Sunday, July 09, 2006

Deficit : Gutknecht -v- Bush

The Bush White House has not exactly exhibited a concern with truly addressing the deficit (see below for Cheney’s comment), but when it raises fiscal concerns of a bill the House has approved, that should be a loud warning shot to any fiscal conservative. On June 29th, the White House issued a statement on that bill. “The Administration strongly opposes the bill’s revenue-sharing provisions because of their adverse long-term consequences on the Federal deficit . The Administration’s preliminary estimate is that the revenue-sharing provisions of H.R. 4761 would reduce Federal Receipts by several hundred billion dollars over 60 years.”
Note : Bolding added by me.

So I was surprised when I read Gil Gutknecht’s weekly email and he promoted this bill as a main House accomplishment of the past week.The bill had detractors – both Republican and Democrat – but was easily passed. Some of the Republican detractors included Minnesota Congressman Jim Ramstad and other fiscally concerned representatives including Iowa Representative Jim Leach, New York retiring Representative Sherwood Boehlert who chairs the Committee on Science, Republic Study Committee members Connie Mack and Roscoe Bartlett. If you are wondering about Mark Kennedy and John Kline, they both voted with Gutknecht. Gutknecht, Kennedy and Kline have at one time or another been a member of the Republican Study Committee which advertises itself having the purpose of advancing a conservative social and economic agenda in the House of Representatives.

H.R. 4761 concerns itself with allowing drilling for oil on Outer Continental Shelf (in other words, coastal areas such as Florida and California.)
For discussion sake, let’s ignore the impact to tourism and the environment and only focus on the fiscal impact (since that is what the White House is basing its concern.)

Currently, the way it is supposed to work, the Federal government signs leases to let oil companies drill offshore. Once the companies recoup their original investments, payments to the public, or royalties, kick in. A single oil lease can yield millions of dollars in royalty payments ... and as oil prices go up and up, so do the royalties. Except that some of the leases do not have clauses in them for government payments and some have caps so the oil companies do not have to pay premium prices (like today with oil over $65 a barrel.)

But this bill has some changes to it. A provision changes the revenue sharing so that states' share of royalties would soar eventually as much as 75 percent. The Interior Department estimated that the changes could cost the federal government as much as $69 billion in lost royalties over 15 years.

This change in who gets the money is why I oppose it. Benefiting from the oil royalty payments Alaska, where state residents receive a rebate from the state’s Permanent Fund, does not have any state income tax nor state sales tax (Dividend checks from the Alaska Permanent Fund (APF) paid $845.76 to every Alaska resident last year.). As you may recall, the 2005 TransPORKtation bill included dubious earmark projects such as the Alaska BridgeToNowhere … so the other 49 states pay while Alaska benefits. With this change in practice, the pool will open so that coastal states get more direct royalty payments plus will have Congressman earmark projects to benefit their districts. It is desirable to reduce our use of foreign oil, but that does not mean that Minnesotans, and the nation as a whole, would receive lower oil prices and definitely not if the Federal Deficit is raised. The Senate needs to take revenue-sharing provisions out.

So why would any Fiscal Hawk vote for this bill ? Let’s see, gas at $3 per gallon and an election in five months. What I see is Fiscal Short-sightedness. Congressman Gutknecht I see the facts – you’re more concerned about the election than our fiscal well-being. Here’s a link to Gutknecht’s email

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Dick Cheney comment as reported in the book, The Price of Loyalty: George W Bush, the White House, and the Education of Paul O'Neill :Treasury Secretary Paul O'Neill “went to see the vice president expecting to get a sympathetic hearing for his concerns over the deficit. Instead he is told: "You know, Paul, Reagan proved that deficits don't matter. We won the mid-term elections, this is our due."

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