Are you worried that we are passing our debt on to future generations? Well, you need not worry.

Before this recession it appeared that absent action, the government’s long-term commitments would become a problem in a few decades. I believe the government response to the recession has created budgetary stress sufficient to bring about the crisis much sooner. Our generation ”” not our grandchildren’s ”” will have to deal with the consequences….

The question we need to ask is this: If we don’t change direction, how long can we travel down this path without having a crisis? The answer lies in two critical issues. First, how long will the capital markets continue to finance government borrowings that may be refinanced but never repaid on reasonable terms? And second, to what extent can obligations that are not financed through traditional fiscal means be satisfied through central bank monetization of debts ”” that is, by the printing of money?

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The United States suggested Europe’s debt crisis would have minimal impact on global growth, but China took a more pessimistic view, warning it would impact demand for its exports and other regions would suffer too….

“The euro zone problems haven’t been cleaned up yet,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “And even though the global economy is definitely showing more signs of recovery than it did 6 months ago, worry continues that the euro zone’s woes will put a brake on this growth.”

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It is past time to end the conspiracy of silence about Fannie Mae and Freddie Mac, government-sponsored companies that buy and sell mortgages and related securities. Both were taken over by the Treasury Department in 2008. So far Washington has shelled out $140 billion to keep them afloat. A Congressional Budget Office study says their losses could reach $400 billion. Other estimates put them at $500 billion.

In contrast, the net cost to date of TARP, after loan repayments and other government income, is $172.5 billion, nearly half of which is owed by the auto industry.

While optimists foresee the repayment of most TARP funds, the same cannot be said of Fannie and Freddie, which own well over a trillion dollars in risky mortgages and mortgage-backed securities.

Unlike TARP funds, the subsidies to Fannie and Freddie do not show up in the government’s budget. If they did, it would be even further out of balance.

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Far be it for me to make a dicey situation dicier but you can’t smell the sulphur in the air right now and not think we might be on the threshold of an age of rage….

Whether in 1789 or now, an incoming regime riding the storm gets a fleeting moment to try to contain calamity. If it is seen to be straining every muscle to put things right it can, for a while, generate provisional legitimacy.

Act two is trickier. Objectively, economic conditions might be improving, but perceptions are everything and a breathing space gives room for a dangerously alienated public to take stock of the brutal interruption of their rising expectations. What happened to the march of income, the acquisition of property, the truism that the next generation will live better than the last? The full impact of the overthrow of these assumptions sinks in and engenders a sense of grievance that “Someone Else” must have engineered the common misfortune. The stock epithet the French Revolution gave to the financiers who were blamed for disaster was “rich egoists”. Our own plutocrats may not be headed for the tumbrils but the fact that financial catastrophe, with its effect on the “real” economy, came about through obscure transactions designed to do nothing except produce short-term profit aggravates a sense of social betrayal. At this point, damage-control means pillorying the perpetrators: bringing them to book and extracting statements of contrition. This is why the psychological impact of financial regulation is almost as critical as its institutional prophylactics. Those who lobby against it risk jeopardising their own long-term interests. Should governments fail to reassert the integrity of public stewardship, suspicions will emerge that, for all the talk of new beginnings, the perps and new regime are cut from common cloth. Both risk being shredded by popular ire or outbid by more dangerous tribunes of indignation.

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The resignation of Dennis C. Blair as director of national intelligence was the product of personal as well as institutional failings. A retired admiral with a distinguished record of service, Mr. Blair’s political judgment looked questionable from the beginning of his DNI tenure, when he nominated a former ambassador with close ties to China and Saudi Arabia — and crackpot views about the Israel “lobby” — to chair the National Intelligence Council. After the failed Christmas Day airplane bombing, Mr. Blair told Congress that the Nigerian suspect should have been questioned by the interagency interrogation group created by the administration for terrorism cases — only to acknowledge later that the team had not yet been launched.

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Prodded by national anger at Wall Street, the Senate on Thursday passed the most far-reaching restraints on big banks since the Great Depression. In its broad sweep, the massive bill would touch Wall Street CEOs and first-time homebuyers, high-flying traders and small town lenders.

The 59-39 vote represents an important achievement for President Barack Obama, and comes just two months after his health care overhaul became law. The bill must now be reconciled with a House version that passed in December. A key House negotiator predicted the legislation would reach Obama’s desk before the Fourth of July.

The legislation aims to prevent a recurrence of the near-meltdown of big Wall Street investment banks and the resulting costly bailouts. It calls for new ways to watch for risks in the financial system and makes it easier to liquidate large failing financial firms. It also writes new rules for complex securities blamed for helping precipitate the 2008 economic crisis, and it creates a new consumer protection agency.

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Senator Arlen Specter of Pennsylvania, who left the Republican Party a year ago in hopes of salvaging a 30-year career, was rejected on Tuesday by Democratic primary voters, with Representative Joe Sestak winning the party’s nomination on an anti-incumbent wave that is defining the midterm elections.

In Kentucky, Rand Paul, the most visible symbol of the Tea Party movement, easily won the Republican Senate primary and delivered a significant blow to the Republican establishment. His 24-point victory over Trey Grayson, who was supported by the most powerful Republican on Capitol Hill, Senator Mitch McConnell of Kentucky, underscored the anti-Washington sentiment echoing across the country.

The outcomes of both contests, along with a Democratic primary in Arkansas that pushed Senator Blanche Lincoln into a runoff election in June, illustrated anew the serious threats both parties face from candidates who are able to portray themselves as outsiders and eager to shake up the system.

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Grilled by skeptical lawmakers, Interior Secretary Ken Salazar on Tuesday acknowledged his agency had been lax in overseeing offshore drilling activities and that may have contributed to the disastrous oil spill in the Gulf of Mexico.

“There will be tremendous lessons to be learned here,” Salazar told a Senate panel in his first appearance before Congress since the April 20 blowout and explosion on the Deepwater Horizon rig.

His appearances before two of the three Senate panels holding hearings Tuesday on the giant oil spill came as federal officials kept a wary eye on the expanding dimensions of the problem. The government increased the area of the Gulf where fishing is shut down to 46,000 square miles, or about 19 percent of federal waters. That’s up from about 7 percent before.

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The White House on Monday showed deep skepticism about Iran’s new deal to ship low-enriched uranium off its soil, saying it has the chance to be “positive step” but warning that the deal still allows Iran to keep enriching uranium toward the pursuit of a nuclear weapon.

“Given Iran’s repeated failure to live up to its own commitments, and the need to address fundamental issues related to Iran’s nuclear program, the United States and international community continue to have serious concerns,” White House press secretary Robert Gibbs said in a written statement to the media.

In a deal struck with Turkey and Brazil, Iran said it would export much of its low-enriched uranium to Turkey. In return, Iran would get fuel rods of medium-enriched uranium to use in a Tehran medical research reactor. The move was seen as an attempt by Iran to prevent a looming round of United Nations sanctions.

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Herein lies the challenge: Small businesses, half of the private sector (and the most important part as far as jobs are concerned), have been heavily impacted by this credit crisis. Small businesses created 64% of new jobs over the past 15 years, but they have cut five million jobs since the onset of this credit crisis. Large businesses, by comparison, have shed three million jobs in the past two years.

Small businesses continue to struggle to gain access to credit and cannot hire in this environment. Thus, the full weight of job creation falls upon large businesses. It would take large businesses rehiring 100% of the three million workers laid off over the past two years to make a substantial change in jobless numbers. Given the productivity gains enjoyed recently, it is improbable that anything near this will occur.

Unless real focus is afforded to re-engaging small businesses in this country, we will have a tragic and dangerous unemployment level for an extended period of time. Small businesses fund themselves exactly the way consumers do, with credit cards and home equity lines. Over the past two years, more than $1.5 trillion in credit-card lines have been cut, and those cuts are increasing by the day….

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Both men faced rows of loved ones still wrapped in grief after shocking tragedies.

Both men quoted the Psalms. Both concluded with visions of eternal life and heavenly reunions. Both referred to familiar songs that offered comfort.

Facing those gathered in Beckley, W.Va., to mourn the loss of 29 miners, President Barack Obama asked them to remember a rhythm and blues classic ”” “Lean on Me” ”” that had its roots in coal country life.

Songwriter Bill Withers wrote: “Sometimes in our lives, we all have pain, we all have sorrow. ”¦ Lean on me, when you’re not strong and I’ll be your friend. I’ll help you carry on, for it won’t be long ”˜til I’m gonna need somebody to lean on.”

The Rev. Billy Graham was more daring at the 1995 prayer service for the 168 victims of the bombing at the Alfred P. Murrah Federal Building in Oklahoma City. The world’s most famous evangelist even quoted an explicitly Christian hymn.

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Oil companies face an immediate tax rise of 1 cent per barrel to help to pay for the clean-up in the Gulf of Mexico under proposed legislation rushed out by the White House.

The measure, unveiled as BP began a new attempt to contain the ruptured well that has leaked millions of gallons of crude oil into America’s southern coastal waters, would put an extra $500 million (£340 million) over ten years into the Oil Spill Liability Trust Fund, which covers damage caused by such disasters.

Under a $118 million spending plan outlined in the package, people affected by the spill ”” such as fishermen who have lost their livelihoods because of the contamination ”” will be granted financial assistance, and federal agencies will get additional funds to monitor the slick and assess its impact.

President Obama, said by a spokesman to be “deeply frustrated” that the leak has still not been plugged three weeks after it erupted, intends that BP will pick up most of the cost of his new plan.

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White House spokesman Ben LaBolt told the AP that “judges confront issues differently than staff attorneys for an administration.”

For the White House, the idea that Kagan might support tougher restrictions on abortion presents a complicated set of political opportunities and risks. The revelation may help to mute right-wing groups who often use support for abortion rights as a way of attacking a nominee.

But the 1997 memorandum may give further rise to the concerns already expressed on Monday by liberal groups, who fear that the lack of evidence of Kagan’s strong support for abortion rights throughout her career suggests that she will not be an advocate for their cause on the court.

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President Obama will nominate Solicitor General Elena Kagan as the nation’s 112th justice, choosing his own chief advocate before the Supreme Court to join it in ruling on cases critical to his view of the country’s future, Democrats close to the White House said Sunday.

After a monthlong search, Mr. Obama informed Ms. Kagan and his advisers on Sunday of his choice to succeed the retiring Justice John Paul Stevens. He plans to announce the nomination at 10 a.m. Monday in the East Room of the White House with Ms. Kagan by his side, said the Democrats, who insisted on anonymity to discuss the decision before it was formally made public.

In settling on Ms. Kagan, the president chose a well-regarded 50-year-old lawyer who served as a staff member in all three branches of government and was the first woman to be dean of Harvard Law School. If confirmed, she would be the youngest member and the third woman on the current court, but the first justice in nearly four decades without any prior judicial experience.

That lack of time on the bench may both help and hurt her confirmation prospects, allowing critics to question whether she is truly qualified while denying them a lengthy judicial paper trail filled with ammunition for attacks….

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Over the past week various people from around the archdiocese have asked for help in reflecting on Arizona’s new immigration law. As readers will know, I’ve used this space many times in the past to urge sensible, national immigration reform. Citizens of this country have a right to their safety and the solvency of their public institutions. But we undermine those very goals if we ignore the basic human rights of immigrant workers and their families.

In the case of Arizona state law, Catholics should listen first to the leaders of the Arizona Catholic community, for obvious reasons. They know the situation there best. Bishop Thomas Olmsted of Phoenix, Bishop Gerald Kicanas of Tucson and Bishop James Wall of Gallup, N.M. (whose diocese includes portions of Arizona) are all excellent pastors. Their leadership in the coming weeks and months should set the tone for our own response.

Having said that, it’s worth making a few simple observations:

First, illegal immigration is wrong and dangerous for everyone involved….

Second, the new Arizona law, despite its flaws, does unintentionally accomplish one good thing. Thanks to Arizona, the urgency of immigration reform and the human issues that underlie it””deported breadwinners; divided families; the anxiety of children who grew up here but do not have citizenship””once again have moved to the front burner of our national discussions. Our current immigration system is now obviously broken. Congress needs to act….

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The Obama administration has wrongly downplayed, in its public remarks, the threat of terrorist attacks on the United States and American interests abroad. Now that the evidence of multiple plots against Americans has become unmistakable, it is time for candor.

In his early efforts to distance himself from the Bush administration, this president dropped the term “war on terror” from the government’s vocabulary. In initial comments on the three terrorist attacks the nation has suffered since last November, two of them luckily unsuccessful, his appointed officials have suggested that they were unconnected events, “one-offs” as Homeland Security Secretary Janet Napolitano described the Times Square plot.

But the November murders at Fort Hood, Texas, by Army Major Nidal Hassan turned out to be inspired by a radical Muslim preacher in Yemen. Yemen turned up again when an al-Qaida cell there sent the Christmas Day bomber Abdul Farouk Abdulmutallab aboard a Northwest Airlines flight to Detroit wearing explosives hidden in his underwear.

Now the Times Square bomber — thankfully, another failure — turns out to have been trained in bomb-making in Pakistan’s “Federally Administered Tribal Areas,” a region bordering Afghanistan that is largely under the control of the militant Taliban groups that play host to al-Qaida.

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A bipartisan U.S. commission on religious freedom says President Obama is softening his stand on protecting the right to one’s faith at a time when religious persecution is on the rise, according to an annual report to be released today.

The 11th annual report by the U.S. Commission on International Religious Freedom says Obama’s recent call for nations to respect “freedom of worship” rather than “religious freedom” allows regimes to claim they are not oppressing certain religions if those faiths exist in a form acceptable to the regime.

“When you start narrowing the discussion, the signal the administration is sending to the international community is that as long as they prop up a few churches or houses of worship (of minority faiths), there isn’t going to be a problem,” Leonard Leo, the chairman of the commission, told USA TODAY.

The report also criticizes the administration for failing to nominate an ambassador-at-large for religious freedom.

Read the whole article.

THE drama over Europe’s sovereign debt might seem good ammunition for American deficit hawks. Not so. As Barack Obama’s bipartisan deficit commission held its first meeting on April 27th, the rising cost of government debt across southern Europe was, if anything, being used to draw a favourable contrast between the American and Greek fiscal positions.

Nevertheless, the American fiscal picture has darkened considerably, thanks to the recession. The projected 2010 deficit, of around 11% of GDP, contrasts with one of 1.2% as recently as 2007, while the net public debt has climbed from 36% to 64% of GDP. These figures look good beside those of Greece, where debt may touch 150% of output by the middle of the decade. There is still enough gloom, however, to trigger concern over the potential for rising interest rates and continued fiscal weakness as America’s baby-boomers start to retire.

The good news is that the deficit is forecast to fall as the federal stimulus unwinds and growth returns.

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…a good number of economists and banking experts are worried. They think the odds of a future bankruptcy-or-bailout dilemma will remain uncomfortably high even if reregulation passes.

For starters, there are the cross-border problems; in the midst of a crisis, governments may have trouble cooperating. Then there is the fact that the regulators have never before tried to shut down anything as complex as a multibillion-dollar financial firm. “It’s really hard ”” really hard,” says Robert Steel, who worked on the financial crisis in the Bush Treasury Department and later was chief executive of Wachovia. “Anyone who says they know exactly what we should do is overconfident.”

Another former top government official adds, bluntly, “Don’t kid yourself into thinking that if J. P. Morgan were on the rocks, it would disappear.”

Above all, no one knows what the next crisis will look like. So no one can be sure exactly how to prevent it. In all likelihood, Wall Street will eventually figure out ways around technocratic rules ”” and technocrats ”” and create trouble that today’s proposals don’t anticipate.

The beauty of a bank tax is that it acknowledges as much.

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Goldman Sachs Group Inc. executives were grilled by U.S. lawmakers who compared the bank’s mortgage bankers to bookies as Senator Carl Levin asked why they sold securities the company itself called “shitty.”

“How about the fact that you sold hundreds of millions of that deal after your people knew it was a shitty deal?” the Michigan Democrat asked Daniel Sparks, who ran the bank’s mortgage unit at the time. “Does that bother you at all?”

Members of the Levin’s Permanent Subcommittee on Investigations, winding up a probe of Goldman Sachs that has lasted more than a year, used today’s hearing to pepper current and former executives with questions about their duty to clients and the ethics of betting against the housing market as the bank also sold mortgage-linked securities to customers.

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With that as the backdrop, it would amount to progress if both parties, via the debt commission, agreed that two big steps can’t be avoided:

”¢ The tax system has to be changed. The U.S. doesn’t have a system that can fund the government the country wants. The Tax Foundation says the levies paid by the top 1% of taxpayers now exceed those paid by all of those in the bottom 95%. And the Tax Policy Institute says almost half of all filers will pay no 2009 income taxes at all, because of various exclusions and credits””up, by some estimates, from a quarter in 1990.

This may be great for those who like soak-the-rich rhetoric, but it’s no way to finance a country. More than that, it’s a bit of a hoax on middle- and lower-middle-class Americans. They certainly pay payroll taxes, and the more they are excused from the income tax-system, the more likely it is that they will be hit with sneakier and less-progressive taxes. Tax reform””a flatter tax system, a value-added tax, something””is needed.

”¢ Americans have to change how they think about retirement. When the economy recovers and costs for recession-related bailouts, stimulus spending and unemployment benefits are resolved, we’ll still be left unable to really afford our Social Security, Medicare and long-term-care commitments. When the easier stuff is done, this is the hard reality, requiring a new and nonpoliticized national discussion.

Read it carefully and read it all.

The one thing we know about the financial “reform” now moving toward what looks like eventual congressional approval is that it will be oversold, says economist Robert Litan of the Kauffman Foundation. We will be told that it will forever prevent a repetition of the recent financial crisis; that it will root out corruption on Wall Street; that it will eliminate “bailouts”; that it will protect consumers against greedy lenders. In the present anti-Wall Street mood, no one wants to be accused of coddling America’s money merchants.

What can we really expect?

History counsels caution. Every financial reform, even if mostly successful, ultimately gives way to another because there are unintended consequences or unforeseen problems. Sheila Bair, the head of the Federal Deposit Insurance Corp., has noted that the reforms of the early 1990s, which curbed risk-taking within the banking system, perversely shifted lending to the largely unregulated “shadow banking system” — mortgage brokers, specialized lenders and “securitization.” The central aim of today’s reform is to avert another financial panic. A panic is not a bubble or just big losses. These are inevitable and, in part, desirable: Without losses, investors would become reckless. A panic is a stampede of selling and hoarding, driven by fear, that threatens the financial system and, through it, production and jobs. A panic occurred in September 2008 when Lehman Brothers failed. Distrusting most financial institutions, investors and money managers fled to safety (a.k.a. Treasury bills).

By its nature, a panic is unanticipated. Reform may resemble generals fighting the last war….

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No pool coverage of today’s visit by President Obama to Billy Graham, just White House statements about the meeting first arranged when Obama called Graham in November to wish him a happy 91st birthday.

“The president had a private prayer and conversation with Rev. Graham,” said White House spokesman Bill Burton. “He is extraordinarily gratified that he took the time to meet with him.”

White House spiritual adviser Josh DuBois also attended the session in Graham’s mountaintop cabin in Montreat, N.C.

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As Rep. Randy Forbes sees it, the decision by a Wisconsin federal judge that the law creating a National Day of Prayer is unconstitutional is little more than one person’s opinion.

Millions of Americans, Forbes said, think otherwise.

“That’s not what the Constitution says,” the Virginia Republican declared Wednesday (April 21), surrounded by other members of the Congressional Prayer Caucus. “That’s what one unelected judge says the Constitution says.”

On Thursday (April 22), the Justice Department said it would appeal the decision, capping a week of political uproar from conservatives after Judge Barbara Crabb of Madison, Wis., issued her April 15 ruling.

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President Obama challenged some of the nation’s most influential bankers on Thursday to call off their “battalions of financial industry lobbyists” and embrace a new regulatory structure meant to avert another economic crisis.

Speaking in the bankers’ backyard, at the Cooper Union in Manhattan, Mr. Obama castigated the “failure of responsibility” by Wall Street that led to the financial crisis of 2008 and pressed his case for what he called “a common-sense, reasonable, non-ideological” system of tighter regulation to prevent any recurrence.

“That may make for a good sound bite, but it’s not factually accurate,” Mr. Obama said. “It is not true. In fact, the system as it stands is what led to a series of massive, costly taxpayer bailouts. And it’s only with reform that we can we avoid a similar outcome in the future. In other words, a vote for reform is a vote to put a stop to taxpayer-funded bailouts. That’s the truth. End of story.”

He said scrupulous business leaders had no reason to resist his regulation plan. “The only people who ought to fear the kind of oversight and transparency that we’re proposing are those whose conduct will fail this scrutiny,” he said.

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“The bashing of Wall Street is something that should worry everybody,” [Michael] Bloomberg declared last week.

The Republican-turned-independent mayor’s positions have made him a lone wolf among left-leaning officials in the city. Local lawmakers and others rallied at City Hall on Tuesday in support of financial reform, some holding signs that read “Goldman Suchs.”

Bloomberg plans to attend Obama’s speech at The Cooper Union college Thursday but demurred when asked whether he was concerned about what the president would say.

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President Barack Obama suggested Wednesday that a new value-added tax on Americans is still on the table, seeming to show more openness to the idea than his aides have expressed in recent days.

Before deciding what revenue options are best for dealing with the deficit and the economy, Obama said in an interview with CNBC, “I want to get a better picture of what our options are….”

After the interview, White House deputy communications director Jen Psaki said nothing has changed and the White House is “not considering” a VAT.

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And speaking of “responsibility.” A new poll by the nonpartisan Pew Research Center throws new light on the question of what’s-all-the-anger-about? In The Wall Street Journal, Pew Research Center president Andrew Kohut notes a national mood edgy and fractious, in the context of “a dismal economy, an unhappy public, and epic discount with Congress and elected officials.” Thirty percent of Americans, it seems, “view the federal government as a major threat to their personal freedoms.”

How come? What goes on here anyway, behind the oratorical battle smoke? A whole lot more goes on than one might surmise from tuning in to the Rush and Bill Show.

A cardinal principle of democracy is, don’t do things to demos — the people — against demos’ own ideas, notions and viewpoints. For instance, take over the health care system.

At the time of the final Senate and House votes on health care, polls indicated majority opposition to the bill, not the least reason being, apparently, that hardly anyone understood what the bill contained and proposed. Polls continue to show large majorities in favor of repeal.

No matter. The White House said we needed the bill.

Read it all (featured on the op-ed of the local paper today which is why I happened to see it).

Washington is gearing up for a big debate: What to do about the exploding national debt, the unsustainable annual budget deficits and what to do about the Bush tax cuts that expire at the end of the year.

Alarm bells are ringing over the size of the national debt, now equal to 84 percent of the country’s gross national product — the highest level since after World War II. The credit-rating agency Moody’s is hinting that the federal treasury’s Triple A bond rating is in jeopardy and Fed Chairman Ben Bernanke is warning that China, the United States’ largest foreign creditor, may start charging higher interest rates.

“The arithmetic is, unfortunately, quite clear,” Bernanke said. “To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.

“These choices are difficult, and it always seems easier to put them off — until the day they cannot be put off any more.”

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Every year, Israelis approach the joy of their Independence Day right after immersing themselves in a 24-hour period of grief for fallen soldiers. Before the fireworks burst across the skies Monday night to celebrate the country’s 62nd birthday, the airwaves filled with anguished stories of servicemen and -women killed, the Kaddish prayer of mourning and speeches placing the deeply personal losses of a small country into the sweep of Jewish history.

So there is nothing new or unusual about Israelis’ marking their collective accomplishments with sorrow and concern. It happens all the time, especially among those on the political left who are angry that Israel’s occupation of the Palestinians shows no sign of ending.

But there is something about the mood this year that feels darker than usual. It has a bipartisan quality to it. Both left and right are troubled, and both largely about the same things, especially the Iranian nuclear program combined with growing tensions with the Obama administration.

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