August 14, 2000
The Bush Family "Oiligarchy"
Part One: The Early Years
The Oilman Politician
Bush’s entrance on the political scene was a modest step. In 1963, Bush ran a successful campaign for chairman of the Republican Party of Harris County, winning a unanimous victory. Though he probably didn’t realize the full implications of it at the time, Bush was entering Texas politics at just the moment that the Democratic Party’s statewide political monopoly was showing serious cracks.
In 1961, John Tower became the first Republican senator from Texas since Reconstruction when he won a special election for the seat vacated by Lyndon Johnson. Throughout the 1960s, conservative Texas Democrats, feeling betrayed by Democratic support for civil rights and labor, began to shift to the Republican Party.
Over the next decade and a half, with Baker as a confidant and Liedtke tapping oil money to fund campaigns, Bush served two terms in the U.S. Congress, ran two unsuccessful but competitive bids for U.S. Senate, and became a recognized leader in the national Republican Party. He served as Ambassador to the United Nations and chaired the Republican National Committee under President Nixon. Under President Ford, he served as ambassador to China and director of the Central Intelligence Agency.
On the national scene, Bush continued to cash in on his many oil connections to help finance his political ambitions. Bush’s connections also became generous donors to the national Republican Party and its leaders. In addition to the Liedtke brothers, oil-money men at the center of the Bush political funding included: C. Fred Chambers, Bobby Holt, Earle Craig Jr., Robert Mosbacher, and Hugh Roy Cullen. [See Parmet’s George Bush.]
In 1966, Bush won a congressional election from Houston and headed off to Washington. As the son of a prominent Senator, Bush commanded immediate attention on Capitol Hill, a fact evidenced by his selection to the powerful House Ways and Means Committee.
The selection of a freshman congressman to serve on the powerful Committee was a remarkable choice. No freshman had served on the committee for 63 years. From his seat on the tax-writing panel, Bush was perfectly positioned to defend the interests of the Texas oil industry.
Big Oil needed Bush’s help. Two of the industry’s sacred cows were in danger. One was a 27.5 percent tax depletion allowance, which dated back to 1926. The allowance benefited the oil industry by removing much of the financial risk investors faced when they invested in oil ventures, which required substantial start-up capital investment. Drillers argued that the risks of hitting a dry spot would be prohibitively high for most investors and national oil production would suffer if the allowance were repealed.
The other major national oil policy of the time was a system of high quotas put in place to protect domestic oil companies from cheaper foreign oil. Removing the quotas, the oil industry argued, could produce a national security threat and would risk domestic oil production. It would pose a direct threat to their profits earned through domestic drilling ventures, too.
In the late 1960s, a spirited band of liberals in Congress were eager for reform, and the inequalities of the tax code were major targets. The oil industry found itself on the defensive as the reformers targeted the oil depletion allowance as a government “giveaway” for Big Oil. Today, it would be called corporate welfare.
For the coming fight over oil policy, newly sworn in President Nixon appointed a Cabinet-level task force headed by Labor Secretary George Schulz to examine the issue in early 1969 and find compromises to present to Capitol Hill.
While Big Oil had many friends in Congress eager to defend their interests, Congressman Bush could be counted on as one of their most loyal supporters. He argued against reducing the allowance and strongly opposed changing the quota system. [See Parmet’s George Bush.]
By 1969, however, the reformers were gaining momentum. It was becoming clear that compromise would have to be reached. The Nixon Administration Task Force proposed a reduction of the 27.5 percent tax allowance to 20 percent. With that as a starting point, the debate moved to Congress, where the oil industry’s allies were able to increase the proposed allowance to 22 percent. The bill passed 394-30, with Bush voting for passage.
Bush’s primary strategy during these policy fights was to give a bit on the depletion allowance while protecting the quotas. Bush warned that reducing the quotas threatened to reduce domestic prices, thereby threatening domestic production.
In mid-November 1969, Bush invited Treasury Secretary David Kennedy and a group of oilmen to his Houston home. The oilmen made it clear to Secretary Kennedy that they would not budge on quotas. The secretary carried the message back to President Nixon. [See Parmet’s George Bush.]
When the Schulz Task Force recommended to Nixon that the quota system be replaced with a sliding scale, the President had to choose between domestic oil interests and the findings of his own task force. Heeding the warning delivered by Secretary Kennedy, Nixon ignored the Schulz plan and upheld the quota system. Bush and his oilmen had won the day.
Bush wrote a thank-you note to Secretary Kennedy in which he confessed, “I was so appreciative of your telling them [the oilmen] how I bled and died for the oil industry. That might kill me off in the Washington Post but it darn sure helps in Houston.” [See Parmet’s George Bush.]
Bush left Congress to run for Senate in 1970, but lost to Lloyd Bentson. He then went on to work for the Nixon and Ford administrations until 1977. When Jimmy Carter became president, Bush found himself temporarily out of politics. With the elder George Bush briefly on the political sidelines, his oldest son, George W. Bush, began building an oil/politics nexus of his own.