House, Senate Dems have different political imperatives in subsidy fight

Democrats are savoring a moment of political combat over their bid to end tax benefits for major oil companies -- but the party's leaders are diverging on how to use the money that such a repeal would raise.

House Minority Leader Nancy Pelosi (D-Calif.) yesterday unveiled two new energy measures that she said would be paid for in part by lifting the contested oil industry tax breaks. Routing two-thirds of the revenue from those tax-benefit rollbacks toward deficit reduction and one-third toward incentives to cut oil consumption would be ideal, she said.

"We can't just say 'get rid of tax breaks for Big Oil' without having something else to offer," Pelosi told reporters yesterday. "And that something else to offer must be paid for."

Yet Democrats in the Senate are pressing ahead with a bill that would do just that, phasing out the oil industry benefits and using the estimated $21 billion in resulting revenue to pare back the $1.6 trillion deficit (E&ENews PM, May 11). While some Senate Democrats say they could support directing the revenue from ending the tax breaks to either the deficit or clean energy, caucus centrists like Claire McCaskill of Missouri are only open to the former option.

Despite the slim chance that any phaseout of oil industry benefits could pass the GOP-controlled House, the Democratic difference of opinion is far from academic. Republicans hammered the president's party this week after Senate Democrats said their bill was not related to high gas costs, contrasting it with House Democratic avowals that the plan would lower rising prices at the pump.


Broadly speaking, the House Democratic strategy leaves their caucus with messages to sell to voters on both fiscal austerity and oil consumption, while the Senate approach largely detaches industry tax breaks from the broader energy-reform debate.

Rep. Henry Waxman of California, top Democrat on the House Energy and Commerce Committee, said yesterday that his chamber's 2-1 ratio of deficit reduction to clean energy spending represents "a very important expenditure."

"I think we ought to make sure we've got funding for electric cars, natural gas vehicles, other alternatives that will move us away from our dependence on oil and help lower the price of oil," Waxman said in an interview.

The Democratic National Committee's new chairwoman, Rep. Debbie Wasserman Schultz of Florida, sounded a similar note yesterday in calling herself "supportive of deficit reduction and investments in alternative energy."

President Obama's economic adviser, Gene Sperling, last month echoed the House in discussing a combination of spending on alternative fuel vehicles and deficit reduction as a possible way to invest money raised by repealing the oil tax breaks. But the White House, as well as major environmental groups, met Senate Democrats' move by endorsing an end to the tax subsidies as the primary goal (E&E Daily, May 10).

"The bottom line is that there are more responsible ways to spend billions in taxpayer dollars than handing them out to oil and gas companies that just posted huge profits," White House spokesman Clark Stevens said earlier this week. "We consider this [Senate] bill an important first step."

On one level, the difference between the House and Senate's plans may stem from the fates of their most vulnerable members. McCaskill is facing a difficult re-election battle, and her ability to link voter concern over spending to related frustrations over gas prices could make the difference as her party attempts to keep control of the upper chamber.

House Democrats, for their part, are connecting the Medicare remodeling proposed in the GOP's 2012 budget to the Republican defense of oil tax benefits for their latest political jabs. Rep. Ed Markey (D-Mass.) appeared alongside Pelosi yesterday with a large poster depicting an oil rig positioned above a Medicare card.

"They want to put an oil rig on top of Grandma's Medicare card and drill down into her pockets," Markey said, adding: "We hope to have this debate as long as necessary, because we think we will prevail."

Meanwhile, Senate Republicans have taken steps to distance themselves from the House GOP budget, making that talking point less effective for upper chamber Democrats. Republicans in both chambers -- as well as oil-friendly Democrats such as Sens. Mary Landrieu of Louisiana and Mark Begich of Alaska -- continue to note that many of the tax benefits at issue are used by other manufacturing sectors, making the current debate one that singles out the oil industry for pain.

Asked about the divergent approaches taken by the two chambers' Democratic leaders, a senior House aide explained that Pelosi's proposal seeks both to address fiscal concerns and make a down payment on programs aimed at lowering long-term oil prices.

"What we're trying to show is that we can reduce the deficit while still making critical investments that we need to innovate and compete," the aide said.

Reporter John McArdle contributed.

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