Earlier this week I decided to visit the website that calculates our national debt and federal spending. What you will find at usdebtclock.org is a myriad of continuous calculations that equate to one thing, the American economy spiraling into demise.
Today, the U.S. national debt is approximately $14.5 trillion and climbing. To address the issue, Congressional leaders and the Administration are working overtime to formalize an agreement on the ballooning deficit and plans to extend the U.S. debt ceiling. Part of these ongoing negotiations will involve tough decisions regarding spending cuts on all levels. On the potential chopping block are cuts to big-ticket programs like Social Security and Medicare. Also, part of the discussion is cuts to ethanol subsidies and vital tax breaks for oil & gas companies.
The Administration should be acknowledged for its willingness to make concessions on both Social Security and Medicare. It’s important that these entitlement programs be the focus of alleviating our debt issues because they are the most serious threats to our nation’s economic sustainability.
It’s a fact that in less than 10 years Social Security will be paying out more than it takes in to the federal government. It has been estimated that the unfunded promises of Medicare and Social Security equate to approximately $80 to $100 trillion. With the baby-boomer generation growing older in age, finding sustainability within these programs will be one of our nation’s greatest challenges moving forward.
Making cuts to these entitlement programs could be the first steps to getting our fiscal house back into some sort of order. However, what’s happening behind the scenes of these negotiations are the potential removal of tax deductions for industries that generate jobs and revenue.
For the oil and gas industry, vital federal tax incentives ensure that rigs keep running, wells keep drilling, energy keeps flowing, and hardworking Americans retain their high-paying jobs here at home. To be clear, these incentives are in no way comparable to the direct government subsidies that the ethanol and renewable energy industries enjoy. In fact, these tax breaks are comparable to deductions that ever other industry in this country utilizes.
Jack Gerrard, President of the American Petroleum Institute, claims that raising taxes on an industry that contributes nearly $86 million every day to the federal government is a step in the wrong direction. Gerrard notes, “It could put American jobs at risk, decrease oil and natural gas production, harm millions of retirees who rely on income from energy companies, and actually reduce revenue to the government over time.”
Plans to target domestic manufacturing deductions, the percentage depletion deduction, and a repeal of intangible drilling costs will exacerbate our growing unemployment problems and inevitably lead to substantial increases in another important deficit that we tend to forget in this country – the trade deficit.
Today we face a serious budget deficit but also a serious foreign trade deficit. A large portion of this foreign trade deficit stems from our continuous addiction to purchasing foreign oil. The penalizing U.S. tax code and our government’s desire to limit access to explore and produce domestic resources are key components to our nations staggering trade deficit. Repealing federal oil and gas tax incentives will only disincentivize investment in our country and worsen our growing economic problems.