Obama Discovers One More Crisis for a Toxic Tax

Last week, while oil was still gushing into the Gulf of Mexico at a rate that may be as high as 60,000 barrels a day, President Barack Obama proposed that Congress reinstate taxes for the Superfund, the federal program that finances the cleanup of toxic sites.

While the step might seem like a logical one, in fact, the Superfund has almost nothing to do with the oil spill. Obama has once again decided not to let a crisis go to waste, making this move a defining example of how partisan and petty his administration has become.

The Superfund was set up in 1980 by Jimmy Carter in a lame-duck session, and was designed to provide the Environmental Protection Agency with the authority to remediate toxic sites. The law requires polluters to pay for cleaning up their own messes if they could be identified. In orphan cases, where the polluter couldn't be identified or no longer exists, the law set up a trust fund to finance the cleanup, paid for by taxes on oil and chemical companies.

While nobody disputes that hazardous sites exist and should be addressed, there has been significant disagreement concerning the performance of the Superfund and the advisability of the targeted Superfund taxes.

Flawed Assumptions

Obama's team seems to believe that even though doubts over new regulations and higher taxes may undercut job creation, the sacrifice is worth it because Democrats get a legislative win.

Independent analysis of the activities of the EPA authorized by the Superfund found that the fund used public safety concerns as justification for excessively expensive risk reductions. For example, a study by the free-market think tank National Center for Policy Analysis found that, "To establish risk at one abandoned site, the EPA relied on the following scenario: A child was assumed to eat 200 milligrams of dirt per day, 350 days a year for 70 years, while playing in the soil. More than 90 percent of all estimated cancer risks at Superfund sites are dependent upon such outlandish scenarios or highly speculative land use changes."

Such assumptions may have been common in the early years of the fund precisely because the targeted taxes gave the EPA so much money to play with. There is no limit to the amount of mischief that bureaucrats with unlimited funds can do.

Because of cost-benefit analyses like this and others, Congress allowed the taxes to expire in 1995, and the trust fund ran out of money in 2003. Ever since, Superfund activities at orphan sites have been funded with general revenue, something critics of the early approach prefer, since it requires EPA funding requests to meet a higher standard in order to gain approval. Some Democrats, though, still think wistfully of the days when the EPA had so much money to play with.

Policy Misdirection

Looking through the arguments on all sides, it seems clear that the Superfund may well have shrunk too much, and that funding for cleanups generally should be increased. But it is also clear that the Superfund has nothing whatsoever to do with the oil spill in the Gulf of Mexico.

After all, the fault for the Deepwater Horizon oil spill mainly lies with its owner, BP Plc. As such, BP will be held to account for the damages. Since BP is flush with cash, it seems likely that it will be able to fund the massive environmental cleanup that is necessary.

President Obama even says this, promising from the Oval Office earlier this month, "We will make BP pay for the damage their company has caused."

That raises the question Obama doesn't want Americans to ask. If you are going to make BP pay for everything, why do we need the new Superfund taxes? (The cleanup costs are separate from the many lawsuits BP might face, which could put it at risk of bankruptcy.)

The answer is, of course, that apart from some moralizing green-power Democrats we don't want such a tax. Aside from the political climate being an opportune one, the issues are unrelated.

But the answer doesn't dismiss the problem. The Superfund proposal has kicked off a predictable partisan squabble, the legislative equivalent of scraping off a scab.

Same Calculus

The calculus that argues for such a move is identical to the calculus that suggests that it is sensible to radically change the U.S. health-care system at a time when joblessness is close to its highest level in decades. Obama's team seems to believe that even though doubts over new regulations and higher taxes may undercut job creation, the sacrifice is worth it because Democrats get a legislative win.

Precisely at the time when policy makers should be focusing on the spill and marshalling all of our resources in a bipartisan effort to devise effective ways to limit the environmental damage associated with it, Obama decides to settle an old score and try to revive a long-dead tax that was neither prudent or necessary.

Sadly, citizens of the Gulf states are about to learn what economists following Obama's policies already know. The more the Obama administration attends to not letting a crisis go to waste, the worse the crisis gets.

Kevin A. Hassett is a senior fellow and the director of Econmic Policy Studies at AEI.

Photo Credit: Flickr user lumis/Creative Commons

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About the Author


Kevin A.
  • Kevin A. Hassett is the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (AEI). He is also a resident scholar and AEI's director of economic policy studies.

    Before joining AEI, Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia (University) Business School. He served as a policy consultant to the US Department of the Treasury during the George H. W. Bush and Bill Clinton administrations.

    Hassett has also been an economic adviser to presidential candidates since 2000, when he became the chief economic adviser to Senator John McCain during that year's presidential primaries. He served as an economic adviser to the George W. Bush 2004 presidential campaign, a senior economic adviser to the McCain 2008 presidential campaign, and an economic adviser to the Mitt Romney 2012 presidential campaign.

    Hassett is the author or editor of many books, among them "Rethinking Competitiveness" (2012), "Toward Fundamental Tax Reform" (2005), "Bubbleology: The New Science of Stock Market Winners and Losers" (2002), and "Inequality and Tax Policy" (2001). He is also a columnist for National Review and has written for Bloomberg.

    Hassett frequently appears on Bloomberg radio and TV, CNBC, CNN, Fox News Channel, NPR, and "PBS NewsHour," among others. He is also often quoted by, and his opinion pieces have been published in, the Los Angeles Times, The New York Times, The Wall Street Journal, and The Washington Post.

    Hassett has a Ph.D. in economics from the University of Pennsylvania and a B.A. in economics from Swarthmore College.

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    Email: khassett@aei.org
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