With oil trading at below $50 bbl and OPEC apparently unwilling to cut production very much, the Obama team is quietly shelving one of the cornerstones of their economic program - a "windfall profits tax" on the oil companies.

Do the math. Obama was expecting hundreds of billions of dollars from this tax to fund his social welfare schemes. He either must shelve almost all of his program (the rest of the money was going to come from increasing taxes on the "rich" - another plan shelved for the moment) or raise taxes on everybody - substantially.

From Reuters:

President-elect Barack Obama is not planning to implement a windfall profit tax on oil companies because prices have dropped below $80 a barrel, an aide said on Tuesday.

"President-elect Obama announced the policy during the campaign because oil prices were above $80 per barrel," an aide on Obama's transition team said. "They are currently below that now and expected to stay below that."

Oil prices have fallen from a record $147 a barrel in July to under $50 this week.

Obama, who signaled early in his campaign for the White House that he would take an active approach to oil markets as president, had planned to use the revenue from a windfall profits tax to fund a tax rebate for low- and middle-income families struggling with high energy prices.

But the aide said Obama's presidential campaign had already taken the price drop into account six weeks ago. When Obama laid out his economic plan for the middle class in mid-October, revenue from a windfall profit tax was not included because of the price change, he said.

Oil companies steadfastly opposed a tax, saying it would stifle exploration and innovation.

Obama is whistling past the graveyard if he thinks he can fund the massive giveaway that polls show was the major reason for his electoral win. With trillion dollar deficits staring him in the face it would be fiscal madness to advance the kind of broad based rebate and handout that he so proudly pushed when running for president.

The dash of reality about revenue that this pullback represents calls into question some of  the primary goals of his Administration. Unless he is willing to push marginal tax rates much higher than he said during the campaign, it appears he will have to renege on that promised giveaway  of hundreds of billions of dollars.