Leak Limits Obama’s Egypt Options

U.S. Lowers Egypt Profile as Hardliners Fan Fears of Foreigners

“You don't understand the Egyptian culture and what would happen if I step down now."

-- Egyptian President Honsi Mubarak recounting to ABC News how he answered President Obama’s suggestion that he should step aside before the already-scheduled September elections

The White House is rejecting reports in the New York Times and elsewhere that President Obama is backing an interim government in Egypt led by Vice President Omar Suleiman and blessed by that nation’s military.

Obama aides were quick to say the administration is assessing multiple courses of action and potential outcomes for the stricken American ally, and that the Suleiman option was just one of them.

Any plan that was seen as being pushed by Obama would suffer in Egyptian popular opinion. Growing anti-Western and xenophobic attitudes in Egypt, evidenced in the beatings and arrests of journalists, would mean any American-supported plan could be viewed as an effort to compromise Egypt’s sovereignty.

Suleiman already has an image problem as the former head of President Hosni Mubarak’s detested intelligence forces. So, whoever leaked the Suleiman strategy to the Times did the administration no favors.

The key to any plan is military support.

Today, massive protests calling for Mubarak’s immediate departure seemed to be more than tolerated by the military. The head of the nation’s armed forces, Field Marshal Mohamed Tantawi, appeared in Tahrir Square and troops provided crowd control and weapons checks in an effort to ensure peaceful demonstrations.

If calm can be restored and maintained after two days of fighting between pro-government and anti-government mobs, it will badly erode Mubarak’s last claim on power – that his departure would worsen the chaos.

He told ABC News as much when he said “If I resign today, there will be chaos."

If there is no chaos, Mubarak’s argument will be badly weakened.

As American diplomats and military leaders help forge a new Army-approved interim government to take Mubarak’s’ place, stability in the streets and secrecy about their involvement are crucial.

America Haters Love Cairo Unrest

"If (the Egyptian protesters) are able to push this through then what will happen to the U.S. policies in the region will be an irreparable defeat for America.”

-- Iran's Supreme Leader Ayatollah Ali Khamenei speaking to worshippers at Friday prayers in Tehran

America’s enemies in the Middle East are giddy at the thought of the regime of one of our most stalwart allies in the region – and the most important Arab friend to Israel –- is on the verge of collapse.

The great malefactors of the region, Iran and Syria, both have problems of their own with domestic unrest. Though little has been heard from Iran’s dissidents since the government effectively quelled protest there last year, discontent is presumably still simmering. Syria has also been a target of the same electronically orchestrated youth revolt that is toppling regimes across the region.

Of course, the mullahs of Iran and the Assad regime in Syria have the luxury of not caring too much about international sentiment when they crackdown on dissent. If you’re already a rogue state what’s cudgeling a few dissidents?

Statements of support of encouragement from Damascus, Tehran and their allies in the Palestinian territories and Lebanon – Hamas and Hezbollah – suggest that despite concerns of a larger youthquake, Islamist groups believe they can turn the unrest in Egypt and any subsequent elections to their favor.

Replacing pro-Western leaders in places wracked by revolt – Algeria, Tunisia, Egypt, Yemen, and Jordan – with even coalition governments that include Islamists would be a huge victory for the movement.

The American hope has to be the reforms being instituted in these nations produce results quickly enough and the protesting masses are patient enough that the step toward democracy can produce liberty.

The hope among our enemies is that frustrated citizens will do what they did in Iran and replace corrupt despots with a theocracy rather than embracing Western ideas about individual rights.

The Muslim Brotherhood has deliberately taken a lower profile in recent days, perhaps in an effort to head off international concerns that what may follow Mubarak could be an Islamist regime.

Lobbyists and Dems Team Up to Fight GOP Cuts

“One thing everyone should be able to agree on now is that a rising tide lifts all boats, and that a higher [Labor, Health & Human Services] allocation improves the chances for every stakeholder group to receive more funding."

-- A message from Sen. Tom Harkin, D-Iowa, in an email to lobbyists calling a mass meeting to discuss ways to fight budget reductions

Power Play has confirmed that top Democratic Senate aides and lobbyists held a Jan. 24 mass meeting to plot their strategy for preventing Republican budget cuts.

Though the list of attendees isn’t known, one health-care lobbyist who was invited but did not attend because he was concerned about the “partisan” flavor said he was told by colleagues that “hundreds” of people showed up.

He described the purpose of the gathering as an effort to “fire up the troops” and get the lobbyists for companies and groups that benefit from federal spending on health and welfare programs engaged in the fight against Republican budget cuts.

“There are a lot of influential people in this town who don’t want to see any kind of cuts to Labor and Health and Human Services,” the lobbyist said. “Getting them united behind one message would be very valuable.”

That united message was on display Thursday as House Budget Committee Chairman Paul Ryan, R-Wis., rolled out his plan for the remaining seven months of the budget year.

Ryan’s proposal came in $74 billion under President Obama’s plan for the same period and $598 billion less than what current spending levels would provide.

Judging by the outcry in Democratic quarters on Capitol Hill to Ryan’s plan, the left is pretty well united against Republican spending reductions.

Bernanke Blows Off GOP Debt Plan

“So I would very much urge Congress not to focus on the debt limit as being the bargaining chip in this discussion, but rather to address directly the spending and tax issues that we all have to deal with if we're going to make progress on this fiscal situation."

-- Federal Reserve Chairman Ben Bernanke speaking at the National Press Club

If Ben Bernanke was an unpopular figure in conservative circles before, wait ‘till they get a load of what he said Thursday about raising the federal debt ceiling.

Bernanke was dismissive of Republican vows to not grant President Obama an increase to the nation’s $14.3 trillion credit limit unless it were accompanied by deep, deep cuts in spending.

The Fed chairman called the consequences of not raising the ceiling “catastrophic” and suggested Republicans were irresponsible for resisting an increase. Of course, when Bernanke wants more money, he can just print it. Neither does he have to face voters who hate the idea of more borrowing.

Bernanke’s comments echoed a letter from his former Fed colleague Treasury Secretary Timothy Geithner. In a letter to Sen. Pat Toomey, R-Pa., Geithner said a Republican plan to keep the debt ceiling in place but avoid default by prioritizing government obligations was “unworkable.”

Geithner on Thursday also ratcheted up the pressure on the debt ceiling debate with a new Treasury estimate on when the government will run out of cash. The previous target was a six-week window from the end of March to mid-May. The new, more specific target is April 5 to May 3.

Toomey and his fellow conservatives in Congress argue that they can prevent default and government shutdown by reordering government obligations. Democrats, meanwhile, are casting the discussion as an either-or situation, that there is no choice but to increase the debt ceiling or face a government shutdown and a global financial panic.

Bernanke’s solemn warning and Geithner’s letter will certainly increase pressure from Wall Street on Republicans to go along with the president’s demand.

But, since Bernanke’s bank is now the largest holder of U.S. debt thanks to his “quantitative easing” program, he might not be considered an impartial arbiter on the subject. In fact, he might have the most to lose if U.S. obligations were reordered. The national bank might be expected to wait longer for repayment than a foreign creditor and certainly wait until after daily functions of the government have been maintained.

Bernanke’s debt-buying plan has been very bold and very controversial. If anything happens to cast doubt on future repayments, it would deeply erode the Fed’s already tested credibility.

Also, watch for Republicans to expedite the move to create Congressional oversight for the central bank. If Bernanke is publicly pooh-poohing their policies, they may want the chance to return the favor.

States Bridle at Medicaid, Obamacare Costs

“… recent conversations suggest a lack of clarity about what flexibility currently exists in Medicaid.”

-- Letter from Health Secretary Kathleen Sebelius to governors

It wasn’t just Tea Party steam or political calculation that led 27 states to go to court and fight President Obama’s national health care law. It was money.

Under Obama’s law, states could see the enrollment in their already overburdened Medicaid programs increase by 25 percent. Medicaid is already the largest expenditure for many states – an average of 17 percent of all the state budgets in the nation – and by using a Medicaid expansion to cover all the uninsured left out of other programs in the Obama plan, Congress dumped huge new costs on the states.

Costs were already expected to rise dramatically in the coming years.

First, there has been a surge in use as the recession forced more Americans onto government assistance. Many of those folks will never leave the rolls as the current plague of long-term joblessness turns into a new segment of the permanently poor.

Second, the previous decade saw a massive expansion of eligibility for children under the program. While costs were initially held down by parents’ resistance to enrolling their children in the program, massive efforts to de-stigmatize the acceptance of government aid and emphasize the ease of participation has steadily increased the number of lower-middle class children covered by the program.

Third, Baby Boomers will soon head (or be herded) into nursing homes in large numbers. While Medicare, a federally subsidized insurance program, is aimed at senior citizens, long term care for the poor falls under Medicaid, a welfare program, costs for which are split between federal and state taxpayers (who are actually the same people taxed twice). Families now know to have elderly folks sell everything of value and empty out their bank accounts before they go into homes, presenting them as paupers seeking government aid.

Forecasts from even before the Obama law had costs to states for Medicare rising by as much as 20 percent in the coming decade. Now, the increase could be double that, or more, depending on how well the rest of the president’s law works. If the other parts don’t function properly, the existing Medicaid system would be the option of last resort for many individuals required to have insurance under the law.

But with crummy reimbursement rates and lots of paperwork, lots of doctors are getting out of the Medicaid business, foreshadowing a serious shortage of doctors who accept government insurance or vouchers.

Governors in both parties pleaded with Congress not to dump the costs of the legislation on them. But, Congress was looking for any way to show the new entitlement expenditure actually represented a budget savings. So, aside from promising that some other, more politically courageous, Congress would slash $500 billion from insurance subsidies for elderly Americans, Congress also engaged in a massive cost shift to the states.

States are rebelling against the law in every way they can

Several states are halting or slowing implementation of the new federal requirements under the Obama law. Florida, Arizona, Utah, Idaho, Texas, Wisconsin, Alaska and others have changed their approach to the Obama mandates since a federal judge struck down the law on Monday, saying that its central provision, which requires all Americans to buy insurance or be enrolled in an approved government program, was unconstitutional.

The case is sure to end up at the Supreme Court, but states could save big bucks even if the law is ultimately affirmed by delaying its implementation during this period of legal uncertainty.

Right now, as states are crafting their budgets for the next fiscal year, governors are badgering the administration for relief from existing requirements. With huge budget shortfalls expected across the country, lawmakers are eying the billions being spent on Medicaid as a way to prevent huge tax increases or deep cuts to already-squeezed services. What the governors want are waivers from existing Medicaid requirements. Making unapproved changes to Medicaid could mean a loss of federal matching funds and an even deeper budget hole.

Health Secretary Sebelius is starting a gentle pushback effort with a letter advising governors on how to reduce costs without deep cuts, a tacit “no” to requests for waivers. But her suggestions about reducing waste and fraud and managing high-cost care more effectively won’t feed the budgetary wolf at the door.

The National Governors Association meets in Washington on Feb. 26 and its members will be in full cry over their busted budgets by then. States have mostly gone along with new federal mandates over the years because mandates meant money, but now that the mandates mean higher costs, state leaders are less inclined to play along.

This will be a huge fight.

And Now, A Word From Charles

“It would be suicidal to cut off aid to the military, unless it splits and joins in a suppression of the demonstrators, in which case, all bets are off. If it doesn't, it's the key, because Mubarak will be gone and the army will remain.”

-- Charles Krauthammer on “Special Report with Bret Baier” discussing a Senate proposal to cut off aid to Egypt