Friday, January 30, 2009

Iceland Economy Ahead of the Pack, for Better and Worse

By Greg Palkot

Shockwaves still are being felt around the world from the global financial crisis, and nowhere is the impact more direct or more destructive than in the small isolated island nation of Iceland.

This week, outgoing center right Prime Minister Geir Haarde tendered his resignation following weeks of regular protests by Iceland citizens angry about the government's inability to handle the country's economic troubles. Protests that resulted in a violent clash with police for the first time in Iceland since 1949.

Haarde now likely will now be replaced by a center-left politician.

What's significant is that for the first time a national government has collapsed due to the economic crisis. What's surprising is that it happened in usually low-key Iceland.

But then again, Iceland has been the scene of a lot of "first's" during this economic crisis. It has been called a "leading indicator" of what was to come in this financial maelstrom, a sort of "canary in the coal mine" of our economic woes.

It took on this role because Iceland's banks were overleveraged with more debt than others as it kept bankrolling entrepreneurs going on a buying spree abroad — banks which, when the chits started to be called in and the subprime market froze up, were more vulnerable than most. This was compounded by the fact that Iceland is a tiny country which doesn't have the financial resources to bail the banks out.

If you look at the history of Iceland's troubles recently it's always a bit ahead of the U.S. and other European countries on many points: The banks failed and got nationalized earlier; the stock market crashed earlier and harder, and now unemployment and inflation numbers are rising fast. They even protested before anyone else did, which resulted in a whole new government.

That's why, once again, Iceland holds a lot of prominence as a bellwether. Experts told FOX News that this country is not the only one that will "kick the rascals" out over the financial crisis, but is the first. They particularly note young democracies on the periphery of Europe, such as Bulgaria and the Baltic countries, have also seen violent protests recently related to the economy.

And even more mainstream European nations like Greece have been hit with unrest. Looking at weak economies and soaring unemployment rolls, experts say that in countries like Italy and Spain protests can't be far behind.

The parallels are now being drawn not just with the nasty protests in Europe of 1968, but — much more tellingly — to the demonstrations that broke out during the Great Depression.
Today, populist politicians are beginning to gain favor in this tumultuous period, and that is not necessarily a good thing for the countries involved, or for U.S. relations.

Case in point is Iceland, once again. The most favored political party right now in Iceland is the Left-Green's, which will be a principal member of the interim coalition government here. It doesn't fully support possible European Union membership for Iceland, but more significantly for the US, it would like to pull Iceland out of NATO.

Iceland was a founding member of North Atlantic Alliance. Due to its utterly strategic location just under the Arctic Circle it played a crucial role for the U.S. during the Cold War. There was a U.S. air base on the island up until 2006. It is no coincidence that former President Reagan knocked heads together here with his Soviet counterpart. The image Wednesday of a NATO flag being burned by protestors in front of a meeting held by the Alliance cannot be too pleasing to the U.S.

All of sudden this global financial crisis looks like it could spread, not just in geographical and monetary terms, but in substance as well. And just as the experts can't define when the downward spiral of financial woes will stop, they also can't say how severe the political collateral damage will be. But many predict that there may be more dangerous days ahead.

Greg Palkot is FOX News' foreign correspondent reporting from Iceland's capital, Reykjavík.

Thursday, January 29, 2009

House passes economic stimulus bill

By David Jackson and Richard Wolf

WASHINGTON — The Democratic-controlled House of Representatives quickly approved President Obama's $819 billion economic recovery plan Wednesday.

The vote was 244-188, mostly along party lines.

"We don't have a moment to spare," the president said earlier in the day.

The vote sent the bill to the Senate, where debate is expected to begin as early as this week on a companion measure already taking shape. Democratic leaders have pledged to have legislation ready for Obama's signature by mid-February.

A mere eight days after Inauguration Day, House Speaker Nancy Pelosi, D-Calif., said the events heralded a new era. "The ship of state is difficult to turn," she said. "But that is what we must do. That is what President Obama called us to do in his inaugural address."

No Republicans supported the measure. Eleven Democrats opposed it. The vote was Obama's first test of the bipartisanship he pledged in his campaign.

After a meeting with executives, which Obama described as "sober" because of the tough times, the president said the group was "confident that we can turn our economy around."

Obama visited Capitol Hill on Tuesday to address GOP criticism that the package has too much spending and not enough tax cuts. He won compliments but few converts.

"I don't expect 100% agreement from my Republican colleagues," Obama said between meetings with House and Senate Republicans. Citing a recent round of layoffs among large U.S. companies, he said, "I do hope that we can all put politics aside and do the American people's business right now."

Senate Republicans hope to make changes before it reaches Obama — possibly by adding small business tax cuts or road and bridge spending.

Though GOP lawmakers said they appreciated Obama's visit Tuesday, their leaders urged a "no" vote because of the bill's price tag. "All it does is burden our kids and their kids with more debt," said House Republican leader John Boehner of Ohio, citing a non-partisan Congressional Budget Office estimate that the plan would add $347 billion in interest on the national debt over 10 years.

Two-thirds of the House bill, or $550 billion, is new spending. That includes money to states and localities, increases in unemployment benefits and other aid to Americans hard hit by the recession, as well as construction projects designed to create jobs. The remaining $275 billion is tax cuts to encourage new spending.

Obama promised to consider Republicans' ideas, but many said they will wait and see. "Reaching out is one thing," said Sen. Jon Kyl, R-Ariz. "Actually taking action to include Republican ideas is another."

Contributing: The Associated Press

Monday, January 26, 2009

Show us the money
St. George, Utah

The debate is raging on Capitol Hill about what should be done to stimulate the economy. The recession continues to hit new depths, and the one thing that there is agreement on with many lawmakers is that something must be done.

The questions, however, relate to what should be done and at what cost.

Estimates put a stimulus package backed by the Barack Obama administration at almost $1 trillion. Such a move could push the federal budget deficit to more than $1.5 trillion and the overall national debt to more than $10 trillion.

It's an obscene amount of money and a crushing debt that will have to be shouldered by our children, grandchildren and - at this rate - great-grandchildren and beyond. While some form of intervention by the federal government may be needed, closer scrutiny of what will be spent also is needed.

Take, for example, the $700 billion stimulus plan passed by the Democratic Congress and signed by former President George W. Bush. The way the money has been used was so poorly monitored that there is almost no way to know how much of the taxpayers' money was wasted. We simply can't afford a repeat.

Congress must turn a much more watchful eye toward monitoring the spending of any taxpayers' money. One group that could play a significant role in that effort is the Blue Dog Coalition - a group comprised mostly of Democrats who push for more conservative measures in the realm of economics. This group has grown to 47 members by sticking to the message that our practices today shouldn't create obstacles for future generations. A growing deficit and corresponding national debt do both.

The Blue Dogs could be the people's watchdogs. To do so, they will have to be more vocal than ever and will have to make some public statements in committee hearings and from the House floor if there is ever going to be a change.

The reality is that stimulus packages have become the "pork-barrel" spending of the 21st century. Everyone wants a piece of the action. Even Utah is asking for billions of dollars in stimulus money.

In some cases, that money is going to be spent wisely to save jobs and to keep communities intact. In some cases, the money could be squandered or go toward projects that benefit only a few when it could be used to assist many.

There's no doubt that this is a large task. Admittedly, the nation is in uncharted territory with this economic downturn. Now is a time for fresh ideas and for a willingness to learn from past mistakes.

It's a time for leadership.

Whether it's the Blue Dogs, Republicans or elected officials of some other ilk, we need to see our lawmakers scrutinizing any further spending they way they research and criticize campaign opponents. They need to show the public that they are working to find the best solution that costs the least amount of money.

A bad decision now could cost our nation even more down the road.

National Debt Clock