Amid jitters that high levels of unemployment may force a double dip recession, the IMF warned the slow US recovery would continue and that debt problems loomed.

The Obama administration is overestimating U.S. economic growth and needs to reduce its budget deficit far more aggressively, the International Monetary Fund said on Thursday in a report that targeted Social Security, the home mortgage interest deduction and other politically sensitive policies as ripe for cutting.

“The central challenge is to develop a credible fiscal strategy to ensure that public debt is put– and is seen to be put–on a sustainable path without putting the recovery in jeopardy,” an IMF report said.

And in its first-ever analysis of the U.S. financial sector, the agency warned that the recovery and seeming health of the banking industry may be illusory, threatened by an expected wave of defaults on commercial real estate loans and possibly in need of another large injection of capital. Small- and medium-size firms, clustered on the West Coast and in the South, are at particular risk from what may be a trillion dollars worth of bad loans for offices and other commercial buildings, IMF officials said in a briefing.

Though the economic recovery in the United States “has become increasingly well established . . . the risks are tilted to the downside,” said David Robinson, deputy director of the IMF’s Western Hemisphere department. Recent data “have increased those downside risks.”

The assessment is in line with growing concern among members of the U.S. Federal Reserve and elsewhere that the U.S. recovery is losing steam. The IMF said recent data–whether the slow advance of hiring, a laggard home market, or a weak stock market–are not enough in themselves to downgrade its forecasts for U.S. growth, which it predicts will be 3.3 percent this year and 2.9 percent next year.

But it also notes that those forecasts are lower than those used in the Obama administration’s plan to cut the U.S. budget deficit in half by 2013 and stabilize overall U.S. debt by 2015.

President Barack Obama has plowed nearly a trillion dollars into the economy to spur economic growth, exploding the US deficit to a level that many believe is unsustainable.

While the United States has already taken steps to freeze spending, the IMF said the Obama Administration may need to increase taxes to hit its deficit reduction targets.

The White House is working with South Korean officials “as they contemplate their next steps” in response to the sinking of a naval ship by North Korea, said Obama administration spokesman Robert Gibbs

Gibbs declined to specify what those next steps might be, nor did he comment on North Korea’s threat that retaliation would trigger “all-out war.”

“I don’t want to get into a series of hypotheticals,” Gibbs said.

South Korea’s formal accusation that a North Korean torpedo sank one of its warships, killing 46 sailors, will set off a diplomatic drumbeat to punish North Korea, backed by the United States and other nations, which could end up in the UN Security Council.

On Thursday in Seoul, the South Korean government presented forensic evidence, including part of a torpedo propeller with what investigators believe is a North Korean serial number.

They said it proved that the underwater explosion that shattered the 1,200-tonne corvette, the Cheonan, in March near a disputed sea border with the North was caused by the detonation of a torpedo.

President Obama’s spokesman said U.S. officials have reviewed the South Korean investigation, and agreed that North Korea engaged in an “act of aggression” that led to the death of 46 sailors.

The attack “further sets back” North Korea, and “further isolates them,” Gibbs said.

On Monday, South Korea is expected to push for the case to be referred to the UN, and the US plans to back Seoul “strongly and unequivocally,” according to Obama administration officials.

President Hamid Karzai and Secretary of State Hillary Clinton attempted to put recent differences between the U.S. and Afghan governments behind them Tuesday, saying that while they may have policy disagreements, such disputes do not reflect instability in the overall bilateral relationship.

The last time Afghanistan’s president, Hamid Karzai, was in Washington—a year ago—he had to share the spotlight with his Pakistani counterpart, Asif Ali Zardari, who got the bulk of the attention from the White House, the Pentagon and the State Department. Secretary of State Hillary Rodham Clinton even made a personal, unscheduled visit to huddle with Mr. Zardari at his hotel.

It is a far, far different visit this time around, reflecting the Obama administration’s decision to abandon the publicly tough approach it tried to use to pressure Mr. Karzai to tackle corruption and drug trafficking in his government. Administration officials concluded that the strategy had backfired, making Mr. Karzai more resentful and resistant.

This time, the Americans are pulling out all the stops for Mr. Karzai as part of a new charm offensive. Mrs. Clinton, one of the few people in the administration with a good rapport with him, has invited him for a stroll through the grounds of a private enclave in Georgetown. Richard C. Holbrooke, the special representative to the region, was dispatched to Andrews Air Force Base at 7 a.m. on Monday to personally greet Mr. Karzai. Vice President Joseph R. Biden Jr. will be Mr. Karzai’s host for a private dinner at the vice president’s mansion.

Notably, Mrs. Clinton mentioned corruption issues in Mr. Karzai’s government only briefly, and then only to praise the Afghan president’s efforts to fight graft, including his strengthening of the Afghan government’s High Office of Oversight.

Speaking at the formal opening of a three-day summit in Washington for Mr. Karzai and a large delegation of Afghan ministers, Mrs. Clinton sought to reassure Afghans that the U.S. was committed to the country’s long-term development, saying the Obama administration would not abandon Mr. Karzai’s government once U.S. troops begin withdrawing next year.

And Lt. Gen. Karl W. Eikenberry, the ambassador to Afghanistan, who personally escorted Mr. Karzai on the flight from Kabul to Washington, was sent off to assure reporters at the White House that he now had faith in the Afghan president’s determination to succeed, a position that stands in contrast to his diplomatic cable last fall denouncing Mr. Karzai as “not an adequate strategic partner.”

The new warmth is oozing all the way to the Oval Office. President Obama, in an unusual show of hospitality and presidential attention toward a visiting foreign delegation, will be host to Mr. Karzai and others in his government for almost a full day at the White House, including a lunch on Wednesday followed by a rare joint news conference.

Thus far during Mr. Karzai’s stay, which began Monday, U.S. officials have noticeably resisted criticism in a move that current and former U.S. officials said is an intentional effort to patch up recent disputes, which spiraled into a public swapping of accusations last month, with Mr. Karzai accusing the West of fraud and the White House intimating it might cancel this visit to Washington altogether.

In her remarks, Mrs. Clinton said disagreements were normal in any relationship between allies.

“President Obama and President Karzai both understand that the ability to disagree on issues of importance … is not an obstacle to achieving our shared objectives,” Mrs. Clinton said. “Rather, it reflects a level of trust that is essential to any meaningful dialogue and enduring strategic partnership.”

Mr. Karzai agreed with Mrs. Clinton, saying disagreements were a sign of a “matured relationship.”

A Bob Woodward book on the Obama administration is coming out in September.

It doesn’t even have a title yet, but that hasn’t prevented Bob Woodward’s latest book from making headlines. Woodward, best known as half of the Pulitzer Prize-winning journalistic duo that busted Watergate wide open, will be writing on the Obama administration. The book is expected to be released this September.

Simon & Schuster spokeswoman Victoria Meyer confirmed the Woodward release, currently listed on Amazon.com, but declined further comment on Wednesday. The book does not yet have a title or announced print run.

Little is known about the book so far, but Woodward did tell Politico earlier this year that the project, which will be published by Simon & Schuster, was going “very well.” A White House official confirmed at that time that Woodward was getting access to senior officials in the Obama administration and would most likely have a chance to interview the president.

Woodward also wrote four bestselling books on the George W. Bush administration based on interviews with Bush and other top officials. In reviewing Woodward’s third Bush book, “State of Denial,” Monitor staffer Peter Grier wrote that “There’s a reason why Bob Woodward remains a brand name of news more than 30 years after Watergate. The man’s a reporting machine. His reputation is such that he can talk to almost anyone he wants to–so he does.”

The result, writes, Grier “is that he’s got great stuff to illustrate his points.”

Woodward has been criticized, however, for using anonymous sources to provide fly-on-the-wall accounts of meetings and events. Woodward has defended this style of reporting and told Politico that his Obama book will use the same methods.

John Paul Stevens, the 89 year-old supreme court associate justice is to retire by mid-summer. Which is just in time for a knock-down, ding-dong battle in Congress over who the Obama administration will appoint to replace the liberal lion.

Stevens said Friday he will step down when the court finishes its work for the summer in late June or early July. He said he hopes his successor is confirmed “well in advance of the commencement of the court’s next term.”

Stevens’ announcement leaves ample time for the White House to settle on a successor and for Senate Democrats, who control a 59-vote majority, to hold confirmation hearings and a vote before the court’s next term begins in October. Republicans have not ruled out attempts to delay confirmation.

Stevens’ announcement, which came 11 days before his 90th birthday, had been hinted at for months. It’s presumed Obama will nominate another liberal, so Stevens’ departure wouldn’t alter the court’s philosophical makeup.

Throughout his tenure, which began after President Gerald Ford nominated him in 1975, Stevens usually sided with the court’s liberal bloc in the most contentious cases — those involving abortion, criminal law, civil rights and church-state relations. He led the dissenters as well in the case of Bush v. Gore that sealed President George W. Bush’s election in 2000.

Stevens began signaling a possible retirement last summer when he hired just one of his usual complement of four law clerks for the next court term. He acknowledged in several interviews that he was contemplating stepping down and would certainly do so during Obama’s presidency.

Obama planned to address Stevens’ retirement in a 1:20 p.m. EDT statement in the Rose Garden.

Chief Justice John Roberts said in a written statement that Stevens “has enriched the lives of everyone at the Court through his intellect, independence, and warm grace.”

Senate confirmations of Supreme Court justices have increasingly become political battles and this one will come amid the added heat of congressional election campaigns.

Sen. Patrick Leahy, D-Vt., chairman of the Senate Judiciary Committee, appealed for civility. “I hope that senators on both sides of the aisle will make this process a thoughtful and civil discourse,” Leahy said.

Looking toward those hearings, Senate Republican Leader Mitch McConnell of Kentucky said, “Americans can expect Senate Republicans to make a sustained and vigorous case for judicial restraint and the fundamental importance of an evenhanded reading of the law.”

In a telephone interview, Leahy said he had suggested to Obama that “the wisest move” would be to plan confirmation hearings on the same midsummer schedule used for the nominations of Roberts and Justice Sonia Sotomayor. Democrats have incentive to seat another justice before the November elections, in case Republican Senate victories make confirmation more difficult.

Leahy said Stevens gave him a heads-up on his plans over a long lunch a few weeks ago.

“I told him at the time I’d like to have him stay forever,” Leahy said.

Stevens officially informed Obama in a one-paragraph letter addressed to “My dear Mr. President.” It was delivered to the White House by court messenger at 10:30 a.m. EDT, two minutes before the public announcement, on a day when the court wasn’t in session.

White House counsel Bob Bauer telephoned the news to Obama aboard Air Force One, as he returned from a trip to Prague.

The Obama administration’s war against Massa ramped up as the ex-lawmaker told a clearly skeptical Glenn Beck on TV that the president’s Chicago thug enforcer Rahm Emanuel approached him in the shower and told him he “better vote with the president.”

House Majority Leader Steny Hoyer accused political opponents Wednesday of trying to exploit the controversy surrounding former Rep. Eric Massa, who resigned from Congress amid accusations of sexual harassment.

“I think there were some people that did jump in and try to use this for political purposes,” the Maryland Democrat said in a nationally broadcast interview, apparently referring to critics who embraced Massa’s charge that he was pressured to leave by majority Democrats because of his opposition to the health care overhaul bill.

Asked directly if he or any other Democratic leaders brought pressure on the New York Democrat to step aside, Hoyer replied, “No, absolutely not.”

But in an interview on NBC’s “Today” show, he declined to say whom he was referring to in saying political opponents had tried to leverage some tactical advantage as a result of the Massa scandal.

House Republican Whip Eric Cantor declined to directly address Hoyer’s assertion, telling interviewers: “I think I’m a little taken aback and stunned by all of this. I don’t know the facts of this at all. I know that the American people are sickened by all of this.”

Hoyer said one of his staffers had alerted him on Feb. 8 that a staffer working for Massa had complained of being harassed.

Hoyer said he told his aide that the person making the complaint “needed to immediately bring this to the attention of the Ethics Committee and I said further, ‘If you don’t make the complaint, I will.’ ”

He said he had not discussed the allegation directly with Massa because he thought the ethics panel was the “appropriate” forum for investigating the complaint.

For his part, Massa offered contradictory explanations for his behavior in cable television interviews Tuesday night.

Rahm Emanuel is officially a Washington caricature. He’s the town’s resident leviathan, a bullying, bruising White House chief of staff who is a prime target for the failings of the Obama administration.

But a contrarian narrative is emerging: Emanuel is a force of political reason within the White House and could have helped the administration avoid its current bind if the president had heeded his advice on some of the most sensitive subjects of the year: health-care reform, jobs and trying alleged terrorists in civilian courts.

A series of columns and in-depth press reports over the past few weeks have established a narrative that is bound to dog the White House–that Chief of Staff Rahm Emanuel knows best, the rest of the administration is not listening, and he is at his wit’s end trying to convince President Obama and his Chicago buddies to dial back their ambitions for the sake of the president’s agenda and political harmony.

It’s Rahmbo vs. the Obamanator. At least that’s the chatter that’s getting louder by the minute in Washington.

A series of columns and in-depth press reports over the past few weeks has hinted at such a slugfest, and the talk is bound to dog the White House for quite a while, especially if there’s any truth to it.

On Tuesday, White House Press Secretary Robert Gibbs was compelled for the first time to respond to the chatter. He said the president “absolutely” has confidence in his chief of staff, and he dismissed speculation of a rift between the two as part of the usual lineup of Washington “parlor games”–which he suggested were being played out of sheer boredom in the vacuum of the football off-season.

“Anybody that works in or around this building knows that there’s nobody working harder on passing the president’s agenda than the chief of staff,” Gibbs said.

Asked whether Emanuel was “burnishing his reputation” via the press at everybody else’s expense, Gibbs responded, “I don’t believe he is, no.”

Whether or not Gibbs could have been more forceful in his response, he was reluctantly addressing the possibility that both Obama and Emanuel are crossing paths with the one person in the world they don’t want to cross paths with. The two Chicagoans–one a former U.S. senator and the other a former U.S. representative–have larger-than-life personalities and egos, and each could make life very difficult for the other.

Gibbs addressed the chatter after The Washington Post published a lengthy piece Tuesday examining how the explosive, hard-nosed, profanity-dealing chief of staff could be the “voice of reason” in the White House, quoting anonymous sources who supported the hypothesis that Emanuel knows best.

“I don’t think the White House has listened to him enough,” an unnamed House Democrat told the Post, arguing that the White House seems “tone-deaf” to the kind of electoral concerns Emanuel is known to handle well. (Case in point, Obama suggested last week that Democrats should suck up their re-election concerns and vote for health care reform regardless of the upcoming midterm elections.)

A slew of struggling homeowners are coming forward with complaints about the way banks are operating under a federal loan modification program announced last year by the Obama administration.
You qualify.

Those two words, from the mouth of a bank representative last October, triggered a wave of relief for Tracy Davis and her husband James. The couple had been in and out of work for three years and were struggling to pay their mortgage–so when the Bank of America worker told them they qualified under a federal program to have their loan modified, they finally saw a path to keeping their house.

“We walked out thinking, great,” Tracy Davis said.

But weeks went by, and nobody contacted them, and they weren’t able to reach anyone — other than representatives at a call center in India.

“To this day, we’ve not heard from someone,” she said. “It’s February. This goes back to October 30.”

The Davises, who live in Cincinnati, are among a slew of struggling homeowners coming forward with complaints about the way banks are operating under a federal loan modification program announced last year by the Obama administration. The program, called the Home Affordable Modification Program, aims to keep 3 to 4 million people in their homes. Federal statistics show banks are making plenty of offers, but relatively few of those loan changes are being made permanent — of the more than 1 million homeowners who have started the required three-month trial period, only 116,000 have had their new terms made permanent.

The complaints have a common tune. Homeowners say the banks are giving them the runaround–either by pledging to modify loans and then not following through, as with the Davis family, or by signing them up for the trial period and then leaving them in limbo.

“This is an epidemic problem,” said Stuart Rossman, director of litigation with the National Consumer Law Center.

Under the terms of the Treasury Department program, participating banks that offer new loan terms are supposed to put homeowners through a three-month trial period. If the homeowners make timely payments and meet other conditions, the terms are supposed to become permanent.

But a pair of lawsuits filed in U.S. District Court in Boston this past week claimed Bank of America and Wells Fargo were violating those rules.

Rossman, who is helping to represent the plaintiffs, said banks–in Massachusetts and across the country–are stringing homeowners along for months without sealing the deal.

“That, to us, is inexcusable and a breach of contract,” he said. “They are living in limbo while they are at risk of losing their home.”

President Barack Obama is trying to revive his stalled national health care overhaul by taking the fight to the private insurance companies.

The Obama administration will propose legislation that would allow the government to block excessive rate hikes by health insurance companies, a senior administration official said.

The official could not speak on the record because the White House has not formally announced the proposal.

The proposal would give the federal Health and Human Services Department–in conjunction with state authorities–the power to deny egregious premium increases, roll them back, or demand rebates for consumers, said a White House official, speaking Sunday on condition of anonymity because details have not yet been officially released.

Word of the administration plan comes as the White House was to unveil President Obama’s latest health insurance reform proposal at 10 a.m. ET Monday.

The United States is the only developed nation that does not have a comprehensive national health care plan for all its citizens. Many people rely on private insurance plans.

The House of Representatives and Senate have passed their own versions of health care reform. The new Obama plan is expected to attempt to smooth the differences.

Obama will propose changes that include eliminating the so-called “Nebraska deal,” a provision worked in by Sen. Ben Nelson, a Nebraska Democrat, that exempts that state from paying increased Medicaid expenses, the official said.

Recent insurance premium hikes of as much as 39 per cent sought by Anthem Blue Cross in California have given Mr. Obama a new argument for his sweeping health care reforms, now stalled in Congress.

The president also plans to include a series of measures proposed by Republicans to eliminate waste, fraud and abuse.

His proposal also introduces a new provision to prevent arbitrary insurance rate hikes such as a recent 39 percent increase in California.

That provision incorporates legislation last week introduced by Sen. Dianne Feinstein, D-California, to protect people from such hikes–a measure that came after the premium increase by Anthem Blue Cross of California, two senior administration officials said.

The proposal also would give the secretary of health and human services new authority to stop private health insurance companies from increasing their premiums, calling on the secretary to work with state regulators to review rate increases and deem them justified or unjustified, according to the officials.

In addition, the proposal would create a Health Insurance Rate Authority–a group of health care experts who would issue an annual report with their assessment on what they would consider reasonable premium increases.

Under the Mr. Obama plan, regulators would create a competitive marketplace for small businesses and people buying their own coverage. The plan would be paid for with a mix of Medicare cuts and tax increases. It would also strip out special Medicaid deals for certain states, while moving to close the Medicare prescription coverage gap and making newly available coverage for working families more affordable.

About 50 million of America’s 300 million people are without health insurance. The government provides Medicaid and Medicare coverage for the poor and elderly, but most Americans rely on private insurance, usually received through their employers. However, not all employers provide insurance and not everyone can afford to buy it on their own. With unemployment rising, many Americans are losing their health insurance when they lose their jobs.

John Podesta, former Clinton chief of staff and leader of Obama’s transition team, thinks American politics are in a sad state. Actually, he thinks it just plain “sucks,” or so he said in an interview.

Podesta made the remark with a chuckle, but the man who chaired President Obama’s transition team expressed deep concern about the White House’s ability to pass big ticket items in the current political climate.

He blamed much of the gridlock on Republicans and a newly “strengthened” conservative movement.

“I think the president is trying to re-engage with Republicans, but quite frankly he is not dealing with the party of Lincoln, he is dealing with the party of Palin and the party of McConnell and the party of Boehner,” Podesta said in the interview, which was filmed and posted online Monday. “They have a political strategy, really, which is that fierce opposition, trying to say no to everything will endure to their political benefit, and so far it looks like that is working for them, so I don’t see them changing all that much.”

Though Podesta thinks Obama should be willing to push things through without the cooperation of Republicans, he does give the President a certain degree of credit for his bipartisan attempts. “I think the president is trying to re-engage with Republicans, but, quite frankly, he’s not dealing with the party of Lincoln. He’s dealing with the party of Palin.”

But he also reserved a healthy dose of criticism for the Obama administration, which he said focused too much on the inside game of Congress during the health care debate, instead of communicating their broader goals to the electorate, particularly to independent voters.

“All the concentration was on working the inside legislative process and I think they paid a price for that, in my mind, the administration paid a price for that because I think the narrative was all about the deals and not what was in it, what the substance of what the legislation was and how it connected to the broader project” of improving people’s lives and strengthening the economy, Podesta said.

“I’m not as despairing as all that to think that he still can’t move forward,” he said of the president. “He still has avenues open to him.”