The United States currently subsidizes domestic oil producers. It pays $50 billion annually to companies for the domestic extraction and sale of oil. This subsidy is a waste of taxpayer dollars and must end. The federal government should more heavily tax foreign oil companies to the anticipated total of $50 billion. It should spend the revenue from this tax on subsidizing the development of basic research on green energy.
A subsidy forces the government to pay money out while a tax brings money in. When the government subsidizes domestic oil, American companies can extract oil more cheaply because the government pays part of the cost. This allows domestic firms to compete more effectively with foreigners. A tax produces the same result. When foreign corporations are taxed, those firms wind up passing on higher costs to consumers.
This enables domestic firms, who do not face the higher tax burden, to charge less than foreigners, which advantages U.S. oil. If two different policies achieve the same result, but one costs money and the other makes money, the government should obviously choose the latter. This simple arithmetic justifies the elimination of domestic oil subsidies in favor of foreign taxes.
Either a tax or a subsidy will lower the overall price of gas. Many critics comment that cheaper fossil fuels delay progress into green technologies. The truth is that green technologies need to be more thoroughly developed. The backbone of technological development is basic research. Without it, there is not a rich enough base of data from which to create new products. Unfortunately, the private sector has weak incentives to work on basic research since the results of such research are not immediately profitable.
This problem is exacerbated in green energy firms, which are currently suffering due to poor demand for their products. Thus, it is unreasonable to expect green firms to undertake costly, but necessary, basic research projects because they simply cannot afford to. Thus, if the government is serious about making progress on the development of green technology it must foot the bill. By utilizing the money saved by taxing foreign oil companies on basic research, the government can help advance green technologies without adding to the deficit.
Basic research on potential energy efficient technologies is promising, but research need not be limited in this way. Research on pollution containment from oil, coal and natural gas is very promising. Though the fruits of such research are probably many years away, the potential benefits are tremendous.
America has had a long history of leading the globe in major innovations. One need only look to Silicon Valley and American pharmaceuticals to see how American businesses can set the global standard. These industries succeeded in large part because of government investment in startup research on microchips and vaccinations. By having the foresight of financing research before it seems profitable, the government can ensure that progress made by American businesses will define the trajectory of global energy use.
In any case, this program will lead to the creation of jobs in the short term. After all, someone needs to conduct the research and build the facilities for the research. In itself, this justifies spending on basic research on green technologies. The government can take any jobs it can get, and the best jobs are those that come with no increase to the deficit.
In the longer term, American innovation will create more jobs in America. After all, when American firms innovate they continue to do so in America. This opens up more jobs and leads to greater capital inflows as foreigners buy American designed products. Over the past 20 years, America has lost its edge in production but led the world in innovation. This is the reason that America still remains the foremost economic power in the world.
The world is staring down a climate disaster that will wreak havoc unless slowed. The finite supply of energy is being far outstripped by increasing global demand for it. The cost of energy is increasing at an unsustainable rate and is adding to the costs of consumers and business alike. In light of these realities, the government must try something, lest future generations be quite literally doomed.
This plan replaces a subsidy with a tax and has no adverse effect on the result of the original policy. It initiates critical research, and will provide jobs both in the near and long terms. It does all of this without contributing to the deficit. For these reasons, America must act. It cannot afford not to.
