Obama Pays the Price for High Energy Costs

Obama Can’t “Ride Out” Energy Prices Anymore

“The fact the Saudi regime is making a big deal of this suggests that it may be a big deal ... If the first kind of explicitly pro-democracy protests happen (today) that sets a precedent and we'll probably see more pro-democracy protests."

-- Shadi Hamid, of the Brookings Institution’s Doha Center in Qatar, talking to Reuters

A massive earthquake and tsunami killed hundreds of people in the farming and industrial region in the northern end of Japan’s main island and shut down the nuclear reactors that power the rest of the nation.

The news sent stocks tumbling around the world again as already twitchy investors retreated on any hint of new troubles for the global economy.

But the underlying economic instability now plaguing America and the rest of the developed world is mostly a result of growing concerns about energy prices and inflation. U.S. consumers have seen wages stagnate but prices on gasoline and staple goods increase sharply in recent months.

Energy prices were already rising because of increased worldwide demand, spurred partly by the end of the economic downturn in the West and exploding growth in China, India and other spots in the developing world.

At the same time, U.S. consumers felt an extra pinch as the Obama administration moved to clamp down on domestic production of coal and oil as part of the president’s push to get America to embrace his fight against global warming, a battle he believes will compensate for the economic disruptions it causes by creating new jobs in approved green energy industries.

An additional problem was that the value of the dollar continued to fall amid concerns about U.S. debt and an aggressive stimulus program by the Federal Reserve that involves dumping huge sums of conjured cash to float U.S. obligations. With the price of oil set in dollars per barrel, the weakening of the American currency has an inflationary affect for anyone in the world who uses petroleum, which is pretty much everyone.

Thus, the stage was set for the current energy shock that began when, fittingly, high energy and commodity prices helped push the poor residents of North African and Arab nations into revolt.

Here’s your energy crisis in a nutshell:

1) Demand goes up

2) Supplies go down

3) Buying power of the dollar is reduced

4) High prices drive rebellions that further threaten supplies

5) Speculators bet on more trouble and drive prices higher still

6) Consumers lose billions in buying power

7) Economy sputters

President Obama is to hold a press briefing today about what his agency is doing to deal with the energy problem. The president previously said that the American economy could “ride out” the current wave of high energy prices and has said that the costs demonstrate why his “Winning the Future” spending plan is a good idea.

But with stocks tumbling, consumer confidence falling and his own approval rating continuing to slip, Obama needs to now address the concern over energy costs.

Many of Obama’s fellow Democrats want him to release oil from the Strategic Petroleum Reserve, the fancy name given to a series of caverns in Louisiana and Texas that are filled with crude oil –- an amount equal to about a month of U.S. consumption. The Reserve was created during the 1973 Arab oil embargo to make sure the U.S. could not be held hostage by foreign governments.

Republicans, meanwhile, want the president to lift his restrictions on mining and drilling in an effort to boost domestic energy production.

Obama’s previous posture of strategic inaction expressed in the “ride out” approach is not politically tenable amid the currently high prices and economic anxiety.

The question today is whether the new concerns about another economic downturn have pushed him to reevaluate his position or if he is just making an effort to show interest in the subject.

The Saudi royal family is the next target for the uprising that has swept the Middle East. It is the great prize for both the democratizers and the Iranians as both the cradle of Islam and the world’s largest oil producer.

Even ripples of unrest there will drive gasoline prices higher for Americans.

Clapper Scores a Gaffe Double Play

“I just think from a standpoint of attrition, this is kind of a stalemate back and forth, but I think over the longer term that the regime will prevail.”

-- Director of National Intelligence Dennis Clapper testifying before the Senate Armed Services Committee about the Libyan civil war

President Obama’s director of national intelligence has had a gaffe-tastic tenure since taking command in August. But James Clapper topped himself on Thursday.

Clapper has previously expressed blunt ignorance about terrorist arrests in London and told Congress that the Muslim Brotherhood was “largely secular,” but scored a gaffe double-play on Thursday when he called Russia and China the greatest threats to the United States (as Vice President Biden was toasting Vladimir Putin on a Russian junket) and then said that Muammar al-Qaddafi would likely prevail in the civil war currently wracking Libya.

His previous mistakes made Clapper seem simply disoriented. His Thursday statements are more troublesome for the administration because they might be true.

It is one thing in Washington to look dopey, but quite another to be impolitic, the latter being the cardinal sin of the capital.

Clapper’s bit about Russia and China is a diplomatic embarrassment, but since the assessment actually flatters our adversaries one presumes it can be smoothed over swiftly.

But to have the nation’s top intelligence official publicly reinforce what many of the president’s sharpest critics on the Libyan civil war have said – that American inaction first on a no-fly zone and then in refusing to arm the rebels will allow Qaddafi to hang on – is a huge blunder.

Obama and Secretary of State Hillary Clinton have pushed hard on the notion that the best course of action for the U.S. vis-à-vis Libya is to not take a leadership role. The publicly stated arguments are that American participation could de-legitimize the rebels and that arming the rebels would be in violation of the U.N. arms embargo of both sides of the war.

The president says Qaddafi must go and is examining all the options for removing him, but has kept actual policy on a slow wobble for weeks.

Having a senior administration official cut to the chase and predict the survival of an enemy regime may have been refreshing, but such truth telling can badly damage a president’s international posture.

It is widely suggested that Obama dislikes the Bush-era position of director of national intelligence and may keep the gaffe-prone former Air Force General in the post as a way of handicapping the agency, designed as an intelligence clearing house.

But with blunder after blunder, Clapper raises doubts about the judgment of a president who keeps him on.

Who Won the Battle of Wisconsin?

“…the actions were not following the principle that we need to all come together and work together and not denigrate or vilify public sector employees, but bring them into the process."

-- White House Press Secretary Jay Carney describing President Obama’s position on a collective bargaining law in Wisconsin

Republicans say they have triumphed in the fight over public sector unions in Wisconsin as a bill stripping collective bargaining power from government workers heads to the desk of Gov. Scott Walker.

Not only will the move help shrink the state government, they say, but it will also go a long way toward de-funding the Democratic Party in a vital swing state. With the state no longer collecting mandatory union dues, the cash available from the most important Democratic patron will dry up dramatically.

Democrats, meanwhile, say that they have prevailed because they turned public opinion against Walker and the ascendant GOP in the liberal-leaning state and fired up the labor base across the country in advance of the all-important 2012 elections.

It is possible, though, for both sides to be right.

The Wisconsin Senate Democrats who fled the state to shut down the legislature got embarrassed. They pulled a procedural stunt and then got outmaneuvered. They look bad and will be returning home in defeat.

Walker and the Republicans, though, allowed the battle to rage on for far too long. Three weeks of stalemate gave union operatives the chance to dominate the discussion. Instead of yanking off the Band-Aid as other governors have done, Walker went slowly – and maybe his fellow Republicans left him no choice – giving well-organized unions and Democratic groups time to push back.

Walker could have offered the compromise he eventually did or used the nuclear option before so much political damage accrued.

The state is now a political wasteland. When the minority leader of the state assembly pulls out a bullhorn in the middle of a session to drown out the speaker, you know things are badly broken.

Labor groups have scheduled a mass demonstration for Saturday at which the fugitive senators will be celebrated and labor leaders say they now have the energy to sweep Wisconsin and the rest of the heartland in 2012.

But big labor is still shrinking as a political force overall and the labor establishment is already unanimously Democrat, so there is some question as to how much of an impact they can make next year

Certainly, without government worker dues, it will be tougher.

House GOP Tries Again on Spending

“It needs to be on time and squeaky clean.”

-- An aide to the House Republican leadership talking about a spending plan coming forward today

House Republicans today are expected to present a three-week spending plan to fund the government after the current two-week measure expires in one week.

The proposal would cut spending by $6 billion – a prorated version of the GOP’s original proposal for $61 billion cuts – and will trim from areas already highlighted by the White House and Senate Democrats as ripe for cuts.

Basically, the idea is to embrace all of the modest cuts President Obama has blessed but to do it in three weeks instead of six months.

There is grousing in the Republican House caucus about letting the chance for larger cuts slip away through the incremental process. But the real anger is in the Senate, where Democrats have grown weary of the White House’s above-the-fray posture on the spending question.

Liberals want a throatier defense of spending, moderates want guidance on which additional cuts the president will abide and Majority Leader Harry Reid needs help in sorting out the warring factions of his caucus.

But so far, Obama is treating the Senate like Libya – he wants them to sort it out themselves and not put his prestige on the line by wading in too deeply.

Knowing that Republicans will likely retake the Senate in 2012 and are unlikely to lose the House, Obama is not looking to tie his fate too closely to his former colleagues on the Hill.