From the first discovery of crude oil in western Pennsylvania before the Civil War, through the early-twentieth-century creation of the Standard Oil Company by John D. Rockefeller, and the wildcatters who brought in gushers rich with oil and natural gas in Texas, Oklahoma and Louisiana, together with vast amounts of coal, the United States enjoyed energy independence. But in less than a century Americans had gone from energy self-sufficiency to a dramatically different and more troubling energy picture.2
The dysfunctional mess that Jimmy Carter inherited was the result of almost a century of political mismanagement, and for years the oil companies operated their own cartel through the Texas Railroad Commission. It parceled out production quotas to prevent oil from dropping back to its ruinous Depression-era lows of four cents a barrel until Texas was eclipsed by Saudi Arabia as the swing producer of the Organization of Petroleum Exporting Countries (OPEC). When major discoveries in Venezuela and Mexico threatened the independent producers in the American oil patch, Congress passed the first tariff on foreign oil in the 1930s. Meanwhile the vertically integrated major oil companies, working in the United States and abroad, focused on obtaining mammoth oil concessions in the Arab Middle East. By 1957 imports had surged to almost one-fifth of domestic consumption, and the independents demanded a stiff protective tariff. The Eisenhower administration resisted, but under their severe pressure President Eisenhower in 1959 reluctantly signed an executive order imposing import quotas in the name of national security; they lasted until the early 1970s, when they were replaced by Nixon’s domestic price controls that sealed our dependence on foreign oil.
U.S. crude oil production had been dropping steadily, and the nation no longer could satisfy its growing appetite without increasingly depending on Middle East suppliers. By the time of Carter’s inauguration, 46 percent of all the oil consumed in the United States as gasoline, home heating and industrial fuel, and for chemical feedstock had to be imported, mostly from OPEC countries, while domestic production continued to slide despite new discoveries in Alaska.
Richard Nixon was the first president to feel the full fury of OPEC. Crude oil prices had quadrupled since the Arab members of OPEC demonstrated their power by imposing an embargo in retaliation for U.S. support of Israel during the 1973 war against Egypt. The first oil price shock led to long lines at gasoline stations, with 40 percent increases in gasoline prices; tipped the United States into recession; dramatically increased inflation; and unbalanced the economy by beginning the “stagflation” phenomenon of simultaneous slow growth and high inflation that would bedevil Nixon, Ford, and Carter; and threw energy policy into disarray. Both production and conservation were discouraged by his price controls, which had the perverse effect of subsidizing foreign oil imported at world market prices. The American people were angry at everyone: the president, the Arab oil states, and most particularly the American oil companies, which they accused of organizing a conspiracy to make record profits. Time labeled them “oil gougers,” and congressional leaders made the oil companies the villains. When a nation and its leaders cannot face up to the truth about their challenges and look instead for scapegoats, it is difficult to develop sensible policies.
But we Americans have short memories, and by the time Carter took office, gasoline lines from 1973 had disappeared. Prices, although higher, were affordable, with the market price suppressed by federal controls. Energy seemed abundant, and it had not been a major issue in the 1976 presidential campaign. As long as gasoline poured out of the pump, drivers knew little and cared less where it came from. James Schlesinger, a Harvard-trained economist who served as Carter’s energy secretary, later noted that aside from gasoline rationing during World War II and the first, temporary oil price shock of 1973, energy “was a new domestic problem for the American people outside the context of war.”3
As a neophyte president, Carter waded into this minefield not fully aware of the political lineup of competing interests and the money behind them. He allied himself with the liberal consumer and conservationist groups, but it was the more conservative producer interests that controlled energy policy in Congress through its most powerful members. Even more, neither Schlesinger, despite all his Washington experience, nor any of us, fully recognized the difference between the more colorful and politically potent domestic independent producers and the vertically integrated giant companies engaged in worldwide extraction, refining, and sales. The multinationals had subsidiaries through which they could shuffle costs and profits to minimize taxes; their interest lay mainly in maintaining predictable rules of the game. Although they were the focus of liberal criticism and public outrage, the real political power of the oil and gas lobby came from the independents and their direct financial support of their senators and congressmen, and not from the bogeyman of Big Oil.
Transforming Carter’s vision into congressional action was also extremely difficult because the nation had created a crazy-quilt system of federal price controls on oil and gas. It discouraged production and encouraged overconsumption because of the artificially low prices, along with quotas, tax privileges, and subsidies that showered benefits on the oil and gas industry in those parts of the country rich in fossil fuels, while imposing costs on the rest of the nation.
The politics of energy are brutally divided along regional lines, because we are the only major democracy that is simultaneously a major producer and consumer of energy. The producing regions in the Southwest and West hold great pools of energy underground, and the Northeast and Midwest have few energy resources but a great appetite for energy to power their industries, homes, and cars. Politicians from producing states generally want higher prices and federal incentives to drive up profits for their energy industry, while consuming regions want lower prices for their consumers. Interest groups had formed on all sides of energy pricing. Environmental organizations and liberals urged conservation while pressing for tight controls on the prices and profits of the energy companies, while conservatives and the energy companies sought to end price controls and unleash more domestic production.
In proposing higher prices and new energy taxes and trying to construct a rational system, Carter took on the oil and gas industry on one side and consumer and environmental groups on the other, none of whom were happy with his policy. The battle demonstrated his governing style. He reached for comprehensive solutions to the most intractable problems, taking on powerful interest groups impervious to the political consequences; ignoring the norms of Washington; making early mistakes and then regaining his footing; and in the end achieving major results of the most profound consequence for the future of the nation.
His domestic campaign mirrored the strategy he adopted to bring peace to the Middle East. The results were similar: historic accomplishments that have withstood the test of time, but at severe political cost. Without fear of exaggeration, I believe that Jimmy Carter did more than any president, past or future, to change U.S. energy policy for the better and to prepare our nation for the sound energy future we now enjoy.
With an overwhelmingly Democratic Congress, party politics were a side issue compared with geography in the fight to enact his long-term presidential vision, embodied in his National Energy Plan. He realized that the forces were closely balanced: “If you line up the conflicting interest groups, oil and gas, and coal producers on the one hand, and basically consumers on the other hand, it’s just a fifty-fifty deal. The members of Congress in the middle who had the swing votes didn’t want to be involved in it. We had to force it. There was no groundswell of support for it.”4 The energy issue haunted his presidency throughout his term in office, leading to more nationwide addresses on energy than on any other domestic issue, and to three major energy packages, the last in the midst of the turmoil caused by the Iranian revolution.
OIL, GAS, AND SAUSAGES
The German chancellor Otto von Bismarck famously remarked, “Laws are like sausages. It’s better not to see them made.” But I want to do just that, so tha
t the public can follow Carter’s iconoclastic, eclectic, but ultimately productive governing style, and better understand the often opaque ways that laws are made through Washington’s transactional politics. Though Carter regarded himself as the guardian of the public good against vested interests, and felt that the quid pro quo of political compromises with Congress was almost immoral, he could not avoid them. They provide an insight into how the process looked from inside the administration and from the perspective of Congress, and a view of the interplay among the key interest groups: consumer advocates, the oil and gas interests, and the broader business community. This provides the give-and-take of Washington at work, demonstrating that when an administration sets an important goal, it must balance regional against national interests, and consumers against corporate lobbyists. It also demonstrates how difficult it is to make laws that have to accommodate so many conflicting interests that assert themselves even today, and it is made more difficult when they are overlaid by fierce ideological battles, leaving little room for compromise.
Titanic congressional egos are easily bruised in the backroom deals that so often grind out the legislative sausages. In this struggle the barons of the Senate were at war with one another. On one side Senator Russell Long of Louisiana, the powerful and colorful chairman of the Senate Finance Committee, led the coalition of oil and gas states against Henry “Scoop” Jackson, the stolid chairman of the Senate Energy and Natural Resources Committee (industrial growth in his Washington State was heavily based on cheap, government-financed hydroelectric power). In the House of Representatives, Speaker Tip O’Neill of Boston, one of the most endearing figures in American political life, and the veteran Detroit congressman John Dingell, the tall, tough, powerful chairman of the House Power and Energy Subcommittee, represented consumer interests and the Michigan-based automobile industry. Battles over something as seminal as energy policy, or any other major issue, are not over the forces of good versus the forces of evil. Senators and congressmen try to do what is right for the country, but it is always first refracted by what is best for their own local constituencies.
It is the president’s job to forge coalitions of interest behind his legislation, and these will shift from issue to issue. In Washington there are no permanent enemies and no permanent friends: A remark attributed to Harry Truman says it best, “If you want a friend in Washington, get a dog.” The truth of this aphorism became all too evident during the epic battle over the Carter energy plan.
To complicate the problem, the battle was not just about Nixon-era controls on the price of oil, but also whether to remove federal price controls from natural gas and make it competitive with the black gold that enriched Texas and propelled its politicians to national stature. Natural-gas pricing was one of the nation’s most contentious—and opaque—public policy issues in the postwar era, with Truman vetoing a bill in 1948 to remove price controls, and battles ever since. Gas flowed out of the ground into an inefficient market, regulating prices as soon as it crossed state lines. This was supposed to protect consumers in the nonproducing states from high prices, but actually it made them more dependent on oil. There was little incentive for the energy companies to extend gas pipelines nationwide when they could only sell gas across state lines at a tiny fraction of what they could charge in the state where it came out of the ground, in an unregulated, free market.
Inside the borders of producing states, natural gas flowed freely. But once it crossed their boundaries, the gas came under federal price control in the shivering Northeast and Midwest and traded at about one-third of the price in the producing states. What producer would ship his gas across the state line to sell at a controlled low price? Across the oil fields, natural gas that hissed out of the wells as the oil was being pumped to the surface was largely burned off in huge flares—and wasted.
I knew Carter felt strongly about energy as a matter of national security, having committed himself to halt the increase in America’s oil imports in his announcement speech for president.5 But as his policy director during his two-year drive for the presidency, I can attest that energy was not a major issue because Americans did not perceive it as one. Until Carter’s nomination looked almost certain, I did not hire an energy specialist—Katherine “Kitty” Schirmer, a Wellesley-educated crackerjack who had worked on energy issues on Capitol Hill. The Democratic Party platform, eying the key votes in Appalachia, pledged to increase coal production and to establish a “clean coal” program for this abundant, and abundantly polluting, American natural resource.
But by far the most politically vexing energy issue was the pricing of crude oil and natural gas, long avoided by presidents because it divided the country. We spent a great deal of campaign time trying to balance these interests, just as we would in the administration, and our electoral calculus marked the energy producing powerhouses of Texas, Oklahoma, and Louisiana as must-win states. Although Carter came out of the Democratic Convention leading President Ford in the polls by more than 30 points, by mid-October he cut Carter’s lead to a precious few points. I received worried calls from two of Jimmy Carter’s earliest supporters, Governors Dolph Briscoe of Texas and David Boren of Oklahoma. Both warned me their states were slipping away and that it was critical for Carter to reinforce his campaign pledge to decontrol the price of newly discovered natural gas. Boren had a portly girth, boyish round face, pleasant manner, and a ready smile, but he was no common politician. He was a Yale Phi Beta Kappa and Rhodes Scholar. Briscoe, a formidable power who at one time was the largest landowner in Texas, with a personal holding of at least one million acres, had endorsed his fellow Southern governor, Jimmy Carter, in a hotly contested Democratic primary, which Carter won.
During the annual Oklahoma-Texas college football game, when the two governors traditionally sit together, they were joined by Bob Strauss, chairman of the Democratic National Committee and a quintessential Texas political phenomenon. At halftime the three began to talk. “And so,” Boren continued, “we all agreed that we were in shooting distance in Louisiana, Texas, and Oklahoma, and we just needed another little boost to pull us over.” The conversation focused on natural-gas deregulation, and they conceived of the idea of a letter from Carter reaffirming his position. Boren drafted and faxed it to me in Atlanta, and with minor changes I sent it to the campaign plane, where Carter signed it. The key sentence pledged that if elected he would “work with the Congress, as the Ford administration has been unable to do, to deregulate new natural gas.” It was released by the governors with much fanfare in Austin and Oklahoma City, and Strauss did his bit by talking it up with the Texas establishment, greased as always by oil money.6 We won the three key producing states by an eyelash, and they were enough to put us over the top on election night.
* * *
Carter’s political debt to these three states was still not large enough to explain why he chose energy as his prime domestic priority. He could have staked his political chips on his promise to end what we constantly called “the Ford recession,” or on more traditional Democratic priorities, such as comprehensive national health insurance. But he was not a traditional Democrat, and would not have been elected if he had been. He was a fiscal conservative and chose to concentrate on curbing soaring hospital costs, on welfare reform as his prime social program, and on reforming the inequitable tax code. In truth, while he overwhelmed Congress by making all these his priorities at the same time, energy was clearly the first among too many equals. Why?
The simple answer was that as governor of Georgia during the 1973 embargo, Carter saw the impact from the perspective of gas lines and especially the vulnerability of the U.S. economy to OPEC.7 But nothing is simple in our politics, which combine personality with policy. Enter James Rodney Schlesinger, who, Carter told me, wanted to see it done. Schlesinger did not come without baggage. He had been summarily fired as Defense secretary by Ford, who found him arrogant, insufferable, and unable to get along with key members of Congress, but his intellect app
ealed to Carter.
Ham had asked Carter to avoid two people during the campaign—Ralph Nader, because he was unpopular with Southern conservatives, and Jim Schlesinger, because he was equally unpopular among Democratic liberals. Carter’s typically hard-headed response was to invite Nader to a softball game in Plains and to meet Schlesinger at his home in Plains.
Schlesinger was a defense intellectual with a long history of public service, and he had the further advantage of having clashed with Henry Kissinger over his policy of détente with Moscow. By nature a contrarian and nominally a Republican, Schlesinger had powerful supporters among the Democratic, anti-Soviet wing led by Scoop Jackson, who had pressed his name on Carter. When Carter sought him out, it was not to discuss energy but China. Schlesinger had just returned from Beijing, where he was the first major American figure to meet the new Chinese leadership after the death of Mao Zedong.8 Seeing a chance for redemption (and possible return to office), Schlesinger leaped at the opportunity. His brilliance and his iconoclastic attitude appealed to the cerebral Carter, who also saw his embrace of Schlesinger as a way of poking a finger in Ford’s eye during the closing weeks of an increasingly tight race.
But there were also personal bonds in their shared love of the outdoors. Schlesinger was a devoted bird-watcher with binoculars and boots of the kind Carter used for his outdoor treks. They also shared experience in nuclear energy, Schlesinger as a former chairman of the Atomic Energy Commission. Both distrusted the establishment and took on causes regardless of the political consequences. Carter decided Schlesinger would be the perfect man to lead the effort to enact a comprehensive, all-encompassing national energy program. What was not known was that the two agreed he would have personal access to the president and that their conversations would not be restricted to energy but range over foreign and defense policy. So on Saturday mornings, as early as 6:00 a.m., Carter and Schlesinger would meet and talk. Carter said: “We never did publicize it, and we would sit like that and drink coffee; and he was very sensitive about my schedule, and I think he never stayed more than an hour, although I didn’t tell him to leave.”9
President Carter Page 18
