Pissy Fanny Blame Gaming - I remain Unimpressed!

GDP began going negative in last year's third quarter and the % of decline accelerated in the 4th to over 6% and should probably be in the minus 5% territory in this year's first quarter. Most economists, and even Chairman Bernanke, expect a decelerating rate of decline through the rest of this year but GDP should remain in negative territory throughout the year.

There is no doubt once the government's monumental spending kicks in it will have a positive effect in generating business activity. Whether consumers, whose balance sheets have been ravaged, will restart significant spending is a question that remains unanswered and difficult to predict. Certainly as business activity picks up and the economy's rate of decline decelerates, assuming energy costs remain around current levels but will they, it is reasonable to expect some consumer pickup in spending.

I personally expect housing price declines to continue, regionally, through most of the year but also at a decelerating rate. The unsold housing overhang should also begin to melt. Housing demand will not approach the level reached in the '90's for some time to come.

The increasing mountain of debt and continued philosophical contentiousness echoing in the halls of Congress should remain weighty concerns and could become the albatross around the neck of any recovery.

What we are experiencing is the vicious deleveraging of the world's financial markets. No one, including the so-called experts, actually know how much water remains behind the weakened dams of bank balance sheets and other such insitutions. Governments, themselves are also in dire financial straits unlike anything seen in the past 50 years. Everyone looks to our ntaion to solve its problems before they can begin to come to grips with their own distress and embarassments. China has become the lender of last resort and only yesterday, perhaps to embarrass us, expressed concern over their U.S. denominated investments. Well they should!

Today China announced an enormous oil purchase deal with Iran. Again demonstrating their dependency upon Middle East oil but also their ability to buy it and undercut our desire to isolate Iran as it goes nuclear.

Four years from now, assuming Obama is capable of enacting much of his legislative agenda, we will be an entirely different nation. Our economy will have been restructured with government increasingly having a hand in how our financial markets function. Our tax system will be geared toward redistribution based on fairness and again the government will have a large say in defining fairness - another man's meat is another man's poison.

Labor will have increased its clout resulting in more jobs either being replaced by technology or moved offshore. Union employment is more costly and less productive. Were this not so union membership would not have shrunken over the last quarter century. We created a middle class, based on excessive salaries, that could not sustain itself when competition went global.

Our nation's health system will come increasingly under federal control as will our education system. The one area that will have undergone less federal expansion will probably be the military as we donwnsize and reduce our military capability.

We will be more energy dependent upon external sources because of the failure to develop nuclear plants and expand oil drilling.

I would expect corporate consolidations will accelerate as consumption shrinks, savings increase and over capacity becomes more evident.

The nation's debt will have risen by 50% and the interest cost for funding this debt will sap more and more of our GDP.

For the nation's youth the change may not be relevant because they will grow up in this altered state but for those like myself it will be unsettling because the America I knew growing up will be less visible and the trends out of synch with my view of what America represents.

I do not fear change because I have made many changes and adjustments. What concerns me is whether the policies that bring about change are good ones and are in keeping with our Constitutional roots - particularly the ones that made us a great nation. I deem these to be a more benign government, a government that tolerates freer markets and does not intrude into every facet of life. A government that recognizes the value of human freedom and encourages entreneurship. A government that takes less of one's earnings and understands the difference between greed that motivates and greed that is uncontrollable and dangerous.

As concerning its citizens, government should not assume its role is to create equal outcomes but rather to provide equality under the law and then let everyone accomplish based on their own abilities and motivation. Those who came here believed we were the land of opportunity and we were. No, not everyone was treated fairly, no not everyone had equality but through the raw and less abridged force of Capitalism and hard work we accomplished more for more than any nation on this earth.

Those days are not likely to be repeated if we follow the 'change' policies of Obama. In fact, I believe we will not only retrogress economically but we will have increased social discord. Obama's brand of populism pits class against class, builds resentment, suspicion and rancor. It is divisive, heightens jealousies and is divisive.

It is human nature to resist change. Inertia is a powerful force. A rock at rest takes effort to move. Without the prodding of government our nation might not have undertaken much of the change, positive change, we have experienced. But with change must come balance, pragmatism and a common sense recognition that much of what we have is actually better than what is speculatively proffered as necessary.
New and improve might be a wonderful commercial and catchy slogan for selling soap etc. but how often is new really all that much of an improvement and even less so when cost measured.

I am open to change and I believe without change retreat is inevitable but not all change is good and change for the sake of change is often counterproductive, stupid and costly. I do not trust our new president to keep his word, I do not share many of his philosophical principles, I do not believe he has leadership qualities beyond his speechifying and I would not want to be in a fox hole with him.

In a few weeks he has managed to re-confirm my deepest suspicions. It is a gut feeling perhaps but I have seen enough to draw some conclusions and most are not favorable. I remain unimpressed with his Harvard education, with his double talk and pissy fanny blame gameness.

These are some other random articles that draw attenton to my same concerns. (See 1, 1a below.)

France to help the Middle East go nuclear. (See 2 below.)

Olmert tries to obtain Shalit's release by giving Hamas the keys to the jail and scaring them regarding Netanyahu. (See 3 below.)

Olmert also reminds everyone how far he went to acheive peace. What did he accomplish - very little when you throw in two wars! Dangling appeasement fruit in front of your adversary does little to quell his appetite in fact it serves to embolden.(See 4 below.)

Netanyahu plans to govern and builds a team of strategic thinkers. (See 5 below.)

Obama also gets advice regarding Hamas.

Obama either has a philosophical disdain for every one of GW's policies or believes every time he renounces or 'changes' one he gains political currency. Therefore, I would not be surprised if Obama relents concerning getting in bed with Hamas. He had no trouble aligning himself with Ayers and other questionable Chicago types so why not Hamas. (See 6 and 6a below.)

Livni throws down the gauntlet - turn left or right - your choice! Will she eat her words down the road? (See 7 below.)

Dick

1) End of the Honeymoon
By David Broder

Two months into his presidency, it is far too soon to make any judgments about Barack Obama's prospects. All we really know is that he has assembled the rudiments of an administration and launched a batch of ambitious but unproven initiatives.

But it is not too soon to say that the Obama honeymoon period is over. His critics in Washington and around the world have found their voices, and they are subjecting his administration to the kind of skeptical questioning that is normal for chief executives once they settle into their jobs.

Obama still enjoys broad public support, but it is stronger for him personally than for his policies. Some of those policies are bafflingly complex, and all of them are untested.

Among those who follow government closely, there has been an unmistakable change in tone in the last few weeks. These are not little Limbaughs hoping that Obama fails. They are politicians and journalists measuring him with the same skeptical eye they apply to everyone else.

I think the shift began when Obama moved beyond the stimulus bill to his speech to the joint session of Congress and his budget message. For the first time, the full extent of his ambitions for 2009 became clear -- not just stopping and reversing the steep slide in the economy but launching highly controversial efforts in health care, energy and education.

Each of those issues has a history in Washington -- a history marked by congressional gridlock and legislative frustration. The Obama administration is obviously aware of that history and is trying to avoid the mistakes of its predecessors.

Where Bill and Hillary Clinton formulated a highly detailed health reform plan in secret and presented it to Congress as a fait accompli, Obama held a televised, all-hands town hall at the White House to kick around ideas on health care and told Congress: Work on it for a while and let me know what you come up with.

That buys him some time, which is useful since two of his key health aides, Kathleen Sebelius and Nancy-Ann DeParle, aren't even in their jobs yet. But expecting Congress to come up on its own with a plan for restructuring one-sixth of the national economy is expecting the impossible.

There is no single center of health policy in Congress. Two separate committees in the Senate and two in the House share overlapping jurisdictions, and their chairmen (and subcommittee chairmen) all have their own ideas about how to proceed.

One of them, Senate Finance Chairman Max Baucus, suggested that he is thinking of financing expanded health insurance coverage by taxing policies now provided by employers -- an idea Obama denounced when John McCain endorsed it during the campaign.

That is just a hint of the troubles to come as many congressional cooks vie to season Obama's health care stew.

Similar challenges await on education and energy. Congress has taken note of the way Obama backed down from his anti-earmark stance, a clear signal that he is leery of any showdown with the lawmakers. Despite his popularity, Obama is not an intimidating figure and so he can expect to be tested time and again.

Meantime, on the main challenge -- fixing the economy -- the criticism has begun to infect the mainstream media, as well as the conservative wing. I was struck last week to read heartfelt pleas to Obama from David Ignatius of The Washington Post and David Brooks of The New York Times to get his priorities straight and concentrate on the crucial task of rescuing banking, credit, housing and jobs.

These are people who deeply admire and respect Obama and wish him nothing but success. But, like some thoughtful congressional Democrats with whom I have spoken, they worry that he has bitten off more than he can chew.

Criticism of this kind is not an augury of failure. But it does signal that the honeymoon is over

1a) Finding Messages in a Blueprint
By N. GREGORY MANKIW

PRESIDENTIAL candidates campaign with soaring rhetoric, but presidents and their advisers make actual policy with spreadsheets. So for policy wonks like me, there is no better place to learn what President Obama really believes than the budget proposal released late last month.

Here are four lessons we can learn from the budget documents about the president and his economic team:

THEY ARE ECONOMIC OPTIMISTS Like everyone else, the president’s economists expect 2009 to be a grim year of falling national income and rising unemployment. But despite all the talk about the worst crisis since the Great Depression, they expect their policies to bring the recession to a swift conclusion. For the next four years, they forecast an average growth rate of 4 percent. The unemployment rate is projected to fall to 5.2 percent in 2013.

Not everyone is so sanguine. The administration forecast is “way too optimistic,” said Nariman Behravesh, chief economist at IHS Global Insight and author of the excellent primer “Spin-Free Economics.”

Let’s hope that the administration is right. But if I had to bet, I’d put my money on Mr. Behravesh.

THEY LIKE TO SPEND In light of the economic downturn, the stimulus package and all the bailouts coming out of Washington, it is no surprise government spending is skyrocketing. According to the president’s budget, federal outlays will be 27.7 percent of gross domestic product in 2009 and 24.1 percent in 2010 — levels not reached since World War II.

But more telling about the president’s priorities is what happens to spending after the crisis is well behind us, at least according to the administration’s forecast. In a second term for Mr. Obama, with the economy recovered and unemployment stabilized at 5 percent, federal outlays would be 22.2 percent of G.D.P. — well above the average of 20.2 percent over the last 50 years.

It is also well above levels in recent history. Before the financial crisis hit in 2008, federal outlays under President George W. Bush never exceeded 20.4 percent of G.D.P. That includes spending from the Iraq war. President Obama is counting on that conflict being over, and no new money-draining military commitment taking its place. Yet federal spending still remains high.

To be sure, part of the increase in government spending is driven by the aging of the population. As more baby boomers retire and become eligible for Social Security and Medicare, spending rises automatically. But President Obama’s focus on universal health insurance suggests that he is more interested in expanding the benefits that Americans can claim than in reining in the unfunded entitlements already on the books.

THEY ARE SERIOUS ABOUT CLIMATE CHANGE President Obama’s budget makes clear that he wants to address the problem of global climate change. This commitment stands in stark contrast to policy during the previous two administrations.

President Bill Clinton offered the Kyoto Protocol, but the policy ended up more symbolic than real. The treaty was overwhelmingly rejected by both parties in Congress, in part because it left out China, now the world’s largest emitter of carbon. President Bush rejected the Kyoto principles as well, but he never made finding an alternative approach to climate change a major priority.

For the new administration, climate change is not only an environmental issue but a budgetary one as well. Under the proposed cap-and-trade system, the government would auction off a limited number of carbon allowances. The cost would be passed on to consumers as higher energy prices, encouraging conservation. According to President Obama’s budget projections, the system would also raise more government revenue than his much-discussed tax increases on upper-income households.

The thrust of the policy makes sense, but several questions remain. First, why not instead impose a more transparent and administratively simpler tax on carbon emissions? Is it merely because the phrase “climate revenues” used in the budget is more politically palatable than the word “tax”? More important, how will the president get China on board? Without China’s participation, any climate policy, along with the associated revenue, may be a political nonstarter.

THEY ARE DEFICIT DOVES Few economists would blame either the Bush administration or the Obama administration for running budget deficits during an economic downturn. What is more telling is what happens to the deficit during normal economic times. From that perspective, the Obama budget policy looks surprisingly similar to the Bush version.

From 2005 to 2007, before the current crisis, unemployment in the United States hovered around 5 percent. During those years, the budget deficit averaged just under 2 percent of G.D.P.

In the Obama administration’s forecast, unemployment again reaches 5 percent in 2014 and remains at that level thereafter. But despite that rosy prediction, the budget does not get close to balance. The Obama team calculates that under its proposed policies, the budget deficit will average a bit over 3 percent of G.D.P.

So if you are a deficit hawk who lamented the Bush budget deficits, the new president’s budget should not make you feel much better. President Obama offers different fiscal priorities than President Bush did: less military spending, more domestic spending and higher marginal tax rates to “spread the wealth around.” But the borrowing and debt imposed on future generations will not be very different, at least if the numbers in the Obama administration’s own budget document can be trusted.

1b)More than a bad day: Worries grow that Barack Obama & Co. have a competence problem
By Michael Goodwin

Not long ago, after a string of especially bad days for the Obama administration, a veteran Democratic pol approached me with a pained look on his face and asked, "Do you think they know what they're doing?"

The question caught me off guard because the man is a well-known Obama supporter. As we talked, I quickly realized his asking suggested his own considerable doubts.

Yes, it's early, but an eerily familiar feeling is spreading across party lines and seeping into the national conversation. It's a nagging doubt about the competency of the White House.

It was during George W. Bush's second term that the I-word - incompetence - became a routine broadside against him. The Democratic frenzy of Bush-bashing had not spent itself when a larger critique emerged, one not confined by partisan boundaries.

The charge of incompetence covered the mismanagement of Iraq, the response to Hurricane Katrina and the economic meltdown. By the time Bush left, the charge tipped the scales to where most of America, including many who had been supporters or just sympathetic, viewed him as a failed President.

The tag of incompetence is powerful precisely because it is a nondenominational rebuke, even when it yields a partisan result. It became the strongest argument against the GOP hammerlock on Washington and, over two elections, gave Democrats their turn at total control.

But already feelings of doubt are rising again. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid were never held in high regard, so doubts about their motives and abilities are not surprising.

What matters more is the growing concern about Obama and his team. The longest campaign in presidential history is being followed by a very short honeymoon.

Polls show that most people like Obama, but they increasingly don't like his policies. The vast spending hikes and plans for more are provoking the most concern, with 82% telling a Gallup survey they are worried about the deficit and 69% worried about the rapid growth of government under Obama. Most expect their own taxes will go up as a result, despite the President's promises to the contrary.

None other than Warren Buffet, an Obama supporter, has called the administration's message on the economy "muddled." Even China says it is worried about its investments in American Treasury bonds. Ouch.

Much of the blame falls on Treasury Secretary Tim Geithner, whose appalling tax problems softened the ground under him before he took office. After his initial fumbling presentations, he became a butt of jokes on "Saturday Night Live," not a sustainable image for the point man in a recession. And still the market waits for his answer to the banks' toxic assets.

It's also notable that four people lined up for top jobs under Geithner have withdrawn, leaving one British official to complain that there is nobody to talk to at the Treasury Department. Perhaps it was a bid to combat the Geithner blues that led Larry Summers, Obama's top economic adviser, to make an unusual appearance Friday in which he defended the spending plans everyone is so worried about.

Yet the doubts aren't all about Geithner, and they were reinforced by the bizarre nomination and withdrawal of Chas Freeman as a top intelligence official. It's hard to know which explanation is worse: that the White House didn't know of Freeman's intemperate criticism of Israel and his praise of China's massacre at Tiananmen Square, or that it didn't care. Good riddance to him. But what of those who picked him?

Which brings us to the heart of the matter: the doubts about Obama himself. His famous eloquence is wearing thin through daily exposure and because his actions are often disconnected from his words. His lack of administrative experience is showing.

His promises and policies contradict each other often enough that evidence of hypocrisy is ceasing to be news. Remember the pledges about bipartisanship and high ethics? They're so last year.

The beat goes on. Last week, Obama brazenly gave a speech about earmark reform just after he quietly signed a $410 billion spending bill that had about 9,000 earmarks in it. He denounced Bush's habit of disregarding pieces of laws he didn't like, so-called signing statements, then issued one himself.

And in an absolute jaw-dropper, he told business leaders, "I don't like the idea of spending more government money, nor am I interested in expanding government's role."

No wonder Americans are confused. Our President is, too.

1c) Post-Rush: Obama's message war
By MIKE ALLEN




Beginning Sunday, the White House will harness every part of the Democratic Party’s machinery to defend President Obama’s budget and portray Republicans as reflexively political, according to party strategists.

A participant in the planning meetings described the push as a successor to Democrats’ message that Rush Limbaugh is the Republican Party leader. “We have exhausted the use of Rush as an attention-getter,” the official said.

David Plouffe, manager of Obama’s presidential race, helped design the strategy, which includes the most extensive activation since November of the campaign’s grassroots network. The database—which includes information for at least 10 million donors, supporters and volunteers—will now be used as a unique tool for governing, with former canvassers now being enlisted to mobilize support for the president’s legislative agenda.

Others involved in the planning included White House senior adviser David Axelrod; the DNC chairman, Virginia Gov. Tim Kaine; and DNC Executive Director Jennifer O'Malley Dillon.

The plan follows the private complaints of some Democrats that Obama let the GOP get the better of him during the debate over pork in the budget bill he just signed, and growing concerns among some Democrats that charges of big spending could stick to the president.

Starting this week, President Obama will be “engaging directly with Congress more, and speaking more forcefully on behalf of his budget,” a top adviser said.

On Sunday morning, three top White House officials will appear on network interview shows to describe brighter days ahead for the nation’s economy, and make the case that the budget is an important part of the president’s overall recovery plan.

And officials throughout the party plan to hammer the idea that Republicans are just saying “no” to the president’s budget plans without offering their own alternative.

House Republicans, who released an alternative to the stimulus bill, say they’ll issue their own budget proposal in the next few weeks. House Minority Leader John Boehner (R-Ohio) said in January in his opening remarks to this legislative session: “During the 111th Congress, Republicans will strive not to be the party of ‘opposition,’ but the party of better solutions.”

The Obama grassroots network—now known as Organizing for America, a project of the Democratic National Committee—has launched an e-mail pledge drive on MyBarackObama.com in which supporters sign their e-mail address to the statement: “I support President Obama's bold approach for renewing America's economy.”

The pledge drive was announced with a video called “Ready for the Fight.” Plouffe e-mailed supporters over the weekend with a challenge labeled “The next few weeks”: “In the next few weeks we'll be asking you to do some of the same things we asked of you during the campaign—talking directly to people in your communities about the President's ideas for long-term prosperity.”

This is not an easy message war for Democrats. Obama's budget calls for the largest deficit in U.S. history and a doubling of the national debt to $23 trillion in 2019. That is a big, juicy target for the GOP, which plans to hit this theme relentlessly all spring.

Republicans were successful in making earmarks, which accounted for only a sliver of total spending, the centerpiece of debate over the omnibus spending bill. The GOP sees sky-high deficits as similarly easy to explain to the public.

So the Democratic allies—the administration, congressional leaders, outside groups and the DNC—are uniting for the new push.

Democratic strategists explain that the message is designed to accomplish three things:

—First, it could deflect attention from the size of Obama’s budget and blunt attacks on the ambition of his agenda.

“It helps change the conversation from their criticism of the president’s plan,” a top Democratic official said. “If they want to say he’s going to raise taxes in the middle of a recession or he’s got socialist tendencies—none of which we agree with—one of the easy things for us to come back with is: We have tough choices to make right now, and you have nothing to offer.”

—Second, by painting Republicans as politically motivated, the conservative House Democrats known as Blue Dogs may be less likely to side with the GOP.

“As long as they’re seen as reflexively political—saying ‘no’ to everything—the Blue Dog Democrats can say, ‘I don’t agree with everything the president proposes, but at least he has a plan, an outline of what we should be working on,’” the official said.

—Third, Republicans could look like they’re playing politics in a time of crisis, rather than disagreeing based on substance.

The DNC on Saturday issued a “Party of ‘No’ Update” accusing House Republican leaders of “obstructionist rhetoric.”

In a new Web ad called “No Responsibility,” the DNC argues: “America is facing tough times. Our economy is in need of repair. Millions of Americans are out of work Fortunately, President Obama has offered a plan to get our economy moving again. A responsible plan to create jobs by investing in health care, energy independence and schools. What are the Republicans offering? Nothing. No plan and no ideas.”

In an ad called “Crickets” that begins Sunday, Americans United for Change, a labor-funded ally of the White House, says: “President Obama has proposed a budget plan to turn the page on the failed economic policies of the past – creating jobs and changing the way things are done in Washington. The Republican response?”

Then the viewer sees Alaska Gov. Sarah Palin, Senator Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader John Boehner (R-Ohio) each saying, “No!”

“So what kind of budget have the Republicans proposed to get us out of the mess they created? Here are the details,” the ad continues. The viewer sees a blank screen and hears the sound of crickets.

Jeremy J. Funk, communications director of Americans United for Change, said: “Building upon our previous ‘Party of No’ ad theme, the new spot calls out Republican leaders for also being the party devoid of ideas for getting us out of the mess they made.”

The ad will run Sunday through Tuesday on national cable and a mix of cable and broadcast in Washington, the group said.

Kevin Smith, Boehner’s communications director, replied: “If I had to defend the president’s budget—which is being eviscerated by both parties because it spends too much, taxes too much, and borrows too much—I’d probably waste time on fictitious claims like this, too."

Smith said both Boehner and the No. 2 House Republican—Whip Eric Cantor (Va.)—“presented alternative economic stimulus ideas at the White House directly to the President on the third day of his presidency.”

“We will continue to roll out our alternative solutions when we disagree with their plans,” Smith added. “House Republicans will have our alternative budget forthcoming in the next couple weeks.”

A Republican Senate leadership aide responded: “It really is a silly campaign. What are we saying ‘no’ to? Trillions in new spending? An unpopular, earmark-laden bill that the President himself was embarrassed to sign? A new national energy tax? Releasing Gitmo terrorists into the U.S.? We’d like to thank them for reminding the American people that we are saying ‘no’ to those things.”



2) France to help develop Saudi, Egyptian, Gulf nuclear programs



France has injected fresh momentum into the Middle East nuclear race by inviting Gulf nations to take a minority stake in the French nuclear giant Areva (CEPFi.PA), military sources report.

After a meeting with French president Nicolas Sarkozy Friday, March 13, the emir of Kuwait, Sheikh Jaber Moubarak Al-Hamad Al-Sabah, said the two leaders discussed the possible purchase of French military materiel and the issue of energy and nuclear reactors. He also referred to Kuwait and other Gulf countries taking a one-to-five percent stake in the world's biggest builder of nuclear reactors.

Paris has a separate deal with Egypt.

The cash-strapped Areva is 90-percent state-owned. Investment from partners in the United Arab Emirates and Saudi Arabia could also help Areva strengthen its standing in a region that is interested in developing nuclear energy

Areva is the only nuclear concern dealing with all aspects of nuclear energy production - from uranium mining and its enrichment to the recycling nuclear waste. The US is represented on its board of directors by AREVA Inc.

The Bush administration signed contracts for building nuclear power-generating industries with Saudi Arabia (Dec. 2, 2008) and the United Arab Emirates (Jan. 15, 2009). Our Middle East sources report that the proposed Arab stake in the French corporation came up in US president Barack Obama's conversation with Saudi King Abdullah Friday ahead of OPEC's weekend conference. He presumably asked how the French connection fitted in with these contracts.

Potential Gulf involvement in the French nuclear industry has four key aspects:

1. A one-to-five percent stake may only be the starter for more substantial control.

2. Paris is ready to open its international nuclear establishment for Arab interests to come in by the front door.

3. The Gulf states can be expected to use this access to win a dominant role in the world's two leading energy markets – oil and nuclear power.

4. They can also use their access to advanced nuclear technology for creating the infrastructure for developing a military nuclear industry to rival Iran's. According to military sources, Saudi Arabia's weapons program is already a lot more advanced that officially admitted.

Right after Washington signed its nuclear contracts with Saudi Arabia and the UAR, an official in region remarked: "The clear message to Iran is: If Tehran insists on pursuing its nuclear program, we the Arab countries in the region are going to have one, too although without enrichment."

3) Olmert using Netanyahu to pressure Hamas on Shalit deal
By Amos Harel and Avi Issacharoff

Like a 'B' thriller, it seems that those in charge of talks over kidnapped soldier Gilad Shalit mean to stretch our nerves to the hilt. Last night, only a few days before Olmert leaves office, his bureau reported that talks were being ratcheted up and the cabinet might be holding a special meeting today to hear, for the first time, details of a possible prisoner-swap that some ministers have been demanding for weeks.

Throughout this period, Olmert has been playing his cards close to his chest. Defense Minister Ehud Barak is being intentionally kept out of the loop; his emissary, Amos Gilad, did not this time either go to Cairo with Olmert's negotiator Ofer Dekel and Shin Bet security service head Yuval Diskin.

Even when it was reported here about a week ago that the chance of Shalit's release seemed to be receding, sources close to Olmert insisted a deal could be attained. Olmert does have an asset now beyond the Hamas prisoners: prime minister-designate Benjamin Netanyahu. Olmert appears to be telling Hamas "I am your last chance for a deal. Netanyahu will not be so generous."


We must hope that Dekel and Diskin manage to bring back a reasonable deal from Cairo. But even if they do, the tough question must be asked: Could the deal not have been made earlier, at a lower price?

Israel has apparently agreed to release all the prisoners on the Hamas list. The remaining dispute is over whether a few dozen of the most dangerous murderers, those with the technical know-how to create bombs and explosive belts and conscript suicide bombers, will be deported. Hamas will apparently agree to deport only a few.

Hamas insists on acting as if it has all the time in the world. But Palestinian public opinion, particularly in Gaza, wants results. To them, the achievement is in Israel's willingness to release suicide bombers and other "heavy-duty" terrorists, and they won't stand for a failure in the talks over the deportation of a few dozen.

But a failure there might be. It is hard to imagine Israel allowing such dangerous terrorists back to their homes in the West Bank. Diskin's participation is intended to give the talks the security stamp of approval, but will Olmert be able to explain it to the public? Or is it merely a last-minute spin?

As things look now, most of the ministers will vote for a deal. But the key is in the hands of one man, the prime minister.

4) Olmert: My government went further in peace talks than anyone before
By Barak Ravid

Mere days before the end of his term, Prime Minister Ehud Olmert used the platform of the weekly cabinet meeting Sunday morning to present an overview of his administration's achievements.

Addressing the peace process with the Palestinians, Olmert said that his government had "gone further in the peace negotiations than any previous government." The prime minister added that it was the Palestinian leadership that didn't have enough courage to made the necessary decisions on the path to peace.

He voiced hope that the decades long conflict between Israel and the Palestinians would be resolved in the near future, saying "I have no doubt that the negotiations I've held with the Palestinian Authority will result in a peace accord."



"But we'll have to make dramatic concessions in order to reach a point of signing an agreement," he remarked.

The prime minister criticized the Palestinian leadership, saying "we have yet to reach an agreement due only to their weakness, lack of courage and lack of desire to resolve the conflict. Everything else is just excuses and efforts to derail the talks."

Olmert also broke down the achievements of his administration to the cabinet ministers, mentioning "two well known military efforts" referring to the 2006 Second Lebanon War and the recent Operation Cast Lead in Gaza.

"The event in the north (Lebanon border) brought about an unprecedented achievement of quiet in that region of Israel," the prime minister declared. "In regard to Gaza, we made an important effort that hasn't been completed yet and we have yet to achieve the full list of goals that we set out to achieve, but we have brought back to the global awareness the might of the Israel Defense Forces and its power of deterrence."

5) 'Strategic thought team' to advise Netanyahu's new government
By Aluf Benn

A group of former top security, government and economic officials are
offering crisis management and decision-making services to the new
government.

The "strategic thought team" will present its main findings for the Benjamin
Netanyahu administration's first 100 days Sunday at the Interdisciplinary
Center in Herzliya, in a conference by the Lauder School of Government.

The team members include former Military Intelligence head Amos Malka,
strategic adviser Haim Asa, Lauder dean Alex Mintz, former Africa Israel CEO
Erez Meltzer and outgoing Cabinet Secretary Oved Yehezkel. Former air force
chief Eliezer Shkedi is expected to join at a later date.

The team will advise government bodies like the Prime Minister's Office,
National Insurance Institute and the Foreign and Defense Ministries.

Mintz will present a plan for addressing the Iranian nuclear threat by
creating a civil administration to coordinate economic warfare, sanctions,
influencing Iranian public opinion, military preparations, public relations
and legal action against Iranian President Mahmoud Ahmadinejad.

In addition, Asa will present the administration with three recommendations:
stepping up negotiating efforts with Syria as a cornerstone for a regional
peace agreement, changing government offices (in particular, moving the
Finance Ministry's budget division to the Prime Minister's Office to help
set the national agenda) and developing a national security project for
developing drones, which will not only bolster national security but will
also find work for unemployed high-tech professionals.


6) US officials to Obama: Talk to Hamas

A top economic adviser to US President Barack Obama, along with nine former senior officials, is calling on the American leader to open dialogue with Hamas, The Boston Globe reported Saturday.

According to the report, Paul A. Volcker and other members of the bipartisan group - including former national security advisers Brent Scowcroft and Zbigniew Brzezinski -have sent a letter to Obama urging him to engage Hamas in order to coax the terrorist organization to disarm and join a peaceful Palestinian unity government.

The letter was reportedly handed to Obama days before he took office.

Another member of the group, US/Middle East Project President Henry Siegman, said the White House has promised to allow the group to make its case before Obama.

"I see no reason not to talk to Hamas," Scowcroft said.

"The main gist is that you need to push hard on the Palestinian peace process," he added. "Don't move it to the end of your agenda and say you have too much to do. And the US needs to have a position, not just hold their coats while they sit down."


Other members of the group are former Republican senators Chuck Hagel and Nancy Kassebaum Baker, former House International Relations Committee chairman Lee Hamilton, former World Bank president James Wolfensohn, former United Nations ambassador Thomas Pickering, former US trade representative Carla Hills and former special counsel to President John F. Kennedy Theodore Sorensen.

The report is not the first instance of cracks appearing in the international boycott of local terror organizations. Britain recently announced that it would hold discussions with Hizbullah's political wing.

Bill Rammell, the UK Foreign Office minister for the Middle East, told the British Parliament earlier this month that the decision was made "in the light of more positive developments in Lebanon, and the formation of the national unity government in which Hizbullah is participating."

"Our over-riding objective is to press Hizbullah to play a more constructive role and move away from violence," he said.

The British move has been roundly condemned in Jerusalem.

6a) Worldview: Decision time on Mideast for Obama
By Trudy Rubin



Hillary Rodham Clinton tiptoed oh-so-carefully around the Israel-Palestine issue on her recent trip to the Middle East.

But she and President Obama will have to make some tough decisions soon, as Israeli Prime Minister-designate Benjamin Netanyahu prepares to form a right-wing government. Otherwise, any prospects for a two-state solution, even in the long run, will be dead before the end of Obama's first term.

Netanyahu is a smooth politician with perfect American English (he attended Cheltenham High School in the Philly suburbs). But his policies are likely to complicate nearly every aspect of Obama's strategy for the Mideast - including the Palestinian issue, and new approaches toward Syria and Iran.

For starters, Netanyahu appears to have chosen Avigdor Lieberman as future foreign minister, a figure whose inflammatory views may undercut any new peace moves in the region. Lieberman has suggested that Egyptian President Hosni Mubarak "go to hell," and proposed that Israel bomb the Aswan Dam in the event of war with Egypt. Recall that Egypt, with whom Israel has a peace treaty, is a crucial mediator in trying to find some solution for the ongoing crisis in Gaza.

Lieberman, a onetime member of the racist Kach Party (before it was banned in Israel), is also notorious for calling on Israel to rid itself of most of its Arab citizens and relocate them to a future Palestinian Arab "entity." Netanyahu tapped Lieberman because he needed the latter's party, Yisrael Beitenu (Israel Is Our Home), to form a ruling coalition. But the presence of such an outrageous figure will complicate uphill efforts to restart Israeli-Arab talks.

As for such talks, Netanyahu doesn't believe in the concept of a sovereign Palestinian state living alongside Israel. But unless a viable formula is found for a two-state solution, Israel will remain in permanent occupation of more than three million bitter Palestinians. That is a prescription for endless, poisonous Israeli-Arab war.

The Israeli leader argues, moreover, that the only correct avenue toward peace is to first pursue Palestinian economic development, and consign any negotiations on sovereignty to the indefinite future. This approach is nothing but a Middle Eastern mirage. It has failed many times in the past.

Anyone who has driven around the West Bank would understand that economic development depends on political progress. West Bank land is divided into cantons by Israeli settlements and roads that are designed to prevent any coherent territorial entity or political opposition.

And then there is Gaza. Even before Hamas took power there, Israel's fear of Palestinian infiltration had led to constant Israeli blockages of imports and exports from Gaza. Such uncertainty makes it impossible for Palestinian industries to develop, and ensures that foreign investors are unwilling to risk their money.

Even when the United States paid for pricey security equipment to scan containers exiting Gaza, easy movement of goods never materialized. And these days, only humanitarian supplies are permitted into this desolate strip of land. Bottom line: Without progress on Palestinian political issues (of which progress on security is a subset), forget economic progress.

This leads to the first decision for Obama: He must declare his administration believes "economic peace" cannot substitute for political progress. He should make clear that his administration will pursue the two-state solution.

However, given the hawkish leadership in Jerusalem, and the weak Palestinian leadership in Ramallah, it may not be possible to move directly to political talks. In that case, Obama must ensure that the situation on the West Bank and Gaza doesn't worsen so badly that peace talks cannot be resumed later. And he must give Palestinians some real reason to hope.

That requires a second decision: The president should firmly confront the new Israeli government on the issue of settlement expansion, making clear that such expansion contradicts our security interests - and theirs.

According to the Israeli group Peace Now, which closely tracks settlements, the Israeli government is planning to build more than 73,000 housing units in the West Bank, doubling the settler population there. Without a freeze on all settlement construction, the prospect for a viable Palestinian state will soon disappear.

Netanyahu has said he supports "natural growth," meaning the expansion of existing settlements. If Obama is unwilling to oppose this, he should admit the two-state solution is dead.

The third decision revolves around talks with Syria. Even if talks with the Palestinians cannot be revived quickly, there may be hopeful prospects for negotiations with Damascus.

Israel's military intelligence is said to strongly favor such talks: If Syria could be wooed away from its alliance with Iran, this would undercut the strength of Hezbollah in Lebanon and Hamas in Gaza. And progress on Syria would give Obama more cards to play in diplomatic overtures to Tehran.

Turkey had mediated indirect talks between Syria and Israel before Israel's elections. The Bush administration was cool to Turkey's move; it wanted to isolate Syria. But Obama backs a thaw; Clinton has dispatched emissaries to Damascus.

In his election campaign, Netanyahu swore he would never return the Golan Heights to Syria. He says he's willing to talk, but he hasn't said he's open to giving back territory.

Obama must try to convince Netanyahu that such an effort is in Israel's interest, and decide how hard to push if the Israeli leader resists. This is a crucial moment: The new U.S. president needs to show that, besides being a close ally of Israel, he is committed to a stable Middle East.

With Netanyahu about to form a government, these decisions must be made now.


7) Livni: Netanyahu must decide - Right or us
By Attila Somfalvi

After series of meetings with Likud chairman, Kadima leader remains firm in demands, including agreement on two-state solution, rotation in PM's role. Meanwhile, Netanyahu aide says 'door still open for Kadima'


Despite the rekindled coalition talks between Kadima and Likud, Kadima Chairwoman Tzipi Livni remained firm in her position Sunday.

Speaking to ministers outside of the weekly cabinet meeting, Livni said there would be no coalition agreement with Likud that would not include the Annapolis inspired two-state solution to the Israeli-Palestinian conflict, and "equal partnership" in the government – meaning rotation in the prime minister's role.

"This is Bibi's (Netanyahu) basic choice," Livni told the ministers, "of whether he goes with the Right or with us. It should be expressed in equal partnership and in the diplomatic field. There will be no agreement without the diplomatic matter."

During the cabinet meeting, Livni met in private with Labor Chairman and Defense Minister Ehud Barak for about an hour.

A sources close to Prime Minister-designate Netanyahu said that while there was a chance that Likud would sign a coalition agreement with several right-wing parties, "the door is still open for Kadima".

According to an aide to Netanyahu, "The other partners know very well that there is a chance for a broad unity government and everything that comes with it, and that Kadima will get whatever it deserves in accordance with its size and significance in the government."

Livni wants 'entire package'

Earlier Sunday, it was reported that Netanyahu and Livni met several times last week and spoke on the phone a few more times in an attempt to renew coalition talks. News of the series of meetings came after the parties reported only one meeting between the two leaders last week.

Ynet has also learned that the Likud leader's associate, Attorney Yitzhak Molcho, was privy to the talks and was helping bridge the differences.

Sources involved in the talks told Ynet that Livni wants "the entire package" from Netanyahu and would not settle for only part of the demands.

In the meetings, the Kadima chairwoman reiterated her demand for an equal government which would be based on Kadima and the Likud, and a commitment from Netanyahu in the diplomatic field.

Over the weekend, Likud, Kadima and Labor Party officials continued to discuss the possibility of forming a national unity government.


However, senior Likud officials who spoke to Benjamin Netanyahu got the impression that the prime minister-designate is unenthusiastic about Kadima Chairwoman Tzipi Livni's demand for a rotation in the prime minister's role.

Ynet reported on Friday that the secret talks between Kadima and the Likud were resumed in recent days. Netanyahu even spoke to senior Kadima officials, but a party source clarified that "these are not negotiation discussions".

Other senior officials from both parties also held secret talks, including Knesset Members Gideon Sa'ar (Likud) and Tzachi Hanegbi (Kadima), who discussed the possibility of resuming the official negotiations for the establishment of a unity government.