By Steven Pearlstein
Friday, December 14, 2007; D01
There was a time not long ago when the major business organizations played a constructive role in Washington. Even if you didn’t always agree with their positions, you had to respect the fact that they took a practical, long-term approach, turned out credible analysis and provided adult supervision over industries or companies that got too piggy. But that is no longer true for the U.S. Chamber of Commerce and the National Association of Manufacturers, which have decided to bring the same inflexibility, partisanship and religious fervor to economic issues that Christian conservatives have brought to social issues. Their relentless crusade against taxes and regulation has damaged financial markets, weakened the economy, poisoned the political atmosphere and eliminated any possibility of effectively representing their members’ interests with a Democratic Congress or White House.
We saw the latest example of their take-no-prisoners approach yesterday morning as the two organizations lined up with the oil industry against a comprehensive and fiscally responsible energy bill that went down to defeat for the want of one vote to break a Senate filibuster.
There was plenty in that version of the energy bill that had strong support from most Americans and, I suspect, most business executives. Higher fuel economy standards for cars. More ethanol in gasoline. Tougher efficiency standards for appliances. Modest subsidies for conservation and alternative fuels.
But because of the intransigence of the business lobby, the subsidies were dramatically trimmed in the compromise bill that passed last night just to make sure the five biggest oil companies — Exxon Mobil, Chevron, ConocoPhillips, Shell and BP — would not have to pay an extra $1 billion a year in taxes.
You would never know from the intensity of the opposition that what was at stake was denying the oil industry, a big importer, the benefits of a tax credit meant to help manufacturing exporters.
Nor would you have guessed that since the tax credit was enacted in 2004, soaring oil prices have triggered a boom in exploration and drilling and increased the combined profits for the five companies to about $120 billion a year from about $85 billion.
To hear it from industry and its business allies, this “massive” new tax on the oil industry would have discouraged domestic energy production, raised energy prices, slowed growth and driven jobs overseas.
Even by Washington standards, this is disingenuous nonsense.
To begin with, you can’t argue that the new tax would be passed along to consumers in the form of higher prices and to oil company investors in the form of lower profits. It may the one or the other, but it can’t be both at the same time.
Nor is there proof that the entire energy bill would have reduced domestic energy supplies, as the industry argued in a newspaper ad yesterday.
To know that, you’d have to know that a dollar used to give a tax break to Chevron would stimulate more energy production than using the same dollar to subsidize ethanol and alternative fuels. When I called the American Petroleum Institute for the study to back up that proposition, an economist there said there wasn’t one.
Its hard to give much credence to any industry that complains out of one side of its mouth that it can’t get enough rigs and operators to do all the drilling it wants to do and out of the other that a new tax would discourage drilling.
Even oilmen don’t buy the industry line. The former chairman of Exxon Mobil told a joint Senate-House committee in November 2005 that if Congress were to take back the tax credit, it wouldn’t affect his company.
And let’s not forget our oilman president, George W. Bush, who told reporters in April 2005 that “with $55 oil, we don’t need incentives to oil and gas companies to explore.” Now that the price is flirting with $100 a barrel, however, the president has threatened to veto the energy bill because the higher taxes would discourage production. Go figure.
It’s one thing for Big Oil to use lies and scare tactics to defeat a tax increase. But it’s quite another for once-respected national business organizations to sacrifice their credibility and political capital to rush to the defense of an industry that has earned windfall profits by raising costs for every business in America.
Let me tell you what’s really going on here. The Republican leadership in Congress has convinced NAM and the Chamber that, with the Democrats in control of Congress, if they don’t pull out all the stops to defeat a tax on one industry, even one that is small and furthers a worthy public policy goal, then every industry will be vulnerable. Hang together, they warn, or hang separately.
The same logic explains why Republicans and their business allies are opposing a bill that would shield millions of middle-class households from having to pay the onerous alternative minimum tax this year. The reason: Democrats are proposing to offset the revenue losses by closing a tax loophole that allows hedge fund managers and corporate executives to shield income in offshore tax havens.
It is now clear how all this will play out. Rather than offsetting the lost revenue from the AMT, the federal debt will be increased by another $50 billion. And rather than taxing Big Oil to subsidize cleaner energy sources, the subsidies will simply expire in a year or two.
Even though the business lobby has won these battles, my hunch is that they are about to lose the war. I somehow doubt the 2008 election will be kind to politicians who put the selfish interests of Big Oil and hedge funds ahead of the public interest.
Steven Pearlstein can be reached [email protected].