Mandate Watch: Obama Backs Off Promise to Pass Windfall Profits Tax on Big Oil

Good news and bad news in the last day. The good news: Barack Obama has appointed a NAFTA critic, Rep. Xavier Becerra, as the next U.S. Trade Representative (more on that here). The bad news is this just off the Reuters wire:

CHICAGO/WASHINGTON (Reuters) - President-elect Barack Obama is not planning to implement a windfall profit tax on oil companies because prices have dropped below $80 a barrel, an aide said on Tuesday...

Obama, who signaled early in his campaign for the White House that he would take an active approach to oil markets as president, had planned to use the revenue from a windfall profits tax to fund a tax rebate for low- and middle-income families struggling with high energy prices.

Between this move and the move to wait to repeal the Bush tax cuts for the wealthy, it seems like the Obama team is buying into the right-wing frame that raising any taxes - even those on the richest citizens and wealthiest corporations - is bad for the economy. Of course, that frame is debunked by history. And while sure, it's OK to rack up deficits so as to spend our way out of the economic crisis, it's sorta silly to ignore the tax moves that could be implemented to limit those deficits where possible.

Oh, and one last thing - if oil prices are down and oil industry profits are truly down, what's the harm in passing a windfall profits tax? Even if you buy the right-wing nonsense about a windfall profits tax "hurting the industry" or "hurting the economy" when it is applied, if there really are no windfall profits to tax, then it won't be applied.

That's what a windfall profits tax really is - a safety valve regulation against profiteering, and one that can raise needed revenues when profiteering occurs. If there is supposedly no profiteering occurring, then what's the supposed harm? There is none even if you ignore history and believe taxing the wealthy/big corporations automatically hurts an economy. That is, unless you are ready to go down another right-wing rathole and argue that a windfall profits tax will somehow prevent energy companies from more energy exploration. But, then, if you are that far out on the fringe, then I guess your not interested in any facts whatsoever...

Comments

[JulieSA]

Windfall oil profit taxes always drive down the oil supply. Obama is smart. I'm very relieved that it looks like he won't be keeping any of his campaign promises.

[UncommonSenz]

oh yeah... and you have what to base that ludicrous statement on?

Oh wait, I forgot- it's already been decided he failed even though he hasn't even taken office yet.

[Yermammy]

Of course not, Julie. With you (as per Bush), everything has to be inverted and turned upside down to make any sense. You have reached new lows of being a sore loser.

[quantumspin]

We may as well have McCain/Palin as president, seeing how Obama is climbing down on almost all his campaign promises.

This reminds me of a Pelosi/Reid White House---cave to business interests while the middle class drowns.

We will all be sorry we worked so hard for Obama. We could have saved our time and money and let the GOP have the election and nothing would be different from what I'm seeing.

Obama is proving to be a banking/Wall Street guy, not someone for the people he tricked into supporting him.

[ErikW65]

Stop spinning, you're making ME dizzy!

Obama's campaign said that they would not pursue a tax on profits that no longer exist. That is all.

[allonfla]

AND WHAT DOES THIS LINK PROVE? http://tpmelectioncentral.talkingpointsmemo.com/2008/12/obama_spokesperson_reaffirms_c.php

[texanna]

I wonder exactly what it will take for Mr. Obama's most ardent supporters to take umbrage with him? Or, will they, like those hardcore Bush supporters, never see anything but great?

[UncommonSenz]

It will take a TRACK RECORD to judge. How about that... you know waiting until he actually does something we can judge?

[jcephrie]

Aren't campaign promises a track record of sorts?

[Yermammy]

From the looks of things, Barack will have a LOT more zombie-like apologists. When people tell me to "calm down" or "let him do his job", I just have to laugh at them, because without the die hard activism that me and many others, he never would have jumped the huge speedbump that is the Hillary Queen Machine Inc. I was his earliest supporter and I will be his first dissenter too! :) Just doing my job as a patriotic citizen!

[UncommonSenz]

NO criticizing BEFORE he has done anything is not patriotic.

It is annoying and juvenile..­. but whatever floats your boat.

And trying to label anyone who has the common sense to judge his administration on what it actually does as a "zombie-like apologist" simply confirms your position as not ready to sit at the adult table.

There will be plenty of critics honestly debating his actual performance. THAT is patriotic. claiming he has already screwed up before he takes office is merely delusional.

[MossyOak]

It was probably take something cogent... like letting him take office FIRST.

[ErikW65]

I wonder what it would take for you to see that this is an effort to manufacture controversy.

[allonfla]

I wonder exactly what it will take for Texanna to read with scrutiny? Do you always blindly believe what you read? http://tpmelectioncentral.talkingpointsmemo.com/2008/12/obama_spokesperson_reaffirms_c.php

[mjt218]

"If there is supposedly no profiteering occurring, then what's the supposed harm?"

That's fine, the issue is that even at $140/barrel oil there is no factual evidence that oil companies were profiteering. They sold product that they took the risk to produce at the price the market set which consumers were willing to pay.

Dictonaries define profiteering as making money off of unethical behavior. Selling your product at the price the market is demanding it is not unethical in my book.

[UncommonSenz]

But they have set the barriers to entry so high, that you do not have true competition.

One of the main things driving the high prices we had was that we had maxed out refinery capacity- so we could not turn anymore oil into gas than we were, yet the demand was higher.

In a normal economic system, one company would say, "gee, I'll make the investment in a new refinery because then I will be able to sell more gas". Instead, they all agree to NOT build a refinery and the price remains high (and so do profit). That is manipulation, and if they had not shut out the market to competition, it would correct itself.

[JulieSA]

There's a refining shortage, but not for the reason you mention. I's because no one wants to live near them, and the best place for them is near ports, which has become valuable residential and recreational real estate now. It's a NIMBY issue.

[mjt218]

What refining shortage? The price of gasoline was high because the price of crude oil was high. It had nothing to do with refining capacity. When have you ever competed with someone to get the last gas from a gas station (SE US this fall was a pipeline failure, unrelated to price increases over the summer)?

We have plenty of refinery capacity. New refineries are not built, old refineries are expanded to produce more (NIMBY and infrastructure investments).

I'll agree that barriers to entry in building refineries are high, but oil companies lost money on refining when crude prices were at their peak this summer. They already operate on extremely thin margins and more competition won't drive these margins down more than a cent or two maximum. Exxon makes a majority of its money producing and selling crude oil to be refined, not making refined products.

[LewDan]

Exactly! Its not like with the economy tanking, two wars, and millions of homes and jobs being lost that he can't take the time to jam meaningless legislation through in case we actually survive the depression and are making enough money that the oil industry can afford to once again gouge us on gas prices! How incredibly short-sighted. I'm with you! We want CHANGE, d@mn it! (Brother, can you spare a dime?)

[canucklivinginUSA]

Mr. Sirota, do you understand the definition of strategy? Base on your latest blogs, I would say the answer is no. Do you truly think the PE would waste political capital when he is not in office yet? He knows is in for a battle against the disgruntled GOP and considering the fact that we didn't get 60, is going to have to thread lightly. Does that mean is not going to tax the rich or impose that windfall tax? No, it just mean that there is a time to do this, just not when we are trying to push for a huge stimulus. Do you want to reform healthcare, the middle tax cut and green job to go through Congress? Then, you are going to have to plan extremely and try to avoid a potential filibuster effort from the GOP. Seriously, you seemed to be a smart guy(I say seem, but so far you have proven otherwise), but you obviously need to look through the dictionary for the definition of strategy.

[Yermammy]

And you, my fine feathered friend, need to look in same dictionary and determine what "political capitol" IS, silly. Just like a wise investment, if Barack uses it NOW to establish POWER, it will pay DIVIDENDS. This ain't no dang Price is Right! WTF? This is Truth or CONSEQUENCES. Now, I've never said you "seem like a smart guy". And now you know :)

[UncommonSenz]

Your failure to grasp even the most basic points of something explained to you is remarkable!

He has a finite number of things he can accomplish. Many of the most important ones will require the goodwill of folks on BOTH sides of the aisle. If he comes out of the gates, pursues something that YOU YOURSELF ADMIT would have zero net affect right now, and then alienates the very folks he needs to get the other stuff passed, he will have wasted this rare opportunity to actually get things done.

If, on the other hand, he waits until those things can be passed WITHOUT alienating the coalition (and will actually have an effect) he will need to build, he can get the other things done AND get this done later.

I can see where game shows might be the only metaphors you could relate to, but try to read the post BEFORE commenting, m'kay?

[jsarets]

Just because spending is more effective fiscal stimulus than tax cuts doesn't mean we shouldn't do both, and it certainly doesn't mean that we should raise production taxes as workers face the prospect of mass layoffs in this difficult economic climate.

Why push a "safety valve" windfall tax while the price of oil is plummeting? It will be easier to pass, if necessary, when the price is rising again. To make a move now would be the worst possible use of political capital on this issue.

Clinton raised the top tax rate, and shortly afterward the economy boomed. Post hoc, ergo propter hoc. Of course tax policy was the cause of the boom. Surely it had nothing to do with the commercialization of the Internet, loose monetary policy, or the start of the housing bubble inflation, all of which occurred in and around 1994.

[canucklivinginUSA]

Considering the fact that prices are bound to go back up, I am sure the idea of windfall tax return on the table.

[Yermammy]

You didn't read the damned article at all, did you? As applied to any gosh darned boiler on the planet, a safety valve doesn't "pop off" until there's enough pressure (profits). So why in hell do you think putting one on now would make a damned bit of difference? If you follow my logic, actually, now would be the BEST time to put on a "valve" while the "pressure" is low. Capech?

[UncommonSenz]

You didn't read his comment- but he (unlike you) clearly understands the implications of the article.

Jsarets did not argue that putting the windfall tax on now would have some effect. we ALL agree that it would have no effect, OK?

What he did say was that TRYING to get it passed right now would be a horrible use of political capital. And it would all be wasted on something that wouldn't generate ANY revenue right now anyway- so it is just an academic exercise that will piss off the right, waste time and energy, and weaken th chance for making progress on everything else that needs fixing.

Is that clear enough for you- it will do nothing right now and be impossible to pass. If we wait, it will do something for us AND be much easier to pass. Pretty simple choice if you actually think about it.

[ProudLiberalDan]

For those of us on the left who never thought Obama was anything else other than a DLC Democrat who speaks well, I can't say I'm particularly disappointed or surprised.

I think a lot of my progressive brethren projected onto the blank slate of Obama their hopes without looking at his action actions or his weak, non-universal health care proposal as evidence of what he would actually do in office.

Instead of FDR in 1932, we've really got Clinton in 1992 without the scandals, which though what I was hoping for, is still completely better than the alternative McCain/Pailn administration and I don't regret my vote for Obama at all.

Disappointed progressives just weren't paying attention. When I posted on these blogs warning that Obama is DLC in spirit if not in name, I was pilloried by some progressives who believed what they wanted to believe. They forgot the oldest rule in the book, don't let fascination with style get in the way of substance.

Whatever, we have the REAL second Clinton Presidency. I am not thrilled, but I can't say I'm disappointed, but I didn't expect anything else. I don't feel betrayed, because Obama is doing everything he said he would do in the way he said he would do it. This is why I supported Kucinich and not Obama in the primaries.

[UncommonSenz]

Great- you were able to condem his entire presidency BEFORE he even takes office. Bravo!

Hey, why stop at that-

let's start criticizing the NEXT president (whomever that will be) for failing already as well. No sense being bothered by the ACTUAL results... we can try and convict them RIGHT NOW!!!!

Yay for hyperbolic nonsensical ranting!!!! Yay for leaps to ridiculous conclusions with no evidence!!! Yay to unreal expectations and rushing to foolish judgements!!!

It is so nice not to have to worry about reality...

[ProudLiberalDan]

Uh, I am not the one ranting angrily here. I am calming stating that I paid attention to his actions during the campaign and correctly discerned how he would govern as President. So far, he is governing exactly like I expected.

As a progressive, I find it disappointing, but not a betrayal for I see Obama doing exactly what he said he would do.

As for "reality", there are some Obama supporters on these boards who cannot seem to emotionally handle a whiff of dissent or criticism of their hero. If that is the case, it is going to be a long eight years for them.

And, whether he has taken office or not, he as already started making Presidential decisions and taken Presidential actions.

"hyperbolic nonsensical ranting"? Pot, meet kettle.

[marignymitch]

Big Oil apparently has a monster Dept of Blackmail. It has a near perfect record of bending politicians to its will.

[canucklivinginUSA]

And on what are you basing this comment?

[Yermammy]

I think you're closer to the truth than you know. We need to BREAK them and make the industry serve the Government. I care less if you call that socialist. Alaska gets the treatment (more like bribes), so why not make them do OUR bidding? Of course, I'm dreaming, as there's no one in D.C. brave enough to take them on.

[Yermammy]

Obama worshippers be damned, I'm pissed off at this. What happened to the bright line that separated Barack from your normal "Democratic" hack just running for a job to split up the spoils? This is NOT change. I see why I've been so cynical and haven't voted since Carter was in office. I came out this time because he had me convinced he would CHANGE the way the cesspool that is Washington works. I reveled in the thought of him sticking it to the big industry pigs and fight for our rights, what with him being a Constitutional scholar. It's starting to look to me he just studied it so he could abuse it. I'm fighting mad over the last eight years of lawlessness and I'm not going to take it from the "blue" side either. He started tap dancing on my nerves when he voted for this new FISA Bill (and telling me "tough sh#t" to boot) and now he puts neoliberals on his security team. NOW he won't even take on the filthy rich bastards that got us here in the first place. No, this isn't looking to peachy. Not at ALL.

[luvangelHussein330]

Your getting yourself all out of sorts over what? Hear-say..­.did Obama give a press confrence to say any of this at all?

[darthdarcy]

David; are you suggesting we were played, lied to, mislead, used, betrayed..­.?

I knew you were a smart guy...!

[Obamaismyguy]

I love our guy, but am confused as to why raising taxes on the rich (as promoted in his campaign) and taxing windfall profits - with a stipulation that they cannot raise prices to compensate for the tax - should not be done as soon as possible. The rich are still MUCH richer than the middle class and the oil companies certainly aren't going to fail because of this.

I work closely with several "rich" guys and they all voted for Obama. They say they have plenty and don't mind helping the people who helped them get to where they are - their workers. This attitude is what America is all about and I think more of the rich feel that way than we think - especially Democrats.

Although there will always be people who are adverse to paying more, even though they are rich, what are they going to do - move out of the country? We in the middle class don't have a choice. We pay our taxes even though sometimes we can't pay our mortgage. The rich don't have that problem.

[UncommonSenz]

Because, as much as YOU may like those ideas, they would not get through this economic environment.

Tax hikes are ALWAYS a tough sell. Tax hikes in the middle of an economic crisis are impossible. He could not get it through congress, and if he tried, he would loose the moderates (on both sides of the aisle) he will need for health care, environmental policy, the new green initiative and other projects.

I am not debating the merit of raising taxes on the wealthy to help out the middle class. What I am debating that it is remotely possible to do it NOW, and that trying to do so would give repubs the ammo to say "see, we told you he didn't know what he was doing" and try and block everything else he tries to get done.

You have to pick the timing for each battle- and raising taxes right now ignores political reality and limits his ability to build coalitions to get the other stuff done.

[XLintLuvR]

It is unfortunate that you missed the biggest piece of this...his was never an intention to raise taxes. It was just to allow the Bush tax cuts to expire or to repeal the tax cuts. This was not going to suddenly raise the burden to the middle class. It was to lessen the burden. Without understanding that one important fact, many of the easily duped red states actually believed that it was our future President's intention to raise taxes on a partifular group. One which laughably, they weren't in and once again, wouldn't have been affected negatively by.

[vippy]

Well not all are doing that because the clause exists that they can take their money off-shore and hide it. There is the February 08 case of Liechtenstein and then UBS came out with a list of
those who hide their taxes. No wonder only 1/5 of the taxes collected come from rich people
(per IRS Website 2003).

[natriley]

Don't get over involved with the tax issue. There is no sign Obama is buying into no-tax policy. He is avoiding a big fight over hot button tax issues. It can be attributed to the willingness of the wealthy to give Obama a chance to prove himself. It isn't smart to pick a fight with allies. Obama is not making gratuitous mistakes

The signs of change are everywhere. The recent agreement with Iraq has troops out of Iraqi cities by June. It forbids U.S. military searches without an Iraqi warrant. Europe just kyboshed the idea of Georgia and the Ukraine joining NATO. Obama's committment to diplomatic engagement over confrontation suggest that the European Anti-Missile site will not happen. Better relations with Russia will be a big change and could spillover into relations with Iran.

Congress is set to send the States a relief package. Fiscal aid that is supported by Republican governors. This would be a dramatic return to the policies of the Democratic era.

Most importantly Barack Obama is welcoming serious, high powered leaders into his government. It means he is confident that he can make decisions. The more competent people who join the administration the greater the prospect that it will accomplish many things.

Obama's promise of change is being fulfilled.

[loper2008]

A lot of rumors have spread that the Obama Team has come out to later deny, so far this sounds like a rumor.

[UncommonSenz]

Yet more hand wringing and moaning before anything has happened yet.

First off, trying to pass a windfall tax is going to be tough enough when oil prices rebound back into sky high territory (which they will in time). It is impossible right now- and that is a political reality. If the author can't see even that, then I think the rest of his "analysis" is suspect.

Secondly, there is a mile long list of things on fire right now that need to be fixed. "what's the harm in passing a windfall profits tax?" That shows you are asking the wrong question, by assuming it will pass. What is the harm in trying to pass it now? He wastes political capital and coalition building that could be put to better use in one of the million other fights he will be waging. There is harm in trying, right now, and just because writers like this can't see the big picture doesn't mean Obama can't.

Lastly, timing is everything. If he pushes this idea now, it will not resonate the way it will if he waited a year or so and the obscene profits return. This also applies to the tax cut repeal. I swear, the tone deaf nature of this post is astounding. I am glad Obama sees the big picture, even if the author cannot.

[kathy001]

Thanks for saying this, UncommonSenz. I could not have said it half so well. I'm constantly astounded by the finger-pointing over every little nit-picky detail before the man even takes office and the broader picture begins to take shape. But this issue, well, this just takes the cake for the biggest waste of moaning and groaning of all.

[UncommonSenz]

We are bombarded daily by how each appointment means he has "turned his back" on this group or that promise. By even acknowledging that in this unprecedented economic turmoil, some plans may not be able to be done right NOW, apparently that is another sign that the "Obama team is buying into the right-wing frame".

All of this before he has had even 1 day in office.

I do have to say that this post, above all the others, seems almost Bush-like in its complete lack of awareness of reality.

I think there are a lot more "lets wait and see what he ACTUALLY does before flinging ourselves off a cliff" types out there- but bloggers have to cut against that grain to have something to cry about right now.