Obama in Secret Meetings with Senators to Talk Austerity Measures and 'Debt Restructuring'; Get Ready for Tax Hikes and Cuts in Programs That Benefit the People Like Medicare and Social Security Before Any Cuts in Bloated Federal Departments, Wasteful Federal Programs, or the Overstaffed and Overcompensated Federal Workforce

"By removing programs that are beyond the constitutional role of the federal government, such as education and housing, we are cutting nearly 40 percent of our projected deficit and removing the big-government bureaucrats who stand in the way of efficiency in our federal government," says Senator Rand Paul. Paul, a Bowling Green eye surgeon elected in November with support from Tea Party activists, centered his campaign largely on fiscal issues. He promised to press for a constitutional amendment that would require the federal budget to be balanced each year. He also said he would present a proposal early in his term to balance the budget in one to five years. - Senator Rand Paul Introduces $500 Billion in Spending Cuts, Rand Paul Press Release, January 25, 2011

Obama Invites Top Senators for Debt Talks

June 24, 2011

AP – Stepping directly into stalled debt talks, President Barack Obama is inviting Senate Majority Leader Harry Reid and Republican leader Mitch McConnell to separate meetings Monday, shifting the negotiations to the highest levels.

The White House meetings, announced Friday by press secretary Jay Carney, would seek to pick up where negotiations headed by Vice President Joe Biden left off. Republican negotiators abandoned those talks Thursday over Democrats' insistence on including tax increases in any deficit-reduction plan.

McConnell has been demanding that Obama become personally involved in the budget discussions.

Congressional Republicans want to reach a deal on about $2 trillion in spending cuts over 10 years before agreeing to raise the nation's borrowing limit, currently capped at $14.3 trillion. The Treasury Department has said it has until Aug. 2 before its ability to pay U.S. debt runs out.

Obama has repeatedly called for a "balanced framework" for long-term deficit reduction, saying cuts in spending are necessary but that additional tax revenue should also be part of the equation. Democrats insist that additional revenues be found by closing tax breaks, alongside the trillions of dollars in spending cuts.

House Speaker John Boehner on Friday ruled out any tax increase as part of a final budget deal.

In a statement following the White House invitation, McConnell said Obama needs to decide between tax hikes or a bipartisan agreement.

"He can't have both," McConnell said.

"Sadly, the Democrats' response has been a mystifying call for more stimulus spending and huge tax hikes on American job creators. That's not serious, and it is my hope that the president will take those off the table on Monday so that we can have a serious discussion about our country's economic future," McConnell said.

The decision by House Majority Leader Eric Cantor, R-Va., and Sen. Jon Kyl, R-Ariz., to quit deficit-reduction talks as a critical deadline approaches set the stage for Obama to step in.

It had long been assumed that the Biden group would clear the way for more decisive talks personally involving Obama and Boehner. As a result, Cantor's move was interpreted as trying to jump-start the talks rather than blow them up — a view shared by Cantor himself.

"The purpose here is to alter the dynamic," Cantor said.

In fact, Cantor's withdrawal came after Boehner had already made a trek to the White House — in a secret meeting Wednesday night that followed up on a golf outing with Obama over the weekend. For his part, Cantor didn't inform Boehner of his decision to leave the talks until Thursday, shortly before the news broke.

The White House sought to put a positive spin on developments.

"As all of us at the table said at the outset, the goal of these talks was to report our findings back to our respective leaders," Biden said in a statement. "The next phase is in the hands of those leaders, who need to determine the scope of an agreement that can tackle the problem and attract bipartisan support."

For his part, Cantor said the secretive Biden-led talks had "established a blueprint" for agreement on significant cuts in spending.

One of the byproducts of Cantor's departure was to provide an opportunity for partisans on all sides to make statements at odds with the positions they may have to take to achieve a deal. Democrats insist that at least some new revenues are needed — both to soften spending cuts and to line up the Democratic votes needed to pass the measure.

"It will take Democratic votes to pass any debt-ceiling agreement," said Sen. Chuck Schumer, D-N.Y. "As a result, certain things are going to have to be true. We cannot make cuts to Medicare benefits. We have to allow for revenues like wasteful subsidies for ethanol and oil companies. And we have to do something on jobs."

Cantor said that plenty of progress has been made in identifying trillions of dollars in potential spending cuts to accompany legislation to raise the $14.3 trillion cap on the government's ability to borrow money.

The Obama administration says passage of the legislation by Aug. 2 is necessary to meet the government's obligations to holders of U.S. Treasurys. The alternative is a market-shaking, first-ever default on U.S. obligations.

U.S. and Others Release Emergency Reserve Oil But Don't Expect More than a Temporary Price Drop of 15 or 20 Cents a Gallon

U.S. and Others Plan Biggest Release of Reserve Oil

June 23, 2011

AP – The United States and other nations that depend on oil imports will release and sell 60 million barrels of crude from emergency stocks in an effort to ease the strain of high oil prices on the global economy.

The release by the International Energy Agency, a group of more than two dozen countries, covers only what the world uses roughly every 16 hours. But it was enough to send oil prices lower, at least for the moment.

In addition to helping the struggling economies of the U.S. and Europe, analysts said the move was meant as a rebuke to OPEC, which has refused to increase oil production to bring down prices.

It will be the largest sale of crude ever from world strategic reserves and only the third since the IEA was formed in 1974 after the Arab oil embargo. The IEA released oil in 2005 after Hurricane Katrina and in 1990 and 1991 after Iraq invaded Kuwait.

Half the oil will come from reserves in the United States. Refiners who turn crude into gasoline will be able to bid on the extra oil and have it shipped to them from the salt caverns along the Gulf Coast where it is stored.

The IEA said high oil demand and shortfalls of oil production caused by unrest in the Middle East and North Africa threatened to "undermine the fragile global economic recovery."

The uprising in Libya has taken 1.5 million barrels of oil per day off of the market — half a million barrels less than will be released each day by the IEA.

The price of oil rose to nearly $114 per barrel in at the end of April, the highest since the summer of 2008, but since then has fallen considerably. Analysts questioned how much relief the move would provide the economy, and for how long.

One analyst, Andrew Lipow, said the timing of the announcement, a day after Federal Reserve Chairman Ben Bernanke delivered a negative outlook on the economy, suggests that industrialized countries are grasping for solutions. He said Americans should expect the price of gasoline to fall, but not dramatically, in coming weeks.

"Fifteen or 20 cents a gallon of relief is not enough to make people feel good about their job prospects or losses on the stock market or our general economic slowdown," he said.

The IEA and the White House said they were acting to increase the supply of oil available during the peak summer driving season.

"We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery," Energy Secretary Steven Chu said.

Gas prices have already fallen for 20 days in a row. They were down another penny Wednesday, to a nationwide average of $3.61 per gallon, according to the AAA Daily Fuel Gauge Report. That's about 21 cents lower than a month ago.

The timing of the release brought criticism from business groups and Republican lawmakers, who accused President Barack Obama of playing politics with the country's oil reserves, which are intended to address emergencies.

The amount of oil to be released, 2 million barrels per day, represents 2.2 percent of daily global oil demand. The 60 million barrels to be released over the span of a month is less than one day's demand, about 89 million barrels.

The IEA left open the possibility that it could continue the program after a month.

The IEA's move comes two weeks after OPEC, the Organization of Petroleum Exporting Countries, decided during a tense meeting not to increase oil production to meet rising demand. OPEC is made up primarily of Middle Eastern and North African nations.

OPEC countries are divided over whether to increase supply. Iran and Venezuela want to keep production stable in hopes of keeping prices — and revenue — high. Saudi Arabia wants to increase production, fearing that high oil prices will hurt the global economy and reduce oil demand over the long term.

The head of the IEA, Nobuo Tanaka, expressed disappointment about OPEC's decision after that meeting. At a news conference Thursday in Paris, he said the IEA's action would "contribute to ensuring that adequate supplies are available to the global market."

Kevin Book, an analyst at Clearview Energy Partners, said the move was the first time the IEA has used its reserves as a defensive weapon "to send an unforgettable message to OPEC." The reserves, he said, have always acted as a shield.

"Now we are using it to bludgeon prices globally. This is the first time we've used our shield as a club."

In addition, Book said, it sends a signal to oil investors that governments will go to great lengths to fight high oil prices. These oil investors, including banks, mutual funds and pension funds, buy contracts for oil in hopes the price will go up, but they don't actually use the oil. Critics have said these investors, derided as speculators, have helped push oil prices far higher than they would otherwise be.

"Part of the reason to do this is to make anyone on the other side of oil consumers, whether it is speculators or oil cartels, worried that it will happen again," Book said.

Oil finished trading at $95.41 on Wednesday just before Fed Chairman Ben Bernanke said the economy may be in bigger trouble than previously thought. Prices dropped to about $94 overnight and then fell as low as $89 per barrel after the IEA announcement. Oil finished trading Thursday at $91.02.

Worldwide oil demand is at record levels because the recovering economies of the West and the surging economies of Asia are burning more gasoline, diesel and jet fuel. The unrest in the Middle East this spring cut into supply. Those two factors drove prices higher, raising costs for shippers, travelers and commuters and leaving people less money to spend on clothes, entertainment and travel.

The U.S. economy grew at a rate of 1.8 percent in the first quarter of this year, down from 3.1 percent in the previous quarter, in part as a result of high gasoline prices.

Oil prices fell later in the spring, though, as the U.S. economy appeared to slow and Greece's financial crisis threatened to spread to the rest of Europe. Reports that Saudi Arabia would increase production in defiance of OPEC helped send prices lower in recent days. It's unclear whether Saudi Arabia has begun to do so, or still might.

Also, oil supplies in the U.S. are among their highest levels ever, a result in part of rising North American production and less consumption.

Analysts also said that while the IEA move will lower oil prices in the short term, it also reveals major concerns about the ability of oil producers to meet growing world demand in the future. If they can't, oil prices will rise dramatically.

Bernard Baumohl, chief global economist at the Economic Outlook Group, said oil would have to drop below $80 a barrel to have much economic impact on the economy. He said he doesn't think the 60 million barrels is enough to do that.

"The argument is, if we can lower oil prices that would be a major tax cut," Baumohl said. "The logic is fine. Whether it can successfully be carried out is the question. And I don't think it can."

IEA members are required to hold in reserve the equivalent of what they would import in 90 days, though countries collectively now hold 146 days' supply.

The U.S. stocks, called the Strategic Petroleum Reserve, hold 727 million barrels. The reserve has never been fuller. It held 707 gallons before the U.S. last tapped the reserve in 2008 in response to supply disruptions caused by Hurricanes Gustav and Ike.

The IEA decision will free about 30 million barrels in the United States. Europe will release 18 million barrels and industrialized countries in Asia 12 million.

For U.S. refiners, bidding for the oil now held in reserve will mean having to import less from abroad. The 1 million barrels per day to be released is about 20 percent of what Gulf Coast refiners import.

Oil Dives to 4-month Low as Emergency Stocks Unleashed

Jun 23, 2011

Reuters – Oil tumbled 6 percent on Thursday to a four-month low after the world's top consumers released emergency oil reserves for the third time ever, a surprise intervention to aid the struggling global economy.

The International Energy Agency announced it would inject 60 million barrels of government-held stocks in the global market, immediately increasing world supply by some 2.5 percent for the next month and sending prices spiraling, with U.S. crude prices erasing all of the year's gains.

The move shocked traders who had been expecting the IEA to give top exporter Saudi Arabia more time to make up for the supply shortfall following OPEC's failed meeting on June 8, when other members blocked Gulf efforts to hike output.

"It comes after the Saudis said they would increase output so it suggests they think this might not be enough," said Helen Henton, head of commodity research for Standard Chartered Bank. "I think it will knock prices lower. I expect prices to be lower a month from now."

Goldman Sachs, whose oil price forecasts are closely watched by markets, said the release of the IEA oil could knock prices for Brent crude down by $10 to $12 a barrel.

Brent crude futures for August plunged by more than $8 after the news, before settling at a four-month low of $107.26 a barrel, down $6.95 for the day.

U.S. crude lagged the decline as traders bet the relaxation of European oil reserve requirements would have a more direct and immediate impact on London Brent.

August U.S. crude dropped $4.39 to settle at $91.02 a barrel, taking prices more than 20 percent below their post-2008 high above $114 in early May.

U.S. heating oil futures also slumped nearly 6 percent, down 17.32 cents to settle below the 150-day moving average.

BRENT HIT HARDEST

The deeper drop in Brent pushed the London grade's premium to U.S. oil to just over $16 a barrel, off $3 from Wednesday in late trade. As part of the action, the United States will release 30 million barrels of crude from its Strategic Petroleum Reserve, specifically light sweet oil.

Brent trade volumes surged to a record high, hitting 1.15 million lots trading in late activity, nearly 2-1/2 times the 30-day average. U.S. volume topped 920,000 lots traded, 30 percent over the 30-day average.

The Brent futures curve flattened on the news, with the premium of the August contract to the September contract to 9 cents, down from 45 cents on Wednesday and reflecting an increase in prompt supplies.

Oil markets were already down sharply ahead of news of the release, due to worries over global fuel demand following higher-than-expected U.S. jobless claims, forecasts of lower U.S. growth from the Federal Reserve and evidence of a slowdown in Chinese manufacturing. The economic concerns helped push investors out of gold, down 2 percent on the day, while other commodities showed smaller losses.

The sell-off also followed a move by the U.S. Federal Reserve on Wednesday to cut its growth forecasts for the world's biggest economy.

IEA EYES ECONOMIES

"This supply disruption has been underway for some time and its effect has become more pronounced as it has continued," said the IEA.

It said expectations were that Libyan production would remain off the market for the rest of 2011.

"Greater tightness in the oil market threatens to undermine the fragile global economic recovery," it said.

The IEA release, at 2 million barrels per day (bpd) over the next 30 days, is more than the daily loss of Libya's 1.2 million bpd exports and comes despite a broad view that the world is not now short of crude -- although many analysts and agencies also agree that markets will tighten later this year.

The release includes 30 million barrels of light, sweet crude from the U.S. Strategic Petroleum Reserve -- the same quality that markets have lost due to the Libya disruption.

Against that backdrop, analysts said the use of the reserves now -- unlike the previous two releases, which immediately followed the first Gulf War and Hurricane Katrina -- signaled it may have been more concerned with tempering prices to aid a faltering economic recovery.

"The move is significant, as it represents a reach by member countries for the remedy of last resort to high oil prices," said John Kilduff, a partner at Again Capital LLC. "Clearly, the energy price spike is being cited as the reason for the economic slowdown and this is a reaction to that. The Libyan outage provides good cover."

Tsunami Warning Canceled after 7.2-Magnitude Quake Strikes Off Alaska

The Alaska Tsunami Warning Center canceled a tsunami warning briefly in effect after a 7.2-magnitude earthquake rattled Alaska's sparsely populated Fox Islands Thursday night. The Fox Islands are a group of islands in the eastern Aleutian Islands, which are a chain of more than 300 islands that extend southwestward from Alaska into the northern Pacific Ocean. The earth's most active seismic belt, the so-called Pacific Ring of Fire, brushes Alaska and the Aleutian Islands, where more earthquakes occur than in the other 49 U.S. states combined.

No Tsunami for Coastal Alaska after Strong Quake

June 24, 2011

AP – A magnitude-7.2 earthquake shook a large swath of Alaska's Aleutian Islands on Thursday evening, sending residents of small coastal towns to higher ground as officials issued a tsunami warning in the temblor's wake.

The quake was centered about 122 miles east of Atka, about 1,200 miles southwest of Anchorage. It was recorded at a depth of 26 miles, the Alaska Earthquake Information Center said.

The quake was felt through the central Aleutians and as far east as Dutch Harbor and Unalaska, but no damage was reported, said Jeremy Zidek, a spokesman with the state Division of Homeland Security and Emergency Management.

"It was shaking, it was just a little rumbly" and lasted about 20 seconds, said Atka resident Rodney Jones.

The West Coast and Alaska Tsunami Warning Center posted a tsunami warning for some coastal areas of Alaska, but canceled the warning about an hour after the quake. The warning covered an area from 80 miles northeast of Dutch Harbor to about 125 miles west of Adak.

Jones said it appeared all of the town's 61 residents took to higher ground when they heard the tsunami warning, which he heard issued over CB radio. The townspeople gathered on a high hill for about an hour, near the city's new water tank.

During their wait for the all-clear signal, he said a priest with the town's Russian Orthodox Church recited prayers.

In Dutch Harbor, longshoreman Jim Paulin said warning sirens caused also caused hundreds of people to begin climbing up a nearby hill.

"Right now there's hundreds of people up on the hilltop," he told The Associated Press before the all-clear was given. "I can look across the bay and see people on another hilltop."

After the tsunami warning was canceled, he said everybody was "calm. It seems like everybody's kind of enjoying it. It's good weather."

Paulin said no one seemed panicked because the city has been evacuated in the past. But, he said,

"It's better to be safe than sorry."

European Leaders Agree to Give Greece New Bailout with New Round of Austerity Measures

European leaders to give Greece another 120 billion euros ($170 billion; £105 billion) of support. The money will come from the 17 eurozone countries and the International Monetary Fund (IMF). There will be contributions from other lenders and fund-raising and cuts within Greece.

Greece Presses Banks, Low-earners in Debt Crisis

June 23, 2011

AP – Greece's beleaguered government said Thursday it will start taxing minimum-wage earners and encourage local banks to help the state delay debt payments for bonds maturing as late as 2015.

Evangelos Venizelos, the country's new finance minister, also said the government is encouraging a deferment scheme under the so-called "Vienna initiative," signing up private investors to voluntarily renew their debt holdings as they expire.

The next big challenge for Greece is to have parliament approve a new round of austerity measures before getting the vital next batch of loans, worth euro12 billion, out of its euro110 billion rescue fund from eurozone countries and the International Monetary Fund.

Venizelos predicted Thursday that the two-stage vote on June 28 and 30 would be successful, and he met with EU and IMF debt inspectors to discuss details of the new austerity plan worth a total of euro28 billion. The two sides reached broad agreement on the package late Thursday, the European Commission said in a statement.

"These measures, once fully implemented, will enable Greece to meet the agreed targets (in its bailout program) and remain on track," the statement said.

Voluntary bond rollovers were used successfully in 2009 to help East European countries during the global financial crisis. But Athens runs the risk that a similar move may be considered a default by ratings agencies, because it will likely involve banks charging interest rates that are significantly lower than what they would currently get on Greek bonds bought on the open market.

"The Vienna process is totally voluntary," Venizelos said. "Are we encouraging the Greek banks to participate? The answer is yes."

Asked what bond maturities would be considered in the voluntary process, he said:

"They may include 2015."

A Greek default could drag down Greek and European banks, endanger weak eurozone countries like Portugal, Ireland and Spain, and potentially spark turmoil in global markets, the European Central Bank has warned.

Greece's creditors are demanding it pass the new round of austerity measures before getting the euro12 billion in loans from the eurozone, IMF rescue fund. Venizelos promised to have the package passed by June 30, even though negotiations are still under way on a euro5.5 billion portion with rescue lenders.

With more cuts still to be announced, Venizelos said the country's tax threshold would be lowered from euro12,000 to euro8,000 ($27,000 to $11,335) — meaning most Greeks on a minimum wage of euro739 ($1,050) per month would have to start paying income tax.

The new measures promoted Greece's largest union, the GSEE, to call a 48-hour strike next Tuesday and Wednesday.

On Thursday, more than 3,000 officers from the police, coast guard and fire service — most wearing their uniforms — protested in central Athens against the cuts in a rally to parliament.

"Police get the worst wages in the public sector. We can't make ends meet," 45-year-old police Sgt. Athanasios Kritsilas from the northern town of Drama, told the AP. "We don't want anymore cuts, we're already at rock bottom, we can't get any lower."

Greece's Socialist government has so far faced down dissent in its own party, violent protests and a national wave of discontent. It survived a confidence vote Tuesday by insisting it must insure the country's national debt remains viable.

With borrowing costs still prohibitive, Greece is likely to require a second bailout package next year to cover its financing needs. Many economists remain convinced the country will have to restructure its debts in some way in the coming years, especially if the economy shrinks further.

Venizelos' talks with creditors in Athens came as European Union leaders met in Brussels for a summit expected to be dominated by the Greek crisis. They were expected to reinforce their message of fiscal austerity to Prime Minister George Papandreou.

Papandreou is to meet with German Chancellor Angela Merkel, French President Nicolas Sarkozy, EU President Herman Van Rompuy and European Central Bank President Jean-Claude Trichet.

Quick Guide to the Greek Crisis

June 23, 2011

Reuters - A debt crisis in Europe's single currency zone has entered a critical phase with fears Greece could default and spark a global financial disaster like that followed U.S. investment bank Lehman Brothers' collapse in 2008.

LATEST DEVELOPMENTS

European Union leaders are meeting on Thursday and Friday and will try to convince Greeks and financial markets that they have a workable plan to help Athens avoid a debt default and return to financial stability.

European Central Bank Executive Board member Juergen Stark told Austrian newspaper Kurier:

"After more than three years of fire-fighting we are certainly at the point where more and more rescue measures would be fatal without structural adjustments in the financial system and economic policy."

U.S. Federal Reserve Chairman Ben Bernanke said on Wednesday:

"If there were a failure to resolve that situation (with Greece), it would pose threats to the European financial system, the global financial system, and to European political unity, I would conjecture, as well."

WHAT'S NEXT?

* June 28 - Greek parliament to vote on a 28 billion euro five-year austerity package agreed with the European Union and International Monetary Fund.

* Main labor unions to launch 48-hour strike on day of austerity vote.

* July 3 - Deadline set by EU for Greek parliament to pass laws implementing the austerity package, including on privatisations, tax rises and spending cuts. Euro zone finance ministers hold an extraordinary meeting the same day and have said Greece must pass the laws by then to obtain its next 12 billion euro tranche of bailout loans.

* Mid-July - Point by which Greece has said it will be unable to pay its debts if it does not get the new loan tranche.

WHAT'S THE PROBLEM?

Greece has a sovereign debt pile of 340 billion euros ($481.5 billion), more than 30,000 euros per person in a population of 11.3 million. The 110-billion-euro bailout Greece accepted last year from the European Union and International Monetary Fund has proved insufficient and a second package worth 120 billion euros is now under discussion. With its debt equivalent to 150 percent of annual output, Greece holds two unwanted world records: the lowest credit rating for a sovereign state, and the most expensive debt to insure. Its people have lost patience with an ever-deepening austerity drive that has slashed public sector wages by a fifth and pensions by a tenth.

Around 53 billion of the original 110 billion euro package has been paid out so far. The government estimates that Greek debt will reach about 350 billion euros at the end of this year, taking in EU/IMF aid tranches including the 12 billion euro emergency loan earmarked for July.

About 70 percent of Greece's debt is held abroad and the remainder at home. Greece is paying an average 4.2 percent interest rate on EU/IMF bailout loans.

WHY DOES IT MATTER OUTSIDE GREECE?

The longer the crisis drags on, the greater the risk that contagion will spread to other troubled euro zone economies like Ireland and Portugal, which have also been bailed out before, and Spain, which is much bigger and would be far more expensive -- perhaps too expensive -- to rescue.

A default by Greece would hammer the banks that hold its debt, including the European Central Bank and big French and German lenders. It could also prompt credit markets to freeze up, as happened after Lehman's demise when banks virtually stopped lending to each other.

The White House said on June 16 the Greek crisis was acting as a headwind to the U.S. economy but opinions vary as to the level of exposure of U.S. banks.

A Greek default would be a catastrophe and a humiliation for the European Union, which launched the euro in 1999 as its most ambitious project and a symbol of the continent's unity. It has prompted some commentators to think the unthinkable: that the euro zone might break up, either by the expulsion of Greece or the departure of Germany, the EU's paymaster, which might be tempted to return to its own currency.

SO WHY NOT JUST BAIL GREECE OUT AGAIN?

The EU's big players -- notably Germany, France and the European Central Bank -- have struggled to work out a rescue mechanism. European governments are keen to avoid a "hard default" because this could threaten banks throughout the euro zone and further afield.

They are therefore discussing a "soft landing" in the form of a debt extension or voluntary rollover by creditors, but some of the proposals have been criticized as a default by another name.

WHO ARE THE KEY PLAYERS?

Greek Prime Minister George Papandreou last week reshuffled his government to quell dissent in his ruling Socialist party and gave the finance portfolio to Evangelos Venizelos, a party rival. Venizelos is a political heavyweight who ran the preparations for the 2004 Athens Olympics, but has no economic track record. Papandreou's government won a confidence vote in parliament on June 22.

At the European level, the single most influential figure is German Chancellor Angela Merkel, as head of the EU's biggest economy. Merkel, who is losing popularity and has suffered a string of defeats in state elections, is under intense pressure from a German public that resents footing the bill for what is widely seen as Greek profligacy -- hence her insistence that banks should share some of the pain. Merkel has been accused of holding up the second Greek aid package, further eroding investor confidence, which could make the bailout more expensive.

WHAT ABOUT THE GREEK PEOPLE?

Public disgruntlement over austerity -- including curbs on widespread early retirement, tax rises and cuts in benefits and wages -- has erupted into frequent strikes and protests, some of them violent. Unemployment is rising. In a poll last month, 80 percent of people said they refused to make any more sacrifices to get more EU/IMF aid. Bank and utility workers, public sector contractors and even doctors have taken to the streets. Private sector workers blame the bloated public sector, civil servants blame tax cheats and many Greeks blame corrupt politicians for the country's problems.

HOW DID IT COME TO THIS?

Greece, whose economy had grown strongly but suffered problems with corruption and bureaucracy, joined the euro zone a decade ago, linking its economy to other European countries.

It went into recession in 2009 after 15 years of growth and its budget deficit hit 15.4 percent of GDP after a series of revisions by the government which revealed the country's economy was in far worse shape than it had previously admitted.

Chronic problems include rampant tax evasion -- the labor minister has estimated a quarter of the economy pays nothing.

More broadly, the Greek crisis reflects an inherent weakness in the euro's structure -- a currency zone with a "one size fits all" interest rate for a set of widely divergent economies, and 17 different countries running their own fiscal policies.

How the crisis plays out will determine the failure or survival of the project.

Greece in Deal with EU/IMF on Austerity Plan

June 23, 2011

Reuters - European Union leaders promised more money to help Greece stave off looming bankruptcy, provided its parliament enacts an austerity plan finalized in fraught last-minute talks with international lenders.

Greek Prime Minister George Papandreou promised to push through radical economic reform after his new finance minister clinched agreement with EU and IMF inspectors on extra tax rises and spending cuts to plug a 3.8 billion euro funding gap.

"A comprehensive reform package... and adoption by the Greek parliament of the key laws on the fiscal strategy and privatization must be finalized as a matter of urgency in the coming days," EU leaders said in a summit statement.

"This will provide the basis for setting up the main parameters of a new program jointly supported by its euro area partners and the IMF and allow disbursement in time to meet Greece's financing needs in July," the 27 leaders said.

The euro rebounded against the dollar and U.S. stocks pared losses on news of the agreement in Athens.

Greece needs 12 billion euros in European and IMF aid to avoid a default on its debt mountain in mid-July that could spread contagion across the euro currency area and send shock waves around the world economy.

"Greece is committed, strongly committed, to continue a very important program for major changes, radical changes, to make our economy viable," Papandreou told reporters.

The EU leaders also exhorted conservative Greek opposition leader Antonis Samaras to rally behind the austerity program, but he stuck to his refusal to vote for the entire plan, saying he would support the spending cuts but not tax increases.

German Chancellor Angela Merkel, who has taken perhaps the toughest line on Greece, urged the Greek opposition to do what was necessary and get behind the package.

"In such a situation, everyone must stand together in a country," she said.

Euro zone governments are meanwhile talking to banks and insurance companies to convince them voluntarily to maintain their exposure to Greek debt when their bonds mature, as part of a second rescue package for Athens.

RESCUE FUNDS APPROVED

The leaders also approved the creation of a permanent euro zone bailout fund from June 2013 as well a strengthening of the existing temporary rescue fund.

Investors remain skeptical. Five-year credit default swaps on Greek government debt rose 138 basis points to 2,025 bps on Thursday, according to data monitor Markit, implying a more than 80 percent probability of default over that period.

A Greek default would force European banks and governments to take big losses, undermine the creditworthiness of other stressed euro zone sovereigns and potentially plunge the economy of the world's biggest trading bloc, already slowing, back into recession.

Economists say even a second bailout plan for Greece may buy its government only a few months' respite and most expect Athens will have to default or write down its debt eventually.

Greece accepted a package of 110 billion euros of EU/IMF loans in May 2010 and now needs a second bailout of a similar size to meet its financial obligations until the end of 2014, when it hopes to return to capital markets for funding.

Euro zone member states, led by Germany, insist any second aid package must involve the private sector. But credit rating agencies have said they would treat even a voluntary debt rollover as a selective default.

At meetings this week, banks and insurers in Germany, France, Spain, Belgium and the Netherlands were asked by national financial authorities to roll over their holdings of Greek debt when the bonds mature.

EU Eases Greek Access to EU Development Funds

June 23, 2011

AP – The European Union said Thursday it would help Greece access billions of euros in EU development funds in an attempt to boost the country's struggling economy and sweeten unpopular austerity measures ahead of a tight parliamentary vote.

European Commission President Jose Manuel Barroso said the EU was prepared to reduce the amount of money Greece has to come up with to co-fund projects under its regional funds to 15 percent, from the usual 50 percent. The Commission, which manages the funds, and other EU member states will also set up a program of technical assistance to make sure debt-laden Greece uses the money to stimulate economic growth and create new jobs.

The EU funds are designed to help underdeveloped regions catch up with richer parts of the 27-nation bloc. About euro15 billion ($22 billion) is still available for Greece until 2013, but the country has been struggling to prove it can use the funds well and come up with matching financing.

EU leaders hope that the prospect of some EU funds — which, in contrast to the rescue loans Greece has been receiving for the past year, do not have to be repaid — will offer some hope to Greek citizens who have been suffering through a steep economic recession and unemployment above 16 percent.

The Greek debt crisis, which has already spilled over into Ireland and Portugal and threatens to take a larger toll on the 17-country eurozone, has reached a new boiling point in recent weeks. Barely one year after first being granted euro110 billion in rescue loans from other eurozone countries and the International Monetary Fund, it has become clear that Greece will need tens of billions more to avoid defaulting on its massive debts in the coming years.

But eurozone governments have blocked a final deal on a new aid package — as well as the payment of a crucial euro12 billion installment of the existing bailout — until the Greek parliament passes euro28 billion in additional spending cuts, tax increases, economic reforms and public asset sales. The new measures, which will allow Greece to meet the deficit targets set out in its bailout program, have sparked sometimes violent protests and been strictly opposed by the conservative opposition party.

In their statement Thursday night, the leaders said the comprehensive package of reforms "must be finalized as a matter of urgency in the coming days" for the new funds to be disbursed. Earlier in the day, they also piled pressure on Greek opposition leader Antonis Samaras, who was in Brussels for a meeting of European conservatives, to back the new measures.

"We call on the opposition to fulfill its historical responsibility," German Chancellor Angela Merkel said as she arrived at the summit.

Obama, the Gayest President Ever; It's a Gay World After All

Obama Says Gay Couples Deserve Same Rights as All

Jun 23, 2011

AP – Treading carefully, President Barack Obama praised New York state lawmakers who were debating landmark legislation Thursday to legalize gay marriage, saying that's what democracy's all about. But as expected, the president stopped short of embracing same-sex marriage himself, instead asking gay and lesbian donors for patience.

"I believe that gay couples deserve the same legal rights as every other couple in this country," the president said at a Manhattan fundraiser, his first geared specifically to the gay community.

Coincidentally, the long-planned event occurred just as lawmakers in Albany were debating legislation that would make New York the sixth and by far the largest state to legalize gay marriage. That served to spotlight the president's own views on same-sex marriage, a sore point with gay supporters who've otherwise warmed to Obama. The president has said his views are "evolving," but for now he supports civil unions, not same-sex marriage.

Obama said progress will be slower than some people want, but he added that he was confident that there will be a day "when every single American, gay or straight or lesbian or bisexual or transgender, is free to live and love as they see fit.

"Traditionally marriage has been decided by the states and right now I understand there's a little debate going on here in New York," he said to laughter. New York's lawmakers, he said, are "doing exactly what democracies are supposed to do."

The lawmakers ended their session late Thursday in Albany without voting on the bill.

As Obama spoke a handful of people shouted out "marriage!"

And Obama said, "I heard you guys."

He never directly mentioned gay marriage.

Obama said there were those who shouted at him at events about other causes of the gay community, such as the need for anti-hate crimes legislation and for the repeal of the "don't ask, don't tell" ban on openly gay military service, and both of those have since been achieved.

Obama also has won favor by instructing the Justice Department to stop defending in court a law defining marriage as between a man and a woman.

Obama told of receiving a letter last year from a teenager in a small town. He said the boy was a senior in high school who was gay and was afraid to come out. The boy wondered to the president why gays shouldn't be equal like everyone else.

"So, yes, we have more work to do," Obama said. "Yes, we have more progress to make. Yes, I expect continued impatience with me on occasion."

He said teenagers such as the one who wrote to him "remind me that there should be impatience when it comes to the fight for basic equality. We've made enormous advances just in these last two and half years. But there's still young people out there looking for us to do more."

In a direct appeal for votes, Obama said:

"With your help, if you keep up the fight, if you will devote your time and your energies to this campaign one more time, I promise you we will write another chapter in that story. ... I'll be standing there, right there with you."

Overall the reaction Obama got was warm from the crowd of nearly 600 who paid up to $35,800 each to hear him speak at a midtown hotel. And only a small group of protesters showed up to demonstrate outside for marriage equality. It was a measure of how much the gay community has warmed to Obama since earlier in his administration when donors threatened to boycott Democratic fundraisers to pressure Obama on "don't ask, don't tell."

If Obama were to endorse gay marriage, it would give a jolt of enthusiasm to his liberal base and perhaps unlock additional fundraising dollars from the well-heeled gay community. It's not clear it would get him too many additional votes in 2012 though, because the Republican field's general opposition to gay rights gives activists no alternative to Obama.

At the same time, supporting gay marriage could alienate some religious voters that the politically cautious White House might still hope to win over for Obama's re-election campaign.

Obama has indicated support in the past for states allowing gay people to marry. As a presidential candidate, he went so far as to congratulate gay couples in California who married during the short period when gay marriage was legal in that state before voters shut it down.

The president also signed a questionnaire in 1996 as a candidate for Illinois state Senate saying he supported gay marriage, something the White House hasn't fully explained.

Even as the president deliberates, public sentiment is marching decisively in the direction of supporting gay marriage. Depending on the poll, people are now about evenly split or narrowly in favor.

"There's been a noticeable shift the last couple of years," said Carroll Doherty, associate director of the Pew Research Center for the People & the Press.

In March, the center found that 45 percent of those surveyed favored gay marriage and 46 percent opposed it. That was the first time that the survey found an essentially even split instead of majority opposition.

It's something the president has noted, telling liberal bloggers in October that "it's pretty clear where the trend lines are going."

The question is when, how and if the president goes there too.

UPDATE JUNE 25, 2011: New York governor signs law approving gay marriage

Nebraska Nuclear Plant Officials Say There is No Fear of Meltdown Because Plants Would Operate with Off-site Power Sources If Necessary

Rumors Fly As Floodwaters Rise Around Nuclear Plants

The relentless waters of the Missouri River are crowding both of Nebraska’s nuclear power plants while inaccurate rumors about their status flood the Internet.

June 23, 2011

Nebraska StatePaper.com - The Cooper Nuclear Station at Brownville was operating at full power Thursday. The Fort Calhoun nuclear plant, 19 miles from Omaha, shut down April 7 for a refueling outage; it won’t be restarted until floodwaters recede, according to the Nuclear Regulatory Commission.

The NRC said “Unusual Event” declarations remain in effect at both plants, the lowest of four levels of emergency notification. NRC officials said close contact is being maintained with the National Weather Service, the U.S. Army Corps of Engineers and both plants.

Operators previously took a variety of steps to protect the plants from water.

Say the words “water” and “nuclear power plants” in the same sentence and you are bound to draw a crowd.

Rachel Maddow did a segment on the Nebraska situation Wednesday night. To see it, click here.

The Lincoln-Journal Star submitted a list of relevant questions, and received answers from operators at both plants. In a thoroughly informatory story, Al Laukaitis reported on the central issues involving the plants and public concern, including this one:

Q: People see photos of Fort Calhoun Nuclear Station surrounded by water and dikes near Cooper Nuclear Station being overtopped near Brownville. Are these plants at risk from the Missouri River floods?

OPPD: If you look closely in the photos, our plant, [Fort Calhoun] our substation and other buildings are dry behind berms, sandbag walls and AquaDams. The plant is secure from water to the 1,014 feet above sea level elevation (the river is now at 1,006). It also has diesel generators and additional fuel staged to provide power from on site.

NPPD: There have been at least five situations of flooding around the Brownville area since 1952, and Cooper Nuclear Station, which has experienced several floods since it began commercial operation in 1974, was built to withstand various natural disasters, including tornadoes and earthquakes. The site was elevated 13 feet above the natural grade to 903 feet sea level elevation to accommodate the maximum, probable flooding event. (Earlier this week floodwaters came within 18 inches of 902 feet -- the mark at which Cooper would be shut down.)

Earlier this week a Cooper spokesman told Nebraska Watchdog that a shutdown, if one were needed, would occur over a period of 4-10 hours although it could occur “within three seconds” if necessary. The spokesman said there is no fear of a meltdown because Cooper “would be operating with power from off-site sources that would run the pumps and other equipment necessary to keep the reactor and spent fuel storage facility with cooling water.”

OPPD established a web page to address flood rumors related to Fort Calhoun. Access that page here.

The NPPD web page, though not as informative, is here.

Public Sector Workers Are the First to Protest Even Though Their Compensation Greatly Exceeds That of the Private Sector

New Jersey Gov. Chris Christie signed into law broad changes to pensions and benefits offered to public workers. The changes, which will largely affect future workers and won’t have much of an immediate impact on the state’s $46 billion pension hole, faced stiff opposition from labor unions every step of the way since being announced in January. The Assembly passed that bill after lawmakers removed a provision to let full-time workers with fewer than 10 years on the job switch to a 401k-style plan; some lawmakers worried that could hurt the stability of the pension system. The state’s pension gap — calculated at $46 billion as of June — is largely the result of stock market losses and the state failing to make payments into the investment fund. But the number of workers in the system has soared by 20 percent since 1999, while retirees have increased 43 percent, placing a greater burden on state and local governments. The new laws ban future part-time workers from the pension system, instead requiring part-timers who make more than $5,000 to join a 401(k)-style plan. It also makes pensions for future hires less generous, rolling back a 9 percent increase granted in 2001, requires pension payments to be based on one job, and limits payments of accrued sick leave for future workers to $15,000. The bills do not affect those already retired. The only bill with a tallied savings is one that would require public workers to pay at least 1.5 percent of their salary toward their health care. That is expected to save local governments at least $314 million a year. - N.J. Gov. Chris Christie signs pension, benefits changes for state employees, NJ.com, March 22, 2010

N.J. Public Workers to Stage Large Protest Over Pension and Health Insurance Reform

June 23, 2011

NJ.com - New Jersey’s battle over benefits could hit a fever pitch today.

Thousands of public workers are expected to stage what leaders vow will be their biggest Statehouse protest yet over a controversial bill to force them to pay more for health insurance and pensions. The bill is up for final passage in the Assembly, which would send it to Gov. Chris Christie, who is expected to sign it swiftly.

Leading up to today's battle, a state workers union chapter Wednesday filed a federal suit against the state saying its contract was broken because pension payments were skipped. And Christie pitched the plan at a town hall where he was booed by some teachers.

At a town hall in Fair Lawn, Christie said the measure, a focal point of his agenda, is needed to restore the state’s fiscal balance and ensure the solvency of the pension fund.

"We have support with both political parties to do this," Christie said. "It isn't like other states."

Fair Lawn schools finished for the summer Tuesday and a group of teachers packed the meeting. The crowd was less friendly than most of his meetings: half the attendees booed when he went through his proposals, and the other half, supporters of the governor, clapped louder in an attempt to drown them out.

"As always in our democracy, there will be people who disagree," Christie said, acknowledging the dissenters.

Lauren Gimon, a math teacher at Fair Lawn High School, joined a group of about 50 teachers who stood on street corners out the meeting holding signs and waving at passing cars. Gimon said she’s hopeful the efforts by public employees to rally in Trenton and across the state will have some influence.

"It made a difference in Wisconsin," Gimon said.

With passage in the Assembly seeming almost inevitable, one union began what could be the first of a several court battles. Local 1033 of the Communication Workers of America filed a lawsuit in federal court claiming the state failed to meet his contractual obligations when it didn’t contribute to the pension system.

Just a day before the Assembly is set to vote on a pension reform bill, Gov. Chris Christie spoke of the reform and the compromise between Democrats and Republicans to reach the edict. The governor's 20th town hall meeting was held on Wednesday in Fair Lawn.

Rae Roeder, president of the local 1033, the only CWA chapter that has all its members in the same pension fund, said the members of the union voted to move forward with the lawsuit.

The union is also alleging the legislation, which would eliminate cost of living adjustments for retirees, violates federal contract law. The suit asks that full payments be made into the pension fund.

The unions yesterday continued their their war of words with Senate President Stephen Sweeney (D-Gloucester). Hetty Rosenstein, state director for the CWA, contested comments Sweeney made Sweeney earlier this week that negotiations over the bill fell apart when the union demanded that the content of the health plans be included in the legislation.

Sweeney has said the unions were trying to subvert collective bargaining, a charge unions have made against he and Christie.

Rosenstein said the proposal sent to them by Sweeney included no details and wasn’t in writing, putting them in a tough spot to sign on.

"This is not anything that any union could accept or that we could do in any fairness to our members," Rosenstein said. "Somehow we’re suppose to say ‘yes’ to that."

Senate spokesman Derek Roseman said Sweeney stands by his comments.

"It’s obvious that with (the) looming Assembly vote, the public union leaders are attempting to rewrite history to save face with the members they have misled for so long," he said.

Taxpayers on the Hook for Retiree Costs for Not Just Federal Employees But Also Federal Contractors

As with all federal retirees, U.S. military retirees and former civilian Department of Defense employees receive pension benefits from the government. The 2012 figure is $48.5 billion for military personnel, $20 billion for those civilian employees. We have no figure for the pensions of non-Pentagon federal retirees who worked on security issues for the Department of Homeland Security, the State Department, or the Departments of Justice and Treasury [The Real U.S. National Security Budget is $1.2 Trillion, Tomdispatch.com, March 3, 2011].

It is one thing for the taxpaying citizens of the United States to know that federal employees are being provided for (including matching deposits into all versions of the Civil Service Retirement), but now the General Accounting Office (GAO) has come out with a new report showing that taxpayers are providing retirement benefits, including pensions and health care, for independent/freelance (private) contractors not on the federal payroll. Taxpayers also cover these retiree costs for contractors' spouses, too. And, in some cases, if contractors want to retire early (at age 50), just like regular federal workers, many can then get taxpayer-funded coverage. A statistic from this GAO Report is as follows: "For the Department of Energy alone, overall this coverage cost taxpayers $6.8 billion over the last 10 years." Note that this situation is ongoing for years.

If private citizens cannot collect Social Security benefits until age 62, and if the maximum Social Security benefit is $21,636 per individual, then why are federal employees allowed to retire at age 50 and why aren't their pensions capped at $21,636 per individual. Many federal retirees have annual pensions of $40,000 or more.

Your Tax Receipt for the Management of Federal Employees and Retirees

Management of federal employees and buildings (1.4%) $47,980,000,000
Federal retirement and disability benefits (3.2%) $110,061,000,000
Federal employees and retirees health benefits (0.2%) $7,140,000,000
General Services Administration (0.0%) $861,000,000
Office of Personnel Management administration (0.0%) $253,000,000
Merit Systems Protection Board (0.0%) $38,000,000
Legal services for government employees and applicants (0.0%) $18,000,000
Office of Government Ethics (0.0%) $13,000,000
Administrative support for federal agencies (0.0%) $1,000,000
Government reports and information distribution (0.0%) -$7,000,000
Federal employee flexible spending account reserve fund (0.0%) -$15,000,000
Federal employee life insurance benefit (0.0%) -$1,455,000,000
Federal payment for employer share of Medicare taxes (-0.1%) -$4,042,000,000
Department of Defense Medicare-Eligible Retiree Health Care Fund (-0.2%) -$7,780,000,000
Fed payment for employer share of Social Security taxes (-0.4%) -$14,936,000,000
Fed payment for employer share of retirement & disability (-1.2%) -$42,170,000,000

Taxpayers on the Hook for Retiree Costs for Federal Contractors

Of course it comes out of our pockets... We not only are on the hook for the juicy unionized public servants' retirement payouts, but also for retirements of labor union third-party federal contractors...

June 10, 2011

FOXBusiness - A surprising new government report shows that taxpayers have been footing the bill for retiree benefits not just for federal workers, but for independent freelance contractors who do work for the government as well. And no one is watching the store to see if your tax dollars are being wasted.

Taxpayers for years have been covering private contractors' retiree costs for things like pensions and health care, even though these workers are not on the federal payroll.

Taxpayers also cover these retiree costs for contractors' spouses, too, and in some cases if contractors want to retire early (at age 50), just like regular federal workers, many can then get taxpayer-funded coverage, says an official at the Government Accountability office.

For the Department of Energy alone, overall this coverage cost taxpayers $6.8 billion over the last 10 years, according to the new GAO report recently sent to Congress. Nine out of ten dollars spent on the DOE's annual budget goes towards contracts, including contractor retiree benefits.

The problem is, the GAO tells FOX Business it only knows about this problem at the DOE -- no one in government knows, or is tracking with regular, transparent reports to Congress, the tax money going out the door for these costs at other agencies, like the Pentagon, Homeland Security, the National Institutes of Health, or NASA.

The lion's share of the DOE’s workforce is private contractors, most of whom work in the nuclear energy sector. DOE has the largest private contractor workforce in the federal government.

“We can't speak for other contractors, but what we found at DOE is that these numbers were not transparent to Congress and recommended they be more transparent,” the GAO tells FOX Business.

Also, no one in government is tracking whether taxpayers are double-covering retiree costs for workers employed at big companies that already cover them, like Boeing (BA: 73.85, -0.79, -1.06%) or Lockheed Martin (LMT: 79.63, -0.01, -0.01%). Moreover, the GAO says in a new report the DOE has to set aside "significantly" more funds for these costs "since the economic downturn."

The GAO adds that the DOE has "limited influence" over reining in contractor retiree benefit costs.

"By contract, DOE must reimburse these costs," the GAO says.

The DOE reimburses the companies directly.

The GAO reports that the DOE says it is facing budget strains due to covering these costs.

"DOE will likely continue to face significant challenges managing the costs of those benefits and mitigating their impact on funding available for the department's mission activities," its report said.

Most of DOE’s budget for contract work is to hire freelance companies that do things like cleanup work at nuclear sites, or do outsourcing work running the business operations of our nation’s laboratories.

DOE bears the responsibility, according to its contracts, for reimbursing contractors for retiree benefits for an estimated 200,000 people, including 100,000 current and former contractor employees, and 100,000 beneficiaries of those employees, such as spouses.

Taxpayer costs for federal contractors’ retiree benefits at the DOE has been volatile. They ranged from as little as $43 million in 2001 to as high as three quarters of a billion dollars in 2009, the GAO says. In fiscal 2008 to 2009, such costs more than doubled, the GAO adds, because of a drop in the interest rate used to calculate contractors’ pension plan liabilities, and because the pension assets plunged in value as the overall market dropped due to the financial crisis.

As is the case across the board, volatile investment returns can drastically impact pension contributions for government contractors, and in turn taxpayer costs to cover them.

"As a result, DOE ultimately bears the investment risk incurred by the contractor sponsoring the plan," the GAO said in its report.

At the same time, federal refunds for contractors’ health care benefits grew by 10%, to $389 million. But all the DOE can do in the face of such funding problems, the GAO says, is to urge contractors to make appropriate investment choices that reduce volatility. It has no power to restructure these plans, the GAO says, as its role is limited to oversight, even though it could do so at the contract stage. The DOE also does not give guidance on how to pick the right coverage nor does it tell contractors how they should allocate plan assets, says the GAO.

The DOE is moving to advocate to contractors that they use 401(k) plans, instead of traditional pension plans that guarantee retirees get set payments each month.

The GAO also reported back in 2008 that the DOE has taken steps to tackle the cost of these benefits that contractors offer to new workers. But the GAO says those moves "were not expected to substantially affect the department's contractor pension and other post-retirement benefit costs for the next 20 to 30 years," since current employees would still earn benefits on their existing plans.

Each contractor negotiates its own pension benefits separately, so reimbursements vary widely among the 50 pension plans the DOE covers. The GAO said a dozen of the contractor pension plans make up 86% of the DOE's total contractor pension liabilities, with the three largest plans accounting for more than a third of all of the DOE's pension liabilities.

Read Between the Lines: The Feds Are Bankrupting Social Security So They Can Justify Stealing Your Private Retirement Money

Senate Democrats Seek New Economic Stimulus

June 22, 2011

Reuters - Democrats in the Senate on Wednesday called on Vice President Joe Biden to include new economic stimulus spending in deficit-reduction talks as a way of lowering the 9.1 percent jobless rate that is hobbling the economic recovery.

Senate Majority Leader Harry Reid made the proposal to the White House, Richard Durbin, the No. 2 Democratic senator, told reporters.

"The Republicans are fixating on the budget deficit and it's a serious problem," Durbin said.

But citing the conclusions of a presidential deficit-cutting commission that he served on last year, Durbin added,

"Get the recovery right before you get in this deficit cutting mode ... get people back to work. Let's start moving in that direction."

A senior Democratic aide said the job-creation idea Senate Democrats are now pursuing represented a pivot in the deficit-reduction negotiations.

He said the idea presented to the White House has three components to help create jobs: new infrastructure spending, a payroll tax cut and support for clean energy jobs.

He did not say how large the infrastructure spending proposal would be. In 2009, President Barack Obama won enactment of an $814 billion economic stimulus that Republicans opposed as wasteful spending.

The aide said the White House appeared to support extending the current payroll tax cut for employees, although there has been discussion on Capitol Hill of also expanding that tax cut to employers.

Biden is to return to the Senate on Wednesday for another meeting with the bipartisan group of lawmakers looking for ways to significantly reduce deficits. A deep cut in spending -- in the neighborhood of $4 trillion over a decade -- is a Republican requirement for allowing a vote to increase U.S. borrowing authority that is hitting up against a $14.3 trillion limit.

The group is facing an August 2 deadline for resolving the debt limit problem and thinks that it needs to make some decisions within the next few days in order to give the Senate and House of Representatives enough time to write and pass spending cut and debt limit legislation.

Durbin told reporters he thought that effort could become a "two-step" process containing a "serious down payment on the deficit" followed by more work on long-term savings.

"We're just not going to be able to accomplish (all of) it by August 2," Durbin said.

The Biden group has aimed to raise borrowing authority by enough to get through 2012 and next year's presidential and congressional elections.

"I hope Vice President Biden can get an agreement that takes us through the election. I don't know if he can," Durbin said.

CBO Sees Government Benefits Swamping Economy

June 22, 2011

Reuters – The United States will find little relief from its bleak long-term fiscal outlook so long as growing federal healthcare and retirement programs gobble up more and more of the country's resources, said a new economic report issued on Wednesday.

The findings by the non-partisan Congressional Budget Office came as the Obama administration and Congress were struggling to find ways to make ends meet amid $1.5 trillion annual budget deficits and a national debt that, at $14.3 trillion, is seen as posing a danger to the nation.

"The aging of the population and the rising cost of health care would cause spending on the major mandatory healthcare programs and Social Security to grow from roughly 10 percent of GDP today to about 15 percent of GDP 25 years from now," CBO said in an annual report.

By comparison, CBO noted, total federal spending, excluding interest payments on the debt, has averaged about 18.5 percent of GDP over the past 40 years.

"CBO's new long-term budget outlook again highlights the urgency of reaching agreement on a bipartisan and comprehensive long-term deficit and debt reduction plan," Senate Budget Committee Chairman Kent Conrad said.

He has been calling for about $4 trillion in long-term savings through a mix of spending cuts and tax increases.

Vice President Joe Biden and a bipartisan group of six lawmakers were to continue their negotiations on Wednesday on how to achieve enough in deficit reductions to clear the way for Congress to raise U.S. borrowing authority.

Republicans in Congress have called for a major revamp of the Medicare healthcare program for the elderly -- one that would basically privatize it with government vouchers to help cover some of the costs.

House Budget Committee Chairman Paul Ryan, the author of the Republican Medicare plan, said

The CBO report underscored that the United States was headed to an "economic crisis" that "is actively hurting job creation today, as businesses hold back on expansion out of concerns that we are headed for a future of massive tax increases and higher interest rates."

But there has been a political backlash against Ryan's Medicare plan, as it is projected to cost seniors about $6,000 more in healthcare costs annually.

Democrats, including President Barack Obama, acknowledge the need for some Medicare reforms. But in deficit-reduction talks that Biden has led since May, Democrats have put more emphasis on a combination of cutting or freezing other domestic programs coupled with select tax increases on the wealthy.

SOME OPTIMISM FOR SHORT-TERM

Unless Washington gets control of its deficit spending over time, economists worry the United States will have to pay sharply higher borrowing rates as its AAA credit rating and reputation as a rock-solid investment haven are undermined.

To keep deficits and debt from climbing to unsustainable levels, CBO said,

"Policymakers will need to increase revenues substantially as a percentage of GDP, decrease spending significantly from projected levels, or adopt some combination of those two approaches."

Similar recommendations were made last December by a presidential commission.

CBO had some optimistic words for the short-term.

"As the economy continues to recover and the policies adopted to counteract the recession phase out, budget deficits will probably decline markedly in the next few years," the budget analysis agency for Congress concluded.

But for the long-run, there was no such optimism.

CBO said that its economic and fiscal projections "understate the severity of the long-term budget problem" because they don't take into account the snowballing effects that growing debt will have on the economy or the impact of any tax increases, which could occur if Congress does not extend current low rates beyond their 2012 expiration.

The Biden group is hoping that within the next few days it can present the outlines of a deficit-reduction plan to Obama and Congress and thus clear the way for raising U.S. borrowing authority before August 2.

That is when the Treasury Department says it will run out of tools for paying its debts and government programs.

But with deep divides between Republicans and Democrats over Medicare and taxes, there is some speculation that the Biden group might have to seek a short-term debt limit increase while negotiations continue.

The Gay Vote is Small Although Influential; 4 to 7 Percent of the Population is Homosexual and 70 Percent of Them Voted for Obama

Obama Treading Carefully on Gay Issues in 2012 Bid

June 22, 2011

Reuters - President Barack Obama has delivered important political victories for gays but is unlikely to push his support for gay rights much further before the 2012 election in case he alienates independent voters.

Gay leaders will likely give Obama high marks at a fundraiser in New York on Thursday for pushing through issues like winning gays the right to serve openly in the military.

Yet calls for the White House to back gay marriage and strengthen federal anti-discrimination protection will probably go unheeded as Obama treads carefully in the run-up to next November's election.

"The conundrum Obama faces is keeping this essential core constituency while not going overboard and alienating the high-intensity opponents of that constituency," said pollster John Zogby of IBOPE Zogby International. "His challenge is to continue to play it cool and not to go overboard."

Independent voters, seen as less likely to back gay causes, will be crucial in winning closely contested states such as Virginia, North Carolina, Ohio, Florida, Indiana and Wisconsin.

With the economy in trouble, the election is shaping up as a tighter race for Obama than his 2008 victory and he must keep key voting groups on board.

Evangelicals mostly vote Republican, but Obama took 30 percent of their votes in 2008 and he cannot afford to lose them, Zogby said. African Americans voted 95 percent for Obama in 2008 and heavily oppose gay marriage, he said.

Among Latinos, which Obama won in 2008, 40 percent call themselves social conservatives.

By contrast, the gay vote is small although influential. A CNN exit poll from 2008 showed 4 percent of voters were gay, lesbian or bisexual and 70 percent of them voted for Obama. Another reckoning puts gays at 7 percent of voters.

Boston University political science department chair Professor Graham Wilson said Obama will want to keep his gay constituencies sweet because they have high incomes, making them a potentially strong fundraising group.

"So long as Obama maintains his reasonably OK record on gay issues and Republicans continue to be identified with fairly aggressive anti-gay sentiments, there is not much doubt as to where the gay vote goes," Wilson said.

GAY RIGHTS ADVANCES

Many in the gay community praise Obama for ending the "don't ask don't tell" policy banning gays from openly serving in the military and for instructing the Justice Department to stop defending a law banning federal recognition of same-sex unions.

But many are annoyed that he has not backed gay marriage, seeing his "evolving" position on the issue as a cop-out. They also want sexual orientation added to federal discrimination statutes.

"So far it's a mixed bag," said Richard Socarides, head of the national gay-rights group Equality Matters.

"People believe his heart is in the right place. He's especially attractive when you consider the alternative," he said.

Obama campaign strategist David Axelrod said the president has made "historic progress" on gay issues and that his record stands in stark contrast to what would happen if Republicans were to win in the 2012 presidential election.

"I don't in any way doubt there are those who don't feel like progress has been made fast enough," Axelrod told MSNBC this week. "There is going to be a fundamental choice to be made in the next election and I think that choice will be clear to everyone and will be a galvanizing choice."

Politics Professor Ken Sherrill at Hunter College in New York City said Obama has made many small advances in gay rights such as requiring that hospitals taking federal money allow gays the right to visit their partners in hospital.

"The objections to Obama are more questions of the pace of change and the visibility of change," Sherrill said.

But Dan Weiller, of Empire State Pride Agenda which is lobbying this week in Albany for gay marriage in New York state, said gays should understand Obama's pragmatic approach.

"We recognize that for the president there are certain political realities," he said.

Marjorie Hill, chief executive of Gay Men's Health Crisis, America's oldest Gay AIDS service group, said she supported Obama financially in 2008 and will again in 2012.

"Anyone can talk the talk, but walking the walk does take longer," she said. "Being in office for two and a half years, there have been amazing strides."