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Monday, August 29, 2005 | 9:20 a.m. ET
From Elizabeth Wilner, Mark Murray and Huma Zaidi

First Glance
We hate to use the "perfect storm" cliché, but at a time when US oil production is going full tilt, and one refinery fire can send already record gas prices even higher, what kind of supply disruption and cost increases might be caused by a Category Four hurricane that barrels through the Gulf of Mexico and smacks into the Louisiana coast?  Even if the offshore rigs and coastal refineries in Katrina's path go unscathed, they still had to shut down temporarily.  Oil prices have already reached $70 per barrel today, with some analysts predicting that the price could hit $75.

  1. Other political news of note
    1. Animated Boehner: 'There's nothing complex about the Keystone Pipeline!'

      House Speaker John Boehner became animated Tuesday over the proposed Keystone Pipeline, castigating the Obama administration for not having approved the project yet.

    2. Budget deficits shrinking but set to grow after 2015
    3. Senate readies another volley on unemployment aid
    4. Obama faces Syria standstill
    5. Fluke files to run in California

Hurricanes give presidents the chance to look presidential, and Bush has ordered up a lot of federal aid for the region; after the storm blows through, we'll see if he tours damaged areas.  But gas prices have plagued Bush throughout August.  Along with Iraq, they dragged on his approval ratings, as well as on public opinion about the otherwise improving economy.  Bush ends this August with an average job rating that is several points below what it was when he started it.

Judging from the plans he laid out in his late July and early August radio addresses, Bush had intended to spend much of the month touting positive economic signs like growing homeownership and the shrinking unemployment rate and deficit.  Instead, gas prices and resulting airline industry problems have been the main economic story of the month.  And due to increased violence in Iraq, delays in the drafting of the constitution, and the national attention paid to Cindy Sheehan, Bush also had to focus much more on the war during August than the White House had anticipated.

Bush's energy secretary told reporters earlier this summer that the Administration would consider tapping the Strategic Petroleum Reserve only in case of an emergency -- such as if a hurricane disrupted supply.

Also worth noting as we start to close out the month: Social Security was barely on the President's radar during August.  Apart from a perfunctory, broad statement commemorating the entitlement program's 70th anniversary, Bush hardly mentioned the reforms which are supposed to comprise the bulk of his domestic legacy.  Indeed, his scheduled focus today is touting the already passed Medicare prescription drug benefit at events in El Mirage, AZ and in Rancho Cucamonga, CA.

Democrats, meanwhile, remain split over how much to criticize Bush over the war and how tough to be on Supreme Court nominee John Roberts, whose confirmation hearings start one week from tomorrow.  Roberts has his second meeting with Senate Judiciary ranking member Pat Leahy today in Leahy's office at 12:30 pm.  Since the two first met in July, Leahy has come out publicly suggesting that Roberts has "radically" conservative views.  NARAL is also out with their second TV ad after having to pull the first amidst criticism of its charges.

One story that faded this month was ethics, despite the indictment of lobbyist Jack Abramoff.  However, the return of Congress, the reassembling of the White House press corps, and the prospect of the Plame leak investigation wrapping up in October mean the issue will likely re-emerge before too long.

Katrina, oil and gas
"Crude oil soared to a record above $70 a barrel in New York after Hurricane Katrina forced companies including Exxon Mobil Corp. and Chevron Corp. to evacuate rigs in the Gulf of Mexico, where 30 percent of U.S. oil is produced," says Bloomberg.  "Oil had its biggest gain in 29 months as Katrina, the U.S. Gulf coast's worst storm since 1969, disrupted production and headed for refineries that make as much as 15 percent of the nation's fuel...  Asian and European shares and U.S. stock futures indexes fell on concern rising energy costs will reduce profits and leave consumers with less money to spend."

"The U.S. has ample crude oil supplies, even if major hurricane destruction trims Gulf oil output and foreign imports, but refining capacity is extraordinarily tight," USA Today notes.  "On Friday, Katrina had been expected to be inconsequential to the energy industry, with many traders selling.  That all changed Saturday, when the system gained power and charged west, directly toward areas of offshore oil production."

One insurance analyst estimates that Katrina may cost US insurers as much as $30 billion, which would make it the most expensive storm to ever hit the nation (though the estimate assumes a direct hit on New Orleans).  Financial Times

Globally, the "near-doubling of oil prices... has had surprisingly little impact on the pace of global growth, as other broad economic factors have helped damp the damage inflicted by previous oil-price shocks," says the Wall Street Journal.

But Bloomberg concludes that "energy prices are high enough now to get Americans' attention and hold back consumer spending."

Dollar store chains say "their largely low-income customers were making fewer visits to their stores and spending less, as a result of having to set aside more money for fuel."  - Financial Times

USA Today says that "Venezuelan President Hugo Chavez" -- the same Venezuelan president whom Pat Robertson suggested be assassinated -- "has been signing deals to supply cut-rate oil throughout Latin America and the Caribbean as a way of spreading influence."  Chavez also has offered heating oil to impoverished communities in the United States.

More on the economy
News out of a Jackson Hole, WY conference this past weekend which served as outgoing Fed chief Alan Greenspan's last big hurrah was obscured by Katrina, but note that Greenspan opened the conference with remarks warning that "he believes much of the run-up in housing and stock prices over the past decade has been due to low long-term interest rates, which could rise if global financial conditions shift.  'History has not dealt kindly' with those who underestimate such risks, Greenspan said."  - Washington Post

"Greenspan's two speeches... dwelt less on the successes of his 18-year tenure than on looming risks.  As the world economy has become more stable, he suggested, investors have become complacent about risk...  This means they have bid up stock and housing prices and accepted unusually low yields on long-term bonds."  The resulting increase in US household wealth "is important fuel for consumer spending, Mr. Greenspan said.  But 'such an increase in market value is too often viewed by market participants as structural and permanent.'"

In advance of tomorrow's Census Bureau release of its latest stats on poverty, average household income, and the number of Americans still lacking health insurance, the Washington Post notes that a "growing chorus of experts and politicians is raising questions about the data."  These "widely accepted statistics are overstating some problems and understating others, miscounting people, and sending policymakers down blind alleys."  All of which "has real-world consequences, allocating federal assistance to some who don't need it while cutting off others who do, raising the costs of programs like Social Security, or pushing policies for problems that may not exist."

That said, the Wall Street Journal's Stephen Moore argues on the paper's op-ed page that "the economic well-being of the American family has never been better -- as measured by income, consumption, and wealth."  Moore refutes "Democrats' new line of attack against the Bush tax cut policies" -- that wages aren't keeping up with inflation.

Bush today
The Arizona Republic previews Bush's stop in El Mirage, where he'll discuss the Medicare prescription drug benefit.  "The Valley is an interesting place for Bush to promote the plan.  Unlike other parts of the country, many area seniors and disabled people - about a third of people here on Medicare - have signed up for Medicare HMOs to get their drugs at low cost, which means they are likely to stay with their Medicare HMO, even in the face of wholesale changes.  Also, Arizonans may drive to Mexico for their drugs more often than their counterparts in other areas.  Because of the relatively high number of seniors living in areas such as Sun City, most analysts expect there to be a lot of competition among plans in the area..."

The San Bernardino Sun previews Bush's stop in Rancho Cucamonga: "Protests and counterprotests are expected near the center throughout the day" while "Critics question the president's use of invited audiences to deliver messages."

National security politics
The Washington Post recounts the stop-start process of the drafting of the Iraqi constitution, which is being hailed by President Bush and rejected by Sunni Arabs.

The Los Angeles Times has the text of Bush's remarks yesterday on the draft.

The AP says that Bush's comments "came as the Bush administration sought to dispel criticism that Iraqis completed a draft constitution that did not meet the U.S. goal of broader backing."

A New York Times analysis says that the “timing of the setback with the constitution was especially tough for President Bush, after a summer in which continuing American casualties and deaths have sent approval ratings of his handling of the war skidding to new lows.  The setback also raises questions about whether the administration can cut the number of troops in Iraq by next year, as is the goal of some in the Pentagon.”

Sen. John Warner (R) intends to summon Defense Secretary Rumsfeld to testify at a hearing on Iraq when Congress returns from its recess, the New York Times reports.  “He spoke as leaders of both parties acknowledged that lawmakers had heard, during the August recess, from voters unhappy with events in Iraq."

The Roberts nomination
USA Today raises the prospect that some of Roberts' stock holdings could prompt him to recuse himself from some "important cases."  "Federal law is clear: Judges may not participate if they, their spouses or their minor children own stock in a company that is a party to a case, although at the Supreme Court, how the rule is applied is up to each justice."

In a separate story, USA Today looks at previous recusals.

The New York Times notes that the released Roberts memos show him to be strict grammarian.  “If Judge Roberts is confirmed, and his word-consciousness follows him to the court, it will put him in the upper tier of justices who have put a premium on the English language.  At a minimum, his arrival would add a formidable Scrabble talent to the bench.”

Pegged to the fight over the use of taxpayer funds to build a day-laborer center in Herndon, VA, the Los Angeles Times notes that "as the housing boom increases the demand for cheap labor and workers become more organized, the sites where they gather have become a battleground in the widening debate over illegal immigration."

We've noted before that immigration is one area on which Republican lawmakers feel free to publicly disagree with their President.  Bloomberg now reports that another key part of the GOP coalition is straying -- that big corporations like Wal-Mart "are withholding contributions to a public campaign supporting... Bush's immigration plan because they're concerned that any legislation may impose greater restrictions on hiring workers from overseas."

The crowded field in the race to fill SEC chief Chris Cox's Orange County-based House seat includes Jim Gilchrist, a leader of the Minuteman Project, who's running on a third-party line.

The values debate
The Washington Post reports that the 2005 "state legislative season draws to a close having produced a near-record number of laws imposing new restrictions on a woman's access to abortion or contraception.  Since January, governors have signed several dozen antiabortion measures ranging from parental consent requirements to an outright ban looming in South Dakota.  Not since 1999... have states imposed so many and so varied a menu of regulations on reproductive health care."

Those lawmakers who feel that developments in embryonic stem cell research are moving so fast that it's better not to get bogged down in the heated political debate got some reaffirmation last week when news broke that Harvard scientists for the first time turned ordinary skin cells into embryonic stem cells without having to use human eggs or make new human embryos in the process.

An organization called the Center for Reclaiming America is up with a TV and radio ad campaign in Iowa drawing attention to Bill Frist's change of heart on embryonic stem cell research by asking him to switch back to his previous position.  The group calls itself nonpartisan, but aims to "to inform, equip, motivate, and support the endeavors of the Christian activist," per the press release about the ad, and is being promoted by a PR firm known for promoting socially conservative causes. – USA Today

The New York Times reports that a candidate for Manhattan borough president is running what he believes is the first-ever campaign TV ad in which an openly gay politician appears with his partner.  “Gay activists in Washington, New York and California said in interviews on Friday that they could not say the commercial was a first in the nation, but that it was certainly the first they had heard about featuring a gay candidate with his or her lover.  Homosexual candidates have been appearing more often with their partners in mailings, they said.”

2005 and 2006
In the Virginia gubernatorial race, Democratic nominee Tim Kaine campaigns today with centrist Democratic Sen. Joe Lieberman, and also goes up with two new bio ads which will run statewide, marking his first advertising foray into the pricey northern Virginia (read: Washington, DC) market.  – Washington Post

The ads feature shots of Gov. Mark Warner (D), although he doesn't speak, and the Richmond Times-Dispatch says those cameos "are a sign that Democrats are ratcheting up their use of what may be their most potent weapon of the 2005 election: the lame-duck governor's popularity.”

Bob Novak devotes his column to the GOP Senate campaign committee’s recruiting woes, noting that in a worst-case scenario, "Republicans could be looking at an overall loss of two seats that could climb to four.”

And the New York Daily News notes how potential New York gubernatorial candidate Bill Weld (R) has seemed to flip-flop on gay marriage, which he currently says he opposes.


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