Wednesday, May 17, 2006

"Menendez" is Spanish for "chutzpah"

Here's the first piece I published in New Jersey, on April 27, in the wake of Bob Menendez's introduction of an amendment to the Emergency Supplemental Appropriations bill then (and now, still) working its way through the Senate:



Bob Menendez is nothing if not crafty and clever. Witness this week's gas tax gambit, wherein the new U.S. Senator proposed reducing motorists' pain at the pump with a 60-day “tax holiday” on the 18.4 cents-per-gallon federal gasoline tax, to be “paid for” by taking back roughly $6 billion worth of tax breaks currently enjoyed by Big Oil. As a political maneuver, it was brilliant: Mr. Menendez stands up for the little guy by taking money out of the pockets of the greedy, bad oil companies and moving it into the pockets of consumers - what could be better? As a legislative maneuver, however, it was idiotic; as a Constitutional maneuver, it was pathetic; and as a policy maneuver, it was virtually criminal. But that's all right - Mr. Menendez wasn't looking for real action to reduce pump pain, he was merely looking for great headlines. And he got them.

Consider first the actual legislative maneuver: Mr. Menendez introduced the measure on Tuesday afternoon, as an amendment to the Emergency Supplemental Appropriations Act now moving through the Senate. Here's where he ran into his first problem: Senate rules strictly prohibit legislating on appropriations bills, so another Senator immediately rose to offer a Point of Order (which is, in Senate-speak, another way of saying he cried “foul!”). The presiding officer of the Senate promptly ruled Mr. Menendez's amendment out of order. Mr. Menendez then asked for unanimous consent to ignore the Point of Order against his amendment, at which point the other Senator played his part in the unfolding drama, and objected. The presiding officer declared the matter closed and moved on. Total floor time taken: approximately six minutes.

But those six minutes - and the press conference that preceded them - got Mr. Menendez everything he wanted: national exposure for his efforts to stand up for the little guy by whacking greedy Big Oil.

Nothing wrong with that, assuming this was just a case of a member of the minority party being shut down by the majority. It happens all the time. But what if Mr. Menendez's gambit was, in fact, a far more cynical maneuver - a maneuver based on a proposed amendment that had no chance at all of passing, and would actually have hurt the very people it was supposedly intended to help if it HAD become law?

Suppose, for a moment, that the chamber had been empty when Mr. Menendez rose to offer his amendment, and there had been no one there to challenge him by offering a Point of Order. Would that have made a difference? Not at all. Mr. Menendez's amendment changes certain provisions of the tax code (placing a hold on the collection of the federal gasoline tax, while raising certain other taxes on oil companies), and is, therefore, a “revenue measure.” Article I, Section 7 of the Constitution of the United States mandates that all revenue measures must originate in the U.S. House of Representatives. So Mr. Menendez's measure wouldn't have been able to withstand a Constitutional challenge from the House, either - where House Ways and Means Committee Chairman Bill Thomas is known as a fierce defender of his chamber's institutional powers.

Surely Mr. Menendez - who, as we are constantly reminded, served in the Democratic leadership of the U.S. House - knew this.

But suppose Mr. Menendez merely intended to offer the amendment immediately, knowing it would be ruled out of order, just so he could say he followed through as promised - and that his plan all along was to try to attach the amendment to a tax bill coming from the House? That would meet the Constitutional test. Could that be what he was really planning?

Not likely. There are currently two conferences going on over tax legislation. But a Conference Report cannot be amended, so he wouldn't be able to offer his amendment to either Conference Report. Nor would he be able to attach his proposed amendment to either Conference Report while the conferences were still meeting - neither conference would agree to add a measure that hadn't yet been passed by either house.

Perhaps Mr. Menendez was really getting ready to propose his measure as an amendment to some other piece of tax legislation originating in the House? The only other tax bill coming down the pike is a bill to make permanent the repeal of the death tax. That bill has already passed the House, and is awaiting floor action in the Senate. Mr. Menendez could try to attach his measure to that bill, couldn't he?

No. Senate Democrats have made clear their intent to filibuster that tax bill. They don't want repeal of the death tax to become permanent. And the last head count shows they likely have the votes to stop it with a filibuster. Which leaves Mr. Menendez - and any consumers silly enough to rely on his efforts - out of luck.

But suppose again, for a moment, that Mr. Menendez had somehow been able to overcome the Senate Rules problem and had also somehow been able to overcome the Constitutional problem and had also somehow been able to find a tax bill to which he could attach his amendment. After all, that's all just process, and we certainly can't let process stand in the way of doing the People's Business. What, then, would be the impact of his proposed amendment, on the policy level?

Mr. Menendez says it would shift $6 billion from greedy oil companies directly into the hands of consumers, by relieving them of the burden of paying the federal excise tax on gasoline for 60 days. A straight transfer of wealth, from oil companies to consumers, courtesy of the coercive power of your federal government.

But Mr. Menendez is wrong. Again.

How can that be? Simple - believe it or not, the federal excise tax on gasoline is not collected at the pump. It is collected at the terminal rack, when refined gasoline flows from those huge silos through a massive hose into the tanker rigs you see driving up and down the Turnpike all day long. It is not the actual consumer who writes the check to the Federal Treasury, it is the oil company.

So under Mr. Menendez's proposed amendment, the oil companies themselves will be relieved of the burden of paying that gasoline tax. That's $6 billion that gets to stay in their left pocket … which makes up nicely for the $6 billion that's about to be taken out of their right pocket, as the tax hikes (the second half of Mr. Menendez's amendment) go into effect.

(In reality, it's worse: by reducing one tax obligation by $6 billion even as it raises another tax by $6 billion, the government is actually going to collect another $2 billion or so from the oil companies - because by reducing the one obligation by $6 billion, you've just increased the oil companies' pre-tax profits by that same amount, and they will have to pay a tax on that added profit. But since when did raising taxes bother Mr. Menendez?)

But wait. What about the consumer? Isn't this supposed to be a tax holiday for consumers?

Oddly, Mr. Menendez's proposed amendment does not include a requirement that the tax holiday savings be passed on to the consumer. Read that again: Mr. Menendez's proposed amendment does not include a requirement that the tax holiday savings be passed on to the consumer.

As any adult who has read a newspaper in the last week knows, there are a host of variables that determine the price of a gallon of gasoline at the pump. Those variables … well, they vary, and on a regular basis - oft times on a daily basis, sometimes even on an hourly basis. So just because a gas station owner gets a break on his cost of product does not necessarily mean that he will turn around and reduce his pump price by an equivalent amount; he could well decide to hold onto it, in anticipation of further price hikes in the underlying cost of his next shipment of gasoline.

So under Mr. Menendez's proposed amendment - assuming it could pass the Rules test and the Constitutional test and be attached to a tax bill somehow - the net effect would be to raise taxes on oil companies by another $2 billion, while offering nothing whatsoever of value to the consumer.

But wait - there's even MORE! Raising taxes on “oil companies” doesn't actually do anything to the oil company (for once, Mr. Menendez is right - an oil company, because it is nothing but a legal entity, literally has no soul), but it DOES do something to the oil company's owners. It costs them money, by reducing the funds available to pay their dividends.

Who owns the oil companies? Millions of stockholders own oil companies, that's who. In the case of ExxonMobil, for instance, institutional investors (read: pension funds) hold 53 percent of the stock.

So retired teachers, and retired cops, and retired firemen, all of whom draw their retirement checks from pension funds whose monies are invested in oil companies … these are the people who will actually pay the price of Mr. Menendez's proposed wealth transfer.

Let's recap: Mr. Menendez has introduced a measure that has no chance of becoming law, for which we should all be grateful - because if it did, the net effect would be to take money out of the retirement checks of teachers, cops, and firemen, and put it into the pockets of gas station owners … all in the name of motorists, who will be left wondering where the heck their supposed “savings” went. But that's all right, because Mr. Menendez got exactly what he wanted - national exposure for his efforts to “help” the little guy.

One final note: After making his floor speech and offering his amendment, Menendez left the Senate chamber and returned to his office in the Hart Senate Office Building two blocks away. He drove the two blocks in … a Ford Explorer XLT.

“Menendez,” apparently, is Spanish for “chutzpah.”


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