Updated 3:50 p.m.
Forty-five Senate Democrats have written a letter to Senate Minority Leader Mitch McConnell (R-Ky.) and House Speaker John Boehner (R-Ohio) arguing that the $56.8 million in cuts to the Commodity Futures Trading Commission proposed under House Republicans’ long-term government funding resolution could lead to higher gas prices.
In the letter, which was spearheaded by Sens. Patty Murray (D-Wash.) and Debbie Stabenow (D-Mich.), the Democrats argue that the cuts to the regulatory agency “will condemn our country to continued reliance on foreign oil and allow market manipulation that could lead to gas prices rising unchecked.”
“At a time where gas prices are rising and squeezing American families, we have a responsibility to provide our watchdogs the resources they need to fulfill their important oversight and regulatory responsibilities,” reads the letter, which is signed by top Democrats including Senate Majority Leader Harry Reid (Nev.), Majority Whip Dick Durbin (Ill.) and Democratic Policy Committee Chairman Charles Schumer (N.Y.).
The Democrats’ letter comes as both parties have been doing battle over rising fuel prices, which now average $3.55 a gallon.
House Republicans have rolled out an “American Energy Initiative” and have used the rising prices to hammer Democrats and the administration over drilling and environmental regulations.
Democrats, meanwhile, have urged President Obama to open the Strategic Petroleum Reserve in an effort to drive down prices and, as in Tuesday’s letter, have used high gas prices to make the case against Republicans’ proposed spending cuts.
The cuts proposed by House Republicans to the CFTC would represent more than one-third of the agency’s current $168 million budget for the rest of the 2011 fiscal year. Obama has requested $308 million for the CFTC in his fiscal year 2012 budget.
CFTC Chairman Gary Gensler testified at a House Appropriations subcommittee hearing last week that the agency’s current funding level is not sufficient given its “expanded mission” following the passage of the Dodd-Frank financial regulatory reform act.
“The President’s budget request asks for $140 million more than our FY 2010 funding level because the 2008 financial crisis was very real, and Congress mandated that regulation be brought to the swaps market,” Gensler said. “An investment in the CFTC is warranted, because, as we saw in 2008, without oversight of the swaps market, billions of taxpayer dollars may be at risk.”
Republicans have argued that the regulations imposed by Dodd-Frank place an excessive burden on business and have sought to roll back the measure through legislation as well as budget cuts.
In his testimony last week, Gensler also touched on the issue of energy prices. “Though the CFTC is not a price-setting agency, rising prices for basic commodities – agricultural and energy – highlight the importance of having effective market oversight that ensures integrity and transparency,” he said.
The House Republican plan was rejected by the Senate earlier this month along with a plan proposed by Senate Democrats; leaders in both chambers are still negotiating the spending cuts as an April 8 deadline looms.
Senate Republicans pointed to a 2008 International Energy Agency report stating that the impact of speculation on fuel prices was limited at best and that “blaming speculation is an easy solution which avoids taking the necessary steps to improve supply-side access and investment or to implement measures to improve energy efficiency.”
Republicans also noted that in testimony before the Senate Banking Committee in summer 2008, Federal Reserve Chairman Ben Bernanke expressed skepticism about the impact of speculation on fuel prices.
“Certainly, investor interest in oil and other commodities has increased substantially of late,” Bernanke said. “However, if financial speculation were pushing oil prices above the levels consistent with the fundamentals of supply and demand, we would expect inventories of crude oil and petroleum products to increase as supply rose and demand fell. But in fact, available data on oil inventories show notable declines over the past year.”
Here is the Democrats’ full letter:
“March 22, 2011
Dear Minority Leader McConnell and Speaker Boehner:
As we work toward a long-term budget compromise to keep the government running through this year, we urge you to abandon the reckless energy proposals in the House-passed Continuing Resolution (H.R 1) that will condemn our country to continued reliance on foreign oil and allow market manipulation that could lead to gas prices rising unchecked.
As you know, H.R. 1 would reduce funding for the Commodity Futures Trading Commission (CFTC) by one-third. The CFTC serves as an important “cop on the beat,” working to protect American consumers by cracking down on manipulation and other market abuses that can drive up oil prices. Yet your spending plan would shrink the CFTC budget back to 2008 levels, when Americans were blindsided by both record high gas prices and a financial crisis that cost us millions of jobs. According to CFTC Chairman Gary Gensler, these cuts would cause “significant curtailment of staff and resources.” At a time where gas prices are rising and squeezing American families, we have a responsibility to provide our watchdogs the resources they need to fulfill their important oversight and regulatory responsibilities.
We find it equally troubling that your preferred budget would cut billions of dollars in investments in critical programs focused on developing new alternative fuels and clean energy technologies, undermining our competitiveness and increasing our trade deficit with oil producing nations. We urge you to reverse these policies that will only set our nation backward, and put America’s independence from foreign oil even further out of reach.
We stand ready to work with you to come to a responsible budget compromise that will not do anything to make our gas price problem worse, or undermine the progress we are making in developing the clean energy technologies we need so we can better compete with countries like China. Together, we can craft a sensible fiscal policy that invests in what we need to grow and cuts what doesn’t, without undermining our mission to transition to a safe, clean and affordable energy future.”