Illinois Senators Vote 59-0 to Oust ‘Devious’ and ‘Unfit’ Governor

By Kari Lydersen and Peter Slevin
Washington Post Staff Writers
Friday, January 30, 2009; A01

SPRINGFIELD, Ill. Jan. 29 — The state senators stood up one by one in a hushed chamber on Thursday to call Gov. Rod Blagojevich (D) a liar and a hypocrite who put his ego and his pocketbook ahead of the interests of Illinois.

One called him “devious, cynical, crass and corrupt.” Another said the evidence of abuse of power was “overwhelming.” A third said he was “without a doubt unfit to govern.”

Together, they voted 59 to 0 to reject Blagojevich’s theatrical last-minute pleas and remove him from office, ending a stormy tenure that left the nation’s fifth-largest state paralyzed by its governor’s alleged misdeeds and nationally ridiculed for its latest bout of corruption.

“I believe our state must enter rehab,” Sen. Randall Hultgren (R) told his colleagues before the vote. “Moral rehabilitation.”

Blagojevich’s repudiation in a state where he was elected twice to the governorship and three times to Congress could mark a dramatic exit from the national stage, which he commanded briefly but memorably. His next battle is expected to come in federal court in Chicago, where he risks losing his freedom over allegations that he schemed to trade official actions for political contributions and other favors.

Blagojevich, charged with wire fraud and bribery, is free on $4,500 bond.

Before Thursday’s speechmaking was over, and a pair of unanimous votes were cast to oust Blagojevich and bar him from Illinois public office for life, the governor had already taken his final flight home to Chicago aboard a state airplane. After he arrived, on a darkening winter afternoon, as his fate was about to be sealed, he went for a jog.

Talking with reporters later, he called the verdict “un-American.”

“The fix was in from the beginning,” Blagojevich said, insisting that he wants no pity.

“There are tens of thousands of people across America just like me who are losing their jobs, or who have lost their jobs,” Blagojevich said. “To the people of Illinois, God bless all of you. I want you to know that I haven’t let you down.”

Lt. Gov. Pat Quinn became the state’s 41st governor and said he would move right away into the Italianate red-brick governor’s mansion that Blagojevich disdained. Quinn supported Blagojevich during their reelection on the Democratic ticket in 2006, but the men have not spoken since August 2007.

“The rule of law prevailed in Illinois. We are ready to move forward,” Quinn said after the vote. “Something I’m going to work on night and day is to ask folks to put aside differences of the past and really focus on the common good. We’re going to make this a year of reform in Illinois.”

Quinn quoted labor leader Cesar Chavez, saying “Sí se puede” — “Yes, we can.”

The impeachment saga moved from drama to farce and back again in the 51 days after FBI agents arrested Blagojevich in the middle of what U.S. Attorney Patrick J. Fitzgerald called “a political corruption crime spree.” Along the way, Blagojevich bucked calls to resign and outmaneuvered Democratic leaders in Springfield and Washington to appoint Roland W. Burris, little known and years out of politics, to the U.S. Senate seat vacated by President Obama.

Instead of challenging his impeachment, he was 700 miles away when the trial began Monday, denouncing the proceedings in more than a dozen national television interviews as a “kangaroo court.” He showed up only on Thursday, to deliver his own closing argument.

It was a speech long on passion and short on answers, and it did nothing to help his cause. Blagojevich spoke of his immigrant parents, his hard-luck upbringing and good works he claimed as governor. He called the proceedings “an evisceration of the presumption of innocence.”

“There was never a conversation where I intended to break any law,” Blagojevich, 52, told the Senate. “How can you throw a governor out of office on a criminal complaint and you haven’t been able to show or to prove any criminal activity? I’m appealing to you and your sense of fairness.”

His defiance left his accusers unmoved in the face of evidence from witnesses and secret wiretaps that appeared to show that Blagojevich schemed to profit from his official actions: He allegedly tried to sell Obama’s former Senate seat and allegedly plotted to force the firing of Chicago Tribune editorial writers by threatening to withhold $150 million in state money for Wrigley Field, owned by Tribune Co.

Prosecutors said Blagojevich plotted to extort campaign contributions from a racetrack operator, a road contractor and an executive of a Chicago children’s hospital whose doctors were owed $8 million in Medicaid reimbursements.

Senators noted that Blagojevich refused to be questioned under oath about the 13 alleged misdeeds that House prosecutor David Ellis called an “unmistakable” pattern of abuse of power. Ellis paid particular attention to FBI excerpts of 60 taped conversations.

“Our point was on his words, his secretly recorded words, and who in the world was more qualified to testify about the governor’s words than the governor himself?” Ellis asked during his closing argument.

“He talked more about the evidence with Barbara Walters on ‘The View’ than he did in this chamber today, where he’s facing impeachment and removal from office. He could have been here, and he wasn’t.”

“The silence that spoke loudest was the absent voice of the governor,” Sen. Toi Hutchinson (D) said before she voted to remove him. “The price of corruption is high, and the people of my district are tired of paying for it, over and over and over.”

“He reminded us today in real detail,” said Sen. Matt Murphy (R), “that he is an unusually good liar.”

Sen. Kirk Dillard (R) added, tongue in cheek, that Blagojevich has a bright future in Hollywood.

Blagojevich became the first Illinois governor to be impeached and expelled from office. Three Illinois governors since 1973 were convicted after leaving office, including his predecessor, George Ryan (R), who is still in prison.

The Blagojevich saga may be remembered for the target’s salty words, captured on the FBI tapes.

“I’ve got this thing and it’s [expletive] golden,” Blagojevich said of his authority to choose Obama’s successor, “and I’m just not giving it up for [expletive] nothing.”

As Sen. James Meeks (D) informed his colleagues that he was planning to vote to kick Blagojevich out of office, he said, “We have this thing called impeachment and it’s bleeping golden, and we’ve used it the right way.”

Slevin reported from Chicago.

WASHINGTON — President Obama branded Wall Street bankers “shameful” on Thursday for giving themselves nearly $20 billion in bonuses as the economy was deteriorating and the government was spending billions to bail out some of the nation’s most prominent financial institutions.

“There will be time for them to make profits, and there will be time for them to get bonuses,” Mr. Obama said during an appearance in the Oval Office with Treasury Secretary Timothy F. Geithner. “Now’s not that time. And that’s a message that I intend to send directly to them, I expect Secretary Geithner to send to them.”

It was a pointed — if calculated — flash of anger from the president, who frequently railed against excesses in executive compensation on the campaign trail. He struck his populist tone as he confronted the possibility of having to ask Congress for additional large sums of money, beyond the $700 billion already authorized, to prop up the financial system, even as he pushes Congress to move quickly on a separate economic stimulus package that could cost taxpayers as much as $900 billion.

This week alone, American companies reported as many as 65,000 job cuts, and public anger is rising over reports of profligate spending by banks and investment firms that are receiving help from the $700 billion bailout fund. About half of that money is still available, but the new administration has yet to announce how it will use it, and many analysts think it will take far more to stabilize the banking system.

Should Mr. Obama have to go to Congress to seek more money for the bailout fund to avert the failure of more banks, he would most likely encounter opposition within both parties and demands for tighter restrictions on pay for executives of institutions that receive government assistance.

Mr. Geithner has already signaled a willingness to impose stricter compensation limits as part of a revamped approach to dealing with the banking crisis, but with his strong words on Thursday, Mr. Obama seemed intent on reassuring Congress and the public that he would step up the pressure on bankers before granting them additional assistance.

Mr. Obama was reacting to a report by the New York State comptroller that found financial executives had received an estimated $18.4 billion in bonuses for 2008, less than for the previous several years but the same level of bonuses as they received in 2004, when times were flush.

“That is the height of irresponsibility,” Mr. Obama said. “It is shameful. And part of what we’re going to need is for the folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility.”

The Obama administration and lawmakers have begun to consider ways to control executive pay; the bailout fund, known as the Troubled Asset Relief Program, or TARP, would be the main vehicle for exerting such control. The administration of former President George W. Bush issued guidelines last October to try to control executive pay at companies receiving government help, but so far they have done little to curb large salaries.

During his confirmation hearings, Mr. Geithner said the administration is preparing rules that would require executives at companies receiving taxpayer money to agree that any compensation above a certain amount — he did not specify how much — be “paid in restricted stock or similar form” that could not be liquidated or sold until the government had been repaid.

Some lawmakers, meanwhile, have said they are considering so-called “clawback” provisions that could be invoked by the government to take back bonuses and executive pay from officials at companies that encountered problems.

In the meantime, public outrage is already forcing some companies to rein in their lavish spending. John A. Thain, the former Merrill Lynch executive who was forced out of Bank of America, said this week he would reimburse Bank of America for an expensive renovation of his office that included an $87,000 area rug and $35,000 commode.

But it took the urging of the Obama administration to force Citigroup, which received an infusion of taxpayer funds last year, to abandon plans to buy a $50 million corporate jet. On Thursday, Mr. Obama made reference to the jet, without singling out Citigroup by name; his remarks came one day after the president met at the White House with business leaders, including Richard D. Parsons, the new chairman of Citigroup.

On Capitol Hill, Senator Christopher J. Dodd of Connecticut, the chairman of the Senate Banking Committee, issued his own warning on Thursday, saying companies would be summoned to testify if taxpayer money was involved.

“Whether it was used directly or indirectly, this infuriates the American people and rightly so,” Mr. Dodd said. “So I say to anyone else who does it, if you do it, I’m going to bring you before the committee.”

There is also political pressure to rein in pay in industries beyond banks and investment firms. The pressure reflects the substantial disparities between pay increases for senior executives, the low rate of wage growth for workers and the frequent disconnect between compensation and the long-term strategic success or failure of corporations.

Mr. Obama’s message on Thursday was reinforced by Vice President Joseph R. Biden Jr., who pledged in an interview with CNBC and The New York Times that the government would spend the remaining $350 billion of the troubled assets money “wisely and prudently and transparently.”

Mr. Biden said that he, like the president, was outraged by reports of large bonuses going to Wall Street executives.

“I’d like to throw these guys in the brig,” he said. “They’re thinking the same old thing that got us here, greed. They’re thinking, ‘Take care of me.’  ”

John Harwood contributed reporting.

UPDATE

In Curbing Pay, Obama Seeks to Alter Corporate Culture

WASHINGTON — In announcing executive pay limits on Wednesday, President Obama is trying to hold the financial industry accountable to taxpayers while aiming to change an entrenched corporate culture that endorses outsize bonuses and perks that often bear little relationship to corporate performance.

Mr. Obama also needs to deflect a growing populist outrage over sky-high pay among the banks and other companies now on the public dole. His announcement comes just days before the administration is expected to unveil a new strategy — and possibly request more money from Congress — to guarantee or buy outright hundreds of billions of dollars in bad assets held by banks.

The new rules would set a $500,000 cap on cash compensation for the most senior executives, curtail severance pay when top executives left a company, restrict cashing in on stock incentives until government assistance was repaid and prod corporate boards to closely scrutinize luxury perquisites like private jets and country club memberships.

The plan’s effectiveness in curbing executive pay may not be known for years, however. Past administrations have also been critical of excessive pay, but corporate executives have found ingenious ways around limits, often hiring consultants to create new forms of compensation.

Even the new rules allow companies some leeway. While giving shareholders a say in bonuses above the cap and restricting when stock incentives can be cashed in, the rules do not place limits on the size of such awards, which have become the biggest part of many compensation packages. In addition, the toughest new rules apply only to large companies seeking government assistance to survive.

They do not apply to the more than 350 institutions that have already received bailout funds, only to those that seek aid under the next phase of the bailout program. And companies that seek aid but do not need exceptional government assistance can waive the $500,000 pay cap, as long as they submit their executive pay policies to a nonbinding shareholder vote.

Still, the rules represent the most comprehensive effort to curb compensation. “This is America,” Mr. Obama said on Wednesday. “We don’t disparage wealth. We don’t begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset — and rightfully so — are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers.”

In 2007, the latest year that figures are available, the largest participants in the bailout program paid their chief executives an average compensation of $11 million, including salary, bonus and benefits. Of that amount, according to a review by Equilar, an executive compensation firm, only about $844,000 was cash salary. About $2.5 million was in a cash bonus, with the bulk — $7.4 million — in stock awards, and the remainder in benefits and perks.

If banks return to the government for more money, the new rules would require a reduction in pay, but not in stock awards, though these would be subject to a non-binding vote of the shareholders and would be in the form of long-term incentives because of restrictions on when they could be cashed in.

The plan will most likely force companies to think twice before coming to Washington for a handout, and it is certain to nudge them to return taxpayer loans more quickly.

On Wednesday, for instance, David A. Viniar, the chief financial officer of Goldman Sachs, which received $10 billion from the Treasury Department, told analysts that his firm wanted to repay the government as quickly as feasible to “be under less scrutiny and under less pressure,” according to Bloomberg News.

The Financial Services Roundtable, which lobbies on behalf of banks and other financial institutions, said that giving shareholders a vote on pay could discourage companies from seeking aid.

The rules would not prohibit a lower-level executive, like a stock trader or investment banker, from continuing to receive tens of millions of dollars in pay. Officials also emphasized that several of the proposals would not be made final until after public comments had been considered.

Still, investor groups, union leaders and lawmakers in both parties embraced the proposal.

“There is absolutely no reason why hard-working American taxpayers should be financing, directly or indirectly, excessive compensation for corporate executives whose decisions, in many cases, have crippled their firms and weakened the broader economy,” said Senator Christopher J. Dodd, the Connecticut Democrat who heads the Senate banking committee.

Representative John A. Boehner of Ohio, the Republican minority leader, said that pay limits would be more equitable for rank-and-file taxpayers. “If anyone is looking for the taxpayer to help bail their company out,” he said, “these types of executive pay caps are appropriate.”

Officials said that the larger goal of the proposal was to make the boards of major corporations across a wide range of industries award pay packages more consistent with corporate earnings.

Appearing with Treasury Secretary Timothy F. Geithner, the architect of the plan, Mr. Obama repeated a theme that he began last week of attacking Wall Street for its excessive compensation.

“For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it’s a bad strategy, and I will not tolerate it as president,” Mr. Obama said. He said such pay is “exactly the kind of disregard for the costs and consequences of their actions that brought about this crisis — a culture of narrow self-interest and short-term gain at the expense of everything else.”

During the Bush administration, the Securities and Exchange Commission adopted new rules promoting better public disclosure of executive compensation as a way to discourage pay not tied to performance. Treasury Secretary Henry M. Paulson Jr. also criticized excessive pay as a factor contributing to the crisis on Wall Street and tried to impose some limits on banks receiving bailout funds.

But none of that put a significant dent in executive pay. A recent study by Equilar, a compensation research firm, found that the chief executives of the 10 largest financial services firms in a survey of 200 companies with revenue of at least $6.5 billion were awarded a total of $320 million last year, even though the companies had mortgage-related losses of $55 billion.

Some companies may not find the new pay curbs all that burdensome. The plan does not limit the size of bonuses that can take the form of restricted stock above the $500,000 cap — though companies would have to give shareholders a nonbinding vote on such awards.

Indeed, troubled financial institutions are already giving executives significant sums of restricted stock — shares that are locked up for years and can be sold only under specified conditions — in part because they are trying to preserve cash. Alan Johnson, managing director of Johnson Associates, a Wall Street pay consulting firm, said that in some cases, restricted stock was making up 60 percent of executives’ total compensation.

Mr. Johnson said the new restrictions could make it harder for the government to resuscitate ailing firms by making it harder for them to retain and recruit talented executives.

The plan does not appear to prohibit a financial institution from sponsoring a major golf tournament that most of its executives attend as part of the company’s marketing strategy. At a White House briefing, senior officials repeatedly declined to answer whether the plan would prohibit a company like Citigroup from paying $400 million to have its name on a baseball stadium. It is also unclear whether lucrative pension plans would be banned.

The administration will have to determine how broadly to apply the most severe restrictions as the TARP program is revised. If the new strategy envisions that many banks will be eligible for assistance, as they have in the past, then the less restrictive pay rules would apply to them.

Eric Dash contributed reporting from New York, and Jeff Zeleny from Washington.

WASHINGTON — Without a single Republican vote, President Obama won House approval on Wednesday for an $819 billion economic recovery plan as Congressional Democrats sought to temper their own differences over the enormous package of tax cuts and spending.

As a piece of legislation, the two-year package is among the biggest in history, reflecting a broad view in Congress that urgent fiscal help is needed for an economy in crisis, at a time when the Federal Reserve has already cut interest rates almost to zero.

But the size and substance of the stimulus package remain in dispute, as House Republicans argued that it tilted heavily toward new spending instead of tax cuts.

All but 11 Democrats voted for the plan, and 177 Republicans voted against it. The 244-to-188 vote came a day after Mr. Obama traveled to Capitol Hill to seek Republican backing, if not for the package then on other issues to come.

Mr. Obama, in a statement hailing the House passage of the plan, did not take note of the partisan divide but signaled that he expected changes to be made in the Senate that might attract support.

“I hope that we can continue to strengthen this plan before it gets to my desk,” he said. “But what we can’t do is drag our feet or allow the same partisan differences to get in our way. We must move swiftly and boldly to put Americans back to work, and that is exactly what this plan begins to do.”

Mr. Obama followed the House vote with a cocktail party at the White House for the Congressional leaders of both parties, from the House and the Senate. The House Republicans, including the minority leader, Representative John A. Boehner of Ohio, were fresh from their votes against the recovery package.

The failure to win Republican support in the House seemed to echo the early months of the last Democratic administration, when President Bill Clinton in 1993 had to rely solely on Democrats to win passage of a deficit-reduction bill that was a signature element of his presidency.

Mr. Obama’s chief of staff, Rahm Emanuel, had met Tuesday night at the White House with 11 moderate House Republicans, none of whom ended up supporting the bill. “The most important number here for this recovery plan is how many jobs it produces, not how many votes it gets,” Mr. Emanuel said.

As Senate Democrats prepare to bring their version of the package to the floor on Monday, House Democrats and the administration indicated they would ultimately accept a provision in the emerging Senate package that would adjust the alternative minimum tax to hold down many middle-class Americans’ income taxes for 2009. The provision was not in the House legislation.

Its cost would drive the overall package’s tally to nearly $900 billion. That would exceed the roughly $850 billion limit that Mr. Obama has set for Congress, House Democratic leadership aides said, and leave no room for other proposals that senators of both parties are poised to seek during Senate debate next week.

While the House and Senate measures are similar, they are most likely to differ in ways that could snarl negotiations between Democrats from the two chambers, and delay getting a measure to the president. In particular, House and Senate Democrats are split over how to divide $87 billion in relief to the states for Medicaid, with senators favoring a formula more beneficial to less-populous states.

Democrats’ own differences aside, they also are under pressure from the White House to be open to proposals from Senate Republicans who might support the final legislation if their interests are accommodated, and which might draw a few Republican supporters on a final vote next month in the House.

The provision on the alternative minimum tax, for example, was a priority for Senator Charles E. Grassley, Republican of Iowa, who added it Tuesday in the Finance Committee’s work on the legislation.

Democrats’ goal is to have the stimulus package, which is roughly two-thirds new spending and one-third tax cuts, to Mr. Obama’s desk for his signature by Feb. 13, before Congress breaks for Presidents’ Day.

“He said he wanted action, bold and swift, and that is exactly what we’re doing today,” Speaker Nancy Pelosi, Democrat of California, said as debate began.

Democrats voluntarily dropped from the package several provisions that Republicans had singled out for derision in recent days, including money to restore the Jefferson Memorial and for family planning programs. But the day’s debate contrasted with the president’s conciliatory gestures.

Representative Virginia Foxx, Republican of North Carolina, said that former President George Bush’s signature tax cuts in 2001 had created years of growth but that the nation’s problems started when Democrats regained majorities in Congress in the 2006 elections.

Representative Steny H. Hoyer, Democrat of Maryland and the majority leader, said that “the economics that got us into this mess” were the Republicans’ policies for the six years that Republicans controlled both the White House and Congress, through 2006.

The House voted down several Republican proposals, including a substitute package made up entirely of tax cuts for individuals and businesses. Republicans did not say how much their package would cost, although Mr. Boehner said it would be far less than the Democratic plan. That tax-cut-only approach was defeated on a mostly party-line vote of 266 to 170; two Democrats joined all but nine moderate Republicans in voting for the Republican plan.

By another near-party-line vote, 270 to 159, the House rejected a Republican plan to delete a number of spending programs, including several representing top campaign promises of Mr. Obama, and to add instead $36 billion for highway construction, more than doubling the $30 billion in the bill, and $24 billion for Army Corps of Engineers projects.

After the final vote, Representative Eric Cantor of Virginia, the second-ranking House Republican, called the Democratic package “a spending bill beyond anyone’s imagination.”

Some Democrats seemed surprised that no Republicans voted for the measure.

“Not one person felt his or her district needed to have any of this assistance?” Representative Rosa DeLauro, Democrat of Connecticut, asked of the Republicans. “That can’t be.”

Brad Woodhouse, president of the union-supported, pro-Democratic group Americans United for Change, e-mailed a statement condemning the Republicans’ opposition under the subject line “Political Suicide.”

That $355 billion in spending isn’t about the economy.

The stimulus bill currently steaming through Congress looks like a legislative freight train, but given last week’s analysis by the Congressional Budget Office, it is more accurate to think of it as a time machine. That may be the only way to explain how spending on public works in 2011 and beyond will help the economy today.

According to Congressional Budget Office estimates, a mere $26 billion of the House stimulus bill’s $355 billion in new spending would actually be spent in the current fiscal year, and just $110 billion would be spent by the end of 2010. This is highly embarrassing given that Congress’s justification for passing this bill so urgently is to help the economy right now, if not sooner.

And the red Congressional faces must be very red indeed, because CBO’s analysis has since vanished into thin air after having been posted early last week on the Appropriations Committee Web site. Officially, the committee says this is because the estimates have been superseded as the legislation has moved through committee. No doubt.

AP

David Obey.

In addition to suppressing the CBO analysis, Democrats have derided it. Appropriations Chairman David Obey (D., Wis.) called it “off the wall,” never mind that CBO is now run by Democrats. Mr. Obey also suggested that it would be a mistake to debate the stimulus “until the cows come home.” We’d settle for a month or two, so at least the voters can inspect the various Congressional cattle they’re buying with that $355 billion.

The stimulus bill is also a time machine in the sense that it’s based on an old, and largely discredited, economic theory. As Harvard economist Robert Barro pointed out on these pages last Thursday, the “stimulus” claim is based on something called the Keynesian “multiplier,” which is that each $1 of spending the government “injects” into the economy yields 1.5 times that in greater output. There’s little evidence to support this theory, but you have to admire its beauty because it assumes the government can create wealth out of thin air. If it were true, the government should spend $10 trillion and we’d all live in paradise.

The problem is that the money for this spending boom has to come from somewhere, which means it is removed from the private sector as higher taxes or borrowing. For every $1 the government “injects,” it must take $1 away from someone else — either in taxes or by issuing a bond. In either case this leaves $1 less available for private investment or consumption. Mr. Barro wrote about this way back in 1974 in his classic article, “Are Government Bonds Net Wealth?”, in the Journal of Political Economy. Larry Summers and Paul Krugman must have missed it.

The government spending will be a net stimulus only if its $1 goes to more productive purposes than those to which private investors would have put that same $1. There are some ways we may want the government to spend money — on national defense, say — but that doesn’t mean it’s a stimulus.

A similar analysis applies to the tax cuts that are part of President Obama’s proposal. In contrast to the spending, at least the tax cuts will take effect immediately. But the problem is that Mr. Obama wants them to be temporary, which means taxpayers realize they will see no permanent increase in their after-tax incomes. Not being fools, Americans may either save or spend the money but they aren’t likely to change their behavior in ways that will spur growth. For Exhibit A, consider the failure of last February’s tax rebate stimulus, which was a bipartisan production of George W. Bush and Mr. Summers, who is now advising Mr. Obama.

To be genuinely stimulating, tax cuts need to be immediate, permanent and on the “margin,” meaning that they apply to the next dollar of income that an individual or business earns. This was the principle behind the Kennedy tax cuts of 1964, as well as the Reagan tax cuts of 1981, which finally took full effect on January 1, 1983.

If the Obama Democrats can’t abide this because it’s a “tax cut for the rich,” as an alternative they could slash the corporate tax to spur business incentives. The revenue cost of eliminating the corporate tax wouldn’t be any more than their proposed $355 billion in new spending, and we guarantee its “multiplier” effects on growth would be far greater. Research by Mr. Obama’s own White House chief economist, Christina Romer, has shown that every $1 in tax cuts can increase output by as much as $3.

As for all of that new spending, CBO will release an updated analysis this week. And we anticipate that the budget analysts will in the interim have discovered that much more of that $355 billion will somehow find its way to “shovel-ready” projects that the Obama Administration can start building before the crocuses bloom. But in the real world, the CBO’s first estimate is likely to prove closer to the truth.

The spending portion of the stimulus, in short, isn’t really about the economy. It’s about promoting long-time Democratic policy goals, such as subsidizing health care for the middle class and promoting alternative energy. The “stimulus” is merely the mother of all political excuses to pack as much of this spending agenda as possible into a single bill when Mr. Obama is at his political zenith.

Apart from the inevitable waste, the Democrats are taking a big political gamble here. Congress and Mr. Obama are promoting this stimulus as the key to economic revival. Americans who know nothing about multipliers or neo-Keynesians expect it to work. The Federal Reserve is pushing trillions of dollars of monetary stimulus into the economy, and perhaps that along with a better bank rescue strategy will make the difference. But if spring and then summer arrive, and the economy is still in recession, Americans are going to start asking what they bought for that $355 billion.

CARACAS, Venezuela — President Hugo Chávez, buffeted by falling oil prices that threaten to damage his efforts to establish a Socialist-inspired state, is quietly courting Western oil companies once again.

Until recently, Mr. Chávez had pushed foreign oil companies here into a corner by nationalizing their oil fields, raiding their offices with tax authorities and imposing a series of royalties increases.

But faced with the plunge in prices and a decline in domestic production, senior officials have begun soliciting bids from some of the largest Western oil companies in recent weeks — including Chevron, Royal Dutch/Shell and Total of France — promising them access to some of the world’s largest petroleum reserves, according to energy executives and industry consultants here.

Their willingness to even consider investing in Venezuela reflects the scarcity of projects open to foreign companies in other top oil nations, particularly in the Middle East.

But the shift also shows how the global financial crisis is hampering Mr. Chávez’s ideological agenda and demanding his pragmatic side. At stake are no less than Venezuela’s economic stability and the sustainability of his rule. With oil prices so low, the longstanding problems plaguing Petróleos de Venezuela, the national oil company that helps keep the country afloat, have become much harder to ignore.

Embracing the Western companies may be the only way to shore up Petróleos de Venezuela and the raft of social welfare programs, like health care and higher education for the poor, that have been made possible by oil proceeds and have helped bolster his popular support.

“If re-engaging with foreign oil companies is necessary to his political survival, then Chávez will do it,” said Roger Tissot, an authority on Venezuela’s oil industry at Gas Energy, a Brazilian consulting company focusing on Latin America. “He is a military man who understands losing a battle to win the war.”

While the new oil projects would not be completed for years, Mr. Chávez is already looking beyond the end of his current term in 2012 by putting forward a referendum, expected as early as next month, that would let him run for indefinite re-election.

In recent years, Mr. Chávez has preferred partnerships with national oil companies from countries like Iran, China and Belarus. But these ventures failed to reverse Venezuela’s declining oil output. State-controlled oil companies from other nations have also been invited to bid this time, but the large private companies are seen as having an advantage, given their expertise in building complex projects in Venezuela and elsewhere in years past.

The bidding process was first conceived last year when oil prices were higher but Petróleos de Venezuela’s production decline was getting impossible to overlook. Still, the process is moving into high gear only this month, with the authorities here expected to start reviewing the companies’ bidding plans on new areas of the Orinoco Belt, an area in southern Venezuela with an estimated 235 billion barrels of recoverable oil. Altogether, more than $20 billion in investment could be required to assemble devilishly complex projects capable of producing a combined 1.2 million barrels of oil a day.

Mr. Chávez’s olive branch to Western oil companies comes after he nationalized their oil fields in 2007. Two companies, Exxon Mobil and ConocoPhillips, left Venezuela and are still waging legal battles over lost projects.

But Venezuela may have little choice but to form new ventures with foreign oil companies. Nationalizations in other sectors, like agriculture and steel manufacturing, are fueling capital flight, leaving Venezuela reliant on oil for about 93 percent of its export revenue in 2008, up from 69 percent in 1998 when Mr. Chávez was first elected.

In the past year, with higher oil prices paving the way, Mr. Chávez also vastly expanded Petróleos de Venezuela’s power, inextricably linking it to his political program. He directed the oil company to build roads, import and distribute food, build docks and shipyards and set up a light-bulb factory. He even expanded it into areas like milk production, soybean farming and the training of athletes after a weak performance at the Beijing Olympics.

One of the oil company’s ventures sells subsidized food and extols Mr. Chávez’s leadership at its stores across Venezuela. At one frenzied store in eastern Caracas, posters hung from the ceiling last Saturday showing Mr. Chávez arm in arm with children beneath the heading, “fortifying agrarian socialism.”

Petróleos de Venezuela has also carried out nationalizations in other industries, absorbing companies like Electricidad de Caracas, the utility serving this city of five million. Top executives like Eulogio del Pino, the Stanford-educated vice president for exploration and production, spent much of 2008 negotiating unfinished deals like the takeover of a cement company.

But all the while, Petróleos de Venezuela has faced its own difficulties. It claimed it produced about 3.3 million barrels a day throughout most of 2008. But other sources, like OPEC, of which Venezuela is a member, place the figure closer to 2.3 million and show a fall of about 100,000 barrels a day from a year earlier. When Mr. Chávez rose to power a decade ago, Venezuela was producing about 3.4 million barrels a day.

Rafael Ramírez, the energy minister and president of Petróleos de Venezuela, did not respond to requests for an interview. But energy executives here with contacts within Petróleos de Venezuela said Mr. Ramírez, a confidant of Mr. Chávez, has been waging a struggle within the company to refocus operations toward producing more oil.

After weathering the turmoil of recent years, Western oil companies here are loath to speak publicly about their plans. “We don’t elaborate on bidding processes beyond the fact that we evaluate every opportunity and our decisions will be based on economics and other factors,” said Scott Walker, a spokesman for Chevron.

But energy executives here speak with restrained optimism. Nineteen companies paid $2 million each last month for data on areas open for exploration, twice what such data costs elsewhere.

Oil companies say they recognize the risk of investing in Venezuela, given the country’s abrupt shifts in the past. But they focus on the long-term potential of its petroleum reserves. Venezuela poses little risk in the search for oil since geologists have known for years where it lies in the Orinoco Belt.

Venezuela also differs from top oil nations like Saudi Arabia and Mexico, where national oil companies have monopolies. Petróleos de Venezuela let private companies remain as minority partners after the nationalizations, despite Mr. Chávez’s often aggressive anticapitalist stance.

Moreover, foreign oil services companies like Halliburton, which has done business in Venezuela for 70 years, have even expanded their activities in the country as Petróleos de Venezuela grew more dependent on contractors to help extract oil from aging wells.

Still, doubts persist over the chances that the new bids, which are set to conclude in June, will ultimately result in finished oil projects. Risks of operating here were underscored again last week when Venezuela ordered new production cuts along with other OPEC members, impacting ventures with private partners.

Under the current bidding rules, the onus for financing the new projects lies with the foreign companies, even though Petróleos de Venezuela would maintain control. Banks might balk at such a prospect. Distrust also lingers in dealing with Petróleos de Venezuela.

“An agreement on a piece of paper means nothing in Venezuela because of the way Chávez abruptly changes the rules of the game,” said a Venezuelan oil executive who has had dealings with oil companies from China, Russia and other countries.

“In 10 years, not one major oil project has been built in Venezuela,” said the oilman, who asked not to be identified for fear of retribution. “Chávez has left his so-called strategic partners out to dry, like the Chinese, who have been given the same treatment as Exxon.”

But the severity of the drop in oil prices may ultimately dictate the terms on which Venezuela re-engages with foreign oil companies.

“Chávez is celebrating the demise of capitalism as this international crisis unfolds,” said Pedro Mario Burelli, a former board member of Petróleos de Venezuela. “But the irony is that capitalism actually fed his system in times of plenty,” he said. “That is something Chávez will discover the hard way.”

María Eugenia Díaz and Thom Walker contributed reporting

María Eugenia Díaz and Thom Walker contributed reporting.

By Rich Noyes

January 13, 200

By Reed Galen

As President-Elect Obama readies his ascent to the White House less than two weeks from now, it appears that his political acumen extends not only to those in all parts of the Democratic party, but in no small part to Senator John McCain as well. Just three short months ago we were inundated with McCain’s talk of Bill Ayres and ‘That One,’ but an easy détente appears to have developed between the former rivals.

To that end, President-Elect Obama has committed four distinct acts that telegraph his political savvy when it comes to Senator McCain. His first move was to invite McCain to Chicago for a face-to-face meeting soon after the election. This magnanimous and post-partisan action surely played to McCain’s sense that politics has gotten far too ugly for its own good and was probably much appreciated as a sign of respect for the Arizonan personally.

Next, Obama selected Janet Napolitano to head the Department of Homeland Security. Aside from being qualified for the job on a number of fronts (former US Attorney, state Attorney General, Governor of Arizona, a major border state, etc.) the Obama team again did Senator McCain a favor. With Napolitano firmly ensconced at the Nebraska Avenue headquarters of DHS, Senator McCain’s toughest potential opposition to re-election in 2010 is out of the picture. Having already announced his intention to seek another term in the Senate, this will allow McCain to carry out his Goldwater-esque desire to bring centrism and civility to the Senate and to the GOP.

In another act that was both gracious and pragmatic, the President-Elect helped ensure that Senator Joe Lieberman would retain his Chairmanship of the Senate Homeland Security Committee. This after Lieberman spent almost two years on the campaign trail in support of his friend John McCain. Rarely hesitating in his criticism of the Obama campaign, Lieberman is lucky to be invited to sit with either caucus.

Lastly, Obama announced that he had selected former Congressman Ray LaHood, a Republican from Illinois, as his Transportation Secretary. Aside from having oversight over that department when he was the Senate Commerce Committee chairman, McCain and LaHood are good friends. McCain must have been pleased with such a choice.

Why, though, would the President-Elect go to all the trouble of giving so much consideration to an opponent whom he soundly defeated? Continuing the thread of wise political judgment that has so far defined his transition, Obama understands that having John McCain as an ally in the United States Senate is a major boon to his policy initiatives. As the recent standard-bearer for the GOP, McCain will be enormously helpful; any Republican imprimatur on Obama legislation could help clear stubborn obstacles. The prospect of having a troika of votes in the Senate (McCain, Lieberman and Lindsay Graham) may have also played into the strategy; pushing a bill from 58 or 59 to the magic level of 60 votes is invaluable as the Democrats stand on the cusp of their magic number.

From Senator McCain’s perspective, this scenario would allow him to return to the role he truly relishes: Being the deal-maker or swing vote in the Senate is much more his style and most importantly to him, keeps him imminently relevant. Acting as manager or administrator is not in McCain’s make-up, nor did he ever seem to enjoy the prospect of having to play that part. In addition, much like the aftermath of the 2000 campaign, 2009 finds John McCain not much a fan of the conservative wing of the GOP nor they of him. In 2001 he went out of his way to break with President Bush and Republicans on tax cuts and spending.

Once again Barack Obama has shown that in addition to his abundant charisma and soaring oratory, he possess deft political skills. One would be hard-pressed to find another recent example of a President (-Elect) and his opponent in the Presidential contest willing to work together, at least in theory. What’s more, now is legacy time for John McCain. With his almost assured re-election next year, it will not be much of a surprise if McCain, more often than not, turns out to be an ally of the Obama Administration.

President-elect Barack Obama plans to issue an executive order on his first full day in office directing the closing of the Guantánamo Bay detention camp in Cuba, people briefed by Obama transition officials said Monday.

But experts say it is likely to take many months, perhaps as long as a year, to empty the prison that has drawn international criticism since it received its first prisoners seven years ago this week. One transition official said the new administration expected that it would take several months to transfer some of the remaining 248 prisoners to other countries, decide how to try suspects and deal with the many other legal challenges posed by closing the camp.

People who have discussed the issues with transition officials in recent weeks said it appeared that the broad outlines of plans for the detention camp were taking shape. They said transition officials appeared committed to ordering an immediate suspension of the Bush administration’s military commissions system for trying detainees.

In addition, people who have conferred with transition officials said the incoming administration appeared to have rejected a proposal to seek a new law authorizing indefinite detention inside the United States. The Bush administration has insisted that such a measure is necessary to close the Guantánamo camp and bring some detainees to the United States.

Mr. Obama has repeatedly said he wants to close the camp. But in an interview on Sunday on ABC, he indicated that the process could take time, saying, “It is more difficult than I think a lot of people realize.” Closing it within the first 100 days of his administration, he said, would be “a challenge.”

The president-elect drew criticism from some human rights groups Monday who said his remarks suggested that closing Guantánamo was not among the new administration’s highest priorities. But even if the detention camp remains open for months, the decision to address Guantánamo on the day after his inauguration seemed intended to make a symbolic break with some of the most controversial policies of the Bush administration.

Several national security and legal analysts have argued in recent weeks that Mr. Obama is in a delicate political position after having committed himself to closing the prison. Sarah Mendelson, the author of a report for the Center for Strategic and International Studies on how to close the prison, said Mr. Obama’s remarks on Sunday appeared intended to indicate the difficulty of the task, which she said it could take a year to complete.

“I thought he was trying to manage expectations of how quickly those detainees who remain can be sorted into two categories: those who will be released and those who will be prosecuted,” Ms. Mendelson said.

Aside from analyzing intelligence and legal filings on each of the remaining detainees, diplomats and legal experts have said the new administration will need to begin an extensive new international effort to resettle as many as 150 or more of the remaining men. Portugal and other European countries have recently broken a long diplomatic standoff, saying they would work with the new administration and might accept some detainees who cannot be sent to their home countries because of concerns about their potential treatment.

The transition official, who asked for anonymity because he was not authorized to discuss the plans, said the administration expected to announce its Guantánamo plans next Wednesday.

Brooke Anderson, a transition spokeswoman, declined to comment on any plans, saying only, “President-elect Obama has repeatedly said that he believes that the legal framework at Guantánamo has failed to successfully and swiftly prosecute terrorists, and he shares the broad bipartisan belief that Guantánamo should be closed.”

In formulating their policy in recent weeks, Obama transition officials have consulted with a variety of authorities on legal and human rights and with military experts. Several of those experts said the officials had expressed great interest in alternatives to the military commission system, like trying detainees in federal courts, and appeared to have grown hostile to proposals like an indefinite detention law.

They also said the transition officials were intensely focused on new international efforts to transfer many of the detainees to other countries.

Several said the officials appeared concerned that a proposal for a new law authorizing indefinite detention would bring the new administration much of the criticism that has been directed at the Bush administration over Guantánamo. A former military official who was part of a series of briefings at the transition headquarters in Washington said the officials had spoken about the indefinite detention proposal as a way of creating a “new Guantanámo someplace else.”

“That is very much not the desire of the Obama team,” said the former military official, who insisted on anonymity because of his concerns about how the transition officials would react to public discussion of their comments.

Catherine Powell, an associate professor of law at Fordham, said transition officials appeared most interested at a meeting last month in showing international critics that they were returning to what they see as traditional American legal values.

“They are really looking for tools that we have in our existing system short of creating an indefinite detention system,” Ms. Powell said.

Mark P. Denbeaux, a Seton Hall law professor who has been a prominent lawyer for Guantánamo detainees, said that at a briefing he attended with senior officials of the transition last month the officials seemed to have decided to suspend the military commissions immediately.

“Their position is they’re a complete and utter failure,” Mr. Denbeaux said.

The Pentagon has been pressing ahead with plans to begin a trial on Jan. 26 of one of its high-profile suspects, a Canadian detainee named Omar Khadr. Mr. Khadr’s case has drawn wide attention, partly because he was 15 when he was first detained on charges of killing an American soldier in a firefight in Afghanistan in 2002.

Some human rights groups said Monday that they were alarmed by Mr. Obama’s vague timetable and lack of specifics in his remarks Sunday. They said they worried that the administration might yield to pressure to display its toughness in dealing with terrorism in its detention policies.

“The devil is in the details,” said Anthony D. Romero, the executive director of the American Civil Liberties Union, who has been pressing the new administration to publicly commit to immediately close Guantánamo.

Mr. Romero said he had grown concerned because transition officials had provided details of their plans for dealing with the economic crisis, but had yet to provide details for how they will close Guantánamo, which has brought worldwide criticism.

“Just like we need specifics on an economic recovery package,” Mr. Romero said, “we need specifics on a ‘justice recovery package.’ ”

WASHINGTON — President Bush deflected a secret request by Israel last year for specialized bunker-busting bombs it wanted for an attack on Iran’s main nuclear complex and told the Israelis that he had authorized new covert action intended to sabotage Iran’s suspected effort to develop nuclear weapons, according to senior American and foreign officials.

White House officials never conclusively determined whether Israel had decided to go ahead with the strike before the United States protested, or whether Prime Minister Ehud Olmert of Israel was trying to goad the White House into more decisive action before Mr. Bush left office. But the Bush administration was particularly alarmed by an Israeli request to fly over Iraq to reach Iran’s major nuclear complex at Natanz, where the country’s only known uranium enrichment plant is located.

The White House denied that request outright, American officials said, and the Israelis backed off their plans, at least temporarily. But the tense exchanges also prompted the White House to step up intelligence-sharing with Israel and brief Israeli officials on new American efforts to subtly sabotage Iran’s nuclear infrastructure, a major covert program that Mr. Bush is about to hand off to President-elect Barack Obama.

This account of the expanded American covert program and the Bush administration’s efforts to dissuade Israel from an aerial attack on Iran emerged in interviews over the past 15 months with current and former American officials, outside experts, international nuclear inspectors and European and Israeli officials. None would speak on the record because of the great secrecy surrounding the intelligence developed on Iran.

Several details of the covert effort have been omitted from this account, at the request of senior United States intelligence and administration officials, to avoid harming continuing operations.

The interviews also suggest that while Mr. Bush was extensively briefed on options for an overt American attack on Iran’s facilities, he never instructed the Pentagon to move beyond contingency planning, even during the final year of his presidency, contrary to what some critics have suggested.

The interviews also indicate that Mr. Bush was convinced by top administration officials, led by Defense Secretary Robert M. Gates, that any overt attack on Iran would probably prove ineffective, lead to the expulsion of international inspectors and drive Iran’s nuclear effort further out of view. Mr. Bush and his aides also discussed the possibility that an airstrike could ignite a broad Middle East war in which America’s 140,000 troops in Iraq would inevitably become involved.

Instead, Mr. Bush embraced more intensive covert operations actions aimed at Iran, the interviews show, having concluded that the sanctions imposed by the United States and its allies were failing to slow the uranium enrichment efforts. Those covert operations, and the question of whether Israel will settle for something less than a conventional attack on Iran, pose immediate and wrenching decisions for Mr. Obama.

The covert American program, started in early 2008, includes renewed American efforts to penetrate Iran’s nuclear supply chain abroad, along with new efforts, some of them experimental, to undermine electrical systems, computer systems and other networks on which Iran relies. It is aimed at delaying the day that Iran can produce the weapons-grade fuel and designs it needs to produce a workable nuclear weapon.

Knowledge of the program has been closely held, yet inside the Bush administration some officials are skeptical about its chances of success, arguing that past efforts to undermine Iran’s nuclear program have been detected by the Iranians and have only delayed, not derailed, their drive to unlock the secrets of uranium enrichment.

Late last year, international inspectors estimated that Iran had 3,800 centrifuges spinning, but American intelligence officials now estimate that the figure is 4,000 to 5,000, enough to produce about one weapon’s worth of uranium every eight months or so.

While declining to be specific, one American official dismissed the latest covert operations against Iran as “science experiments.” One senior intelligence official argued that as Mr. Bush prepared to leave office, the Iranians were already so close to achieving a weapons capacity that they were unlikely to be stopped.

Others disagreed, making the point that the Israelis would not have been dissuaded from conducting an attack if they believed that the American effort was unlikely to prove effective.

Since his election on Nov. 4, Mr. Obama has been extensively briefed on the American actions in Iran, though his transition aides have refused to comment on the issue.

Early in his presidency, Mr. Obama must decide whether the covert actions begun by Mr. Bush are worth the risks of disrupting what he has pledged will be a more active diplomatic effort to engage with Iran.

Either course could carry risks for Mr. Obama. An inherited intelligence or military mission that went wrong could backfire, as happened to President Kennedy with the Bay of Pigs operation in Cuba. But a decision to pull back on operations aimed at Iran could leave Mr. Obama vulnerable to charges that he is allowing Iran to speed ahead toward a nuclear capacity, one that could change the contours of power in the Middle East.

An Intelligence Conflict

Israel’s effort to obtain the weapons, refueling capacity and permission to fly over Iraq for an attack on Iran grew out of its disbelief and anger at an American intelligence assessment completed in late 2007 that concluded that Iran had effectively suspended its development of nuclear weapons four years earlier.

That conclusion also stunned Mr. Bush’s national security team — and Mr. Bush himself, who was deeply suspicious of the conclusion, according to officials who discussed it with him.

The assessment, a National Intelligence Estimate, was based on a trove of Iranian reports obtained by penetrating Iran’s computer networks.

Those reports indicated that Iranian engineers had been ordered to halt development of a nuclear warhead in 2003, even while they continued to speed ahead in enriching uranium, the most difficult obstacle to building a weapon.

The “key judgments” of the National Intelligence Estimate, which were publicly released, emphasized the suspension of the weapons work.

The public version made only glancing reference to evidence described at great length in the 140-page classified version of the assessment: the suspicion that Iran had 10 or 15 other nuclear-related facilities, never opened to international inspectors, where enrichment activity, weapons work or the manufacturing of centrifuges might be taking place.

The Israelis responded angrily and rebutted the American report, providing American intelligence officials and Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, with evidence that they said indicated that the Iranians were still working on a weapon.

While the Americans were not convinced that the Iranian weapons development was continuing, the Israelis were not the only ones highly critical of the United States report. Secretary Gates, a former director of the Central Intelligence Agency, said the report had presented the evidence poorly, underemphasizing the importance of Iran’s enrichment activity and overemphasizing the suspension of a weapons-design effort that could easily be turned back on.

In an interview, Mr. Gates said that in his whole career he had never seen “an N.I.E. that had such an impact on U.S. diplomacy,” because “people figured, well, the military option is now off the table.”

Prime Minister Olmert came to the same conclusion. He had previously expected, according to several Americans and Israeli officials, that Mr. Bush would deal with Iran’s nuclear program before he left office. “Now,” said one American official who bore the brunt of Israel’s reaction, “they didn’t believe he would.”

Attack Planning

Early in 2008, the Israeli government signaled that it might be preparing to take matters into its own hands. In a series of meetings, Israeli officials asked Washington for a new generation of powerful bunker-busters, far more capable of blowing up a deep underground plant than anything in Israel’s arsenal of conventional weapons. They asked for refueling equipment that would allow their aircraft to reach Iran and return to Israel. And they asked for the right to fly over Iraq.

Mr. Bush deflected the first two requests, pushing the issue off, but “we said ‘hell no’ to the overflights,” one of his top aides said. At the White House and the Pentagon, there was widespread concern that a political uproar in Iraq about the use of its American-controlled airspace could result in the expulsion of American forces from the country.

The Israeli ambassador to the United States, Sallai Meridor, declined several requests over the past four weeks to be interviewed about Israel’s efforts to obtain the weapons from Washington, saying through aides that he was too busy.

Last June, the Israelis conducted an exercise over the Mediterranean Sea that appeared to be a dry run for an attack on the enrichment plant at Natanz. When the exercise was analyzed at the Pentagon, officials concluded that the distances flown almost exactly equaled the distance between Israel and the Iranian nuclear site.

“This really spooked a lot of people,” one White House official said. White House officials discussed the possibility that the Israelis would fly over Iraq without American permission. In that case, would the American military be ordered to shoot them down? If the United States did not interfere to stop an Israeli attack, would the Bush administration be accused of being complicit in it?

Admiral Mullen, traveling to Israel in early July on a previously scheduled trip, questioned Israeli officials about their intentions. His Israeli counterpart, Lt. Gen. Gabi Ashkenazi, argued that an aerial attack could set Iran’s program back by two or three years, according to officials familiar with the exchange. The American estimates at the time were far more conservative.

Yet by the time Admiral Mullen made his visit, Israeli officials appear to have concluded that without American help, they were not yet capable of hitting the site effectively enough to strike a decisive blow against the Iranian program.

The United States did give Israel one item on its shopping list: high-powered radar, called the X-Band, to detect any Iranian missile launchings. It was the only element in the Israeli request that could be used solely for defense, not offense.

Mr. Gates’s spokesman, Geoff Morrell, said last week that Mr. Gates — whom Mr. Obama is retaining as defense secretary — believed that “a potential strike on the Iranian facilities is not something that we or anyone else should be pursuing at this time.”

A New Covert Push

Throughout 2008, the Bush administration insisted that it had a plan to deal with the Iranians: applying overwhelming financial pressure that would persuade Tehran to abandon its nuclear program, as foreign enterprises like the French company Total pulled out of Iranian oil projects, European banks cut financing, and trade credits were squeezed.

But the Iranians were making uranium faster than the sanctions were making progress. As Mr. Bush realized that the sanctions he had pressed for were inadequate and his military options untenable, he turned to the C.I.A. His hope, several people involved in the program said, was to create some leverage against the Iranians, by setting back their nuclear program while sanctions continued and, more recently, oil prices dropped precipitously.

There were two specific objectives: to slow progress at Natanz and other known and suspected nuclear facilities, and keep the pressure on a little-known Iranian professor named Mohsen Fakrizadeh, a scientist described in classified portions of American intelligence reports as deeply involved in an effort to design a nuclear warhead for Iran.

Past American-led efforts aimed at Natanz had yielded little result. Several years ago, foreign intelligence services tinkered with individual power units that Iran bought in Turkey to drive its centrifuges, the floor-to-ceiling silvery tubes that spin at the speed of sound, enriching uranium for use in power stations or, with additional enrichment, nuclear weapons.

A number of centrifuges blew up, prompting public declarations of sabotage by Iranian officials. An engineer in Switzerland, who worked with the Pakistani nuclear black-marketeer Abdul Qadeer Khan, had been “turned” by American intelligence officials and helped them slip faulty technology into parts bought by the Iranians.

What Mr. Bush authorized, and informed a narrow group of Congressional leaders about, was a far broader effort, aimed at the entire industrial infrastructure that supports the Iranian nuclear program. Some of the efforts focused on ways to destabilize the centrifuges. The details are closely held, for obvious reasons, by American officials. One official, however, said, “It was not until the last year that they got really imaginative about what one could do to screw up the system.”

Then, he cautioned, “none of these are game-changers,” meaning that the efforts would not necessarily cripple the Iranian program. Others in the administration strongly disagree.

In the end, success or failure may come down to how much pressure can be brought to bear on Mr. Fakrizadeh, whom the 2007 National Intelligence Estimate identifies, in its classified sections, as the manager of Project 110 and Project 111. According to a presentation by the chief inspector of the International Atomic Energy Agency, those were the names for two Iranian efforts that appeared to be dedicated to designing a warhead and making it work with an Iranian missile. Iranian officials say the projects are a fiction, made up by the United States.

While the international agency readily concedes that the evidence about the two projects remains murky, one of the documents it briefly displayed at a meeting of the agency’s member countries in Vienna last year, from Mr. Fakrizadeh’s projects, showed the chronology of a missile launching, ending with a warhead exploding about 650 yards above ground — approximately the altitude from which the bomb dropped on Hiroshima was detonated.

The exact status of Mr. Fakrizadeh’s projects today is unclear. While the National Intelligence Estimate reported that activity on Projects 110 and 111 had been halted, the fear among intelligence agencies is that if the weapons design projects are turned back on, will they know?

David E. Sanger is the chief Washington correspondent for The New York Times. Reporting for this article was developed in the course of research for “The Inheritance: The World Obama Confronts and the Challenges to American Power,” to be published Tuesday by Harmony Books.

The Democrats are folding like an ironing board over this Roland Burris business, and for some reason people are surprised.

Just to catch up: The governor of Illinois, Rod Blagojevich, is in scalding-hot water over allegations he wanted to sell Barack Obama’s still-warm Senate seat. This was discovered via federal wiretaps of the helmet-haired governor’s phone conversations and fueled by some juicy dialogue better suited for fleet week in Manila.

In response, Senate Democrats took a Churchillian stand, vowing that no Blago appointee would ever be accepted by the Senate. No appointee, the Democrats insisted, so tainted with scandal could be allowed to sit in the same chamber that Ted Kennedy calls home.

The party of the infinitely elastic “living Constitution” suddenly planted their flag of principle in the terra firma of constitutional concrete and watched it flap in the hot wind of their political bloviation. Even after Blagojevich announced he was appointing Roland Burris, a respected but unremarkable black Illinois politician, to Obama’s seat, Senate Majority Leader Harry Reid of Nevada stood his ground, pronouncing the move “unacceptable.”

But that resolve melted like a Hershey bar in a Nevada parking lot the moment Mr. Burris came to Washington. Apparently, the Constitution wasn’t on the Democrats’ side (Fancy that!) and liberals lacked the stomach to stand in the doorway of the Capitol and block admittance of a black man.

Indeed, that was Blago’s thinking all along. When the Democratic governor announced his decision, he assembled various black Illinois pols to support the move, including Rep. Bobby Rush, a Democrat from Chicago’s South Side and a founder of the Illinois chapter of the Black Panther Party. Rush immediately played the race card at the press conference. “There are no African-Americans in the U.S. Senate. And I don’t think any U.S. senator who’s sitting in the Senate right now wants to go on record to deny one African-American from being seated in the U.S. Senate,” he said.

In case you needed a ball peen hammer to drive the point into your forehead, he added: “I would ask you to not hang or lynch the appointee as you try to castigate the appointer …”

Rush assembled more than 60 black ministers Sunday to rally around Burris at a Chicago church. “We are just faced with a hard-headed room of people in the Senate who want to keep an African-American out of the Senate,” Rush said. He condemned the Senate, where until recently Barack Obama served before becoming president of the United States, as “the last bastion of plantation politics.”

And that was all she wrote for Reid, who by next week should be on all fours like Kevin Bacon in “Animal House,” shouting, “Thank you sir! May I have another?” as Burris paddles him.

Now, I certainly understand why Reid & Co. caved. For starters, Reid’s not exactly the brightest crayon in the box.

But why all the fuss in the first place? Isn’t this how it always works? The Atlantic’s Ta-Nehisi Coates, an impressive African-American writer, is amazed that “Reid has been outmaneuvered by the sort of overt, ham-fisted identity politics deployed in the ’70s.”

The ’70s? So this sort of thing stopped more than three decades ago? I had no idea. What planet do my newscasts come from?

I thought this was simply what liberals and Democrats do. When Newt Gingrich introduced the Contract with America, black Democrats denounced it as racist. Charlie Rangel proclaimed, “Hitler wasn’t even talking about doing these things.” When impeachment threatened Bill Clinton, he draped himself in black ministers and staffers. The NAACP ran an ad narrated by the daughter of James Byrd, a black man brutally murdered in a hate crime, insinuating that then-presidential candidate George W. Bush’s refusal to support hate-crime legislation in Texas was like murdering her father again. In the recent campaign, nearly the entire liberal punditocracy insisted that opposition to Barack Obama could only be explained by racism, a story line egged on by Obama himself when convenient.

And don’t tell me Blago’s corruption changes the equation. Has anyone read about the baleful history of minority set-aside programs in cities like Chicago? Cronies and grifters are routinely given sweetheart contracts under the guise of fighting discrimination when in reality it’s all a riot of kickbacks, “pay-to-play” and cronyism. People don’t call Jesse Jackson a shakedown artist for nothing.

There are two reasons why this spectacle shocks some liberals. The first is that Blago, Burris and Rush used this tactic on fellow Democrats. And since Democrats can’t be motivated by racism, any ploy like this must be cynical. When the same gambit is used on Republicans, it’s called “speaking truth to power.” Second, some honestly believed that Obama represented a real change of the racial landscape. So far, alas, these folks just look naive.

Jonah Goldberg is editor-at-large of National Review Online. His e-mail address is jonahscolumn@aol.com.

David S. Broder

It was not lost on anyone that the president-elect of the United States, riding the crest of his popularity, and the Democratic leadership of the U.S. Senate were outsmarted last week by a state politician who won his last election almost 20 years ago.

When and if Roland Burris claims the Senate seat from Illinois formerly occupied by Barack Obama, it will represent the greatest climb-down by an incoming president since Sam Nunn turned Bill Clinton around on the issue of gays in the military at the start of Clinton’s first term.

Fortunately for Obama, the voters are much more concerned with the economy and Obama’s effort to fix it than they are with the infighting over the Illinois Senate seat.

But politicians keep score on each other all the time. And, after a near-perfect month of transition operations, Obama has stumbled twice in two weeks, first being caught unaware by the investigation of Bill Richardson, his choice for commerce secretary, and then being outmaneuvered by Burris and his tawdry sponsor, Gov. Rod Blagojevich.

There are lessons for Obama in both incidents, starting with the importance of really knowing the other players in the game. Obama has had such a rapid rise in national politics that there are many key figures in both parties he barely has had time to size up.

But Richardson was a familiar fellow traveler on the 2007-08 presidential campaign trail, and Obama should have known that there were reports of a grand jury investigation of pay-for-play in New Mexico.

As for Blagojevich, Obama had to know, from his years in Springfield and Chicago, about the governor’s tawdry and ruthless reputation. But Obama seriously underestimated him.

Harry Reid, the Senate majority leader, got all 50 members of his caucus to sign a statement vowing they would never accept a Senate appointee from Blagojevich’s tainted hands, after prosecutors had published excerpts of wiretaps in which the governor had salivated obscenely over the way he could cash in on Obama’s Senate vacancy.

Obama personally endorsed that hard-line stand against seating anyone “tainted” by Blagojevich, issuing a statement that backed Reid and the others. But Burris was no more impressed than Blagojevich had been.

When the governor called the senators’ bluff, Burris launched a public relations blitz on television, insisting that it would be unfair to punish him for the governor’s alleged sins. Ignored for the moment was the fact that Burris had been rejected by the voters in three straight Illinois Democratic gubernatorial races and in one primary for mayor of Chicago. Had the Democrat-controlled Legislature ordered a special election, the odds against Burris would have been enormous.

But Burris’ ego is limitless. And it turned out that Reid had, once again, failed to do his homework or line up his votes. When Chicago black congressman Bobby Rush played the race card, questioning why anyone would stand in the way of Burris succeeding Obama as the lone African-American senator, you could feel a wave of anxiety go through Democratic ranks.

Soon, Sen. Dianne Feinstein, the outgoing chairman of the Rules Committee and a potential candidate for California governor next year, publicly called on Reid to relent. The Congressional Black Caucus weighed in on Burris’ behalf. By the time Burris sat down with Reid and Majority Whip Dick Durbin of Illinois, the fight was effectively over and Burris was gracious about accepting their surrender. Obama conceded as well, saying that if the Senate seated Burris, “then I’m going to work with Roland Burris just like I work with all the other senators.”

Obama justifiably figured that Burris was not worth a knockdown fight when he has so many bigger battles ahead of him. But the lesson that other politicians have drawn is that Obama may not always be able to count on his congressional allies and they may not be able to count on him. That is not the way he wanted to begin.

David S. Broder is a columnist for the Washington Post. His e-mail address is davidbroder@washpost.com.

January 10, 2009

By LOUIS UCHITELLE

The nation lost 524,000 jobs in December, reflecting a pervasive fear among employers that if they fail to shed workers quickly their companies may go under in a recession poised to become the worst since the 1930s.

The unemployment rate, meanwhile, jumped to a 16-year-high of 7.2 percent, the Bureau of Labor Statistics reported on Friday. The growing army of the unemployed, at 11.1 million, is nearly 50 percent bigger than at the start of the recession a year ago.

Responding to the report, President-elect Barack Obama said Congress must enact an economic stimulus plan quickly.

The December decline in jobs came on top of similar losses in October and November. Not since 1980 has the work force shrunk so much in just three months. Companies across all industries are grappling with sales that are deteriorating rapidly just as they lose easy access to loans.

“The simplest way for a company to hoard cash is to drain their inventories and fire their workers,” said Robert J. Barbera, chief economist at the Investment Technology Group, a research and trading firm, “and everywhere you look, that is what is happening.”

The total number of jobs lost in the recession now totals 2.59 million, counting upward revisions for October and November, with many more job losses expected in coming months.

Nearly as troubling, hundreds of thousands more people sought full-time work in December but could not get more than part-time jobs.

If those workers are included, the so-called total unemployment rate swelled to 13.5 percent, from 12.6 percent in November and just 8.7 percent at the start of the recession. Total unemployment includes the officially unemployed, the part-timers who seek more hours and the nearly 300,000 who would like a job but tell pollsters from the Bureau of Labor Statistics that they are too discouraged to look.

Employers in nearly every industry cut payrolls. Only health care and education bucked the trend in December, adding just 45,000 jobs combined, the Bureau of Labor Statistics reported. Manufacturers, construction companies and retailers led all last year in eliminating jobs, and they did so again in December.

“What happened to jobs in the fourth quarter tells us unmistakably that this recession is going to be a long one and a deep one,” Mr. Barbera said. “The toughest six months,” he added, “will be the just-completed fourth quarter and the first quarter of this year.”

The consensus view of economists surveyed by Blue Chip Economic Indicators is that the economy will continue to contract until July at the very least, but at a slowing pace in the second quarter. That would make it the longest recession since the 1930s, outlasting the two record-holders, the mid-1970s and early 1980s downturns. Each of these recessions lasted 16 months. The current recession, which started in December 2007, would reach that milestone in April.

At a news conference in Washington, Mr. Obama said that behind the latest job statistics were “real lives, real suffering, real fears,” and Congress must bring Americans relief by quickly enacting a stimulus plan. Asked whether he was worried that some lawmakers thought his proposed stimulus program, estimated at $775 billion, was too small, he responded that others thought it was too big and said he was open to a “whole host of ideas” in consultation with Congress.

“You are assuming that I expected it to be easy,” he told one questioner. “No.”

The latest jobs report suggested that many employers tried to cut back hours before resorting to job cuts or hiring freezes. The average number of hours that Americans worked fell to 33.3 a week in December, down two-tenths of an hour, to the lowest level since records first were kept in 1964. Over the course of the recession, average weekly hours worked are down 4 percent.

“There has been a change in psychology as the financial crisis has devolved into a panic,” said Mark Zandi, chief economist at Moody’s Economy.com. “Businesses have gone from trying to hold onto workers, by reducing their hours, to laying them off in an effort to survive.”

Economists fell over themselves in describing the dire nature of the jobs report, which they said was alarming confirmation that the economy was in the midst of a sharp contraction in which consumer spending and business investment bordered on free fall. Many say that the economy contracted in the fourth quarter at a 5 or 6 percent annual rate and that steep contraction will continue at least through the first quarter, letting up only if Congress approves a sizable stimulus, one that kicks in soon and is at least as big as the $775 billion that the Obama camp has proposed.

“It will add massively to the budget deficit,” said Stuart G. Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh, who counts himself as an advocate of balanced budgets. “But I am not against running deficits in these circumstances, not with so many people losing their jobs.”

Mr. Hoffman expects the unemployment rate, which jumped to 7.2 percent last month from 6.8 percent in November, to rise to 8.5 percent by July and plateau there for the rest of the year.

Others are less sanguine. They see 9 or 10 percent unemployment by early next year, and a jobless recovery that continues for about six months even after the economy ceases to contract.

By comparison, the unemployment rate reached 10.8 percent in the 1981-1982 recession, its highest level since World War II. In those years, unemployment and economic growth rose and fell more or less in tandem. But in the early 1990s that changed. In the 1990-1991 recession and again after the 2001 recession, employers continued to shed jobs for months. In the case of the 2001 recession, employment did not return to its prerecession level for four years.

“Even with the help of a stimulus,” said David A. Levy, chairman of the Jerome Levy Forecasting Center, “the unemployment rate is going to keep rising for the rest of the year, or longer.”

Cal Thomas is a columnist for Tribune Media Services.

GOP Asked to Help Design Bill; $300 Billion in Tax Cuts Sought

By Paul Kane, Lori Montgomery and Shailagh Murray
Washington Post Staff Writers
Tuesday, January 6, 2009; A01

President-elect Barack Obama arrived on Capitol Hill yesterday and immediately set to work reassuring skeptical Republicans about his massive economic stimulus package — part of a campaign that earned him praise for seeking their input but questions from those averse to hundreds of billions of dollars in new spending.

Pitching a plan that is expected to include $300 billion in tax cuts, Obama pledged to consult Republican leaders, who until yesterday had been left out of negotiations between the president-elect’s advisers and congressional Democratic staff.

“The monopoly on good ideas does not belong to a single party. If it’s a good idea, we will consider it,” Obama told House and Senate leaders at an hour-long closed-door meeting, according to one attendee.

Obama, making his pitch two weeks before taking office, won generally favorable reviews from GOP leaders, particularly because of his decision to increase the tax-cut ratio to 40 percent of the overall package.

Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader John A. Boehner (R-Ohio) told reporters they were convinced that Obama was sincere in his invitation to let Republicans help craft the nearly $800 billion package to create jobs and lift the nation out of recession. But they also expressed concerns about the size of the package, as well as particular elements under discussion between Obama and Democratic lawmakers.

“I remain concerned about wasteful spending that might be attached to the tax relief. Simply put, we should not bury future generations under mountains of debt,” Boehner said.

Boehner suggested the legislation would likely be signed into law by mid-February, but the president-elect said yesterday that he would like the House and Senate to present him with a bill by the end of January or beginning of February.

“The economy is very sick,” Obama said. “The situation is getting worse. . . . We have to act and act now to break the momentum of this recession.”

As described by his advisers, Obama is proposing a package of tax cuts to benefit families and businesses. Like the overall spending proposal, the tax cuts would be designed to put cash in people’s pockets over the next two years and kick-start the economy.

Working families would be eligible for a tax credit worth up to $1,000. Individuals would be eligible for a $500 credit.

Businesses would get an extension of expired tax breaks from the 2008 stimulus package signed by President Bush, including a “bonus depreciation” break that allows businesses to write off more of their purchases more quickly and an increase in small-business expensing limits. Businesses could apply current losses to taxes paid back as far as five years ago, reaping an immediate cash windfall. And they would receive a $3,000 tax credit for every job they create or preserve.

Key details of the stimulus proposal remain unresolved. For instance, upper-income individuals would not be eligible for the income tax credit, but the income threshold for phasing out the benefit has not been set. Obama officials said it would likely be about $200,000 a year, the range set during the campaign.

Obama officials said they tried to keep the package ideologically neutral, rejecting an option supported by many progressives to make people who are not working eligible for a “refundable” tax credit. And they passed up conservative provisions such as estate tax relief and capital gains tax cuts that disproportionately benefit wealthier individuals.

After a lunchtime session with his economic advisers, Obama rejected suggestions that the tax cuts were designed to win over GOP votes. “The notion that me wanting to include relief for working families in this plan is somehow a political ploy, when this was a centerpiece of my plan for the last two years doesn’t make too much sense,” he told reporters.

Some prominent Republicans expressed reservations about the tax proposals’ specifics. Jon Kyl (Ariz.), a member of the Senate Republican leadership team, said he hadn’t studied the list of proposed cuts, but that he favored reducing corporate and capital gains taxes, and providing more generous small-business incentives. And, he said, “These changes should be permanent, rather than just temporary.”

Sen. Charles E. Grassley (Iowa), the senior Republican on the tax-writing Senate Finance Committee, said he would prefer a tax package that is “inclusive rather than exclusive” and that offers relief to “as many as taxpayers as possible.” One option, according to a senior Grassley aide, would be to include a $75 billion provision to prevent the alternative minimum tax from applying to millions of additional families.

It is also not clear that tax cuts are the most effective way to win GOP votes. Two key Republican moderates in the Senate — Susan Collins and Olympia J. Snowe, both of Maine — have not focused on tax breaks as the best solution to the economic crisis.

In a letter to Obama last month, Collins outlined her stimulus priorities as transportation construction projects, energy-efficiency investments and a temporary increase in Medicaid assistance to states. In conversations with Obama and his Treasury secretary-designate Timothy F. Geithner, Snowe has urged the inclusion of unemployment assistance, mortgage relief for strapped homeowners and programs to ease the credit crunch facing small businesses.

“With more than 10.3 million people currently out of work, Congress must swiftly enact economic recovery legislation that will create jobs, assist the unemployed and reduce the devastating rate of home foreclosures,” Snowe said.

Obama bounced across the Capitol yesterday to take part in three meetings, beginning with a one-on-one meeting with House Speaker Nancy Pelosi (D-Calif.) in the morning and a sit-down in the early afternoon with Senate Majority Leader Harry M. Reid (D-Nev.). The final meeting was with the bipartisan leadership from both chambers.

Democrats described the atmosphere as markedly different than the confrontational tone of recent battles with the Bush White House, in part because the new administration is run by former senators.

“They understand the Senate, they understand the Capitol. It wasn’t as if someone new was coming to town,” Sen. Richard J. Durbin (D-Ill.), the majority whip and close Obama ally, said afterward.

Some Republicans, while saying they were pleased by Obama’s attempt to open dialogue, questioned whether the spending side of the plan would be transparent enough. Rahm Emanuel, Obama’s chief of staff, pledged to put details of the spending plan online, including the creation of a monitoring system for the progress on some of the projects, according to one attendee.

Some independent analysts joined GOP aides in questioning Obama’s tax credit for job creation, saying it’s unclear how such a provision would be crafted.

“When somebody lays off 10,000 people but hires back 1,000, should they get a tax credit? That doesn’t really seem fair,” said Leonard Burman, a director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution. “The problem with these things is defining what qualifies.”

Meanwhile, some Republicans and moderate Democrats are pushing Obama to commit to addressing the nation’s long-term budget problems even as his stimulus package pushes the government deeper into debt. With congressional budget analysts expected to announce later this week that this year’s deficit is likely to soar well over $1 trillion, a commitment to reducing future deficits is critical, said Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee.

“At some point here, you have to pivot and face up to these long-term problems,” said Conrad, who along with Sen. Judd Gregg (R-N.H.) is proposing a commission to re-examine the expensive entitlement programs Social Security, Medicare and Medicaid.

If the United States and Israel hope to ever truly come up with a successful strategy for fighting extreme militarism and threats to their security, they need bigger imaginations.

Pretend just for a minute that you are a mainstream Palestinian person living in Gaza. You, like 66 percent of your fellow Palestinians, support some sort of peace process with Israel. You are fairly moderate and generally prefer peace to violence, but in 2006 you voted for Hamas in the elections. You didn’t necessarily agree with Hamas’s more radical rhetoric, but at the same time you found the status quo unacceptable. You voted for change.

Now in 2008, you are under attack. Israel has launched air strikes that make you afraid to go outside. Then their troops invade. You may not like how things have gone under Hamas’s rule, but at least they are there vowing to fight back against Israeli attacks.

It is baffling that Israel is unable to use its imagination to put itself inside the shoes of Palestinians and understand how Israeli actions are driving Palestinians toward supporting Hamas.

Hamas is a political entity. After winning the elections in 2002, it still faces threats to its power from other political factions. Its periodic rocket attacks could not possibly destroy Israel, but were intended to annoy and provoke; Israel has fallen right into the trap and has taken the bait. Why would Hamas provoke Israel?  Because Hamas knows that if Israel responds with military force, threatens Palestinians, and kills civilians, it will further radicalize Muslim opinion worldwide against the Israelis and strengthen Hamas’s position domestically with the Palestinian people.

The Israelis would do much better for themselves, strategically, to take a different approach. In the past, Hamas has indicated its willingness to negotiate with Israel. The Israeli government should take them up on this offer and make a good faith effort to talk and compromise. If Hamas engages Israel honestly, then perhaps some sort of agreement will materialize. If not, it will be clear to moderate Muslims and the Palestinian people that Hamas is standing in the way of peace, and not the Israelis. Ultimately, Hamas must answer to the Palestinian people, and obstructing peaceful negotiation when it is the will of the people is not a good political strategy.

By choosing to attack instead of talk, Israel is losing the battle for hearts and minds across the world. The anti-Israeli sentiment that follows breeds tolerance for extremism and an environment that anti-Semitic militants ultimately thrive on. Losing the masses is a mistake the United States made in Iraq, a mistake it made in Afghanistan and a mistake Israel is making with Muslims and mainstream Palestinians.

Clearly neither Hamas nor Israel has much moral high ground to stand on right now. Hamas provoked Israel with rocket attacks, and is operating in densely populated areas to intentionally drive up the number of civilians killed by Israeli bombs. Despite the fact that these latest Hamas attacks didn’t result in any deaths, Israeli retaliations resulted in the death of more than 400 Palestinians, and 60 civilians. I can understand both why Israel did what it did and the criticisms of its actions.

The question we should be asking ourselves is what can America do to bring peace and stability? Vast majorities of the populations in every major Muslim country have a negative view of the United States, and a lot of that ill will is a result of our policy, which has basically been to sit on the sidelines and condemn Hamas at every opportunity.

Israel is a strong ally, and America should not abandon her. At the same time, we need a change. We need a policy that takes the high ground and Israel needs one that won’t draw the fire of the Muslim world, and that’s in its strategic interest. America should press Israel to seek peace, not war. The only chance Israel has to undercut extremism is through reaching out with their voices, not their bombers.

Reach columnist Chris Jordan at opinion@dailyuw.com.  Chris is a MSHS graduate and former AP GO PO Student.

BY BARRY RUBIN

Monday, January 5th 2009, 4:00 AM

The war in Gaza is the first chapter of a new era in the Middle East. The Arab-Israeli conflict is far from the region’s dominant dispute. The Arab-Islamist conflict now overwhelms it – by a large margin.

Increasingly, Arab regimes know Hamas isn’t their friend and, though they won’t say so publicly, don’t see Israel as an enemy. No wonder: Israel is politically stable and economically prosperous. It doesn’t threaten to take over their countries, overthrow their regimes and stand them in front of a firing squad.

Radical Islamism, Iran-style, does.

That’s right. Arab nations’ prime 21st century enemy is Iran and its allies: Syria, Hezbollah, Hamas and Iraqi terrorists. After destroying their own countries, they want to do the same to everyone else.

Up on the Lebanese border, where I just visited, things are quiet. Hezbollah talks big about its 2006 “victory” but knows how hard Israel hit it then. It’s not looking for trouble with the Jewish state now.

At the same time, Egypt condemns Hamas and urges Israel to smash the radical Islamist group. Lebanese friends tell me they fear that unless Israel and the West stop the Islamists, their country will be taken over in this new year.

The editor of the important Arabic newspaper Al-Sharq al-Awsat, himself a Saudi, warns that Iran and Hamas – effectively at war with Egypt and Saudi Arabia – are the real threat to Arab security.

And the meeting of Arab states last week, instead of producing a condemnation of Israel or America, did nothing.

What was the 2006 Israel-Hezbollah war’s big lesson? That unless Israel wins a clear victory, Islamists will be more aggressive. It’s the same thing the U.S. surge in Iraq demonstrates: pulling punches on terrorists doesn’t make them love you or be peaceable.

Of course, the Israel-Palestinian conflict is far from over: It will probably continue for decades. But that’s precisely the point. It’s an Israel-Palestinian battle, smaller and less strategically significant than this other half-century-long conflict, which involves the whole region.

This is also a conflict among Palestinians. The Palestinian Authority, which rules the West Bank, is still full of radicals but has worked recently to stop terrorist attacks against Israel and to create a stable society. The PA can’t and won’t make full peace with Israel, but the two sides do cooperate in reducing violence.

In contrast, Hamas wants permanent war on Israel, constant terrorism, and openly preaches genocide.

This is what the Obama administration must understand. The Arab-Israeli conflict is relatively unimportant today in regional terms. It is overwhelmed by a dangerous mix of other nations and issues: Iran, Iraq, Afghanistan, Pakistan, Lebanon (on the verge of an Iran-Syria takeover), Islamism, terrorism and oil.

Barack Obama must understand that Iran and radical Islamists are out to destroy U.S. interests in the Middle East, expand their own influence and escalate anti-Americanism to murderous proportions around the globe.

Moderate Arabs – and the nations in which they have the most influence – live in constant fear of that happening. America can allay those fears – if it follows a policy mixing intelligence and toughness.

Rather than obsessing over the Arab-Israeli conflict, as many want Obama to do, job one for the new administration in the Mideast should be uniting America’s Arab friends alongside Israel against their common enemies: the fanatical Islamists.

A broad moderate Arab coalition, strengthened to resist the likes of Iran, Hezbollah and Hamas, will not only put the region on far more solid footing. It will help the Israeli-Palestinian mess take care of itself.

Barry Rubin is director of the Global Research in International Affairs Center (GLORIA) and editor of the Middle East Review of International Affairs (MERIA) Journal. He is author of “The Long War for Freedom: The Arab Struggle for Democracy in the Middle East.”

By Michael D. Shear and Carol D. Leonnig
Washington Post Staff Writers
Monday, January 5, 2009

New Mexico Gov. Bill Richardson, chosen by President-elect Barack Obama to be commerce secretary, withdrew from consideration yesterday, citing an ongoing federal “pay-to-play” investigation involving one of his political donors as a significant obstacle to his confirmation.

Richardson, 61, who competed unsuccessfully for the Democratic presidential nomination last year, becomes the first political casualty in Obama’s Cabinet, and his withdrawal marked the first visible crack in what had been one of the smoothest presidential transitions in modern history.

The former energy secretary and U.N. ambassador under President Bill Clinton was positioned to become the highest-profile Hispanic in Obama’s administration. But Richardson made it clear yesterday that he thought confirmation was far from a sure thing, even with Democrats firmly in control of the Senate.

“Given the gravity of the economic situation the nation is facing, I could not in good conscience ask the President-elect and his administration to delay for one day the important work that needs to be done,” Richardson said in a statement.

The New Mexico investigation, which began last summer, focuses on whether Richardson’s office urged a state agency to hire a California firm as a result of generous contributions from the company and its president to political action committees established by the governor.

Richardson insisted that he and his staff “have acted properly in all matters” and predicted that the investigation would exonerate him. But he said the probe could take weeks or months, potentially holding up his Senate approval. Instead, Richardson said he will remain “in the job I love as governor of New Mexico.”

He called Obama on Friday to advise him of his plans, and the president-elect accepted the decision “with deep regret,” according to a statement issued yesterday. Aides said no one in Obama’s transition pressured Richardson to drop out.

No clear replacement for Richardson at the Commerce Department emerged yesterday, but sources close to the transition said Obama would move quickly to find one.

A grand jury in Albuquerque is looking into whether CDR Financial Products received a contract with the New Mexico Finance Authority because of pressure from Richardson or other state employees. CDR made $1.48 million advising the authority on interest-rate swaps and refinancing of funds related to $1.6 billion in transportation bonds, state officials confirmed.

The Beverly Hills-based firm and its president, David Rubin, together gave $100,000 to Sí Se Puede and Moving America Forward, both PACs started by Richardson, shortly before winning the lucrative state contract, records show.

The federal probe heated up considerably last month, just around the time Obama announced Richardson as his choice for commerce secretary, according to sources familiar with the investigation. New subpoenas were issued, and testimony was scheduled from officials at J.P. Morgan Chase who worked for the state with CDR and from the director of Richardson’s political action committees.

CDR’s selection drew FBI interest because the firm did not make an initial list of the most qualified bidders. The bidding was reopened for review, and a state committee headed by one of Richardson’s former top aides later helped select CDR.

A legal source familiar with the investigation said yesterday that FBI agents, working on the Senate’s behalf and conducting a background check of Richardson for the Commerce job, conveyed to Obama’s transition team the seriousness and significance of the Albuquerque grand jury probe.

The agents are said to have communicated that the governor’s top aides — and even Richardson’s actions — were under scrutiny. At least two sources familiar with the investigation said some evidence raises concern about the propriety of the Richardson administration’s interactions with a donor.

Obama aides declined to comment on any conversations the transition team may have had with the FBI about the investigation.

The inquiry springs from a long-running nationwide investigation by the Justice Department into “pay-to-play” practices in local government bond markets. Federal investigators are questioning whether financial firms have lavished politicians with money and gifts in exchange for high fees on work advising municipal and local governments on investments.

In mid-December, Richardson spokesman Gilbert Gallegos said the governor was “aware of questions surrounding some financial transactions at the New Mexico Finance Authority” and expected state officials to cooperate fully.

CDR’s attorney, Richard Beckler, declined several weeks ago to elaborate on the investigation, but he told a Washington Post reporter Dec. 15 that the company “has always tried to abide by these byzantine campaign finance regulations and is cooperating fully with this investigation.”

The suddenness of Richardson’s withdrawal renewed questions about the Obama team’s vetting procedures. The New Mexico investigation had been publicized since the summer, yet aides to the president-elect said yesterday that they were not aware of the matter when Richardson was nominated. Richardson advisers insisted that the governor had relayed information about the investigation to transition officials before his name was announced.

“I think our vetters have done a good job,” incoming Obama press secretary Robert Gibbs said last night, crediting the “impressive . . . totality of our Cabinet picks.”

A senior transition aide said yesterday that Richardson had assured the team that he would emerge unscathed by the investigation and that there was no reason to think otherwise. “But it became clear that confirmation hearings would have to be delayed until the investigation was complete and that would take six weeks or, perhaps, longer. Governor Richardson concluded that this was too long, and he decided to withdraw,” the aide said.

Gallegos, the Richardson spokesman, said yesterday that the governor considered asking Obama to delay sending his name to Capitol Hill until the case was concluded.

“He was hopeful that his name would be cleared and it would be wrapped up before his confirmation,” Gallegos said. Over the weekend, when it became clear that would not happen, Richardson decided to withdraw, Gallegos said.

Obama praised Richardson yesterday and said that he looked forward to having the governor serve his administration in some capacity.

Staff writer Chris Cillizza contributed to this report.

January 5, 2009
Op-Ed Columnist

By PAUL KRUGMAN

“If we don’t act swiftly and boldly,” declared President-elect Barack Obama in his latest weekly address, “we could see a much deeper economic downturn that could lead to double-digit unemployment.” If you ask me, he was understating the case.

The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression.

So will we “act swiftly and boldly” enough to stop that from happening? We’ll soon find out.

We weren’t supposed to find ourselves in this situation. For many years most economists believed that preventing another Great Depression would be easy. In 2003, Robert Lucas of the University of Chicago, in his presidential address to the American Economic Association, declared that the “central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.”

Milton Friedman, in particular, persuaded many economists that the Federal Reserve could have stopped the Depression in its tracks simply by providing banks with more liquidity, which would have prevented a sharp fall in the money supply. Ben Bernanke, the Federal Reserve chairman, famously apologized to Friedman on his institution’s behalf: “You’re right. We did it. We’re very sorry. But thanks to you, we won’t do it again.”

It turns out, however, that preventing depressions isn’t that easy after all. Under Mr. Bernanke’s leadership, the Fed has been supplying liquidity like an engine crew trying to put out a five-alarm fire, and the money supply has been rising rapidly. Yet credit remains scarce, and the economy is still in free fall.

Friedman’s claim that monetary policy could have prevented the Great Depression was an attempt to refute the analysis of John Maynard Keynes, who argued that monetary policy is ineffective under depression conditions and that fiscal policy — large-scale deficit spending by the government — is needed to fight mass unemployment. The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Mr. Obama’s plans to rescue the economy.

But these plans may turn out to be a hard sell.

News reports say that Democrats hope to pass an economic plan with broad bipartisan support. Good luck with that.

In reality, the political posturing has already started, with Republican leaders setting up roadblocks to stimulus legislation while posing as the champions of careful Congressional deliberation — which is pretty rich considering their party’s behavior over the past eight years.

More broadly, after decades of declaring that government is the problem, not the solution, not to mention reviling both Keynesian economics and the New Deal, most Republicans aren’t going to accept the need for a big-spending, F.D.R.-type solution to the economic crisis.

The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs — a burden of proof never imposed on proposals for tax cuts.

This is a problem with which Keynes was familiar: giving money away, he pointed out, tends to be met with fewer objections than plans for public investment “which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” What gets lost in such discussions is the key argument for economic stimulus — namely, that under current conditions, a surge in public spending would employ Americans who would otherwise be unemployed and money that would otherwise be sitting idle, and put both to work producing something useful.

All of this leaves me concerned about the prospects for the Obama plan. I’m sure that Congress will pass a stimulus plan, but I worry that the plan may be delayed and/or downsized. And Mr. Obama is right: We really do need swift, bold action.

Here’s my nightmare scenario: It takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious. As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it’s only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy — well, you can see where this is going.

So this is our moment of truth. Will we in fact do what’s necessary to prevent Great Depression II?