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As C-Note Falls Flat, GOP Looks for Plan B on Gas

By Shailagh Murray and Jim VandeHei
Washington Post Staff Writers
Wednesday, May 3, 2006

Some Republicans thought they were being clever indeed with their plan to respond to soaring gasoline prices by giving most drivers a $100 rebate. At a news conference last week to unveil the idea, Sen. James M. Talent (R-Mo.) declared, "It will show people that Washington gets it."

Many voters, however, concluded that Washington does not get it. Besieged with complaints about political pandering, GOP lawmakers now say the rebate idea is a non-starter. As Sen. Trent Lott (R-Miss.) explained yesterday, "When my own daughter harasses me, you know you're in trouble."

Republicans on Capitol Hill and at the White House are well aware that $3-per-gallon gas spells trouble. But as the fumbling over the rebate showed, they are not at all clear what, if anything, they can or should do about it.

The response so far has been profiles in panic. Some conservatives dropped their philosophical opposition to tax hikes and business regulations and began complaining loudly about oil companies and the auto industry.

President Bush last week announced that he wanted the authority to raise fuel economy standards on automobiles. One aide acknowledged the idea was devised on the fly, with almost no planning or discussion among relevant agencies. This became obvious within hours when White House officials cautioned that Bush had no immediate plan to use the authority even if he had it.

A few days earlier, Bush backed diverting crude oil from the Strategic Petroleum Reserve, an idea he dismissed less than two years earlier as a political stunt.

Republican lawmakers likewise have responded with a mishmash of solutions -- some barely vetted, others with little chance of becoming law.

They proposed an accounting-rule change that would have amounted to a tax increase on any company that maintains an inventory, including oil firms. Then they dropped it after business supporters yelped. House Majority Leader John A. Boehner (R-Ohio) yesterday called the idea "stupid."

Democrats, likewise, have joined in the bazaar of proposals for dealing with high-priced gas. In this case, though, proposals to investigate oil companies or tax their profits are in general more consistent with the party's pro-regulation philosophy.

The new anti-business attitude among Republicans hit such fevered pitch that it prompted the conservative Wall Street Journal opinion page to denounce the party's election-year "desperation" under editorials titled "Congress Gone Wild" and "Denny Pelosi," a swipe that linked conservative House Speaker J. Dennis Hastert (R-Ill.) with liberal House Minority Leader Nancy Pelosi (D-Calif.). Winging it during a crisis is not a new phenomenon. In an election year in particular, political leaders often respond to short-term emergencies with proposals they privately admit have dubious merit.

The calculation is that it is better to appear empathetic and responsive than to lose an election. Gas prices are setting records, and polls show voters are anxious and angry with Bush and Congress.

In truth, there is bipartisan agreement that there is little Washington can do to lower gas prices in the short-term. Tax rebates are expensive and difficult to implement because the money is dedicated to a trust fund for highway repair. The other options may take months, if not years or decades, to affect the price of gasoline, which is largely controlled by supply and demand. Right now, demand is soaring and the supply is not.

But many of the party's staunchest supporters are worried about what ideas politicians may float in search of a plausible-sounding remedy. A group of business trade associations representing scores of Fortune 500 companies wrote Senate Majority Leader Bill Frist (R-Tenn.) to warn him against the tax hike. "We will continue to build this coalition to ensure that the very serious ramifications" of the bill are widely known, said the letter circulated by the National Association of Wholesaler-Distributors, which is run by Bush fundraiser Dirk Van Dongen.

All sorts of Republican energy-related proposals are circulating around on Capitol Hill. In the Senate, the list includes price-gouging protections, new tax breaks for hybrid vehicles and to expand refinery capacity, research dollars for alternative fuels, and oil drilling in Alaska's Arctic National Wildlife Refuge, a highly controversial proposal that environmentalists have succeeded in blocking for years.

The House today will consider anti-price-gouging and refinery capacity measures, although neither is particularly controversial. Another House bill in the works would provide incentives for specialty fuels.

The gas-tax rebate was as close to a slapdash effort as legislative proposals get. Numerous GOP senators said they had no idea it was being considered before Frist announced it at last week's news conference.

"They just said, come quick to a press conference," according to Lott.

Senate Energy and Natural Resources Committee Chairman Pete V. Domenici (R-N.M.) conceded that "it just showed up" and said he was not crazy about the idea. He wants Congress to encourage the development of renewable fuels and hybrid vehicles.

The rebate proposal began percolating last month, as prices at the pump topped $3 per gallon and the idea of a federal gas tax holiday starting gaining momentum with Republicans. Their policy aides pointed out that the tax was collected by refineries and that Congress could not guarantee that the savings from the holiday would be passed on to consumers. GOP staffers on the Senate Finance Committee, which writes tax legislation, told Republican lawmakers that if they wanted to make sure consumers reaped the benefit, a rebate was the way to go.

The $100 sum is the equivalent of a nine-month federal gas tax holiday -- far more generous than the two-month break some Democrats were proposing, as Republicans who still support the idea like to point out. "So what we're talking about here is a substantially bigger benefit to the average consumer," said Sen. Rick Santorum (Pa.), considered one of the most vulnerable Republicans in the upcoming midterm election.

But Republicans are sorely divided.

Boehner called proposed new business taxes to pay for the rebate an "insulting" trade-off. He was no more impressed by Bush's suggestion of higher mileage standards. "The American car manufacturers and other manufacturers are producing cars that Americans want," Boehner said. "These high gas prices will lead consumers to probably better decisions. The market can handle this much better than some kind of government regulation."

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