Cal Parli

Polls of the Israeli public have shown that a majority are willing to withdraw from parts or even most of the West Bank in exchange for a comprehensive peace deal. But the numbers supporting such a trade in East Jerusalem or the Golan Heights is much lower. Israel annexed both of those territories – unlike the West Bank – and extended Israeli sovereignty there in the 1980s. As such, most of the public does not consider Israelis living in East Jerusalem or the Golan Heights to be settlers, although they are counted as such by international standards.

The formation of a new government does not push back the specter of another war with Israel. In July 2006, Hezbollah abducted two Israeli soldiers in a cross-border raid, setting off a 34-day war that crippled Lebanon's infrastructure, displaced 1 million people, and killed more than 1,200 Lebanese – the majority of them civilians. Since that conflict ended, both sides have been preparing for a new round.

Hezbollah leaders boast that the group now has an even larger and more potent cache of missiles than it did three years ago. Israeli officials, who are also escalating their war rhetoric, estimate Hezbollah's arsenal at between 40,000 and 80,000 rockets. On Nov. 3, the Israeli navy intercepted a ship in the Mediterranean Sea that was carrying 500 tons of rockets, mortars, and other weapons. Israeli officials claimed that it was an Iranian arms shipment intended to reach Hezbollah through Syria, which led to a new round of bellicose threats from both sides.

The basic problem is that Hezbollah makes decisions that could lead to war – without consulting or involving the Lebanese state. And Israeli Prime Minister Benjamin Netanyahu has threatened to hold the Lebanese government responsible for the militia's actions. This puts Hariri in a difficult position and it will make him reliant on the Obama administration to keep Israel at bay.

While Hezbollah has shown a willingness to adapt and evolve politically, it is unlikely that the movement would give up its weapons – or the idea of perpetual resistance – without a political settlement between the West and Hezbollah's main patron, Iran.

The Obama administration can avert a new conflict by keeping its attention focused on Lebanon, continuing to support Hariri's government, and helping to strengthen state institutions like the Lebanese Army. But US officials must eventually reach out to Hezbollah, which is designated a terrorist organization by the State Department. Washington could begin indirect outreach through France and other Western countries that maintain contact with Hezbollah.

These price surges could cause or temporarily conceal bad debts in a number of smaller economies, hurting investors who have turned to these markets. However, unless these surges continue, the risk to the global recovery will be contained.

• Dubai World’s recent near default illustrates the potential shocks that debt from bursting asset bubbles can cause.
• Similar problems could and probably will emerge in other economies which have been badly hit by the crisis, and where government finances are stretched, including Ireland, Greece, and the Baltics.

if large economies keep interest rates loose for too long, faster global growth could instead add fuel to the fire. Tighter monetary policy in the United States and the Euro area is still a way off, but may be edging closer. 

• The European Central Bank will conclude emergency lending in December. The rate on the final loans will be indexed to the ECB’s benchmark rate, rather than fixed at 1 percent, giving the Bank room to raise interest rates if needed.
• Unemployment, a key signal for central bankers considering raising rates, fell to 10 percent in the United States last week, but it is not yet clear if this improvement will persist.

On the budget front, the House bill would reduce deficits by $138 billion over the next decade and the Senate measure would reduce deficits by $130 billion over that period, says the Congressional Budget Office (CBO), which predicts the two measures would continue to reduce deficits for at least a decade thereafter. The bills would achieve this goal through a combination of spending cuts (largely in Medicare) and tax increases that, together, exceed the costs of bringing health insurance coverage to about 95 percent of all legal residents.

The House and Senate bills deserve much more credit for cost control than they have received. They [address] almost all areas that experts have identified as promising areas for reducing the growth of healthcare spending. Most important, both would create a health insurance exchange to promote competition among private health insurance plans based on price and quality, reduce administrative costs, and provide a platform for systemic change across the healthcare system.

The continuing attacks in Baghdad highlight a partial failure to achieve political reconciliation. While some of the alliances competing in the forthcoming election are non-sectarian, the blame for the attacks follows a familiar pattern. Sunnis say that the Shia government is failing to protect Iraqi citizens. Some Shias accuse Sunni politicians of secretly allying with insurgents, while other Shias point fingers within their divided camp. Hadi al-Ameri, head of the security committee in parliament and a leading opponent of the prime minister, Nuri al-Maliki, told al-Sharqiya TV that all the commanders of the security force in Baghdad, who are appointed by Mr Maliki, ought to be replaced.

Such recriminations play into the hands of insurgents, thought to be Sunni extremists variously identified as Baathists, Saddamists or al-Qaeda in Iraq. A divided country is less likely to find the courage to turn up at polling stations. This could undermine the legitimacy of the next government and trigger further recriminations between the parties vying to form the next administration, especially if the bombings continue, as seems likely.

There is good reason to think that these reforms would pour gasoline on the fire of health inflation: Though details differ, both the House and Senate bills would offer subsidies to millions, insist on first-dollar coverage for certain services and expand entitlements.

News of November sales, delivered on Thursday December 3rd, dampened any holiday cheer. Sales were up by only 0.7% in November in comparable shops compared to the previous year according to Retail Metrics, a research firm. Sales at Saks and Abercrombie & Fitch, a clothes retailer, were down by 26% and 17% respectively. Even discount stores, such as Target, did not live up to analysts’ forecasts.

News of November sales, delivered on Thursday December 3rd, dampened any holiday cheer. Sales were up by only 0.7% in November in comparable shops compared to the previous year according to Retail Metrics, a research firm. Sales at Saks and Abercrombie & Fitch, a clothes retailer, were down by 26% and 17% respectively. Even discount stores, such as Target, did not live up to analysts’ forecasts.

November sales figures are a good guide to the health of American retailers. They include traffic from Black Friday, the day after Thanksgiving, when retailers usually start to rake in cash. The day boasts discounts so significant that retailers refer to some of them as “door-busters” and it marks the start of the holiday shopping period. This year hopes were high that Black Friday would see shoppers starting as they meant to go on—with wallets wide open. No such luck. Although more people went to the shops on Black Friday and over that weekend (195m, up by 13% from last year), they spent nearly 8% less per person, according to the National Retail Federation, an industry body.

Obama
recently pledged
that the United States would reduce emissions about 17 percent by 2020 as compared
with 2005 levels (though the Wall Street
Journal is reporting
that he might soon announce steeper cuts for 2050); his current pledge reflects
numbers in bills now under review by Congress. The president probably can't
offer much more without risking that any final treaty would later be rejected
by Congress, similar to what happened when the U.S. Senate failed to ratify the
Kyoto
climate treaty in 1997.

Rather
than absolute carbon cuts, some developing countries, including China and
India, have declared goals of reducing the "carbon intensity" of
their economies. In other words, they will use less carbon per unit of GDP
growth, but as their overall economies grow, so too will carbon emissions, at
least for the short term. China
has pledged to reduce the carbon intensity of its economy by 40 to 45 percent. India
has a target of 20 to 25 percent. The targets have been applauded
by some as a step forward and pilloried
by others as far too
low.

The
upshot: Nothing
will happen unless there's money behind it, and for some countries, the financial
pledge may be as politically difficult as the carbon-reduction pledge. (Sen.
John Kerry has proposed that the United States pony up $2.5
billion to $3 billion, roughly equivalent to the annual budget of the U.S. Food
and Drug Administration.) With many industrialized countries stuck in
recessions and struggling with high unemployment, short-term generosity will be
difficult.

State government finances are a wreck. The drop in tax receipts is the worst in a half century. Fewer than 10 states ended the last fiscal year with significant reserves, and three-fourths have deficits exceeding 10% of their budgets. Only an emergency infusion of printed federal funny money is keeping most state boats afloat right now.

It's much more likely that we're facing a near permanent reduction in state tax revenues that will require us to reduce the size and scope of our state governments. And the time to prepare for this new reality is already at hand.

• The Obama administration established new federal greenhouse gas pollution limits. An October executive order requires federal government agencies to set greenhouse gas emission reduction targets that must be met by 2020. All of these actions, along with additional steps forward, will help enhance American economic competitiveness. And on December 7, Environmental Protection Agency Adminstrator Lisa Jackson announced the "endangerment finding" under the Clean Air Act. This enables EPA to finalize limits on global warming pollution from motor vehicles and large industrial sources. President Obama would prefer that Congress, rather than EPA, establish these pollution limits, but the endangerment finding means that EPA will act if Congress fails to do so.

• China announced a carbon reduction target. The Obama administration’s hard work with China and India is starting to pay off. China announced on Thanksgiving Day a target of reducing carbon pollution per unit of gross domestic product by 40 to 45 percent from 2005 levels by 2020. This is the first time China has committed to specific carbon reductions. The November joint statement by Presidents Obama and Hu Jintao on the creation of a greenhouse gas inventory between the U.S. EPA and China will make it possible to measure and verify these reductions.

• India announced a carbon reduction target. India announced on December 2, soon after the U.S.-India summit in Washington, that it intends to offer a target for decreasing its carbon intensity 24 percent from 2005 levels by 2020. This is the first time India has proposed its own specific carbon reduction target, which adds to its already established commitment to set the largest solar power generation target in the world.

The only answer to the question of whether IP serves the desired purpose must be empirical. Does
it work in practice?

A great deal of applied economic research has tried to answer this question. The short answer is that intellectual property
does not increase innovation and creation. Extending IP rights may modestly boost the incentive for innovation, but this positive
effect is wiped away by the negative effect of creating monopolies. There is simply no evidence that strengthening patent
regimes increases innovation or economic productivity. In fact, some evidence shows that increased protection even decreases
innovation.

Rather than trying to continually fix the existing system with band-aids, it would be far better to eliminate it entirely.
The resulting drastic restructuring of industry would lead to new, more competitive business models – and an environment far
more favorable to the small entrepreneur.