THE WISDOM OF KENNY ROGERS

Kenny Rogers put it this way: ". . . you gotta know when to fold 'em." It is with regret that this blog is folding. It started as a way to write some 50-year later postings based on John Steinbeck"s l962 book, TRAVELS WITH CHARLEY. But it very quickly evolved into fact/opinion pieces on events here and abroad, with a liberal tilt.

Lately I found myself increasingly cynical about where we are at politically and policywise and what to me the future portended. And, increasingly, I was writing about the Republican mantra on taxes and spending while also hearing what seemed like an evolving Democratic mantra on the same subjects. It got to the point where I was creating my own hypercynical mantra on these and other subjects like the setbacks for U.S. policy in the post-Arab Spring world.

So, because of the self-created mantra combined with the intellectual fatigue that accompanies chronological aging, the time seemed right to shut up, fold my cards, and silently slip away.

I'd like to thank my readers and those who felt there was enough said in some postings to warrant a comment in agreement or disagreement. I'd particularly like to thank my daughter who set up the blogsite and performed a variety of techie tasks as needed.

So thank you all and best wishes.

Charlie

"CLASS WARFARE" -- "BRING 'EM ON"

The Republicans call it "class warfare". That is their reaction to any proposals to increase the taxes on the wealthy in any way, shape, or form. "Class warfare" is also their smokescreen for greed and a shield used by the GOP as political protection when the party sides with the wealthy and large corporations on any issue. The political corollary for "class warfare" is cut the spending for everybody else's programs.

So let it be called "class warfare" and let's get on with it.

President Obama has proposed several ideas for increasing taxes on the wealthy, particularly ending the Bush tax cuts at the end of 2012 for upper income earners and cutting off tax gifts for the oil industry and other large corporations. These presidential proposals have been around since Obama took office in 2009 but have gotten nowhere because of GOP intransigence on any tax increases. To that basic proposal has now been added the so-called Buffet rule (after financier Warren Buffet) which would be some form of calculation to make sure that those with annual income over $1 milliion pay something at least equivalent to taxes paid by the middle class.

To me a central feature of Obama's most recent ideas is capping itemized deductions of the wealthy at 28 percent, 11 percentage points below what would be the top tax rate if the Bush cuts for the wealthy were allowed to expire. Capping deductions gets at the sensitive problem of what to do about so-called tax loopholes such as deductions for property taxes, interest on mortgage payments, and charitable contributions. These deductions are very popular with the middle class as well as the wealthy and proposals for outright elimination is virtually impossible politically, short of a whole new flat tax rate scheme. So capping deductions for the wealthy alleviates that problem. A recent posting gave an example of how the capping would work on a mortgage interest deduction for a large, luxury home:

If a person in the top 39 percent tax rate bracket pays a mortgage interest of $20,000 per year, he saves $7,800 on his itemized deduction, but by limiting total itemized deductions to 28 percent, the return to the rich homeowner is reduced to $5,600. Thus, increasing the taxes of the wealthy is not solely reliant on the tax rate itself, but also ending the large revenue leakage that occurs by the rich using the itemized deductions as a means of getting richer.

All of this still leaves the problem of defining the income of the wealthy. The Buffet Rule proposal allows Obama to set millionaires as a specific target. But in my view, expressed several times previously, defining "wealthy" as $200,000 income for a single person and $250,000 for a married couple filing jointly sets the threshhold much too low. With high living costs in some areas, and with kids in college as pointed out by a reader, these levels don't realistically reflect "wealth". If Obama is to have any prospects for ending the upper end Bush tax cuts, the President and his Democratic congressional colleagues will have to change these levels upward. This would mean less revenue but give the Democrats a better, but still not good, chance of ending some of the Bush tax cuts.

This brings me back to the GOP assertion about "class warfare". I'm not given to quoting George Bush but in this case it would be in order to use his injudicious comment made early in the Iraq war -- "Bring 'em on". If the "class warfare" charge is taken into the larger public realm, the term "class warfare" will soon be seen for what it really is. It is not, as originally conceived, the upper and middle classes versus the lower income groups, but the upper class enriching itself at the expense of both the middle and lower income groups.

AT HOME AND ABROAD (ISRAEL)

To me it sounds like we're still sitting on square one. As noted in the last posting, President Obama proposes to have some tax increases as part of his plan to pay for his jobs program. And perhaps even bigger changes in the tax code to fund a long term plan for deficit reduction.


That having been said, GOP House Speaker Boehner said a few days ago that he would accept no tax increase proposals from the Super Committee set up about 7 weeks ago to reduce current deficit spending by $1.2-1.5 trillion and permit an equal increase in the national debt ceiling. To that amount Obama has proposed adding the $450 billion cost of his jobs program, pushing the Super Committee's target up to close to $2 trillion. The Committee is to send its plan to Congress by Thanksgiving. Boehner apparently has no problem with this as long as the Committee rejects any new spending and meets the target through cuts in expenditures only.


So it sounds like we are back to where we were in August, and before, when Congress was dealing with funding the federal government for the remainder of fiscal 2011 and then struggling with raising the debt ceiling to avoid a national fiscal default. In short, we can expect a rerun of the same deficit/debt/new revenues arguments that we heard all summer. The latest poll gave Congress a 12 percent approval rating. Can it go lower? And what about Obama's approval rating?


0-0-0-0-0-0


If the above combination of fact and opinion isn't depressing enough, what seems to be lying ahead in the United Nations may be equally discouraging for U.S. policy and Israeli political isolation. The U.S. image in the Muslim world may suffer another downward slide when Palestinian President Abbas asks the U.N. Security Council to grant full U.N. membership to the Palestinians. That is certain to draw a U.S. veto and bring with it new denunciations from the Muslim world and some others about U.S. policy in the Middle East. That pro-Israeli policy has been a huge problem for the U.S. since Israel was established through a U.N. vote in l948.


The Palestinians plan to backup the certainty of a U.S. veto in the Security Council by going to the General Assembly for a majority vote there to upgrade its observer status. The change would permit it to participate in various U.N. organs and possibly bring legal action against Israel. Whatever action the U.N. may take, it involves the status of the Palestinians within the international organization. It does not involve establishment of Palestine as an independent state.

Adding to the sensitivity of the problem is Israeli Foreign Minister Lieberman, a far right member of the governing coalition, who threatened that the Palestinian U.N. strategy could lead to "dire consequences". What these consequences might be were undefined but formal annexation of Israeli settlements on Palestinian territory into the state of Israel is one possibility. Whatever the "dire consequences" may be, the end result of all of this will be some form of international condemnation by many countries of Israel and add further to the political isolation of that country.

The growing isolation was evidenced most recently by Turkey, a one time close ally of Israel, booting out Israel's top diplomats. The degrading of Turkish-Israeli relations is rooted in the killing of nine Turks during an effort by an international group to break the Israeli blockade of Gaza by trying to bring in a shipload of relief supplies. Others have suggested that the deterioration of relations is a sign that Turkey, governed by a Mulim based party, is sliding toward closer relations with Islamic fundamentalists.

Adding to the increasing isolation of Israel was the recent incident on the Egyptian-Israeli border when people from both sides were killed by gunfire. That was followed by an attack on the Israeli embassy in Cairo and Israel's withdrawing its diplomats. Israel has expressed regret for the border incident and is investigating but no apology has been made. The lack of an apology to Turkey for the blockade-running incident is the ostensible reason for the breakdown in those relations.



And just last week Turkish Prime Minister Erdogan visited Cairo, along with Tunisia and Libya, to demonstrate Turkey's growing role in that part of the Arab world. The Cairo meeting might also fortell further problems between Israel and both Egypt and Turkey. Israel's relations with Egypt were already in trouble following the ouster of President Mubarak who supported Israel in a variety of ways and stood by the peace treaty between the two countries.


So at home and in the Middle East, there seems to be more more clouds gathering.

AND NOW THE PAYING-FOR-IT PLAN

Having served up his lite job creation program, President Obama has now turned his attention to paying for it, a very touchy political subject because of GOP intransigence on no tax increases. The core piece of Obama's paying-for-it plan is to allow the so-called "temporary" (now about 10 years old) Bush tax cuts to expire at the end of next year. A few things are immediately to be noticed.


1. Allowing the tax cuts for the wealthy to expire and revert to the 36 and 39 percent rates would bring in future revenues far greater than needed for the under $500 billion jobs program. That would be a big plus for dealing with the long term problem of reducing deficit spending and slowing down the accumulation of debt.


2. One big problem beyond the GOP no-tax-increase-for-anyone mantra is that Obama continues to define the wealthy as a single earner with income above $200,000 and a married couple earning over $250,000. Hardly levels of wealth if you live in one of the high cost areas of the country such as New York, Boston, or San Francisco. There are many, including myself, who regard these levels as too low. The ideal might be a $1 million level as the definition of wealthy so you could say you are going after the millionaires. On the other hand, the $1 million level would reduce the amount of new revenues so badly needed. So somewhere between $250,000 and $1 million might make a good compromise point for concerned Democrats; there is little or nothing that can be done about the GOP opposition on new revenues from tax increases.


3. The new revenues proposed by Obama also extend to altering some of the innards of the tax code. He would limit itemized deductions of the $200,000-$250,000 "wealthy" to 28 percent of taxable income. For example, if the itemized deductions were left untouched, a person in the 39 percent bracket paying a mortgage interest of $20,000 in 2014 on his/her very large luxury home would have a $7,800 deduction on that interest. By limiting itemized deductions to 28 percent, the tax deduction would be limited to $5,600.


Other changes in the tax code would tax hedge fund managers income at the ordinary income rate, say 39 percent, rather than the 15 percent capital gains rate now used. And tax subsidies of $40 billion to the oil industry would be eliminated, as well as some other tax benefits for large corporations.


4. All of this means an immediate replay of the politics of yesteryear when Obama made very similar proposals and failed even with Congress under Democratic control. Thus, with the House now controlled by the GOP, his prospects for success are not exactly encouraging.


What is puzzling, however, is that he is willing to make the big tax increase push despite its dim political prospects, while he apparently was not willing to step forward and be equally bold on his job creation program. Like the covert operations of the CIA, we can only hope he knows something we don't know. But I doubt it.

COOKING LITE

Much has already been written and/or said about President Obama's job creation speech before Congress on Thursday night. So this posting is my random observations on his various proposals.

1. It is certainly a job-creation lite or ultra lite proposal. I don't like lite beer and it is difficult to be enthusiastic about his lite offering. With a total cost of under $500 billion it certainly seems too anemic to deal meaningfully with the severity of the nation's unemployment and underemployment problem. And almost half of what he did propose was in the form of another reduction of the payroll/social security tax for employees and to a lesser extent for employers.

The larger payroll tax cut for another year has the same goal as the smaller current reduction of 2 percentage points, due to expire at the end of this year. The cut for the next year would be 3.1 percentage points, half of the tax. The argument for the reduction is that the added money on the paycheck will increase consumer spending and thus give the economy a boost. Adding to that supposed spending power is Obama's request for another extension of unemployment assistance, estimated to cost $49 billion. To the extent that there would be any boost by these two proposals, it would certainly be a small one given the size of the American economy. Also, much of the added spending will be diverted toward paying off credit cards or helping with the mortgage or car payment, none of which will help boost consumer spending and create jobs.

As to the rest of the package, it is broken up into so many small parts, it is difficult to imagine any significant impact. Gone is the idea of a huge job creation stimulus in the form of a large infrastructure building and repair program. Instead there is a $10 billion request to set up a revolving loan fund for private sector borrowing for infrastructure, plus $50 for surface transportatiion projects, and another $25 billion to modernize schools and vacant properties.


In short, where's the beef?

2. Having said the above and giving a much too-lite slant to the Obama plan, that perspective must be matched by the view that even some of the smaller pieces of the package will run into the standard GOP opposition to any new spending. Most Republicans have set their feet in concrete when it comes to adding any new spending programs. That intransigence may partly explain why Obama didn't have a beefier proposal. Except for any value in political posturing a huge infrastructure proposal may have entailed, the political futility of offering such was obvious. If you anticipate big trouble with getting less than $100 billion in new spending past the GOP, what's the point in going for $500-600 billion? Which brings up another observation.

3. Obama has proposed that his under $500 billion program be incorporated into the work of the Super Committee in Congress which is madated to produce $1.2-1.5 trillion in spending cuts by the end of November to allow an equal amount to be added to the national debt ceiling. If the Super Committee goes with the Obama request, it will mean the cuts and/or possible revenue increases would have to total close to $2 trillion, thus adding to the already considerable political problems of the bipartisan House and Senate group. But the complications don't stop there.

4. Obama has said he would have his own plan ready for the Super Committee on September 19, a plan that is almost certain to include revenue-producing tax reform and perhaps modest concessions on medicare and medicaid funding. Such tax reforms are likely to be interpreted immediately as tax increases by the GOP, and thus be greeted with an absolute no, no. Continuing on.

Before the bipartisan committee has had a chance to confront its instant task, $1.2-1.5 trillion in cuts, it now totals about $2 trillion if Obama's latest program is included in the deliberations. And there is already talk, once again, that perhaps this is a new opportunity for a "grand bargain" in the spending/tax/debt battle. Such a "grand bargain" would involve about $4 trillion that would include large spending cuts, increased revenues through tax reform, and changes to the health care programs which many Democrats are committed to protect but which are the biggest drivers of the deficit/debt problem.

To close, all of this sounds like the basis for a rerun of the same partisan politics and political posturing we have had for the last two and a half years. And with the 2012 elections just over a year away, there is little reason to believe we are on the threshhold of a new political togetherness mood in Washington. Congress will do the easy stuff like cutting the payroll tax, but the tough stuff will go back on the shelf.

ISRAEL AND THE PALESTINIANS: WHITHER?

Having dumped a bit of my chronic pessimism and cynicism on Washington politics in the previous posting, it is time to spread a bit of gloom abroad. A good place to start is, as usual, Israel and the endless, seemingly intractable problem of Israel reaching agreement with the Palestinians on establishment of an independent Palestinian state.

The issue may come once again to a head later this month if the Palestinians, in the person of Palestinian Authority head Mahmoud Abbas, go ahead with plans to bypass the moribund peace talks and go directly to the United Nations to gain recognition as a state. Needless to say, that move is frought with political dangers for Israel, the Palestinians, the U.S., and, to a lesser degree, a number of interested parties such as the European Union and Russia who have been pressing for some kind of renewed peace talks.


Right now the U.S. is scrambling to get negotiations resumed on some basis before the U.N. General Assembly meets on September 20. The Palestinians have two options and could choose both. First is to go to the Security Council and ask for U.N. membership, a move certain to draw a U.S. veto and thus the wrath of the Muslim world which sees the U.S. as the spear carrier for Israel, a role it has played since the U.N. created Israel in l948. The Arab world has long viewed the U.S. relationship with Israel as anti-Muslim, politically driven because of the large role played by Jewish votes and money in U.S. elections.

The other option is to go to the General Assembly where the U.S. has no veto power and seek recognition as a "nonmember" state like, for example, Taiwan and The Vatican. The U.S. efforts in behalf of Israel in the General Assembly is to lobby to reduce the number of countries voting for the Palestinians. Beyond these two options which have negative implications for U.S. policy in the Middle East, the U.S. already has enough troubles in the Arab world with its diminished image resulting from the demonstrations and revolutions of the Arab Spring.

The Israelis are equally interested in getting the Palestinians to call off its U.N. quest and return to some kind of negotiations. But there are serious limitations on what Israel can do about the problem since any return to the peace table is likely to be preceded by a renewed Palestinian demand for halting the building of Jewish settlements on land envisioned to be included in a new Palestinian state. The Palestinians also see the pre-l967 war boundaries as the starting point for delineating the borders of a new state. Israeli Prime Minister Netanyahu , even if he is personally willing to be flexible on these points, will run into the firm opposition of the extreme right wing members of his governing coalition. Ignoring the opposition of the settlement extremists within and outside of the government would likely mean the fall of the Netanyahu coalition.

For their part the Israelis will be pushing for Palestinian and world recognition of Israel as a Jewish state. Neither the Palestinians nor most countries can accept this because so many Palestinians still live within Israel and have been subjected to a variety of discriminatory actions that favor the Jewish citizens against the Palestinians. Recognition of Israel as a Jewish state would likely exacerbate that problem. These are to suggest only a few of the issues that can derail negotiations.


As to Abbas and "his" Palestinians, there is the thorny problem of the reconciliation of Abbas' Fatah faction of the Palestine Liberation Organization (PLO) with Hamas which controls the Gaza strip and has been branded a terrorist organization by both Israel and the U.S. If Abbas wants to present himself as the legitimate Palestinian leader, he has to come to terms with Hamas. A reconciliation process, sponsored by Egypt, got underway a few months ago but implementing a deal to share governance has stalled, in part because a full reconciliation could mean the end of the $400 million annual subsidy of the Abbas government from the U.S. The
European Union is also a major contributor to Abbas.

But the real problem for Abbas in seeking to maintain his governing legitimacy is that he somehow has to show the Palestinians on the street that he can advance the cause of creation of an independent country. Lost in the Arab Spring headlines from Tunisia, Egypt, Yemen, Bahrain, etc., were the demonstrations among Palestinians on the West Bank for political and economic progress in their part of the Arab world. With nothing to show for years of talks within the so-called peace process, Abbas came forth with the U.N. strategy to gain recognition at least as a participating state in the General Assembly and thus able to be represented on various U.N. committees.

So while the major players are moving pieces around on the international chessboard, the real problem for each is their own domestic politics which is the real stage and audience for all of the maneuvering. Right now it is difficult to see how the U.S. can avoid a further negative impact in the Arab world.

A SPITTING CONTEST WHEN EVERYONE GETS WET

Whenever I sit down to write a posting, I look for a glass half-full item. Unfortunately, and maybe its my own Cassandra view of the world, all I found were glasses half empty or almost entirely empty. This posting is about an empty glass.

Congress reconvenes this week after a month plus of unearned vacation. It would be difficult to read more depressing "news" than the story and granular media analysis of the Obama-Boehner spitting contest over what night, Wednesday or Thursday, the President could use the House chamber for a speech on the need for new job-creation programs. The inner details are really inconsequential and, except for the media's eagnerness to latch on to time- and space-filling "news", the bickering might have received little attention in bygone days when time and space were so important that only real news was used.

Guess the real news is how this dust up between a President and House Speaker of the opposite party signals bad days ahead on issues of real substance, such as creating new jobs which both parties keep talking about but doing nothing about. Before Congress went home in early August the nation was treated to some very ugly partisan, posturing politics over the linked issues of reduced spending and raising the national debt limit. Partisan politics has always been with us. Raising the debt ceiling has occurred many times in the past during both Democratic and Republican administrations and was dealt with with little or no political fanfare.

Sadly, what was different this time was the election last year of tea party (TP) fiscal hawks, joined by very conservative Republican freshmen fellow travelers who hold the spending/debt issue as a fundamental piece of their ideology. Such ideological fundamentalism, mixed with cultural and social values, is not unique to our politics. Remember civil rights and southern resistence to racial equality from the Civil War to the mid-l960s. But the crippling ingredient brought to the spending/debt bargaining table was the TP belief there should be no bargaining; the TP view was "our way or the highway". The second unfortunate ingredient was that during the 2009-10 election campaign, the TP, although a patched-together collection of dissident groups funded by well-heeled arch conservatives, emerged as the voice of the disgruntled center and right and was able to shift much of the Republican Party to the extreme right.

A spending/debt settlement was reached before the vacation but it was a short term arrangment to head off what even some influential GOP leaders feared would be a collapse of our fiscal structure at home with dire consequences also for the international fiscal markets.

So now, given the Obama-Boehner spitting contest over the timing of the job-creation speech, how can we be anything but depressed about the prospects for both job creation and the next round of the spending/debt issue. The return of the latter issue is set legislatively for Thanksgiving when the Super Committee, Super Congress, or Super Whatever is required to come forth with a bipartisan plan that will mandate spending cuts and possibly new revenues to clear the way for another needed increase in the debt ceiling. The preliminary politics to the bipartisan plan is certain to be a replay of the GOP mantra that the problem is excessive spending by a government that's too big and Republican intransigence on any new revenues which to them is synonomous with tax increases. For the Democrats it will be a replay of demands for new revenues and defense of entitlement programs, particularly health care.

The really scarey thing is that whatever is decided and ultimately clears Congress will still be just another short term band-aid solution to fix the immediate partisan political problem of both sides, the 2012 presidential/congressional elections.

In sum, Congress, the broken branch of government, will remain broken. The politics and political posturing this fall and through early November 2012, will be very ugly and get even uglier over the next 14 months. Politics will be alive and well; the many national problems will be rhetorically addressed but likely remain unresolved. That's the real significance of the petty bickering over when the House chamber could be reserved for the Obama speech.

THE DENOUEMENT OF AMERICAN EXCEPTIONALISM?

Last November I wrote a posting on the "Arrogance of Exceptionalism". It was sparked by a story in the Washington Post about American "exceptionalism" (to be referred to as E)and how the concept was an important element of right wing ideology.

As stated by me in that posting, the heart of E was the idea that the U.S. "is superior to other countries in the world and . . . to deny that means you are both un-American and godless." The Post article noted that E was a view adopted by such persons as Mitt Romney, Sarah Palin, and Mike Huckabee. That these three would latch on to American E as part of their pitch to far right ideologies was no surprise. But I was taken aback when the term was used subsequently by leftist commentator Chris Matthews to press the remarkable fact that Barack Obama, an African-American, could be elected U.S. President.

The counterview of E was made by the late Senator Fulbright more than four decades ago in his book "Arrogance of Power", written within the context of the U.S. war in Vietnam. (There is no doubt he would have felt the same way about the U.S. invasion of Iraq in 2003.) He put it this way: "Power tends to confuse itself with virtue and a great nation is particularly susceptible to the idea that its power is a sign of God's favor, conferring upon it a special responsibility for other nations . . . . "

What is so striking about the right wing adherence to American E is the clear evidence that E, if it was ever true, has certainly been humbled in recent years. In the fall of 2008, the greed of the financial markets in this country brought on a near collapse of the international financial structure. Then of course there is the current fiscal/political issue of spending cuts and debt ceiling, an issue that has not enhanced our image abroad.

The so-called Arab Spring found us in the embarassing situation of having been a major supporter of various authoritarian regimes while unsuccessfully preaching to them the need for democratic reform. When authoritarian regimes in Tunisia and Egypt fell, the U.S. was exposed as their major props and we were slow to join the pro-democracy forces seeking to oust these regimes. Similarly in authoritarian Bahrain and Yemen where we found our national security interests outweighing support for regime change or democratic reform, although we did call for such reform. Our very late call for Syrian President Assad to step aside sounded hollow and the likely ouster of Kaddafi in Libya followed a period of accomodationist policy after the Libyan dictator appeared to throw off his terrorist connections and nuclear weapons ambitions.

In short, if American E encompasses a special international responsibility for bringing U.S. and western values to the world, we should stand humbled. To the extent that such values have recently found niches in some countries of the Arab world, it came from home-grown discontent and desires in spite of our support, explicit or implicit, for authoritarian regimes that suppressed such demands.

Years ago, and this is from memory rather than taking the time to look it up, historian/political scientist James McGregor Burns wrote a book on the American presidency. In the book he cited three examples of President Truman's exercising strong executive power. I can only remember two: 1) Truman's seizure of the steel industry after a management-labor breakdown during the Korean War; and 2) his firing of General MacArthur when the general overstepped his military role and involved himself deeply and publicly in the policy debate over using nuclear weapons against China after its military intervention in the Korean War.

Burns noted that these actions were interpreted as moves of a strong exercise of presidential executive authority. Burns said, not so. To him, these were in fact evidence of presidential failures, failures of the President to persuade steel's management and labor leaders and MacArthur that they should do the right thing without the exercise of presidential executive authority, the last resort for solving the problems.

What we need to do today is to be able to sort out what are actually successes and what are failures. In doing so we will discover the hollowness of American E ideology and accept a more modest role for ourselves in the universe of nations.

WHAT'S NEXT FOR CONGRESS?

Congress, our dysfunctional and unloved branch of government, has a bit more than a week of unearned vacation before returning to "work" and resuming its political posturing and partisan ways. If that seems a bit harsh, I'm sorry but their deliberations have more the character of a mantra than a serious dialog for resolving differences of opinions and policy choices.

There will be a new guy on the block, however. With its inability to resolve the spending cuts/new revenues issues through its normal byzantine procedures, before going on vacation it resorted to creating a Special Committee or Super Congress to come up with a new round of spending cuts and/or new revenues that will accompany further increases in the debt ceiling. How this newly rigged process will turn out remains to be seen, but with the requirement that this Super Whatever come up with a new fiscal plan by Thanksgiving, we won't have too long to wait.

But of one thing we can be reasonably assured, the GOP center of ideological gravity will continue to be reliance on big spending reductions, accompanied by corporate tax cuts, while the Democrats will seek to leaven a solution with some revenue increases along with continued defense of health care entitlements. If we again get a GOP position of no compromise on new revenues and an equally firm Democratic response on entitlements, across the board spending cuts will be the legislatively prescribed alternative.

That alternative would hit particularly heavily on defense spending and the Pentagon has already started its traditional counteroffensive about the dire implications of deep cuts on national security. To this was usually added how newly discovered threats from a foreign source make cuts in the Pentagon budget even more dangerous. In the good old days the Pentagon could be counted on to have a report of some new Soviet threat such as a new missle or anti-missile system. Now it's China and just last week there was a report on the future dangers of Chinese development of stealth aircraft and aircraft carriers to threaten our future dominance of the western Pacific. So not much changes when the Pentagon feels its budget, currently $500 billion plus (not counting the money for two wars), is threatened.

So the return of Congress means the return to the fiscal battle, but with the Super
Whatever as the supposed final arbiter of how things will be resolved THIS YEAR. Ahead in 2012 still lies the more intense battles to be fought over what to do about the costly entitlement programs, particularly health care, and another shootout over whether some or all of the decade-old "temporary" tax cuts of the Bush administration should expire at the end of next year.

On track two of the returning Congress is likely to be a renewed fight over jobs and the economy. With the economic recovery just limping along, the outlook for new jobs and/or re-employing those already laid off is not very encouraging. But it is the issue which has driven and continues to drive public opinion about the failures of Washington to solve or even get good traction on the problem. In such instances in the past, the President, in this case Obama, has drawn the most fire for his presumed failure to get the economy moving again. Presidents get good marks when the economy is robust and they pay the price when it isn't. What this distills to is that jobs and the economy will once again break the surface as a dominant issue dividing Republicans and Democrats. With the presidential election just a little over a year away, there is likely to be a lot of clash and clang, if not progress, or as Shakespeare put it in a different context the air and airwaves will be "full of sound and fury, signifying nothing".

To this blogger, a big part of any solution has to be a meaningful stimulus program, even in the face of huge deficits and growing debts. The partisan difference is that the Democrats, or most of them, see the need to somehow get substantial money into the pockets of the consumer for immediate spending, plus a longer term program in the form of job creation through a new and large package aimed at building and repairing our infrastructure from roads and bridges to sewer lines.

Unfortunately, the GOP has a single and timeless mantra as its answer to the jobs problem. Cut taxes on the wealthy and corporations and let the money "trickle down" in a way that new jobs will be created. This posting will not again go into the fallacies of trickle down, voodoo economics, but the reader is referred to the recent postings of June 15 and 22 to show the dead end character of GOP job creation policy.

As journalists used to say in ending a story, "that's 30."

WHAT NEXT FOR THE ARAB WORLD?

As things seem to look good for the ouster of Gaddafi, a more sobering view may be in order, an overview that takes into account future U.S. foreign policy prospects in the Middle East and the Arab world.

While I am a supporter of President Obama and a lot of his works, there is one area where Obama's policy efforts seem to be crashing in flames. That is, or was, his policy of engagement. Two major targets of that policy were Iran and Syria. Departing from the Bush policy of having no relations with the two countries, Obama held the view that it is necessary to engage the two countries in a kind of step-by-step dialogue in order to eventually resolve some major issues and restore normal relations.

For Iran that engagement policy was directed at persuading it to give up any nuclear ambitions that would lead to weaponizing its nuclear capabilities. But Iran has rejected, with a tone of finality, various international efforts to halt its uranium enrichment program neeeded to reach the weapons development stage.

In Syria's case Bush ended our relations when that country was implicated in the assassination of Lebanese Prime Minister Hariri in 2005. (Those relations were already strained for several reasons including Syria's opposition to the U.S. invasion of Iraq and Syria was seen as the haven for foreign fighters entering Iraq.) Following the assassination of Hariri our ambassador was pulled out of Damascus and not replaced until earlier this year. In the case of Syria, Obama's engagement policy was , among other things, aimed at encouraging President Assad to liberalize his control of the country and to try to wean him away from his close ties to Iran's President Ahmadinejad. And it was hoped that Syria would become a stabilizing country in the Middle East rather than a source of support, like Iran, of terrorist organizations such as Hezbollah and Hamas.

When the anti-Assad street demonstrations for political liberalization began, the U.S. walked softly in its attitude toward Assad despite his bloody suppression of the demonstrations, secretly aided by Iran. It wasn't until last week that the U.S. finally called for Assad's ouster, thus ending whatever was left of Obama's Syrian engagement policy. So instead of succeeding in driving a wedge between Syria and Iran, the end result seems to be strengthened ties between the two neighbors.

Returning to the situation in Libya, the U.S. from the outset left it to NATO to take the lead in supporting the anti-Gaddafi rebels while we took a secondary role of providing intelligence and weapons support. More recently, as the rebels closed in on Gaddafi's stronghold in Tripoli, the U.S. began to give more direct air support to the effort. If this is the end of Gaddafi, the question becomes -- what then? The rebels are not a single unified force, but rather a collection of historically competing tribes, a problem which may or may not be easily resolved with victory. Further, there were questions early in the rebellion about the role and linkages of al-Qaeda to the rebels. In short, we did not know what we were buying into in supporting the rebels.

All of this comes at a time when U.S. leadership and image in the Arab world was already greatly diminished, beginning with the Arab Spring and the ouster of one- time regional ally President Mubarak of Egypt. In that case the U.S. waffled for several weeks before finally saying Mubarak must go. And in saying so, our standing with another strong regional ally, Saudi Arabia, was weakened as we were perceived by the authoritarian Saudi monarchy as less than a reliable source of support.

To sum up, our already weakened position in the Middle East and the Arab world was further diminished this week. Our call for the ouster of Assad sounded like the final tolling of the bell for the Obama engagement policy. And, assuming for now the ouster of Ghadaffi, we are left supporting successful rebels about whom there are many questiions of who they are and in what direction they are heading.

FIGHT HARDER -- FOR WHAT?

NOTE TO READERS: We're in the process of moving this week so the usual posting on Sunday as well as replies to comments will be missing this week. Thank you.

0-0-0-0-0

Last November 19, about two weeks after the mid-term elections, the posting was entitled "Disappearance of the Middle: Bipolarization of Politics." The bottom line of the posting was that "the political middle seems to have disappeared, at least for now, as we drift toward increased bipolar politics." The "at least for now" still holds.

A very recent New York Times article carried the head, "Fight Harder, Voters Telling Congressmen." The article was based on comments from a few local gatherings held by House lawmakers during their unearned summer vacation. The comments came from the left and right, or perhaps it would be better to say from the farther left and right. They came from party activists who are the people who tend to show up for such gatherings. The middle and independents stay at home. Their primary political act is casting a vote, with an occasional word of disgruntlement.

The key words and views expressed in the article were "fight harder," meaning the lawmakers were not tough enough. A Minnesota liberal said President Obama just "rolled over" and needs "some steel in his backbone". A Utah Republican was quoted: ". . . Republicans chasing Democrats to the left, and I hate it when the party deserts me." And a Georgia Congressman was applauded when he said "compromises are what got us into this mess." Another liberal Democrat put blame on the tea party which "forced the country from one manufactured crisis after another."

The scarey part of the story, if such anecdotal stuff reflects a broader public opinion, is that what lawmakers seem to be hearing are messages that reinforce their partisan/ideological predispositions. Is anyone out there saying, go back to Washington and work issues out in an agreeable manner without political posturing and a vision that doesn't go beyond just getting re-elected?

Recent polls show an all time low for congressional approval ratings, with disapproval over 80 percent. Is the disapproval more a reflection of the disappointment of the ideologically driven wings of the two parties or does the low opinion primarily reflect a general attitude toward congressional political and policy behavior? That's no small question. This blogger prefers to think it's the latter, general disapproval, but the Times story could lend credence to the view that the two extreme sides don't believe their lawmakers are tough enough and thus give very low grades to Congress. If the latter is the case, then we are in for some discouraging times ahead when the so-called Super Congress makes it recommendations by late November on further cuts big cuts in spending and, perhaps, revenue increases. There is already room for skepticism about the Super Procedures of the Super Congress, a skepticism that could get even deeper if intransigence, purveyed primarily and quite successfully by the tea party to fellow Republicans, continues as the guideline for resolution of highly partisan political conflicts in Washington.

To me the Times story is depressing since lawmakers hear what they want to hear and if what they hear is that they're not tough enough in pushing their partisan/ideological agendas, then there can be little expectation of light at the end of the long, dark tunnel we have been traveling through. Is there a voice for the middle that is clear enough and loud enough to say, and be heard, that is is indeed time for a change in the Washington political culture? --or "In the name of God, go", or in Brooklyn baseball parlance,"throw the bums out."

INTERNATIONAL POTPOURRI: ISRAEL, FRANCE, BRITAIN

It is hardly any wonder that Israel finds it difficult to make and keep friends in the international community.

About a week ago Israeli Prime Minister Netanyahu said he was willing to reopen peace talks with the Palestinians, using the pre-l967 border as a starting point for negotiations. When President Obama first suggested such an approach, Netanyahu seemed outraged, saying the l967 borders were indefensible for Israeli security, even though Obama said some lands would have to be swapped by both parties to reflect the reality on the ground, primarily meaning the pattern of Israeli settlements built since l967. So Netanyahu's most recent statement sounded like a significant concession, although this blog labeled it a "phony gesture" concocted by both the U.S. and Israel to head off the Palestinian strategy to bypass peace talks and go directly to the United Nations for recognition as an independent state. Mahmoud Abbas, President of the Palestinian Authority, said he would submit an application for membership when the U.N. General Assembly meets on September 20.

How "phony" Netanyahu was or how little control he has over his coalition government with its pro-settlement right wing was highlighted this week when his Interior Minister announced plans for large, new apartment settlements in east Jerusalem. East Jerusalem is a key area for the Palestinians who want to make it their future capital.

The announced new settlement plans were immediately denounced by the Palestinians who asked the U.S. to pressure Israel to stop this "unilateral" move. Lots of luck. The U.S. has been noticeably ineffective in trying to get the Israelis to halt new settlements on land envisioned to be part of a new Palestinian state. The Israeli "in your face" attitude on settlements was starkly evident in March 2010 when Israel announced major new settlement plans just when Vice President Biden was visiting the country.

In short, nothing has changed and it seems that the next confrontation will be at the U.N. when Israel, backed by the U.S. in a move that will be unpopular in the Arab world, works to block the Palestinian request for recognition. But . . . . There is always a "but" in the endless so-called peace talks.

0-0-0-0

France, Italy, Spain, and Portugal have joined forces to halt "short selling" of their securities by market manipulators who bet that the fiscal conditions of these countries will get worse.

Short selling is when an investor anticipates or aids and abets a decline in securities, stocks or bonds, by taking steps to assure the decline will take place and the investor will make money. A short seller is one who sells securities he or she doesn't even own. In simple terms what he or she does is borrow the securities from some institution such as a pension fund and then sells the borrowed securities on the market. By selling them, the short seller hopes to drive the prices down. Then the short seller buys these or identical ones at the lower price and returns the securities to the institution from which they were borrowed. The profit is the difference between the cost at the time of the borrowing and the lower price he or she actually paid for the securities.

Large scale short selling can be very injurious to the companies or countries whose securities are involved. For a time after the October 2008 fiasco on Wall Street, the U.S. halted short sales on financial institution securities to prevent them from getting into an even deeper hole. With the shakey fiscal condition of some European countries, it is no surprise that the halt on short selling was put in place.

0-0-0-0

Much was written during the period of the "Arab Spring" earlier this year and how the social media such as Facebook and Twitter were a very important part of mobilizing pro-democracy public sentiment in Egypt and elsewhere. Some countries sought to head off such communications through various technological schemes, with mixed success.

Now Britain is looking at what it sees as the other side of the coin with the social media allegedly being used to mobilize destructive riots that erupted in various cities. The violence started as a protest against a police shooting in an area of London. According to the British government, the London violence spread to other cities through the social media. Prime Minister Cameron is exploring ways to shut down such communications in what is turning out to be a free speech vs. public safety issue, an issue not easily resolved.

Will keep on looking for some good news at home or abroad, but such seems to be quite scarce.

SCORCHING THE FINANCIAL EARTH

Last November 22, my posting was entitled "GOP: Putting the Torch to Everything." The thought was inspired by economist Paul Krugman's inclusion of the GOP in his "Axis of Depression" which included China and Germany because of their opposition to the Federal Reserve plan to purchase $600 billion in government bonds to help drive down interest rates and contribute to economic growth. The need to use monetary policy came because fiscal policy, meaning at the time more federal spending, was blocked in Congress by the GOP backed by the obstructionist tea party (TP) and its fellow traveling fiscal hawks on the right right wing of the GOP.

With the debt ceiling legislation passed with its short term, remedy-light promises for cutting federal spending, and with Congress on vacation where it could do no further damage, it seemed like a time for a breather from the political angst rippling out of Washington everyday. Ah, for the good old days of just two weeks ago. Like the Cold War of yesteryear, just two weeks ago we knew who the enemy was and could try to protect ourselves, emphasis on "try".

But then, out of the cosmos came the credit rating agencies, particularly Standard & Poor (S&P) to gain immediate membership and perhaps leadership in Krugman's Axis of Depression. The three major credit agencies, S&P, Moody and Fitch, had been giving warning about downgrading the country's AAA credit rating because of the fiscal ill-health of the federal government. But there were few who expected the magnitude of the negative impact on the financial world when S&P lowered the U.S. credit rating from AAA to AA+ last Friday. Within two trading days on Wall Street, the Dow index dropped more than 1,100 points, bringing back analyst comparison with the debacle of October 2008 when the fall of Lehman Brothers triggered a Wall Street collapse and the Great Recession which still seems to be with us. In all fairness to S&P it should be noted that there were economic indicators and the fiscal troubles in Europe which contributed to the huge Dow decline.

Aside from the immediate negative impact in financial markets, the really troubling aspect of the S&P downgrade is that that agency brushed aside the fact that its analysis was based, at least in part, on some faulty data. S&P chose to give emphasis to subjective factors, meaning its view of Washington politics and the inability of the players there to deal effectively with the country's fiscal problems, as the primary reason for the credit downgrade. And if that resort to subject analysis isn't enough, there is also the troubling fact that S&P and other rating agencies were among the villains who brought about the collapse of the housing market by overrating mortgage-backed bond issues which were huckstered to investors. So how reliable are they in judging the fiscal health of nations? (See previous post)

Not content with lowering the U.S. credit rating, S&P then proceeded to downgrade the ratings of financially troubled Fannie Mae and Freddie Mac whose holdings of untold numbers of bad mortgages had forced them to keep coming back to the government for bailout money. Those downgrades were overdue. At the same time, S&P lowered the ratings on some Israeli bonds backed by the U.S. government.

Still not finished, on Monday S&P also lowered the ratings on five large insurance companies from AAA to AA+ and warned that further downgrades may be ahead. On the same day it lowered the outlook on five other firms from stable to negative, including Warren Buffet's Berkshire Hathaway. Not content with all of that, S&P also lowered the ratings on some other firms who support credit by loaning to other banks.

And there may be more trouble ahead at the state and local levels. Even before the debt ceiling agreement in Congress, the Moody rating firm warned that at least five states are in trouble because of high levels of reliance on federal funds and the high number of federal employees in the state. If these states are downgraded they will have to pay higher interest rates to continue borrowing in the credit markets. And such downgrading is not likely to be confined to just five states. So far Moody and Fitch are staying with the AAA rating for the federal government.

The bottom line in all of this is that S&P, Moody, and Fitch by their in-house data and subjective political analyses have had or potentially will have a major negative effect on the financial markets, and all of the rippling effects are as yet unknown. If the TP and right wing extremists think the federal government is too big and too intrusive in our lives, what about these rating agencies who can and have already shaken the financial world here and abroad and have cost millions of us collectively to lose trillions of dollars in the 401k plans and other investments. We have heard disparagingly of "too big to fail;" how about "too arrogant to roam freely to scorch the financial earth."

AT HOME AND ABROAD: U.S., ISRAEL, CHINA

The Standard & Poor rating service is becoming something of a handmaiden to the tea party (TP) and fellow traveling right wing fiscal hawks who seem to have an interest in aggravating our fiscal problems rather than seeking solutions. At least that's the way I view S&P's decision on Friday to downgrade the country's AAA credit rating. Moody and Fitch, the other two major credit rating firms, are sticking with the AAA rating, although both have served notice that they will be watching the U.S. credit standing with a critical eye.

In a recent posting I was critical of all the credit rating agencies in their role as judges of any country's credit standing, although there is enough evidence to question the fiscal viability of such countries as Greece, Ireland, Portugal, and perhaps a few other European countries. My point in that posting was that these private credit rating agencies were the same ones who were knowingly giving high investment ratings to mortgage-backed bonds being huckstered by investment banks such as Goldman Sachs. The high ratings were given even though there was plenty of evidence to know that the bundle of mortgages serving as collateral on a bond issue was loaded with subprime housing loans that were almost certain to go bad.

So why should we give them any more credibility when it comes to assessing a country's credit worthiness? In the case of the S&P downgrading the U.S.'s AAA rating, the Obama administration protested that the model used by S&P for analysis was off by several trillion dollars. S&P paused briefly in making the decision final, but quickly went ahead with the original downgrade decision. What really caught the eye (or ear) was that S&P acknowledged a $2 trillion error in its calculation but it didn't make a difference relative to other data points such as the ratio of debt to gross domestic product. The $2 trillion error didn't "make a material difference," according to S&P.

Then came the subjective political judgment on risk with S&P saying its decision also considered the slowness of Congress raising the debt ceiling and the political infighting involved. It was akin to the TP modus operandi -- we know where we want to go and that is where we are going regardless of the facts and how what we do may negatively affect the U.S. fiscal credibility in the world and the world economy itself. The only saving grace, at least in my initial reaction, is that ultimately it won't be the S&P decision that drives the bond market and collateral effects, but the judgment of investors in the safety of U.S. bonds. Given the shakey fiscal condition of some European countries, the U.S. bond market is likely to remain the best poker game in town. Now to turn the corner and go abroad.

0-0-0-0-0

Israeli Prime Minister Netanyahu said he was willing to reopen peace talks with the Palestinians using the pre-l967 borders as a starting point for negotiations. This comes after Netanyahu several weeks ago denounced President Obama's proposal that the l967 borders be the basis of new talks, but with the recognition that land swaps will be a necessary part of any agreement, such swaps reflecting the reality of where Israel has established new or expanded settlements.

The Netanyahu offer, agreed to in written form with the U.S., had the clear appearance of a phony gesture concocted by both the U.S. and Israel to head off the Palestinian strategy to bypass the peace talks and go to the U.N. this fall to seek recognition of Palestine as an independent state. Both the U.S. and Israel figure they have a lot to lose if the Palestinians pursue their U.N. strategy for recognition. Recognition would put international pressure on Israel to make concessions on various outstanding economic and security issues. The U.S. stands to lose even more friends in the Muslim world if it votes against Palestinian recognition, as it almost certainly would if recognition comes to a vote. As of this posting, the Palestinians have rejected the Netanyahu offer. But on the unending Israeli-Palestinian confrontation, there is no such thing as the final word.

0-0-0-0-0

There was another outbreak of violence in China's predominantly Muslim province of Xinjiang in northwest China. This time it was a rather mild outbreak compared with previous violence between the Muslim Uighurs and the Chinese Han minority. The basic Uighur complaint is that Beijing development policies, such as development of oil and natural gas resources, discriminate in favor of the Han. That has been the Uighur charge against China.

What struck me was farther down in the story with China saying that the Uighur ringleaders received their training in firearms and explosives in Pakistan! Pakistan has long been a staunch ally of China in China's long border dispute, including a war, with India, Pakistan's number one enemy. So Pakistan, or at least the northeast frontier region bordering Afghanistan, has now become an equal opportunity training camp for terrorists, a charge we have long made about Taliban and al-Qaeda safe havens in Pakistan.

To conclude, the world at home and abroad has become so jumbled and messy that it may be time to step through Alice's looking glass in search of an alternative reality.

THE HIGH PRICE OF BIPARTISANSHIP

It seems that whenever Congress and President Obama cobble together major domestic legislation tailored to get bipartisan support the end result is a lopsided, so-called compromise victory for the GOP and the wealthy. This is the real outcome regardless of Democratic efforts to find some silver lining in the debt ceiling agreement. We hear some Democrats tout how they saved medicare, put the Pentagon budget on the line, and how they succeeded in avoiding another debt ceiling battle until after the 2012 election. But for the GOP, pushed by the tea party (TP) and fellow traveling kamikaze-like fiscal hawks, the victory was in the $2.1 - 2.5 trillion in spending cuts over the next decade while excluding any revenue increases by closing tax loopholes and tax give- aways to the wealthy and large corporations.

The last time "bipartisanship" blossomed so visibly was late last year in the special session of Congress following the huge GOP victory in the congressional elections which gave them control of the House and set the stage for this year's display of how broken the congressional branch of government really is. The 2010 special session preserved the Bush income tax cuts which particularly benefited the wealthy, along with aiding the wealthy in preserving the big benefits of the estate tax. This is not to say that President Obama and the Democrats got nothing out of the deal. The extension of benefits for the unemployed and the disguised stimulus of a one-year, 2 percentage point reduction in the social security payroll tax were also included in the fiscal package. Further extension of these Democratic pieces of the package were not included in the debt ceiling agreement just passed.

In this week's minimalist agreement the Democrats are quick to point out that tax reform and revenue increases are possible this fall. That's when a special 12-person "bipartisan" (again in quotation marks) congressional committee submits its vote-up-or-down proposal on a further increase of about $1.5 trillion to be added both to spending cuts and the debt ceiling This would be added to the approximately $900 billion provided in a two-step increase between now and the fall. Lots of luck. Any proposal from the special committee that includes new revenues that look like a tax increase has dim prospects of passing, at least in my opinion. As a side note, the establishment of a special committee further indicates how broken Congress is that it can't conduct its business through normal processes.

If the GOP could kill revenue increases in the deal just completed, there is no reason to believe it can't do the same this fall. Congressional rejection of the special committee proposal would trigger an across-the-board cut in spending, including a big reduction in the Pentagon budget but exclude cuts in medicaid and social security. The argument is made that the GOP may go for the special committee package to avoid cutting defense spending. But it should be noted that the tea party wants reductions in the Pentagon budget and the TP already has demonstrated how the TP tail can wag the GOP dog.

The upshot of the minimalist deal just signed into law is that it just kicks the can down the road. In 2013 this battle will have to be fought again and the President, whoever he or she may be, and Congress cannot continue to avoid the really big decisions needed to get the country's fiscal house in order. Such decisions could very well include ways to control social security and health care spending, as well as tax reform to increase revenues.

Also, keep in mind that the Bush tax cuts expire at the end of 2012 which means a post-election lame duck session of Congress is again likely. The GOP will again seek to protect those in the top income brackets and the Democrats will take a stand on preserving the tax cuts for the middle class. The same positions were taken in the post-election 2010 special session and we saw how that turned out. The determining fact is that in these great taxing/spending battles, the GOP, stiffened by TP intransigence, seems willing to risk an economic debacle while the Democrats are not. Translated, this means the GOP can take a no compromise stand to get its way, maneuvering the Democrats into a so-called compromise that undermines the basic Democratic political ideology and alienates the progressive wing of the party while the GOP walks away with its ideology intact as it continues to pander to its extreme right wing base.

How many more "bipartisan" compromises can the Democrats afford?

2011 SHAPING UP TO BE A BAD YEAR FOR U.S.

The year is just seven months old but is shaping up as a bad year for the U.S. at home and abroad in both substance and image.

Starting at home, one would have to conclude that regardless of how the debt ceiling issue ends, it is almost certain to be a half measure at best in terms of a long term solution to the country's fiscal condition. The problem is undertaxation, thanks to George W. Bush, and the inability to support the high spending levels to which we've become accustomed. Further, the inability to get beyond short-term, politically driven fixes can be laid to a significant degree on the GOP's lack of leadership against the irresponsible demands of the tea party (TP) and its no-compromise, fiscal extremist supporters in the House of Representatives.

Not only has the TP-driven fracture among Republicans undermined congressional ability to deal with the substance of the spending/taxing issue, but the mess in Washington has further sullied the standing of the U.S. as the gold standard of fiscal responsibility. China, which has a big stake in the soundness of the U.S. government debt, has labeled the floundering and fumbling in Washington as "dangerously irresponsible". It is difficult to sell democracy abroad when our own government is badly broken.

Adding further to the diminished image of U.S. financial responsibility and strength has been the threat of downgrading the country's credit rating by the major rating companies. While at vastly different levels of fiscal soundness, the U.S. now gets bundled with Greece, Ireland, Italy, and a few other European countries, as nations whose credit standing needs to be watched for further signs of deterioration. This comes on top of the worldwide financial crisis three years ago when fast and loose practices by Wall Street and mortgage lenders brought us and some other countries to the brink of financial collapse. Thus, we now face the world with a badly tarnished image of financial stability, reliability, and integrity.

Turning to 2011 as a bad year for the U.S. abroad, it is difficult to know where to start. An obvious starting point would be our two wars in Iraq and Afghanistan, but first a look at the so-called Arab Spring sparked by pro-democracy movements toppling the government of Tunisia followed by the ouster of long-time ally President Mubarak of Egypt. Mubarak's fall clearly undermined our image as a reliable ally. Now once-close Middle East partners such as Saudi Arabia view us as an unreliable partner willing to undermine authoritarian rulers such as Mubarak (and perhaps the Saudi king) with whom we were aligned for decades if the politics of the moment demand it. Mubarak had been our principal spear carrier in the Middle East in seeking a resolution of the Israeli-Palestinian issue and in serving as a military counterbalance to the growing power of Iran. The expansion of Iran's influence was greatly aided by our invasion of Iraq and the toppling of Saddam Hussein in 2003. Now the Iraq invasion is seen by many in the Muslim world as a neo-Christian crusade seeking to implant western political and cultural values in the Muslim Middle East.

Looking at EGYPT today, there are troubling signs that our major hope of preventing the emergence of a strict Islamic regime may be in danger. It was very recently reported that ultraconservative Islamics, along with the large and influential Muslim Brotherhood whose political/religious goals are not clear, have been turning out in very large numbers to protest against some of the political aims of liberal activists.
In IRAQ violence is greater now than it was a year ago with assassinations, bombings, and attacks on U.S. troops increasing rather than decreasing as Iraqi has assumed greater responsibility for its own security. At the same time, Iran has been gaining greater influence in Iraqi affairs.

In AFGHANISTAN the recent killings of the mayor of Kandahar and the half brother of President Karzai have highlighted the fragile nature of political and military control there. This comes at the same time still another U.S. report is issued on the rampant corruption inside and outside of the Karzai government. Meanwhile, at home there is increasing public discontent with the seeming war-without-end which has now been going for ten years.

In SYRIA we had been holding out the hope that the Assad government might somehow be the vehicle for political reform. Instead Assad has cracked down severely on the dissenters and there is evidence that the fighting is becoming a sectarian battle promoted by Assad. With fighting between religious groups possibly emerging, Assad can claim that his government is the only means to protect the various religious and ethnic groups in that country.

In LIBYA. we have passed the baton for getting rid of Qadaffi to NATO but what we seem to have is a stalemated civil war with no near term sign that this will change.

In the ISRAELI-PALESTINIAN confrontation, what can one say? Despite the many international efforts to get peace talks resumed, the issue appears to be stuck on square one.

In sum, to flip the words of a Frank Sinatra song, 2011 so far has not been a very good year.

. . . GO." AND DON'T COME BACK. AND A NOTE ON KARZAI

In the previous posting, I borrowed from British history the frustrated outcry, "In the name of God, go" to characterize what must be the growing national frustration in this country about the inability of the Washington political self-interest establishment to resolve the debt ceiling issue. The posting was particularly aimed at House Speaker John Boehner and his Majority Leader Eric Cantor whose lack-of-leadership strategy seems to be, "if we can't have it our way, we walk away" from any negotiations on proposals that have "compromise" attached or implied. And for Boehner it has become increasingly evident that he is unable to control the tea party (TP) members and their fiscal extremist supporters.

In their efforts to appease the TP and the fellow travelers, which they don't seem to be able to do, both Boehner and Cantor have rejected any proposals that require or imply increasing revenues in any form. The basic GOP idea of a deal is to make deep spending cuts in exchange for increasing the debt limit, and the cuts-only approach will make the deficit go away. For many in the TP and its supporters, however, the demand is to cut spending deeply BUT don't raise the debt ceiling at all. The result is a floundering House GOP leadership with the resultant inability of Congress to enact any resolution of the problem, at least to this point.

Congress and the White House have for some time been floating numerous proposals to raise the debt ceiling, with new ideas coming out almost daily, adding to the bewilderment and frustration of the public. In addition to the cut spending/raise revenues division between the GOP and the Democrats, there is also the politically driven issue of a short term fix to meet the August 2 deadline for default on the national debt versus larger, longer term plans. The GOP wants a short term fix to keep the issue alive to be trotted out again next year in hopes of damaging the re-election of President Obama. The Democrats want a solution that will carry beyond the 2012 elections, giving the voters an opportunity next year to register their party preference before the issue would return to the congressional agenda in 2013.

So as of today, July 27, the parties are deadlocked on both the substance and the time frame of a solution with the default deadline just five days away. And just three days after that, lawmakers are scheduled to leave Washington to begin a month-long unearned summer vacation. It is possible that the vacation could be delayed or canceled to keep Congress in town to do whatever needs to be done to clean up their mess.

The title of this posting is based on the expectation that some kind of minimal band-aid fix will be agreed to and the congressional vacation will occur. Thus another concluding note of frustration. Most of the nation is tired of partisan deadlock and political posturing with the White House and congressional eyes fixed on getting re-elected. The lawmakers will, of course, come back in September but contempt for Congress by many voters at least requires a concluding characterization of frustration. Thus, "And don't come back" -- until you reach adulthood or at least go through puberty.

0-0-0-0-0

And while at it, how about applying the title of the previous post, "In the name of God, go" to Afghanistan, specifically President Hamid Karzai.

Once again Karzai's chutzpah amazes. Despite his depending on the U.S. and NATO for his government's preservation, and U.S. and international money for its fiscal existence (not counting what goes on with the opium trade in Afghanistan), he has once again rammed a stick in our eye. Now, according to a recent U.S. Treasury report, Karzai has blocked U.S. officials from checking on funds being stolen through government corruption or diverted to the Taliban as a bribe not to attack our truck convoys traveling through the war zone.

So for Karzai, it's also "go," but, like Congress, since that doesn't seem likely the message should go to Obama in modified form. "In the name of God, get out" of that pit of corruption and war-without-end which keeps sucking out money we can't afford and killing young men and women which the nation and their families can afford even less.

"IN THE NAME OF GOD, GO."

I have always been attracted to the quote, "Depart I say, and let us have done with you. In the name of God, go." This was supposedly first said by Oliver Cromwell in his fight with the British Parliament during the short period of the Commonwealth in the mid-17th century. The quote was trotted out again in May l940 in another speech in the British Parliament demanding the resignation of Prime Minister Neville Chamberlain who had been appeasing Hitler in his territorial demands in Europe and was also too weak a leader to head the war effort which was to come to full fury just a few days later when Hitler launched his attack on France, Britain and everything in between.

It's time again to raise the "go" sentiment, this time aimed at the GOP so-called leadership in the House, specifically Speaker John Boehner and Majority Leader Eric Cantor. Both have and continue to compete over which of them can most appease the tea party (TP) and its supporters who seem determined to push the country into financial default on August 2, when we hit the debt ceiling of $14.3 trillion. And after the mental implant about the August 2 deadline, the administration now seems to be hinting there could be some short wiggle room. But Boehner seems to be the biggest villain on the stage, or at least that's the script he has been handed by the TP.

Just when the public is led to think that he and President Obama have agreed to a deal to raise the debt ceiling and avoid default, Boehner walks away from the talks parroting the GOP and TP mantra of no new revenues which they interpret as raising taxes regardless of the specific origin and form of the revenues to be increased. Boehner, the current lead spear carrier of the House GOP/TP, is actually following the similar antics of Cantor who several weeks ago walked out of bipartisan talks led by Vice President Biden for the same reason -- opposition to any new revenues.

The GOP intransigence on increasing revenues, primarily from the wealthy and large corporations, comes despite the Democratic willingness to give up trillions of dollars in spending over the next decade, including cuts in Democratic-favored programs such as medicare, medicaid, and social security. It must be added, however, that there is some liberal Democratic resistance to cuts in the entitlements. In addition to the basic problem of a clash of partisan ideologies, there is also the less visible problem of competition for the Speaker's job with Cantor having that lean and hungry look of Cassius while waiting for Boehner to make a deal with Obama that will cost him, Boehner, his job.

While August 2 is the much trumpeted deadline set for default to be triggered, perhaps the biggest incentive for cutting some kind of deal between Congress and the White House is the scheduled beginning of a month long vacation for Congress which is to begin less than a week later. But right now it looks like another round of kick the can down the road with some kind of deal that will allow the underworked lawmakers to go on the vacations they don't deserve, followed later with the certitude of having to go through all of this again.

As may seem apparent, this posting flows from considerable frustration with Washington and the political posturing, frustration primarily based on the "no compromise", "to the barricades," position of the GOP which has cowered before the irresponsible demands of the TP and its extreme right wing followers. So thank you Oliver Cromwell for finding the right words and sentiment many Americans share about Washington politics and politicians whose primary focus is the 2012 elections and their re-election, with the added GOP objective of taking over the White House and making Obama a one-term President. Unfortunately, a simple "In the name of God, go" won't work. We are stuck with the mess, the mess makers, and the frustrations that flow from them.

TEA PARTY AND THE WANNABES; CHINA AS A WORLD POWER

A posting last September 20 said the tea party (TP) has taken on the character of a puritanical movement. That is, if you want TP support, you have to endorse its positions on all issues or risk having TP opposition in primary elections. It has already targeted three Senators (Hatch, Lugar, and Snowe because of their supporting the Democrats on some issues. And in the House the TP has intimidated the GOP leadership and most of the rank and file into supporting the TP positions on deficit spending, size of government, and debt ceiling issues.

But among the GOP presidential aspirants the TP has had mixed success in getting its way. Some GOP would-be's are willing to take a stand against the TP on some issues. Mitt Romney has said he believes in global warming and has declined to endorse one strong anti-abortion pledge. Tim Pawlenty, who panders to the extreme right, says he opposes cutting the defense budget which the TP has targeted for cuts to support its bedrock position on reducing federal spending. Jon Huntsman seems to be seeking a more centrist position, is on record in support of gay and lesbian rights, and has declined to sign any of the pledges initiated or endorsed by the TP.

Meanwhile, the current darling of the TP, Michelle Bachmann, founder of the Tea Party Caucus in the U.S. House, is a staunch believer in the fiscal, governmental, and social policy issues of the TP and the extreme right wing of the GOP. Herman Cain, seeking name recognition and grandstanding for the far right, recently chose to spout anti-Muslim, anti-mosque rhetoric during a visit to Murfreesboro, TN, where construction of a new mosque has been a community issue for months. Given the attachment of Bachmann and the as-yet-unknown candidacies of Sara Palin and Texas governor Rick Perry, taking on the TP seems to have less risk for some of the presidential candidates as long as they don't stray too far from the increasingly conservative center of gravity of the Republican party.

0-0-0-0-0

Mike Mullen, Chairman of the Joint Chiefs of Staff, during a very recent visit to China said that country ". . . is no longer a rising power. It has, in fact, arrived as a world power."

In a January 18 posting, the topic was the endless roller coaster ride in U.S.-China relations. In the posting I said, "I don't know whether it's because the Chinese are easily offended or that they think they still need to muscle their way into the role of a world power . . . . If the first, then maybe there isn't too much we can do about it; if the second, 'enough already,' you've arrived."

The Chinese have certainly made their mark on the world stage as a major nuclear power and as a very wealthy nation able to invest its money and win friends and influence people by funding activities ranging from infrastructure projects in Africa to purchasing the bonds of fiscally ailing countries in Europe. But at the same time China doesn't seem able to shake its inclination to look around for things that offend it and then react like a second class power.

The most recent occasion was the Dalai Lama's latest visit to the United States and his meetings with congressional leaders and President Obama. It is difficult to see how the Dalai Lama, who may serve as the spiritual/political head of Tibetan dissidents living abroad, remains much of a threat to China. Tibet has been securely, if forcefully, incorporated into the Chinese state, although not without some recurring unrest, and the U.S. has recognized that de jure and de facto situation. Yet a foreign ministry spokesman said the Obama-Dalai Lama meeting "hurt the feelings of the Chinese people and harmed Sino-U.S. relations," interpreting the meeting as interfering in Chinese internal affairs.

Then there's the case of the Norwegian fresh salmon. Reacting, or over reacting, to the award of the Nobel Peace Prize to a jailed Chinese dissident last year, China started holding up Norway's signature fish export for days or weeks, thus killing the freshness of the fish. Other Norwegian products continued to flow into China with no problem, but in delaying fresh fish sales and marketing, it makes the Chinese look like they chose to get into a bush league argument.

And there were other instances of bush league reaction such as the halting of the sale of rare earth, needed for high tech manufacturing, to Japan over an overblown issue of a Chinese-Japanese boat collision. Bottom line: China should act like a world power with class rather than a second tier rising country looking for ways to be offended.

EUROPE, THE U.S. AND CREDIT RATINGS

Fitch downgrades Greek bonds. Moody's cuts Ireland's credit rating. Moody and Standard & Poor threaten to lower U.S. credit rating if the debt ceiling issue is not resolved. In making announcements of such actions, the big three of credit rating agencies capture headlines in newspapers and become the talking topics of television news because these agencies are movers and shakers in international financial markets.

What boggles the mind is that credit rating agencies which now bring gloom and doom to fiscally struggling countries are the same agencies attacked just a short time ago for prostituting themselves in overrating the quality of bonds backed by home mortgages and in doing so contributed to the collapse of the housing market which was and remains a major part of our economic time of troubles.

This is not saying that the same people within credit rating firms made and are making decisions both on the quality of housing-backed securities and national credit ratings, but only to suggest the power of these agencies and our willingness to take their advice as a close approximation of the truth. Certainly in rating housing-backed bonds, these agencies raised serious questions about their willingness to compromise their integrity and professional ethics to enrich themselves.

That process went something like this. An investment bank wanted to sell a large bond issue whose collateral is thousands of home mortgages. The particular mortgages involved included solid ones which were certain to be repaid by homeowners while others in the bond package were subprime mortgages which had a high probability of not being paid by the financially unqualified home buyer. The investment banker shopped around the credit agencies and paid a fee to the one which would give the highest rating to the bond issue. So rating agency X said it would give a AA rating to the issue, knowing the bonds had a good chance of going sour because of the bad home loans included in the package. Rating agency Y said it would give an A rating to the package. While both overrated the bonds, X got the fee.

Assessing a country's credit rating is certainly a different process, but are the ratings reasonably accurate? There is no question that Greece, for example, has put itself into such a financial hole that it merits a junk bond rating or something close to it, meaning that if it tries to sell new bonds, it will have to pay a very high interest rate to attract any buyers. But the overall process of rating a country's credit worthiness opens up a range of opportunities for the financial community to make money from low ratings. And don't forget that part of Greece's problem is because Wall Street giant Goldman Sachs and other banks helped Greece to hide the magnitude of its growing deficits.

And this doesn't even get to the messy next layer of credit default swaps which in effect are insurance policies for the investors to protect against losses on the bonds. For example, hedge fund X buys Greek bonds and then buys insurance from another firm that will pay for losses if Greece's credit rating declines to a certain level. If a credit agency or agencies subsequently downgrades the country's credit rating then the insurance policy is paid off to the hedge fund. And as a country's credit rating drops, the insurance on its bonds cost more. So how much are we able to rely on the credit rating agencies which provide various avenues for money making in the bond market, including profits by financial manipulation such as short selling. On the other hand, an investor needs guidance on the credit worthiness of a country before putting his or her money on the line and there doesn't seem to be an alternative to the credit rating agencies for such guidance.

Certainly this is a task worthy of Diogenes carrying his lantern seeking to find an honest man or woman.

REDUX: CHARLEY, IF YOU COULD HEAR IT NOW

A year ago on this date when this blog started, the first posting was a look back to l960 when our politics was less noisy and the Cold War and the threat of the Soviet Union was a unifying force for our citizenry. As stated in that posting, "Charley, if you could hear it now," this blog was inspired by a re-reading of TRAVELS WITH CHARLEY by Nobel prize winning author John Steinbeck who made a three-month journey of personal re-discovery around the country with his pet poodle Charley. In TRAVELS Steinbeck gave us his observations and musings on a range of subjects from his enjoyable visit with some migrant French-Canadian farm workers in Aroostook County, Maine, to outrage about the racism he witnessed in New Orleans when it was forced to integrate an elementary school.

One of his l960 observations that seemed particularly out of joint with 2010 when the posting was written concerned the tenor and tone of our politics. At one point in his journey he commented, "I had been keen to hear what people thought politically, those whom I had met did not talk about it. It seemed to me partly caution and partly a lack of interest, but strong opinions were just not stated." In comparing Steinbeck's comment in l960 with our politics 50 years later in the age of Glenn Beck, Rush Limbaugh, and Keith Olberman, my view was that "our politics has morphed from a system of low decibel pluralistic politics characterized by civility. . . to one of high decibel 'to the barricades' confrontation."

Contributing significantly to the clash and clang of our politics in 2010 was the recently arrived-on-the-scene tea party (TP) which held a puritanical view of politics; that is, you must agree with us on all parts of our governmental and social policy agenda, or you are the enemy. At the time of the mid-July 2010 posting, the country was heavily engaged in election year politics and the TP movement, created in early 2009, was pressing its issues through noisy street demonstrations and invasion of local town hall political gatherings where TP adherents shouted down any opposing views. The result: the TP succeeded in getting a number of its candidates elected to Congress. But more importantly, it succeeded in moving the Republican party farther toward the extreme conservative far right.

So in addition to its own election successes, it brought with it to Congress a number of freshmen/women fellow travelers who shared the TP view on issues, particularly its bedrock governmental agenda. That was insistence on the need for major reductions in federal spending and shrinking the size of government to prevent what it believed was unconstitutional intrusion into the country's economic and social/cultural life. The country is now experiencing the result of the TP/fellow travelers success in the current political confrontation over increasing the federal debt limit to head off a fiscal default with all of its negative consequences at home and abroad.

The most visible aspect of this confrontation is the seeming deadlock between President Obama and his Democratic congressional supporters on one side and congressional Republicans on the other side who have adopted the TP "our way or no way" stand on efforts to come to agreement on how to deal with the federal deficit and debt. The GOP way is to make huge cuts in spending but no tax/revenue increases to help cut the deficit. For Obama and his supporters, the deficit problem should be dealt with by a combination of major spending cuts with some revenue increases by ending tax advantages to the wealthy and large corporations.

But behind the very visible issue may be the more subtle struggle between House Speaker John Boehner and his ambitious Majority Leader, Eric Cantor. While Boehner may be inclined toward a compromise solution, he has been backed into a "no compromise" corner by the fiscal hawks made up of TP adherents and a significant number of freshmen House members. Cantor has made his own "no compromise" stand very apparent and has thus has aligned himself with the fiscal hardliners, with the possibility of replacing Boehner as Speaker if Boehner weakens on the "no" compromise", "no revenue increases" stand.

The highly partisan, highly visible confrontation over the debt ceiling, leavened with any personal ambitions, is just the current manifestation of the sea change that has occurred in our political atmosphere since the age of civility in Steinbeck's time. That is not to say there were no strong disagreements between the two parties in the l960 "era", there were. But it was a time when compromise was the dynamic for resolving conflicts. Today compromise is still a way out of the seeming deadlock, but the "no compromise" stand of the Republican leadership and many of the GOP rank and file has made our politics loud and ugly. Sadly, the GOP is anchored to its attachment to the far right wing of the party. And, unhappily, we don't seem to have any unifying force at work to offset that ugliness. Ah, for the good old days of the Cold War and an identifiable enemy beyond the water's edge. Today, to also redux a quote from the first posting, an insightful and prophetic statement from the old cartoon strip Pogo: "We have met the enemy and he is us."

POLITICS AT HOME: DEBT CEILING DEAL; JOB PROBLEM

Supposedly this weekend is the crucial period for a make or break deal on the debt ceiling issue. That is, given the deadline of August 2 for avoiding a default, President Obama and congressional leaders of both parties have to come up with some kind of deal for raising the debt ceiling above $14.3 trillion, a package that would include huge spending cuts and revenue increases. If such a deal can be put together Congress will need the time between now and August 2 to write and pass the various pieces of legislation needed to complete the deal.

A grand bargain is a kind of gleam in the eye of persons like myself who just want an end to all of the political posturing and get the issue settled so we can move on to other things. But the weekend could produce, if it produces anything, a not-so-grand bargain that will will put off the big and politically tough decisions to another day. In either case there are certain factors to be taken into account in trying to understand any settlement--large, medium, or small.

Democratic liberals are wary of Obama's seeming willingness to give ground on social security and medicare as potential sources of savings. On the other side, the fiscal hawks are suspicious about Speaker Boehner and Senate Minority Leader McConnell giving ground on the party's no tax increases stand. Depending on which newspaper article you read or which talking head you watch on television, you get varying stories on what the two sides have been cooking up or will cook up on almost any part of the spending cuts/revenue increases issue. If this is supposedly THE weekend for a grand bargain, a mini bargain, or no bargain, perhaps the Monday morning news will enlighten us all. But one thing you can count on without waiting is that almost any agreed upon package, whenever it comes, will defy understanding of we mere mortals.

On both spending cuts and revenue increases there will likely be cuts and increases that occur now and others that won't happen for perhaps two or three years, or more. On revenue increases the fundamental GOP position is that any revenue increases, whether closing loopholes or ending subsidies through the tax code, must be offset by revenue decreases so the final result is revenue neutral; that is, no net change in revenues up or down. To get around this a deal of any dimension may include provisions for more revenues immediately but to be offset the increases sometime down the road, say 1-3 years, by some revenue decreases. Thus the Republicans can stick to their pledge. Likewise in spending cuts. Keep in mind also that all talks of spending cuts is in terms of $X trillions over a 10-12 year period, thus allowing a lot of staging when these will occur. If there is one overriding goal sought by both sides, it is do nothing that outrages too many of the left or right political bases before the 2012 election.

0-0-0-0-0

Speaking of the 2012 election, the GOP is delighted with the last jobs report which showed little increase in new jobs and an increase in the unemployment rate from 9.1 to 9.2 percent. While using the report to attack the President's economic/job creation policies, the GOP continues to push for policies almost certain to keep the job situation bad.

The latest report showed an overall increase of 18,000 new jobs in June but less attention was given to the fact that 39,000 jobs were lost in the government sector last month with a total of 238,000 government jobs lost in the last eight months. It is GOP spending cut policy at the national and state levels that contribute significantly to these job losses which they blame on Obama policies. Further, there is every reason to believe that the GOP will continue to cut government jobs as part of a deliberate but deniable effort to maintain a dismal job picture for 2012.

ISRAEL AS A JEWISH STATE

In the U.S. when one talks of a deadline these days it means August 2 when the government is threatened with financial default unless the current debt ceiling is raised by Congress above $14.3 trillion. But there is another deadline a month or so later which has multiple countries and other concerned participants scrambling for a solution, a solution not yet in sight. This involves the threat by the Palestinian Authority (PA) under President Abbas to bypass peace talks with Israel and go directly to the United Nations in September to seek recognition of Palestine an an independent state, which hopefully for Abbas would ultimately lead to membership in the United Nations.

The Palestinian threat to go to the U.N. for recognition came after the so-called peace process between Arab Palestine and Israel broke down last fall. The breakdown was triggered by Palestinian insistence on Israel halting the building of housing settlements on West Bank territory which the Palestinians envision as part of a new independent state. The Israeli response was "no" on a new moratorium while, at the same time, going ahead with approval of still more settlements.

What is interesting now is that the focus for getting peace talks resumed and heading off the U.N. strategy of the Palestinians seems to be not the settlements issue, which is still alive, but on Palestinian recognition of the existence of Israel as a Jewish state for the Jewish people. This issue has been around for a long time but seems to have taken on a new urgency. But this may not be any easier to achieve than dealing with the settlements as the threshold for re-starting the peace talks, particularly if Abbas settles his dispute with Hamas over the composition of a unified government. It may, however, reflect a growing Israeli awareness that the longer time goes by without a resolution of the Palestine independence problem, the less Israel may be a "Jewish state" as perceived since its creation in l948.

This point was made by no less a person than 87-year old Israeli President Shimon Peres, a long time participant in the Israeli-Palestinian/Arab wars and struggles for a peaceful solution. While insisting that the Palestinians would be making a mistake by declaring independence outside of a negotiated settlement, Peres said the failure to make such a deal threatens the Jewish character of Israel. "If there will be one state without a clear majority or an un-Jewish majority, that is against everything we are trying to work for," Peres told CNN in a recent interview. About the same time another unnamed Israeli official said the U.N. strategy could be averted and peace talks resumed by acknowledgment of Jewish sovereignty. Thus Jewishness and acknowledgment of such seems to have replaced settlements as the stumbling block for new talks.

A look at the demographics from an online FOREIGN AFFAIRS article gives substance to what Jewishness may mean to Peres and others. In l996, Israel had 5.7 million people; 15 years later this has climbed to 7.75 million. The population of Palestinian Arabs living in Israel has gone from 1.03 to 1.59 million, representing 27 percent of the population increase. At the same time, the ultra-orthodox Jewish population has gone from about 170,000 to 775,000 and is expected to become an increasing part of the future population. Thus, about 30 percent of Israel's population is made up currently of the two most antagonistic groups, neither of which is happy with the traditional values of Israel, including democratic governance, which is based on the cultural/political values of the European Jews who have long shaped the politics and economics of the country.

Further, about 20 percent of the Israeli population are Russians who arrived within the past 20 years with a background in authoritarianism, not democratic politics. This segment of the population has taken root in the far right wing of Israeli politics opposed to the existence of any independent Palestinian state.

Thus Peres' "Jewish" character of the Israeli state may itself be disappearing or undergoing a fundamental shift from the European-based character of the country of which he is a part. In its place is emerging a country splintered by various factions, with the right wing factions becoming the dominant political players while having a more traditionalist Netanyahou as Prime Minister presiding over an often unruly coalition. So when Peres views a peace settlement as urgent and time is running out, the question becomes running out for whom?

Netanyahou, who sometimes but not other times, seems ready for the peace process to resume has set preconditions for such resumption. Besides acceptance of a Jewish state by the Palestinians, he wants the Palestinians to give up the right of about 1.5 million refugees and their offspring to return to the homes they had within Israel in l948, and to have a security system that includes the presence of Israeli armed forces on the Jordan River, encompassing land of the future Palestinian state. For the Palestinians, these demands are nonstarters which require resolution farther down the line but not as preconditions to even get talks restarted.

The U.N. strategy has problems for all concerned. For Israel such recognition would mean international pressure to make a variety of political, economic , and military concessions in the future. For Abbas the U.N. strategy will lose him support of the U.S. and some western European countries who threatened to work against Abbas in rounding up U.N. votes and also jeopardize the $400 million in annual U.S. aid which the PA receives. For the U.S.. it has some significant non-winning elements since this country can hardly afford to further alienate the Arab world by still another bending over to Israel.

So if the debt-ceiling problem gets resolved, you can shift your attention to the next deadline in September at the U.N.