Free Markets, Free People

Rooting against the home team: Democrats and administration attack job creators

The other day I was on a conference call with representatives of ExxonMobil as they tried to explain why the upcoming attempt to remove certain tax breaks was a bad idea.  I was struck by a statement one of the representatives made:

The thing that tends to get lost is we’re the home team here. And you have two – if the government is looking, U.S. government is looking to raise revenue and they’re looking at our industry, they really have – it’s coming down to two choices, it appears. They’re looking at, right now, singularly focused on increasing tax, our taxes, as a way to increase revenue coming into the government. But study after study show that if you increase access, increase business opportunity for our industry, give us access to more resources to go explore and develop, give equal treatment to downstream investments, that by increasing access, you will increase revenue.

And by – and you will increase revenue by magnitudes more than by focusing just on raising taxes. And by giving us – the industry more opportunity to explore, develop, refine, what have you, that increases jobs. And jobs increases overall social welfare. [emphasis mine]

ExxonMobil employs about 84,000 people directly world wide (the oil industry in the US, both directly and indirectly is responsible for over 9 million jobs).  In the US, that part of the total is 35,000.  Now imagine if, instead of doing everything in their power to stand in ExxonMobil’s way, the government actually did what the ExxonMobil representative lays out?  The result would be as he concludes – more jobs, more revenue for government, and more opportunities in the works for both in the near future.  Right here. 

Instead of that, however, we see government doing everything in its power to hurt the “home team”.  I asked, given the situation here and the fact that ExxonMobil derives much of its income from outside the US (~75%), whether the sort of shenanigans now being attempted by Congress and the administration would have an effect on corporate planning:

Well, we approach our investments on a global basis, and obviously it’s – the money that we’re investing is our – it’s money – it’s not our money; it’s our shareholders’ money. And we’re looking to make investments that are safe; they are going to make consistent returns over a long period of time, given the nature of our business; and obviously, government policy and the consistency of government policy is an important criteria for us as we look at projects that are competing for our investment dollars around the world.

So to the extent that United States policy makes an investment, for example, in a U.S.refinery less attractive than an investment in a similar operation outside the United States, is that something we will consider? The answer’s yes, of course we’ll consider it.

You can’t ask for a clearer answer.  What is it the Democrats in Congress are doing?  Well they’re playing politics with American jobs.  In essence they’re trying to repeal tax breaks , but only for the oil industry.  Specifically (thanks Neo):

Intangible Drilling Costs – Companies which engage purely in energy exploration and discovery can recover their costs related to exploration at tax time at a rate of 100%. This lessens the burden on energy providers for the number of “dry holes” which may be found in the process. Integrated companies (i.e. “big oil”) can recover these exploration costs at 70%.

Domestic Manufacturer’s Deduction (Section 199) – A deduction (not a credit) equal to 9% of income earned from manufacturing, producing, growing or extracting in the United States, is available to every single taxpayer who qualifies in the U.S. The oil and gas industry, and only the oil and gas industry, is limited to a 6% deduction.

Percentage Depletion – The percentage depletion deduction is a cost recovery method that allows taxpayers to recover their lease investment in a mineral interest through a percentage of gross income from a well. This depletion method is not available to companies that produce oil as well as refine and market it (i.e. “Big Oil”.) This is available to all extractive industries (gold, iron, clay, etc) in the US and is in no way unique to the oil and gas industry.

Note that none of these are “subsidies”, nor (other than intangible drilling costs) are they unique only to the oil industry (although the oil industry is the only industry that is limited in the Section 199 deductions).  We hear Democrats whine constantly about the loss of manufacturing jobs, yet here they are pushing for tax changes that will likely kill good high paying manufacturing jobs in a critical industry.  Not only that, but as API’s chief economist, John Felmy points out they will also hurt our economy in other areas and possibly lessen our energy security by driving future jobs off shore:

[T]he more we invest here, the more we produce, the more we have improved energy security and, really importantly, it reduces he trade deficit. And for every reduction in the trade deficit means that’s dollars that aren’t lowing abroad and can be spent here, and adds further to the U.S. economy that we desperately need.

Those are extremely important points, points that are being virtually ignored by the Democrats and the administration in this headlong rush to “punish” big oil for “excess profits” and more importantly, as a means of taking the political heat off themselves and their absurd and self-defeating economic policies.  Somehow, one assumes, they believe that if they tax the oil industry more, then gas will cost less – go figure.

Read the transcript of the call I’ve linked above.  Check the numbers out.  It is eye-opening.

And the oil business isn’t the only target of such nonsense.  Jim McNerney, CEO of Boeing, covers the NLRB/Boeing debacle in today’s WSJ – something I pointed out a week or so ago.  The National Labor Relations Board  (NLRB) has gone to war against another home team – Boeing.  Here’s a company doing precisely what you’d expect the administration would applaud if they at all believed their rhetoric about “jobs, jobs, jobs”:

Deep into the recent recession, Boeing decided to invest more than $1 billion in a new factory in South Carolina. Surging global demand for our innovative, new 787 Dreamliner exceeded what we could build on one production line and we needed to open another.

This was good news for Boeing and for the economy. The new jetliner assembly plant would be the first one built in the U.S. in 40 years. It would create new American jobs at a time when most employers are hunkered down. It would expand the domestic footprint of the nation’s leading exporter and make it more competitive against emerging plane makers from China, Russia and elsewhere. And it would bring hope to a state burdened by double-digit unemployment—with the construction phase alone estimated to create more than 9,000 total jobs.

Eighteen months later, a North Charleston swamp has been transformed into a state-of-the-art, green-energy powered, 1.2 million square-foot airplane assembly plant. One thousand new workers are hired and being trained to start building planes in July.

It is an American industrial success story by every measure. With 9% unemployment nationwide, we need more of them—and soon.

Pretty hard not to agree with that, right?  And, the administration and Democrats have told the America people repeatedly that their focus is on jobs.  But in the example above about the oil industry and this example about Boeing, the rhetoric does not come close to supporting reality  In reality, they’re at war with the job creators:

Yet the National Labor Relations Board (NLRB) believes it was a mistake and that our actions were unlawful. It claims we improperly transferred existing work, and that our decision reflected "animus" and constituted "retaliation" against union-represented employees in Washington state. Its remedy: Reverse course, Boeing, and build the assembly line where we tell you to build it.

And, as with ExxonMobil, the government’s actions have consequences that it either doesn’t understand or doesn’t care about.  McNerney lays them out for you in the cold light of economic reality and, as you’ll note, it’s not much different than ExxonMobil’s answer:

The world the NLRB wants to create with its complaint would effectively prevent all companies from placing new plants in right-to-work states if they have existing plants in unionized states. But as an unintended consequence, forward-thinking CEOs also would be reluctant to place new plants in unionized states—lest they be forever restricted from placing future plants elsewhere across the country.

U.S. tax and regulatory policies already make it more attractive for many companies to build new manufacturing capacity overseas. That’s something the administration has said it wants to change and is taking steps to address. It appears that message hasn’t made it to the front offices of the NLRB.

We are in some dire economic times right now, and we have an activist government that is saying one thing but doing another.  It is telling us how critical jobs are to our economy on the one hand while, in two very important examples, doing everything in their power to discourage large American companies from creating them.

This is nothing more than political payback and cronyism.  At risk are the lives and livelihoods of thousands of Americans, put at risk to satisfy a political agenda.   The oil industry is not a favored industry of the left, so the administration and Democrats are doing their level best to drive it off, just when untold amounts of new fossil energy has been discovered (shale).  Boeing, on the other hand, isn’t serving a favored constituency as the administration and Democrats would prefer.  So they have attacked that company as well.

Both are extraordinarily bad precedents and symptomatic of a toxic political atmosphere in which the administration and Democrats are engaged in trying to pick winners and losers.  They are also engaged in serving favored constituencies rather than doing all that is necessary to encourage and invite domestic American industries (the home team) to create jobs.  Their actions border on the criminal and are inexcusable – especially in these tough economic times when Americans are suffering from the economic downturn.

These are actions that by government that must be stopped and stopped now.  And Democrats need to be put on notice that their ploy to punish the oil industry is transparent partisan politics and wholly unacceptable to the American people.

~McQ

Twitter: @McQandO

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41 Responses to Rooting against the home team: Democrats and administration attack job creators

  • As I noted the other day…
    This economy CANNOT much improve…may easily further decline…as a matter of pure cause/effect.
    I can think of NO…not one…pro-capitalist act or program of the Obami.  There are legions of anti-capitalist forces among the Obami, and several (like the EPA under the racist Lisa Jackson) are quite lethal to an economy all by themselves.

  • Well, we don’t want to create just ANY jobs you know, we want to create Green Jobs, that will require massive subsidies, and make more segments of the population dependent on more government handouts to keep their companies afloat.  If we can manage to unionize the green companies in the process, so much the better.
     
    Yes, we can create green jobs that we can give to the illegals we’re going to give amnesty to, course they’ll all be in unions, so the issue of them taking union jobs won’t be a big deal.  After all, the union is about the dues, not the members, it’s a sweet deal for the election of 2012.

    • The green jobs all end up in China. In the USA, we just get the dock workers, the forklift drivers, and the people who install and maintain the green machinery.
      Occasionally, if you get enough subsidy, you build a pilot plant here to appease the pols, but quietly shut it down later when the money runs out and your vendor in China is finished tooling up.

  • To quibble a bit:  I wouldn’t call any multilateral corporation the ‘home team.’

    • What WOULD you call it…????

      • What it is:  a multi lateral corporation that really doesn’t care where it produces or what labor force, since this is about labor, it uses.

    • When they’re corporate headquarters is in Irving TX, they’re the “home team” to me.

      • Both the companies that went to make up ExxonMOBIL were formed in the USA.
        Much of their labor-force is American.  Most of their contractors are American.
        Sure, they CAN decamp to another place…in whole or in part.  It would be irresponsible for their management to NOT do that if they find the US is hostile to the interests of their stockholders…who I would BET are dominantly Americans and their investment vehicles.
        Ben and Jerry’s would do EXACTLY the same thing.  Ever hear of “going Galt”?

        • All you have to do is read what the EM rep and CEO of Boeing said. They are responsible to their stockholders. So their job is to optimize the return on investment. My guess is they’d rather do that here … but … if that’s not possible, then yeah, they go where they have to go. That’s a problem easily fixed if government would just get the eff out of the way (and that’s the point of the post, of course).

          • EzzzzACTLY…
            As iconic and tied-to-a-place as SEARS is with Chicago, THEY are edging toward the door.
            Unless the Collective somehow nails people to the floor, they WILL vote with their feet…AND send their money IN FRONT of them.

    • Do they pay taxes in the US ??

      • Very LOTS…
        Just think of the state and local taxes a single refinery generates, not to mention the income taxes from the employees and the company, its suppliers, transportation assets, etc.
        Remember, too, that a lot of “fines” are merely taxes.

    • I quite agree. It would be the “Home Team” if the clear majority of workers were from, and worked in, the United States.

      To quote: The result would be as he concludes – more jobs, more revenue for government, and more opportunities in the works for both in the near future.  Right here.
      I’m not sold on “The result would be…”. Most likely even with minimal taxes and little or no regulation the companies would still go to the places with crap wages. That maximizes the profits for the shareholders, don’t ya know. But hey, give it a shot, and be prepared for the massive blowback and “I told you so!” from various parties involved.

      • Yeah, except you’re an idiot.
        Low wages are not determinative.
        The cost of PRODUCTION IS.  Hence, a high wage, highly productive worker (i.e., the American) beats his or her competition all hollow.
        Dope.

      • Maybe the majority would if the government got the hell out of the way. Until it does, the company still has a requirement to optimize its shareholder’s investment, where ever that takes them to do so.

        • You can see the verity of my statement in the fact that Japanese and German auto makers build cars here, when they could just as well build them in Bangladesh.
          Phananx is a putz.

  • Quick — which presidential candidate pledged to restore science to its “rightful place” in government policy?  If you’ve forgotten, well, so has Barack Obama and his administration, according to the GAO.  The watchdog agency reports that the White House rushed to shut down the Yucca Mountain nuclear waste disposal facility for political rather than scientific considerations, and that Obama’s manipulation will cost taxpayers billions of dollars and set back the nuclear industry by decades
    All the while telling Americans we supports nuclear power.  The decline is a feature, not a bug.

    • I believe you are misinformed.
      A careful and impartial review of the latest scientific literature reveals, storing radioactive waste in over 100 distributed “pools” around the nation, rather than one secure vault thousands of feet below the ground is far safe. IF, you are a politician dependent on the voters of Nevada for retention in office.

      • IF, you are a politician dependent on the [fringe lunatic witch-doctor-believing] voters of Nevada for retention in office.

        FIFY.

    • (In the melody of the old Toyota jingle:To the American people): “You asked (demanded) for it, you got it- Obama”.
      Enjoy your reverse prosperity.

  • “Democrats whine constantly about the loss of manufacturing jobs,”
    In think that is just an old reflex. They probably don’t know anyone in manufacturing because they are all lawyers, civil servants, academic administrators, community organizers, or marketers.
    In California, the big Democrat donors are from silicon valley, which doesn’t care about manufacturing being harmed by their “green” regulations, because they offshore all of their production, and then get mandates to force people to buy it.

  • This administration is doing nothing to advance job growth!! But, everything to qwell the same!! Simple as that!! Look at the evidence above!! Thank you!!
     

    • Oil prices tumbled more than $5 on Wednesday as U.S. gasoline futures plunged limit down, triggering a brief halt in trade on the New York Mercantile Exchange. Gasoline traded down 25 cents at midday in New York, a move that stopped trade on NYMEX crude, heating oil and gasoline futures. Losses carried on as trading resumed with a new limit of 50 cents. Prices completed erased gains from Monday and Tuesday, when traders bid up gasoline on fears that flooding would hit Gulf refiners. Further weakness came from U.S. inventory data from the Energy Information Administration, which showed the first build in gasoline inventories in twelve weeks.

      By next week, this discussion will be moot.

  • The other day I was on a conference call with representatives of ExxonMobil

    This, right here, was where Oliver Willis stopped reading.

    • Oliver Willis tweeted me calling me a “shill”. After I stopped laughing so hard I coughed up a lung I asked if he knew what that meant and if he remembered who he worked for and what he did for them.

      Naturally, Willis can’t deal with the facts in the article – his only tactic is diversion – try to discredit the source so you don’t have to deal with the facts.

      Hardly anything new for him or his organization.

    • Instead we should be granting that corporate welfare to favored, less effective, less efficient, more costly (covered by less effective and less efficient but some people can’t make that connection) and certainly not currently producing much power, GREEN energy companies.
       
       
       

    • I can’t believe both of you passed up this opportunity to say -
       
      “Whatchu talkin bout Willis”?
       
      Well, okay, I CAN believe you did, but me?  Not so much.

  • This conversation is going to be so volatile and so worth it because of so many issues wrapped up in it.
     
    First, let me “out” you all. You, YOU, are all liberals and justifiably so. Click over to Wiki and whistle up “liberal” or “liberalism” and I’ll bet dollars to doughnuts, I’ll be getting slaps on the back instead of slaps on the face. … Classic liberalism is a genuine uniter.
     
    What we are looking at here is a clash between what Wiki calls “social liberalism” and “neo-liberalism” which is the logical backlash to all of these word changing games. Heh, I love to surf Wiki because even though the contributers are largely New-Left, at least in the social sciences field, even they have to struggle to reconcile their internal contradictions. I haven’t taken screen shots over the years but it is clear that as the material on a particular subject becomes more dense in terms of completeness, even they must acknowledge the obvious.
     
    Of course, the NLRB does not want to see any movement south. It would be a econo/political failure. A short anecdote: I was talking to a college kid from Canada recently about Obama and paying back the big three auto makers in the “old Northwest.” The kid was astounded by the fact that manufacturing was hot stuff in the “old Southwest,” as far as it could be had. He was positively stunned when I told him that a friend of mine’s sister, along with all the other folks at the Mitsubishi plant in S. Alabama decided in ’08/09 that the they would work just four days a week to insure that the last hired did not get fired. As far as I know, she is still living on that 20% pay cut. … Elsewhere in the news, Sears is searching around for new digs. … Heh.
     
    Disclaimer: the oil industry is no more my friend than the Boeing conglomerate or my banker, for that matter. The fact is, “them boys is” much bigger dogs, so I am going to stay on the porch, thank you very much. And, I am certainly never going to tread where Bruce and Neo are competent. Still, I can talk energy. Further, and crucially, I have long thought government, business (of the gigantic type) and academia tossed the notion of patriotism years ago. But that is just me.
     
    Presently, I’m trying to school a Brit, our age, about the US. … And, it just so happens I can also talk geo-chem resources and this is what I am saying to him. Fracting is a perfectly acceptable (if superficially messy) method of extracting shale oil. “Clean coal” was/is still difficult (for him to grasp). Between Canada and the US, we could best Saudi resource/production according to what I have seen in the literature. No one had a problem exploiting the Brent Sea crude. Why should we? The answer:
     
    Social liberalism.
     
    It is all about control. Oil men ain’t particularly smart; creative, perhaps; gutsy, sure. Look at T. Boone Pickens, would you use words like genius to describe him? Not, me. … The Boeing types all know they are part of the iron triangle and this particular go ’round will be bloody. It means nothing to them because they provide the gear that the armed services rely upon.
     
    Me, I’m mixing up a “government on the rocks” this evening …
     

  • By the way don’t thank me.  The reason that is in “quotes” is because I took it from Hot Air

  • none of these are “subsidies”, nor (other than intangible drilling costs)
    … but they are effectively identical to NRE (Non-Reoccurring Engineering) costs written off by Apple, Intel, and Microsoft.

  • On CNBC’s “Fast Money” the other night, the gang was discussing the amount of cash that Apple now has on hand.  With a caption of “Apple has more cash than God“, they commented that Apple now has $65 billion in cash, and expect them to have $100 billion by year’s end.
    I wonder when Congress will notice, but then again Apple has been very friendly with the Democrats.  Will they play favorites ?

    • Cash is simply another asset on the balance sheet.  The real question is why is Apple holding onto this cash instead of giving it to it’s rightful owners:  the shareholders.

      • “The real question is why is Apple holding onto this cash instead of giving it to it’s rightful owners:  the Federal and State governments.”
         
        There, FIFY.
         
         

  • Look it is real simple, he has gone into total campaign mode early, His base likes to hate on “Big Oil” so he be hatin on big oil.  It is as simple as that.

    Of course the economy is not going to get any better, and will likely get a whole lot worse in the near future. Look for more of the same, blame republicans, use that as an excuse for even more spending. etc.

    The democrats are truly the way that Tallyrand described the Bourbon kings.  Except stupider.

  • We need to ask, why Obama is trying everything in his power to destroy the US? Every policy, decision, rule, regulation, tax that he has come up with (and invented) has the result of eliminating business in the US and diminishing our wealth. We are in a depression, yet he consistently will not face the fact and reduce regulation and promote those concepts that will stimulate business.

    When bin was killed, I did not think that much of the event as I now view our government as just as much of an enemy as he was.