Will MN Republicans Support McCain’s Plan to Tax Health Care Benefits ?

As voters enter the voting booth this November, a recent NYTimes / CBS News poll indicate that the top issue will be jobs and the economy. The most salient point that Barack Obama made during his acceptance speech concerned those issues :
OBAMA: Now, I don't believe that Senator McCain doesn't care what's going on in the lives of Americans; I just think he doesn't know.
Why else would he define middle-class as someone making under $5 million a year? How else could he propose hundreds of billions in tax breaks for big corporations and oil companies, but not one penny of tax relief to more than 100 million Americans?
How else could he offer a health care plan that would actually tax people's benefits, or an education plan that would do nothing to help families pay for college, or a plan that would privatize Social Security and gamble your retirement?

That’s right … under the McCain plan, employer-provided health insurance benefits would be taxed as normal income for individual income tax purposes.

While employers would continue to deduct health insurance coverage costs, employees would pay taxes on the fringe benefit. Currently, the tax code provides an exclusion that allows companies to offer health care benefits to employees free from taxation.

That’s a MAJOR TAX INCREASE that is not being portrayed as such.
In August 2007 the U.S. Census Bureau reported that 59.7% of Americans received employment-based health insurance in 2006. Thus, this would be a major change for those employed by employers who provide health insurance benefits and no impact for those companies that do not.

Your employer may have different rates depending upon group history and policy coverage. For a point of reference, the Kaiser Family Foundation and Health Research and Educational Trust report the annual cost of a family health insurance premium in 2006 was $11,480. Essentially under the McCain plan, your taxable income would increase by that amount … and whatever your tax rate (10% to 35%) would be applied. Although the employer has a rate per employee, the insurance expense is probably a group policy expense, so the impact of adding $11,480 to the average worker’s pay will impact lower wage-earners harder … as well as ethnic breakdown. For example, the median household income in 2006 for White Americans was $50,673 (25% tax bracket) while Hispanics were $37,781 and African-Americans were $31,969. (Source : Income, Poverty, and Health Insurance Coverage in the United States, 2006. Current Population Reports, Consumer Income. August 2007).
Simply, the CEO of the company will have the same additional taxable income --- $11,480 health benefit --- as well as the lowest paid worker.

While burdensome to all but the most affluent families, this level of spending can be deemed excessive.

While this tax increase is substantial to the individual, it would provide the Government with some needed revenue. According to the Committee for a Responsible Federal Budget A Fiscal Voter Guide to the 2008 Election report, this plan to eliminate of the tax exclusion for employer provided health insurance could result in adding $201 billion to $274 billion to the Federal Treasury. (Yep, that’s Billion.)

One could look at this as a necessity to pay for the ongoing Iraq and Afghanistan operations or addressing the “borrowing” from Social Security and Medicare fund for other spending programs. Yet the CRFB report also indicates that McCain’s plans to continue the Bush tax cuts which will cost the government $294 billion, and that McCain plans to reduce the Corporate Income Taxes costing the Treasury another $55 to $68 billion. (Yep, that’s Billion.) MORE on reducing Corporate Income Taxes in a future commentary.

The obvious question is, Why does McCain advocate this change ?

Republicans like Dr. Brian Davis believe that there needs to be more competition and less government intervention in healthcare.
IF employees begin to be taxed for health care benefits, employees may be inclined to want to opt out of insurance. With the rising cost that employers have seen in health care costs, they may likely comply. This could lead to the end of the employer-sponsored health care benefit system. In 2007, some 45.7 million Americans — 15.3 percent of the population — were uninsured so that figure could rise substantially as more people just determine that health care insurance is unaffordable.

That may work out good for employers … and possibly for healthy employees, but for the others that have health problems that would be a problem. The percentage of Americans with insurance through a public program increased from 27.0 percent in 2006 to 27.8 percentage in 2007, primarily as a result of gains in coverage through Medicare and Medicaid. IF the employer-sponsored health care benefit system is effectively terminated, that would cause an increase demands for public programs which may result in scaling back Medicaid benefits and eligibility.

Remember McCain said that Bush made "the right call" in vetoing the SCHIP legislation and has repeatedly voted to cut, eliminate, or restrict health insurance coverage for low income children and pregnant mothers.(source) Congresswoman Michele Bachmann (R-06) and Congressman John Kline (R-02) also voted against SCHIP legislation.

When Norm Coleman, Dr. Brian Davis, Dick Day, John Kline, Erik Paulsen, Barb Davis White, Ed Matthews, Michele Bachmann, or Glenn Menze talk about taxes, be sure to ask them if they support McCain’s efforts to tax health care benefits.
Also, as you watch the Republican National Convention, watch for how often "cutting taxes" is discussed and how many times eliminating the health care tax benefit is mentioned.

Tax fairness should not begin with taxing the health care benefits.

MN-06 : GOP Platform is a Nightmare for Bachmann

For Congresswoman Michele Bachmann to control the Party’s agenda, the best way is to get involved in approval of the Party Platform. Thus far, the results may not be to her liking.

Bachmann is one of 112 Republican activists writing the planks for the RNC Platform. There are a number of key issues :
Drilling in ANWR
Cap and Trade legislation to curb greenhouse gas emission
Immigration
And even, gun ownership ( The Bush Administration wants background checks prior to someone on the Terrorist Watch List before being able to buy a gun. )

Surely, at the top of Bachmann’s list is Alaska National Wildlife Refuge (ANWR).

Of expanding oil drilling into ANWR, she recently said, "Currently, the U.S. is the only country in the world that discourages using its own energy resources. Our country imports 10 billion barrels of crude oil every day. And we are importing 1.3 million barrels of refined gasoline.”

But drilling in ANWR is not something that everyone agrees. Bachmann said in an interview with Townhall.com “It’s difficult when our nominee is not on the same page with us.”

CQ Politics reports the draft proposal unveiled Tuesday called for “accelerated exploration, drilling and development in America, from new oil fields off the nation’s coasts to onshore fields such as those in Montana, North Dakota and Alaska” but was silent on the specific issue of ANWR.

Additionally, from the CQ article “the platform committee also rejected a proposal to discourage the export of oil and gas garnered from any new leases.
Consider that DOE data revealed “A record 1.6 million barrels a day in U.S. refined petroleum products were exported during the first four months of this year, up 33 percent from 1.2 million barrels a day over the same period in 2007. Shipments this February topped 1.8 million barrels a day for the first time during any month. The surge in exports appears to contradict the pleas from the U.S. oil industry and the Bush administration for Congress to open more offshore waters and Alaska's Arctic National Wildlife Refuge to drilling. ”
Congressman Edward Markey (D-MA) protested this exporting practice to President Bush writing that projections from the Department of Energy for offshore drilling say that “at the height of production, in 2030, increased offshore drilling would produce only 200,000 barrels per day – one ninth the amount of oil we currently send to foreign countries every day.”

While the RNC Platform Committee may be rejecting her plea, she has offered a Discharge Petition on HR 6107 that would open ANWR for drilling. Thus far 90 Republicans have not signed her petition.

And as a side note, this platform plank is in direct opposition to the stated goals of Dr. Brian Davis, State Senator Dick Day, Congressman John Kline (R-02), and Ed Matthews (whose speech at the MN-GOP convention demanded drilling). But Erik Paulsen and Senator Norm Coleman do not support drilling in the ANWR.

So for voters that hear MN-GOP Party Chairman Ron Carey attempting to blame Congressman Tim Walz (D-MN-01) for the failing to open ANWR for drilling, they need to be reminded that the RNC is not committed to that goal.

On Immigration, the draft does not include stronger anti-amnesty language that some advocates wanted. It does not specifically oppose “comprehensive immigration reform” and is silent on a guest worker program, a policy that President Bush and McCain have both supported.

On Cap and Trade, the Platform Committee included no amendments to oppose cap-and-trade explicitly, in fact there were no amendments on climate change at all. By taking a heavy pen to the section that used to read “Global Warming and Environmental Protection”, they decided to strike the phrase “global warming” anywhere it appeared in the document, either replacing it with the more neutral “climate change,” or removing it altogether.
Ah, thus RNC answers the question – If a tree falls in the forest and no one is there does it make a sound?
If the RNC does not acknowledge “global warming”, then it must not be happening.

And on another annoyance for Bachmann, the Platform Committee voted down a proposal to call the opposition the "Democrat Party" in the 2008 platform. Instead, they'll go with the proper Democratic Party. "We probably should use what the actual name is," said Mississippi Gov. Haley Barbour, the panel's chairman. "At least in writing."
Bachmann, as evidenced by her appearance on television broadcasts has a tendency to use the “Democrat” term.

The decision on Gun Ownership has not been publicized yet.

MN-01 : Davis Distortions in first cable ad

The television networks are running promos for their new Fall Season … but voters better be aware that everything shown on television is NOT reality programming. Take for instance the charade commercial offered by Republican endorsed candidate for the First District, Dr. Brian Davis.

Haven’t seen it yet ?
Oh, maybe because he’s not going after your demographics. The First District runs 280 miles across the southern tier of the state with 43.5% of the district classified as rural voters.
Maybe Dr. Davis is not aware but there is a digital divide between the urban/suburban haves and the rural have-nots. Telecommunications companies have failed to make the needed investments in rural infrastructure and technology. Carriers are able to claim subsidies from the Universal Service Fund, but do not have the requirement to offer broadband. As a result rural communities are falling behind in economic development opportunties, education and healthcare … but that is a subject for another commentary.

But even if you reside in Davis’ advertising target market – Rochester and Mankato --- unless you are “rich” like the reluctant millionaire doctor to afford cable, you may not still see the commercial.

Fortunately, the advertisement is available via You Tube ( Hat tip to Ollie at Bluestem Prairie.

Davis’ theme is the rising gas prices … and the screen shows the price starting at $2.95 then to $3.16 to $3.57 to $3.92 and finally finishing at $4.08. Obviously this is old film footage since gas has been about $3.60 for most of the month of August but we get his point – gas has increased. His words fail to mention any cause … like speculators (including one that was involved in the Iraq Oil-for-Food program), the war of words with Iran , the weakening dollar, etc.

No, to Dr. Davis the blame goes to the current Congressman – Tim Walz.

Next, the screen showcases a newspaper headline citing Davis support for drilling.
Be sure to look closely to notice that the paper is dated June 20, 2008.
Davis fails to mention that Congressman Walz cosponsored HR 6515 which is known as the DRILL Act and would have expedited the leasing of oil sites currently under US government control. That bill was defeated by the Republicans.

The Republicans would prefer Minority Leader John Boehner’s bill -- HR 6566 American Energy Act -- which was introduced on July 22 and currently has 127 co-sponsors. Despite what many assume that this is strictly a “Drill here, Drill now” bill, it has provisions that give the Administration until July 1, 2010 (plus the bill has provisions related to nuclear industries and other businesses.) Not exactly a quick fix and a bill that should not be passed without proper Committee hearings.

Davis fails to mention that Walz did not give up on domestic production after the Republicans defeated the DRILL Act. He worked with a bipartisan group of Representatives to introduce HR 6709 National Conservation, Environment, and Energy Independence Act . The legislation was introduced on July 31st and immediately, many Representatives became co-sponsors. Most interesting is the number of Republicans who originally co-sponsored Boehner’s bill and now have joined with Walz --- Representatives Aderholt, Bachmann, Barrett, Bartlett, Bishop, Boozman, Capito, Carter, Cole, Davis, Deal, Doolittle, Drake, Emerson, English, Fallin, Gingery, Gohmert, Goode, Kline, Knollenberg, Lucas, Manzullo, Marchant, McCarthy, Miller, Moran, Neugebauer, Pence, Pickering, Platts, Radanovich, Renzi, Rogers, Royce, Sali, Shimkus, Smith, Souder, Sullivan, Terry, Thornberry, Tiahrt, Turner, Upton, Wamp, Wilson, and Wolf ... that's 48 Republicans. In total the bi-partisan bill has 119 co-sponsors.
This bill should produce drilling opportunities quicker than Boehner’s and does not have the nuclear baggage that could cause a delay in getting Senate concurrence. Besides the drilling industry, it has provision affecting the renewable energy industry that has been waiting for the Senate to pass legislation. Overall a much better bill.

Davis’ ad also complains about Walz voting to go on “vacation”. While the August recess has been customary for Congress, Walz used the time last year to hold district listening sessions … although as I recall he did have one trip planned for outside the country … a fact-finding mission to the War Zone but that was cancelled due to the flooding in the Rushford. This year, Walz has hardly been on vacation … with regular meetings with his constituents.

Accepting his argument that Davis will “remove all barriers from drilling for our own oil”, does he realize that many of the companies that are doing the drilling in the Gulf are NOT American companies … but Australia, Brazil, Norway, Canada, etc operations ?
Does he realize that there are not enough drill rigs and personnel to actually do any more drilling today ?
Did he hear the results of last week’s Lease Sale in the Gulf which did not produce extensive bidding ?
Does he realize that the DOE says it will take a decade before that oil gets into the system and that there is no guarantee that the wells will be productive ?

Lastly, Does he think that all voters are as uninformed as he is ?

I will give him credit for one honest comment … he’s not a “career politician” … since he’s never held any elective public office.

Yes, TV may have offer a New Fall Season, but Davis is offering a Distorted Reality Show that voters will reject (if he succeeds in the Republican Primary Election.)

MN-01 : Dr. Davis Tax Policy – Fighting for the Fortunate 230

According to Jim Nussle, director of the Office of Management and Budget, the federal deficit will hit a record $482 billion in 2009. Last February, the administration forecasted a deficit of $407 billion but the weakening economy, unwise economic stimulus program, and the Iraq War, have blown that plan out of the water. The National Debt is now in excess of $9.6 Trillion.

Nobody wants to pay taxes, but if you want a civil society ( your definition can be as minimal as just a national defense and a local police function all the way to a full socialist state), taxes must be paid. So the real question should be, what is a Fair Tax system ?

The next Congress and President will address this question including whether to make the temporary tax cuts from 2001 and 2003 permanent after 2010.
One tax that will be included is the Federal Estate Tax.
In 2004 and 2005 estates worth up to $1.5 million (or $3 million for estates owned by a married couple) were exempt from the estate tax.
Since then, the exemption has increased to $2 million ($4 million for married couples).
Under the Bush tax cuts, those rules are scheduled to change to allow even more estates to escape the tax as in 2009 the exemption will increase to $3.5 million ($7 million for married couples).
In 2010 the estate tax will disappear entirely --- a one year “freebie”.
Under current law after 2010, it will return to the 2001 levels in 2011 --- taxing estates worth over $1 million.

Tax policy should be an important factor in determining who gets your vote.

In Minnesota’s First District, Dr. Brian Davis has offered little information on specific taxes, but has issued an opinion on the Federal Estate Tax.
“Estate and Capital Gains Tax Policy - The current estate tax that is scheduled to increase on January 1, 2011 will place a tremendous financial burden on families who wish to pass down a farm from one generation to the next, particularly in the current setting of increased land prices where it is difficult to start a farming operation. Likewise, expiration of the capital gains tax rates and their subsequent increase pose an excessive tax burden which will be placed on farmers choosing to sell property and assets. Brian Davis wants to promote an environment where young farmers can continue the family business. Congressman Walz's positions on these tax issues are not helping farmers transfer their assets to our next generation of farmers or to realize the equity built up from years of hard work. ”

Sounds like Dr. Davis is raising a serious concern, but is it ?

Citizens for Tax Justice reported the number of Federal Estate Tax filings for Minnesota in recent years was :
2000 – 672
2002 – 740
2004 – 466
2005 – 203
2006 – 230
The obvious result is that the Federal Estate Tax continues to have no effect on the vast majority of Americans and clearly benefits only the very wealthiest families in America.

Why is Dr. Davis, the Reluctant Millionaire, trying to confuse the voters with this issue ?
The easy answer is that it is one of the best ways to scare voters …. “My opponent will raise your taxes … I won’t”.

Dr. Davis may be painting an image of someone trying to protect those small family farms, but Congress will be influenced by the next President. With a veto power, the President will have more of an impact than the Congressman representing Minnesota’s First District.
The Committee for a Responsible Federal Budget has issued a report, A Fiscal Voter Guide to the 2008 Election, evaluating the major party’s nominees :
Senator McCain supports a permanent estate tax with a $5 million exemption ($10 million per family). The estimated impact is $10 billion.
Senator Obama would instead freeze the estate tax at its 2009 levels. This would create a permanent estate tax a $3.5 million exemption ($7 million per family). The estimated impact is $44 billion.

Davis is offering a charade (much like his “Drill here, Drill now” charade).

Tax fairness and the National Debt are issues … focusing solely on the Federal Estate Tax is insult to the voters.

On September 9th, voters will have a chance to vote in the Republican Primary to determine who will be on the November ballot. Davis is a neophyte that is playing on emotional issues and has never held any elective office. Contrast that with State Senator Dick Day who is in his sixth term having been first elected in 1990 where he has held leadership positions. His experience in the give-and-take necessary to move legislation forward in the areas of taxes (as well as the issues related to transportation, education, agriculture, etc.), should be weighed carefully by those primary voters.

MN-06 : Has Bachmann Read HER Bill ?

Congresswoman Michele Bachmann has updated her blog encouraging her colleagues to support HR 6716 - Promoting New American Energy Act of 2008. Bachmann is the prime author of the legislation which was introduced on July 31st with seven Republican co-sponsors.

On her blog, she writes : “Renewable energy is currently a sort of second-class citizen in the United States because of its high cost. According to the Energy Information Administration (EIA), renewable energy plants are generally more expensive to operate than plants using coal and natural gas. But we’re leaving real solutions behind by not changing this disincentive. Tax incentives for renewable plants would help equalize the financial burden, creating more energy production and a number of new domestic jobs.” [Emphasis added]

It’s laudable that she has finally come around to encouraging greater investment in solar, wind, geothermal and biodiesel. But if you read HR 6716, it really is a very limited bill. It changes the deprecation rates for “energy production and distribution facilities” which would include any electric utility nuclear production plants (Sec. 2.3 a-v) as well as any electric utility combustion turbine production plant which is fueled by natural gas (Sec. 2.3 a-viii).

Her own bill will not equalize the financial burden for the renewable energy industry if the same benefit is given to the nuclear and natural gas industries.

Bachmann’s post is an attempt to confuse the voters by implying that she is working to advance renewable energy, yet it is clear that she is offering a broad tax law change without any offset for the lost revenues.

Frankly, Congresswoman Bachmann (joined by Second District Congressman John Kline) voted in February, 2008 against the HR 5351 - Renewable Energy and Energy Conservation Tax Act of 2008 which has put Minnesota jobs at stake.

Voters in the Sixth District should be aware that DFL candidate El Tinklenberg has written in an OpEd piece “Provide incentives for biofuel, wind, solar and clean coal energy development. American innovation is our key to an independent energy future. While there is general agreement in Congress that economic incentives are necessary to develop alternative energy technologies, the parties quickly split when the discussion turns to paying for them. We can start by eliminating the Bush tax cuts for the richest Americans and using the money to pay for these incentives.”

Where are the bidders for Drill Here ?

To have an auction, you need at least two bidders … to have a good auction, you need two idiots … two bidders that “must have” the item to get maximum price.

But what if you have an auction, and the bidders don't participate ...

As previously mentioned, August 20th would be the first auction since the Republicans started their “Drill now, Drill here” charade, and the results are not good.

The Department of the Interior’s Minerals Management Service (MMS) lease sale resulted in 53 companies submitting 423 bids on 319 tracts comprising over 1.8 million acres offshore Texas.

Assuming that all tracts got a bid, it does not reflect active bidding as most tracts would have received only one bid.
Collusion is always a concern … (I’ll bid on this tract and you bid on that tract) … but that would be only speculation at this point. That’s why that each high bid on a tract will go through an evaluation process within MMS to ensure the public receives fair market value before a lease is awarded.

The highest bid received on a tract was $61,110,000, submitted by Statoil Gulf of Mexico LLC for Alaminos Canyon, Block 380.
A unit of Norway's Statoil ASA oil company spent nearly $286,000 to lobby the U.S. federal government in the first quarter of the year after spending $600,000 during 2007.

The Republican’s antics have resulted in suppressing bidding activity as the drillers have a shortage of rigs and personnel and anticipate more lease tracts being opened in the future.

One caveat that Rigzone mentions : “But even after a company invests up to a billion dollars or more in a lease during pre-production activities and spends several years engaged in multiple inspections, reviews, and strict government oversight, there's a very real possibility that no amount of oil or natural gas will be found or produced.”

MN-01 : Is the Reluctant Millionaire Doctor Rich ?

Pastor Rick Warren, best selling author of A Purpose Driven Life, during the Saddleback Civil Forum on the Presidency, asked the candidates to define “rich”.
WARREN: “OK. Taxes, this is a real simple question. Define rich. [ laughter ] I mean give me a number, Is it $50,000, $100,000, 200,000? Everybody keeps talking about who we’re going to tax. How can you define that? ”
OBAMA: “You know, if you’ve got book sales of $25 million, then you qualify. ”
[ laughter ] [ applause ]
OBAMA: “Yes. ”
WARREN: “No, I’m not asking about me. ”
OBAMA: “Look, the - here’s how I think about it. Here’s how I think about it. And this is reflected in my tax plan. If you are making $150,000 a year or less, as a family, then you’re middle class or you may be poor. But $150,000 down you’re basically middle class, obviously depends on the region where you’re living. ”
WARREN: “In this region, you’re poor. ”
OBAMA: “Yes, well - depending. I don’t know what housing practices are going. I would argue that if you’re making more than $250,000, then you’re in the top three percent, four percent of this country. You’re doing well. Now, these things are all relative. And I’m not suggesting that everybody is making over $250,000 is living on easy street. But the question that I think we have to ask ourselves is, if we believe in good schools, if we believe in good roles, if we want to make sure that kids can go to college, if we don’t want to leave a mountain of debt for the next generation. Then we’ve got to pay for these things, they don’t come for free, and it is irresponsible. ”

A straight answer to a straight-forward question.
$250,000 salary is rich and $150,000 and below is middle class.

When asked the same question, McCain failed to give a direct answer instead he tried to connect a happy state of mind to being rich and --- hopefully in jest, said -- “So, I think if you are just talking about income, how about $5 million?”
But hidden in his answer was the comment “I don’t want to take any money from the rich — I want everybody to get rich."
A laudable goal which may be more realistically achievable if he was still trying to create a happy state of mind than financial net worth.

I don’t want to get into the comparison of the Presidential candidate’s net worth as we know they are both out of our neighborhoods… while Obama may live in a $1.65 million Georgian revival Kenwood mansion while McCain's ten homes are valued at $13,823,269
It’s safe to say that they are both “rich”.

In reality, aren't most people who run for federal offices "rich" ?

Yet, in Minnesota, we have a candidate who is reluctant to acknowledge his financial status. In fact, he has stated that “I don’t believe our total assets, even with our house, that we’re over $1 million.”

OK, but Mayo Clinic Dr. Brian Davis reported a salary of $411,720 while his wife, Dr. Lori Lillienberg also received a salary from the Mayo Clinic totaling $52,009.31 in 2007. With the benefits offered by his employer including a 401k plan, most would consider Davis “rich”.

Why this charade ?
Dr. Davis you are “rich” … after all, most do not have the $124,000 to loan or $60,614 to donate to a Congressional campaign. link
Spending money like that may be “technically” why you may not be a millionaire ... but you wouldn't have it to give if you weren't "rich".

For Davis his theme is “Drill here, Drill now” yet, with a national debt that has skyrocketed during the Bush years, he needs to address the important questions regarding tax policy.
Will you tax the "rich" or ignore the problem for future generations to address?
Will you promote a program of tax fairness ?

Davis has said that a good Congressman “focuses on the bottom line and works to reduce spending and taxes.”
So far, Davis has only expressed his support for eliminating the Estate Tax (which I suppose may get him some votes from millionaires).
Thus he has promoting a lower tax revenue base which supports his analysis that “Our budget deficit in Washington has been created because of a spending problem, not an income problem.”
What spending programs would he cut ?
Davis expressed displeasure with the Food, Conservation, and Energy Act of 2008 (aka the Farm Bill which was approved by overwhelming margins : House 317-109 Senate 80-14) because it contained “bad parts” such as the USDA’s Food and Nutritional programs that assist working families and seniors.
How will he address other entitlement programs such as Medicare and Social Security ?

There are many other issues that need to be addressed, but to this fiscal conservative, tax fairness is at the center and to me Obama outlined a fair plan :

OBAMA: “What I can say is under the approach I’m taking, if you make $150,000 or less, you will see a tax cut. If you’re making $250,000 a year or more, you’re going to see a modest increase. What I’m trying to do is create a sense of balance, and fairness in our tax code. One thing I think we can all agree on, is that it should be simpler so that you don’t have all these loopholes and big stacks of stuff that you’ve got to comb through, which wastes a huge amount of money and allows special interests to take advantage of things that ordinary people cannot take advantage of.

Obama’s ideas seem to fall in sync with Tim Walz’s Middle-Class Tax Fairness Act which will cut taxes for 61 million taxpayers and save an average of $750 on their taxes this year if his legislation were enacted. The Walz Middle Class Tax is fiscally responsible and fully paid for by cutting government waste and tax give-aways for big corporations. The Walz legislation would also help pay down nearly $60 billion of the national debt.

Davis --- millionaire or not – needs to tell us what his idea is for a Fair Tax plan … continued budget deficits will haunt future generations.

Is “Drill here, Drill now” Just a Feel-good Slogan ?

George Bush knows something about oil.
In 1951, Bush #41 started Bush-Overby Oil Development Company and became a millionaire.
In 1977, Bush #43 started Arbusto Energy which under its own weight would have gone bust if not for the political connections of his father.
That’s the oil business … boom or bust (unless you get a bailout) !

So will drilling in the Outer Continental Shelf (OCS) be a boom or a bust … or just a stalling of the inevitable ?

Menzie Chinn writes “Although a significant volume of undiscovered, technically recoverable oil and natural gas resources is added in the OCS access case, conversion of those resources to production would require both time and money. In addition, the average field size in the Pacific and Atlantic regions tends to be smaller than the average in the Gulf of Mexico, implying that a significant portion of the additional resource would not be economically attractive to develop at the reference case prices.” Chinn believes the impact of OCS drilling on the world’s oil prices to be minimal and production output years away.

But assuming that the US Government changes its regulations and industry acquires the production resources, will the oil be there ?
According to Sara Banaszak of the American Petroleum Institute (link) “Leases don't come with MapQuest directions that say "Drill here for 50 million barrels." It takes a process of exploration. Banaszak says developing an oil lease, especially offshore, can take up to 10 years and cost as much as a billion dollars .. ”
Banaszak is right. ExxonMobil took a year and a half to drill at cost up to a staggering $200 million going down over 30,000 feet at the Blackbeard West well before giving up.
BUST.
Even if your Exxon or George Bush, there is no guarantee of success.

“Drill here, Drill now” is feel-good slogan that may garner some votes for Republican candidates this November, but what then ? Voters will quickly realize that we’ve been had. OCS drilling should be part of the solution … but even those wells will run dry. Mexico’s production has been diminishing.
Ultimately, the long term solution must be based on better consumption utilization, wind and solar.

And while Republican candidates like to chant “Drill here, Drill now”, voters need to read Tom Friedman’s column concluding “The fact that Congress has failed eight times to renew them [investment tax credits for installing solar energy and the production tax credits for building wind turbines and other energy-efficiency systems] is largely because of a hard core of Republican senators who either don’t want to give Democrats such a victory in an election year or simply don’t believe in renewable energy.”

This should be a stark reminder for voters in Minnesota’s Second and Sixth Districts that while John Kline and Michele Bachmann have spent time in Washington talking in the dark chanting “Drill here, Drill now”, voters need to be reminded that they opposed these tax credits putting Minnesota jobs at risk.

Slogans are not needed … embracing a comprehensive long-term solution is. Candidates should talk policy … not shout slogans.

Will “Drill now, Drill here” affect the August 20 prices ?

Could Minority Leader John Boehner (OH-08) be correct the Republicans daily “Drill now, Drill here” protests are "already helping to lower oil prices" ?

Well, maybe no.
The Wall Street Journal reported: “Hard evidence is emerging that the changing behavior of consumers and businesses may be making a dent in the oil market. The Energy Department reported last week that demand for gasoline for the four weeks ended Aug. 1 was 2.3% lower than in the same period last year. [Americans drove 9.66 billion fewer miles in May than they did a year earlier, according to the Transportation Department.] Declining demand is the prime force behind the oil market's recent slide.”

But, maybe yes … and that’s a bad thing.
On August 20, Minerals Management Service of the Department of the Interior will hold its second lease sale this year for Gulf Coast. Sale 207 encompasses about 3,400 unleased blocks covering approximately 18 million acres in the Western Gulf of Mexico Planning Area offshore Texas.
The Republican “Drill Now” antics may actually lower the price at the lease sale … as the companies begin to realize that more off-shore drilling possibilities may be in the future. It’s supply and demand. Will their bids factor in that they already have enough work as their rigs are tied up (read yesterday’s commentary), and they foresee greater opportunities in a few years ?
If the price is higher at the August lease sale then the March sale that doesn’t mean that the prices wouldn’t have been higher without the Republicans ranting.
The revenues generated from these sales go to the Gulf States (Louisiana, Mississippi, Alabama and Texas) as well as the federal treasury …. funds that are needed with the exploding national debt.

But even at lower prices, this should mean jobs, right ?
But for whom ?
So, who is drilling in the Gulf of Mexico ?
According to Minerals Management Service report lists a number of companies include:
-- Australia's BHP Billiton
-- Brazil's government-run oil company Petrobras
-- Canada Nexen Inc.
-- Cobalt International Energy LP (which is owned by the Carlyle Group which is known for their relationships with George H. W. Bush and the bin Laden families)
-- ENI Petroleum Co. Inc. operates as a subsidiary of Eni Norge AS (Norway)
-- Shell Offshore Inc., (part of Royal Dutch Shell)
And you probably thought it was good-old US based Exxon-Mobil !
The argument offered is that America must become energy independent and not reliant on foreign countries … but that doesn’t mean that foreign business won’t be involved.
But are these employees, taxpaying Americans ?
Recalling how Kellogg, Brown & Root, a company that has experience in the oil patch, classified its employees so as not to pay taxes, the question should be asked. Although legislation has been initiated such that domestically controlled foreign persons performing services under contract with the United States Government are treated as American employers for purposes of certain employment taxes and benefits, but since these are foreign-controlled domestic corporations that may not apply.

If we’re going to do more drilling, American business needs to invest in more rigs and train more American workers … that’s the way to have America become more energy independent.

Forget "Drill here, Drill now" ... It should be "Drill more, Drill with US workers"

Kim Strassel in her Wall Street Journal Potomac Watch column clearly explained why the “Drill here, Drill now” issue was so important …. It’s pure political theatre. She gushes over Senator Norm Coleman for not joining his fellow Republican Senators who have the audacity to work with Democrat Senators to develop bipartisan legislation to address future energy needs. Her commentary concludes “Not one of the five Republicans in the Gang is facing a tough election this year. That's the sort of security that leads to bad decisions. And theirs is the sort of thinking that could leave Republicans in a permanent minority.” Gosh, heaven forbid that a politician would actually want to advance something good for the country regardless of its impact on his/her party. I thought voters elected people to serve in the country's best interests, not in their Party's interests.

So, accepting that this is just a political theme, what aren’t they telling us ?

The US News and World Reports recently looked at the limitation in OCS drilling. The article noted a key factor that is not being discussed is the lack of equipment and manpower to actually "Drill" ... here's the last paragraph.
"Yet even if Congress opens up the 574 million acres now off limits along the outer continental shelf, tight supplies of equipment and labor will severely constrain exploration in the next decade. Only a limited number of shipyards are capable of building the necessary $700 million drilling rig, and many of the rigs being built today are going to Brazil, West Africa, and Southeast Asia, where the oil business is also booming. Even then, it usually takes at least seven to 10 years for the oil to start flowing."

OK, let’s put this in perspective that even if you are not trained as a Radiation Oncologist can understand.
If you have one Gamma Stereotactic Radiosurgery unit, how many patients can you process ?
Only as many as the gamma unit can process … with the additional limitation of trained personnel.

The point is simple, it doesn't matter how many sites they open for drilling, it takes one rig per drill site, so until the oil companies commit to increasing the number of rigs, it doesn't matter. The other problem is manpower ... anyone who has ever spent time on a rig knows it's not fun (I know people who have serviced them). We do not have sufficient trained people today ... and since these are in the Gulf, there is no guarantee that non-Americans would not be hired.

But what if you could divert equipment elsewhere ? Not likely as many of the existing rigs are under contract for use all around the world. For example, when ExxonMobil gave up after drilling in the Blackbeard West off the Louisiana coast, the equipment was sent to Saudi Arabia where it is leased into 2011.

Why not build more rigs ? Rigs are expensive and at the price of oil, why not control the marketplace by the amount that is extracted.

Just more proof that any additional drilling will not produce additional crude for years.

The politicians promoting “Drill now, Drill here” are purely promoting a simplistic slogan for election purposes.

Over the next few days, additional commentaries will be offered concerning OCS drilling.

And for the record, I am not opposed to drilling … as long as the American treasury gets the royalties and not individual states.

MN-02 : Kline needs to divest after Russia invasion of Georgia

On Friday, August 8, Russian military forces invaded Georgia targeting the areas of South Ossetia and Abkhazia with overwhelming military force including air attacks on Georgia's oil pipeline and airports. This aggression may not be just a movement by Russia to re-align its borders with two new friendly separatists’ states, but also to enhance its control of oil and gas resources while confronting acceptance of Kosovo as an independent country and NATO’s expansion plans.

To many this August 8th was unpredictable, yet Secretary of State Rice on July 10th visited Georgia and discussed the ongoing controversy. She was asked “how concerned are you about the possibility of the violence in Abkhazia erupting into a wider war?” In the end, her response was “We always fight for our friends” and “Georgia’s future is in NATO.”

Russia’s economy may have improved and “democratic elections” may have taken place, but it is still a country with a concentration of power with leaders that are accountable to no one. There is still a crackdown on a free press, and restraints on individual rights and on free enterprise. The genocide against the Chechens is another stark reminder of how Vladimir Putin operates.

Georgia may not be clean in their management of the provinces of South Ossetia and Abkhazia, but they have been America’s ally in the Global War on Terror. While the coalition of the willing has been diminishing, Georgia had 2,000 troops in Iraq prior to the Russian invasion.

This conflict will escalate as Bush and world leaders try to exert some influence. Congress may be asked to increase foreign aid (aka military aid) to Georgia … either overtly or covertly.
Representative John Kline, who sits on the House Armed Services Committee, will have a voice.

But Kline should not wait for a funding request, he should take personal action immediately.

As previously written in Does John Kline Put His Money Where His Mouth Is ?, Kline has a personal investment in the ING Russia Fund. The ING Russia Fund is composed of 47.8% investment in the oil and gas industry. The dollar amount of Kline’s investment is immaterial, the fact is that he is placing his own personal investment in Russia over US interests. There are many places to invest your money ... after all, the U.S. is the number one investor in Georgia.

I am not a believer in sanctions as they have proven unsuccessful, but also don’t believe in war-profiteers.
Kline must divest now.