Fact Check: Jesse Kelly’s ‘pants on fire’ – ‘saving’ social security and Medicare through increased domestic energy production

Posted by AzBlueMeanie:

One of the statements from Jesse Kelly that is a sort of "six degrees of Kevin Bacon" kind of analysis is when he claims that he is going to "save" social security and Medicare through increased domestic energy production in the United States. It is an attempt to connect together the two focus group tested issues that his campaign wants to run on.

No part of mineral severance, or royalties, or energy taxes, etc. are used for social security and Medicare. These programs are funded through payroll tax deductions from workers.

So unless Kelly' is proposing new taxes on energy producers to be dedicated to social security and Medicare — rest assured he is not — his statement requires some explanation: Kelly is arguing that producing more domestic energy –> creates more jobs –> creates more payroll tax deductions for social security and Medicare.

Have you noticed that he never estimates how many new jobs (from a credible source)?

For April, the Bureau of Labor Statisitics estimates there are 12.5 million unemployed actively seeking work. There are another 7.9 milliom who are considered involuntary part-time workers. And another 2.4 million who are marginally attached to the work force — persons who want and are available to work, but who have looke for work marginally in the past year, many of whom have given up hope. The Employment Situation – April 2012 – US Bureau of Labor Statistics (.pdf).

That's 22.8 million Americans who are either unemployed or underemployed. The Bush years were a "lost decade" of job creation compounded by the catastrophic job losses of the Bush Great Recession. Repost: The Bush Years Were a Lost Decade. The U.S. is still digging out of the unemployment hole that GOP economic policies produced in the last decade, let alone creating enough jobs for new workers entering the work force today. (If the Bush tax cuts actually encouraged the so-called "job creators" to create jobs, "Mr. Boehner, where are the jobs?")

The one energy production project that has received the most attention this year is the Keystone Pipeline. TransCanada, the company that wants to build the pipeline, says Keystone would create 20,000 "direct" jobs. That includes 13,000 construction jobs and 7,000 jobs making stuff like pump houses and the pipe itself. It also projects nearly 120,000 "indirect" jobs — think restaurant workers and hotel employees to support the construction. Keystone pipeline: How many jobs it would really create – CNN Money:

But TransCanada numbers count each job on a yearly basis. If the pipeline employs 10,000 people working for two years, that's 20,000 jobs by the company's count.

The estimates also include jobs in Canada, where about a third of the $7 billion pipeline would be constructed.

The U.S. State Department, which must green light the project, forecasts just 5,000 direct U.S. jobs over a two year construction period.

Even according to TransCanada, the amount of permanent jobs created would be only in the hundreds.

Another study from Cornell University said the pipeline could actually lead to a decline in jobs in the long run. One reason is that the pipeline would lead to higher fuel prices in the Midwest, the study said, and that would slow consumer spending and cost jobs.

So TransCanada says only "hundreds" of permanent new jobs. When we have 22.8 million Americans who are either unemployed or underemployed. This is only one project, but it is illustrative of the fact that increased domestic energy production is not going to create anywhere near the millions of new jobs needed –> to create more payroll taxes for social security and Medicare –> or substantially reduce the unemployment rate. Massive numbers of new jobs in domestic energy production is a "pipe dream."

But wait, the other half of Jesse Kelly's increased domestic energy production platform is that he claims the U.S. can be energy self-sufficient, and that lower energy costs will grow the economy.

I have already fact checked his energy self-sufficiency claim. It is wildly inaccurate and borders on fantasy. Fact Check: Jesse Kelly's 'pants on fire' – U.S. has 1/10 the oil 'reserves' as those of Saudi Arabia.

I have also posted about the Associated Press analysis of 36 years of gasoline prices and domestic oil production which found that there is zero statistical correlation between increased drilling and lower prices at the gas pump.

More domestic drilling does not make America less susceptible to global supply disruptions or protect consumers from gasoline price volatility, according to a new analysis from the Congressional Budget Office. CBO Report: Boosting Oil Production Won’t Protect Americans From Gasoline Price Shocks:

The CBO report reviewed different policies intended to make the country more energy secure, concluding that the only effective tool for shielding businesses and consumers from price spikes is to use less oil.

Because oil is sold on the global market, CBO concludes that increasing domestic oil production would do little to influence rising gas prices in the U.S.

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The CBO report creates a dilemma for drilling proponents. Even if increased drilling did substantially lower gas prices — which it has not –  the agency says those lower prices would actually make the country less secure from price shocks:

Policies that promoted greater production of oil in the United States would probably not protect U.S. consumers from sudden worldwide increases in oil prices stemming from supply disruptions elsewhere in the world, even if increased production lowered the world price of oil on an ongoing basis. In fact, such lower prices would encourage greater use of oil, thus making consumers more vulnerable to increases in oil prices. Even if the United States increased production and became a net exporter of oil, U.S. consumers would still be exposed to gasoline prices that rose and fell in response to disruptions around the world.

In contrast, policies that reduced the use of oil and its products would create an incentive for consumers to use less oil or make decisions that reduced their exposure to higher oil prices in the future, such as purchasing more fuel-efficient vehicles or living closer to work. Such policies would impose costs on vehicle users (in the case of fuel taxes or fuel-efficiency requirements) or taxpayers (in the case of subsidies for alternative fuels or for new vehicle technologies). But the resulting decisions would make consumers less vulnerable to increases in oil prices.

The solution is clear: the only way to make America more energy secure is to use less energy.

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Even as the analysis piles up showing that increased domestic drilling is not an effective solution to high gas prices or energy security, political leaders continue to repeat these false claims.

So both sides of Jesse Kelly's increased domestic energy production platform fail. It will not "save" social security and Medicare by creating any appreciable number of new jobs. And it will have little effect on the price of oil, from which any job creation is pure conjecture and speculation.

UPDATE: Dan Gibson at the Tucson Weekly writes about an anecdote that Jesse Kelly is telling voters and call B.S. Jesse Kelly Just Making Stuff Up as He Goes Along:

Jesse Kelly has been using an anecdote about the power of oil to power the economy:

I think energy's the way forward in this nation. We talk about gas prices, jobs, and all these other things. Two million oil jobs alone are sitting out there. And a lot of you, I'm not in the oil field, that doesn't benefit me directly, but you know there are McDonald's in this country that are paying $25 an hour to work at McDonald's? They're around the oil fields.

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The most likely source of Kelly's wrong information are a stream of news reports about the oil boom in Williston, North Dakota, which is certainly undergoing a rapid influx of cash, leading to stories with lines like this:

The McDonald's in Williston is one of the busiest in the country, and it needs to pay $15 an hour just to attract employees. 

$15? $25? That's a mistake that could be made, sure. However, all anyone has to do is head to the McDonald's hiring website, which conveniently informs potential applicants what they might make as a new hire…and all the positions at the Williston McDonald's start at $9.00. Not bad as it goes, I suppose, but a far, far cry from $25/hour. Maybe you can find an actual, verifiable listing for an oil-rich McDonald's that pays that much. I spent an hour looking and the fine people of McDonald's chose not to return my email or phone call, for what it's worth.

Then again, what difference does it make? Kelly has already established he has a loose relationship with reality regarding oil. The story sounds way better the way Kelly tells it, plus life is probably better at the top of the magical beanstalk.