The U.S. Isn't Broke

by Gary Palmer

 Despite what you have heard from the politicians in Washington and from the hand-wringing media about whether or not to raise the debt limit, the United States is not broke. Our nation has abundant assets; we simply refuse to use them.

As sensible as the Cut, Cap and Balance Act that just passed the U.S. House of Representatives may be, it should be obvious that with Republicans only in control of the House, there is practically no chance of getting it passed by the Democrat-controlled Senate and signed by the President as part of a deal to raise the debt limit. In fact, the Democrats, along with President Obama, are insisting any legislation that includes spending cuts must also include substantial tax increases to raise federal revenue.

In an already weak and stagnant economy, the last thing we need is a major tax increase that would further slow an economic recovery. What the nation desperately needs now is legislation that will help get our economy growing again.

Consequently, what the Republicans should be pushing for in exchange for raising the debt limit is passage of legislation that will authorize the sale of oil and gas leases on federal land as the means to raise federal revenue. In other words, if Obama and the Democrats want to raise revenues, they should get it out of the ground instead of out of our pockets.

According to the U.S. Department of the Interior and the Bureau of Land Management, there are 800 billion barrels of recoverable oil from oil shale in the Green River Formation. This is three times more than the proven oil reserves of Saudi Arabia. The Green River Formation covers about 11 million acres in Colorado, Utah and Wyoming, with about 80 percent of the recoverable oil in a 1,225 sq. mile area of western Colorado.

The federal government owns or manages 73 percent of the lands that contain significant oil shale deposits in the West and 80 percent of the recoverable oil in the Green River Formation. In addition, there are several billion barrels more offshore. In fact, only about 15 percent of the U.S. coastal waters have been opened to exploration. Including the known oil reserves in Alaska and other areas of the nation, the U.S. has oil reserves worth trillions of dollars.

And that is just the oil reserves. The U.S. has an estimated 284 trillion cubic feet of recoverable natural gas. Together, it is estimated that there are enough oil and natural gas reserves on federal lands alone to power 65 million cars for 60 years and heat 60 million households for 160 years. In addition, the U.S. has 261 billion tons of coal that is recoverable using current mining technology, enough to last 249 years.

Opening some of these reserves for recovery would provide the federal government with additional revenue, hundreds of thousands of jobs to our economy, less U.S. dependence on foreign oil, lowered energy costs to help make U.S. businesses more competitive, and lowered household energy costs for utilities and gasoline. It is estimated that just allowing permits for offshore exploration and drilling to return to levels before the BP spill, including approval of backlogged permit requests, would generate 400,000 jobs and add $45 billion to GDP over the next two years.

Lowering energy costs would have a tremendous effect on household incomes, particularly for low income families. Americans are now spending 12 percent of their household income on higher energy costs for gasoline, electricity and heating. Since 2002, the household energy costs have more than doubled, rising from $2,180 per year to $4,410. Households with incomes below $50,000 annually, which is half of all U.S. households, are estimated to be spending 20 percent of their disposable income on energy costs; households with incomes less than $30,000 are spending 23 percent.

The federal government is actually adding to our debt problem by providing payments to states to help low-income households pay their rising energy costs. As of April 2011, the Department of Health and Human Services has spent almost $3.9 billion thus far in the current fiscal year on subsidies to help low-income households pay their energy bills, including $58.3 million in Alabama.

If the Obama Administration and the leadership of the Democrat-controlled U.S. Senate insist that any agreement to cut spending must be coupled with higher revenues, then the Republicans should put revenues from oil, natural gas and coal reserves on the table.

Given the enormous amounts of revenue that could be generated, opening up these reserves should be part of a common sense solution on the agenda of every member of Congress who truly cares about the American people. This would generate direct revenue from royalties and add hundreds of thousands of new jobs, generate billions in tax revenues for state and federal government, add hundreds of billions of dollars to the GDP over the next ten to 15 years and provide significant relief from high energy costs for millions of low- and middle-income households and for senior citizens on fixed incomes.

If members of Congress are looking for a way to ease the political pain of raising the debt ceiling, tying the increase to reducing energy costs and boosting an economic recovery would be a great way to do it while also continuing the fight for spending cuts.

July 21, 2011

Gary Palmer is president of the Alabama Policy Institute, a non-partisan, non-profit research and education organization dedicated to the preservation of free markets, limited government and strong families, which are indispensable to a prosperous society.