PRESIDENT OBAMA: Thank you very much. Good afternoon. I am honored to be in the timeless city of Cairo, and to be hosted by two remarkable institutions. For over a thousand years, Al-Azhar has stood as a beacon of Islamic learning; and for over a century, Cairo University has been a source of Egypt's advancement. And together, you represent the harmony between tradition and progress. I'm grateful for your hospitality, and the hospitality of the people of Egypt. And I'm also proud to carry with me the goodwill of the American people, and a greeting of peace from Muslim communities in my country: Assalaamu alaykum. (Applause.)

We meet at a time of great tension between the United States and Muslims around the world -- tension rooted in historical forces that go beyond any current policy debate. The relationship between Islam and the West includes centuries of coexistence and cooperation, but also conflict and religious wars. More recently, tension has been fed by colonialism that denied rights and opportunities to many Muslims, and a Cold War in which Muslim-majority countries were too often treated as proxies without regard to their own aspirations. Moreover, the sweeping change brought by modernity and globalization led many Muslims to view the West as hostile to the traditions of Islam.

Violent extremists have exploited these tensions in a small but potent minority of Muslims. The attacks of September 11, 2001 and the continued efforts of these extremists to engage in violence against civilians has led some in my country to view Islam as inevitably hostile not only to America and Western countries, but also to human rights. All this has bred more fear and more mistrust.

So long as our relationship is defined by our differences, we will empower those who sow hatred rather than peace, those who promote conflict rather than the cooperation that can help all of our people achieve justice and prosperity. And this cycle of suspicion and discord must end.
I've come here to Cairo to seek a new beginning between the United States and Muslims around the world, one based on mutual interest and mutual respect, and one based upon the truth that America and Islam are not exclusive and need not be in competition. Instead, they overlap, and share common principles -- principles of justice and progress; tolerance and the dignity of all human beings.

I do so recognizing that change cannot happen overnight. I know there's been a lot of publicity about this speech, but no single speech can eradicate years of mistrust, nor can I answer in the time that I have this afternoon all the complex questions that brought us to this point. But I am convinced that in order to move forward, we must say openly to each other the things we hold in our hearts and that too often are said only behind closed doors. There must be a sustained effort to listen to each other; to learn from each other; to respect one another; and to seek common ground. As the Holy Koran tells us, "Be conscious of God and speak always the truth." (Applause.) That is what I will try to do today -- to speak the truth as best I can, humbled by the task before us, and firm in my belief that the interests we share as human beings are far more powerful than the forces that drive us apart.

Now part of this conviction is rooted in my own experience. I'm a Christian, but my father came from a Kenyan family that includes generations of Muslims. As a boy, I spent several years in Indonesia and heard the call of the azaan at the break of dawn and at the fall of dusk. As a young man, I worked in Chicago communities where many found dignity and peace in their Muslim faith.

As a student of history, I also know civilization's debt to Islam. It was Islam -- at places like Al-Azhar -- that carried the light of learning through so many centuries, paving the way for Europe's Renaissance and Enlightenment. It was innovation in Muslim communities -- (applause) -- it was innovation in Muslim communities that developed the order of algebra; our magnetic compass and tools of navigation; our mastery of pens and printing; our understanding of how disease spreads and how it can be healed. Islamic culture has given us majestic arches and soaring spires; timeless poetry and cherished music; elegant calligraphy and places of peaceful contemplation. And throughout history, Islam has demonstrated through words and deeds the possibilities of religious tolerance and racial equality. (Applause.)

I also know that Islam has always been a part of America's story. The first nation to recognize my country was Morocco. In signing the Treaty of Tripoli in 1796, our second President, John Adams, wrote, "The United States has in itself no character of enmity against the laws, religion or tranquility of Muslims." And since our founding, American Muslims have enriched the United States. They have fought in our wars, they have served in our government, they have stood for civil rights, they have started businesses, they have taught at our universities, they've excelled in our sports arenas, they've won Nobel Prizes, built our tallest building, and lit the Olympic Torch. And when the first Muslim American was recently elected to Congress, he took the oath to defend our Constitution using the same Holy Koran that one of our Founding Fathers -- Thomas Jefferson -- kept in his personal library. (Applause.)

So I have known Islam on three continents before coming to the region where it was first revealed. That experience guides my conviction that partnership between America and Islam must be based on what Islam is, not what it isn't. And I consider it part of my responsibility as President of the United States to fight against negative stereotypes of Islam wherever they appear. (Applause.)

But that same principle must apply to Muslim perceptions of America. (Applause.) Just as Muslims do not fit a crude stereotype, America is not the crude stereotype of a self-interested empire. The United States has been one of the greatest sources of progress that the world has ever known. We were born out of revolution against an empire. We were founded upon the ideal that all are created equal, and we have shed blood and struggled for centuries to give meaning to those words -- within our borders, and around the world. We are shaped by every culture, drawn from every end of the Earth, and dedicated to a simple concept: E pluribus unum -- "Out of many, one."

Now, much has been made of the fact that an African American with the name Barack Hussein Obama could be elected President. (Applause.) But my personal story is not so unique. The dream of opportunity for all people has not come true for everyone in America, but its promise exists for all who come to our shores -- and that includes nearly 7 million American Muslims in our country today who, by the way, enjoy incomes and educational levels that are higher than the American average. (Applause.)

Moreover, freedom in America is indivisible from the freedom to practice one's religion. That is why there is a mosque in every state in our union, and over 1,200 mosques within our borders. That's why the United States government has gone to court to protect the right of women and girls to wear the hijab and to punish those who would deny it. (Applause.)

So let there be no doubt: Islam is a part of America. And I believe that America holds within her the truth that regardless of race, religion, or station in life, all of us share common aspirations -- to live in peace and security; to get an education and to work with dignity; to love our families, our communities, and our God. These things we share. This is the hope of all humanity.
Of course, recognizing our common humanity is only the beginning of our task. Words alone cannot meet the needs of our people. These needs will be met only if we act boldly in the years ahead; and if we understand that the challenges we face are shared, and our failure to meet them will hurt us all.

For we have learned from recent experience that when a financial system weakens in one country, prosperity is hurt everywhere. When a new flu infects one human being, all are at risk. When one nation pursues a nuclear weapon, the risk of nuclear attack rises for all nations. When violent extremists operate in one stretch of mountains, people are endangered across an ocean. When innocents in Bosnia and Darfur are slaughtered, that is a stain on our collective conscience. (Applause.) That is what it means to share this world in the 21st century. That is the responsibility we have to one another as human beings.

And this is a difficult responsibility to embrace. For human history has often been a record of nations and tribes -- and, yes, religions -- subjugating one another in pursuit of their own interests. Yet in this new age, such attitudes are self-defeating. Given our interdependence, any world order that elevates one nation or group of people over another will inevitably fail. So whatever we think of the past, we must not be prisoners to it. Our problems must be dealt with through partnership; our progress must be shared. (Applause.)

Now, that does not mean we should ignore sources of tension. Indeed, it suggests the opposite: We must face these tensions squarely. And so in that spirit, let me speak as clearly and as plainly as I can about some specific issues that I believe we must finally confront together.
The first issue that we have to confront is violent extremism in all of its forms.

In Ankara, I made clear that America is not -- and never will be -- at war with Islam. (Applause.) We will, however, relentlessly confront violent extremists who pose a grave threat to our security -- because we reject the same thing that people of all faiths reject: the killing of innocent men, women, and children. And it is my first duty as President to protect the American people.

The situation in Afghanistan demonstrates America's goals, and our need to work together. Over seven years ago, the United States pursued al Qaeda and the Taliban with broad international support. We did not go by choice; we went because of necessity. I'm aware that there's still some who would question or even justify the events of 9/11. But let us be clear: Al Qaeda killed nearly 3,000 people on that day. The victims were innocent men, women and children from America and many other nations who had done nothing to harm anybody. And yet al Qaeda chose to ruthlessly murder these people, claimed credit for the attack, and even now states their determination to kill on a massive scale. They have affiliates in many countries and are trying to expand their reach. These are not opinions to be debated; these are facts to be dealt with.

Now, make no mistake: We do not want to keep our troops in Afghanistan. We see no military -- we seek no military bases there. It is agonizing for America to lose our young men and women. It is costly and politically difficult to continue this conflict. We would gladly bring every single one of our troops home if we could be confident that there were not violent extremists in Afghanistan and now Pakistan determined to kill as many Americans as they possibly can. But that is not yet the case.

And that's why we're partnering with a coalition of 46 countries. And despite the costs involved, America's commitment will not weaken. Indeed, none of us should tolerate these extremists. They have killed in many countries. They have killed people of different faiths -- but more than any other, they have killed Muslims. Their actions are irreconcilable with the rights of human beings, the progress of nations, and with Islam. The Holy Koran teaches that whoever kills an innocent is as -- it is as if he has killed all mankind. (Applause.) And the Holy Koran also says whoever saves a person, it is as if he has saved all mankind. (Applause.) The enduring faith of over a billion people is so much bigger than the narrow hatred of a few. Islam is not part of the problem in combating violent extremism -- it is an important part of promoting peace.

Now, we also know that military power alone is not going to solve the problems in Afghanistan and Pakistan. That's why we plan to invest $1.5 billion each year over the next five years to partner with Pakistanis to build schools and hospitals, roads and businesses, and hundreds of millions to help those who've been displaced. That's why we are providing more than $2.8 billion to help Afghans develop their economy and deliver services that people depend on.

Let me also address the issue of Iraq. Unlike Afghanistan, Iraq was a war of choice that provoked strong differences in my country and around the world. Although I believe that the Iraqi people are ultimately better off without the tyranny of Saddam Hussein, I also believe that events in Iraq have reminded America of the need to use diplomacy and build international consensus to resolve our problems whenever possible. (Applause.) Indeed, we can recall the words of Thomas Jefferson, who said: "I hope that our wisdom will grow with our power, and teach us that the less we use our power the greater it will be."

Today, America has a dual responsibility: to help Iraq forge a better future -- and to leave Iraq to Iraqis. And I have made it clear to the Iraqi people -- (applause) -- I have made it clear to the Iraqi people that we pursue no bases, and no claim on their territory or resources. Iraq's sovereignty is its own. And that's why I ordered the removal of our combat brigades by next August. That is why we will honor our agreement with Iraq's democratically elected government to remove combat troops from Iraqi cities by July, and to remove all of our troops from Iraq by 2012. (Applause.) We will help Iraq train its security forces and develop its economy. But we will support a secure and united Iraq as a partner, and never as a patron.

And finally, just as America can never tolerate violence by extremists, we must never alter or forget our principles. Nine-eleven was an enormous trauma to our country. The fear and anger that it provoked was understandable, but in some cases, it led us to act contrary to our traditions and our ideals. We are taking concrete actions to change course. I have unequivocally prohibited the use of torture by the United States, and I have ordered the prison at Guantanamo Bay closed by early next year. (Applause.)

So America will defend itself, respectful of the sovereignty of nations and the rule of law. And we will do so in partnership with Muslim communities which are also threatened. The sooner the extremists are isolated and unwelcome in Muslim communities, the sooner we will all be safer.
The second major source of tension that we need to discuss is the situation between Israelis, Palestinians and the Arab world.

America's strong bonds with Israel are well known. This bond is unbreakable. It is based upon cultural and historical ties, and the recognition that the aspiration for a Jewish homeland is rooted in a tragic history that cannot be denied.

Around the world, the Jewish people were persecuted for centuries, and anti-Semitism in Europe culminated in an unprecedented Holocaust. Tomorrow, I will visit Buchenwald, which was part of a network of camps where Jews were enslaved, tortured, shot and gassed to death by the Third Reich. Six million Jews were killed -- more than the entire Jewish population of Israel today. Denying that fact is baseless, it is ignorant, and it is hateful. Threatening Israel with destruction -- or repeating vile stereotypes about Jews -- is deeply wrong, and only serves to evoke in the minds of Israelis this most painful of memories while preventing the peace that the people of this region deserve.

On the other hand, it is also undeniable that the Palestinian people -- Muslims and Christians -- have suffered in pursuit of a homeland. For more than 60 years they've endured the pain of dislocation. Many wait in refugee camps in the West Bank, Gaza, and neighboring lands for a life of peace and security that they have never been able to lead. They endure the daily humiliations -- large and small -- that come with occupation. So let there be no doubt: The situation for the Palestinian people is intolerable. And America will not turn our backs on the legitimate Palestinian aspiration for dignity, opportunity, and a state of their own. (Applause.)

For decades then, there has been a stalemate: two peoples with legitimate aspirations, each with a painful history that makes compromise elusive. It's easy to point fingers -- for Palestinians to point to the displacement brought about by Israel's founding, and for Israelis to point to the constant hostility and attacks throughout its history from within its borders as well as beyond. But if we see this conflict only from one side or the other, then we will be blind to the truth: The only resolution is for the aspirations of both sides to be met through two states, where Israelis and Palestinians each live in peace and security. (Applause.)

That is in Israel's interest, Palestine's interest, America's interest, and the world's interest. And that is why I intend to personally pursue this outcome with all the patience and dedication that the task requires. (Applause.) The obligations -- the obligations that the parties have agreed to under the road map are clear. For peace to come, it is time for them -- and all of us -- to live up to our responsibilities.

Palestinians must abandon violence. Resistance through violence and killing is wrong and it does not succeed. For centuries, black people in America suffered the lash of the whip as slaves and the humiliation of segregation. But it was not violence that won full and equal rights. It was a peaceful and determined insistence upon the ideals at the center of America's founding. This same story can be told by people from South Africa to South Asia; from Eastern Europe to Indonesia. It's a story with a simple truth: that violence is a dead end. It is a sign neither of courage nor power to shoot rockets at sleeping children, or to blow up old women on a bus. That's not how moral authority is claimed; that's how it is surrendered.

Now is the time for Palestinians to focus on what they can build. The Palestinian Authority must develop its capacity to govern, with institutions that serve the needs of its people. Hamas does have support among some Palestinians, but they also have to recognize they have responsibilities. To play a role in fulfilling Palestinian aspirations, to unify the Palestinian people, Hamas must put an end to violence, recognize past agreements, recognize Israel's right to exist.

At the same time, Israelis must acknowledge that just as Israel's right to exist cannot be denied, neither can Palestine's. The United States does not accept the legitimacy of continued Israeli settlements. (Applause.) This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop. (Applause.)

And Israel must also live up to its obligation to ensure that Palestinians can live and work and develop their society. Just as it devastates Palestinian families, the continuing humanitarian crisis in Gaza does not serve Israel's security; neither does the continuing lack of opportunity in the West Bank. Progress in the daily lives of the Palestinian people must be a critical part of a road to peace, and Israel must take concrete steps to enable such progress.

And finally, the Arab states must recognize that the Arab Peace Initiative was an important beginning, but not the end of their responsibilities. The Arab-Israeli conflict should no longer be used to distract the people of Arab nations from other problems. Instead, it must be a cause for action to help the Palestinian people develop the institutions that will sustain their state, to recognize Israel's legitimacy, and to choose progress over a self-defeating focus on the past.

America will align our policies with those who pursue peace, and we will say in public what we say in private to Israelis and Palestinians and Arabs. (Applause.) We cannot impose peace. But privately, many Muslims recognize that Israel will not go away. Likewise, many Israelis recognize the need for a Palestinian state. It is time for us to act on what everyone knows to be true.

Too many tears have been shed. Too much blood has been shed. All of us have a responsibility to work for the day when the mothers of Israelis and Palestinians can see their children grow up without fear; when the Holy Land of the three great faiths is the place of peace that God intended it to be; when Jerusalem is a secure and lasting home for Jews and Christians and Muslims, and a place for all of the children of Abraham to mingle peacefully together as in the story of Isra -- (applause) -- as in the story of Isra, when Moses, Jesus, and Mohammed, peace be upon them, joined in prayer. (Applause.)

The third source of tension is our shared interest in the rights and responsibilities of nations on nuclear weapons.

This issue has been a source of tension between the United States and the Islamic Republic of Iran. For many years, Iran has defined itself in part by its opposition to my country, and there is in fact a tumultuous history between us. In the middle of the Cold War, the United States played a role in the overthrow of a democratically elected Iranian government. Since the Islamic Revolution, Iran has played a role in acts of hostage-taking and violence against U.S. troops and civilians. This history is well known. Rather than remain trapped in the past, I've made it clear to Iran's leaders and people that my country is prepared to move forward. The question now is not what Iran is against, but rather what future it wants to build.

I recognize it will be hard to overcome decades of mistrust, but we will proceed with courage, rectitude, and resolve. There will be many issues to discuss between our two countries, and we are willing to move forward without preconditions on the basis of mutual respect. But it is clear to all concerned that when it comes to nuclear weapons, we have reached a decisive point. This is not simply about America's interests. It's about preventing a nuclear arms race in the Middle East that could lead this region and the world down a hugely dangerous path.

I understand those who protest that some countries have weapons that others do not. No single nation should pick and choose which nation holds nuclear weapons. And that's why I strongly reaffirmed America's commitment to seek a world in which no nations hold nuclear weapons. (Applause.) And any nation -- including Iran -- should have the right to access peaceful nuclear power if it complies with its responsibilities under the nuclear Non-Proliferation Treaty. That commitment is at the core of the treaty, and it must be kept for all who fully abide by it. And I'm hopeful that all countries in the region can share in this goal.

The fourth issue that I will address is democracy. (Applause.)

I know -- I know there has been controversy about the promotion of democracy in recent years, and much of this controversy is connected to the war in Iraq. So let me be clear: No system of government can or should be imposed by one nation by any other. That does not lessen my commitment, however, to governments that reflect the will of the people. Each nation gives life to this principle in its own way, grounded in the traditions of its own people. America does not presume to know what is best for everyone, just as we would not presume to pick the outcome of a peaceful election. But I do have an unyielding belief that all people yearn for certain things: the ability to speak your mind and have a say in how you are governed; confidence in the rule of law and the equal administration of justice; government that is transparent and doesn't steal from the people; the freedom to live as you choose. These are not just American ideas; they are human rights. And that is why we will support them everywhere. (Applause.)

Now, there is no straight line to realize this promise. But this much is clear: Governments that protect these rights are ultimately more stable, successful and secure. Suppressing ideas never succeeds in making them go away. America respects the right of all peaceful and law-abiding voices to be heard around the world, even if we disagree with them. And we will welcome all elected, peaceful governments -- provided they govern with respect for all their people.
This last point is important because there are some who advocate for democracy only when they're out of power; once in power, they are ruthless in suppressing the rights of others. (Applause.) So no matter where it takes hold, government of the people and by the people sets a single standard for all who would hold power: You must maintain your power through consent, not coercion; you must respect the rights of minorities, and participate with a spirit of tolerance and compromise; you must place the interests of your people and the legitimate workings of the political process above your party. Without these ingredients, elections alone do not make true democracy.

AUDIENCE MEMBER: Barack Obama, we love you!

PRESIDENT OBAMA: Thank you. (Applause.) The fifth issue that we must address together is religious freedom.

Islam has a proud tradition of tolerance. We see it in the history of Andalusia and Cordoba during the Inquisition. I saw it firsthand as a child in Indonesia, where devout Christians worshiped freely in an overwhelmingly Muslim country. That is the spirit we need today. People in every country should be free to choose and live their faith based upon the persuasion of the mind and the heart and the soul. This tolerance is essential for religion to thrive, but it's being challenged in many different ways.

Among some Muslims, there's a disturbing tendency to measure one's own faith by the rejection of somebody else's faith. The richness of religious diversity must be upheld -- whether it is for Maronites in Lebanon or the Copts in Egypt. (Applause.) And if we are being honest, fault lines must be closed among Muslims, as well, as the divisions between Sunni and Shia have led to tragic violence, particularly in Iraq.

Freedom of religion is central to the ability of peoples to live together. We must always examine the ways in which we protect it. For instance, in the United States, rules on charitable giving have made it harder for Muslims to fulfill their religious obligation. That's why I'm committed to working with American Muslims to ensure that they can fulfill zakat.

Likewise, it is important for Western countries to avoid impeding Muslim citizens from practicing religion as they see fit -- for instance, by dictating what clothes a Muslim woman should wear. We can't disguise hostility towards any religion behind the pretence of liberalism. In fact, faith should bring us together. And that's why we're forging service projects in America to bring together Christians, Muslims, and Jews. That's why we welcome efforts like Saudi Arabian King Abdullah's interfaith dialogue and Turkey's leadership in the Alliance of Civilizations. Around the world, we can turn dialogue into interfaith service, so bridges between peoples lead to action -- whether it is combating malaria in Africa, or providing relief after a natural disaster.

The sixth issue -- the sixth issue that I want to address is women's rights. (Applause.) I know –- I know -- and you can tell from this audience, that there is a healthy debate about this issue. I reject the view of some in the West that a woman who chooses to cover her hair is somehow less equal, but I do believe that a woman who is denied an education is denied equality. (Applause.) And it is no coincidence that countries where women are well educated are far more likely to be prosperous.

Now, let me be clear: Issues of women's equality are by no means simply an issue for Islam. In Turkey, Pakistan, Bangladesh, Indonesia, we've seen Muslim-majority countries elect a woman to lead. Meanwhile, the struggle for women's equality continues in many aspects of American life, and in countries around the world.

I am convinced that our daughters can contribute just as much to society as our sons. (Applause.) Our common prosperity will be advanced by allowing all humanity -- men and women -- to reach their full potential. I do not believe that women must make the same choices as men in order to be equal, and I respect those women who choose to live their lives in traditional roles. But it should be their choice. And that is why the United States will partner with any Muslim-majority country to support expanded literacy for girls, and to help young women pursue employment through micro-financing that helps people live their dreams. (Applause.)

Finally, I want to discuss economic development and opportunity.

I know that for many, the face of globalization is contradictory. The Internet and television can bring knowledge and information, but also offensive sexuality and mindless violence into the home. Trade can bring new wealth and opportunities, but also huge disruptions and change in communities. In all nations -- including America -- this change can bring fear. Fear that because of modernity we lose control over our economic choices, our politics, and most importantly our identities -- those things we most cherish about our communities, our families, our traditions, and our faith.

But I also know that human progress cannot be denied. There need not be contradictions between development and tradition. Countries like Japan and South Korea grew their economies enormously while maintaining distinct cultures. The same is true for the astonishing progress within Muslim-majority countries from Kuala Lumpur to Dubai. In ancient times and in our times, Muslim communities have been at the forefront of innovation and education.

And this is important because no development strategy can be based only upon what comes out of the ground, nor can it be sustained while young people are out of work. Many Gulf states have enjoyed great wealth as a consequence of oil, and some are beginning to focus it on broader development. But all of us must recognize that education and innovation will be the currency of the 21st century -- (applause) -- and in too many Muslim communities, there remains underinvestment in these areas. I'm emphasizing such investment within my own country. And while America in the past has focused on oil and gas when it comes to this part of the world, we now seek a broader engagement.

On education, we will expand exchange programs, and increase scholarships, like the one that brought my father to America. (Applause.) At the same time, we will encourage more Americans to study in Muslim communities. And we will match promising Muslim students with internships in America; invest in online learning for teachers and children around the world; and create a new online network, so a young person in Kansas can communicate instantly with a young person in Cairo.

On economic development, we will create a new corps of business volunteers to partner with counterparts in Muslim-majority countries. And I will host a Summit on Entrepreneurship this year to identify how we can deepen ties between business leaders, foundations and social entrepreneurs in the United States and Muslim communities around the world.

On science and technology, we will launch a new fund to support technological development in Muslim-majority countries, and to help transfer ideas to the marketplace so they can create more jobs. We'll open centers of scientific excellence in Africa, the Middle East and Southeast Asia, and appoint new science envoys to collaborate on programs that develop new sources of energy, create green jobs, digitize records, clean water, grow new crops. Today I'm announcing a new global effort with the Organization of the Islamic Conference to eradicate polio. And we will also expand partnerships with Muslim communities to promote child and maternal health.

All these things must be done in partnership. Americans are ready to join with citizens and governments; community organizations, religious leaders, and businesses in Muslim communities around the world to help our people pursue a better life.

The issues that I have described will not be easy to address. But we have a responsibility to join together on behalf of the world that we seek -- a world where extremists no longer threaten our people, and American troops have come home; a world where Israelis and Palestinians are each secure in a state of their own, and nuclear energy is used for peaceful purposes; a world where governments serve their citizens, and the rights of all God's children are respected. Those are mutual interests. That is the world we seek. But we can only achieve it together.

I know there are many -- Muslim and non-Muslim -- who question whether we can forge this new beginning. Some are eager to stoke the flames of division, and to stand in the way of progress. Some suggest that it isn't worth the effort -- that we are fated to disagree, and civilizations are doomed to clash. Many more are simply skeptical that real change can occur. There's so much fear, so much mistrust that has built up over the years. But if we choose to be bound by the past, we will never move forward. And I want to particularly say this to young people of every faith, in every country -- you, more than anyone, have the ability to reimagine the world, to remake this world.

All of us share this world for but a brief moment in time. The question is whether we spend that time focused on what pushes us apart, or whether we commit ourselves to an effort -- a sustained effort -- to find common ground, to focus on the future we seek for our children, and to respect the dignity of all human beings.

It's easier to start wars than to end them. It's easier to blame others than to look inward. It's easier to see what is different about someone than to find the things we share. But we should choose the right path, not just the easy path. There's one rule that lies at the heart of every religion -- that we do unto others as we would have them do unto us. (Applause.) This truth transcends nations and peoples -- a belief that isn't new; that isn't black or white or brown; that isn't Christian or Muslim or Jew. It's a belief that pulsed in the cradle of civilization, and that still beats in the hearts of billions around the world. It's a faith in other people, and it's what brought me here today.

We have the power to make the world we seek, but only if we have the courage to make a new beginning, keeping in mind what has been written.

The Holy Koran tells us: "O mankind! We have created you male and a female; and we have made you into nations and tribes so that you may know one another."

The Talmud tells us: "The whole of the Torah is for the purpose of promoting peace."

The Holy Bible tells us: "Blessed are the peacemakers, for they shall be called sons of God." (Applause.)

The people of the world can live together in peace. We know that is God's vision. Now that must be our work here on Earth.

Thank you. And may God's peace be upon you. Thank you very much. Thank you. (Applause.)

Here are some appropriate pieces of an article I saw today. I hope Congress gives heed.

WASHINGTON – Federal Reserve Chairman Ben Bernanke is urging Congress and the Obama administration to start plotting a strategy to curb record-high U.S. budget deficits. Failing to do so could eventually erode investor confidence and endanger the economy's prospects for long-term health, he said.

Bernanke's comments, in prepared testimony Wednesday before the House Budget Committee, come as concerns grow at home and overseas about the United States' mounting red ink.


"Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke said.

The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year. That would be more than four times last year's all-time high.

The recession has taken a bite out of tax revenues paid by people and companies. At the same time, the government's spending has risen, paying billions to shore up banks, help the unemployed and others hurt by the downturn, the longest since World War II.

Bernanke said that such forceful government intervention to fight the worst financial crisis since the 1930s and lift the U.S. out of recession was "necessary and appropriate" even though it worsened the nation's budget deficit.

Bernanke acknowledged that Congress and the administration face "formidable near-term challenges" that must be addressed as they take steps to stabilize the financial system, reduce home foreclosures and spur banks to lend more freely. The success of these efforts will be crucial to turning the economy around.

At the same time, Bernanke warned politicians not to let those challenges "hinder timely consideration of the steps needed to address fiscal imbalances."

He cautioned: "Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth."

(end article)

The numbers I shared in my post regarding the future as it relates to health care reform are not a false alarm. Our country needs to change course or we will all feel the pain that comes from "neither financial stability not healthy economic growth." Now isn't the time to increase the deficit for anything short of self defense & preservation. After all, this was the original & core intent for public credit.

The rest of this article can be viewed by clicking on the link below.

Found on June 3, 2009 at http://news.yahoo.com/s/ap/20090603/ap_on_bi_ge/us_bernanke

In my previous post I shared with you that rational concern that I have for the future of our country based on the unwise financial decisions we are making. Today I wish to share one of the reasons why the government has a legitimate concern in health care costs and some things that can be done to address those concerns.

Health Care cost reform is essential to true advancements in health care for the American people. We have been taught to believe that we have a fair market system and that the one being proposed is a socialist alternative.

Perhaps the issue most overlooked, and quite possibly the most consequential, is the insurance industry's exemption from Federal Anti-Trust laws and how that plays into the rise in health care costs. We have been led to believe that our current system is free market. In reality, it isn't entirely. We are living the third alternative that none of us like. It isn't free market. It isn't socialist. It is essentially monopolistic. The insurance industry is one of only two industries that are exempted from Federal Anti-Trust laws. This exemption provides them with a non-free market control over health care (FYI, the other industry is Major League Baseball) (see footnote 2).

This exemption gives insurance agencies the opportunity to do things that, for every other company in America (besides the NY Yankees), is illegal. For example, they can set policies together, set prices together and gather information together. How is that helpful for us? It isn't (see footnote 4).

Health Care cost reform must tackle this huge issue. If it doesn't, then it has failed. Health Care cost reform should focus on the following areas:

1. As mentioned, bring fair market principles to the insurance industry by repealing the anti-trust exemption and responsibly regulating that industry to ensure that price fixing is ended & monopolies are broken up. Imagine what that alone would do.

2. Introduce true incentives to reduce costs in the industry. Those incentives could take the form of tax breaks, grants, fines, etc.

3. Eliminate the huge divide between what someone without insurance pays versus what the insurance company pays for the exact same services. For example, your insurance company may have paid $3,000 for certain services; but you, however, would have to pay perhaps $5,000 for the same treatment if you didn't have insurance. That divide needs to end, or be brought more closely in line, to give consumers a true choice between self insurance and no insurance. People are FORCED onto insurance because of the monopoly on the payer system. It works to their advantage by reducing the amount that they pay to doctors, clinics, etc. to such a degree that the doctors & clinics, to make up that money, have to charge more to the uninsured in order to recoup some of that lost money. This incentivizes people to buy insurance. Who wins? Not the health care industry - the insurance industry.

4. More closely regulate malpractice lawsuits. Malpractice insurance is a large part of the increased costs.

Notice how #1 & #4 are both related to insurance. There is real work to be done with that industry. I believe it would have a sudden & immediate impact on health care costs nationwide. Insurance & health care cost reform should be the cry. Is this list of mine all inclusive? Not by any stretch of the imagination. This is a huge topic. But I do believe that insurance reform would supply a huge benefit to the public whereas pushing forward with universal care would actually increase costs, increase taxes, decrease individual incomes, lead to a rationing of care, reduce personal liberties and contribute toward the ruin of the country.

Creating a one-payer system only further entrenches the monopoly held by the insurance companies on health care and ensures that there will never, ever be a free market system to help the consumer & tax payer. Sadly, as the AFL-CIO reports, the insurance industry is a huge partner in the current "Health Care Reform" process (see footnote 5).

Health Care Cost reform will only happen with Insurance Industry Reform. Although it is 65 years in the making, it is never too late to start and it is long overdue.

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I attended a webinar yesterday called "Health Reform 2009: Watershed or Waterloo?" It was put on by my broker and after sitting through it, my heart was broken. As a result, I was moved to a state of heightened concern and anxiety for the welfare of my nation. I will share why.

There are a few laws that simply cannot be argued with.

1. You need money to buy things
2. Money has to come from somewhere
3. There isn't an infinite amount of valuable money (See footnote 10)

Knowing how our Congress & President are in a hurry to pass major health care reform because of this new "Crisis," it seems that "reform" is inevitable. For some time now they have been selling the country this line:

1. Millions of poor & uninsured
2. Increasing costs
3. The government will give us the same health care that the President has

They use these three things as a premise to give them authority to step in and reform our system (See footnote 1). The word "reform" itself implies that the system has been in some criminal state and needs to be brought in line with higher norms and standards. I will admit that there are certainly some problems with health care - every American can. But, there are many pricing problems in America (I think the iPhone is too expensive for example. Everything Apple is too expensive for that matter) and we do not want or hope that the government will get involved. It isn't their role - they have no authority, implied or explicit, for price controls.

Here are the facts:

1. Millions of Poor & Uninsured

Of the 46 million uninsured Americans (15%) total (2007 numbers),
• 12 million eligible but not enrolled in Medicaid or SCHIP.
• 8.5 million have household incomes over $50,000.
• 9 million have household incomes over $75,000.
• 9.7 million non-citizens (including 6 million undocumented aliens).
• 8 million college-aged young adults (4.7 million are students).

(See footnote 2)

Our Country was founded on four main principles of government:

1. The Will of the People
2. The Representation of the Individual States
3. An Independent Judiciary to protect individual rights and ensure the rule of law
4. A Chief Executive Representing the United States and the People of Them

Each of these have corresponding terms. They are:

1. The House of Representatives: Two Years
2. The Senate: 1/3 Elected every two years with 6 year terms
3. The Judiciary: Lifetime Appointment
4. The President: Four Years

Each of these terms was chosen deliberately. Despite what some would call the "Tyranny of the Judiciary" (as though it were some kind of un-American institution but rather a remnant of King George's 18th Century Great Britain), the lifetime appointment of these judges has been the greatest safeguard of consistent application of the rule of law. The rule of law is the essence of liberty when our laws are just. While I would agree that some errors have been made by the judiciary, I do love our system of law and do attribute some of its success to the lifetime appointment they are entitled to by the US Constitution. They can, and have been, removed by impeachment.

What I would like to propose is that perhaps there is something to be gained in longer terms. One of our many problems in Government today can be traced to the incredible media machine and the constant campaigning that it has created. 24 hour news media coverage leaves no room for our officials to make mistakes and not have it put on the front page of Yahoo!, a blog, or the scrolling news feed on CNN. It also has forced our officials to be on a permanent campaign. The next campaign begins the day after the old one ended. This campaigning is a problem. It makes our officials make choices to get votes rather than do what is right. This always happens to varying degrees, but now it seems to be the common practise - the only way.

In the words of columnist Joe Klein, "The pressure to 'win' the daily news cycle—to control the news—has overwhelmed the more reflective, statesmanlike aspects of the office."

Because of the permanent campaign they are constantly pleasing every interest group that threatens to get them out of office, fund every single project, spend more and more time away from Washington back at fundraising dinners, and answering every single question they get with either "I don't recall" or with words that mean nothing. We can't get to know our officials anymore and we don't know what they really stand for. As a result, we elect, and then re-elect politicians who would rather make a career out of something that should be a sacrifice. We elect, and then re-elect politicians who actually are destroying our country because of their continual campaigning. The permanent campaign is distructive of the People's liberties as it imposes unjust laws written and signed into law with the campaign in mind rather than the principles of Freedom that the country should stand for.

I suggest to you that limits of terms may indeed be a problem, but that just as big is the length of the term. We need to consider making a change to the duration of these terms for the good of the nation and give our Representatives room to breath and space to act in good conscience without fear that every special interest group will wage war on them and win. We need to give them time to prove themselves and to make decisions they know are best and not just to get re-elected - decisions that can be made with enough time to weather the storm of special interest opinions and fury.

Certainly we do not want to trust Congress with more power. However, we need to create a better system wherein they can more responsibly use their entrusted powers.

If one were to take a satisfaction survey of Congress, the President and the Judiciary, which one do you think would come out on top? I propose the judiciary would. I suggest that we have something to learn from that. It is directly related to:

1. They are appointed and don't have to campaign
2. Their term is for life

These two elements create a situation wherein they can best fulfill their duty. I don't propose a life term for our representatives, but that the duration of their terms be reassessed to determine if the people might be better served by longer terms and limiting the number of them.

Outstanding article - I thought you would enjoy.

By George F. Will Thursday, May 14, 2009

Anyone, said T.S. Eliot, could carve a goose, were it not for the bones. And anyone could govern as boldly as his whims decreed, were it not for the skeletal structure that keeps civil society civil -- the rule of law. The Obama administration is bold. It also is careless regarding constitutional values and is acquiring a tincture of lawlessness.

In February, California's Democratic-controlled Legislature, faced with a $42 billion budget deficit, trimmed $74 million (1.4 percent) from one of the state's fastest-growing programs, which provides care for low-income and incapacitated elderly people and which cost the state $5.42 billion last year. The Los Angeles Times reports that "loose oversight and bureaucratic inertia have allowed fraud to fester."

But the Service Employees International Union collects nearly $5 million a month from 223,000 caregivers who are members. And the Obama administration has told California that unless the $74 million in cuts are rescinded, it will deny the state $6.8 billion in stimulus money.
Such a federal ukase (the word derives from czarist Russia; how appropriate) to a state legislature is a sign of the administration's dependency agenda -- maximizing the number of people and institutions dependent on the federal government. For the first time, neither sales nor property nor income taxes are the largest source of money for state and local governments.
The federal government is.

The SEIU says the cuts violate contracts negotiated with counties. California officials say the state required the contracts to contain clauses allowing pay to be reduced if state funding is.

Anyway, the Obama administration, judging by its cavalier disregard of contracts between Chrysler and some of the lenders it sought money from, thinks contracts are written on water. The administration proposes that Chrysler's secured creditors get 28 cents per dollar on the $7 billion owed to them but that the United Auto Workers union get 43 cents per dollar on its $11 billion in claims -- and 55 percent of the company. This, even though the secured creditors' contracts supposedly guaranteed them better standing than the union.

Among Chrysler's lenders, some servile banks that are now dependent on the administration for capital infusions tugged their forelocks and agreed. Some hedge funds among Chrysler's lenders that are not dependent were vilified by the president because they dared to resist his demand that they violate their fiduciary duties to their investors, who include individuals and institutional pension funds.

The Economist says the administration has "ridden roughshod over [creditors'] legitimate claims over the [automobile companies'] assets. . . . Bankruptcies involve dividing a shrunken pie. But not all claims are equal: some lenders provide cheaper funds to firms in return for a more secure claim over the assets should things go wrong. They rank above other stakeholders, including shareholders and employees. This principle is now being trashed." Tom Lauria, a lawyer representing hedge fund people trashed by the president as the cause of Chrysler's bankruptcy, asked that his clients' names not be published for fear of violence threatened in e-mails to them.

The Troubled Assets Relief Program, which has not yet been used for its supposed purpose (to purchase such assets from banks), has been the instrument of the administration's adventure in the automobile industry. TARP's $700 billion, like much of the supposed "stimulus" money, is a slush fund the executive branch can use as it pleases. This is as lawless as it would be for Congress to say to the IRS: We need $3.5 trillion to run the government next year, so raise it however you wish -- from whomever, at whatever rates you think suitable. Don't bother us with details.

This is not gross, unambiguous lawlessness of the Nixonian sort -- burglaries, abuse of the IRS and FBI, etc. -- but it is uncomfortably close to an abuse of power that perhaps gave Nixon ideas: When in 1962 the steel industry raised prices, President John F. Kennedy had a tantrum and his administration leaked rumors that the IRS would conduct audits of steel executives, and sent FBI agents on predawn visits to the homes of journalists who covered the steel industry, ostensibly to further a legitimate investigation.

The Obama administration's agenda of maximizing dependency involves political favoritism cloaked in the raiment of "economic planning" and "social justice" that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail. The administration's central activity -- the political allocation of wealth and opportunity -- is not merely susceptible to corruption, it is corruption.
georgewill@washpost.com

Found at http://www.washingtonpost.com/wp-dyn/content/article/2009/05/13/AR2009051303014_pf.html on May 14, 2009

Below is an adapted lecture delivered at Hillsdale College on March 9, 2009. Some individual statements I do not agree with, but all in all, this was a great speach and I think worth your time.

MY REMARKS are titled tonight after the words of General Stark, New Hampshire's great hero of the Revolutionary War: "Live free or die!" When I first moved to New Hampshire, where this appears on our license plates, I assumed General Stark had said it before some battle or other—a bit of red meat to rally the boys for the charge; a touch of the old Henry V-at-Agincourt routine. But I soon discovered that the general had made his famous statement decades after the war, in a letter regretting that he would be unable to attend a dinner. And in a curious way I found that even more impressive. In extreme circumstances, many people can rouse themselves to rediscover the primal impulses: The brave men on Flight 93 did. They took off on what they thought was a routine business trip, and, when they realized it wasn't, they went into General Stark mode and cried "Let's roll!" But it's harder to maintain the "Live free or die!" spirit when you're facing not an immediate crisis but just a slow, remorseless, incremental, unceasing ratchet effect. "Live free or die!" sounds like a battle cry: We'll win this thing or die trying, die an honorable death. But in fact it's something far less dramatic: It's a bald statement of the reality of our lives in the prosperous West. You can live as free men, but, if you choose not to, your society will die.

My book America Alone is often assumed to be about radical Islam, firebreathing imams, the excitable young men jumping up and down in the street doing the old "Death to the Great Satan" dance. It's not. It's about us. It's about a possibly terminal manifestation of an old civilizational temptation: Indolence, as Machiavelli understood, is the greatest enemy of a republic. When I ran into trouble with the so-called "human rights" commissions up in Canada, it seemed bizarre to find the progressive left making common cause with radical Islam. One half of the alliance profess to be pro-gay, pro-feminist secularists; the other half are homophobic, misogynist theocrats. Even as the cheap bus 'n' truck road-tour version of the Hitler-Stalin Pact, it made no sense. But in fact what they have in common overrides their superficially more obvious incompatibilities: Both the secular Big Government progressives and political Islam recoil from the concept of the citizen, of the free individual entrusted to operate within his own societal space, assume his responsibilities, and exploit his potential.

In most of the developed world, the state has gradually annexed all the responsibilities of adulthood—health care, child care, care of the elderly—to the point where it's effectively severed its citizens from humanity's primal instincts, not least the survival instinct. Hillary Rodham Clinton said it takes a village to raise a child. It's supposedly an African proverb—there is no record of anyone in Africa ever using this proverb, but let that pass. P.J. O'Rourke summed up that book superbly: It takes a village to raise a child. The government is the village, and you're the child. Oh, and by the way, even if it did take a village to raise a child, I wouldn't want it to be an African village. If you fly over West Africa at night, the lights form one giant coastal megalopolis: Not even Africans regard the African village as a useful societal model. But nor is the European village. Europe's addiction to big government, unaffordable entitlements, cradle-to-grave welfare, and a dependence on mass immigration needed to sustain it has become an existential threat to some of the oldest nation-states in the world.

And now the last holdout, the United States, is embarking on the same grim path: After the President unveiled his budget, I heard Americans complain, oh, it's another Jimmy Carter, or LBJ's Great Society, or the new New Deal. You should be so lucky. Those nickel-and-dime comparisons barely begin to encompass the wholesale Europeanization that's underway. The 44th president's multi-trillion-dollar budget, the first of many, adds more to the national debt than all the previous 43 presidents combined, from George Washington to George Dubya. The President wants Europeanized health care, Europeanized daycare, Europeanized education, and, as the Europeans have discovered, even with Europeanized tax rates you can't make that math add up. In Sweden, state spending accounts for 54% of GDP. In America, it was 34%—ten years ago. Today, it's about 40%. In four years' time, that number will be trending very Swede-like.
But forget the money, the deficit, the debt, the big numbers with the 12 zeroes on the end of them. So-called fiscal conservatives often miss the point. The problem isn't the cost. These programs would still be wrong even if Bill Gates wrote a check to cover them each month. They're wrong because they deform the relationship between the citizen and the state. Even if there were no financial consequences, the moral and even spiritual consequences would still be fatal. That's the stage where Europe is.

America is just beginning this process. I looked at the rankings in Freedom in the 50 States published by George Mason University last month. New Hampshire came in Number One, the Freest State in the Nation, which all but certainly makes it the freest jurisdiction in the Western world. Which kind of depressed me. Because the Granite State feels less free to me than it did when I moved there, and you always hope there's somewhere else out there just in case things go belly up and you have to hit the road. And way down at the bottom in the last five places were Maryland, California, Rhode Island, New Jersey, and the least free state in the Union by some distance, New York.

New York! How does the song go? "If you can make it there, you'll make it anywhere!" If you can make it there, you're some kind of genius. "This is the worst fiscal downturn since the Great Depression," announced Governor Paterson a few weeks ago. So what's he doing? He's bringing in the biggest tax hike in New York history. If you can make it there, he can take it there—via state tax, sales tax, municipal tax, a doubled beer tax, a tax on clothing, a tax on cab rides, an "iTunes tax," a tax on haircuts, 137 new tax hikes in all. Call 1-800-I-HEART-NEW-YORK today and order your new package of state tax forms, for just $199.99, plus the 12% tax on tax forms and the 4% tax form application fee partially refundable upon payment of the 7.5% tax filing tax. If you can make it there, you'll certainly have no difficulty making it in Tajikistan.
New York, California... These are the great iconic American states, the ones we foreigners have heard of. To a penniless immigrant called Arnold Schwarzenegger, California was a land of plenty. Now Arnold is an immigrant of plenty in a penniless land: That's not an improvement. One of his predecessors as governor of California, Ronald Reagan, famously said, "We are a nation that has a government, not the other way around." In California, it's now the other way around: California is increasingly a government that has a state. And it is still in the early stages of the process. California has thirtysomething million people. The Province of Quebec has seven million people. Yet California and Quebec have roughly the same number of government workers. "There is a great deal of ruin in a nation," said Adam Smith, and America still has a long way to go. But it's better to jump off the train as you're leaving the station and it's still picking up speed than when it's roaring down the track and you realize you've got a one-way ticket on the Oblivion Express.

"Indolence," in Machiavelli's word: There are stages to the enervation of free peoples. America, which held out against the trend, is now at Stage One: The benign paternalist state promises to make all those worries about mortgages, debt, and health care disappear. Every night of the week, you can switch on the TV and see one of these ersatz "town meetings" in which freeborn citizens of the republic (I use the term loosely) petition the Sovereign to make all the bad stuff go away. "I have an urgent need," a lady in Fort Myers beseeched the President. "We need a home, our own kitchen, our own bathroom." He took her name and ordered his staff to meet with her. Hopefully, he didn't insult her by dispatching some no-name deputy assistant associate secretary of whatever instead of flying in one of the bigtime tax-avoiding cabinet honchos to nationalize a Florida bank and convert one of its branches into a desirable family residence, with a swing set hanging where the drive-thru ATM used to be.

As all of you know, Hillsdale College takes no federal or state monies. That used to make it an anomaly in American education. It's in danger of becoming an anomaly in America, period. Maybe it's time for Hillsdale College to launch the Hillsdale Insurance Agency, the Hillsdale Motor Company and the First National Bank of Hillsdale. The executive supremo at Bank of America is now saying, oh, if only he'd known what he knows now, he wouldn't have taken the government money. Apparently it comes with strings attached. Who knew? Sure, Hillsdale College did, but nobody else.

If you're a business, when government gives you 2% of your income, it has a veto on 100% of what you do. If you're an individual, the impact is even starker. Once you have government health care, it can be used to justify almost any restraint on freedom: After all, if the state has to cure you, it surely has an interest in preventing you needing treatment in the first place. That's the argument behind, for example, mandatory motorcycle helmets, or the creepy teams of government nutritionists currently going door to door in Britain and conducting a "health audit" of the contents of your refrigerator. They're not yet confiscating your Twinkies; they just want to take a census of how many you have. So you do all this for the "free" health care—and in the end you may not get the "free" health care anyway. Under Britain's National Health Service, for example, smokers in Manchester have been denied treatment for heart disease, and the obese in Suffolk are refused hip and knee replacements. Patricia Hewitt, the British Health Secretary, says that it's appropriate to decline treatment on the basis of "lifestyle choices." Smokers and the obese may look at their gay neighbor having unprotected sex with multiple partners, and wonder why his "lifestyle choices" get a pass while theirs don't. But that's the point: Tyranny is always whimsical.

And if they can't get you on grounds of your personal health, they'll do it on grounds of planetary health. Not so long ago in Britain it was proposed that each citizen should have a government-approved travel allowance. If you take one flight a year, you'll pay just the standard amount of tax on the journey. But, if you travel more frequently, if you take a second or third flight, you'll be subject to additional levies—in the interest of saving the planet for Al Gore's polar bear documentaries and that carbon-offset palace he lives in in Tennessee.

Isn't this the very definition of totalitarianism-lite? The Soviets restricted the movement of people through the bureaucratic apparatus of "exit visas." The British are proposing to do it through the bureaucratic apparatus of exit taxes—indeed, the bluntest form of regressive taxation. As with the Communists, the nomenklatura—the Prince of Wales, Al Gore, Madonna—will still be able to jet about hither and yon. What's a 20% surcharge to them? Especially as those for whom vast amounts of air travel are deemed essential—government officials, heads of NGOs, environmental activists—will no doubt be exempted from having to pay the extra amount. But the ghastly masses will have to stay home.

"Freedom of movement" used to be regarded as a bedrock freedom. The movement is still free, but there's now a government processing fee of $389.95. And the interesting thing about this proposal was that it came not from the Labour Party but the Conservative Party.

That's Stage Two of societal enervation—when the state as guarantor of all your basic needs becomes increasingly comfortable with regulating your behavior. Free peoples who were once willing to give their lives for liberty can be persuaded very quickly to relinquish their liberties for a quiet life. When President Bush talked about promoting democracy in the Middle East, there was a phrase he liked to use: "Freedom is the desire of every human heart." Really? It's unclear whether that's really the case in Gaza and the Pakistani tribal lands. But it's absolutely certain that it's not the case in Berlin and Paris, Stockholm and London, New Orleans and Buffalo. The story of the Western world since 1945 is that, invited to choose between freedom and government "security," large numbers of people vote to dump freedom every time—the freedom to make your own decisions about health care, education, property rights, and a ton of other stuff. It's ridiculous for grown men and women to say: I want to be able to choose from hundreds of cereals at the supermarket, thousands of movies from Netflix, millions of songs to play on my iPod—but I want the government to choose for me when it comes to my health care. A nation that demands the government take care of all the grown-up stuff is a nation turning into the world's wrinkliest adolescent, free only to choose its record collection.

And don't be too sure you'll get to choose your record collection in the end. That's Stage Three: When the populace has agreed to become wards of the state, it's a mere difference of degree to start regulating their thoughts. When my anglophone friends in the Province of Quebec used to complain about the lack of English signs in Quebec hospitals, my response was that, if you allow the government to be the sole provider of health care, why be surprised that they're allowed to decide the language they'll give it in? But, as I've learned during my year in the hellhole of Canadian "human rights" law, that's true in a broader sense. In the interests of "cultural protection," the Canadian state keeps foreign newspaper owners, foreign TV operators, and foreign bookstore owners out of Canada. Why shouldn't it, in return, assume the right to police the ideas disseminated through those newspapers, bookstores and TV networks it graciously agrees to permit?

When Maclean's magazine and I were hauled up in 2007 for the crime of "flagrant Islamophobia," it quickly became very clear that, for members of a profession that brags about its "courage" incessantly (far more than, say, firemen do), an awful lot of journalists are quite content to be the eunuchs in the politically correct harem. A distressing number of Western journalists see no conflict between attending lunches for World Press Freedom Day every month and agreeing to be micro-regulated by the state. The big problem for those of us arguing for classical liberalism is that in modern Canada there's hardly anything left that isn't on the state dripfeed to one degree or another: Too many of the institutions healthy societies traditionally look to as outposts of independent thought—churches, private schools, literature, the arts, the media—either have an ambiguous relationship with government or are downright dependent on it. Up north, "intellectual freedom" means the relevant film-funding agency—Cinedole Canada or whatever it's called—gives you a check to enable you to continue making so-called "bold, brave, transgressive" films that discombobulate state power not a whit.

And then comes Stage Four, in which dissenting ideas and even words are labeled as "hatred." In effect, the language itself becomes a means of control. Despite the smiley-face banalities, the tyranny becomes more naked: In Britain, a land with rampant property crime, undercover constables nevertheless find time to dine at curry restaurants on Friday nights to monitor adjoining tables lest someone in private conversation should make a racist remark. An author interviewed on BBC Radio expressed, very mildly and politely, some concerns about gay adoption and was investigated by Scotland Yard's Community Safety Unit for Homophobic, Racist and Domestic Incidents. A Daily Telegraph columnist is arrested and detained in a jail cell over a joke in a speech. A Dutch legislator is invited to speak at the Palace of Westminster by a member of the House of Lords, but is banned by the government, arrested on arrival at Heathrow and deported.

America, Britain, and even Canada are not peripheral nations: They're the three anglophone members of the G7. They're three of a handful of countries that were on the right side of all the great conflicts of the last century. But individual liberty flickers dimmer in each of them. The massive expansion of government under the laughable euphemism of "stimulus" (Stage One) comes with a quid pro quo down the line (Stage Two): Once you accept you're a child in the government nursery, why shouldn't Nanny tell you what to do? And then—Stage Three—what to think? And—Stage Four—what you're forbidden to think . . . .

Which brings us to the final stage: As I said at the beginning, Big Government isn't about the money. It's more profound than that. A couple of years back Paul Krugman wrote a column in The New York Times asserting that, while parochial American conservatives drone on about "family values," the Europeans live it, enacting policies that are more "family friendly." On the Continent, claims the professor, "government regulations actually allow people to make a desirable tradeoff-to modestly lower income in return for more time with friends and family."
As befits a distinguished economist, Professor Krugman failed to notice that for a continent of "family friendly" policies, Europe is remarkably short of families. While America's fertility rate is more or less at replacement level—2.1—seventeen European nations are at what demographers call "lowest-low" fertility—1.3 or less—a rate from which no society in human history has ever recovered. Germans, Spaniards, Italians and Greeks have upside-down family trees: four grandparents have two children and one grandchild. How can an economist analyze "family friendly" policies without noticing that the upshot of these policies is that nobody has any families?

As for all that extra time, what happened? Europeans work fewer hours than Americans, they don't have to pay for their own health care, they're post-Christian so they don't go to church, they don't marry and they don't have kids to take to school and basketball and the 4-H stand at the county fair. So what do they do with all the time?

Forget for the moment Europe's lack of world-beating companies: They regard capitalism as an Anglo-American fetish, and they mostly despise it. But what about the things Europeans supposedly value? With so much free time, where is the great European art? Where are Europe's men of science? At American universities. Meanwhile, Continental governments pour fortunes into prestigious white elephants of Euro-identity, like the Airbus A380, capable of carrying 500, 800, a thousand passengers at a time, if only somebody somewhere would order the darn thing, which they might consider doing once all the airports have built new runways to handle it.

"Give people plenty and security, and they will fall into spiritual torpor," wrote Charles Murray in In Our Hands. "When life becomes an extended picnic, with nothing of importance to do, ideas of greatness become an irritant. Such is the nature of the Europe syndrome."

The key word here is "give." When the state "gives" you plenty—when it takes care of your health, takes cares of your kids, takes care of your elderly parents, takes care of every primary responsibility of adulthood—it's not surprising that the citizenry cease to function as adults: Life becomes a kind of extended adolescence—literally so for those Germans who've mastered the knack of staying in education till they're 34 and taking early retirement at 42. Hilaire Belloc, incidentally, foresaw this very clearly in his book The Servile State in 1912. He understood that the long-term cost of a welfare society is the infantilization of the population.

Genteel decline can be very agreeable—initially: You still have terrific restaurants, beautiful buildings, a great opera house. And once the pressure's off it's nice to linger at the sidewalk table, have a second café au lait and a pain au chocolat, and watch the world go by. At the Munich Security Conference in February, President Sarkozy demanded of his fellow Continentals, "Does Europe want peace, or do we want to be left in peace?" To pose the question is to answer it. Alas, it only works for a generation or two. And it's hard to come up with a wake-up call for a society as dedicated as latterday Europe to the belief that life is about sleeping in.

As Gerald Ford liked to say when trying to ingratiate himself with conservative audiences, "A government big enough to give you everything you want is big enough to take away everything you have." And that's true. But there's an intermediate stage: A government big enough to give you everything you want isn't big enough to get you to give any of it back. That's the position European governments find themselves in. Their citizens have become hooked on unaffordable levels of social programs which in the end will put those countries out of business. Just to get the Social Security debate in perspective, projected public pension liabilities are expected to rise by 2040 to about 6.8% of GDP in the U.S. In Greece, the figure is 25%—i.e., total societal collapse. So what? shrug the voters. Not my problem. I want my benefits. The crisis isn't the lack of money, but the lack of citizens—in the meaningful sense of that word.

Every Democrat running for election tells you they want to do this or that "for the children." If America really wanted to do something "for the children," it could try not to make the same mistake as most of the rest of the Western world and avoid bequeathing the next generation a leviathan of bloated bureaucracy and unsustainable entitlements that turns the entire nation into a giant Ponzi scheme. That's the real "war on children" (to use another Democrat catchphrase)—and every time you bulk up the budget you make it less and less likely they'll win it.

Conservatives often talk about "small government," which, in a sense, is framing the issue in leftist terms: they're for big government. But small government gives you big freedoms—and big government leaves you with very little freedom. The bailout and the stimulus and the budget and the trillion-dollar deficits are not merely massive transfers from the most dynamic and productive sector to the least dynamic and productive. When governments annex a huge chunk of the economy, they also annex a huge chunk of individual liberty. You fundamentally change the relationship between the citizen and the state into something closer to that of junkie and pusher—and you make it very difficult ever to change back. Americans face a choice: They can rediscover the animating principles of the American idea—of limited government, a self-reliant citizenry, and the opportunities to exploit your talents to the fullest—or they can join most of the rest of the Western world in terminal decline. To rekindle the spark of liberty once it dies is very difficult. The inertia, the ennui, the fatalism is more pathetic than the demographic decline and fiscal profligacy of the social democratic state, because it's subtler and less tangible. But once in a while it swims into very sharp focus. Here is the writer Oscar van den Boogaard from an interview with the Belgian paper De Standaard. Mr. van den Boogaard, a Dutch gay "humanist" (which is pretty much the trifecta of Eurocool), was reflecting on the accelerating Islamification of the Continent and concluding that the jig was up for the Europe he loved. "I am not a warrior, but who is?" he shrugged. "I have never learned to fight for my freedom. I was only good at enjoying it." In the famous Kubler-Ross five stages of grief, Mr. van den Boogard is past denial, anger, bargaining and depression, and has arrived at a kind of acceptance.
"I have never learned to fight for my freedom. I was only good at enjoying it." Sorry, doesn't work—not for long. Back in New Hampshire, General Stark knew that. Mr. van den Boogard's words are an epitaph for Europe. Whereas New Hampshire's motto—"Live free or die!"—is still the greatest rallying cry for this state or any other. About a year ago, there was a picture in the papers of Iranian students demonstrating in Tehran and waving placards. And what they'd written on those placards was: "Live free or die!" They understand the power of those words; so should we.

Similar to many other work facilities, the building where I work has a security system where you have to swipe in before the door will open for your entrance or exit. Today, that system was down for a few moments and it happened to be down when I was leaving.

I saw this on the cover the Wall Street Journal last week and had to share it. I think it does a good job of showing how far beyond reasonable government we have gone and are going to. I had no idea that banks were forced to take the loans from the government - both stable and unstable banks were forced to take them. I also think it intresting how the banks were forced to receive the money and therefore they were forced to accept the strings attached as well - such as regulations on executive compensation.

I can understand the need to save the financial system and support certain efforts to do so. However, I can't understand how the Government has the right or the ability to compel institutions and people to receive money and the regulations along with it. This is the equivalent of marketplace emminent domain - a place where they have no emminent domain capabilities. What happened to Freedom? What happened to choice and accountability? Goldman doesn't even have to ask for help now - the government will step right in before they need it. At any rate, I thought it was worth sharing.

By SUSANNE CRAIG, KATE KELLY and DEBORAH SOLOMON

Goldman Sachs Group Inc., frustrated at federally mandated pay caps, has been plotting for months to get out from under the government's thumb.

On Monday, Goldman took fresh steps to break free: It announced, as expected, that it plans to raise $5 billion by selling new common shares to investors, and that it would like to use the money to repay government bailout money received last year. The firm also reported stronger-than-expected first-quarter earnings of $1.81 billion.

Goldman managers have a big incentive to escape the state's clutches. Last year, 953 Goldman employees -- nearly one in 30 -- were paid in excess of $1 million apiece, according to people familiar with the matter. But tight federal restrictions connected to the financial-sector bailout have severely crimped the Wall Street firm's ability to offer such lavish pay this year.

At a meeting President Barack Obama hosted with bank executives at the White House in late March, Lloyd Blankfein, Goldman's chief executive, argued that banks needed freedom to repay the loans the U.S. forced them to accept in October. Eight large institutions received a total of $165 billion in capital, including $10 billion for Goldman. The pay restrictions were tied to those loans. The banks were told then that everyone had to accept the money so it wouldn't be obvious who needed it most.

"Those who could pay it back have an obligation to do so," Mr. Blankfein urged the president, according to attendees. Mr. Blankfein, who was paid $68.5 million in 2007, added that the pay caps and other factors are "going to limit our ability to compete, both here and abroad."

The federal government's management of the financial crisis is entering a new phase. The trillions of dollars Washington has committed to help stabilize companies and thaw frozen credit markets have enmeshed the government deep in the affairs of investment banks, insurers and auto companies. Now that stock and bond markets have rebounded a bit, and pressure is easing for some financial firms, the government has to begin deciding how tight a grip to maintain on some companies, and for how long.

If Goldman is permitted to repay its loan, it would be the first big bank to do so. That would set the stage for the firm to once again pay its executives, traders and bankers -- long among Wall Street's highest paid -- as it sees fit.

But an early repayment could pose a risk to other banks that received government money, by rekindling investor concerns about their health. Morgan Stanley, for example, which is expected to report a first-quarter loss, isn't likely to quickly repay the U.S., according to banking executives and government officials. Will other profitable banks rush to repay, deepening the divide between the haves and the have-nots? And what would happen if there's another financial shock and banks are forced to ask for more U.S. funds?

A handful of smaller banks already have taken steps to repay the government. The U.S. has indicated it won't allow any major banks to do so before the government considers the results of financial "stress tests," which are expected by April 30. The tests measure banks' ability to continue lending through a severe and prolonged economic downturn. Because of the technicalities of the loans, it could take months before Goldman or any other big bank that repays will escape the government's clutches.

The 140-year-old firm long has boasted a culture of lucrative compensation. Although overall Goldman pay fell last year, the firm, which has about 30,000 employees, paid 953 people more than $1 million in salary and bonus, according to people familiar with the matter. No one got more than $1 million in cash; much of the pay was through stock grants that vest in the future, these people say. (At Merrill Lynch & Co., which had roughly twice as many employees, 696 executives were paid more than $1 million last year, according to data released by New York Attorney General Andrew Cuomo.) In 2008, the pay of Mr. Blankfein and three top Goldman lieutenants fell 97%, to a total of $9.3 million.

Firms are chafing under new legislative rules dictating that bonuses can account for no more than one-third of the total annual pay to top earners at companies receiving government money. The Obama administration also has endorsed capping salaries at $500,000 at some firms receiving significant U.S. aid. The government also restricts companies accepting U.S. funds from increasing dividends and from buying back their own stock, among other things.

Mr. Blankfein now uses Amtrak's Acela Express train to shuttle between New York and Washington to make his case with government officials. That's a far cry from the private plane Goldman executives have used in the past. Some Goldman partners, careful not to appear to be spending taxpayer money, now use their personal credit cards when paying for client entertaining. Employees visiting New York now stay at an Embassy Suites hotel rather than the tony Ritz-Carlton where they used to bed down.

Goldman has fared better than most rivals during the crisis, but was hammered nonetheless after Lehman Brothers Holdings Inc. filed for bankruptcy protection in September. Goldman's stock sank to $108 on Sept. 18, less than half its high of more than $247 a share in October 2007.

Even then, Goldman executives didn't believe the firm needed U.S. money. On Sept. 23, as the financial crisis intensified, Goldman raised $5 billion from Warren Buffett's Berkshire Hathaway Inc. Goldman hoped the investment -- preferred stock with a steep 10% annual return -- would reassure investors. Goldman raised another $5.75 billion in a common-stock offering.

Mr. Blankfein spoke up when nine big banks were called to the emergency meeting in October where the Treasury Department unveiled its plan.

"This is pretty vague," Mr. Blankfein told then-Treasury Secretary Henry Paulson, attendees say. "What are the terms?"

The U.S. did more than give the banks money. In exchange for the capital, it also received warrants, a security that gives the holder the right to buy common stock at a certain price. Paying back the money doesn't end the government's ability to exercise those warrants and own common stock in the banks. To formally end the government's involvement, the Treasury must sell the warrants back to the bank or to private investors.

It didn't take long for Goldman investors to raise concerns about Washington's grip. At a Nov. 11 conference at New York's Grand Hyatt hotel, an audience member grilled Mr. Blankfein.
"Some of the politicians are questioning companies who have accepted...money as to whether they should be paying bonuses this year," the attendee said. "And I'm wondering...how you're thinking about your ability to continue to compensate your staff the way you have in the past?"
Mr. Blankfein replied: "We hear those voices and we take it into account."

Six days later, Goldman said its board decided that senior executives would take no bonuses. The numbers were released in mid-December. Money set aside for pay and benefits fell 46% to $10.93 billion. Most partners, the firm's elite, saw bonuses fall by about 70%, according to people familiar with the matter.

All costs were being scrutinized by then, due to heightened public scrutiny and declining profits. Goldman employees working late now are entitled to only $20 in reimbursement for dinner, a 20% reduction. Car-service rides home aren't free until 10 p.m., an hour later than before.
At a Goldman partners meeting in early January, Mr. Blankfein said repaying the federal money was a priority.

The firm took the message public at an investor conference on Feb. 4. "Operating our business without the government capital would be an easier thing to do," said David Viniar, Goldman's chief financial officer. "We'd be under less scrutiny and under less pressure." Goldman's shares rose 6.2% that day, to $87.97.

Goldman aimed to spin the message more broadly at a congressional hearing on Feb. 11. It was Mr. Blankfein's first-ever congressional appearance, and he spent hours preparing.

Mr. Blankfein played diplomat. "When conditions allow, and with the support of our regulators and the Treasury, we look forward to paying back the government's investment so that money can be used elsewhere to support our economy," he testified.

On Feb. 26, the Treasury sent an email to Goldman's finance department containing the financial stress test. Mr. Viniar, Goldman's CFO, ordered his staff to work around-the-clock so Goldman could return the questionnaire by Monday, four days later.

But the Treasury told the firm it had to wait until its review was concluded later this month before the U.S. would entertain a repayment of the money, according to people familiar with the matter.

A public uproar last month over bonuses paid to American International Group Inc. employees only heightened Goldman's urgency. The AIG bonuses prompted a House bill to slap a 90% tax on bonuses for those receiving pay of $250,000 or more at firms that received more than $5 billion in government funds.

Some Goldman executives privately discussed repaying $5 billion -- half its government loan -- or more, say people familiar with the matter. That would have exempted Goldman from the bill taxing bonuses.

The bonus-taxing measure fizzled after President Obama expressed reservations.

Soon, a prominent government official indirectly suggested a course of action that might pave the way for a payback. On March 15, Federal Reserve Chairman Ben Bernanke said in a "60 Minutes" television interview that the day a bank could raise private capital would be an important milestone. "Right now, all the private money is sitting on the sidelines saying: 'We don't know what these banks are worth. We don't know that they're stable,'" Mr. Bernanke said.

Two days later, at a monthly meeting of Goldman's nearly 400 partners, Mr. Blankfein said it may be "prudent" for Goldman to raise capital, say attendees.

He has sought political backing. Mr. Blankfein has met twice with Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee. Messrs. Blankfein and Frank discussed repaying government funds, among other things, says Mr. Frank.

"I think it's a sign of strength" for Goldman to seek to repay U.S. money, Mr. Frank said in a recent interview.

Some Goldman rivals are less likely to repay their loans right away. At the March 27 White House meeting with President Obama, Morgan Stanley's Chief Executive John Mack struck a different tone. Analysts estimate that his firm faces a first-quarter loss of approximately $100 million. A quick payback of U.S funds would "undercut the purpose" of the Treasury's Troubled Asset Relief Program, or TARP, for large banks, Mr. Mack told President Obama, attendees say.

Treasury Secretary Timothy Geithner indicated recently that healthy banks will be able to repay bailout money, and that the Treasury was considering those repayments in its calculations about how much TARP money remains. The Bush administration had said that even healthy banks had to keep the money until the crisis passed.

A provision in the recently passed stimulus bill mandates that TARP recipients be allowed to repay the funds, as long as their primary regulator approves the move.

At least one Goldman shareholder has benefited with the government in the picture. The 10% annual payout Mr. Buffett's Berkshire Hathaway receives on its $5 billion investment earns it more than $1.3 million each day.

As long as Goldman holds the government's money, it can't pay off Mr. Buffett without U.S. approval.—Damian Paletta, Susan Pulliam, Jon Hilsenrath and Aaron Lucchetti contributed to this article.

Found at http://online.wsj.com/article/SB123966372945715013.html on April 20th, 2009.

This is an excellent read from the AEI. I highly recommend it.

In an effort to address the Federal Reserve's ballooning balance sheet, bank officials are arguing for the institution to issue its own debt. While this might effectively curtail inflation in the future, the best way to ensure the bank is on sound financial footing--in a democracy--would be for Congress to appropriate the funds to acquire troubled assets, and for Treasury to borrow the money that it needs.

Senior Fellow Kevin A. Hassett

The wise men of Washington keep finding more core beliefs that we have to give up. First it was free markets. Now it's democracy.

The financial rescue may be the least popular big-ticket government program in history. If the U.S. Treasury decides it needs more money to keep the bailout going, it is anybody's guess whether Congress would provide it.

As a result, Treasury and the Federal Reserve have been running what feels to this lifelong student of fiscal policy like a scam.

Many economists believe that helping financial institutions turn their less liquid assets into hard cash is a key step toward returning them to good footing. The best way to achieve that in a democracy would be for Congress to appropriate the funds to acquire the assets and for Treasury to borrow the money that it needs.

It might be that voters are too stupid to understand that government officials should get as much bailout money as they desire.

But Congress is unwilling to appropriate enough money, so Treasury and the Fed have cooked up a work-around: the Fed buys the assets instead. Since the Fed exists outside of the normal budget process, no permission from elected officials is required.

Here's a sketch of how it works. Many financial institutions have reserve accounts with the Fed. If one of them shows up with an asset it wants to ditch, the Fed takes it and ratchets up the balance in the reserve account. This means that the Fed is effectively summoning cash out of thin air to purchase the assets.

In isolation, such a move might be inconsequential. But the scale of this end-around is enormous. The Fed's balance sheet is closing in on $2 trillion and stands ready to skyrocket above that. Last month, for example, the Fed committed to buy more than $1 trillion in mortgage-backed securities.

Printing Cash

This means that the Fed is printing cash at a rate that, while not threatening historic records set in Weimar Germany, promises to create substantial inflationary pressures once the economy revives.

Therein lies the problem. At some point, when the economy begins to pick up again, the Fed will have to withdraw some of those reserves from the system before they ignite an inflation bonfire.

Traditionally, the Fed might withdraw reserves by selling some of the Treasuries it owns. But the scale of the money creation is so grand this time that the Fed might not be able to sell enough Treasuries to meaningfully affect inflation without running up against the debt limit that Congress sets when it gives Treasury the authority to borrow money.

The Fed could, in principle, sell some of the assets it has been buying--but if these assets were liquid, the Fed wouldn't have been buying them in the first place. Which means it may be extremely difficult to get the cash out of the economy before it is too late.

"Fed Bills"

The Fed has cooked up a solution, though. Vice Chairman Donald Kohn, told an audience at the College of Wooster in Ohio that a possible solution would be for the Fed to issue its own securities, which might be called "Fed bills." Kohn argued that a key attraction of these bills is that they wouldn't be subject to the debt ceiling set by Congress.

In other words, the Fed wants to have unbounded authority to borrow money and buy assets without the inconvenience of having to explain itself on Capitol Hill.

The actions that have been taken already may indeed necessitate granting the Fed that authority. The cash is out the door, and at some point, the Fed will have to rake it back in. Congress may have to choose between giving the Fed the authority it wants, or having the mother of all inflation episodes.

Crowd Out Spending

Should the Fed's balance sheet climb to $6 trillion, then its losses might be enormous and threaten to crowd out spending on defense, education and health care. And it would do so without Congress ever voting on the increase in the debt ceiling that would have been required if Treasury were performing the rescue.

If the Fed receives the authority to issue debt whenever it wants to, then future bureaucrats can, in principle, play whatever financial games they want. The powerlessness of voters will be codified into law.

We can't let that happen.

It might be that voters are too stupid to understand that government officials should get as much bailout money as they desire. The financial rescue might have been precisely what the doctor ordered.

But the public might be right as well. Our founders didn't construct a democracy because voters are always right. Rather, they viewed democracy as better than the alternatives.

While fully legal, the steps that have been taken by Treasury and the Fed have clearly been designed to insulate those institutions from the will of Americans' elected representatives. In that regard, the damage from these actions probably exceeds the benefits. If we accept the view that we can be democratic in some areas but not others, then democracy will wither and die.

Kevin A. Hassett is a senior fellow and the director of economic policy studies at AEI.

Found at http://www.aei.org/publications/pubID.29695,filter.all/pub_detail.asp on April 13, 2009.

I read this this morning and found it troubling. Does anyone else?

WASHINGTON (Reuters) – Cyberspies have penetrated the U.S. electrical grid and left behind software programs that could be used to disrupt the system, the Wall Street Journal reported on Wednesday.

The spies came from China, Russia and other countries, and were believed to be on a mission to navigate the U.S. electrical system and its controls, the newspaper said, citing current and former U.S. national security officials.

The intruders have not sought to damage the power grid or other key infrastructure but officials said they could try during a crisis or war, the paper said in a report on its website.

"The Chinese have attempted to map our infrastructure, such as the electrical grid," a senior intelligence official told the Journal. "So have the Russians."

The espionage appeared pervasive across the United States and does not target a particular company or region, said a former Department of Homeland Security official.

"There are intrusions, and they are growing," the former official told the paper, referring to electrical systems. "There were a lot last year."

The administration of U.S. President Barack Obama was not immediately available for comment on the newspaper report.

Authorities investigating the intrusions have found software tools left behind that could be used to destroy infrastructure components, the senior intelligence official said. He added, "If we go to war with them, they will try to turn them on."

Officials said water, sewage and other infrastructure systems also were at risk.

Protecting the electrical grid and other infrastructure is a key part of the Obama administration's cybersecurity review, which is to be completed next week.

The sophistication of the U.S. intrusions, which extend beyond electric to other key infrastructure systems, suggests that China and Russia are mainly responsible, according to intelligence officials and cybersecurity specialists.

While terrorist groups could develop the ability to penetrate U.S. infrastructure, they do not appear to have yet mounted attacks, these officials say.

(Writing by Eric Beech; Editing by Jon Boyle)

Found at http://news.yahoo.com/s/nm/20090408/us_nm/us_cyberattack_usa on April 8, 2009.