Seeing the collapse of the Senate Republicans' effort to make political gains on the gas prices issue has been like watching a slow motion train wreck. By last Friday the tactics were clear: the Senate Republicans were supposed to get behind this idea of offering $100 checks to 100 million Americans to help them pay for gas (which I commented on last week). They also proposed a couple ideas for extracting more revenue from the oil industry to cover the costs of these checks. But those tax plans were almost certainly phony: Bush had already signaled he would veto them, and House Republicans were conspicuously silent. So the Republicans in the Senate knew from the outset that any plans they came up with for rolling back any of the oil industry's multitude of tax breaks would go nowhere. I think the game plan was to push through the $100 payment plan (with checks that would arrive around Labor Day, right in time for the peak of the Fall campaign season), make some noises about greedy oil companies, but in the end finance the $100 checks with deficit spending rather than actually passing tax increases on one of the GOPs biggest financial supporters, the oil industry. As evidence of this, look what happened when a Democrat in the Senate came up with an idea that wasn't part of the Republicans' script:
Senator Ron Wyden, Democrat of Oregon, tied up the Senate for almost five hours on Thursday in an effort to force a vote on his proposal to prohibit oil companies from escaping federal royalties for drilling on public lands when oil prices exceeded $55 per barrel. (Prices recently rose above $75 a barrel.) But Republicans blocked that effort. "You cannot get a vote up or down in the United States Senate on a rip-off of taxpayer money," Mr. Wyden said.
Wyden's proposal was actually a remarkably sensible one, but the Republicans blocked the vote because they didn't want to reveal their true colors, and have to go on record as actually opposing rolling back one of the many tax breaks and subsidies they've given to the oil industry over the years.
Blocking Wyden's proposal was just a small bump in the road - it was after that when a couple things went seriously wrong with the plan.
One was that voters saw the $100 payment plan for what it was, and this started to make the GOP Senators nervous:
"The conservatives think it is socialist bunk, and the liberals think it is conservative trickery," said Don Stewart, a spokesman for Senator John Cornyn, Republican of Texas, pointing out that the criticism was coming from across the ideological spectrum. Angry constituents have asked, "Do you think we are prostitutes? Do you think you can buy us?" said another Republican senator's aide...
The other was the tax proposal they came up with. It was so broad based that it affected any businesses that worked with large inventories, not just the oil industry. The business community caught wind of it, and they got scared:
Major trade groups quickly and vociferously registered their disdain for the tax provision, saying the plan amounted to a hefty new tax not only on the oil industry, but also on many manufacturers, wholesalers and retailers that rely on large inventories as well."This just came out of the blue," said Dorothy Coleman, vice president of tax and domestic economic policy at the National Association of Manufacturers. "Before you make a change in longstanding tax policy — I am talking 70 years or so — you don't just up and do it in an energy bill."At the National Retail Federation, Rochelle Bernstein, vice president and tax counsel, said lobbyists there immediately raised a red flag with lawmakers and aides. "Our concern was did they understand what they were doing, did they know this was a proposal that could have wide-ranging implications?" Ms. Bernstein said.
I'm not sure what the answer to Ms. Bernstein's question is. My guess is that it was just a massive miscalculation. A broad-based tax increase like this goes way beyond the problem at hand, and besides that, Republicans just don't do big tax increases on businesses. Like I said, I don't think the proposal was serious to begin with (which may be why the Senators didn't do their homework on it), but that's not something that's necessarily obvious to those who aren't in the game, so the business community's reaction is understandable.
These problems sent the plan off the rails, and it was reported today that it appears to be dead, with a fair amount of finger-pointing going on among the Republicans. This was a pretty big screw-up on a key election year issue. Since Bill Frist was the architect of the plan, I don't think it bodes well for his Presidential ambitions in 2008.