Washington's political squabble this week over the payroll tax highlights ideological showmanship over pragmatic statesmanship.
We have argued previously that, absent an overall rethink of the current tax code and the Social Security system, a payroll tax holiday is little more than a short-term gimmick that destabilizes funding for Social Security over the long term.
But going into an election year, a short-term gimmick that allows politicians to avoid raising a tax they temporarily cut for their constituents is, well, probably inevitable.
What remains at question: How to pay for this year's incumbency-protection gimmick. Will it be through (as Senate Democrats insist) increased taxes on the rich or through (as House Republicans insist) cuts to spending? Sound familiar?
What is adding fuel to the fire (pun intended) in this week's ideological squabble over this inevitability, however, is the issue of pipelined oil. House Republicans attached to their version of the payroll tax cut extension a provision that would override President Barack Obama's decision to postpone action on the controversial Keystone XL pipeline. The Keystone XL would allow oil from the oil sands of Alberta, Canada to flow directly to refineries in Houston, Texas.
Just as there are axioms in democratic politics (e.g., no tax increases in an election year), there are axioms in economics (e.g., supply will meet demand at some price). Despite all the efforts of idealistic groups to reduce mankind's dependence on fossil fuels, fossil fuels will continue to provide the vast majority of the world's energy for as far as anyone can reasonably plan.
It is then, by almost all accounts, inevitable that Canada's rapidly increasing supply of oil from its oil sands will find its way to the world's strong demand. All that really remains in question is will that meeting of supply and demand be through the United States, employing U.S. labor and capital to build the pipeline and refine the oil? Or, will it be through Western Canada, employing Canadian labor and probably significant Chinese capital to build a pipeline to Canadian Pacific ports without refineries?
If Canada's oil goes west, it will require shipping massive amounts of unrefined fuel through ecologically sensitive waters, probably to East Asia for substandard refining.
We don't appreciate the tactic of introducing non-germane and controversial issues to otherwise popular legislation. But since the issue of the Keystone XL pipeline has now been broached in this manner, we would ask policymakers in Washington to consider the economic inevitability of Canadian oil development. They should welcome what that represents, not just in terms of shovel-ready jobs for domestic workers, but also what it would mean geopolitically to reduce our dependence on oil from questionable regimes throughout the world.
Pragmatic statesmanship would suggest that the Keystone XL pipeline is an inevitability that we should embrace sooner than later.
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