Semantics are wondrous things. Many politicians, including some Republicans, are now calling for the elimination of oil industry "subsidies" as one small way of closing our heinous budget deficit. These subsidies supposedly total $4.4 billion per year (see: Oil Industry Subsidies.) This is a very small amelioration (less than 0.3%) considering that our budget deficits are now running around $1.6 trillion per year.
Now, I am old enough to remember what these oil-industry "subsidies" really are. They used to be called "oil depletion allowances." These allowances were meant to equate to "depreciation" in other industries. In other words, as an oil company either purchased or leased the mineral rights to a piece of land ... and then extracted the oil, there was a reduced value to this land since the oil was being extracted. Thus oil companies were thus allowed to "depreciate" this depleted oil deposit to allow them to then go and buy or lease other land to look for more oil.
Can we thus call the ability of General Motors to depreciate the machinery (robots, machine tools, etc.) it uses to make cars an "auto-industry subsidy?" If we did, all hell would break loose. Now maybe the formulas used to calculate oil depletion allowances need to be reformulated given the new technology used in oil extraction. But to eliminate these oil-industry "subsides" entirely is but another step in our tree huggers' attempt to emasculate the United States' energy-producing capabilities. This is a little like playing Russian Roulette with five bullets in your six-shooter.
You still have a 20 percent chance of living.
ReplyDeleteRemoving subsidies for companies that are enjoying obscene profits hardly equates to playing russian roulette. Your semantics needs a new muffler when $4.4 billion isn't enough to bother with. "oil depletion allowance" was just another synonym for "Gimmee"
ReplyDeleteThen, of course, depreciation too is just another synonym for "Gimmee." That's my point. And, by the way, does a Democrat ever use the word "profits" without the adjective "obscene"? I kind of like obscene profits ... particularly when they occur at companies I have in my retirement account.
ReplyDelete"Oil depletion allowance" is just a synonym for "the art of lobbying." You are correct that Depreciation is another form of subsidy that should be eliminated, since the cost of purchasing the property has already been deducted from profit. However, if you think that $4.4 Billion is too tiny to be reclaimed, your semantics needs reformulation. Reminder: oil company profits are obscene!
ReplyDeleteDEN, Capital spending is not the same as operational (cash) spending and is accounted for separately. If you think that the costs of capital spending are already included in profit calculations then you (and Congress) need to take a remedial course in accounting. Depreciation is an age-old accounting construct that tries to match the timing of expenditure with the timing of revenues recieved. Otherwise, companies are whip-sawed with gyrating earnings flows = not equitable and not reliably investable. Should a steel mill expense a new factory the year it is constructed? I don't think so. Ergo, as per my argument, if depreciation is valid, so are oil depletion allowances.
ReplyDeleteSigned, Peter Drucker
I think I already disallowed depreciation for anyone, steel mills, abortion clinics, Casinos all included. I don't care about your age-old accounting principles. These outfits are making obscene profits and poor folks are being subjected to death panels. Wealth needs to be re-distibuted. Join us and you might be spared when the uprising begins.
ReplyDeleteIf you haven't noticed, the people making obscene profits from the sale of gasoline are our governments with their taxes (federal taxes, about $0.18 per gallon and, if Obama has his way increasing) ... for which they lift not a finger ... and the OPEC nations ... which pays for opressing their peoples.
ReplyDelete