POLITICS:

Maneuvers over gas prices, federal spending on collision course; bin Laden's death a wildcard

The still-spiking price of gas is set to generate even more political heat on Capitol Hill this week, as members of both parties see an opening for their spending and budget messages in voters' fury over the punishing cost of a full tank.

Neither the Republican push for more offshore drilling nor the Democratic bid to end oil company tax benefits is likely to ease the near-term squeeze of high gas prices. But President Obama's party is finding its footing on the issue after weeks of playing defense against GOP attacks on his energy agenda, juxtaposing a season of fat oil-industry profits against the fiscal austerity of the House Republican budget.

Obama's announcement late last night that American troops had killed Osama bin Laden could change the week's political dynamic and force the parties to hit pause on their planned partisan attacks. But bin Laden's death doesn't change the overall picture in the Middle East in the short term or the U.S. strategy there -- and until Obama's announcement, both Democrats and Republicans were going full-bore in their plans to score political points over gas prices and the deficit.

"Republicans in Congress voted on a budget that essentially eliminates Medicare and did so on the justification that we can't afford it ... [while] at the same time defending tax breaks for oil companies," said Seth Hanlon, director of fiscal reform at the liberal-leaning Center for American Progress.

House Minority Leader Nancy Pelosi's (D-Calif.) office reinforced that contrast in a Friday news release slamming the 2012 GOP budget as "the Republican plan to end Medicare as we know it in order to reward Big Oil with tax breaks." Obama later drew a subtler version of it in his weekend radio address: "When oil companies are making huge profits and you're struggling at the pump, and we're scouring the federal budget for spending we can afford to do without, these tax giveaways aren't right."

The twinning of the gas price and budget debates began in the House 17 days ago, when every Republican and 23 Democrats voted against an alternative blueprint that would have eliminated tax breaks for major oil companies before passing Budget Chairman Paul Ryan's (R-Wis.) plan on a mostly party-line vote (E&ENews PM, April 15). The action is now poised to move to the Senate, where Majority Leader Harry Reid (D-Nev.) aims to hold votes on both a rollback of the oil subsidies and the Ryan budget as soon as the upper chamber reaches accord on a long-pending small business bill.

Both of those votes -- which could happen this week or slip to the next -- risk illuminating as much Democratic disunity as Republican rifts. Seven senators in Obama's party voted against ending some of the targeted oil industry benefits in February, and Minority Leader Mitch McConnell (R-Ky.) is vowing to set up a vote of his own to gauge Democratic support for a White House 2012 budget that left some centrists cold.

Even if the Senate schedule prevents the oil tax breaks and Ryan budget from coming to a vote in the short term, the late-April drama that began joining the two debates is sure to provide further political fodder. Three senior Republicans suggested last week that the current tax treatment of the oil industry should be revisited, handing Democrats an unexpected cudgel to wallop the GOP for opposing the subsidies before the recess began.

Oil and gas companies were in the throes of a vigorous campaign to defend their benefits even before the comments made by Ryan, House Speaker John Boehner (R-Ohio) and House Majority Leader Eric Cantor (R-Va.). That effort was borne out by Ryan and Cantor carving some distance between themselves and the industry, couching their support for ending energy tax benefits in terms of the broad rate-lowering and loophole-closing envisioned in the Wisconsinite's controversial budget.

"We need to go about broadening the tax code, getting rid of loopholes, special interest loopholes," Cantor told Fox News on Wednesday, depicting "the problem" at the root of the oil subsidy debate as the ability of "an individual industry ... to curry favor and get a preference in the tax code" E&ENews PM, April 27).

Democrats took both serious and satirical aim at GOP ties to oil companies during a week of flush first-quarter earnings reports by Chevron Corp., Exxon Mobil Corp. and others. Their apparent goal is nothing less than a circling of the wagons ahead of the 2012 election, achieved by convincing the public that rising oil costs are the fault of industry rather than Obama.

"As Americans continue to suffer under the weight of high gas prices, the political implications will be severe for whomever the public blames for their pain," the League of Conservation Voters senior vice president for campaigns, Navin Nayak, wrote in a Thursday memo. Nayak cited a March poll by the Democratic-aligned firm Greenberg Quinlan Rosner that found "52 percent of Americans blame oil companies for high gas prices -- more than three times as many as blame the President."

Often lost in the shuffle, however, are acknowledgments that ending the oil-company benefits at issue would have little to no effect on gas prices set by a global market. White House spokesman Jay Carney echoed Obama last week in admitting that "no silver bullet" exists to ease near-term prices, while a February report by Democratic staffers on the House Natural Resources Committee took a more candid view.

"Repealing the oil industry's tax subsidies will not impact gas prices for American consumers," the Democratic report stated. "Oil companies that receive tax subsidies pass on that benefit to their shareholders, not to consumers."

Conversely, Republican calls to expand offshore oil production are expected to fare little better. The Energy Information Administration found in 2009 that opening the outer continental shelf regions of the lower 48 states to drilling would push gas prices lower by 3 cents per gallon in the year 2030, relative to an alternative plan that limited offshore exploration.

"It's better than a sharp stick in eye, but not really significant, because oil is a world market," University of Houston business school professor and energy economics expert Craig Pirrong said in an interview. "In terms of world production, what would be available offshore during that period of time is probably not going to be able to contribute that much to world supply."

Donning their caps?

Alongside his announcement of planned votes on the Ryan budget and oil tax-break rollbacks, Reid proposed instituting "deficit caps" as part of still-evolving talks over how to trim the federal debt while raising the government's borrowing limit.

House Republicans were quick to slam the notion, on which Reid provided few details, but enforceable federal spending caps could also come before Congress this year during the debt-limit debate. The Nevadan said in February that he would be open to considering a proposal first pushed in 2010 by Sens. Claire McCaskill (D-Mo.) and Jeff Sessions (R-Ala.) that would cap annual increases in nondefense discretionary spending to between 1 and 2 percent (E&E Daily, Feb. 14).

The McCaskill-Sessions measure, which could win 60 votes in the upper chamber this year, would limit spending in 2011 to $1.108 trillion, in 2012 to $1.121 trillion and in 2013 to about $1.139 trillion, with potentially significant consequences for energy and environmental programs.

Proposals in that vein are expected to be in the mix during a Wednesday hearing on budget enforcement mechanisms in the Senate Finance Committee, where Chairman Max Baucus (D-Mont.) is also circulating a plan of his own to end oil industry tax benefits.

Finance schedule: The hearing is Wednesday, May 4, at 10 a.m. in 215 Dirksen.

Witnesses: Former Sen. Phil Gramm (R-Texas), vice chairman of UBS Investment Bank, UBS AG; Susan Irving, director for federal budget analysis and strategic issues at the Government Accountability Office; and Center on Budget and Policy Priorities senior fellow Paul Van de Water.

Want to read more stories like this?

E&E is the leading source for comprehensive, daily coverage of environmental and energy politics and policy.

Click here to start a free trial to E&E -- the best way to track policy and markets.

Latest Selected Headlines

More headlines&nbspMore headlines

More headlines&nbspMore headlines

More headlines&nbspMore headlines

More headlines&nbspMore headlines

Latest E&ETV Videos