Dear Bernie: Oil fuels your beloved Scandinavian spending spree
With Bernie Sanders recently announcing he intends to seek the presidency, I thought it was a good time to share an article I wrote in January of 2016 which was originally published at Investor’s Business Daily.
Democratic presidential candidate Bernie Sanders has often talked about his desire for the United States to emulate the socialist welfare states of Denmark, Norway, and Sweden by providing free college and health care and expanding Social Security. Sanders also wants to ban oil, natural gas, and coal production on lands owned by the federal government, and he has called for a ban on hydraulic fracturing, which has dramatically increased production of oil and natural gas in the United States.
Although many would-be Sanders voters may rejoice at all of these notions, someone really ought to inform the senator and his followers that the socialist spending sprees of Denmark and Norway are bankrolled by oil: Big Oil, to be specific.
You heard that right. While Sanders is calling for a ban on oil production on U.S. government land, the Norwegian government, which owns a staggering 67% of Statoil ASA, the largest oil company in Norway, is producing oil and natural gas on government land — and lots of it. Norway is the largest oil producer in Western Europe and the seventh largest oil exporter in the world. The Nordic nation is also the leading exporter of natural gas to Western Europe, selling more natural gas to Western European counties than Russia does. Incredibly, half of Norway’s exports are related to petroleum.
All this oil and natural gas creates large sums of cash for the Norwegian government, as taxes on the petroleum sector account for about 30 percent of government revenues. By comparison, Texas, a state famous for oil and natural gas, derived only 11% of its state revenue from oil and gas severance taxes in 2014.
The Economistreports that the Norwegian oil boom, which followed the discovery of oil in the North Sea in 1969, has enabled a boom in public spending. The number of people employed in education has doubled and the number working in health and social services has quadrupled since the 1970s. Without oil and natural gas production, there’s little to no chance that the Norwegian welfare state could persist in its current form.
Denmark produced its first oil from the North Sea in 1972. Since then, it has become the third-largest producer of oil and natural gas in Western Europe. The Danish government derives proceeds from North Sea oil and gas production via direct revenue from various taxes and fees: corporate income tax, hydrocarbon tax, royalties, the oil pipeline tariff, compensatory fees, and profit sharing.
In total, Denmark derived 18.8 billion kroner from oil and natural gas production in 2014, down significantly from more than 30 billion kroner in 2011, and that money funds a significant portion of the Danish welfare state.
Although Sanders and his supporters often talk about concepts such as “free” college, “free” health care and expanded Social Security, we all know that nothing is really free. Ultimately, someone must foot the bill for this largesse. Unlike Sanders and his followers, the people of Denmark and Norway are pragmatic about it. They understand that oil and natural gas provide them with the lifestyles that they desire, and they accept hydrocarbon production as a means of maintaining that lifestyle.
Oil and natural gas production improves the lives of Americans as well. In addition to providing hundreds of thousands of blue-collar workers with living-wage jobs, severance tax revenues from oil and gas production fund government programs, help improve infrastructure, provide health care assistance to seniors and pay teachers’ salaries.
For example, 33% of New Mexico’s funding for schools comes from taxes on oil and gas production. Much of this drilling is on federal land, which means that children in the state will have fewer educational opportunities if Sanders succeeds in banning production of oil and natural gas.
Banning energy production on federal land and prohibiting hydraulic fracturing would severely limit government revenues at the federal and state level, diminishing governments’ ability to provide their citizens with public services they need. Sanders and his supporters ought to acknowledge this reality.
It is one thing to advocate Scandinavian-style socialism, but it’s inconsistent and irresponsible to ignore how those countries pay for it.