Obama's (Unintentionally?) Brilliant Strategy on Cap-and-Trade

We've been focusing so much on health care (and Iran) that we haven't written very much about climate change. And yet, after making concessions to farm state Democrats, the House is prepared to vote on the Waxman-Markey cap-and-trade bill on Friday. Ezra Klein wonders where exactly the President is in all of this. Climate change, obviously, was a key piece of Obama's agenda. But why is the House about to vote on this bill now, when Obama is more focused on health care?

First of all, we don't necessarily know that this is Obama's doing. It's the House's job to -- well, to vote on stuff. It's the Senate, where bills are much easier to block through a variety of tactics ranging from filibusters to holds to plain old stalling, that is more inclined to play traffic cop and where the President probably has more influence on the timing process.

But if this is a deliberate strategy on the White House's behalf, I think it's a pretty smart one. The reasoning is as follows:

1. No climate bill will pass the Senate which has not passed the House. In contrast to health care, where using the reconciliation process remains a possibility (meaning that a vote could not be filibustered and only 50 votes would be required for passage), the Senate has already banned use of the reconciliation process on climate. There's pretty much no way that a climate bill could get 60 votes in the Senate but fail to garner a majority in the House.

2. The House vote will provide a benchmark. The prospects for passage of a climate in the Senate can probably be reasonably be inferred by exactly what happens in the House. Specifically, Democrats will get to see how many Blue Dogs vote for the bill and how many Republicans do. If the bill gets the support of, say, all but a dozen Blue Dogs as well as handful of moderate Republicans, you can envision a route toward passage in the Senate. If it passes by a bare majority in the House, on the other hand, it is unlikely to overcome a Senate filibuster. And if it the bill entirely fails to pass, it's back to the drawing board and the Democrats will know they'll have to make more compromises.

3. Support for a cap-and-trade bill is probably relatively dependent on cyclical factors. By cyclical factors I mean three things: gas prices, the overall state of the economy, and Presidential approval. Polling generally indicates that support for curbing carbon emissions rises along with gas prices, as well as the overall health of the economy. And as Ezra suggests, because public opinion on climate change is relatively poorly formed, it may also depend heavily on the amount of political capital that the President is willing and able to expend.

Right now, Presidential approval is fairly high, and gas prices are also fairly high, having increased significantly since bottoming out in January:



(If this chart looks a little funky, it's because I'm using yearly data from 1976-1990, and then weekly data from 1991 onward).

On the other hand, the economy remains in really bad shape. If we had to rate these three factors on a scale of 0 to 10, where 10 represents the most favorable conditions for a climate bill and 0 the least favorable, we'd probably rate Presidential approval at about a 7, gas prices at about a 6.5, and the economy at about a 1.5. That averages out to a 5, meaning that this is a fairly average time to be pushing a climate bill. In February, by contrast, we might have rated Presidential approval at an 8, the economy at a 1, and gas prices at a 4, which averages to a 4.3. That probably would have been a slightly worse time, on balance, to push a climate bill forward.

4. Democrats get to pick their moment in the Senate. Just because a climate bill is approved by the House does not mean that the Democrats have to push it through the Senate immediately. The Democrats could wait on floor action until essentially any point until November 2010. This is one of the advantages of controlling the chamber.

I hope you see where I'm going this: the four factors above are very powerful when taken in combination. Say that Waxman-Markey passes the House, but only barely. That means the Democrats can wait for a better moment in the Senate -- gamble on the prospect that the economy is going to improve, which would probably improve Obama's approval ratings with it. So long as gas remained somewhere in the range of $2.50 or higher, a climate bill would probably have a much better chance of picking up votes from your Evan Bayhs and Susan Collinses and Mel Martinezes than it does now. On the other hand, if the Waxman bill passes the House by a 40-vote margin, the Administration could begin to think more seriously about pushing it forward now, and not risk something like a deterioration in its approval ratings.

In finance terms, there is a lot of option value created for the Democrats by having the House vote on the bill now. The reasons that Obama may not be exerting political capital are twofold. Firstly, it may be many months before Senate action follows. And secondly, seeing what the House does on its own merits may provide for a better benchmark: you don't want to take your temperature after you've just taken aspirin.