The Democrats' Energy Charade

By MICHELE BACHMANN

Earlier this month the House of Representatives voted on an energy bill called the Drill Responsibly in Leased Lands (Drill) Act. The good news, for those of us who actually want to do something to lower gas prices, is that it failed.

The bad news is that Democrats will try again before the November elections. We can expect more legislation that claims to increase production, but in reality offers a framework of heavy regulation, litigation and union rules that could prevent new energy supplies from getting to market. And we can expect legislation that would likely hamper current oil and gas exploration.

Consider the details of Drill. It would not have opened new lands to energy exploration. Instead, it would have increased the number of lease sales in the National Petroleum Reserve -- the Arctic National Wildlife Refuge's (ANWR's) sister territory on Alaska's North Slope -- from one lease sale every two years to one every year. The problem here came in the fine print. The bill would have mandated that leasing be done in an undefined, "environmentally responsible" way.

We know from experience that such ambiguous language leads to lawsuits and delays. Further, the bill authorized the construction of new pipelines, but would have mandated that they be built in an "environmentally responsible manner" using labor agreements that earmarked all the work for labor union members.

The Democrats' focus on the National Petroleum Reserve is also striking. While it contains comparable known reserves to ANWR -- 10.6 billion barrels compared to an estimated 10.4 billion barrels in the wildlife refuge -- its fields are spread over 23 million acres. The portion of ANWR territory that should be opened to exploration covers a mere 2,000 acres. The National Petroleum Reserve's fields are a little over 250 miles from the current pipeline infrastructure, while ANWR is only 75 miles away. To top it off, currently there is no production in the National Petroleum Reserve because of ongoing litigation.

By focusing on a patch of Arctic tundra more spread out than ANWR, a greater distance from current pipelines, and subject to lawsuits not addressed by the legislation, the Democrats chose to respond to American cries for expedited drilling in such a way that would have made it harder to produce energy.

There's more. The Drill Act included "use it or lose it" restrictions that prohibit the federal government from issuing new exploration or production leases anywhere, unless the applicant can certify that every lease currently held is being "diligently developed" (again, to be defined later by lawyers) to produce oil or natural gas. Any lease not meeting the yet-to-be-determined standards would have to be relinquished.

Yet federal law already requires lease holders to produce within a set number of years, and energy companies have no incentive to let leases (paid for with up-front bonus fees and annual rent payments regardless of production) go idle. The "inaction" decried by some Democrats overlooks the exploration on these lands that is expensive, ongoing and time consuming.

In the real world, forcing companies to "use" their leases immediately or lose them means making exploration more cost-prohibitive. It will ensure that less exploration will take place. It's akin to forcing a pharmaceutical company to develop a cure for cancer in some arbitrary number of years or else lose the ability to seek the cure.

Unfortunately, the Drill Act is likely to be the first of many phony bills offered to the public this year. They will be aimed at giving the appearance of wanting to increase energy supplies. But in reality they will undermine efforts to increase domestic oil production.

Perhaps the Democratic majority will change course in the months ahead, and choose to join with Republicans to adopt commonsense proposals to unlock vast American energy reserves. But that will only happen if the American people make it clear that they know when they are being had.

Fannie Mae's Political Immunity

President Bush is poised to sign the housing and Fannie Mae bailout bill, after the Senate passed it with 72 votes on the weekend. But an underreported part of this story is that Majority Leader Harry Reid refused to allow a vote on Republican Jim DeMint's amendment to bar political donations and lobbying by Fannie and its sibling, Freddie Mac.

This is a rare parliamentary move for a body in which even Senators in the minority party have long been able to force votes. The strong-arm play illustrates how politically powerful these government-sponsored enterprises remain even after going hat in hand to taxpayers. This has implications in the days ahead, because the Beltway battle now shifts to who will be the new regulator for the mortgage giants and how much political insulation he'll have from Fannie and Freddie pressure.

We believe in the right of individuals and businesses to lobby Congress. But with Fan and Fred now explicitly guaranteed by taxpayers, letting them ladle cash all over Washington amounts to using government-guaranteed profits to lobby for continued government protection. Congress sets the rules in favor of Fan and Fred, which then repay the Members with cash from their rigged profit stream. This is the government lobbying itself for more government.

And, oh, what a stream of political cash it is. First, there are Fannie and Freddie's political action committees, which have already distributed roughly $800,000 to U.S. House and Senate Members this election cycle. Nearly half of the Senators have received funds and almost all of the money is directed to incumbents. Fannie gave $10,000 to Speaker Nancy Pelosi, $10,000 to third-ranking House Democrat Rahm Emanuel, $5,000 to Barney Frank, $10,000 to Republican House whip Roy Blunt, $8,500 to Majority Leader Steny Hoyer and $7,500 to Minority Leader John Boehner and . . . you get the picture.

FANNIE MAYHEM: A HISTORY

Click here for a compendium of our recent Fannie and Freddie coverage.

Then there are the "charitable" foundations. Freddie Mac's foundation handed out $25 million to political groups, think tanks and other Beltway outfits in 2007 alone, more than any other foundation in the country, according to the Washington Business Journal. Guess which foundation ranked number two? Yep, Fannie Mae's, which gave out $21 million. The foundations grew thanks to gifts of stock during the companies' heyday before their accounting scandals and the housing bust. Last year, as political scrutiny increased, Fannie closed down its foundation and now runs its tax-deductible donations through the company itself.

Most of this foundation money goes to charity groups uninvolved in politics and policy. But tens of millions of dollars find their way to policy advocacy groups on the left and even some on the right. (See nearby table.) Affiliates of Acorn, the left-wing activist group, have received multiple $100,000 grants for their "housing" activities.

Jesse Jackson's Citizenship Education Fund, an offshoot of his Rainbow/PUSH Coalition, has received more than $500,000 from Fannie and Freddie since 1996. A decade ago Mr. Jackson accused Fannie and Freddie of discriminatory lending practices. Those charges of racism went away once the grant money started flowing. Groups on the left complain about "corporate welfare" all the time, but curiously nary a one has opposed the Fannie and Freddie bailout -- which amounts to one of the biggest corporate welfare gifts in U.S. history.

Mr. DeMint has pledged to offer his amendment to end Fannie and Freddie lobbying to every Senate bill through Election Day. We wish him luck, but he's up against the reality that Congressional leaders and the companies want to return as quickly as possible to the business of greasing each other's palms. The companies are even hosting swanky receptions at the Republican and Democratic nominating conventions in a few weeks. Consider it a Fannie and Freddie "thank you" for their bailout.

Mercenaries for Darfur

When Bill Gates and Michael Bloomberg announced a new antismoking campaign the other day, they put their money in line with their mouths. The former Microsoft chairman and the mayor of New York together pledged $500 million to target what Mr. Gates called "one of the greatest health challenges facing developing countries."

AP

This Blackwater helicopter could become an angel of hope.

The same day they were announcing their campaign, the president of Sudan was on a visit to Darfur. Presumably it was his way of responding to news that the prosecutor for the International Criminal Court is seeking an arrest warrant against him on charges of genocide, war crimes and crimes against humanity. Yet Omar al-Bashir did not appear to be a troubled man.

At one rally, the AP reports, he broke into a little dance -- and state television ran footage of supporters "waving banners reading 'No! No! to the prosecutor!' and 'We are with you, al-Bashir!'"

Mr. Bashir's visit to Darfur is a good reminder that for much of the developing world, and especially for the people of Africa, the gravest health threat does not come from Philip Morris. As the headlines from the Sudan and Zimbabwe illustrate, the gravest health threat typically comes from a combination of murderous government and Western powers unwilling to use their force to stop them.

Oh, Darfur gets plenty of news coverage from sympathetic reporters sickened by the carnage and devastation they have seen. What the people of Darfur do not get is an armed force capable of taking on the Janjaweed -- a horse-mounted militia. The Janjaweed has murdered men, gang-raped women, beaten children to death, and left poisoned wells and burnt-down villages in its wake. All this Mr. Bashir encourages and supports to help maintain his grip over Darfur.

Enter Erik Prince, the chairman and CEO of Blackwater Worldwide. Yes, that Blackwater. Most of the attention the company has attracted has been for its security work in protecting U.S. diplomats in Iraq. But much more of their work is training: from border and narcotics police in Afghanistan to police and maritime forces in countries ranging from the United States and Japan, to nations in Africa and South America.

Mr. Prince says that the 9,000 or so African Union soldiers in Darfur, as part of the United Nations peacekeeping force, are a good start. But he says that to be effective they need better training, communications and equipment. That is more or less the same message from a report released yesterday by the Darfur Consortium, a coalition of 50 African-based and Africa-focused NGOs. "One year ago the U.N. Security Council stood unanimous and promised Darfurians the strongest and largest protection force ever," says a coalition spokesman. "Today that force is just over a third deployed, lacks even the most basic equipment and is unable to protect itself let alone civilians."

Mr. Prince has a remedy. He believes that with 250 or so professionals, Blackwater can transform about a thousand of the African Union soldiers into an elite and highly mobile force. This force would also be equipped with helicopters and the kind of small planes that missionaries use in this part of the world. It would be cheaper than the hundreds of millions we are spending to set up a larger AU/U.N. force. And he says he'd do it at cost.

Blackwater would not do the fighting. Its people would serve as advisers, mechanics and pilots. Aid workers and villagers would be equipped with satellite telephones that include Global Positioning Systems. When they call in, the troops would respond.

"I'm so sick of hearing that nothing can be done," he says. "The Janjaweed is a truly unfettered bully. No one has stood up to them. If they were met by a mobile quick reaction force of African Union soldiers, the Janjaweed would quickly learn their habits were not sustainable." And to ensure accountability, he says, the U.S. could send 25 military officers to observe how Blackwater is doing and serve as liaisons.

At this moment, the U.N. is again debating a resolution on Darfur. Others are still hoping for a boycott of next month's Summer Olympics, hoping to pressure Beijing to pressure Mr. Bashir, who supplies the Chinese with a healthy percentage of their oil. Still others are working to tighten sanctions.

But nothing appears to have had much of an effect on Mr. Bashir's behavior. And if we are honest with ourselves, nobody really expects any of this activity ever will.

Then again, that's the point: Strongly worded resolutions, sanctions and boycotts are generally what you do in place of decisive action. I understand that the whole idea of Blackwater helicopters flying over Darfur probably horrifies many of the same people frustrated by Mr. Bashir's ability to game the system. But it's at least worth wondering what that same Blackwater helo might look like to a defenseless Darfur mother and her daughters lying in fear of a Janjaweed attack.

The lure of the great cliché of China

By Gideon Rachman

In normal weeks, I try to say something original in my column and to avoid writing in clichés. But this week I have decided to change tack.

The task I have set myself is to write an article entirely composed of received wisdom and tired phrases. The central argument must be a cliché. Every idea must be a cliché. Every sentence must contain a cliché.

This is harder than it sounds. But I have been aided in my task by careful rereading of my own work. In the matter of clichés, we are all sinners. And with that appropriately hackneyed thought, let me begin:

The Beijing Olympics is one of those iconic moments that tell us we have reached a tipping point. Our kids are going to inherit a very different world.

As a confident China strides on to the Olympic stage, the US is mired in a credit crunch and a war on terror – it is the perfect storm.

It was Napoleon who said: “Let China sleep, for when China wakes she will shake the world.” The turbo-charged Chinese dragon woke up in the go-go 1980s. Whisper it softly, but there will be no respite. This is not even the beginning of the end, although it may be the end of the beginning.

In a flat world, everybody is affected by the relentless rise of China – investment bankers in their corner offices, hard-bitten kids in the inner cities, yummy mummies in the leafy suburbs. It’s the economy, stupid.

We, in the west, are being challenged. But we must keep our nerve and play a long game. We must deploy soft power in the battle for hearts and minds. Call me old-fashioned, but I believe that Brand America remains strong. The doom-merchants may yet be surprised.

To be sure, the unipolar moment has passed. But the race for global supremacy is a marathon not a sprint. And in this Olympic year, it is worth reminding ourselves that China still runs with a limp.

The elephant in the room is that China has yet to make the transition to a sustainable democratic system. This is the 800lb gorilla that threatens to throw a monkey-wrench into the Chinese system. The Chinese leadership is still capable of snatching defeat from the jaws of victory.

The Chinese – and the Chinese alone – will decide the destiny of their magnificent, inscrutable country. But perhaps we could gently remind them that it is a truth universally acknowledged that democracy is the worst of all possible systems – apart from all the others.

Western leaders must have the courage of their convictions. They must not only visit the Great Wall of China – they must urge their hosts to tear it down.

But therein lies a paradox. Even as we rip down walls, we must build bridges. China must be encouraged to be a responsible stakeholder in the international system. This can be achieved only through a judicious mix of carefully calibrated carrots and sticks.

This will require us to make painful compromises. So be it.

I could go on and on in this vein. But I will not.

The odd thing is that in rereading my column so far, I find that there is very little in it that I disagree with. This suggests that clichés serve a valuable function. The best clichéd phrases are repeated because they are pithy ways of expressing important notions. (Indeed, that view of clichés is, I think, a cliché in itself.)

Napoleon’s quote about China has launched a thousand articles – and an excellent book by James Kynge, the former Financial Times correspondent in China. It now ranks alongside other great clichéd (and possibly apocryphal) China quotes – such as Chou En-lai’s reply when asked about the impact of the French revolution, that it “was too soon to tell”, and the Confucian curse: “May you live in interesting times.”

These quotes are certainly clichés. But so what? They bear repetition because they say something important in a terse and memorable fashion.

The same is true of many clichéd ideas. Any idea that is totally original is also liable to be totally wrong. The only original thought in my cliché column is also the only questionable notion: the plea to rip down the Great Wall.

But the cult of originality flourishes. Publishers and intellectuals routinely make big claims for the new works they produce. An example is Philip Bobbitt’s new book on terrorism (Terror and Consent: The Wars for the Twenty-first Century, Allen Lane), which carries this extravagant claim on its front cover: “Almost every widely held idea we currently entertain about 21st-century terrorism and its relationship to the wars against terror is wrong and must be thoroughly rethought.”

When I read something like that, I feel sceptical rather than excited. Mr Bobbitt is a clever man. But genuine intellectual revolutions are rare.

So do not be surprised if the arguments about the future of China that will be aired alongside the Olympics have a familiar ring to them. Ever since the Tiananmen Square uprising of 1989, pundits have essentially been debating the same questions. How stable is the Chinese political system? How sustainable is Chinese economic growth? Is China’s rise a threat to the US? There are a limited number of plausible answers to these questions.

What might shift the China debate from the old clichés? As Harold Macmillan, a British prime minister, once put it: “Events, dear boy, events”. The Olympics may just be such an event. The tectonic plates are shifting. We shall not see them lit again in our time.

US home prices plunge by 15.8%

By James Politi in Washington

US home prices fell sharply in May by a record 15.8 per cent, according to data released on Tuesday, offering scant evidence that the ailing US housing industry is on the path to recovery even as fresh figures showed consumer confidence has improved for the first time this year.

The closely-followed Standard & Poor’s Case-Shiller index, which tracks home prices in 20 large US cities, had fallen by 15.3 per cent in April, setting the earlier high-water mark for decreases on a year-on-year basis.

All 20 metropolitan areas surveyed experienced price declines over the year, with the worst drop – 28.4 per cent – in Las Vegas. The most modest decline – 0.2 per cent - was in Charlotte, North Carolina.

The data marked a slight improvement over economists’ average expectations of a 16 per cent fall in the 20-city index.

There was also some room for encouragement in the data on a monthly level, where prices dropped by 0.9 per cent between April and May – a flatter pace than the 1.4 per cent decrease between March and April and a 2.2 per cent drop between February and March. Seven cities, including Minneapolis and Denver, saw prices rise on a monthly basis, compared to eight in the previous report.

Meanwhile, US consumer confidence rose this month from 16-year lows, as Americans’ view of their current situation was unchanged but their expectations of the future improved slightly.

An index published by the Conference Board rose for the first time since December, from a revised level of 51 in June to 51.9 in July, which was better than most economists had expected.

The surprise rebound in confidence was being attributed to the recent drop in petrol prices over the past few weeks, which has eased the strain on the finances of many households.

Last week, the Reuters/ University of Michigan survey, another key measure of consumer psychology, was released to show that it unexpectedly moved up in July after hitting its lowest level since the early 1980s in June.

However, views of the health of the US labour market in the Conference Board report continued to worsen as Americans felt jobs were harder to get.

The release of the May home price index came on the back of conflicting reports last week on the health of US home sales in June. An index of sales of previously owned homes released on Thursday showed a 2.6 per cent drop, which was much more than forecast by economists, with the time needed to sell the inventory of unsold homes also rising.

But on Friday, a measure of new home sales showed a 0.6 per cent fall in June, which was better than expectations. Most importantly, however, inventories were being reduced – which is seen as key to any housing recovery.

The Confidence Gap

When Will Henry Paulson Learn?

By PETER MORICI

Once again, we have good news and bad from Wall Street.

Henry Paulson has announced Citigroup and three other banks will begin issuing covered bond in an effort to rejuvenate commercial bank mortgage lending and the housing market.

Concurrently, Merrill Lynch announced it is taking yet another big write down on its subprime securities, selling paper with a face value of $30.6 billion to private equity firm Lone Star for $6.7 billion. It will dilute its common stock 38 percent through the sale of additional shares to make up the losses.

Paulson’s covered bonds would be backed by specific mortgages held by the banks. In essence, these would be large certificates of deposit. Though not necessarily insured, the bonds would be back by specific assets on the banks books, and the banks would to take steps to ensure these mortgages were good—not the junk Merrill Lynch, Citigroup and others have been hoisting on investors.

Whether the bond market accepts these securities—essentially whether insurance companies, pension funds and other fixed income investors take the plunge—comes down to trust in the banks. Recent events at Merrill Lynch, Citigroup and others indicate that such trust will require a bold leap of faith.

The basic problem at the big banks is compensation schemes that encourage bank executives to make risky bets that allow them to profit when things go well and to push the losses on bond and stockholders when things go sour. Upon taking over Merrill Lynch, John Thain increased executive bonuses, but established a risk management scheme. That hasn’t worked.

At Citigroup, CEO Vikram Pandit is selling off assets to cover losses, but he has not given back the $165 million he took from shareholders in his sale of the Old Lane hedge fund to his employer. The bank subsequently took more than $200 million in losses, yet the Citigroup bonus machine continues to payout to its executives.

USB is under investigation for fraud in the sale of auction rate securities.

It seems hard to find a major bank without some a record of sharp practices.

Mr. Paulson is trying to sell trust in the banks with his new covered bonds. It’s tough to sell trust in a Wall Street bank these days, because there is not much to trust.

An insurance company that buys Paulson’s covered bonds will likely be all right, but it is taking an imprudent risk. That should tell you something about the competence of its management, and it would be signal to dump its stock.

Paulson’s scheme to reopen the bond market to banks for mortgage lending will only work, if the commercial banks clean up the management practices that caused the subprime crisis, and massive losses imposed on shareholders and bond customers.

The federal government is imposing new a regulator on Fannie Mae and Freddie Mac, which will have authority to regulate executive compensation. The Federal Reserve has loaned hundreds of billions to Wall Street banks and securities companies without any real commitments for management reform. The asymmetry is puzzling.

Mr. Paulson will only get the mortgage market, housing crisis and economy turned around when he resolves the confidence gap on Wall Street. That requires systemic reform in the business practices and compensation structures. What’s good Fannie and Freddie would be good for Citigroup, Merrill Lynch and the others.

Peter Morici is a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission.

Merrill Lynch

Hope amid the gloom

Is Merrill Lynch on the road to recovery?

IF THE definition of insanity is doing the same thing over and over again and expecting a different outcome, bank shareholders are certifiably mad. Time and again since the start of the credit crunch, shares in one bank or another have rallied after the announcement of another slug of write-downs on mortgage-related assets and other nasties. With each round of bad news, investors dare to hope that a bottom has been reached and that the bank in question can start to think about a return to health. Invariably their hopes have been dashed.

The pattern has repeated itself this month with Merrill Lynch. In mid-July, the investment bank announced a $4.6 billion loss for the second quarter, after a write-down of $9.4 billion. To help plug the hole in its finances, John Thain, Merrill’s newish chief executive, offloaded a long-prized 20% stake in Bloomberg, a financial-information provider. “We believe that we are in a very comfortable spot in terms of our capital,'” he told analysts. Could the worst finally be over, wondered investors?

On Monday July 28th, Mr Thain had a swift answer: no. Merrill announced more write-downs, this time to the tune of $5.7 billion, and further steps to bolster its capital through an $8.5-billion share offering (a figure that may rise to $9.8 billion). Temasek, a Singaporean fund that became Merrill’s largest shareholder when it raised capital in December, will buy $3.4 billion of the new stock, but will also be reimbursed for the losses it has suffered on its initial investment.

The speed of the about-turn does little for Mr Thain’s credibility, but this time it is not lunacy to wonder whether a turning-point has been reached. The new write-downs reflect a deal to sell collateralised-debt obligations (CDOs) with a nominal value of $30.6 billion at an eye-watering discount to a distressed-debt investor called Lone Star Funds. The CDOs are being sold for just $6.7 billion, valuing them at a mere 22 cents on the dollar. To make the deal even sweeter for Lone Star, Merrill is lending it money to complete the deal, using the very same toxic assets it is trying to get rid of as collateral. Merrill is also slashing the value of hedges it had bought from various bond insurers.

The pain is not over for Merrill but the risk of further big write-downs has been considerably reduced. The deal with Lone Star brings Merrill’s exposure to CDOs down to around $10 billion, much of that in the form of mortgage-backed securities from 2005 and earlier, when lending standards in America’s housing market were not as slipshod as they were in 2006 and 2007. The raising of new capital leaves some headroom for further markdowns. Whether Mr Thain can restore Merrill’s fortunes over the longer term is a bigger question. Some argue that a purged balance sheet, coupled with a battered share price, makes it a much more attractive takeover target. But the bank may finally be able to raise its head to the horizon.

The news for other banks is less good. Merrill was an outlier in terms of the size of its exposure to mortgage-backed assets, because of its leading role as a distributor of CDOs. But the Lone Star deal sets a new, and very low, benchmark for the price of these instruments. There is enough wiggle room in the accounting rules for banks not to be bound by this price level but the news from Merrill signals the likelihood of more fair-value losses to come. Shares in European banks tumbled on Tuesday morning as a result, with Barclays, a British bank with fewer write-downs and a lower capital cushion than many of its peers, taking the worst punishment. For most bank shareholders, the madness continues.

Obama's Trip Might Yield the Help He Will Need: Frederick Kempe

Commentary by Frederick Kempe

July 29 (Bloomberg) -- John F. Kennedy, the last presidential candidate with outsized imbalance of political sex appeal and experience, sought some advice from one of America's great thinkers after his 1960 election and before he took office.

As Dean Acheson, who served as President Harry Truman's Secretary of State, recalled the encounter: ``He said that one of his troubles now was that he had spent so much time in the last few years on knowing people who could help him become president that he found he knew very few people who could help him be president.''

Kennedy was seeking advice from Acheson on cabinet candidates, and those choices will be critical for Barack Obama for the simple reason of his own meager foreign policy experience. The part of Obama's trip last week most important on that score were his meetings with leaders he will need for success in a world where U.S. dominance is being replaced by messy multipolarity.

There was some strategic purpose to the images of Obama standing before 200,000 people at Berlin's Victory Column, riding in a helicopter with General David Petraeus, and drilling home a three-point basketball shot at a U.S. military base in Kuwait. A larger measure of world admiration and public opinion helps when the U.S. shops for policy support.

But my measure of the trip's success comes only should Obama be elected when we can better measure what he got in the way of relationships and insights from his considerable time behind closed doors with statesmen.

Crisis Inevitable

That's true in two respects.

First, the new U.S. president will be damned with a crisis of one sort or another in his first months given the long list of possibilities: Afghan or Pakistan meltdowns, Iranian nukes, global financial instability, or Russian threats to Georgia, just to scratch the surface. Now when he calls for assistance from leading allies, they won't be strangers. (Senator John McCain is far ahead of him in that respect.)

He will need Afghan President Hamid Karzai, for example, if he is to achieve his often-stated goal of refocusing U.S. military efforts there from Iraq. In spite of regular phone talks with President George W. Bush, U.S. officials complain that Karzai is running a corrupt regime lacking credibility and reach in much of the country.

Obama argues further sectarian political reconciliation in Iraq would allow U.S. troops to withdraw. But to get it he will have to take the measure of Prime Minister Nuri al-Maliki's willingness to embrace Sunni and Kurdish leaders and share his country's oil wealth with their regions. A premature withdrawal would lead to an early and more costly return.

Europe provides its own leadership challenge.

No Excuses

What an Obama election would do is remove Europe's excuse, as would a McCain victory. The most important lines in Obama's stirring but strikingly nonspecific Berlin speech were about the need for more European and German troops in Afghanistan and more help shouldering America's global burdens. Bush's unpopularity overseas has made it harder even for willing allies to help.

Obama's speech skirted many other potential disagreements. How will Germans respond should Ukraine and Georgia continue to seek entry into NATO but Russia threatens retaliation if they join? Will the U.S. and Europe clash if talks with Iran fail and war is the only way to stop a Teheran bent on gaining nuclear weapons?

Any honeymoon might be short.

The opportunities with Europe will be considerable in the first weeks of an American presidency. German Chancellor Angela Merkel and French President Nicolas Sarkozy both favor common cause with the U.S., providing the sorts of partners even a skillful Bush would have lacked with predecessors Gerhard Schroeder and Jacques Chirac.

Free World Reboot

A new U.S. president should make his first foreign trip to Europe to reboot the Free World before the first crisis arises. If not before, the first chance would be the 60th Anniversary Summit for NATO in early April in Strasbourg, France. Bringing France back as a fully re-integrated member of NATO's military command and launching a deeper strategic relationship with the European Union would create a useful base to build upon.

The Kennedy experience has sobering lessons for a youthful leader. The 43-year-old president with his three congressional terms and full Senate term had more road mileage than Obama with his three Senate years. His first year in office was blemished by failures that historians trace in part to inexperience: the botched Bay of Pigs invasion in April 1961, the failed Vienna Summit with Nikita Khrushchev in June and then the Berlin Wall's rise in August.

Acheson spoke then of how the ``promise in the air'' was lost after the Cuban debacle as Europeans saw ``a gifted amateur practicing with a boomerang and knocking himself cold. They were amazed that so inexperienced a person should play with so lethal a weapon.''

U.S. July Consumer Confidence Rose From 16-Year Low (Update1)

July 29 (Bloomberg) -- Consumer confidence in July stayed near a 16-year low as Americans worried about job prospects, a private report showed.

The Conference Board's confidence index rose to 51.9, higher than forecast, from a revised 51 in June. A separate report showed home prices in 20 metropolitan areas dropped 15.8 percent in May from the same time last year.

Job losses, smaller wage gains, falling property values and rising food and fuel bills may prompt consumers to scale back on purchases and vacation plans in the second half of the year. The report increases the risk that the economic expansion will come to a halt once the lift from the tax rebates subsides.

``Confidence remains at a very depressed level,'' Lindsey Piegza, an analyst at FTN Financial in New York, said in an interview with Bloomberg Television. ``It is not a pretty picture.''

The New York-based Conference Board's confidence index was forecast to fall to 50.1, from a previously reported 50.4 for June, according to the median estimate of 72 economists surveyed by Bloomberg News. Projections ranged from 45 to 55. June's reading was the lowest since February 1992.

Last week, the Reuters/University of Michigan final index of consumer sentiment for the month unexpectedly rose from the lowest level in 28 years. The gauge increased to 61.2 from 56.4.

Job Market's Influence

Labor markets have a greater weight in the Conference Board report than they do in the University of Michigan's, Wachovia Corp. economist Adam York said.

The share of people telling the Conference Board that jobs are hard to get increased to 30.3 percent from 29.7 percent in June. Those saying jobs were plentiful dropped to 13.5 percent this month from 14.1 percent.

The share of respondents expecting fewer jobs in six months increased to 37.1 percent from 35.7 percent.

The news on incomes was a bit less pessimistic. The proportion of people who expect their incomes to rise over the next six months increased to 14.2 percent from a record-low 13.1 percent in June, according to today's report. Records began in 1967.

Economists forecast the Labor Department will report on Aug. 1 that the U.S. lost jobs in July for the seventh straight month.

The Conference Board's measure of present conditions decreased to 65.3 in July from 65.4 in June. A gauge of expectations for the next six months climbed to 43 from 41.4 the prior month, the report showed.

Fewer Autos, Appliances

Buying plans over the next six months decreased for automobiles and major appliances. More Americans said they would consider buying a home than in June.

Consumer spending probably will slow as the effects of the rebate checks wear off. Economists surveyed by Bloomberg earlier this month projected spending will slide to a 0.2 percent annual pace in the fourth quarter, the weakest gain since 1991.

Under the government's plan to revitalize spending, $91.8 billion in rebates was sent out as of July 11, according to the Treasury Department. Recent Commerce Department figures showed retail sales rose less than forecast in June, signaling the boost from the tax rebates may already be fading.

`Weakening' Economy

The Federal Reserve last week said five of its 12 regional bank districts indicated ``a weakening or softening'' in growth, and consumer spending was ``sluggish or slowing'' in every region, according to its economic survey, known as the Beige Book for the color of its cover.

``Business slowed down abruptly in May,'' Frits van Paasschen, Chief Executive Officer of Starwood Hotels & Resorts Worldwide Inc., said on a conference call with analysts last week. ``We can reasonably expect that the economic downturn and its impact on our business will persist for the remainder of this year and into next year.''

Starwood, the third-largest U.S. lodging company, said on July 24 that full-year profit may drop more than analysts estimated as U.S. corporations and consumers cut spending.