Morning Must Reads — Spend, baby, spend

Democrats are under pressure from the preferred economists on the Left to not get squeamish about spending.

The New York Times offers an unintentionally hilarious editorial today in which they argue against any application of fiscal restraint with a logy economy.

As the remaining real economies in Europe – Germany and Britain – are starting to put the breaks on government spending to avoid Greek tragedies and moderate Democrats in Congress have lost their appetite for deficit-funded stimulus, President Obama and the economists he trusts, like Ben Bernanke and Paul Krugman, are saying don’t stop believing.

Says the Times: “…the best policy should be to take advantage of the cheap money to spend more, not less. Deficits will have to be reduced once the recovery gains more traction and unemployment recedes.”

Right now, Congress is trying to push through a bill that provides a final shot of stimulus before, they promise, the future austerity sets in.

Senate Democrats are trying to get a $140 billion mini-stimulus passed. The legislation was initially seen as a $200 billion-plus package of tax incentives, direct handouts and a continuation of emergency relief programs for the unemployed along with funding the continued delay in a long-ago approved reduction in Medicare payments to doctors.

Now, the bill is down to the benefits and the so-called “doc fix,” and Democrats say they’re willing to make a deal. That money isn’t as appealing to Bernanke, Obama, Krugman and the Times because things like continuing unemployment benefits or forestalling scheduled cuts don’t provide the kind of Keynesian boost that they’re hoping for.

But Republicans are suggesting a smaller-still bill of $126 billion with even less stimulus spending and, most importantly, paid for in cuts to other spending. That’s a big Obamian no-no. Cutting other government spending to keep the cash pump status quo alive isn’t Krugman’s idea of stimulus. He still thinks FDR was a wimp for pulling back spending in 1937. He thinks the Obama stimulus should have been much bigger.

Democrats once mocked Republicans for arguing that the growth created by tax cuts would pay for the cuts themselves. Now the Left says that they can pay for stimulus deficits with stimulus growth.

So while the President and his advisors are urging Congress and Europe to keep spending, how has the spending so far been doing?

George Will reminds that amid this cut-deficits-but-grow-them-first pitch, the jobless numbers that came out last week suggest that the Obama economic model is taking on water fast.

Despite misattributing Examiner colleague Byron York’s recollection of Obama’s 2008 promises that his experience running a campaign would prepare him for the executive duties of the presidency to Megan McAardle (even though McCardle herself credits York), Will produces the necessary tonic for the Obama-Bernanke-Krugman fever for more short-term spending.

The 41,000 private sector jobs created in May compared to the 490,000 new federal positions was an alarming call not for more federal intervention, not less.

Will’s point is that the longer the federal government keeps expanding its role in the economy, the more private investors will withdraw.

“At any time, some economic conditions would be better than others, but the more certainty about conditions the better. Today investors and employers are certain that uncertainties are multiplying.

They are uncertain about when interest rates will rise, and by how much. They do not know how badly the economy will be burdened by the expiration, approximately 200 days from now, of the Bush tax cuts for high earners — a.k.a. investors and employers. They know the costs of Obamacare will be higher than was advertised, but not how much higher. They do not know the potential costs of cap-and-trade and other energy policies. They do not know whether “card check” — abolition of the right of secret-ballot elections in unionization decisions — will pass, or how much the economy will be injured by making unions more muscular. They do not know how the functioning of the financial sector will be altered and impeded by the many new regulatory rules and agencies created by the financial reform legislation. The economy has become dependent on government stimulation of demand, and no one knows what will happen as the stimulus spending wanes.”

Wall Street Journal — U.S. Ramps Up Tab on BP

As Examiner colleague Julie Mason explains, the president is in a jam over is moratorium on offshore drilling in the Gulf. Not only will it raise gas prices in a weak economy, it is putting lots and lots of Gulf residents out of work.

The solution that the White House has seized on is to have BP pay the salaries of the workers of other oil operators idled because of the president’s ban.

The thinking goes that since BP’s spill caused Obama to impose the ban, it’s BP’s responsibility to pay its competitors employees who were put out of work.

It’s only $10 million more a week, but BP shares took a 16 percent dive because the move makes it increasingly clear that the company is going to be bled out.

After BP’s last asset is sold to a competitor in a few years, all that will remain of the company is Tony Hayward sitting in a sublet London office answering hate mail and responding to summons.

Making a company pay the costs of competitors who are suffering under federal regulations prompted by its mistake is a novel approach. But no more novel than, say, taking over a car company, exempting it from bankruptcy laws and fleecing its bondholders.

Plus, since polls show that public approval for the government’s handling of the spill stinks and that poor administration of existing regulations are largely responsible for the spill, Obama is eager to pitch blame far and wide.

(My column for today about Obama’s inability to stop finger pointing even as he decries the practice is here.)

If he lifts the ban, environmentalists will be mad, but if he doesn’t, the defenders of the Gulf peoples will be outraged that he’s killing the economy there. Both groups have powerful liberal gris-gris, so Obama has found a way to make BP pay for the ban.

But if Obama means to drain BP dry it does have some rather unhappy consequences for the British people, whose pension funds rely heavily on BP stock and dividends.

Writers Guy Chazan and Stephen Power explain:

“The Louisiana Mid-Continent Oil and Gas Association has estimated that the number of jobs affected by the moratorium ranges from 26,000 to 46,000. Direct wages lost could be as high as $330 million a month.

The government has big sticks to use against BP, including the threat of criminal indictment. BP is the biggest supplier of fuel to the Pentagon, with contracts worth $2.2 billion a year. BP is also the largest oil producer on federal waters in the Gulf. “

Wall Street Journal — Drilling Bits of Fiction

The Journal Editorial Page catches the White House fibbing about its offshore drilling ban:

“In the wake of the oil spill, President Obama asked Interior Secretary Ken Salazar to produce a report on new drilling safety recommendations. Then on May 27 Mr. Obama announced a six-month deep water drilling ban, justifying it on the basis of Mr. Salazar’s report, a top recommendation of which was the moratorium. To lend an air of technical authority, the report noted: ‘The recommendations contained in this report have been peer-reviewed by seven experts identified by the National Academy of Engineering.’

That would be false, sir. In a scathing statement this week, the seven experts explained that the report draft they had reviewed did not include a six-month drilling moratorium. That was added only after they signed off. ‘The Secretary should be free to recommend whatever he thinks is correct, but he should not be free to use our names to justify his political decisions,’ wrote the seven in a letter to Gulf Coast politicians.”

New York Times — A Clash in Texas Over Air Pollution

The White House is getting ready to hand Texas Gov. Rick Perry a campaign issue as the EPA gets ready to crack down on Lone Star State air pollution and refuse an operating permit for a oil refinery in Corpus Christi.

By putting Texans out of work through federal regulations, the administration is giving Perry, who is in a close race with former Houston Mayor Bill White, a chance to make the race a national referendum.

The move also comes as Republicans in Congress are trying hard to limit the EPA’s authority.

The Senate is considering a proposal from Alaska Sen. Lisa Murkowski that would prevent the EPA from setting carbon standards itself, and instead reserves the job of setting global warming legislation for Congress.

Though the legislation seems unlikely to move forward in the House, there are going to be several Democrats voting for the plan in the Senate.

That won Murkowski a debate on the measure, which will be discussed as part of the debate on increasing the cap on oil spill damages.

Like the fight in Texas, Democrats are finding that the reintroduction of the global warming issue under a BP pretext is not going over well.

Writer James McKinley explains what the shutdown is all about.

“At issue is the state’s practice of “flexible permitting.” The Clean Air Act requires polluters to limit emissions for several key pollutants from each smokestack, or other source inside a plant or refinery. But since 1994, Texas has instead given about 140 plants — among them the largest refineries in the state — a general ceiling for pollution from all sources inside a plant.”

New York Times — Iran Warns of ‘Reduced’ Ties With U.N. Inspectors

The U.N. (weakly) sanctioned Iran again over its nuclear program.

Iran is now using this as a pretext to ramp up its nuclear program.

Writer Alan Cowell explains:

“In the past, the officials said, Iranian threats to downgrade ties to the I.A.E.A. have been followed by measures to curb inspectors’ authority and to slow notification of its intentions. The newest threats could lead to further restrictions on inspectors’ visits, the officials said.

The officials said Western governments believed that Iran might also react to the sanctions by expanding its enrichment process at Natanz, doubling the number of centrifuges producing uranium enriched to 20 percent.

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