Assessing Obama and Romney Energy Economics

Ken Silverstein | Aug 13, 2012

Share/Save  

When it comes to re-generating the economy, who has the better plan? Is it President Obama, who is using government’s levers to increase consumer demand and consumer confidence? Or, is it GOP-hopeful Mitt Romney, who would reduce taxes across the board?

Both candidates, in fact, say that they support a simpler tax system whereby a plethora of corporate and personal loopholes would be closed in exchange for reduced overall rates. But, generally, the agreement ends there.

President Obama asserts that the Bush-era tax cuts caused federal revenues to drop off while his hands-off approach to regulating big business helped create the Great Recession. His prescription: Funneling nearly $1 trillion in stimulus monies to keep the economy liquid and commerce flowing -- billions of which went to green energy and smart grid enterprises.

The fairest tax system, he adds, is one in which the top corporate tax rate is reduced from 35 percent to 28 percent -- to be paid in part by cutting or eliminating the breaks and subsidies given to the fossil fuel industry. Repealing those tax preferences, he says, would not jeopardize the incentive to produce oil or gas.

In its most elementary form, the president’s proposals would eliminate specific tax breaks given to oil, gas and coal to the tune of about $41 billion over 10 years. Some of that money would be shifted over to help out renewable energy, including making permanent the production tax credit for wind that will expire in December.

“The tax code currently subsidizes oil and gas production through tax expenditures that provide preferences for these industries over others,” reads the president’s 2013 corporate tax reform plan. “The Framework would repeal tax preferences available for fossil fuels.” Such breaks, it adds, distort markets and serve to play down the strengths of green energy.

Romney responds to such policies by saying that his business background makes him exceptionally well-qualified to lead a recovery. He would reduce the tax rates for all Americans and offset those federal revenues by closing tax breaks given to both business and consumers -- loopholes that he has yet to define. By giving people more money to spend, they would then pump that back into the economy.

Blending Vision

A Romney administration would propose reducing the top income tax rate from 35 to 28 percent while also cutting that of the lowest earners from 10 percent to 8 percent, all for individuals. For corporations, it would drop from a high of 35 percent to 25 percent. Now that he has selected Rep. Paul Ryan from Wisconsin as his running mate, he would likely incorporate some of the details from his proposed 2013 budget into his economic plan.

That plan passed the Republican-led U.S. House of Representatives in the spring. That blueprint is critical of what Ryan calls “crony capitalism” while also demanding a cut back in “corporate welfare.” And while that budget would target the tax breaks given to green energy and it specifically list such things as the wind energy’s production tax credit, it is less vocal about those breaks long-awarded to the fossil fuel sector.

The running mates’ economic visions could be blended. Romney says that his plan is “revenue neutral.” However, because he does not say which loopholes would be closed -- it could be those affecting oil companies or it could be those impacting mortgage interest deductions -- critics are skeptical. For years, analysts have been talking about shutting down these things. But in practice, the clamor is too loud.

Finally, Romney would eliminate the capital gains and dividend tax paid on stock-oriented investments for those married couples making less than $200,000 a year. Obama, meanwhile, would raise such taxes for those earning more than $1 million annually. Utilities, of course, attract those investors seeking stable dividend payments and would be opposed to any increase in those taxes, especially at a time when they will be required to make investments in new infrastructure.

The Brookings Institution’s and Urban Institute's Tax Policy Center dissected the Romney plan. Its analysts included two former economic advisors to both Bush 11 and Obama. They concluded that the tax cuts provided to high-income individuals would result in higher taxes on those in both the middle and lower brackets -- unless the campaign specifies its offsets, or where it intends to close off existing loopholes. 

The presidential debate centers on the economy and jobs. President Obama and Mitt Romney have different visions, with one using government’s resources to induce confidence and to create a larger green economy and the other adjusting the tax code to spur growth and reduce deficits.


EnergyBiz Insider has been awarded the Gold for Original Web Commentary presented by the American Society of Business Press Editors. The column is also the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has been named one of the Top Economics Journalists by Wall Street Economists.

Twitter: @Ken_Silverstein

energybizinsider@energycentral.com

Related Topics

Comments

Romney on Coal

When you say Romney is for coal, are you saying since he started running for president or when he was governor? Good soundbites of Romney talking about how coal is "killing" voters in Mass, but that was before he started running for president. Now it is more convenient to be pro-coal I guess. Romney also used to support tax credits to build wind projects in his stand and now he thinks they are a bad idea. Remind us of which Romney it is you are talking about?

2012 Romney vs. Obama's failed over-the-top subsidies to wind

Much has been learned.  

1.  Wind does not produce jobs.  Not in Europe, not here.  

2. Federal subsidies to wind and solar are completely out of line.  http://www.instituteforenergyresearch.org/wp-content/uploads/2011/08/Federal-Electric-Subsidies.png   

Per MWH: coal: $.64; nat. gas: $.64; hydro:$ .82; nuclear$:3.14;geotherm:$12.85; WIND: $56.29; solar: $775.64.    Keep in mind that Wind and solar provide less than 2% of our national electricity. 

 

Now why would any citizen promote this give-away of tax dollars?  Why would anyone vote for a president that guaranteed that electricity prices would up?  Not anyone dependent on manufacturing, not anyone who wants to keep grocery prices in check.  I can't think of anyone, except those who get the handouts.  Are there more of those people, the takers, than those who pay?

The real problem for either candidate is our Class system

 Class in the U.S. is an explosive issue, like sex or religion: you're not supposed to talk about it, even though you're probably thinking about how you're doing in relation to your neighbors or others. - Richard Wolff

Wolff describes how our economy became thoroughly counterproductive, and why neither candidate is likely to do anything to correct this condition.

http://www.thesunmagazine.org/issues/434/capitalism_and_its_discontents?page=1

How much "help" for renewables?

Very little information on Romney's economic energy policies in this article. For more see: http://www.aboutmittromney.com/energy.htm. Romney believes in "affordable and reliable," needed baseload generation investments instead of questionable windmills and solar that cannot stand alone and provide less than 2% of our generation. Obama's irresponsible and unethical funding of companies like Solyndra and political games in promoting Cape Wind is "picking winners and losers" and must be ended now. He says it is "leveling the playing field"!! Give me a break: renewables get more than 50% more subsidies than all other fuels put together according to the EIA when you look at MWH produced. Way too much money shelled out to cronies for very little value to consumers. Obama considers coal a four letter word. Romney doesn't. Romney favors eliminating the PTC, a pathetic and demanding drain on our resources until kingdom come for no good reason! Obama wants to spend away, more and more, until we become so dependent on our lenders, we will fall in a major economic hole. There is no justification for spending billions or trillions on renewable sources that cannot provide needed, reliable and economic electricity generation.

Obama vs Romney on Energy Economics

"Bush 11"--hopefully they meant Bush II.

Continuing to compare deductions from taxable income to production tax credits, cash grants-in-lieu, and other government handouts to "green" energy is deceptive.  To get a deduction from taxable income for business expenses means you actually have to spend money on services or products to get the exemption--ie fuel, contract services, wages and benefits for employees, purchases of mineral rights, maintenance etc.  Once a "green" facility is built the owner gets to deduct expenses such as O&M but he does not have to spend a dime to get a tax credit.  While there is some ongoing O&M, it is not at the level thermal power plants have nor does a wind or solar farm have any fuel bill.  Wind and solar do little to support supply side businesses.  Giving them a $1 of PTC is would be equivalent to a fossil or nuclear generator adding $2.86 to their taxable income.  To do so, they must spend somewhere in the neighborhood of $29 to $35 on fuel, services etc.  All that activity creates and maintains jobs within their own staffs, within the ranks of their suppliers, and within the ranks of contract service industries.  The sales transactions involved create sales tax revenues for the local and state governments.  The wages and corporate revenues generate income tax revenues.  Green energy PTCs and other federal incentive programs require that other taxpayers, not involved in green energy, provide the funds to give to the green energy suppliers.

Revenue Neutral

No analyses out there shows Romney's plan to be revenue neutral. He won't say exactly what he will cut because he does not want to make any upset at him before the election. Congress may go along with tax cuts for people but I doubt he can win a majority to eliminate the major loopholes he needs to make up the difference. Romney needs to lead and tell us what loopholes he plans to close. 

"Government Resources"

"President Obama and Mitt Romney have different visions, with one using government’s resources to induce confidence and to create a larger green economy and the other adjusting the tax code to spur growth and reduce deficits."

Government has no resources until it takes them, through taxes and fees, from those who have produced the resources. The Obama position is that government, the "smartest folks in the room", can spend the resources more effectively and efficiently than the people who produced those resources. This position ignores the FACT that the "smartest folks in the room" have produced nothing.

"The Brookings Institution’s and Urban Institute's Tax Policy Center dissected the Romney plan. Its analysts included two former economic advisors to both Bush 11 and Obama. They concluded that the tax cuts provided to high-income individuals would result in higher taxes on those in both the middle and lower brackets -- unless the campaign specifies its offsets, or where it intends to close off existing loopholes." 

Who was "Bush 11"? I was unaware of a Bush presidency until 41 and 43. Also, note that 47% of "taxpayers" pay no income tax. Raising tax rates on their "taxable income" to 100% would make no difference. I have yet to see a numerical definition, or even a rational definition, of "fair share" as it relates to the income taxes of the 53% of "taxpayers" who actually pay all federal income taxes. I would have thought that 100% of income taxes paid would at least meet, if not exceed, any reasonable definition of "fair".