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Thursday, May 7, 2009

Cap and Trade on the Ropes?

It's not being reported much but the first major initiative for President Obama, cap and trade, is in deep trouble. One of the reasons that this story is underreported is that much of the dynamic is total inside baseball politics. Right now, cap and trade is having trouble finding enough votes not merely out of the Congress, not even out of committee, but out of sub committee.

First, as has become his modus operandi, President Obama ceded the nuts and bolts of writing the bill to members of the House. In this case, the two major architects of the president's cap and trade are Henry Waxman and Ed Markey. Both Markey and Waxman are liberal stalwarts of the Democratic party. As such, the writing of cap and trade already has problems attracting moderates and certainly conservatives.

The major problem with cap and trade is not necessarily ideological but rather economic, demographic and economic. Most of the Democratic legislators against cap and trade are against it because they are from states which have energy sources that would be hurt by cap and trade. States like Ohio, Michigan, Pennsylvania, etc. have robust industries that would be adversely affected by cap and trade. As such, legislators from those states are against cap and trade.

The second sub narrative in the cap and trade story is the emergence of strength of both the New Democrats and the Blue Dogs. I predicted before the term that the Blue Dogs would eventually flex their political muscle and they have on cap and trade. The Blue Dogs are conservative and Democrats and they have on cap and trade. Much of both coalitions, the New Democrats and the Blue Dogs (often members of both are members of both)

The third sub narrative is the power struggle within the power structure of the Democratic party. The Hill has the story.

Democratic centrists are pressing House Speaker Nancy Pelosi to set aside a flagging climate change bill to focus on what they think is a more achievable goal: overhauling the nation’s healthcare system.

But those close to Pelosi (D-Calif.) say she is charging forward on cap-and-trade legislation, despite the potential defections of Democrats who represent states with industries that would be adversely affected by the bill.

...

The views of the two Ways and Means Southerners square with those of Rep. Chris Van Hollen (Md.), the House Democratic campaign chief charged with protecting vulnerable members in conservative districts. In an exchange in a leadership meeting last week confirmed by aides and participants, House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) criticized Van Hollen for disparaging the chances of cap-and-trade. Van Hollen said he felt that healthcare reform should be done first.

So, while Democrat heavy weights like Chris Van Hollen, Henry Waxmen, and Nancy Pelosi battle it out for power, the fate of cap and trade lies in the balance.

Beyond this, the agenda of President Obama is also in flux. Most of the same folks strenuously objecting to cap and trade say that health care reform has a much better chance of passing. Yet, so far at least, the president is determined to pass cap and trade before moving onto health care reform.

Furthermore, while health care "reform" may in fact be popular, what that reform is remains to be determined. While in my opinion, cap and trade is misguided, it's also a fairly simple piece of legislation. Health care reform is not simple. It will be very complicated and messy.

On top of this, if President Obama cedes crafting health care reform to liberal stalwarts like Ted Kennedy, you can bet that moderates will object. Trying to manage the competing interests of ideology, demographics, and economics for health care reform will make cap and trade seem basic math. Furthermore, if the president isn't able to maneuver the passage of cap and trade, it will give competing interests that much more power to extract more concessions on health care in order to get their vote.

As for cap and trade, the divisions are largely irreconcilable. With total control, this is an issue that Democrats can't blame on Republicans. Most of those against it see cap and trade as hurting economic interest of their constituency. As such, the only way to appease these legislators is to waive their particular piece of energy from cap and trade. In other words, anyone from a coal producing region will want coal waived from cap and trade. Of course, such a watered down bill would not really be cap and trade, and Republicans would easily deride it. Furthermore, such waivers would inherently confirm that cap and trade is economically adverse.

Keep an eye on the travails of cap and trade. The real job of governing by President Obama starts now and passage of cap and trade is a real sign of his political influence.

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