New Economic Perspectives: MMP #33: Functional Finance and ...

MMP #33: Functional Finance and Long Term Growth


Last week we examined Milton Friedman?s version of Functional Finance, which we found to be remarkably similar to Abba Lerner?s. If the economy is operating below full employment, government ought to run a budget deficit; if beyond full employment it should run a surplus. He also advocated that all government spending should be financed by ?printing money? and taxes would destroy money. That, as we know, is an accurate description of sovereign government spending?except that it is keystrokes, not money printing. Deficits mean net money creation, through net keystrokes. The only problem with Friedman?s analysis is that he did not account for the external sector: he wanted a balanced budget at full employment, but if a country tends to run a trade deficit at full employment, then it must have a government budget deficit to allow the private sector to run a balanced budget?which is the minimum we should normally expect. Somehow all this understanding was lost over the course of the postwar period, replaced by ?sound finance? which is anything but sound. It was based on an inappropriate extension of the household ?budget constraint? to government. This is obviously inappropriate?households are users of the currency, while government is the issuer. It doesn?t face anything like a household budget constraint. How could economics have become so confused? Let us see what Paul Samuelson said, and then turn to proper policy to promote long term growth.Functional Finance versus Superstition.
The functional finance approach of Friedman and Lerner was mostly forgotten by the 1970s. Indeed, it was replaced in academia with something known as the ?government budget constraint?. The idea is simple: a government?s spending is constrained by its tax revenue, its ability to borrow (sell bonds) and ?printing money?. In this view, government really spends its tax revenue and borrows money from markets in order to finance a shortfall of tax revenue. If all else fails, it can run the printing presses, but most economists abhor this activity because it is believed to be highly inflationary. Indeed, economists continually refer to hyperinflationary episodes?such as Germany?s Weimar republic, Hungary?s experience, or in modern times, Zimbabwe?as a cautionary tale against ?financing? spending through printing money.
Note that there are two related points that are being made. First, government is ?constrained? much like a household. A household has income (wages, interest, profits) and when that is insufficient it can run a deficit through borrowing from a bank or other financial institution. While it is recognized that government can also print money, which is something households cannot do, these is seen as extraordinary behaviour?sort of a last resort. There is no recognition that all spending by government is actually done by crediting bank accounts?keystrokes that are more akin to ?printing money? than to ?spending out of income?. That is to say, the second point is that the conventional view does not recognize that as the issuer of the sovereign currency, government cannot really rely on taxpayers or financial markets to supply it with the ?money? it needs. From inception, taxpayers and financial markets can only supply to the government the ?money? they received from government. That is to say, taxpayers pay taxes using government?s own IOUs; banks use government?s own IOUs to buy bonds from government.
This confusion by economists then leads to the views propagated by the media and by policy-makers: a government that continually spends more than its tax revenue is ?living beyond its means?, flirting with ?insolvency? because eventually markets will ?shut off credit?. To be sure, most macroeconomists do not make these mistakes?they recognize that a sovereign government cannot really become insolvent in its own currency. They do recognize that government can make all promises as they come due, because it can ?run the printing presses?. Yet, they shudder at the thought?since that would expose the nation to the dangers of inflation or hyperinflation. The discussion by policy-makers?at least in the US?is far more confused. For example, President Obama frequently asserted throughout 2010 that the US government was ?running out of money??like a household that had spent all the money it had saved in a cookie jar.
So how did we get to this point? How could we have forgotten what Lerner and Friedman clearly understood?In a very interesting interview in a documentary produced by Mark Blaug on J.M. Keynes, Samuelson explained: ??????????????? "I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he ??????????????? would say "uh, oh what you have done" and James Buchanan argues in those terms. I have to say that I see merit in that view."

The belief that the government must balance its budget over some timeframe is likened to a ?religion?, a ?superstition? that is necessary to scare the population into behaving in a desired manner. Otherwise, voters might demand that their elected officials spend too much, causing inflation. Thus, the view that balanced budgets are desirable has nothing to do with ?affordability? and the analogies between a household budget and a government budget are not correct. Rather, it is necessary to constrain government spending with the ?myth? precisely because it does not really face a budget constraint.

The US (and many other nations) really did face inflationary pressures from the late 1960s until the 1990s (at least periodically). Those who believed the inflation resulted from too much government spending helped to fuel the creation of the balanced budget ?religion? to fight the inflation. The problem is that what started as something recognized by economists and policymakers to be a ?myth? came to be believed as the truth. An incorrect understanding was developed. Originally the myth was ?functional? in the sense that it constrained a government that otherwise would spend too much, creating inflation. But like many useful myths, this one eventually became a harmful myth?an example of what John Kenneth Galbraith called an ?innocent fraud?, an unwarranted belief that prevents proper behaviour. Sovereign governments began to believe that the really could not ?afford? to undertake desired policy, on the belief they might become insolvent. Ironically, in the midst of the worst economic crisis since the Great Depression of the 1930s, President Obama repeatedly claimed that the US government had ?run out of money??that it could not afford to undertake policy that most believed to be desired. As unemployment rose to nearly 10%, the government was paralysed?it could not adopt the policy that both Lerner and Friedman advocated: spend enough to return the economy toward full employment.
Ironically, throughout the crisis, the Fed (as well as some other central banks, including the Bank of England and the Bank of Japan) essentially followed Lerner?s second principle: it provided more than enough bank reserves to keep the overnight interest rate on a target that was nearly zero. It did this by purchasing financial assets from banks (a policy known as ?quantitative easing?), in record volumes ($1.75 trillion in the first phase, with a planned additional $600 billion in the second phase). Chairman Bernanke was actually grilled in Congress about where he obtained all the ?money? to buy those bonds. He (correctly) stated that the Fed simply created it by crediting bank reserves?through keystrokes. The Fed can never run out ?money?; it can afford to buy any financial assets banks are willing to sell. And yet we have the President (as well as many members of the economics profession as well as most politicians in Congress) believing government is ?running out of money?! There are plenty of ?keystrokes? to buy financial assets, but no ?keystrokes? to pay wages.That indicates just how dysfunctional the myth has become.A Budget Stance to Promote Long Term Growth.
The lesson that can be learned from that three decade experience of the US is that in the context of a private sector desire to run a budget surplus (to accumulate savings) plus a propensity to run current account deficits, the government budget must be biased to run a deficit even at full employment. This is a situation that had not been foreseen by Friedman (not surprising since the US was running a current account surplus in the first two decades after WWII). The other lesson to be learned is that a budget surplus (like the one President Clinton presided over) is not something to be celebrated as an accomplishment?it falls out of an identity, and is indicative of a private sector deficit (ignoring the current account). Unlike the sovereign issuer of the currency, the private sector is a user of the currency. It really does face a budget constraint. And as we now know, that decade of deficit spending by the US private sector left it with a mountain of debt that it could not service. That is part of the explanation for the global financial crisis that began in the US.
To be sure, the causal relations are complex. We should not conclude that the cause of the private deficit was the Clinton budget surplus; and we should not conclude that the global crisis should be attributed solely to US household deficit spending. But we can conclude that accounting identities do hold: with a current account balance of zero, a private domestic deficit equals a government surplus. And if the current account balance is in deficit, then the private sector can run a surplus (?save?) only if the budget deficit of the government is larger than the current account deficit.
Finally, the conclusion we should reach from our understanding of currency sovereignty is that a government deficit is more sustainable than a private sector deficit?the government is the issuer, the household or the firm is the user of the currency. Unless a nation can run a continuous current account surplus, the government?s budget will need to be biased to run deficits on a sustained basis to promote long term growth.However, we know from our previous discussion that fiscal policy space depends on the exchange rate regime?the topic of the next blog.
Further, we want to be clear: the appropriate budget stance depends on the balance of the other two sectors. A nation that tends to run a current account surplus can run tighter fiscal policy; it might even be able to run a sustained government budget surplus (this is the case in Singapore?which pegs its exchange rate, and runs a budget surplus because it runs a current account surplus while it accumulates foreign exchange). A government budget surplus is also appropriate when the domestic private sector runs a deficit (given a current account balance of zero, this must be true by identity). However, for the reasons discussed above, that is not ultimately sustainable because the private sector is a user, not an issuer, of the currency.
Finally, we must note that it is not possible for all nations to run current account surpluses?Asian net exporters, for example, rely heavily on sales to the US, which runs a current account deficit to provide the Dollar assets the exporters want to accumulate. We conclude that at least some governments will have to run persistent deficits to provide the net financial assets desired by the world?s savers. It makes sense for the government of the nation that provides the international reserve currency to fill that role. For the time being, that is the US government.

Source: http://neweconomicperspectives.blogspot.com/2012/01/mmp-33-functional-finance-and-long-term.html

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Scosche cellControl locks your device while driving, tattles on your text habit

Trying to keep the points off your record, but just can't resist the urge to tweet, text and talk behind the wheel? Maybe it's time you gave up on that whole "self-restraint" schtick and leaned on technology to keep your cellular inhibitions in check. Scosche's cellControl might do the trick, it pairs bit of bluetooth-enabled automotive hardware with a feature-blocking smartphone app to keep your handset under lockdown when you're on the go. It even rats you out if you deactivate or uninstall the system -- automatically sending a text message or email to a "designated administrator," just in case you fall off the wagon. The system boasts compatibility with over 1200 devices across Android, Blackberry, Symbian and Windows Mobile 5 and 6. Artificial restraint will set you back $130, you know, in case self-control and other distracted driving apps aren't doing the trick. Hit the break for the system's official press release.

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Source: http://www.engadget.com/2012/01/23/scosche-cellcontrol-locks-your-device-while-driving-tattles-on/

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Environmentalists see reason for alarm in GOP race (AP)

WEST PALM BEACH, Fla. ? Four years after the GOP's rallying cry became "drill, baby, drill," environmental issues have barely registered a blip in this Republican presidential primary.

That's likely to change as the race turns to Florida.

The candidates' positions on environmental regulation, global warming as well as clean air and water are all but certain to get attention ahead of the Jan. 31 primary in a state where the twin issues of offshore oil drilling and Everglades restoration are considered mandatory topics for discussion.

"It's almost like eating fried cheese in Iowa," said Jerry Karnas of the Everglades Foundation. Drilling has long been banned off Florida's coasts because of fears that a spill would foul its beaches, wrecking the tourism industry, while the federal and state governments are spending billions to clean the Everglades.

Though most expect the candidates to express support for Everglades restoration ? as Mitt Romney did in his 2008 campaign ? environmentalists are noting a further rightward shift overall among the GOP field. The candidates have called for fewer environmental regulations, questioned whether global warming is a hoax and criticized the agency that implements and enforces clean air and water regulations.

"A cycle ago, there were people who actually believed in solving some of these problems," said Navin Nayak of the League of Conservation Voters. "Now we're faced with a slate that doesn't even believe in basic science."

The candidates, of course, dispute such a characterization. But their stances have generally grown more conservative. And even when they haven't, they often offer positions that aren't in line with conservationists.

_Romney heralded the passage of stricter limits on carbon emissions in 2005 when he was governor of Massachusetts but last year said it was a mistake. He previously agreed with the scientific consensus on global warming and humans' contribution to it but now says "we don't know what's causing climate change."

_Former House Speaker Newt Gingrich supported tougher environmental regulation early in his congressional career and appeared in a 2008 TV spot with then-House Speaker Nancy Pelosi pleading for action on climate change. Now he's says appearing with the San Francisco liberal was "the dumbest thing I've done in the last couple of years" and is calling for lifting restrictions on offshore drilling and branding the Environmental Protection Agency a "job killer" that must be replaced.

_Texas Rep. Ron Paul said during his 2008 campaign that "human activity probably does play a role" in global warming. Now he calls the science on manmade global warming a "hoax."

_Former Pennsylvania Sen. Rick Santorum shows fewer signs of a shift on such issues. He has called for more drilling, including in the Arctic National Wildlife Refuge, and doubts research that points to a human role in global warming, calling it "junk science."

An analysis by the nonpartisan Center for Responsive Politics found about $2.8 million in campaign donations were made by those in the energy and natural resources sector, according to Federal Elections Commission data, with about 84 percent of it going to Republicans.

Meantime, the EPA, which is responsible for policing environmental rules, has been singled out for Republican criticism this campaign season. Paul has called for its outright elimination as part of his plan to drastically curtail the federal government. Romney has said it's "out of control." Santorum has railed against the EPA's limits on mercury from coal-fired power plants. And Gingrich has called for overhauling the EPA, saying it should be converted to an "environmental solutions agency."

Nayak says: "There's no doubt that this kind of slate of presidential candidates is one of the most regressive and most closely tied to polluters that we've seen at least in decades."

Some Republican presidents and nominees have been strong environmentalists. Teddy Roosevelt was seen as a role model to environmentalists, using his presidency to establish wildlife refuges, preserve forests, and conserve water. Richard Nixon helped create the EPA that has been vilified by his successors on the campaign trail today. And the last Republican nominee, Sen. John McCain, was the chief co-sponsor of a bill that sought mandatory caps on greenhouse gas emissions.

Michelle Pautz, a political science professor at the University of Dayton who focuses on environmental policy, said the current slate of Republicans may not be giving much reason to applaud their environmental stances, but it may not matter much overall with the economy taking center stage.

"The bottom line is both with the GOP primary and looking to Obama and the general election, the green vote is a non-issue," Pautz said. "There are too many other issues crowding out the environmental ones."

But Tony Cani, the national political director for the Sierra Club, said taking what he calls "extreme" views on the environment won't play well come Nov. 6.

"They're going to be hurt with young voters, women, families, Latino voters," Cani said.

Jim DiPeso, of Republicans for Environmental Protection, said he hopes to see a shift as Election Day draws closer, but that the state of politics right now has made ecological issues untouchable.

"A lot of the more pragmatic mainstream Republicans just are trying to steer clear of the issue because it's become so politically fraught," he said.

Source: http://us.rd.yahoo.com/dailynews/rss/politics/*http%3A//news.yahoo.com/s/ap/20120123/ap_on_el_pr/us_gop_campaign_environment

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Braun makes passing reference to drug test (AP)

NEW YORK ? Ryan Braun referred only in passing to his positive drug test and possible 50-game suspension as he accepted the National League MVP award at a black-tie dinner Saturday night.

After congratulating other award winners and thanking teammates, family, and the Milwaukee organization, the Brewers left fielder, speaking before a crowd of around 800 in a hotel ballroom, thanked the Major League Baseball Players Association for supporting him through his entire career, "especially for supporting me through everything I've went through over the last couple of months."

ESPN.com first reported in December that Braun had tested positive in October. Braun's grievance appeal before arbitrator Shyam Das to avoid a suspension began Thursday.

"You know, sometimes in life, we all deal with challenges we never expected to endure," Braun told the crowd. "We have an opportunity to look at those challenges and view them either as obstacles or as opportunities, and I've chosen to view every challenge I've ever faced as an opportunity and this will be no different. I have always believed that a person's character is revealed through the way they deal with those moments of adversity."

Braun, the NL Rookie of the Year in 2007, hit .312 with 33 home runs and 111 RBIs last season in leading Milwaukee to the NL Central title. He was not available to take questions from reporters Saturday night, his first public appearance since news broke about the positive test.

Braun's appearance overshadowed a sometimes funny, sometimes poignant 89th dinner of the BBWAA's New York chapter that honored, among others, former Mets catcher Gary Carter, who is fighting brain cancer. The Hall of Fame slugger was represented by his three children.

Carter received the "You Gotta Have Heart" award. Fighting tears, his pregnant daughter, Chrissy, said: "I'll tell my dad about the standing O ? he'll like that."

Also honored was Yankees head athletic trainer Gene Monahan, who retired at the end of last season after 49 years with the organization.

Monahan, the night's final award recipient, was honored for long and meritorious service to baseball. He was introduced, appropriately, by Yankees closer Mariano Rivera ? who had earlier received the "Toast of the Town" award. In an emotional speech, Monahan acknowledged late Yankees owner George Steinbrenner on several occasions and concluded by saying, "To do what you do the best and love the most, that's what happiness is all about."

Don Newcombe, 85, elicited laughter as he introduced Tigers ace Justin Verlander, who joined the former Brooklyn Dodgers pitcher as the only players to win a Cy Young Award, MVP trophy and Rookie of the Year.

On a Mets-themed evening that acknowledged the 50th anniversary of the team's first season, Frank Thomas, Jay Hook and Al Jackson spoke on behalf of the 1962 Mets, remembered for their 40-120 record.

Former Mets player and manager Bobby Valentine was lightly and briefly booed when introduced as Boston's new manager. Valentine joked about traveling from the Boston chapter's Thursday dinner before introducing Yankees reliever David Robertson, who received an award for community service.

Former Mets and new Miami shortstop Jose Reyes accepted the writers' "Good Guy" award, and outfielder Tommy Davis received the "You Could Look It Up" award, honoring the 50th anniversary of his 153-RBI season with the Los Angeles Dodgers.

Stu Sternberg, principal owner of the Tampa Bay Rays, accepted Manager of the Year and AL Rookie of the Year on behalf of Joe Maddon and Jeremy Hellickson, respectively. Maddon, who spoke by video, is on vacation with his wife in the Greek islands, a trip planned in early September, before the Rays made their big comeback to reach the AL playoffs.

Cardinals third baseman David Freese was in attendance to accept the Babe Ruth award as postseason MVP.

Source: http://us.rd.yahoo.com/dailynews/rss/sports/*http%3A//news.yahoo.com/s/ap/20120122/ap_on_sp_ba_ne/bbo_bbwaa_dinner_braun

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Friday Campaign to Speak for Pets at MAS ? YesBiscuit!

January 20, 2012

Memphis Animal Services (MAS) is normally open only one weekend day (Saturday) which contributes to their abysmal live release rate since weekends are their greatest chance for increased traffic and adoptions.? The pound is closing this weekend for mandatory employee training on pet killing. Sunday will be the practical ? that is, killing actual pets.

It is impossible for a shelter to conduct a practical on ?humane euthanasia? for 9 hours on a designated day.? Here?s why:? Because there is no way of knowing if any pets at MAS (or anywhere) will cross over into the medically hopeless and suffering category in which humane euthanasia is warranted on Sunday.? Chances are very low that even one pet will suddenly be deemed by a vet to be medically hopeless and suffering on Sunday when there was still hope on Saturday ? never mind enough pets to fill up a 9 hour practical.? Therefore, it is impossible to conduct a day long practical on ?humane euthanasia?.? If MAS does hold this practical, what they will be doing is killing healthy/treatable pets.? That is not ?humane euthanasia? as the city is purporting the course to be.

The healthy/treatable pets who MAS is planning to kill on Sunday could potentially be adopted, fostered or rescued on Saturday if the city would keep the pound open.? I have offered to help if they would post their pets online so I could network them.? I know some of you would help too.? Further ? and I can not stress this enough ? whether or not the city opens the pound on Saturday, it is ethically wrong to kill healthy/treatable pets for a class on Sunday or for any reason, any day.

MAS kills more than 11,000 pets a year.? When will it be enough?

I say:? today.? Today is enough.

Please pick up the phone and speak for the pets at MAS who won?t be adopted this weekend but who will be killed in a practical for a killing course ? call Memphis Mayor AC Wharton at (901) 576-6000.? Politely explain that you are protesting both the closing of the pound on Saturday for a pet killing class and the needless killing of healthy/treatable pets on Sunday.? If you are unable to call, please e-mail the mayor to make your voice heard: ? Mayor@memphistn.gov

A worker at MAS drags a dog from his cage in the stray area on October 28, 2011.

The worker uses the chokepole to drag the dog to the kill room.

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Source: http://yesbiscuit.wordpress.com/2012/01/20/friday-campaign-to-speak-for-pets-at-mas/

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Officials confirm light fuel near ship

The cruise ship Costa Concordia is seen off the Tuscan island of Giglio, Italy, Saturday, Jan. 21, 2012. The cruise captain, Capt. Francesco Schettino, who grounded the Costa Concordia off the Tuscan coast with 4,200 people on board did not relay correct information either to the company or crew after the ship hit rocks, the cruise ship owner's CEO said as the search resumed for 21 missing passengers. (AP Photo/Gregorio Borgia)

The cruise ship Costa Concordia is seen off the Tuscan island of Giglio, Italy, Saturday, Jan. 21, 2012. The cruise captain, Capt. Francesco Schettino, who grounded the Costa Concordia off the Tuscan coast with 4,200 people on board did not relay correct information either to the company or crew after the ship hit rocks, the cruise ship owner's CEO said as the search resumed for 21 missing passengers. (AP Photo/Gregorio Borgia)

The cruise ship Costa Concordia is seen off the Tuscan island of Giglio, Italy, Saturday, Jan. 21, 2012. The cruise captain who grounded the Costa Concordia off the Tuscan coast with 4,200 people on board did not relay correct information either to the company or crew after the ship hit rocks, the cruise ship owner's CEO said as the search resumed for 21 missing passengers. (AP Photo/Gregorio Borgia)

Workers prepare their work of oil recovery from the cruise ship Costa Concordia off the Tuscan island of Giglio, Italy, Saturday, Jan. 21, 2012 as half-million gallons (2,400 tons) of fuel inside the capsized cruiser liner risk polluting some of the Mediterranean's most pristine sea. The cruise captain who grounded the Costa Concordia off the Tuscan coast with 4,200 people on board did not relay correct information either to the company or crew after the ship hit rocks, the cruise ship owner's CEO said as the search resumed for 21 missing passengers. (AP Photo/Gregorio Borgia)

Seagulls fly over the cruise ship Costa Concordia off the Tuscan island of Giglio, Italy, Saturday, Jan. 21, 2012. The cruise captain who grounded the Costa Concordia off the Tuscan coast with 4,200 people on board did not relay correct information either to the company or crew after the ship hit rocks, the cruise ship owner's CEO said as the search resumed for 21 missing passengers. (AP Photo/Gregorio Borgia)

Italian navy scuba divers sail past the cruise ship Costa Concordia off the Tuscan island of Giglio, Italy, Saturday, Jan. 21, 2012. The cruise captain who grounded the Costa Concordia off the Tuscan coast with 4,200 people on board did not relay correct information either to the company or crew after the ship hit rocks, the cruise ship owner's CEO said as the search resumed for 21 missing passengers. (AP Photo/Gregorio Borgia)

(AP) ? Light fuel, apparently from machinery aboard the capsized Costa Concordia, was detected Saturday in the sea near the ship, Italian Coast Guard officials said Saturday.

But Coast Guard spokesman Cmdr. Cosimo Nicastro says there is no indication that any of the nearly half-million gallons (2,200 metric tons) of heavy fuel oil has leaked from the ship's double-bottomed tanks. Nicastro said Saturday that the leaked substance appears to be diesel, which is used to fuel rescue boats and dinghies and as a lubricant for ship machinery.

There are 185 tons of diesel and lubricants on board the crippled vessel, which is lying on its side just outside the port of the tiny Tuscan island of Giglio. Nicastro described the light fuel's presence in the sea as "very light, very superficial" and appearing to be under control.

Although attention has been concentrated on the heavy fuel oil in the tanks, "we must not forget that on that ship there are oils, solvents, detergents, everything that a city of 4,000 people needs," Franco Gabrielli, the head of Italy's civil protection agency, told reporters in Giglio.

Gabrielli, who is leading rescue, search and anti-pollution efforts for the Concordia, was referring to the roughly 3,200 passengers and 1,000 crew who were aboard the cruise liner when it ran into a reef near Giglio's coast on Jan. 14, and then, with the sea rushing into a 70-meter (230-foot) gash in its hull, listed and finally fell onto its side.

Considering all the substances aboard the Concordia, "contamination of the environment, ladies and gentlemen, already occurred" when the cruise liner capsized, Gabrielli told a news conference.

Vessels equipped with machinery to suck out the light fuel oil were in the area, Italian officials told Italian TV.

Earlier on Saturday, crews removed oil-absorbing booms used to prevent environmental damage in case of a leak. Originally white, the booms were grayish.

Divers resumed their search of the wreckage after data indicated the cruise ship had stabilized in the sea off Tuscany. To make it easier to enter and leave, the divers blasted more holes into the carcass of the ship. They were hoping to inspect an area where many passengers had gathered during the evacuation.

They were searching for bodies or survivors, although it is considered unlikely any of the 21 missing in the accident could still be alive.

The search had been suspended on Friday after the Concordia shifted, prompting fears the ship could roll off a rocky ledge of sea bed and plunge deeper into the sea. An abrupt shift could also cause a leak in the Concordia's fuel tanks, polluting the pristine waters around Giglio, part of a seven-island Tuscan archipelago.

___

Barry contributed from Milan. Andrea Foa contributed from Giglio.

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/cae69a7523db45408eeb2b3a98c0c9c5/Article_2012-01-21-EU-Italy-Cruise-Aground/id-3415ccc467f24cab8cc9228f414f0a40

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Obama rejects Canada-Texas oil pipeline ? for now (AP)

WASHINGTON ? Raising the stakes on a bitter election-year fight with Republicans, President Barack Obama on Wednesday rejected a Canadian company's plan to build a U.S.-spanning, 1,700-mile pipeline to carry oil across six U.S. states to Texas refineries.

Though the project promises thousands of temporary jobs for the recovering U.S. economy, Obama said a February deadline set by Congress would not allow for a proper review of potential harm from the $7 billion Keystone XL project.

"As the State Department made clear last month, the rushed and arbitrary deadline insisted on by congressional Republicans prevented a full assessment of the pipeline's impact, especially the health and safety of the American people, as well as our environment," Obama said.

The plan proposed by Calgary-based TransCanada would carry oil from tar sands in western Canada to Texas, passing through Montana, South Dakota, Nebraska, Kansas and Oklahoma.

Republicans assailed Obama's decision as a job-killer and said the fight wasn't over.

And the State Department said the decision was made "without prejudice," meaning TransCanada can submit a new application once a route through environmentally sensitive areas of Nebraska is established.

Russ Girling, TransCanada's president and chief executive officer, said the company plans to do exactly that. If approved, the pipeline could begin operation as soon as 2014, Girling said.

Republicans were not assuaged.

Newt Gingrich, campaigning for the GOP presidential nomination in South Carolina, called Obama's decision "stunningly stupid," adding: "What Obama has done is kill jobs, weaken American security and drive Canada into the arms of China out of just sheer stupidity."

Sen. John Hoeven, R-N.D., has said of the Canadian crude oil: "It's going to go to China if we don't build it here."

But Alex Pourbaix, TransCanada Corp.'s president for energy and oil pipelines, said last week the company soon will have a new route through Nebraska "that everyone agrees on."

For now, though, Mitt Romney, the Republican nomination front-runner, called Obama's decision "as shocking as it is revealing," adding that it "shows a president who once again has put politics ahead of sound policy."

House Speaker John Boehner said Obama was breaking his promise to create jobs.

"This is not the end of this fight," said Boehner, R-Ohio. He called the pipeline good for the U.S. economy and a major job creator.

The pipeline proposal has forced the White House to make a politically risky choice between two important Democratic constituencies. Many labor unions back the project because of the prospects of new jobs in a fragile economy. Environmental groups fear the pipeline could lead to an oil spill disaster.

Some liberal donors threatened to cut off funds to Obama's re-election campaign to protest the project, which opponents say would transport "dirty oil" that requires huge amounts of energy to extract.

Obama said his decision was not based on the pipeline's merits but on what he called an arbitrary Feb. 21 deadline set by Republicans in Congress. GOP lawmakers set the deadline as part of a tax bill that Obama signed into law just before Christmas.

"I'm disappointed that Republicans in Congress forced this decision, but it does not change my administration's commitment to American-made energy that creates jobs and reduces our dependence on oil," Obama said.

Under his administration, domestic oil and natural gas production is up, while imports of foreign oil are down, Obama said.

"In the months ahead, we will continue to look for new ways to partner with the oil and gas industry to increase our energy security," Obama said.

To underscore the point, Obama signaled that he would not oppose development of an oil pipeline from Oklahoma to refineries along the Gulf of Mexico. TransCanada already operates a pipeline from Canada to Cushing, Okla.

Refineries in Houston and along the Texas Gulf Coast can handle heavy crude such as that extracted from Canadian tar sands ? the type of oil that would flow through the Keystone XL pipeline.

Canadian Prime Minister Stephen Harper said he was profoundly disappointed that Obama turned down the pipeline.

Sen. Kent Conrad, D-N.D., said he doesn't believe the Keystone XL is a dead project. He said the Obama administration did not have enough time to review the project, given the Republican-imposed timeline.

"I don't believe this is the end of the story," Conrad told The Associated Press. "My personal view is that it should be constructed. It's clear Canada is going to develop this resource, and I believe it is better for our country to have it go here rather than Asian markets."

Bill McKibben, an environmental activist who led opposition to the pipeline, praised Obama's decision to stand up to what he called a "naked political threat from Big Oil." Jack Gerard, the oil industry's top lobbyist, had said last week that Obama faced "huge political consequences" if he rejected the pipeline.

"It's not only the right thing, it's a very brave thing to do," McKibben said. "That's the Barack Obama I think people thought they were electing back in 2008."

___

Associated Press writers Dina Cappiello, Ben Feller and Laurie Kellman in Washington, Shannon McCaffrey in Warrenville, S.C., and Ramit Plushnick-Masti in Houston contributed to this story.

Follow Matthew Daly on Twitter: (at)MatthewDalyWDC

Source: http://us.rd.yahoo.com/dailynews/rss/politics/*http%3A//news.yahoo.com/s/ap/20120118/ap_on_bi_ge/us_oil_pipeline

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Blake Shelton delays tour to mourn father

Sad news for Blake Shelton.

The 35-year-old country superstar and "The Voice" mentor is grieving the Wednesday passing of his father, Dick.

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"Mr. Shelton, who was in declining health this past year, was surrounded by loved ones in Oklahoma upon his passing this evening," a rep for Shelton told Us Weekly in a statement late Wednesday.

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As the singer mourns with his family, he has announced plans to reschedule four dates through next week on his Well Lit & Amplified tour. His stops in Bismark, N.D., Rapid City, S.D., Bozeman, Mont. and Billings, Mont. will be delayed until late March.

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"I appreciate your understanding during this difficult time and thank you for all your prayers. Your support means the world to me. I love you guys," Shelton told Us in a statement.

For more information on Shelton's makeup dates, visit his website, BlakeShelton.com.

Source: http://today.msnbc.msn.com/id/46040519/ns/today-entertainment/

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Judge clears Bruno Mars of cocaine charge

A Las Vegas judge on Wednesday dismissed the cocaine possession case against pop star Bruno Mars after he successfully completed court-ordered drug education classes and community service, even exceeding the amount of hours he was told to serve.

Clark County District Court Judge Jessie Walsh cleared Bruno of the charge, said Mary Ann Price, court information officer for the 8th Judicial District Court.

Mars, whose real name is Peter Hernandez, was arrested in September 2010 after a bathroom attendendant at the Las Vegas Hard Rock Hotel caught him with "a baggy of white powder," later found to be cocaine, according to a police report at the time.

He pleaded guilty to a charge of possessing cocaine and received a $2,000 fine, 200 hours of community service, drug counseling and was told to stay out of trouble during a year of informal probation. Bruno performed all the requirements and exceeded the 200 hours of service, his attorney told Reuters.

Mars' original guilty plea was nullified and will not show up on his record.

The "Grenade" singer, 26, burst onto music charts in 2010 after collaborating with rapper B.o.B on "Nothin' On You" and Gym Class Heroes' Travie McCoy on "Billionaire." He is currently nominated in six categories at the upcoming Grammy Awards in February.

Judge Walsh took over Mars' case after County Clark Deputy District Attorney David Schubert, who prosecuted Mars in early 2011, was arrested for buying cocaine himself a few months later.

Source: http://today.msnbc.msn.com/id/46046935/ns/today-entertainment/

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