The House of Representatives is finally getting around to jobs, the number 3 thing on its 2010 campaign agenda. House Ways & Means Committee Chairman Dave Camp (R–MI) has introduced the legislation, “To improve jobs, opportunity, benefits, and services for unemployed Americans, and for other purposes.” The bill does not have a number yet but according to its text may be referred to as the ‘‘Jobs, Opportunity, Benefits, and Services Act of 2011’’ or simply the ‘‘JOBS Act of 2011’’. But it does not have to do with jobs; it has to do with unemployment benefits. It cuts them back.
Despite the noble wording of its title, what the bill does is to encourage states to whittle back their unemployment insurance systems. The bill gives states the option of using federal unemployment-benefit dollars to repay federal loans or provide tax breaks to businesses. Not continuing to pay jobless benefits to long-term unemployed people somehow counts as “job creation.”
Representative Sander Levin (D-MI) put it this way, “This is the opposite of a jobs bill — it is a hatchet job on the unemployment insurance program.” The Ranking Member of the Ways & Means Committee, Levin said, “With this legislation, Republicans are proposing to end this year’s guaranteed benefit for the long-term unemployed.” If states follow Michigan’s example by cutting benefits and instead using federal dollars to repay loans rather than providing weeks of aid, it could take billions of dollars away from jobless Americans.
Even though federally extended benefits could stay in place for the remainder of the year, some states let those benefits expire, benefits already budgeted and paid for in Washington. By not passing simple legislative measures to ensure that the federal government’s share of weekly benefits continues, a number of states failed to extend those benefits, as Missouri did on April 2. North Carolina, Tennessee, and Wisconsin followed suit on April 16. As a result they all denied 20 weeks of federal benefits to their jobless women and men.
Last week Florida’s Republican-controlled House and Senate passed a compromise measure, just before the session expired at midnight, that would cut maximum state benefits from 26 weeks to 23 when the state jobless rate is 10.5% or higher. Florida has one of the highest unemployment rates in the country, 11.5%. It also has some of the lowest unemployment benefits. Republican Governor Rick Scott is expected to sign the bill.
New claims for unemployment insurance are again going up and 13.7 million Americans are looking for work. According to the Congressional Budget Office, federal unemployment insurance kept about 3.3 million people above the poverty line in 2009. Job growth is weak. At the current monthly rate, it would take more than five years to return to the pre-recession unemployment rate of 5%, back in December 2007. While more aid to states could help stanch job loss,legislative fixation on the federal deficit has silenced talk of more fiscal stimulus.
On election eve the new Republican House Speaker Boehner promised to hold weekly votes to cut federal spending, make jobs the top GOP priority and fight to repeal the health care law. Representative Darrell Issa (R-CA) called the election vote a "mandate" on limited government. Issa said the message to Washington was, "Advance an agenda that will create real jobs, not government jobs, but real jobs to get our economy moving again.” So far that has not happened.
As abortion foes continue to lobby Congress, the Republican House majority has been at odds with itself on handling the deficit and raising the debt ceiling, ignorant that the near-term fiscal situation that embroils them is largely unimportant to investors. The US Treasury has no trouble selling debt and is still able to borrow money quite cheaply. It can do so because investors continue to have high confidence that debts will be repaid in full. The make-believe fiscal crisis is largely made-for-television to create celebrities out of elected politicians.
The real crisis is unemployment. Our political class does not seem to understand that it is the millions of American men and women who cannot find work that needs their attention, not the defunding of anything having to do with abortion or repealing the Health Care and Education Reconciliation Act. America’s future is at stake. According to New York Times columnist and Nobel Laureate Paul Krugman, “The longer this goes on, the more workers will find it impossible ever to return to employment, the more young people will find their prospects destroyed because they can’t find a decent starting job.”
Congress has passed at least 113 bills so far and sent them to the Senate. Not one of them mentions of the words “employment” or “unemployment.” Only two resolutions contain the word “jobs”, as opposed to “job-killing,” and neither of them have anything to do with the public. Only the “JOBS Act of 2011” has a chance in the 112th Congress because it does deal with unemployment. It screws the unemployed.
Last year President Obama got on Big Oil over “environmental procedures for oil and gas exploration and development,” in response to the huge oil spill in the Gulf of Mexico. A year later he is on Big Oil’s case again over their “making huge profits and you’re struggling at the pump.” The president jumped their case in his weekly radio address following one of the biggest oil companies, Exxon Mobil, report that its profit rose 69 percent to $10.65 billion during the first three months of the year. Unfortunately, huge profits are different from huge oil spills.
In addition to Obama saying, “these tax giveaways aren’t right” and “we need to end them,” Senate Finance Committee Chairman Max Baucus (D-MT) released a plan to end “billions of dollars in tax breaks for large, multinational oil and gas companies.” Echoing the president’s charge with the headline, “Skyrocketing Gas Prices Necessitate Action to Address Energy Costs,” Baucus called his plan a blueprint for legislation that he intends to craft in the Committee.
Its first big bullet point is, “Repeal tax breaks for the largest oil and gas companies – end tax incentives for the five largest oil and gas companies that announced tens of billions of dollars in first quarter profits this week. This includes the elimination of the section 199 manufacturing deduction, reduction in the foreign tax credit for royalty payments to foreign governments and the imposition of an excise tax on certain Gulf leases.” It is the targeting section 199 of the tax code that makes the ensuing political debate a fake.
According to WTAS, one of the largest independent tax, valuation, and financial advisory firms in the United States, Congress enacted Section 199 in 2004 “to encourage the retention and growth of U.S. manufacturing without regard to whether the output of those manufacturers was exported out of the country or consumed domestically.” What it does is to reduce the income tax assessed on the profits of targeted industries, principally manufacturing, construction and natural resource extraction (oil and gas, mining, forestry, etc.).” In its newsletter WTAS also noted, “For good measure, software developers, filmmakers and music publishers were also tagged to benefit from the new incentive.” No one complains about their huge profits.
In a 2005 study, the Congressional Budget Office reported that capital investments “like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry.”
But that is only interesting. Big Oil has big pockets. For that reason any efforts such as Senator Baucus’ to curtail the tax breaks are likely to face fierce opposition in Congress. The oil and natural gas industry has spent $340 million on lobbyists since 2008, according to the nonpartisan Center for Responsive Politics, which monitors political spending.
Other than the president and Senator Baucus, Americans are not complaining about profits or blaming Congress, which they dislike anyway. They are complaining about prices. A McClatchy-Marist poll reported that far more Americans blame oil companies for surging oil prices than they blame either political party. “Drivers split their blame, with 36 percent pointing at the Middle East and 33 percent blaming oil companies. Only 11 percent blame Obama and Democrats, while 6 percent blame congressional Republicans.”
Gallup began asking the "most important problem" question in 1939 and established monthly updates in 2001. Economic concerns became dominant for Americans in April 2008 and have since tied or outpaced non-economic concerns in all but four months and gas prices are not on the top of the list. “The top five economic problems named this month are the economy in general (28%), unemployment (26%), the federal deficit or debt (13%), gas prices (6%), and lack of money (4%).”
It should be remembered that 68% of the pump price for gasoline is the price of crude oil, which is a commodity. Refining, where most of the jobs are, makes up 13%. Taxes account for 12% and the remaining 7% goes to distribution and marketing, according to the US Energy Information Association. With the exception of diesel, pump prices have gone up more than a dollar a gallon across the US since last year. In California, we have been paying more than $4 per gallon since January.
My crude price analysis of a “Sampled History of Crude Oil Prices at The New York Mercantile Exchange” reveals the following. Five years ago the barrel price of crude cost $72. April 2007 it was $66, April 2008: $117; 2009: $52; 2010: $86; 2011: $114. Low prices below $50 occurred in November 2008 and remained there until March 2009 at $46. The record bottom was the week ending January 16, 2009 when it cost $37 a barrel. The public did not complain about Big Oil profits, although there were big profits anyway. By contrast, high crude prices occurred in February 2008 at $145 through September 2008 at $107. So far this year prices have averaged $111 per barrel. Accordingly, pump price is high.
By the way the record low was January 16, 2009 at $37. The record high to date was July 4, 2008 at $145. The cost of raw material is always passed along to consumers. Profit margins are not accidental.
Speaker John Boehner told ABC news, “I don't think the-- the big oil companies-- need to have the oil depletion allowances. But for small, independent-- oil and gas producers-- if they didn't have this-- there'd be even less exploration in America then there is today.” When asked about doing away with subsidies for Big Oil altogether, Boehner said, “We certainly oughta take a look at it.”
My great-grandfather had a similar expression to Boehner’s. An Irish immigrant and labor leader with the Congress of Industrial Organizations in the 40’s, when he wanted everyone think he was agreeing with them he would say, “Won’t it be fine when we do.” The translation is, “As if that’s going to happen.” Noted.