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Senate Democrats planned to open debate Wednesday on legislation to cut $21 billion in subsidies from big oil companies and use the money to reduce the federal debt -- a move designed to put Republicans on the defensive and capitalize on public anger over rising gas prices.

The bill has virtually no chance of winning congressional approval. Analysts believe, however, that Democrats will try to use the issue to their political advantage in both the run-up to the 2012 elections and the ongoing fight to increase to the amount of money the federal government is allowed to borrow before Washington defaults on its financial obligations.

Treasury Secretary Tim Geithner has warned of a possible default if the current $14.294 trillion debt ceiling is not increased by August 2.

The bill targets the five biggest oil companies: ExxonMobil, Shell, ConocoPhillips, BP and Chevron. The chief executive officers of those companies -- which have reported large profits -- have been summoned to testify before a Democratic-controlled Senate committee Thursday.

"Seniors are struggling. Oil companies are not struggling," Senate Majority Leader Harry Reid, D-Nevada, said Tuesday. "Yet Republicans want to keep handing billions of dollars to the oil companies."

Republicans, who have promised to oppose any tax increases, dismiss the move as a hollow political gesture. GOP leaders argue, among other things, that it is unfair to single out a specific industry, regardless of how unpopular that industry may be. They also contend the bill, if passed, would do nothing to lower what most consumers view as exorbitant gas prices.

In fact, some analysts warn, any tax increases might get passed on to consumers.

Democrats have "unveiled yet another attempt to slow American energy production, this time through a tax hike on American energy," Senate Minority Leader Mitch McConnell, R-Kentucky, said Wednesday morning. "They acknowledged, however, that this will not lower the price of gas, and they're right."

"Raising taxes on American energy will do two things: increase the price of gas and increase our dependence on foreign competitors," McConnell asserted. "By taxing American energy production, they're also outsourcing American jobs."

Republicans, however, are also trying to take political advantage of high prices at the pump. The GOP-controlled House is expected to pass two measures Wednesday -- one to accelerate the oil drilling permitting process in the Gulf of Mexico and another to promote more offshore oil and gas exploration.

Neither bill is expected to the clear the Democratic Senate.

The oil skirmishes are taking place against the backdrop of heated budget talks between the leadership of the two parties. Top Democrats and Republicans are not only trying to find a way to reach an agreement on the debt ceiling; they are also starting to consider ways to approach fiscal year 2012, which starts in October.

Economic analysts warn that a failure to reach an agreement raising the debt ceiling in time to avoid a national default could have devastating consequences. Among other things, Americans could be faced with skyrocketing interest rates and a plummeting dollar.

President Barack Obama is scheduled to discuss the issue with Senate Democrats behind closed doors at the White House Wednesday afternoon. The president will do the same with Senate Republicans on Thursday.

Vice President Joe Biden, meanwhile, has been holding deficit reduction talks this week with a bipartisan group of House and Senate leaders. A separate bipartisan group of senators -- the so-called "Gang of Six" -- has also been trying to find an acceptable middle ground.

Both parties say they would like to avoid a repeat of the debate over fiscal year 2011, which wasn't resolved until a near-government shutdown in April. The two sides finally agreed to $38.5 billion in cuts as part of a deal to keep the government running through September 30.

Top Republicans have repeatedly said they will not agree to any tax hikes as part of a deal with Democrats. House Speaker John Boehner, R-Ohio, raised the stakes Monday night during an address to the New York Economic Club, declaring that the overall size of any spending cuts has to exceed the magnitude of any ceiling increase.

Boehner stressed that the spending cuts should be in the "trillions, not just billions."

"With the exception of tax hikes -- which in my opinion will destroy jobs -- everything is on the table," he said.

The speaker acknowledged that a default would be "irresponsible," but said it would be even worse for the country to continue on its current fiscal course.

Boehner didn't specify the exact size of the GOP's desired cuts. Congressional sources, however, have told CNN they believe the House could vote to increase the debt ceiling by about $2 trillion.

In contrast, the entire annual federal budget is roughly $3.5 trillion.

Boehner refused to specify the period of time over which any spending cuts could be implemented -- a critical factor in any agreement. It is also unclear exactly how much Congress is willing to increase the debt ceiling.

One GOP aide told CNN on Tuesday it is hard to imagine not agreeing to a debt limit increase that lasts at least through the end of the 2012 election cycle.

Any vote to increase the debt -- even if it's tied to major spending cuts -- is "toxic" to Republicans, the aide said.

Democrats have called the Republican position extreme and blasted the GOP for refusing to be more flexible in the talks.

"Maximalist positions do not produce compromise," White House Press Secretary Jay Carney said Tuesday.

In terms of specifics for the 2012 budget, the current GOP proposal, drafted by House Budget Committee Chairman Paul Ryan, R-Wisconsin, would set the federal government on a path to cut federal deficits by roughly $4.4 trillion over the next decade.

The most contentious parts of Ryan's blueprint revolve around its proposed changes to Medicare and Medicaid. Medicare, a major contributor to growing federal deficits, would be overhauled starting in 2022. The government would no longer directly pay bills for senior citizens in the program. Instead, recipients would choose a plan from a list of private providers, which the federal government would subsidize.

Individuals currently 55 or older would not be affected by the changes.

Medicaid, which provides health care for the disabled and the poor, would be transformed into a series of block grants to the states. Republicans believe that state governments would spend the money more efficiently and would benefit from increased flexibility. Democrats warn that the move would shred the health care security provided to the most vulnerable Americans in recent generations.

GOP leaders have denied reports that they are already backing away from their Medicare plan. Democrats, who control both the Senate and the White House, have repeatedly said the idea has no chance of being enacted.

Obama's plan, in contrast to Ryan's, aims to cut deficits by a combined $4 trillion over the next 12 years without significantly changing any of the major entitlements. Among other things, the president wants to repeal the Bush-era tax cuts on families making more than $250,000, something vehemently opposed by Republicans.

The president has also called for the creation of a "debt fail-safe" trigger that would impose automatic across-the-board spending cuts and tax changes in coming years if annual deficits are on track to exceed 2.8% of the nation's gross domestic product.

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I was out driving/just a taking it slow
Looked at my tank/ it was reading low
Pulled in a Exxon station/out on Highway One
Held up without a gun
Held up without a gun

- Bruce Springsteen

Springsteen's song could not be more true today. Big Oil is once again riding high oil prices to large profits (see below) while American consumers get stuck with a $2.7 billion gasoline bill in the first quarter of 2010 due to higher oil prices. But the problems with oil go beyond these companies' profits. Rising oil prices also add more filthy lucre to the coffers of hostile regimes, including Iran.

Meanwhile, the Gulf of Mexico is suffering a huge oil spill while taxpayers spend billions of dollars paying for tax loopholes for Big Oil. And Big Oil spends record amounts of money to pressure Congress to cement these loopholes in place and defeat clean energy legislation. Adding injury to insult, big oil opposes energy and global warming legislation that would reduce our reliance on oil.

Much of the U.S. economy is slowly recovering from a deep recession, but oil companies continue to prosper. The big five oil companies -- BP, Chevron, ConocoPhillips, ExxonMobil, and Shell -- announced huge first quarter profits -- four of the five companies announced profits larger than analysts predicted. Big oil saw profits in the first quarter of 2010 that far eclipse analysts' projections and are significantly higher than 2009 profits as well.

BP's 2010 first quarter profits were $5.6 billion, a 135 percent increase over the first quarter of 2009. This profit was 50 percent higher than predicted by The Financial Times. Shell announced that its profits had risen by 49 percent since the first quarter of 2009. Chevron's profit was $4.6 billion, a 156 percent increase, while ConocoPhillips had $2.1 billion in profits. The world's largest private oil company, ExxonMobil, had a first quarter profit of $6.8 billion, which was 38 percent more than 2009.

Despite high prices and profits, big oil companies still want taxpayer-funded loopholes even though some conservative oil men believe they are unnecessary. In 2005, former oil man and President George W. Bush noted that with higher oil prices big oil does not need tax breaks to explore and develop oil fields.

Yet even with today's prices more than 50 percent higher than $55 per barrel, Big Oil companies want to maintain tax loopholes that siphon additional billions of dollars from U.S. taxpayers. Taxpayer money pays for the tax breaks claimed by Big Oil, but the industry claims that closing these loopholes is really a new energy tax on them. American Petroleum Institute President Jack Gerard stated:

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With America still recovering from recession and one in ten Americans out of work, now is not the time to impose new taxes on the nation's oil and natural gas industry. New taxes would mean fewer American jobs and less revenue at a time when we desperately need both. A robust U.S. oil and gas industry is essential to the recovery of the nation's economy.

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Contrary to this assertion, cutting the subsidies to Big Oil would help our economy while shrinking the federal budget deficit. In fact, a state-by-state analysis ( http://www.americanprogressaction.org/issues/2009/03/oil_loopholes.htm
l) indicates that taxpayers would actually save money if the subsidies and tax breaks were lifted. A recent CAP analysis found that the effective federal income tax rate ( http://www.americanprogress.org/issues/2010/04/oil_subsidies.html) in the United States for major oil companies is lower than the effective tax rates they face abroad -- sometimes close to 50 percent lower. The report also determined that subsidies to the oil industry will cost the U.S. government about $3 billion in lost revenues next year and nearly $20 billion over the next five years.

These estimates are only the initial assessment -- they still vastly underestimate the help that the oil industry receives from the government via extensive hidden tax code benefits ( http://www.americanprogress.org/issues/2010/04/dww_tax_expenditures.ht
ml) as well.

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People often talk about how our country is attempting to redistribute wealth, but people seem to ignore that the wealthiest individuals are being taxed substantially less now than during most of this country’s recent history. From 1917 until now we have had tax rates for the highest incomes groups up to 92% of their income. That rate was not for just a few years. In 1917 the tax rate was 67% for this group and it was still 70% in 1980. From 1950 to 1963 the tax rate was 91% (92% in 1952 and 1952). During the Reagan presidency the tax rate topped out at 69.13%. The top tax rate in 2010 was 35%. The lowest tax rate during the last 90 years was 24% in 1929, the year the Great Depression began. So why are people concerned that the wealthiest Americans are getting taxed too much when they are being taxed at the historic low that they are now?

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