Thursday, July 28, 2011

Plenty of Obama Beef but Where's The Obama Plan?

My friend Ne'eman writes about Netanyahu and Israel's socio-economic problems. (See 1below.)
Three articles discussing the various additional problems Israel faces. (See 2, 2a and 2b. below.)
Ken Langone slams Obama. (See 3 below.)
Roubini continues to believe fiscal drag is unavoidable. (See 4 below.)
Who is Gov. Rick Perry. One man's insights. (See 5 below.)
Let the wish beget the thought. (See 6 below.)
Too long to post but confirms what I have been saying about our longer term debt problems which continue to be ignored. (See:Long Term Debt Crisis Worse Than You Think - Peter Coy, BusinessWeek.)
Plenty of beef but where's the plan? (See 7 below.)
1)Unconventional Wisdom
Israel's Socio-Economic Revolt
By Yisrael Ne'eman

In Israel this summer the sounds of domestic rebellion over housing prices increase daily. It began with the "cottage cheese" revolt a month ago, quickly spread to the dairy industry in general and is now focused on housing – the most painful issue for young middle class Israelis. And just as an aside we are in the middle of a doctors' strike/slowdown going on for months. Thousands are living in tent encampments from Kiryat Shmona in the north to Beersheva in the south with Tel Aviv supplying us with the largest most activist of all protests with 20,000 – 30,000 joining last Saturday night's demo which in part turned violent. And no, this is not similar in any way to what is happening in the Arab world, but rather here we have a mass civil protest in a democratic society.

Although there are some down and outers, generally we are speaking of Israel's young middle class Jewish population, often professionals or trades persons where both parents work to support a family of four or five. Government housing no longer exists yet did so into the 1990s. The Likud, as well as the previous Kadima government believe in capital incentive market societies, call it Reaganomics or Thatcherism of 1980s vintage – here in Israel it is the vision of the Likud ideological father Zeev Jabotinsky. So far the only government intervention is the Land Authority reform with the promise to make more government properties available for sale to private interests and "ensure" construction. Few truly believe such a move will drive prices down, but rather that the public will still find housing unaffordable. Contractors will build expensive apartments and the public will have no choice but to buy or remain without a property.

Netanyahu and the conservatives discount the government as a player in the game. Yet government is elected to govern or "intervene", it always being a question of degree. For instance the American "Fanny" and "Freddie" mortgage insanity of almost giving away real estate in some cases (in the short term) is an example of what not to do. No one is entitled to own a home. However working people who pay their taxes and serve in the army deserve a roof over their heads, a roof that does not bankrupt them. Ben Gurion and the Laborites understood this very well, one can say that the Likud's Menachem Begin did as well (remember "Project Renewal"?). What these two great Zionist leaders, yet bitter political enemies understood is that Israel is for all Jews, not just wealthy ones. And taking the analogy further into the democratic sphere, all of Israel's working law abiding citizens, Jewish or not, deserve adequate housing, even if dependent on reasonable rentals and rent control. According to the protesters nowadays the middle class must spend up to half its earnings on housing.

The government does not deny the complaint, but rather points out that there is cheaper housing well outside of the Tel Aviv metro region. The government also claims they built more housing units in 2010 than in any previous years from the time Kadima was in power (2006-09). This is correct, however 56% of all housing went to the ultra-orthodox (haredim), most of whom do not work, pay taxes or do military service. Haredi housing is part of the government agreements with Shas and United Torah Judaism – this reported by Nadav Eyal on Channel 10. The government is correct concerning the outlying regions, but job opportunities are limited in the northern Galilee/Golan and southern Negev regions. And let's face it the protests in Kiryat Shmona in the far north on the Lebanese border undercut all government claims that the periphery is the ultimate answer.

As everyone knows the problems did not begin with Netanyahu's present government. Serious capitalization began in the mid nineties during the Rabin/Peres Labor coalition as part of the Oslo Accords accompanying "peace dividend" but was accelerated from 1996 onwards when Netanyahu took office. For the past 15 years market driven capitalism dominates Israel's economy and the socio-economic gap is now the largest in the Western World and among OECD members. In these times of economic crisis in the US and Europe many on the right such as Foreign Minister Avigdor Leiberman claim these housing and economic issues to be trifling, and ridicule the well educated potentially middle class tent dwellers, the future backbone of Israeli society. They are labeled "spoiled children" whose "problems are those of the rich."

For sure no one has the "right" to live in a gentrifying Tel Aviv – families can move to the suburbs if prices are too high. Yet students do need dorms and affordable housing off campus at Tel Aviv University. Downtown Tel Aviv does not have moderately priced housing and it is true that one can move to the close by towns like Rishon LeTzion, Herzliya or Ramat Gan. The answer is two fold – government housing outside of the immediate Tel Aviv metro region such as Lod, Ramle, Netanya, Bet Shemesh, Modiin, Ashdod and Ashkelon with the accompanying necessary excellent public transportation exemplified by trains arriving every ten to fifteen minutes during rush hour, but such rail service is only a dream. Unfortunately there are many safety problems with the train, it arrives twice an hour in these towns and the light rail system to be built in Tel Aviv never happened because the billionaire tycoon who won the contract Lev Leviyev failed to make the investment. Some things responsible governments cannot leave to market forces, such as infrastructure for essential services. After they are built, and functioning, it can be decided whether to sell them off or not.

Israel's growth rate is a steady 5% or so for several years now, unemployment last month stood at 5.7% and there were $77.4 billion in foreign currency reserves at the end of June as reported by Israel's leading financial newspaper Globes. These figures however are misleading. Unemployment is down because many people have half time (or even less) jobs making minimum wage and are not considered on the welfare roles and the growth rate is heavily impacted by the growth of the technology sector. Israel has a foreign debt worth about the same as its foreign currency reserves, but less that half of the overall GDP (Wikipedia – Economy of Israel). The Governor of the Bank of Israel (Federal Reserve) Stanley Fischer has done a fine job and is recognized as among the best in the world.

However it falls to the government to decide on socio-economic priorities. There is far too much indirect taxation through Value Added Tax and the like. Income tax is constantly shrinking, especially for the wealthy. Another problem with such a small economy is that wealth is concentrated in the hands of a few extended families often called the "oligarchs" and whether there are five, ten or twenty, does not really matter. The promised "trickle down" is dysfunctional. These billionaires are connected to the political powers that be, in particular on the economic right including the Likud, Yisrael Betainu, Kadima and Ehud Barak's breakaway (from Labor) Independence list. And what of the left or social democrats? They barely exist: eight seats for Labor and three for Meretz totaling eleven – less than 10% of the electorate.

The Likud and Kadima are capitalist parties and no one knows what Ehud Barak's Independence party represents (He doesn't know either). But Labor is not to be let off the hook, let's recall they were part of the coalition from 2006-09 and ceded the economic portfolios to Ehud Olmert's Kadima faction. Party chairman Amir Peretz, the former Histadrut labor union secretary general became defense minister instead of insisting on the treasury or the industry/commerce/employment portfolio. He failed as defense minister (remember the Second Lebanon War 2006) while Kadima Finance Minister Avraham Hirshzon continued a full capital incentive policy until he ended up in jail on corruption charges. As finance minister Netanyahu's market policies were greatly welcomed in 2003 when Israel was in the doldrums suffering from the Palestinian Low Intensity Conflict. By 2009 when he became prime minister it was time to reconsider the middle class – in particular as said before - those who work, pay taxes and serve in the security forces, these are the citizens who form the backbone of the Israeli State and to whom the government officials and apparatus owe their existence. 2011 may be the wake-up call for those politicians who forgot the very people who make the state possible.

Israel is in desperate need of a long term, permanent multi-billion dollar government project of affordable housing and mass transit especially on the periphery of the Tel Aviv metro region. Government involvement needs to be limited and flexible, playing a minimal, yet crucial role. When the free market system does not respond to the needs of the people the government is obligated to step in as a player and at time that means major government investment.

In a country overwhelmed by external threats, the last thing we need is an unbridgeable class gap and the even remote possibility of internal disintegration as a result of major socio-economic disparities. The danger is even more blatant when the well educated, up and coming middle class are alienated, many believing they have a diminishing stake in Israel's future. Such a scenario is at least as dangerous as Hezbollah or Hamas. It is time to build a balanced and flexible mixed economy
-------------------------------------------------------------------------------------------------------------------------2)Israel's Epic Chess Game
By Steven M. Goldberg

The Palestinians are about to make a fatal error. Israel must not hesitate to declare “checkmate.”

Israel is engaged in a war for survival that started even before its declaration of independence and continues to this very day. Its enemies have prosecuted this war militarily, economically, politically, diplomatically, legally and psychologically. Because of the length and complexity of this struggle, an appropriate metaphor is a game of chess – one in which the stakes for Israel are life and death.

Winning a game of chess is no simple matter. It requires strategy, patience, steady nerves, the proper balance between aggression and caution, and the ruthlessness to checkmate one’s opponent when the opportunity presents itself. Impulsiveness and emotionalism usually lead to defeat. When a grandmaster makes a mistake, he must not panic; instead, he must extract himself from danger with care and determination.
Israel’s leaders have not played like grandmasters.

Instead, they have mixed brilliant moves with blunders.

Among the former, the preemptive strike on Egypt of June 5, 1967, that led to Israel’s victory in the Six Day War and Menachem Begin’s decision to destroy Iraq’s nuclear reactor in Osirak in June 1981 stand out.
Both moves required boldness and careful preparation, and both were highly successful.

Unfortunately Israel has subsequently made serious strategic errors. It allowed Egypt to strike the first blow in October 1973, and almost lost the Yom Kippur War.
The Oslo Accords of 1993 allowed Yasser Arafat and the PLO to return from exile, and have resulted in the murder or maiming of thousands of Israelis. Israel’s precipitous withdrawal from southern Lebanon in 2000 and its forcible eviction of Jews from Gaza in 2005 compounded the error of Oslo.

THE CAUSE of these errors was emotional exhaustion, best summed up by former prime minister Ehud Olmert’s tragic admission that “we are tired of fighting.
We are tired of being courageous. We are tired of winning.

We are tired of defeating our enemies.” Such a mentality is frankly catastrophic.
Fortunately for Israel, its enemies have made even worse mistakes. Most important have been their serial refusals to accept overly generous offers by prime ministers Ehud Barak and Olmert to sacrifice strategically vital territory in Judea and Samaria for a Palestinian state. More recently, the Palestinians have also shortsightedly insisted on a complete settlement freeze as a condition for negotiating with Prime Minister Binyamin Netanyahu, despite his misguided eagerness to make a bargain similar to those offered by his predecessors.

The Palestinians are about to make their worst blunder yet – one that is potentially fatal to their cause.

Specifically, the Palestinian Authority, knowing that its leadership status is failing and that the clock is about to run out, has announced its intention to seek recognition as a state from the United Nations. This desperate gambit flatly abrogates both the Oslo Accords and UN Resolution 242, providing Israel with the legal justification to cancel both agreements and simply annex portions of Judea and Samaria.

TO WIN this chess game, Israel must correct the life-threatening mistake it made by agreeing to a Palestinian state. The land west of the Jordan River can hold a Jewish state or another Arab state; it can’t hold both.

Israel’s leaders, including Yitzhak Rabin, recognized this truth before weakening in the face of international pressure. It’s time to declare categorically that there will never be a Palestinian state in Judea and Samaria.
The Arabs who live there may continue to be residents of Israel with full civil and religious rights and local autonomy, but any national or political rights must be exercised in affiliation with Jordan – the already existing Palestinian state.
Taking advantage of the Palestinian blunder by terminating all discussions of Palestinian statehood won’t be easy. There will be powerful international pressure against Israel for making such a bold move. Many will implore Israel to just surrender, or to make a reckless, needless sacrifice that will lead to its defeat.
But Israel can’t afford to be checkmated. Now it must play like a grand-master.

2a)Why is Judea and Samaria Vanishing?
Dr. Steve Carol, Prof. of History (retired)

Have Judea and Samaria been figuratively lost? Judea and Samaria are the historically biblical names for the highland regions of the Land of Israel, with Samaria in the north and Judea to the south. They are the definitive and proper political and geographic names for the region and have been in general use since Clearchus, a disciple of Aristotle. These two areas have no other names. These names were used during the League of Nations Mandate period. They appear in British government documents, United Nations documents including the UN Partition Plan of 1947. They appear in U.S. State Department documents, including a July 18, 1948 map. Even as late as 1961, the Encyclopaedia Britannica refers to “Judaea” and “Samaria” in an article on “Palestine” (Vol. 17, p. 118).

Trans-Jordan illegally invaded Judea-Samaria in 1948 and as a result of its aggression occupied that region. It then unilaterally annexed the area on April 4, 1950, which was recognized by only two nations, the United Kingdom and Pakistan.
The Arab League, their Muslim supporters, anti-Israel elements and anti-Semites, deliberately sought to rob the region of its correct political and geographic name. They had to fabricate a brand new name for they could find no other name for the territory. Mislabeling was their technique of disinformation and de-legitimization. The “West Bank” was the name concocted by King Abdullah I of Trans-Jordan and his British advisors, allowing the king to annex land outside of his artificially “created” kingdom. He then changed the name of his kingdom twice, first to “The Hashemite Kingdom of the Jordan” but that was quickly rejected since it gave the appearance of a kingdom only along the banks of the Jordan River. The name then was changed again to the “Hashemite Kingdom of Jordan.” The term “West Bank” eradicates all Jewish historical connection to the area. It is a sad commentary that many in the West, including the political left, many Israel’s supporters, some Israelis themselves, as well as the naïve and self-delusional who think the name does not matter, have acquiesced to this unilateral change of names and use it in common parlance. But the name does matter. Similarly, the Arabs insist on calling the Persian Gulf, the “Arabian Gulf” and Iran’s Khuzistan province, “Arabistan.” Why then doesn’t much of the world call the Persian Gulf “Arabian?” Is there a double standard at work here?

Besides the political origins of the phrase, one must wonder from a geographical perspective how wide a river bank can be? A river bank may be a few feet or so, but not some 30 miles deep from the river! Just because a new name is invented, does not mean the world should adopt it in common usage. Does an aggressor get rewarded with the additional bonus of a geographic name change designed to eradicate the historic name of a region? In March 1939, Germany renamed the present-day Czech Republic, “Böhmen und Mähren” after seizing that land by aggressive act. During World War II, Germany invaded, occupied and annexed part of Russia calling it “Ostland.” Do we use those terms today? Do we call Mexico the “South Bank” because it borders on the Rio Grande? Should we rename Serbia, the “West Bank” (of Europe) because it lies to the west of the Danube River and re-designate Poland the “East Bank” due to its location east of the Oder-Neisse Rivers?
Long before most of media capitulated to protests over Danish cartoons and statements by the Pope, the media and many in the world, out of fear and intellectual laziness agreed to obfuscate the truth by surrendering the use of the name Judea-Samaria and adopt the term “West Bank.”

The Roman emperor Hadrian in 135 CE after suppressing the Jewish revolt led by Bar Kochba, attempted to eradicate Jewish nationhood, statehood and any connection to the Land of Israel. He renamed the territory “Palestina” – after the Philistines, the ancient adversaries of the Israelites. Seeking to erase the Jewish connection to Jerusalem the Romans razed the city and named the city built atop the rubble, “Aelia Capitolina.” Nevertheless as late as the 4th century, the Christian author, Epiphanius, referred to “Palestina, that is Judea.” Despite this “Palestina” is still Israel, Aelia Capitolina is still Jerusalem and the West Bank is still Judea-Samaria.

2b)Why Abbas Cannot Recognize Israel as a Jewish State
By David Meir-Levi

Israel’s Prime Minister Benjamin Netanyahu demands that the Palestinian Authority recognize Israel as a “Jewish State.” The Palestinian Authority’s President Mahmud Abbas refuses. Netanyahu demands again and Abbas refuses. Netanyahu tells the US Congress that if only Abbas would recognize Israel as a Jewish State then 90% of the conflict would be over; but Abbas refuses.

One might think that we are witness to two five-year-olds engaged in a playground argument: “Yes you will!” “No I won’t!” “You must!” “I can’t!”
But one would be wrong.

The issue of Israel’s existence as a Jewish State is the very core of the conflict. If Abbas, or any other Muslim leader for that matter, were to agree that Israel is a Jewish state, he would be in opposition to the Islamic religious concepts of “defense of Muslim lands” and of non-Muslims as dhimmi.

Though not found in the Qur’an, the obligation for the defense of Muslim lands is a core concept in medieval and modern Muslim theology, dating back to the 13th century Muslim exegete Ibn Taymiyyah, who declared that all Muslims are obligated to rise up and attack any non-Muslim who takes Muslim land. It is a compulsory duty (fard Ayn) to wage interminable jihad until the Muslim land is reclaimed and again under its divinely ordained and rightful Muslim sovereignty.

There are Muslim scholars who disagree. They quote the Qur’anic references in Chapters V and XVII and elsewhere which state specifically that Allah gave the Promised Land to the Children of Israel as an eternal inheritance. However, Ibn Taymiyyah’s interpretation, that Palestine is Muslim land and must be reclaimed from the Jews, despite the Qur’anic references to God’s promise to the Israelites, seems to prevail in modern Muslim thought.

The concept dhimmi is based upon a Qur’anic source, Sura 9:29, in which Muslims are commanded to make the defeated non-Muslims feel low and subdued. The “Pact of Omar” written during the time of the Caliph Omar II (early 8th century), but ascribed to the 7th century Caliph Omar 1, established a list of regulations detailing the status of non-Muslims under Muslim rule, and circumscribing their behavior. While there is scholarly debate about the extent to which these laws were enforced, it is clear that the position of the dhimmi was subordinate to that of Muslim, and as such the dhimmi could never be a full citizen of any Muslim state, and could never be in a position of authority or sovereignty over Muslims.

Given the high antiquity and religious authority of these concepts, no Muslim leader can acknowledge or recognized Israel as a Jewish state. To do so would be to ignore Allah’s command that Jews (along with other non-Muslims) are condemned to dhimmitude and are not free citizens with their own sovereignty. Similarly, an acknowledgement of Jewish sovereignty and statehood would be an admission that “Palestine” is not Muslim land but is in fact Jewish “Israel.” And, most critical of all, such acknowledgements would mean that there is no basis for declaring a jihad against Israel or against Jews. Instead, by refusing such recognition and maintaining that Israel is an illegal occupier from an Islamic ideological viewpoint, holding Jewish sovereignty over Muslim land contrary to God’s will, Arab leadership can declare the need to maintain a holy jihad until the land is again under divinely ordained Muslim sovereignty.

This is an important issue because it reveals that the prime motivation for the conflict is not borders or water sources or refugees: it is the Arab refusal to accommodate the existence of a Jewish state. Such a motivation, arising from what in essence is Islamic institutionalized religious apartheid, is inconsistent with the sensibilities of 21st century western culture, and would thus have difficulty finding support among western nations. So Abbas and others lie about it. They pretend that a Jewish state is likely to discriminate against its non-Jewish inhabitants — a rather risible claim since non-Jewish minorities in Israel are far better off than any minorities, Muslim or non-Muslim, in Arab lands. Or they argue that a religious definition of a state is inherently racist — beyond risible since they have no such complaint against the Islamic republic of Iran or the self-identified Muslim states of Afghanistan, Pakistan, Yemen, Oman, Kuwait, Qatar, or Saudi Arabia.

To further obfuscate the real motivation for their animus toward Israel, Arab leaders and propaganda sources have focused the world’s attention on a variety of issues such as borders, water rights, refugee repatriation, and the status of Jerusalem: all of which could be resolved in peaceful negotiations, if the Arab side were willing to end the conflict peacefully. All too many of our mainstream media outlets and our political leaders have been duped by this obfuscation. And all attempts at resolution have failed because the focus has been on Israel’s concessions to these propagandistic demands, while ignoring the real cause of the conflict: Arab leaders’ unwillingness to accept Jewish sovereignty over what they still consider Muslim land.

But a Palestinian Authority spokesperson let the proverbial cat out of the bag, perhaps inadvertently, earlier this year. Among the “Palestinian papers” released to the world via wikileaks, there is one called “Talking Points on Recogntion [sic] of Jewish State.” In this paper the Palestinian Authority spokesperson details the reasons for not accepting Israel as a Jewish state. Among them: “Recognizing the Jewish state implies recognition of a Jewish people and recognition of its right to self-determination….Those who assert this right also assert that the territory historically associated with this right of self-determination (i.e., the self-determination unit) is all of Historic Palestine. Therefore, recognition of the Jewish people and their right of self-determination may lend credence to the Jewish people’s claim to all of Historic Palestine.”

In other words, if Abbas were to acknowledge that Israel is a Jewish state, then he would have acknowledged that Jews have the right to political self-determination and national self-realization, just what he claims for the Palestinians, and just what the Qur’anic concept of dhimmitude denies to Jews. Arab leaders don’t want to do that because that would strengthen the Israeli argument for Israel’s just demand of those same rights. And such an admission would acknowledge that Jews can have sovereignty over Muslims (Arab Muslim citizens of Israel) and over what Muslims call Muslim land. So Abbas must continue to deny the obvious, no matter how ridiculous it sounds, because to not do so will weaken his own arguments. And to admit that the motivation for the animus that so much of the Muslim world bears toward Israel originates in the Islamic religious concepts of dhimmi and of the inadmissibility of non-Muslim sovereignty on Muslim land would be to reveal the real core issue in the conflict: the Muslim religious apartheid ideology of the supremacy of Islam.
Thus, Netanyahu is right to demand recognition of Israel as a Jewish state. Since the real motivator for Arab animus against Israel is the Jewish character of the state, there can be no end to the conflict until Arab leaders abandon these Islamic religious concepts. This is not likely to happen any time soon.
3)Home Depot Co-founder Langone: Obama's 'Unpresidential' Behavior Destroying Economy, Country
By Forrest Jones

The United States will work its way through the debt ceiling crisis and probably avoid a default but President Barack Obama's "unpresidential" behavior during the process has fueled division and suspicion to the extent that the damage of his actions will endure, says Home Depot co-founder and former New York Stock Exchange director Ken Langone.

"He's not bringing us together. He's willfully dividing us. He's petulant," Langone told CNBC.

"This guy worked like hell to be president ... Behave like a president. Let me look to you as a model of how we should behave. So what does he say: fat cats, jet airplanes, what's the purpose?"

That purpose, Langone says is to divide the nation by accusing others of not doing their fair share to contribute to the country's finances, said Langone, now chairman and CEO of investment bank Invemed Associates.

"Divide us and we all lose. And this has got to stop. And if he's listening, or one of his people are listening, and you can quote me exactly for what I say, he is not acting presidential, he is behaving in a way designed in my opinion to divide us and make us look at each other with skepticism, with suspicion. That's the end of America as we know it when that happens."

Turning to the debate over lifting the government's $14.3 trillion debt ceiling to avoid default, Langone says both sides of the political spectrum will agree to lift it.

"The deficit, we're going to get through, the debt limit, it will all come through. The destruction he is inflicting by his behavior will carry on long after we have settled the debt limit," he told CNBC.

Republicans and Democrats in Congress are at odds over ways to narrow deficits in exchange for agreeing to raise the government's borrowing limit, with the former opposed to tax hikes and the latter opposed to certain spending cuts.

Langone, meanwhile, says he shouldn't receive Social Security due to his immense wealth but says those like him should expect responsible fiscal behavior in return for the taxes they pay.

"I should not get Social Security. I think it's a travesty for a man of my success and of my means to get anything from the federal government. I think I should pay more taxes ... but everything they take from me" should go to reduce the debt.

Other financiers have criticized what they see as presidential scare tactics.

"Scaring senior citizens about the possibility of not receiving their Social Security and Medicare checks, lambasting the corporate jet industry, and calling for higher taxes on managers of private partnerships is not a constructive approach to handling a multi-trillion dollar problem that will have a multi-generational impact," says hedge fund manager Dan Loeb, according to Dealbreaker.

"It's increasingly difficult to avoid that conclusion that while Washington burns, President Obama is fiddling away by insisting that the only solution to the nation's problems — whether unemployment, the debt ceiling or deficit reductions — lies in redistribution of wealth."

Ratings agencies say they may strip the United States of its AAA credit rating if default occurs, which would prompt investors to demand higher interest rates on government debt due to the increase in perceived risk. That would carry over to financial markets across the country, thus increasing interest rates for borrowers everywhere.

Still, says one economist at Standard and Poor's, one of the ratings agencies, don't expect chaos to ensue.

"It's not good but I don't think it's the end of the world" if the United States's credit rating is downgraded, Mark Zandi, chief economist of Moody’s Analytics, tells Good Morning America.

Plus if the Washington works out its deficit issues, sunnier skies could return, Zandi adds.

"These things aren't written in stone. We can get that triple-A back if we do the right thing."

© Moneynews. All rights reserved.
4) Roubini: US Will Avoid Default but Not Fiscal Drag

U.S. policymakers will agree to lift the $14.3 trillion debt ceiling and avoid a government default but won't avoid steering the economy away from a fiscal drag, says New York University economist Nouriel Roubini.

The government says Congress must lift its $14.3 trillion debt ceiling or risk a default on Aug. 2.

Both Republicans and Democrats in Congress say they don't want to see a default, but are at odds over the role tax hikes should play in narrowing fiscal deficits in exchange for lifting the government's borrowing limit.

They'll likely work things out, Roubini says.

"There are about eight days until the deadline. My baseline scenario is still an agreement will be reached. I don't think the U.S. will default," says Roubini, according to MarketWatch.

Still, lawmakers will likely agree on spending cuts and eventually hike taxes, and such a fiscal drag will weigh on economic growth.

That's going to take place in a world marked by sluggish recovery from the Great Recession.

"(Recovery) has been so weak because this was not a traditional recession, but was a recession caused by a financial crisis brought on by too much debt and leverage first in the private sector and now in the public sector," Roubini says.

Republican Senate Leader Mitch McConnell says both sides need to concede a little more to avoid a default, which could cost the U.S. its AAA credit ratings.

"We are going to have to get back together and get a solution here," McConnell says, according to CNN.

"I am prepared to accept something less than perfect because perfect is not achievable."

© Moneynews. All rights reserved.
5)A Texas Journalist on Rick Perry
By Paul Burka

Here we go again. As you know, Rick Perry, the governor of Texas, is contemplating a presidential run, which means that any day now, your boss will be sending you down here to take the measure of the man. Though he managed to avoid the 2012 spotlight longer than any other candidate, Perry, the nation’s longest-serving governor, has lately become, in the words of a recent NPR report, “the eight-hundred-pound gorilla on the sidelines of this race.” The trickle of stories about him has become a stream, and the minute Perry declares his candidacy, that stream will become a flood, a flood that will carry you straight to Austin. I am writing you this note in the hope that it will help you avoid the political and sociological clichés that Texas is subjected to every time one of our politicians seeks the national stage.
It’s an experience we’re all too familiar with. A Texan has occupied the White House in 17 of the past 48 years—just over a third of the time. Texas has become an incubator for presidents, as Virginia and Ohio were in America’s distant past. I’ll grant you that the presidents we have sent to Washington, from LBJ to 
George W. Bush, have not always served as the best advertisements for Texas. Nevertheless, we have endured a disproportionate amount of bad writing about our state from journalists who don’t know very much about the place, and I for one can’t bear to suffer through another campaign of it.

So please, heed this advice. Rick Perry, as you have no doubt already discovered, is not the easiest man to write about. He is secretive and leery of the media (sometimes to the point of hostility), and he has a strategically valuable knack for being underestimated by his critics. I have been writing about him since the eighties, when he began his career in the Texas Legislature. Along the way I have learned a few things, which I have arranged in this handy list of Eight Points to Keep in Mind When Writing About Rick Perry.

1. Perry is not George Bush. Don’t assume that because Bush and Perry served together in the Capitol, or because they’re both Republican Texans who wear boots, the two men have a lot in common. They don’t. As governor, Bush positioned himself as “a uniter, not a divider,” championing education as one of his main priorities. Perry has been the opposite kind of chief executive: dismissive of Democrats and fond of political maneuvers that put the heat on moderates within his own party. And in the legislative session that just wrapped up, he presided over a budget that cut $4 billion from public schools. The cultural differences are striking too. Perry, the son of a Big Country cotton farmer, is at ease with a populist tea party message; W., the scion of a political dynasty, always seemed more comfortable with the country club set. They have followed starkly different paths. When W. began his political career, he had a famous name, access to his father’s huge national fund-raising base, and the backing of the establishment wing of the Republican party. As a late arrival in the Republican ranks, Perry had no fund-raising base and little name identification. He had no choice but to gravitate to the conservative wing of the GOP, where he could prove up his conservative bona fides. Nor is there any love lost between the two men. When Perry ran for lieutenant governor, in 1998, Bush’s camp wanted everyone on the ticket to run positive races; the Perry team defied the order, and ever since, relations have been frosty. There is one other critical difference. Bush lost his first race, for Congress. Perry has won every race he’s ever run.

2. It’s not a big deal that Perry was once a Democrat. To suggest otherwise will make you look foolish. When Perry was elected to the statehouse, in 1985, conservative Democrats ran the Legislature. In 1989, realizing that a conservative had little future in the party, Perry switched to the GOP. He has been a rock-solid Republican ever since and has driven the state party further to the right. Only twice has he made strategic errors that brought him into conflict with his hard-right base. One was an edict that twelve-year-old girls be inoculated against cervical cancer (it was quickly overturned); another was his promotion of a giant system of toll roads called the Trans-Texas Corridor, which stirred up significant opposition from landowners. These two bobbles aside, Perry has a genius for sensing where his base is on any given issue.

3. Perry is cannier than you think he is. Perry revels in political plays that are initially misunderstood by the press and his critics. Take his secession “gaffe” on tax day 2009, when he responded to a TV reporter’s question with an acknowledgment that if the federal government continued to interfere with Texas, the state might have to leave the union someday. His response may have repelled Democrats and independents, but it hit a nerve among conservatives and led to his shellacking of Kay Bailey Hutchison in the 2010 Republican primary for governor.

4. Texas is not a “weak governor” state. A common misconception. It used to be true, but during his historic governorship, Perry has reinvented the office as a power center. This may be his greatest accomplishment. Yes, our state constitution, written the year before Reconstruction ended, created a weak governor’s office (as did most constitutions of the states of the former Confederacy). We had two-year terms (the Legislature changed it to four-year terms beginning with the 1974 election) and a fragmented executive department with power divided among the governor, the lieutenant governor, the comptroller, the land and agriculture commissioners, the attorney general, and the railroad commission. But Perry has used his appointment power to install political allies in every state agency, effectively establishing a Cabinet form of government and making him vastly more powerful than any of his predecessors. In this regard, the Texas politician he most resembles is LBJ, who, Robert Caro reports, once told an assistant, “I do understand power, whatever else may be said about me. I know where to look for it and how to use it.” Rick Perry, to a tee.

5. Perry is not a male hair model. The late Molly Ivins coined the nickname Governor Goodhair, and it has stuck, especially with liberals and journalists from up north. It is true that Perry has a much-remarked-upon coif, but don’t let this lead you to assume that he’s soft, or feckless, like that other recent walking shampoo ad, John Edwards. Perry is a hard man. He is the kind of politician who would rather be feared than loved—or respected. And he has gotten his wish. Perry does not have many friends in the Legislature.

6. Perry is from the middle of nowhere. The first place you need to go to understand Perry is Paint Creek, where he grew up. Paint Creek is not a town. It’s a watercourse that runs through the cotton fields of southern Haskell County. Perry’s parents were tenant farmers, and not just tenant farmers but dryland farmers, which is as hard as farming gets. In a June 2010 interview with TEXAS MONTHLY editor Jake Silverstein, Perry described an incident involving a new couch that his parents, who “rarely ever bought anything,” had just purchased. “There were places in our house that you could see outside through the cracks by the windows,” the governor recalled, “and this dust storm came in and there was a layer of dust all over that new couch. And it just, you know, kind of—it was a hard life for them.” In the interview, Perry also described taking baths in the number two washtub and using an outhouse until his father built indoor plumbing in his early years. “We were rich,” Perry said, “but not in material things. I had miles and miles of pasture, a Shetland pony, and a dog. . . . I spent a lot of time just alone with my dog. A lot.”

7. Perry is an Aggie. Like many Texans with rural roots and sympathies, Perry attended Texas A&M University. This is the other place you need to go to understand him. Of course, it has changed dramatically, so you’ll have to envision it as it was when Perry was there, around 1970. A&M was uncompromising in those days. There was a saying, regarding the road to College Station, that was directed at students who resisted the A&M military culture: “Highway 6 runs both ways.” You either bought into the school’s traditions or you didn’t. Perry bought all the way in, becoming a yell leader. To this day, Perry’s style on the stump is that of the Aggie yell leader (“Are you fired up?”).

8. Don’t discount the luck factor. It is uncanny how often good fortune has been in Perry’s corner throughout his political career. His opponents self-destruct, as Jim Hightower did in 1990, when Perry, a big underdog, won his first statewide race, for agriculture commissioner, and as Kay Bailey Hutchison did in 2010. In 2006, when he was at his most vulnerable, Hutchison opted not to challenge him. Perry got only 39 percent of the vote, but because there were four major candidates in the race, he won with a plurality. This spring, he lost two top aides to the Gingrich-for-president campaign, only to see Gingrich self-destruct and the aides return with national campaign experience. The list goes on and on. If you look at Perry’s career, it seems that fate is always arranging the universe so that its favorite son will be in the right place at the right time.

So there you have it. In closing, I would like to request that you please do your best to avoid tin-ear clichés about barbecue, cattle, oil, football, and the Alamo. Remember, this is an urban state of 25 million people. We don’t go to sleep at night dreaming of William Barret Travis drawing a line in the sand. We do admire our rural history, as this month’s cover attests, but our vitality is in the cities. Enjoy your visit, best of luck, and please get it right this time.
6) Obama Seems To Be Taking His Defeat In The 2012 Election Rather Well
By J.R. Dunn

Make no mistake: that's what happened over the past weekend. We have been through a mercilessly condensed version of a presidential campaign, lasting only hours, in which Barack Obama ran against his own image, demonstrated himself unworthy of office, and threw away any chance of victory in next year's contest.

To start with, we have his failure to deal with the budget in due time, thus allowing the crisis to build up in the first place. Then we have his walking out of the negotiations after he himself tried to pull a fast one (adding $500 billion -- that's a half-trillion, folks -- in taxes at the last minute). The threats against grandma's checks. His petulant and adolescent Friday press conference. His prolonged weekend sulk, leaving the separate houses of Congress to work their way through the crisis with no input from the White House whatsoever. His wordless rejection of a better deal than he had coming. The attempt to crash the Asian markets by personal decree. And finally the speech which was intended to rally the country behind his vision but wound up as a prolonged plea for Congress and the Tea Parties to stop picking on him.

How can this be described as anything else but a complete dereliction of his duty as chief executive of this country? Put aside all else that has occurred over the past two years; last weekend we saw the utter disintegration of a president. It cannot be overlooked, and it will not be forgotten.

What Obama wanted was a personal triumph, a vindication of his status as the American Augustus. A clear road to 2012 with no more budgetary debates and crises. The utter humiliation of the GOP, which would be forced to swallow new taxes, leaving them with one less issue next year. An under-the-table legitimization of his "policies" (I think that's the word I'm groping for), which could then be touted as successes despite the damage they have left behind. The reestablishment of Barack Obama as a political demigod. And before we overlook it, another few hundred billion to toss to his political allies.

What has he got? He's got as clear a defeat as any president has ever suffered. A party in total disarray. A set of embarrassed and angry subordinates. An economic policy that's going down for the third time. A GOP heading into 2012 with a momentum comparable to that of Patton tearing into the Palatinate. And one final thing: the long-overdue public revelation of a fatally flawed and inadequate personality.

This is where voting "present" brings you at last. He's tried this before, on the occasion of the September 15 financial crash, right in the middle of the 2008 campaign. It will be recalled that John McCain put his campaign on hold and headed for Washington to do what was necessary. Whatever might be thought of McCain, and however good or poor his reasons at the time, it was the act of a man to whom duty was more important than career. And Obama? Well, Obama always comes first, doesn't he? He just turned his back and kept on going. He knew he couldn't lose, whichever way things broke.

He obviously thought the same thing now. But times have changed. People have seen Barack Obama, have taken in his oddities, his narcissism, his ignorance, his lack of quality. They are unwilling to cut him any more slack. They know what a president looks like, good or bad, popular or not, and they no longer see a president in Barack Obama. Is it possible to imagine Reagan, FDR, Truman, or either of the Bushes pulling the kind of tricks that Obama has in recent days?

A president does certain things and acts in certain ways. He is the modern extension, the most advanced version, of the headman, the tribal chief, and much of his role is played on the most primitive of levels. He must take the punishment the gods mete out and make whatever sacrifices they demand on behalf of his people. Consider FDR rolling unceasingly toward his death with the destruction of the Axis the sole thought in his mind. Consider Eisenhower overcoming heart attacks (in an era where heart attacks were far more deadly than today) in order to continue serving. Consider Reagan smiling with an assassin's bullet in his chest. Consider George W. Bush prevailing in the face of hatred, invective, and threats that would have broken most other men. And then reverse the question: can anyone picture Barack Obama doing the same?

His hollowness can no longer be ignored. It has become his major feature. The Obama persona has always been pure mythology, with next to nothing holding it together. It has been deteriorating for some time, and that process reached a critical point this week. Now it will accelerate, with the pieces falling off in ever-larger chunks. He has lost the respect of his opponents. He is losing the respect of his own party. Official Washington will follow. The country as a whole will grow angry with the anger of the betrayed. All that will remain will be the true believers. A new myth will take shape: that of Obama the victim, hero of the people and onetime messiah, ambushed and pulled down by vicious and dishonorable enemies. If it weren't for Boehner, prince of evil... If it weren't for the GOP... If it weren't for the Koch brothers and all their cash...

That new myth will be solid, irrefutable, and well-made. It will have to be. If the record is any indication, it's the only thing they will have for quite some time to come.

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