Prices and Production.  The production message is strong.  Almost three-quarters of respondents (77%) said yes when asked whether increasing U.S. production could help moderate gasoline prices.  That attitude is not de minimis either; 4 in 5 said that such an increase in production could help either “some” (32%) or “quite a lot” (57%).  Even 52% of moderates and 38% of liberals think that additional production of oil would help moderate gas prices ‘quite a lot’.  Additionally, 83% of total respondents agreed that increased U.S. production would reduce our dependence on imported oil.

As a corollary to those attitudes, respondents think that the federal government can do more.  When asked (on a scale of one to ten, with ten being “quite a lot”) how much the federal government could do to affect the price of gasoline, the mean response was 6.5 (and the median response was 7).  Ominously for the Administration, when asked what the President was actually doing, the mean response was 3.6 (and the median was just 3).  That means that voters perceive a fairly significant gap between what can be done and what is being done.

The core of the issue remains cost and imports.  While there was some traction to the thought that we use too much oil (16% identified it as the biggest problem associated with oil) and the need to reduce consumption, the principal problems identified with oil use is that we import too much (49%) or that it is too expensive (20%).  In short, imports and cost are the most important features of the landscape.

When asked about the best way to reduce reliance on imported oil from unstable nations, 46% said increasing domestic production, and 16% said importing more oil from friendly nations like Canada.  Just 23% identified the Administration’s preferred option of increasing the fuel efficiency of cars and trucks, and only 2% wanted to increase taxes on gasoline.

In short, respondents are generally favorable to the idea that additional production can have a meaningful effect on the price of gasoline.  When coupled with extant sentiments about the lack of wisdom of importing energy, and the very strong preference to employ Americans in the United States (rather than whoever in the Persian Gulf), this can form the core of a powerful message.

One cautionary note is probably in order.  It may be important to be aware that voters are not completely sold that production is the entire answer (although they do think it is most of the answer).  They want to hear about renewable energy; they want to hear about efficiency.  But ultimately, they know that renewables are not going to be ready for quite some time, and their willingness to pay to reduce the economy’s dependence on fossil fuels is comically low (median response = $1).

There are three final points that are probably worth thinking about with respect to prices and production.

First, the very strong temptation in some quarters is to blame the President entirely for high gas prices.  That may be an arguable case, but it will be a challenge contextually.  Just slightly more than a quarter of respondents (27%) in the survey identified government policies as responsible for the price increases.  That sentiment tends to conform to the focus group research.  Participants there noted the President was not solely (or even mostly) responsible, but they also noted he has not done much to alleviate the problem.  Respondents in the survey took a similar tack, rejecting the Obama Administration’s approach that emphasizes making the economy less dependent on fossil fuels versus increased production.  In that hard test, more than half (51%) preferred increased American production, while 38% said that the right answer was to reduce our overall dependence on fossil fuels.  Perhaps more tellingly, when asked how much they would be willing to pay each year to make the economy less dependent on fossil fuels, the average response was 429 dollars; however, the median response was 1 dollar.

In short, and shorn away from all the rhetoric about weaning us from fossil fuels and the imperative of renewable energy, the President’s preferred approach is a dud.

All of that leads us to conclude that the better approach is to note that the federal government could be doing more and is not.  People clearly believe that more production is part of the answer, and they seem to understand that the President is not particularly helpful in this regard.

Asking the Saudis or the Brazilians or the SPR or whoever for more production probably hurts enormously, as it confirms both parts of the hypothesis – more production would help, and the President is not that interested in American production.  Not surprisingly, given a choice between more American production and asking the Saudis for more production, 87% indicated that they would prefer more American production.  Similarly, respondents believe that more production from U.S. lands will both help moderate price increases (77%) and reduce our dependence on imported oil (83%).    Finally, positive sentiments about production (overlayed with concerns about trading partners) are why Keystone is a winner.  The survey confirms that; 79% favor construction of the pipeline and 86% would rather import oil from Canada than from OPEC.

Second, and on a related note, respondents are clear that the President is not as committed to traditional fuels as he is to alternative fuels.  Almost two thirds (64%) agreed that the President would rather focus on alternative energy instead of oil and gas.  It appears that the President has been branded as an alternative energy fan; that means that his efforts to seem to be in favor of more oil and gas production ring hollow (which is probably why respondents rate his efforts so low).  In a way, he is the ying to President Bush’s yang.  President Bush was an oil and gas fan trying to sell renewable energy.  No one accepted that notion, either.  The campaign might want to emphasize that the current President is already fully committed to alternative energy, especially since it tends to get lost in the media coverage of energy issues.

Third, despite the fact that Speaker Gingrich is essentially out of the Presidential race, it might make him happy to note that most (62%) respondents believe that, with the right energy policy, gasoline would cost $2.50 per gallon.  Apart from any other consideration, this response set indicates just how big the difference is between what voters think the federal government can do, and what it has been doing.

Even liberals agree (46% to 44%) with the proposition.  In fact, no demographic or ideological groups disagree with it, which should give some sense of how voters think about the reach of federal policy and the current deficiencies in those policies.  One could argue that the difference between voter expectations and voter sentiments with respect to gasoline policy is the difference between the current average price of gasoline (around $3.85) and the $2.50 per gallon they think is possible.

The economy remains the primary issue; 61% identified it as either the first or second most important issue facing the United States (the second largest response was “jobs” at 29%).  This leads to a thought that is tangential but important.  Candidates, especially Republican candidates, at all levels have been inclined to discuss debt and deficit issues.  There is no doubt that debt and deficit issues are important (19% of respondents indicated that the issue is either the first or second most important issue facing the United States).  At the same time, more than three times as many respondents indicated that the economy was more pressing.

Those who believe that economic growth is essential, that it is imperative, that it is good might want to think about explicitly addressing the importance of economic growth.  It sounds obvious, but if you think about the conversation of the campaigns, you will see that in many instances the need for economic growth remains without an advocate.

The lame duck will be characterized by a intense burst of activity directed at expiring tax rates, automatic budget cuts, the debt ceiling, the payroll tax cut extension, and, possibly, (depending on the vagaries of the Supreme Court) health care. Consequently, it might be helpful to offer some context on each of these puzzle pieces. I apologize in advance for the generous use of numbers; it is unavoidable.

Tax rates. As you probably know, on December 31st our current rates revert to those in effect in 2001. Apart from rate increases (the new top rate would be 39.6%), the AMT fix also expires, and the tax rate on dividends would increase from 20% to 39.6%. In addition, it might be useful to remember that, starting in 2014, dividend rates for the rich (those couples with adjusted gross of $250,000 or more) are also going to be subject to a 3.8% surcharge (not a tax, if you please!) included in the Affordable Care Act.

On a macro level, estimates of how much it would cost to keep the current rates in effect range from 3.3 trillion to 3.7 trillion dollars over 10 years. Perhaps more importantly, there is fairly widespread agreement that about two-thirds of those benefits accrue to the un-rich (those households with adjusted gross of less than $250,000 per year). As a practical matter, that means that if the current rates are allowed to expire, the President could be accused of breaking his promise not to increase taxes on those making less than $250,000 per year. On the other hand, to protect those households from increases in both nominal and effective tax rates would probably cost north of 2 trillion dollars within the budget window. Consequently, it seems likely that the President (if reelected) will try to keep the current rates for the un-rich while allowing the rates to expire for the rich. That will provide him with somewhere between 1.1 and 1.3 trillion dollars in the budget window (for things like deficit reduction or tax reform), while also keeping an important campaign pledge.

Unfortunately for those who care about dividend rates, the math is almost precisely reversed. Best estimates suggest that two-thirds of all the tax advantages of lower dividend rates are realized by taxpayers with more than $250,000 in annual income. It seems very likely that rates for dividends for upper income taxpayers are ultimately going to be equal to rates for regular income (for our purposes, 39.6%).

I would also note that the payroll tax cuts, unemployment insurance, and perhaps even the reimbursement fix for physicians for Medicare patients will also need to be addressed in the lame duck session, as the current extensions for these expire at the end of the year. All in, these extensions cost the Treasury about 20 billion dollars a month, or about 2.4 trillion dollars in the budget window.

Debt ceiling. Depending on which set of estimates you believe, the federal government will reach its statutory debt ceiling (now set at $16.4 trillion) somewhere between September 2012 and February 2013. Consequently, it is impossible to imagine that an increase in the debt ceiling will not be on the agenda during the lame duck session.

You may remember that the previous debt ceiling increase initiated negotiations in which it was agreed that some budget modifications would be made immediately and others would occur either as result of the effort of the Joint Select Committee on Deficit Reduction or, in the event of their failure, as a result of an automatic set of cuts to begin in January 2013.

Automatic sequestration. As part of the previous debt ceiling increase, Congress agreed that in the event of the failure of the Joint Select Committee on Deficit Reduction, automatic cuts to spending (totaling 1.2 trillion over the ten year budget window, split roughly 50-50 between defense and domestic discretionary spending) would be imposed beginning in January 2013. I don’t think I am breaking any new ground here when I note that almost every Member of Congress would like to undo, forestall, or prevent those automatic cuts from taking place. The lame duck session is their last chance.

Health care. Given the oral arguments in the Supreme Court on the Affordable Care Act, it seems very likely that the court is going to invalidate some or all of the law. If they do so, it is difficult to imagine that the President will not attempt to include fixes to the law (if possible) in the deals that will happen during the lame duck. Though unlikely to succeed, such efforts will complicate and retard other efforts to reach accommodations on debt, deficit, and tax issues.

Thoughts. Predicting what will be discussed during lame duck is fairly straightforward. Unfortunately, it is slightly more challenging to predict what will happen in the lame duck session for three reasons. First, it is impossible to guess whether there will be some contextual event (war in the Middle East? collapse of the Euro?) which will send the ball bouncing off in a completely different direction. Second, the compression of time in the lame duck places a premium on prior preparation. Unfortunately, it is difficult to predict which set of advocates will do the best job of preparing between now and then. Third, what happens during the lame duck is very dependent on what happens during the election.

Let’s think about three scenarios. For each one, let’s assume that the Republicans retain the House (by far the most likely outcome in this election cycle).

First, the President loses. In that event, you have to think that the lame duck session will be very unproductive, at least in part because the President will have no incentive to help solve what will be (at that point) the Republicans’ problem. It is very unlikely that any deal of any sort will be reached, and the new Republican President will be greeted with the entire set of debt, deficit, and tax challenges.

Second, the President wins and the Democrats retain control of the Senate. In that event, it seems likely that a lame duck would be very productive, in part because the President would view the election results as unalloyed ratification of his policies, and in part because the Republicans in the House would be less resistant to making deals prior to the start of the next Congress. The tax rates would be allowed to expire for upper income taxpayers, dividends would be taxed as ordinary income, some sort of debt ceiling deal would be struck (made easier by the expiration of the tax rates), and the automatic cuts would be avoided.

The third scenario is that the President is elected and the Republicans gain the majority in the Senate. In this instance, the lame duck will be viewed by the Obama Administration as the last, best chance to secure their agenda. The next cycle is not likely to be more advantageous to the Administration; the election in the sixth year of a two-term President is traditionally the worst of any cycle for the incumbent’s party.

In this scenario, the lame duck session will almost certainly be more contentious, which means that it will be less productive and will ultimately focus only on those things that are absolutely necessary – namely, the statutory increase in the debt ceiling. That deal will probably increase some taxes (resulting from the expiration of the current rates), extend (again) the payroll tax cut, and postpone the automatic spending cuts. The crystal ball is a little murky on how the automatic cuts get addressed, but you have to think that reduced spending further out in the ten-year budget window will wind up being the right answer.

The President (and the still Democrat Senate) will ensure that the tax rates expire, at least for those in the upper income brackets. Dividends will be taxed as ordinary income, and, unless the Supreme Court strikes the entire Affordable Care Act, the surcharge will remain in place. In short, if the President wins, it is difficult to imagine the tax rates remaining the same into the New Year, and it is equally difficult to imagine that the automatic spending cuts will occur.

One final thought is probably worth noting. Given the sensitivity of the lame duck outcomes to the election results, the quantity and quality of lobbying on any particular issue, while important, is not likely to be dispositive. As noted above, advocates can (and should) help frame the issues, but in a larger sense the issues are likely to be driven by both the economic and budget realities and political preferences of the electoral victors.

The point of contention is whether the elimination of a tax subsidy is tantamount to a tax increase.  This is the continuation of a conversation that was started last month when Republican leadership, in an effort to win an argument, offered the thought that reducing certain oil and gas tax advantages were the same as tax increases.

But are they really?

The simple reality is that subsidies, whether administered through the tax code or through spending programs, are wrong.  They are wrong because they are instances of theft typically perpetrated by a very small group of taxpayers on all taxpayers.  They are also corrosive because they migrate economic and other decisions from individuals to governments.

Pretty much everyone on the right side of the political spectrum agrees with this characterization.  However, there are some who believe that while tax subsidies should not be created because they are morally bad and inherently corrosive, those that are already in place can only be eliminated in those instances when the revenues in question are essentially rebated to all taxpayers.

These people know full well that such an approach is very nearly impossible (which is why it has not happened in living memory).  In short, they are prepared to acknowledge that subsidies are theft.  But they are perfectly comfortable in insisting that efforts to correct this moral bad have to be arranged in such a way as to ensure that they cannot be done.

For me, at least, the irreducible minimum is that the creation of these subsidies is itself a violation of the just order.  In each instance, a small, well-organized group carves a subsidy out of the body politic.  Repeal of such things, apart from any other consideration, results in a restoration of the original and intended order, and is therefore a desirable end irrespective of who gets what.

But let’s think about the specific instance.  Today’s disagreement involves ethanol.  There is no argument that the subsidy (totaling about $6 billion per year) is ridiculous and indefensible.  What is in question is whether the Senate should couple the elimination of the tax subsidy with an attendant and comparable decrease in the tax burden for all taxpayers.

Two thoughts occur.  First, the scale and scope are completely mismatched.  In a budget of 3.5 trillion dollars, 6 billion is less than one-fifth of one percent.  It is a rounding error.  If the Senate wants to true-up this rounding error at some point in the future, it should feel free.  But why waste the time and effort now.  In short, call me when the numbers climb above 1 percent (in total or in any specific moment).

Second, in a budget that is $1.4 trillion in deficit, it is probably important to remember that we are all thieves.  We are stealing from our children.  Viewed in this light, it seems comical to suggest that somehow we are “due” this measly, meaningless 6 billion dollars.

Finally, I am sensitive to the notion that federal government employees (like Congressmen) tend to spend whatever money they have available.  The answer is to work more diligently to make them responsible.  We have tried the Reagan idea of starving the beast.  It has failed.  The Democrats have discovered that they, too, can spend money they don’t have.  The idea that the current legislative crew is constrained by what they have or don’t have  is clearly contradicted by close to 40 years of experience.

The bottom line?  Intentionally or not, a rigid insistence on real-time, one-for-one offsets of tax subsidies (while ignoring subsidies on the spending side of the ledger), leads us to where we are — a place where it is difficult to get rid of a tax subsidy that everyone agrees is a disaster because they fear retribution from our version of Talmudic scholars.

To my mind, that singular comment sums up everything that is wrong and dangerous with the thinking of Republicans about the relationship between them and big business in general, and, more specifically, the thinking of Republicans with respect to the question of taxes and subsidies.

For some years now, I have labored under the idea that the right side of the political spectrum in this Nation is about smaller government, more personal autonomy, less federal interference in what Tom Wolfe called the “macaroni of life.” But it has become clear to me that some on the right have a fetish with business.  They are fully prepared to defend businesses, irrespective of whether the businesses in question even support the nominal policies of the Republican Party.

Take the oil and gas industry.  More than half supported cap and trade last Congress; the National Petrochemical Refiners Association  went so far as to construct a gasoline tax.  Even the most routinely reactionary company (Humble Refining) favors a gasoline tax to address global warming.  Even now, Boone Pickens wants another 9 billion dollars to spend on natural gas vehicles (which, coincidentally, will help him add more billions to his personal wealth).

Does it surprise anyone that more than 100 Republicans have already signed onto the Pickens boondoggle?  It shouldn’t.  The Republicans are in the grip of an unrequited love with big business in general and the oil and gas industry.  This crush undermines the core message of the right, and damages its ability to speak coherently across a wide range of topics.  If you doubt this, watch the debate on the debt ceiling and the deficit.  The business community is already working to undermine Republican and Tea Party efforts to use the debt ceiling increase to leverage reductions.  Similarly, they are working to undermine Republican and Tea Party efforts to reduce subsidies.

So if the mortgage interest deduction, which is the most widely available deduction, is a subsidy, then surely the oil and gas tax advantages – however meritorious – are also subsidies.

In short, we have arrived at the inflection point in the debate.  There are only three possible arguments to make.  All subsidies are legitimate.  None are legitimate.  The legitimacy of a subsidy can only be determined by the political strength of its advocates.  Given both our fiscal situation and our longstanding commitment to smaller government, only the second of these is supportable.

Yet, inexplicably, some have chosen to select the third argument.  Our subsidies are good; yours are suspect.  Worse yet, some have argued that opposing our subsidies would raise the price of gasoline, thereby presenting the features of a tax.  That is a particularly wrong and dangerous line of rhetoric.  First, whether as consumers or taxpayers, the public is already paying what the increased cost of gasoline would be – most of it directly to the oil companies and then a tiny fraction (2 cents a gallon?) to the federal government.  What conceivable difference would it make if the consumers pay all of it to the oil companies directly?

Second, and potentially much more damaging, this line of thought and language leads us into a situation in which we will not be able to reduce any subsidy under almost any circumstances.  Surely, that cannot be the desired result.

Perhaps everyone would be better served if the conversation pivoted to the wisdom of all other subsidies.  The bottom line is this:  all subsidies are either good or bad; they either distort investment and spending or they don’t; they either corrupt the political process or they don’t.  I think they are all bad.

This is too easy. As we have noted here and elsewhere, “all of the above” is not a coherent policy; it is a note passed to a teller during a bank robbery. I thank Speaker Gingrich for making my point so concisely, and for placing in stark relief the intellectual bankruptcy of the policy.

One other thing. It sickens me that he is being given time to speak at tomorrow’s Catholic Prayer Breakfast. If three wives do not disqualify you from communion with the Church of Rome, what, conceivably, could be the point of any of its rules?

Of course, we do not have to imagine any of this, because it all happened.  Joe Miller was the Republican nominee in the State of Alaska for the United States Senate election held in 2010.  Lisa Murkowski was an independent candidate in that same election.  We even know how the Republican caucus in the Senate treated Senator Murkowski:  they welcomed her as one of their own with open arms.  They reestablished her seniority on the Energy and Natural Resources Committee and offered her the Ranking spot on an appropriations subcommittee.

All of that may seem well and good and proper.  I would note without reservation that Senator Murkowski is both well-qualified to execute those jobs, and is, without question, a solid member of the vast right-wing conspiracy.  But what about the precedent such treatment sets?  Do the Republican Senators fully comprehend what they have done?

By treating a candidate who has lost a Republican nominating contest and subsequently won the general election as an independent (thereby, obviously, causing the defeat of the Republican nominee) as a member in good standing of the Party, the Senators have undermined the value of a Republican nomination.  It is difficult to see what would keep another candidate who loses a Republican nominating contest from mounting an independent campaign and claiming to be the legitimate Republican in the race.  What will the Senators say then?

While this may seem a small matter today, it is easy to imagine a future nominating contest in which a tea party candidate loses, refuses to accept that decision, runs as an independent (claiming to be the “legitimate Republican”) and wins.  What will the Republican caucus in the Senate do then?  Having already devalued the Republican brand and set the precedent that a Republican nomination is not worth much when dividing up posts in the Senate, how will they resist such an independent’s claims?  They will, of course, not be able to.  In turn, that will serve to reduce the value of the nomination that each and every one of them will seek (at great expense) during their next reelection.

By treating Senator Murkowski as the Republican candidate from Alaska (which she was not), they have announced their indifference to those who challenge the Party’s decisions as encoded in the nomination process.  How will they be able to argue for the enforcement of party discipline in the future?

As part of the budget roll-out, the Administration promised us that it would cut $1.1 trillion from projected spending over those same 10 years.  That works out to about $100 billion a year, or roughly the same amount the Republicans want to cut from the remaining seven months of this year’s budget.  In other words, the Republicans, in office for less than two months, are fully prepared to almost double what the Administration proposes to cut on an annual basis.  Please keep in mind that the Administration’s proposed budget cuts are from a baseline of spending that they themselves created.

There are only two possible ways to view the Administration’s budget.  It is either woefully and intentionally inadequate.  Or, it is specifically designed to bring about financial collapse.  Either way, it is a clear signal to Republicans and others in Congress that the Administration is profoundly and systemically unconcerned with the Nation’s finances in general, and the debt in particular.

Many Members of Congress are unsure what the appropriate course of action is with respect to the debt ceiling increase that will shortly be upon us.  The Administration’s budget, with its intentional addition of more debt, with its unwillingness to even nod to financial realities, and with its stubborn insistence on conducting business as usual, answers that question.

It is now clear that the crisis is coming.  The only question is when and under what circumstances.  Congress should begin to fix this problem here and now, before it gets any worse.  Congress must vote against increasing the debt ceiling.

The Republicans should instead meet the President’s call for an end to some energy subsidies with their own call for an end to all energy subsidies.  The 80 billion dollars or so that the taxpayers have spent on renewable energy subsidies in the last three years is a big, ripe target for the cutting floor.  Tax credits for ethanol, grants equivalent to 30% of the project value for wind and solar projects, loan guarantees for alternative energy and tranmission projects, and similar subsidies would be excellent chips for the Republicans to throw into the pot as they call and raise the President.

Such an approach would allow the Republicans to shed the unfortunate and ultimately counterproductive rhetorical device of “all of the above”, and focus on something more useful and intellectually coherent like, “a level playing field”.  More importantly, it will help voters focus on the meaningful elements of energy — affordability, reliability, security of supply — rather than the steady stream of propaganda that surrounds alternative energy.  Finally, it will help the Republicans gain credibility on their core issue of spending discipline.