"A White House summit that opened discussions on how to make sweeping changes in entitlement programs concluded yesterday with a pledge to immediately pursue an effort to provide health insurance to most Americans, which could increase spending in the short term but would be designed to save money later."
USA Today: "President Obama pledged Monday to target Medicare, farm subsidies, tax breaks for companies that ship jobs overseas and no-bid contracts in Iraq in the proposed 2010 budget he will unveil later this week. Turning his attention from short-term economic stimulus to long-term fiscal discipline, Obama said he will urge Congress to require that any spending increases or tax cuts be paid for, rather than add to a $1.3 trillion deficit. That requirement was dropped as the Bush administration waged wars in Afghanistan and Iraq."
The New York Times says that "Mr. Obama called on Mr. McCain to offer any thoughts" during the Q&A session at the end of the president's Fiscal Responsibility Summit. "Mr. McCain praised Mr. Obama for holding the event, then suggested one priority should be dealing with out-of-control military contracts. Exhibit A was the program to replace the current Marine One helicopters, with costs mushrooming to $11.2 billion from $6.1 billion. The Defense Science Board issued a new study blaming 'poor communication' about aircraft requirements between the government and contractors. Lockheed Martin declared Monday that it was 'committed to the program's success' and would meet any conditions imposed by an Obama administration review."
"'Your helicopter is now going to cost as much as Air Force One,' Mr. McCain told Mr. Obama. 'I don't think there is any more graphic demonstration of how good ideas have cost taxpayers an enormous amount of money.' Mr. Obama agreed. 'The helicopter I have now seems perfectly adequate to me,' he said to laughter. 'Of course, I've never had a helicopter before, you know? Maybe I've been deprived and I didn't know it. But I think it is in example of the procurement process gone amok. And we're going to have to fix it.'"
Roll Call's Dennis draws a parallel between Obama's deficit-cut call and George W. Bush's. "In 2004, while running for re-election, Bush proposed cutting the budget deficit 'in half' by 2009. But that was only after a large surplus morphed into a large deficit during his first term. Bush technically succeeded in reaching his goal -- and even projected a return to budget surpluses -- before the bottom dropped out of the economy on his way out the door. Which is why one might want to take any of these budget projections with, say, a trillion-dollar grain of salt, or two."
The New York Times writes that President Obama has settled on former Washington Gov. Gary Locke to be his third pick for Commerce secretary. "Mr. Locke, a two-term governor, former state legislator and onetime county executive, would bring a technocratic, pro-business record to the post. As the first Chinese-American to serve as a governor in the United States, Mr. Locke would also be the third person of Asian descent in Mr. Obama's cabinet, after Energy Secretary Steven Chu and Veterans Affairs Secretary Eric K. Shinseki."
If the AIG bailout -- the biggest single corporate bailout to date -- is not working, then what do we do? "A.I.G. declined to provide details of its new financial problems, citing the 'quiet period' just before it issues fourth-quarter results. But some people familiar with A.I.G.'s negotiations said it was on the brink of reporting one of the biggest year-end losses in American history. Such losses lead to a bigger problem. A further credit rating downgrade would force the company to raise more capital, according to a person involved in the negotiations. The losses appeared to be across the board, unlike the insurer's losses of last September, which were confined mostly to derivative contracts called credit-default swaps."
"A.I.G. has not been writing new credit-default swap contracts, and had tried to put the swaps disaster behind it. In November the company worked out a relief package with the Federal Reserve Bank of New York, in which the most toxic of its swap contracts were put into a kind of quarantine, so they could no longer hurt its balance sheet. But A.I.G. had written several other classes of credit-default swaps, which it kept on its books. "