In mid-May, the Senate considered a proposal to end some of the subsidies for oil and gas companies that cost taxpayers $4 billion a year. Though a majority of the Senate voted to support this idea, it failed to get the 60 votes needed to end a filibuster. But ending these subsidies should still be a part of our drive to rein in the budget deficit.
If oil and gas companies were struggling, if jobs were at risk, if ending these subsidies threatened to increase the price families have to pay for gasoline or fuel oil, if it would create a drag on our fragile economic recovery – if any of those things were true, this might be a closer call.
But large oil companies, far from struggling, are massively profitable. Experts – and the oil companies’ own lobbyists – tell us that this proposal will not affect gas prices. Struggling families and small businesses will not pay more because we end these subsidies. Oil production, and therefore the jobs it creates, will not decline. And by ending them, we can help close a budget deficit we all agree is a significant problem.
Let’s look at gas prices first. Prices at the pump are hurting Michigan families. Ending these subsidies won’t alter the economics of oil prices. I and many of my colleagues fear that speculation in oil markets is boosting the price of oil, and subsidies have nothing to do with that. The nonpartisan Congressional Research Service, and even the chief tax expert for the American Petroleum Institute, a trade group for the oil industry, have said that ending these subsidies would not affect the global economics of oil. That’s because, while $4 billion a year in subsidies sounds like a lot to you and me, it’s small relative to the massive global marketplace for oil.
It is also small relative to the profits oil companies have reaped. The five companies that would be affected by the proposal to end these handouts made a combined $76 billion in profit in 2010. From 2001 to 2010, their combined profit approaches $1 trillion. With oil prices sky-high for the foreseeable future, these record profits are likely to continue. These companies do not need taxpayer assistance.
And at the same time, the money we spend helping them is increasing the budget deficit – a deficit that some of my colleagues say is such a severe problem that we must make dramatic reductions in health care for our seniors, support for our college students, Head Start for our youngest students and other draconian cuts. We can’t continue tax handouts to hugely profitable companies, on one hand, while threatening big cuts to important programs on the other.
We must address our deficit problem. But if we’re to get serious about it, we need to eliminate unnecessary tax breaks, and if we can’t tackle such an obvious example of wasteful spending as this one, further reform is unlikely.
When the CEOs of major oil companies testified recently before the Senate Finance Committee, they said they want to be treated just like everybody else. I say, fine, let’s do that. Let’s expect massively profitable oil companies to pay the taxes they fairly owe. And let’s expect those companies to give a little bit as we address the budget deficit, just as we ask middle-class American families to give a little bit.
The Senate failed, for the moment, to end these subsidies. But the debate over the deficit is far from over. In the coming weeks, we will continue to seek solutions that bring down the deficit without doing grave damage to programs that working families depend on. And putting an end to oil and gas subsidies should be one of those solutions.
We often hear that our deficits are unsustainable. I agree. We hear that the problem is urgent. I agree. We can act, and we can end these subsidies. Now is the time for all of us to act, to end billions of dollars in handouts to massively profitable corporations and use that money to help put our fiscal house in order.
Photo by futureatlas.org/ cc by 2.0/Flickr
