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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.

After crunching the numbers, my team has estimated that it would take GDP growth of at least twice the historical average to return state tax revenues to their previous long-term trend line by 2012.

On Wednesday in Washington, the House passed a $154 billion jobs bill. It includes $46 billion in aid to states, which would mostly go to help them in 2011. Half of the money is an extension of the increase in the federal share of the Medicaid program. The rest of the money is designated for jobs in education.

On Wednesday in Washington, the House passed a $154 billion jobs bill. It includes $46 billion in aid to states, which would mostly go to help them in 2011. Half of the money is an extension of the increase in the federal share of the Medicaid program. The rest of the money is designated for jobs in education. However, it won’t be enough for many states. According to the CBPP, 30 states have already enacted tax increases, raised tuition at state universities, or found other revenue methods. For example, only this week, the Missouri Department of Revenue told yoga studios to begin to collect a 4 percent recreation sales tax on class fees.At the same time, many states are looking at service cuts. According to the CBPP analysis, 28 states have enacted or implemented cuts to reduce the eligibility of low-income families for health coverage. Some 42 states and the District of Columbia have proposed or implemented cuts to the state workforce.

41% of the public says the United States plays a less important and powerful role as a world leader today than it did 10 years ago -- the highest percentage ever in a Pew Research survey.

44% of the public now says China is the world's leading economic power, while just 27% name the United States.

the percentage saying that the United States should "mind its own business internationally and let other countries get along the best they can on their own" has reached an all-time high of 49%.

Why does the WTO face such paralysis? The political impossibility of curbing farm subsidies in many countries is only part of the reason the Doha talks are stalled. Sheer numbers are an equally troublesome problem. The days when the United States and the European Union could write the rules for world trade are long gone. There are now 153 countries around the bargaining table, and emerging economies such as Brazil, China, India, and Argentina are eager to flex their muscles on the world stage, making consensus all but impossible to come by.

Why does the WTO face such paralysis? The political impossibility of curbing farm subsidies in many countries is only part of the reason the Doha talks are stalled. Sheer numbers are an equally troublesome problem. The days when the United States and the European Union could write the rules for world trade are long gone. There are now 153 countries around the bargaining table, and emerging economies such as Brazil, China, India, and Argentina are eager to flex their muscles on the world stage, making consensus all but impossible to come by.

With the WTO paralyzed, countries have increasingly taken matters into their own hands and struck trade agreements bilaterally or in small groups, diminishing the WTO's role still further. The United States started this trend, signing the controversial North America Free Trade Agreement (NAFTA), pacts with Israel and Jordan, and several others. These deals, never popular, have become politically problematic in America, but they have become all the rage in Asia, the fastest-growing part of the world. As they proliferate, an increasing number of countries will give better treatment to exports from one another than to exports from the United States.

With conditions deteriorating on the ground and the Taliban gaining strength across the country, coalition forces will be in an even worse position next year than they are now. The situation around the major cities of Jalalabad and Kabul is seriously deteriorating, and the state structure in the north is disappearing. In the southern city of Kandahar, a sustained U.S.-led effort has proved unable to dislodge the Taliban from their traditional stronghold; the Taliban have also launched a systematic campaign targeting anyone ready to work with the coalition, killing hundreds since last spring. Instead of being able to start pulling out troops next summer, as Obama has pledged, the United States will be forced to send additional troops just to hold ground. And the longer Washington waits, the harder it will be to negotiate. As the Taliban solidify their power, they will be less and less likely to talk. It's time to negotiate -- this is the only way forward.

the longer Washington waits, the harder it will be to negotiate. As the Taliban solidify their power, they will be less and less likely to talk.

With conditions deteriorating on the ground and the Taliban gaining strength across the country, coalition forces will be in an even worse position next year than they are now.

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.

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.

The Obama administration has an opportunity to break the current logjam in the Middle East by focusing away from the Israeli-Palestinian conflict — and pushing for renewed Syrian-Israeli negotiations. The Syrian-Israeli track can move faster than Israeli-Palestinian negotiations, where the two sides are still far apart on the central issues: Israeli settlements, the fate of Palestinian refugees and the final status of Jerusalem. By contrast, the Syrians and Israelis mainly need to negotiate over the return of the Golan Heights, and related security guarantees and water access issues.

Unlike the weak Palestinian leader Mahmoud Abbas, Syrian President Bashar Assad can actually deliver on a peace deal. Such an agreement is possible during Obama's presidency, but it will not happen without the deep involvement of his administration. The United States has much to gain strategically from renewed Syrian-Israeli dialogue: Damascus could be pressed to play a more constructive role in the region, instead of being a spoiler. If there are serious negotiations, the United States can demand that Assad's regime stop interfering in Iraq, carry out domestic reforms, respect human rights and drop Syrian support for Hamas and other Palestinian groups that reject peace with Israel. To achieve peace, the United States must strongly push Israel back to negotiations and be willing to dispatch U.S. personnel as monitors of any final agreement.

Yemen has frequently been described as a failing state -- and with good reason. Civil war, terrorism, a deepening secessionist movement and economic and demographic trends threaten to overpower the Yemeni government, provide a breeding ground for terrorists and destabilize the region. Yemen has often teetered on the brink of collapse, but it has never faced so many interconnected challenges at one time.

At the heart of the country's problems is a looming economic crisis. Oil is the source of nearly 80 percent of government revenue, and it is quickly running out. There are few viable options for a sustainable post-oil economy, and Yemen is already the poorest country in the Arab world with an unemployment rate conservatively estimated at 35 percent. Yemen's pending economic collapse has been greatly accelerated by the civil war in Saada. Government forces have been unable to decisively put down the rebels in the north of the country, and there is no military solution to the conflict. The toll in Saada has been severe, with extensive damage to infrastructure and an estimated 175,000 internally displaced people. The conflict's strain on the Yemeni army has led to questions about the military's ability to simultaneously engage in other operations, including counterterrorism. The government is spending foreign currency reserves at an alarming rate, recently estimated at more than $200 million per month. Spending on the war will create a major budget deficit next year. Every dollar spent on the civil war is a dollar not spent on addressing the underlying causes of instability in Yemen. Yemen also is facing a growing secessionist movement in the south of the country. When the war in Saada subsides, it is feared that the secessionist movement will again flare up.  The government does not control the entire territory of Yemen, and the emergence of additional areas outside of the capital of Sanaa's control will create more under-governed spaces that can be exploited by terrorist movements.

Military operations to kill or capture al Qaeda operatives will likely increase in 2010. These actions carry risks. Publicly acknowledged American involvement in counterterrorism operations in Yemen would be deeply unpopular in the country, likely undermine the legitimacy of the Yemeni government and feed into the grievances that help fuel al Qaeda militancy. Development assistance is one of the most effective tools available to address the interconnected long-term challenges facing Yemen. But, U.S. aid is disproportionately small considering the magnitude of the problems facing the country and Yemen's strategic importance to the United States. In addition to the reported $70 million of military and security assistance, the United States recently announced $121 million in development aid over the next three years, a significant increase from previous years and a vital step in the right direction. Still, the amount pales in comparison to the $1.5 billion allotted to Pakistan in the next year alone. This disparity persists even as U.S. officials increasingly cite Yemen as a terrorism and security priority second only to Afghanistan and Pakistan.

The California initiative comes amidst a flurry of activity nationally in the past two months after nearly two-decades of inactivity, according to Bruce Mirken, director of communications for the Marijuana Policy Project in Washington D. C., which advocates legalization of marijuana. California has a legislative bill in the offing, he says, as does Washington State while New Hampshire has recently introduced a bill and Rhode Island has adopted a commission to study ideas.“There are signs all over the place that this has reached critical mass,” says Mirken, citing the photograph of Olympic superstar Michael Phelps last summer. He also says that law enforcement agencies have begun to realize the high cost of arresting, trying, and incarcerating marijuana users – money that could be better spent elsewhere. [Editor's note: The original version of this story mischaracterized the situation involving Mr. Phelps.]

Hall points out that for the last 20 years, nearly two-thirds of all first-time marijuana users have been below the age of 18. Statistics also show that the younger a person begins marijuana use, the greater the risk of substance abuse later in life, he says. Therefore, it’s important to ask a host of questions: Who is going to determine or regulate how marijuana is produced and distributed? Who will it be distributed by? How is the state going to collect the taxes? Will it really have an impact on the illicit trafficking and production of marijuana? Will this lead to proposals to legalize other drugs?

Dan Newman, spokesman for the proposed Regulate, Control and Tax Cannabis Act, counters that the initiative does includes significant safeguards and controls. For example, it will increase the penalty for providing marijuana to a minor, expressly prohibit the consumption of marijuana in public, forbids smoking marijuana while minors are present, and bans possession on school grounds.He also says that studies by state tax experts – the Board of Equalization and the Legislative Analyst Office – show that the initiative will generate billions of dollars in revenue to fund schools, public safety, and other critical needs at a time when the state is desperate for resources.

And while most Americans understand this system to be badly broken already, the US Supreme Court this year ruled, in Citizens United v. Federal Election Commission, to permit unlimited spending by corporations and unions to influence elections. Indeed, early figures show that vastly more money is being spent to influence the outcome of our elections this fall – $4.2 billion in political ad spending alone compared with just $2.1 billion in 2008, according to Borrell Associates. Less than a third of organizations spending money on the fall elections thus far are disclosing their sources of funds, thereby denying citizens any knowledge of who is trying to influence the election.

As an important first step in reclaiming our elections and curbing the undue influence of special interests on our candidates, it is high time that Congress passed the Fair Elections Now Act, introduced in the House by my former colleagues Democrat John Larson of Connecticut and Republican Walter Jones of North Carolina. Modeled after successful Fair Elections programs in eight states, the proposed law would require that participating candidates turn down special interest money and accept only $100-or-less donations from their constituents. Candidates who reach a qualifying threshold of 1,500 in-state donations would then be eligible to receive sufficient matching funds to run a serious campaign. This would dramatically reduce the influence of special interests, including unions and corporations. And Fair Elections would open the election process to many more Americans who currently have no opportunity to seek public office for lack of funds.

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.

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.

The trouble is enthusiasm for both charter schools and performance pay runs far ahead of any compelling data that indicates their merit.The most recent data came in September, when economist Margaret Raymond of Stanford University released the results of her study of charter schools in 15 states and the District of Columbia. She found that 37 percent of charter schools posted worse standardized test scores than comparable traditional schools, 46 percent did about the same, and only 17 percent were superior.

Performance pay for teachers has not fared any better. In the 2005-06 school year, Texas introduced a merit pay plan for teachers. It offered $100 million in bonuses at 1,150 schools if teachers raised their students’ test scores. But in May 2009, the Texas Educator Excellence Grant was quietly retired after getting lackluster results, even though payments to teachers were based overwhelmingly on the test scores of their students

The Senate vote marks the beginning of the end for the long march of healthcare reform through the US legislative system. The Senate bill must now be merged with the House version of healthcare reform, approved in November. Substantial differences between the two approaches remain, particularly in regard to antiabortion language, methods of financing, and a governmnt-run public option insurance plan.A conference committee of members from both chambers will struggle over this harmonization. In its own way, that task could be almost as difficult as the Senate debate, as lawmakers struggle to keep intact the language passed on their side of Capitol Hill. The Senate bill, like its House counterpart, would prevent the insurance industry from denying benefits to people with pre-existing health conditions. It provides subsidies to help low- and middle-income residents purchase that insurance. And it establishes state marketplaces, called "exchanges," whereby individuals without employer-provided insurance, and some small businessess, could buy coverage.

The partisan divide is such that Democrats now own healthcare reform. If it succeeds in coming years, they may benefit politically. If it struggles, it may drag them down.Republicans, similarly, own the opposite side of this issue. If the debt skyrockets and the economy struggles, they could look prescient. If the programs succeed, then the Christmas Eve vote could become something analogous to the GOP's opposition to the creation of Medicare – something with which Democrats can assail them at every electoral opportunity.

Yes, the freeze that has extended from the Midwest to the mid-Atlantic states is helping to boost demand for anything that takes the chill out of the house.The result: Natural-gas prices have soared 78 percent in the past 30 days, and even home heating oil is up 2.5 percent. The price of a barrel of oil is now more than $78 – about double the price of a year ago.

Energy traders are watching more than just the weather. Recently, another factor has been whether the US dollar was rising or falling. When the dollar has dropped, traders have bought commodities, such as oil, as a store of value. That has sent the price of oil up.

Although it would like to do so, Al Qaeda does not have the capability of launching an attack on the scale of 9/11, when hijacked airliners flown by suicidal Islamist terrorists slammed into the twin towers of the World Trade Center and the Pentagon, killing thousands.But Al Qaeda still could carry out attacks against symbolic American targets such as the New York subway system or a passenger jet – two plots that were thwarted last year and could have killed hundreds of people. And, according to the report, “This level of threat is likely to persist for years to come.”Al Qaeda and its allies also have established the beginnings of a terrorist recruitment, radicalization, and operational infrastructure in the US, according to “Assessing the Terrorist Threat” by the Bipartisan Policy Center. (The center is a nonprofit organization established in 2007 by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell – two Republicans and two Democrats.)

Although it would like to do so, Al Qaeda does not have the capability of launching an attack on the scale of 9/11, when hijacked airliners flown by suicidal Islamist terrorists slammed into the twin towers of the World Trade Center and the Pentagon, killing thousands.But Al Qaeda still could carry out attacks against symbolic American targets such as the New York subway system or a passenger jet – two plots that were thwarted last year and could have killed hundreds of people. And, according to the report, “This level of threat is likely to persist for years to come.”

President Obama is pushing for a permanent middle-class tax cut, but only if Bush-era cuts for top earners are eliminated. Republicans, in turn, want permanent tax relief for all income levels. The divide is rapidly becoming the marquee issue of the midterm election.

Given the lackluster recovery — with crucial housing and job markets still ailing — an expiration of tax cuts worth about $300 billion a year would be a huge hit to the economy, equivalent to 2% of the nation's total output. The potential economic fallout is far less clear if tax rates rose only for high earners.

The chances are small that Congress might address the issue before the November election. But there are ample opportunities for both parties to use their economic messages during the campaign.

But so far, the numbers undermine the stark crime wave predictions. In fact, the plunge in the national crime rate has been most evident in areas the housing bust has hit the hardest. Even with California unemployment higher than 12 percent, car thefts declined in Los Angeles by 20 percent last year over 2008. Nationally, both violent crime and property crime declined by about 5 percent between 2008 and 2009 – the height of the recession, according to an FBI report issued Monday.

Government safety nets – including extension of unemployment benefits and a growth in food stamp recipients – may also have helped to keep despair down and crime rates low, criminologists suggest. At the same time, new policing tactics, including the "broken windows" theory, and booming prison populations – currently at 1.6 million, five times the number of people incarcerated in 1977 – have succeeded largely by targeting specific lawbreakers and high-crime locales instead of broader social injustices, some social critics say.