Monday, April 30, 2012

Obama emphasizes kept promises before union crowd


Pablo Martinez Monsivais / AP
President Barack Obama speaks April 30 at the Building and Construction Trades Department Legislative Conference.

President Obama roused union members behind supporting his re-election bid in a speech Monday to labor leaders, a core Democratic constituency with which his administration has had differences in his first term.

"These have been some tough years we’ve been in," Obama said to members of the Building and Construction Trade Department, an AFL-CIO-affiliated group. “I know a lot of your membership can get discouraged. They can feel like nobody’s looking out for them. They can get frustrated and it sure is easy to give up on Washington.”

Among those labor members who have expressed their frustration with Washington -– including the president –- is AFL-CIO President Richard Trumka, who in January criticized the administration’s Council on Jobs and Competitiveness for focusing on reforming regulations and the tax system.

There are varied other instances in which unions that supported Obama during the 2008 election felted jilted by the president. Labor leaders pushed for a more robust stimulus and jobs program, and were generally disappointed deeply by Obama's decision to jettison the so-called "public option" as part of health care reform. The Employee Free Choice Act, a priority of organized labor that had enjoyed administration support, also died in Congress amid heavy business opposition.

Unions have also been generally supportive of a plan to build the TransCanada Keystone Oil pipeline, development of which the administration has mostly blocked.

Obama told the group Monday that, while he has not always been “a perfect president,” he has kept his promise to labor unions –- and, by extension, all voters.

“I made a promise I’d always tell you where I stood, I’d always tell you what I thought, what I believed in. And most importantly, I would wake up every single day working as hard as I know how to make your lives a little bit better," he said. "And for all that we’ve gone through these three-and-a-half or four years, I have kept that promise."

While not mentioning presumptive Republican presidential nominee Mitt Romney by name, Obama also contrasted his views on labor with those of Republicans, saying that the party wants to weaken labor unions.

“If you asked them what's their big economic plan in addition to tax cuts for rich folks, it's dismantling your unions,” Obama said.

He criticized Republicans for advocating so-called “right to work” laws, which bar unions from requiring prospective employees to join as a precondition for being hired. Twenty-three U.S. states currently have such laws.

“I believe when folks try and take collective bargaining rights away by passing so-called ‘right to work’ laws that might as well be called ‘the right to work for less and less,’ that's not about economics -- it's about politics," Obama said.

He said that his support for labor unions was evident in his belief in strong collective-bargaining rights.

“The right to organize and negotiate a fair pay for hard work should be the right of every American -- from the CEO in the corner office to the worker who built that office,” he said.


President Obama Speaks on American Infrastructure

April 30, 2012 | 25:20 | Public Domain

President Obama speaks at the Building and Construction Trades Department Conference about creating good jobs for American workers, who can help our economy grow by rebuilding our nation’s roads, bridges, train tracks, and airports.

The White House
Office of the Press Secretary

Remarks by the President at the Building and Construction Trades Department Conference

Washington Hilton Hotel
Washington, D.C.
10:38 A.M. EDT

THE PRESIDENT:  Hey!  Hello, everybody!  (Applause.)  Thank you.  Thank you.

AUDIENCE:  Four more years!  Four more years!

THE PRESIDENT:  Thank you.  Thank you very much.  Everybody, please have a seat.  (Applause.)  Thank you, guys.  Everybody, take a seat.  Well, thank you, Sean, for that outstanding introduction.

AUDIENCE MEMBER:  Four more years!  Four more years!

THE PRESIDENT:  (Laughter.)  I'll take it.  Thank you.  Thank you.
Well, it is good to be back among friends.  The last time I was here we -- was Saturday night.  (Laughter.)  And they tell me I did okay.  But I want to not only thank Sean for his extraordinary leadership; I want to acknowledge all the other presidents who are on stage for what they do each and every day on behalf of not just their members, but on behalf of all working people.  I'm proud of that.  (Applause.)

I want to thank my good friend, Tim Kaine, who is here and is a friend of labor -- (applause) --
the next United States senator from the great Commonwealth of Virginia.
And obviously, we come here at a time where -- I just want to repeat my condolences to everybody in the building and construction trades on the passing of Mark Ayers.  Mark was a tremendous leader.  He was a good friend.  His commitment to the labor movement and to working people will leave a mark for years to come.  And my thoughts and prayers are with his family.  But I know that Sean is going to do an outstanding job, and we wish him all the best in his future endeavors.  So congratulations.  (Applause.)

So it's good to be back in front of all of you.  It's always an honor to be with folks who get up every day and work real jobs -- (laughter) -- and every day fight for America's workers.  You represent the latest in a long, proud line of men and women who built this country from the bottom up.  That's who you are.  (Applause.)  It was workers like you who led us westward.  It was workers like you who pushed us skyward.  It was your predecessors who put down the hard hats and helped us defeat fascism.  And when that was done, you kept on building --highways that we drive on, and the houses we live in, and the schools where our children learn.  And you established the foundation of what it means to be a proud American.
And along the way, unions like yours made sure that everybody had a fair shake, everybody had a fair shot.  You helped build the greatest middle class that we've ever seen.  You believed that prosperity shouldn’t be reserved just for a privileged few; it should extend all the way from the boardroom all the way down to the factory floor.  That's what you believe.  (Applause.)

Time and again, you stood up for the idea that hard work should pay off; responsibility should be rewarded.  When folks do the right thing, they should be able to make it here in America.  And because you did, America became home of the greatest middle class the world has ever known.  You helped make that possible -- not just through your organizing but how you lived; looking after your families, looking out for your communities.  You’re what America is about.
And so sometimes when I listen to the political debates, it seems as if people have forgotten American progress has always been driven by American workers.  And that’s especially important to remember today.

The last decade has been tough on everybody.  But the men and women of the building and construction trades have suffered more than most.  Since the housing bubble burst, millions of your brothers and sisters have had to look for work.  Even more have had to struggle to keep the work coming in.  And that makes absolutely no sense at a time when there is so much work to be done.

I don’t have to tell you we’ve got bridges and roads all over this country in desperate need of repair.  Our highways are clogged with traffic.  Our railroads are no longer the fastest in the world.  Our skies are congested, our airports are the busiest on the planet.  All of this costs families and businesses billions of dollars a year.  That drags down our entire economy.
And the worst part of it is that we could be doing something about it.  I think about what my grandparents’ generation built:  the Hoover Dam, the Golden Gate Bridge, the Interstate Highway System.  That's what we do.  We build.  There was a time where we would never accept the notion that some other country has better roads than us, and some other country has better airports than us.  I don't know about you, but I’m chauvinistic.  I want America to have the best stuff.  I want us to be doing the building, not somebody else.  (Applause.)  We should be having -- (applause) -- people should be visiting us from all over the world.  They should be visiting us from all over the world and marveling at what at what we’ve done.
That kind of unbridled, can-do spirit -- that’s what made America an economic superpower.  And now, it’s up to us to continue that tradition, to give our businesses access to the best roads and airports and high-speed rail and Internet networks.  It’s up to us to make sure our kids are learning in state-of-the-art schools.  It’s our turn to do big things.  It is our turn to do big things.

But here’s the thing -- as a share of the economy, Europe invests more than twice what we do in infrastructure; China about four times as much.  Are we going to sit back and let other countries build the newest airports and the fastest railroads and the most modern schools, at a time when we’ve got private construction companies all over the world -- or all over the country -- and millions of workers who are ready and willing to do that work right here in the United States of America?

American workers built this country, and now we need American workers to rebuild this country.  That’s what we need.  (Applause.)  It is time we take some of the money that we spend on wars, use half of it to pay down our debt, and then use the rest of it to do some nation-building right here at home.  (Applause.)  There is work to be done.  There are workers ready to do it, and you guys can help lead the way.

AUDIENCE MEMBER:  We can do it!

THE PRESIDENT:  We can do it.  We’ve done it before.  And the truth is, the only way we can do it on a scale that’s needed is with some bold action from Congress.  They’re the ones with the purse strings.  That’s why, over the last year, I’ve sent Congress a whole series of jobs bills to put people to work, to put your members back to work.  (Applause.)  Again and again, I’ve said now is the time do this; interest rates are low, construction workers are out of work.  Contractors are begging for work, and the work needs to be done.  Let’s do it.  And time after time, the Republicans have gotten together and they’ve said no.

AUDIENCE:  Booo --

THE PRESIDENT:  I sent them a jobs bill that would have put hundreds of thousands of construction workers back to work repairing our roads, our bridges, schools, transit systems, along with saving the jobs of cops and teachers and firefighters, creating a new tax cut for businesses.  They said no.

AUDIENCE:  Booo --

THE PRESIDENT:  I went to the Speaker’s hometown, stood under a bridge that was crumbling.  Everybody acknowledges it needs to be rebuilt.

AUDIENCE MEMBER:  Let him drive on it! (Laughter.)

THE PRESIDENT:  Maybe he doesn’t drive anymore.  (Laughter.)  Maybe he doesn’t notice how messed up it was.  (Laughter.)  They still said no.

There are bridges between Kentucky and Ohio where some of the key Republican leadership come from, where folks are having to do detours an extra hour, hour and a half drive every day on their commute because these bridges don’t work.  They still said no.  So then I said, well, maybe they couldn’t handle the whole bill in one big piece.  Let’s break it up.  Maybe it’s just too much for them.

So I sent them just the part of the bill that would have created these construction jobs.  They said no.

AUDIENCE:  Booo --

THE PRESIDENT:  We’re seeing it again right now.  As we speak, the House Republicans are refusing to pass a bipartisan bill that could guarantee work for millions of construction workers.  Already passed the Senate.  Ready to go, ready to put folks back to work.  Used to be the most -- the easiest bill to pass in Washington used to be getting roads and bridges built, because it’s not like only Democrats are allowed to use these things.  Everybody is permitted.  (Laughter.)  Everybody needs them.  (Applause.)

So this makes no sense.  Congress needs to do the right thing.  Pass this bill right away.  It shouldn’t be that hard.  It shouldn’t be that hard.  Not everything should be subject to thinking about the next election instead of thinking about the next generation.  (Applause.)  Not everything should be subject to politics instead of thinking about all those families out there and all your membership that need work -- that don’t just support their own families, but support entire communities.

So we’re still waiting for Congress.  But we can’t afford to just wait for Congress.  You can’t afford to wait.  So where Congress won’t act, I will.  That’s why I’ve taken steps on my own.  (Applause.)  That's why I’ve taken steps on my own and speeded up loans and speeded up competitive grants for projects across the country that will support thousands of jobs.  That’s why we’re cutting through the red tape and launching a lot of existing projects faster and more efficiently.

Because the truth is, government can be smarter.  A whole bunch of projects at the state level sometimes are ready to go, but they get tangled up in all kinds of bureaucracy and red tape.  So what we’ve said is if there’s red tape that's stopping a project and stopping folks from getting to work right now, let’s put that aside.

Because the point is, infrastructure shouldn’t be a partisan issue.  Investments in better roads and safer bridges -- these have never been made by just one party or another because they benefit all of us.  They lead to a strong, durable economy.  Ronald Reagan once said that rebuilding our infrastructure is “common sense” -- “an investment in tomorrow that we need to make today.”  Ronald Reagan said that, that great socialist -- Ronald Reagan.  (Laughter.)  Couldn’t get through a Republican primary these days.

The folks up on Capitol Hill right now, they seem to have exactly the opposite view.  They voted to cut spending on transportation infrastructure by almost 30 percent.  That means instead of putting more construction workers back on the job, they want to lay more off.  Instead of breaking ground on new projects, they want to let existing projects grind to a halt.  Instead of making the investments we need to get ahead, they’re willing to let us all fall further behind.

Now, when you ask them, well, why are you doing this -- other than the fact that I’m proposing it?  (Laughter.)  They’ll say it’s because we need to pay down our deficit.  And you know what, the deficit is a real problem.  All of us recognize in our own lives and our own families, we try to live within our means.  So we got to deal with the debt and we got to deal with the deficit.
And their argument might actually fly if they didn’t just vote to spend $4.6 trillion on lower tax rates -– that’s with a T, trillion -– on top of the $1 trillion they’d spend on tax cuts for people making more than $250,000 a year.  So they're willing to spend over $5 trillion to give tax breaks to folks like me who don't need them and weren’t even asking for them at a time when this country needs to be rebuilt.  That gives you a sense of their priorities.

Think about that.  Republicans in Congress would rather put fewer of you to work rebuilding America than ask millionaires and billionaires to live without massive new tax cuts on top of the ones they’ve already gotten.

Now, what do you think would make the economy strongerGiving another tax break to every millionaire and billionaire in the countryOr rebuilding our roads and our bridges and our broadband networks that will help our businesses sell goods all around the world?  It’s pretty clear.  This choice is not a hard one.  (Applause.)

Of course, we need to bring down our deficits in the long term.  But if we’re smart about it, we also will be making and can afford to make the investments that will help our country and the American people in the short term.  Not only will it put people back to work, but if the economy is growing -- look, every time one of your members is on a job, that means they’ve got more money in their pockets.  That means that they’re going to the restaurant, and that restaurant owner suddenly is doing a little bit better.  They’re going to Home Depot to buy some stuff, and suddenly Home Depot is doing a little bit better.

This is a no-brainer.  And, by the way, when everybody is doing better and the economy is growing, lo and behold, that actually helps to bring down the deficit, helps us pay off our debt.  Previous generations understood this.  Apparently, right now, Republicans disagree.
And what makes it worse -- it would be bad enough if they just had these set of bad ideas, but they’ve also set their sights on dismantling unions like yours.  I mean, if you ask them, what’s their big economic plan in addition to tax cuts for rich folks, it’s dismantling your unions.  After all you’ve done to build and protect the middle class, they make the argument you’re responsible for the problems facing the middle class.  Somehow, that makes sense to them.
That’s not what I believe.  I believe our economy is stronger when workers are getting paid good wages and good benefits.  That’s what I believe.  (Applause.)  That’s what I believe.  I believe the economy is stronger when collective bargaining rights are protected.  I believe all of us are better off when we’ve got broad-based prosperity that grows outwards from a strong middle class.  I believe when folks try and take collective bargaining rights away by passing so-called “right to work” laws that might also be called “right to work for less,” laws -- (applause) -- that’s not about economics, that’s about politics.  That’s about politics.

That’s why we’ve reversed harmful decisions designed to undermine those rights.  That’s why we passed the Fair Pay Act to help stop pay discrimination.  That’s why we’ve supported Davis-Bacon.  That’s why we reversed the ban on Project Labor Agreements, because we believe in those things as part of a strategy to rebuild America.  (Applause.)

And as long as I’m your President, I’m going to keep it up.  (Applause.)  I am going to keep it up -- because the right to organize and negotiate fair pay for hard work, that’s the right of every American, from the CEO in the corner office all the way to the worker who built that office.

And every day, you’re hearing from the other side whether it’s the idea that tax cuts for the wealthy are more important than investing for our future, or the notion we should pursue anti-worker policies in the hopes that somehow unions are going to crumble.  It’s all part of that same old philosophy -- tired, worn-out philosophy that says if you’ve already made it, we’ll protect you; if you haven’t made it yet, well, tough luck, you’re on your own.

That misreads America.  That's not what America is about.  The American story has never been about what we can do on our own.  It’s about what we do together.  In the construction industry, nobody gets very far by themselves.  I'm the first to admit -- I’ve got to be careful here because I just barely can hammer a -- (laughter) -- nail into the wall, and my wife is not impressed with my skills when it comes to fixing up the house.  (Laughter.)  Right now, fortunately, I'm in a rental, so -- (laughter) -- I don't end up having to do a lot of work.  (Laughter and applause.)

But here is what I know about the trades:  If you’ve got folks who aren't pulling together, doing their own thing, things don’t work.  But if you've got enough people with the same goal, pulling in the same direction, looking at the same game plan, you can build something that will stand long after you're gone.  That's how a Hoover Dam or a Golden Gate Bridge or a Empire State Building gets built -- folks working together.  We can do more together than we can do on our own.

That's why unions were built -- understood workers on their own wouldn't have the same ability to look after themselves and their families as they could together.  And what’s true for you is true for America.  We can’t settle for a country where just a few people do really well and everybody else struggles to get by.  We've got to build an economy where everybody has got a fair shot, and everybody does their fair share, and everybody plays by the same set of rules.  We can’t just cut our way to prosperity.  We need to fight for an economy that helps everybody -– one built on things like American education, and American energy, and American manufacturing, and a kind of world-class infrastructure that makes it all possible.

Now, these have been some tough years we've been in.  I know a lot of your membership can get discouraged, and they can feel like nobody is looking out for them, and they can get frustrated and they -- sure, it's easy to give up on Washington.  I know that.  But we've been through tougher times before.  Your unions have been through tougher times before.  And we’ve always been able to overcome it, because we don't quit.

I know we can get there, because here in America we don't give up.  We’ve been through tougher times before, and we’ve made it through because we didn't quit, and we didn't throw in the towel.  We rolled up our sleeves.  We fired up our engines, and we remembered a fundamental truth about our country:  Here in America, we rise or fall together as one nation, as one people.

It doesn't matter where you come from, what you look like, what your last name is.  It doesn't matter whether your folks came from Poland, or came from Italy or came from Mexico.  One people -- strong, united, firing all cylinders.  That's the America I know.  That's the America I believe in.  That's the America we can rebuild together.  (Applause.)

So if you’re willing to join us in this project of rebuilding America, I want you to know -- when I was running for this office, I told people I’m not perfect.  I’m not a perfect man.  Michelle can tell you that.  (Laughter.)  I’m not a perfect President.  But I made a promise I’d always tell you where I stood.  I’d always tell you what I thought, what I believed in, and most importantly I would wake up every single day working as hard as I know how to make your lives a little bit better.

And for all that we’ve gone through over the last three and a half, four years, I have kept that promise.  I have kept that promise.  (Applause.)  And I’m still thinking about you.  I’m still thinking about you, and I still believe in you.  And if you join me, we’ll remind the world just why it is that America is the greatest nation on Earth.  (Applause.)

Thank you.  God bless you.  God bless the United States of America.  (Applause.)


11:03 A.M. EDT

Bob Lutz: Labor Rules Are Payback for Unions

Published: Tuesday, 24 Apr 2012 | 9:06 PM ET
By: Bruno J. Navarro

Biden Blasts 'Romney Rule'

Fri 13 Apr 12 | 07:22 PM ET
Debating whether VP Biden is deliberately going after Mitt Romney on his taxes and business success, with Keith Boykin, former Clinton White House aide; Robert Costa, National Review political reporter; and Matt Lewis, Daily Caller senior contributor.

A federal rule that fast-tracks elections to unionize workers is nothing more than a political payback to organized labor, former General Motors Vice Chairman Bob Lutz said Tuesday.

“I think, look, the whole thing was voted in by a Democratic-controlled Senate. This is the Democratic Party paying back the unions for their support,” he said on CNBC’s “The Kudlow Report.”

Lutz said it wasn’t a surprise.

“Do we like it? No. Do we think it’s a good thing? No,” he said. “Will it make America more competitive? No.”

Earlier, the U.S. Senate rejected a move to overturn the new rules set by the National Labor Relations Board. The measure, proposed by Sen. Mike Enzi, R-Wyo., would have thrown out rules to make it easier to unionize – and tougher for companies to dissuade workers from doing so.

Assured a White House veto and an uphill battle in the Democratic-controlled Senate, the anti-union measure failed along party lines, 45 to 54.

(Monday on “The Kudlow Report,” Home Depot co-founder Bernie Marcus criticized the NLRB rules.)

Greg Junemann, president of the International Federation of Professional and Technical Engineers and a labor organizer, said the NLRB rules were absolutely necessary, saying the process was “completely slanted in favor of business.”

“It does call for a faster election. Faster elections are needed,” he said. “Once the board rules, OK we’re going to have an election date, right now businesses have the right to file appeal after appeal after appeal.

“The delays are endless. This is the smart way to do this. This is what’s fair for employees,” he said.

Lutz argued that workers don’t want unions.

“The fact is, many workforces in the United States, once they understand the full ramifications of unionization, elect not to have a union,” he said. “The UAW has been significantly unsuccessful in unionizing the Japanese and German transplants in the southern states."

“So, you can hear the rhetoric all you want, the bottom line is this is the Democratic Party paying the unions back, and trying to foster increased unionization in American industry,” he said.

Junemann said it was an issue of fairness.

“What’s happening here is that Congress needs to try to level the playing field on behalf of workers,” he said. “If workers decide they don’t want a union, that’s their right.”

Home Depot’s Bernie Marcus Blasts Obama Record

Published: Monday, 23 Apr 2012 | 9:09 PM ET
By: Bruno J. Navarro
What businesses need right now is for the government to eliminate regulations and simplify the tax code, Home Depot  co-founder Bernie Marcus said Monday.

“I think that this administration is not friendly to business. I don’t mean they’re not friendly. They just don’t understand what makes business work,” he said on CNBC’s “The Kudlow Report.”

Marcus, who is retired from the building supply chain and now runs his own foundation, proposed a hands-off approach. 

“The entrepreneurs who built the free enterprise system, who built the middle market in the United States without government help basically don’t want government help. They want to be left alone. Cut out the regulations. Let them understand what the tax situation’s going to be. Let them understand what Obamacare is going to cost them. And let them go on and create jobs and hire the people who are unemployed,” he said. 

In a past CNBC appearance, Marcus made headlines for a scathing critique of the Obama administration, claiming that Democrats are out of touch with the private sector. He also took aim at Republicans — "Some are crazy." — Goldman Sachs and the rest of Wall Street, whose work in derivatives he said has hurt the country. 

On Monday, he took a more measured tone. 

NLRB's 'Ambush' Elections
Tue 24 Apr 12 | 07:31 PM ET
The National Labor Relations Board got the green light today by the Senate to allow so-called ambush union elections in 10 days. Bob Lutz, former GM vice chairman, and Greg Junemann, IFPTE president, discuss.
“We saw the statistic that 50 percent of graduates with MBAs are unemployed, are working at jobs that they don’t want,” he said. “This is not a great economy. This president has not created jobs. And you can spur all you want, it just hasn’t happened.” 

Former Labor Secretary Robert Reich agreed with Marcus — on one point.

“It’s not a great economy,” he said. “But I don’t know what exactly Bernie Marcus is complaining about. From a business perspective, this economy has turned way up, profits and earnings, share prices. I mean, if I were the head of a business, I’d be pretty happy with Obama. The people who are unhappy — and I they have a right to be unhappy about the economy — are a lot of working people who have seen their wages go down not because of Obama but because a lot of the ways in which big businesses have created more profits is by cutting payrolls.” 

Reich, who served in the Clinton administration and is now a professor of public policy at the University of California, Berkeley, said that headwinds were coming from elsewhere. 

“The real challenge ahead is aggregate demand. There just is not enough of it,” he said. “You’ve got Europe, you’ve got China shrinking in terms of slowing down, and you also have at the same time American consumers dipping into their savings, going deeper into debt. I worry, frankly, about a slowdown before Election Day.” 

Marcus said that the economic recession forced companies to make cuts that are still being felt. 

“When the economy tanked, they learned to live with less people,” he said, adding that the only growth is happening overseas. 

Companies, Marcus added, “have lots of money, and they are producing great profits, but they are not hiring people, and they are not hiring people because of the instability of the economy that they’re looking at.” 

Marcus also cited the rising cost of fuel, including gasoline prices. 

Asked by host Larry Kudlow whether he blamed President Obama for the economy, Marcus qualified his response. 

“Hey, listen. Things happen. I can’t blame everything that happened on him. I mean, he’s inherited some things in 2008,” he said. “But my God, he’s been in the job for three years. He hasn’t made a dent in it, and the policies he’s pursuing now don’t look good for the future.”
In particular, he blasted an effort by the National Labor Relations Board to inform employees of their rights — a rule blocked by a U.S. Court of Appeals last week — as “making it simple for unions to organize.” 

Reich challenged that view of labor.

“We’ve had about 30 years after the Second World War when unions got up to about roughly 34 percent of the total workforce, and everybody grew and everybody did well. And we grew on average faster on average than we’ve grown since,” he said. 

“One of the problem is consumers don’t have money in their pockets. They don’t have money in their pockets because they don’t have bargaining leverage. They don’t have bargaining leverage partly because they don’t have unions or anybody else sticking up for them. Why assume that unions are a zero-sum game and bad for business? That’s not been the history of America.” 

Marcus called Reich’s argument “wrong.”

Global Policy Shifting From Austerity Toward Growth

Published: Sunday, 29 Apr 2012 | 5:09 PM ET
By: Reuters

Growth in the United States is softening, the slump in Europe deepening and Britain has fallen back into recession, heightening concern that efforts to cut budget gaps could go too far.
Fiscal austerity has been the mantra on both sides of the Atlantic for the past two years. The tide now appears to be turning.

In Europe, socialist Francois Hollande, who is favored to win the run-off election for the French presidency on Sunday, has laid out a growth agenda. Italian Prime Minister Mario Monti, after pushing through tough budget reforms, is calling on the European Union to back a growth plan.

European Central Bank  President Mario Draghi wants a "growth compact" for Europe to complement its fiscal compact, an issue he is likely to be quizzed on at his monthly news conference on Thursday.

Even Germany, fast losing allies for its harsh fiscal medicine after the Dutch government fell over budget cuts, is modifying its tone. "We are not the (fiscal) consolidation Taliban," German Deputy Finance Minister Thomas Steffen said at a conference last week.
In the United States too, there are tentative signs the fiscal debate is poised for recalibration.

"Harsh austerity was all the rage, and it drove the (U.S.) Republican Tea Party landslide in 2010 and became the dominant prescription in Europe," said Greg Valliere, political economist at Potomac Research Group.

"Now it's in retreat on both sides of the Atlantic."

Analysts point to U.S. Senate Republican leader Mitch O'Connell's decision to withhold his support for the tough budget adopted by the Republican-controlled House, which would deepen domestic spending cuts beyond levels agreed in torturous deficits talks last August.

A new poll hints at a waning of support for the Tea Party, the driving force behind deep budget cuts. An ABC News/Washington Post poll on April 15 found that Americans by a broad 23-point margin say the more they hear about the Tea Party, the less they like it. Its support has slipped to 41 percent of Americans from 47 percent last September, the poll found.

U.S. Federal Reserve Chairman Ben Bernanke last week issued his sternest warning yet over the risks of sharp fiscal contraction. Numerous tax cuts are due to expire and budget cuts will kick in at year end, enough to withdraw $500 billion from the economy. Analysts say that would cut 3 to 5 percentage points from growth and tip the economy back into recession.

"There is, I think, absolutely no chance that the Federal Reserve could or would have any ability whatsoever to offset that effect on the economy," Bernanke said.

Although it is too early to tell exactly how the U.S. budget debate will play out in November's elections, analysts say an awareness is gradually building in both Europe and the United States that too-fast budgetary consolidation could actually damage the goal of debt reduction.

Investors also may be willing to give governments leeway.

"Politicians are nervous that loosening the fiscal brake will be taken negatively by markets. But we have reached the point where the contrary is true," said Martin Lueck, an economist at UBS Investment Research.

"If there is a realistic stance of supporting growth on the one hand and fiscal consolidation on the other hand, it will be well received," he said.


Paul McCulley, former managing director at the giant bond fund PIMCO and now at the think tank Global Interdependence Center, says indebted Western nations are running full force into a liquidity trap. Households, corporations and governments are deleveraging at the same time, sucking all the drivers of growth from the economy and worsening budgets.

No matter how much money a central bank pumps in to hold interest rates low and ease deleveraging, it isn't enough to brake the vicious downward cycle as governments cut budgets, he argues.

"Fiscal austerity does not work in a liquidity trap and makes as much sense as putting an anorexic on a diet. Yet diets are the very prescription that fiscal austerians have imposed," he said in a paper delivered last month at the Bank of France.

“There is, I think, absolutely no chance that the Federal Reserve could or would have any ability whatsoever to offset that effect on the economy.”

Ben BernankeChairman, Federal Reserve
John Maynard Keynes called this the paradox of thrift - by paying off debt and saving more, growth weakens and budget deficits and debt levels worsen.

The answer, said McCulley, is for governments to spend more, supported by a central bank that buys up government debt. This will reflate the economy, restore demand and avert depression, which in turn will allow government debt to be paid down.

The U.S. economy has not reached the point of ever-worsening deficits. But first-quarter GDP growth slowed to a 2.2 percent annual rate from 3.0 percent in the fourth quarter. A taste of whether the slowing continued into the second quarter will come in the April jobs report on Friday.

While analysts forecast 170,000 new jobs added, a gain from 120,000 in March, that would be down from the 246,000 monthly average seen from December to February. But seasonal quirks and warm winter weather may depress the number.

A national factory index and U.S. car sales data on Tuesday are expected to show steady growth, which would support the Fed view that the U.S. economy is gradually firming.

Romney campaigns with Ayotte in NH amid short list speculation


PORTSMOUTH, NH -- Mitt Romney's short list of vice presidential candidates is expected to include 10 to 15 names, a source with knowledge of the deliberations said Monday as one of those potential candidates, Sen. Kelly Ayotte, joined Romney on the campaign trail this morning.
Making his first appearance in the Granite States since having assumed the role of the presumptive Republican nominee, Romney was flanked by Ayotte, a longtime ally who's now receiving new scrutiny as a possible contender for the No. 2 spot on the GOP ticket this fall.
A freshman senator and former New Hampshire attorney general, Ayotte, who endorsed Romney last November, toured the port here with Romney this morning, and introduced him, telling a crowd of supporters and local fisherman "help is on the way" under a Romney presidency.
The stop was sure to stoke speculation due to its spot in a series of campaign stops Romney has made with potential candidates to round out his ticket. He campaigned heavily in Wisconsin with Rep. Paul Ryan, and Florida Sen. Marco Rubio, another vice presidential favorite, appeared with Romney last week in Pennsylvania.
"There's a whole ledger of items you check off, and Senator Ayotte is a strong candidate on the list," Former New Hampshire Governor and White House Chief of Staff John Sununu told reporters. "She knows how to cut budgets. She knows that you cut spending instead of raising taxes to cut budgets. She's a hard campaigner. She's earned the respect of her colleagues on both sides of the aisle in Washington."
Sununu, whom Romney described in his remarks as a "bulldog" for the campaign, played down the notion that today's appearance in Portsmouth constituted an audition for Ayotte. He pointed to her previous appearances and work for Romney, and the former New Hampshire governor suggested that Romney would continue to appear with GOP heavyweights in swing states.
But Sununu also raised eyebrows when he suggested that the vice presidential search committee, being led by longtime Romney aide Beth Myers, would be working with an extensive short list of prospective running mates.
"I know that the bowl has about 19 or 20 little folded pieces of paper in it, and they keep shaking the bowl," Sununu said.
A source with knowledge of the deliberations thus far called that number "a little high" and said the working list contained somewhere around ten to fifteen names instead.
Ayotte might earn her way onto that list because of her experience in law enforcement and background in the swing state of New Hampshire. Adding a woman to the ticket might help Romney to close the gap with women voters, as well.
But, even as Sununu acknowledged, Ayotte has little relative experience on the national stage -- something that could open her up to attacks on her inexperience.
But for all the speculation surrounding the second spot on the GOP ticket, the man at the top remained almost exclusively focused on the economy in his remarks today, accused the president and his campaign of engaging in "silliness" and distractions, and saying he would remain focused on "helping those that need help the most."
"I wish the president would start talking about the economy and stop trying to divert with all the silliness day in and day out," Romney said. "Let’s focus on what people care about, and the issue people care about is the one that is effecting us, which is their pocketbooks. The gasoline prices. The cost of higher education. The need for more jobs. The need for better incomes."

The Blind Spot in Romney's Economic Plan

Jonathan Cohn
April 29, 2012 | 11:58 pm

Editor's Note: Today TNR begins a series of items examining the details of Governor Mitt Romney's policy agenda. 

First up is the economy—specifically, how Romney proposes to boost growth and employment. 

Later installments will look more closely at Romney's plans to change the tax code and his ideas about organized labor, as well as other proposals including health care and energy. 

Will anybody pay attention to policy quesitons like these? We hope so. Substance doesn't always get the attention it should in presidential campaigns. But in this election, the differences between the candidates seem more stark, and more important, than at any time in recent history.

* * *
What Romney would do: Cut taxes and regulations, shrink government, undo pretty much the entire Obama agenda, and stick it to labor.

The Good: Using independent boards of experts to assign federal research dollars. Allowing more highly skilled immigrants to work and stay in the country. Getting tough with China, assuming it’s done right.

The Bad: Requiring congressional approval of all “major” regulations, apparent reductions in funding of productive investments like education and infrastructure.

The Ugly: Capping total federal spending at 20 percent of GDP, with 4 percent reserved for defense—a potentially devastating reduction in government services that, if implemented swiftly, could also deal a serious economic blow. Then again, his numbers don’t really add up, so who knows what he’d really do?

The Verdict: The focus on lower taxes and regulation will appeal to conservatives who see those as major impediments to long-term growth. The lack of investment in education, infrastructure, and technology will worry everybody else. In some ways, the real story is what’s not here: Proposals designed specifically to boost growth in the short run, despite still-high unemployment.

They Said It: “Our best hope—and not an entirely implausible one—is that presumptive-nominee Romney has a secret plan for the economy. If he doesn’t, we may be in for years’ more stagnation.” - Josh Barro, in the Guardian

* * *
If Mitt Romney has his way, the general election will be just like the one Bill Clinton won in 1992: It’ll be about the economy, stupid. And you can understand why. A recovery is underway but it’s tentative and weak. Large numbers of Americans remain out of work, not to mention the many more who have jobs but still struggle to pay bills. Romney’s pitch to these people is simple and compelling: Hire me, and somebody will hire you.

But how would he do that? It’s a difficult question to answer, in part because Romney’s 160-page manifesto, “Believe in America,” is less specific than you might think. It spends a lot of time offering a story about why the country is in trouble, but only a little on what Romney would do about it. As Reason’s Peter Suderman observed, “it’s sufficiently thorough in its background analysis, yet aspirationally vague when it comes to proposing action items.”

Uploaded by on Nov 21, 2011
Mitt Romney will take a smaller, simpler, and smarter approach to government. We have a moral responsibility not to spend more than we take in. It's high time to bring those principles of fiscal responsibility to Washington, D.C.

More important, Romney has made some promises that don’t seem possible to fulfill. A central theme of his economic policy is a promise to reduce federal spending dramatically, quickly capping federal spending at 20 percent of GDP and setting aside 4 percent of GDP for defense spending—numbers that would, as the Center on Budget and Policy Priorities has observed, imply a downsizing of government even more dramatic than the one House Budget Chairman Paul Ryan has endorsed.

But if you look past those contradictions and omissions (don't worry, I'll come back to them another day) you will see the outlines of a familiar conservative agenda that, most likely, would guide Romney’s decisions about economic policy. 

Reducing regulation? Check.  

Lowering taxes? Check.  

Shifting authority from Washington to the states? Check.

Supposedly this will boost investment and business confidence, unleashing prosperity. If that sounds like trickle-down economics all over again, that’s because it is.

Romney's agenda does have one surprise, however. For all of his talk about how much people are struggling right now, he’s not proposing ideas designed specifically to improve the economy in 2012 or 2013. His premise is that the long-term agenda will take care of the short-term problems—and that attempting to do more right away, as President Obama has proposed with his own jobs bill, will only make matters worse.

* * *

How you feel about this agenda will depend, to great extent, on what you think of what’s become mainstream economic thinking among conservatives.

Consider Romney’s proposal to replace the existing unemployment insurance program with a system of private accounts, into which workers would deposit money they could withdraw for retraining or just sustaining themselves during periods of joblessness. Conservatives have long argued that unemployment insurance discourages the jobless from finding work; according to this argument, personal accounts would remove that disincentive while enabling more individuals to take advantage of training they would find useful. Liberals question the evidence behind the conservative critique and worry that a system of private accounts would be less reliable, leaving many more unemployed workers in serious financial difficulty.

It's the same basic story with the broader ideas in Romney’s agenda. Do you think taxes retard growth more than, say, an undereducated workforce? Do you think Bush-era policies did more to cause our economic problems than Obama-era polices? Etc. And while I'm not precisely qualified to answer those questions, I know a few people who are.

One of them is Jesse Rothstein, an economist at Berkeley, who wrote a widely-cited paper testing the hypothesis that unemployment insurance discourages people from seeking jobs. His method was to study extensions of unemployment insurance to 99 weeks during this recession. His conclusion? The overall affect on unemployment was to raise it by no more than one-tenth of one percent—in other words, it had virtually no effect.

Another person qualified to answer these questions is Paul Krugman, who noted recently that "the economic record certainly doesn’t support the notion that superlow taxes on the superrich are the key to prosperity. During that first Clinton term, when the very rich paid much higher taxes than they do now, the economy added 11.5 million jobs, dwarfing anything achieved even during the good years of the Bush administration."

MIT's Peter Diamond and Berkeley's Emmanuel Saez take the same essential view. Writing in the Wall Street Journal, they recently observed that "In the postwar U.S., higher top tax rates tend to go with higher economic growth—not lower." Yes, they said, taxes can slow growth. But they'd have to be a lot higher than they are now and a lot higher than virtually anybody is currently proposing.

Not everybody agrees, of course. The Diamond-Saez op-ed provoked a sharp response from the Heritage Foundation's J.D. Foster and Curtis Dubay, among others. "Of course higher taxes would slow economic growth," they wrote. "There are no ifs, ands, or buts about it." But the basis of their argument is that the rich today bear a larger share of the total tax burden, which merely reflects the fact that they're making more money relative to the rest of the population. That's one reason I'm inclined to agree with Jared Bernstein, the Obama Administration veteran who is now with the Center on Budget and Policy Priorities. Via e-mail, he wrote:
I don't expect a lot of specificity from a presidential candidate. I'm looking for a framework, a road map. And it seems undeniable that Gov Romney's road map leads this economy right back over the supply-side, trickle-down, deregulatory cliff from which we're still climbing back.
* * *
To be clear, not quite everything in the Romney economic agenda breaks down along such clean left-right lines. Romney says, for example, that the government should channel its research in energy technology through programs such as “ARPA-E.” That’s a reference to the Advanced Research Projects Agency-Energy, which operates more or less as the government’s in-house venture capital firm on green investment. It’s a knockoff of a similar agency that’s operated for decades within the Pentagon, spawning research that led to global positioning devices and the internet, among other things. (Michael Grunwald has written about this for Time magazine.) President Bush signed the law creating it, but it was President Obama who funded the program and has (along with Vice President Biden) been its most vocal champion.

Then again, whether Romney would also put money into research remains very much an open question, given his determination to radically reduce government spending overall. Romney has also backed off one of his promising promising proposals—linking the minimum wage to inflation, so that it rises automatically with the cost-of-living—although he hasn’t, as best as I can tell, specifically repudiated it.

But let's get back to what Romney’s agenda doesn’t say. Even some writers and thinkers who support the general thrust of Romney’s low-tax, anti-regulatory agenda worry that it doesn’t explicitly address the problems that led to the financial crisis of 2008 and are still hampering growth now. Housing is the most obvious example.  Lots of people are struggling with mortgages they can't pay. Most experts agree this is one reason the economy isn't growing faster—and that the Obama Administration still hasn't done (nearly) enough to fix the problem. But Romney's manifesto is virtually silent on the issue, as Josh Barro observed in the Guardian last fall:
while Romney’s plan has an admirable quantity of detail, it does not contain all the right details. Many of the ideas in Romney’s plan, from tax reform to free trade to revamping job training, are good. But they would also have been good ideas in 2007. What Romney’s plan lacks are ideas that relate to the housing bubble and the prolonged economic crisis that it sparked. Amazingly, none of Romney’s 59 economic proposals addresses housing policy or monetary policy.
David Frum, the former Bush speechwriter, was similarly dismayed by the lack of explicit focus on today's jobless:
A President Romney would take office in January 2013, at a time when even on a best-case scenario more than 10 million Americans will still be unemployed or under-employed, more than half of them for a very long time. What to do for them? On this urgent topic, the plan falls dismayingly quiet. Even if Romney’s policies do raise the long-term growth rate of the United States beginning sometime about 2014, unemployment won’t return to normal levels until a Romney second term. That portends almost a decade of very high unemployment.
I put these criticisms directly to Glenn Hubbard, the Columbia University economist and a top adviser to Romney. Via e-mail, he (graciously) responded that Romney’s focus on bolstering the economy over the long run, by shrinking government and reducing “regulatory uncertainty,” is actually the best way to improve the economy in the short run, as well:
Here your question appears to be based on an idea that the "short run" and the "long run" are different subjects. That is another underpinning of recent policy errors. Getting the long-term right (e.g., a credible and stable path of tax rates instead of periodic Taxmageddons, entitlement reform instead of a spending binge, and regulatory stability instead of regulatory uncertainty) would encourage investment and consumption today. Such long-term action would also give breathing room for properly done short-run action. Hence, it is no accident that Romney has focused on the right long-term policy. If you want to take a look at the real-world consequences of policy uncertainty, you might consider the research by Nick Bloom (Stanford) and Steve Davis (Chicago), which concludes that returning to pre-financial-crisis levels of policy uncertainty would lead to 2.3 million additional jobs over 18 months.
* * *
There's a certain logic, or at least a consistency, to this argument. Hubbard is among those who have argued that the Recovery Act was a failure and that new efforts at stimulating growth, of the sort President Obama has been promoting since last fall, will fare no better.

But most independent forecasters, as well as respected non-partisan authorities like the Congressional Budget Office, take a different view. They believe the Recovery Act kept the recession from getting much worse.

It may have been too small,

it may have had some design flaws, but overall

it created jobs and probably quite a lot of them.

That was also the consensus opinion of nine leading studies that Dylan Matthews surveyed for the Washington Post last year.

Romney's (and Hubbard's) take on regulation also seems to be a minority view. Although even many liberals would acknowledge that excessive regulation can spook business and impede growth, even conservative Bruce Bartlett, who helped craft economic poilcy in the Reagan and George H.W. Bush Administrations, has said evidence that regulation as a primary cause of our current problems is "very weak." A review of government data by Bloomberg News found that “Obama’s White House has approved fewer regulations than his predecessor George W. Bush at this same point in their tenures, and the estimated costs of those rules haven’t reached the annual peak set in fiscal 1992 under Bush’s father.” (See the graph at the bottom of this item, put together by my colleague Thomas Stackpole.)

It's possible that Romney and his advisers simply disagree. To some extent, I'm sure, they do. But I suspect something else is also going on here: Romney has driven himself into an ideological cul-de-sac.

In order to win the election and, more immediately, to satisfy the extremist instincts of Republican Party primary voters, Romney has been disavowing not just the Recovery Act but the Keynesian logic behind it (i.e., that expansionary fiscal policy can boost growth during a downtown). Like the rest of the Republican field, he’s been promising to focus immediately on deficits, starting with a 5 percent reduction in discretionary spending. Presumably they would come on top of cuts already signed into law.

Romney parses his statements carefully (something else he seems to have learned from Clinton) and, as Krugman has observed, Romney has on occasion acknowledged that too much focus on austerity might be damaging to growth. That suggests that, like Hubbard and fellow Romney advisor Gregory Mankiw, Romney doesn't completely reject the premises of Keynesian economics. But having helped turn “stimulus” into a bad word, he’s implicitly taken a lot of policy options off the table. And that may be true even of initiatives that wouldn’t look just like the Recovery Act. Focusing on housing and monetary policy, Barro's proposed alternatives, are as anathema on the right these days as stimulus spending and health care reform.

It’s possible Romney’s blueprint for the economy is more about posturing than policy-making—that he actually has a “secret plan,” as Barro wrote, to give the economy immediate helps once he gets to office. And maybe, just maybe, he’ll start to introduce that plan soon, now that the primaries are over. But would Romney actually move on such plans in office? And if he did, would they really make a difference? On both counts, there's reason to be skeptical.

Update: I modified the wording in a few places and introduced a few more cites to actual economists, who surely are more qualified to make these judgments than I am.

More From this Author

Commentary: Why Are We So Stupid?

  I took the test, it was simple.  I missed only one.

Published: Monday, 23 Apr 2012 | 4:03 PM ET

By: John Carney
Senior Editor, CNBC

If Barack Obama and Mitt Romney hope that Americans will make well-informed decisions when it comes time to vote in November, they’ve got their work cut out for them.

A recent study from the Pew Research Center found that 47 percent of Americans didn’t know which political party supports reducing the size and scope of the federal government. Forty-two percent didn’t know which party usually supports reducing military spending. 

Thirty-nine percent didn’t know which party generally favors restrictions on abortion.

Pew asked 1,000 adults a series of very simple multiple choice questions about politics. All the questions had followed almost the same format: Is this policy or person or symbol more associated with the Republican Party or the Democratic Party?

You can take an online version of the Pew test yourself. It’s only 13 questions, and you’re likely to find that you score in the top percentiles. I got all the questions right — not because I know a lot about politics but because the questions are really, really easy. 

Once you get past the veneer good news — the majority of Americans can correctly identify the relative positions of the Republicans and Democrats on issues of the day — the results are pretty jarring. There’s a substantial ignorant minority on almost every issue. 

Thirty-five percent of Americans correctly answered only six or fewer questions, which is worse than random guessing, as blogger Steve Sailer points out.

Some of the intersections of ignorance and demographics are quite surprising. Forty-four percent of women, for example, did not know Nancy Pelosi is a Democrat (fewer men, 33 percent, got this wrong). Fifty percent of women didn’t know what John Boehner’s party. (For the benefit of those who got it wrong, including 40 percent of men, the answer is Republican.)
Overall, men scored better than women, Republicans better than Democrats, older people better than young people. 

There are some interesting exceptions. For example, the 18-29 cohort scored better than older folks when it came to knowing the Democratic party is more aligned with cuts in defense spending, creating a “path to citizenship” for illegal aliens and expanding the rights of gays of lesbians. 

One way of reading these results is as an indicator of what people care about. You probably know a bit more about the issues that concern you. If that’s right, younger people are far more engaged by the issues of defense, immigration and gay rights, and less engaged by partisan identifications. People ages 50 and up are engaged by taxes and partisanship (70 percent correctly identified the party affiliation of Pelosi, 72 percent correctly identified which party is known as the G.O.P.). 

As an employee at a cable news stations, I should point out that it’s not clear that my colleagues do much to ameliorate ignorance. Thomas Edsall at The New York Times recently reported on the top 10 television shows that appeal to Democrats versus those that appeal to Republicans

The Democratic shows were: “Washington Week,” “Tavis Smiley,” “Late Show with David Letterman,” “The View,” “PBS NewsHour,” “NOW” on PBS, “House of Payne,” “ABC World News Now,” “60 Minutes” and “Insider Weekend.” That’s a pretty heavy roster of public policy and news oriented shows. 

The top-10 Republican shows were “The Office,” “Rules of Engagement,” “The Mentalist,” “New Yankee Workshop,” “The Big Bang Theory,” “Castle,” “Desperate Housewives,” “Dancing With The Stars,” “The Biggest Loser” and “Grey’s Anatomy.” Not one public policy or news oriented show was on the list. 

Republicans, however, outscored Democrats on every question on the Pew Test other than the one about defense spending. Perhaps this makes sense.
Democrats may watch a lot of news and public policy programming in an attempt to overcome their ignorance. 
Republicans already know enough, so they can spend their time watching stars dance. 

 Pew Research Center 

The News IQ Quiz

Find out how your score compares with other Americans who took the test in our national telephone survey:

Overall Score

How you did, question by question (below)

Demographic breakdowns by question

You got 12 questions correct, along with 83% of the public.
 The quiz was made up of 13 questions excerpted from the larger Knowledge Survey. Your responses do not affect the survey results.

Two horse race in final stretch for Egypt presidency

Published: Monday, 30 Apr 2012 | 3:02 PM ET

CAIRO (Reuters) - Egypt enters the last stage of its first democratic presidential race on Monday with its field narrowing to a two-horse race between the urbane former head of the Arab League and a charismatic Islamist medic jailed for years under Hosni Mubarak.

A poll published in state-run al-Ahram daily on Monday showed veteran diplomat Amr Moussa in the lead, followed by Abdel Moneim Abol Fotouh, who has emerged in recent days as the leading Islamist candidate after securing the support of the ultra-conservative Salafist movement.

Both men are well ahead of 11 other candidates and, for now, look the most likely to face each other in a second round. That would give Egyptians a stark choice about the future of the Arab world's most populous state.

Moussa, 75, served for a decade as Mubarak's foreign minister before taking over the leadership of the Arab League, and must win over voters skeptical of the old elite.

Abol Fotouh, 60, grew to prominence in the 1970s as a student activist opposing Egypt's military rulers and was jailed in the 1990s as a member of the Muslim Brotherhood, which he split from last year. He needs to maintain the support of Islamists, while reassuring secular Egytians he will not impose a radical transformation on society.

Monday marked the official start of campaigning for the election, although candidates have been canvassing voters for months. A first round will be held on May 23-24, followed by an expected second round run-off in June.

Though they appear to be the clear leaders, it is still not certain Moussa and Abol Fotouh will make it to the second round: many voters are undecided and polls have no track record of accuracy. The Muslim Brotherhood has a candidate challenging Abol Fotouh for Islamist votes, and can never be written off.

"Nobody can talk about forecasts because in Egypt there are no scientific opinion polls. They are all impressions," senior Brotherhood official Essam El-Erian told reporters.

The election could prove to be one of the most important turning points in the Arab Spring of revolts that swept across the region since last year, bringing down the leaders of Tunisia, Libya and Yemen as well as Egypt's Mubarak.

Egypt's revolution has been an unfinished project. Since Mubarak was swept out by popular protest, generals have ruled uneasily, their tenure punctuated by bouts of violence, political quarrels and spiraling economic decline.

In recent days, unrest has rattled ties with Saudi Arabia, once a close ally. The West is closely watching the race in the first Arab state to make peace with Israel.


Moussa has generally led in the polls till now, benefitting from better name recognition than others. Abol Fotouh's growing appeal could make the race tighter. Some may yet be swayed by the unprecedented spectacle of a televised debate between the top candidates, the first of which is scheduled for Thursday.

Islamists have been on the rise since Mubarak fell. The Muslim Brotherhood, banned under Mubarak, won parliamentary elections four months ago, followed by the Salafists, who call for an even stricter reading of Islamic law.

Abol Fotouh broke away from the Muslim Brotherhood last year when it initially said it would not field a candidate.

He has solidified his position as the leading Islamist in the race by securing the backing of the ultra-conservative Salafists, but portrays himself as a moderate, keen to reassure secular Egyptians and Christians they have nothing to fear. He has played up issues of economic and social justice and promised to increase health and education spending.

"It's the Egyptian mainstream I am banking on, the ones I have been working to win over since I started my campaign, who make up more than 90 percent of Egyptians ... who understand sharia (Islamic law) correctly," he said in an April 23 television interview. "Wherever we look out for people's interests, we serve them, we are implementing God's law."

Abol Fotouh long clashed with the Brotherhood's leadership by advocating a more open approach to Egyptians from different social, political and religious backgrounds. Leading Salafis have acknowledged ideological differences with him, but have been drawn to a charismatic figure whose break with the Brotherhood gave him credibility as an independent voice.

Some liberals and more secular-minded Egyptians have also rallied behind him. Unlike Moussa, he has no links to Mubarak's era. But many Egyptians remain suspicious that he still holds ties to the Brotherhood that could surface in his presidency.

The Brotherhood reversed its decision not to field a candidate, but its first choice was barred from standing. Its replacement candidate, Mohamed Mursi, has a low profile so far and starts well behind in polls, but stands yet to gain from the support of the Brotherhood's unrivalled grassroots organization.

Senior Brotherhood official Mahmoud Ghozlan said rank and file Salafis could still back Mursi, even though their leaders picked Abol Fotouh.

As the largest group in the new parliament, the Brotherhood has clashed with the military rulers over who should appoint the cabinet, and with other Islamists and liberals over the make-up of a 100-member panel drafting a constitution, now stalled.


Moussa, who became popular with ordinary Egyptians as head of the Cairo-based Arab League, has to fight accusations by Islamists that he is a member of Mubarak's old guard.

"The question is not old guard or new guard. The question is either you were part of the corrupt people that have done a lot of harm to the country or among the people who have worked and done their duty according to the highest standard they could do," Moussa told Reuters last year early in campaigning.

Many Egyptians fondly remember how Moussa regularly criticized Israeli policies and in 2003 warned against the U.S-led invasion of Iraq, saying it would "open the gates of hell."
He benefits from fear of religious radicalism. Asked about his Islamist rivals last week, Moussa said Egyptians should "not get into an experiment that has not been tried before."

While Egypt has limped through the political transition, the economy has taken a nose-dive. Foreign reserves have plunged and talks with the International Monetary Fund on a loan facility seen as vital for restoring confidence have foundered.

Egypt's economic prospects may have taken a further hit on Saturday when Saudi Arabia, a long-time ally of Mubarak and potential donor, recalled its ambassador over protests outside its embassy against the Saudi arrest of an Egyptian lawyer.

"The current crisis between Egypt and Saudi Arabia will be contained, given the solid relations between the two countries which transcend any problem," Planning and International Cooperation Minister Faiza Abu el-Naga said on Sunday.

(Additional reporting by Tamim Elyan, Ali Abdelatti and Tom Perry; Writing by Edmund Blair; Editing by Peter Graff)