will raise their prices to assure the same profit levels to their shareholders as before.
And those of us who subsidize at a greater rate (by not using cars as much) will pay a higher price to do so than before.
It almost makes me want to drive a car through the front door of a building or something, but I’d first have to find a car I’d be willing to sacrifice (don’t want to spend money that way).
@Rob -So then we must keep the subsidy to the oil companies in fear of them raising prices? The common consensus is that alternatives to the petroleum fueled auto will only be developed in a viable and widespread way when people can no longer afford filling up their tanks. Ending the gas subsidy will help bring that about in the long run thus encouraging more healthy and sustainable transport. In the short run, shifting the subsidy to individuals will help real people and the weak economy. Its a win, win.
I think Rob is correct on one point: eliminating oil industry subsidies would result in the loss of profit being passed on to the consumer. The revenue from subsidies is built into the profit margin and neither stockholders nor corporations can just sit back and say “whoops – there it goes”. That is not the nature of a profit-oriented enterprise. On the other hand, current trends & information suggest that higher oil & gas prices drive domestic demand down, which would mean that the oil industry would (might), to an extent, recoup the subsidy loss through higher prices overseas, i.e. China, Brazil, and India.