Non-Government by Veto

The continuing Washington stalemate over energy policy resembles nothing quite so much as a soap opera: at the end of each episode, events swirl toward a grand denouement only to emerge in the next episode as tangled as ever, with nothing really resolved. Last week, after battling through their third showdown in two months over petroleum prices, the White House and Congress found themselves still caught in a deadlock that raises serious questions about how far and how fast oil prices will be allowed to rise, how the U.S. will reduce its dependence on foreign oil, if it does so at all, and whether the two branches of Government can ever resolve their differences about how to manage the economy.

Legally Free. The latest round began as President Ford made good on his promise to veto a bill extending for six months the oil price controls that have been in effect since 1973. In response, Senate Democrats, led by presidential hopeful Henry Jackson, provoked a test of strength by scheduling an attempt to override Ford's veto. All 100 Senators showed up to vote, but the Democrats, joined by a few Republican defectors, fell six votes short of the two-thirds necessary to reverse the veto. Result: oil companies are legally free to charge any prices they think the market can stand--as, indeed, they have been since Sept. 1, when the old law expired. However, they dare not do so until they see whether the President and Congress will be able to negotiate a compromise.

Last week's episode dramatically demonstrated the political standoff that has left the U.S. without any coherent energy policy. Lacking the votes to get his own programs passed, Ford can only attempt to bludgeon the Democrats into considering them by vetoing their party's legislation--not only on energy but also on other matters. The Democrats, despite their huge majorities, usually cannot muster the strength to override (an exception: both houses last week voted to enact a $7.9 billion aid-to-education bill, overcoming a presidential no). "This has become a Government by veto," lamented Rhode Island Democrat John O. Pastore after the Senate's oil vote. "We've got the minority dragging the majority around by the nose."

Not quite. The situation might more properly be termed non-Government by veto. Ford has still not won over many Democrats to his approach of letting prices of U.S.-produced oil rise gradually as a means of stimulating exploration and production and forcing consumers and industry to burn less petroleum. The President's latest plan--to lift the controls over a period of 39 months, with the major impact coming after the November 1976 elections--was voted down in July. Many Democrats have deep ideological objections to price rises that fatten oil-company profits. At the same time, the Democrats have no agreed strategy for forcing energy conservation and curtailing imports. Alternative ideas --rationing, import quotas, stiff taxes on energy usage--cannot survive even a congressional vote, let alone a veto.

Thus the two sides must start almost from scratch to work out some sort of policy. While vetoing the six-month extension of controls, Ford last week renewed his pledge to sign a 45-day extension, provided that within this period the Democrats would agree to negotiate a compromise bill, which presumably would include gradual decontrol. The House quickly passed an extension to Oct. 31, but some Democratic Senators began arguing that they really needed 60 days after the enactment of an extension--as if an extra few days would make much difference.

If a quick bipartisan accord cannot be reached, the oil companies may conclude that they will remain free of controls. Then the price of the two-thirds of U.S.-produced oil, which has been held at $5.25 per bbl., could begin to shoot up toward the $12.50 per bbl. now generally charged for uncontrolled "new" oil, which accounts for one-third of domestic output. As might be expected, the Republican Administration and congressional Democrats disagree about the inflationary impact of such an abrupt decontrol. The Congressional Budget Office last week darkly predicted that during the next 27 months sudden decontrol would by itself push consumer prices up 1.8% and, by draining away consumer purchasing power, make the unemployment rate 0.6% higher than it would otherwise be. The Federal Energy Administration insists that the effects would be far more modest. Whatever the actual figures, no one wants to risk the inflationary impact of instant decontrol. Even Ford recognizes the political danger of a sudden decontrol that might send the price of gasoline up 7-c- per gal. by early next year. Nonetheless, sudden decontrol will happen unless the White House and Congress can reach, in the next 45 or 60 days, the accommodation that has eluded them for more than eight months.

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