In abandoning the Btu tax, the Clinton administration this week gave up one of the defining elements of its economic plan, an elaborate creation that President Clinton had spent considerable political capital defending as the fairest possible way to tax energy.
After underestimating the opposition the tax would face from manufacturers, farmers and the energy industry, the administration cut deal after deal in an effort to preserve it. The president compromised not only on the substance of his proposal, but also on his stated aversion to the special-interest horse-trading emblematic of politics as usual.
But for each constituency that was placated, it seemed, another was emboldened to demand its own accommodation. In the end, the many concessions the administration made left the tax -- based on an energy source's heat content as measured in British thermal units, or Btu's -- an even easier target for lobbyists, who argued that it had become riddled with loopholes.
Early this week, a lobbyist who had spent weeks arguing that the burden on manufacturers and other businesses should be eased took a fresh line of assault -- saying the tax had so many loopholes that it discriminated against people who didn't have one.
"There's a lot of unfairness ... because those people who couldn't get an exemption are going to have to pay a higher rate," said Jerry J. Jasinowski, president of the National Association of Manufacturers (NAM).
Treasury Secretary Lloyd Bentsen conceded yesterday that "obviously, not enough" was done to counter an aggressive lobbying campaign by business groups.
"They've done a very sophisticated job," he said.
A coalition that included NAM, the American Petroleum Institute, U.S. Chamber of Commerce and farming interests spent more than $2 million on television and newspaper ads and other efforts to mobilize public opposition to the tax and make key lawmakers feel the heat. The campaign targeted oil states such as Oklahoma and Louisiana, the homes of Democratic senators on the tax-writing Senate Finance Committee.
Along the way, the administration misjudged Sen. David L. Boren (D-Okla.), who became an implacable foe of the Btu tax on the Finance Committee.
The administration could not afford to lose a single Democratic vote on the Finance Committee, and when Boren dug in his heels, something had to give. Moynihan and Bentsen talked about going around the Finance Committee, but their prospects before the full Senate appeared no brighter.
"We've now been advised by the Senate leadership that it has no chance in the Senate," Bentsen said yesterday. "We're recognizing that reality."
The Btu tax hasn't vanished completely: Because it is in the House-passed version of the bill, it will be on the table when lawmakers meet to work out the differences between the House and Senate measures.
Tuesday morning, with the proposal plainly in trouble, the administration was offering to exempt manufacturers and base the tax on the cost rather than the heat content of energy, a source involved in the deliberations said.
That idea might have split the alliance of manufacturers and oil companies fighting the Btu tax. However, by late Tuesday, the administration was overtaken by the transportation fuels tax proposal unveiled by Sen. John B. Breaux (D-La.), which gathered momentum in the Senate.
Even before the proposal reached Congress, the administration made a variety of technical changes to help grain alcohol producers, the coal-mining industry and consumers of home heating oil, among others.
Then, in the House Ways and Means Committee, the administration agreed to changes that would help electric utilities, farmers, aluminum producers and petroleum refiners, among others.
In proposing the energy tax, Clinton took the political risk of turning upside down his campaign pledge to cut taxes on the middle class. But to offset the energy tax's impact on poor Americans, he called for large increases in spending on food stamps and the earned income tax credit for the working poor, which cut deeply into the revenue that the tax would generate.
Clinton had been counting on his broad-based energy tax to raise about $70 billion over five years. Among his many tax proposals, it was second in size only to the personal income tax hike.
But Clinton promoted the tax as much more than a way to pay for government programs and reduce the deficit.
He argued it would encourage energy conservation, reduce pollution and lessen U.S. dependence on foreign oil.
Morever, he said it was fairer than any other energy tax because it would distribute the burden evenly, affecting heavy consumers of home heating oil in the Northeast as well as heavy consumers of gasoline in the large and sparsely populated Western states, for example.