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Moving Ahead for Progress in the 21st Century Act --Continued

Floor Speech

By:
Date:
Location: Washington, DC

BREAK IN TRANSCRIPT

Mr. VITTER. Mr. President, I have returned to the Senate floor today to talk about what is a true crisis for many Louisianans, many Americans, which is the ever-rising price of gasoline at the pump. This hits everybody in their tough pocketbook in a horrible economy. It is a true crisis for many American families all around the country.

In this debate--and it has been a significant national debate--a lot of Republicans say: Well, President Obama does not have a plan, does not have a policy to address the price at the pump. A lot of supporters of President Obama say: Well, no President can have a significant impact, can determine the price at the pump.

I think both of those statements are equally wrong. I think the President, this administration, does have a policy. They have made specific proposals and it would, if we enact it, have a significant impact on the price at the pump. It would just be the wrong sort of impact. It would drive the price even higher than it is now, not help American families by stabilizing that price.

I want to focus on one very specific, clearly laid out policy of President Obama, and that is to increase taxes on oil and gas and energy producers--increase taxes on that product, which I think clearly is going to only drive up the price at the pump.

President Obama has advocated this very consistently for a long time. He advocated it as a Senator. He laid it out as a central plank of his energy policy when he was originally running for President in 2008. He has fought for it ever since, including it in every budget submission to Congress. He has always advocated increasing taxes on domestic oil and gas energy producers.

To underscore this point, one of the President's biggest supporters in the Senate, Senator Menendez, has introduced this concept in the Senate. Yesterday, Senator Menendez introduced the Repeal Big Oil Tax Subsidies Act, which, again, does exactly the same thing as the President has long advocated. It increases taxes on that product. It increases taxes on those domestic producers.

I think the American people get it. We can argue about fairness. We can argue about other considerations. But in terms of the impact this is going to have on the price at the pump, I think the American people get it. It is economics 101: If you tax something more, you tend to drive the price up in the market, and you decrease supply. Again, that is economics 101.

I could talk about the true facts of this with regard to energy companies--the fact that they pay an effective tax rate of about 41 percent, the fact that they account for enough revenue to cover 10 percent of our entire discretionary budget, that they are not undertaxed at all by any reasonable comparison. But I am not going to focus on that because, quite frankly, I do not care about the direct impact on the companies. I care about the direct impact on Louisianans, on Americans, on consumers, on what so many low or middle-class families are dealing with right now--that real crisis I talked about that you face every time you go to fill up your car; that is, the burden of skyrocketing prices at the pump. That is what we should all be concerned about. As I said, I think it is pretty obvious, it is economics 101, that if you tax something more, the price at the pump, the price in the market goes up, and you get less of it.

But even if that were not so obvious, we have history to look at. There is a very clear history lesson from the Carter years, when this same experiment was actually enacted. Back then, in 1979, it was called the windfall profits tax. You may remember that debate. Well, that was actually enacted here in Congress, here in Washington--the Crude Oil Windfall Profits Tax Act. It was passed back then, and it went into effect on April 2, 1980. Again, the same arguments, the same policy: Somehow the tax treatment of these companies is unfair. Somehow they are not paying their fair share--even though the facts show otherwise--so we are going to increase the tax on those domestic energy producers.

Well, what happened? The first thing that happened was the price at the pump went up. It went up significantly for several years. There was a lot going on in the world at the same time. I know folks will point to developments in the Middle East and everything else. But that is what happened immediately following the enactment of that law. The price went up by about 50 percent and stayed there for several years.

But let's look at other factors. You can argue about the impact of politics and developments in the Middle East on price. What about things that should not be so impacted by developments in the Middle East? What about things such as domestic production and whether that increased or decreased? Well, in fact, as a direct result of the windfall profits tax, domestic oil and gas production, energy production, went down over that entire period from between 3 percent to 6 percent. If you look at the entire period of the tax, it went down.

In this debate, everyone at least has paid lip service to the idea that we should be producing more energy here at home. Yet in this historical example, in this experiment, increasing the tax on this product did what you would expect it to do, again from economics 101: It decreased that activity here at home. It decreased domestic production.

What else did it do? Well, the second big impact it had was it increased our dependence on foreign oil. Again, you can connect the dots. This is exactly what you would expect. If you increase taxes on domestic production, you decrease that supply, and guess what. We are even more dependent on those unstable foreign sources we want to get away from. That is exactly what happened in the Jimmy Carter experiment. He passed the windfall profits tax, and during the entire tenure of that tax, dependence on foreign oil increased significantly--between 8 percent and 16 percent.

Then something that might be a little less obvious is the impact on revenue. There were enormous promises made about the revenue this windfall profits tax would bring in. Well, at the beginning it did have that impact, but guess what. Over time that impact declined enormously, down to actually a zero net revenue increase by 1987. The tax was eventually repealed in 1988, but this impact on revenue went down to zero before that repeal, not because of the repeal. It went back to zero in 1987.

This purple, as shown on this chart, is what was promised. This purple is the increase in revenue that was promised and projected by President Carter. This gray, as shown on the chart, is what happened. Sure, there was an immediate spike. Then guess what. Domestic energy producers reacted. They did less activity here. If you tax something more, you get less of it, we are more dependent on foreign sources, we drive out that activity--those jobs and that revenue. So there was a steady decline, until it was actually zero net additional revenue in 1987, leading to the repeal in 1988.

So I would hope, when we look at this proposal--I would hope first we focus on the American people, we focus on their plight every time they go to fill up their gas tank, with these ever-increasing prices, and our top goal is to give them relief.

Increasing taxes on that product, increasing taxes on domestic producers of energy, is not going to give them relief. It is going to do exactly the opposite. Every rule of economics says that. If you tax something more, you get less of it, you increase the price in the market. History proves that--a very clear lesson from the Carter years that some folks on this Senate floor, President Obama, and others, want to repeat. This is not good policy if we truly want to help the American people with their everyday struggle with the price at the pump.

I think what is going on is a completely different agenda. Folks are so set against fossil fuel, folks want to advantage new forms of energy so much that they are willing to resort to actually increasing the price at the pump to do it. That is exactly what Secretary of Energy Chu advocated in late 2008 right before he was appointed to his present position. Let's not do that. The American people cannot afford it. They need relief. They need it now.

An American President can make a difference. Unfortunately, this one has a policy that would make a difference in the wrong direction. Taxing something more increases the price, produces less of it. We need to be doing the opposite. We need to be increasing domestic supply, bringing down the price, helping the American people in their everyday struggles with their family budgets, with how to manage their scant resources in a very tough economy.

I yield the floor.

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