Saturday, September 06, 2008
What Palin Really Did To the Oil Industry
Oil companies in Alaska are paying more money in taxes than ever before. The state's oil and gas tax revenues for its just-ended fiscal 2007 topped $10 billion. That's twice as much as fiscal 2006 and four times more than 2004.
Some supporters of Barack Obama see that money coming in and say that John McCain's running mate, Alaska Gov. Sarah Palin, must have done what Sen. Obama wants to do -- sock those companies with a big fat windfall profit tax. This is a deeply misleading reading of her 2007 tax reform.
A few years ago, Alaska had a big problem. Despite high oil prices, the state's fiscal future was in peril because the state relies on only three aging oilfields for 80% of its oil and gas tax revenue.
In 2006, then Gov. Frank Murkowski, a Republican, proposed changing the state's tax on oil from a gross-revenue to a net-revenue basis. Instead of creaming 10% off the top -- which was how the mature oil fields were taxed -- Mr. Murkowski pushed to tax oil companies on their profits only, at a rate of 22.5%. The change in tax regime was meant to encourage investment in and development of new fields.
In effect, the state would become the oil companies' development partner. It would participate in the upside of oil and gas exploration, but only after the companies had recovered the enormous upfront costs of drilling new wells.
These costs are considerable. In Alaska, the locations are remote, the climate is extreme, the infrastructure mostly nonexistent, the environmental rules the strictest in the world, and there is only a short work season of three or four months a year. The costs make any project very risky.
Mr. Murkowski's plan turned into a disaster. It depended much on trust, but it lacked the transparency and predictability needed to win public confidence. One year after it went into effect, the Petroleum Profits Tax brought in far less revenue than expected and the state suffered a revenue crunch.
Somehow, the legislature had never properly defined accounting procedures and permissible deductions -- and the deductions came in much higher than expected. Meanwhile, as the shortfall appeared, a number of state legislators were on trial, under indictment, or under investigation for bribery by the FBI. These included some who should have done due diligence for the taxpayer on the proposal they enacted.
As a new governor in 2007, Mrs. Palin stepped in to address the fiscal crisis and restore accountability. Working with Democrats and Republicans alike, she chose a 25% profits tax. But in lean years the state reverts to a 10% gross revenue tax on legacy fields that do not require massive continuing inputs of new capital.
Relative to the old system, Mrs. Palin's plan -- called "Alaska's Clear and Equitable Share" (ACES) -- improves incentives for developing new resources. It ensures the state does well in boom times -- as it is doing now -- when oil prices are high. But it also hedges against low prices in the future by ensuring that oil companies exposed to commodity price swings don't face a crushing tax burden when commodity prices fall.
Her plan includes an escalator clause that gives the state a larger share of revenues when oil prices rise. This is common to production-sharing agreements all over the world.
Mr. Obama proposes to give each American a $1,000 check funded by windfall profit taxes to ease the pain of high energy prices. Some say Mrs. Palin's ACES is like that, because this year every Alaskan will receive a $1,200 check as a share of the oil bonanza. (The check comes in addition to the approximately $2,000 every Alaskan will receive this year as a dividend from the Permanent Fund, which was established by state constitutional amendment in 1976 as a way of sharing the state's mineral wealth with the people.)
A direct share in oil profits for every citizen is the ultimate incentive for more drilling. That's why in Alaska drilling for oil seems almost universally popular, while other states are drill-phobic.
The real comparison is not between Mr. Obama's windfall profit tax and Mrs. Palin's risk-and-profit-sharing plan. It is between Alaska's constitutional rule -- that the people must share directly in the state's mineral wealth -- and Mr. McCain's proposal that coastal states should share in federal offshore oil revenue. His plan is for the funds to be used for public purposes like roads, schools and conservation. A share of royalties dramatically improves the coastal states' incentive to support drilling. But if Mr. McCain offered every individual American a royalty check too, he might find it easier to sell his program.
Let's Talk About Palin's Family Challenges
Gov. Sarah Palin's commando muscle-flex in St. Paul Wednesday night eviscerated the argument that she might not be capable of handling the vice presidency and five children at the same time. Indeed, we were left with the distinct impression that on a slow day, she could clean up America, balance our budget with a little help from eBay, and win the Iditarod -- all with 10 kids tied to her back.
What Sarah Palin did not do, however, is put an end to the latest national conversation about "trying to have it all." Because the question we're all asking isn't can she do it, but why is she doing it? Mrs. Palin, you see, happens to be bucking a new national trend. Even as most mothers across America chuckle appreciatively about pit bulls and lipstick and applaud her bravado, they are making choices that look very un-Palinesque.
This week we've heard our feminist foremothers argue that any sentence mixing the words woman, kids and work is inappropriate -- heretical even. "A man wouldn't face this sort of scrutiny," they grumble darkly.
But Mrs. Palin and her career aspirations are not falling victim to a secret cabal of men trying, once again, to impose an impossible standard on women. And this is not a redux of the old Mommy Wars -- that stale, red herring of a debate between "career" moms and their "stay at home" counterparts.
Mrs. Palin is actually putting a spotlight on a new women's movement we call "Womenomics." Thanks to women's fast-growing market value we can finally live and work in a way that wins us time and avoids that agonizing choice of career or kids. Today as never before women can define success on their own terms.
Fed up with 50- and 60-hour weeks and a career ladder we didn't build and don't want to climb, women are looking for jobs that demand fewer and freer hours. We want to work but we also want quantity time, as well as quality time, with our children. Most of us no longer buy the onwards-and-upwards drive to the corner office (or in Mrs. Palin's case, the West Wing) at the cost of a fragmented family life. More and more, women are choosing a tapestry of family and work in which we define our own success in reasonable terms -- even if we sacrifice some "prestige."
In 1992, 57% of women with degrees wanted more responsibility at work, but by 2002 that figure had plummeted to 36%, according to the Family and Work Institute. Four out of five women want more flexibility at work and call it a top priority; 60% of us want to work part-time. What we're saying is we'll trade responsibility, title -- even paycheck -- for more time and more control. And we have company. Increasingly men say they too want more flexibility at work. Gen X and Gen Y won't even talk about sitting at a desk for 10 hours a day.
What makes this revolution possible is that it's grounded in hard-core economics. Women are the hottest commodity in the hunt for talent.
We're 58% of college graduates, we get graduate degrees in greater numbers than men. Companies are waking up to the fact that women are more than a politically correct nod to diversity. We help the bottom line. A recent 19-year study of 215 Fortune 500 firms found that companies that have more women in executive positions make more money. Companies with more women in senior management get higher valuations on the American Stock Exchange.
Overwhelmingly, women are using this professional clout to redefine work, not chain themselves to it. And companies, eager to keep us and terrified of the cost of replacing us, are responding. They've discovered that offering work-life balance actually increases productivity. There are accountants who get home at 3 p.m. every day but remain on the fast track. Top New York Law firms have part-time partners who are still players. Can investment banks be far behind?
This isn't really about whether Mrs. Palin can do the job with five children. Will she do it all well? That depends on your yardstick, at least on the home front. How much time is "enough" with your children, or at work, is an extremely personal decision. The point is we now have reasonable options -- it's not all or nothing. Our mother's generation may bemoan the fact that there is still a dearth of female CEOs, but our generation knows a big part of the reason why isn't that we can't get there, but that most of us don't want to make the sacrifices necessary, as the jobs are now defined, to get there.
It's important to understand why, then, Mrs. Palin has hit a nerve. It's not because she's a woman with children trying to do a man's job. It's because she's actually pushing the combination of professional and personal ambitions beyond the sensibilities of this generation of working moms. As women, we may be awed by her, but she's not necessarily a role model for so many professional women who now say they want to do it differently, that they don't want to do 150% of everything all of the time.
So what you are hearing is less condemnation than a collective gasp of amazement -- and exhaustion -- at the thought of juggling five children, one of them an infant, and the most extreme example of a job with little or no flexibility. It would make supermom feel feeble. And we should celebrate the fact that all of this can now be discussed openly.
It is not sexist to have this conversation. It is sexist not to.
Bush Owes His Successor A Tough Finish on Foreign Policy
Mr. Bush has been Israel's greatest friend in the Oval Office, and he may now have one more chance to prove it. Instead of rejecting Israeli requests for support, as press reports indicate the Pentagon is doing, Washington should at least be quietly helping Israel increase its defensive readiness.
Pushing back North Korea, standing up to Russia, and supporting Israel against Iran: now there's a real Bush administration legacy. That is the President Bush who was actually elected in 2000, not the one now being lauded by the high minded for his second-term policy reversals. Those people are mostly interested in laying the foreign policy foundations of an Obama administration. Let's hope that President Bush hasn't left the building yet.
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