A Further Perspective

Architects of Economic Ruin

They can take our jobs, but they'll never take… our… diet soda.

By 3.20.12

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Like a delusional fast food customer who orders a triple bacon cheeseburger and smugly asks for a "diet" soda, Obama administration policies that aim to promote economic health actually threaten economic ruin for the country.

Consider the president's insistence on cutting so-called "subsidies" for the oil and natural gas industry. The president pledges to eliminate Section 199 of the Tax Code -- but for oil companies only. The section 199 manufacturer's deduction has been a central focus in trips to Iowa, Wisconsin, and other states where he touts it as a jobs creating measure. So, is the deduction not creating oil and natural gas industry jobs? Is the president right in wanting to eliminate it for the U.S. oil and natural gas industry? According to new research, the answer is a resounding no.

A recent analysis by the World Economic Forum indicated that oil and natural gas companies, though targeted for punitive elimination of the manufacturer's deduction, created 9 percent of all new U.S. jobs in 2011. Those included 37,000 new, direct jobs, and 111,000 indirect jobs in related service fields and contracting positions. This total of nearly 150,000 employment opportunities does not include, as most such studies do, another set of jobs for store clerks and others who are hired because of the influx of new oil industry jobs. In a year when the president is scrambling to defend his policies (to get re-elected in an "Economy Election") his rancor against an industry creating so many jobs seems reckless, or worse.

Further, another study, by economist and University of Pennsylvania Wharton Senior Fellow Dr. Joseph Mason, uses government modeling to find the economic impact if the selected tax deductions for oil and natural gas companies are eliminated. The results aren't pretty: 155,000 lost jobs and over $340 billion in unrealized economic output. The tax barrage on these U.S. companies highlights this administration's fundamental misunderstanding of the way the economy grows.

As former Congressman Harold Ford Jr. (D-TN) recently pointed out on MSNBC's "Morning Joe" program, Americans get excited about cutting edge companies like Apple, but "ExxonMobil's a great U.S. company, as well, and we seem very shy to talk about."

In fact, the country's big corporations -- including oil and natural gas companies -- are a major driver of the economy; fueling every home and industry, creating jobs, innovating profusely and providing a large proportion of U.S. tax revenues. Moreover the federal Energy Information Administration (EIA) reports that the oil industry paid $35.7 billion in corporate income taxes in 2009, the last year for which the government has released that data. Large corporations like ExxonMobil, GE, Ford, or any other company that employs 5,000 or more typically account for 70 percent of U.S. exports. Ironically, one of the president's major goals for economic revival has been to increase exports, something targeted tax increases would stymie. These same companies are responsible for 69 percent of private sector research and development spending, the investment which makes U.S. products and services a must-have for people around the globe. And they employ 32 percent of the workforce. But Washington "experts" don't appreciate the impact of these major economic players.

From the disastrous passage and implementation of "Obamacare" to the refusal to reduce the corporate tax rate to a reasonable 25 percent, Washington has let down the unemployed and underemployed across the nation. Imposing higher financial demands on businesses leaves them less competitive against their international rivals, with less revenue to invest in growth opportunities, to expand operations, and, ultimately, to hire new employees. When these companies are succeeding, Americans find employment, earn money, and spend it to reinvigorate our economy.

On the other hand, obtuse policy decisions that hamper large businesses with higher federal costs push jobs overseas or eliminate them altogether. Such "leadership" is as self-delusional (but more dangerous for the country) as buying a diet soda to go with your triple bacon cheeseburger.

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About the Author

Jack Rafuse, a former energy advisor to the Nixon administration, is principal of the Rafuse Organization, an energy, trade, and national security consulting group.