Wednesday, January 7, 2009

Obama Warns of Trillion-Dollar Deficit Potential


WASHINGTON — President-elect Barack Obama on Tuesday braced Americans for the unparalleled prospect of “trillion-dollar deficits for years to come,” a stark assessment of the budgetary outlook that he said would force his administration to impose tighter fiscal discipline on the government.

Mr. Obama sought to distinguish between the need to run what is likely to be record-setting deficits for several years and the necessity to begin bringing them down markedly in subsequent years. Even as he prepares a stimulus plan that is expected to total nearly $800 billion in new spending and tax cuts over the next two years, he said he would make sure the money was wisely spent, and he pledged to work with Congress to enact spending controls and efficiency measures throughout the federal budget.

“We’re not going to be able to expect the American people to support this critical effort unless we take extraordinary steps to ensure that the investments are made wisely and managed well,” Mr. Obama said, speaking about the dire fiscal outlook after meeting with his economic team for a second straight day.

In his most explicit language on the subject since winning the election, Mr. Obama sought to reassure lawmakers and the financial markets that he was aware of the long-term dangers of running huge deficits and would take steps to limit and eventually reduce them.

Big deficits force the government to borrow more money, saddling future generations with large financial burdens and leaving the nation reliant on foreign governments and other big investors to lend cash. The problem is even more acute now because credit markets, which in recent months have made it much harder and more expensive for businesses and individuals to borrow, could be further strained by financing a huge government deficit.

On Wednesday, Mr. Obama plans to name a chief performance officer with the task of finding government efficiencies. He has chosen Nancy Killefer, who is director of McKinsey & Company, a management consulting firm, and was an assistant secretary of the Treasury in the Clinton administration. The Congressional Budget Office will also release its latest budget estimates, providing the first official predictions of the shortfalls tied to the economic slowdown and the fallen financial markets.

Mr. Obama has made the economy virtually the sole public focus of his first full week in Washington since winning the election. He called on Tuesday for the creation of an economic recovery oversight board that would include outside advisers to monitor spending — and find abuses — of the economic stimulus plan. He also said earmarks for lawmakers’ special projects would be banned from the bill.

“When the American people spoke last November, they were demanding change — change in policies that helped deliver the worst economic crisis that we’ve see since the Great Depression,” Mr. Obama told reporters at his transition offices. He added, “They were demanding that we restore a sense of responsibility and prudence to how we run our government.”

But Republicans and some fiscally conservative Democrats have expressed concern that the need for a substantial economic stimulus plan could sweep away for years any serious effort to bring government spending into line with its revenues.

While economists almost universally support running large deficits to combat the kind of steep recession the country is grappling with now, they are increasingly expressing alarm at the prospect of sustained fiscal imbalances heading into a period in which the aging of the population will create huge budgetary strains because of the growing costs of the Medicare and Social Security programs.

Still, the deficit now seems likely to be so large that it will inevitably constrain Mr. Obama’s administration to some degree. At a minimum, it seems sure to force him to walk a line between maintaining the confidence of the financial markets, which could drive interest rates up sharply if they doubt his will or ability to improve the government’s financial condition in the long run, and various constituencies that will be pressing him to make good on his campaign promises.

Mr. Obama has so far not backed away from any of the big initiatives he ran on, including his plan to expand health insurance. On that issue, as on others, he has begun making a case that the economically prudent course is to invest now in addressing the nation’s big challenges rather than avoiding them in the name of saving money in the short run.

Mr. Obama was not specific about the size of the deficit he expects, beyond his reference to “a trillion-dollar deficit or close to a trillion-dollar deficit” for the fiscal year that ends Sept. 30. Aides said later that the estimate — in line with what economists have been anticipating given the economy’s rapid deterioration — did not include the costs of the proposed stimulus package, which could add hundreds of billions of dollars more to the red ink.

At $1 trillion, the deficit would not only shatter the largest previous shortfall in dollar terms — $455 billion last year — but it could also exceed the post-World War II-era record by the measure more meaningful in economic terms, the deficit as a percentage of total economic activity.

Diane Rogers, chief economist at the Concord Coalition, a nonpartisan organization that supports fiscal discipline, estimated that the deficit this year would hit 7 percent of the gross domestic product. The largest previous record in those terms was in 1983, when it hit 6 percent.

Mr. Obama declined to say on Tuesday whether the budget that his administration submits to Congress in February would be larger than the $3.1 trillion budget that President Bush submitted for the current fiscal year. He also did not offer any specific examples of how spending could be controlled, saying only that his advisers had been scouring the budget looking for programs that could be eliminated.

“I’m going to be willing to make some very difficult choices in how we get a handle on his deficit,” Mr. Obama said. “That’s what the American people are looking for and, you know, what we intended to do this year.”

But the short-term budget shortfalls are big enough to pose serious headaches in themselves, especially if bond investors start demanding higher interest rates.

In just the first three months of the 2009 fiscal year, which began on Oct. 1, the government spent $408 billion more than it took in. About one-third of that shortfall stemmed from the Treasury Department’s rescue program of injecting capital into banks, which the government will book as an “investment” rather than “spending.”

The recession itself will add hundreds of billions of dollars to the deficit. Even before Congress adds any new stimulus measures, higher outlays will climb for existing unemployment benefits, food stamps and other social programs. Tax revenues will fall because of rising unemployment, falling corporate profits and huge investment losses in the stock and bond markets. Mr. Obama’s stimulus program could add another $400 billion in each of the next two years.

“One thing investors have to be thinking is, what’s the exit strategy? How do we unwind this stuff?” said Robert Bixby, director of the Concord Coalition. “I would analogize it to what the government is doing with the auto companies. Congress said, we’ll give you the money but you have to show us a plan for sustainability.”

Mr. Bixby added, “Now the government is in the same position of the auto companies, but they haven’t come up with any plan for sustainability.”

As the latest budget estimates are released on Wednesday, the good news, at least for the moment, is that the Treasury’s borrowing costs are as almost as low as they have ever been. Short-term Treasury rates are hovering just above zero, but the rates on 10-year Treasury bonds are about 2.5 percent.

Monday, January 5, 2009

A Pitch for Mass Transit

Unlike President Bush, Barack Obama is going to enter office with a clear appreciation of the urgent problems of climate change and America’s growing dependency on foreign oil — and a strong commitment to address both.

One way he can do this is to give mass transit — trains, buses, commuter rails — the priority it deserves and the full financial and technological help it needs and has long been denied.

Mass transit has always played second fiddle to the automobile, so Mr. Obama will need strong allies. Ray LaHood, Mr. Obama’s choice for transportation secretary, must be not only an ally but a champion for mass transit. Mr. LaHood is a Republican and former member of Congress from rural Illinois, where farmers produce a lot of ethanol and where people mostly drive. His résumé on transportation issues is thin, and we fear he may need some coaxing in this new direction.

Another important ally should be — and almost certainly will be — James Oberstar, a Minnesota Democrat who is chairman of the House Transportation and Infrastructure Committee.

For years, the division of transportation money in Washington has heavily favored cars and trucks — more than 80 percent of the big transit money from gas taxes goes to highways and bridges, and less than 20 percent to railroads or mass transit. Mr. Oberstar is leading the charge to change that formula and divide this money a little more evenly. This will not be easy. Automobiles will be with us a long time, and old spending habits die hard. But as part of the stimulus package now under discussion for transportation, Mr. Oberstar is proposing $30 billion for highways and bridges and $12 billion for public transit. That is certainly a far healthier mix.

The new administration could further help mass transit by shelving the unfair “cost effectiveness index” that President Bush put in place several years ago for new transit programs. The net effect of this index was to make it easier to build highways and almost impossible to use federal money for buses, streetcars, light rail, trolleys — indeed, any commuter-rail projects.

For Mr. Obama’s transit agenda and for Mr. LaHood, the next big challenge will be a transit bill that Congress must pass by September. Mr. LaHood is widely praised for his management skills and his ability to work well with others. Those abilities will certainly be needed if he and the Congress are to find and then finance the best, the most-efficient and the most-advanced ways for Americans to move around.

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Friday, January 2, 2009

Relentless Challenger of Apartheid System, Is Dead at 91


Helen Suzman, the internationally renowned anti-apartheid campaigner who befriended the imprisoned Nelson Mandela and offered an often lonely voice for change among South Africa’s white minority, died in Johannesburg early on Thursday, a family member said. She was 91.

Her son-in-law, Jeffrey Jowell, a law professor in London, said she died peacefully at her home in the affluent northern suburbs of Johannesburg after a brief illness.

For decades, Mrs. Suzman was among the most venerated of white campaigners urging an end to racial rule. As the liberal Progressive Party’s lone representative in the all-white Parliament for 13 years until the mid-1970s, a period when many of apartheid’s most repressive features were being devised, she used her parliamentary immunity to speak out when other avenues of protest were harshly suppressed.

While she challenged apartheid at a time of violent protests among the black majority, she advocated peaceful change. More controversially, she differed sharply with more radical campaigners inside and outside South Africa who were supportive of economic sanctions to press the country’s white rulers toward reform, saying sanctions would hurt poor blacks more than whites.

To Mrs. Suzman’s frustration, this led some of her critics to say she was unwittingly helping to prolong apartheid. This was a variation on a critique she had long endured, and to some extent accepted — that by engaging in what was largely a charade of parliamentary politics in apartheid South Africa, she became complicit, however unwillingly, in the larger deceits of apartheid, which would ultimately be ended not by a small band of white dissenters, but by the more powerful forces of the black freedom struggle and external political pressure.

Among her friends, it was a reality Mrs. Suzman conceded, though she and many opponents of apartheid believed that it was important to keep the hopes of eventual democracy in the country alive and that she could help the victims of apartheid by her efforts to expose the evils of the system in and out of Parliament.

In a 1966 profile in The New York Times Magazine, Joseph Lelyveld, the newspaper’s correspondent in South Africa at the time, recounted one of her favorite stories, about an overeager dinner host who gave a black man serving her a lecture on her parliamentary achievements.

“Do you know who this is, John?” the host asked. “This is Helen Suzman, the champion of your cause — the champion of human rights in South Africa.”

“She waste her time,” John replied, as Mrs. Suzman retold it later, laughing brightly as she repeated the line. “She waste her time.”

Diminutive, elegant and indefatigable, Mrs. Suzman confronted the forbidding Afrikaner prime ministers — Hendrik F. Verwoerd, John Vorster and P. W. Botha — who became synonymous with apartheid’s repression of the black and mixed-race populations. She was dismissive of the death threats she received by telephone and in the mail, and undaunted in her showdowns with the men she described as apartheid’s leading “bullies,” who in turn dismissed her as a “dangerous subversive” and a “sickly humanist.”

Shouts of “Go back to Moscow!” greeted her when she rose in Parliament, and, on at least one occasion, “Go back to Israel!” — a reference to her antecedents as the daughter of early 20th-century Jewish immigrants from Lithuania. After the 1976 Soweto riots, Mr. Vorster mocked her for beating with what he called her “pretty little pink hands” against apartheid, while secure in the knowledge, as he claimed, that she and other white opponents could continue to enjoy the privileged lives apartheid guaranteed without fear that their demands for an end to the racial laws would succeed.

“I am not frightened of you — I never have been, and I never will be,” she told Prime Minister Botha in a parliamentary exchange in the late 1970s. “I think nothing of you.”

For his part, Mr. Botha called her “a vicious little cat.” When a government minister once accused her of embarrassing South Africa with her parliamentary questions, she replied, “It is not my questions that embarrass South Africa; it is your answers.”

Her home and office telephones were constantly tapped, an intrusion she liked to counter by blowing an ear-splitting whistle into the mouthpiece.

But perhaps because of her parliamentary immunity, a feature of their showpiece democracy that apartheid leaders guarded with care, she was never detained or subjected to one of the stifling “banning orders” that apartheid leaders used to curb dissent by prohibiting people from attending political meetings, speaking in public or even leaving their homes.

Her opposition to economic sanctions made her a contentious figure among some apartheid opponents, including protesters on American college campuses, like Brandeis and Harvard, where she received honorary degrees. “I understand the moral abhorrence and pleasure it gives you when you demonstrate,” she told a New York audience in 1986. “But I don’t see how wrecking the economy of the country will ensure a more stable and just society.”

She rarely faced such criticism from South Africa’s best-known black leaders. Mr. Mandela spoke with affection of her visits to the Robben Island prison in the chilly Atlantic waters off Cape Town, where he was serving a life sentence imposed in 1964 and where he remained until he was moved to a mainland prison nearly 20 years later. Using her parliamentary visiting rights, she made her first trip in 1967 and returned frequently.

“It was an odd and wonderful sight to see this courageous woman peering into our cells and strolling around our courtyard,” Mr. Mandela recalled in an interview when he was released in 1990 after serving 27 years. “She was the first and only woman ever to grace our cells.”

On Thursday, the governing African National Congress paid tribute by saying in a statement that Mrs. Suzman “became a thorn in the flesh of apartheid by openly criticizing segregation of Blacks by a Whites-only apartheid system.” Mr. Mandela’s foundation issued a statement from its Johannesburg headquarters saying that South Africa had lost “a great patriot and a fearless fighter against apartheid.”

Archbishop Desmond Tutu, winner of the 1984 Nobel Peace Prize, who forged a close friendship with Mrs. Suzman when they were leading proponents of peaceful change during the violent upheavals of the 1970s and 1980s, said in his statement that the country owed her an enormous debt. “She really was indomitable,” he said.

By the early 1990s, when apartheid gave way to black majority rule, there was widespread affection for Mrs. Suzman in black townships like Soweto, where many people knew her simply as Miss Helen.

But while no longer in Parliament in her final years, she remained an acerbic critic of what she viewed as official wrongdoing, now by the country’s new black rulers. Only recently, she joined other prominent South Africans in demanding a fresh inquiry into dubious government arms contracts in the 1990s, some involving the president of the African National Congress, Jacob Zuma.

Mrs. Suzman was born Helen Gavronsky on Nov. 17, 1917, in Germiston, a gold-mining town on the outskirts of Johannesburg. She was educated at the Parktown convent school in Johannesburg, and studied economics at the city’s Witwatersrand University. At the age of 19, in 1937, she married Moses Meyer Suzman, known as Mosie, a cardiologist, with whom she had two daughters, before returning to the university in 1944.

She is survived by her daughters, Frances, an art historian, and Patricia, a medical specialist.

Universities around the world awarded Mrs. Suzman 27 honorary doctorates, and she received numerous other honors from the United Nations and an array of religious and human rights groups around the world. Queen Elizabeth II made her an honorary dame, customary for citizens of countries other than Britain.

Mrs. Suzman traced her opposition to apartheid to her university years, when she studied South Africa’s racial laws and was incensed by what she learned, particularly by the so-called pass laws, which were fundamental to the apartheid system, restricting where blacks could live and work.

She ran for Parliament in Johannesburg’s upscale Houghton district and remained the district’s legislator from 1953 to 1989. She began as a member of the United Party, which had been usurped in 1949, after decades as South Africa’s governing party, by the Afrikaner-dominated National Party. It was the Nationalists, under Mr. Verwoerd, who codified and extended the existing racial laws, creating apartheid.

In 1959, impatient with the United Party’s tolerance of racial segregation, she became a founder of the liberal Progressive Party, later known as the Progressive Federal Party, which favored a more inclusive, nonracial franchise that would lead to black majority rule. Some of the most relentless enforcers of apartheid eventually developed a grudging respect for her, even a hint of affection. James T. Kruger, the justice minister under Mr. Vorster during the Soweto riots, was one of the “bullies” Mrs. Suzman frequently denounced.

Years later, out of office, Mr. Kruger learned that Mrs. Suzman was planning a tourist visit to the Soviet Union with her husband. A keen amateur philatelist, he approached her in the parliamentary lobby and gave her a sheaf of self-addressed postcards and letters, each bearing new South African stamps, asking her to mail them back to him from Moscow.

When she said that the Soviet postal authorities would not accept South African stamps, she recalled, Mr. Kruger was puzzled. For Mrs. Suzman, the incident demonstrated the occluded world inhabited by many apartheid leaders, who often acted, she said, as if they belonged to the 17th, not the 20th century. “Poor old Jimmy Kruger,” she said. “Like most of them, he knew very little of the world beyond South Africa.”