by Ira Shapiro
On September 22, Jimmy Carter told a group of out-of-town editors that it was “almost impossible” for a president to maintain high approval ratings, given the state of the world and the economy. Carter expressed pride in making tough decisions to pursue the Panama Canal treaties and a balanced national energy policy, even though they were “patently a losing political proposition.” “Most of the decisions that have to be made by a president are inherently not popular ones,” Carter observed. “They are contentious.”
Even Republicans were beginning to agree. Danforth for one could no longer abide the amount of abuse being heaped on Carter. In a speech in Columbia, Missouri, Danforth suggested that “we let up on President Carter.” Saying he was “terribly concerned about the incessant drumbeat of criticism directed at the president,” Danforth argued that “we have overdone the criticism, it has become too unrelenting and it has impaired the man’s capacity to fulfill his responsibilities.” This was a highly unusual speech for a Republican senator to give then; it would be inconceivable now.
On September 25, Senate Finance voted 13–0 to exempt all new finds from Carter’s windfall profits tax and broadened the definition of new oil to include anything not in production in 1978. This move cut an estimated $14 billion in profits by 1990. Observers calculated that the Finance Committee had stripped about $20 billion from the $104 billion in estimated revenue, and already approved $63 billion in tax credits, while preparing to consider $62 billion more. Danforth warned that the committee must begin comparing revenues with credits, or “we will end up with a tax of zero and expenditures of $200 billion.”
The next day, the Finance Committee had made more cuts to, and credits from, the windfall profits tax than the tax would raise: $117 billion to $104 billion. The round of credits included a 40 percent break for businesses that explore unconventional energy, such as solar and geothermal. Danforth expressed his view that it would be necessary “to make a choice between the Energy Security Trust fund and these energy tax credits. There is no way you can have both.” Ribicoff suggested a solution to the dilemma, proposing a 25-cent-per-barrel tax on all oil used in the United States, but got little support. As the committee gave out credits far beyond the revenues it would raise, one Senate observer commented: “It was just like a bunch of college kids drinking beer. It didn’t matter how much they’d drunk before. They just chug-a-lugged it all.”
Long had given the Finance Committee wide latitude, and most of the members recognized that the result had been massive overreach. On September 28, the chairman told the committee that they had voted too many credits, versus revenues, and that they should start over. The members agreed, and the staff was asked to prepare several alternative plans for the committee to consider in the following week. Committee members would face the challenge of dealing with the magnitude of the credits, and the exemptions that they had carved out.
On September 28, Hart’s subcommittee issued its report, pouring cold water all over Carter’s synfuels program. The report said that synfuels were not likely to become a major alternative to dependence on foreign oil and that Carter’s plan could not be justified on economic grounds. The report recommended instead a greater emphasis on conservation by businesses and homeowners, and a quick conversion by many utility plants from oil to coal. The report estimated that such an intensive effort could save 5.5 million barrels of oil a day by 1990, and that full decontrol of oil prices could save another 2.4 million barrels a day.
With the enthusiasm for synthetic fuels waning, on October 3, Long put forth a compromise to cut the revenues in the House-passed version by about one-third (through exemptions) and split the remaining revenues between synfuel production and credits to homeowners and businesses that take energy-saving measures. The committee tentatively rejected Carter’s idea of an energy trust fund, but reversed itself the next day. Ribicoff, who had tried to be responsible during the committee’s feeding frenzy, persuaded the members that the trust fund provided the only assurance that the money would be used for energy conservation or production and not go into the general treasury.
The Finance Committee bill would capture 29 percent of the new oil revenues, a solid amount, but far less than the 43 percent that the House bill would capture. It was still an open question how the Senate as a whole would respond.
ON OCTOBER 2, LEGISLATION to create an Energy Mobilization Board reached the Senate floor. The novel idea had come to divide the Democrats sharply. Jackson and Johnston favored the powerful EMB originally proposed by the White House; ideally, they wanted a board that could override state and local environmental regulations to speed the construction of synthetic fuels plants. But the vehement opposition of state and local officials, supported by a strong environmental lobby, forced them to scale back their ambitions. They proposed instead that the board could set a two-year deadline on projects and make a decision itself if the deadline was not met. They also wanted approved projects to be “grandfathered” into future environmental laws.
They encountered formidable opposition from Muskie and Ribicoff. Muskie, with his customary passion, told his colleagues that waiving future laws would “make it impossible to protect people from chemical poisons produced by the new energy facility if those poisons are discovered after the facility is built and make it impossible for the government to correct its mistakes. Under the committee bill, we would be literally and dangerously helpless.”
Jackson responded vehemently, saying that the Muskie-Ribicoff substitute “guts” the bill, does “nothing to help expedite the time schedule, puts another layer of bureaucracy in and injects the court into it too.” Jackson hammered on the basic justification for the EMB: “The energy mobilization board offers the best hope in the short term for reducing our dependence upon OPEC oil. The nation is now paralyzed by a bureaucracy that can delay vital energy projects for months and even years. . . . We should either give the board the power to get the job done or not create a board at all.” Jackson had his own strong environmental record, but argued that “the environment and state’s rights have dominated this debate . . . many of us seem to have forgotten that our future is at stake.”
The next day, the Senate rejected the Muskie-Ribicoff substitute by a 58–39 vote. Pete Domenici said that the defeat of Muskie-Ribicoff “clearly indicates the Senate is ready to make some major energy decisions.” But Jackson and the administration, seeking to build a strong consensus and undercut the opponents, reached out to Muskie and Ribicoff, agreeing that the secretary of interior or the EPA director could veto any board decision to waive a state or local law. Muskie was not placated; he predicted that the legislation would face court challenges that would slow energy progress rather than speeding it. “If they think they are short cutting anything with this,” he argued, “they could not be more wrong.” But the EMB legislation passed the Senate on October 4, by a strong 68–25 vote.
Building on the momentum, on October 10, the Senate Appropriations Committee approved $20 billion for synfuels development funds, even though the synfuels projects had not yet been authorized. Lowell Weicker, among others, argued against this novel approach: “What kind of legislating is this,” Weicker asked, “when we just put out on the table $20 billion?” Stevens argued that the money was essential, even if it only sent symbolic help to those Americans stuck in long gas lines. Vermont Democrat Patrick Leahy retorted that “$20 billion is a lot of symbolism.” But Robert Byrd’s argument—“the money will be there; we won’t have to wait. . . . If we reject this, we’re put in a position of turning down synthetic fuels”—helped carry the day.
On October 17, the Committee decided to scale back the tax credit package by scrapping the increase in the insulation tax credit it had previously adopted. The money saved was committed to energy aid for the poor and a tax credit for families earning $20,000 or less.
Despite the intense flurry of action on so many fronts, the Senate had not met Carter’s deadlines or Long’s. Now presidential politics began to
intrude. On November 4, at a rally in Buffalo, Kennedy called on Carter to issue an ultimatum that if Congress did not impose a windfall profits tax of 50 percent, he would veto the measure and reimpose price controls. He also called on Carter to issue a moratorium on new nuclear plants.
TED KENNEDY WAS SCHEDULED to announce his presidential bid on November 7 in Boston, at historic Faneuil Hall. But on the evening of November 4, CBS televised an interview of Kennedy done by Roger Mudd, which would go down in the annals of disastrous political appearances. Kennedy failed to respond adequately to tough, but fair and predictable, questions from Mudd about the state of his troubled marriage and the Chappaquiddick tragedy. (Tip O’Neill had warned Kennedy in September that he was greatly underestimating the impact of the “moral issue” and urged him not to run.) When Mudd served up a softball, asking Kennedy why he wanted to be president, the senator offered a rambling, stammering answer that was as nonsubstan-tive as it was incoherent. Kennedy’s performance shocked the national political community. Despite his gaudy poll numbers, his impressive Senate record, his magnetism, and the memory of his brothers, Kennedy was about to launch a presidential campaign without being ready. Some of his closest friends wondered whether the weak interview reflected lingering doubts about whether to run.
The Roger Mudd interview was major political news, but it was quickly overshadowed by dramatic events in Tehran on the same day. For months, the Carter administration had been grappling with the question of whether to admit the shah to the United States. Henry Kissinger and David Rockefeller, the chairman of Chase Manhattan Bank, had been lobbying the White House on the issue, pointing to the shah’s decades of support for the United States. Zbigniew Brzezinski strongly supported their argument, and over time, Vice President Mondale and Secretary of State Cyrus Vance also supported the recommendation, on humanitarian grounds because the shah, suffering from potentially fatal lymphoma, could not get first-class medical care in Mexico, where he was currently living.
At an October 19 meeting of his national security team, Carter asked: “What are you guys going to advise me to do if they overrun our embassy and take our people hostage?” Carter’s concern may have reflected the warning of Ibrahim Yazdi, the foreign minister in the Barzagan government, who, upon hearing of the idea of letting the shah into the United States, had told U.S. policymakers: “You’re opening Pandora’s Box with this.” Despite his reservations, on October 20, Carter agreed to admit the shah into the United States for medical treatment in New York City.
Two weeks later, on November 4, several hundred militant students stormed the lightly guarded U.S. embassy in Tehran on a rainy Sunday morning. By the afternoon, more than sixty U.S. diplomats and embassy personnel had been taken hostage. The original idea, according to the leader of the students, was to seize the embassy for “forty eight or perhaps seventy two hours—unless the provisional government evicted them earlier.” The ordeal of the hostages, which would last for 444 days, doom Carter’s presidency, and introduce the United States, and the world, to militant Islam, had begun.
CARTER WAS CLEARLY FEELING the political pressure from the Northeast and aggrieved consumers around the nation. Speaking to a conference of northeastern state officials, Carter lashed out at the Senate Finance Committee, saying that its efforts to reduce the proposed windfall profits tax “could become a trillion-dollar giveaway to the oil companies.” Administration officials scrambled to correct the president’s recklessly inaccurate statement. Unperturbed by the criticism, Long commented: “When people campaign for office, they tend to make controversial statements.”
Carter was in a political vise. The middle ground that he sought seemed to be shrinking daily. Kennedy was attacking him for “surrender to the oil companies and OPEC.” Oil company executives were accusing him of stretching the truth and unfairly bashing the industry. The general political climate on the Hill had shifted against him. In July, legislators had applauded Carter’s statement that he would use quotas to ensure that the United States would never import more oil than it did in 1977. Now, four months later, the Senate voted to give Congress the power to restrict any future presidential move to limit oil imports.
On November 5, the Senate began floor debate on competing versions of the synfuels legislation. Jackson and the Energy Committee pushed the administration’s proposal to create a Synthetic Fuels Corporation, to distribute $20 billion. Proxmire offered the Banking Committee alternative, providing $3 to $10 billion for synfuels and another $11 billion on solar power, conservation, and gasohol. Proxmire, a notorious skeptic about big government projects, argued that his bill limited federal government involvement, while the Energy Committee version involved the federal government “up to their eyeballs.”
Proxmire had some strong arguments, but he was offering them on the wrong day. Bennett Johnston retorted that “as of yesterday, there was a cutoff of oil delivered by Iran”; passage of the Banking Committee’s “puny” bill would send the wrong message about America’s determination to fight OPEC and become energy independent. The Senate rejected Proxmire’s version, 57–37, and the next day approved the Energy Committee version, with additional conservation measures that the administration had not sought, by a 65–14 vote.
On November 7, a Washington Post article by Mary Russell presented a caustic analysis of the progress on energy so far. “Congress’ pattern of response to the national energy problem had become fairly clear,” Russell wrote. “It is to give money to people and sometimes create new agencies but not to take chances or inflict pain. It is all strained carrots and no sticks.” Reviewing the bidding, Russell noted that the Senate had taken away part of Carter’s power to impose oil import quotas; refused to give him clear authority to ration gasoline; “flinched” when asked to set demanding fuel economy standards for new cars; and refused repeatedly to take other steps that would have restricted consumption. “The chosen congressional weapon to fight the oil cartel is—,” Russell concluded, “storm windows.”
The only possible meaningful action that remained under consideration was decontrol of oil prices coupled with a stiff windfall profits tax—and any decision would require much wrangling.
ON NOVEMBER 16, THE Senate finally began floor debate on the windfall profits tax. The Finance Committee version of the bill recaptured $138 million from the oil industry, only half of what the House-passed bill had done. Long, speaking in support of the bill, called it “the largest tax increase ever levied on a single American industry,” but went on to describe it as “a compromise between revenue considerations and the need to provide the proper production incentives.” Howard Metzenbaum, in his customary, self-assigned role of protector of consumers, called the bill “by far the biggest giveaway in American history.” Bill Roth endorsed the bill, which found the middle ground “between those who want to kick the hell out of Big Oil and those who want to get in bed with Big Oil.” Days and nights of debate remained ahead, with possible pitfalls on the left and right.
On November 19, Dale Bumpers introduced an amendment to substitute the House bill for the Senate’s. Like Metzenbaum, Bumpers believed that the oil companies were getting away with murder. So did Muskie, who argued passionately: “We have mortgaged our future. Without a more productive windfall profits tax, we just can’t make the payments.” Bumpers’s amendment would go down to defeat, but so would an amendment by Bob Dole that would have further reduced the windfall profits tax.
On November 27, the Senate voted, 53–41, to exempt most independent producers from the windfall profits tax. Lloyd Bentsen, a longtime champion of the independents, who drilled 98 percent of the nation’s exploratory wells, offered the amendment to exempt the first 1,000 barrels a day that they produced. Bentsen argued that the exemption was needed to ensure that they would keep drilling at full tilt. Moynihan led the fight against the exemption. Calling Bentsen’s amendment “legislation for a privileged thousand firms,” he argued that the independents were rich enough and that the exemption wou
ld not produce any more oil. Several Democrats expecting hard races in 1980, including McGovern, Bumpers, Frank Church, Birch Bayh, and Ernest Hollings, voted for the exemption even though they traditionally opposed the oil industry.
Byrd’s role as majority leader required him to harmonize the White House agenda, what the country expected of the Senate, and what traffic would bear within the Senate. In Byrd’s estimation, the Finance Committee had already reduced the windfall profits tax too much, and now Bentsen’s amendment had reduced it by $10 billion further. On December 1, Byrd said he favored raising the windfall profits tax in the Senate bill to $190 or $200 billion and that Long was willing to work with those numbers. If a “fair tax” isn’t passed, Byrd said, Carter should reimpose price controls. Bill Bradley, in his first year in the Senate, took the lead for those pressing for an increased tax. Stevens, Dole, and Bellmon represented the pro-producer Republicans. A possible compromise was coming into view.
On December 4, the Senate voted 58–35 for a Bradley-Chafee amendment to add $22.5 billion over the next decade by raising the windfall tax on oil discovered between 1973 and 1979 from 60 to 75 percent. Then, in a surprising move, the Senate approved a Metzenbaum amendment to extend the tax for six years, into the mid-1990’s, producing a total revenue of $214 billion. This was too much for the pro-producer Republicans and the talks stalemated again.
The Republicans rarely missed an opportunity to put the Senate on record on the subject of tax cuts and balanced budgets, and this was a natural moment. On December 5, the Republicans offered a plan to force a major tax cut in 1981 by capping the amount of GNP that the government could take in tax revenues, at 20.5 percent in 1981, 20 percent in 1982, and 19.5 percent thereafter. They took pleasure in pointing out that Jimmy Carter had endorsed a tax ceiling as part of his 1976 campaign. They were forcing the Democrats to oppose a simplistic, but appealing, scheme. Muskie and Moynihan argued against it, saying it would interfere with the government’s budget process and produce deficits at least through the mid-1980’s. The amendment went down on a virtual party line vote; and the Republicans had put the Democrats running for the Senate in 1980 on record with a very unpopular vote.
