by Associated Press

WASHINGTON (AP) — President Barack Obama declared the swine flu outbreak a national emergency and empowered his health secretary to suspend federal requirements and speed treatment for thousands of infected people.

The declaration that Obama signed late Friday authorized Health and Human Services Secretary Kathleen Sebelius to bypass federal rules so health officials can respond more quickly to the outbreak, which has killed more than 1,000 people in the United States.

The goal is to remove bureaucratic roadblocks and make it easier for sick people to seek treatment and medical providers to provide it immediately. That could mean fewer hurdles involving Medicare, Medicaid or health privacy regulations.

“As a nation, we have prepared at all levels of government, and as individuals and communities, taking unprecedented steps to counter the emerging pandemic,” Obama wrote in the declaration, which the White House announced Saturday.

He said the pandemic keeps evolving, the rates of illness are rising rapidly in many areas and there’s a potential “to overburden health care resources.”

Because of vaccine production delays, the government has backed off initial, optimistic estimates that as many as 120 million doses would be available by mid-October. As of Wednesday, only 11 million doses had been shipped to health departments, doctor’s offices and other providers, according to the Centers for Disease Control and Prevention officials said.

The government now hopes to have about 50 million doses of swine flu vaccine out by mid-November and 150 million in December.

The flu virus has to be grown in chicken eggs, and the yield hasn’t been as high as was initially hoped, officials explained.

Swine flu is more widespread now than it’s ever been. Health authorities say almost 100 children have died from the flu, known as H1N1, and 46 states now have widespread flu activity.

Worldwide, more than 5,000 people have reportedly died from swine flu since it emerged this year and developed into a global epidemic, the World Health Organization said Friday. Since most countries have stopped counting individual swine flu cases, the figure is considered an underestimate.

By CARL HULSE

WASHINGTON — Representative Earl Blumenauer should be experiencing the most fulfilling days of his more than 35 years in public service.

The liberal Democrat from Portland, Ore. — known for his bowties, his Trek bicycle and a pragmatic brand of progressivism — embraced Barack Obama’s presidential candidacy early in 2008 and campaigned hard alongside him, steadily gaining confidence that the young senator from Illinois was the ideal liberal remedy to eight years of conservative dominance.

Now political reality has set in, testing Mr. Blumenauer’s faith that Mr. Obama’s election and big Democratic majorities in Congress would yield quick advances in the progressive agenda.

Instead of forging ahead, Mr. Blumenauer, 61, finds himself fighting to retain one of the touchstones for liberals this year, a public insurance option in the health care overhaul, and is watching his hopes of curbing global warming grow cold in the Senate. Mr. Blumenauer, a seven-term congressman, is bracing for a tough vote on sending more troops to Afghanistan while he frets about the detention facility at Guantánamo Bay remaining open.

“It has been a hard landing for a lot of the people that I represent,” Mr. Blumenauer, referring to his largely liberal constituency, said as he assessed the first months of the Obama administration.

As health care legislation moves to the floor with other major issues close behind, the question for Mr. Blumenauer and those who share his ideology will be whether they relent on some of their core beliefs to support less satisfying compromises, despite being in what, on the surface, is a commanding political position.

“It is still something that I am struggling with,” he said.

Mr. Blumenauer is just one example of what might be called the Frustrated Left, a substantial caucus of Congressional Democrats who dreamed that Mr. Obama would usher in a new era of liberal problem-solving only to see Congress and the new administration collide with the old problems of partisanship, internal disagreement and the challenge of mustering 60 votes to get just about anything done in the Senate.

While Congressional leaders try to appease moderate and conservative Democrats who can provide the crucial votes for passage, more liberal Democrats from safer districts sometimes simmer, feeling that they are being taken for granted while it is assumed they will get on board when the time comes.

On health care, Democrats are growing more optimistic that they can find a compromise approach to creating a government-run insurer to compete with the private sector — an issue that as much as any other has split the party’s liberals and moderates — even as progressive voices outside of Congress insist that there be no compromise.

“The fact is that Earl Blumenauer could stop a bill going through that does not have a public option in it,” said Jane Hamsher, founder of the progressive blog firedoglake.com. “Is it his loyalty to the party, partisan politics over principle? We are going to get to see that.”

Mr. Blumenauer strongly favors a public option and in late July was one of more than 60 Democrats who signed a letter to the leadership saying that, essentially, they would not back a final bill without an acceptable public plan. But on health care — as on other domestic issues, global warming and foreign policy — he must weigh whether it makes more sense to take what he can get as opposed to standing firm and perhaps seeing the overall effort collapse.

“It would be very hard for me to do,” Mr. Blumenauer said of voting for a final health care overhaul without a public plan. “But if it gets to the point where the choice is doing some things that will make a significant difference without a public option or letting the whole thing die, that too would be hard.”

Mr. Blumenauer got on board early with Mr. Obama after concluding that he offered the chance for a more decisive change in course than Hillary Rodham Clinton could provide. He first met Mr. Obama at the 2004 Democratic convention in Boston and endorsed him in late January 2008.

“There was something going on here, this guy has got some real capacity being able to, I think, connect, communicate,” remembered Mr. Blumenauer.

Mr. Obama won Oregon and Mr. Blumenauer’s district going away, setting sky-high expectations among his followers in the Pacific Northwest.

Mr. Blumenauer, a member of the tax-writing and climate change committees with a devotion to trying to improve the livability of American cities, said he did not think Mr. Obama had shifted his ideological stance since his election and did not blame the president for the problems slowing the liberal agenda. He said he saw a combination of factors — the troubled economy, the sheer scope of the nation’s problems and an unexpected level of Republican opposition — as the culprits.

“The combination of the economic shock and frankly the political upset and outrage has changed the landscape,” Mr. Blumenauer said. “The Barack Obama that I campaigned with is pretty much the same guy. But it is an environment that is unprecedented and would press anyone’s skills.”

Back home, Mr. Blumenauer said his constituents had shown patience with the pace of things, partly, he suggested, because they were so disenchanted with the Bush administration.

Activists and pollsters in Oregon said that they agreed but that the patience of Mr. Blumenauer’s liberal base was not unlimited.

“I think people realize you can’t do everything precisely all at once,” said Steve Novick, a Democratic advocate in Portland who lost a Senate bid in 2008.

Senator Ron Wyden, whose move to the Senate opened up the House seat for Mr. Blumenauer in 1996, said Oregon residents grasped the complexity of the problems facing the country. “Look at what is coming at us: Iraq, Afghanistan, Iran,” he said. “There is a sense that there is going to be a lot of heavy lifting, but people want to stay at it until it happens.”

Even with his frustrations, Mr. Blumenauer said that having a Democratic administration had paid tangible benefits. The secretaries of the housing and transportation departments have visited Portland, and he recently hosted Lisa P. Jackson, the administrator of the Environmental Protection Agency, in his office. “They want to be a partner on the cleanup rather than ignoring it,” he said, referring to environmental cleanup projects in his state.

And though some of his preferred legislative approaches might be stalled or fall victim to compromise, Mr. Blumenauer said he believed that Mr. Obama and the Democratic majorities in Congress would ultimately be successful in advancing a liberal agenda on the major issues.

“We are going to be working on climate, on health care, on the economy for every minute of the next two Congresses and beyond,” he said. “Will the public be patient enough? Will the political process hold together?

“This is not going to be easy,” he said, “but I think we are seeing a process that makes me actually optimistic, even though it is not exactly like I would have liked.”

By ROBERT PEAR and DAVID M. HERSZENHORN

WASHINGTON — After months of relentless courting and suspense, Senator Olympia J. Snowe, Republican of Maine, cast her vote with Democrats on Tuesday as the Senate Finance Committee approved legislation to remake the health care system and provide coverage to millions of the uninsured.

With Ms. Snowe’s support, the committee backed the $829 billion measure on a vote of 14 to 9, with all the other Republicans opposed.

“Is this bill all that I would want?” Ms. Snowe said. “Far from it. Is it all that it can be? No. But when history calls, history calls. And I happen to think that the consequences of inaction dictate the urgency of Congress to take every opportunity to demonstrate its capacity to solve the monumental issues of our time.”

Ms. Snowe’s remarks silenced the packed committee room, riveted colleagues and thrilled the White House. President Obama had sought her vote, hoping that she would break with Republican leaders and provide at least a veneer of bipartisanship to the bill, which he has declared his top domestic priority.

Mr. Obama, speaking in the Rose Garden, described the committee’s action as “a critical milestone” and declared, “We are now closer than ever before to passing health reform.” But he added: “Now is not the time to pat ourselves on the back. Now is not the time to offer ourselves congratulations. Now is the time to dig in and work even harder to get this done.”

With its vote Tuesday, the Finance Committee became the fifth — and final — Congressional panel to approve a sweeping health care bill. The action will now move to the floors of the House and the Senate, where the health care measures still face significant hurdles.

Aside from Ms. Snowe, no Republicans in Congress have publicly endorsed the bills in their current form. And Republican leaders are strongly opposed, saying the bills cost too much, raise taxes, cut Medicare and dangerously expand federal power.

Pressure from lobbyists is sure to grow in the coming weeks. And many more lawmakers will get involved in what promise to be impassioned and highly politicized debates in the Senate and the House.

After the Finance Committee vote, the chief architect of the bill, Senator Max Baucus, Democrat of Montana and chairman of the committee, declared: “It’s clear that health care reform will pass this year. Our action today provides terrific momentum.”

Senator Charles E. Grassley of Iowa, the senior Republican on the Finance Committee, said the bill put the nation on “a slippery slope toward more and more government control of health care.”

Ms. Snowe helped write the Finance Committee bill, in months of bipartisan negotiations, but had not committed to vote for it. She said Tuesday that she shared many of her Republican colleagues’ reservations about the legislation, and pointedly warned Democrats that they could lose her support later in the legislative process.

“My vote today is my vote today,” she said. “It doesn’t forecast what my vote will be tomorrow.” And she observed, “There are many, many miles to go in this legislative journey.”

Ms. Snowe gave no clue how she would vote in the first few hours of committee deliberations Tuesday and she did not alert the White House to her plans.

While colleagues spoke, she kept her head buried in papers, fidgeted and spoke occasionally with aides. When Mr. Baucus stepped over to speak to her, a small army of photographers snapped pictures, with cameras clicking like a chorus of chirping crickets.

The Congressional Budget Office said the bill would cost $829 billion over 10 years. The costs include $345 billion for the expansion of Medicaid and $461 billion for subsidies to help lower-income people buy insurance.

The budget office said the costs would be completely offset by new fees and taxes and by cutbacks in Medicare, so federal budget deficits in the next 10 years would be $81 billion lower than now projected.

But Douglas W. Elmendorf, director of the Congressional Budget Office, said his agency had not estimated the impact of the bill on overall national health spending, public and private, and could not say whether it would “bend the cost curve,” as Mr. Obama and lawmakers want.

Likewise, Mr. Elmendorf said he did not know for sure how the bill would affect premiums.

Several senators said they would fight for changes on the Senate floor.

Liberal Democrats, like Senator John D. Rockefeller IV of West Virginia, said they would push for a public insurance plan. Senators Ron Wyden of Oregon and Robert Menendez of New Jersey, both Democrats, said they would seek changes to make insurance more affordable to middle-income families. And Senator John Kerry of Massachusetts said he wanted to require employers to provide insurance to their employees.

The bill does not include such an employer mandate. But employers with more than 50 workers would have to reimburse the government for some or all of the cost of federal subsidies provided to employees who buy insurance on their own.

Ms. Snowe said she liked the Finance Committee bill because it would prohibit insurance companies from discriminating against people on account of health status or sex and would create a network of insurance exchanges where individuals, families and small businesses could shop for coverage, with subsidies from the federal government.

At the same time, Ms. Snowe said she shared Republican “concerns about vast governmental bureaucracies and governmental intrusions.” That, she said, is why she had opposed amendments to create a government insurance plan and would continue to do so.

Ms. Snowe said she was open to a compromise under which a public plan could be “triggered” in states where people could not otherwise find affordable insurance. She said her “paramount concern” was that insurance might be too expensive for some people, even with government subsidies.

The Congressional Budget Office said the Finance Committee bill would provide coverage to 29 million people, but still leave 25 million uninsured in 2019. Of those left uncovered, about a third would be illegal immigrants.

David Stout contributed reporting.

by Leonard Pitts Jr.

Christmas is probably unconstitutional.

I’m no lawyer, but the logic seems unassailable to me. Consider: Santa Claus aside, Christmas is an explicitly Christian holiday and the only holiday of any religion to be observed by the federal government. Which would seem to violate the First Amendment edict that Congress “shall make no law respecting an establishment of religion.” Yet to the best of my admittedly limited knowledge, no one has ever sued Christmas before the Supreme Court.

Not that I’m trying to give any ideas. No, I’m only trying to tease out an opinion I can live with in a case the court heard last week, about a cross in the Mojave Desert.

The original cross (it has been replaced a number of times over the years) was erected in 1934 as a tribute to the dead of World War I and sits in a remote corner of what is now the Mojave National Preserve. Its legal troubles began 10 years ago with a former employee of the National Park Service who sued because he thought the cross an improper display on federal land in that it celebrated one faith over others.

It’s a contention Justice Antonin Scalia sharply disputed last week. “It’s erected as a war memorial,” he said. “I assume it is erected in honor of all the war dead.”

To which Peter Eliasberg, a lawyer representing the American Civil Liberties Union, shot back: “I have been in Jewish cemeteries. There is never a cross on a tombstone of a Jew.”

Scalia was unconvinced: “I don’t think you can leap from that to the conclusion that the only war dead that the cross honors are the Christian war dead. I think that’s an outrageous conclusion.”

But Eliasberg’s conclusion was, of course, perfectly valid, and Scalia’s obstinate insistence that the cross is a generic symbol manages to simultaneously demean Christianity and deftly illustrate the sort of bullying the Constitution discourages. How easily and readily the majority embraces the myopic view that its symbols and norms represent us all.

That said, I keep wondering what good can come of this.

The plaintiff is said to be a devout Catholic, so we can take it on – ahem – faith that he is motivated solely by principle. For the record, the principle is one I support.

You need only look at Iran to know the separation of church and state is a good thing. You do not post the Ten Commandments in court for the same reason you do not mandate prayer in schools or require Bible study to get a job: There is a coercive effect that is wholly unfair to those of other faiths or no faith at all.

But I have trouble seeing the coercive effect of a cross in the middle of nowhere.

I submit that this is a battle poorly chosen. Yes, the argument arguably has legal merit, but you have to ask yourself: What’s the point? Is someone really injured by a cross in the desert? Or is this not about validating principle at all costs – even public peace and common sense?

Indeed, by the same reasoning, one might sue cities that allow crosses to be planted at roadsides where traffic fatalities have occurred. Except that if it comforts some grieving family and your only “injury” is to glimpse it while driving by at 65 mph, why would you bother? Principle absent human compassion is just intellectual masturbation.

So forgive me if I am unimpressed by the argument that a cross in the middle of nowhere is unconstitutional. Understand: I think the argument may well be correct.

But that’s not the same as being right.

Leonard Pitts Jr. is a columnist for the Miami Herald. His e-mail address is lpitts@miamiherald.com.

Inside the Supremes’ new term.

Published Sep 24, 2009 From the magazine issue dated Oct 5, 2009

Next week the Supreme Court will begin its 2009 term, secure in the knowledge that it remains completely misunderstood by the American public. A Gallup poll conducted in September showed the court’s current approval rating—61 percent—to be higher than it’s been in a decade. (Last year that number was 50 percent.) This fall, 50 percent of Americans believe the court is not too liberal or too conservative; that’s up from 43 percent last year. The number of Americans who believe the court is too conservative has dropped from 30 to 19 percent.

All this public admiration for the court’s moderation came the same week the court was hearing a campaign-finance-reform case that may dismantle a longstanding system of campaign-finance restrictions. The issue in Citizens United v. Federal Elections Commission is not limited to the constitutionality of the McCain-Feingold campaign-finance-reform law. The reason court watchers got so worked up about this case is that it squarely tests Chief Justice John Roberts’s stated commitments to preserving precedent, deferring to the elected branches, and issuing narrow rulings instead of sweeping ones. Oral arguments revealed that the court’s five conservatives feel nothing but contempt for campaign-finance regulations that demonize corporations, restrict core political speech, and—to quote the chief justice—”put our First Amendment rights in the hands of FEC bureaucrats.”

But that’s where the public confusion kicks in. In last term’s cases on voting rights, reverse discrimination, and a school strip search, the court opted for narrow, case-specific rulings rather than the sweeping ones foreshadowed by dramatic oral arguments. All this hardly means the 2008 term was a triumph for liberals at the high court. On balance, the term continued a clear trend in which big business always prevails, environmentalists are always buried, female and elderly workers go unprotected, death-row inmates get the needle, and criminal defendants are shown the door. So how to explain these new poll numbers showing that 49 percent of Republicans believe the Roberts Court is too liberal and 59 percent of Democrats believe the court is “about right”?

In part, the numbers reflect a focus on the wrong data; we continue to believe in the court we see on TV. Thus, the highly charged confirmation hearings of Justice Sonia Sotomayor this summer contributed to the idea that the court was swinging leftward, even though it’s clear that her substitution for Justice David Souter will do nothing to alter the balance of the court (indeed, she is generally expected to move the court to the right in some areas of criminal law). Similarly, the refusal of the court to go all the way in the big-banner civil-rights cases last year leads to the broad perception that the court is quite liberal.

To be sure, progressives who claim that the court’s eventual ruling in September’s campaign-finance fracas will conclusively reveal the heart of darkness that lurks inside the Roberts Court are also overstating their case. It’s true that the Roberts Court is a fundamentally conservative creature and will remain that way for the foreseeable future. But as we learned yet again last term, it’s also a court that is deeply aware of, even responsive to, public opinion. This is a court willing to reverse the Warren revolution with a tablespoon instead of a wrecking ball, and that may be too nuanced an approach to be captured in public-opinion polls.

The term that opens next week promises to provide another fistful of cases that will slowly deepen our understanding of the Roberts Court. Among them: yet another challenge to a cross on government property (raising questions about who has standing to be offended by religious symbols); a dispute over the constitutionality of a federal statute criminalizing depictions of animal cruelty; questions about whether juveniles may be sentenced to life without parole; another hot eminent-domain case; and maybe even a quarrel over whether the name “Washington Redskins” is offensive. If the tea leaves are correct, we may also see another confirmation hearing next summer.

As a generation raised on a constant diet of reality television and the inevitable “big reveal,” we will continue to look to the high drama of oral argument and the staged fireworks of judicial-confirmation hearings for our views about the Supreme Court. What really happens at the high court in the coming years will continue to occur by the tablespoon—even if we are too busy with imagined wrecking balls to see it.

Mr. President, please stay off TV.

By Howard Fineman | NEWSWEEK

Published Sep 26, 2009 From the magazine issue dated Oct 5, 2009

If ubiquity were the measure of a presidency, Barack Obama would already be grinning at us from Mount Rushmore. But of course it is not. Despite his many words and television appearances, our elegant and eloquent president remains more an emblem of change than an agent of it. He’s a man with an endless, worthy to-do list—health care, climate change, bank reform, global capital regulation, AfPak, the Middle East, you name it—but, as yet, no boxes checked “done.” This is a problem that style will not fix. Unless Obama learns to rely less on charm, rhetoric, and good intentions and more on picking his spots and winning in political combat, he’s not going to be reelected, let alone enshrined in South Dakota.

The president’s problem isn’t that he is too visible; it’s the lack of content in what he says when he keeps showing up on the tube. Obama can seem a mite too impressed with his own aura, as if his presence on the stage is the Answer. There is, at times, a self-referential (even self-reverential) tone in his big speeches. They are heavily salted with the words “I” and “my.” (He used the former 11 times in the first few paragraphs of his address to the U.N. last week.) Obama is a historic figure, but that is the beginning, not the end, of the story.

There is only so much political mileage that can still be had by his reminding the world that he is not George W. Bush. It was the winning theme of the 2008 campaign, but that race ended nearly a year ago. The ex-president is now more ex than ever, yet the current president, who vowed to look forward, is still reaching back to Bush as bogeyman.

He did it again in that U.N. speech. The delegates wanted to know what the president was going to do about Israel and the Palestinian territories. He answered by telling them what his predecessor had failed to do. This was effective for his first month or two. Now it is starting to sound more like an excuse than an explanation.

Members of Obama’s own party know who Obama is not; they still sometimes wonder who he really is. In Washington, the appearance of uncertainty is taken as weakness—especially on Capitol Hill, where a president is only as revered as he is feared. Being the cool, convivial late-night-guest in chief won’t cut it with Congress, an institution impervious to charm (especially the charm of a president with wavering poll numbers). Members of both parties are taking Obama’s measure with their defiant and sometimes hostile response to his desires on health care. Never much of a legislator (and not long a senator), Obama underestimated the complexity of enacting a major “reform” bill. Letting Congress try to write it on its own was an awful idea. As a balkanized land of microfiefdoms, each loyal to its own lobbyists and consultants, Congress is incapable of being led by its “leadership.” It’s not like Chicago, where you call a guy who calls a guy who calls Daley, who makes the call. The president himself must make his wishes clear—along with the consequences for those who fail to grant them.

The model is a man whose political effectiveness Obama repeatedly says he admires: Ronald Reagan. There was never doubt about what he wanted. The Gipper made his simple, dramatic tax cuts the centerpiece not only of his campaign but also of the entire first year of his presidency.

Obama seems to think he’ll get credit for the breathtaking scope of his ambition. But unless he sees results, it will have the opposite effect—diluting his clout, exhausting his allies, and emboldening his enemies.

That may be starting to happen. Health-care legislation is still weeks, if not months, from passage, and the bill as it stands could well be a windfall for the very insurance and drug companies it was supposed to rein in. Climate-change legislation (a.k.a. cap-and-trade) is almost certainly dead for this year, which means that American negotiators will go empty-handed to the Copenhagen summit in December —pushing the goal of limiting carbon emissions even farther into the distance. In the spring Obama privately told the big banks that he was going to change the way they do business. It was going to be his way or the highway. But the complex legislation he wants to submit to Congress has little chance of passage this year. Doing Letterman again won’t help. It may boost the host’s ratings, Mr. President, but probably not your own.

Howard Fineman is also the author of The Thirteen American Arguments: Enduring Debates That Define and Inspire Our Country .

by David S. Broder

Barack Obama has reached the moment of truth for answering the persistent question about his core beliefs and political priorities. The coming votes in the House and Senate on his signature health care reform effort will tell us more about the president than anything so far in his White House tenure.

The challenge is not one he invited. All during last year’s campaign, Obama skillfully skirted the question of whether he was a moderate, consensus-seeking pragmatist, as his words suggested, or a faithful adherent to the liberal agenda, as his voting record demonstrated.

In stylistic terms, he cultivated the pragmatic image. On issues, he was alternately one or the other – lining up with the liberals on Iraq and civil liberties, for example, but joining the hard-liners on Afghanistan and the budget.

In the campaign, he took the moderate side of the health care debate – disagreeing with Hillary Clinton on the necessity for an individual mandate to buy health insurance and suggesting he would be satisfied with incremental progress toward covering all the uninsured.

But now, a number of factors have combined to strip him of the camouflage he once enjoyed when it comes to health care policy.

His effort to craft a bipartisan package with significant Republican support has failed, as GOP leaders in Congress have chosen to take their chances on handing him a costly defeat rather than opting to claim a share of the credit for success. With Sen. Olympia Snowe of Maine apparently the only Republican who might vote for the evolving legislation, Obama will have to find virtually all the votes he needs among his fellow Democrats.

Also, the debates inside the five House and Senate committees that have shared in drafting the bills have dramatized the deep ideological splits on the Democratic side of the aisle. The symbolic issue has been the public option – the proposal for a Medicare-like insurance plan competing with those offered by private companies.

Four of the five committees have included that proposal; the fifth, the Senate Finance Committee, has explicitly rejected it.

Beyond that much-hyped dispute are multiple disagreements on the cost and financing of the overall reform, with no consensus between the more conservative Democratic Blue Dogs and the more numerous liberals, especially in the House.

The first imperative for House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid is to find a formula that will produce 218 Democratic votes in the House and 59 of the needed 60 votes in the Senate.

Obama will have to be an active player in that process. But in addition, he will have to negotiate something that will be workable in the real world. As he contemplates a re-election race in 2012, he needs at least three years when his most important domestic initiative has not blown up in his face.

What are his chances of pulling it off? It will not be easy. In the House, Pelosi and a clear majority of the Democratic caucus members want a liberal bill, including the public option. They may have to offer some cosmetic concessions to the Blue Dogs, but they are unlikely to yield on the main points.

In the Senate, on the other hand, while the liberals may prevail on floor amendments to install the public option, they cannot by themselves deliver 60 votes for passage. At this point, the leverage swings to the handful of more conservative, small-state Democratic senators who, with the Republicans, may be able to force substantive changes.

As this plays out – finally, in a House-Senate conference committee – the political cost of the Republican decision to be simply a blocking force will become clear. Had the GOP furnished even a few votes in return for seeing some of their concerns addressed, chances are Obama and the Democratic congressional leaders would not have felt the necessity to keep all the liberals in line. This would have given the president more room to maneuver.

As it is, his main leverage point is the realization among nearly all Democrats that nothing would be as costly to them, in their individual 2010 races, as the failure of this Congress, with its heavy Democratic majorities, to pass a substantive health reform bill.

That may be enough in the end for Obama to succeed. But the task of getting there will really test him – and expose his core values.

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

By Chris Jordan
October 1, 2009

As UW students flock back to school this week, their representatives in Congress will have recently flocked back to their D.C. offices after an August recess marked by angry town halls and endless health-care ad wars.

President Barack Obama’s signature domestic agenda item has faced a tough road, and no doubt his own strategy and execution is partly to blame. By failing to explain what health-care reform means to those who already possess insurance, the President left a vague plan open to attack.

Such Republican scare tactics and outright lies (see “death panels”) have unfortunately had an impact. They’ve inflamed the passions of anti-Obama activists on the right and sewn doubt in the minds of many Americans about health insurance reform.

The key sticking point in this debate has been the inclusion of a government run “public option” that would compete with private health insurance. While support has declined for the Democratic plan in general, a CBS poll in September showed support for a public option strong at 68 percent. Another poll published in September found that 73 percent of doctors support the public option.

Republicans have used confusion over this proposal to paint the entire reform effort as a “government takeover.” They have constantly claimed that Americans will be forced from their private insurance into a “big government plan.”

I find this to be a strange argument because, as I understand it, you can’t be forced into something that is by definition an option.

The public option is intended to provide competition to private insurance by giving Americans more choices. If people choose to abandon their private insurance for a public option, it’ll be because they make the decision that they can get better care at a lower cost with that plan. It won’t be because the evil, socialist government forced them to do it.

We can all agree that the goals of health reform should be to lower overall costs and increase the quality of care. We can also agree on the general principle that more choice for consumers and competition in the marketplace leads to both lower costs and an increased quality of the product being sold. That’s what the public plan will do; provide another choice to consumers and force private insurers to compete.

For those who suggest that the public option would drive private insurers out of business, the Congressional Budget Office estimates that only 11 to 12 million people will sign up for it. Not to mention the fact that reform will require everyone to have insurance, similar to the way everyone is required to have auto insurance. With roughly 45 million Americans currently lacking any plan, private insurance companies will be signing up new customers faster than they can take them.

And for those who suggest that the public option would be too costly, the President has said that it must be self-sustaining and funded by those who pay to use it.

We should set up a health-care system that is uniquely American; one that combines the best aspects of our own system (high quality care, innovation) with the best of other systems (universal coverage, lower cost). That’s why Obama is not proposing a government takeover, he’s proposing a government option that will pay for itself and provide more health insurance choices, and thus competition.

If the public option does not survive into the final bill, we will have lost a great tool for controlling health-care costs.

Reach columnist Chris Jordan at opinion@dailyuw.com.

If Congress fails to act, agency plans to proceed
Jim Tankersley / Tribune Washington bureau

Tags: climate change Environmental Protection Agency global warming

WASHINGTON – The Environmental Protection Agency on Wednesday unveiled a detailed proposal for using the government’s regulatory powers to curb greenhouse gas emissions – reassuring foreign allies on the U.S. commitment to fight climate change and warning Congress that the administration will act on its own if lawmakers fail to address the issue.

The proposed regulations would apply to large-scale industrial sources of heat-trapping gases, including power plants, factories and refineries, but not to smaller sources, such as new schools, as some critics of the EPA action had feared.

The rules would force new – or substantially modified – industrial emitters to employ “best available control technologies and energy efficiency measures” to minimize greenhouse-gas emissions, a tougher standard than the one applied to many emitters now.

The EPA action, along with the formal unveiling of proposed legislation in the Senate, stoked optimism among environmentalists and others who have voiced concern that the chances for agreement at a global warming conference in Copenhagen could be reduced if leaders of other countries concluded the U.S. was not prepared to take the kinds of steps it has urged other developed nations to take.

“We are not going to continue with business as usual while we wait for Congress to act,” EPA Administrator Lisa P. Jackson told a climate conference in Los Angeles. She said the proposal “allows us to do what the Clean Air Act does best – reduce emissions for better health, drive technology innovation for a better economy, and protect the environment for a better future – all without placing an undue burden on the businesses that make up the better part of our economy.”

EPA officials unveiled the proposal as international climate negotiators gathered in Bangkok to prepare for global warming treaty talks in Copenhagen in December.

The EPA rules would mimic how the agency forces power plants and factories to install “scrubbers” and other means of limiting many types of air pollutants.

But it’s unclear exactly how that would apply in the case of greenhouse gases, which scientists blame for climate change. Researchers are still studying and have yet to deploy a commercial-scale method to capture and store carbon emissions from coal plants, for example.

The EPA proposal, which must now move through a lengthy process of comments and reviews, is likely to encounter legal challenges.

Charles Krauthammer is a columnist for the Washington Post Writers Group. His e-mail address is letters@charleskrauthammer.com.

Justices could overturn finance restrictions

Government program endorsed, not required

WASHINGTON – President Barack Obama on Wednesday laid out a series of compromises he’s willing to make to get a health care overhaul through a nervous Congress this year, including diluting his vision for a new public insurance program and embracing ideas floated by Republicans.

In an address to a joint session of Congress, Obama tried to seize control of the Democratic Party’s highest domestic priority after months of party disarray and raucous public debate across the country. The president said that he’d require all individuals to have health insurance and would provide tax credits to people and small businesses that couldn’t afford it.

“Well, the time for bickering is over. The time for games has passed. Now is the season for action,” Obama said.

At one point, a South Carolina Republican congressman shouted, “You lie” when Obama characterized reports that he’d insure illegal immigrants as false.

On perhaps the most controversial single plank in his program, Obama endorsed creating a “public option” government program to compete against private insurers, but he didn’t insist that it be included.

Instead, he left room for alternatives that liberal Democrats in Congress are resisting. Those include creating nonprofit health care cooperatives; a “trigger” mechanism for a public option to kick in later if private insurers fail to meet benchmarks of coverage; or perhaps simply tightening regulations on private insurers.

He pledged that any “public option” wouldn’t weaken coverage for those in Medicare or insured through their employers. He promised them “more security and stability.”

In turn, Obama made it clear that he intends to work with congressional Democrats to push some health care plan through Congress this year – on a bare partisan majority if necessary.

“I am not the first president to take up this cause, but I am determined to be the last,” Obama said in remarks that he hoped would breathe new life into Democrats’ push to expand coverage to many of the roughly 46 million in the U.S. who now lack health insurance.

“We are the only advanced democracy on Earth, the only nation, that allows such hardships for millions of people,” he said. “Now is the season for action.”

Such an expansion is a goal that’s eluded presidents since Harry Truman, and, most recently, Bill Clinton 15 years ago.

Obama said that his plan would cost about $900 billion over a decade. He said it could be paid for mostly by eliminating “waste and abuse” from the existing health care system, but he wasn’t specific. In addition, he’d charge insurance companies “a fee for their most expensive policies” to fund his plan. Beyond that, he failed to specify how his proposals would slow rising health costs.

Three House of Representatives committees have written legislation that would create a public option, raise taxes on the wealthy to help pay for the plan and mandate coverage for most people. The House is expected to combine three pending Democratic bills into one piece of legislation and attempt to pass it this month.

The Senate outlook is cloudier and likely to take longer. Even if both chambers pass versions of the legislation, they’re all but certain to differ, requiring a House-Senate conference to draft a compromise version that each house then must pass. How that will happen or what final terms it may contain aren’t clear.

Fleshing out a framework that he’s been advocating for months now, Obama called for creating a government health insurance exchange, or marketplace, to take effect by 2013. Through it many Americans could obtain lower-cost private coverage – or possibly coverage through some variation of a public plan if Congress creates one.

Until the exchange would take effect, Obama would borrow from a plan that his 2008 Republican rival, Arizona Sen. John McCain, proposed last year – to provide catastrophic coverage for those with pre-existing conditions.

In another olive branch to Republicans, Obama indicated that he’d support some “demonstration projects” to try setting experimental limits on medical malpractice lawsuits – long a Republican goal that Democrats typically oppose.

Obama also called for new regulations on private insurers to protect patients. He told Americans that any plan he signs will:

•Ban insurance companies from denying coverage because of pre-existing conditions.

•Prevent insurers from dropping or watering down coverage during illness.

•End arbitrary annual or lifetime coverage caps.

•Limit out-of-pocket expenses.

•Require insurers to cover routine checkups, mammograms and colonoscopies.

By Michael Barone

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Charles Krauthammer is a columnist for the Washington Post Writers Group. His e-mail address is letters@charleskrauthammer.com.

Insurance companies would face benchmarks

Objectors call Tuesday’s broadcast political move

Texas Gov. Rick Perry responds to a question in his Capitol office on Thursday about President Obama’s school-time speech next week.

DALLAS – President Barack Obama’s back-to-school address next week was supposed to be a feel-good story for an administration battered over its health care agenda. Now Republican critics are calling it an effort to foist a political agenda on children, creating yet another confrontation with the White House.

Obama plans to speak directly to students Tuesday about the need to work hard and stay in school. His address will be shown live on the White House Web site and on C-SPAN at noon EDT, a time when classrooms across the country will be able to tune in.

Schools don’t have to show it. But districts across the country have been inundated with phone calls from parents and are struggling to address the controversy that broke out after Education Secretary Arne Duncan sent a letter to principals urging schools to watch.

Districts in states including Texas, Illinois, Minnesota, Missouri, Virginia and Wisconsin have decided not to show the speech to students. Others are still thinking it over or are letting parents have their kids opt out.

Some conservatives, driven by radio pundits and bloggers, are urging schools and parents to boycott the address. They say Obama is using the opportunity to promote a political agenda and is overstepping the boundaries of federal involvement in schools.

“As far as I am concerned, this is not civics education – it gives the appearance of creating a cult of personality,” said Oklahoma state Sen. Steve Russell. “This is something you’d expect to see in North Korea or in Saddam Hussein’s Iraq.”

Arizona state schools superintendent Tom Horne, a Republican, said lesson plans for teachers created by Obama’s Education Department “call for a worshipful rather than critical approach.”

The White House plans to release the speech online Monday so parents can read it. He will deliver the speech at Wakefield High School in Arlington, Va.

“I think it’s really unfortunate that politics has been brought into this,” White House deputy policy director Heather Higginbottom said in an interview.

“It’s simply a plea to students to really take their learning seriously. Find out what they’re good at. Set goals. And take the school year seriously.”

She noted that President George H.W. Bush made a similar address to schools in 1991. Like Obama, Bush drew criticism, with Democrats accusing the Republican president of making the event into a campaign commercial.

Critics are particularly upset about lesson plans the administration created to accompany the speech. The lesson plans, available online, originally recommended having students “write letters to themselves about what they can do to help the president.”

The White House revised the plans Wednesday to say students could “write letters to themselves about how they can achieve their short-term and long-term education goals.”

“That was inartfully worded, and we corrected it,” Higginbottom said.

In the Dallas suburb of Plano, Texas, the 54,000-student school district is not showing the 15- to 20-minute address but will make the video available later.

PTA council President Cara Mendelsohn said Obama is “cutting out the parent” by speaking to kids during school hours.

“Why can’t a parent be watching this with their kid in the evening?” Mendelsohn said. “Because that’s what makes a powerful statement, when a parent is sitting there saying, ‘This is what I dream for you. This is what I want you to achieve.’ ”

Texas Gov. Rick Perry, a Republican, said in an interview that he’s “certainly not going to advise anybody not to send their kids to school that day.”

“Hearing the president speak is always a memorable moment,” he said.

But he also said he understood where the criticism was coming from.

“Nobody seems to know what he’s going to be talking about,” Perry said. “Why didn’t he spend more time talking to the local districts and superintendents, at least give them a heads-up about it?”

One school superintendent, Murray Dalgleish of Council, in west-central Idaho, urged people not to rush to judgment.

“Is the president dictating to these kids? I don’t think so,” Dalgleish said. “He’s trying to get out the same message we’re trying to get out, which is, ‘You are in charge of your education.’ ”

‘Everything but marriage’ referendum, still facing court hurdle, would come in November

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

July 21, 2009 in Nation/World

July 14, 2009 in Nation/World

Fed boss says U.S. economy should start growing again soon

Bernanke

JACKSON, Wyo. – Federal Reserve Chairman Ben Bernanke on Friday offered his most optimistic outlook since the financial crisis struck, saying the economy is on the verge of growing again.

Speaking at an annual Fed conference, Bernanke acknowledged no missteps by the central bank in managing the worst crisis since the Great Depression. But he conceded that consumers and businesses are still having trouble getting loans, even though the financial system is gradually stabilizing.

Economic activity in both the U.S. and around the world seems to be leveling out, and the economy is likely to start growing again soon, Bernanke said.

Bernanke’s hopeful remarks on the economy contributed to a rally on Wall Street. The Dow Jones industrial average surged about 155 points, or 1.7 percent, and broader stock averages also gained sharply.

Despite his upbeat tone, Bernanke cautioned that the recovery is likely to be “relatively slow at first.”

Unemployment, now at 9.4 percent, is widely expected to hit double digits later this year and to remain high for many months.

The financial markets have stabilized, and some businesses and consumers have found it easier to get loans. Still, the banking system has yet to return to normal, Bernanke said.

Financial institutions face further losses on soured investments. And many businesses and households still can’t get the credit they need to fuel the economy, he said.

“Although we have avoided the worst, difficult challenges still lie ahead,” Bernanke told the gathering of fellow bankers, academics and economists. “We must work together to build on the gains already made to secure a sustained economic recovery.”

Reviewing the past year’s crisis, Bernanke outlined the many emergency measures the Fed and other regulators took to help ward off a global financial meltdown. He declined to acknowledge critics’ arguments that regulators failed to detect signs of the crisis before it occurred – or that Wall Street bailouts sent a message that big companies that make reckless bets would be rescued with taxpayer money.

A $700 billion taxpayer-funded bailout program to prop up financial institutions incensed many Americans. So did the repeated bailouts of AIG, which paid hefty bonuses to employees who worked in the division that brought down the firm.

Some analysts said Bernanke appeared to be angling to keep his job for another term.

“The lack of any mea culpa suggests the Fed chairman wants to be reappointed,” said Richard Yamarone, economist at Argus Research. “When you go on an interview, you never speak of your shortcomings.”

President Barack Obama will have to decide in coming months whether to reappoint or replace Bernanke, whose term expires early next year.

The bulk of Bernanke’s speech chronicled the extraordinary events of the past year.

Financial markets took a dizzying plunge starting in September and into October, nearly shutting down the flow of credit. The crisis felled storied Wall Street firms. The government took over mortgage giants Fannie Mae and Freddie Mac, as well as insurance titan American International Group Inc.

Lehman Brothers failed. It filed for bankruptcy on Sept. 15, the largest in corporate history, roiling markets worldwide.

The Fed swooped in with unprecedented emergency lending programs to fight the crisis. It eventually slashed a key bank lending rate to a record low near zero. And Congress enacted programs to stimulate the economy, including a $787 billion package of tax cuts and increased government spending.

“Without these speedy and forceful actions, last October’s panic would likely have continued to intensify, more major firms would have failed and the entire global financial system would have been at serious risk,” Bernanke said.

Unlike in the 1930s, Washington policymakers this time acted aggressively and quickly to contain the crisis, said Bernanke, a scholar of the Great Depression.

“As severe as the economic impact has been, however, the outcome could have been decidedly worse,” he said.

Global cooperation in battling the crisis was crucial, with central banks slashing interest rates and the U.S. and other governments delivering fiscal stimulus, he said.

Spin Control is a weekly political column that also appears online with daily posts, videos and reader comments at www. spokesman.com/blogs/ spincontrol. See the McMorris Rodgers video and hear audio from her Colville interview on the blog.

Assignment: Ask a question that you need assistance with and answer a question submitted by another student for each chapter in Unit IV.

Assignment: Ask a question that you need assistance with and answer a question submitted by another student for each chapter in Unit IV.

Assignment: Ask a question that you need assistance with and answer a question submitted by another student for each chapter in Unit IV.

Assignment: Ask a question that you need assistance with and answer a question submitted by another student for each chapter in Unit IV.

Assignment: Ask a question that you need assistance with and answer a question submitted by another student for each chapter in Unit IV.

Republican Senator Cites Policy Disagreements As Congress Prepares to Vote on Stimulus Plan

By Anne E. Kornblut and Michael D. Shear
Washington Post Staff Writers
Friday, February 13, 2009

Saying he “made a mistake,” Republican Sen. Judd Gregg withdrew yesterday as the nominee for commerce secretary, dealing a fresh blow to President Obama’s quest to fill out his Cabinet and dramatically undercutting his efforts to forge a new bipartisanship in the capital.

Gregg said that he had simply lacked foresight and that he shouldered the burden of the decision entirely. “I should have focused sooner and more effectively on the implications of being in the Cabinet versus myself as an individual doing my job,” he said at a news conference on Capitol Hill.

He cited concerns about Obama’s economic recovery plan and the administration’s intent to have the next census director report to senior White House officials as well as the commerce secretary.

The timing of Gregg’s communication with the White House about his decision was murky through much of the day, as the president’s aides scrambled to revise their sometimes conflicting statements about when Obama was notified. Returning to Washington from Springfield, Ill., Obama told reporters on Air Force One that he learned just yesterday of Gregg’s decision. He later clarified that he had spoken with the senator from New Hampshire a day earlier but “wasn’t sure whether he’d made a final decision.”

The episode underscored how burdensome Cabinet selection has become for the new administration, which has watched nearly half a dozen of its top appointees withdraw or face embarrassing scrutiny over the past several weeks. The slip-ups have caused the White House to revamp its vetting process and have slowed down confirmations for nominees already in the pipeline.

And now Obama is left with two key openings — at the departments of Commerce and Health and Human Services — and more questions about his personnel choices.

Gregg’s withdrawal comes as Congress prepares for final passage of a $789 billion stimulus package; Obama previously got no Republican votes for the legislation in the House and only three in the Senate.

Senior Obama officials portrayed the latest personnel debacle as reflecting badly on Gregg alone, insisting they are still on course to change the tone in Washington and implement the president’s policies. But aides acknowledged that it is now clear that Obama has not been rewarded for reaching across the aisle, and they said he feels no imperative to replace Gregg with another Republican.

Gregg’s confirmation would have given Obama more Republican Cabinet members than any Democratic president in history. Obama himself wasted no time making clear that Gregg was responsible for first seeking, and then rejecting, the position, despite efforts to accommodate him.

“It comes as something of a surprise, because the truth, you know, Mr. Gregg approached us with interest and seemed enthusiastic,” Obama said in an interview yesterday with the State Journal-Register in Springfield. “But ultimately, I think, we’re going to just keep on making efforts to build the kind of bipartisan consensus around important issues that I think the American people are looking for.”

Though the news came as a shock to the political establishment, White House officials said they had an inkling of Gregg’s unease. Chief of Staff Rahm Emanuel said Gregg called him Monday to say he was having second thoughts. Obama met with Gregg privately at the White House on Wednesday, according to Emanuel, and the three-term senator said he was leaning toward dropping out.

Gregg made the decision public yesterday afternoon, becoming the second Commerce Department nominee in two months to withdraw from consideration.

“It’s better we discover it now than later,” Emanuel told reporters last night. Asked what had motivated Gregg, the chief of staff replied: “I’m not going to play psychologist or get into his head.” Gregg and administration officials alike said there had been no vetting issues involved.

The timing was unfortunate for Obama, who had sought to focus on promoting his economic recovery plan yesterday, as well as to celebrate the 200th birthday of Abraham Lincoln, whose spirit of unity Obama has claimed as his own.

As the news unfolded, Obama was on his way to a dinner in Lincoln’s honor in Springfield. White House officials rushed to contain the fallout, pointing to Gregg’s seemingly peculiar decision to accept a job that would, by definition, require him to adhere to the positions that he later claimed drove him away. Administration officials rejected the idea that the size of the economic stimulus package, or other Democratic policies, had alienated Gregg.

In his statement, Gregg said that “on issues such as the stimulus package and the Census there are irresolvable conflicts for me. Prior to accepting this post, we had discussed these and other potential differences, but unfortunately we did not adequately focus on these concerns.”

“I think what ended Judd Gregg’s hope of and desire of being the commerce secretary wasn’t anything any Democrat said or did, but what Republicans said and did,” a senior administration official said, speaking on the condition of anonymity. Democratic officials said they believed Gregg would have potentially faced rough questioning from Republicans during his confirmation hearings as they worked to find the GOP’s footing as an opposition party.

The withdrawal raised new questions about whom Obama can safely choose for the commerce spot. A senior official said the president was not quite back at ground zero in the selection process. Still, there were no obvious alternatives.

After losing New Mexico Gov. Bill Richardson (D) and then Gregg, Obama could turn to Symantec chief John Thompson, a Silicon Valley executive. But as a wealthy businessman, Thompson could have complicated finances, a situation Obama might want to avoid after the tax problems that have plagued other nominees.

Tax issues felled his pick to lead Health and Human Services, former senator Thomas A. Daschle (D-S.D.), and he has yet to announce a replacement.

Asked whether Obama had suffered a blow in his efforts to recruit Republicans, White House press secretary Robert Gibbs said he had not. “I’m standing in East Peoria with Ray LaHood,” Gibbs said by phone, referring to the Republican transportation secretary.

Nonetheless, Gregg’s withdrawal sharpened the already palpable sense in Washington that Obama’s promise of a new era of bipartisanship is seriously faltering. Just days after his historic inauguration, Obama held an unprecedented pair of closed-door meetings with Republicans on Capitol Hill — meetings that, despite the kind words from GOP lawmakers that followed, yielded no results measured in votes.

By the time the president’s stimulus package passed the Senate this week, all but three GOP members of Congress were lined up against it, complaining furiously that Obama and his allies were forcing a bloated, liberal bill down their throats.

“Despite our repeated attempts to work with President Obama and the Democrat Majority, Speaker Pelosi has refused to meet with us, or even include us in key negotiations, choosing instead to stick with a pork-filled bill that even members of her own party do not support,” said a statement from Rep. Eric Cantor (R-Va.), the minority whip.

Obama and his top aides tried furiously all week to rebut that cha rge. In his prime-time news conference Monday, the president said his efforts at bipartisanship were “designed to try to build up some trust over time.”

Staff writers Alec MacGillis and Michael A. Fletcher contributed to this report.

WASHINGTON — House and Senate leaders on Wednesday struck a deal on a $789 billion economic stimulus bill after little more than 24 hours of rapid-fire negotiations with the Obama administration, clearing the way for final Congressional action later this week.

The package of spending increases and tax relief, intended to spur an economic recovery and create jobs by putting money back in the pockets of consumers and companies, ended up smaller than either the House or Senate had proposed.

Many Democrats would have preferred a larger bill, but agreed to pare back, including cuts to favored education and health programs, to win three crucial Republican votes in the Senate.

“Legislation is the art of compromise, consensus building, and that’s what we did,” the Senate majority leader, Harry Reid of Nevada, said in announcing the accord.

The House was poised for a final vote as early as Friday, with the Senate to follow, clearing the way for President Obama to sign the bill by Monday. The White House is considering a prime-time bill signing ceremony, and on Wednesday asked the television networks if they would air the event.

In a statement, the president thanked Congress for agreeing to a measure that he said would save or create 3.6 million jobs.

“I’m grateful,” Mr. Obama said, “for moving it along with the urgency that this moment demands.”

The deal reflected a calculated gamble by Mr. Obama in the first weeks of his term. To win Republican votes, the final stimulus package is considerably leaner than what many economists say is now needed to jolt the economy, given its grave condition.

But it is unclear if Mr. Obama will be able to claim credit for bringing change to Washington by winning bipartisan support for his first major piece of legislation. Not a single House Republican voted for the bill when it came to the floor two weeks ago, and despite many compromises in the Senate, only three Republicans came on board.

The final bill includes $507 billion in spending programs and $282 billion in tax relief, including a scaled-back version of Mr. Obama’s middle-class tax cut proposal, which would give credits of up to $400 for individuals and $800 for families within certain income limits. It will also provide a one-time payment of $250 to recipients of Social Security and government disability support.

House Democrats, angry over some cuts, particularly for school construction, initially balked at the deal and delayed a final meeting on Wednesday between House and Senate negotiators.

Democratic officials said Speaker Nancy Pelosi felt that Mr. Reid went too far by announcing a deal before it was vetted by her office and discussed by House members in an emergency caucus meeting, setting off the last-minute flare-up.

Ms. Pelosi said at a news conference that the delay helped House Democrats win some final concessions, including an agreement to let states use some money in a fiscal stabilization fund for school renovations. “There is no question that one of our overriding priorities in the House was a very strong commitment to school construction,” she said. “That’s still in the bill.”

But they soon relented and the meeting got under way in a packed Lyndon B. Johnson Room on the Senate side of the Capitol.

Despite the show of pique, for Democrats the stimulus bill is the most prominent display yet that they now fully control Washington. Their ability to push the package forward represented a turnabout from years of losing battles under President George W. Bush. For Republicans, it underscored the limits of their diminished ranks.

Even trimmed to $789 billion, the recovery measure will be the most expansive unleashing of the government’s fiscal firepower in the face of a recession since World War II.

And yet it seemed almost trifling compared with the $2.5 trillion rescue plan for the financial system — a combination of loans to banks and incentives to bring private capital into the banking system — announced on Tuesday by Treasury Secretary Timothy F. Geithner.

Although the final legislative language was not immediately available, lawmakers said the bill contained more than $150 billion in public works projects for transportation, energy and technology, and $87 billion to help states meet rising Medicaid costs.

Despite intense lobbying by governors around the country, the final deal slashed $25 billion from a proposed state fiscal stabilization fund, eliminated a $16 billion line item for school construction and sharply curtailed spending to provide health insurance for the unemployed.

In driving down the total cost — from $838 billion for the Senate stimulus bill and $820 billion for the House-passed measure — lawmakers also reduced the Senate’s proposed tax incentives for buyers of homes and cars, which hold big public appeal.

The final agreement retained a $70 billion tax break to spare millions of middle-income Americans from paying the alternative minimum tax in 2009. Some Democrats decried the provision as a costly addition that would not lift the economy and that Congress would have approved, regardless of the recession.

After huddling in Ms. Pelosi’s office on Tuesday until nearly midnight, top White House officials and Congressional leaders had all but ironed out the differences between the House and Senate versions of the stimulus by noon on Wednesday.

Even before the last touches were put to the bill, some angry Democrats said that Mr. Obama and Congressional leaders had been too quick to give up on Democratic priorities. “I am not happy with it,” said Senator Tom Harkin, Democrat of Iowa. “You are not looking at a happy camper. I mean they took a lot of stuff out of education. They took it out of health, school construction and they put it more into tax issues.”

Mr. Harkin said he was particularly frustrated by the money being spent on fixing the alternative minimum tax. “It’s about 9 percent of the whole bill,” he said, “Why is it in there? It has nothing to do with stimulus. It has nothing to do with recovery.”

But even as Congressional leaders and top White House officials went through the package with a carving knife, it was clear that the three Republicans who agreed to support the bill in the Senate wielded extraordinary power, and along with conservative Democrats, had put a firm stamp on the stimulus package.

For instance, negotiators opted to keep many of the Senate’s reduced spending provisions, but they were careful to maintain an additional $6.5 billion for medical research that was inserted at the insistence of Senator Arlen Specter, Republican of Pennsylvania, who is a cancer survivor. He was one of the three Republican supporters of the recovery package.

“I think it is an important component of putting America back on its feet,” Mr. Specter said, though he added that it was still a difficult vote “in view of the large deficit and national debt.”

The Senate bill came together only after a bipartisan group of centrist senators, led by Susan Collins, Republican of Maine, and Ben Nelson, Democrat of Nebraska, reached a deal to trim the cost of the package to $838 billion from more than $920 billion.

“These aren’t easy times, obviously for America,” said Senator Olympia J. Snowe, Republican of Maine, who was also a member of that group. “Given the gravity of the circumstances economically, I thought it was important to be part of a process that could yield a consensus-based solution.”

But the majority of Republicans continued to criticize the stimulus measure on Wednesday as a bloated and ill-designed spending bonanza by Democrats on favored projects that would not help lift the economy out of recession but would permanently expand the federal government and plunge future generations of Americans deep into debt.

“Yesterday the Senate cast one of the most expensive votes in history,” said the Republican leader, Senator Mitch McConnell of Kentucky. “Americans are wondering how we’re going to pay for all this.”

Indeed, the formal House-Senate conference meeting, usually an elaborate parliamentary ritual with reams of legislative paperwork strewn across cluttered conference tables, instead served mostly as a live, televised forum for some of the most powerful Democrats and Republicans in Congress to trade barbs.

Senator Charles E. Grassley, Republican of Iowa, complained that despite Mr. Obama’s call for bipartisan cooperation, Republicans had largely been shut out. “We didn’t have a chance to negotiate,” Mr. Grassley said.

Robert Pear, Kate Phillips and Jeff Zeleny contributed reporting.

WASHINGTON — The White House plan to rescue the nation’s financial system, announced on Tuesday by Timothy F. Geithner, the Treasury secretary, is far bigger than anyone predicted and envisions a far greater government role in markets and banks than at any time since the 1930s.

Administration officials committed to flood the financial system with as much as $2.5 trillion — $350 billion of that coming from the bailout fund and the rest from private investors and the Federal Reserve, making use of its ability to print money.

Mindful of previous financial crises at home and abroad that became protracted because governments moved too slowly, Mr. Geithner pointedly criticized the Bush administration for not acting boldly and quickly enough.

But the initial assessment of the plan from the markets, lawmakers and economists was brutally negative, in large part because they expected more details.

Basic questions about how the various parts of the program would work, especially those involving the unsellable mortgages that banks are holding and preventing home foreclosures, were left for another day. Some Wall Street experts criticized the plan for relying too heavily on the same vague solutions proposed by the Bush administration.

The stock market, propped up for weeks on the expectation that Washington would finally deliver a comprehensive rescue plan, dipped almost as soon as Mr. Geithner began speaking in the morning. The Dow Jones industrial average fell 382 points, or 4.6 percent, by the time the market closed. Yields on Treasury bills dropped, indicating a flight from stocks to the safety of government bonds. Asian markets slipped more narrowly.

While traveling in Fort Myers, Fla., President Obama welcomed the news that the Senate voted 61-37 to approve its $838 billion economic stimulus bill Tuesday, but dismissed the market reaction to his bank rescue plan.

“Wall Street, I think, is hoping for an easy out on this thing and there is no easy out,” Mr. Obama said in an interview with ABC News.

Many of the vital details of the program remain unsettled and are the subject of an intense behind-the-scenes debate.

The president himself had built up expectations that the plan would get ahead of the crisis — and not lurch from pillar to post as the Bush administration did last year, often in partnership with the New York Federal Reserve under its then-president, Mr. Geithner.

A central piece of the plan — and the one item that investors most craved information about — would create one or more so-called bad banks that would rely on taxpayer and private money to purchase and hold banks’ bad assets. But the administration provided the least amount of details about this part of the plan.

Another centerpiece of the plan would stretch the last $350 billion that the Treasury has for the bailout by relying on the Federal Reserve’s ability to create money, in effect, out of thin air. The Fed’s money will enable the government to become involved in the management of markets and banks in ways not seen since the Great Depression.

In the credit markets, for instance, the administration and the Fed are proposing to expand a lending program that would spend as much as $1 trillion to make up for the $1.2 trillion decline between 2006 and last year in the issuance of securities backed primarily by consumer loans.

The plan’s third major component would give banks new helpings of capital with which to lend. Banks that receive new government assistance will have to cut the salaries and perks of their executives and sharply limit dividends and corporate acquisitions.

They will also have to make public more information about their lending practices. A Treasury fact sheet said that banks would have to state monthly how many new loans they make, but stopped short of ordering banks to issue new loans or requiring them to account in detail for the federal money.

Mr. Obama, in the ABC News interview, suggested that banks would be required to reveal more about their mortgage holdings.

“Essentially what you’ve got are a set of banks that have not been as transparent as we need to be in terms of what their books look like. And we’re going to have to hold out the Band-Aid a little bit and go ahead and just be clear about some of the losses that have been made because until we do that, we’re not going to be able to attract private capital into the marketplace.”

The day was the first big test of Mr. Geithner as Treasury secretary, who has one of the toughest sells in America: convincing lawmakers and taxpayers that they should again bail out the very banks whose mistakes contributed to the loss of more than three million jobs and caused acute financial pain.

It was clear during the hours he spent before the cameras and lawmakers that he was well-spoken and thoughtful. But his career until now had played out behind the scenes as a civil servant and a central banker. He occasionally lapsed into financial jargon and struggled to connect to a broader public audience.

As the day wore on, Mr. Geithner faced growing skepticism from Democratic and Republican lawmakers, many of them channeling deep voter disgust with the way the government has handled the bailout over the last nine months.

Even Democrats who are supportive of the administration said that it had failed to provide more information about how it would be spending the remaining money in the bailout program.

“We need more details from Treasury on how exactly it plans to remove bad assets while protecting the taxpayer,” said Senator John Kerry, the Massachusetts Democrat who is a senior member of the Senate Finance Committee. “We have zombie banks that are weighed down because their liabilities exceed their assets. Without a precise mechanism for addressing toxic assets, it will be difficult to increase lending.”

The pessimism seemed to indicate that Mr. Geithner missed the mark with one of his shorter-term goals — to quickly instill confidence that the Obama administration has a coherent approach to the banking crisis and that the transparency and oversight of the new program will differ markedly from the Bush administration’s management of the first $350 billion that Congress authorized last year for the Troubled Asset Relief Program, or TARP.

“The spectacle of huge amounts of taxpayer money being provided to the same institutions that helped cause the crisis, with limited transparency and oversight, added to the public distrust,” the Treasury secretary said, in a clear swipe at the Bush administration.

“We will have to try things we’ve never tried before. We will make mistakes. We will go through periods in which things get worse and progress is uneven or interrupted,” Mr. Geithner said.

Representative Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, criticized the Obama administration for not putting out more details and said it should commit more than $50 billion to avert home foreclosures.

“The secretary said the administration would present details of their foreclosure reduction plan in a few weeks, which is too much time,” Mr. Frank said.

Appearing on Tuesday afternoon before the Senate banking committee, Mr. Geithner vowed to move quickly to provide more details. But Republicans were skeptical.

“Is there a concrete plan here?” Richard Shelby of Alabama, the senior Republican on the committee, asked Mr. Geithner point blank, after noting that Mr. Geithner had been part of the leadership involved in last year’s bailout efforts. “What is different about the process that you are offering here to devise your plan such that we should have confidence that it is well thought out?”

There was also withering criticism from Wall Street. Ethan Harris, co-head of United States economics research at Barclays Capital, said the program was “shock and uh.” He said the Treasury made a “tactical mistake” by building up expectations about a plan before it had much to announce.

“What’s striking is that these are not new issues that they are facing,” Mr. Harris said. “These are the same issues that the Treasury faced last fall — how do we price the assets? The fact that it’s so been so difficult to figure out the answer may tell you something about whether it’s worth doing or not.”

Mr. Harris warned that setting up a so-called bad bank would be very expensive, as Mr. Geithner himself acknowledged when he set the goal of creating a fund that would reach $1 trillion. Frank Pallotta, a former managing director at Morgan Stanley and a veteran mortgage trader, said the gap was so wide between what banks were valuing their assets and what investors were willing to pay that the government would attract investors to buy only if it provided a subsidy of one form or another.

“Right now, the banks aren’t selling anything,” said Mr. Pallotta, now a consultant to both buyers and sellers of distressed mortgages. “You have Chase thinking that its assets are worth 75 cents on the dollar, and Joe Hedge Fund who thinks they are only worth 45 or 25. There is a huge gap, and the government has to find out if there is some middle point where they can get in.”

Mr. Pallotta said he did not fault the Treasury for failing to offer specifics yet, but he said it could not delay for long. “If we don’t hear in the next 30 days about how this thing will flesh out, then I would be upset.”

Jeff Zeleny contributed reporting from Fort Myers, Fla.

Charles Krauthammer is a columnist for the Washington Post Writers Troup. His e-mail address is letters@charleskrauthammer.com.

WASHINGTON — Senate Democrats reached an agreement with Republican moderates on Friday to pare a huge economic recovery measure, clearing the way for approval of a package that President Obama said was urgently needed in light of mounting job losses.

The deal, announced on the Senate floor, was a result of two days of tense negotiations and political theater. Mr. Obama dispatched his chief of staff to Capitol Hill to help conclude the talks and reassure senators in his own party, and he called three key Republicans to applaud them for their patriotism.

Earlier, when it looked as if a vote might take place Friday night, officials said, a government plane was dispatched to Florida to bring back Senator Edward M. Kennedy, a Massachusetts Democrat who has brain cancer.

The fine print was not immediately available, and the numbers were shifting. But in essence, the Democratic leadership and two centrist Republicans announced they had struck a deal on about $110 billion in cuts to the roughly $900 billion legislation — a deal expected to provide at least the 60 votes needed to send the bill out of the Senate and into negotiations with the House, which has passed its own version.

The pact, which is expected to be approved in the next few days, was concluded just hours after the Labor Department announced that 598,000 jobs were lost in January. The contraction in jobs is already steeper than in any other recession since at least the early 1980s. And economists warn that several more shoes are about to drop, a message that added urgency to the Senate deliberations.

As the negotiations were under way, lawmakers said it was time to stop quibbling about the exact parameters of the legislation — which mixes safety-net spending, tax cuts and a huge infusion of dollars into federal programs — and to begin work toward a final agreement that could be sent to Mr. Obama next week.

“Our country can’t wait another day for another approach,” said Senator Ben Nelson, a Nebraska Democrat who is a leader of the bipartisan coalition that worked out the agreement.

The details were negotiated at an afternoon meeting in the office of the Senate majority leader, Harry Reid of Nevada, involving Mr. Reid, other top Democrats and two Republicans, Susan Collins of Maine and Arlen Specter of Pennsylvania. After they came to terms, the senators brought in the White House chief of staff, Rahm Emanuel, for assurance that the deal was acceptable to the administration. Mr. Emanuel signaled it was.

“With today’s unemployment numbers reaching more than 3.6 million workers,” Mr. Emanuel said after the session, “delay and failure were not an option.”

Mr. Obama called Ms. Collins and Mr. Specter, as well as Senator Olympia J. Snowe of Maine, another Republican expected to support the deal, to acknowledge they were acting against pressure from their party and, one official said, to thank them for their patriotism in helping advance the bill at a critical time.

Earlier in the day, Mr. Obama urged Congress to act expeditiously. “It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay or politics as usual while millions of Americans are being put out of work,” said Mr. Obama, who has recently shown less patience for Republican resistance to the bill.

Most Senate Republicans remained opposed to the measure, criticizing it as a case study in excessive spending that would do little to lift the economy. Some conservatives indicated Friday night that they would push for time to study the new legislation before any final vote.

“We want to stimulate the economy, not mortgage the future of our children and grandchildren by the kind of fiscally profligate spending embodied in this legislation,” said Senator John McCain of Arizona, the defeated Republican presidential nominee, who has emerged as a chief opponent of the proposal.

Republicans were clearly irritated at the outcome and faulted those involved in working out the bargain. “When you say this was the best we could do, I disagree with you,” Senator Lindsey Graham of South Carolina said on the floor. “This not remotely close to what we could have done if we had sat down in a true bipartisan fashion and found a better way.”

The Senate’s proposed cuts took aim at an array of popular spending programs that critics said should not be part of a fiscal recovery bill, even if they represent laudable policy goals, because they would not deliver a quick enough jolt to the economy.

Even Mr. Obama’s signature tax cut for middle-class Americans was scaled back as part of the deal. Under the new plan, tax credits of up to $500 for individuals and $1,000 for couples would begin to phase out at lower income levels than first proposed, saving the government $2 billion.

The biggest cut, roughly $40 billion in aid to states, was likely to spur a fierce fight in negotiations with the House over the final bill. Many states, hit hard by the recession, face wrenching cuts in services and layoffs of public employees as they struggle to comply with laws requiring them to balance their budgets.

When debate began this week, the price tag on the Senate version of the stimulus bill was roughly $884 billion, but it grew to more than $900 billion as senators added provisions including tax breaks totaling $30 billion for purchases of homes and cars.

Lawmakers said that by poring over the 736-page bill they had excised about $110 billion, bringing the total cost to about $780 billion — $40 billion less than the stimulus bill approved by the House last week. Because of consumer tax breaks and spending for health research that had been added in the Senate, the new total for the measure could be about $820 billion. But even the senators behind the compromise were uncertain of the number.

In addition to the large cut in state aid, the Senate agreement would cut nearly $20 billion proposed for school construction; $8 billion to refurbish federal buildings and make them more energy efficient; $1 billion for the early childhood program Head Start; and $2 billion from a plan to expand broadband data networks in rural and underserved areas.

The administration had initially hoped that it could win the support of as many as 80 senators, but that goal disappeared after House Republicans voted unanimously against the measure. As questions were raised about the total spending, getting even three or four Republican senators to sign on became difficult.

Ms. Collins said she believed the changes had significantly improved the measure. Mr. Specter said that while he still had reservations, he had come to accept Mr. Obama’s push to enact the economic plan by mid-February. “I believe we do have to act,” Mr. Specter said, “and under the circumstances this is the best we can do.”

But several other Republicans who had taken part in the talks said they could not support the compromise.

“Unfortunately, there was too much in the Democratic counterproposal that was not stimulative,” said Senator George V. Voinovich of Ohio, “and that did not provide the jump-start our economy so desperately needs.”

The Senate Republican leader, Mitch McConnell of Kentucky, said most Republicans remained unconvinced that the package would reinvigorate the economy.

“You have to balance the likelihood of success versus the crushing debt that we’re levying on the backs of our children, our grandchildren and, yes, their children,” Mr. McConnell said.

Mr. Reid urged Republicans to get behind the plan. “This is a critical day for this new Congress and our country,” he said. “Faced with this grave and growing economic crisis, Republicans must decide today whether they will join the president and Congressional Democrats on that road to recovery.”

HHS Pick Built Connections Over Decades

By Ceci Connolly
Washington Post Staff Writer
Tuesday, February 3, 2009

As he battles this week to save his nomination to be secretary of health and human services, one thing is certain: No one in Washington has a better-positioned network of allies in the Obama administration than Thomas A. Daschle.

Over three decades on Capitol Hill, including 10 years as the Senate Democratic leader, Daschle has nurtured one of the largest, most experienced talent pools in the city. His charges guided Barack Obama from his first days in the Senate, through the presidential race and into the White House. Daschle’s tentacles, moreover, stretch far beyond the agency Obama picked him to lead, reaching across the entire administration from the upper echelons of the White House to mid-level departmental positions to Obama’s kitchen cabinet.

The network is being tapped this week as Daschle and his allies scramble to explain why he did not pay more than $100,000 in back taxes, primarily for the use of a car and driver for three years. After a 75-minute closed-door meeting yesterday with the Senate Finance Committee, he emerged ashen-faced and apologetic. His confirmation vote has been postponed until at least the middle of next week.

Republicans remained noncommittal yesterday, weighing the costs and benefits of perhaps killing the nomination of a former colleague and close personal friend of the president. Democrats rose to Daschle’s defense, including, most notably, the man who would be without much of his top staff were it not for Daschle.

Asked yesterday morning whether he stands by Daschle, Obama said firmly: “Absolutely.”

If he weathers the tax controversy, Daschle is likely to be one of the best-connected Cabinet secretaries in the administration, if not history.

At least a dozen Daschle alumni are stepping into the highest positions of the federal government. Already, Obama and Vice President Biden have tapped Daschle veterans to manage their staffs, guide foreign policy and craft public relations strategy. In addition to the new HHS chief of staff, the chiefs of staff to Biden, the National Security Council and Treasury Secretary Timothy F. Geithner all worked for Daschle. His allies oversaw Obama’s transition team — including vetting Daschle himself — and one serves as the president’s personal lawyer.

“This is notable for the breadth and scope and number,” said Chris Jennings, who was the Clinton administration point man on health care and knows the challenges of navigating the White House bureaucracy.

As news broke over the weekend that Daschle had made several tax errors, many of those former colleagues and aides helped mount a defense, praising his integrity on talk shows, in news releases and in whispered asides. Not a single lawmaker has called for him to withdraw.

But the real potency of the network will come if Daschle is confirmed, said Ross K. Baker, a political scientist at Rutgers University. With such well-placed, trusted advisers, he would be in a position to promote his priorities and shape policy well beyond the contours of his department.

“The fact that he has eyes and ears in the White House, rather than way down in the HHS bureaucracy, is really an advantage,” Baker said. He likened Daschle’s sphere of influence to the broad power that Henry Kissinger held as secretary of state in the Nixon administration.

“Geography is determinant of influence,” he said. “To have people proximate to the president is a real advantage.”

Like Daschle, Secretary of State Hillary Rodham Clinton can lay claim to an impressive network of insiders, developed during her husband’s eight years in the Oval Office and her eight in the Senate. Many have worked for Daschle as well. But the Clinton coalition has become fractured and she carries the lingering scars of a contentious fight with Obama in the Democratic presidential primaries.

By contrast, Daschle and Obama share an uncommon bond, forged during the 2004 campaign. Many — including aides to Daschle — had expected him to seek the White House. But the South Dakotan lost a nasty reelection fight, and the young Illinois legislator burst onto the national scene and into the U.S. Senate.

“Tom was the first guy to go with Obama” in the pre-presidential campaign season, said Frederick H. Graefe, a Washington lobbyist and one of Daschle’s oldest friends. “He told him, ‘Run now, don’t wait, don’t make the mistake I made. I’ll give you everybody I have — the campaign team, the personal staff, leadership staff, fundraising lists — lock, stock and barrel.’ ”

“It was a ready-made team,” Graefe added.

As a Senate leader with authority over not just his personal staff but several policy and campaign committees as well, Daschle employed more than 100 people at any given time. From 1994 to 2005, even more than the Clinton White House, “the University of Daschle” was the place to learn the inner workings of governing, Baker said.

More than half a dozen Daschle veterans hold high-ranking White House positions, most notably Pete Rouse, who was his chief of staff and is now senior adviser to the president, and Phil Schiliro, Obama’s legislative liaison.

Daschle-ites are also taking positions at the Agriculture Department and the Democratic National Committee. Some of his closest allies are among Obama’s most trusted outside advisers, a select group whose influence comes not from a title but from a personal bond. They include John D. Podesta, the Center for American Progress president who masterminded Obama’s transition; lawyer Robert Bauer; and political consultant Anita Dunn.

“The spokes of the wheel all lead to Pete Rouse,” said Dunn, who has deep ties to both men. “When Pete went to work for Barack, what Barack got — and I don’t think he realized it — was the only network in Democratic circles that from both a policy and political perspective came close to the Clinton network.”

Rouse got his start in Washington in the early 1970s when he and Daschle were young aides to then-Sen. James Abourezk (D-S.D.). In 1986, he began an 18-year stint with Daschle.

When Daschle lost in 2004, he encouraged his team to sign on with Obama. Rouse agreed and eventually recruited many of Obama’s top aides, including Schiliro and the husband-and-wife team Dan Pfeiffer and Sarah Feinberg.

If confirmed, Daschle will be “HHS secretary plus,” said Dunn, referring to the additional role as head of the new White House Office of Health Reform, which has a small but well-situated office in the basement of the West Wing.

If Daschle were working at HHS headquarters, his “embeds,” as Dunn calls them, could provide “an extraordinary level of information and access that most Cabinet secretaries don’t have.”

“It’s a matter of him not having to go in and forge relationships,” she said. “Daschle gets to deal directly with people he knows and is comfortable with.”

If as HHS secretary he wanted to tweak health tax policy, his longtime chief of staff, Mark Childress, would need only pick up the phone and call former colleague Mark Patterson, Geithner’s chief of staff. If there were an international health issue to resolve, Childress could contact Daschle alums Mark Lippert at the NSC and Denis McDonough on the White House staff.

And if Daschle needed assistance from Biden, he could turn to Ron Klain, the vice president’s chief of staff, who oversaw the Senate Democratic Leadership Committee for Daschle in 1995. Biden was making calls on Daschle’s behalf yesterday.

The Daschle hires that Obama has made are the “cream of the crop” of the Democratic establishment, Jennings said.

“People outside the Daschle orbit recognize his friendship with and influence with President Obama,” he said. “It’s the cumulative perceptions of his respect and influence within the administration and his former staff. Whether it’s an accurate perception or not, perception is reality in Washington.”

Staff writers Paul Kane and Joe Stephens and research editor Alice Crites contributed to this report.

UPDATE

Daschle Ends Bid for Post; Obama Concedes Mistake

WASHINGTON — Tom Daschle withdrew his nomination as secretary of health and human services on Tuesday after weathering four days of scrutiny over unpaid taxes, prompting President Obama to concede having “screwed up” in undermining his own ethical standards by pushing the appointment.

“I’ve got to own up to my mistake, which is that ultimately it’s important for this administration to send a message that there aren’t two sets of rules,” Mr. Obama said in an interview with NBC News. “You know, one for prominent people and one for ordinary folks who have to pay their taxes.”

Mr. Daschle, a closer confidant to Mr. Obama than any other cabinet nominee, had offered to step down over the weekend, but officials close to both men said Mr. Obama had urged him to fight for confirmation.

Mr. Daschle went to Capitol Hill on Monday to keep his confirmation on track, but by Tuesday morning, with the pressure showing no signs of easing, he told the president that he believed he had become a distraction and too wounded to be effective.

It was the rockiest day yet for the new White House. Two hours before Mr. Daschle withdrew, Mr. Obama’s nominee to be the chief White House performance officer, Nancy Killefer, pulled her name from consideration because of unpaid payroll taxes for a household employee.

The developments distracted attention from Mr. Obama’s effort to push his economic stimulus plan through the Senate and complicated the initiative that Mr. Daschle was to have led, his plan for overhauling the health care system.

The nominees’ tax problems also gave Republicans a new argument against Mr. Obama and his party as the economic debate proceeds: that Democrats are cavalier about taxing other people because they do not abide by the tax laws themselves.

In evening interviews on broadcast and cable television networks, Mr. Obama said he took responsibility for the errors. “And so I’m frustrated with myself, with our team,” he told NBC, “but ultimately my job is to get this thing back on track because what we need to focus on is a deteriorating economy and getting people back to work.”

He added, “I’m here on television saying I screwed up and that’s part of the era of responsibility.”

Mr. Daschle delivered the news in a call on Tuesday morning to Mr. Obama, who was in his study, just off the Oval Office. He also stepped down from his position as White House heath czar, a job with a West Wing office.

Mr. Daschle said Monday that his failure to pay $128,000 in taxes for the use of a friend’s chauffer and car service was “completely inadvertent.”

Declining an interview request on Tuesday afternoon, Mr. Daschle said in a brief statement distributed by the White House that he would not have been able to lead an overhaul of the nation’s health care system “with the full faith of the Congress and the American people.”

“I am not that leader,” Mr. Daschle said, “and will not be a distraction.”

The withdrawals by the two advisers represent the highest-level political casualties of the young administration and raised fresh questions about the vetting procedures for officials already selected and scores of positions that remain open.

Senate Republicans signaled their intention to step up scrutiny of all appointees. Treasury Secretary Timothy F. Geithner was confirmed last week after apologizing and weathering weeks of criticism for late payment of $34,000 in income taxes.

Both Mr. Daschle and Ms. Killefer pulled out on their own accord, officials said, after their tax returns were scrutinized by the Senate Finance Committee. On the campaign trail, Mr. Obama often expressed frustration to aides about the practice of cutting loose advisers at the first sign of political trouble.

“They both decided and recognized that their nominations would distract from the important goals and the critical agenda that the president put forward,” Robert Gibbs, the White House press secretary, said Tuesday.

Asked repeatedly whether the White House had quietly urged Mr. Daschle to step aside to quell the controversy, Mr. Gibbs said, “He did not get a signal.”

Among the people mentioned as possible candidates for the job of health secretary are Gov. Kathleen Sebelius of Kansas, a former state insurance commissioner; former Gov. John A. Kitzhaber of Oregon, a doctor; and Gov. Jennifer M. Granholm of Michigan. All are Democrats.

In the Senate, Democrats were caught by surprise by Mr. Daschle’s decision, particularly after his appearance at the Finance Committee on Monday, as well as several indications that he could win confirmation.

But Republicans were intensifying their criticism of his tax failings, and Senator Harry Reid of Nevada, the majority leader, said Mr. Daschle told him in a phone call on Tuesday morning that he believed the nomination was getting too much attention.

Senator Richard J. Durbin of Illinois, the No. 2 Democrat in the Senate, said Mr. Daschle, the former Senate majority leader, had done “the honorable thing to spare his family, the president and his colleagues in the Senate from a tough political battle that would lie ahead.”

Mr. Durbin added, “I think he would have prevailed in the end, but it would have taken a while, and there would have been some suffering.”

The day had been scripted by advisers to turn the page on the tax controversy and refocus on the economy. In a rare move, television anchors for five broadcast and cable networks had been invited to interview Mr. Obama about the urgency of passing the economic recovery plan, a decision that magnified the troubles at the White House by giving them increased prominence on the evening news.

He delivered almost precisely the same mea culpa to each of the anchors as they cycled through the Oval Office.

Hours earlier, as his advisers huddled in the West Wing to shape a strategy for responding to the dizzying turn of events, Mr. Obama and his wife, Michelle, made an unscheduled stop at a public school not far away.

“We were just tired of being in the White House,” Mr. Obama told second graders at Capital City Public Charter School.

Senator John Kerry, Democrat of Massachusetts, who sits on the Finance Committee, said he believed Mr. Daschle should not have withdrawn his name.

“I believe that when the smoke clears and the frenzy has ended, no one will believe that this unwitting mistake should have erased 30 years of selfless public service and remarkable legislative skill and expertise on health care,” Mr. Kerry said.

In the case of Ms. Killefer, administration officials said she had failed to pay more than a year’s worth of unemployment taxes on household help.

The District of Columbia filed a $946.69 tax lien on her home in 2005 for failure to pay the tax. That was disclosed to the Senate Finance Committee, but officials said her tax records were being further scrutinized.

“I recognize that your agenda and the duties facing your chief performance officer are urgent,” Ms. Killefer wrote in a letter to Mr. Obama on Tuesday.

“I have also come to realize in the current environment that my personal tax issue of D.C. unemployment tax could be used to create exactly the kind of distraction and delay those duties must avoid.”

Ms. Killefer, head of the Washington office of the consulting firm McKinsey & Company, was named to the new position on Jan. 7. In the announcement, Mr. Obama said she would help “restore the American people’s confidence in their government.”

He said at the time that her role would be to scour the budget for wasteful or inefficient spending.

Robert Pear and Carl Hulse contributing reporting.

By PHILIP ELLIOTT

WASHINGTON (AP)

Republican Sen. Judd Gregg of New Hampshire said Friday that he’s being considered by President Barack Obama for a Cabinet appointment as head of the Commerce Department. Senior Democrats said the New Hampshire senator is among those at the top of a list for the job, although they emphasized that no move was imminent. They spoke on condition of anonymity because no decision has been made and they were not authorized to discuss the administration’s thinking. “I am aware that my name is one of those being considered by the White House for secretary of commerce, and am honored to be considered, along with others, for the position,” Gregg said in a statement. “Beyond that there is nothing more I can say at this time.” A Capitol Hill leadership aide said Thursday evening that Obama had talked with his party’s leaders about the move to appoint Gregg, which could put Democrats within reach of a 60-person, filibuster-proof majority in the Senate if New Hampshire Gov. John Lynch were to name a fellow Democrat. Democrats hold a 56-41 majority in the 100-member Senate, and two independents caucus with them. The Senate seat from Minnesota remains undecided, with Sen. Norm Coleman and challenger Al Franken in a close, court-based contest. Gregg has said he plans to run for re-election in 2010. He was the GOP’s chief negotiator for the $700 billion bailout of the financial industry, a plan unpopular with many Republicans. New Hampshire has been trending toward the Democrats, although independents remain a major force in the “Live Free or Die” state. Obama’s first choice to run the Commerce Department, New Mexico Gov. Bill Richardson, dropped out of consideration amid a grand jury investigation over how state contracts were issued to political donors. White House officials insisted Thursday that no decision had been made. It was also not clear if Lynch — popular, but for many fellow Democrats frustratingly moderate at times — would pick someone out of party loyalty. During the state’s first-in-the-nation presidential primary, Lynch made positive statements about Republican John McCain and attended one of his signature town halls. He also named GOP star Kelly Ayotte his attorney general as part of a centrist governing style that delivered him re-election with 70 percent of the vote. A member of a New Hampshire political family and a policy wonk, Gregg rose through the Senate ranks to serve as chairman of the powerful Budget Committee and the Appropriations subcommittee that funds homeland security. Now in the minority, he is the ranking Republican member on the Budget Committee but still has large sway in the GOP’s response to Obama’s legislative agenda.

Gregg to Be Nominated Tuesday for Commerce Job

By Anne E. Kornblut and Shailagh Murray
President Obama will nominate Sen. Judd Gregg (R-N.H.) tomorrow for commerce secretary, a White House official said tonight.

The nomination is the last for Obama’s Cabinet. New Mexico Gov. Bill Richardson (D) was nominated Dec. 3 to head the Commerce Department, but he withdrew his name from consideration a month later because of a federal investigation involving state government contracts.

Gregg appears willing to take the Commerce job, but he announced one condition today: His replacement in the Senate had to be a Republican.

“I have made it clear to the Senate leadership on both sides of the aisle and to the Governor that I would not leave the Senate if I felt my departure would cause a change in the makeup of the Senate,” Gregg said in a statement.

Over the weekend, White House officials said that Gregg was the leading candidate for the Commerce.

Senate Republicans said they were somewhat mystified by Gregg’s potential move. As the ranking GOP senator on the Budget Committee, Gregg could play a potentially pivotal role in budget and entitlement reform, potentially the most challenging items on Obama’s ambitious to-do list. But if Gregg takes the Cabinet slot, he would likely be replaced as ranking member by Sen. Jeff Sessions (R-Ala.), one of the most conservative members of the Senate with a highly partisan track record.

Robert Gibbs, the White House press secretary, declined to answer questions about Gregg during his daily briefing. “Obviously the president has great respect for Senator Gregg. I’m not going to get into personnel announcements before we are there,” Gibbs said. “And as it relates to picking senators in states that need new senators, I think you can rest reasonably assured that this administration has had nothing and wants nothing to do with that going forward. And I would bold and underline that.”

Lynch is widely expected to appoint a Republican to replace Gregg, someone who could be a caretaker in the seat until the next election, in 2010. But Lynch has not officially said so. In a statement on Monday, Lynch said: “We are in the midst of a national economic crisis, and it calls for cooperation on all of our parts. We all need to work together to do what is in the best interest of our country and our state. I have had conversations with Senator Gregg, the White House and the U.S. Senate leadership. Senator Gregg has said he would not resign his seat in the U.S. Senate if it changed the balance in the Senate. Based on my discussions, it is clear the White House and Senate leadership understand this as well.”

Lynch continued: “It is important that President Obama be able to select the advisers he feels are necessary to help him address the challenges facing our nation.”

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.

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.’ ”

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.

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.

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?

By: Carrie Budoff Brown and Mike Allen
December 30, 2008 03:38 PM EST

Setting up a clash with Senate Democrats, Illinois Gov. Rod Blagojevich announced Tuesday that he would appoint former state attorney general and comptroller Roland Burris to fill out President-elect Obama’s term in the U.S. Senate.

Saying Illinois should not be “deprived” of the representation of two senators, Blagojevich introduced Burris as “someone with unquestioned integrity.” The governor defended his decision to make the appointment as part of his gubernatorial responsibility to fill Senate vacancies.

“I would like to ask everyone to do one last thing: Don’t allow the allegations against me to taint this good and honest man,” Blagojevich said at a 3 p.m. press conference.

The move was met with a rebuke from Senate Majority Leader Harry Reid (D-Nev.), who said the Democratic caucus would refuse the appointment from a governor who stands accused of selling the position to the highest bidder.

“Under these circumstances, anyone appointed by Gov. Blagojevich cannot be an effective representative of the people of Illinois and, as we have said, will not be seated by the Democratic Caucus,” Reid said in a statement.

In addition, Jesse White, the Illinois secretary of state, said he will not certify Burris as the replacement for Obama’s seat.

For his part, Burris said it’s inconceivable that the state of Illinois should start the new Congress “shorthanded,” with just one senator.

Burris also said he has “no relationship” to charges that Blagojevich tried to sell Obama’s Senate seat for personal gain and said of the governor, “In this legal process, you’re innocent until you’re proven guilty.”

Blagojevich’s lawyer had said earlier that the governor did not plan to defy the Senate leaders and impose an Obama successor on them.

Reid (D-Nev.) has said that Illinois Lt. Gov. Pat Quinn should make the appointment, and the Senate Democratic caucus signed a letter supporting that option.

Reid said in a letter to the governor: “Please understand that should you decide to ignore the request of the Senate Democratic Caucus and make an appointment we would be forced to exercise our Constitutional authority under Article I, Section 5, to determine whether such a person should be seated.”

Blagojevich’s lawyer, Ed Genson, had told a news conference Dec. 17 that the governor did not plan to try to make the appointment. “Harry Reid said that they’re not going to accept anybody, so why would he do that?” Genson said.

Burris, 71, told reporters earlier this month that he only wanted to serve the remaining two years of the Senate term and would not run for reelection.

Burris was the first African American to be elected to statewide office in Illinois, serving as comptroller from 1983 to 1991 and as attorney general from 1991 to 1995.

He also ran against Blagojevich for the Democratic nomination for governor in 2002 – winning the support of much of Illinois African-American political establishment, including then-state Sen. Barack Obama.

Another complication in the selection is that Burris is a registered lobbyist in Illinois and Washington, D.C. His Chicago-based firm, Burris & Lebed, is registered in Springfield to represent clients ranging from Comcast to the Illinois Funeral Directors Association. In 2007, the firm was also registered to represent the Illinois Association of Mortgage Bankers. The firm is registered in both Springfield and Washington to represent MicroSun Technologies, an Illinois-based maker of battery and power supplies.

Burris’ lobbying partner is Fred Lebed, a veteran Democratic political operative who once served as executive director of the Cook County party and has also held a number of state government posts.

Blagojevich has been under pressure to resign from office, or at least relinquish his gubernatorial authority to fill Senate vacancies. He has remained in office, however, as he fights a federal corruption investigation and a legislative effort to impeach him.

The two-term governor has denied any wrongdoing.

It’s unclear whether Reid has the power to block Burris’ appointment. Senate leaders discussed the impending announcement on a conference call Tuesday afternoon.

John Fortier, a research fellow at the American Enterprise Institute, wrote in a Politico Ideas piece this month that the Senate doesn’t have the power to reject the appointment.

“The Senate would have little recourse but to seat Blagojevich, as he meets the minimum constitutional qualifications for office,” Fortier wrote of the possibility that the governor might appoint himself. “But after seating Blagojevich, the Senate could then expel him by a two-thirds vote. The seat would be vacant again, and the new governor could make an appointment. Or by then, the Legislature might have changed the law to do away with appointments, in which case the seat would sit vacant until a special election was held.

The office of the Senate historian referred questions Tuesday to the Senate counsel, saying it is a legal matter.

By James V. Grimaldi and Philip Rucker
Washington Post Staff Writers
Friday, December 19, 2008; A01

Former president Bill Clinton’s disclosure yesterday that foreign governments and state-sponsored agencies have donated between $75 million and $165 million to his foundation highlighted a series of potential conflicts that Hillary Rodham Clinton could face should she become secretary of state.

The kingdom of Saudi Arabia made one of the largest contributions, between $10 million and $25 million, as did the Australian government’s overseas aid program and a Dominican Republic agency that fights AIDS. The William J. Clinton Foundation also raised more than $1 million each from the governments of Brunei, Kuwait, Oman and Qatar.

The former president had resisted releasing the list of donors during his wife’s presidential campaign, but he agreed to do so when it became a possible issue as President-elect Barack Obama was considering whether to make her part of his Cabinet.

The list — containing more than 200,000 donor names — shows the extent to which Bill Clinton relied on foreign governments, especially those of Middle Eastern oil states, to establish his foundation over the past decade. In many cases, those governments have national interests that have routinely come before the State Department and other U.S. government agencies.

Obama transition officials believe Clinton’s disclosure “goes above and beyond in preventing conflicts,” spokesman Tommy Vietor said. “Past donations to the Clinton Foundation have no connection to Senator Clinton’s prospective tenure as secretary of state. Going forward, all donors will be disclosed on an annual basis, and new donations from foreign governments will be scrutinized by government ethics officers.”

The release of the Clinton donors shows for the first time the scope of his international fundraising and charitable efforts since leaving the White House in 2001. Norway and the national charitable lottery of the Netherlands gave more than $5 million, for example, and the Swedish lottery also donated. The Jamaican and Italian governments each contributed more than $50,000.

“It is going to be complex to disassociate the specialized interests of the foundation of Bill Clinton from certain foreign interests that are represented by the U.S. government,” said James Thurber of American University’s Center for Congressional and Presidential Studies. “But I think they can do it. I don’t think it is a major issue yet, but you never know, when it comes to Bill Clinton, what might come out.”

Since it was established in 1997, the Clinton Foundation has raised more than $500 million, which has financed construction of Clinton’s presidential library in Little Rock as well as charitable programs in global health, poverty, climate change and education. The donations have gone to an estimated 150 countries and provided medication to some 1.4 million people living with AIDS, according to foundation staff. In partnership with former president George H.W. Bush, the foundation also raised millions of dollars for recovery efforts along the Gulf Coast after Hurricane Katrina.

The list released yesterday includes some controversial figures and companies. Affiliates of the Korean conglomerate Hanwha — Hanwha L&C, Hanwha Engineering and Construction, and Hanwha Stores — donated about $1 million after Clinton traveled to Seoul in 2003 and appeared with Hanwha Group Chairman Kim Seung-youn. Kim has been charged and jailed in Korea on public corruption allegations.

Another donation followed Clinton’s trip to Kazakhstan in 2005 on the private jet of Frank Giustra, a financier of mining ventures. On the trip, Clinton praised Kazakhstan’s authoritarian president, and Giustra later entered into agreements to invest in uranium projects controlled by Kazakhstan’s government. Giustra donated $10 million to $25 million, and the Clinton Giustra Sustainable Growth Initiative gave between $1 million and $5 million.

A donation of more than $25,000 came from Andre Agapov, a Russian mining company owner who allegedly worked with the Russian secret police for President Boris Yeltsin.

Other contributors include Friends of Saudi Arabia and the Dubai Foundation, as well as Saudi businessman Nasser Al-Rashid, each giving more than $1 million. Haim Saban, the Egyptian-born media tycoon who funds many Israeli initiatives, gave more than $5 million.

Among the top donors were foundations created by Microsoft founder Bill Gates and his wife, Melinda Gates, and Scottish retail-clothing executive Tom Hunter. Also on the list of the biggest contributors, giving between $10 million and $25 million each, are real estate and Hollywood mogul Stephen L. Bing, New York billionaire B. Thomas Golisano, Gateway computer co-founder Theodore W. Waitt and Chicago media executive Fred Eychaner. Black Entertainment Television founder Robert L. Johnson gave more than $1 million.

Billionaire financier and political supporter George Soros and his Open Society Institute each gave major donations, while the Arkansas-based foundations linked to retail giant Wal-Mart each gave at least $1 million.

The list also includes gifts from companies damaged in the current economic meltdown, such as Lehman Brothers, Citigroup, Freddie Mac and General Motors.

Entertainment figures on the list include producer Steven Spielberg, actors Cameron Diaz and the late Paul Newman, and singers Barbra Streisand and Carly Simon. New York Yankees owner George Steinbrenner and Formula One driver Michael Schumacher also donated.

“I want to personally express my deepest appreciation to our many contributors, who remain steadfast partners in our work to impact the lives of so many around the world in measurable and meaningful ways,” Bill Clinton said in a statement. “We have just begun — and it is an honor and privilege to be on this journey alongside each and every person who is committed to our foundation’s ongoing charitable mission.”

The foundation did not release the exact amounts or dates for donations, but it did include donors who gave very small amounts, going beyond the normal requirements for federal campaign disclosures. The donors were classified by amount of their gifts, within ranges.

Clinton released more detail than that promised by President Bush, who has said he does not plan to release names of donors, or George H.W. Bush, who also received contributions of at least $1 million from Oman, Saudi Arabia and the United Arab Emirates. The elder Bush also collected more than $50,000 from Japan, Hong Kong and Thailand.

Former president Jimmy Carter’s center, which was a model for Clinton’s, releases the names of $1 million-plus donors, and they include foreign governments as well.

Research editor Alice Crites, database editor Sarah Cohen, and staff writers Matthew Mosk, Dan Morgan, Steven Mufson, Derek Kravitz and Mary Pat Flaherty contributed to this report.

This article is by David E. Sanger, Bill Vlasic and Micheline Maynard.

WASHINGTON — The White House raised for the first time on Thursday the prospect of forcing General Motors and Chrysler into a managed bankruptcy as a solution to save the companies from financial collapse.

The White House announced early on Friday that President Bush would make a statement at 9 a.m. Eastern time about efforts to negotiate a bailout for the domestic auto industry.

On Thursday, his spokeswoman, Dana Perino, confirmed growing speculation within legal circles that the president and Treasury Secretary Henry M. Paulson Jr. were considering the step.

“There’s an orderly way to do bankruptcies that provides for more of a soft landing,” Ms. Perino said. “I think that’s what we would be talking about. That would be one of the options.”

A senior administration official, however, later described that option as a last resort, to be used only if an agreement for a voluntary overhaul of the industry could not be reached.

These officials said the preferred solution would be to force a restructuring of the industry outside of bankruptcy court, extracting concessions that would make the companies more cost-competitive with foreign automakers.

In return, the Treasury would tap the financial rescue fund, called the Troubled Asset Relief Program, to make loans to the companies.

After a week of talks between the automakers and the Treasury Department over the terms of a possible bailout, Ms. Perino on Thursday said, “we’re very close.”

President Bush, speaking on Thursday at the American Enterprise Institute, an organization dedicated to free market principles, said that he had determined that the economy was too fragile to allow G.M. and Chrysler to fail. The companies have warned that will happen if they do not receive financial aid soon.

In his speech Thursday, Mr. Bush made clear that he wanted to avoid a “disorderly bankruptcy” because of “what it would do to the psychology of the markets.” But he also said he was “worried about putting good money after bad,” and suggested he would only approve a plan that allowed the auto companies to “become viable in the future.”

Mr. Bush’s comments, a month before he leaves office, made clear that he was worried by the idea of returning to Texas amid more economic chaos and the surge in unemployment that a collapse of the companies could cause.

“The autos obviously are very fragile,” he said. He added that he was concerned about what President-elect Barack Obama would face on Jan. 20. “I believe that good policy is not to dump him a major catastrophe in his first day of office,” he said.

What the White House appears to be envisaging is a package deal of concessions — and an injection of money from the TARP, the $700 billion financial bailout fund — to keep credit flowing for G.M. and Chrysler.

Taxpayer loans, the White House has said, would have first priority over all other debt. Ms. Perino said the goal was to “try to come up with something that would protect the taxpayers but not allow a collapse that would hurt everybody in America.”

But for Mr. Bush, that could be difficult to negotiate. If the autoworkers’ unions conclude they are likely to get a better deal from Mr. Obama, they are likely to stall negotiations and settle for a shorter-term loan.

After the White House raised the possibility of a bankruptcy, G.M.’s shares fell to $3.66.

Investors may have also been reacting to a report in The Wall Street Journal that said G.M. had restarted merger discussions with Chrysler. But a G.M. spokesman, Tony Cervone, said the automaker had not held any talks with Chrysler since late October, when G.M. suspended discussions because of its bleak financial condition. “Nothing has changed,” he said.

G.M. declined to comment on the Bush administration’s suggestion that an “orderly bankruptcy” was under consideration. But the company was surprised by the White House statements, according to G.M. officials who asked not to be identified because the discussions with the administration were not yet final.

The automaker’s senior executives have said repeatedly that bankruptcy was not a viable solution because consumers would be reluctant to buy a vehicle from a bankrupt automaker.

In July, CNW Marketing Research said a survey it conducted showed that 80 percent of prospective car buyers would not consider purchasing a vehicle from a bankrupt company. A more recent survey found that 51 percent of the people it interviewed said they would not buy a car from G.M. even if it received a government bailout.

“G.M. cannot afford to lose half of its prospective customers,” said Art Spinella, CNW’s president.

Spokesmen for Chrysler and Ford also declined to comment specifically on the inclusion of bankruptcy as an alternative.

Chrysler’s chairman, Robert L. Nardelli, has said that getting financing to reorganize in bankruptcy would be difficult given tight credit conditions. Ford is not seeking immediate government help.

There was no immediate comment from the United Automobile Workers union.

In a traditional bankruptcy proceeding, the U.A.W.’s contracts could be voided and the union forced to renegotiate benefits like health care.

The union’s president, Ron Gettelfinger, has said the U.A.W. is willing to make concessions if G.M. or Chrysler gets government loans that help them survive.

But Mr. Gettelfinger has said he believes that bankruptcy would cripple either company’s ability to sell cars. “There’s no question in my mind that people would not buy their vehicles,” he said in an interview.

Both companies are cutting production to stretch their available cash. On Friday, Chrysler will begin an unusual monthlong shutdown of all of its North American manufacturing plants in a bid to save money.

Legal experts said Thursday that despite discussion of an out-of-court solution, a revamping of G.M. and Chrysler might be difficult to accomplish outside of bankruptcy court, given the significant steps an overhaul would require.

“It’s not going to be easy, it’s not going to be pleasant, or palatable, but it’s the only solution that makes the least bit of sense,” said Hugh M. Ray, head of the bankruptcy practice at the Houston law firm Andrews Kurth, who has participated in major bankruptcy cases.

If the companies were to file for bankruptcy, major banks would provide financing, with federal funds as security for the bank loans for the companies to operate.

Some lawyers have suggested that the two companies could receive $25 billion, using $5 billion in federal funds to guarantee the banks’ loans, although auto industry analysts said the companies might need more.

G.M. has retained Harvey R. Miller, a longtime bankruptcy lawyer, as its adviser. It is also being advised by William Repko, an expert in restructuring with Evercore Partners who has worked with companies like United Airlines. G.M. is also working with Arthur B. Newman of the Blackstone Group.

Chrysler has retained the law firm of Jones Day to provide revamping expertise.

Mr. Ray said that a number of airlines went through bankruptcy protection earlier this decade, using federally backed loans awarded by the Air Transportation Stabilization Board, which was set up to aid the industry after the September 2001 attacks.

The board turned down United’s request, however, and the airline subsequently restructured under bankruptcy protection without federal money.

“United is still flying, and G.M. is not doing very well,” Mr. Ray said. “Their chickens have come home to roost, and now it’s inevitable” that G.M. seek bankruptcy protection, he added.

David E. Sanger reported from Washington and Bill Vlasic and Micheline Maynard from Detroit.

You probably sat in a fancier conference room the last time you refinanced or heard a pitch about life insurance. There’s a table, some off-brand mesh office chairs, a bookcase that looks as if it had been put together with an Allen wrench and instructions in Swedish.

To reach this room, you pass through a cubicle farm lightly populated by quiet young people. Either they have just arrived or they are just leaving, because their desks are almost bare. The place has a vaguely familiar feel to it, this air of transient shabbiness and nondescriptitude. You can’t quite put your finger on it …

“It’s like the set of The Office,” someone offers.

Bingo.

It is here that we find Barack Obama one soul-freezingly cold December day, mentally unpacking the crate of crushing problems — some old, some new, all ugly — that he is about to inherit as the 44th President of the United States. Most of his hours inside the presidential-transition office are spent in this bland and bare-bones room. You would think the President-elect — a guy who draws 100,000 people to a speech in St. Louis, Mo., who raises three-quarters of a billion dollars, who is facing the toughest first year since Franklin Roosevelt’s — might merit a leather chair. Maybe a credenza? A hutch?

But he doesn’t seem to notice. Obama is cheerfully showing his visitors around, gripping the souvenir basketball he received from Hall of Famer Lenny Wilkens, explaining a snapshot taken the day he played pickup with the University of North Carolina hoops team. (”They are so big and so fast and so strong, you know.”) Then, since those two items basically exhaust the room’s décor, Obama sits down on one of the mesh chairs and launches into a spoken tour of his world of woes. It’s a mind-boggling journey, although he shows no signs of being boggled — unless you count the increasingly prevalent salt in his salt-and-pepper hair. By now we are all accustomed to that Obi-Wan Kenobi calm, though we may never entirely understand it. In a soothing monotone, he highlights the scariest hairpin turns on his itinerary, the ones that combine difficulty with danger plus a jolt of existential risk. (See pictures of the Civil Rights movement from Emmett Till to Barack Obama.)

“It is not clear that the economy’s bottomed out,” he begins, understatedly. (The morning newspaper trumpets the worst unemployment spike in more than 30 years.) “And so even if we take a whole host of the right steps in terms of the economy, two years from now it may not have fully recovered.” That worries him. Also Afghanistan: “We’re going to have to make a series of not just military but also diplomatic moves that fully enlist Pakistan as an ally in that region, that lessen tensions between India and Pakistan, and then get everybody focused on rooting out militancy in a terrain, a territory, that is very tough — and in an enormous country that is one of the poorest and least developed in the world. So that, I think, is going to be a very tough situation.

“And then the third thing that keeps me up at night is the issue of nuclear proliferation,” Obama continues, sailing on through the horribles. “And then the final thing, just to round out my Happy List, is climate change. All the indicators are that this is happening faster than even the most pessimistic scientists were anticipating a couple of years ago.”

Score that as follows: one imploding economy, one deteriorating war in an impossible region and two versions of Armageddon — the bang of loose nukes and the whimper of environmental collapse. That’s just for starters; we’ll hear the unabridged version shortly.

But first, there is a bit of business to be dealt with, having to do with why you are reading this story in this magazine at this time of the year. It’s unlikely that you were surprised to see Obama’s face on the cover. He has come to dominate the public sphere so completely that it beggars belief to recall that half the people in America had never heard of him two years ago — that even his campaign manager, at the outset, wasn’t sure Obama had what it would take to win the election. He hit the American scene like a thunderclap, upended our politics, shattered decades of conventional wisdom and overcame centuries of the social pecking order. Understandably, you may be thinking Obama is on the cover for these big and flashy reasons: for ushering the country across a momentous symbolic line, for infusing our democracy with a new intensity of participation, for showing the world and ourselves that our most cherished myth — the one about boundless opportunity — has plenty of juice left in it.

See pictures of Obama’s nation of hope.

See pictures of Obama’s college years.

But crisis has a way of ushering even great events into the past. As Obama has moved with unprecedented speed to build an Administration that would bolster the confidence of a shaken world, his flash and dazzle have faded into the background. In the waning days of his extraordinary year and on the cusp of his presidency, what now seems most salient about Obama is the opposite of flashy, the antithesis of rhetoric: he gets things done. He is a man about his business — a Mr. Fix It going to Washington. That’s why he’s here and why he doesn’t care about the furniture. We’ve heard fine speechmakers before and read compelling personal narratives. We’ve observed candidates who somehow latch on to just the right issue at just the right moment. Obama was all these when he started his campaign: a talented speaker who had opposed the Iraq war and lived a biography that was all things to all people. But while events undermined those pillars of his candidacy, making Iraq seem less urgent and biography less relevant, Obama has kept on rising. He possesses a rare ability to read the imperatives and possibilities of each new moment and organize himself and others to anticipate change and translate it into opportunity. (See pictures of Obama’s nation of hope.)

The real story of Obama’s year is the steady march of seemingly impossible accomplishments: beating the Clinton machine, organizing previously marginal voters, harnessing the new technologies of democratic engagement, shattering fundraising records, turning previously red states blue — and then waking up the day after his victory to reinvent the presidential-transition process in the face of a potentially dangerous vacuum of leadership. “We always did our best up on the high wire,” says his campaign manager, David Plouffe.

Obama’s competence fills him with a genuine self-confidence. “I’ve got a pretty healthy ego,” he allows. That’s clear when he offers a checklist for voters to use in judging his performance two years from now. It’s quite an agenda. Listen: “Have we helped this economy recover from what is the worst financial crisis since the Great Depression? Have we instituted financial regulations and rules of the road that assure this kind of crisis doesn’t occur again? Have we created jobs that pay well and allow families to support themselves? Have we made significant progress on reducing the cost of health care and expanding coverage? Have we begun what will probably be a decade-long project to shift America to a new energy economy? Have we begun what may be an even longer project of revitalizing our public-school systems?”

There’s more: “Have we closed down Guantánamo in a responsible way, put a clear end to torture and restored a balance between the demands of our security and our Constitution? Have we rebuilt alliances around the world effectively? Have I drawn down U.S. troops out of Iraq, and have we strengthened our approach in Afghanistan — not just militarily but also diplomatically and in terms of development? And have we been able to reinvigorate international institutions to deal with transnational threats, like climate change, that we can’t solve on our own?”

And: “Outside of specific policy measures, two years from now, I want the American people to be able to say, ‘Government’s not perfect; there are some things Obama does that get on my nerves. But you know what? I feel like the government’s working for me. I feel like it’s accountable. I feel like it’s transparent. I feel that I am well informed about what government actions are being taken. I feel that this is a President and an Administration that admits when it makes mistakes and adapts itself to new information.’”

Can he really achieve all that? Plenty of voters will be happy if he aces only Item 1 on his list. But the essence of both Obama’s strength and his promise is that, according to a recent poll, a strong majority of Americans believe he will accomplish most of what he aims to do. For having the confidence to sketch that kind of future in this gloomy hour and for showing the competence that makes Americans hopeful that he will pull it off, Barack Obama is Time’s Person of the Year for 2008.

I. Simple Competence
In some tellings, Obama’s journey to the white house started with his little-noticed but carefully nuanced speech against the Iraq war in 2002. In other versions, it began with his electrifying address to the Democratic Convention in 2004. Those moments blazed with potential, true, but something more was necessary: a certain appetite among the electorate. The country had to be hungry for the menu he offered, and in that sense, his path’s true beginning lay in the drowned precincts of New Orleans in the sweltering, desperate late summer of 2005.

Hurricane Katrina blew away the last gauzy veil from an ugly specter of executive incompetence in American politics. When the people of New Orleans needed leadership, the Republican Administration in Washington proved useless. The Democratic governor and mayor were pitiful. At long last, our government was united — but under an appalling banner of fecklessness. The moral bankruptcy of the spin doctors was laid bare: no soul remained gullible enough to believe that Brownie was doing a heckuva job.

After Katrina, demand collapsed for the very qualities that Obama lacked as a candidate: empty boasts, finger-pointing, backstabbing and years of experience inside a government that couldn’t deliver bottled water to the stranded citizens of a major U.S. city. Spare us the dead-or-alive bravado, the gates-of-hell bluster, the melodrama of the 3 a.m. phone call. A door swung open for a candidate who would merely stand and deliver. Simple competence — although there’s nothing simple about it, not in today’s intricate, interdependent, interwoven, intensely dangerous world.

See pictures of Barack Obama’s campaign behind the scenes.

See pictures of Obama on Flickr.

His official theme was change, but a specific kind of change: the nuts-and-bolts kind you can see and measure. Voters were invited to believe because Obama kept delivering the goods. Certainly he made mistakes and gave up on some ideas while doubling back on others — his promise to stick to the existing campaign-finance system, for example. On the whole, though, he was a doer. Obama told people that a black man could win white votes. In Iowa he proved it. He said a broad-gauge campaign could win in GOP strongholds; along came Indiana and Virginia and North Carolina. He declared that a new approach to politics would topple the old Clinton-Bush seesaw, and topple it he did. He sank the three-pointer with the cameras rolling. Made a speech in a football stadium feel intimate. Some might say these are not exactly Churchillian achievements, but in the land of the hapless, the competent man is king. In the end, his campaign e-mail list numbered some 13 million people, of whom more than 3.5 million put actual skin in the game — money, volunteer hours or both. Obama’s most formidable opponent, Hillary Clinton, tried to convince voters that he was all talk and no action, a vessel empty but for intoxicating fumes. Yet he was the one whose campaign ran like clockwork, while hers was a fratricidal mess. And by Nov. 4, the strongest party in the U.S. was no longer the Republican Party or the Democratic Party; it was the Obama Party.

II. Filling the Vacuum
“A presidential campaign is like an MRI of the soul,” says David Axelrod, Obama’s chief strategist. “And one of the great revelations of this process, certainly the most thrilling revelation to me, was to learn what a great manager this guy is. We had no way of knowing that when we started. When he decided to run, we had no political infrastructure at all. There was just a handful of us, and we were setting off to challenge the greatest political operation in the Democratic Party.”

Keep in mind that Obama, as Rudy Giuliani put it at the Republican Convention in September, had “never led anything, nothing, nada” — certainly not a sprawling organization spread from coast to coast. But he did have a philosophy of leadership, which he explains like this: “I don’t think there’s some magic trick here. I think I’ve got a good nose for talent, so I hire really good people. And I’ve got a pretty healthy ego, so I’m not scared of hiring the smartest people, even when they’re smarter than me. And I have a low tolerance of nonsense and turf battles and game-playing, and I send that message very clearly. And so over time, I think, people start trusting each other, and they stay focused on mission, as opposed to personal ambition or grievance. If you’ve got really smart people who are all focused on the same mission, then usually you can get some things done.”

Stop and look back at those last few words, because they are a telltale sign of Obama’s pragmatism. A persistent question during the campaign — it became the heart of John McCain’s message in the closing weeks — was whether Obama was some kind of radical, a terrorist-befriending socialist masquerading as Steady Freddy. As he builds his Administration, though, he is emerging as a leader who just wants to “get some things done.” (Read “The New Liberal Order.”)

Obama is a businesslike boss. He prefers briefing papers tightly written and shows up for meetings fully prepared. He expects people to challenge him when they think he is wrong and to back up their ideas with facts. He’s not a shouter — “Hollering at people isn’t usually that effective,” he explains — but if he thinks you’ve let him down, you’ll know it. “What was always effective with me as a kid — and Michelle and I find it effective with our kids — is just making people feel really guilty,” he says. “Like ‘Boy, I am disappointed in you. I expected so much more.’ And I think people generally want to do the right thing, and if you’re clear to them about what that right thing is, and if they see you doing the right thing, then that gives you some leverage.”

Again, take a second to reread, this time the bit where he says “people generally want to do the right thing.” Trust of this kind has been in short supply for many years in American politics, where the dominant attitude is that every disagreement is a sign of bad faith and every opponent is assumed to be malevolent. Obama’s attitude was ridiculed as kumbaya naiveté during the campaign, but trust proved to be essential to his victory. His campaign entrusted millions of volunteers with unprecedented authority to download information about prospective voters, to assign themselves to make phone calls and canvass their own neighborhoods and apartment buildings, and to keep the campaign abreast of their progress. A typical presidential effort is top-down, intensely protective of its data and strategies. Obama’s approach seemed to court mischief or even chaos. “There was a lot of snickering among the political pros,” says Plouffe. “They couldn’t believe that we were giving people we didn’t know access to our data and trusting them to handle it honestly. But it was enormously important because it made people feel that much more accountable: ‘These are my three blocks, and everyone’s counting on me.’”

See pictures of Obama on Flickr.

See the Six Degrees of Barack Obama.

Yes, Obama could talk — like nobody’s business — but talk didn’t win the election. According to the daily tracking polls, the tumblers clicked into place precisely at the moment the financial hurricane hit, when the wizards of Wall Street proved as incompetent as Oz and neither the President nor the leaders of Congress nor the Treasury boss nor Senator McCain could deliver a rescue package. When this group failure provoked a stock-market crash in early October, Americans asked, “Can’t anybody here play this game?” Astounding as it would have seemed scant months before, their gaze fell on the one fixed point in the widening gyre: a guy named Barack Hussein Obama. (See pictures of Barack Obama’s family tree.)

III. Fear Itself
As White House Chief of Staff during the final years of the Clinton Administration, John Podesta became accustomed to short nights and emotional roller coasters. Still, he found it a bit strange to be headed to the airport in the predawn darkness of Nov. 5 — just a few hours after the election of a Democratic President. Was Obama really going to chair a major strategy session the morning after winning the longest and most grueling campaign on record? How about a day off?

Long before Election Day, Obama decided that an ordinary transition wouldn’t do. Given the shaky economy and two wars, he knew that the winner of the election — whoever it turned out to be — would face instant and daunting challenges. He wanted to be ready. “What I was absolutely convinced of was that, whether it was me or John McCain, the next President-elect was going to have to move swiftly,” Obama recalls. He deployed Podesta in midsummer to lead an unusually elaborate preparation for a possible Obama presidency. McCain accused him of overconfidence and vanity, of measuring the Oval Office drapes. To Obama, it was simply a matter of prudence. (See pictures from the historic Election Day.)

Podesta had long been planning the return of a Democrat to the White House, and his think tank, the Center for American Progress, was already preparing detailed briefings on conditions in the various departments of government. As the financial system went into free fall in September, Podesta’s team pressed the FBI to work overtime on security screenings of potential Obama nominees. Now, as he boarded a 6 a.m. flight to Chicago, Podesta carried a list of more than 100 candidates who had passed their background investigations and were ready for confirmation on Day One. Instead of taking a day off, the new President-elect celebrated his victory with a five-hour meeting.

Obama had been pondering whether he should step to center stage or wait in the wings as the turbulent last months of the Bush Administration played out. His aides were all over the map. Some advised him to go quietly about his business in Chicago and insist that America has just one President at a time. For Obama to succeed, they argued, the country needed to see his Inauguration as a clean break, a new sunrise. Others floated the idea of immediately starting the First Hundred Days, perhaps asking George W. Bush to appoint Obama’s choices to key offices so that they could get to work by late November.

Obama was leery of appearing to shoulder responsibility for problems before he had any real authority to fix them. Bush’s bank of political capital was busted, and Obama wasn’t about to take ownership of the toxic assets. On the other hand, he didn’t want to repeat the dysfunctional transition of power from Herbert Hoover to Roosevelt in the dark hours of the Great Depression. F.D.R.’s silence between his election and his Inauguration may have deepened the crisis. By 5 p.m. on Nov. 5, when Podesta walked out of that meeting — not 24 hours after the polls closed — Obama was far ahead of the normal transition process, having homed in on finalists for many of his key staff and Cabinet positions. But he hadn’t yet decided how public to be about it.

Within two days, however, events forced his hand. On Friday, Nov. 7, Obama convened a meeting of his economic advisers in Chicago, and the tone of their comments was chilling. The stock market was plunging; credit remained tight; fresh unemployment numbers were shocking. “There was just a very dramatic deterioration” in the days after the election, says Timothy Geithner, Obama’s choice for Treasury Secretary. On previous occasions when the group had gathered, someone could always be counted on to find potential upsides in dismal forecasts, while Paul Volcker, the 81-year-old former chairman of the Federal Reserve, reliably closed each meeting with a gloomy soliloquy. On this day, though, there was no positive scenario for Volcker to deflate. Everyone in the room was grim.

See pictures of the global financial crisis.

See pictures of Obama’s nation of hope.

Obama opened the meeting by reflecting on his dilemma: act now or wait until January? By the end of the session, he had concluded that, like it or not, he must “accelerate all of our timetables,” as he put it, “in appointments not just on the Cabinet but also our White House team, in structuring economic plans so that we can start getting them to Congress and hopefully begin work — even before I’m sworn in — on some of our key priorities around the economy, on laying the groundwork for a national-security team that can take the baton in a wartime transition.” There was no time for the “traditional postelection holiday.” Vacations would have to wait until Christmas.

Transition is such a gentle word. We make the transition from youth to adulthood or from the dinner table to the den. For Obama, though, the concept was freighted with danger. “He was very focused on the basic perils of the gap between the election and the Inauguration, at a time when the economy was clearly deteriorating and the markets were very fragile,” Geithner explains. In certain powerful respects, Obama felt compelled to begin his presidency immediately. Markets needed to size up his economic team and hear what he planned to do. Congressional leaders, contemplating a colossal economic-stimulus package, needed to know where he was headed. Military leaders, key allies and opportunistic enemies were all keen to know just how dovish the anti-Iraq-war President intended to be. Obama concluded that hanging back would create a dangerous leadership void in the short-term and compound his troubles come January. And nothing that has happened since that Nov. 7 decision — the crisis at Citigroup, the drama of the automakers or the assault on Mumbai — has made the transfer of power look any less perilous.

He could not have predicted when he set out to become President that he would face such circumstances. The distance from the birth of his campaign to these first days of his fledgling presidency could be counted in months but measured in light-years. When he announced his candidacy on a frigid morning in Springfield, Ill., in 2007, Iraq was a disaster, and the Dow was still headed upward past 14,000. So this moment was a test not only of his speed but also of his flexibility. Obama proved lithe, indeed, persuading Robert Gates, Bush’s Secretary of Defense, to remain in his post and asking Clinton, a constant critic of Obama’s foreign policy views during their primary battle, to be his Secretary of State. Priority 1 was the economic team, however. There his task was to find a mix of people familiar enough to signal stability but fresh enough to promise change, and to design a stimulus strategy dramatic enough to inspire markets to swallow their panic. (See pictures of Obama’s White House team.)

In the days leading up to Thanksgiving, Obama delivered. Having promised to govern from the middle, he rolled out a bright purple team of economic advisers, neither red nor blue. Geithner had served in various posts under both Bush and Bill Clinton. As president of the New York Fed, he was well known to Wall Street but relatively unknown on Main Street — just the blend of experience and newness that Obama was seeking. His budget director, Peter Orszag, had fans across the political spectrum, and his in-house oracle, Volcker, was a Democrat who fought inflation alongside Ronald Reagan. Larry Summers, named to run the economics team from the White House, was a Clinton stalwart.

Unveiling these and other picks at a series of daily press conferences, Obama assured the public that he wanted to move fast, so fast that trainloads of money might be ready for him to dispatch across the country with a stroke of his pen on Inauguration Day. The idea of another wave of spending horrifies America’s surviving conservatives, but most economists support it — some with enthusiasm, some with resignation. Obama realized that the stimulus package could be a vehicle for launching his broad domestic agenda. His ambitious campaign promises — to reform health care, cut taxes for low- and moderate-income earners and steer the U.S. toward a new energy economy — had seemed doomed by the yawning budget deficit (some $200 billion a month, according to the latest projections). But call these projects “stimulus,” and suddenly a ship headed for the reef of economic disaster might sail through Congress flying the flag of economic recovery. With even Republican economists talking about hundreds of billions in new spending, the sky’s the limit. A dream of health-care reformers — electronic medical records — is now economic stimulus because Obama will pour money into hospitals for computers and clerical workers. His tax cut is stimulus because it puts spending money in the pockets of working Americans. His pledge to repair the nation’s infrastructure is a stimulus plan for construction workers, while his energy strategy is stimulus for the people who will modernize government buildings, update public schools and improve the electrical grid.

See pictures of Obama’s nation of hope.

See pictures of Obama’s college years.

Of course, the bullet points are easy to list; far harder is the task of spending vast sums — perhaps $1 trillion over two years — efficiently, effectively and quickly enough to spur the economy. Washington’s three goblins — waste, fraud and abuse — are watching with hungry eyes. Obama has cast Orszag as a flinty keeper of the purse strings, but he has no intention of letting his opportunity go by. “I don’t think that Americans want hubris from their next President,” Obama says, noting that McCain received nearly 47% of the vote last month. However, “I do think that we received a strong mandate for change. And I know that people have said, ‘Well, what does this change word mean? You know that it’s sort of ill defined.’ Actually, we defined it pretty precisely during the campaign, and I’m trying to define it further for people during this transition,” he says. “It means a government that is not ideologically driven. It means a government that is competent. It means a government, most importantly, that is focused day in, day out on the needs and struggles, the hopes and dreams of ordinary people.”

IV. Into the Breach
More than 75 years ago, a new president took the oath of office amid economic catastrophe and admonished the nation that “the only thing we have to fear is fear itself.” Today generations of Americans are experiencing a harsh tutorial in the true meaning of that resonant diagnosis. Fear is kryptonite to the economy, which cannot operate efficiently without broad and well-founded confidence — that wise investments will gain value, that balance sheets mean what they say, that contracts will be honored and bills paid.

The events of the past autumn produced the sharpest drop in consumer confidence ever recorded, and a similar wave of fear cratered credit markets. Obama notes the very real structural flaws in the economy, but he is also aware of the role that fear plays. “Nobody trusts other people’s books anymore. And people decide, ‘Well, I’m just going to hold on to my cash for a while,’” he explains. “And that compounds the crisis. And all that results in a contraction in lending, in consumer spending, which then has a real impact on Main Street. And so what starts off as psychological is now very real.”

Just like our banks and our carmakers, America’s shattered confidence is in serious need of a bailout. And the thing about competence is that it nourishes fresh confidence. “Yes, we can” is both an affirmation of optimism and the essential claim of the competent. When the slogan is rooted in a record of accomplishment — when tomorrow’s yes-we-can is backed up by yesterday’s yes-we-did — confidence and competence begin to feed on each other. This virtuous cycle of possibility isn’t the whole of leadership, but it is an important part and perhaps the element most needed in today’s sea of troubles. (See pictures of Obama’s nation of hope.)

After the election, veteran Democratic pollster Peter Hart convened one last focus group to ask Virginia voters why a state that gave Bush an 8-point victory four years ago chose Obama by 6 points this time. Their responses clustered around the crucial connection between competence and confidence. They told Hart they were drawn to Obama’s self-assured and calming personality. They felt he was “honest,” a “straight shooter” — in other words, a person who does what he says he will do. Their confidence in Obama wasn’t starry-eyed; they hadn’t been swept away by his stadium speeches. They saw a man who can get some things done, at a time when so many of their leaders, from Pennsylvania Avenue to Wall Street, cannot. He made moderates feel hopeful, and even among many core Republicans who did not ultimately vote for him, Obama inspired admiration. Viewing these comments through the results of his national surveys, Hart discerned a surge of good feeling that he had not seen in a generation: “a sense of real hope,” he says, “and the kind of broad bipartisan support that has not been in evidence since the 1980 Reagan election.”

Obama has begun to turn his thoughts to his Inaugural Address. According to strategist Axelrod, he is looking for the right mixture of bracing and boost in a speech that will be “both sober and hopeful.” He may signal a new day by announcing a plan to stem the foreclosure crisis, which aides say is in the works. As the gray Chicago sky frowns outside his conference-room window, Obama rehearses his message. Americans “should anticipate that 2009 is going to be a tough year,” he says. Then he adds, “If we make some good choices, I’m confident that we can limit some of the damage in 2009. And that in 2010 we can start seeing an upward trajectory on the economy.”

A few days after this interview, Illinois Governor Rod Blagojevich reminded the country that some aspects of politics will never change. Government is a human enterprise, after all, and Obama, like everyone else, is bound by its limits and subject to human frailty. Nevertheless, if he has shown anything this year, Obama has made it clear that he knows how to write new playbooks and do things in new ways. Which is a compelling quality right now. His arrival on the scene feels like a step into the next century — his genome is global, his mind is innovative, his world is networked, and his spirit is democratic. Perhaps it takes a new face to see the promise in a future that now looks dark. What’s in store for Obama’s America? “I don’t have a crystal ball,” he says. But the measure of his success in menacing times can be found in the number and variety of people who consider the question with eagerness alongside their dread.

—David Von Drehle with reporting by Massimo Calabresi and Michael Duffy / Washington

See pictures of Obama’s college years.

See pictures of the Civil Rights movement from Emmett Till to Barack Obama.

By NICHOLAS CONFESSORE

ALBANY — Caroline Kennedy, the deeply private daughter of America’s most storied political dynasty, will seek the United States Senate seat in New York being vacated by Hillary Rodham Clinton.

ROD BLAGOJEVICH is the perfect holiday treat for a country fighting off depression. He gift-wraps the ugliness of corruption in the mirthful garb of farce. From a safe distance outside Illinois, it’s hard not to laugh at the “culture of Chicago,” where even the president-elect’s Senate seat is just another commodity to be bought and sold.

But the entertainment is escapist only up to a point. What went down in the Land of Lincoln is just the reductio ad absurdum of an American era where both entitlement and corruption have been the calling cards of power. Blagojevich’s alleged crimes pale next to the larger scandals of Washington and Wall Street. Yet those who promoted and condoned the twin national catastrophes of reckless war in Iraq and reckless gambling in our markets have largely escaped the accountability that now seems to await the Chicago punk nabbed by the United States attorney, Patrick Fitzgerald.

The Republican partisans cheering Fitzgerald’s prosecution of a Democrat have forgotten his other red-letter case in this decade, his conviction of Scooter Libby, Dick Cheney’s chief of staff. Libby was far bigger prey. He was part of the White House Iraq Group, the task force of propagandists that sold an entire war to America on false pretenses. Because Libby was caught lying to a grand jury and federal prosecutors as well as to the public, he was sentenced to two and a half years in prison. But President Bush commuted the sentence before he served a day.

Fitzgerald was not pleased. “It is fundamental to the rule of law that all citizens stand before the bar of justice as equals,” he said at the time.

Not in the Bush era, man. Though the president had earlier vowed to fire anyone involved in leaking the classified identity of a C.I.A. officer, Valerie Plame Wilson — the act Libby tried to cover up by committing perjury — both Libby and his collaborator in leaking, Karl Rove, remained in place.

Accountability wasn’t remotely on Bush’s mind. If anything, he was more likely to reward malfeasance and incompetence, as exemplified by his gifting of the Presidential Medal of Freedom to George Tenet, L. Paul Bremer and Gen. Tommy Franks, three of the most culpable stooges of the Iraq fiasco.

Bush had arrived in Washington vowing to inaugurate a new, post-Clinton era of “personal responsibility” in which “people are accountable for their actions.” Eight years later he holds himself accountable for nothing. In his recent exit interview with Charles Gibson, he presented himself as a passive witness to disastrous events, the Forrest Gump of his own White House. He wishes “the intelligence had been different” about W.M.D. in Iraq — as if his administration hadn’t hyped and manipulated that intelligence. As for the economic meltdown, he had this to say: “I’m sorry it’s happening, of course.”

If you want to trace the bipartisan roots of the morally bankrupt culture that has now found its culmination in our financial apocalypse, a good place to start is late 2001 and 2002, just as the White House contemplated inflating Saddam’s W.M.D. That’s when we learned about another scandal with cooked books, Enron. This was a supreme embarrassment for Bush, whose political career had been bankrolled by the Enron titan Kenneth Lay, or, as Bush nicknamed him back in Texas, “Kenny Boy.”

The chagrined president eventually convened a one-day “economic summit” photo op in August 2002 (held in Waco, Tex., lest his vacation in Crawford be disrupted). But while some perpetrators of fraud at Enron would ultimately pay a price, any lessons from its demise, including a need for safeguards, were promptly forgotten by one and all in the power centers of both federal and corporate governance.

Enron was an energy company that had diversified to trade in derivatives — financial instruments that were bets on everything from exchange rates to the weather. It was also brilliant in devising shell companies that kept hundreds of millions of dollars of debt off the company’s bottom line and away from the prying eyes of shareholders.

Regulators had failed to see the iceberg in Enron’s path and so had Enron’s own accountants at Arthur Andersen, a corporate giant whose parallel implosion had its own casualty list of some 80,000 jobs. Despite Bush’s post-Enron call for “a new ethic of personal responsibility in the business community,” the exact opposite has happened in the six years since. Warren Buffett’s warning in 2003 that derivatives were “financial weapons of mass destruction” was politely ignored. Much larger companies than Enron figured out how to place even bigger and more impenetrable gambles on derivatives, all the while piling up unseen debt. They built castles of air on a far grander scale than Kenny Boy could have imagined, doing so with sheer stupidity and cavalier, greed-fueled carelessness rather than fraud.

The most stupendous example as measured in dollars is Citigroup, now the recipient of potentially the biggest taxpayer bailout to date. The price tag could be some $300 billion — 20 times the proposed first installment of the scuttled Detroit bailout. Citigroup’s toxic derivatives, often tied to subprime mortgages, metastasized without appearing on the balance sheet. Both the company’s former chief executive, Charles O. Prince III, and his senior adviser, Robert Rubin, the former Clinton Treasury secretary, have said they didn’t know the size of the worthless holdings until they’d spiraled into the tens of billions of dollars.

Once again, regulators slept. Once again, credit-rating agencies, typified this time by Moody’s, kept giving a thumbs-up to worthless paper until it was too late. There was just so much easy money to be made, and no one wanted to be left out. As Michael Lewis concludes in his brilliant account of “the end” of Wall Street in Portfolio magazine: “Something for nothing. It never loses its charm.”

But if all bubbles and panics are alike, this one, the worst since the Great Depression, also carried the DNA of our own time. Enron had been a Citigroup client. In a now-forgotten footnote to that scandal, Rubin was discovered to have made a phone call to a former colleague in the Treasury Department to float the idea of asking credit-rating agencies to delay downgrading Enron’s debt. This inappropriate lobbying never went anywhere, but Rubin neither apologized nor learned any lessons. “I can see why that call might be questioned,” he wrote in his 2003 memoir, “but I would make it again.” He would say the same this year about his performance at Citigroup during its collapse.

The Republican side of the same tarnished coin is Phil Gramm, the former senator from Texas. Like Rubin, he helped push through banking deregulation when in government in the 1990s, then cashed in on the relaxed rules by joining the banking industry once he left Washington. Gramm is at UBS, which also binged on credit-default swaps and is now receiving a $60 billion bailout from the Swiss government.

It’s a sad snapshot of our century’s establishment that Rubin has been an economic adviser to Barack Obama and Gramm to John McCain. And that both captains of finance remain unapologetic, unaccountable and still at their banks, which have each lost more than 70 percent of their shareholders’ value this year and have collectively announced more than 90,000 layoffs so far.

The Times calls its chilling investigative series on the financial failures “The Reckoning,” but the reckoning is largely for the rest of us — taxpayers, shareholders, the countless laid-off employees — not the corporate and political leaders who led us into the quagmire. It’s a replay of the Iraq equation: the troops, the Iraqi people and American taxpayers have borne the harshest costs while Bush and company retire to their McMansions.

As our outgoing president passes the buck for his failures — all that bad intelligence — so do leaders in the private and public sectors who enabled the economic debacle. Gramm has put the blame for the subprime fiasco on “predatory borrowers.” Rubin has blamed a “perfect storm” of economic factors, as has Sam Zell, the magnate who bought and maimed the Tribune newspapers in a highly leveraged financial stunt that led to a bankruptcy filing last week. Donald Trump has invoked a standard “act of God” clause to avoid paying a $40 million construction loan on his huge new project in Chicago.

After a while they all start to sound like O. J. Simpson, who when at last held accountable for some of his behavior told a Las Vegas judge this month, “In no way did I mean to hurt anybody.” Or perhaps they are channeling Donald Rumsfeld, whose famous excuse for his failure to secure post-invasion Iraq, “Stuff happens,” could be the epitaph of our age.

Our next president, like his predecessor, is promising “a new era of responsibility and accountability.” We must hope he means it. Meanwhile, we have the governor he leaves behind in Illinois to serve as our national whipping boy, the one betrayer of the public trust who could actually end up paying for his behavior. The surveillance tapes of Blagojevich are so fabulous it seems a tragedy we don’t have similar audio records of the bigger fish who have wrecked the country. But in these hard times we’ll take what we can get.

Special election only way to keep things honest

Political leaders in Illinois may still not get it. But we do.

Gov. Blagojevich’s downfall has given the rest of the country a jaw-dropping look at how the world works in the Land of Lincoln.

And you know what? After they got past the nasty language, I doubt that the majority of them were shocked that the fix was in when it came to who would fill President-elect Barack Obama’s Senate seat.

The most shocking aspect of this tawdry affair is that Blagojevich was free to do whatever the heck he wanted.

Far as I can tell, no one complained about the lack of a credible and transparent process.

No one complained that the governor was dragging his heels.

No one ran off screaming: shakedown, shakedown!!

Despite Blagojevich’s arrogant and bullying demeanor, no one dared rat out the governor.

In fact, I would argue that Blagojevich’s colleagues weren’t surprised that he was trying to barter the Senate seat for political favors and campaign donations.

But these same colleagues are likely absolutely shocked by Blagojevich’s tackiness.

But Blagojevich apparently didn’t have time to be subtle.

He has been in the cross hairs of federal prosecutors since he took office in 2003.

Before he’d even warmed the governor’s seat, his own father-in-law, Ald. Dick Mell, who viewed his son-in-law as cocky and ungrateful, said publicly that Blagojevich was trading board appointments for campaign donations. It was beginning to look like “The People” had fallen for a rogue in reformer’s clothing.

Now it seems clear from the complaint that Blagojevich was certain he was going to be impeached and desperately needed a place to land.

“I’ve got this thing and it’s f—— golden, and uh, uh, I’m just not giving it up for f——’ nothing. I’m not gonna do it,” Blagojevich allegedly said in a call that was intercepted by federal prosecutors.

Although the legislative body that was working with Blagojevich was a war zone, no one balked at him picking the next senator?

No one suspected the investigation that was swirling around Blagojevich was a problem?

No one had the courage to demand that the laws be changed so there could be a special election?

I suspect that Blagojevich’s biggest sin, and the thing that has members of the General Assembly gnashing their teeth, is that he was so inept at the sleazy gamesmanship that is an integral part of Illinois politics.

Blagojevich was caught on tape saying: “I want to make money,” words pols dare not speak … on a wiretap.

Because regardless of how we rail against Blagojevich, at the heart of all politics is pay to play.

Yes. There’s a thin line between expectations and shakedown. But do any of us really believe that the people who raise huge sums of money for a particular political candidate aren’t expecting something for their efforts?

Do we really believe that a person who is vested with the power to give away a Senate seat isn’t going to give it to the person who will somehow do him or her the most good?

That’s why the way out of the Senate seat scandal can’t be more of the same.

With all due respect to Lt. Gov. Pat Quinn, he shouldn’t be in a position to pick the next Illinois senator.

He has served six years with the governor and didn’t have a clue as to what was really going on with the Blagojevich administration.

Hopefully, Blagojevich will resign and spare the state further embarrassment.

If he doesn’t, the General Assembly appears to be moving toward impeachment.

And a lawsuit filed by Illinois Attorney General Lisa Madigan asking the Illinois Supreme Court to remove Blagojevich from office because he is unable to serve would also pave the way for a Quinn pick.

No thank you.

Once Blagojevich is drummed out of office, the race for the Senate seat would begin anew with a fresh round of lobbying and horse trading.

Illinois voters should demand that the state hold a special election.

We’ve heard enough promises of change from enough reformers that we finally get it.

We know how Illinois works.

Froma Harrop
The Providence Journal
December 12, 2008

Have New York Democrats lost all self-respect? Their excited talk of whether Caroline Kennedy is “interested” in Hillary Clinton’s Senate seat makes you wonder. The late John F. Kennedy’s daughter has made at least one feeler phone call to New York Gov. David Paterson. And Uncle Teddy, the Massachusetts senator, is busy pulling the levers to slip her in. The seat will be vacant upon Clinton’s confirmation as secretary of state.

This unsavory spectacle has been upstaged by the wild drama in Illinois, where Gov. Rod Blagojevich is being accused of trying to sell Barack Obama’s Senate seat. The doings in New York are not blatant corruption, but they are corrosive to our democratic ideals. Lest anyone forget the point of the American Revolution, our representatives are not chosen by hereditary succession, which, to quote Thomas Paine, “is an insult and imposition on posterity.”

Of course, Caroline can ask for whatever she wants. The astounding part is that the idea of such a request hasn’t been laughed out of the news pages.

New York Mayor Michael Bloomberg, against all evidence, touts Caroline as “a very experienced woman.” Her government service starts and ends at raising private money for the New York City schools. While a worthy endeavor, it’s a socialite’s job.

For nearly four decades after her father’s assassination, Caroline commendably resisted the call to become a Democratic Party ornament. Then at the 2000 Democratic convention, she stepped on the stage to the tune of “Camelot” and, with no little presumption, thanked the American people for “sustaining us through the good times, and the difficult ones, and for helping us dream my father’s dream.” Then she introduced “Uncle Teddy.”

Women’s groups have been eager to see Clinton replaced by another female. The Feminist Majority and the National Organization for Women had already endorsed Carolyn Maloney, a congresswoman who has represented parts of Manhattan and Queens for 15 years.

But if Caroline Kennedy wants the job, all bets are off, according to Feminist Majority President Eleanor Smeal. “You’re talking to someone who thinks Ted Kennedy is the most effective senator there,” Smeal actually told the New York Times.

Here you have it. Without a second thought, feminists talk of throwing a seasoned, self-made professional overboard to make room for a Kennedy princess.

Uncle Ted has been reminding Democrats that Caroline would be backed by – as the Times straightforwardly put it – “the Kennedy family’s extensive fundraising network.” That’s nice, but this is New York state, where electing a Democrat requires no miracle.

Set aside whether any seat should be gender-specific. It certainly shouldn’t be genealogy-specific. But that’s one of Caroline’s selling points, at least from the Kennedy perspective. The seat was held for three years by her uncle Robert F. Kennedy, who was killed in 1968. For this reason, RFK’s son Robert F. Kennedy Jr. was also eying the seat for himself. (Perhaps he could be made ambassador to France, instead.)

Hey, what about the Moynihans? Democrat Daniel Patrick Moynihan occupied that Senate chair for more than 20 years. No Moynihan has yet come forward to claim it as a family possession to be handed down unto the generations.

Are we really having this conversation?

Paterson says he hasn’t decided whom he will choose, though he notes that Caroline is “thinking about” the Senate position. According to the Times, “Some influential Democrats have privately suggested that given the buzz set off by Ms. Kennedy’s emergence, the governor would have little choice but to appoint her if she decided she truly wanted the job.”

Actually, he does have a choice.

Can New York Democrats summon up some dignity? We shall see.

Associated Press
December 9, 2008

In this August 2008 file photo, Illinois Gov. Rod Blagojevich discusses an executive order he signed that extends the language of an ethics bill passed by the House and the Senate earlier this year to include campaign contributions from large state contractors to officeholders. Blagojevich was arrested Dec. 9, 2008, on charges of conspiring to get financial benefits through his authority to appoint a U.S. senator to fill the vacancy left by Barack Obama’s election as president. (Associated Press) A look at Illinois Gov. Rod R. Blagojevich Age, birthdate: 51; Dec. 10, 1956 Home: Chicago Family: Wife, Patricia; two daughters Education: Northwestern University, graduated 1979; Pepperdine University, law degree, 1983 Experience: Elected Illinois governor 2002, re-elected 2006; served in the U.S. House of Representatives from Illinois’ 5th district 1997-2002; served in the Illinois House from a North Side Chicago district 1992-1996; assistant Cook County state’s attorney, prosecuting criminal cases. Quote: “I don’t care whether you tape me privately or publicly. I can tell you that whatever I say is always lawful.”

CHICAGO — Federal authorities arrested Illinois Gov. Rod Blagojevich today on charges that he brazenly conspired to sell or trade the Senate seat left vacant by President-elect Barack Obama to the highest bidder.

Blagojevich also was charged with illegally threatening to withhold state assistance to Tribune Co., the owner of the Chicago Tribune, in the sale of Wrigley Field, according to a federal criminal complaint. In return for state assistance, Blagojevich allegedly wanted members of the paper’s editorial board who had been critical of him fired.

A 76-page FBI affidavit said the 51-year-old Democratic governor was intercepted on court-authorized wiretaps over the last month conspiring to sell or trade the vacant Senate seat for personal benefits for himself and his wife, Patti.

Otherwise, Blagojevich considered appointing himself. The affidavit said that as late as Nov. 3, he told his deputy governor that if “they’re not going to offer me anything of value I might as well take it.”

“I’m going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain,” Blagojevich allegedly said later that day, according to the affidavit, which also quoted him as saying in a remark punctuated by profanity that the seat was “a valuable thing — you just don’t give it away for nothing.”

The affidavit said Blagojevich also discussed getting a substantial salary for himself at a nonprofit foundation or an organization affiliated with labor unions.

It said Blagojevich also talked about getting his wife placed on corporate boards where she might get $150,000 a year in director’s fees.

He also allegedly discussed getting campaign funds for himself or possibly a post in the president’s cabinet or an ambassadorship once he left the governor’s office. He noted becoming a U.S. senator might remake his image for a possible presidential run in 2016, according to the affidavit. And he allegedly said a Senate seat would also provide him with corporate contacts if he needed a job and present an opportunity for his wife to work as a lobbyist.

“I want to make money,” the affidavit quotes him as saying in one conversation.

The affidavit said Blagojevich expressed frustration at being “stuck” as governor and that he would have access to greater resources if he were indicted while in the U.S. Senate than while sitting as governor.

U.S. Attorney Patrick J. Fitzgerald said in a statement that “the breadth of corruption laid out in these charges is staggering.”

“They allege that Blagojevich put a for sale sign on the naming of a United States senator,” Fitzgerald said.”

Among those being considered for the post include U.S. Reps. Danny Davis and Jesse Jackson Jr.

Blagojevich also was charged with using his authority as governor in an attempt to squeeze out campaign contributions.

His chief of staff, John Harris, also was arrested.

Corruption in the Blagojevich administration has been the focus of a federal investigation involving an alleged $7 million scheme aimed at squeezing kickbacks out of companies seeking business from the state. Federal prosecutors have acknowledged they’re also investigating “serious allegations of endemic hiring fraud” under Blagojevich.

Political fundraiser Antoin “Tony” Rezko who raised money for the campaigns of both Blagojevich and Obama is awaiting sentencing after being convicted of fraud and other charges. Blagojevich’s chief fundraiser, Christopher G. Kelly, is due to stand trial early next year on charges of obstructing the Internal Revenue Service.

According to today’s complaint, Blagojevich schemed with Rezko, millionaire-fundraiser turned federal witness Stuart Levine and others to get financial benefits for himself and his campaign committee.

Federal prosecutors said Blagojevich and the chairman of his campaign committee have been speeding up corrupt fundraising activities in the last month to get as much money as possible before the end of the year when a new law would curtail his ability to raise contributions from companies with state contracts worth more than $50,000.

According to the affidavit, agents learned Blagojevich was seeking $2.5 million in campaign contributions by the end of the year, with a large part allegedly to come from companies and individuals who have gotten state contracts or appointments.

Blagojevich took the chief executive’s office in 2003 as a reformer promising to clean up former Gov. George Ryan’s mess.

Ryan, a Republican, is serving a 6-year prison sentence after being convicted on racketeering and fraud charges. A decade-long investigation began with the sale of driver’s licenses for bribes and led to the conviction of dozens of people who worked for Ryan when he was secretary of state and governor.

FBI spokesman Frank Bochte said federal agents arrested the governor and Harris simultaneously at their homes at 6:15 a.m. and took them to the Chicago FBI headquarters.

Bochte said he did not know if either man was handcuffed or if the governor’s family was their North Side home at the time of his arrest. He did say Blagojevich and Harris both were given time to get dressed before being taken to the headquarters.

He also did not have any details about Blagojevich’s arrest, only that he was cooperative with federal agents.

“It was a very calm setting,” he said.

The governor was to appear later today before U.S. Magistrate Judge Nan Nolan to answer the charges. The time was not immediately set.

WASHINGTON — Congressional Democrats were drafting legislation Sunday for tight government control of the crippled American auto industry, including the possible creation of an oversight board made up of five cabinet secretaries and the head of the Environmental Protection Agency and led by an independent chairman or “car czar.”

While the form of oversight was still to be negotiated by Congressional Democrats and the White House, the talks made clear the extent to which the auto companies would have to submit to substantial government supervision in order to receive a taxpayer-financed bailout.

Whatever oversight entity is created, it would direct the drastic reorganization plans that the auto companies have said they were willing to undertake in exchange for billions of dollars in short-term government loans to keep them in business, a senior Congressional aide said. A main factor complicating the deliberations was the imminent transition between the Bush and Obama administrations.

The discussions of how strong a hand the government should take with the auto industry came as Congressional and White House negotiators sought to put the final touches on emergency bridge loans of about $15 billion to keep General Motors, Chrysler and Ford afloat.

The final legislation is also expected to impose stringent taxpayer protections, including stock warrants that would give the government an equity stake in the three companies, new limits on executive pay and a ban on stock dividends while the loans are outstanding. One proposal would require the auto companies to seek government approval for any business transaction of $25 million or more.

Once a bill offering aid to the industry is completed by Congressional Democrats and the White House, it would still need the approval of some Senate Republicans. Senator Carl Levin, Democrat of Michigan, one of the auto industry’s biggest supporters, said on Sunday that it was uncertain whether the plan would win the 60 votes needed to advance in the Senate.

President-elect Barack Obama, whose transition team has been involved in the talks, made starkly clear in an interview and at a brief news conference on Sunday that any aid to the Big Three auto companies should not come without significant concessions.

“They’re going to have to restructure,” Mr. Obama said in an interview on “Meet the Press” on NBC. “And all their stakeholders are going to have restructure. Labor, management, shareholders, creditors — everybody is going to recognize that they have — they do not have a sustainable business model right now, and if they expect taxpayers to help in that adjustment process, then they can’t keep on putting off the kinds of changes that they, frankly, should have made 20 or 30 years ago.”

Still, the bill seemed likely to stop short of authorizing the broad powers that some lawmakers had urged to allow what could have amounted to an out-of-court bankruptcy proceeding, in which the automakers’ creditors could be forced to accept reduced payments, labor contracts could be rewritten and executives could be summarily dismissed.

Senator Christopher J. Dodd, the chairman of the banking committee that is drafting the legislation, called for the dismissal or resignation of Rick Wagoner, the chief executive of G.M., which is the most imperiled automaker.

“I think you’ve got to consider new leadership,” Mr. Dodd said Sunday in an interview on “Face the Nation” on CBS. “If you’re going to really restructure this, you’ve got to bring in a new team to do this, in my view.”

Asked specifically about Mr. Wagoner, Mr. Dodd said: “I think he has to move on.”

A G.M. spokesman, Steve Harris, said that the company was grateful for Mr. Dodd’s assistance and that it was willing to accept tough oversight, but that it retained confidence in Mr. Wagoner.

“We appreciate Senator Dodd’s support in trying to provide some assistance for the industry, but General Motors’ employees, dealers, suppliers and the G.M. board of directors feel strongly that Rick Wagoner is the right person to continue the transformation of the company that he began and has presented plans to Congress to continue and accelerate,” Mr. Harris said.

All of the proposals made clear that Congressional Democrats and the White House, furious over the need for another huge corporate bailout, intended to make the automakers pay a price far greater than the 5 percent interest on the emergency loans.

Congressional Democrats said that if any of the companies failed to meet government requirements by the end of March, the emergency loans could be called in for immediate repayment.

At the news conference in Chicago, Mr. Obama affirmed his position that it would be unacceptable to allow the auto industry to collapse. But using somewhat tougher language than he had before, he said it made “no sense for us to shovel more money into the problem” if the companies are unwilling to reorganize.

The Bush White House, in its proposal for an auto rescue plan, called for the creation of a “financial viability adviser” within the Commerce Department charged with negotiating a “long-term financial viability plan” for each of the auto companies.

If such a viability plan could not be negotiated, the White House proposal called for allowing the adviser to mandate one.

Democrats were weighing counterproposals calling for the creation of a full oversight board, made up of the secretaries of commerce, energy, labor, transportation and of the Treasury, and the administrator of the Environmental Protection Agency.

Many lawmakers in both parties say they are troubled by the Bush administration’s handling of the $700 billion financial system rescue, which Congress approved in October. Several lawmakers said they did not want to be pressured again into spending billions of taxpayer dollars to rescue private companies.

“I think Congress is tired of being stampeded,” Senator Jeff Sessions, Republican of Alabama, said on “Face the Nation.” “We haven’t even seen a bill yet. So I think there’s still a lot of skepticism out there.”

Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, on “Fox News Sunday” urged his Republican colleagues to filibuster a bailout bill. “I think this is a bridge loan to nowhere,” he said.

As lawmakers grappled with ways to aid the auto industry. Mr. Obama cautioned on “Meet the Press” that it was critical to think about both short- and long-term solutions to the nation’s economic woes. “Things are going to get worse before they get better,” Mr. Obama said.

David M. Herszenhorn reported from Washington, and Jackie Calmes from Chicago. Peter Baker and John M. Broder contributed reporting from Washington, and Bill Vlasic from Detroit.

Oversight Definition (answers.com):  In general usage, oversight usually means something that has been forgotten or overlooked. But in Congress it means just the opposite. When Congress performs its oversight functions, it is supervising, or looking over, the business of executive branch departments.

The Legislative Reorganization Act of 1946 assigned to each committee or subcommittee with jurisdiction over legislation relating to a particular agency, or with the power to appropriate its funds, the power to exercise “continuous watchfulness” over that agency. Through their oversight functions, congressional committees monitor how well agencies are administering the laws and if they are spending federal money properly. The General Accounting Office conducts regular audits of agency finances. Committees also call agency heads to testify during oversight hearings. By contrast to investigations, which are usually special hearings concerned with a single issue or event, oversight is a regular, year-to-year, ongoing procedure. Consequently, Congress’s oversight functions get less attention from the media than dosplashier investigations. (1946 and 1970)

Program focuses on infrastructure, modernizing public buildings

Michael D. Shear
Washington Post
December 7, 2008

WASHINGTON – On the heels of more grim unemployment news, President-elect Barack Obama on Saturday offered the first glimpse of what would be the largest public works program since President Dwight D. Eisenhower created the federal interstate system in the 1950s.

Obama said the massive government spending program he proposes to lift the country out of economic recession will include a renewed effort to make public buildings energy-efficient, rebuild the nation’s highways, renovate aging schools and install computers in classrooms, extend high-speed Internet to underserved areas and modernize hospitals by giving them access to electronic medical records.

“We need to act with the urgency this moment demands to save or create at least 2 1/2 million jobs so that the nearly 2 million Americans who’ve lost them know that they have a future,” Obama said in his weekly address, broadcast on the radio and the Internet.

Obama offered few details and no cost estimate for the investment in public infrastructure. But it is intended to be part of a broader effort to stimulate economic activity that will also include tax cuts for middle-class Americans and direct aid to state governments to forestall layoffs as programs shrink.

House Speaker Nancy Pelosi, D-Calif., has called for spending $400 billion to $500 billion on the overall package. Some Senate Democrats and other economists have suggested spending even more – potentially $1 trillion – in the hope of jolting the economy into shape more quickly.

On Friday, the government reported that 533,000 jobs were eliminated in November, the largest one-month drop since 1974, raising unemployment to 6.7 percent. And last week, the National Bureau of Economic Research officially declared that the country has been in a recession since last December.

Republicans in the House oppose Obama’s plan, saying they favor a series of tax cuts that they say would put money in people’s pockets and encourage businesses to expand domestically.

Democrats said that even if a recovery act quickly passed the House early next year, it could take longer in the Senate, where fiscally conservative Republicans have expressed concern about adding to the soaring deficit with a massive new round of government spending. Even with at least 58 Democratic votes in the new Senate, Republicans could easily hold up a final vote, they said.

In his address, Obama offered the first outline of how he wants to direct the public works spending.

The largest share would go to roads and bridges and could be used to accelerate long-delayed repairs and expansions. Responding to concerns that new transportation money might be caught up in red tape at the state level, Obama said states must quickly invest in road and bridge construction and repair or lose the federal dollars.

Obama would also direct a “massive effort” to make federal buildings energy-efficient by replacing aging heating systems and installing efficient light bulbs. Obama said the effort to “green” the federal government would save taxpayers billions.

Much of the public works program would be aimed at improving technology. The government would pay for new computers in schools, new medical technology in hospitals and doctors’ offices, and a nationwide push to bring broadband to parts of the country that cannot yet access the Internet at high speeds.

This article was reported by Louis Uchitelle, Edmund L. Andrews and Stephen Labaton and written by Mr. Uchitelle.

The government’s report of a giant job loss in November, the biggest monthly decline in a generation, puts more pressure on Congress and the administration to move quickly on a stimulus package, mortgage relief and perhaps financial aid for Detroit’s big automakers.

The nation’s employers cut 533,000 jobs in November, the Bureau of Labor Statistics reported Friday.

Not since December 1974, toward the end of a severe recession, have so many jobs disappeared in a single month — and the current recession, far from ending, appears to be just gathering steam.

“We are caught in a downward spiral in which employment, incomes and spending are collapsing together,” said Nigel Gault, chief domestic economist for IHS Global Insight. “With private spending frozen, we have no choice but to rely on a stimulus package to revive the economy.”

The unemployment rate rose to 6.7 percent, up just two-tenths of a percentage point from October, but up six-tenths over the last three months. More than 420,000 men and women who had been working or seeking work in October left the labor force in November.

More significantly, the unemployment rate does not include those too discouraged to look for work any longer or those working fewer hours than they would like. Add those people to the roster of the unemployed, and the rate hit a record 12.5 percent in November, up 1.5 percentage points since September.

Noting that 1.9 million jobs have been lost since the start of the recession a year ago — two-thirds of them since September — President-elect Barack Obama invoked public spending as the best way to get a dead-in-the-water economy moving again. “This painful crisis,” he said in a statement, is an opportunity “to improve the lives of ordinary people by rebuilding roads and modernizing schools for our children,” and by investing in clean energy projects.

A goal of all this spending is to generate 2.5 million jobs over the next two years, he said, repeating an earlier pledge. Given the accelerating job losses, hitting that target would barely recover the jobs that have disappeared over the last year.

As part of Friday’s announcement, the government revised higher its estimates of jobs lost in September and October. Instead of 524,000 jobs disappearing in those months, 723,000 were lost, or a total of 1.2 million jobs in just three months. In all, jobs have been lost in each of the last 11 months.

“Obama is being deliberately unclear about those 2.5 million jobs,” said Robert Pollin, a University of Massachusetts economist. “He is not going to add 2.5 million on top of recovering the 1.9 million that have been lost so far this year.”

Despite the deterioration of the labor market, Democrats in Congress and a lame-duck president remain in a standoff over rescue measures.

At its core, the stalemate between the Republicans and the Democrats springs from fundamentally different views about the nature of the crisis and the role of government in resolving it. The White House contends that it has rightly focused on the credit and housing markets, while the Democrats see economic problems that can be resolved only through broader intervention.

New efforts to adopt a broad economic package are likely to wait until the new president takes office and Democrats have bigger majorities in Congress. That delay poses the possibility of a deeper recession, according to some experts.

President Bush, appearing in front of cameras on Friday morning at the White House, said he was “concerned about our workers who have lost jobs.” But he offered no hint of softening his opposition to either a stimulus package or a bailout of the automobile industry, saying that the measures already put in place by the Treasury Department and the Federal Reserve to ease credit problems would take time to work.

Shortly after his appearance, a White House spokesman, Scott Stanzel, dashed any expectation of a change in policy when he said that officials expected a stimulus package would “happen in the next administration.”

Support is building for a significant stimulus package as the economy slips into a deep recession. Most forecasters expect the gross domestic product to contract in the current fourth quarter at an annual rate of 4 or 5 percent, and continue to contract through most of next year, shrinking by 2 percent for all of 2009 — a contraction that has occurred only once since World War II: in 1982, a year of severe recession.

“If there was any doubt that a very large fiscal stimulus is required, then the numbers we have been getting recently should dispel that doubt,” said Jan Hatzius, chief domestic economist for Goldman Sachs. To offset the private sector retrenchment, he added, “we will need a stimulus package of $600 billion at an annual rate, or $1.2 trillion over two years.”

Economists and policy makers increasingly share his estimate of what it will take to revive America’s $14 trillion economy, with Democratic leaders talking recently about a stimulus package of $400 billion or more.

Though any broad economic package seems to be delayed, Democrats still had faint hopes of approving next week a rescue package for the car companies. Their goal would be to prevent far more rapid deterioration in the job market.

The latest job numbers were stark evidence of a breakdown in consumer spending and business investment since mid-September, when the Treasury Department and the Federal Reserve decided to let Lehman Brothers fail, delivering a shock to the financial sector. Almost simultaneously, stock prices began a free fall, undermining the wealth and the retirement accounts of millions of Americans.

“We have recorded the largest decline in consumer confidence in our history,” said Richard T. Curtin, director of the Reuters/University of Michigan Survey of Consumers, which started its polling in the 1950s.

Job loss has played a big role in this erosion, he acknowledged. But so have fewer hours of work, smaller bonuses, less overtime, falling home prices, falling stock prices and a drumbeat of job cut announcements — the most recent, this week, from big names like AT&T, Viacom, CVS, DuPont and the Avis Budget Group.

The Dow Jones industrial average, down more than 20 percent since mid-September, fell Friday morning in response to the November jobs report, but recovered later and gained 259.18 points, or 3 percent, by the end of trading, to close at 8,635.42.

With home prices still in decline, one in 10 mortgage holders was either delinquent on loans in September or in foreclosure, the Mortgage Bankers Association reported Friday. That was up from 9.2 percent in June and the highest percentage since the association began to collect this data 30 years ago.

The mortgage crisis makes lenders ever more reluctant to lend for the purchase of homes, autos and other big consumer items. In more normal times, lenders bundle these loans into securities and sell them. The buyers of these securities have disappeared in the current credit crisis, however, and the Federal Reserve is considering ways for lenders to borrow from the Fed, using the securities as collateral.

Jobs disappeared last month from every sector of the economy except health care and state government, which mainly added educators. The biggest losses were in manufacturing, construction, retailing — despite the first month of Christmas shopping — financial services, hotel and restaurant work and temporary workers. Over the course of the recession, 604,000 jobs — nearly one-third of the total — have been eliminated in manufacturing, and the Big Three automakers promise more layoffs to qualify for a federal bailout.

“Business shut down in November,” said Mark Zandi, chief economist at Moody’s Economy.com. “Businesses are in survival mode and are slashing jobs and investment to conserve cash. Unless credit starts flowing soon, big job losses will continue well into next year.”

The administration says its recent actions are beginning to make credit flow more easily. “We are pulling some very significant levers on the economy right now, through what we’re doing with Treasury and what we’re doing with the Fed,” said Tony Fratto, a White House spokesman.

Jack Healy contributed reporting.

December 04, 2008

By Carl Leubsdorf

Tuesday’s Senate runoff victory in Georgia gave Republicans a small bright spot after their devastating electoral setbacks.

But there is probably more bravado than reality in Sen. Saxby Chambliss’ claim that his triumph will ensure a “balance of government” when President-elect Barack Obama take office.

The claim stems from the fact that, without Georgia and the unresolved Senate race in Minnesota, the Democrats remain two seats short of the 60 needed to prevent procedural roadblocks by a united minority.

But the political climate and economic crisis will make it far harder for Mr. Obama’s opponents to employ the obstructionist tactics they used so successfully when Democrats enjoyed only a modest margin the past two years and the GOP held the White House.

Even Minority Leader Mitch McConnell is talking more of using the GOP’s 41 seats to influence the new president’s course, rather than block it. In fact, all signs are that the Democrats have enough votes to help Mr. Obama pass both a massive economic stimulus package and the energy and health insurance measures he pledged in the campaign.

In the House, a Democratic majority of nearly 260 members should enable the new administration to prevail consistently, even if it occasionally loses some of the more conservative Democrats.

And while Senate rules permit greater resistance, reality suggests it won’t be that easy. A main reason is that the 41 or 42 GOP senators include hard-line conservatives from heavily Republican states in the South and moderates from predominantly Democratic states in the Northeast.

At least for the first year or two, it seems unlikely that moderates like Maine’s Olympia Snowe and Susan Collins, Ohio’s George Voinovich, Minnesota’s Norm Coleman and Pennsylvania’s Arlen Specter would try to prevent votes on major Obama proposals and nominations.

Other Republicans – like Texas’ Kay Bailey Hutchison and, more importantly, Arizona’s John McCain – are likely to reflect public disdain for seeking political gain with confrontational tactics.

Interestingly, Sen. Judd Gregg of New Hampshire, the only remaining major GOP officeholder in a state once solidly Republican, has seconded the Democratic call for a large-scale stimulus program.

It’s no coincidence that he’s up for re-election in 2010.

Meanwhile, Mr. Obama has shrewdly tapped into the public mood by stressing repeatedly the need to reach across party lines. Other presidents have done so before, only to fall victim to excessive partisanship on their side or from their opposition. This time, the political fallout from such tactics might be more severe.

The question is how long Mr. Obama can benefit from such a mood. Traditionally, presidents are lucky if their honeymoons last until the August congressional recess of their first year.

Democratic pollster Peter Hart conducted a recent focus group for the University of Pennsylvania’s Annenberg Public Policy Center among “swing” voters who backed Mr. Obama. Results suggest the economic crisis may give him more time.

These voters, Mr. Hart concluded, “recognize the mess he is inheriting, and their expectations are reasonable and not excessive. The judgments about him are more likely to be based on the way he approaches the problems and not by instantaneous results.”

Ultimately, the natural political order will reassert itself. Mr. Obama’s public support may fade; Republicans will seek ways to revive their fortunes.

By the time he enters his third year in 2011, he may need 60 Senate votes more than now. But while the opposition party usually rebounds in the next midterm election, more 2010 Senate races loom on Democratic than Republican turf.

Sen. John Cornyn, the new chairman of the National Republican Senatorial Committee, will have his hands full trying to stem the Democratic tide, especially if Mr. Obama retains popular support.

Until then, Tuesday’s GOP victory in Georgia seems likely to be seen as more significant in underscoring the party’s hold on Dixie than in erecting a barrier to the new administration.

More on RCP: Austin, TX Aims to Be Green Energy Capital

By Paul Kane
Washington Post Staff Writer
Wednesday, November 19, 2008; A01

Anchorage Mayor Mark Begich (D) defeated Sen. Ted Stevens, ending the tenure of the longest-serving Republican in Senate history, after the counting of more ballots yesterday gave him a larger lead than the number of votes still untallied, Alaska elections officials said.

Begich’s win gives Democrats control of 58 seats in the Senate, including two independents who caucus with them. That is two shy of the number needed to prevent Republicans from filibustering, with two races still undecided. Democrats have not controlled 60 seats since 1978.

Begich leads Stevens by more than 3,700 votes, according to the Alaska secretary of state. Gail Fenumiai, the head of the state’s election division, said about 2,500 absentee votes from overseas and Alaska’s most remote regions remain to be counted.

The Democrat’s lead thus far — 47.8 percent to 46.6 percent — puts him beyond the margin of victory that would allow Stevens to call for a state-funded recount of the ballots.

“I am humbled and honored to serve Alaska in the United States Senate,” Begich said in a statement declaring victory. “It’s been an incredible journey getting to this point.”

Alaska voters “wanted to see c