Obama: Pure As Driven Snow But Now Drifitng!

Thoughts from an astute investor, John Mauldin, on his way to Itaay. (See 1 below.)
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Interesting film about Israeli technology. (See 2 below.)
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I spoke with another experienced and bright cosultant investor this morning about two basic subjects;

a) His thoughts on how Obama was doing and

b)His thoughts on Israel and its relationship with our country.

He answered the second first and said the military relationship with Israel and the U.S. had never been better. Israel was now on par with getting what it needed by way of information, intelligence and equipment to fend off any possible missile attack from Iran.

He thought the fundamentalist problem was a hundred year on and not only from just Islam but world wide. Therefore, he felt the best Israel could hope for was to remain strong, accept a cold peace type relationship with Jordan and Egypt and hope, over time, they could achieve peace between themselves and the Palestinians as well as Syria.

He also felt s Lebanon made economic progress and Hezballah became more politically part of the nation's leadership it would have a more difficult time engaging in fanciful wars because they would lose their political clout.

In terms of Obama and his accomplishments he thought the financial part of the equation had been masterfully handled but when it cames to other social matters, overall intelligence integration and the effectiveness of government bureaucracy he was not hopeful and concluded Obama had virtually failed to move the ball.

His main concern is with our failure in education and said it is tragic that Brazil is graduating more engineers than our own country.

I respect his views a great deal and do not differ on what is happening with respect to Israel, am not fully aboard regrading his thinking with respect to the financial arena but acknowledge the fact that Europe spent almost as much simply bailing out Greece.

In terms of Obama's various bashing of Netanyahu, Wall Streeters, fat cat bankers etc. my friend saw that as political populism and simply sop to play to the masses.

Time will tell how this all plays out but we both agreed European prospects were dismal. (See 3 below.)
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Egyptian troops continue to take strong measures against illegal weapon smuggling. (See 4 below.)
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Obama said he was going to ride heard on an 'openess' administration. Every time the lid is taken off the White House more stench rises.

So far we have witnessed more business as usual leadership style and Obama's comment about taking responsibility will prove empty words.

When it comes to an administration that was going to raise the bar on integrity it just knocked that bar to the ground with President Bill's involvement in being Rahm's spear carrier. Obama purposely selected Rahm because he was a proven crafty manipulator so Obama cannot claim he is surprised about the Sestak matter. Obama is not only up to his armpits in oil and now is possibly involved in an improper, and even maybe an illegal, job offer.

This event will probably be passed over based on the explanation 'it is done all the time.' That attitude, however, simply validates that when we experience 'anything goes government' we should not be surprised or complain when the nation's belief in government plunges.

Obama claimed he would be as pure as driven snow. Now that snow seems to be drifting.

I believe it fair to say had this happened on GW's watch the press and media would have been all over this event. (See 5, 5a and 5b below.)
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Dick
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1)Six Impossible Things
By John Mauldin

Alice laughed. "There's no use trying," she said" One can't believe impossible things."

"I daresay you haven't had much practice," said the Queen. "When I was your age, I always did it for half-an-hour a day. Why, sometimes I've believed as many as six impossible things before breakfast."

- From Through the Looking Glass by Lewis Carroll

Economists and policy makers seem to want to believe impossible things in regards to the current debt crisis percolating throughout the world. And believing in them, they are adopting policies that will result in, well, tragedy. Today we address what passes for wisdom among the political crowd and see where we are headed, especially in Europe.

I am reminded of the great line from the movie, The Princess Bride. Vizzini is the short bad guy who is trying to get away from Westley and every thing he attempts does not work. Westley just keeps on coming. At each failed attempt, Vizzini mutters, "Inconceivable." Finally, Vizzini has just cut the rope and The Dread Pirate Roberts (Westley) is still climbing up the cliff.

Vizzini: HE DIDN'T FALL? INCONCEIVABLE.

Inigo Montoya: You keep using that word. I do not think it means what you think it means.

European leaders keep telling us that the break-up of the eurozone is inconceivable. I do not think they know what that word really means. Let's see if I can explain the problem so that even a politician can understand.


Six Impossible Things
I have written several letters over the years about the basic economic equation

Which is to say, that Gross Domestic Product in a country is equal to total Consumption (personal and business) plus Investments plus Government Spending plus next exports. This equation is known as an identity equation. It is true for all countries and times.

Now, gentle reader, I am going to spare you a few pages of algebra and cut to the chase. Let's divide a country's economy into three sections, private, government and exports. If you play with the variables a little bit you find that you get the following equation.

Domestic Private Sector Financial Balance + Governmental Fiscal Balance – the Current Account Balance (or Trade Deficit/Surplus) = 0

This equation was introduced to you a few months ago in an Outside the Box written by Rob Parenteau. We are going to review this briefly, as it is VERY important. Paragraphs in quotes will be from that letter. As Rob noted, "...keep in mind this is an accounting identity, not a theory. If it is wrong, then five centuries of double entry book keeping must also be wrong."

By Domestic Private Sector Financial Balance we mean the net balance of business and consumers. Are they borrowing money or paying down debt? Government Fiscal Balance is the same: is the government borrowing or paying down debt? And the Current Account Balance is the trade deficit or surplus.

The implications are simple. The three items have to add up to zero. That means you cannot have both surpluses in the private and government sectors and run a trade deficit. You have to have a trade surplus.

Let's make this simple. Let's say that the private sector runs a $100 surplus (they pay down debt) as does the government. Now, we subtract the trade balance. To make the equation come to zero it means that there must be a $200 trade surplus.

$100 (private debt reduction) + $100 (government debt reduction) - $200 (trade surplus) = 0.

But what if the country wanted to run a $100 trade deficit? Then that means that either private or public debt would have to increase by $100. The numbers have to add up to zero. One way for that to happen would be:

$50 (private debt reduction) + (-$150) (government deficit) - (-$100) (trade deficit) = 0. Remember that we are adding a negative number and subtracting a negative number.

Bottom line. You can run a trade deficit, reduce government debt and reduce private debt but not all three at the same time. Choose two. Choose carefully. And before we get into the implications, let's look at yet another equation, although this is somewhat simpler.

Delta Force
There are two and only two, ways that you can grow your economy. You can either increase your population or increase your productivity. That's it.

The Greek letter "Delta" is the symbol for change. So if you want to change your GDP you write that as:

Δ GDP = Δ Population + Δ Productivity

If you are a country facing a population decline (like Japan) that means to keep your GDP growing you have to increase your productivity even more. That is why I have written so much about demographics over the years. Population growth (or the lack thereof) is very important. Russia is facing a very serious problem over the next 20 years that will require either a significant increase in productivity or large immigration to stave off a collapsing economy. Russia's population has declined by almost 7 million in the last 19 years to 142 million. UN estimates are that it may shrink by about a third in the next 40 years. But that's another story for another letter.

One last economic insight. You cannot grow your debt faster than nominal GDP forever. At some point, the market begins to think you will not be able to pay your debts back. This is no different than the fact that a family cannot grow its debt faster than its income ability to pay the debt back. At some point, you run out of the ability to borrow more money as lenders "just say no."

As a family's or country's debts grow, the carrying cost or interest expenses rise. At some point, the interest expense consumes an ever larger portion of the budget. Increasing the debt increases the interest expense eventually to the breaking point. There are limits.

Reduce your Deficits!
Now, let's look at the implication of all this. Let's start with Great Britain. They are running very large deficits on the order of 11% of GDP. Clearly, that is unsustainable and the new government knows it. They are looking to cut £6 billion in their first effort, which sounds like a lot, but is less than 4% of the £156 billion deficit. There is a lot more cutting that needs to be done.

But spending cuts and tax hikes have consequences. The UK retail industry is warning that a feared hike in value-added tax to 20% from the Conservative-Liberal Democrat government would cost 163,000 jobs and cut consumer spending by £3.6bn over four years. And that tax hike is just for openers.

The classic hope for any country in such a dire strait is to be able to grow your way out of the problem. Martin Wolfe wrote in the Financial Times a few weeks ago that Britain needed to let the pound drift lower so that British exports would be more competitive. A cheap pound will drive up tourism. Their trade deficit can become a trade surplus.

Here is their dilemma. In order to reduce the government's fiscal deficit, either private business must increase their deficits or the trade balance has to shift, or some combination. Lucky for them, they can in fact allow the pound to drift lower by monetizing some of their debt. Lucky, in they can at least find a path out or their morass. Of course, that means that pound denominated assets drop by another third against the dollar. It means that the buying power of British citizens for foreign goods is crushed. British citizens on pensions in foreign countries could see their locally denominated incomes drop by half from their peak (well, not against the euro which is also in free fall).

What's the alternative? Keep running those massive deficits until ever increasing borrowing costs blow a hole in your economy reducing your currency valuation anyway. And remember, if you reduce government spending, in the short run that is a drag on the economy, so you are guaranteeing slower growth in the short run. As I have been pointing out for a long time, countries around the world are down to no good choices.

Britain's is a much slower economy (maybe another recession), much lower buying power for the pound, lower real incomes for its workers, yet they have a path that they can get back on track in a few years. Because they have control of their currency and their debt which is mostly in their own currency, they can devalue their way to a solution.

Pity the Greeks
Some of my fondest memories were made in Greece. I like the country and the people. But they have made some bad choices and now must deal with the consequences.

We all know that Greek government deficits are somewhere around 14%. But their trade deficit is running north of 10%. (By comparison, the US trade deficit is now about 4%.)

Going back to the equation, if Greece wants to reduce its fiscal deficit by 11% over the next three years, then either private debt must increase or the trade deficit must drop sharply. That's the accounting rules.

But here's the problem. Greece cannot devalue its currency. It is (for now) stuck with the euro. So, how can they make their products more competitive? How do they grow their way out of their problems? How do they become more productive relative to the rest of Europe and the world?

Barring some new productivity boost in olive oil and produce production, there is no easy way. Since the beginning of the euro, Germany has become some 30% more productive than Greece. Very roughly, that means it cost 30% more to produce the same amount of goods. That is why Greece imports $64 billion and exports $21 billion.

What needs to happen for Greece to become more competitive? Labor costs must fall by a lot. And not by just 10 or 15%. But if labor costs drop (deflation) then that means that taxes also drop. The government takes in less and GDP drops. The perverse situation is that the debt to GDP ratio gets worse even as they enact their austerity measures.

In short, Greek life styles are on the line. They are going to fall. They have no choice. They are going to willingly have to put themselves into a severe recession or more realistically a depression.

Just as British incomes relative to their competitors will fall, Greek labor costs must fall as well. But the problem for Greeks is that the costs they bear are still in euros.

It becomes a most vicious spiral. The more cuts they make, the less income there is to tax, which means less government revenue which means more cuts which mean, etc.

And the solution is to borrow more money they cannot at the end of the day hope to pay. All that is happening is that the day of reckoning is delayed in the hope for some miracle.

What are their choices? They can simply default on the debt. Stop making any payments. That means they cannot borrow any money, but it would go along way toward balancing the government budget. Government employees would need to take large pay cuts and there would be other large cuts in services. It would be a depression, but you work your way out of it. You are still in the euro and need to figure out how to become more competitive.

Or, you could take the austerity, downsize your labor costs and borrow more money which means even larger debt service in a few years. Private citizens can go into more debt. (Remember, we have to have our balance!) This is also a depression.

Finally, you could leave the euro and devalue like Britain is going to do. Very ugly scenario, as contracts are in euros. The legal bills would go forever.

There are no good choices for the Greeks. No easy way. And then you wonder why people worry about contagion to Portugal and Spain?

I see that hand asking a question. Since the euro is falling won't that make Greece more competitive? The answer is yes and no. Yes, relative to the dollar and a lot of emerging market currencies. No to the rest of Europe, which are their main trade partners. A falling euro just makes economic export power Germany and the other northern countries even more competitive.

Europe as a whole has a small trade surplus. But the bulk of it comes from a few countries. For Greece to reduce their trade deficit is a very large life style change.

Germany is basically saying you should be like us. And everyone wants to be. Just not everyone can.

Every country cannot run a trade surplus. Someone has to buy. But the prescription that politicians want is for fiscal austerity and trade surpluses, at least for European countries. But if the PIIGS reduce their trade deficits, that will not be good for Germany.

Yet politicians want to believe that somehow we all can run surpluses, at least in their country. We can balance the budgets. We can reduce our debts. We all want to believe in that mythical Lake Woebegone, where all the kids are above average. Sadly, it just isn't possible for everyone to have a happy ending.

And this brings us to a last quick point, which some day will be its own letter. Every country wants it currency to be valued "fairly" which means lower than its competitors. With both Europe and Britain on their way to parity with the US dollar, what will be the reaction of Asia and especially China?

As Ollie said to Stan (Laurel and Hardy), "Here's another nice mess you've gotten me into!" A nice mess indeed.

Should the US Bail Out European Banks?
The obvious answer to the above question, at least on this side of the Atlantic, is no. But that is the plan being foisted on US tax-payers by the International Monetary Fund. The IMF wants to create a $250 billion dollar bailout fund for Greece, Portugal, et al that the US will contribute roughly 20% to. This fund will loan money and that IMG debt will be subordinate (junior!) to regular Greek debt, so when Greece does default, and they will, the IMF is the last in line to get paid.

Where will the money go? It will buy mostly Greek rollover debt from European banks getting out of their Greek debt. It is a back door bailout for German and French banks. The US Senate voted 94-0 that the US should not fund any such debt if the Treasury cannot certify the probability of getting repayment. If the Obama administration allows this funding to go through, the hue and cry will be large. It is bad enough that we have to pay for Freddie and Fannie (already $400 billion and counting!). Not meaning to be churlish, but the French and Germans can bail out their own banks.

Italy at Last! I-Pads, Paris, Milan
Next week I leave for Italy with the kids, three of their spouses and two grandkids. 13 in all. This is not quite the Normandy invasion, but it does leave you with an appreciation for logistics personnel. Planes, Trains and Automobiles. Rome for five days, Venice for four more and then Tuscany. I will get to see Pompeii, which has been on my bucket list like forever. And a hot air balloon ride in Tuscany. I am sure lots of pasta, Chianta, pizza (my kids will force me) and so many great experiences. I am really getting jazzed.

I will write at least one letter from Italy, and have a guest or two help me out. After a quick trip to Paris to speak at the Global Interdependence Council I will go back to Tuscany for some "work" with my European partners and then up to Milan for a speech. The Paris speech is closed but the one in Milan is open. Drop me a note and I will get you on the invite list.

There is so much to get done before I leave, not the least of which is getting my new I-Pad up to speed. Yes, I relented. My intention was to wait for the next version to come out next year. But watching Tiffani use hersand another friend just work magic with hers, and I have to have one. It is going to change my book reading habits, as well as keep me even more online. Is that good? We will see. And yes, when the next one comes out, I will get it. But at least I can tell myself that one of my kids really needs this one. :-)

Have a great week.

You ready for some local Chianti analyst,

John Mauldin
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2)http://www.youtube.com/watch?v=zHStBGk_D8Y
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3)Obama, the Thin-Skinned President
By Peter Wehner

In their book "The Battle for America 2008," Haynes Johnson and Dan Balz wrote this:
[Chief political aide David] Axelrod also warned that Obama's confessions of youthful drug use, described in his memoir, Dreams From My Father, would be used against him. "This is more than an unpleasant inconvenience," he wrote. "It goes to your willingness and ability to put up with something you have never experienced on a sustained basis: criticism. At the risk of triggering the very reaction that concerns me, I don't know if you are Muhammad Ali or Floyd Patterson when it comes to taking a punch. You care far too much what is written and said about you. You don't relish combat when it becomes personal and nasty. When the largely irrelevant Alan Keyes attacked you, you flinched," he said of Obama's 2004 U.S. Senate opponent.

I thought of this memo after reading the comment by Sen. Pat Roberts after he and other Senate Republicans had a contentious 80-minute meeting with the president on Tuesday. "He needs to take a Valium before he comes in and talks to Republicans," Roberts said. "He's pretty thin-skinned."

Sen. Roberts is being too generous. Obama is among the most thin-skinned presidents we have had, and we see evidence of it in every possible venue imaginable, from one-on-one interviews to press conferences, from extemporaneous remarks to set speeches.
The president is constantly complaining about what others are saying about him. He is upset at Fox News, and conservative talk radio, and Republicans, and people carrying unflattering posters of him. He gets upset when his avalanche of faulty facts are challenged, like on health care. He gets upset when he is called on his hypocrisy, on everything from breaking his promise not to hire lobbyists in the White House to broadcasting health care meetings on C-SPAN to not curtailing earmarks to failing in his promises of transparency and bipartisanship.

In Obama's eyes, he is always the aggrieved, always the violated, always the victim of some injustice. He is America's virtuous and valorous hero, a man of unusually pure motives and uncommon wisdom, under assault by the forces of darkness.
It is all so darn unfair.

Not surprisingly, Obama's thin skin leads to self pity. As Daniel Halper of The Weekly Standard pointed out, in a fundraising event for Sen. Barbara Boxer, Obama said,

Let's face it: this has been the toughest year and a half since any year and a half since the 1930s.

Really, now? Worse than the period surrounding December 7, 1941 and September 11, 2001? Worse than what Gerald Ford faced after the resignation of Richard Nixon and Watergate, which constituted the worse constitutional scandal in our history and tore the country apart? Worse than what Ronald Reagan faced after Jimmy Carter (when interest rates were 22 percent, inflation was more than 13 percent, and Reagan faced something entirely new under the sun, "stagflation")? Worse than 1968, when Bobby Kennedy and Martin Luther King, Jr. were assassinated and there was rioting in our streets? Worse than what LBJ faced during Vietnam -- a war which eventually claimed more than 58,000 lives? Worse than what John Kennedy faced in the Bay of Pigs and in the Cuban Missile Crisis, when we and the Soviet Union edged up to the brink of nuclear war? Worse than what Franklin Roosevelt faced on the eve of the Normandy invasion? Worse than what Bush faced in Iraq in 2006, when that nation was on the edge of civil war, or when the financial system collapsed in the last months of his presidency? Worse than what Truman faced in defeating imperial Japan, in reconstructing post-war Europe, and in responding to North Korea's invasion of South Korea?

In his autobiography "Present at the Creation," Dean Acheson wrote about the immensity of the task the Truman administration faced after war ended in 1945, which "only slowly revealed itself. As it did so, it began to appear as just a bit less formidable than that described in the first chapter of Genesis. That was to create a world out of chaos; ours, to create half a world, a free half, out of the same material without blowing the whole to pieces in the process."
For Obama to complain that the problems he faces are so much worse than any other president in the last 80 years is stunningly self-indulgent, to say nothing of ahistorical.

With Obama there is also the compulsive need to admonish others, to point fingers, to say that the problems he faces are not of his doing. Oh, sure; on occasions there are the grudging concessions, like in Thursday's press conference devoted to the oil spill in the Gulf of Mexico, where Obama says, "In case you're wondering who's responsible, I take responsibility" to ensure that "everything is done to shut this down." But those words are always pro forma, done reluctantly and for tactical political reasons, a rhetorical trick that is meant to get him off the hook. As recently as last week, Obama, in the Rose Garden, was implicitly blaming the previous occupant of the White House for the explosion of the offshore rig Deepwater Horizon [Obama remarks linked here].

The president's instincts are by now obvious to all: deflect blame, point fingers, and lash out at others, most especially his predecessor. We know from press reports (see here and here) that the strategy for the Democrats in 2010, two years after Obama was elected president, is to – you guessed it – blame George W. Bush.
What explains all this is hard to know. But it's clear he has adopted an image of himself as something rare and remarkable, a historic figure of almost super-human abilities. "I am absolutely certain that generations from now," Obama said during the summer of his presidential run, "we will be able to look back and tell our children that this was the moment when we began to provide care for the sick and good jobs to the jobless; this was the moment when the rise of the oceans began to slow and our planet began to heal; this was the moment when we ended a war and secured our nation and restored our image as the last, best hope on earth."
"We are the ones we have been waiting for," Obama and his aides said constantly during the campaign.

President Obama's more unattractive personal qualities probably won't wear well with the electorate. Americans tend to tire of those who are look back rather than ahead and are always blaming others for the problems they face.

Barack Obama -- a man who was as unprepared to be president as any man in our lifetime -- has over the last 16 months shown that he is overmatched by events. His poll numbers continue to drop, his health care proposal is becoming less rather than more popular, the oil spill in the Gulf is badly eroding his image for leadership and competence, and his party has been battered in election after election since November. We have now reached the point where Democrats are running against Obama and his agenda in order to survive (witness Mark Critz in Pennsylvania).
We can hope that Obama, an intelligent man, learns from the errors of his ways. But the great danger in all of this is that in the face of his troubles Obama and his aides become increasingly defensive, display a greater sense of entitlement and even a touch of paranoia. When arrogant men lose control of events it can easily lead to feelings of isolation, to striking out at critics, to bullying opponents, and to straying across lines that should not be crossed.

And so the president needs to surround himself with people who can tamp down on the uglier impulses within his administration, who are willing to tell Obama that the lore created by him, Axelrod, Plouffe, and Gibbs during the campaign has given way to reality, that cockiness is not the same as wisdom, and that spin is no substitute for substantive achievements. And Obama needs someone who has standing in his life to tell him that the presidency is a revered institution that should not be treated as if it were a ward in Chicago.

The ingredients are in place for some serious problems down the road. Those who care for the president need to recognize the warning signs now, sooner rather later, before it becomes too late, for him and for the nation.
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4)Egyptian forces in fierce battles with Sinai Bedouin jihadist smugglers

For four days, Egyptian special forces have been fighting Bedouin tribesmen in rugged central Sinai in an effort to shut down the arms-cum-fighter smuggling highway they run for al Qaeda and the Palestinian Hamas, debkafile's counter-terror sources report. The al Qaeda-led tribesmen are battling Egyptian APCs, artillery and helicopters with heavy machine guns and RPGs, in exchanges so fierce that the Egyptians retired to El Arish Saturday, May 29, to recuperate, restock on ammo and collected reinforcements for the next round.
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5)Analysis: Politics as usual for Obama
By Liz Sidoti

So much for changing how Washington works.

Crimping his carefully crafted outsider image and undercutting a centerpiece of his 2008 campaign, President Barack Obama got caught playing the usual politics — dangling a job offer for a political favor in the hunt for power.

His lawyer admitted as much in a Friday report that detailed how Chief of Staff Rahm Emanuel dispatched former President Bill Clinton to try to persuade Pennsylvania Rep. Joe Sestak to abandon his primary challenge to Sen. Arlen Specter by offering an executive branch post.

"I can assure the public that nothing improper took place," Obama told reporters at the White House a day earlier.

True or not, Obama has a political problem.

Because what did take place was backroom bargaining, political maneuvering and stonewalling, all of which run counter to the higher — perhaps impossibly high — bar Obama has set for himself and his White House to do things differently.

The White House's reluctant acknowledgment of the chain of events shone a light on the unseemly, favor-trading side of politics — and at an inopportune time for Obama and Democrats as they seek to keep control of Congress.

This election year, angry voters have made clear they have little patience for politics generally and Washington politics specifically. And they are choosing candidates who promise to change the system — and ousting incumbents who fail to deliver.

But what may be even more troubling for the president is the question the episode raises: Has Obama become just like every other politician?

The answer could have implications for him ahead of midterm congressional elections this fall and his likely re-election race in two years.

Mindful of the potential fallout, the White House sought to play down the embarrassing situation even as it tried to blunt the media maelstrom by releasing its report on the Friday before a long Memorial Day weekend when few Americans pay attention to the news.

White House counsel Robert Bauer said what transpired was neither illegal nor unethical.

But he also said: "There have been numerous reported instances in the past when prior administrations — both Democratic and Republicans and motivated by the same goals — discussed alternative paths to service for qualified individuals also considering campaigns for public office."

Fair enough.

But Obama has held himself to a different standard.

And, by that measurement and in this case, he failed to deliver.

As a candidate, Obama cast himself as above partisan sniping and political maneuvering — even as he proved to be a shrewd politician able to broker deals. He promised voters turned off by politics and Washington — and yearning for change that this fresh-faced, political newcomer offered — that he would do things differently from his predecessors.

In Obama's new Washington, lobbyists would be banned from serving in his administration, the Democratic National Committee would be barred from accepting money from political action committees, White House visitor logs would be released and reams of information would be posted online.

As president, Obama has turned that vision into reality, albeit with some exceptions. He has trumpeted his goal of an open and transparent administration. He bristles at the notion that his White House is anything but. And in a frustrated tone, he routinely talks like an outsider doggedly working to change the ways of Washington.

But the Sestak incident undercuts all that — a point not lost on Obama's GOP critics.

It all began when Specter, a veteran GOP senator facing a difficult Republican primary, chose to become a Democrat last year at the White House's urging. Obama quickly endorsed him and pledged to campaign for him. And the White House tried to clear the Democratic field for him.

But Sestak entered the Democratic primary anyway.

At one point during his campaign, he said that a job was offered but he provided no details. And the White House deflected repeated questions about the claim, insisting officials did not behave inappropriately while also declining to elaborate.

Republicans pounced, mindful of Obama's repeated promises to run an open government that was above backroom deals.

But it wasn't until Sestak upset Specter in the Democratic primary May 18 that Republicans renewed their pressure on the administration to disclose what happened and two top Democrats — party chief Tim Kaine and Dick Durbin of Illinois, the party's second-ranking leader in the Senate — said the White House and Sestak needed to address the questions.

In the end, Bauer's report said this: Emanuel enlisted Clinton's help as a go-between with Sestak. Clinton agreed to raise the offer of a seat on a presidential advisory board or another executive board if Sestak remained in the House and dropped his bid, "which would avoid a divisive Senate primary."

Sestak said Clinton called him last summer and raised the possibility, but "I said no."

The White House hopes the report puts the matter to rest.

But Republicans, no strangers to election-year politics, will surely try to keep it alive.

5a)Obama: America's chief confessor
By Victor Davis Hanson

The first duty of national leaders is to worry about the self-interest of their own countries; utopian internationalism can come later. German Chancellor Angela Merkel, despite her soaring European Union rhetoric, is relearning that lesson.

German voters in a recent parliamentary election rebuked her for bailing out the spendthrift Greeks with hard-earned German money. Barack Obama should take note.

Last year, Obama won a Nobel peace prize not for what he did, but for what he represented — to the European judges a new post-national American president. His subsequent apology tours abroad have emphasized American sins without much discussion of the context of the times.

In Cairo last year, the president inaccurately claimed that Islam helped to foster Western achievements like the Renaissance and Enlightenment. In such moments, Obama sounds as if he thinks America has to be perfect to be good, while other nations merely need to be OK.

Obama's new outreach to Iran, Syria and Venezuela tells the world, fairly or not, that the United States — not these anti-American authoritarians — was responsible for tense relations in the past. Meanwhile, the old special relationship with democratic Britain, the once unquestioned support for democratic Israel, and missile defense for democratic Eastern Europe all seem passe.

Recently, Obama went too far when he invited Mexican President Felipe Calderon to the White House to address the Arizona immigration law. Side by side with Obama, Calderon summarily trashed the voters of Arizona for demanding enforcement of their nation's immigration laws: "It is a law that not only ignores a reality … but also introduces a terrible idea, using racial profiling as the basis for law enforcement.”

Wrong. In truth, the law prohibits racial profiling. The new Arizona statute allows law enforcement to request proof of citizenship of only those detained for other reasons — and only if there is sufficient reason to doubt their citizenship.

Obama right there should have corrected Calderon's unfair caricatures. The Mexican government treats illegal immigrants from Central America far less sympathetically. And not long ago, Mexico printed a comic book instructing its own citizens how to break American law — cynically assuming its own fleeing citizens were both illiterate and without worry about illegally entering Mexico's northern neighbor.


Side with states
Obama, however, in response to Calderon, mentioned the growing irrelevance of borders themselves. He cited his own worry about the propriety of an Arizona law that currently receives a 70 percent approval rating among Americans. Even if Obama in the past has remarked that he thinks America is not necessarily an exceptional nation, the president still should side with states that want to enforce federal laws rather than with foreign nations that seek to circumvent them.

The Obama-Calderon criticism of Arizona came after Assistant Secretary of State Michael Posner, in a meeting with Chinese envoys, on his own initiative raised the issue of Arizona's immigration law "early and often.” Posner wanted to offer his own example of America's morally equivalent problems with issues of human rights. He forgot, however, to actually read the Arizona law — and that he was discussing human rights with a regime that routinely denies its citizens rights of free speech and due process, and not all that long ago killed millions of its own citizens and swallowed Tibet.

Instead of seeing his nation or its states as the problem, our president would do better to focus on the woes of the European Union, North Korea's sinking of a South Korean ship, Iran's plans to get the bomb, continued terrorist attacks in the U.S., wars in Afghanistan and Iraq and Mexico's encouragement of its own citizens to violate American immigration law.

Right now there are quite enough foreign felonies in the world without dwelling on American misdemeanors.

5b)Rahm to Bill to Joe

At his Thursday press conference, President Obama said that "I can assure the public that nothing improper took place" in the curious case of Joe Sestak and the

Pennsylvania Senate primary—but he declined to say what, exactly, took place. After yesterday's pre-Memorial Day weekend news dump, now we know. Sort of. Maybe. In a way.

Last summer, Mr. Sestak said he'd been offered a high-ranking federal job in return for ending his ultimately successful bid to depose Arlen Specter, an act of interfering in an election that would constitute a felony if it was direct enough. The account released yesterday by White House counsel Robert Bauer says that Rahm Emanuel enlisted Bill Clinton "to determine whether Congressman Sestak would be interested in service on a Presidential or other Senior Executive Branch Advisory Board." And the post "would have been uncompensated."

So a two-term President who is now ambassador to the world is running errands for the White House chief of staff, and the plumb job he has at his disposal is a seat on the President's Intelligence Advisory Board, or perhaps the President's Commission on White House Fellowships?

And the Congressman was supposed to give up his reasonable chance at a U.S. Senate seat for such a sinecure? As a simple matter of political respect, Mr. Clinton could at least have thrown in a consulting gig with Yucaipa.

Mr. Sestak put out a statement yesterday corroborating that chain of events, which is somewhat credulity-straining—not least because of the White House's eagerness to clear the primary field. "There have been numerous, reported instances in the past when prior Administrations—both Democratic and Republican, and motivated by the same goals—discussed alternative paths to service for qualified individuals also considering campaigns for public office," Mr. Bauer wrote. "Such discussions are fully consistent with the relevant law and ethical requirements."

You've got to love that "alternative paths to service" rap. Mr. Clinton must be howling.

It's possible that all we really have here is a case of the Obama White House playing Washington politics as usual, which the White House refused to admit for three months because this is what Mr. Obama promised he would not do if he became President. However, this is clearly what he hired Mr. Emanuel to do for him, and given his ethical record Mr. Clinton was the perfect political cutout. So much for the most transparent Administration in history.

Then again, George W. Bush merely exercised his right to fire a handful of U.S. Attorneys, and Democrats made that a federal case for years even though it has since gone nowhere legally. The Emanuel to Clinton to Sestak job offer still needs a scrub under oath by the Justice Department and the relevant Congressional committees.
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