This is just one more reason why a ‘community organizer” should NOT be negotiating anything dealing with money and finances!
Bottom line: The $20 Billion BP is putting up will create a $7.5 Billion positive cash for BP flow this year. But, Obama actually “thinks” he really did something special and “kicked ass’ (in his own words).
In reality, BP executives are laughing at him and ‘kicked his ass”. Oh well….what’s new with this President anyway??? The “BOY” is in over his head when he starts dealing with “business people”.
It seems like a miracle that our beloved 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 negotiating.
But, let us take a closer look at the effect on BP’s 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 but only about 30% of it’s income is derived from the US.
3. By Generally Accepted Accounting Principles (GAP), BP must book the entire $20 billion expense in the year accrued. Therefore, they will book a $20 billion expense in 2010, reducing their US tax liability by $7 billion.
4. Our dear 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 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:
o Escrow funding ($7 billion)
o Dividend saving $7.5 billion
o Tax savings $7 billion
o Net favorable cash flow : $7.5 billion
US Treasury Tax Receipts:
o BP Corporate income tax ($7.5 billion)
o BP Shareholders ($0.45 billion)
o Net unfavorable tax receipts ($7.95 billion)
I guess we really should expect this. After all, our dear leader is the most inexperienced man in ANY room he enters.
Now tell me …………………Did the enlightened one “Kick Ass”, or did he get ”Sucker Punched”?