THE BLOG
05/03/2011 10:25 pm ET | Updated Jul 03, 2011

No Hobgoblins Here!

Washington, D.C. -- "A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines." So wrote Ralph Waldo Emerson, but consistency, foolish or otherwise, is something that the current Republican Congressional leadership wants very little part of.

This won't be the week, it turns out, that Congress votes on whether we need to continue giving oil companies and foreign petro-states like Saudi Arabia billions of dollars in tax breaks. Senate Majority Leader Reid says he can't yet schedule floor time, but the bill will come up soon. But it's clear that in both the House and the Senate the issue of throwing our money at the richest companies and countries in the world is not going away.

Meanwhile it is amusing to watch the Republicans try to parse the words "deficit reduction" and "fiscal conservatism" to somehow obscure the reality that they are about to choose between their announced principles (and voters) on the one hand and their biggest campaign donors on the other. (Oil companies give 77 percent of their campaign gifts to Republicans.)

Rush Limbaugh doesn't see why this should be hard for them. When, briefly, House Speaker Boehner announced that he thought Big Oil ought to pay its "fair share" of the nation's tax bill, Limbaugh grumped,  "If I were a political leader and a Republican, and the Democrats were hellbent on ending Big Oil subsidies and raising taxes on Big Oil in circumstances like we are in now .... I would defend Big Oil! Especially now."

Nor does one of the leading Republicans on the House Commerce Committee. Texas Representative "Smoky Joe" Barton is very clear on the concept that Big Oil, including the biggest oil company of them all, can't make it in a free market. ExxonMobil, Barton argues, couldn't survive without government subsidies, which, after all, do enable the company to be generous with its friends -- Barton received $156,870 from the oil industry in 2010 alone.

The oil industry's traditional friends in the Beltway crowd are trying to make this choice easier by arguing that these giveaways really aren't subsidies at all -- that, in fact, making the oil industry pay taxes would amount to raising its taxes, something Republicans should never support. In a recent dialogue hosted by National Journal, for example, Jack Gerard, the CEO of the American Petroleum Institute, blandy asserted "The government does not 'dole out dollars' to oil and natural gas companies, because this industry receives no subsidies."  Bernard Weinstein of Southern Methodist University claims that what the oil industry gets are not subsidies, they are "incentives": "Incentives are another tool used by government to encourage domestic energy production, but these can hardly be described as handouts." (Except of course, when they are provided to wind and solar, whose tax breaks Weinstein unhesitatingly describes as "subsidies.") Charles Drevna of the National Refiners Association boldly claims, "Subsidies, Tax Deductions are Different."

In the interests of encouraging Republican members of Congress to consider embracing at least a wee, tiny hobgoblin, and perhaps going along with the suggestion by House budget hawk Paul Ryan that oil and gas giveaways ought to at least be on the budget-balancing table, here's a primer on free markets:

In a real market, three rules apply:

1) Own what you sell. (Otherwise it's fencing.)

2) Pay for what you take. (Don't shoplift.)

3) You can choose what you buy. (The alternative is communism.)

Energy markets violate all three principles. Most aren't real markets. (Don't take my word for it. Both Jack Welch and Jeff Immelt have deplored the lack of real markets in energy.) Massey Coal dumps its mining wastes into streams it doesn't own. BP isn't legally liable and thus doesn't pay for the livelihoods and sales it ruined for oystermen in the Gulf. The people of Bangla Desh have never agreed to have their rice paddies flooded by rising sea levels -- they don't choose what they get.

These market distortions aren't trivial -- they are the biggest part of the profits nominally posted by coal and oil. The public health costs of burning coal in the United States are almost certainly larger than the entire economic value of the coal mining and burning industry. Sulfur emissions alone cost us over $100 billion every year. The single largest subsidy we give to the oil industry doesn't even end up with its shareholders. We allow Saudi Arabia, Venezuela, and Nigeria to pretend that the royalties they charge U.S. oil companies operating on their territory are actually income taxes -- and then the U.S. Treasury rebates about one-third of those royalties, so that American taxpayers are actually subsidizing not only Big Oil, but the Saudi treasury as well.

In most states, a businessman who wants to put solar cells on his warehouse can't sell the power he generates -- the local utility has a government monopoly to protect it from competition from its own customers. The only states where new nuclear power plants are being built are states where ratepayers, not shareholders, must assume the entire risk that the power company will fail to complete the project. When Florida stripped its power companies of that privilege ("construction work in progress," it's called), Florida power companies canceled their nukes.

When one industrial sector -- oil and coal -- doesn't pay the same taxes that other businesses shell out, it's a handout. The oil industry has historically argued that it deserved this handout, because it's in a business much riskier than, say, pouring steel or making cars. But if we look back at the past 40 years, the big oil companies are all still around, in one form or another. The oil business, for the big guys, is a lot less risky than steel or autos. (Meanwhile, many manufacturing companies went bankrupt.)

If oil and coal paid for everything they took, including the landscapes they foul; if they had to own our lungs before dumping toxics into them; and if we got to choose what we bought from them (including a stable or chaotic climate), then we would have real energy markets.

We're a long way from that moment, and oil and coal and their Beltway allies are not going to help us get there. So the most sensible thing to do is to modestly underwrite good things that we don't have enough of -- like renewable energy and clean air and water -- and start collecting the same taxes that everyone else pays from the dirty industries that are giving us too much of things that we don't want: foreign oil dependence, air pollution, dirty water, and climate disruption.

Can you imagine the shouts of protest if we sent BP and Peabody Coal even a fraction of the bill for the fires in Texas, the tornadoes in the southeast, and the floods in the Mississippi Valley? People who don't pay their bills shouldn't keep asking for handouts. They're encouraging the rest of us to start asking questions.

Why not ask your favorite Tea Party member of the House or Senate where he or she stands on bailing out Big Oil and Coal?