America and Israel

A plan in the offing

Barack Obama promises Israel's prime minister a new American peace plan for the Middle East

ISRAEL’S prime minister, Binyamin Netanyahu, leaves Washington on Tuesday May 19th having notched up what he considers an important success: President Barack Obama has set a time limit—the year's end—for determining whether America’s attempt at dialogue with Iran has worked. “We’re not going to have talks forever,” the Mr Obama said on Monday, after a private meeting with Mr Netanyahu. “We’re not going to create a situation in which talks become an excuse for inaction while Iran proceeds with developing and deploying a nuclear weapon… If we can begin discussions soon, shortly after the Iranian elections, we should have a fairly good sense by the end of the year as to whether they are moving in the right direction.”

Mr Netanyahu said after the meeting that he was satisfied that Mr Obama understood the full extent of the threat that an Iranian bomb would pose to Israel. Mr Netanyahu, for his part, has been reassured that America's “goal” is to prevent Iran “developing a military nuclear capability”. Mr Netanyahu told the press that America would soon propose a new peace initiative for the Israeli-Palestinian conflict. This, he said, would try to engage other Arab states in the peacemaking effort, and urge them to normalise their relations with the Jewish state.

While plainly pleased with the newly announced American deadline on talks with Iran, Mr Netanyahu kept carefully vague about what would happen if the deadline passed and the country's nuclear programme continued. He praised Mr Obama for having said that "all options were on the table". The president, in fact, pointedly refrained from rehearsing that formula in his comments in the Oval Office. He said, “We are not foreclosing a range of steps, including much stronger international sanctions, in assuring that Iran understands that we are serious.” At his briefing Mr Netanyahu added his own oracular line: "Israel reserves the right to act in self-defence." He contended that these veiled references to military action contributed to the potential efficacy of diplomatic and economic measures designed to persuade Iran to forgo the bomb.

Mr Netanyahu, son of an eminent professor of Jewish history, said he had reviewed for Mr Obama the millennia of Jewish suffering and impotence, and the significance of the Zionist "return to history…We are an ancient nation and we must protect our restored sovereignty," he said.

Mr Netanyahu leaves Washington without having subscribed to the “two-state” solution even though Mr Obama vigorously reasserted, in private and in public, America's commitment to this policy. “I have said before and I will repeat again,” Mr Obama said, “that it is I believe in the interest not only of the Palestinians, but also the Israelis and the United States and the international community to achieve a two-state solution in which Israelis and Palestinians are living side by side in peace and security.”

Mr Netanyahu argued that Palestinian statehood was a matter of “terminology” while what was important was “substance, not terminology”. He wanted the Palestinians to rule themselves, eventually, but self-rule would have to be circumscribed by Israel's security requirements. They would not, for instance, be allowed to have an army.

He spoke as though such issues have not been the stuff of negotiations for close to two decades. He appeared to ignore understandings reached by past Israeli governments on a demilitarisation regime for a Palestinian state. The last Democratic administration, under Bill Clinton, came close to a comprehensive agreement. Mr Clinton blamed the Palestinian leader at the time, Yasser Arafat, for failing to seize an historic opportunity. Mr Obama is anxious to recreate a comprehensive deal.

Mr Obama asserted that "settlements have to be stopped". Mr Netanyahu was unrattled. The subject would continue to be discussed, he said later. Regarding Israel's longstanding commitment, honoured in the breach, to dismantle the dozens of settlement-outposts on the West Bank which it itself defines as illegal, Mr Netanyahu produced a novel argument: Israel dismantled all its settlements in the Gaza Strip, but the Palestinians, instead of dismantling terrorist infrastructures, as they were committed to do, installed the terrorist movement Hamas as masters of Gaza.

Did this mean, Mr Netanyahu was asked, that Israel would go on building settlements in the West Bank as long as Hamas ruled in Gaza? That was not quite what he had said. And anyway, why nitpick over past commitments when a new American peace plan was about to be unveiled?

Gauging the Economy's Engine as It Sputters Along

Calling a Recession's End Is Tough Amid Conflicting Data, but Here's a User's Manual to the Gears and Measures

JUSTIN LAHART

It's hard to tell the moment when a recession ends.

The economy spews forth a stream of data daily. But at a recession's end, news typically turns mixed, as it has lately. Optimism prompted by good news can vanish quickly when bad news suggests the economy is relapsing.

After a queasy period when the U.S. economy went from bad to dreadful beginning last fall, a series of improved reports has fueled hopes that the country is on the cusp of recovery. Corporate borrowing costs have fallen. Surveys of businesses and households show increased confidence. The labor market is showing tentative signs of improvement. Investors have seized onto these "green shoots," as Federal Reserve Chairman Ben Bernanke called them, sending the Dow Jones Industrial Average up 30% from its 12-year low in March.

Illustrating a Recovery

See a PDF of various economic indicators.

Yet last week's government report that retail sales fell in April sapped hopes that consumer spending is on the rise. And the housing market, where the seeds of recession were sown, remains distressed. In brief, the signs of recovery so far have been inconclusive.

"The shoots are still pretty green and pretty thin," warns economist James Hamilton of the University of California, San Diego.

Recovery means different things to different people. Economists expect that gross domestic product, the value of all goods and services produced, will resume growing this summer. But that won't feel much like a recovery to many workers with or without a job. Companies tend to wait until they are certain that business is picking up before hiring again.

"For most people, they're not going to think the bottom has been past until unemployment is falling, even if GDP is rising -- and why should they?" says Princeton University economist Alan Blinder, a former Fed vice chairman.

The official arbiters at the nonprofit National Bureau of Economic Research define recession as "a significant decline in economic activity spread across the economy, lasting more than a few months." Since the current one began in December 2007, the U.S. has lost 5.7 million jobs. GDP has contracted at more than a 6% annual rate the past two quarters, and is likely to contract further in the current quarter. The six-member NBER Business Cycle Dating Committee will probably wait to declare the recession over until the economy has improved to the point when GDP is restored to its former peak.

"Until GDP and employment turn around, it's premature to declare any kind of victory," says Jeffrey Frankel, a Harvard University economist and a committee member.

Nevertheless, Mr. Frankel draws comfort that credit conditions have improved markedly since the Lehman Brothers failure last September. One sign is that the short-term rates that banks charge each other to borrow money have fallen, though they're still high, compared with rates of U.S. Treasury debt. "If those get back to normal, and we dodge any new bullets, then things look very good," he says.

Financial markets are pointing to recovery. Investors are out of panic mode. A rally in corporate bonds has sent their yields lower. Investor willingness to take more risk has pushed down the prices of Treasury bonds, and thus pushed up their yields. The result is a narrowing in the gap between yields on corporate bonds and Treasurys, a development that is often a forerunner to economic recovery. Investors often sniff out the end to recession before it occurs, and rising markets often provide a confidence-boosting, all-clear signal to fretful consumers and business executives.

Adding to optimism is the improving mood of manufacturing purchasing managers, surveyed monthly by the Institute for Supply Management in a report that precedes hard government data. The April survey found signs that the slowdown in manufacturing has eased. More purchasing managers said orders were picking up than said they were falling, a welcome sign.

In the labor market, one of the nearly instant measures is the weekly tally of Americans filing new claims for unemployment benefits. Even with a flurry of Chrysler workers furloughed, that number is below the peak hit earlier this spring. The four-week average, monitored because it smoothes week-to-week volatility, was 630,500 as of May 9 -- still high, but down from early April's peak of 658,750.

A cresting in that measure has been a reliable signal that a recession is within six weeks of ending, says Northwestern University economist Robert Gordon, who sits on the NBER committee. "This thing does amazingly well," he says of the indicator. "Even if you were shut up in a dark room, you could forecast the end of the recession."

In the wake of the financial crisis and the steep downturn it provoked, the economy may be at the start of an almost "garden-variety" recovery, thinks Mr. Gordon. That means improved confidence will yield a pickup in sales and, in turn, an increase in corporate investment and hiring.

But for an economy battered by the worst downturn in at least a quarter-century, there is still plenty that could go wrong. The economy shed 539,000 jobs last month, less than any month since October but still a very sharp decline. "It's hard to get euphoric about the snapshot for employment in April, since it was the worst number I've seen in my career, except for the last six months," says economist Robert Barbera of research and trading firm ITG.

A recovery can begin even if jobs are slow to come back -- if households feel confident enough to increase spending in anticipation of better times. The problem now is that a persistent collapse in house prices has hurt many households' finances and tight-fisted lenders have limited their ability to borrow. That makes it even harder for them to spend more.

"The optimistic interpretations of a number of recent statistics are incorrect -- too optimistic," says Harvard's Martin Feldstein, an NBER committee member. "There's a grabbing for good news, and when you dig down a little deeper, the news isn't good."

In the past, one signal that the economy was coming out of recession was an increase in the number of new single-family homes that builders started, often because lower interest rates prompted more building. This time, home building remains depressed. The latest data suggest that housing starts have stopped falling, finally, but they remain 50% below the year-earlier level and 80% below the 2006 peak.

In every recession, the economy breaks some rule. This time around, it may be the rule that an ebb in unemployment claims presages recovery. Or that housing must recover for the all-clear signal to sound. While economists would like all the arrows to line up according to their theories, Harvard's Mr. Frankel says, "the reality is always much more jagged than that."

Tamil Tigers Deny Leader Dead

Iran's Nuclear Shopping List

Morgenthau: 'It's late in the game.'

Back when the Bush Administration was warning about Iran's nuclear progress, or its deadly meddling in Iraq, the typical Democratic and media response was to treat the Islamic Republic as innocent until proven guilty. This month, Democrat Robert Morgenthau supplied the proof.

In testimony to the Senate Foreign Relations Committee that was largely ignored by the media, the legendary Manhattan District Attorney opened a window on how Iran is secretly obtaining the ingredients for an arsenal of mass destruction. Mr. Morgenthau, whose recent cases have exposed illicit Iranian finance and procurement networks, has discovered what he calls "Iran's shopping list for materials related to weapons of mass destruction." They add up to "literally thousands of records."

Missile accuracy appears to be a key Iranian goal. In one of Mr. Morgenthau's cases -- the prosecution of Chinese citizen Li Fang Wei and his LIMMT company for allegedly scamming Manhattan banks to slip past sanctions on Iran -- the DA uncovered a list that included 400 sophisticated gyroscopes and 600 accelerometers. These are critical for developing accurate long-range missiles. He also found that Iran was acquiring a rare metal called tantalum, "used in those roadside bombs that are being used against our troops in Iraq and Afghanistan." So much for the media notion that Iran has played no part in killing American GIs.

Mr. Morgenthau also noted that the material shipped by LIMMT "included 15,000 kilograms of a specialized aluminum alloy used almost exclusively in long-range missile production; 1,700 kilograms of graphite cylinders used for banned electrical discharge machines which are used in converting uranium; more than 30,000 kilograms of tungsten-copper plates; 200 pieces of tungsten-copper alloy hollow cylinders, all used for missiles; 19,000 kilograms of tungsten metal powder, and 24,500 kilograms of maraging steel rods . . . especially hardened steel suitable for long-range missiles."

Lest anyone think that these materials may have innocent uses, Mr. Morgenthau added that "we have consulted with top experts in the field from MIT and from private industry and from the CIA. . . . Frankly, some of the people we've consulted are shocked by the sophistication of the equipment they're buying."

Mr. Morgenthau's information is corroborated by a staff report for the Foreign Relations Committee, chaired by Democrat John Kerry, which notes that Iran is making nuclear progress on all fronts, and that it "could produce enough weapons-grade material for a bomb within six months." The committee also notes that "Iran is operating a broad network of front organizations," and that authorities suspect "some purchases for Iran's nuclear and missile programs may have come through an elaborate ruse to avoid U.S. financial sanctions on dealing with Iranian banks."

As we've reported, Lloyds bank entered into a deferred prosecution agreement in January with Mr. Morgenthau's office in which it admitted to a $300 million "stripping" scheme designed to hide the Iranian origin of banking transfers from 2001 to 2004. Several other banks are also in the crosshairs of Mr. Morgenthau and the Justice Department.

All this should put to rest any doubts about the Iranian regime's purposes and determination. As for what the U.S. should do about it, the committee report insists that "direct engagement" must be a part of American strategy, and so it seems fated to be under the Obama Administration. The least it can do is heed Mr. Morgenthau's central point about everything he's learned about Iran's nuclear progress: "It's late in the game, and we don't have a lot of time."

Running for Lean Times

It's no accident that jogging took off in the 1970s.

CAMERON STRACHER

It's nearly summertime, but the living isn't easy -- not if you're suffering from a 401(k) meltdown. Life, in fact, is hard, and only getting harder. And when life gets tough, the tough get running.

While gym memberships are down and personal trainers are getting the boot, running is making a major comeback according to race directors and shoe retailers.

It's easy to see why. Running is an inexpensive activity that requires little in the way of equipment -- a decent pair of shoes, shorts, socks and a T-shirt and you're ready. The playing field is any free land, sidewalk, park or road. (It's not surprising that America's first running craze was born of the economic malaise of the 1970s.) And most cities and towns have at least one running club, an informal group that meets for distance runs and interval workouts. In short, running is one of the cheapest forms of exercise a body can do.

But running is not just exercise. It's a great stress reliever and an inexpensive source of neurotransmitters like dopamine that wash the body with good feelings. In stressful times, running can literally make us happy. Thus, being a runner is both an emotional and biochemical commitment.

Of course, some people "jog" purely for fitness purposes and hate it. This might explain why the French were recently in an uproar after photos surfaced of President Nicolas Sarkozy in shorts and a T-shirt breaking a sweat in the Tuileries. Running is an American activity, the French press claimed, a fascistic act designed to manage and control the body. Not an intellectual pursuit at all. "It is about performance and individualism," one writer wrote, right-wing values antithetical to everything cherished by the country that gave us foie gras.

Perhaps so. Yet once infected by the running bug, it's hard to find a cure.

During the winter in New York I would routinely encounter a man who ran the loop of Central Park shirtless, no matter the weather. I once saw him in the middle of a 22-inch snowstorm when I thought I'd be the only one crazy enough to venture outside. Yet the park was filled with runners.

Another time my training partner burst into tears in the middle of a run because his girlfriend had just dumped him. Rather than stopping, he picked up the pace, until the two of us were flying down the mall in Washington, D.C., in the middle of a blistering hot day, silent and relentless, burning away the sorrow.

All runners have stories, many of them bizarre or off-color. In law school I ran with a world-class, 5,000 meter runner who disclosed he was stoned in the middle of a 13-mile run (apparently a common training technique for him).

At the Olympic trials in Charlotte, N.C., in 1996, marathoner Bob Kempainen vomited a bright green stream of Gatorade on national television, then calmly accelerated (running a 4:44 mile) and sprinted to victory. World record-holder Grete Waitz did her business on the side of the road, then pulled up her shorts and went on to win the 1984 New York City Marathon. Every runner has a tale about a port-a-potty just missed, a coffee that wouldn't stay down, a blister that burst and filled a sock with blood. We tell the stories with pride, metaphors for our own indomitability.

None of us, of course, can beat back disease, debilitation or death. Running may temporarily relieve our stress, but it's sure to take its toll on our knees and hips and the fatigue of constant training can have a depressant effect.

Yet imagine the runner, alone on the road, his footfalls on gravel in sync with his breathing. He is swift and fast and focused. His arms pump in steady cadence. His knees rise in regular rhythm.

There is nothing on his mind but how his fingers feel as they brush his palm, his toes as they kiss the edge of his shoes, his calves as they whisper against each other with every stride. He is man, machine, spirit. Watch him fly.

Mr. Stracher is publisher of the New York Law School Law Review. He is writing a book about the 1970s and the running boom.

A Strategy for Netanyahu

Time for a solution that shows who wants peace.

By BRET STEPHENS

Imagine yourself as Israeli Prime Minister Benjamin Netanyahu, returning to Jerusalem from your first White House parley with Barack Obama.

Both in public and in private, the young president (he's a dozen years your junior, and worryingly free of normal human anxieties) assures you that, when it comes to Iran and the existential threat it poses Israel, he gets it. It's an expression he uses too often, and too easily, to satisfy you that he actually does.

Associated Press

Prior to the visit, the commentariat was heavy with predictions that this was to be make or, more likely, break time for U.S.-Israeli relations, since President Obama is skittish about an attack on Iran and you're not, while you're skittish about a Palestinian state and he's not. But the last thing the two of you need is to get into a giant contest of wills this early in your administrations.

What's more, unlike Bill Clinton or Jimmy Carter, an Arab-Israeli peace deal isn't the Holy Grail of the Obama presidency. (Thank God, you think, for socialized medicine.) What the president mainly wants is better mood music. At least half your job is to show you can carry a tune.

The tune is called Two States for Two Peoples, and it's one you yourself have sung, albeit slightly off-key: "We don't want to govern the Palestinians. We want them to govern themselves," you said yesterday, adding that terminology isn't important.

But if the words don't matter, then accepting the two-state solution in principle comes with major advantages. For starters, it defuses a ticking bomb in U.S.-Israeli relations and hands Mr. Obama a talking-point victory.

It also allows you to engage in the same fine-print diplomacy that has so neatly served your enemies via the 2002 Arab peace initiative, a poison pill of demographic destruction (aka, the "right of return") wrapped in the silk purse of "full normalization." Better to return the favor by accepting the two-state formula and challenging the Arab world, as you did yesterday, to accept Israel as a Jewish state -- the way it was conceived by the U.S. and the U.N. at its founding, and the very essence of the two-state idea -- and then see who is really opposed to peace.

Most important, a show of flexibility on the Palestinian issue gives you added leverage with the Americans on the infinitely more consequential matter of Iran's nuclear programs. Linkage in foreign policy is usually a bad idea, but if Hillary Clinton, Rahm Emanuel and Jim Jones want to hand you a card, play it.

That means that if Mr. Obama isn't seriously prepared to lead (or follow, or get out of the way) when it comes to stopping Tehran, why should you lift a finger for the sake of a Palestinian state, especially given the strong possibility that it will rapidly devolve into another Gaza, richly endowed with Iranian arms?

On the other hand, there's no end to the "progress" you can offer -- if, you may tell yourself, only in the spirit of Zeno's paradox -- to placate George Mitchell as he scurries between Ramallah, Jerusalem, Amman and Cairo. No end, that is, assuming Mr. Obama makes his diplomatic overture to Iran a take-it-or-leave-it, time-limited offer, and then resolves to do something should the offer be rebuffed.

As for the chances of that, you got a taste of the Obama method in the Oval Office, when he simultaneously rejected a fixed deadline for diplomacy while promising that "we're not going to have talks forever" and indicating that "forever" would begin next January. Talking out of both sides of his mouth is this president's specialty. It's a skill worth practicing.

At some point, however, you will have to make the decision on whether to strike Iran. As a tactical issue, your bald insistence that Iran will not be allowed to go nuclear has only put the mullahs further on their guard. If it weren't for a certain trick up Israel's sleeve, that kind of rhetoric would be dangerous to your own airmen.

But in the manner of Richard Nixon's style of détente, it helps to be thought of as maybe a little bit crazy. An Israeli attack on Iran, successful or not, could mean big trouble for U.S. interests in the Middle East, especially in Iraq and the Persian Gulf. So much the better from your point of view: It gives the U.S. every incentive either to ratchet up sanctions on Iran in some convincing way, ideally through an embargo on Iran's gasoline imports, or else assist you, probably covertly, in seeing to it that the strikes succeed. That could mean anything from an air corridor over Iraq to the sale of highly sophisticated munitions.

Of course, there's always the possibility that this president will wind up not only doing nothing to stop Iran, but actively seeking to prevent you from doing something. In that case, you will stand truly alone.

Then your options will be to turn Israel into a bunker state, take harsh measures against Palestinians, and plan for all out war with Iran, damn the consequences to the U.S. A point you might want to make privately with Mr. Obama, just to see that he "gets it."

How Washington Rations

ObamaCare omen: a case study in 'cost-control.'

Try to follow this logic: Last week the Medicare trustees reported that the program has an "unfunded liability" of nearly $38 trillion -- which is the amount of benefits promised but not covered by taxes over the next 75 years. So Democrats have decided that the way to close this gap is to create a new "universal" health insurance entitlement for the middle class.

Such thinking may be a non sequitur, but it will have drastic effects on the health care of all Americans -- and as it happens, this future is playing out in miniature in Medicare right now. Desperate to prevent medical costs from engulfing the federal budget, the program's central planners decided last week to deny payment for a new version of one of life's most unpleasant routine procedures, the colonoscopy. This is a preview of how health care will be rationed when Democrats get their way.

At issue are "virtual colonoscopies," or CT scans of the abdomen. Colon cancer is the second leading cause of U.S. cancer death but one of the most preventable. Found early, the cure rate is 93%, but only 8% at later stages. Virtual colonoscopies are likely to boost screenings because they are quicker, more comfortable and significantly cheaper than the standard "optical" procedure, which involves anesthesia and threading an endoscope through the lower intestine.

Associated Press

OMB Director Peter Orszag.

Virtual colonoscopies are endorsed by the American Cancer Society and covered by a growing number of private insurers including Cigna and UnitedHealthcare. The problem for Medicare is that if cancerous lesions are found using a scan, then patients must follow up with a traditional colonoscopy anyway. Costs would be lower if everyone simply took the invasive route, where doctors can remove polyps on the spot. As Medicare noted in its ruling, "If there is a relatively high referral rate [for traditional colonoscopy], the utility of an intermediate test such as CT colonography is limited." In other words, duplication would be too pricey.

This is precisely the sort of complexity that the Democrats would prefer to ignore as they try to restructure health care. Led by budget chief Peter Orszag, the White House believes that comparative effectiveness research, which examines clinical evidence to determine what "works best," will let them cut wasteful or ineffective treatments and thus contain health spending.

The problem is that what "works best" isn't the same for everyone. While not painless or risk free, virtual colonoscopy might be better for some patients -- especially among seniors who are infirm or because the presence of other diseases puts them at risk for complications. Ideally doctors would decide with their patients. But Medicare instead made the hard-and-fast choice that it was cheaper to cut it off for all beneficiaries. If some patients are worse off, well, too bad.

Medicare is already the country's largest purchaser of health care. Private carriers generally adopt its rates and policies, and the virtual colonoscopy decision may run this technology out of the marketplace. Now multiply that by the new "public option" that Democrats favor, which would transfer millions of patients to a new insurance program managed by the federal government. Washington's utilitarian judgments about costs would reshape the practice of medicine.

Initially, the open-ended style of American care will barely be touched, if only for political self-preservation. Health planners will adjust at the margins, as with virtual colonoscopy. But scarcity forces choices. As the Medicare trustees note in their report, the tax increases necessary to fund merely the current benefit schedule for the elderly would cripple the economy. The far more expensive public option will not turn into a pumpkin when cost savings do not materialize. At that point, government will clamp down with price controls in the form of lines and rock-bottom reimbursement rates.

Mr. Orszag says that a federal health board will make these Solomonic decisions, which is only true until the lobbies get to Congress and the White House. With virtual colonoscopy, radiologists and gastroenterologists are feuding over which group should get paid for colon cancer screening. Companies like General Electric and Seimens that make CT technology are pressuring Medicare administrators too. More than 50 Congressmen are demanding that the decision be overturned.

All this is merely a preview of the life-and-death decisions that will be determined by politics once government finances substantially more health care than the 46% it already does. Anyone who buys Democratic claims about "choice" and "affordability" will be in for a very rude awakening.

Obama Scored Big at Notre Dame

At least the president is forthright about his principles.

By WILLIAM MCGURN

Seldom does dawn rise on an America where the morning's New York Times displays a more intuitive grasp of a story than the New York Post. The coverage of Barack Obama's commencement address at Notre Dame, however, was such a day. Where the Post headlined an inside spread with "Obama In the Lions' Den," the Times front page was dominated by a color photograph of a beaming president, resplendent in his blue-and-gold Notre Dame academic gown, reaching out to graduates eager to shake his hand or just touch his robe.

It was precisely the message President Obama wanted to send: How bad can he be on abortion if Notre Dame is willing to honor him?

We cannot blame the president for this one. During his campaign for president, Mr. Obama spoke honestly about the aggressive pro-choice agenda he intended to pursue -- as he assured Planned Parenthood, he was "about playing offense," not defense -- and his actions have been consistent with that pledge. If only our nation's premier Catholic university were as forthright in advancing its principles as Mr. Obama has been for his.

In a letter to Notre Dame's Class of 2009, the university's president, the Rev. John Jenkins, stated that the honors for Mr. Obama do not indicate any "ambiguity" about Notre Dame's commitment to Catholic teaching on the sanctity of human life. The reality is that it was this ambiguity that the White House was counting on; this ambiguity that was furthered by the adoring reaction to Mr. Obama's visit; and this ambiguity that disheartens those working for an America that respects the dignity of life inside the womb.

We've been here before. In his response to an inquiry from this reporter, Dennis Brown, the university's spokesman, wisely ignored a question asking whether "ambiguity" would be the word to describe a similar decision in 1984 to give Mario Cuomo, then governor of New York, the Notre Dame platform he so famously used to advance his personally-opposed-but argument. Or the decision a few years later to bestow its highest Catholic award on Sen. Daniel Patrick Moynihan, another supporter of legal abortion. It seems that whenever Democratic leaders find themselves in trouble over their party's abortion record, some Notre Dame honor or platform will be forthcoming to provide the needed cover.

Probably Notre Dame is rich enough that it can safely thumb its institutional nose at the 70 or so bishops who publicly challenged the university for flouting their guidelines on such invitations. Nor can we expect much from Notre Dame's trustees. At a time when Americans all across this country have declared themselves "yea" or "nay" on the Obama invite, the reaction of Notre Dame's board is less the roar of the lion than the silence of the lambs.

Pro-lifers are used to this. They know their stand makes them unglamorous. They find themselves a stumbling block to Democratic progressives -- and unwelcome at the Republican country club. And they are especially desperate for the support of institutions willing to engage in the clear, thoughtful and unembarrassed way that even Mr. Obama says we should.

With its billions in endowment and its prestigious name, Notre Dame ought to be in the lead here. But when asked for examples illuminating the university's unambiguous support for unborn life, Mr. Brown could provide only four: help for pregnant students who want to carry their babies to term, student volunteer work for pregnant women at local shelters, prayer mentions at campus Masses, and lectures such as a seminar on life issues.

These are all well and good, but they also highlight the poverty of Notre Dame's institutional witness. At Notre Dame today, there is no pro-life organization -- in size, in funding, in prestige -- that compares with the many centers, institutes and so forth dedicated to other important issues ranging from peace and justice to protecting the environment. Perhaps this explains why a number of pro-life professors tell me they must not be quoted by name, lest they face career retaliation.

The one institute that does put the culture of life at the heart of its work, moreover -- the Center for Ethics and Culture -- doesn't even merit a link under the "Faith and Service" section on the university's Web site. The point is this: When Notre Dame doesn't dress for the game, the field is left to those like Randall Terry who create a spectacle and declare their contempt for civil and respectful witness.

In the National Portrait Gallery of the Smithsonian, there is a wonderful photograph of Father Ted Hesburgh -- then Notre Dame president -- linking hands with Martin Luther King Jr. at a 1964 civil-rights rally at Chicago's Soldier Field. Today, nearly four decades and 50 million abortions after Roe v. Wade, there is no photograph of similar prominence of any Notre Dame president taking a lead at any of the annual marches for life.

Father Jenkins is right: That's not ambiguity. That's a statement.

Obama, Netanyahu Discuss Mideast Peace

Day Ahead:The Bulls Are Back in Town

Stocks Waver After Starts Data

Data showing a surprising decline in residential construction squelched the housing-related hopes that were a key ingredient in the previous session's stock-market boom, leaving major indexes in narrow range Tuesday morning.

The Dow Jones Average posted a disappointing follow-up to Monday's 235-point surge, trading 21 points higher at 10:33 a.m. It was weighed down by a slide of about 5.6% for component Home Depot, after it posted stronger earnings but said sales and margins declined and it reaffirmed its guidance for the year ahead.

Market Data Center >

Monday, Home Depot rival Lowe's sparked a broad stock-market rally by reporting better-than-expected results and boosting its outlook for the rest of the year. Its shares were down about 1.8% in early trading

The Nasdaq Composite Index was up 0.2%. The S&P 500 edged up 0.4%, its losses tempered by gains in the utilities and basic-materials sectors.

The Commerce Department reported that housing starts unexpectedly fell in April, brought down by a large decline in apartment groundbreakings that offset a modest increase in single-family housing starts. Housing starts dropped 12.8% to a seasonally adjusted 458,000 annual rate compared to the prior month, the Commerce Department said.

The report ran counter to recent readings of builder sentiment and earnings at major home-improvement chains that painted a rosier picture of the housing market, whose woes are at the epicenter of the U.S. recession.

However, most traders and analysts remain cautiously bullish on stocks, based in part on the idea that pressure is rising for investors sitting on the sidelines to put to work their excess cash, which is garnering little interest because of the Federal Reserve's rock-bottom target aimed at spurring an economic recovery.

"The fundamentals almost don't matter at the moment," said Cantor Fitzgerald strategist Marc Pado, pointing to recent data from the Investment Company Institute showing that retail investors are holding almost $4 trillion in cash reserves. "If we even get a small percentage of that money come into the market, you can easily get another leg to this rally."

Over the longer haul, however, Mr. Pado and other investors agree that the economy and corporate profits will have to revive for the market to hold on to its recent gains, including a nearly 30% gain for the Dow from its early-March lows.

Reports on Tuesday said that J.P. Morgan Chase, Goldman Sachs Group and Morgan Stanley have applied to repay $20 billion of government funds. Shares of the banks were lower. American Express fell .3% after it said it's cutting 4,000 jobs as it looks to save $800 million a year.

Crude-oil futures briefly moved over $60 a barrel to hit a six-month high. The contract recently traded at $59.87.

Overseas, China's Shanghai Composite rose 0.9% to reach a nine-month high. Hong Kong's Hang Seng Index closed at a seven-and-half month high. Markets in Europe were also mostly stronger in recent trading.

Monday, May 18, 2009

The Arms-Control Dinosaurs Are Back

Why invite Russia to veto the nuclear progress we've been making on our own?

MARC A. THIESSEN

When John Bolton served in the State Department during the Bush administration, he often walked the halls of Foggy Bottom wearing his trademark dinosaur ties -- a self-deprecating nod to those who thought his political views somewhat Jurassic. Today other dinosaurs have replaced him. The aging arms controllers who once haggled with Soviet officials are staging a comeback in the Obama administration.

This week in Moscow they'll pick up where they left off nearly two decades ago, sitting across the table from their Russian counterparts negotiating a renewal of the 1991 U.S.-Soviet Strategic Arms Reduction Treaty (Start). One of the U.S. negotiators, Assistant Secretary of State Rose Gottemoeller, refers to herself as a "Sputnik baby." She told the Washington Post after initial talks in New York earlier this month: "We've all been looking around and chuckling and saying 'We're all over 50.'"

President Barack Obama's goal of "a world without nuclear weapons" notwithstanding, the State Department is reportedly scrambling to staff its arms-control bureau because so many arms-control experts have retired and there's no one coming up in the ranks to replace them. Apparently not many young policy wonks are aware that cutting nuclear deals with Moscow is again the fast track to a high-flying diplomatic career.

Martin Kozlowski

The Obama revival of arms control comes at an odd moment. The past eight years have seen the fewest arms-control negotiations in a generation and some of the deepest nuclear weapons reductions in history. Thanks to the work of the Bush administration, the U.S. nuclear stockpile is now one-quarter the size it was at the end of the Cold War -- the lowest level since the Eisenhower administration. When George W. Bush took office, the U.S. had more than 6,000 operationally deployed strategic nuclear warheads. Today, that number has been reduced to less than 2,200. The U.S. had originally planned to reach this milestone on Dec. 31, 2012, but instead met its goal this February.

How did the U.S. achieve such dramatic reductions so quickly? Answer: By abandoning traditional arms control. When Mr. Bush took office, he decided not to engage in lengthy, adversarial negotiations with Russia in which both sides kept thousands of weapons they did not need as bargaining chips. He did not establish standing negotiating teams in Geneva with armies of arms-control experts doing battle over every colon and comma. If he had done so, the two sides would probably still be negotiating today.

Instead, Mr. Bush simply announced his intention to reduce the U.S.'s operationally deployed strategic nuclear warheads by some two-thirds and invited Russia to do the same. President Vladimir Putin accepted his offer. These unilateral reductions were then codified in the 2002 Moscow Treaty, a three-page pact that took just six months to negotiate. By contrast, the Start treaty signed by President George H.W. Bush and Soviet President Mikhail Gorbachev -- and now being revived by the Obama team -- is 700-pages long and took nine years to negotiate.

Even as he enacted massive reductions in nuclear weapons, George W. Bush took other actions to reduce nuclear dangers. His administration launched the Global Threat Reduction Initiative, which secured more than 600 vulnerable nuclear sites around the world and helped convert 57 nuclear reactors in 32 countries from highly-enriched uranium to low-enriched uranium, removing enough weapons-grade material from countries around the world for more than 40 nuclear bombs.

With G-8 leaders, Mr. Bush launched the Global Partnership Against the Spread of Weapons and Materials of Mass Destruction -- a $20 billion international effort to secure and dispose of nuclear and fissile materials and help former weapons scientists find new lines of work. The U.S. and Russia launched the Global Initiative to Combat Nuclear Terrorism, a coalition of 75 nations that is working to stop the illicit spread of nuclear materials. The U.S. and Russia also launched the Bratislava Initiative, which has secured nearly 150 Russian sites containing nuclear warheads and hundreds of metric tons of weapons-quality material.

Despite this record of achievement, the arms controllers see the Bush era as a dark age from which they must rescue the world. They are intent on reviving the antiquated and adversarial approach to arms reductions. As serious negotiations begin, Russia will use these negotiations on arms reductions as leverage to get the U.S. to give up its planned deployment of ballistic missile defenses in Poland and the Czech Republic. Unlike Ronald Reagan at Reykjavik, it is not clear that Mr. Obama would walk away from a deal to preserve these vital defenses.

In addition to a new Start treaty, the Obama administration also reportedly plans to press the Senate to approve the Comprehensive Test Ban Treaty (CTBT), a fatally flawed agreement that was rejected by the Senate in 1999 because it would undermine reliability of our nuclear stockpile. Instead of pressing the Senate to act on the CTBT, the administration should be calling on Congress to restore the funding it eliminated last year for the Reliable Replacement Warhead program, which would allow us to develop new warheads without the need for nuclear testing and thus ensure the reliability of America's nuclear deterrent.

Mr. Obama will visit Moscow in July where he and President Dmitry Medvedev will discuss progress on their stated goal to "move beyond Cold War mentalities and chart a fresh start in relations." Bringing back Cold War-era arms-control negotiations is a strange way to do so. In the 21st century, arms-control agreements are as antiquated as cave drawings. We no longer need pieces of parchment and armies of arms-control aficionados to achieve deep reductions in nuclear weapons. This fact is lost on the Sputnik babies now inhabiting the State Department.

Mr. Thiessen served as chief speechwriter to President George W. Bush and Secretary of Defense Donald Rumsfeld. In 2002, he traveled to Russia with Mr. Rumsfeld for the negotiations of the Moscow Treaty.

Bye Bye Pelosi

WORDS, NOT GESTURES

Xanax Nation Beats a Panicked Nation

Xanax Nation Beats a Panicked Nation Any Day: Caroline Baum

Commentary by Caroline Baum

May 15 (Bloomberg) -- Economic historians like to put some distance between themselves and the events they’re writing about. The Founding Fathers come up for a scholarly re-look a few times each century. The Civil War and the economics of slavery provide endless fodder. The Great Depression is still hotly debated 80 years after the fact.

With any luck, by 2088 we should have a good handle on the Panic of 2008: the causes, cures and curiosities surrounding the subprime collapse that was heard, and felt, ‘round the world.

What will the current crisis look like when viewed through history’s telescopic lens? We can only imagine.

Systemic Risk Regulator R.I.P.

The U.S. Congress, which excels at preventing the last crisis from recurring, enacted new rules and regulations before the last bank had extricated itself from the government’s grip.

Regulation was deemed too important to be left solely to the regulators. So Congress vested authority in a Money Czar to ferret out financial instability wherever it might roam.

The notion of a systemic risk regulator fit right in with the country’s post-crisis czarism fetish. Like all czars, this one was doomed.

The post-mortems after the crash of ‘29 -- that’s 2029 -- went something like this: A single regulator is poorly suited to identifying systemic risk. The chances are much better that a patchwork of regulatory agencies, maligned after the Panic of ‘08, will spot something a centralized authority missed.

Glass-Steagall-Gramm-Leach-Bliley-Dodd-Frank-Pelosi

The 1933 Glass-Steagall Act, which separated investment banking from the more staid commercial banking, was repealed in 1999 by Gramm-Leach-Bliley.

A decade later, members of Congress determined that deregulation was the proximate cause of excessive speculation in the financial services industry. The de-leveraging that followed turned an ordinary recession into a worldwide meltdown.

Under the sponsorship of Senate Banking Committee Chairman Chris Dodd, House Financial Services Committee Chairman Barney Frank and House Speaker Nancy Pelosi, lawmakers gave new meaning to the separation of powers. Instead of just separating investment banking and brokerage activities from commercial banking, Congress took the investment out of banking.

The new business model of counting coins and making change wasn’t nearly as lucrative as debt securitization. But never again would the nation have to contend with the fallout from excess leverage.

Swaps, the Old-Fashioned Way

Following the Panic of 2008, Congress enacted all kinds of restrictions on executive compensation.

And not just for financial institutions. Corporate executives nationwide saw caps placed on their comp, with the government providing detailed formulas for determining how much executives could earn.

For example, directive 16-717 dealt specifically with the chief executive officer. “The compensation of the CEO shall not exceed 0.6 percent of the square root of the corporation’s average profits for the last 10 years adjusted for one-time charges,” according to the directive. “Under no circumstances shall the CEO earn more than 10 times the median compensation of the company’s full-time employees or 20 times the compensation of the lowest-paid full-time employees.”

Maybe you can guess what happened.

The post-agricultural, post-industrial, post-informational U.S. economy went back to barter.

Not the old-fashioned payment-in-kind: You fix my roof, I’ll install your home entertainment center. Heck no.

Under the new system, General Electric pulls 4.6 million energy-saving 60-watt bulbs out of inventory, swaps them for a top-of-the-line Maybach 62S and presents it to CEO Jeff Immelt.

It’s a little more cumbersome than a deferred compensation plan, but at least the underground economy gets a lift.

Alternative (Energy) Bubble

The housing bubble may have been turbo-charged by the Federal Reserve’s easy money policy from 2003-2005, but all the ingredients were already in place, just waiting for a match to be struck.

Housing’s tax-advantaged status made homeownership more desirable and affordable. Government diktats, starting with the Community Reinvestment Act of 1977, pressured banks to lend to less-creditworthy borrowers in minority neighborhoods. Fannie Mae and Freddie Mac made affordable housing their mission.

Just as the housing bubble inflated on the heels of the tech boom-bust, an alternative-energy bubble began to take shape before the economy fully recovered from the 2008 recession.

The Obama administration provided all kinds of tax incentives for going green. Fed policy stayed too easy too long because Congress enacted a law requiring pre-approval for any policy actions that would raise the overnight benchmark rate.

If you print it, they will spend. The U.S. ended up with a lot of unused, portable solar panels, which folks took to wearing -- a big improvement over tin hats.

Xanax Nation vs. Panicked Nation

It’s said that there are no atheists in foxholes and no libertarians in financial crises. Still, many of the decisions made during the Panic of 2008 were hasty, ill-considered and left the nation with huge imbalances. (There’s no shortage of Monday-morning quarterbacks in the foxhole after the crisis.)

Consider Treasury Secretary Hank Paulson’s request for $700 billion from Congress, no questions asked. Or Congress’s rush to confirm Tim Geithner as Treasury secretary, even after he was exposed as a tax cheat. Or the seemingly arbitrary decisions on which institutions should live and which should die.

Panicked decisions are usually bad decisions because they’re driven by emotion. In retrospect, maybe it would have been better to give Sheila Bair the $700 billion and let the Federal Deposit Insurance Corp. figure it out.

So great were the repercussions from the Panic of 2008 and the Panic Fix that the federal government pressured the Food and Drug Administration to make Xanax, an anti-anxiety medication, an over-the-counter drug and to require all policy makers to take it during crisis times.

Tuesday, May 19, 2009