Word Have Meanings - Do Obama's?

An old and dear friend asked a relative living in Israel to update her on the mood there etc. and this is what she asked and his response. (See 1 below.)

No more good and evil. Only good and, maybe, not so good. (See 2 below.)

Sent to me by a CFA friend and fellow memo reader.

The article below explains why Geithner's toxic bond program will not accomplish its three obectives in this writer's view. (See 3 below.)

The Saudis initiative and what it means for Israel. Has Obama signed on? Yes, words have meaning but so does fine print and often the latter becomes controlling.

20 million Mexican illegals represents about 6% plus of the U.S. population whereas 2million Palestinians reresents 30% of Israel's. Proportionality is only raised against Israel.(See 4 below.)

Iran should draw comfort from our empty phrases regarding N Korea's missile launch. (See 5 below.)

What will ultimately be the clear meaning and consequences of Obama's visit both to the G-20 conference as well as Turkey? Only time will tell. (See 6 below.)

Meanwhile, the way Iran sees it and The New York Times editorial states it, time waits for no one and the Iran clock continues ticking. (See 7 and 7a below.)

Ne'eman gives his analysis of Netanyahu's second time around and the coalition he formed. Ne'eman believes Livni remains exclusively in the driver's seat when it comes to heading the sole party in opposition. (See 8 below.)

It is not PC to ever reveal the state of the king's dress status. Diplomacy is a delicate undertaking and generally winks at truth. (See 9 below.)

Is it show time yet and Matt Welch hears a lot of double talk.(See 10 ands 10a below.)

Will there be life after newspapers? (See 11 below.)

Dick


1) R..., When you have time, could you please convey to me your feelings about what is happening in Israel re: leadership, mood of people, feeling that the younger generation is developing different values from the founding generation of the current State of Isrwith its emphasis on materialism to communities in the Negev or Galilee to instill an earlier national value system? American Jews want to understand what motivates the younger generation of Israelis and what type of national leadership is evolving in 21st Century Israel. Are younger Israeli Jews leaving their homeland in significant numbers to live in other places in the world on a permanent basis?

A.., Hi partner! You sent me on a difficult mission.

First you have to understand the structure of the Israeli society today. It is made up of 20% ultra religious people. Half of them spend their life in yeshivas and have an average of 8 kids. They do not have a secular education. They do not serve in the army and hate the Arabs. Their share in the population is growing fast. Additionally 10% who have both very low education and income also hate Arabs and Israeli elite. 15% are new immigrants from Russia who are educated but hate the Arabs and are ready to use force (Lieberman). The total is 45%. 15% of Israelis are Arabs.

The center (including moderate right and left) numbers 40%. In a democracy this means the moderate part of the population is equal to the extremist. That is why you hear of a split country. Some time the center wins and sometime the extremists. Soon while the moderates will be return to power.

The leadership problem is not only Israeli. You had Bush for 8 years. Politics is not inspiring to people . However, we have to remain optimistic because of people like Obama and Livni. In Israel young journalists are going into politics.

The younger generation is hedonistic. They think that if you pursue your personal goals you do good for society. Altruism is weak. You see the same in American society. The behavior of the top staff of the financial system around the world attests to it. The new crisis may change this but only time will tell.

The younger generation are a mixed bag like we were. Only a small minority are interested in life abroad. They may pursue a career abroad but usually they return.

Do not be alarmed by the war rhetoric. We may have some problems with the Iranian coalition but Israel is strong enough to handle it

We are a normal country under pressure. We shall overcome.

Shalom,

R...

2) How to Lose a War
By Paul Eidelberg



It seems that the United Nations wants to make it a criminal act to disparage Islam. What about Arab or Islamic regimes that disparage Judaism? About what about the Quran that refers to Jews as “dogs” and “pigs”?

Meanwhile, thanks to the American State Department, it is no longer proper for the CIA or the Department of Homeland Security to refer to Islamic terrorism. The Obama Administration seems to have invented a charming euphemism for terrorism—“Man Made Disasters.” Well, let’s play this game of “political correctness.”


The Shoah was a “Man Made Disaster. Those who perpetrated for this disaster were Germans. The creed of these Germans is called “National Socialism” or Nazism. But to be “politically correct,” one must not call this creed “evil,” just as one would not call an earthquake or Natural Disaster “evil.”


Indeed, to be “politically correct,” one must not call anything “evil.” The seed of this doctrine goes back to the 17th century philosopher Thomas Hobbes, the father of moral relativism. Here is what Hobbes said in his book The Leviathan:


Whatever is the object of any man’s appetite or desire, that is it which he for his part calleth “good”; and the object of his hate or aversion, “evil” ... For these words of “good” [and] “evil” ... are ever used with relation to the person that useth them:


The destruction of the World Trade Center, which ended the lives of some 3,000 human beings, was a Man Made Disaster. To attribute this disaster to a creed, namely, Islam or Islamism or Islamic Fundamentalism, is politically incorrect or indicative of Islamophobia.


Orwell would have called this metamorphosis of “terrorism” to “Man Made Disasters” “newspeak.” Some may call it “semantic subversion.” Whatever the case, some questions arise.


First, who are they that commit the vast majority of these Man Made Disasters? Do they have a distinctive character­­­, whether ethnic or religious? If not, how do we recognize and prevent them from causing these Man Made Disasters?


Second, suppose Man Made Disasters are made by those who call Christians “evil,” but that Christians do not call those that commit Man Made Disasters “evil.” All other things being equal, in a conflict between the two, which side is more likely to win?


Third, the answer to the last question raises another: Was the election of Barack Obama a Man Made Disaster?

3) How Not to Price Toxic Bond
By JAMES KELLER

Why the Treasury's plan to buy toxic debt from banks has little chance of achieving any of its three objectives.


WHAT IS THE MAXIMUM PRICE OF A BOND? You can ask this question to newly minted MBAs to distinguish the merely smart from the truly clever. The "smart" answer, approved in all the best business schools, is "the sum of the future cash flows." Occasionally someone will provide something more interesting. My all-time favorite answer came from a fellow who became a very successful trader. The maximum price of a bond? "Whatever the stupidest investor is willing to pay for it."



Much of the current financial problem stems from a surfeit of cheap financing that induced investors to overpay for financial assets. Treasury Secretary Tim Geithner's solution is to create a surfeit of cheap financing to induce investors to overpay for financial assets.


This definition came to mind while reading the term sheets for the latest manifestation of Treasury's plans to buy toxic debt from the banks. The American taxpayer is once again being cast in the role of "stupidest investor."

Treasury Secretary Tim Geithner's plan has three immodest objectives: price discovery, fairness to taxpayers and getting the banks lending again. His plan is likely to fail on all three counts.

START WITH PRICE DISCOVERY. Geithner and the interventionist crowd repeatedly claim that we are in the midst of genuine market failure with respect to toxic securities. Nothing is trading because nobody knows what anything is worth. According to many commentators, the securities are not tradable because their value is unknowable.

One of the principal aims of Geithner's plan is to provide a market where none exists, so that these securities can be valued and traded. But it is not true that nothing is trading because nobody knows what things are worth. Nothing is trading because too many people know what things are really worth.

It is true that the banks that gorged themselves on toxic debt are unwilling to sell at the price that potential buyers are bidding, but that is not a "market failure."

Whenever the explanation for a problem is "market failure," it makes sense to look for a simpler explanation. Here the simpler explanation is obvious: Banks don't want to sell to astute investors, who are bidding conservatively for something that may continue to fall in value.

Banks want to sell to investors who will overpay for noneconomic reasons. Geithner proposes to give them that chance.

GEITHNER'S PLAN, the Public-Private Investment Program, or PPIP, presumes that the involvement of private asset managers in valuing the toxic debt will ensure that the debt is fairly priced and that the public gets a good deal.

Ironically, the plan is a collateralized debt obligation, the very structure that supposedly caused all the trouble. The sine qua non of CDOs is "non-recourse leverage," meaning that if the assets decline in value, the owners don't have to pay back the debt. A second attribute of CDOs at the core of the recent unpleasantness was that the bulk of the purchased assets were financed at very low interest rates. Issuance of collateralized debt obligations ground to a halt at the end of 2007, when it became impossible to find senior investors willing to provide leverage on such uneconomic terms.

Enter the U.S. taxpayer.

Under the PPIP, there are two classes of investors, a junior and a senior. The senior investor, hereinafter known as Uncle Sugar, provides 84% of the total. The junior investors are the government again and private asset managers, each contributing 8%.

Assume that the assets are purchased at 50% of face value and that, in five years, they either fall to zero or return to 100% of face value. Under the downside scenario, both the private investors and the taxpayers lose all their money. But under the recovery scenario, the private investors will reap a 625% return -- nearly 50% a year. Uncle Sugar's annual return in the upside scenario is unlikely to climb much above 10% -- it depends on how low the senior financing rate is set.

Some of the largest fixed-income asset managers were quick to get behind the plan. They wouldn't really price the asset; they would price an option on the asset, with enormous upside and limited downside. Such an asymmetric bet, with somebody else putting up most of the money, would tend to lead to an artificial inflation of prices. Geithner's plan is not an attempt to discover prices, but to inflate them.

We can sum up much of the current financial problem as stemming from a surfeit of cheap financing that induced investors to overpay for financial assets. Geithner's solution is to create a surfeit of cheap financing to induce investors to overpay for financial assets.

As Will Rogers asked, "If stupidity got us into this mess, why can't it get us out?"

THE PPIP WILL NOT PROVIDE meaningful price information, and it will not give taxpayers a fair deal. What is worse, it is unlikely to achieve its paramount goal of getting credit flowing again. The proposition we hear over and over again is that these toxic bonds are clogging the arteries of the credit system and that, when they are removed, credit will flow freely again. It is a picturesque metaphor, but it does not really explain what is broken.

Geithner seems to have swallowed whole the arguments of the bankers, who desperately want the government to overpay for the toxic bonds. To lure the taxpayers into their scheme, they hold out the carrot of lending again.

But what is broken is not the large banks' willingness to extend credit.

What is broken is the shadow banking system in which the big banks played a significant but supporting role.

The shadow banking system has been the driver of credit creation for the past two decades. It is not clogged; it no longer exists. And it cannot be recreated by overpaying for Citibank's bad loans.

The shadow banking system is that complex interplay of banks, hedge funds, structured investment vehicles, mono-line insurers, derivative products companies and the likes of AIG-Financial Products.

Consider that AIG-FP alone had insured over $400 billion of mortgage securities. Most of these securities were "owned" by banks, but it is a mistake to classify the banks as lenders. The banks didn't think they were lending; they thought they were providing funding only to the extent someone like AIG was there to take the risk.

Schemes designed to get banks lending again overlook the financial developments of the past 20 years. If we want to return to 1988, when for instance Citibank held its credit-card assets on its own books, we will quickly discover that the capital of the banks, even if unimpaired by bad debt, will finance only a much smaller amount of credit.

The real problem is much more difficult than coaxing banks to lend. The shadow banking system evolved over 20 years and imploded in just six months.

AIG-FP and the other institutions that made super-cheap credit available cannot easily be recreated. Geithner's plan seems to miss this point.

The next act of this financial tragedy should not be to discover that spending still more money pushing ahead with PPIP has not done any good.


JAMES KELLER, a former head of structured products at UBS, now runs a micro-finance enterprise in Peru .

4) President Obama, King Abdullah, and the end of Israel
By Leo Rennert

During the G-20 summit in London, Barack Obama took time out for a brief meeting with King Abdullah of Saudi Arabia caught on video by two cameras, and by a still photographer, where the U.S. president bowed deeply in greeting the Saudi monarch. No major American media paid any attention to the startling, unreciprocated bow, gesture of subservience.


In tandem, there was scant paid attention to a disquieting comment by Obama when he spoke effusively about a 2002 Saudi peace initiative for normalization of relations between the Arab world and Israel. The Saudi initiative, which would end Israel as a Jewish state, is now also the official position of the entire Arab League.


In a brief press statement, the White House said "the President reiterated his appreciation for Saudi Arabia's leadership in promoting the Arab peace initiative."

Later, President Obama's Middle East Special Envoy, George Mitchell, said the U.S. intends to "incorporate" the initiative into its Middle East policy


That stops short of an explicit endorsement of the Saudi-Arab plan, but it comes uncomfortably close. Either way, Obama's gushing over the Saudi initiative hardly can be reconciled with his oft-repeated assurances that Israel can count on U.S "unwavering support" of its basic security interests.


The Saudi initiative usually is presented in mainstream media as a pretty good deal -- Arab nations would normalize relations with Israel in exchange for Israeli withdrawal to the 1967 line and a "just" solution to the refugee problem.


But there's far more to the plan, and the devilish details can't be swept away or ignored.


For starters, the plan would grant millions of Palestinian refugees and their descendants a "right of return" to Israel -- a demographic bomb in the megaton range that would end up creating two states -- both Palestinian. The Saudis pull off this feat by defining a "just" solution to the refugee problem as having to be "in accordance with" UN General Assembly Resolution 194 -- a non-binding 1948 measure that vainly pleaded for an end to Arab aggression against the nascent Jewish state. In the midst of the war, the resolution also pleaded for return of refugees -- not just for Arabs who were displaced but for all refugees, including a greater number of Jews who were being driven out of Arab lands.


Significantly, all Arab nations voted against Resolution 194 -- after all, they weren't ready in late 1948 to halt their war against Israel. But in later years, in a revisionist twist, they adopted Resolution 194 as a legal warrant for a "return" of all Palestinian refugees and their descendants.


As if this weren't enough, the Saudi initiative -- with its absolute insistence on Israeli withdrawal to the 1949-1967 armistice line -- would require Israel to pull back from all of Gaza (which it already has done), from the entire West Bank, from all of East Jerusalem, and from the entire Old City of Jerusalem, the site of Judaism's most sacred shrine -- the Western Wall.


Jewish worshippers again would be beholden to an Arab regime for access to the Western Wall, having tasted the bitter experience of not being allowed to pray there during Jordan's 19-year-old occupation of the Old City. Jordan destroyed numerous synagogues there and used Jewish tombstones from the Mount of Olives to build a road. It doesn't take much imagination to project a repeat of this tragic episode if Palestinians ruled the entire Old City since, in areas already under their control, they have fired on Rachel's Tomb near Bethlehem, demolished Joseph's Tomb near Nablus and desecrated an ancient synagogue in Jericho.


To comply with the Saudi initiative, Israel would have to uproot more than a half million Jews from the Old City, East Jerusalem, and close-in Jewish settlements that George W. Bush pledged would remain on the Israeli side in any two-state peace deal.


Prior U.S. and Israeli governments offered a cordial but nuanced reception to the Saudi plan over the last seven years. The diplomatic term usually was that the Arab initiative had some promising elements that could form a "basis" for productive negotiations. But neither Bush, nor Ariel Sharon or his successor Ehud Olmert, ever embraced it in its totality. King Abdullah and other Arab rulers, however, insist on full acceptance of their initiative -- take it or leave it.


Now comes Obama in his debut on the world stage and gets ever so close to a full endorsement of this Saudi "gift" to peace.


One is left to wonder if the President is aware of the full implications of the Saudi-Arab peace initiative, or how he's put Israel behind the eight ball by praising King Abdullah's efforts to put it front and center in future peace negotiations.


Since Obama previously was quoted as saying that "the Israelis would be crazy not to support this initiative," it is past time for him to explain how he reconciles the real Saudi plan with Israel's real security challenges.

5) What North Korea's missile means for Israel and Iran
By Amos Harel



Although world intelligence agencies have assessed that North Korea's satellite launch on Sunday was a failure, it must still be seen as a bold provocation by Pyongyang, directed at the United States.

North Korea defied the Obama administration, while ignoring an explicit United Nations security council ban and Washington's preliminary warnings.

While the American president reacted acridly, he has not taken substantial action.

North Korea has endured sanctions for years - and yet it still launched the rocket on Sunday, so continuing its convoluted tango with the international community: one step forward, two backwards, repeat.

This is Barak Obama's first international test as U.S. president, one expected to take much of his time, despite the understandable priority he has given to battling the financial crisis both on the home-front and abroad.

Iran is sure to track U.S. behavior in the wake of this affair with special interest.

In a few months' time, Washington is expected to commence its diplomatic dialogue with Teheran, ultimately aiming to impede Iran's contentious nuclear program.

Obama has already committed to this dialogue, regardless of developments with North Korea. But if he is soft with Pyongyang - if the Iranians get the impression that the new president is not hard enough or experienced enough as a negotiator - Tehran could reach troubling conclusions.

A little less than a year ago, Israel harbored a false hope that the United States would bomb Iranian nuclear sites or even give Israel a green light to act in its stead.

That did not happen with the Bush administration. On George Bush's last visit to Israel in May, he even went so far as to clarify that the U.S. traffic light remains bright red.

A similar message, one may assume, was also passed on during talks between U.S. Joint Chief of Staff Admiral Mike Mullen and his counterpart Gabi Ashkenazi on the sidelines of last weekend's NATO conferrence.

Israel's defense establishment now estimates that the prospect of Obama agreeing to such an attack are even slimmer.

The North Korea-Iran tie is deeper. Dr. Ephraim Kam, deputy director of The Institute for National Security Studies, says that the Iranian missile program relies on Pyongyang technology and know-how.

When North Korea launches a rocket, one which could in the future carry a ton of explosives across 6,000 kilometers, it is assumed that Iran is just a few steps behind.

Tal Inbar, director of the space division of the The Fisher Brothers Institute for Air and Space Strategic Studies, explains that there is just one rocket technology being tested - not two.

The ability to launch a satellite, he says, is relevant to launching a long rage ballistic rocket. No country is successful in its first try, he adds, and some even fail the second time around.

6) Obama: US strongly supports 2-state solution




In a clear message to Israel's new rightist government and to the Palestinians, American President Barack Obama demanded that both sides adhere to their Road Map and Annapolis Conference obligations.



"In the Middle East, we share the goal of a lasting peace between Israel and its neighbors," Obama said during a special address to the Turkish parliament. "Let me be clear: the United States strongly supports the goal of two states, Israel and Palestine, living side by side in peace and security."



"That is a goal shared by Palestinians, Israelis, and people of good will around the world," the president said. "That is a goal that that the parties agreed to in the Roadmap and at Annapolis. And that is a goal that I will actively pursue as president."



The comments marked Obama's first response to belligerent statements made by incoming Foreign Minister Avigdor Lieberman in his induction speech.



Obama, who is currently visiting Turkey for the first time as president, said he expects the road ahead to be difficult, and added that "both Israelis and Palestinians must take the steps that are necessary to build confidence." He did not, however, outline any specific steps that must be adopted at this time.



"Both must live up to the commitments they have made. Both must overcome longstanding passions and the politics of the moment to make progress toward a secure and lasting peace." he said.



'No need for arms race'
The president added that both the US and Turkey can help the Palestinians and Israelis achieve peace.



"Like the United States, Turkey has been a friend and partner in Israel’s quest for security," he said. "We must reject the use of terror, and recognize that Israel’s security concerns are legitimate."




Turning his attention to Iran, Obama said that "the peace of the region will also be advanced if Iran forgoes any nuclear weapons ambitions."



"As I made clear yesterday in Prague, no one is served by the spread of nuclear weapons," the president said. 'This part of the world has known enough violence. It has known enough hatred. It does not need a race for ever-more powerful tools of destruction."

7) Iran calls on US to scrap nuclear arms

Tehran criticizes President Obama for saying it poses threat with its nuclear program. 'It seems that the repetition of the past U.S administration's accusations would be in contrast with the slogan of change,' Foreign Ministry spokesman says
Reuters

Iran criticized on Monday US President Barack Obama for saying Tehran posed a threat with its nuclear program and urged Washington and other countries possessing atom weapons to dismantle their arsenals.



Foreign Ministry spokesman Hassan Qashqavi made the comments a day after Obama, who is seeking to engage Iran diplomatically in a sharp policy shift from George W. Bush's approach, set out his vision for ridding the world of such arms.



Delivering a speech in Prague given new urgency by North Korea's rocket launch, Obama also said the United States would go ahead with plans to build a missile defense shield in Europe as long as Iran posed a threat with its nuclear activities.



Qashqavi noted that the Bush administration, which spearheaded a drive to isolate Iran over its disputed nuclear plans, had also described the Islamic state as a threat.



"It seems that the repetition of the past US administration's accusations (against Iran) would be in contrast with the slogan of change (by Obama)," Qashqavi said.



"And such a thing - nuclear armament - does not exist in Iran to be inferred as a threat," he said.



The West suspects Iran's nuclear program is a cover for developing bombs. Iran, the world's fourth-largest oil producer, says it is a peaceful drive to generate electricity.



Asked about North Korea's rocket launch, which analysts said was effectively a test of a ballistic missile designed to carry a warhead as far as the US state of Alaska, Qashqavi said Iran's and North Korea's missile activities were not related.



'Awaiting a world free of nuclear arms'
Obama last month offered Iran a "new beginning" of diplomatic engagement, following three decades of hostility. Iran has responded cautiously to the overture, saying Washington must show real policy change toward Iran rather than in words.



Qashqavi said nuclear weapons had no place in Iran's defense doctrine and that the existence of such arms was a serious threat to the global community.



"We, like the rest of the world community, are awaiting a world free of nuclear arms," Qashqavi said.



"Our expectation from the US and others is to take serious and practical measures toward nuclear disarmament and dismantling of weapons of mass destruction," he said.



Obama pledged on Sunday to cut the US nuclear arsenal, to bring the Comprehensive Test Ban Treaty into force and to seek tough penalties for those that broke rules on non-proliferation.




He presented Iran with a "clear choice" of halting its nuclear and missile activity or facing increased isolation.



Tehran has repeatedly rejected international demands to stop its most sensitive atom work and officials say Iran will unveil "good news" when it marks its national nuclear day on Thursday.

7a) Editorial Diplomacy on the Sidelines

President Obama’s tentative outreach to Iran inched forward last week. At an international conference on Afghanistan, Richard Holbrooke — one of the president’s top diplomats — managed a brief exchange with an Iranian counterpart. Secretary of State Hillary Clinton, meanwhile, had an aide pass the Iranians a letter seeking the release of three Americans held by the Tehran government. (Washington usually leaves such contacts to third parties.)

After 30 years of mutual isolation, we fully support Mr. Obama’s constructive tone and efforts to engage the mullah-led government. But we wonder whether this incremental, seemingly ad hoc approach is best.

Time is on Tehran’s side when it comes to the core issue: its nuclear ambitions and ever-improving technical skills. Even after the Bush administration grudgingly joined Europe, Russia and China in offering a deal (economic and political inducements if Iran stopped producing nuclear fuel, sanctions if it did not), Tehran relentlessly advanced its ability to produce nuclear fuel. It brilliantly exploited international divisions to ward off significant sanctions.

The difference now is that Mr. Obama is making a serious effort to find common ground with Iran on Afghanistan and Iraq and to dispel the Bush-era threat of regime change. The administration’s decision to invite Iran to the Afghanistan conference was a smart one. It was encouraging that Iran offered to help combat the Afghan drug trade. It would have been even better if it had also promised to stop aiding the Taliban.

Anecdotal evidence suggests that the Iranian people are eager for contact. But Iranian officials, who have long used their hatred of the Great Satan to justify their repression and failed policies, seem at best ambivalent. They certainly took pains to play down the brief encounter with Mr. Holbrooke, and have dismissed Mr. Obama’s outreach as too little.

Iran has elections this June, and there may be an argument for waiting to see how they play out. But we suspect that subtle and tentative approaches are not going to change much in Tehran.

Mr. Obama will soon have to decide whether to go for a potentially game-changing gesture — like offering to open an interests section or sending his secretary of state to Tehran. That could force Iran’s leaders to make a choice — and leave no doubt in Iranians’ or anyone else’s minds about what it is.

Defense Secretary Robert Gates has said that Iran is “not close” to having a nuclear weapon and that it could take one or more years. Israel predicts that Iran could have enough fuel for a weapon by the end of this year. Either way, the clock is ticking.



8) Getting the Coalition Wrong
By Yisrael Ne'eman




Very few commentators, including this one, expected an Israeli government like the one we have now. Although second time PM Benyamin Netanyahu was expected to win and have his choice between a Center Right coalition or a Right Religious one, the conglomerate outcome is somewhat of a surprise. Along with the Likud (27 seats) there is Yisrael Beitainu (15) led by Foreign Minister Avigdor Leiberman, the ultra-orthodox Shas faction (11), United Torah Judaism or UTJ (5), the Jewish Home party (3) and Defense Minister Ehud Barak's Labor party with supposedly 13 seats, bringing in a grand coalition of over 70 MKs. But in Barak's party it is unpredictable how many faction members will actually support the coalition.



Labor is the most interesting riddle as the party needed to decide whether to join the coalition or not. Close to 60% of the central committee voted "Yes" and Netanyahu had what he needed. Barak chocked up five ministries and several other jobs, far out of proportion to their numbers. But what difference does that make when there are 30 ministers in the most expensive and wasteful government ever glued together? Originally only six out of the 13 MKs were willing to support the Right/Religious government but cajoling (such as handing out jobs) drew two more supporters from the rejectionists, one of them the well respected economics professor and former president of Beersheva's Ben Gurion University, Avishai Braverman. If one counts in all of Labor the coalition has 74 seats, but if the Labor rebels are deducted from the tally there are 69. Netanyahu was able to bypass the extreme religious and right wing National Union (4) and replace them with at least half of Labor, thereby destroying the Left alternative social democratic opposition which could potentially mount a comeback should Netanyahu's capital incentive policies fail to stimulate an increasingly moribund Israeli economy buried in the world economic recession. On the Right he reinforced the split between the more practical Jewish Home party and the extremist NU who both draw from the same national religious reservoir of voters.




One must credit Netanyahu with superior tactical politics when handling coalition talks and agreements. The Likud broke the Left and the Right while leaving the centrist Kadima faction (28) led by chairwoman Tzipi Livni in the opposition. As mentioned in previous articles Netanyahu wanted Kadima in his coalition but was not able to bridge the gaps concerning declaring a "two-state solution" as the objective when working to achieve conflict resolution with the Palestinians, a clause held dear by Livni. There were also matters of electoral reform and a rotation agreement between Netanyahu and Livni whereby they would share the PM's office during the four year Knesset term.


As leader of the opposition Livni is also in a good position to criticize government waste (and already has) beginning with its bloated size and to skewer Netanyahu's economic policies despite the fact that Kadima holds very similar views. On the foreign front the Kadima opposition will not only make the new government look like steadfast opponents of a peace accord with the Palestinians but will certainly point out the massive international damage Foreign Minister Avigdor Leiberman will and already has caused through his bellicose statements about Israeli Arabs and Israel's Arab neighbors, in particular Egypt. There is certainly substance to much of what Leiberman claims but as foreign minister he is expected to be a diplomat. What Livni will downplay is that Yisrael Beitainu and Kadima are of one mind in openly supporting a two-state solution while the Likud knows it will come about in one form or another (certainly as preferable to a bi-national state) but refuses to use the terminology.



Livni is the unchallenged leader of the opposition since neither the Arab factions (11 seats together) nor the solidly leftist Zionist faction Meretz (3) or the NU (4) can mount any challenge or be seen as an alternative to the ruling coalition. Labor would have stood a chance but the party's self destruction button was pressed by Ehud Barak when it joined the coalition "in the national interest" and now it is just a matter of time until the founding party of the State of Israel virtually disappears. Barak could have allowed Labor to regroup in the opposition but he preferred to destroy his own party while claiming the necessity of his taking the defense portfolio. He could have left the party to do so, just as Moshe Dayan did with the foreign ministry in Menachem Begin's 1977 government.



But not all is rosy in Benyamin Netanyahu's second government. Leiberman is under serious police investigation for money laundering and other economic violations and may be charged within a few months. Inside the Likud, except for finance, there are virtually no serious cabinet ministries remaining after the great "give away" to glue together a coalition. Over the months one can expect restlessness among the Likud faction members and possible challenges to the PM himself. But most worrying is the economic situation as there is no 2009 state budget and projections estimate a 10 – 15% loss in state revenues due to a severe reduction in tax collection caused by the world economic crisis. In the meantime the state is still working by the 2008state budget guidelines when tax revenues were plentiful and there was a surplus from 2007, meaning once there is a budget the country will be even further in the red.



The Likud has promised to cut taxes and raise benefits for all concerned. Many Netanyahu supporters have nicknamed him the "magician". It will be interesting to see how he will live up to his populist reputation.

9) In Israel, finally, a voice of realism
By Jeff Jacoby

IF AVIGDOR LIEBERMAN'S first speech as Israel's new foreign minister did nothing else, it certainly vexed the media.


The Associated Press called it a "scathing critique of Mideast peace efforts" that had diplomats "cringing," while other reports said Lieberman had "dropped a political bombshell," "sparked an uproar," "repudiated a key accord," and "reinforced fears." The New York Times pronounced Lieberman's remarks "blunt and belligerent," describing the foreign minister as a "hawkish nationalist" who is "not known for diplomacy" and heads an "ultranationalist" party that is "seen by many as racist." Headlines summed up Lieberman's debut as an attack on peacemaking: "Lieberman dashes peace hopes," "Israeli official hits peace efforts," "Lieberman dumps peace deal."


But the headlines were wrong, as anyone can ascertain by reading Lieberman's short address. Far from disparaging peace, Israel's new foreign minister called for pursuing it with the respect and realism it deserves. And far from "dumping" agreements entered into by his predecessors, he explicitly committed himself to upholding the Roadmap — a step-by-step blueprint to a "two-state solution" adopted by Israel, the Palestinian Authority, and the international Quartet (the United States, the United Nations, Russia, and the European Union) in 2003.


"I voted against the Roadmap," Lieberman acknowledged, but it was "approved by the Cabinet and by the Security Council" and is therefore "a binding resolution and it binds this government as well." However, he insisted, it must be implemented "exactly as written" and "in full." The Road Map imposes specific obligations that the Palestinians must meet prior to achieving statehood — above all, an unequivocal end to violence, terrorism, and incitement against the Jewish state — and Israel will not agree to waive them in order to negotiate a final settlement.


If Lieberman is as good as his word — and if he is backed up by Benjamin Netanyahu, the new prime minister — we may finally see an end to Israel's fruitless attempts to buy peace with ever-more-desperate concessions and retreats. Under Ariel Sharon and Ehud Olmert, Israel surrendered the entire Gaza Strip, released hundreds of terrorists from prison, expelled thousands of Jews from their homes, and even offered to divide Jerusalem with the Palestinian Authority. "But none of these far-reaching measures have brought peace," said Lieberman. "To the contrary." The steeper the price Israel has been willing to pay for peace, the more it has been repaid with violence: suicide bombings, rocket attacks, kidnapped and murdered soldiers, and wars with Hamas in Gaza and Hezbollah in Lebanon.


It is time, Lieberman is saying, for Israel to stop genuflecting to a feckless and counterproductive "peace process" and to return instead to the pre-Oslo policy of deterrence. "The fact that we say the word 'peace' 20 times a day will not bring peace any closer," he noted. It only makes Israel seem weak and irresolute, encouraging its enemies not to halt their murderous jihad, but to redouble it. Sixteen years of appeasement have left Israel more demonized and isolated than ever, the foreign minister observed. And when was Israel most admired in the world? "After the victory of the Six Day War," when no one doubted the Jewish state's audacity or resolve.


"If you want peace, prepare for war," Lieberman declared. That belief may offend the smart set and leave diplomats "cringing," but Israel's new foreign minister is scarcely the first to express it. "To be prepared for war is one of the most effectual means of preserving peace," affirmed President George Washington in his first address to Congress in 1790. Nearly two centuries later, Ronald Reagan told the world much the same thing. "Peace is made by the fact of strength," said the leader who would go on to win the Cold War. "Peace is lost when such strength disappears — or, just as bad, is seen by an adversary as disappearing."


Perhaps the world would more clearly understand the nature of Israel's adversary if the media weren't forever fanning moral outrage at the Mideast's only bulwark of freedom and democracy.


In recent weeks, the Palestinian Authority has warned Arabs that it is "high treason" punishable by death to sell homes or property to Jews in Jerusalem; shut down a Palestinian youth orchestra and arrested its founder because the ensemble played for a group of elderly Israeli Holocaust survivors; and celebrated the deadliest terrorist attack in Israel's history — a PLO bus hijacking that left 38 civilians dead — with a TV special extolling the massacre. On Thursday, after a Palestinian terrorist used an axe to murder a 13-year-old Jewish boy, the al-Aqsa Martyrs Brigades — a wing of the supposedly "moderate" Fatah party — issued a statement claiming responsibility.


There is no appeasing such hatred, and demonizing those who say so will not change that fact. "If you want peace, prepare for war." How refreshing, at last, to hear an Israeli leader say so.

10)President Obama, are you ready? Here's the test Vice President Joe Biden warned us all about
BY Thomas M. Defrank

North Korea launches long-range rocketU.S. deploys warships in anticipation of N. Korea rocket launchBam drops bomb: I want to make world nuke free.


WASHINGTON - North Korea's rocket launch is the early diplomatic challenge Vice President Biden famously warned about last fall. Unfortunately for President Obama, Pyongyang's nuclear aspirations are a far more intractable problem than the average global crisis.

Strongman Kim Jong Il's in-your-face defiance during Obama's first overseas trip has at least one silver lining: It lends gravity to Obama's insistence in meetings with Chinese and Russian leaders last week that the North's provocations are reckless and intolerable.

Beyond ratcheting up the rhetoric, however, Obama's punitive options are limited.

"There's not a lot we can do beyond expressing our outrage and pushing our allies to be less timid," a top U.S. policymaker told the Daily News a few days before the launch.

Experts say military retaliation, like a naval blockade or surgical strike against weapons facilities, are nonstarters. Even the more muscular Bush administration recognized such tactics might trigger an invasion of South Korea by the North's million-man army.

Moreover, the Pentagon is stretched too thin in Iraq and Afghanistan to cope with another war on the Korean peninsula.

That essentially leaves more aggressive diplomacy by Obama with Russia and particularly the China, North Korea's primary protector at the United Nations.

Last week in London, Obama lobbied Chinese President Hu Jintao to press Kim to stop misbehaving - and endorse more stringent sanctions if he doesn't.

"The Chinese ... don't want to see the Japanese get nuclear weapons," said ex-Pentagon official Lawrence Korb, a senior fellow at the Center for American Progress think tank. "We need to tell the Chinese if North Korea keeps it up we're not going to be able to hold Japan back."

Sunday's liftoff will test whether Obama's successful charm offensive during his European trip translates into greater clout for American statecraft.

It's an unwelcome front-burner problem for an agenda clogged with major issues, notably the domestic economic crisis.

"With everything else on his plate, this is something Obama would rather not have to deal with, but he has to do it" said Robert Jervis, a political science professor at Columbia University. "It's a real problem for him. He's going to face some hard choices."

And, as with the economy, he can blame this headache on his predecessor for only so long.


10a) Obama's Double-Talk: While the president talks sobriety, his policies take America on an economic bender.
By Matt Welch

High-flying presidencies tend to reveal their base character in trivial moments. In March 2002, when the nation was still massively behind George W. Bush in the wake of the September 11 attacks, he gave the first obvious signal that his administration would play cheap politics even in a time of grave global uncertainty by slapping a temporary new tariff on imported steel. If the world’s fragile economy and the putatively bedrock principles of free trade could be sold out for a couple of percentage points in contested Rust Belt states, we shouldn’t have been surprised to learn that the very “war on terror” would be subject to political manipulation, or that Bush’s skin-deep economic philosophy could not be counted on in a crisis. The costs of what this move revealed became clear soon enough, and eventually Americans withdrew their benefit of the doubt.

Barack Obama’s revelatory moment may have come in his first week as president. On his first day of work, he signed an executive order prohibiting lobbyists from holding highranking administration jobs, thereby fulfilling a campaign promise to “close the revolving door” between K Street and government via “the most sweeping ethics reform in history.” Two days later, the president granted a “waiver” from the new rules to install Raytheon lobbyist William Lynn as the No. 2 man in the Pentagon.

As offenses go, the move was trivial. But as a signal of a governing pathology, it established a pattern that Obama has repeated serially since being sworn into office: reiterate a high-sounding promise from the campaign, undermine said promise with a concrete act of governance to the contrary, then claim with a straight face that the campaign promise has been and will continue to be fulfilled.

So candidate Obama promised to usher in the “most transparent administration in history,” in part by making sure the American people were allowed to read each proposed non-emergency law for at least five days before the president signs it. Yet in his first month, President Obama signed three laws from the liberal wish list—the State Children’s Health Insurance Program (SCHIP), the Lily Ledbetter Fair Play Act, and the $787 billion “stimulus” package—in less than five days. Explained the White House: “We will be implementing this policy in full soon.…Currently we are working through implementation procedures.”

The SCHIP law, which was paid for in part by a cigarette tax hike of 61 cents a pack, also put the lie to a pledge Obama repeated after its passage in his first address before a joint session of Congress. “Let me be perfectly clear,” he said on February 24, with less than perfect clarity. “If your family earns less than $250,000a year, you will not see your taxes increased a single dime. I repeat: not one single dime.”

But not only is the cigarette tax a “tax” (and worth six dimes at that), it’s among the most regressive kind possible, since poorer people are more likely to smoke and spend a larger share of their incomes on cigarettes than richer smokers do. And it’s hardly the only tax Obama will levy on those not yet in the quarter-million club. In that same speech, and also in the budget proposal he handed to Congress shortly thereafter, the president called for a cap-and-trade system for companies that emit carbon. That would surely translate into a price increase on every gallon of gasoline sold in the United States, a change that would have more impact on the household budgets of working-class heroes than those of modern-day plutocrats.

Spending? Candidate Obama promised “a net spending cut” in which “every dollar that I’ve proposed, I’ve proposed an additional cut so that it matches.” President Obama has proposed the largest net spending increase since World War II, even while holding summits on “fiscal responsibility” and vowing to live by the same “pay as you go” principles he’s already blown to smithereens.

Deficits? A president whose first budget will expand the deficit into uncharted territory (see Veronique de Rugy’s “When Do Deficits Matter?,” page 21) nonetheless promises to cut his shortfall in half within four years. This, he claimed in his speech to Congress, will be achieved partly through $2 trillion in “savings” that will come by “eliminat[ing] wasteful and ineffective programs.” Analysts noted within hours that around half of Obama’s “savings” actually come from letting Bush’s tax cuts expire after 2010. It takes a certain kind of mind-set to characterize Americans’ taking home their own money as a “wasteful and ineffective program,” let alone tax increases as “savings.”

Once you identify the president’s tic of celebrating the very campaign promises that he breaks, you’ll see it everywhere. So there he is, “proud that we passed the recovery plan free of earmarks,” just days after passing a recovery plan stuffed with what the investigative website Pro Publica described as “items that could arguably be called earmarks” (and in the same week that Congress handed him a new budget swollen with brand new chunks of pork). The stimulus package will “save or create 3.5 million jobs,” an elastic, impossible-to-prove projection that neatly gives him credit for either boom or bust. (For more on Obama’s stimulus, please see “Will We Be Stimulated?,” page 32. For more on the state government jobs that will be “saved” by using federal money to cover for bad fiscal management, see “Failed States,” page 24.)

The two faces of Obama reveal more than just a politician hardwired to work both sides of a room. The new president’s political goals and governing goals are in tension. The post-Bush executive needs to solve a mammoth financial and economic crisis affecting the entire country, but the pre-Clintonomics Democrat needs to blame it on fat cats and Republicans.

So in early January, the president-elect lamented that “banks made loans without concern for whether borrowers could repay them, and some borrowers took advantage of cheap credit to take on debt they couldn’t afford.” In February his administration pushed banks to lend still more to risky homebuyers while bailing out underwater borrowers. Technocrat Obama wants to jumpstart the “flow of credit,” which he has described as “the lifeblood of our economy,” but politician Obama wants to somehow surgically remove the “speculators” from the process. “I will not spend a single penny,” he vowed to Congress, unconvincingly, “for the purpose of rewarding a single Wall Street executive, but I will do whatever it takes to help the small business that can’t pay its workers or the family that has saved and still can’t get a mortgage.” The following week his administration authorized another $30 billion in the $163-billion-and-counting bailout of the Wall Street insurance giant AIG.

There are both risks and rewards when a politician pronounces gray skies (particularly of his own making) to be blue. For now, Obama is mostly reaping the rewards. A public weary of the president’s tongue-tied predecessor is giving the eloquent new fellow the benefit of the doubt, as evidenced by an MSNBC poll in early March showing his approval rating at an all-time high of 68 percent. But that same poll pointed to Obama’s weakness: A substantially smaller number, 54 percent, thought the president’s policies were on the right track. The country seems to like the guy who talks about fiscal responsibility, less so the one who practices the opposite.

The illusion will eventually give way, and voters will see more of who Obama is than who they wish him to be. In the meantime the president has proposed a budget blueprint that would significantly alter the way Americans spend money on energy, mortgages, charities, and investments, to name just a few areas. Will they recognize the tic in time?

11) Life After Newspapers
By Michael Kinsle


Few industries in this country have been as coddled as newspapers. The government doesn't actually write them checks, as it does to farmers and now to banks, insurance companies and automobile manufacturers. But politicians routinely pay court to local newspapers the way other industries pay court to politicians. Until very recently, most newspapers were monopolies, with a special antitrust exemption to help them stay that way. The attorney general has said he is open to additional antitrust exemptions to lift the industry out of today's predicament. The Constitution itself protects the newspaper industry's business from government interference, and the Supreme Court says that includes almost total immunity from lawsuits over its mistakes, like the lawsuits that plague other industries.

And then along came the Internet to wipe out some of the industry's biggest costs. If you had told one of the great newspaper moguls of the past that someday it would be possible to publish a newspaper without paying anything for paper, printing and delivery, he would not have predicted that this would mean catastrophe for the industry. But that is what it has been.

It is tempting, but too easy, to say the problems of newspapers are their own fault. True enough, the industry missed a whole armada of boats. If newspapers had been smarter, or moved faster, they might have kept the classified ads. They might have invented social networking. But that's all hindsight. I didn't think of these things, nor did you. Judging from Tribune Co., for which I once worked, the typical newspaper executive is a bear of little brain. Until recently, little brain was needed. Even now, to say the newspaper industry has no problems that a busload of geniuses couldn't solve is essentially saying that the industry's problems are insoluable. Or at least insoluable without help.

But help may be on the way. Suggestions are pouring in -- sometimes with checks attached -- that newspapers should become nonprofit foundations, or that foundations should supply investigative teams and foreign bureaus and other expensive accessories. Or that limits should be placed on the nefarious practice of "aggregation" -- Web sites lifting the news, via links, from other sites. Or that customers should be forced, somehow, to pay. Two recent articles in Slate argued that newspapers (1) actually play a fairly unimportant role in our democracy and (2) are in this pickle because of financial shenanigans, not inexorable forces of technology. But let's say these are both wrong: that technology is on the verge of removing some traditionally vital organs of the body politic. What should we do?

How about nothing? Capitalism is a "perennial gale of creative destruction" (Joseph Schumpeter). Industries come and go. A newspaper industry that was a ward of the state or of high-minded foundations would be sadly compromised. And for what?

You may love the morning ritual of the paper and coffee, as I do, but do you seriously think that this deserves a subsidy? Sorry, but people who have grown up around computers find reading the news on paper just as annoying as you find reading it on a screen. (All that ink on your hands and clothes.) If your concern is grander -- that if we don't save traditional newspapers we will lose information vital to democracy -- you are saying that people should get this information whether or not they want it. That's an unattractive argument: shoving information down people's throats in the name of democracy.

But this really isn't a problem. As many have pointed out, more people are spending more time reading news and analysis than ever before. They're just doing it online. For centuries people valued the content of newspapers enough to pay what it cost to produce them (either directly or by patronizing advertisers). We're in a transition, destination uncertain. Arianna Huffington may wake up some morning to find The Washington Post gone forever and the nakedness of her ripoff exposed to the world. Or she may be producing all her own news long before then. Who knows? But there is no reason to suppose that when the dust has settled, people will have lost their appetite for serious news when the only fundamental change is that producing and delivering that news has become cheaper.

Maybe the newspaper of the future will be more or less like the one of the past, only not on paper. More likely it will be something more casual in tone, more opinionated, more reader-participatory. Or it will be a list of favorite Web sites rather than any single entity. Who knows? Who knows what mix of advertising and reader fees will support it? And who knows which, if any, of today's newspaper companies will survive the transition?

But will there be a Baghdad bureau? Will there be resources to expose a future Watergate? Will you be able to get your news straight and not in an ideological fog of blogs? Yes, why not -- if there are customers for these things. There used to be enough customers in each of half a dozen American cities to support networks of bureaus around the world. Now the customers can come from around the world as well.

If General Motors goes under, there will still be cars. And if the New York Times disappears, there will still be news.