Remember Michael Brown and Hurricane Katrina? President Bush, said, “good job, Brownie.” Then it hit the fan. It cost Bush the majority in the Congress. Brown was incompetent and everyone paid for his incompetence. FEMA did everything wrong and little right in the aftermath of the hurricane. It caused serious human suffering that didn’t need to happen. Lives were lost.
We have 80 plus days of an oil spill in the Gulf. Most of what the government has done is obstruct efforts to mitigate the damage. You will not that recently ships are skimming and oil is being burned at the spill sight. All of that could have started in week two, if not day one. Bobby Jindal has had to beg for everything he’s gotten from Washington. Obama said the buck stops with him. But, after making that big statement what has eh done to stop the buck? Picked up a few tar balls on the beach and sent his wife there.
He made a big deal out of the $20 billion he extracted from BP. Here’s the real cost to BP.
ACCOUNTING 101
It seems like a miracle that our anointed leader was able to convince BP to establish a $20 billion slush (oops, escrow) fund to compensate those hurt by the ongoing oil plume in the Gulf of Mexico.
After all, he had no constitutional power to force them to do so; so had to resort to Chicago-style arm twisting.
But, let us take a closer look at the effect on BP’s 2010 finances:
1. BP will establish a $20 billion fund, but will pay only $7 billion into it during 2010.
2. BP is a British corporation, but has a very large operating entity in the US.
3. By Generally Accepted Accounting Principles (GAAP), BP must book the entire $20 billion expense in the year accrued, i.e., year the
liability is incurred. Therefore, they will book a $20 billion expense in 2010, reducing their US tax liability by $7 billion.
4. Our anointed leader also convinced this massive corporation to show their concern for the “small people” by withholding dividends
to their shareholders for the last 3 quarters of 2010. This reduces their outward cash flow by about $7.5 billion, including approximately
40% of that amount to US citizens. Assuming that the Bush tax cuts will survive through the end of 2010, the US Treasury will lose another $450 million in taxes on that amount. We won’t even discuss the effect on the US economy.
Let us put the results into a table easily understood by the “small” people:
BP Cash Flow:
Escrow funding ($7 billion)
Dividend saving $7.5 billion
Tax savings $7 billion
Net favorable cash flow for 2010 to BP : $7.5 billion
US Treasury Tax Receipts/Reductions:
BP Corporate income tax (-$7.5 billion)
BP Shareholders (-$0.45 billion)
Net unfavorable tax receipts ($7.95 billion)
I guess we really should expect this. After all, our anointed leader is the most inexperienced man in any room he enters.
Scorecard:
BP Corporate Bean Counters – 1
Washington Tax Smart Guys – 0
American People – We Get BP (Bean Poop)
This isn’t so hard to understand – BP made their largest political contributions to Obama’s campaign. Obama plays politics acting tough
on BP. We pay.
Frankly, I admire BP for their deal making ability. They must have brought their accountants to the table. After all, BP is not a fly by night operation and Obama thought he and his minimal business experience tax people and accountants could take on BP.
YOUR SOUTHERN BUDDY … HLS
Most recently, BP was delayed in turning the valves on the cap we all hope will work. The delay was so Dr. Chu could look at the seismic mapping do make sure turning the valves would not cause another problem. That’s tantamount to me reading your CAT scan. Dr Chu is as qualified to do that as Brownie was to head FEMA.
Obama shut down drilling putting hundreds out of work. BP will not pay more than committed for this loss. The rest will come from your pocket. Salazar has lost two court cases on the legality of this shutdown. Obama’s people sue first, then lose the suits. Probably will lose the Arizona suit too.
Where is the objective reporting on the government’s real role in the spill? Who is tearing this story up and telling the country the miscues Salazar, Napolitano, Thad Allen, Dr. Chu, and Obama have made that made a bad situation worse?
Since no one knows who is really responsible for managing this spill, Brownie’s incompetence is spread across the above list of potential culprits. With Katrina, Bush took it all. He owned up and took it like a man. Don’t expect that from Obama. He’s busy campaigning for Reed.
