Exactly. The mob is all about politics.
People like Tommy, psychopaths who can't control themselves, get used and abused by the truly dangerous people, the bosses. Just like Henry, Tommy grew up around the mob. They obviously knew what he was("Tommy's a bad kid, he's a bad seed...", "You gotta watch out for kids like that"). So they use him as a lightning rod to do their killing and make whatever money they can and once they outlive their usefulness they make the expedient choice and kill them. There's always another young cowboy waiting to step up.
Paulie was no dummy. He knew Henry and Jimmy were involved in that mess, and so did Billy Batts' people. But why throw away 2 smart and capable moneymakers? So he plays stupid and throws Tommy to the wolves, the Gambinos can save face and say they got revenge for Batts, everyone is satisfied.
To truly understand how cunning Paulie is, consider the move he and Henry pull on the connected restaurant owner(Larry Boy in The Sopranos). They basically make good use of Tommy's natural psychopathy and use him as a bad cop to their good cop routine to take over his restaurant.
While Tommy was busy playing tough guy and waving guns around in crowded restaurants, Henry spotted the opportunity and suggested to Larry that Paulie will probably "help him out". Remember in that sitdown Henry is right there and gives Larry the go ahead to make his plea to Paulie. So Paulie cynically makes a big show of how his hands are tied and he can't control Tommy etc. and then he "reluctantly" accepts a piece of the restaurant... and then he fukks Larry in the ass by running up unpaid bills on the store's credit and then setting it on fire for the insurance money.
That's why Paulie is upper management, because he can be an apex predator while keeping his hands clean, while Tommy was a just another low level grunt in an army of low level grunts..