An ex-terrorist says Osama bin Laden got much more than he bargained for after 9/11.

http://online.wsj.com/article/SB10001424052748704471204575210254017082986.html?mod=WSJ_Opinion_MIDDLETopOpinion

Washington's WTOP-FM reports that a Libyan former terrorist and onetime associate of Osama bin Laden is telling his story of the planning for the Sept. 11 attacks. According to him, it was a miscalculation of enormous proportions:

"I'm 100 percent sure they had no clue about what was going to happen," says Noman Benotman, who was head of the Libyan Islamic Fighting Group in the summer of 2000.

"What happened after the 11th of September was beyond their imagination, " says Benotman, who adds that al-Qaida thought the U.S. was a "paper tiger." . . .

[Bin Laden deputy Ayman al] Zawahiri laughed when [Benotman] warned those at the 2000 meeting that the U.S. response would be swift, hard and long, Benotman says.

Benotman attributes al-Qaida's overconfident attitude to the United States' response to al-Qaida attacks on its in embassies in Nairobi, Kenya and Dar es Salaam, Tanzania in 1998.

Zawahiri, according to Benotman, expected only a missile attack.

"When they attacked the embassies in East Africa, they estimated the U.S. launched 75 cruise missiles and eight people got killed. So they said this time, maybe they will launch 200 and they laughed about this."

Benotman's assessment is backed up by a former Central Intelligence Agency officer, who was active in the fight against al-Qaida.

The officer, who spoke on the condition of anonymity, says "several captured terrorists have said publicly that al-Qaida never expected the towers to fall. Their goal was to frighten people and impact the U.S. economy, so they really didn't plan for the massive response the U.S. launched."

WTOP quotes a non-anonymous ex-CIA man, Michael Scheuer, who doubts Benotman's sincerity and thinks he's saying these things because Libya's dictator, Muammar Gadhafi, "is holding a hammer over his head"--though it's not clear why it's in Gadhafi's interests for Benotman to say the things he's saying.

Scheuer adds: "I would like to believe that bin Laden was shocked and dismayed by what we did after 9/11, but I come hard up against an awful lot of evidence that that's exactly what he wanted."

We could be wrong, but this view of bin Laden's limitless cunning has always struck us as naive. We would also point out that bin Laden is as impressed with Scheuer as vice versa. In 2007, as NPR.org notes, the al Qaeda chief was quoted as saying the following: "If you want to understand what's going on and if you would like to get to know some of the reasons for your losing the war against us, then read the book of Michael Scheuer." It could just be that Scheuer is praising bin Laden as repayment for this blurb--or in the hope of getting another one.

Goldman rallies for Obama in Wall Street 'reform'

http://www.washingtonexaminer.com/opinion/columns/Goldman-rallies-for-Obama-in-Wall-Street-_reform_-90957879.html

In his self-styled war against Wall Street, President Obama appears to have a powerful ally: Goldman Sachs.

The nation's largest investment bank, famously cozy with top government officials in both parties, has tipped its hand to its shareholders, indicating that major financial "reform" proposals will help Goldman's bottom line.

"Given that much of the financial contagion was fueled by uncertainty about counterparties' balance sheets," Goldman Chief Executive Officer Lloyd Blankfein and President Gary Cohn wrote in a letter at the beginning of the annual report, "we support measures that would require higher capital and liquidity levels, as well as the use of clearinghouses for standardized derivative transactions."

Goldman's executives are calling for two regulations here. First, they want the federal government to restrict free-wheeling, heavily leveraged, high-stakes financial risk taking. Second, they want government to set more rules of the road for trading derivatives -- financial products that are often complex.

These are the very "fat cats" to whom Obama directed his trash talk in January: "If they want a fight, that's a fight I'm willing to have." Well, it looks like they don't really want a fight. It looks like they want more regulation. The question is: What's in it for Goldman?

If you take Blankfein and Cohn's word, stricter federal liquidity and capital requirements would amount to regulators doing Goldman's work for Goldman. They want Uncle Sam to mitigate "uncertainty about counterparties' balance sheets." That is, they want the government to reduce the risk that Goldman's debtors or insurers will run into trouble.

This is an odd function of government: Making Goldman Sachs feel safer in its business dealings. Blogger Ira Stoll, at his Web site The Future of Capitalism, put it well:

"It's one thing for some elderly retail depositor to ask the FDIC to protect her from risk by guaranteeing bank deposits. But the idea that the government needs to run around setting capital requirements to protect Blankfein and Cohn from the risk that their counterparties might go under or get in a liquidity crunch seems a bit odd. Let them protect themselves."

Also at play in Goldman's call for stricter capital requirements and standardization of derivatives: the confidence game. Much of America has lost some faith in the markets. Regular investors are still a bit scared of the stock market. Financial firms are lending less. Goldman thrives on free-flowing capital.

If Obama signs a financial "reform" and declares that it now safe to enter the waters of the stock market, that's good news for Goldman.

Restoring public confidence in the markets should be the job of those who profit from your investing in the market -- it should not be the job of the federal government.

Another pillar of Obama's financial reform is the "Volcker Rule," which would restrict the trading banks can do. Blankfein and Cohn, in their letter, indicate to shareholders that this rule will be no big deal for them.

The Volcker Rule would bar "proprietary trading" by Goldman (that is trading simply to benefit Goldman's bottom line) but would not restrict dealings "related to" serving the bank's clients. But even Goldman's most notorious financial dealings, transactions with failed insurance giant AIG, were client-related, Goldman told shareholders: "The net risk we were exposed to," Blankfein and Cohn wrote, "was consistent with our role as a market intermediary rather than a proprietary market participant."

In other words, almost any deal Goldman would make could be tied to a client, meaning the Volcker Rule couldn't touch Goldman, even if it cramps the style of smaller, less well-connected banks.

Goldman is lobbying hard on financial regulation, but that doesn't mean they're lobbying "against" regulation. And they certainly shouldn't be considered White House foes: Goldman was Obama's No. 1 corporate source of funds in 2008.

So when Obama triumphantly signs his "reform" later this year, forget the rhetoric and watch the smart money -- it'll be betting on Goldman.

Timothy P. Carney is the Washington Examiner's lobbying editor. His K Street column appears on Wednesdays.

http://thehill.com/blogs/on-the-money/banking-financial-institutions/94735-blankfein-supports-financial-reform-legislation

Blankfein supports financial reform legislation

By Vicki Needham - 04/27/10 06:45 PM ET

A financial regulatory reform bill has at least one supporter outside of Congressional Democrats, Lloyd Blankfein, the head of investment bank Goldman Sachs. 

"I'm generally supportive," Blankfein told the Senate Permanent Subcommittee on Investigations. 

Wall Street will benefit from the bill because it will make the market safer, Blankfein said.

"The biggest beneficiary of reform is Wall Street itself," he said. "The biggest risk is risk financial institutions have with each other."

American consumers also would benefit from better regulations, he said. 

Blankfein said he didn't know all the bill's details and couldn't speak to provisions that affect community and consumer banks and mortgage originators because they are "remote" to our experience. 

The Goldman Gaffe

http://www.forbes.com/2010/04/26/goldman-sachs-sec-regulation-opinions-columnists-richard-a-epstein_print.html

Richard A. Epstein, 04.26.10, 12:00 PM ET
On April 16, 2010, the Securities and Exchange Commission filed a highly publicized, if threadbare, civil fraud complaint against Goldman Sachs. The motion said that in January 2007, just before the collapse of the subprime market, Goldman Sachs and its young whiz-kid Fabrice Tourre worked together to issue a set of synthetic collaterized debt obligations (CDOs) that it sold to ACA Management LLC (“ACA”) at the behest of the then-unknown hedge fund manager John Paulson. Goldman’s sin: not disclosing to ACA that Paulson & Co. was in fact on the opposite side of the deal.
The absurdities of its case are evident from the SEC complaint. Paulson, ACA and Goldman knew exactly where each other stood. Indeed paragraph 30 of the SEC complaint states that ACA rejected some of the subprime reference positions that Paulson had proposed for inclusion in the mortgage reference pool and substituted others in its place. As such, the SEC claim’s of Goldman deception looks utterly groundless given ACA’s active role. Unless it was brain dead, ACA knew that it was negotiating with a party on the opposing end of the agreement.
At this point the mysteries only deepen. If Goldman committed fraud, then so did Paulson, who was mysteriously not charged. Even more notably, the SEC complaint makes no mention that Goldman actually took the same side of the deal as ACA, which puts it in the unique position of defrauding itself. In light of Goldman’s business decision, it is odd for the SEC to fault Goldman’s efforts to enlist ACA’s aid in selling the new round of CDOs to other sophisticated investment banks. So long as ACA knew what was going on, Goldman adopted a sensible marketing strategy that helps other investors.
So why the fuss? No one doubts that CDOs transfer risk between parties. It is therefore of no moment, in bad times or good, that one side to the deal lost big and the other won. Unfortunately, SEC seems to think that the $1 billion or so lost by ACA and its other sellers of CDOs count as social losses, while the gains to Paulson count as illicit profits that should be disgorged.
Unfortunately, the SEC makes a complete mess of the social accounting. The ex post transfer payment between two behemoths on Wall Street represents neither a social gain nor loss. It is a straight wash transaction. The right question from the ex ante perspective is whether that transaction generated a social gain or loss. The SEC decreed social loss on the undefended ground that “synthetic CDOS ... contributed to the recent financial crisis by magnifying losses associated with the downturn in the United States Housing Market.”
The SEC’s categorical statement has been echoed by other commentators who also misunderstand how and why the CDO market operates at all. Quite simply, this market would never exist unless both sides expected to gain. Goldman collected a cool $15 million for putting the deal together. Why would anyone ante up in a high stakes game just to pay the dealer? Surely there have to be some ex ante social gains if someone is prepared to look to find them.
But look you must. Too many commentators, however, bring more indignation than insight to this question. Roger Lowenstein, writing in the New York Times, likens the entire CDO operation on synthetics to a giant gambling game with no social value. In good Aristotelian fashion, he insists that the proper end of all mortgage activities is financing new houses and factories. At this point, the attack on Goldman Sachs and CDOs has nothing to do with transactional fraud. It has morphed into a demand to shut down the entire derivative market on the ground that they “only” deal with the allocation of risk, as if that were an unworthy cause.
During the 19th century, many states held that no one could buy insurance unless they had an “insurable interest.” The fear was that if I wrote insurance on the life of a stranger, I would be that much more inclined to take steps that lead to his demise. But in the modern context, neither Paulson, nor Goldman, nor ACA, nor all the financiers in the world have force individual homeowners to default on their mortgages. So the moral hazard is gone.
Risk allocation remains, however, where CDOs actually do some good. Matters would have been a lot worse if sly financiers felt compelled to urge the government and the banks to write more lousy subprime mortgages for them to sell. In addition, hedging transactions can work wonders by allowing larger players to reduce their risks by taking positions that offset any systematic risk in their loan portfolios. If big boys want to go naked in that market, let them, so long as there is no free explicit or implicit government guarantee at the other end.

---

In the end, we learn a lot from this latest SEC fiasco. The agency that cannot detect a Madoff fraud can conjure up a Goldman fraud out of thin air. At this point, some fundamental reform is in order. Forget the fancy stuff. Either the SEC should master its primary fraud prevention mission, or it should shut down altogether. Libertarians are against fraud. But they are against government agencies that cannot tell up from down on the fraud question.
Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law, the University of Chicago; the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, and a visiting professor at New York University Law School. He writes a weekly column for Forbes.com.

Meet the Real Villain of the Financial Crisis

http://www.nytimes.com/2010/04/27/opinion/27mclean.html?ref=opinion&pagewanted=print

By BETHANY McLEAN

TODAY, we will have the pleasure of watching outraged members of the Senate Permanent Subcommittee on Investigations fire questions at a half-dozen executives from Goldman Sachs. The firm first attracted anger for its return to making billions, and paying its employees millions, right after the financial crisis. And since the Securities and Exchange Commission this month charged Goldman with fraud over an investment tied to subprime mortgages, politicians have turned the firm into the arch-villain of the economic collapse.
But the transaction at the heart of the S.E.C.’s complaint is a microcosm of the entire credit crisis. That is, there are no good guys here. It’s dishonest and ultimately dangerous to pretend that Goldman is the only bad actor. And the worst actor of all is the one leading the charge against Goldman: our government.
Each of the supposed victims here was, at best, a willing accomplice. Let’s start with those who bet that the investment in question, Abacus 2007-AC1, would be profitable for them: a bond insurer called ACA Capital Holdings and a German bank named IKB Deutsche Industriebank. These companies allegedly didn’t know that Goldman, in exchange for $15 million in fees, had allowed a client, the hedge fund manager John Paulson, to help design the investment in order to improve the odds that it would fail.
But there was nothing hindering ACA’s ability to see that mortgages sold to people who probably couldn’t pay weren’t great investments. Meanwhile, the company’s insurance arm was covering as many subprime mortgages as it could to increase its own short-term profits. In some ways, the ACA story is the A.I.G. story: The company thought it had found free money — and basically bankrupted itself.
Similarly, the German bank advertised itself as a sophisticated investor, but didn’t seem to have bothered to analyze the subprime-backed bonds it was buying. The bank just relied on the AAA rating and, not surprisingly, pretty much bankrupted itself, too.
Which brings us to the rating agencies that stamped over 75 percent of Goldman’s Abacus securities with that AAA rating, meaning the securities were supposed to be as safe as United States Treasury bonds. They did the same to billions of dollars worth of equally appalling securities backed by subprime mortgages at other firms. Without the cravenness of the rating agencies, there would have been no Abacus, and no subprime mortgage crisis.
None of this excuses Goldman. Whether the transaction was legal or not, there’s a difference between what’s legal and what’s right. Goldman, where I worked at a junior level from 1992 to 1995, has always held itself up as a firm that adheres to a higher standard. “Integrity and honesty are at the heart of our business” is one of Goldman’s 14 principles. There is no way to square this principle with the accusation that Goldman did not tell a customer who didn’t want to lose money — the very definition of a buyer of AAA-rated securities — that the investment it was selling had been rigged to amplify the chances that it would, yes, lose money.
Transactions like this one open up a window into modern finance, and the view is downright ugly. This deal didn’t build a house, finance a world-changing invention or create any jobs. It was just a zero-sum game that transferred wealth from what Wall Street calls “dumb money” (often those who manage the public’s funds) to a hedge fund. It certainly belies what Lloyd Blankfein, the firm’s chief executive, told me last fall: “What’s good for Goldman Sachs is good for America.” Could the scary truth be that, at best, the success of one has nothing to do with the success of the other?
Yet, in the end, it comes down to this: Goldman Sachs, ACA Capital, IKB Deutsche Industriebank and even the rating agencies never had any duty to protect us from their greed. There was one entity that did — our government.
But it was the purported regulators, including the Office of the Comptroller of the Currency and the Office of Thrift Supervision, that used their power not to protect, but rather to prevent predatory lending laws. The Federal Reserve, which could have cracked down on lending practices at any time, did next to nothing, thereby putting us at risk as both consumers and taxpayers. All of these regulators, along with the S.E.C., failed to look at the bad loans that were moving through the nation’s banking system, even though there were plentiful warnings about them.
More important, it was Congress that sat by idly as consumer advocates warned that people were getting loans they’d never be able to pay back. It was Congress that refused to regulate derivatives, despite ample evidence dating back to 1994 of the dangers they posed. It was Congress that repealed the Glass-Steagall Act, which separated investment and commercial banking, yet failed to update the fraying regulatory system.
It was Congress that spread the politically convenient gospel of home ownership, despite data and testimony showing that much of what was going on had little to do with putting people in homes. And it’s Congress that has been either unwilling or unable to put in place rules that have a shot at making things better. The financial crisis began almost three years ago and it’s still not clear if we’ll have meaningful new legislation. In fact, Senate Republicans on Monday voted to block floor debate on the latest attempt at a reform bill.
Come to think about it, shouldn’t Congress have its turn on the hot seat as well? Seeing Goldman executives get their comeuppance may make us all feel better in the short term. But today’s spectacle shouldn’t provide our government with a convenient way to deflect the blame it so richly deserves.

Bethany McLean, a contributing editor for Vanity Fair, is writing a book about the financial crisis with Joe Nocera of The Times.

Democrats’ Long-Held Seats Face G.O.P. Threat

http://www.nytimes.com/2010/04/25/us/politics/25campaign.html?hp=&pagewanted=print

By JEFF ZELENY and ADAM NAGOURNEY

ASHLAND, Wis. — Representative David R. Obey has won 21 straight races, easily prevailing through wars and economic crises that have spanned presidencies from Nixon’s to Obama’s. Yet the discontent with Washington surging through politics is now threatening not only his seat but also Democratic control of Congress.

Mr. Obey is one of nearly a dozen well-established House Democrats who are bracing for something they rarely face: serious competition. Their predicament is the latest sign of distress for their party and underlines why Republicans are confident of making big gains in November and perhaps even winning back the House.
The fight for the midterm elections is not confined to traditional battlegrounds, where Republicans and Democrats often swap seats every few cycles. In the Senate, Democrats are struggling to hold on to, among others, seats once held by President Obama and Vice President Joseph R. Biden Jr. Democrats are preparing to lose as many as 30 House seats — including a wave of first-term members — and Republicans have expanded their sights to places where political challenges seldom develop.

“It’s not a lifetime appointment,” said Sean Duffy, a Republican district attorney here in the Northwoods of Wisconsin, where he has established himself as one of the most aggressive challengers to Mr. Obey since he went to Washington in 1969. “There are changes in this country going on, and people aren’t happy.”
Mr. Obey, who leads the powerful Appropriations Committee, is one of three House Democratic chairmen who have drawn serious opposition. Representatives John M. Spratt Jr. of South Carolina, who oversees the Budget Committee, and Ike Skelton of Missouri, who runs the Armed Services Committee, have been warned by party leaders to step up the intensity of their campaigns to help preserve the Democratic majority.
These established House Democrats find themselves in the same endangered straits as some of their newer colleagues, particularly those who were swept into office in 2008 by Mr. Obama as he scored victories in traditionally Republican states like Indiana and Virginia.

Representative Pete Sessions of Texas, chairman of the National Republican Congressional Committee, said he would consider anything short of taking back the House a failure. Republicans say they have not recruited strong candidates in all districts, but both parties agree that Republicans are within reach of capturing the 40 additional seats needed to win control. Republicans also are likely to eat into the Democratic majority in the Senate, though their prospects of taking control remain slim.

Democratic Congressional officials — well aware that a president’s party typically loses seats in midterm elections — have long been preparing for a tough year. But that Mr. Obey here in Wisconsin and other veteran lawmakers like Representative Earl Pomeroy of North Dakota suddenly find themselves in a fight reflects an increasingly sour mood toward the Democratic Party and incumbents.

“He’s supporting the party line of the Democrats, which is not consistent with North Dakota,” said Rick Berg, a Republican state representative from North Dakota who is challenging Mr. Pomeroy. “In the past, we’ve been more conservative at home than the people we send to Washington.”

Asked if this was a good time to be a Republican candidate, Mr. Berg laughed and said, “I sure think so.”
Mr. Pomeroy, who has served for 18 years as the state’s only congressman, won two years ago with 62 percent of the vote. Now he is among the top targets of House Republicans and is fighting without the help of one of the state’s incumbent Democratic senators on the ballot, since Byron L. Dorgan chose to retire.
“Some cycles are more challenging as a candidate than others,” Mr. Pomeroy said. “This should be in the range of challenging cycles.”

Democrats worry that some lawmakers who have avoided tough races in the past could be at added risk of defeat because they are out of practice, slow on their feet and often reluctant to acknowledge the threat they are facing. The chairman of the House re-election effort, Representative Chris Van Hollen of Maryland, has called mandatory face-to-face meetings with vulnerable members to monitor their campaigns.

In the Seventh District of Wisconsin, which covers 17,787 square miles from the middle of the state to Lake Superior, signs of Mr. Obey’s service in Congress are found in new bridges, highway expansions and countless other projects. Yet there are fewer signs of Mr. Obey himself. At the Democratic Party office in Wausau, his hometown, campaign placards hang in the window for Senator Russ Feingold, but none for Mr. Obey.

When asked to discuss his re-election bid, Mr. Obey declined, saying that it was too early to begin talking politics and that he was focused on his legislative duties. “I have never met anyone who thought political campaigns were too short,” he said.

Mr. Obey, 71, was elected two years before Mr. Duffy, 38, was born. Mr. Duffy is widely seen as leading in the Republican primary — his opponent is the candidate who lost to Mr. Obey two years ago by 22 percentage points — and his race has drawn support from party leaders in Washington, Tea Party activists and Sarah Palin.

He has been elected four times as the district attorney of Ashland County, but the attention surrounding him began in 1997 when he was on MTV’s “The Real World: Boston.” He also is well-known here as a champion lumberjack sports competitor.

He said he decided to challenge Mr. Obey because of his leading role in the economic stimulus bill, health care legislation and the growth of government. “I know that I can have a serious impact on the direction of the country if I could take out Obey,” he said.

But Mr. Obey, who has a campaign balance of $1.4 million compared with $400,000 for Mr. Duffy, is also emblematic of a bright spot for Democrats: a financial advantage.

Mr. Sessions, the Republican re-election committee chairman, acknowledged that his party might raise less money, but said Republicans would sweep away dozens of Democrats because of the searing intensity of their voters, which he said exceeded the conservative spirit of 1994. When Republicans won control of Congress that year, the tide claimed several top Democrats, including Speaker Thomas S. Foley.

In the Senate, Republicans also are looking to make major gains, though their hopes of winning control were set back when Tommy Thompson, a former Wisconsin governor, decided against challenging Mr. Feingold, who is seeking a fourth term. Democrats control the Senate by 59 to 41 seats.

To win the majority, Republicans would essentially have to run the table in races across the country: fending off Democratic challenges to four vulnerable Republican seats in Kentucky, Missouri, New Hampshire and Ohio, and capturing 10 seats now held by Democrats. Even in this climate, Republican officials concede that an error-free year is unlikely. Republicans appear to have a shot at winning races in Arkansas, Colorado, Delaware, Illinois, Indiana, Nevada, North Dakota and Pennsylvania.

They would also have to pick up the seats of decidedly more entrenched — though not unbeatable — incumbents, like Senators Barbara Boxer of California or Patty Murray of Washington.

But the Republicans have suffered a series of setbacks that could complicate their efforts in the Senate. In Florida, the possibility that Gov. Charlie Crist might abandon the Republican primary and run as an independent could create a three-way race, putting a state in play that Republicans thought they would not have to worry about.

Senator Robert Menendez of New Jersey, chairman of the Democratic Senatorial Campaign Committee, said that while he was expecting losses, he saw signs of a turnaround, including increased contributions and enthusiasm from core Democrats.

“I’m not euphoric — don’t misunderstand me,” he said. “I just get a sense that we are moving in a better direction. I don’t think Republicans are taking either one of them, but I’m damn sure they are not taking the Senate.”

Jeff Zeleny reported from Ashland, Wis., and Adam Nagourney from Washington. Carl Hulse contributed reporting from Washington.

Report says health care will cover more, cost more

By RICARDO ALONSO-ZALDIVAR, Associated Press Writer – 2 hrs 6 mins ago

WASHINGTON – President Barack Obama's health care overhaul law is getting a mixed verdict in the first comprehensive look by neutral experts: More Americans will be covered, but costs are also going up.

Economic experts at the Health and Human Services Departmentconcluded in a report issued Thursday that the health care remake will achieve Obama's aim of expanding health insurance — adding 34 million to the coverage rolls.

But the analysis also found that the law falls short of the president's twin goal of controlling runaway costs, raising projected spending by about 1 percent over 10 years. That increase could get bigger, since Medicare cuts in the law may be unrealistic and unsustainable, the report warned.

It's a worrisome assessment for Democrats.

In particular, concerns about Medicare could become a major political liability in the midterm elections. The report projected that Medicare cuts could drive about 15 percent of hospitals and other institutional providers into the red, "possibly jeopardizing access" to care for seniors.

The report from Medicare's Office of the Actuary carried a disclaimer saying it does not represent the official position of the Obama administration. White House officials have repeatedly complained that such analyses have been too pessimistic and lowball the law's potential to achieve savings.

The report acknowledged that some of the cost-control measures in the bill — Medicare cuts, a tax on high-cost insurance and a commission to seek ongoing Medicare savings — could help reduce the rate of cost increases beyond 2020. But it held out little hope for progress in the first decade.

"During 2010-2019, however, these effects would be outweighed by the increased costs associated with the expansions of health insurance coverage," wrote Richard S. Foster, Medicare's chief actuary. "Also, the longer-term viability of the Medicare ... reductions is doubtful." Foster's office is responsible for long-range costs estimates.

Republicans said the findings validate their concerns about Obama's 10-year, nearly $1 trillion plan to remake the nation's health care system.

"A trillion dollars gets spent, and it's no surprise — health care costs are going to go up," said Rep. Dave Camp, R-Mich., a leading Republican on health care issues. Camp added that he's concerned the Medicare cuts will undermine care for seniors.

In a statement, HHS Secretary Kathleen Sebelius sought to highlight some positive findings for seniors. For example, the report concluded that Medicare monthly premiums would be lower than otherwise expected, due to the spending reductions.

"The Affordable Care Act will improve the health care system for all Americans, and we will continue our work to quickly and carefully implement the new law," the statement said.

Passed by a divided Congress after a year of bitter partisan debate, the law would create new health insurance markets for individuals and small businesses. Starting in 2014, most Americans would be required to carry health insurance except in cases of financial hardship. Tax credits would help many middle-class households pay their premiums, while Medicaid would pick up more low-income people. Insurers would be required to accept all applicants, regardless of their health.

The U.S. spends $2.5 trillion a year on health care, far more per person than any other developed nation, and for results that aren't clearly better when compared to more frugal countries. At the outset of the health care debate last year, Obama held out the hope that by bending the cost curve down, the U.S. could cover all its citizens for about what the nation would spend absent any changes.

The report found that the president's law missed the mark, although not by much. The overhaul will increasenational health care spending by $311 billion from 2010-2019, or nine-tenths of 1 percent. To put that in perspective, total health care spending during the decade is estimated to surpass $35 trillion.

Administration officials argue the increase is a bargain price for guaranteeing coverage to 95 percent of Americans. They also point out that the law will decrease the federal deficit by $143 billion over the 10-year period.

The report's most sober assessments concerned Medicare.

In addition to flagging provider cuts as potentially unsustainable, the report projected that reductions in payments to private Medicare Advantage plans would trigger an exodus from the popular alternative. Enrollment would plummet by about 50 percent. Seniors leaving the private plans would still have health insurance under traditional Medicare, but many might face higher out-of-pocket costs.

In another flashing yellow light, the report warned that a new voluntary long-term care insurance programcreated under the law faces "a very serious risk" of insolvency.

Report says health care will cover more, cost more

http://news.yahoo.com/s/ap/20100423/ap_on_bi_ge/us_health_care_law_costs

WASHINGTON – President Barack Obama's health care overhaul law is getting a mixed verdict in the first comprehensive look by neutral experts: More Americans will be covered, but costs are also going up.

Economic experts at the Health and Human Services Departmentconcluded in a report issued Thursday that the health care remake will achieve Obama's aim of expanding health insurance — adding 34 million to the coverage rolls.

But the analysis also found that the law falls short of the president's twin goal of controlling runaway costs, raising projected spending by about 1 percent over 10 years. That increase could get bigger, since Medicare cuts in the law may be unrealistic and unsustainable, the report warned.

It's a worrisome assessment for Democrats.

In particular, concerns about Medicare could become a major political liability in the midterm elections. The report projected that Medicare cuts could drive about 15 percent of hospitals and other institutional providers into the red, "possibly jeopardizing access" to care for seniors.

The report from Medicare's Office of the Actuary carried a disclaimer saying it does not represent the official position of the Obama administration. White House officials have repeatedly complained that such analyses have been too pessimistic and lowball the law's potential to achieve savings.

The report acknowledged that some of the cost-control measures in the bill — Medicare cuts, a tax on high-cost insurance and a commission to seek ongoing Medicare savings — could help reduce the rate of cost increases beyond 2020. But it held out little hope for progress in the first decade.

"During 2010-2019, however, these effects would be outweighed by the increased costs associated with the expansions of health insurance coverage," wrote Richard S. Foster, Medicare's chief actuary. "Also, the longer-term viability of the Medicare ... reductions is doubtful." Foster's office is responsible for long-range costs estimates.

Republicans said the findings validate their concerns about Obama's 10-year, nearly $1 trillion plan to remake the nation's health care system.

"A trillion dollars gets spent, and it's no surprise — health care costs are going to go up," said Rep. Dave Camp, R-Mich., a leading Republican on health care issues. Camp added that he's concerned the Medicare cuts will undermine care for seniors.

In a statement, HHS Secretary Kathleen Sebelius sought to highlight some positive findings for seniors. For example, the report concluded that Medicare monthly premiums would be lower than otherwise expected, due to the spending reductions.

"The Affordable Care Act will improve the health care system for all Americans, and we will continue our work to quickly and carefully implement the new law," the statement said.

Passed by a divided Congress after a year of bitter partisan debate, the law would create new health insurance markets for individuals and small businesses. Starting in 2014, most Americans would be required to carry health insurance except in cases of financial hardship. Tax credits would help many middle-class households pay their premiums, while Medicaid would pick up more low-income people. Insurers would be required to accept all applicants, regardless of their health.

The U.S. spends $2.5 trillion a year on health care, far more per person than any other developed nation, and for results that aren't clearly better when compared to more frugal countries. At the outset of the health care debate last year, Obama held out the hope that by bending the cost curve down, the U.S. could cover all its citizens for about what the nation would spend absent any changes.

The report found that the president's law missed the mark, although not by much. The overhaul will increasenational health care spending by $311 billion from 2010-2019, or nine-tenths of 1 percent. To put that in perspective, total health care spending during the decade is estimated to surpass $35 trillion.

Administration officials argue the increase is a bargain price for guaranteeing coverage to 95 percent of Americans. They also point out that the law will decrease the federal deficit by $143 billion over the 10-year period.

The report's most sober assessments concerned Medicare.

In addition to flagging provider cuts as potentially unsustainable, the report projected that reductions in payments to private Medicare Advantage plans would trigger an exodus from the popular alternative. Enrollment would plummet by about 50 percent. Seniors leaving the private plans would still have health insurance under traditional Medicare, but many might face higher out-of-pocket costs.

In another flashing yellow light, the report warned that a new voluntary long-term care insurance programcreated under the law faces "a very serious risk" of insolvency.

Obama Backs Down on Sudan

http://www.nytimes.com/2010/04/22/opinion/22kristof.html?ref=opinion

Until he reached the White House, Barack Obama repeatedly insisted that the United States apply more pressure on Sudan so as to avoid a humanitarian catastrophe in Darfur and elsewhere.
Yet, as president, Mr. Obama and his aides have caved, leaving Sudan gloating at American weakness.

Western monitors, Sudanese journalists and local civil society groups have all found this month’s Sudanese elections to be deeply flawed — yet Mr. Obama’s special envoy for Sudan, Maj. Gen. Scott Gration, pre-emptively defended the elections, saying they would be “as free and as fair as possible.” The White House showed only a hint more backbone with a hurried reference this week to “an essential step” with “serious irregularities.”

President Omar Hassan al-Bashir of Sudan — the man wanted by the International Criminal Court for crimes against humanity in Darfur — has been celebrating. His regime calls itself the National Congress Party, or N.C.P., and he was quoted in Sudan as telling a rally in the Blue Nile region: “Even America is becoming an N.C.P. member. No one is against our will.”

Memo to Mr. Obama: When a man who has been charged with crimes against humanity tells the world that America is in his pocket, it’s time to review your policy.

Perhaps the Obama administration caved because it considers a flawed election better than no election. That’s a reasonable view, one I share. It’s conceivable that Mr. Bashir could have won a quasi-fair election — oil revenues have manifestly raised the standard of living in parts of Sudan — and the campaigning did create space for sharp criticism of the government.

It’s also true that Sudan has been behaving better in some respects. The death toll in Darfur is hugely reduced, and the government is negotiating with rebel groups there. The Sudanese government gave me a visa and travel permits to Darfur, allowing me to travel legally and freely.

The real game isn’t, in fact, Darfur or the elections but the maneuvering for a possible new civil war. The last north-south civil war in Sudan ended with a fragile peace in 2005, after some two million deaths. The peace agreement provided for a referendum, scheduled to take place in January, in which southern Sudanese will decide whether to secede. They are expected to vote overwhelmingly to form a separate country.

Then the question becomes: will the north allow South Sudan to separate? The south holds the great majority of the country’s oil, and it’s difficult to see President Bashir allowing oil fields to walk away.

“If the result of the referendum is independence, there is going to be war — complete war,” predicts Mudawi Ibrahim Adam, one of Sudan’s most outspoken human rights advocates. He cautions that America’s willingness to turn a blind eye to election-rigging here increases the risk that Mr. Bashir will feel that he can get away with war.

“They’re very naïve in Washington,” Mr. Mudawi said. “They don’t understand what is going on.”

On the other hand, a senior Sudanese government official, Ghazi Salahuddin, told me unequivocally in Khartoum, the nation’s capital, that Sudan will honor the referendum results. And it’s certainly plausible that north and south will muddle through and avoid war, for both sides are exhausted by years of fighting.

Here in Juba, the South Sudan capital, I met Winnie Wol, 26, who fled the civil war in 1994 after a militia from the north attacked her village to kill, loot, rape and burn. Her father and many relatives were killed, but she escaped and made her way to Kenya — and eventually resettled as a refugee in California. She now lives in Olathe, Kan., and she had returned for the first time to Sudan to visit a mother and sisters she had last seen when she was a little girl.

Ms. Wol, every bit the well-dressed American, let me tag along for her journey back to her village of Nyamlell, 400 miles northwest of Juba. The trip ended by a thatch-roof hut that belonged to her mother, who didn’t know she was coming — so no one was home. Ms. Wol was crushed.

Then there was a scream and a woman came running. It was Ms. Wol’s mother, somehow recognizing her, and they flew into each other’s arms. To me, it felt like a peace dividend.

Yet that peace is fragile, and Ms. Wol knows that the northern forces may come back to pillage again. “I don’t want war,” she said, “but I don’t think they will allow us to separate.”

My own hunch is that the north hasn’t entirely decided what to do, and that strong international pressure can reduce the risk of another savage war. If President Obama is ever going to find his voice on Sudan, it had better be soon.

Democrats at the Edge of the Cliff

http://online.wsj.com/article/SB10001424052748704133804575198290459062592.html

Democrats are spending trillions at the worst possible moment, with a new poll showing public trust in government at a historic low of 22%.

There was always something eerie about the way the Democrats said their health-care legislation was what the American people had waited "70 years" for. Invoking the ghosts of 1939 was kind of creepy. Then when the moment in history finally arrived, history got no votes from the other party. Whatever the politics, there was something ominous about all this. One felt something else was going on.

A Pew Research Center report just out, the one that says trust in government is at an "historic low" of only 22%, looks like the something else.

Dig past the headline of the Pew study and one discovers why Bill Clinton is insinuating that "demonizing" government could cause another Oklahoma City bombing. If these numbers are at all close to reality, something one can hardly doubt just now, the American people have issued a no-confidence vote in government, at both the national and state level. To the extent one believes in the "consent of the governed," consent is being eroded.

Daniel Henninger says that the American people have issued a no-confidence vote in government.

Podcast: Listen to the audio of Wonder Land.

This report isn't bad news for the Democrats. It's Armageddon.

The survey compares views sampled in 1997 with now. The "now" is the Democrats' problem. The survey took place this mid-March. After one year of the charismatic, ever-present Barack Obama, after passage of the party's totemic health-care bill, after spending zillions on Keynesian pump-priming, the American people—well beyond the tea partiers—have the lowest opinion ever of national government.

A year ago, 54% said government should exert more control over the economy; a year later it's 40%.

Some 58% say Uncle Sam is interfering too much in state and local affairs; 53% want "very major reform" of the federal government. After health care passed in March, Pew re-sampled in early April: Trust in government rose—to 25% from 22%. Inspector Clouseau would call that a "bmp."

Pew concludes: "A desire for smaller government is particularly evident since Barack Obama took office." That's pin-the-tail-on-the-donkey without blindfolds.

Democrats could cite one passage in Pew to mitigate this dire portrait. Historically, the report notes, whichever incumbent party is standing next to a big disaster gets pulled down in the undertow. Thus Bush and the Iraq war and Katrina. They can argue that Mr. Obama and the Democrats are getting hit with the legacy of the Bush downdraft and the after-shocks of the financial meltdown of September 2008. Once that passes, and after the inevitable November losses, the economy will stabilize and by 2012 the playing field will reset to normal.

I don't buy this. Something unique happened in the first Obama year, about the last thing the Democratic Party needed: The veil was ripped from the true cost of government. This is the ghastly nightmare Democrats have always needed to keep locked in a crypt.

Before the Internet, that was easy. Washington, California, New York, New Jersey—who knew what the pols were spending? The Democrats (and their Republican pilot fish) could get away with this. Not now. Email lists, 24/7 newspapers, blogs, TV and talk radio—the spending beast is running naked.

When the financial crisis piled in atop a recession, the Democrats' academic/pundit economists blandly convinced the party to wave a $787 billion stimulus at the problem in early 2009. Then, on April 30, the Democrats passed an FY 2010 budget of $3.5 trillion. This year the FY 2011 budget hit $3.8 trillion, reaching a post-World War II high of 25% of GDP. In March, they passed the trillion-dollar health-care bill. Total headline spending commitments in one year: about $9 trillion. That's a lot of "trust" to ask for during a recession with 9% unemployment. And now a sense is building of some broad middle-class tax grab. After soaking the rich, comes the deluge.

Demonization? No need. They did it to themselves.

Barack Obama's speeches are filled with the Democrats' core claim to legitimacy: Government must and will do good. It must "act." But in a crucial period when voters across the political spectrum were losing faith in that core claim, the Democrats lost any self-protective sense of what they were doing with public budgets. Barack Obama took a rising reservoir of public trust for his party (62% said they liked the Democrats in January 2009), and emptied it. Since he took office, the percentage of people who want smaller government and fewer services has risen, to 50% from 42%.

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Associated Press

A Quinnipiac poll released yesterday has the Obama presidential approval rating down to 44%—after health care, after the arms treaty with Russia, after the 47-nation, anti-proliferation convocation in Washington.

He insists on more government. People want less, and don't trust what they've got. They want reform. Here's the Pew blowout data:

In 1994 when the Democrats lost over 50 House seats at mid-term, the party's favorable rating was 62%, and for the Congress they controlled it was 53%. They still got killed. Now the party's favorable is 38% and Congress's approval is 25%. The Republicans' numbers are low, too, but they're not in charge.

The Democratic Party is on the edge of an electoral cliff with a long fall to the bottom. No wonder they're seeing a demon under every bed.

Write to henninger@wsj.com