The Pipeline Controversy: Keystone Cops in Washington?

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The Obama administration may have set itself up to disappoint supporters on the Left still again. In so doing, the President may also have weakened his sources of bargaining power.

Earlier this morning the Senate, by an 89-10 vote, approved a two-month extension (until February 29th of next year) of the payroll tax cut enacted last year. The Senate legislation also includes language authorizing approval for the controversial Keystone XL pipeline unless President Obama decides the pipeline is not in the national interest. (The bill, which must pass the House, also includes the so-called “doc fix” by postponing a 27% cut in pay for doctors serving Medicare patients, and it extends jobless benefits. To cover the lost revenue and increased spending, the Senate will levy new fees on the Fannie Mae and Freddie Mac.)

But here’s the catch. You will recall that the Obama administration has been pushing for an extension of the tax cut, which was enacted a year ago and lowered the payroll tax to 4.2%, saving families earning $50,000 about $1,000 a year. In an election year, voting against a tax hike would appear to be a winning issue. Tea Party activists, however, have expressed ambivalence about signing on to an extension, arguing that the loss of revenue furthers undercuts the Social Security and Medicare programs which depend on payroll tax revenue for funding. To sweeten the deal for Tea Party-backed Republicans, House Speaker John Boehner linked an extension of the payroll tax reduction with provisions expediting review of the controversial Keystone pipeline project.  When this proposed deal was first raised in a House bill (H.R. 3630) that linked the Keystone project to an extension of the payroll tax cuts Obama promised a presidential veto: “If the president were presented with H.R. 3630, he would veto the bill.”

To be sure, in the administration’s Statement of Policy (SAP) containing the veto threat Obama didn’t mention Keystone by name.  Instead the SAP referenced opposition to Republicans’ “choice to refight old political battles over health care and introduce ideological issues into what should be a simple debate about cutting taxes for the middle class.” Nonetheless, the reason for the veto threat was clear to see. And that veto threat, in my view, was a mistake. Remember, the Obama administration was initially on board with approving the Keystone project, but last November, under heavy pressure from environmental activists, it reversed course and put off a decision until after the 2012 elections, citing the need for further environmental review of the  project.  That decision was intended take the divisive issue off the table during an election year.

Here’s the problem. Obama issued his veto threat without in my view fully gauging how Republicans – and members of his own party – might react to the Keystone proposal.  In fact, it’s quite possible that some Senate Democrats will support a bill extending the tax cut even if it is linked to expedited consideration of the Keystone project.  The reason why is not hard to understand; it will be hard for many Democrats, in a time of 8.5% unemployment and dwindling energy resources, to go on record opposing a bill that backers promise will create jobs and reduce energy dependence on foreign imports. Several labor unions that typically support Democrats have gone on record as supporting the Keystone project as well.  To be sure, a vote for the Keystone bill will again alienate environmentalists but – their dire threats to enact retribution notwithstanding – does anyone really think they will vote against Obama come 2012?

In two months, then, (if I understand the legislative process) when the current extension expires Obama is going to find himself in a very difficult position: he either stands by his veto threat and blocks an extension of the payroll tax because of the Keystone linkage, after pushing for it during the last several months, or he signs on to the legislation and incurs the wrath of environmentalists and the left wing of his party once again.  All this presumes, of course, that some version of the Senate bill passes the House, which will likely vote on the bill later this week.  Based on his past record, if these are his only two options, I am confident I know which one he will choose. But the veto threat makes this a far riskier choice than it otherwise had to be.

To be sure, if Obama wants to stand by his threat, he may get some political cover from the State Department, which must issue the permit approving the Keystone project. It has said it cannot conclude a review of the pipeline project within the next 60 days.  So in theory Obama can claim that his hands are tied and reject the project come next February.  This maneuver, however, won’t stop Republicans from using this as a campaign issue by portraying Obama as anti-jobs and in hock to environmental extremists.

I’ll leave it to those more knowledgeable than I regarding the merits of the Keystone project.  But politically, Obama has boxed himself in with his veto threat.  This is still another reminder that we often confuse the exercise of a president’s formal powers, in this case the veto, with actual power – effective influence on political outcomes.  There was no reason for Obama to put his political reputation on the line by personally issuing the threat.  Instead, he could have reprised the more limited threat he used in the military detainee debate, in which his advisers, but not Obama, recommend the veto threat.  This allows the president to signal his preferences, but leaves some wiggle room for negotiating a compromise. Instead he has put his political reputation on the line.

The choices a president has in his own hands are his only means of guarding his power prospects. Given the limited opportunity to influence events, presidents must be acutely sensitive to the likely impact of those choices on their sources of power.  I could very well be wrong but from my vantage point it’s not clear that in this instance, Obama fully gauged the long-term risks in making his veto threat.

2 Responses to The Pipeline Controversy: Keystone Cops in Washington?

  1. Alex says:

    Very interesting point about the veto threat being an ill-considered decision. The Middlebury community will probably hate me for this one, but it seems that approving the pipeline is one of few sure methods Obama has to lop off a chunk of unemployment, and by extension, greatly increase his chances at reelection. But then again, it is hard to justify building a nation-spanning fuse to the biggest carbon bomb in North America. Very tough issue. And it’s too bad it’s linked to Obama’s own payroll tax cut initiative. But maybe it’s a blessing in disguise. If you are Obama, why not ensure reelection first, then make the environment your issue for the next 4 years, and potentially become a memorable president while doing so?

  2. Matthew Dickinson says:

    Alex – As you note, there’s substantive arguments on both sides of this issue. I’ve heard more than one economist argue that the jobs from building the pipeline may be less than its proponents are suggesting. On the other hand, it’s hard to evaluate just what the environmental consequences of extracting oil sands from Canada and piping it through the U.S. will be although, as you point out, no matter how carefully it’s done it still is going to be another source of carbon emissions.

    Politically, however, it seems to me that Obama really isn’t going to have much choice here. Yes, he will piss off the Middlebury community and environmental activists, but better them than labor unions and independents. At least that’s what I think he’s going to conclude.

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