Shaky Economy Challenges
Ambitious Obama Agenda

Stocks and Housing Falter as Democrats' Convention Opens

By BOB DAVIS and T.W. FARNAM

Democrats convened in Denver on Monday with the economy's woes muscling to the top of political concerns, as reflected in further drops in stocks and housing prices.

The Dow Jones Industrial Average tumbled 241.81 points, or 2.1%, to 11386.25, amid continuing worry over the economic and credit problems. Inventories of unsold homes rose to a record, while prices continued to slip, threatening to delay the housing market's recovery.

Sen. Barack Obama, whom the party will nominate for president this week, addressed one of the key issues, the parlous state of the government-sponsored buyers of mortgages. "I don't think we can allow Fannie Mae and Freddie Mac to collapse," he said at a town-hall meeting in Davenport, Iowa, adding that their shareholders "shouldn't be protected."

Against this backdrop, Sen. Obama is proposing to use the government to remake economic policies in a way that hasn't been seen in Washington in decades.

The last two Democratic presidents, Jimmy Carter and Bill Clinton, were hamstrung by rising deficits, feuds with Democrats in Congress and antigovernment sentiment in Washington. Sen. Obama's advisers argue that he would be largely free from those constraints, easing the way for him to put in place big government programs, tax increases on the wealthy and trade restraints.

An Obama victory would be nearly certain to usher in a larger Democratic majority, which could give his proposals smoother sailing through Congress. If the economy is faltering if and when he takes office -- as most economists and policy experts predict it will be -- Mr. Obama would push for a stimulus plan with a price tag of $115 billion, his aides say. The plan would include $1,000 rebates for moderate-income and middle-class families, aid to state and local governments and heavy spending on roads, ports and levees and other infrastructure to create jobs.

Sen. Obama, in campaign appearances and discussions with staff, has said that he would start his term in office with three big economic priorities, apart from a possible stimulus plan. One would be a government health-care plan to cover millions without insurance. Another would be a system of tradable pollution permits to reduce emissions and bankroll alternative-energy projects. He'd also push the first increases in income-tax rates since 1993 and in capital-gains taxes since 1986.

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In total, his top priorities would cost hundreds of billions of dollars a year, and some of them might require a stiff increase in regulation.

Rice University presidential historian Alan Brinkley compares Sen. Obama's approach on economic issues to the last Democrat to occupy the White House before Mr. Carter: Lyndon Johnson. But, he says, "it would be a Great Society with a small 'g' and a small 's'" because Sen. Obama isn't planning anything as sweeping as the creation of Medicare, Medicaid and antipoverty agencies.

No matter what he plans, he might confront circumstances that divert him from his agenda, whether foreign threats from Iraq, Iran or Russia or a recession. Any such contingencies could consume his attention and divert many billions of dollars he would rather use otherwise.

Still, many presidents have pushed through their priorities despite major setbacks. President George W. Bush drove through two rounds of tax cuts while pursuing an unanticipated global war on terror. Ronald Reagan won tax cuts and deregulation despite years of Soviet challenges.

Sen. Obama's opponent, Sen. John McCain, is looking at a more Reagan-style approach of lower taxes and reduced costs for business. He shares certain priorities with Sen. Obama, such as curbing greenhouse-gas emissions and expanding health care. But the Republican's environment plan is less ambitious, and his health-care plan focuses on markets, not the government. He would remake the employer-based health-care system by shifting responsibility to individuals.

Republicans hope the "tax-and-spend liberal" attack they have used effectively in the past quarter-century still resonates with voters in 2008, and they are trying to paint the broad Obama agenda that way. The National Republican Senatorial Committee's fund-raising pitches cite the "high taxes, wasteful spending, more regulation" an Obama presidency would supposedly try to enact.

Business groups are gearing up to fight what they consider antibusiness measures. The U.S. Chamber of Commerce says it's raising "far in excess" of $20 million to support "pro-business" candidates this year, mainly Republicans. The Pharmaceutical Research and Manufacturers of America association says it would bitterly fight an Obama plan to have the government negotiate prescription-drug prices.

Driving the Agenda

An Obama victory would likely mean an expanded Democratic majority in Congress. In the Senate, Democrats currently have just 51 votes, a single-vote advantage. Some are hopeful that, in a strong anti-Republican year, they can boost their total to 60, enough to halt filibusters and give a Democratic White House much more freedom to drive the agenda.

Republican Sen. James DeMint of South Carolina says that Republicans would turn to conservative talk radio, blogs and friendly media, as well as fights on the Senate floor, to oppose a President Obama's plans to "sell a socialist philosophy in a very persuasive way."

Sen. Obama says his plan would seek to reverse Bush economic priorities that he says favored the rich and ignored the middle class. That's essentially the same charge Bill Clinton made against the first President Bush in the 1992 campaign.

Once in office, though, Mr. Clinton quickly jettisoned his plans for a middle-class tax cut and big infrastructure spending and pushed instead for a deficit-reduction plan, which required a tax increase and weakened his standing in his own party. That was followed by a bruising battle over the North American Free Trade Agreement, which further split Democrats, and a failed health-care plan. In 1994, Republicans won control of Congress and President Clinton governed in moderate fashion, even enacting Republican-inspired welfare reform.

Many of the economists who advised President Clinton are now central figures in Obama policy circles. They say this time, a Democratic president won't be sidetracked. The deficit, though huge at $389 billion in fiscal 2008, isn't the economic threat it once was, they argue, because as a portion of the economy, it's only a little more than half the size it was when Bill Clinton took office.

WASHINGTON WIRE

The Journal's political team reports from Denver. Latest posts:

• Q&A With Sen. Schumer: Obama Needs 'a Shield And a Sword'

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• Obama Would Back a Bailout for Fannie, Freddie

• Clinton Urges Her Supporters to Back Obama

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They say they have learned from President Bush that there is little political price to pay for free spending. They also say that after the corporate scandals of 2001-02 and the financial-industry crisis of this past year, both marked by flawed regulation, the country is ready for a bigger government role.

That may be a naive calculation, argues Leon Panetta, a deficit hawk who was President Clinton's chief of staff. To the extent that an Obama administration pursues an activist agenda, it could alienate conservative Democrats whose numbers are expanding as the party picks up seats in districts once held by Republicans. "By expanding the base of the party," Mr. Panetta says, "you are expanding the potential for serious divisions."

He notes that House Speaker Nancy Pelosi dropped her opposition to a vote on offshore oil drilling after conservative Democrats complained they were getting beaten up on the issue. Sen. Obama has made a similar switch, after Sen. McCain started pushing for offshore drilling.

Climate Change

Already, the Obama campaign is debating which economic policy to push first after a victory: climate change or health care. Though the decision probably won't be made until at least November, the discussion gives a sense of how Mr. Obama would govern.

Climate change could be the easier choice, his advisers say. There are already a number of bills in Congress that would set up a so-called cap-and-trade system: Emissions blamed for global warming would be capped, and companies would be able to trade permits that allow them to produce emissions up to a set limit. Sen. Obama could put together his own proposals relatively quickly by borrowing measures and language in existing bills.

He would have the government auction off all the permits, raising vast amounts of money -- more than $100 billion a year as the program scales up -- which he could use for other priorities, such as infrastructure spending. He already plans to commit $15 billion a year to alternative-energy programs to reduce U.S. reliance on foreign oil. He aims to cut U.S. emissions overall in 2050 by 80% from 1990 levels.

The Obama camp also believes it has a regulatory stick to force congressional action. The Supreme Court has ruled that the Environmental Protection Agency can regulate carbon dioxide under the Clean Air Act. While the Bush administration has taken a go-slow approach, a President Obama would shift into high gear, says Elgie Holstein, a senior Obama energy adviser. If Congress didn't act on a cap-and-trade system, he says, Mr. Obama "wouldn't hesitate to use Clean Air Act authorization to regulate" CO2 emissions, a step that could involve a huge increase in EPA oversight of industry.

Some other Obama energy proposals -- a "windfall-profits" tax on oil companies and the tapping of the strategic petroleum reserve -- may fall by the wayside, Obama aides acknowledge, if the price of oil continues to decline and energy is less of a front-page story.

Still, Sen. Obama faces stiff opposition among many in business. The National Association of Manufacturers opposed a cap-and-trade proposal that failed in the Senate earlier this year and would likely fight an Obama plan as well. The Senate cap-and-trade proposal "ended up being very detrimental to the economy and would put us in a position where we couldn't compete internationally," says Jay Timmons, NAM executive vice president.

Overhauling Health Care

The other major Obama priority, extending health-care coverage to millions of the uninsured, is even more daunting, conceptually and politically. Sen. Obama would create a new government health-insurance plan and subsidize those who can't afford it, as well as issue regulations for private plans that wanted to compete with the government plan. He would require larger companies either to provide health insurance or to pay into a fund to help with the cost of covering the uninsured. The program would cost $115 billion a year, Sen. Obama estimates.

This hasn't been proposed in detail on the federal level, so it could take many months to put together a specific plan, making it less likely to be the first priority. Obama advisers say the concept is similar to one started in Massachusetts under former Republican Gov. Mitt Romney, a possible McCain running mate. In Massachusetts, many more people have signed up than anticipated, and costs are skyrocketing.

Sen. Obama's health economists say the plan's price tag would be partly offset by lowering health-care costs by $50 billion annually. Savings would come from computerizing patient records, improving preventive care and allowing drugs to be imported from overseas, among other measures.

Some health-care economists are dubious of the cost savings. Sen. Obama's aides say they would find the rest of the revenue by reworking President Bush's tax cuts, which are set to expire at the end of 2010. But that will make the health-care battle even more complicated.

Sen. Obama would raise the top two tax rates to 36% from 33% for married couples with taxable income of more than $165,000, and to 39.6% from 35% for those couples with taxable income of more than $357,000, says Leonard Burman, director of the nonpartisan Tax Policy Center, a Washington think tank. In addition, under Sen. Obama, the tax on capital gains would increase to 20% from 15% for wealthier taxpayers.

The prospect of a tax fight and health-care battle rolled into one might prompt an Obama administration to push climate change first. But some say the breadth of the legislation could make broad-scale bargaining possible -- for instance, Mr. Obama could agree to a smaller tax increase in exchange for health-care changes. Taxes and health care are handled by the same committees in Congress, making such compromises easier to manage.

Some changes sought by Sen. Obama don't require congressional approval, which could move them to the top of his to-do list. Obama advisers expect that China, which pegs its currency to the dollar and thus appears to keep it undervalued, would be named a currency manipulator in May 2009, when the new administration must report to Congress. The designation requires the U.S. to negotiate with Beijing to realign its currency, but it might be seen as a slap in the face in China, and encourage Congress to place tariffs on Chinese imports.

What may keep Putin up at night

Russia's economic future looks bleaker after the invasion. Just ask its oligarchs.

Oh, to be a fly on the wall next month at the annual "summit" of Russia's richest capitalists and Vladimir Putin. Will the oligarchs tell the modern-day czar, "Bravo on invading Georgia!" Or might they whisper, "Watch out what you do to our economy." The latter would be smarter.

Soviet leaders during the cold war never had to deal with pesky capitalists when they rolled tanks into other countries. In today's Russia, Mr. Putin may sit on gushers of oil money and he has co-opted the business class to his authoritarian rule, but he must still live with Adam Smith's invisible hand.

Markets do react to unpleasant facts, such as other peoples' fear and resentment of Russian bullying. And since the invasion, markets have sent a clear signal of Nyet. Many investors – both foreign and domestic – are fleeing Russia. Its currency reserves and stock market have plunged in recent weeks. And that's on top of the West's warning that relations with Russia will not be "business as usual."

The West's victory in the cold war was as much about saving free markets as it was defending democracy. While Putin, a former KGB agent, has rolled back Boris Yeltsin's post-Soviet democracy, he'll have a harder time in a globalized world using his political judo to control Russia's markets and its rising dependency on the West.

For some years to come, of course, Europe will be dependent on oil and gas pipelines from Russia – an unwise choice made years ago by countries such as Germany. But as Russia's oil output declines – it has fallen since 2007 – Putin's reliance on petrowealth and a practice of cutting off petroleum exports in disputes will not be as effective.

As the West now debates how or even whether to isolate Russia, Putin is isolating his own country, even punishing it.

The economy has become overly dependent on oil exports and other resources. Much of that wealth has not trickled down, staying with the elite, especially many aligned with Putin. Russia's gross domestic product per capita has risen by only 2 percent in the past 20 years, reflecting a hollow economy beneath the oil riches and one now stuck in double-digit inflation.

Russia also faces a declining population from a low fertility rate and a lower male life expectancy. It badly needs foreign investment to drill more oil and to bring in technology to develop its nonoil economy.

By invading Georgia, however, Putin seems to have decided that keeping Russia's military influence over neighbors is more important than building a better economic future for his people. He should have learned from China, which prefers a "peaceful rise" as a power in order to keep its economy humming. China also has joined the World Trade Organization while Putin has now jeopardized Russia's chances of entering the WTO soon.

Persuading Putin to change course will not be easy. His communist training was all about keeping state power and strategic security. The more that Russia is isolated by its own actions, the more it will resort to a Soviet-style economy.

Will the oligarchs who rely on Western markets and access to the West still go along with Putin and his militant nationalism? If the West has a fifth column inside Russia, the oligarchs are it. They are the market forces best able to stand up to Russia's military force.

Joe Vengeance

Joe Lieberman says he left the Democratic Party and is stumping for John McCain out of principle. Really?

• By Michael Idov

(Photo: David Harry Stewart)

Senator Joe Lieberman enters the room, but I can’t see him—just a centipedelike scrum of black suits and Hasid hats that has formed around him and now moves, buzzing, toward the dais. We’re at a dinner being thrown at the Library of Congress by Agudath Israel of America, an assembly of ultra-Orthodox rabbis, and Lieberman is the star attraction. He’s come here to stump for John McCain, whose presidential endeavor the self-described independent Democrat improbably—make that unbelievably—endorsed last December. It’s mid-July now, and this is Lieberman’s fourth engagement of the day on his Republican friend’s behalf: He has spent the morning dispensing sound bites to CNN, Fox News, and MSNBC, from a nook festooned with McCain campaign logos. (“Have you taken a pad and pencil and figured out how many times Barack Obama has flip-flopped on Iraq?” soft-served the Fox host. “It’s a real serious question,” intoned Lieberman gravely.)

The adoring entourage finally falls away, allowing the senator, short and slight, to take his seat on the dais. His never-changing coif—a mass of yellowish-gray hair combed backward in two bulky wings—retains a whiff of seventies cool; it would go well with a turtleneck. Right now there’s a blue-and-white yarmulke nestled atop it. “I’m under oath today as a surrogate for John McCain, to speak to you about this great American,” the senator begins. The speech is a collection of familiar notes on McCain’s heroism, experience, and resolve. At some point, Lieberman says McCain will be “ready to lead on day one,” a phrase firmly associated with Hillary Clinton’s campaign. He also swipes a flourish from Obama’s post-partisanship playbook: “Too many people describe themselves as Democrats or Republicans, but forget that we’re all Americans.” Lieberman is just getting to what, in this room, is the red-meat portion of his remarks—the promise of a tough policy on Iran and total unity with Israel—when something makes him abruptly pause. Congressman Anthony Weiner, a Democrat from New York, walks in. For objectivity’s sake, the dinner’s organizers have invited him to campaign for Obama.

“Oh, hi, Congressman,” says Lieberman softly. Weiner smiles. For a moment, the senator looks ambushed, perhaps even panicky, as if caught in flagrante delicto by an ex. Officially, his relationship with the Democratic Party is supposed to be an amiable trial separation, not a nasty, soap-opera breakup. “Congressman Weiner,” Lieberman says, regaining his voice. “We debate, but we’re friends.”

Nothing in Joe Lieberman’s long and placid career—a respected attorney general in Connecticut, a centrist Democrat on the Senate floor, Al Gore’s high-minded running mate—could have presaged his current status: an apostate to his party and perhaps the most hated politician in the United States. Some days it seems like McCain himself doesn’t trigger as much vitriol from the left. The rancor between Lieberman and the Democratic-party elders has been amassing since at least 2006, when the senator “refused to crawl away and die,” in the words of a friend, after losing the Connecticut Democratic Senate primary to the upstart Ned Lamont and instead ran, and beat Lamont, as an independent. Some place the beginning of the end still further back, in 2004, when Lieberman’s pro-war presidential bid found no purchase with the party’s base, then at the apex of its anyone-but-Bush fury. There is no question, however, when the end of the end arrived: on December 17, 2007, when the senator, still caucusing with Democrats, threw his support in the 2008 presidential race to John McCain. Now, with his opening-night speech at the GOP convention approaching and Election Day just over two months away, Lieberman is poised to become a major spoiler for the Democrats, delivering votes in at least one critical swing state (he’s been trolling Florida for Jewish support) and bolstering McCain’s centrist appeal nationwide. In a year when Congress is all but certain to tip to the left no matter who wins the White House, Lieberman’s decision to abandon his party and back McCain is, depending on whom you ask, a bold stroke of political principle or a suicidal act of revenge.

Politicians’ office photo collections are usually displays of high-powered friendships and bi-partisan bonhomie. The most prominent photo in Lieberman’s lair in the Hart Building is one of the senator with Ronald Reagan, inscribed in the Gipper’s frilly handwriting; around it are snaps of George H. W. Bush, Bill Clinton, Chris Dodd from happier days, and, amusingly, Prince Charles. There’s only one small picture of Lieberman and John McCain, but the office itself is a souvenir of sorts. It used to belong to McCain.

Bi-partisanship, at least from the Democratic side of the aisle, isn’t what it used to be for Lieberman. Ever since he threw his lot in with McCain, the party Establishment, which had made peace with the senator’s “independent” tag, has turned its back on him. On the record, the Washington types still tread carefully for fear of jeopardizing Lieberman’s support; though he’s nominally an independent, Lieberman still effectively functions as the 51st Democrat in the Senate. “It’s more of a ‘What the hell are you doing?’ thing,” says Joe Trippi, a party insider and Howard Dean’s 2004 campaign manager. Off the record, however, his Democratic colleagues are fuming. The standard complaint goes something like this: Leaving the party was bad. Backing McCain is worse. And attacking Obama, as Lieberman has recently begun doing, is an unforgivable sin. “He has no allegiance to the party he was once a part of,” says a consultant to two former Democratic presidential candidates. “He says he’s an independent, but if you speak at the GOP convention, if you endorse McCain for president, you’re a Republican, end of story.” The political press has been even less restrained. Salon.com labeled Lieberman an “ideological turncoat.” “Watching Joe Lieberman go around the bend … is one of the strangest things I’ve ever seen in politics,” wrote Jonathan Chait in The New Republic. And Wonkette, the Washington gossip blog, turned the hatred of the senator into something like a literary extreme sport: “It’s like two quarter-pound stools of alien space shit crashed into a toxic-waste dumpster in Stamford, Connecticut, fucked, and out came their mutilated, blood-soaked carcass of a baby rat-child, Senator Joseph Lieberman.”

Blind Punditry in Denver

by Eric Alterman

In June, I wrote (with George Zornick) in Loving John McCain about the media's maddening blindness towards the extremism and/or crass political expediency of Senator John McCain:

On issue after issue, and from every side of the journalistic political spectrum, a campaign of deception and distortion has helped to ensure that McCain's extreme positions and politically inspired flip-flops remain far from the consciousness of the average voter. Just as the media-promoted notion that George W. Bush was the kind of guy with whom one might enjoy a few beers managed to obscure the predictable catastrophes that lay in store for this nation once he became President, so too can the deep-seated media denial of McCain's extremist policies and addiction to political expediency mask the fact that his victory in November would result in a continuation--and even, in some instances, an expansion--of the very policies that have brought the nation to the brink of irreversible disaster.

I hope that, 7,000 words later, we proved our case. A few months later, we've seen many more examples of the media's transgressions in this regard--although perhaps none better than what Tom Brokaw offered up yesterday in Denver. (Halperin was a close second, also yesterday.

The Joan Shorenstein Center on Press, Politics, and Public Policy held a talk, moderated by Judy Woodruff, between the Sunday show honchos-- Brokaw, Bob Schieffer, and George Stephanopoulos. Discussing McCain's success in the Republican primaries, Brokaw attributed it to the candidate's "indomitable will," and opined that McCain won by simply being "the most authentic...he wasn't trying to reinvent himself."

This is not only wrong, but diametrically, screamingly wrong. It's not a difficult point--McCain won the primaries specifically by reversing himself on taxes, immigration, the religious right, and virtually every other issue important to the hard right. These policies were not only blazingly visible--Mitt Romney and others called him on it loudly during the Republican debates--but obviously destructive, as the last eight years have proven.

And yet, here is Brokaw saying of the candidate who by far has done the most to change his positions that McCain was "the most authentic...he wasn't trying to reinvent himself." Remember, this isn't old, retired, mildly irrelevant Tom Brokaw. This is the new (for now) host of Meet the Press, and certainly someone who will be a prominent figure in the coverage of the allegedly most-liberal cable network during the elections.

Now, that's not to say that all the reporting has been bad... the New York Times had a probing story this weekend about the McCain family's path to wealth. It's long, but in it, we learn the following:

The wealth is almost all Cindy's--but she ain't an industrious success story. She inherited a beer distributorship from her father, for which she does little, if any, actual work: "She crisscrosses the country on the company jet, keeps an accountant on the company payroll to mind her personal finances, drives a company Lexus with 'MS BUD' plates and says she oversees the company's "strategic planning and corporate vision." Yet she almost never shows up in the office, is deemed an absentee owner by Anheuser-Busch and has left scarcely a mark on the company, present and former executives say."

The company does wield a lot of clout in Arizona politics, but usually to suspect ends. "Her business ... recently found itself at odds with advocates for pediatric hospital beds in Arizona's neediest communities and for a statewide childhood education program. When the advocates proposed initiatives that would raise liquor taxes, Hensley opposed them." Also, "At the national level, the company's priorities, fought for by the National Beer Wholesalers' Association, include rolling back the national excise tax of about 5 cents a beer, last raised in 1991, and fighting efforts by hard-liquor distillers to require labels showing the amount of alcohol in a standard serving. The beer lobby also successfully opposed a bill to pay for television advertisements combating under-age drinking."

Read it and weep in your beer.... (haha, I know we're only wine drinkers here at The Nation....)

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Democrats praise 'new hope' Obama

Michelle Obama on her husband's hopes

US Democrats have launched their national convention in Denver, with ringing endorsements of the party's White House hopeful Barack Obama.

In a keynote speech, Mr Obama's wife, Michelle, praised his values, saying her husband would make "an extraordinary president".

Senator Edward Kennedy, undergoing treatment for brain cancer, said the "dream lives on" through Mr Obama.

Senator Obama will formally accept the party's nomination on Thursday night.

He is to address a crowd of an expected 80,000 people at a sports stadium, arriving from a tour of electoral battlegrounds.

The first African-American to be nominated as a US presidential candidate, he will stand against Republican John McCain in the 4 November ballot.

Senator McCain will be nominated next week at the Republican Party's convention in Minneapolis-St Paul, Minnesota.

Some of the latest opinion polls suggest the two men are in a statistical dead heat.

'Best ideals'

The Democrats hope their national convention in Colorado will show the Illinois senator as a family man and heal the rifts of the primary race.

Senator Edward Kennedy addresses the delegates

In an assured speech, Mrs Obama talked of being raised with the same values as her husband: "That you work hard for what you want in life; that your word is your bond and you do what you say you're going to do; that you treat people with dignity and respect."

She went on: "We want our children and all children in this nation, to know that the only limit to the height of your achievements is the reach of your dreams and your willingness to work for them."

The couple's two young daughters, Sasha and Malia, then joined their mother on stage as Mr Obama spoke by satellite video link-up from Missouri.

I thought Michelle Obama's speech was effective but not a knock-out; it doesn't settle the matters of perceived lack of patriotism and oddness and effeteness (if that is a word) BBC North America Editor, Justin Webb Read Justin's thoughts in full Three arrested over 'Obama plot'

The BBC's Kevin Connolly in Denver says Mrs Obama knew that she had to claw her way back into the affections of the US public after a nasty slip earlier this year, when a comment about being proud about her country for the first time drew stinging criticism.

Her speech was effortless political theatre, our correspondent says, but also brilliant content, aimed at precisely the kind of Americans worried about her patriotism.

Earlier, Mr Kennedy, the 76-year-old scion of the iconic Democratic family, appeared on stage to loud cheers.

"I have come here to stand with you to change America, to restore its future, to rise to our best ideals and elect Barack Obama president of the United States," he said

"There is a new wave of change all around us," he said, "and if we set our compass true, we will reach our destination - not merely victory for our party, but renewal for our nation. And this November, the torch will be passed again to a new generation of Americans."

CONVENTION AGENDA Monday: Michelle Obama speech on Obama the man; tribute to Ted Kennedy Tuesday: Hillary Clinton speech; keynote speech by former Virginia governor Mark Warner Wednesday: Speeches by Bill Clinton and Joe Biden; vote to confirm Barack Obama as party's candidate Barack Obama to accept nomination with speech in stadium Convention programme Voters' views on the convention Convention diary

And in an echo of his speech in 1980 when he ceded the nomination to the incumbent president Jimmy Carter, he said: "The work begins anew, the hope rises again, and the dream lives on."

His niece, Caroline Kennedy, who had introduced a video homage to Mr Kennedy shortly before, paid her own emotional tribute to both him and Mr Obama.

"Their stories are very different but they share a commitment to the timeless American ideals of justice and fairness, service and sacrifice, faith and family," she said.

"Leaders like them come along rarely. But once or twice in a lifetime, they come along just when we need them most."

Mr Obama's half-sister, Maya Soetero-Ng, earlier spoke of a shared upbringing in which she and her brother learned that with hard work and imagination they could "dream the improbable".

'Strength and unity'

House Speaker Nancy Pelosi spoke of a defining moment in history for the US.

Praising Mr Obama's "bold" vision for the nation's future, Mrs Pelosi described him as "honouring American values, a belief in personal responsibility, in community, in hard work".

Party officials have played down the scope for discord between supporters of Mr Obama and Hillary Clinton, who was his chief rival for the nomination.

Opening the convention, Democratic chairman Howard Dean spoke of "the strength and unity of our party".

Mrs Clinton herself, addressing delegates from her home state of New York on Monday, urged them to throw their support behind Mr Obama.

She will give a speech to the convention on Tuesday and her husband and former president Bill is to speak on Wednesday.

More than 4,000 Democratic delegates and tens of thousands of officials, activists, protesters and journalists have descended on Denver for the event.

Russia recognises Georgian rebels

Many South Ossetians feel closer to Russia than Georgia

President Dmitry Medvedev has declared that Russia formally recognises the independence of the breakaway Georgian regions of South Ossetia and Abkhazia.

The move follows a vote in both houses of parliament on Monday, which called on Moscow to recognise the regions.

The move, in defiance of a specific plea from the US president, provoked a wave of protest from Western countries.

Russia and Georgia fought a brief war this month over the provinces, which already had de facto independence.

Analysts say the move is likely to further escalate tensions between Russia and the West.

"I have signed decrees on the recognition by the Russian Federation of the independence of South Ossetia and the independence of Abkhazia," Mr Medvedev said in the announcement.

"That was no easy choice to make, but it is the sole chance of saving people's lives," Mr Medvedev added.

He blamed Georgia for failing to negotiate a peaceful settlement to the problem and called on other states to follow Russia's example.

Violation

Georgia's deputy foreign minister Giga Bokeria responded angrily, saying: "This is an unconcealed annexation of these territories, which are a part of Georgia."

Western countries, including the US, Germany, Britain and France immediately condemned the move.

US Secretary of State Condoleezza Rice, speaking from the West Bank city of Ramallah, said the decision was "regrettable".

SOUTH OSSETIA & ABKHAZIA South Ossetia Population: About 70,000 (before recent conflict) Capital: Tskhinvali President: Eduard Kokoity Abkhazia Population: About 250,000 (2003) Capital: Sukhumi President: Sergei Bagapsh Profile: South Ossetia Profile: Abkhazia

Late on Monday, the US state department had warned that recognition of the two provinces' independence would be "a violation of Georgian territorial integrity" and "inconsistent with international law".

In a statement, Mr Bush had called on Russia's leadership to "meet its commitments and not recognise these separatist regions".

In the two breakaway regions, however, Moscow's move was warmly welcomed.

Residents in Abkhazia took to the streets to celebrate the news, firing into the air, Reuters reports, and in the South Ossetian capital of Tskhinvali there were scenes of jubilation.

"We feel happy. We all have tears in our eyes. We feel pride for our people," said Aida Gabaz, a 38-year-old lawyer in the Abkhaz capital Sukhumi.

'New understanding'

Earlier on Tuesday, Russia cancelled a visit by Nato's secretary general, one of a series of measures to suspend co-operation with the military alliance.

Russia's ambassador to Nato said the trip would be delayed until relations between the two were clarified.

Dmitry Rogozin said a "new understanding" needed to be reached between Russia and Nato.

The BBC's Humphrey Hawksley, in Moscow, says the recognition is bound to dramatically heighten tensions in Russia's already fragile relationship with the West.

He says this and a series of other announcements indicate that Russia is preparing itself for a showdown.

Although most of Russia's forces pulled out of the rest of Georgia last Friday, it is maintaining a presence both within the two rebel regions and in buffer zones imposed round their boundaries.

Port control

Some Russian troops also continue to operate near the Black Sea port of Poti, south of Abkhazia, where Russia says it will carry out regular inspections of cargo.

The US said on Tuesday that its warships would deliver aid to Georgia's port of Poti, which is under Russian control. The move could mean US and Russian forces coming face-to-face.

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Earlier, the head of European security organisation, the OSCE, Alexander Stubb, accused Russia of trying to empty South Ossetia of Georgians.

Speaking to the BBC's Europe Today programme, he said: "They are clearly trying to empty southern Ossetia from Georgians, which I don't think goes by any of the books that we deal with in international relations".

At a checkpoint in South Ossetia, the BBC's Gabriel Gatehouse said a South Ossetian commander said many Georgian civilians had already left of their own accord, because they were scared of the guns.