Taxes Up and Up - So Can Spend More and More!

If Democrats were vaguely interested in responding to our nation's financial plight they would 'change' their entire leadership and most committee chairs in both the Senate and House and select others with more common sense, less commitment to partisanship and extreme liberal ideology. I suspect the nation would be greatly relieved, the markets would respond and we might move forward.

If the Demwits were truly interested in freeing up capital and getting the market to function better they could increase the loss deductibility on earned income from $3m to say $50M or even more.

What we are witnessing is the first president in my lifetime who seems not to understand or appreciate capitalism and believes attacking Wall Street is the 'change' that will bring the nation together.

Sent to me by a neighbor, friend and fellow memo reader. It is dangerous to assume Israel and Netanyahu will repeat Olmert's perfidious mistakes. The administration's policies could push Israel over the edge. (See 1 below.)

Like the old "Casablanca" song about "It's Just The Same old Story" that is what Obama means by 'change' - your taxes are going up and up and up so spending and government can grow and grow and grow. (See 2 and 2a below.)

Iran and the problem it presents and the problem Obama will eventually have to face unless he chooses to ignore it and sweep it under the 'appeasement' rug, which, at present seems, to be his poloicy.

Historically market declines that reach depression levels (10% decline in GDP) have also been overwhelmingly associated with wars.

I continue to urge my memo readers to get and read Norman Poderetz' book: "WW 4." Also read the article below by Caroline Glick.

It's the Czech story all over again - different names but same story. Sacrifice a nation to appease another in hopes of buying peace. Obama is a trained lawyer and probably has little knowledge of history so hecould be more prone to repeat its mistakes.(He also is a social radical. See 3 and 3a below.)

Meanwhile, the Obama Administration appears ready to have direct dialogue with Iran and is being advised by Brzezinski and Scowcroft. (See 4 below.)

More Obama foreign policy happenings. (See 5 and 5a below.)

More interesting reading. (See 6, 6a and 6b below.)

Have a great weekend.


Dick



1) McCain's Brother Speech On The Jews & Israel

There is a lot of worry popping up in the media just now -- "Can
Israel Survive?" Don't worry about it. It relates to something that
Palestinians, the Arabs, and perhaps most Americans don't realize --
the Jews are never going quietly again. Never. And if the world
doesn't come to understand that, then millions of Arabs are going to
die. It's as simple as that.

Throughout the history of the world, the most abused, kicked-around
race of people have been the Jews. Not just during the Holocaust of
World War II, but for thousands of years. They have truly been "The
Chosen People" in a terrible and tragic sense.

The Bible story of Egypt 's enslavement of the Jews is not just a
story, it is history, if festooned with theological legend and
heroic epics. In 70 A. D. the Romans, which had for a long time
tolerated the Jews -- even admired them as 'superior' to other
vassals -- tired of their truculent demands for independence and
decided on an early "Solution" to the Jewish problem. Jerusalem was
sacked and reduced to near rubble, Jewish resistance was pursued and
crushed by the implacable Roman War Machine -- see ' Masada '. And
thus began The Diaspora, the dispersal of Jews throughout the rest
of the world.

Their homeland destroyed, their culture crushed, they looked
desperately for the few niches in a hostile world where they could
be safe. That safety was fragile, and often subject to the whims of
moody hosts. The words 'pogrom', 'ghetto', and 'anti-Semitism' come
from this treatment of the first mono-theistic people. Throughout
Europe , changing times meant sometimes tolerance, sometimes even
warmth for the Jews, but eventually it meant hostility, then
malevolence. There is not a country in Europe or Western Asia that
at one time or another has not decided to lash out against the
children of Moses, sometimes by whim, sometimes by manipulation.

Winston Churchill calls Edward I one of England 's very greatest
kings. It was under his rule in the late 1200's that Wales and
Cornwall were hammered into the British crown, and Scotland and
Ireland were invaded and occupied. He was also the first European
monarch to set up a really effective administrative bureaucracy,
surveyed and censused his kingdom, established laws and political
divisions. But he also embraced the Jews.

Actually Edward didn't embrace Jews so much as he embraced their
money. For the English Jews had acquired wealth -- understandable,
because this people that could not own land or office, could not
join most of the trades and professions, soon found out that money
was a very good thing to accumulate. Much harder to take away than
land or a store, was a hidden sock of gold and silver coins.. Ever
resourceful, Edward found a way -- he borrowed money from the Jews
to finance imperial ambitions in Europe, especially France .. The
loans were almost certainly not made gladly, but how do you refuse
your King? Especially when he is 'Edward the Hammer'. Then, rather
than pay back the debt, Edward simply expelled the Jews. Edward was
especially inventive -- he did this twice. After a time, he invited
the Jews back to their English homeland, borrowed more money, then
expelled them again.

Most people do not know that Spain was one of the early entrants
into The Renaissance. People from all over the world came to Spain
in the late medieval period.. All were welcome -- Arabs, Jews, other
Europeans. The University of Salamanca was one of the great centers
of learning in the world -- scholars of all nations, all fields came
to Salamanca to share their knowledge and their ideas. But in 1492,
Ferdinand and Isabella, having driven the last of Moors from the
Spanish Shield, were persuaded by the righteous fundamentalists of
the time to announce "The Act of Purification". A series of steps
were taken in which all Jews and Arabs and other non-Christians were
expelled from the country, or would face the tools and the torches
of The Inquisition. From this 'cleansing' come the Sephardic Jews --
as opposed to the Ashkenazis of Eastern Europe . In Eastern Europe ,
the sporadic violence and brutality against Jews are common
knowledge. 'Fiddler' without the music and the folksy humor. At
times of fury, no accommodation by the Jew was good enough, no
profile low enough, no village poor enough or distant enough.

From these come the near-steady flow of Jews to the United States .
And despite the disdain of the Jews by most 'American' Americans,
they came to grab the American Dream with both hands, and
contributed everything from new ideas of enterprise in retail and
entertainment to becoming some of our finest physicians and lawyers.
The modern United States , in spite of itself, IS The United States
in part because of its Jewish blood.

Then the Nazi Holocaust -- the corralling, sorting, orderly
eradication of millions of the people of Moses. Not something that
other realms in other times didn't try to do, by the way, the
Germans were just more organized and had better murder technology.


I stood in the center of Dachau for an entire day, about 15 years
ago, trying to comprehend how this could have happened. I had gone
there on a side trip from Munich , vaguely curious about this Dachau .
I soon became engulfed in the enormity of what had occurred there
nestled in this middle and working class neighborhood.

How could human beings do this to other human beings, hear their
cries, their pleas, their terror, their pain, and continue without
apparently even wincing? I no longer wonder. At some times, some
places, ANY sect of the human race is capable of horrors against
their fellow man, whether a member of the Waffen SS, a Serbian
sniper, a Turkish policeman in 1920's Armenia , a Mississippi
Klansman. Because even in the United States not all was a Rose
Garden. For a long time Jews had quotas in our universities and
graduate schools. Only so many Jews could be in a medical or law
school at one time. Jews were disparaged widely. I remember as a kid
Jewish jokes
told without a wince - "Why do Jews have such big noses?"

Well, now the Jews have a homeland again. A place that is theirs.
And that's the point. It doesn't matter how many times the United
States and European powers try to rein in Israel, if it comes down
to survival of its nation, its people, they will fight like no
lioness has ever fought to save her cubs. They will fight with a
ferocity, a determination, and a skill, that will astound us.

And many will die, mostly their attackers, I believe. If there were
a macabre historical betting parlor, my money would be on the
Israelis to be standing at the end. As we killed the kamikazes and
the Wehrmacht soldaten of World War II, so will the Israelis kill
their suicidal attackers, until there are not enough to torment
them..

The irony goes unnoticed -- while we are hammering away to punish
those who brought the horrors of last September here, we restrain
the Israelis from the same retaliation. Not the same thing, of
course -- We are We, They are They. While we mourn and seethe at
September 11th, we don't notice that Israel has a September 11th
sometimes every day.

We may not notice, but it doesn't make any difference. And it
doesn't make any difference whether you are pro-Israeli or you think
Israel is the bully of the Middle East . If it comes to where a new
holocaust looms -- with or without the concurrence of the United
States and Europe -- Israel will lash out without pause or restraint
at those who would try to annihilate their country.

The Jews will not go quietly again.

Joe McCain

2) The Obama Double Tax Whammy
By Gregory V. Helvering

President Obama's proposal to provide only a 28 percent benefit for charitable contributions by top-bracket taxpayers is part of a double whammy, since he proposes at the same time to raise the top bracket from 35 to 39.6 percent. The double-barreled increase/decrease reflects a two-part strategy that is much more than a simple tax increase. Less civil society and more government power is the result.


Taken alone, an increase in tax rates would result in more charitable giving: if one receives a 39.6 percent benefit from giving to charity, and one previously gave $1,000 at an after-tax cost of $650 (based on a 35 percent deduction), one can now give $1,076 at the same after-tax cost of $650.


In addition, higher tax rates might increase charitable contributions even beyond that, since higher rates also have a psychological effect. When the state and federal government together take close to 50 percent of the income of top-bracket taxpayers, those taxpayers increasingly prefer giving money to charity rather than sending it to government. They may round the $1,076 contribution up to $1,250 (or higher): in that instance, the $1,000 contribution that used to cost the government $350 turns into a $1,250 contribution costing the government $500.


By simultaneously increasing tax rates to 39.6 percent and decreasing the tax benefits of deductions to 28 percent, the government can (a) eliminate the increased tax incentive for giving and thus protect its new revenue; and (b) at the same time, reduce the tax benefit for the giving already occurring and thus generate even more money for the government. The government keeps its higher revenues that might be reduced by increased contributions, while the charities see existing contributions fall (since the tax cost to contributors of even the existing level of contributions increases). There is an effective shift of money from private charity to government -- the exact opposite of what would occur if there were only a single whammy (an increase in tax rates).


So the Obama plan hurts not only top-bracket taxpayers, but the charities themselves. The administration has an answer to this, but as Jacob Sullum notes in "Obama's Charitable Taking," the response reveals the underlying philosophy behind the two-whammy proposal:


In response to nonprofit organizations worried that limiting the deduction for charitable contributions will reduce donations, The Washington Times reports, [Budget Director Peter] Orszag "said Mr. Obama took care of that by giving charities government money to make up part of the difference." Orszag noted that "in the recovery act, there's $100 million to support nonprofits and charities." In essence, then, Obama plans to take money people otherwise would have given to the charities of their choice and give it to the charities of his choice.


The increase/decrease proposal will thus shift significant funds from charities chosen by taxpayers to government-chosen charities that are politically connected (or at least politically correct). Charities that want to share in the increased government largesse will need to ensure that their goals and activities are the ones the government wants to support. Civil society is weakened and government empowered.


Taxpayers who might otherwise choose to opt out of the 39.6 percent tax -- by increasing contributions to charitable, educational, and religious institutions they want to support -- will thus find that exit strategy blocked by the 28 percent deduction limit. Any increased contributions will necessitate an 11.6 percent toll charge to be paid to the government along with the contribution.


Audacious, no? If you are a taxpayer and think you can choose to support worthwhile charities instead of paying more money to the government, Obama is here to tell you: no, you can't. If you are a charity and think that, as a private institution with private support, the government cannot affect the direction of your activities, Obama also has a response: yes, we can.

2a) Warning! Bracket Creep Ahead!
By Tom Bruner


With a guarantee that only those making more than $250,000 a year will see a tax increase it is probably a good time to talk about something that has not been a problem for decades: Bracket Creep.


Bracket creep is the result of a progressive tax system in an inflationary environment. In a progressive tax system the rate at which income (or whatever the basis for taxation is, but for this discussion it is income) is taxed at a greater rate as income goes up. The increases are incremental in a discreet number of brackets, of which there are currently six. The net effect is that the last dollar earned is taxed at a greater rate than the first dollar earned as long as enough is earned to advance out of the lowest bracket.


In a relatively inflation-free environment earners move up the brackets as a result of gaining earning power and so greater income. Progressive tax policies can be accused of having the effect of diminishing motivation to improve one's earning power since rewards are effectively less as income, and so the marginal tax rate, increases.


In an inflationary environment income levels rise more or less in time with rising prices: more for those with valued skills, less for those without. As one's income rises, so too does his or her marginal tax rate. However, due to inflation, buying power does not increase with increasing income. This is why bracket creep is a problem and why a $250,000 income will not mean "rich" for long.


Inflation and Finance


Inflation, the decline of purchasing power, is caused by a number of factors. Most relevant now is massive increases in government spending. Technically this is demand-pull inflation. Inflation has not been zero for a very long time, and arguably some inflation is better than disinflation because the latter causes inventories to decay value over time. When inflation is tame, as it has been for over twenty years, the gradual decline in purchasing power is not noticed. Fluctuations in food and fuel prices mask the effect in the short term, and annual merit raises preserves buying power in the long term.


The impending flood of government spending can be financed in one or a combination of three ways. The three are: Increase Tax Revenue, Borrow, and Print Money. Increasing taxes on those making over $250,000 will not pay the bill. Confiscating the entire income of the top 10% of earners in the United States would not pay half of the proposed deficit, and that would work only once as top earners lose all motivation to earn anything. Increasing tax revenues would help but, contrary to what would make sense at first glance, that generally only happens when tax rates are lowered. This policy is not currently under consideration.


Borrowing money, which the government accomplishes by selling bonds, has been an ongoing government activity for generations. There is no point in putting a number here for the total debt as of now, it changes constantly, so just visit the Debt Clock. Perspective is important when looking at numbers that, in a perfect world, would be presented in scientific notation. Remember that debt, when managed responsibly, is a good thing for both borrower and lender. The borrower uses the capital to improve operations in some way, and the lender earns interest income on funds for which there is no better use.


There are few lenders with adequate resources to provide the incredible pile of cash needed to fund the proposed government programs. Recent losses in the equity markets has drained the private sector of capital, so it comes to China. But China has only about $2 trillion on hand at the moment, and the best possible use is probably not to lend it all to the United States. The Chinese economy is slowing too and they have their own stimulus packages to finance. Secretary of State Clinton may have some favors to call in from the Chinese, but they may not be able to provide financing even if they want to.


In principle the Chinese may be interested in seeing this process through:



The principle governing our economic policy is to proceed with all the essential work of economic construction within our power and concentrate our economic resources on the war effort, and at the same time to improve the life of the people as much as possible, consolidate the worker-peasant alliance in the economic field, ensure proletarian leadership of the peasantry, and strive to secure leadership by the state sector of the economy over the private sector, thus creating the prerequisites for our future advance to socialism.
-- Our Economic Policy, Mao Tse-tung (Mao Zedung)


So, if the Chinese care to help finance our advance to socialism, perhaps they will put economic considerations aside and approve the loan. The priorities seem remarkably similar now in the U.S. as in China in 1934. Twenty-four years after writing this Mao launched the Great Leap Forward, and perhaps as many as 20 million Chinese died from starvation and related diseases. Mao resigned his position as head-of-state, but remained popular and powerful as party chairman (they only have one party, greatly simplifying the decision of whether to report a politicians party affiliation in the press), kicking off the somewhat less disastrous Cultural Revolution a few years later. If the Chinese, given their recent history, believe that this proposed loan is beneficial to both lender and borrower, considering political implications as well as economic ones, then they will approve the application. Time will tell.


Another observation by Mao from Our Economic Policy:


As regards the private sector of the economy, we shall not hamper it, indeed we shall promote and encourage it, so long as it does not transgress the legal limits set by our government. For the development of private enterprise is essential to the interests of the state and the people at the present stage. Needless to say, private enterprise is now preponderant and will inevitably continue to occupy a dominant position for a considerable time.


Mao was arguably more supportive of the private sector in 1934 than the President of the United States is in 2009. Now that's progress! Perhaps it would help if the current administration adopted this policy of promoting and encouraging the private sector, like Mao?


Print Money


Since the rich do not have enough money to confiscate, and the Chinese may not be inclined to provide debt financing, it is likely that it will be necessary to print money. Of course in the digital age the money does not need to be literally "printed;" actual currency is only one part of the money supply. The informal definition of inflation is "too much money chasing too few goods." Providing a job in the bike path industry pays the bills and provides more self-esteem than public assistance, but it produces no good or service with economic value so money chasing goods goes up, supply of goods stays the same - which way does inflation go?


Of the trillions of dollars in stimulus and other spending, which started in the previous administration and is accelerating in the current one, only a fraction will stimulate the economy without introducing inflationary pressure. For example, if a new bridge or improvements to an existing one cuts transport time and fuel consumption it provides real economic value, albeit indirectly. Projects in this category are being considered. This does not suggest that bike paths and Salt Marsh Harvest Mouse conservation efforts are not necessary or that they are bad ideas, only that government spending in some areas will tend to have better economic results than spending in other areas.


There is a perverse side to this strategy. Whatever bonds can be sold will be repaid with considerably shrunken dollars, and we get to keep the bike paths. So if inflation exceeds the interest rate paid on the debt, the bonds are a bargain in the long run for the government, not so much for the lender. The lender knows this and will act accordingly.


Those who live in the shadow of a macroeconomic game of chicken should expect to become familiar with terms like bracket creep, stagflation, and another measure of economic performance of little interest for the last couple of decades: the Misery Index. And do not be surprised if you find yourself among the rich taxpayer class sooner than expected.

3) A Nuclear Iran: Obama's Dire Strait
By Peter Glover and Michael J. Economides

The economic downturn may have given the Obama White House its first major crisis, but the fast-looming Iran nuclear crisis is about to give him his second.


It was some of the Administration's highest ranking officials, Chairman of the Joint Chiefs, Adm. Mike Mullen and the Secretary of Defense Robert Gates that put the exclamation marks on the issue on March 1.


Mullen when asked on CNN whether Iran "might now have enough fissile material to make a bomb" he answered: "We think they do, quite frankly." He went on to add "Iran having a nuclear weapon, I believe, for a long time, is a very, very bad outcome for the region and for the world."


Secretary Robert Gates, speaking on NBC's "Meet the Press," while acknowledging the Iranian problem said of Iran, "They're not close to a stockpile, they're not close to a weapon at this point and so there is some time." What he was not pressed about is the duration of this time. It may be running out fast.


Even before his inauguration on January 20, President Obama, trying to show his differentiation from single-minded, "cowboy" George W. Bush, has been expansive on the philosophy of new international co-operation, multi-lateral working with previously considered rogue countries, even promising new talks without pre-conditions with Iran. But, as regards the latter, Obama has been conspicuously short on specifics. Meanwhile, in what can only described as a suicide wish and one that can only be possible in that part of the world, Teheran continues to flaunt the fact it is closing fast on its nuclear goals, whatever they may be.


While the issue of how and when new talks might be conducted may define the White House thinking, President Obama needs to consider two equally serious questions if Israel, as appears increasingly likely under prime minister Benjamin Netanyahu, moves militarily against Iran. First, how, given it is Iran's nuclear-build partner, will Russia react? Second, what contingency plans does Obama have to safeguard vital American and world oil supplies if, as threatened, Iran moves to close the vital Strait of Hormuz?


Latest Key Developments


In an op-ed in the Jerusalem Post, Edwin Black noted four key developments since mid-January that have ratcheted up the stakes since President Obama's inauguration. They include:


Iran launching a space satellite - claiming it was to ‘monitor earthquakes and enhance communications'

The International Energy Agency admitting it had underestimated Iran's nuclear stockpile by about one-third.

Iran boosting the number of its centrifuges to over 5,400 (actually, Iran now claims it has reached its target figure of 6,000)

Benjamin Netanyahu becoming Israeli Prime Minister

As with North Korea's recent claim that it too was about to launch a "communications satellite", the response from Western politicians and the media alike was cynical. The Washington Post claimed the North Korean's had "dressed up a long-range ballistic missile". Is anyone in the West gullible enough to really believe the Iranian Mullahtocracy was doing anything other than testing its own missile delivery system? The IEA has also stated that it totally underestimated Iran's capacity to manufacture sufficient low-enriched uranium to create at least one nuclear bomb. If the latest Iranian claims over the number of centrifuges it possesses is even remotely close to be correct, that process is set to speed up dramatically. Equally significant is the return to power in Jerusalem of Benjamin Netanyahu, a man deeply committed to pre-emptive action to prevent Iran achieving its nuclear potential.


Reality vs Wishful Thinking


With Israeli politicians themselves also wanting to avoid any sort of military intervention, most in the West appear to be pinning their hopes on a combination of Obama-instigated talks and the possibility that the Iranian hardliner President Mahmud Ahmadinejad might be voted out of office in upcoming Iranian elections in June.


Just what diplomatic arm-twisting President Obama might bring to the table that has not already been tried remains a mystery. With tension mounting, EU leaders are, yet again, even at this late hour with Operation Nuclear Iran almost up and running, calling for more sanctions. As we have written previously, sanctions had little chance of working and now are 3-D: a diplomatic dead duck. That leaves talks. If they fail, as even the Obama fawning New York Times asked, "Then what?" Hope that a victory for more moderate former president, Mohammed Khatami, would make a significant difference must be a forlorn one. As recently put by one Iranian diplomat, it was an article of "faith within the regime that they all have to support the nuclear program".


Endless talks and ostrich-like head hiding are hardly an option for Israel faced with what it -- and many others -- consider a deeply ideological regime committed to Israel's destruction, and about to achieve the means to ‘deliver' it. And, with the potentially hawkish threat of the Bush administration downgraded to the dovish diplomacy of the Obama White House, the fear is that yet more talking can only buy Teheran more time. Time Israel undoubtedly believes it no longer has.


Israel's Covert War


Recent reports reveal that Israel has been conducting a covert war against Iran's nuclear program in a bid to avoid military intervention and slow down Iran's nuclear progress using hitmen, sabotage and other means. According to Reva Bhalla, a key analyst with Stratfor, the US private intelligence company, the "decapitation" program has been aimed at taking out key scientists and others. Mossad, for instance, is believed to have been behind the death of Ardeshire Hassanpour, a top Iranian nuclear scientist who died from "gas poisoning" in 2007. But the limitations of a covert operation of this kind was recently put into perspective by Vince Canastraro, former CIA counter-terrorism chief, who said, "You can't get rid of a couple of people and hope to affect Iran's nuclear capability."


So when Iran began testing its first nuclear reactor in late February it was a signal the program was approaching the ‘point of no return' feared by the West and by Iran's neighbors in the Middle East alike. As the reactor whirred into action, Iranian nuclear scientists were waxing lyrical on their achievements. Gholamreza Aghazadeh, the head of Iran's Atomic Energy Organisation, claimed that an extra 1000 centrifuges had been brought online (making 6000) since just last November. He also alluded to a new nuclear milestone that would be reached in April this year.


The Russian Role


At Aghazadeh's shoulder during the launch at the Bushehr plant was Sergei Kiriyenko, head of Rosatom, Russia's state-owned nuclear company and Iran's full partner in the project. Is this what is driving Iran's freewheeling attitude to world opinion? The dual knowledge that the Obama administration is desperate to avoid military conflict but also because Iran may have a Russian ‘bodyguard'.


It remains hard to see what diplomatic leverage Obama can employ that has not already been tried. That leaves military force. And with Hamas and Fatah currently patching up their differences and a ceasefire in Gaza, it leaves Israel, with its new prime minister, free to concentrate on the Iranian threat.


So what does President Obama do if final talks fail? All the indications are that there is no back-up plan. If Israel should then take the only action logically left open, President Obama will immediately be faced with two equally serious issues: first, what will Iran's partner Russia do? (and what should the US do if Russia does take action?) Second, the Iranians will close the Straits of Hormuz cutting off vital world and US oil supplies. The first is clearly a major issue, but is not our concern here. The second is. 90 percent of oil exported from the Persian Gulf is carried on oil tankers through the Straits of Hormuz. A staggering 35 percent of all transnational oil trade passes through. A headline that the Straights are closed will sky-rocket the oil price. Headlines ruled prices when they went to almost $150 (only last July) and economic crisis headlines brought it down to an unsustainable $40. There was no rational reason for either. But then there has never been as dire headline than the potential closing of the Straits of Hormuz.


The Iranian nuclear affair is plainly reaching its denouement. If proposed talks fail even President Obama will find it difficult to restrain an Israel that fears for its very existence, threatened as explicitly and clearly as could be by Ahmadinejad. In the event of a military strike by Israel, Obama is likely to have to deal with an irate Russian ‘project manager' as well as Iranian ‘fallout'. Moreover, if he fails to react swiftly to protect the oil supply through Hormuz, he will quickly see what appears to be his total lack of contingency energy planning turn into a full-blown domestic security nightmare.

3a)How Obama, Hillary and Kerry will, ultimately, bring peace to the Middle East
By Caroline B. Glick

Compare and contrast the following three events:

At the International Atomic Energy Agency's Board of Governors meeting on Wednesday, George Schulte, the US ambassador to the IAEA pointed an accusatory finger at Syria. Syria, Schulte said, has not come clean on its nuclear program. That program of course, was exposed in September 2007 when Israel reportedly destroyed Syria's North Korean built, Iranian financed al Kibar nuclear reactor.

In its report to its board of governors, the IAEA stated that in analyzing soil samples from the bombed installation, its inspectors discovered traces of uranium. The nuclear watchdog agency also noted that the Syrians have blocked UN nuclear inspectors from the site and from three other suspected nuclear sites.

Reacting to the IAEA report, Schulte said that it, "contributes to the growing evidence of clandestine nuclear activities in Syria." He added, "We must understand why such [uranium] material - material not previously declared to the IAEA - existed in Syria and this can only happen if Syria provides the cooperation requested."

On Tuesday, at a press conference in Jerusalem with outgoing Foreign Minister Tzipi Livni, visiting US Secretary of State Hillary Clinton announced that the Obama administration is sending two senior envoys to Syria. Their job, as she put it, is to begin "preliminary conversations," on how to jumpstart US-Syrian bilateral ties.

Clinton's statement made good headlines, but she was light on details. On Wednesday, hours after Schulte accused Syria of covering up its illicit nuclear program, US Senator John Kerry helpfully filled in the blanks about the nature of the Obama administration's overtures to nuclear-proliferating Damascus. In an address before the left-leaning Saban Center for Middle East Policy at the Brookings Institute in Washington, the Chairman of the Senate Foreign Relations Committee, who just returned from a visit to Syria, Israel and the Palestinian Authority said that the purpose of US overtures to Syria is to appease Syrian President Bashar Assad.

If in the past, both American and Israeli policymakers interested in engaging Syria have made ending Syria's alliance with Iran a central goal of their proposed engagement, Kerry dismissed such an aim as unrealistic. In his words, "We should have no illusions that Syria will immediately end its ties with Iran."

Indeed, as far as Kerry is concerned, Syria's role in these talks is not to actually give the US anything of value. Rather, Syria's role is to take things of value from the US - and of course from Israel.

Kerry proposed that in exchange for Syrian acceptance the US's offer of friendship and Assad's willingness to negotiate an Israeli surrender of the Golan Heights, the US should consider "loosening certain sanctions" against Syria. Doing so, he claimed will also be good for the US economy because it will open new opportunities for US businesses.

On the surface, the disparate statements by Schulte, Clinton and Kerry present us with a puzzle. In Geneva, Schulte noted that Syria is a nuclear proliferating rogue state that has refused to cooperate with UN nuclear inspectors. And in Jerusalem and Washington, Clinton and Kerry ignored Syria's dangerous actions, and advocated a policy of appeasement.

At the same IAEA Board of Governors meeting this week, the agency reported that Iran has produced more than a thousand kilograms of low enriched uranium - enough to build a bomb after further enrichment. That enrichment can be completed by year's end with Iran's 5,600 centrifuges. Moreover, between the Russian-built, soon to be opened nuclear reactor in Bushehr and Iran' illicit heavy water reactor in Arak, Iran will have the capacity to build plutonium-based bombs within two years.

Commenting on the IAEA's report on Iran, US Admiral Michael Mullen, the Chairman of the Joint Chiefs of Staff acknowledged that Iran has enough uranium for a bomb. Seemingly contradicting Mullen, Defense Secretary Robert Gates claimed that there is no reason to worry about all that uranium because Iran won't have a bomb for some time given that the uranium it possesses is not sufficiently enriched to make a bomb.

For his part, US President Barack Obama is receiving guidance on contending with Iran from former Congressman Lee Hamilton, who co-authored the Baker-Hamilton Iraq Study Group report published in December 2006. That report called for the US to coordinate the withdrawal of its forces from Iraq with Iran and Syria - the principal sponsors of both the Shiite and Sunni insurgencies in the country. It recommended that the US purchase Syria's good will by pressuring Israel to surrender the Golan Heights to Damascus and Judea, Samaria and Jerusalem to Hamas. It recommended that the US win Iran's trust by accepting it as a nuclear power and pledging not to overthrow the regime.

In an interview last month with Washington Post columnist David Ignatius, Hamilton reiterated those recommendations. He claimed that the starting point for US-Iran discussions is for the US to "state our respect for the Iranian people, renounce regime change as an instrument of US policy, seek opportunities for a range of dialogue across a range of issues, and acknowledge Iran's security concerns and its right to civilian nuclear power."

Hamilton assured Ignatius that these recommendations have been adopted by the White House.

All of the above show that there is no contradiction between what the Obama administration understands about Iran and Syria and the policy it has adopted towards them. Specifically, as Schulte's and Mullen's statements make clear, the administration is aware of the dangers that both Iran and Syria constitute to global security. And as Clinton, Kerry, Gates and Hamilton all make clear, the administration's policy for dealing with those dangers is to change the subject and hope the American public won't notice or mind.

To this end, the administration is now asserting that Iran and Syria - the two most active agents of regional instability - share the US's interest in a stable, democratic Iraq. And owing to their sudden devotion to stability, Obama's surrogates tell us the Syrians and Iranians will support the new anti-Syrian and anti-Iranian Iraqi democracy and even protect it after the US withdraws its forces from the country.

Then too, as both Kerry and Clinton made clear, the administration plans to ignore Syria's support for Iraqi, Palestinian and Lebanese terrorism, its nuclear proliferation activities and its massive ballistic missile arsenal as well as its strategic alliance with Iran. Rather than confront Syria about its bad behavior, the administration favors a policy based on making believe that in his heart of hearts, Assad is a liberal democrat who aspires to peace, and hope, and change.

But the core of the administration's campaign to ignore Iran's nuclear program - as well as Syria's - is its unrelenting quest for the big payoff: Palestinian statehood.

This week Iran staged yet another "Destroy Israel" conference in Teheran, replete with Mahmoud Ahmadinejad's trademark Holocaust denial, Supreme Leader Ali Khamenei's ritual castigation of the Jewish state as a "cancerous tumor," and the US as a treacherous enemy, and Ali Larijani's threat to attack Israel's suspected nuclear sites. The conference enjoyed a newfound sense of international legitimacy taking place as it did just after burka-clad Annette Benning's goodwill Hollywood celebrity visit to the mullocracy.

The genocidal pageantry in Teheran, elicited no significant response from Clinton and Kerry. They had bigger fish to fry. While the administration and its supporters seem to believe that the US has no right to make demands on Iran and Syria which, they assert, are both just advancing their national interests, for them Israel is a completely different story. As Clinton and Kerry demonstrated this week, the administration and its supporters will not stop making demands on Israel.

Kerry justified Syria's continued alliance with Iran by saying that Syria should be expected to "play both sides of the fence [with the US and Iran] as other nations do when they believe it is in their interests."

But Israel has no right to similarly take what action it deems necessary to secure its interests. In Kerry's view, the time has come for the US to show that it is serious about Palestinian statehood and the way to do that is to force Israel to block all Jewish building in Judea and Samaria.

In his words, "On the Israeli side, nothing will do more to make clear our seriousness about turning the page than demonstrating - with actions rather than words - that we are serious about Israel freezing settlement activity in the West Bank."

He also called for the US to compel Israel to open its borders with Gaza. And he said that from his perspective, it is unacceptable for the incoming Netanyahu government not to embrace establishing a Palestinian state as its most urgent goal.

Clinton joined Kerry his efforts to compel the Jewish state to ignore its national interests in the cause of the higher goal of Palestinian statehood. Like him, she attacked Israel for not handing control over its borders with Gaza to Hamas. And like Kerry, she stated repeatedly that her greatest goal is to establish a Palestinian state.

Clinton's unique contribution to that great "pro-peace" endeavor this week was her outspoken criticism on Wednesday of the Jerusalem municipality's decision to enforce the city's building and planning ordinances equally towards both Jews and Arabs. That policy was made clear this week when city inspectors destroyed illegal buildings in both Jewish and Arab neighborhoods.

Since as far as Clinton is concerned, Israel will one day be required to throw all the Jews out of East, South and North Jerusalem to make room forwhat she believes is the "inevitable" Palestinian state, Israel has no right to treat Arabs and Jews equally in its soon-to-be-inevitably divided capital city. Arabs should be allowed to break the law at will. When Israel insists on enforcing its laws without prejudice, Clinton condemns it for being anti-peace.

Kerry argues that by forcing Israel to give its land to the Palestinians the US will be promoting regional stability by doing the bidding of anti-Iranian Arab states like Egypt and Saudi Arabia. But even if putting the screws to Israel makes Cairo and Riyadh happy, their happiness will have no impact whatsoever on Iran's nuclear weapons programs or on Syria's proliferation activities. That is, Israeli land giveaways will have no impact on regional stability.

And that's precisely the point. The Obama administration has no intention of preventing Iran from becoming a nuclear power or Syria from maintaining its alliance with the mullahs. The White House seeks far more modest ends.

Through its policies towards Israel on the one hand and Iran and Syria on the other, the Obama administration demonstrates that it has already accepted a nuclear Iran. Its chief concern today is to avoid being blamed when the mushroom clouds appear in the sky. And it may well achieve that aim. After all, how could the administration be blamed for a nuclear Iran when it has wholly devoted its efforts to advancing the righteous cause of peace?

4) US Afghan parley likely to include Iran
By HILARY LEILA KRIEGER

What's this?

US Secretary of State Hillary Clinton on Thursday proposed holding a regional conference on Afghanistan on March 31 that would likely include Iran.


If Iran were to attend, it would mark an opening in relations between the Islamic republic and the Obama administration, which has been exploring ways of engaging with Teheran.

The conference would be held under the auspices of the UN and look at ways of harnessing international efforts to improve the situation there.

"Iran borders Afghanistan. In the early days of the military efforts by the United States and our allies to go after the Taliban and al-Qaida, Iran was consulting with our ambassador on a daily basis," Clinton told reporters in Brussels. "Where it is appropriate and useful for the United States and others to see whether Iran can be constructive, that will be considered."

The development came the same day that US Senate Foreign Relations Committee Chairman John Kerry held a hearing on American policy toward Iran, in which he said, "If ever there was an urgent challenge that will require a multi-dimensional solution, surely it is Iran's nuclear program."


He praised the idea of talking to Iran, saying, "We must engage directly with Iran, and I'm glad that this idea's day is coming."

But he cautioned, "We must be honest with ourselves: We will not solve this problem just by talking directly to Teheran. While Iran was just talking to the IAEA and the Europeans, it deftly sidestepped every supposed red line laid down by the international community. While Iran was just talking to the world, it moved to the threshold of becoming a nuclear-capable state."

The committee heard testimony from two former US national security advisers, Zbigniew Brzezinski, who served under Jimmy Carter, and Brent Scowcroft, who worked for George H.W. Bush.

Brzezinski began by stressing actions that US shouldn't take, to avoid prejudicing the negotiations, arguing against ratcheting up sanctions, threatening the use of force, speaking of regime change and setting deadlines for the negotiations, unless the aim was for the talks to break down and for America to be able to blame that breakdown on Iranian intransigence.

Accordingly, he criticized a story in Haaretz this week that said Israel told Clinton to impose a time frame on talks for them to have impact.

"We should be very careful not to become susceptible to interested parties" and their policies on Iran, he warned.

He also took issue with Israel's contention that a nuclear-armed Iran would be an "existential threat," and argued that deterrence in the form of extending America's nuclear umbrella to friends in the Middle East should allay Jerusalem's concerns.

The US, Brzezinski maintained, faced more of an existential threat from the Soviet arsenal when he was in the White House, in the 1970s, than Israel did now, and deterrence proved effective in that case.

Both Brzezinski and Scowcroft agreed that the biggest threat came not from Iran acquiring a nuclear weapon but from the impetus such an acquisition would give to a regional nuclear arms race.

Many pro-Israel figures have assailed Brzezinski and Scowcroft for their views on the Middle East, and the choice to invite the two to testify did not sit well with several activists.

"The choice of Brzezinski and Scowcroft sent up two yellow flags when I heard they were given such prominence," one Jewish leader said of Thursday's hearing. "When Brzezinski used his short opening statement to say Secretary of State Hillary Clinton should be cautious about listening to Israel's ideas, the red flag really went up. After all, Israel knows an awful lot about Iran and what they do that's against the interest of peace."

5) Obama Shouldn't Sacrifice Allies To Please Russia
By Michael Rubin

On March 2, "The New York Times" reported that U.S. President Barack Obama had written to Russian President Dmitry Medvedev suggesting that reconsideration in Moscow of the extent of its support for Iran's nuclear program might result in a U.S. suspension of plans to establish a missile-defense system in Poland and a radar station in the Czech Republic. The Russian leadership rebuffed Obama's outstretched hand. Moscow, Medvedev said, would welcome discussions about missile defense, but would not link such talks to its policy toward Tehran.

Too often, new U.S. administrations assume that the reason for the failure of engagement lies more with their predecessors than with their adversaries. Obama is no different, but rushing into diplomatic initiatives, however well intentioned, can be costly.

The impact on the North Atlantic Treaty Organization (NATO) of Obama's proposed quid pro quo with Russia could be profound. Founded in 1949 as a collective-defense pact against the Soviet Union, NATO spanned continents and the Atlantic Ocean.

Equal Protection
For collective defense to work, however, President Harry S Truman determined that all NATO members should enjoy equal defense. Western Europe would not simply be strategic depth for the United States, but would enjoy the same level of protection. NATO expanded over the years. Greece and Turkey joined in 1952; West Germany in 1955; and Spain in 1982. With the fall of the Iron Curtain, NATO moved eastward. Poland, Hungary, and the Czech Republic joined in 1999, and Slovenia, Bulgaria, Romania, and the Baltic states five years later.

Central and Eastern Europe have always been sensitive to the perception that they retain second-class status within both the European Union and NATO. As the Russian government grew more belligerent in its opposition to the radar station and antiballistic-missile base, some U.S. diplomats floated the idea of placing the facilities in older NATO members, such as Italy or the United Kingdom. Former President George W. Bush rightly opposed such a compromise in order to signal that every NATO member was equal, and that Eastern Europe was not simply strategic depth.

It was to cement this point that both Prague and Warsaw agreed to host such facilities despite sizable domestic opposition. Scrapping the European antiballistic-missile coverage altogether would, in effect, relegate first-tier missile defense to North America, which maintains its early warning radar and missile defense in Canada, Alaska, and the continental United States.

While Obama and his aides campaigned for a return to realism in foreign policy, their approach to diplomacy suggests dangerous idealism. The Obama era may have begun on January 20, but neither Moscow nor Tehran abide by the U.S. political calendar. It is not possible to simply "reboot" relations.

Common Interests
For Russian Prime Minister Vladimir Putin, realism means maximizing Russian power. He does not seek good relations with the West; he seeks the resurrection of Moscow as the leader of an informal empire corresponding to the borders of the former Soviet Union. Putin appears to see Russian aid to the Iranian nuclear program as a win-win situation for Moscow. On one hand, Russian nuclear assistance to Iran has netted Rosatom, the Russian state nuclear-power agency, billions of dollars. Russian military sales -- either direct or channeled through Belarus -- are icing on the cake. On the other hand, in the unlikely event that the United States strikes Iran militarily, the price of oil will shoot up, pulling the shaky Russian economy out of recession.

Iranian officials, likewise, see the United States' back against the wall. On February 11, 2008, commemorating the 29th anniversary of the Islamic Revolution, Iranian President Mahmud Ahmadinejad announced: "I officially declare that Iran has become a true and real superpower.... I say with a loud voice that the era of imperialism and [U.S.] bullying has come to an end."

In fact, the time for a deal such as the one outlined in Obama's letter to Medvedev may already have expired. On February 27, delivering the Islamic republic's official sermon, Ali Akbar Hashemi Rafsanjani, among the most powerful figures in Iran today and himself once a target of U.S. engagement, declared, "Even if the Russian experts don't complete the Bushehr nuclear power plant, Iranian experts will finish the job."

Obama may see his offer to Russia as pragmatism, but gestures create precedent. U.S. allies who fear that Washington is willing to sacrifice allies for the sake of diplomatic convenience may question whether alliances remain built on today's interests only, or also on shared values and history. If, after all, Russian antagonism forces U.S. concessions over Poland and the Czech Republic, why not increase Russian belligerence in the Caucasus, Central Asia, or on the Korean Peninsula? If the Obama administration signals that Poland and the Czech Republic are on the table, why should Ukraine and Georgia not be? Why should China not expect to deal over Taiwan, or why should Iran -- another target of Obama's desire to engage -- not demand concessions on Israel?

Diplomacy should always be a strategy of first resort. But Obama should realize that diplomacy with dictatorships is not the same as diplomacy among democratic nations. If democracies can be swayed with values and incentives, altering autocrats' behavior often requires far more complex coercion, not simply idealistic letters. If Washington is to remain strong, its alliances must remain strong. The White House must learn that the best security comes from supporting allies, not cutting deals over them.



5a) Aid for sale in Hamas' Gaza
by Asaf Romirowsky and Nicole Brackman

There was a bit of head-scratching going on recently in the hallowed halls of the UN.

After weeks of rebuking Israel for preventing humanitarian aid to flow into Gaza, UN officials were forced to cancel deliveries of aid into the Hamas-controlled territory after terrorists broke into a UN Relief and Works Agency warehouse and made off with 800 tons of blankets, food and other basic commodities to sell them to the highest bidders.

Israeli officials have been saying all along that Hamas routinely diverts humanitarian aid. In April, fuel trucks destined for UNRWA warehouses were overtaken. It was reported in August that Hamas gunmen had hijacked more than 10 trucks destined for the Palestinian Red Crescent Society full of food and medical supplies.

All that is only more ironic given the worldwide castigation of Israel for allegedly preventing humanitarian aid to flow into Gaza during the military operation.

And the criticism wasn't limited to the issue of aid. The UN (and the international community) was quick to condemn Israel for allegedly targeting an UNRWA-run school, despite widespread acknowledgement that Hamas routinely employs such facilities as "civilian shields" in an attempt to draw Israeli fire.

The incident where IDF fire hit an UNRWA school in the Jabalya refugee camp in Gaza is indeed tragic. At the time, UNRWA insisted there were no terrorists in the school compound and the Israelis were "careless," with UNRWA Operations Director John Ging claiming that mortars had hit the school, killing dozens and wounding more.

Just days ago, though, UN officials admitted that Israel had not hit the school at all, but an area outside it. Ging admitted that his original claims were wrong.

It may have taken the embarrassment over such a glaring error to get the UN to acknowledge what the Israelis have been saying all along: that Hamas' callous use of civilians as shields is itself a humanitarian crisis.

Despite the new information, it's worth taking a close look at the historical ties between UNRWA and Hamas. UNRWA has long been a major employer for Hamas members, and has lent its facilities to Hamas and other terror organizations for weapons-related purposes.

For example, in May, we learned that Awad al-Qiq, who was targeted by the Israeli military, was a U.N. employee and headmaster of a top prep school in Gaza. Al-Qiq, a science teacher, was also in the rocket business while at the same time educating Palestinian youth.

Since Hamas' takeover of Gaza in 2006 after Israel's unilateral withdrawal in August 2005, UNRWA hasn't raised explicit objections to the brutal Hamas violence that enabled the terrorist group to take the Gaza Strip by force.

UNRWA appears to be chiefly concerned with its own survival and continued funding. As Karen AbuZayd, the commissioner general of UNRWA, said after the Hamas takeover, "We are not scared. Donor countries have not in any way said they will stop their aid to UNRWA.

"On the contrary, we were approached by many of these countries, even Israel, asking us to continue our services to Palestinian refugees and perhaps even extend these services to do things we haven't done before."

To be perfectly blunt, the theft of humanitarian aid by Hamas (not to mention its ruthless use of its own people as targets as well as shields) only proves the point: Dead civilians are not Israel's goal but Hamas'.

According to Hamas' thinking, the more Palestinian victims there are, the more the international community will try to pressure Israel to avoid any further military operations.

Now that the shooting has stopped, the Obama administration has pledged to provide some $900 million to help rebuild Gaza. Governments and NGOs serious about assisting Palestinian Gazan society must insist on accountability whereby that reconstruction funding is allocated independently and transparently.

When it comes to doling out the money, UNRWA and Hamas - both of whom seem to be more focused on empty rhetoric rather than working towards a peaceful Palestinian civil society - should be bypassed.

6) Obama's Left Turn: Centrists fear that the president's budget reveals his liberal leanings.
By Stuart Taylor

Having praised President Obama's job performance in two recent columns, it is with regret that I now worry that he may be deepening what looks more and more like a depression and may engineer so much spending, debt, and government control of the economy as to leave most Americans permanently less prosperous and less free.

Other Obama-admiring centrists have expressed similar concerns. Like them, I would like to be proved wrong. After all, if this president fails, who will revive our economy? And when? And what kind of America will our children inherit?

The house is burning down. It's no time to be watering the grass.

But with the nation already plunging deep into probably necessary debt to rescue the crippled financial system and stimulate the economy, Obama's proposals for many hundreds of billions in additional spending on universal health care, universal postsecondary education, a massive overhaul of the energy economy, and other liberal programs seem grandiose and unaffordable.

With little in the way of offsetting savings likely to materialize, the Obama agenda would probably generate trillion-dollar deficits with no end in sight, or send middle-class taxes soaring to record levels, or both.

All this from a man who told the nation last week that he doesn't "believe in bigger government" and who promised tax cuts for 95 percent of Americans.

The president's suggestions that all the necessary tax increases can be squeezed out of the richest 2 percent are deceptive and likely to stir class resentment. And his apparent cave-ins to liberal interest groups may change the country for the worse.

Such concerns may help explain why the Dow Jones industrial average plunged 17 percent from the morning of Inauguration Day (8,280) to its close on March 4 (6,876). The markets have also been deeply shaken by Obama's alarming failure to come up with a clear plan for fixing the crippled financial system -- which has loomed since his election four months ago as by far his most urgent challenge -- or for working with foreign leaders to arrest the meltdown of the world economy.

The house is burning down. It's no time to be watering the grass.

This is not to deny that the liberal wish list in Obama's staggering $3.6 trillion budget would be wonderful if we had limitless resources. But in the real world, it could put vast areas of the economy under permanent government mismanagement, kill millions of jobs, drive investors and employers overseas, and bankrupt the nation.

Meanwhile, liberal Democrats in Congress are racing to gratify their interest groups in a slew of ways likely to do much more harm than good: pushing a union-backed "card-check" bill that would bypass secret-ballot elections on unionization and facilitate intimidation of reluctant workers; slipping into the stimulus package a formula to reimburse states that increase welfare dependency among single mothers and reduce their incentives to work; defunding a program that now pays for the parents of some 1,700 poor kids to choose private schools over crumbling D.C. public schools; fencing out would-be immigrants with much-needed skills.

Not to mention the $7.7 billion in an omnibus spending bill to pay for 9,000 earmarks of the kind that Obama campaigned against: $1.7 million for research on pig odors in Iowa; $1.7 million for a honeybee factory in Texas; $819,000 for research on catfish genetics in Alabama; $2 million to promote astronomy in Hawaii; $650,000 to manage beavers in North Carolina and Mississippi; and many more.

Meanwhile, the stimulus package is stuffed with spending such as "the $88.6 million for new construction for Milwaukee public schools, which, reports the Milwaukee Journal Sentinel, have shrinking enrollment, 15 vacant schools, and, quite logically, no plans for new construction," in the words of conservative columnist Charles Krauthammer.

Obama can take credit for keeping campaign promises (which he might have been wiser to defer) on health care, energy, and more, and for ending some of George W. Bush's budget gimmickry. But he has been deceptive in basing his deficit projections on phantom expenditure cuts and wildly optimistic revenue estimates, and in proclaiming "a new era of responsibility" to be paid for by raising taxes only on "the wealthiest 2 percent of Americans."

The numbers don't add up -- and still won't if and when, as seems almost certain, Obama ratchets up his so-far-fairly-modest new taxes on the top 2 percent. "A tax policy that confiscated 100 percent of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue," according to a February 27 editorial in The Wall Street Journal. "That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable 'dime' of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion."

Resurgent Democratic liberals and wounded Republican conservatives get most of the media attention.

As for the budget's $2 trillion in projected net "savings," Obama's budget director, Peter Orszag, admitted in testimony on Tuesday under questioning by Rep. Paul Ryan, R-Wis., that $1.6 trillion comes from phantom cuts of the money that would be needed to sustain the troop surge in Iraq for another decade -- money that nobody ever intended to spend.

Other supposed savings -- especially from Medicare -- seem unlikely to materialize absent benefit cuts, which Obama has not proposed. And the cost of any health care legislation -- to be drafted largely by a Congress that is allergic to the kind of cost-cutting necessary to make universal care sustainable -- is likely to be two or three times the $634 billion over 10 years that Obama has budgeted.

Meanwhile, "politics trumps economics" in Obama's housing program, says Washington Post columnist Robert Samuelson. It targets tax credits narrowly on first-time homebuyers with weak credit ratings while creating few incentives for the more affluent and credit-worthy people who have the collective buying power to revive the housing market. Obama also supports a "cram-down" proposal -- authorizing bankruptcy judges to unilaterally cut distressed homeowners' payments -- that would be hopelessly unadministrable at best and might drive up mortgage rates.

Small wonder that liberal commentators who complained about Obama's initial stabs at bipartisanship are ecstatic about his budget. And small wonder that some centrists who have had high hopes for Obama -- including New York Times columnist David Brooks, my colleague Clive Crook, David Gergen, and Christopher Buckley -- are sounding alarms.

In a March 3 column headed "A Moderate Manifesto," Brooks wrote: "Those of us who consider ourselves moderates -- moderate conservative, in my case -- are forced to confront the reality that Barack Obama is not who we thought he was. His words are responsible; his character is inspiring. But his actions betray a transformational liberalism that should put every centrist on notice.... The only thing more scary than Obama's experiment is the thought that it might fail and the political power will swing over to a Republican Party that is currently unfit to wield it.... [We] thus find ourselves facing a void. We moderates are going to have to assert ourselves. We're going to have to take a centrist tendency that has been politically feckless and intellectually vapid and turn it into an influential force."

Exactly right, except perhaps the "intellectually vapid" part. But turning centrist values into an influential political force will take some doing. Although almost 30 percent of Americans call themselves political independents, the political and intellectual classes are so ideologically polarized that resurgent Democratic liberals and wounded Republican conservatives get most of the media attention.

With the Republican Party in ruins and dominated by such hard-right conservatives as Rush Limbaugh, no center-right figure on the scene today has the stature to lead a loyal opposition against a popular president who puts a moderate face and an eloquent voice on an ambitiously liberal ideology.

Fortunately, a dozen or so centrist Democrats in the Senate are voicing concerns about the more profligate spending proposals. Together with the Senate's three centrist Republicans, they could hold back the liberal tide and appeal to the more moderate angels of Obama's nature.

I still hold out hope that Obama is not irrevocably "casting his lot with collectivists and statists," as asserted by Peter Wehner, a former Bush aide and a leading conservative intellectual now with the Ethics and Public Policy Center, in Commentary magazine's blog Contentions.

And I hope that the president ponders well Margaret Thatcher's wise warning against some collectivist conceits, in a 1980 speech quoted by Wehner: "The illusion that government can be a universal provider, and yet society still stay free and prosperous.... The illusion that every loss can be covered by a subsidy. The illusion that we can break the link between reward and effort, and still get the effort."

6a) Barack Obama bets the farm in $4 trillion poker game:The President believes he can change US politics for a generation. If he's wrong he could bankrupt the whole country
By Tim Reid

One of the most seductive elements of Barack Obama's ascent to the White House was his unshakeable conviction that he was being called upon, at a time of epochal peril, to bend the arc of history America's way.

Only a candidate possessed with such boldness and self-belief would have challenged Hillary Clinton for the Democratic nomination two years after leaving the Illinois state senate, promising in his first campaign speech to “transform a nation and usher in a new birth of freedom on this Earth”.

Only a man who frequently compares himself to America's greatest President, Abraham Lincoln, would declare that when he was elected, “the rise of the oceans will begin to slow”. Only someone who believes that America is on the crest of a dangerous historic wave - and that he “can help guide it” - would have undertaken a glitzy world tour midway through the campaign.

Such ostentatious gambles underscored his promise to transform US governance, and with his intellect and cool temperament made a combination many found thrilling.

In his first month in office he has pushed through an unprecedented $787 billion economic stimulus package, announced plans to save the car industry, stabilise the stricken banking sector and stem the flood of home repossessions.

Then came his near-$4-trillion budget last week. It is a manifesto to usher in a new age of government activism that involves levels of borrowing and spending never before seen in the US and is a document of such staggering ambition and risk that even some of Mr Obama's Democratic supporters are suddenly beginning to feel a little queasy.

A keen poker player, Mr Obama is gambling not only his own presidency, but the future well being of the country. If he pulls it off, they might find room for him on Mount Rushmore. If he fails, he could bankrupt the world's largest economy.

There have been only a few watershed moments in US history, and this is one. In the face of such a dark economic crisis, Mr Obama believes that timidity will beget catastrophe. He believes that the peril of the moment compels him to tackle both the short and long-term financial problems all at once - and quickly.

What he unveiled last week was one of the most audacious agendas announced by a new president. He declared his intention not just to pump trillions of dollars into a short-term rescue for the economy, but also to press ahead with enormously costly plans to trigger a green industrial revolution, transform education and provide health coverage to all Americans. These are issues that have bedevilled Congress and other presidents for decades. Achieving just one would be an extraordinary achievement. Mr Obama wants all three - and fast.

What was most striking about the budget - including that it will explode the federal deficit to $1.75trillion this year, its highest since the Second World War - was that it was a ruthless declaration of how Mr Obama intends fundamentally to change the American social contract, from Right to Left.

Its goal is not just to rescue the economy. It is to crush conservatism, end the age of anti-tax, anti-regulation policies that have been the guiding philosophies of US governance for a generation, and usher in a fresh “epoch”, as his aides call it, of New Deal-Great Society wealth redistribution and central intervention that were repudiated by Ronald Reagan 30 years ago. Much of his agenda will be paid for by a ten-year, $1 trillion tax increase on families earning more than $250,000 a year, beginning in 2011, a move that critics say risks stunting the economic recovery.

Mr Obama and his aides are particularly attracted to the notion, put forward by the Yale political scientist Stephen Skowronek, that most of the truly transformative US presidents - and there are only a handful - followed failed ones. They include Thomas Jefferson after John Adams, Lincoln after James Buchanan, FranklinD. Roosevelt after Herbert Hoover and Ronald Reagan after Jimmy Carter.

Their belief is that these presidents were able to reshape, for at least a generation, the governing philosophy and electoral alignment because the public rejected the era that preceded them. Yet presidents who believe that they are governing at such transformational moments - as Mr Obama does - take bigger risks to achieve momentous change. The stakes he has placed on the table with his budget are extraordinary.

What has begun to trouble some even within his own party is that Mr Obama's pledge to spend the US out of recession, while slashing the budget deficit to $533 billion within four years, already looks recklessly optimistic. Few dispute, even among Republicans, the need for healthcare reform or to wean America off foreign oil. It is the scale of debt that Mr Obama is willing to incur to achieve these goals that is causing such heartburn.

And it is not just Americans who desperately need him to prevail. As Gordon Brown said in Washington this week, while pledging faith in the President's plans, everyone is watching the US economy. The entire developed world is banking on Mr Obama to succeed.

But much of his promise to rein in the deficit rested on a projection that the recession will cease and the US economy grow next year, but nobody can clearly see an end to this slump. The central question - how to stop the banking sector from collapse - is still a work in progress. They prefer huge injections of cash to stop the banks dying - but stop short of nationalisation - while they try to work out how to rid them of at least $2 trillion of toxic assets. There is still a significant chance that the scale of debt involved could devour Mr Obama's presidency.

The markets are so unnerved about Mr Obama's ability to rescue the financial sector, and by the numerous bailouts that have had little effect, that wealth is being destroyed on Wall Street at a rate not seen since the 1930s. The President said on Tuesday that he does not worry about “the day-to-day gyrations of the stock market”, but investors have made it clear that his economic prescriptions have so far failed to reassure them.

Mr Obama also says that much of his programme will be paid for by reducing the cost of the wars in Iraq and Afghanistan. Yet he has just ordered 17,000 more troops to Afghanistan for a war that his Defence Secretary says will be a long and difficult slog, and he is still groping for a strategy in Pakistan.

“We are always better off on the high wire,” David Plouffe, Mr Obama's campaign manager, said last year. Now Mr Obama is President, watching from below has become both enthralling and terrifying.

6b) Deception at Core of Obama Plans
By Charles Krauthammer

Forget the pork. Forget the waste. Forget the 8,570 earmarks in a bill supported by a president who poses as the scourge of earmarks. Forget the "$2 trillion dollars in savings" that "we have already identified," $1.6 trillion of which President Obama's budget director later admits is the "savings" of not continuing the surge in Iraq until 2019 -- 11 years after George Bush ended it, and eight years after even Bush would have had us out of Iraq completely.

Forget all of this. This is run-of-the-mill budget trickery. True, Obama's tricks come festooned with strings of zeros tacked onto the end. But that's a matter of scale, not principle.

All presidents do that. But few undertake the kind of brazen deception at the heart of Obama's radically transformative economic plan, a rhetorical sleight of hand so smoothly offered that few noticed.

The logic of Obama's address to Congress went like this:

"Our economy did not fall into decline overnight," he averred. Indeed, it all began before the housing crisis. What did we do wrong? We are paying for past sins in three principal areas: energy, health care, and education -- importing too much oil and not finding new sources of energy (as in the Arctic National Wildlife Refuge and the Outer Continental Shelf?), not reforming health care, and tolerating too many bad schools.

The "day of reckoning" has now arrived. And because "it is only by understanding how we arrived at this moment that we'll be able to lift ourselves out of this predicament," Obama has come to redeem us with his far-seeing program of universal, heavily nationalized health care; a cap-and-trade tax on energy; and a major federalization of education with universal access to college as the goal.

Amazing. As an explanation of our current economic difficulties, this is total fantasy. As a cure for rapidly growing joblessness, a massive destruction of wealth, a deepening worldwide recession, this is perhaps the greatest non sequitur ever foisted upon the American people.

At the very center of our economic near-depression is a credit bubble, a housing collapse and a systemic failure of the entire banking system. One can come up with a host of causes: Fannie Mae and Freddie Mac pushed by Washington (and greed) into improvident loans, corrupted bond-ratings agencies, insufficient regulation of new and exotic debt instruments, the easy money policy of Alan Greenspan's Fed, irresponsible bankers pushing (and then unloading in packaged loan instruments) highly dubious mortgages, greedy house-flippers, deceitful homebuyers.

The list is long. But the list of causes of the collapse of the financial system does not include the absence of universal health care, let alone of computerized medical records. Nor the absence of an industry-killing cap-and-trade carbon levy. Nor the lack of college graduates. Indeed, one could perversely make the case that, if anything, the proliferation of overeducated, Gucci-wearing, smart-ass MBAs inventing ever more sophisticated and opaque mathematical models and debt instruments helped get us into this credit catastrophe in the first place.

And yet with our financial house on fire, Obama makes clear both in his speech and his budget that the essence of his presidency will be the transformation of health care, education and energy. Four months after winning the election, six weeks after his swearing in, Obama has yet to unveil a plan to deal with the banking crisis.

What's going on? "You never want a serious crisis to go to waste," said Chief of Staff Rahm Emanuel. "This crisis provides the opportunity for us to do things that you could not do before."

Things. Now we know what they are. The markets' recent precipitous decline is a reaction not just to the absence of any plausible bank rescue plan, but also to the suspicion that Obama sees the continuing financial crisis as usefully creating the psychological conditions -- the sense of crisis bordering on fear-itself panic -- for enacting his "Big Bang" agenda to federalize and/or socialize health care, education and energy, the commanding heights of post-industrial society.

Clever politics, but intellectually dishonest to the core. Health, education and energy -- worthy and weighty as they may be -- are not the cause of our financial collapse. And they are not the cure. The fraudulent claim that they are both cause and cure is the rhetorical device by which an ambitious president intends to enact the most radical agenda of social transformation seen in our lifetime.