Wednesday, February 01, 2012

Guest Post: Investment Best Left to Private Sector, Not Government

The following is a guest post by William O’Keefe, chief executive officer of the George C. Marshall Institute, and president of Solutions Consulting Inc.

Investment Best Left to Private Sector, Not Government

Al Gore’s self-aggrandizing claim that he “took the initiative in creating the Internet” has haunted him since he first uttered it during a 1999 interview. Newt Gingrich has taken a good deal of flack since claiming “helped lead the effort to defeat communism” late last year. It makes sense. In a society where people expect to be rewarded for their hard work and good ideas, the public generally abhors those who take credit where it’s not due. Self-promotion is what hucksters do.

For those reasons and others, politicians—especially those seeking reelection—should avoid engaging in unwarranted swagger. President Obama has not.

In his State of the Union address and campaign ads, Obama attempts to credit his administration with the recent boom in U.S. oil and gas production. Yet the facts don’t bear this out.

Obama has been more of an obstacle than an enabler to growth in America’s energy industry: straddling the fence over his support for development, targeting the sector for punitive tax hikes, and failing to issue a single new offshore permit in fiscal year 2011. So what are we to make of the President’s sudden embracing of traditional fuels and the more than 9 million workers whose jobs are supported by this industry? Why, election year politics, of course.

The President has already kicked off his swing state tour, traveling across the U.S. touting the need to create manufacturing jobs throughout 2012. Manufacturing is an important part of the Ohio economy, making this a politically savvy move to ensure his rhetoric resonates in the state. The manufacturing sector is the largest contributor to Ohio GDP at over 17 percent, and employs over 600,000 workers in the state. Nationally, the sector represents 11 percent of GDP.

But has the Obama administration really played the role in boosting manufacturing in the energy industry as he claims? In a word, no.

Private sector engineers invented hydraulic fracturing, the process responsible for the boom we’re witnessing in domestic natural gas production, back in 1947—over a decade before the President was even born. This innovation has enabled U.S. firms to unlock resources never before accessible and invest billions in our economy in the process. Far from encouraging this success, the President has singled out this sector for massive tax hikes—jeopardizing our already shaky position in the global energy market (not one U.S. company is in the top 15 largest energy companies worldwide).

In effect, by increasing taxes on U.S. companies, this desired policy would send more jobs and revenue abroad. This is a far cry from creating needed manufacturing jobs domestically. While domestic employment has been declining during the president’s tenure, employment in the oil industry has grown over 20%.

While gunning for oil and gas, the White House is playing favorites with the renewable lobby. Currently, about $11.3 billion taxpayer dollars are directed toward “green” energy annually. Despite decades of massive subsidization, the industry still accounts for only eight percent of U.S. energy demand. Heavily subsidized failures like the botched $500 million Solyndra loan are just the tip of the iceberg when it comes to government failures at picking winners and losers in the energy sector.

Ohio needs jobs, and that will require a plan to make our state and nation as a whole more attractive to investment and innovation. The President’s continued pursuit of job killing punitive tax hikes on manufacturers puts off investors and is contradictory to his campaign message touting the need for job creation. If Obama is serious about job creation, he must move to leave capital in the hands of proven private sector innovators, and stop trying to increase taxes to fund failed pet projects.

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