Friday, April 11, 2008

Downturn Reviving Rift Over 1996 Welfare Change

Downturn Reviving Rift Over 1996 Welfare Change

By Peter S. Goodman

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In the summer of 1996, President Bill Clinton delivered on his pledge to "end welfare as we know it." Despite howls of protest from some liberals, he signed into law a bill forcing recipients to work and imposing a five-year limit on cash assistance.

As first lady, Hillary Rodham Clinton supported her husband's decision, drawing the wrath of old friends from her days as an advocate for poor children. Some accused the Clintons of throwing vulnerable families to the winds in pursuit of centrist votes as Mr. Clinton headed into the final stages of his re-election campaign.

Despite the criticism and anxiety from the left, the legislation came to be viewed as one of Mr. Clinton's signature achievements. It won broad bipartisan praise, with some Democrats relieved that it took a politically difficult issue off the table for them, and many liberals came to accept if not embrace it.

Mrs. Clinton's opponent in the race for the Democratic presidential nomination, Senator Barack Obama, said in an interview that the welfare overhaul had been greatly beneficial in eliminating a divisive force in American politics.

Mrs. Clinton, now a senator from New York, rarely mentions the issue as she battles for the nomination, despite the emphasis she has placed on her experience in her husband's White House.

But now the issue is back, pulled to the fore by an economy turning down more sharply than at any other time since the welfare changes were imposed. With low-income people especially threatened by a weakening labor market, some advocates for poor families are raising concerns about the adequacy of the remaining social safety net. Mrs. Clinton is now calling for the establishment of a cabinet-level position to fight poverty.

As social welfare policy returns to the political debate, it is providing a window into the ways in which Mrs. Clinton has navigated the legacy of her husband's administration and the ideological crosscurrents of her party.

In an interview, Mrs. Clinton acknowledged that "people who are more vulnerable" were going to suffer more than others as the economy turned down. But she put the blame squarely on the Bush administration and the Republicans who controlled Congress until last year. Mrs. Clinton said they blocked her efforts, and those of other Democrats, to buttress the safety net with increased financing for health insurance for impoverished children, child care for poor working mothers, and food stamps.

Mrs. Clinton expressed no misgivings about the 1996 legislation, saying that it was a needed - and enormously successful - first step toward making poor families self-sufficient.

"Welfare should have been a temporary way station for people who needed immediate assistance," she said. "It should not be considered an anti-poverty program. It simply did not work."

During the presidential campaign, she has faced little challenge on the issue, in large part because Mr. Obama has supported the 1996 law. "Before welfare reform, you had, in the minds of most Americans, a stark separation between the deserving working poor and the undeserving welfare poor," Mr. Obama said in an interview. "What welfare reform did was desegregate those two groups. Now, everybody was poor, and everybody had to work."

Mr. Obama called the resulting law "an imperfect reform." Like Mrs. Clinton, he called for an expansion of government-provided health care, child care and job training to assist women making the transition from welfare to work - programs he says he helped expand in Illinois as a state senator.

Asked if he would have vetoed the 1996 law, Mr. Obama said, "I won't second guess President Clinton for signing."

Among some advocates for the poor, the growing prospect of a severe recession and evidence of backsliding from the initial successes of the policy shift have crystallized fresh concern. Many remain upset that Mrs. Clinton, once seemingly a stalwart member of their camp, supported a law that they contend left many people at risk.

"If there is no national controversy about welfare reform, we paid an awfully high price," said Peter Edelman, a law professor at Georgetown University who has known Mrs. Clinton since her college days, and who quit his post as assistant secretary of social services at the Department of Health and Human Services in protest after Mr. Clinton signed the measure.

"They don't acknowledge the number of people who were hurt," Mr. Edelman said. "It's just not in their lens. It was predictably bad public policy."

Forcing families to rely on work instead of government money went well from 1996 to 2000, when the economy was booming and paychecks were plentiful, economists say. Since then, however, job creation has slowed and poverty has risen. The current downturn could be the first serious test of how well the changes brought about by the 1996 law hold up under sharp economic stress.

"We should have enormous concern about the lack of a fully functioning safety net for families with children," said Mark H. Greenberg, director of the Poverty and Prosperity Program at the Center for American Progress, a liberal research group.

In many ways, Mrs. Clinton has sought to moderate her liberal image since leaving the White House. But on welfare, she has faced the opposite problem: accusations from some liberals that she sold out their principles for a politically calculated centrism.

On the campaign trail, Mrs. Clinton is largely focused on the middle class. Since the departure from the Democratic race of John Edwards, who had made poverty a centerpiece of his campaign, there has been little debate about social welfare policy. But in promising on Friday to establish a cabinet-rank poverty-fighting position if she is elected, Mrs. Clinton reintroduced the topic and the question of her record.

In the interview, conducted last month, Mrs. Clinton said she had followed through on her promise to address what she viewed as shortcomings in the welfare law after being elected to the Senate in 2000. She said she had pressed for legislation that would have increased financing for child care for poor mothers by up to $11 billion, seeking to expand food stamps, and allowing welfare recipients to draw cash aid while attending school.

Those provisions were blocked by the Republican leadership.

"We've had to mostly spend our time since President Bush came in to office preventing bad things from happening," Mrs. Clinton said.

Many welfare advocates dispute Mrs. Clinton's characterization. Since entering the Senate, they say, she has shown a predilection for compromise at the expense of the poor.

When the overhaul bill came up for reauthorization, Sandra Chapin, a former welfare recipient affiliated with a coalition called Welfare Made a Difference, lobbied Congress to allow more women to attend college while they received aid. Mrs. Clinton "wouldn't have anything to do with it," Ms. Chapin said.

Ms. Chapin, now program director of the Consumer Federation of California, posted an e-mail message to a discussion board in February accusing Mrs. Clinton of having "had a hand in devaluing motherwork in this country, and no doubt sending thousands of children and their families deeper into poverty."

In the interview, and in her memoir, Mrs. Clinton said she had serious misgivings about some of the changes proposed to the welfare system as the issue percolated through Washington in the mid-1990s.

Her husband had taken office with a pledge to dismantle the old system. He embraced time limits for cash aid and allowing states to largely decide for themselves how to spend the money. He set out to expand job training, access to health care, child care and food stamps.

When the Republicans took over Congress after the 1994 elections, making Newt Gingrich the House speaker, they seized the initiative. Twice, they passed bills seeking to impose time limits on welfare benefits while cutting other aid. Twice, Mr. Clinton vetoed the bills, with the encouragement of Mrs. Clinton.

In August 1996, three months before Election Day, Congress sent the White House a third bill. This one imposed time limits on cash benefits and barred most legal immigrants from receiving welfare. But it maintained guarantees for Medicaid and food stamps and increased financing for child care. This time, Mr. Clinton signed.

"I agreed that he should sign it and worked hard to round up votes," Mrs. Clinton wrote in her memoir.

Mrs. Clinton remained troubled by parts of the bill, she wrote in her memoir, particularly the provision barring welfare for legal immigrants. But "pragmatic politics" had to be considered. "If he vetoed welfare reform a third time," she wrote, "Bill would be handing the Republicans a potential political windfall."

Marian Wright Edelman, the founder of Children's Defense Fund, an activist group that had given Mrs. Clinton her first job, blasted the Clintons as betraying the poor, opening a rift that Mrs. Clinton called "sad and painful." Mrs. Edelman's husband, Peter, quit his administration post.

In the years that followed, the number of those on welfare rolls plummeted by more than 60 percent. A study last year by the Congressional Budget Office found that from 1991 to 2005, poor families with children saw their inflation-adjusted incomes climb by 35 percent, as employment climbed.

In recent years, however, low-skilled women have struggled. The percentage of poor single mothers neither working nor drawing cash assistance surged from under 20 percent before the welfare overhaul to more than 30 percent in 2005, according to the Congressional Research Service. During the same period, the number of children in poverty rose to 12.8 million from 11.6 million, according to census data.

Consumer Sentiment Drops to 26-Year Low

Consumer Sentiment Drops to 26-Year Low

By Courtney Schlisserman

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Confidence among U.S. consumers fell to a 26-year low after employers fired workers and gasoline prices surged, threatening the spending that accounts for more than two thirds of the economy.

The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.2 this month, the weakest level since 1982, when the jobless rate approached 11 percent, the worst since the Great Depression. In other figures released today, the Labor Department reported that the cost of imported goods climbed 14.8 percent in March from a year ago, led by oil.

The reports validate concern among Federal Reserve officials that the economy will shrink in the first half of the year, and traders now anticipate the central bank will lower its benchmark interest rate by another half point on April 30. General Electric Co., the world's third-largest company by market value, also said today that its profit fell for the first time since 2003.

``The pocketbook issues are striking home,'' Richard DeKaser, chief economist at National City Corp., said in an interview with Bloomberg Television in Washington. ``People seemed here to be more focused on things like the rising unemployment rate, persistently high gas prices.''

Treasuries, which had risen earlier in the day after General Electric reported a 12 percent drop in earnings, stayed higher. Ten-year note yields fell to 3.45 percent at 11:08 a.m. in New York, from 3.54 percent late yesterday.

Job Losses

Americans are confronting the loss of 232,000 jobs so far this year, along with higher food and energy costs and overall weakening in the economy. Consumer spending in the first half will advance at the weakest rate in 17 years, according to economists surveyed by Bloomberg News.

Democratic presidential candidates Hillary Clinton and Barack Obama have focused on the weakening economy to press the case that Republicans, led by their presumptive nominee Senator John McCain, can't be trusted with another four years in the White House.

In a speech in Indianapolis today, Obama, citing a poll, said ``folks are now more downbeat about their futures than they've been in nearly fifty years.''

Import prices rose 2.8 percent in March after a 0.2 percent gain the prior month, the Labor Department said. Expenses excluding fuels jumped 0.9 percent, the most since records began in 2001.

Import Prices

Import prices were forecast to rise 2 percent, according to the median estimate of 52 economists in a Bloomberg News survey.

``People will be a little less confident about the inflation outlook now than they were before the report,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York, who had forecast a 2.6 percent gain. ``The Fed's going to ease, but they'd feel better about it if these numbers had come in lower. The risk remains that higher import and commodity prices may get passed on to the consumer.''

Economists had forecast the consumer sentiment gauge would fall to 69, from 69.5 in March, according to the median of 64 projections in a Bloomberg News survey.

``The consumer's feeling increasingly hemmed in,'' said Brian Bethune, director of financial economics at Global Insight Inc. in Lexington, Massachusetts. ``They've got higher energy bills, higher gasoline bills, higher food bills and obviously the employment markets are nowhere near as strong as they were.''

`Another Down-Leg'

``This kind of another down-leg does not augur well for consumption in the second quarter,'' Bethune added.

Fairfield, Connecticut-based GE also cut the profit forecast that Chief Executive Officer Jeffrey Immelt once told investors was ``in the bag'' for 2008.

``We hate disappointing investors,'' Immelt said in an interview on the company-owned CNBC television network. ``It's not part of the company. It's not part of the culture. We take accountability for that.''

The Reuters/University of Michigan's index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, fell to 53.4, the lowest reading since November 1990, from 60.1 last month.

The U.S. retail market ``will remain challenging this year,'' Patrick Bousquet-Chavanne, group president of Estee Lauder Cos., said April 9 in an interview at the World Retail Congress.

Spending Slowing

Consumer spending will rise at an average annual pace of 0.5 percent in the first half of the year, economists surveyed by Bloomberg News earlier this month forecast. That would be the smallest two-quarter gain since purchases fell in the six months ended March 1991.

The economy will not expand at all the first six months of this year, according to the Bloomberg survey taken from April 2 to April 8. A majority of those polled also projected the world's largest economy is, or will soon be, in a recession.

Job losses may continue into this month. The government said yesterday that the number of people remaining on unemployment-benefit rolls rose to the highest level in almost four years.

Consumers polled in today's survey said they expect an inflation rate of 4.8 percent in a year, compared with 4.3 percent projected last month.

Higher energy costs have weighed on consumers' outlooks in recent months. The average price of crude oil futures traded on the New York Mercantile Exchange in March jumped to $105.42 a barrel, from $95.01 a month earlier.

Gasoline Up

Gasoline reached a record $3.332 a gallon in the week ended April 7, according to the Energy Information Administration. The administration, which is the Energy Department's statistical arm, forecast on April 8 that gasoline will cost an average of $3.54 a gallon between April and September.

Fed officials last month anticipated the economy will shrink in the first half of the year, and some expressed concern about ``a prolonged and severe economic downturn'' as they cut interest rates, according to minutes of their most-recent policy-setting meeting, which were released April 8.

``Many participants thought some contraction in economic activity in the first half of 2008 now appeared likely,'' the Fed said in the minutes of the March 18 Federal Open Market Committee meeting.

The Fed has cut its benchmark overnight lending rate by 3 percentage points since September to try to avert a recession. Last month, Chairman Ben S. Bernanke also invoked rarely used authority to provide emergency financing for investment banks and rescued Bear Stearns Cos. from bankruptcy.

WaMu gets $7 billion infusion, cuts jobs, sees big loss

WaMu gets $7 billion infusion, cuts jobs, sees big loss

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NEW YORK (Reuters) - Washington Mutual Inc (NYSE:WM- News), the largest U.S. savings and loan, said on Tuesday it obtained a $7 billion capital injection from private equity firm TPG Inc and other investors, but that mortgage problems will lead to a $1.1 billion quarterly loss and the elimination of 3,000 jobs.

The thrift also plans to close its 186 stand-alone home loan offices and stop offering home loans through brokers. It will instead offer mortgages through its retail branches, where some of the affected mortgage employees will be offered jobs, spokesman Derek Aney said.

WaMu, as the thrift is known, said it expects a first-quarter loss of $1.40 per share, more than twice the 51 cents that analysts on average expected.

The Seattle-based thrift expects to set aside $3.5 billion in the quarter for loan losses, nearly twice what it previously projected, and said net charge-offs will total $1.4 billion.

WaMu will also reduce its quarterly dividend per share to 1 cent from 15 cents, saving $490 million a year. The cut is the second in four months.

"These companies are getting serious," said James McGlynn, a portfolio manager at Summit Investment Partners in Southlake, Texas. "They are bringing in capital, (and) getting out of businesses where they weren't efficient. It just seems like they are getting their comeuppance."

Shares of WaMu fell 73 cents, or 5.6 percent, to $12.39 in morning trading. They had risen 29 percent on Monday, after news of the thrift's plans to raise $5 billion first surfaced.

WaMu joined more than a dozen commercial and investment banks to seek cash from outside investors in the last year, following more than $200 billion of write-downs and credit losses tied to the nation's housing and credit crisis.

The thrift lost $1.87 billion in the fourth quarter, hurt by exposure to housing markets such as California and Florida.

While the thrift last year pared its exposure to subprime and other risky home loans, it didn't do so fast enough.

In a statement, Chief Executive Kerry Killinger said: "This substantial new capital -- along with the other steps we are announcing today -- will position us for a return to profitability as these elevated credit costs subside."

Killinger was not immediately available for further comment.

BONDERMAN REJOINS BOARD

In the capital-raising, WaMu sold about 176 million shares at $8.75 each, for gross proceeds of $1.54 billion. It also sold $5.5 billion of convertible preferred shares with an initial conversion price of $8.75.

David Bonderman, a founding partner of TPG and a director of WaMu from 1996 to 2002, will rejoin WaMu's board. Larry Kellner, the chief executive of Continental Airlines Inc (NYSE:CAL- News), will become a board observer, at TPG's request, WaMu said.

The investment could signal confidence in the banking system, but would expose TPG to losses if WaMu's business sours further.

"It's a sign of smart money making a major bet in what they hope is a bottom in real estate," said Robert Stovall, a strategist at Wood Asset Management in Sarasota, Florida.

It was not immediately clear which other investors were involved in the transaction, or how much each invested. Neither TPG nor Continental was immediately available for comment.

Last year, WaMu was the nation's sixth-largest U.S. mortgage lender and 11th-largest subprime lender, according to the newsletter Inside Mortgage Finance.

The thrift's other units include retail banking, commercial banking and credit cards. To shore up capital, WaMu in the fourth quarter cut its dividend 73 percent and sold $3.9 billion of preferred shares.

Goldman Sachs & Co., Lehman Brothers Inc and the law firm Simpson Thacher & Bartlett LLP assisted WaMu on the TPG-led transaction. Credit Suisse and the law firm Cleary Gottlieb Steen & Hamilton LLP advised TPG.

Pentagon Delays Report on FBI Role in Detainee Abuse

Pentagon Delays Report on FBI Role in Detainee Abuse

By Marisa Taylor

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Washington - The release of a report on the FBI's role in the interrogations of prisoners in Afghanistan, Guantanamo Bay and Iraq has been delayed for months because the Pentagon is reviewing how much of it should remain classified, according to the Justice Department's watchdog.

Glenn Fine, the Justice Department's inspector general, told McClatchy that his office has pressed the Defense Department to finish its review, but officials there haven't completed the process "in a timely fashion."

"Why that happened, I don't know," Fine said in an interview this week.

"It's been slower than we would like, and it's taken a long time. We provided our report to them months ago, and we are pushing hard to conclude this process."

Fine is investigating whether FBI employees participated in detainee abuse, whether they witnessed or reported incidents of abuse, and how such reports were handled by the bureau.

Fine launched his investigation into the FBI's role in the interrogations in early 2005 amid disclosures that FBI agents had witnessed and complained about harsh interrogation practices of detainees, including seeing Guantanamo Bay detainees who had defecated and urinated on themselves and who had been chained on the floor for more than 24 hours without food or water in more than 100 degree temperatures.

Government agencies that provide information during inspector generals' investigations are routinely asked to review drafts of reports for accuracy and to determine what information in the reports should remain classified.

Fine said the Pentagon now appears to be moving on his request.

"My sense is they are working hard on it now, and I believe we're going to reach a resolution one way or another in the not-too-distant future," he said.

The Defense Department didn't immediately respond to questions about the delay.

Fine's comments are a rare critique of a government agency's handling of one of his inquiries. His office has conducted a series of probes of the administration's anti-terrorism tactics, but since he took office, Fine has taken pains to appear impartial and never speaks publicly about the contents of a report before its release.

The delays come as the Bush administration is under fire for its legal justifications of harsh interrogation practices, which critics say equated to an endorsement of torture prohibited by U.S. and international laws.

The allegations that FBI agents witnessed the abuse of prisoners were outlined in internal government documents obtained by the American Civil Liberties Union as part of a Freedom of Information lawsuit. The documents raised questions about whether the bureau's top officials did enough to investigate allegations of detainee abuse by military interrogators and whether military interrogators were impersonating FBI agents to avoid liability against allegations of torture.

Fine has no jurisdiction to investigate the actions of employees of the Defense Department, which has its own inspector general. Fine said his office hasn't encountered similar problems with the FBI.

"There are issues we are working through regarding the FBI's comments, but not to the same extent as the delay from the Department of Defense," he said.

Arguments on Privilege for Two Bush Aides

Arguments on Privilege for Two Bush Aides

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Washington - President Bush's refusal to let two confidants provide information to Congress about fired federal prosecutors represents the most expansive view of executive privilege since Watergate, the House Judiciary Committee told a federal judge Thursday.

Lawyers for the panel, which Democrats control, argued in court documents that Mr. Bush's chief of staff, Joshua B. Bolten, and Harriet E. Miers, a former White House counsel, were not protected from subpoenas last year that sought information about the dismissals.

The legal filing came in a lawsuit that pits the legislative branch against the executive in a fight over a president's powers.

The committee is seeking the testimony as it tries to make a case that the White House directed the ouster of nine United States attorneys because they were not supportive enough of Republican agendas.

The White House says such communications are covered by executive privilege.

House lawyers told the judge, John D. Bates of Federal District Court, that subpoenaed White House officials could not simply skip hearings as Ms. Miers had done during the panel's inquiry. They also said any documents or testimony believed to be covered by privilege must be itemized for Congress's assessment.

Fred F. Fielding, the White House counsel, declared Ms. Miers and Mr. Bolten immune from prosecution because their refusal to comply with the subpoenas was done at White House direction, under privilege.

The House voted 223 to 32 in February to hold Mr. Bolten and Ms. Miers in contempt. Most Republicans boycotted the vote. Speaker Nancy Pelosi asked the attorney general to refer the matter to a federal prosecutor. He refused, and the panel sued.

Cheney, Others OK'd Harsh Interrogations

Cheney, Others OK'd Harsh Interrogations

By Lara Jakes Jordon and Pamela Hess

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Washington - Bush administration officials from Vice President Dick Cheney on down signed off on using harsh interrogation techniques against suspected terrorists after asking the Justice Department to endorse their legality, The Associated Press has learned.

The officials also took care to insulate President Bush from a series of meetings where CIA interrogation methods, including waterboarding, which simulates drowning, were discussed and ultimately approved.

A former senior U.S. intelligence official familiar with the meetings described them Thursday to the AP to confirm details first reported by ABC News on Wednesday. The intelligence official spoke on condition of anonymity because he was not authorized to publicly discuss the issue.

Between 2002 and 2003, the Justice Department issued several memos from its Office of Legal Counsel that justified using the interrogation tactics, including ones that critics call torture.

"If you looked at the timing of the meetings and the memos you'd see a correlation," the former intelligence official said. Those who attended the dozens of meetings agreed that "there'd need to be a legal opinion on the legality of these tactics" before using them on al-Qaida detainees, the former official said.

The meetings were held in the White House Situation Room in the years immediately following the Sept. 11 attacks. Attending the sessions were Cheney, then-Bush aides Attorney General John Ashcroft, Secretary of State Colin Powell, CIA Director George Tenet and national security adviser Condoleezza Rice.

The White House, Justice and State departments and the CIA refused comment Thursday, as did a spokesman for Tenet. A message for Ashcroft was not immediately returned.

Sen. Edward M. Kennedy, D-Mass., lambasted what he described as "yet another astonishing disclosure about the Bush administration and its use of torture."

"Who would have thought that in the United States of America in the 21st century, the top officials of the executive branch would routinely gather in the White House to approve torture?" Kennedy said in a statement. "Long after President Bush has left office, our country will continue to pay the price for his administration's renegade repudiation of the rule of law and fundamental human rights."

The American Civil Liberties Union called on Congress to investigate.

"With each new revelation, it is beginning to look like the torture operation was managed and directed out of the White House," ACLU legislative director Caroline Fredrickson said. "This is what we suspected all along."

The former intelligence official described Cheney and the top national security officials as deeply immersed in developing the CIA's interrogation program during months of discussions over which methods should be used and when.

At times, CIA officers would demonstrate some of the tactics, or at least detail how they worked, to make sure the small group of "principals" fully understood what the al-Qaida detainees would undergo. The principals eventually authorized physical abuse such as slaps and pushes, sleep deprivation, or waterboarding. This technique involves strapping a person down and pouring water over his cloth-covered face to create the sensation of drowning.

The small group then asked the Justice Department to examine whether using the interrogation methods would break domestic or international laws.

"No one at the agency wanted to operate under a notion of winks and nods and assumptions that everyone understood what was being talked about," said a second former senior intelligence official. "People wanted to be assured that everything that was conducted was understood and approved by the folks in the chain of command."

The Office of Legal Counsel issued at least two opinions on interrogation methods.

In one, dated Aug. 1, 2002, then-Assistant Attorney General Jay Bybee defined torture as covering "only extreme acts" causing pain similar in intensity to that caused by death or organ failure. A second, dated March 14, 2003, justified using harsh tactics on detainees held overseas so long as military interrogators did not specifically intend to torture their captives.

Both legal opinions since have been withdrawn.

The second former senior intelligence official said rescinding the memos caused the CIA to seek even more detailed approvals for the interrogations.

The department issued another still-secret memo in October 2001 that, in part, sought to outline novel ways the military could be used domestically to defend the country in the face of an impending attack. The Justice Department so far has refused to release it, citing attorney-client privilege, and Attorney General Michael Mukasey declined to describe it Thursday at a Senate panel where Democrats characterized it as a "torture memo."

Not all of the principals who attended were fully comfortable with the White House meetings.

The ABC News report portrayed Ashcroft as troubled by the discussions, despite agreeing that the interrogations methods were legal.

"Why are we talking about this in the White House?" the network quoted Ashcroft as saying during one meeting. "History will not judge this kindly."

IMF says US crisis is 'largest financial shock since Great Depression'

IMF says US crisis is 'largest financial shock since Great Depression'

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America's mortgage crisis has spiralled into "the largest financial shock since the Great Depression" and there is now a one-in-four chance of a full-blown global recession over the next 12 months, the International Monetary Fund warned today.

The US is already sliding into what the IMF predicts will be a "mild recession" but there is mounting pessimism about the ability of the rest of the world to escape unscathed, the IMF said in its twice-yearly World Economic Outlook. Britain is particularly vulnerable, it warned, as it slashed its growth targets for both the US and the UK.

The report made it clear that there will be no early resolution to the global financial crisis.

"The financial shock that erupted in August 2007, as the US sub-prime mortgage market was derailed by the reversal of the housing boom, has spread quickly and unpredictably to inflict extensive damage on markets and institutions at the heart of the financial system," it said.

After warning earlier this week that the world's financial firms could end up shouldering $1 trillion (£500bn) worth of losses from the credit crunch, the IMF said it expects the US to achieve GDP growth of just 0.5% this year, and 0.6% in 2008, with the housing crash getting even worse.

Simon Johnson, the IMF's director of research, said later the key risk to the forecasts was the danger of a vicious circle emerging, as house prices continue to fall, dealing a fresh blow to the banks, and exacerbating the problems in the markets. "Sentiment in financial markets has improved in recent weeks since the Federal Reserve's strong actions with regard to investment banks. But we have seen how strains in markets can quickly become reinforcing, and the possibility of a negative spiral or 'financial decelerator' remains a possibility."

President George Bush has already signed off a $150bn tax rebate package to kick-start the economy, and the Federal Reserve has backed an emergency buyout of investment bank Bear Stearns, but the IMF said this may still not be enough: "Room may need to be found for some additional support for housing and financial markets."

In the UK, the chancellor has repeatedly insisted that the economy is "better-placed" to weather the storm, because of its flexible labour market and low unemployment, but the IMF calculated that the British housing market is overvalued by up to 30%, and could be destined for a damaging correction.

Alistair Darling is due to fly to Washington tomorrow to discuss the turmoil with fellow G7 finance ministers.

Mervyn King, governor of the Bank of England, will also be in Washington this weekend to discuss the ramifications of the credit crunch with central bankers from around the world.

Longshoremen to close ports on West Coast to protest war

Longshoremen to close ports on West Coast to protest war

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While millions of people worldwide have marched against the wars in Iraq and Afghanistan, and last week's New York Times/CBS News poll indicated that 81 percent believe the country is headed in the wrong direction - key concerns being the war and the economy - the war machine inexorably grinds on.

Amid this political atmosphere, dockworkers of the International Longshore and Warehouse Union have decided to stop work for eight hours in all U.S. West Coast ports on May 1, International Workers' Day, to call for an end to the war.

This decision came after an impassioned debate where the union's Vietnam veterans turned the tide of opinion in favor of the anti-war resolution. The motion called it an imperial action for oil in which the lives of working-class youth and Iraqi civilians were being wasted and declared May Day a "no peace, no work" holiday. Angered after supporting Democrats who received a mandate to end the war but who now continue to fund it, longshoremen decided to exercise their political power on the docks.

Last month, in response to the union's declaration, the Pacific Maritime Association, the West Coast employer association of shipowners, stevedore companies and terminal operators, declared its opposition to the union's protest. Thus, the stage is set for a conflict in the run up to the longshore contract negotiations.

The last set of contentious negotiations (in 2002) took place during the period between the 9/11 terrorist attacks and the invasion of Iraq. Representatives of the Bush administration threatened that if there were any of the usual job actions during contract bargaining, then troops would occupy the docks because such actions would jeopardize "national security." Yet, when the PMA employers locked out the longshoremen and shut down West Coast ports for 11 days, the "security" issue vanished. President Bush then invoked the Taft-Hartley Act, forcing longshoremen back to work under conditions favorable to the employers.

The San Francisco longshore union has a proud history of opposition to the war in Iraq, being the first union to call for an end to the war and immediate withdrawal of troops. Representatives of the union spoke at anti-war rallies in February 2003, including one in London attended by nearly 2 million people, the largest ever held in Britain. Executive Board member Clarence Thomas went to Iraq with a delegation to observe workers' rights during the occupation.

At the start of the war in Iraq, hundreds of protesters demonstrated on the Oakland docks, and longshoremen honored their picket lines. Without warning, police in riot gear opened fire with so-called less-than-lethal weapons, shooting protesters and longshoremen alike with wooden dowels, rubber bullets, pellet bags, concussion grenades and tear gas. A U.N. Human Rights Commission investigator characterized the Oakland police attack as "the most violent" against anti-war protesters in the United States.

And finally, last year, two black longshoremen going to work in the port of Sacramento were beaten, Maced and arrested by police under the rubric of Homeland Security regulations ordained by the "war on terror."

There's precedent for this action. In the '50s, French dockworkers refused to load war materiel on ships headed for Indochina, and helped to bring that colonial war to an end. At the ILWU's convention in San Francisco in 2003, A. Q. McElrath, an octogenarian University of Hawaii regent and former ILWU organizer from the pineapple canneries, challenged the delegates to act for social justice, invoking the union's slogan, "An injury to one is an injury to all." She concluded, "The cudgel is on the ground. Will you pick it up?"

It appears that longshore workers may be doing just that on May Day and calling on immigrant workers and others to join them.

May Day protest

WHEN: 10:30 a.m., May 1, followed by a rally at noon.

WHERE: Longshore Union Hall, corner of Mason and Beach (near Fisherman's Wharf).

WHAT: March to a rally at Justin Herman Plaza along the Embarcadero.

FOR MORE INFORMATION: www.maydayilwu.googlepages.com; www.ilwu.org; www.transportworkers.org or call (415) 776-8100.

Breaking The Silence

Breaking The Silence

A hard hitting special report into the "war on terror"
Award winning journalist John Pilger

Mugabe government responds to mass opposition with repression

Mugabe government responds to mass opposition with repression

By Ann Talbot

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President Robert Mugabe of Zimbabwe has launched a wave of repression in a bid to cling to power in the face of mass opposition in the towns and countryside. The move follows the defeat of the ruling ZANU-PF party in the parliamentary elections and Mugabe’s failure to win an overall majority in the presidential election.

Soldiers wearing face masks are said to have beaten up civilians in the town of Gweru. They accused their victims of not “voting correctly.”

Some 60 white farmers and at least two black farmers are said to have been evicted from their land. Seven officials of the Zimbabwean Electoral Commission, which was responsible for counting the votes, have been arrested. They are to be charged with rigging the election in favour of the opposition. Four foreign journalists have been arrested, including New York Times correspondent Barry Bearak.

A serving officer in the Zimbabwean military has released the names of 200 high-ranking officers who are said to be leading gangs of thugs in the guise of war veterans in attacks on government opponents. Unemployed youths are reportedly being recruited to join government-backed gangs.

Accounts are only slowly emerging from rural areas where the mobile phone network does not reach. Gangs are said to be hunting down opponents of the regime, burning houses and beating people. Tendai Biti, secretary general of the opposition Movement for Democratic Change (MDC), was reported as saying that there had been “massive violence in the country” since the election.

The rigging of elections and the intimidation of voters has become standard practice for the regime. Mugabe has adopted similar tactics every time his hold on power has been threatened.

In the 2002 presidential elections opposition supporters were abducted, beaten and murdered. Criticizing the president was made a criminal offence. Electoral rolls were padded with fake voters and new rules were introduced to make the registration of urban voters more difficult. Local journalists were abducted and killed. Government food aid to drought-stricken areas was used as a means of buying votes.

In May 2005, the government demolished shanty towns in “Operation Murambatsvina,” which means “clear out the trash” in Shona. Residents were loaded onto trucks and driven into the countryside where they were dumped without any means of livelihood or even basic sanitation.

An estimated 700,000 people, or six percent of the population, were displaced in this operation. In total, 2.4 million people were affected directly or indirectly. It was an attempt to crush opposition among the urban working class. When the white farms were occupied, the rural workers they employed were treated with similar brutality.

At each point in this process, Mugabe has stepped up his anti-imperialist rhetoric in an attempt to rally support. Last weekend he declared, “The land is ours, it must not be allowed to slip back into the hands of the whites.”

Mugabe presents himself as the liberator of his country, but his record tells another story. He was brought to power in 1980 with the backing of Britain and the United States, who saw in Mugabe their best hope of suppressing the working class and peasantry.

The then-British colony of Rhodesia had unilaterally declared independence in 1965 under a white racist regime, which refused to grant even the most modest political rights to the majority of the population. An insurgency developed, leading US Secretary of State Henry Kissinger to fear that the impasse in Rhodesia would allow the Soviet Union to gain ground in southern Africa and threaten strategic American interests. He put pressure on Britain to reach an accord.

The Lancaster House agreement was the result. The Conservative government of Margaret Thatcher would have preferred Bishop Muzorewa to come to power, but his conciliatory attitude to the white regime led to his being routed in the British-supervised elections.

Mugabe topped the poll and proved that he was the only man who had a chance of ruling an increasingly radicalized population. His Zimbabwe African National Union (ZANU) proclaimed itself Maoist and pro-Chinese, and sought support primarily in the rural areas.

It had the advantage as far as the US was concerned of being opposed to the pro-Soviet Zimbabwe African People’s Union (ZAPU) of Joshua Nkomo, from which Mugabe himself split in 1963 to join ZANU. The Western powers feared Soviet influence in Africa more than they did Chinese influence.

Washington and London got what they wanted. The new state of Zimbabwe did not become a Soviet client. Mugabe preserved capitalism and safeguarded all major imperialist investments. He did not expropriate the white farmers, but offered compensation to those who wanted to emigrate with money provided by the US and Britain. Most remained secure in the enjoyment of their possessions and privileged life style. In fact, more settlers arrived after independence. Tobacco exports continued and it was business as usual for the mining companies.

Mugabe routinely speaks of his “revolution,” but in reality the institutions of the Rhodesian state were largely preserved and adopted by the new regime. Peter Walls, the head of the armed forces, remained in office as did Ken Flowers, head of the Rhodesian intelligence services. Peasants who tried to occupy land were driven off by the security forces and Mugabe was dubbed “Good old Bob” by his former opponents.

Mugabe’s methods were as brutal then as they are now. The only difference is that Britain and the US did not object to his attacks on ZAPU.

Nkomo’s social base was mostly among the Matabele. In 1982, Mugabe launched “Operation Gukurahundi”—sweep away the chaff—in Matabeleland. There were beatings, murders, arson, rapes and public executions. Famine relief was blocked.

An estimated 20,000 civilians died before Mugabe declared an amnesty in 1987, which led up to the merger of the two parties to form ZANU-PF (Popular Front-the previous electoral name for ZAPU.)

Mugabe’s anti-imperialist rhetoric was feverish as he dealt with the internal opposition to his regime. But the white farmers had nothing to fear. Land reform proceeded at a glacial pace. By 1998, only 70,000 families had been resettled. Most of them received poor-quality, drought-prone land. White farmers continued to own 40 percent of the land and two thirds of the best agricultural land.

Mugabe’s regime has presided over massive inequality in Zimbabwe since it came to power. A new ruling elite emerged under his patronage, like millionaire businessman Philip Chiyangwa, who boasted, “I am rich because I belong to ZANU-PF.”

While the new ruling elite enjoyed private health care and private education for their children, the former fighters were left destitute. Government ministers even looted funds set aside for the compensation of war victims.

Threat of land reform remained a useful tool to win support among his increasingly disillusioned supporters and to gain concessions from the US and Britain. Mugabe remained valuable to them, particularly as long as the Soviet Union was in existence. His regime was a vital part of their Cold War strategy in Africa.

Mugabe was given favourable treatment by donors and lenders as Britain and the US tried to establish his regime as a bulwark of capitalism in southern Africa. Thus, while other African regimes came under pressure during the 1980s to cut social spending, Zimbabwe was able to develop a relatively high standard of public health care and education.

The liquidation of the Soviet Union in 1991 brought this period to an end.

In response, Mugabe willingly adopted an International Monetary Fund (IMF) Structural Adjustment Programme (SAP) that involved enormous attacks on the working class and rural poor. Spending on public health care and education was cut. The rural poor were driven further into poverty while huge tax breaks were offered to the commercial farmers. By 1999, two thirds of the population were living on less than $2 a day and Mugabe had begun to speak of “pragmatic socialism” and “indigenous capitalism.”

Opposition to the ZANU-PF regime mounted. In 1997 there was a massive strike wave that included Zimbabwe’s first general strike for half a century.

Faced with rising prices, higher taxation, mounting unemployment and falling living standards, workers came out against the government. In 1999, the Zimbabwe Confederation of Trade Unions (ZCTU) responded to the unrest by forming a new party—the MDC—under the leadership of former ZCTU general secretary Morgan Tsvangirai.

The MDC and the ZCTU did not oppose the IMF measures that were driving their members into poverty, but instead argued for a more effective implementation of the programme. They won the backing of white farmers in the Commercial Farmers Union and of businessmen in Zimbabwe.

Zimbabwe’s export earnings fell because the price of the commodities it depended on were driven down. The government had to go ever deeper into debt, and the IMF made the conditions of its loans even more stringent.

Mugabe came into conflict with the IMF only when it became clear that its demands would undermine the basis of the ZANU-PF regime. As long as the IMF measures only hit the mass of the population, Mugabe was prepared to implement them. But if he could not pay his army or reward his supporters, he knew that his days in the presidential palace were numbered.

As the US and UK became ever more dissatisfied with Mugabe, they imposed sanctions that worsened the already appalling situation facing Zimbabweans. The Zimbabwe Democracy and Economic Recovery Act passed by the US passed in 2001 turned off the credit tap to Zimbabwe and effectively excluded the country from functioning on the world market. As a result, the government has often no hard currency to pay for a shipment of wheat to put bread on the supermarket shelves. But the ruling elite have continued to live in luxury.

London and Washington increasingly looked to the MDC and provided the new party with funding and advice. Tsvangirai assured his foreign backers in 2000 that “We would privatise and restore business confidence in Zimbabwe.”

The MDC is a party that has nothing to offer the mass of the population in Zimbabwe except more suffering. But it has benefited electorally from the growing opposition to Mugabe.

The most public targets of the government’s repression are the local activists of the MDC. But the regime’s fundamental objective is to terrorize the working class and rural poor and prevent any independent class opposition emerging.

At no point has the MDC attempted to mobilize mass opposition to the regime. Like all the ruling elites in Africa, the leaders of the MDC fear the independent strength of working class because it threatens their privileged lifestyle. They share that class outlook with Mugabe’s cronies.

Tsvangirai is even now attempting to cut deals with factions of ZANU-PF that have become dissatisfied with Mugabe. If he came to power, his attitude to working people would be essentially the same as that of Mugabe.

Social conditions have been destroyed over the past two decades. Inflation is officially running at 165,000 percent, but the Financial Times puts the actual rate at 400,000 percent. Even the 20 percent of people still in work find their wages eroded on a daily basis.

In addition, Zimbabwe has one of the highest rates on HIV/AIDS infection in the world. A quarter of the population are thought to be HIV positive. The epidemic, coupled with malnutrition, has reduced the life expectancy to 34 years for women and 37 for men, one of the lowest in the world. Many elderly grandparents are caring for children orphaned by AIDS-related diseases.

Inflation, sanctions and the loss of a generation of workers to disease have sent the economy into free-fall. Formerly one of Africa’s main grain exporters, Zimbabwe has become dependent on food aid.

An estimated quarter of the population—three million—has fled the country. The latest round of government repression and the complicity of the MDC have sent more people across the border into South Africa, where they are forced to eke out a living in the informal economy. Recently, 1,500 Zimbabweans are reported to have crossed Beit Bridge in one day alone.

Even so, the working class has again and again shown its readiness to fight. There has been a wave of strikes since 2007 involving broad layers of the working class. This year alone, doctors and nurses, civil servants and council workers have all taken strike action. Teachers went on strike just before the election to demand an increase in their Z$500 million a month pay—the equivalent of just $10. Hospital staff only returned to work because they feared for their patients.

It is not a matter of workers choosing between Mugabe and Tsvangirai, between the MDC and ZANU-PF. Both represent class forces whose interests are antithetical to those of the working class.

The 28 years of Mugabe’s rule in Zimbabwe and that of other bourgeois national movements throughout Africa are a vindication of Trotsky’s theory of Permanent Revolution, which insists that the national bourgeoisie in the oppressed nations can have no genuine independence from the imperialist powers, the transnational corporations and major banks.

The African bourgeoisie conceived of national independence from the standpoint of securing its own right to exploit the working class. The need to win influence over the workers and oppressed masses required for a time that it dress up this perspective in socialist clothing—a task made easier by backing from the Soviet Union in furtherance of the Kremlin’s geo-political interests.

But the post-colonial regimes in Africa remained dependent on world markets dominated by the imperialist powers. They have all functioned historically—and do so ever more nakedly—as mechanisms through which the economic exploitation and political suppression of the working class on behalf of the corporations and banks have been imposed.

Precisely because the impoverishment of Africa is rooted in its position within the global capitalist economy, it can be ended only through the reorganisation of the world economy to meet the needs of the world’s people. The economic and democratic development of the African continent could not take place based on the setting up of nominally independent states based on capitalist foundations, but only through the overthrow of capitalism by the working class, leading behind it the oppressed rural masses. This struggle cannot be completed on the foundations of a single nation, or even on a continent-wide basis, but demands the victory of the working class in the struggle for socialism in the imperialist centres.

The only way out of the terrible impasse for the Zimbabwean and African masses is the organization of the working class in its own party, uniting its struggles with those of workers the world over on the basis of an international socialist perspective.

Bush orders Iraq escalation to continue

Bush orders Iraq escalation to continue

By Patrick Martin

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In a brief televised speech delivered just before noon Thursday, President Bush announced that there would be no further reduction of US troop strength once the current drawdown of forces is completed in July. This means that some 140,000 US soldiers will remain in occupation of the country through the November election, and likely until Bush leaves the White House on January 20, 2009.

The speech followed two days of testimony on Capitol Hill by General David Petraeus, the US commander in Iraq, and Ambassador Ryan Crocker. While their appearance before a series of House and Senate committees provided the semblance of consultation with the legislature, the decision to maintain US troop strength was taken weeks ago and made public well in advance in both Baghdad and Washington.

Bush himself barely gave lip service to a congressional role in foreign policy in his 15-minute speech, saying only that Congress had to pass as soon as possible the latest $108 billion emergency war funding bill submitted by the administration. “Members of Congress must pass a bill that provides our troops the resources they need,” he said, “and does not tie the hands of our commanders or impose artificial timelines for withdrawal.”

As in dozens of previous speeches on Iraq, Bush portrayed the war, which began with the unprovoked US invasion in March 2003, as part of a global struggle against Al Qaeda terrorists—although there was no Al Qaeda presence in Iraq until the US invasion, and the Islamic fundamentalists were deeply hostile to the secular nationalist dictatorship of Saddam Hussein.

There was a prominent addition to the roster of enemies, however, as White House speechwriters worked Iraq’s neighbor, Iran, into the address. At one point Bush declared, “Iraq is the convergence point for two of the greatest threats to America in this new century: Al Qaeda and Iran.” (Neither, of course, had significant influence until the US invasion shattered the Baathist regime in Baghdad.) Bush later said, “If we succeed in Iraq, after all that Al Qaeda and Iran have invested there, it’d be a historic blow to the global terrorist movement and a severe setback for Iran.”

This rhetorical joining of two antagonists—the Al Qaeda leaders are fundamentalist Sunnis who regard Shiites, like the Iranian mullahs, as apostates and renegades—is typical of the Bush administration’s propaganda. The hope is that constant repetition of such fabricated associations will prepare the American public for the next radical shift in US foreign policy, from a counterinsurgency war against Iraqis to air strikes or even a major invasion of Iran.

The speech exuded the growing crisis of the Bush administration in its final months. The brevity of the address and the perfunctory delivery, even by Bush’s dismal standards, suggest a White House going through the motions, barely able to summon the energy to trot out the usual lies and distortions which world public opinion, and the American people, have largely discounted.

The repeated invocations of “freedom” and “democracy” as the goals of the US invasion and conquest of Iraq coincided with the attempts of the US-backed puppet regime in Baghdad to physically exterminate the most widely-based Iraqi political movement—that headed by the radical Shiite cleric Muqtada al-Sadr.

Bush described the military offensive against Sadr’s forces, ordered by Iraqi Prime Minister Nouri al-Maliki, as “operations in Basra that make clear a free Iraq will no longer tolerate the lawlessness by Iranian-backed militants.”

As it happened, the military operation was a complete failure, with Iraqi government forces requiring rescue by the US and British military, and Maliki compelled to send representatives to the Iranian religious capital, Qom, to plead with Sadr for a ceasefire. Fighting is still continuing on a lesser scale, particularly in the stronghold of Sadr’s Mahdi Army militia in the Sadr City neighborhood on the east side of Baghdad.

Bush also painted a delusional picture of improving economic and financial conditions in Iraq—a country with an unemployment rate over 50 percent, no functioning banking system, a chronic lack of electrical power and clean drinking water, and 4.5 million displaced people.

The speech combined warnings about the dire consequences of an American defeat with overblown claims about the success produced by the increase in US troop strength from 130,000 to 160,000 last year. Bush said that as a result of this escalation of the war—initially dubbed a “surge” to suggest that the troop buildup was temporary—“a major strategic shift has occurred. Fifteen months ago, America and the Iraqi government were on the defensive. Today, we have the initiative.”

The president did not bother to explain why his depiction of Iraq flatly contradicts the optimistic statements that were made by the White House in previous years. Prior to the launching of the “surge” in January of 2007, equally grandiose accounts of success on the part of the US occupation were being made regularly by White House spokesmen. Vice President Cheney said the Iraqi resistance was “in its last throes” at a time when, in retrospect, the administration now admits the US occupation regime was losing ground.

Neither the servile media nor Bush’s Democratic collaborators hold the administration to account for its ever-changing but always mendacious descriptions of “progress” in Iraq. Nor do they raise the real and horrifying conditions facing the population of that tortured country—more than 1 million dead, 2 million internally displaced, 2.5 million refugees, mainly in Syria and Jordan, and the complete devastation of what was once among the most prosperous and economically advanced countries in the Arab world.

The criticism of the administration by congressional Democrats and the two candidates for the Democratic presidential nomination, Barack Obama and Hillary Clinton, remained entirely within the framework of what is best for the American “national interest,” without the slightest outrage expressed over the ongoing crimes committed by the occupation regime against the Iraqi people.

House Speaker Nancy Pelosi sent a letter to the White House, after Petraeus’s testimony, condemning “a war that has claimed more than 4,000 American lives ... cost nearly a trillion dollars that could have been used to meet urgent needs at home and damaged the reputation of the United States in the eyes of the world.” She warned that an over-commitment to Iraq was allowing a threat from Al Qaeda on the Pakistan-Afghanistan border to “grow because our resource commitment in Iraq makes it is impossible to respond adequately.”

Senate Majority Leader Harry Reid noted the Catch 22 character of the Bush administration policy in Iraq. “When violence is up, the president says we cannot bring our troops home,” he said. “When violence dips, the president says we cannot bring our troops home.” He complained that Bush was squandering “America’s limited resources” and “leaving all the tough decisions to the next administration. President Bush has an exit strategy for only one man, himself, on January 20, 2009.”

Senator Clinton attacked Bush for failing to spell out an exit strategy for Iraq, and the Republican presidential nominee, Senator John McCain, for backing an open-ended war, while at the same time attempting to criticize her opponent for the Democratic nomination, Senator Obama, as insufficiently antiwar. “One candidate will continue the war and keep troops in Iraq indefinitely, one candidate only says he’ll end the war,” she said, “and one candidate is ready, willing and able to end the war and to rebuild our military while honoring our soldiers and our veterans.”

Clinton initially positioned herself as the most right-wing of the Democratic presidential candidates on the war, refusing to apologize for her 2002 vote to authorize the US invasion or to set a deadline for withdrawal. With her chances to win the nomination dwindling, Clinton is making a desperate and transparently insincere appeal to popular antiwar sentiment.

Obama, for his part, attacked both Clinton and McCain for their 2002 votes to authorize the war, and, at a town hall meeting in a Philadelphia suburb, asked again, “why we want to invade a country like Iraq that had nothing to do with 9/11.” At the same time, he reiterated his support for “success” in Iraq, without defining it, and called for a major increase in manpower for both the Army and the Marines, and for an escalation of the US military intervention in Afghanistan.

The conflict between the Democrats and the Republicans is a factional struggle within the ruling elite in which both sides conceal the predatory war aims behind US imperialism’s military aggression in Iraq.

Bush, McCain and the congressional Republicans declare that an American withdrawal from Iraq would be a colossal blow to the United States’ worldwide position. Clinton, Obama and the congressional Democrats declare that the Iraq war has become an endless and unproductive squandering of resources with devastating long-term effects on the capabilities of the US military.

Both, in a sense, are right. American imperialism is caught in a trap of its own manufacture: unable to withdraw from Iraq without a shattering loss of political authority, not only internationally but also at home, unable to win a war which has no definable end point except the physical extermination of the bulk of the Iraqi people, who will never accept the establishment of a US-backed semi-colonial regime that opens up the country’s oil resources to American corporations.

Left entirely out of this discussion are the sentiments of the vast majority of the American people, who, according to poll after poll, overwhelmingly favor the quickest possible withdrawal of American troops from Iraq—a position repudiated by all factions in both of the corporate-controlled political parties.

A Rasmussen telephone survey Monday found that 65 percent of Americans would like all US troops out of Iraq within a year, the highest total ever reported supporting a rapid withdrawal. Some 26 percent want troops brought home immediately. A separate poll by AP-Ipsos, published Thursday, found that Bush’s approval rating has hit a new low of 28 percent.

How the Army Corps Is Swindling Americans

How the Army Corps Is Swindling Americans

By Michael Grunwald

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Imagine the Pentagon had been caught red-handed concocting its justification before launching the invasion of Iraq in 2003. Imagine that after the scandal died down, the Pentagon admitted Saddam didn't really have WMDs -- but proposed an even larger invasion, because there was a remote possibility things might change someday. Then imagine Congress had rewarded this logic with overwhelming bipartisan support.

It's a silly thought experiment, because Congress -- for all its flaws -- takes war at least somewhat seriously. But there's still one part of the Pentagon that can count on overwhelming bipartisan support no matter what it proposes. In 2000, the Army Corps of Engineers was caught red-handed concocting its justification before launching a $1 billion project on the upper Mississippi River system. After the scandal died down, the corps admitted there wasn't really enough barge traffic to justify construction -- but proposed a $4 billion project, because there was a remote possibility things might change someday. And yes, the project recently sailed through a united Congress, where water projects are a time-honored form of political currency that steer jobs and money to the constituents and contributors of powerful members.

By corps standards, pouring thousands of tons of concrete into the Mississippi and Illinois Rivers to relieve nonexistent barge congestion with seven new locks is no environmental disaster; those rivers are already highly engineered and degraded. But it is a stark example of the dysfunction of the corps -- its dishonest analyses, anachronistic priorities, predilection for makework, and desperation to please its congressional patrons and special-interest clients. And that dysfunction is itself an environmental disaster -- not only because some of the porky boondoggles it produces destroy pristine rivers and enormous swaths of wetlands, but because an honest corps with better priorities could help revive America's ravaged ecosystems.

The upper Mississippi scandal was the start of my morbid fascination with the corps and its enablers in Congress. I was a Washington Post reporter then, and I had stumbled into America's bumbling water resources agency after hearing that it was spending billions of dollars damming and dredging rivers with little barge traffic. Soon leakers were sending me a stream of hilarious internal corps memos about "getting creative" with economic analyses in order to "grow the program" with ginned-up projects. I remember my editor saying the corps bureaucracy reminded him of covering communist Czechoslovakia. And I remember thinking -- after independent investigations by the Government Accountability Office, the National Academy of Sciences, and even the Pentagon inspector general confirmed that the corps was an unholy mess -- that since the mess had become public, it would have to be cleaned up.

I thought wrong. Since 2000, corps leaders have repeatedly promised more environmental sensitivity and better economic analyses. But they keep rubber-stamping the same wasteful and destructive pork that soured their reputations in the first place. As I have written in Grist, the dysfunction of the corps and America's water resources system drowned the city of New Orleans and killed more than 1,000 people in 2005. And not even that catastrophe has prompted change. So I was pretty naïve to expect the debacle on the upper Mississippi to lead to reform.

Situation Normal: All Porked Up

My first corps story was about the Red River, where the agency had spent $2 billion building dams (named after Louisiana congressmen) to create a liquid highway (named after a Louisiana senator) for barges that never came. My second was about the Missouri River, where the corps was flouting the Endangered Species Act to maintain a reliable waterway for barges that rarely came. And with that I figured I had given more than enough attention to an obscure public works agency with an addiction to concrete.

Then I got a pile of documents from a corps economist named Don Sweeney.

In 1993, the corps had begun a $60 million study of navigation improvements on the upper Mississippi, its largest study ever. Sweeney was tapped to lead the study team. His task was to calculate whether the economic benefits that private shipping interests would receive from larger locks would exceed the costs to the public. If so, the corps would recommend the project, and Congress would approve it.

Sweeney knew the corps tended to overestimate the need for giant navigation projects with powerful congressional sponsors. The agency had predicted 27 million tons of barge traffic for the first year of the Tennessee-Tombigbee Waterway, 25 million tons too high. He realized the corps was using a hopelessly primitive economics model that assumed shippers would use barges at any cost. So he developed a more sophisticated model that was hailed inside and outside the corps as a supermodel. And in 1998, he concluded there was no need to spend a billion dollars on larger locks; the river's occasional barge delays could be eased with decent scheduling.

But this was not the answer his bosses wanted. The barge industry -- dominated by influential conglomerates like CSX, ConAgra, Cargill, and Archer Daniels Midland -- wanted bigger locks. So their friends in Congress, led by Sen. Christopher Bond (R-Mo.), were pushing as well. Corps generals disbanded Sweeney's team and ordered a new team to come up with a "reasonably plausible" rationale for the project.

The No. 2 corps general ordered the team "to develop evidence or data to support a defensible set of capacity enhancement projects." In an email summarizing the orders, one corps economist wrote: "If the demand curves, traffic growth projections and associated variables ... do not capture the need for navigation improvements, then we have to figure out some other way to do it."

Eventually, the team managed to inflate enough benefits, ignore enough costs, and skew enough data to produce a positive benefit-cost ratio. It made just one mistake: It kept copying Sweeney on its emails. And Sweeney's lawyers relayed them to me. I also got a copy of a secret "Program Growth Initiative" that corps military leaders had developed to try to boost their agency's budget, as if they were dot-com executives trying to expand market share. "We have been encouraged to have our study managers not take no for an answer," one corps official wrote. "The push to grow the program is coming from the top down." When I read excerpts to Joseph Westphal, the assistant Army secretary who was supposed to be overseeing the corps for the Clinton administration, this was his response: "Oh my God. My God. I have no idea what you're talking about." Good times! Army Secretary Louis Caldera, who once told me he wished it could be the Navy Corps of Engineers, promptly announced some gentle "management reforms" reminding the corps brass to obey its civilian overseers. He might as well have sent the 101st Airborne to storm Capitol Hill. Congress considers itself the only true overseer of the corps, and Caldera was promptly forced to retract his reforms. It was clear that I had stumbled into the journalistic equivalent of a full-employment program.

I spent six more months investigating how the corps had twisted its analyses to justify billions of dollars worth of white elephants, from a flood-control pump in the Mississippi Delta that would have drained 200,000 acres of wetlands to a dredging scheme for the Port of Baltimore that was so preposterous it became a subplot on HBO's The Wire. My final article was supposed to be about the corps redeeming itself by restoring the damage it had done to the Florida Everglades, but the story turned out to be a lot more complex and interesting than that -- so complex and interesting that I ended up writing a book. Let's just say that the corps is a lot better at draining wetlands than it is at fixing them.

In December 2000, the Pentagon wrapped up its internal investigation of the corps, concluding not only that the Mississippi study was rigged, but also that the agency had a systemic bias in favor of large-scale construction. It was a shocking admission, but by then no one was paying much attention. A few corps officers were reprimanded, a new commander renounced the Program Growth Initiative, and the Mississippi study went back to the drawing board. Otherwise, it was business as usual. In fact, after a National Academies report that trashed the corps for cooking its books also included a few caveats acknowledging that even Sweeney's model couldn't always predict the future -- the economic equivalent of acknowledging that evolution is a theory -- corps officials tried to blame the whole controversy on Sweeney and resurrect their discredited model.

"It was surreal," says Sweeney, who filed a successful whistleblower complaint with the Office of Special Counsel, and is now a professor at the University of Missouri at St. Louis. "But facts don't count for much at the corps."

Gaining the Upper (Mississippi) Hand

These days, the Bush administration's environmental reputation is about as good as Eliot Spitzer's marital reputation, but credit where it's due: The Bushies have tried to rein in the corps. All administrations talk about reining in the corps, but Bush's has consistently proposed zero funding for the worst corps oinkers, although it's been just as consistently overruled by Congress. Corps projects hate to die, but the Bushies somehow managed to kill a ridiculous $108 million jetty scheme in North Carolina in 2003, and they're about to kill that $220 million pump nonsense in the Mississippi Delta. And Bush's budget office delved deep into the details of the upper Mississippi study, publicly trashing that discredited corps model, forcing the agency back to the drawing board yet again.

The prospects for larger locks were starting to look bleak. In 2000, the project's rationale had depended on an agribusiness consultant's study predicting huge increases in grain shipments, even though shipments had been declining slightly for over a decade. Since 2000, grain shipments have continued to slow, and the rise of the corn ethanol industry should mean fewer grain exports in the future. "You'd need significant growth to justify a project," the new corps study leader, Denny Lundberg, admitted to me in 2003. Right now, the seven locks are in use less than half the time, and barge traffic is so light that Sweeney says there's not even a need for a schedule, much less a megaproject. But the corps wasn't about to let 20 years of no-growth experience trump its big-growth dreams. "You've got to think about the potential for growth," Lundberg explained. "If you only made these judgments based on past history, you'd never do anything."

Sounds like a plan!

Unfortunately, the corps can't stand to do nothing -- its motto is essayons, French for "let us try" -- so it decided instead to adopt a new approach, basing its recommendations on "scenarios" instead of forecasts. For example, under a mildly optimistic flat-growth scenario, it calculated that the costs of new locks would be five times the economic benefits. And under a highly optimistic modest-growth scenario, the costs would be 2.5 times the benefits. But under an outlandishly optimistic high-growth scenario, the benefits would slightly exceed the costs. That was good enough for the corps, which liked the high-growth scenario so much it recommended expanding the original $1 billion plan to expand seven locks into a $2.2 billion plan to build seven new locks. A triumphant Sen. Bond called it "a plan that gets the corps back in the business of building for the future rather than haggling about predicting it."

Corps boondoggles thrive because they provide benefits to a few -- in this case, barge interests, farm interests, and unions -- at the expense of the many. You pay for this foolishness, but you probably won't come to Washington to fight it. There are a few corps reformers on the Hill, such as Sen. John McCain (R-Ariz.) and especially Sen. Russ Feingold (D-Wis.), but most members of Congress consider it bad form to oppose another member's water project. Usually, the strongest voices in opposition are environmentalists. And the corps devised a brilliant strategy for dealing with them on the upper Mississippi: It bought them off.

In addition to the $2.2 billion in navigation improvements, the corps proposed $1.7 billion in environmental improvements. Groups like the Audubon Society and The Nature Conservancy were delighted with the green pork, especially after Congress included toothless language pledging "comparable" spending on restoration and navigation. (My house is "comparable" to the Sears Tower; it's smaller.) And the project's supporters got to brag about saving the earth as well as bringing home jobs. "The funding for ecosystem restoration will keep the land around these mighty rivers clean and beautiful," crowed Sen. Barack Obama (D-Ill.).

The entire $4 billion bonanza was stashed into the Water Resources Development Act of 2007. Most environmental groups ended up supporting the bill, because it also included $5 billion for the Everglades and the devastated Louisiana coast, along with $14 billion worth of more traditional pork. But as I have already whined at length on this website, there was nothing in the bill to reform the troubled corps for the 21st century. Obama supported some proposed reforms, such as independent reviews of corps projects, but he didn't fight for them because he "didn't want to slow the process down." That's an understandable sentiment for an Illinois senator. But the water resources bill had pork for every state; that's why it was so popular. And that's why, once again, nothing is going to change.

Some corps projects are true ecological nightmares, like the pump in the Delta, or this flood-control fiasco on the Mississippi. But the real ecological nightmare of the corps is the opportunity cost. If it didn't have to spend another $2.2 billion pouring concrete into the Mississippi, maybe it really would spend $1.7 billion restoring the Mississippi. And if it wasn't the kind of agency that spent its time finagling ways to pour concrete, maybe it would be the kind of agency we could actually trust to restore the Mississippi properly -- along with the Everglades, Louisiana's coastal marshes, and so many other ecosystems the corps has helped to destroy in the first place.