The White House is caught in a battle within its own party over how to finance a comprehensive overhaul of America’s health-care system, as key Democrats advocate a tax plan that could require President Obama to break his campaign pledge not to raise taxes on the middle class.

Sensitive to voter anxiety about a soaring federal deficit, Obama and congressional leaders have vowed to pay for a sweeping expansion of the health-care system — expected to cost more than $1 trillion over the next decade — without additional borrowing.

Much of the money is likely to come from reining in spending on federal health programs for the elderly and the poor. Obama has proposed trimming more than $600 billion from Medicare and Medicaid by 2019 — including more than $300 billion in cuts unveiled in his Saturday radio and Internet address — which could fulfill the promise to curb the growth of federal health spending.

The rest of the cash will probably come from new taxes.

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The American Medical Association has long battled Democrats who oppose protecting doctors from malpractice lawsuits. But during a private meeting at the White House last month, association officials said, they found one Democrat willing to entertain the idea: President Obama.

In closed-door talks, Mr. Obama has been making the case that reducing malpractice lawsuits ”” a goal of many doctors and Republicans ”” can help drive down health care costs, and should be considered as part of any health care overhaul, according to lawmakers of both parties, as well as A.M.A. officials.

It is a position that could hurt Mr. Obama with the left wing of his party and with trial lawyers who are major donors to Democratic campaigns. But one Democrat close to the president said Mr. Obama, who wants health legislation to have broad support, views addressing medical liability issues as a “credibility builder” ”” in effect, a bargaining chip that might keep doctors and, more important, Republicans, at the negotiating table.

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Not since the second world war have so many governments borrowed so much so quickly or, collectively, been so heavily in hock. And today’s debt surge, unlike the wartime one, will not be temporary. Even after the recession ends few rich countries will be running budgets tight enough to stop their debt from rising further. Worse, today’s borrowing binge is taking place just before a slow-motion budget-bust caused by the pension and health-care costs of a greying population. By 2050 a third of the rich world’s population will be over 60. The demographic bill is likely to be ten times bigger than the fiscal cost of the financial crisis.

Will they default, inflate or manage their way out?

This alarming trajectory puts policymakers in an increasingly tricky bind. In the short term government borrowing is an essential antidote to the slump. Without bank bail-outs the financial crash would have been even more of a catastrophe. Without stimulus the global recession would be deeper and longer””and it is a prolonged downturn that does the greatest damage to public finances. But in the long run today’s fiscal laxity is unsustainable. Governments’ thirst for funds will eventually crowd out private investment and reduce economic growth. More alarming, the scale of the coming indebtedness might ultimately induce governments to default or to cut the real cost of their debt through high inflation.

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Binyamin Netanyahu tonight endorsed the creation of a Palestinian state after weeks of pressure from Washington, but defied President Obama’s demand for a halt to all settlements.

In a high-profile speech that the Palestinian administration of Mahmoud Abbas said “hobbles all efforts to save the peace process”, the Israeli Prime Minister said that the Palestinians must recognise Israel as a “Jewish state” and that any future Palestinian state had to be demilitarised.

“If we have the guarantees on demilitarisation and if the Palestinians recognise Israel as the state of the Jewish people, then we arrive at a solution based on a demilitarised Palestinian state alongside Israel,” Mr Netanyahu said.

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The decision taken last March by U.S. President Barack Obama to allocate Federal funds to research on stem cells created by the destruction of human embryos (embryonic stem cells) has rekindled the polemics on a topic characterized by complex bioethical implications. The situation has been further aggravated by the nature and content of the declarations made in support of this decision, which will have a huge impact on the question of the defence of human life in the context of stem cell research.

The argument that this decision is necessary in order to defend the right of the sick to have access to possible future treatments constitutes a distortion of logic. In this approach, the rights of the sick person are used as a lever to justify measures which, given the recent developments in this field, would not be justifiable on a scientific basis. Furthermore, the contemporaneous urging to look at the facts and not to act in conformity with ideological considerations is astonishing at a time when, analyzing the objective facts, we discover that they lead to diametrically opposite conclusions that is, that there is no need to destroy human embryos in order to pursue all possible paths in the search for cures for many serious diseases by means of stem cells.

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Binyamin Netanyahu is expected to endorse a “two-state solution” in a much-heralded speech this weekend, but he may stall on American demands to freeze Jewish settlements in the West Bank.

Feeling the squeeze between the US Administration, which wants a moratorium on settlement growth and a commitment to a Palestinian state, and his national-religious coalition, which favours neither, the Israeli Prime Minister appears likely to try to steer a middle course.

Israeli newspapers were full of speculation about what Mr Netanyahu ”” who has so far refused openly to back a Palestinian state alongside Israel ”” might offer to deflect pressure from Washington. Ehud Barak, his Defence Minister, urged him this week to recognise a Palestinian state, but members of Mr Netanyahu’s right-wing Likud party have cautioned him against the move.

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That said, the basic terms of discussion have become clear. The main question is whether congressional Democrats will be able to include a government-funded health plan to compete with existing programmes. This public plan would have the scale to negotiate with providers and drug companies and would, therefore, set prices for the industry as a whole and set a floor on cost. Republicans oppose the move, regarding it as the first step towards socialisation. A public plan would, on this view, bleed business away from the prvate providers with whom it was ostensibly in competition. That would lead, in turn, to a gradual reduction in quality, with regulation proving less effective than competition at maintaining standards.

President Obama himself has invested too much political capital in reform for nothing to happen. There will be a Bill. It will increase coverage and a victory will be declared. But the escalating cost will have been laid aside as too difficult an issue. It cannot be avoided for ever.

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There are two basic truths about the enormous deficits that the federal government will run in the coming years.

The first is that President Obama’s agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying. The second is that Mr. Obama does not have a realistic plan for eliminating the deficit, despite what his advisers have suggested.

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Members of Congress are seriously considering proposals to rein in the growth of health spending by taking tens of billions of dollars of Medicare money away from doctors and hospitals in high-cost areas and using it to help cover the uninsured or treat patients in lower-cost regions.

Those proposals have alarmed lawmakers from higher-cost states like Florida, Massachusetts, New Jersey and New York. But they have won tentative support among some lawmakers from Iowa, Minnesota, Montana, North Dakota, Oregon and Washington, who say their states have long been shortchanged by Medicare.

Nationally, according to the Dartmouth Atlas of Health Care, Medicare spent an average of $8,304 per beneficiary in 2006. Among states, New York was tops, at $9,564, and Hawaii was lowest, at $5,311.

Researchers at Dartmouth Medical School have also found wide variations within states and among cities. Medicare spent $16,351 per beneficiary in Miami in 2006, almost twice the average of $8,331 in San Francisco, they said.

Read it all from the front page of yesterday’s New York Times.

I’ve been wanting to post this for days — on what how the White House is going to handle the thorny religious hiring question that folks on the political left have been complaining about for months now. Fortunately Religion & Ethics Newsweekly now has quotes by the White House’s Joshua Dubois up on its site — quotes from a panel he appeared on Monday morning at a Sojourners -sponsored Mobilization to End Poverty conference.

His response on whether government-funded faith organizations can hire people from their own religion was that basically the administration is going to take the matter “on a case by case basis,” which is not going to please a lot of liberals. “It’s a difficult topic,” he said. “As difficult legal issues arise,” he added, he is to work with the White House and attorney general’s office and make recommendations. Whatever that means.

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President Obama was getting his daily economic briefing one recent morning when a fly distracted him. The president swatted and missed, just as the pest buzzed near the shoes of Lawrence H. Summers, the chief White House economic adviser. “Couldn’t you aim a little higher?” deadpanned Christina D. Romer, the chairwoman of the Council of Economic Advisers.

Mrs. Romer was joking, she said in an interview, adding, “There are only a few times that I felt like smacking Larry.” Yet few laughed in the president’s presence.

If the Oval Office incident was meant as a lighthearted moment, it also exposed the underlying tensions that have gripped Mr. Obama’s economic advisers as they have struggled with the gravest financial crisis since the Depression, according to several dozen interviews with administration officials and others familiar with the internal debates.

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Why hasn’t President Obama insisted on public hearings over what happened during this financial crisis?

Not a single top executive of a Wall Street securities firm responsible for causing the financial crisis has had the courage or the decency to step forward in front of the cameras and explain to the American people in his own words exactly how and why he allowed his firm to cause the crisis. Both Mr. Fuld and Alan Schwartz, the chief executive of Bear Stearns at the end, in their Congressional testimony blamed the proverbial once-in-a-century financial tsunami. Do they or any of their peers really think this is true?

There may be a way to find out. There is much talk nowadays coming from top bankers ”” Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JPMorganChase, John Mack of Morgan Stanley and even Ken Lewis of Bank of America ”” about seeing how quickly they can repay to the Treasury the TARP money Mr. Paulson forced on them. One precondition of their being allowed to repay the funds should be a requirement that each gives a public deposition and explains, under oath, what truly happened and why.

This piece was given an astonishing full page on yesterday’s New York Times op-ed page. Read it all.

But Mr. Obama has grown concerned that he is losing the debate over certain policy prescriptions he favors, like a government-run insurance plan to compete with the private sector, said one Democrat familiar with his thinking. With Congress beginning a burst of work on the measure, top advisers say, the president is determined to make certain the final bill bears his stamp.

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Here is one:

For as long as I can remember, my Muslim identity and my American identity have made me a stranger in both worlds.

In the sensitivities of the post- 9/11 era, I had to be cautious when asserting my Muslim identity to my fellow Americans who were not Muslim. When visiting cousins in Pakistan, I had to be cautious asserting my pride in being an American.

Today, I have never been so proud to be a Muslim-American. Thank you, President Obama, for bringing our two worlds together, and for helping me merge the worlds within myself.

Moein Khawaja
Philadelphia

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The big retreat to realism concerns democracy promotion. The Bush administration tried to promote democracy, even at the expense of stability. That proved unworkable.

But many of us hoped that Obama would put a gradual, bottom-up democracy-building initiative at the heart of his approach. This effort would begin with projects to create honest cops and independent judges so local citizens could get justice. It would make space for civic organizations and democratic activists. It would include clear statements so the world understands that the U.S. is not in bed with the tired old Arab autocrats.

There was a democracy-promotion section to the speech, and given the struggle behind it, maybe we should be grateful it was there at all. But it was stilted and abstract ”” the sort of prose you get after an unresolved internal debate. The president didn’t really champion democratic institutions. He said that governments “should reflect the will of the people” and that citizens should “have a say” in how they are governed.

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Many of Mr. Obama’s supporters surely thought this young, dynamic generation of public leaders would elevate the hip, cutting edge of the U.S. economy — nanotechnology, genomics, robotics, even health and medicine technology. Instead, we’ve gotten the Old Economy on dialysis. General Motors has been commanded to restart aging UAW factories to output product on behalf of the administration’s hybrid-car obsession. Where’s the New Economy in any of this?

Or ObamaCare. How will a build-out of Medicare (b. 1965) to cover everyone and costing $1.2 trillion over 10 years not kill innovation in medical and health technology by siphoning away growth capital and its potential financial rewards?
All of this seems so out of sync with the persona and promise Barack Obama conveyed in the campaign. A lot of his Web-based supporters probably thought Mr. Obama was going to be about promoting young guns with new ideas seeking risk capital for the next big thing. Instead, it looks as if the Obama years will be about managing soft landings for mature industries and old unions in the American autumn.

Congress is talking about a “bad behavior” tax on beer and soda pop to reduce obesity and fund mega-Medicare. How about a bad-behavior tax on government? Slim as the president looks, Uncle Sam is looking like quite the fat boy.

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There were divided opinions in the Israeli media about U.S. President Barack Obama’s speech in Cairo on Thursday. What all media outlets, including the printed and the electronic, did unitedly was the blanket coverage given to the address.

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The Arabs may have wished for more – for a tougher line on Gaza, a new peace “initiative” and an apology for past US policies. He was right to offer none of these. He did not repudiate his presidential predecessor. Nor did he denounce the two interventions that have inflamed much of the Muslim world – in Iraq and in Afghanistan. Instead, he insisted that America had no wish to stay a moment longer in Afghanistan than the threat dictated. His Administration knew that “the less we use our power, the greater it will be”. But that did not mean that America would not confront extremists.

Like his earlier address to Iran, Mr Obama’s appeal struck a chord that infuriated those peddling hatred of America. Both Iran and Osama bin Laden were swift to belittle his words. He did not, sadly, address the issue of democracy. That must remain part of the agenda. What he did was to demolish the myth of a clash of civilisations. That is the first step to bridging the chasm.

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Muslim shopkeepers, students and even radical groups such as Hamas praised President Barack Obama’s address Thursday as a positive shift in U.S. attitude and tone. But Arabs and Muslims of all political stripes said they want him to turn his words into action – particularly in standing up to Israel.

Obama impressed Muslims with his humility and respect and they were thrilled by his citing of Quranic verses. Aiming to repair ties with the Muslim world that had been strained under his predecessor George W. Bush, he opened with the traditional greeting in Arabic “Assalamu Aleikum,” which drew enthusiastic applause from his audience at Cairo University.

His address touched on many themes Muslims wanted to hear in the highly anticipated speech broadcast live across much of the Middle East and elsewhere in the Muslim world. He insisted Palestinians must have a state and said continued Israeli settlement in the West Bank is not legitimate. He assured them the U.S. would pull all it troops out of Iraq by 2012 and promised no permanent U.S. presence in Afghanistan.

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When it comes to dealing with the Middle East, the president noted, “there is a Kabuki dance going on constantly. That is what I would like to see broken down. I am going to be holding up a mirror and saying: ”˜Here is the situation, and the U.S. is prepared to work with all of you to deal with these problems. But we can’t impose a solution. You are all going to have to make some tough decisions.’ Leaders have to lead, and, hopefully, they will get supported by their people.”

It was clear from the 20-minute conversation that the president has no illusions that one speech will make lambs lie down with lions. Rather, he sees it as part of his broader diplomatic approach that says: If you go right into peoples’ living rooms, don’t be afraid to hold up a mirror to everything they are doing, but also engage them in a way that says ”˜I know and respect who you are.’ You end up ”” if nothing else ”” creating a little more space for U.S. diplomacy. And you never know when that can help.

“As somebody who ordered an additional 17,000 troops into Afghanistan,” said Mr. Obama, “you would be hard pressed to suggest that what we are doing is not backed up by hard power. I discount a lot of that criticism. What I do believe is that if we are engaged in speaking directly to the Arab street, and they are persuaded that we are operating in a straightforward manner, then, at the margins, both they and their leadership are more inclined and able to work with us.”

Read it carefully and read it all.

[James Baker said in 1989]: “Israeli interests in the West Bank and Gaza, security and otherwise, can be accommodated in a settlement based on Resolution 242. Forswear annexation; stop settlement activity.”

Those words make startling but depressing reading: Little has changed in 20 years. After Bush 41 and Baker, we got Clinton’s love affair with Yitzhak Rabin (“I had come to love him as I had rarely loved another man”); the disintegration of Oslo after Rabin’s tragic assassination; and the Israel-can-do-no-wrong policy of Bush 43.

Balance ”” the credential no honest broker can forsake ”” vanished from American diplomacy.

I don’t believe that’s been good for Israel. The Jewish state needs to be challenged by its inseparable ally if it is to achieve the security it craves.

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As a student of history, I also know civilization’s debt to Islam. It was Islam – at places like Al-Azhar University – that carried the light of learning through so many centuries, paving the way for Europe’s Renaissance and Enlightenment. It was innovation in Muslim communities that developed the order of algebra; our magnetic compass and tools of navigation; our mastery of pens and printing; our understanding of how disease spreads and how it can be healed. Islamic culture has given us majestic arches and soaring spires; timeless poetry and cherished music; elegant calligraphy and places of peaceful contemplation. And throughout history, Islam has demonstrated through words and deeds the possibilities of religious tolerance and racial equality.

I know, too, that Islam has always been a part of America’s story. The first nation to recognize my country was Morocco. In signing the Treaty of Tripoli in 1796, our second President John Adams wrote, “The United States has in itself no character of enmity against the laws, religion or tranquility of Muslims.” And since our founding, American Muslims have enriched the United States. They have fought in our wars, served in government, stood for civil rights, started businesses, taught at our Universities, excelled in our sports arenas, won Nobel Prizes, built our tallest building, and lit the Olympic Torch. And when the first Muslim-American was recently elected to Congress, he took the oath to defend our Constitution using the same Holy Koran that one of our Founding Fathers – Thomas Jefferson – kept in his personal library.

So I have known Islam on three continents before coming to the region where it was first revealed. That experience guides my conviction that partnership between America and Islam must be based on what Islam is, not what it isn’t. And I consider it part of my responsibility as President of the United States to fight against negative stereotypes of Islam wherever they appear.

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It is available via the whitehouse website; he just started speaking.

The precise link to the video feed is here in case you need it.

President Obama arrived in Egypt on Thursday aiming to repair America’s relationship with the Muslim world through a speech at Cairo University, a carefully planned address that aides said would challenge Muslim perceptions about the United States.

Mr. Obama arrived in Cairo at 9 a.m. (2 a.m. E.D.T.) and was greeted by the Egyptian foreign minister, Ahmad Aboul Gheit. The streets were empty as he traveled toward the Quabba Palace, except for soldiers who lined the sidewalks. In advance of his speech, he met with President Hosni Mubarak. He was to be joined by Secretary of State Hillary Rodham Clinton for a tour of the Sultan Hassan Mosque before arriving at Cairo University for his afternoon address.

After President Mubarak welcomed Mr. Obama, he told reporters that the two leaders had discussed “all problems here in the region,” including “the situation and everything related to Iran and to the region.”

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The Federal Reserve chairman, Ben S. Bernanke, said on Wednesday that the United States needed to develop a plan to restore fiscal balance, even as the government builds huge budget deficits as it tries to spend its way out of the worst economic crisis since the Great Depression.

In remarks to the House Budget Committee, Mr. Bernanke said that the government must address the immediate problems of a crippling recession that has erased trillions of dollars in household wealth, hobbled investment portfolios and raised unemployment to its highest levels in a generation. Still, he said, the government needs to think about putting its fiscal house back in order.

“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” he said.

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President Obama said Wednesday that he was receptive to Congressional proposals that would require every American to have health insurance and that would force employers to offer health insurance to their employees. But he said there should be exemptions for people who cannot afford coverage and for small businesses in general.

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President Obama starts his much anticipated Middle East tour on Wednesday in Saudi Arabia, where he is expected to press the Arab nations to offer a gesture to the Israelis to entice them to accelerate the peace process.

But when he meets in Riyadh, the Saudi capital, with King Abdullah, he should be prepared for a polite but firm refusal, Saudi officials and political experts say. The Arab countries, they say, believe they have already made their best offer and that it is now up to Israel to make a gesture, perhaps by dismantling settlements in the West Bank or committing to a two-state solution.

“What do you expect the Arabs to give without getting anything in advance, if Israel is still hesitating to accept the idea of two states in itself?” said Mohammad Abdullah al-Zulfa, a historian and member of the Saudi Shura Council, which serves as an advisory panel in place of a parliament.

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Jon Alterman, director of the Middle East Program at the Center for Strategic and International Studies, says the Obama administration felt the need to pick an Arab country.

“Arabs are a minority of Muslims, but they have [a] disproportionate voice in Muslim life and Muslim jurisprudence ”¦ so they decided it has to be in an Arab city,” he says. “And if you start thinking about Arab cities, there aren’t a lot that leap off the page.”

Alterman says there was a process of elimination: Morocco, while more democratic than Egypt, is too peripheral; Jordan is too small; and Saudi Arabia would bring other problems, he says. “So, you end up going to Cairo, which has been an influential Arab and Islamic city for centuries.”

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ABC News’ Jake Tapper and Sunlen Miller report: The other day we heard a comment from a White House aide that never would have been uttered during the primaries or general election
campaign.

During a conference call in preparation for President Obama’s trip to Cairo, Egypt, where he will address the Muslim world, deputy National Security Adviser for Strategic Communications Denis McDonough said “the President himself experienced Islam on three continents before he was able to — or before he’s been able to visit, really, the heart of the Islamic world — you know, growing up in Indonesia, having a
Muslim father — obviously Muslim Americans (are) a key part of Illinois and Chicago.”

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Such government micromanagement of the economy is everywhere. The Post recently reported that Richard Wagoner, the former CEO of General Motors who was removed by the government, remains on GM’s payroll “because senior Treasury officials have yet to decide whether he should get the $20 million severance package that the company had promised him.” His 2009 compensation — $1 — is payable Dec. 31. The $20 million promised to him includes contractual awards, deferred compensation and pension benefits accrued over 32 years with the company. Promise-keeping, including honoring contracts, is the default position of a lawful society. But suddenly, many citizens’ legal claims are merely starting points for negotiations with an overbearing government.

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