by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The fracking revolution is the most exciting economic news since the commercial flowering of the Internet. As Barron’s reported in our Jan. 28 cover story, the lure of abundant, low-cost gas has made our country an attractive destination for multinational manufacturers, a concept that was inconceivable less than 10 years ago.
Good-paying jobs are being created for every skill set, and most of this is happening on private land. Drilling advocates say the government could be pocketing billions in royalties and revenue if President Obama would just open up more federal land for energy exploration and development.
A study paid for by the Institute for Energy Research, a conservative think tank in Washington that receives some funding from the oil and gas industry, predicts that the federal government stands to receive $2.7 trillion more in tax revenue over the next 37 years if it lifts drilling restrictions. Tom Donohue, president of the U.S. Chamber of Commerce, said earlier this year: “To achieve these great benefits, we need to safely open up new land to exploration. We’ve foolishly locked away too much of our resources on land and off our coasts.”
I risk breaking out in joyful giggles every time I contemplate the beneficent turn caused by fracking. But then, I am not a government accountant. If I were, I’d be unimpressed, like Douglas Elmendorf, director of the nonpartisan Congressional Budget Office. Elmendorf told me that the fracking revolution is good for the U.S. economy relative to no fracking at all. As for the fracking revolution’s overall effect of on the economy and tax receipts, “It is probably smaller than some of the more enthusiastic supporters have said.”
The CBO, which prepares forecasts of revenues and deficits for Congress, often misses dramatic turns in the economy, especially when big changes in energy prices and productivity are taking place. Nevertheless, boosters of the gas revolution are perturbed that the CBO doesn’t concur that fracking could be a boon for the debt-driven federal government.