By Russell Berman and Ben Geman - 04/26/11 11:59 PM EDT
President Obama seized on a rare opening by Speaker John Boehner (R-Ohio) and urged Congress to eliminate subsidies for major oil companies.
With voters anxious over rising gas prices, the president fired off a letter Tuesday calling on congressional leaders to “take immediate action to eliminate unwarranted tax breaks for the oil and gas industry.”
“It’s certainly something we ought to be looking at,” Boehner told ABC News on Monday. “We’re in a time when the federal government is short on revenues. We need to control spending, but we need to have revenues to keep the government moving. And they ought to be paying their fair share.”
The comments marked a shift both on substantive and rhetorical grounds for Boehner, who is fond of reminding reporters that “Washington doesn’t have a revenue problem, Washington has a spending problem.”
Democrats pounced quickly. In his letter, Obama said he was “heartened” by Boehner’s openness, and called for lawmakers to redirect $4 billion in tax breaks to investments in clean-energy development. Sen. Charles Schumer (N.Y.), the third-ranking Senate Democrat, and Rep. Sandy Levin (Mich.), the top Democrat on the House Ways and Means Committee, also released statements noting Boehner’s comments.
“It is almost too good to be true, but gas hitting $4 per gallon seems to have finally caused Speaker Boehner to see the light on the insanity of providing subsidies to profit-soaked Big Oil companies,” Schumer said.
Boehner spokesman Michael Steel sought to clarify the Speaker’s remarks, saying Boehner “made clear in the interview that raising taxes was a nonstarter, and he’s told the president that.”
“He simply wasn’t going to take the bait and fall into the trap of defending ‘Big Oil’ companies,” Steel said. “Boehner believes, as he stated in the interview, that expanding American energy production will help lower gas prices and create more American jobs. We’ll look at any reasonable policy that lowers gas prices. Unfortunately, what the president has suggested so far would simply raise taxes and increase the price at the pump.”
Steel wouldn’t say whether Boehner considers the elimination of certain subsidies a tax increase.
Boehner also said he would support the elimination of what are known as “oil depletion allowances” for large oil companies, but the American Petroleum Institute pointed out that big firms are already exempt.
Republicans have long resisted attempts by Democrats to collect higher taxes from major energy producers, and Boehner’s remarks sounded an alarm in conservative circles.
Grover Norquist, the activist and author of a pledge against tax hikes that most Republican lawmakers sign, told The Hill he emailed Boehner’s office after seeing his comments and received an assurance that the Speaker “remained opposed to any net tax increase.”
GOP lawmakers could remain faithful to Norquist’s pledge if they supported a revenue-neutral package that paired the elimination of some tax breaks with tax cuts elsewhere, such as a reduction in the corporate tax rate that Republicans and Democrats are discussing.
Norquist, who accused Obama of pushing for higher overall taxes, said he was satisfied with what he heard from Boehner’s staff. “I’m happy,” he said.
Senate Republican Leader Mitch McConnell (Ky.) took a stronger line than Boehner, saying “the president’s latest call to raise taxes on U.S. energy is as predictable as it is counterproductive.”
The tempest over the tax treatment of oil companies played out as soaring gas prices once again threatened the political fortunes of President Obama and Republican leaders. A Washington Post/ABC News poll released Monday found that 43 percent of respondents reported “serious financial hardship” from gas prices. Of that group, just 39 percent approved of Obama’s job performance and 33 percent approved of his handling of the economy.
Due in part to turmoil in the Middle East, the cost of fuel has spiked by 81 cents since Jan. 1, with pump prices topping $4 per gallon in some regions.
With Republicans now controlling the House, voters might decide they deserve some of the blame. “Nothing brings out populism like high gas prices,” said Paul Bledsoe, a senior adviser at the Bipartisan Policy Center. “It strikes me as a straight populist pirouette by the Speaker.”
Republicans are preparing a raft of legislation tied to energy issues for consideration when Congress returns next month. Many of the proposals are aimed at boosting domestic production and rolling back what the GOP argues are job-destroying regulations by the Obama administration.
Whether oil subsidies come into play, however, could depend on the status of tax reform in broader deficit-reduction talks to be led by Vice President Joe Biden.
“The rubber will hit the road if we get serious budget negotiations,” Bledsoe said.
Boehner’s comments aside, Republicans are likely to try to shift attention to their push for expanding U.S. oil-and-gas production by speeding up permitting and making more offshore areas available for development.
While GOP calls for wider drilling are familiar, Republican strategist Ron Bonjean argues that GOP policy responses to rising prices are now even more resonant because they’re set against the backdrop of unrest in the Middle East.
“It is different because of the crisis in the Middle East. It gives it extra weight because there is a direct connection between the crisis in Libya and rising gas prices,” said Bonjean, a former aide to GOP leadership in both chambers.
The bickering over energy policy has become an annual summertime ritual in Washington, and the partisan rancor often rises and falls with the price at the pump.
Julian Zelizer, a professor of history at Princeton University, cautioned that there’s a long time until the 2012 elections, noting that when prices fall, “the issue vanishes from the political radar as quickly as it emerges.”
But fuel costs could be a political threat to Obama if they remain elevated, he said.
“There is some peril,” he said.
Republicans, Zelizer said, have a built-in advantage in the current messaging war.
“People blame the president, and Congress is more of an amorphous body, and it is divided,” he said. “Republicans generally are a little safer.”