Energy Independence

I have written in the past about "oil industry subsidies." Rather than using a hyperlink, I will just reproduce my 2011 blog entry text here:

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 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.

I pretty much said what needed to be said back in 2011, but now Jeanne Shaheen of New Hampshire is using this same demagoguery against Scott Brown in their Senate race up there. If we are ever going to achieve energy independence in this country, it will not be by eliminating this valid accounting process for oil exploration companies. Machinery wears out and is obsoleted ... and needs to be replaced. That is why depreciation is a valid accounting entry for manufacturing companies. Such is also the case for oil in the ground. Once it is gone then the high prices paid for this resource is lost unless it was allowed to be depreciated like any other income-producing asset. This is not a "subsidy" ... it is simply a logical accounting rule ... something that seems continually to be lost on liberals ... and naive voters

Why the media, accounting professionals and university professors don't come to defend this age-old accounting practice is beyond me.  Oh, yes ... I think I just answered my own question.

Affordable Care Facts

We are finally starting to get some cold hard facts behind the Affordable Care Act and the “healthcare.gov” website … according to CNN Money:

Some 87% of the 5.4 million people who have signed up through healthcare.gov, which handled enrollment for 36 states, qualified for subsidies. The department is still gathering data for the 14 states and District of Columbia that ran their own exchanges, which attracted roughly another 2.6 million sign-ups.

This means that 4.7 million of “healthcare.gov” enrollees are getting subsidies. The average monthly subsidy provided to these 4.7 million enrollees is $264 ... versus the average premium that they paid after subsidy being $82. This means that just this partial piece of Obamacare is going to cost the American taxpayer $1.24 billion per month in the first year. And you might be shocked at how one qualifies for this largess (again from CNN Money):

Anyone earning up to 400% of the poverty line -- up to $45,960 for an individual and $94,200 for a family of four -- was eligible for a subsidy. The subsidies were pegged to the cost of the second-cheapest silver plan in one's area. People could choose from four coverage tiers ranging from the cheapest, bronze, to the most expensive, platinum.

Shhh! Don’t let this all get out … otherwise these Obamacare percentages are going to skyrocket … particularly after this fall’s elections when the employer mandates kick in … and tens of millions of employees lose their healthcare insurance. Even before this happens the Congressional Budget Office has estimated that the total cost of the Affordable Care Act subsidies this year will total $12 billion … see: CNN Money. Now we finally understand the logic behind the naming of this piece of wealth-distribution legislation.

It will be “affordable” to everyone but the U.S. taxpayer.

Oily Proposal

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.