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05.17.11

Republicans' Cynical Oil Payoff

Democrats didn’t expect to win a vote to end subsidies to oil companies. But as Michael Tomasky explains, the loss exposes how vulnerable they are to Republican budget psychosis.

Last night the Senate refused to end $2 billion worth of subsidies to oil companies. These companies are poised, according to the bill’s chief sponsor, Democrat Robert Menendez of New Jersey, to make $144 billion in profits this year. It was never a bill that had a chance of getting the 60 votes needed to cut off debate (it fell eight votes short). Aside from that, the House of Representatives never would have passed it. And aside from that, it was likely unconstitutional because bills that raise revenue must originate in the House.

The vote took place largely so the Democrats could make campaign ads saying that Republicans voted to protect the oil industry. But its failure once again puts on display the central fact of this season’s budget battle: Republican psychosis on the question of revenue. It’s a form of madness so disorienting that by the time the year’s budget fight is over, it may have left the Democrats wondering just how they got so thoroughly played.

Let me explain. Between now and the start of the next fiscal year on October 1, the following is likely to happen. Democrats will agree to substantial spending cuts, partly in an effort to get a deal on raising the debt ceiling. On entitlements (Social Security and Medicare), Democrats will be more hesitant, but the White House seems willing (more willing than Democrats in Congress) to give a little something there. On taxes, meanwhile, Democrats will delude themselves that Republicans will deal, and enough Republicans, just a few, will act like they’re serious. And then they will pull the football away. Republicans won’t agree to anything having to do with taxes.

All over Washington these last few months, I have gone to meetings and panels and seminars where a broad range of well-intentioned moderates or liberals talk about how we could solve our fiscal problems, by golly, if both sides got serious and came to the table in good faith in the name of the American people, putting partisanship aside. Just this morning, I heard North Carolina Democratic Senator Kay Hagan say pretty much precisely that. It was my first direct encounter with her. She seemed a dedicated and thoroughly decent person. She described herself as an avowed disciple of the Bowles-Simpson commission’s deficit reduction plan in broad strokes and said that she would happily agree to anything that came out of the Senate along those lines. And she invested great faith in the so-called Senate Gang of Six, the three Democrats and three Republicans negotiating a plan of their own.

If the Democrats can’t speak with one voice on the need to raise tax revenue, then they will find themselves in the position of giving Republicans about 80 percent of what they want.

Not six hours later, the Gang of Six was finished—Republican Tom Coburn of Oklahoma, the only Republican in town who has thus far indicated he might be willing to raise one nickel of tax, walked out of a meeting and quit.  Coburn said he left because the Democrats wouldn’t budge on Social Security, and I’m sure that’s true. But I also wonder whether the two sides were getting anywhere on “tax expenditures,” the loopholes and deductions worth $1.1 trillion a year. Everyone in town talks about eliminating them in general, but so far I can find no one who wants to eliminate any specific ones. I asked Hagan this morning if she would support ending two big ones, the home-mortgage deduction and the employer-sponsored health-care exemption, and she said she’s “not going to say yea or nay” just yet.

Just before the vote, I spoke with an aide to Democratic Senator Mary Landrieu of Louisiana, one of three Democrats who opposed ending the subsidies. Fine, Landrieu is from an oil state. We get that. But, I asked, the issue here is whether revenues are going to be a part of the overall budget deal; and if the Senate’s Democrats can’t agree on ending subsidies for America’s richest corporations, what can they agree on? “The senator wants to see comprehensive tax reform,” the aide said. “She’s very clear that we have to look at both sides of the ledger.”

But if the Democrats can’t speak with one voice on revenue, then they—including President Obama—will find themselves in the position of defending a budget agreement in which Republicans get about 80 percent of what they want. In fact, I’d go so far as to bet we’re more likely to emerge this fall with lower top marginal tax rates for the wealthy rather than higher ones, with a few piddling loopholes closed so that Democrats can sell it to their people as less embarrassing than it is. And then maybe the president can make another video.

Newsweek/Daily Beast Special Correspondent Michael Tomasky is also editor of Democracy: A Journal of Ideas.