Sixteen years ago, two economists published a research paper with a delightfully simple title: “Looting.”

The economists were George Akerlof, who would later win a Nobel Prize, and Paul Romer, the renowned expert on economic growth. In the paper, they argued that several financial crises in the 1980s, like the Texas real estate bust, had been the result of private investors taking advantage of the government. The investors had borrowed huge amounts of money, made big profits when times were good and then left the government holding the bag for their eventual (and predictable) losses.

In a word, the investors looted. Someone trying to make an honest profit, Professors Akerlof and Romer said, would have operated in a completely different manner. The investors displayed a “total disregard for even the most basic principles of lending,” failing to verify standard information about their borrowers or, in some cases, even to ask for that information.

The investors “acted as if future losses were somebody else’s problem,” the economists wrote. “They were right.”

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But this kind of calculation is precisely what has gotten Christian political activists in trouble in the past, not just for 40 years but for 1,600 years. We gain access to Caesar in order to affect policy; we hold onto access even if it involves compromising some of what we want in policy; in the end, we can easily forget what policies we were after in the first place. I think this definitely happened to the Christian right. It doesn’t need to be repeated by the Christian center or left.

My understanding of the majestic God-given sacredness of human life tells me that a society that legally permits abortion on demand is deeply corrupt. It pays for adult sexual liberties with the lives of defenseless developing children. That practice, in turn, desensitizes society to the implications of paying for prospective medical cures with defenseless frozen embryos, which themselves are available because our society pays for medically assisted reproductive technology by producing hundreds of thousands of these embryos as spares. And yes, that same commitment to life’s sacredness has grounded my opposition to paying for national security with torture, or paying for today’s affluence with tomorrow’s environmental destruction.

Christian conscience requires me to make this case even if it has no chance of prevailing in American society. And if we lose on abortion, as it appears we will lose for a long time to come, Christian conscience requires me to ask the government not to require citizens to pay for procuring services that violate their sacred beliefs.

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Which leads to a question: When we do hit the bottom ”” this year or years from now ”” how will we know?

There’s no easy answer.

Mr. Galbraith was not the first or last economist to acknowledge fallibility at predicting turning points. (Just think back to assurances by top government officials in early 2007 that the growing problems with subprime mortgages were “contained.”)

Forecasting the end of the current recession is even more difficult because it will hinge on how quickly and efficiently governments resolve the crisis in the banking system. Many investors continue to worry that the world’s biggest financial institutions are insolvent, despite assurances from Washington that those firms have plenty of capital.

How political leaders diagnose and fix the banks will be critical. Analysts say misguided and erratic government responses exacerbated Japan’s “lost decade” in the 1990s and the Depression of the 1930s. “The things that can screw it up are bad policies,” said Thomas F. Cooley, dean of the Stern School of Business at New York University.

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Almost no one was surprised this week when President Obama lifted restrictions on stem cell research that involved the destruction of human embryos. Even jaded Washington watchers are adjusting to the idea that this is a president with an eerie determination to do exactly what he said he would do during his campaign.

Those who approve such research applauded Mr. Obama’s action. (“Fantastic,” said one stem cell scientist on PBS.) Those who disapprove condemned it. (“Deadly,” said an anti-abortion leader in The New York Times.) But some commentary focused at least as much on the nature of the president’s moral argument as on the specific conclusions he reached.

When it comes to the controversy over human embryonic stem cell research, moral argument has not been much in evidence. The president spoke of a popular consensus in favor of it reached “after much discussion, debate and reflection.” That is a kindly description of the hype, exaggeration and denunciation that have dominated the controversy.

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Nearly a year after a painful break from his Chicago church, President Barack Obama and his family are considering joining several churches of various denominations in the nation’s capital but have yet to settle on one, and aides said that they’re unlikely to decide before Easter.

The delay reflects how the economic crisis has crowded out some personal considerations since Obama’s inauguration in January, but it also underscores the complexities of this personal decision by a public man.

Past presidents have grappled with how and where to worship, but Obama’s pick is especially guaranteed to provoke interest and scrutiny.

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Secularism seems to be on the march in America. This week, a new study from the Program on Public Values at Trinity College found that the number of Americans claiming no religion now stands at 15%, up from 8% in 1990 and 2% in 1962.

The secular tide appears to be running strongest among young Americans. Religious attendance among those 21 to 45 years old is at its lowest level in decades, according to Princeton sociologist Robert Wuthnow. Only 25% of young adults now attend services regularly, compared with about one-third in the early 1970s.

The most powerful force driving religious participation down is the nation’s recent retreat from marriage, Mr. Wuthnow notes. Nothing brings women and especially men into the pews like marriage and parenthood, as they seek out the religious, moral and social support provided by a congregation upon starting a family of their own. But because growing numbers of young adults are now postponing or avoiding marriage and childbearing, they are also much less likely to end up in church on any given Sunday. Mr. Wuthnow estimates that America’s houses of worship would have about six million more regularly attending young adults if today’s young men and women started families at the rate they did three decades ago.

Now, President Barack Obama seems poised to give secularism in America another boost, however inadvertently.

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This could be the week when the greatest financial crisis in history finally reached its nadir. Then again, it could merely be another week in which a brief rally in global stock markets has suckered more investors, politicians and commentators into assuming that the worst is over, when the tentative improvement in financial confidence is just another false dawn.

So which will it be? The answer depends, even more than usual, on the finance ministers and central bankers gathering at a potentially chaotic G20 meeting this weekend. The omens are not benign.

It is now understood that the global financial system can be stabilised and economic demand revived only through government intervention. Private businesses and consumers do not have the access to credit or the confidence to start spending and investing again. But government intervention will work only with some degree of international co-operation and that requires leadership from America. Yet despite the mandate won by President Obama, Washington has proved muddled in its economic priorities and indecisive in its financial response to the crisis.

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Zach is feeling the icy fingers of the recession gripping his throat. He’s a small-business man with a retail store in New York and an investment in a small apartment renovation that hasn’t gotten a buyer. Suddenly, his income is down by 25 percent or so. He has a mortgage on the house in Brooklyn where he lives that he used to be able to afford, but now he’s dipping into his savings to the tune of $2,000 or $3,000 a month to cover his costs, and he’s worried.

So he called his mortgage bank to see what might be done. The answer was: not much, certainly nothing from any government plans to help homeowners get through the crisis. And for Zach, who’s never gone to the government for anything before, there’s a larger point in that fact.

To wit: If you’ve behaved responsibly and prudently all these years, you’re on your own. But if you’ve made colossal mistakes of greed and misjudgment ”” either by selling billions in mortgages to people who couldn’t afford to pay you back or by being one of the people whose eyes were bigger than their wallets”” you might just get rescued, at the expense of taxpayers like Zach.

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U.S. President Barack Obama and Treasury Secretary Timothy Geithner received failing grades for their efforts to revive the economy from participants in the latest Wall Street Journal forecasting survey.

The economists’ assessment stands in stark contrast with Mr. Obama’s popularity with the public, with a recent Wall Street Journal/NBC poll giving him a 60% approval rating. A majority of the 49 economists polled said they were dissatisfied with the administration’s economic policies.

On average, they gave the president a grade of 59 out of 100, and although there was a broad range of marks, 42% of respondents rated Mr. Obama below 60. Mr. Geithner received an average grade of 51. Federal Reserve Chairman Ben Bernanke scored better, with an average 71.

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For a ballroom full of downhearted conservatives desperate for some good news, Mark Sanford had an odd message.

The South Carolina governor urged 1,000 activists, gathered in late February at the Ronald Reagan Banquet in a fancy Washington hotel, to be prepared to lose, and to feel happy about it ”” to “be happy warriors,” as he put it.

“Would you be willing to support a cause or a candidate that is likely to lose?” Sanford asked conventioneers at the Conservative Political Action Committee’s annual gathering.

Too much focus on winning, Sanford said, leads to compromise and the abandonment of conservative principles.

As the diners leapt to their feet and applauded, Sanford declared:

“The name of the game is staying true to the principles that got you into politics in the first place ”” and letting the chips fall where they may.”

Over the past three months, Sanford’s criticism of President Barack Obama’s $787 billion economic-stimulus plan has transformed him from a conservative Republican governor little-known outside South Carolina to a political powerhouse with a growing profile among party stalwarts nationwide.

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U.S. President Barack Obama’s lifting of restrictions on federal funding for human embryonic stem cell research puts him at odds with Pope Benedict and the American Roman Catholic Church.

After Obama signed the order on Monday, the Vatican and U.S. and Italian Church leaders condemned the move. One commentator said the test of “a real democracy” was its defence of the most defenceless.

Obama’s executive order reversed and repudiated restrictions placed on the research by his predecessor, George W. Bush, freeing labs across the country to start working with the cells, which can give rise to any kind of cell in the body.

Cardinal Justin Rigali of Philadelphia, chairman of the U.S. Conference of Catholic Bishops’ committee on pro-life activities, called Obama’s decision “a sad victory of politics over science and ethics.”

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Prayer has become more common at presidential appearances under the Obama administration, including at nonreligious events such as stimulus rallies. The White House is acting in a deliberately inclusive, interfaith way that seems to limit opposition.

Church-state experts say the policy, which President Obama also followed while campaigning, does not appear to be illegal because the White House tells people who lead the prayers to be nonsectarian. But some raised concerns about prayers being scripted or reviewed in advance.

People who helped plan public events for former presidents George W. Bush and Bill Clinton say they did not routinely organize prayers before non-religious events. Historians note that there is no clear record of prayers before presidential appearances, but they could not remember prayers being said as routinely as they are now.

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Luckily for Obama, the public still likes and trusts him, at least judging by the latest polls, including NEWSWEEK’s. But, in ways both large and small, what’s left of the American establishment is taking his measure and, with surprising swiftness, they are finding him lacking.

They have some reasons to be concerned. I trace them to a central trait of the president’s character: he’s not really an in-your-face guy. By recent standards””and that includes Bill Clinton as well as George Bush””Obama for the most part is seeking to govern from the left, looking to solidify and rely on his own party more than woo Republicans. And yet he is by temperament judicious, even judicial. He’d have made a fine judge. But we don’t need a judge. We need a blunt-spoken coach.

Obama may be mistaking motion for progress, calling signals for a game plan. A busy, industrious overachiever, he likes to check off boxes on a long to-do list. A genial, amenable guy, he likes to appeal to every constituency, or at least not write off any. A beau ideal of Harvard Law, he can’t wait to tackle extra-credit answers on the exam.

But there is only one question on this great test of American fate: can he lead us away from plunging into another Depression?

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Watch it all from Charlie Rose.

The misguided policy response from Washington has focused almost exclusively on squandering public money and burdening our children with indebtedness in order to defend the bondholders of mismanaged financial institutions (blame Paulson and Geithner ”“ I’ve got a lot of respect for our President, but he’s been sold a load of garbage by banking insiders). Meanwhile, I suspect that the little tapes in Bernanke’s head playing “we let the banks fail in the Great Depression” and “we let Lehman fail and look what happened” are so loud that he is making no distinction about the form of those failures. Simply letting an institution unravel is quite different from taking receivership, protecting the customers, keeping the institution intact, replacing management, properly taking the losses out of stockholder and bondholder capital, and issuing it back into private ownership at a later date. This is what it would mean for these banks to “fail.” Nobody is advocating an uncontrolled unraveling of major financial institutions or permanent nationalization as if we’ve suddenly become Venezuela.

Make no mistake. Buying up “troubled assets” will not materially ease this crisis, nor will it even improve the capital position of financial institutions (see You Can’t Rescue the Financial System if You Can’t Read a Balance Sheet). Homeowners will continue to default because their payment obligations have not been restructured to any meaningful extent. We are simply protecting the bondholders of mismanaged financial institutions, even though that bondholder capital is more than sufficient to cover the losses without harm to customers. Institutions that cannot survive without continual provision of public funds should be taken into receivership, their assets should be restructured to better ensure repayment, their stockholders should be wiped out, bondholders should take a major haircut, customer assets should (and will) be fully protected, and these institutions should be re-issued to the markets when the economy stabilizes.

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Among those shocked by President Obama’s 2010 budget, the most surprising are the true-blue liberals who run most of America’s nonprofits, universities and charities. How dare he limit tax deductions for charitable giving! They’re afraid they’ll get fewer donations, but they should be more concerned that Mr. Obama’s policies will shove them aside in favor of the New Charity State.

What did these nonprofit liberals expect, anyway? Mr. Obama is proposing a vast expansion of the entitlement state, and he has to find some way to pay for it. So logically enough, one of his ideas for funding public welfare is to reduce the tax benefit for private charity. His budget proposes to raise the top personal income tax rate to 39.6% in 2011 from 35%, and the 33% rate to 36% while reducing the tax benefit from itemized deductions for the top two brackets to 28% from 35% and 33%, respectively. The White House estimates the deduction reduction will yield $318 billion in revenue over 10 years.

From the Ivy League to the United Jewish Appeal, petitions and manifestos are in the works. The Independent Sector, otherwise eager to praise the Obama budget, worries the tax change “could be a disincentive to some donors.” According to the Center on Philanthropy at Indiana University, total itemized contributions from the highest income households would have dropped 4.8% — or $3.87 billion — in 2006 if the Obama policy had been in place. That year, Americans gave $186.6 billion to charity, more than 40% from those in the highest tax bracket. A back of the envelope calculation by the Tax Policy Center, a left-of-center think tank, estimates the Obama plan will reduce annual giving by 2%, or some $9 billion.

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Medical miracles do not happen simply by accident. They result from painstaking and costly research, from years of lonely trial and error, much of which never bears fruit, and from a government willing to support that work. From life-saving vaccines, to pioneering cancer treatments, to the sequencing of the human genome — that is the story of scientific progress in America. When government fails to make these investments, opportunities are missed. Promising avenues go unexplored. Some of our best scientists leave for other countries that will sponsor their work. And those countries may surge ahead of ours in the advances that transform our lives.

In recent years, when it comes to stem cell research, rather than furthering discovery, our government has forced what I believe is a false choice between sound science and moral values. In this case, I believe the two are not inconsistent. As a person of faith, I believe we are called to care for each other and work to ease human suffering. I believe we have been given the capacity and will to pursue this research — and the humanity and conscience to do so responsibly.

It’s a difficult and delicate balance. And many thoughtful and decent people are conflicted about, or strongly oppose, this research. And I understand their concerns, and I believe that we must respect their point of view.

But after much discussion, debate and reflection, the proper course has become clear. The majority of Americans — from across the political spectrum, and from all backgrounds and beliefs — have come to a consensus that we should pursue this research; that the potential it offers is great, and with proper guidelines and strict oversight, the perils can be avoided.

That is a conclusion with which I agree. And that is why I am signing this executive order, and why I hope Congress will act on a bipartisan basis to provide further support for this research. We are joined today by many leaders who have reached across the aisle to champion this cause, and I commend all of them who are here for that work.

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Germany may be at the heart of any European response to a weakening world economy, but Germany’s heart is not in it.

As world leaders gear up for a London summit meeting on April 2 where they are supposed to settle upon a coordinated response to the global economic crisis, conflict is brewing between Europeans who see tighter regulation of a skewed financial system as the main task ahead and Americans who are focused on the more immediate challenge of countering the acute dropoff in economic activity across the globe.

The differences between Europe and the United States are most evident in Germany, where years of growth fueled by a mighty manufacturing base and a deep-seated suspicion of financial capitalism has spurred a powerful resistance to the Keynesian-style deficit-spending favored in Washington.

As the United States pushes to ensure that governments around the world are spending enough to replace the demand that has evaporated as U.S. consumers lead a global retrenchment, Germany is sticking to the relatively modest stimulus it has already approved.

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Last month, in his big speech to Congress, President Obama argued for bold steps to fix America’s dysfunctional banks. “While the cost of action will be great,” he declared, “I can assure you that the cost of inaction will be far greater, for it could result in an economy that sputters along for not months or years, but perhaps a decade.”

Many analysts agree. But among people I talk to there’s a growing sense of frustration, even panic, over Mr. Obama’s failure to match his words with deeds. The reality is that when it comes to dealing with the banks, the Obama administration is dithering. Policy is stuck in a holding pattern.

Here’s how the pattern works: first, administration officials, usually speaking off the record, float a plan for rescuing the banks in the press. This trial balloon is quickly shot down by informed commentators.

Then, a few weeks later, the administration floats a new plan. This plan is, however, just a thinly disguised version of the previous plan, a fact quickly realized by all concerned. And the cycle starts again.

Why do officials keep offering plans that nobody else finds credible?

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I’m worried. We’ve just elected a talented young president with many good instincts about how to propel our country forward, extend health care to more people, make our tax code fairer and launch a green industrial revolution. But do you know what I fear? I fear that his whole first term could be eaten by Citigroup, A.I.G., Bank of America, Merrill Lynch, and the whole housing/subprime credit bubble we inflated these past 20 years.

I hope my fears are exaggerated. But ask yourself this: Why couldn’t former Treasury Secretary Hank Paulson solve this problem? And why does it seem as though his successor, Tim Geithner, won’t even look us in the eye and spell out his strategy? Is it because they don’t get it? No. It is because they know ”” like Roy Scheider in the movie “Jaws,” when he first saw the great white shark ”” that “we’re gonna need a bigger boat,” and they’re too afraid to tell us just how big.

This problem is more complicated than anything you can imagine. We are coming off a 20-year credit binge. As a country, too many of us stopped making money by making “stuff” and started making money from money ”” consumers making money out of rising home prices and using the profits to buy flat-screen TVs from China on their credit cards, and bankers making money by creating complex securities and leverage so more and more consumers could get in on the credit game.

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[From the current administration] we end up with an agenda that is unexceptional in its parts but that, when taken as a whole, represents a social-engineering experiment that is entirely new.

The U.S. has never been a society riven by class resentment. Yet the Obama budget is predicated on a class divide. The president issued a read-my-lips pledge that no new burdens will fall on 95 percent of the American people. All the costs will be borne by the rich and all benefits redistributed downward.

The U.S. has always been a decentralized nation, skeptical of top-down planning. Yet, the current administration concentrates enormous power in Washington, while plan after plan emanates from a small group of understaffed experts.

The U.S. has always had vibrant neighborhood associations. But in its very first budget, the Obama administration raises the cost of charitable giving. It punishes civic activism and expands state intervention.

The U.S. has traditionally had a relatively limited central government. But federal spending as a share of G.D.P. is zooming from its modern norm of 20 percent to an unacknowledged level somewhere far beyond.

Those of us who consider ourselves moderates ”” moderate-conservative, in my case ”” are forced to confront the reality that Barack Obama is not who we thought he was.

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Russian President Medvedev has said he’s willing to discuss the proposed US missile shield with Washington. But he added that any deal linking those talks with negotiations regarding Iran would not be productive.

Russian President Dimitry Medvedev’s comments came in response to a New York Times report that US President Barack Obama had written a secret letter to his Russian counterpart offering to halt the planned missile shield, which would be located mainly in Poland and the Czech Republic, in return for Moscow’s help in stopping Iran from developing long-range nuclear weapons.

The Russian president welcomed the “positive signals” coming from the Obama administration with which he said he hoped to reach “agreements.” “Haggling,” however, was “not productive,” added Medvedev on Tuesday, March 3.

The Russian president also said Obama’s letter had not presented the issue in such a way.

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As 2009 opened, three weeks before Barack Obama took office, the Dow Jones Industrial Average closed at 9034 on January 2, its highest level since the autumn panic. Yesterday the Dow fell another 4.24% to 6763, for an overall decline of 25% in two months and to its lowest level since 1997. The dismaying message here is that President Obama’s policies have become part of the economy’s problem.

Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it’s become clear that Mr. Obama’s policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence — and thus a longer period of recession or subpar growth.

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Update: Investor’s Business Daily is not happy either:

Capital, bluntly put, has gone on strike. Those who own wealth are pushing it to the sidelines, as a young and inexperienced president tries to jam through the most sweeping economic changes in over 70 years.

The prospect of these changes becoming law has already radically altered our nation’s economy. Entrepreneurs and CEOs who once created new products, new services, jobs and trillions in wealth for America’s workers and retirees now find themselves vilified and punished for their success.

ABC News reported this week that many upper-income taxpayers already are planning to cut back on work and investments to stay under $250,000 in income ”” the point where Obama’s punitive taxes kick in. No one wins from this, yet Obama seems oblivious.

This isn’t the only warning sign. A new study asserts that some 100,000 highly educated, well-trained Indians now living in the U.S. will return home in the next few years. Ditto China.

Immigrant entrepreneurs are highly sensitive bellwethers of economic and social conditions. They know where the opportunities are ”” and where they aren’t. They’re voting with their feet.

The agenda is likely to reshape American capitalism, if that’s what you want. But let me rain on this parade as it passes ”” before The Music Man runs off with River City’s most beautiful women. While he promises to deliver Americans from recession, financial crisis and the Wall St. Pool Hall, Mr. Obama’s agenda actually threatens to plunge America into new crises, while extending the current crises.

Profoundly anti-market and anti-capitalist themes and tones run through Mr. Obama’s speech. Nowhere in the world has a country risen to prosperity by blowing up markets (in energy, for example) and turning to massive state intervention (banking) to solve problems, especially problems that do not even exist (oil dependence).

Mr. Obama’s speech, burdened with never-ending calls for state action, contains the seeds of at least four crises….

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President Barack Obama sent a secret letter to Russia’s president last month suggesting that he would back off deploying a new missile defense system in Eastern Europe if Moscow would help stop Iran from developing long-range weapons, American officials said Monday.

The letter to President Dmitri A. Medvedev was hand-delivered in Moscow by top administration officials three weeks ago. It said the United States would not need to proceed with the interceptor system, which has been vehemently opposed by Russia since it was proposed by the Bush administration, if Iran halted any efforts to build nuclear warheads and ballistic missiles.

The officials who described the contents of the message requested anonymity because it has not been made public. While they said it did not offer a direct quid pro quo, the letter was intended to give Moscow incentive to join the United States in a common front against Iran. Russia’s military, diplomatic and commercial ties to Tehran give it some influence there, but it has often resisted Washington’s hard line against Iran.

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“The stuttering attempts to repair the banking and lending mechanisms so far by the new administration suggests that by late 2010, the specter of a second dip into recession will be looming large,” said Merrill Lynch economist Sheryl King.

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Stimulus””that is, fiscal intervention with the express purpose of speeding up the normal regenerative process that Grant describes””is unnecessary and almost certainly harmful, a policy based on hubris and anxiety, rather than on history and good sense. Under such circumstances, the proper way to analyze discrete proposals today for spending or taxing is on their own merits, not on their supposed ability to stimulate something else. There may, in fact, be a good reason for government to spend billions of dollars today on building highways, and it has nothing to do with stimulus. It is that long-term interest rates are at historic lows and that the right highways can boost the economy in the long term. There also may be a good reason, again far apart from stimulus, for revising the tax code and reforming Social Security and Medicare. It is that Americans now understand that the economic future is not so assured as they believed a couple of years ago, and it is time for decisions to be made””in a manner careful, sensible, and unstimulated.

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All this is telling. The administration and Congress, though pledging to restore economic growth, care more about protecting foreclosure victims and promoting homeownership among the young and poor. Politics trumps economics.

—Robert Samuelson in a piece I posted this morning

How to rescue housing? The Obama administration doesn’t have a plan — or, more accurately, it has only half a plan. It presupposes that preventing or minimizing home foreclosures is a formula for revival. It isn’t.

Almost everyone agrees that a housing recovery is essential for a broader economic upswing, in part because housing’s collapse brought on the recession. Mortgage delinquencies triggered the financial crisis. Tumbling home prices (down 26 percent from their peak) ravaged consumer confidence, borrowing and spending. Since late 2007, housing-related jobs — carpenters, real estate agents, appraisers — have dropped by 1 million, a quarter of all lost jobs.

Housing’s distress is too much supply chasing too little demand. Huge inventories of unsold homes have depressed prices and construction. Given that prices rose too high in the “bubble” — homes were affordable only because credit was dispensed so recklessly — much of this painful adjustment was unavoidable. But that process should be mostly complete….

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The gap between rhetoric and hype in President Barack Obama’s budget is as wide as the Pacific Ocean. Obama has not offered change; he has offered a continuation of George W. Bush’s policies.

Obama is not the anti-Bush. He is Bush on steroids.

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