JUDY WOODRUFF: The presidential candidates clashed over energy policy today, and we get the views of both campaigns.
First, former U.S. Energy Secretary Federico Pena, he serves as Barack Obama’s national campaign co-chair, and he joins us now from Denver.
Mr. Secretary, good to see you again.
FEDERICO PENA, Obama Campaign’s National Co-Chair: Thank you, Judy.
JUDY WOODRUFF: First of all, does Senator Obama believe that there is a short-term fix for high gasoline prices?
FEDERICO PENA: There are no short-term fixes. There are short-term efforts we can take to begin to reduce world crude oil prices. But the real solution is to understand we cannot drill our way out of this problem, but to begin to invest in alternative fuels and to gradually get us off the use of oil. That’s the long-term strategy.
JUDY WOODRUFF: If he doesn’t believe that the country can drill its way out of the problem, why did he change his position in the last few days and now say he is willing to go along with some off-shore drilling?
FEDERICO PENA: Well, Judy, he hasn’t really changed his position. What he said some months ago was he was against off-shore drilling by itself. But recently, a group of senators, the Group of 10, five Democrats and five Republicans, came up with a very interesting strategy, which involved eliminating the tax reductions for the oil and gas companies, taking that money, investing it in clean energy, alternative fuels, and some other conservation efforts, which Senator Obama has been supporting — that’s the main thrust of that bill — and limited off-shore drilling.
So in the context of a comprehensive approach, Senator Obama said he would be open to limited off-shore drilling. But let’s be very clear: We cannot drill our way out of this problem.
JUDY WOODRUFF: Now, he’s also said, as you just referred to, that he wants to levy a windfall profits tax on the large oil companies. How would he calculate that?
FEDERICO PENA: Well, there’s a formula that’s used, and that is to recognize that oil and gas companies have made profits in excess of what they normally would have achieved because of technology, innovation or investment.
So the idea here is to allow the oil and gas companies to keep a certain level of profits. Added to that would be profits to be used for further investment, because you don’t want to discourage them from making further investment. And any excess profits above that would be rebated to the government and given to consumers.
And what the senator is proposing is a $1,000 energy rebate to couples and $500 for individuals to help defray the increasing costs of gas, food, health care, education costs, all the kinds of pressures that everyday consumers are facing today. And that’s the approach that he’s taking.
Obama proposes fuel efficiency
JUDY WOODRUFF: Now, again, on -- just circling back quickly to this question of drilling, some of the environmentalists who were supporting this compromise, some members of Congress had come up, are pointing that that is the one part of that package, that compromise package, that was mandatory. They're asking why was it that Sen. Obama was not prepared to give on some of the more voluntary parts of the package?
FEDERICO PENA: Well, again, it's a compromise solution. But the idea here is that it reflects Sen. Obama's position, which is we cannot drill our way out of this problem. We've got to invest, as he's proposing, $15 billion a year in alternative fuels, in alternative technology.
We've got to increase our corporate average fuel economy to make our cars more fuel efficient. And he's proposing a 4 percent increase per year over a number of years.
We've got to continue to invest in energy efficiency, helping people retrofit their homes, major companies retrofitting their buildings, increasing investment in capturing heat from major manufacturing plants, and using that again to generate more electricity.
He wants to support a renewable portfolio standard, which means that, by the year 2012, 10 percent of our electricity would be produced from green energy, solar, wind, et cetera.
So it's a comprehensive approach with the concept and the idea being getting us off this idea that we can simply drill our way out of this problem, which we have failed to do for 40 years. We made the same mistakes, relied on the same concept for 40 years. It's not working.
JUDY WOODRUFF: And just two other quick questions. Nuclear, what does the senator believe about nuclear power?
FEDERICO PENA: Well, he has said he will keep the nuclear option on the table if we can resolve the challenge of how we deposit the nuclear fuel rods. The idea in the past was Yucca Mountain. There's some issues with Yucca Mountain. We've got to find another solution. And if we can deal with that and deal with the security issues, he is very open to continuing to support nuclear power.
JUDY WOODRUFF: And, again, in just a few seconds, his position now that he is in favor of tapping the Strategic Petroleum Reserve?
FEDERICO PENA: Right. And that's consistent with what he has said in the past. What he was against in the past was a straight sale of the oil out of the Strategic Petroleum Reserve, which used to be done years ago to balance the federal budget.
What he is willing to accept is a sale and then a later swap to put that oil back into the ground so we will have it for security purposes. President Bush did that before our first Persian Gulf War. President Clinton did that in the year 2000, when we had the home heating oil crisis. And there was a slight reduction in crude prices as a result of that swap.
JUDY WOODRUFF: All right.
FEDERICO PENA: But let's be clear: That is not a long-term solution. It's a temporary solution.
JUDY WOODRUFF: All right, Secretary Pena, we're going to come back to you in just a moment, but let's turn now to Nancy Pfotenhauer. She is a top policy adviser to Sen. John McCain. She's also former president of the Independent Women's Forum. She joins us from campaign headquarters in Arlington, Virginia.
McCain's fix to high gas prices
Nancy Pfotenhauer, first question, the same one I posed to Secretary Pena. Does Senator McCain believe there is a short-term fix to high gasoline prices?
NANCY PFOTENHAUER: Oh, Judy, yes, I think we believe that there are things you can do in the short term and that will have midterm implications, as well.
And let me just start with the context that everyone agrees that we need alternative sources of energy. There's no presidential candidate that I'm aware of -- certainly not Sen. McCain or Sen. Obama -- who don't believe that we should be actively pursuing alternate sources of energy. They both support that.
The problem is, as Sen. Obama signaled, is that his approach is pie in the sky. He doesn't do anything in the short term or, I would argue, even midterm to affect supply issues.
And that's why he's missing the entire boat, if you will. It's like having a huge empty swimming pool you're trying to fill and he's going to fill it with this thimble and ignore the fire hose sitting right next to him.
We need to increase domestic production, and we need to do it now. The American people are aware of this. We've already seen the futures market and the signaling that's occurred that has helped lower prices because President Bush and Sen. McCain have actively called for it.
So we definitely need to increase domestic production. And he's missing the whole ballgame when he starts talking about these things that are 20, 30, 40 years out into the future that most people don't disagree with. We may disagree on how you get there, but we don't disagree with the goals.
And Sen. McCain has a 20-year history of being out ahead on things, on cap-and-trade, on CAFE standards, on all sorts of issues.
So he can't -- he's trying to put Sen. McCain in a box he just can't put him in. And he's missing the most crucial aspect of the problem that we're facing right now, and that is how to increase supply.
JUDY WOODRUFF: So when you say Sen. Obama's missing the point or missing the boat, I think you said, on cap-and-trade and CAFE standards, in a nutshell, explain what you mean by that?
NANCY PFOTENHAUER: Oh, what I mean is he's missing the boat -- he is refusing to embrace safe and known production -- methods of increasing domestic production that signals that we're going to change the supply situation that will lower gas prices.
We've seen that effect already in play because you've had Sen. McCain out front exercising leadership. Senator -- and you've seen the House and Senate Republicans and even some Democrats step forward and clamor to increase domestic production.
The last thing you do, by the way, is increase taxes, which is what Sen. Obama is advocating. He's advocating increasing -- going the windfall profits tax route. If you tax something, you get less of it. It's economic masochism to put a windfall profits tax in place, because you punish domestic producers, you reward foreign energy sources, so you increase our reliance on foreign oil, and you drive up the price for consumers.
JUDY WOODRUFF: So Sen. Obama's plan to take that money and give it, as I believe Secretary Pena said, in a $1,000 rebate to American families, you're saying that's a mistake?
NANCY PFOTENHAUER: It doesn't solve, Judy, the underlying problem. It doesn't increase the supply of this product of gasoline and, therefore, won't affect prices over the long term. It's a redistributionist Band-Aid, if you will.
And by rising prices on the sources of oil production that are domestic, you actually decrease supply. You do the exact opposite of what you're trying to accomplish.
It's really a flawed approach. And it's Obama-nomics, if you will, because he's taxing -- if you tax something, you get less of it. He's going to tax production. We will get less of that.
And we've tried it here. I mean, if it worked, I'd be in favor of it. But we tried it, and it decreased domestic production and it increased prices for consumers.
JUDY WOODRUFF: Coming back to the question of drilling, this is something that just a year ago Sen. Obama -- I'm sorry, Sen. McCain had reservations about. So isn't it the case that both of these senators have moved in their thinking in terms of drilling for oil?
NANCY PFOTENHAUER: Well, it doesn't actually sound to me -- I mean, I've tried to figure out where Sen. Obama is on this. It doesn't sound to me like he's changed his position. He's pretty strongly against drilling and against domestic production.
He gave an energy speech that I might point out is two months after Sen. McCain led out the Lexington Project in five separate speeches on this issue, but he seems to be pretty firmly against drilling even now.
Sen. McCain was, you know, absolutely clear about it, the way he is. He said, look, I was against it in the past because I wasn't convinced that the technology existed to be able to do this in a way that was -- you know, protected environmentally pristine areas.
Americans were not suffering under the burden of $4-a-gallon gasoline. And we had evidence, because we had survived some really fairly horrific storms, with Katrina and Rita, and seen that the technology was pretty remarkable and that there were no significant spills during that period of time.
So he said it was basically the duty, if you will, from a leadership standpoint to step forward and increase production.
JUDY WOODRUFF: Less than 30 seconds. Can you explain why Sen. McCain opposes tapping the Strategic Petroleum Reserve?
NANCY PFOTENHAUER: Well, you have to approach that with a lot of hesitancy if you look at things from a commander-in-chief perspective, because obviously it is established -- and it's only supposed to be tapped at times of crisis.
And the fear, of course, is that, if you tap it, you might be signaling people who have bad intentions, terrorists, if you will, whose goal is to disrupt supply that we would be particularly vulnerable at that time.
Now, I might point out that Sen. Obama's plan to swap for heavier crude could ironically enough put us in a position where we're having to purchase oil from Chavez, who is not exactly the type of person we want to be dealing with.
Candidates' opposing stances
JUDY WOODRUFF: All right, well, let's bring Secretary Pena back so we can get some response back and forth.
Secretary, what about that last point, that if you swap this oil, light sweet crude or light sweet oil for the heavier crude, you may put yourself in a vulnerable position?
FEDERICO PENA: Well, President Bush did it before the Persian Gulf invasion. President Clinton did it in the year 2000. And President Obama can do it, too. And we've done it very safely and securely for many years.
But if I might respond to some of the language that was used by your guest, first of all, let's be very clear. Sen. McCain has opposed a corporate average fuel economy for years. He's opposed investments in solar and wind and alternative fuels.
And as was just stated, he was opposed to off-shore drilling the last time he ran for president. Once he became a new candidate for president, he changed his position on that, too.
And, secondly, I find it amazing that credit is being given to Sen. McCain for the reduction in the price of crude oil. The fact is the demand is down. American consumers have stopped -- they've slowed down their driving.
And so demand is down, world demand is down, and that's why the world markets have responded, not because of a comment made by Sen. McCain or by Sen. Obama. These are market forces that are largely at work here.
And the last point I want to make -- and this is the fundamental difference we have to understand...
JUDY WOODRUFF: Well, let me just -- I was just going to ask Nancy Pfotenhauer to respond to those two and then I'll come back to you.
FEDERICO PENA: That's fine.
JUDY WOODRUFF: So hold that thought.
NANCY PFOTENHAUER: Well, first of all, it's so funny, because the Obama folks try to have it both ways. They try to portray Sen. McCain as somehow being a puppet of Big Oil, which is laughable to anybody who has been in this town or watched his career.
But the bottom line is he voted against the 2005 Bush-Cheney energy package that was a pinata of pork, if you will, to energy companies. Sen. Obama voted for it. So they're really going to get a lot of pushback on that one from anybody who's honest or objective.
And Sen. McCain is the one -- he actually fashioned with John Kerry, the former Democratic presidential nominee, the bipartisan agreement on CAFE standards.
Now, I will say that he has some hesitancy about pushing those CAFE standards or mileage standards, if you will, higher because it was going to kill Detroit, an auto industry that was already suffering.
JUDY WOODRUFF: What about those last two points, Secretary Pena?
FEDERICO PENA: Well, they're wrong. First of all, we doubled our...
FEDERICO PENA: ... laugh all you want, but I was around when we doubled our corporate average fuel economy in the 1970s. We doubled that, both for vehicles and we increased it by 50 percent for trucks, and the auto industry did not die. We can do it again.
And what Sen. Obama is proposing is a $4 billion loan on other forms of assistance to the big three to help them retool and produce these new vehicles for this generation.
If Toyota can do it, General Motors can do it, too. So let's be very realistic about where we can go here. But, again, this is a difference of long-term solutions, and finally getting us off of oil, and understanding we cannot drill our way out of this problem.
Gas tax hike or tax break?
JUDY WOODRUFF: Secretary Pena, very quickly, a response to what Nancy Pfotenhauer said about, if you tax the oil companies, you're going to decrease production, hurt production?
FEDERICO PENA: The oil and gas companies made $140 billion in profit last year. What the senator is proposing is that we eliminate the tax reductions that were in place some time ago. And, by the way, Senator McCain is proposing another $4 billion in tax relief to the oil and gas companies.
NANCY PFOTENHAUER: That is not so true.
FEDERICO PENA: Well, I didn't interrupt you, so please don't interrupt me. And this is the last industry that needs to have a tax break. The people who need a tax break are the working men and women of this country.
JUDY WOODRUFF: Nancy Pfotenhauer, last word?
NANCY PFOTENHAUER: Senator McCain has proposed lowering the corporate tax rate across all industries, because we have a rate of 35 percent, which is significantly above our competitor nations. We're competing with countries like Ireland that have a rate that's less than half our corporate tax rate.
It's exactly what we need to do. And it's why folks like Jason Furman, who are Senator Obama's top economic adviser now, was in favor of reducing the corporate tax rate a month before he went on board. And it's why Senator Obama had to even signal...
JUDY WOODRUFF: We're going to have to...
NANCY PFOTENHAUER: ... that it needs to come down. So you're cherry-picking and being selective. It's not accurate.
JUDY WOODRUFF: We are going to have to leave it there, but I want to thank both of you, Nancy Pfotenhauer, former Secretary Federico Pena, we appreciate it.
NANCY PFOTENHAUER: Thank you.
FEDERICO PENA: Thank you. Thank you, Judy.