Tuesday, May 27, 2008

Entrenched, Embedded, and Here to Stay

Entrenched, Embedded, and Here to Stay

The Pentagon's Expansion Will Be Bush's Lasting Legacy

By Frida Berrigan

Go To Original

A full-fledged cottage industry is already focused on those who eagerly await the end of the Bush administration, offering calendars, magnets, and t-shirts for sale as well as counters and graphics to download onto blogs and websites. But when the countdown ends and George W. Bush vacates the Oval Office, he will leave a legacy to contend with. Certainly, he wills to his successor a world marred by war and battered by deprivation, but perhaps his most enduring legacy is now deeply embedded in Washington-area politics -- a Pentagon metastasized almost beyond recognition.

The Pentagon's massive bulk-up these last seven years will not be easily unbuilt, no matter who dons the presidential mantle on January 19, 2009. "The Pentagon" is now so much more than a five-sided building across the Potomac from Washington or even the seat of the Department of Defense. In many ways, it defies description or labeling.

Who, today, even remembers the debate at the end of the Cold War about what role U.S. military power should play in a "unipolar" world? Was U.S. supremacy so well established, pundits were then asking, that Washington could rely on softer economic and cultural power, with military power no more than a backup (and a domestic "peace dividend" thrown into the bargain)? Or was the U.S. to strap on the six-guns of a global sheriff and police the world as the fountainhead of "humanitarian interventions"? Or was it the moment to boldly declare ourselves the world's sole superpower and wield a high-tech military comparable to none, actively discouraging any other power or power bloc from even considering future rivalry?

The attacks of September 11, 2001 decisively ended that debate. The Bush administration promptly declared total war on every front -- against peoples, ideologies, and, above all, "terrorism" (a tactic of the weak). That very September, administration officials proudly leaked the information that they were ready to "target" up to 60 other nations and the terrorist movements within them.

The Pentagon's "footprint" was to be firmly planted, military base by military base, across the planet, with a special emphasis on its energy heartlands. Top administration officials began preparing the Pentagon to go anywhere and do anything, while rewriting, shredding, or ignoring whatever laws, national or international, stood in the way. In 2002, Defense Secretary Donald Rumsfeld officially articulated a new U.S. military posture that, in conception, was little short of revolutionary. It was called -- in classic Pentagon shorthand -- the 1-4-2-1 Defense Strategy (replacing the Clinton administration's already none-too-modest plan to be prepared to fight two major wars -- in the Middle East and Northeast Asia -- simultaneously).

Theoretically, this strategy meant that the Pentagon was to prepare to defend the United States, while building forces capable of deterring aggression and coercion in four "critical regions" (Europe, Northeast Asia, East Asia, and the Middle East). It would be able to defeat aggression in two of these regions simultaneously and "win decisively" in one of those conflicts "at a time and place of our choosing." Hence 1-4-2-1.

And that was just going to be the beginning. We had, by then, already entered the new age of the Mega-Pentagon. Almost six years later, the scale of that institution's expansion has yet to be fully grasped, so let's look at just seven of the major ways in which the Pentagon has experienced mission creep -- and leap -- dwarfing other institutions of government in the process.

1. The Budget-busting Pentagon: The Pentagon's core budget -- already a staggering $300 billion when George W. Bush took the presidency -- has almost doubled while he's been parked behind the big desk in the Oval Office. For fiscal year 2009, the regular Pentagon budget will total roughly $541 billion (including work on nuclear warheads and naval reactors at the Department of Energy).

The Bush administration has presided over one of the largest military buildups in the history of the United States. And that's before we even count "war spending." If the direct costs of the wars in Iraq and Afghanistan, as well as the Global War on Terror, are factored in, "defense" spending has essentially tripled.

As of February 2008, according to the Congressional Budget Office, lawmakers have appropriated $752 billion for the Iraq war and occupation, ongoing military operations in Afghanistan, and other activities associated with the Global War on Terror. The Pentagon estimates that it will need another $170 billion for fiscal 2009, which means, at $922 billion, that direct war spending since 2001 would be at the edge of the trillion-dollar mark.

As New York Times columnist Bob Herbert has pointed out, if a stack of bills roughly six inches high is worth $1 million; then, a $1 billion stack would be as tall as the Washington Monument, and a $1 trillion stack would be 95 miles high. And note that none of these war-fighting funds are even counted as part of the annual military budget, but are raised from Congress in the form of "emergency supplementals" a few times a year.

With the war added to the Pentagon's core budget, the United States now spends nearly as much on military matters as the rest of the world combined. Military spending also throws all other parts of the federal budget into shadow, representing 58 cents of every dollar spent by the federal government on "discretionary programs" (those that Congress gets to vote up or down on an annual basis).

The total Pentagon budget represents more than our combined spending on education, environmental protection, justice administration, veteran's benefits, housing assistance, transportation, job training, agriculture, energy, and economic development. No wonder, then, that, as it collects ever more money, the Pentagon is taking on (or taking over) ever more functions and roles.

2. The Pentagon as Diplomat: The Bush administration has repeatedly exhibited its disdain for discussion and compromise, treaties and agreements, and an equally deep admiration for what can be won by threat and force. No surprise, then, that the White House's foreign policy agenda has increasingly been directed through the military. With a military budget more than 30 times that of all State Department operations and non-military foreign aid put together, the Pentagon has marched into State's two traditional strongholds -- diplomacy and development -- duplicating or replacing much of its work, often by refocusing Washington's diplomacy around military-to-military, rather than diplomat-to-diplomat, relations.

Since the late eighteenth century, the U.S. ambassador in any country has been considered the president's personal representative, responsible for ensuring that foreign policy goals are met. As one ambassador explained; "The rule is: if you're in country, you work for the ambassador. If you don't work for the ambassador, you don't get country clearance."

In the Bush era, the Pentagon has overturned this model. According to a 2006 Congressional report by Senator Richard Lugar (R-IN), Embassies as Command Posts in the Anti-Terror Campaign, civilian personnel in many embassies now feel occupied by, outnumbered by, and subordinated to military personnel. They see themselves as the second team when it comes to decision-making. Even Defense Secretary Robert Gates is aware of the problem, noting as he did last November that there are "only about 6,600 professional Foreign Service officers -- less than the manning for one aircraft carrier strike group." But, typically, he added that, while the State Department might need more resources, "Don't get me wrong, I'll be asking for yet more money for Defense next year." Another ambassador lamented that his foreign counterparts are "following the money" and developing relationships with U.S. military personnel rather than cultivating contacts with their State Department counterparts.

The Pentagon invariably couches its bureaucratic imperialism in terms of "interagency cooperation." For example, last year U.S. Southern Command (Southcom) released Command Strategy 2016, a document which identified poverty, crime, and corruption as key "security" problems in Latin America. It suggested that Southcom, a security command, should, in fact, be the "central actor in addressing… regional problems" previously the concern of civilian agencies. It then touted itself as the future focus of a "joint interagency security command... in support of security, stability and prosperity in the region."

As Southcom head Admiral James Stavridis vividly put the matter, the command now likes to see itself as "a big Velcro cube that these other agencies can hook to so we can collectively do what needs to be done in this region."

The Pentagon has generally followed this pattern globally since 2001. But what does "cooperation" mean when one entity dwarfs all others in personnel, resources, and access to decision-makers, while increasingly controlling the very definition of the "threats" to be dealt with.

3. The Pentagon as Arms Dealer: In the Bush years, the Pentagon has aggressively increased its role as the planet's foremost arms dealer, pumping up its weapons sales everywhere it can -- and so seeding the future with war and conflict.

By 2006 (the last year for which full data is available), the United States alone accounted for more than half the world's trade in arms with $14 billion in sales. Noteworthy were a $5 billion deal for F-16s to Pakistan and a $5.8 billion agreement to completely reequip Saudi Arabia's internal security force. U.S. arms sales for 2006 came in at roughly twice the level of any previous year of the Bush administration.

Number two arms dealer, Russia, registered a comparatively paltry $5.8 billion in deliveries, just over a third of the U.S. arms totals. Ally Great Britain was third at $3.3 billion -- and those three countries account for a whopping 85% of the weaponry sold that year, more than 70% of which went to the developing world.

Great at selling weapons, the Pentagon is slow to report its sales. Arms sales notifications issued by the Pentagon's Defense Security Cooperation Agency (DSCA) do, however, offer one crude way to the take the Department of Defense's pulse; and, while not all reported deals are finalized, that pulse is clearly racing. Through May of 2008, DSCA had already issued more than $9.1 billion in arms sales notifications including smart bomb kits for Saudi Arabia, TOW missiles for Kuwait, F-16 combat aircraft for Romania, and Chinook helicopters for Canada.

To maintain market advantage, the Pentagon never stops its high-pressure campaigns to peddle weapons abroad. That's why, despite a broken shoulder, Secretary of Defense Gates took to the skies in February, to push weapons systems on countries like India and Indonesia, key growing markets for Pentagon arms dealers.

4. The Pentagon as Intelligence Analyst and Spy: In the area of "intelligence," the Pentagon's expansion -- the commandeering of information and analysis roles -- has been swift, clumsy, and catastrophic.

Tracing the Pentagon's take-over of intelligence is no easy task. For one thing, there are dozens of Pentagon agencies and offices that now collect and analyze information using everything from "humint" (human intelligence) to wiretaps and satellites. The task is only made tougher by the secrecy that surrounds U.S. intelligence operations and the "black budgets" into which so much intelligence money disappears.

But the end results are clear enough. The Pentagon's takeover of intelligence has meant fewer intelligence analysts who speak Arabic, Farsi, or Pashto and more dog-and-pony shows like those four-star generals and three-stripe admirals mouthing administration-approved talking points on cable news and the Sunday morning talk shows.

Intelligence budgets are secret, so what we know about them is not comprehensive -- but the glimpses analysts have gotten suggest that total intelligence spending was about $26 billion a decade ago. After 9/11, Congress pumped a lot of new money into intelligence so that by 2003, the total intelligence budget had already climbed to more than $40 billion.

In 2004, the 9/11 Commission highlighted the intelligence failures of the Central Intelligence Agency and others in the alphabet soup of the U.S. Intelligence Community charged with collecting and analyzing information on threats to the country. Congress then passed an intelligence "reform" bill, establishing the Office of the Director of National Intelligence, designed to manage intelligence operations. Thanks to stiff resistance from pro-military lawmakers, the National Intelligence Directorate never assumed that role, however, and the Pentagon kept control of three key collection agencies -- the National Security Agency, the National Geospatial-Intelligence Agency, and the National Reconnaissance Agency.

As a result, according to Tim Shorrock, investigative journalist and author of Spies for Hire: The Secret World of Intelligence Outsourcing, the Pentagon now controls more than 80% of U.S. intelligence spending, which he estimated at about $60 billion in 2007. As Mel Goodman, former CIA official and now an analyst at the Center for International Policy, observed, "The Pentagon has been the big bureaucratic winner in all of this."

It is such a big winner that CIA Director Michael Hayden now controls only the budget for the CIA itself -- about $4 or 5 billion a year and no longer even gives the President his daily helping of intelligence.

The Pentagon's intelligence shadow looms large well beyond the corridors of Washington's bureaucracies. It stretches across the mountains of Afghanistan as well. After the U.S. invaded that country in 2001, Defense Secretary Rumsfeld recognized that, unless the Pentagon controlled information-gathering and took the lead in carrying out covert operations, it would remain dependent on -- and therefore subordinate to -- the Central Intelligence Agency with its grasp of "on-the-ground" intelligence.

In one of his now infamous memos, labeled "snowflakes" by a staff that watched them regularly flutter down from on high, he asserted that, if the War on Terror was going to stretch far into the future, he did not want to continue the Pentagon's "near total dependence on the CIA." And so Rumsfeld set up a new, directly competitive organization, the Pentagon's Strategic Support Branch, which put the intelligence gathering components of the U.S. Special Forces under one roof reporting directly to him. (Many in the intelligence community saw the office as illegitimate, but Rumsfeld was riding high and they were helpless to do anything.)

As Seymour Hersh, who repeatedly broke stories in the New Yorker on the Pentagon's misdeeds in the Global War on Terror, wrote in January 2005, the Bush administration had already "consolidated control over the military and intelligence communities' strategic analyses and covert operations to a degree unmatched since the rise of the post-Second World War II national-security state."

In the rush to invade Iraq, the civilians running the Pentagon also fused the administration's propaganda machine with military intelligence. In 2002, Undersecretary of Defense Douglas Feith established the Office of Special Plans (OSP) in the Pentagon to provide "actionable information" to White House policymakers. Using existing intelligence reports "scrubbed" of qualifiers like "probably" or "may," or sometimes simply fabricated ones, the office was able to turn worst-case scenarios about Saddam Hussein's supposed programs to develop weapons of mass destruction into fact, and then, through leaks, use the news media to validate them.

Former CIA Director Robert Gates, who took over the Pentagon when Donald Rumsfeld resigned in November 2006, has been critical of the Pentagon's "dominance" in intelligence and "the decline in the CIA's central role." He has also signaled his intention to rollback the Pentagon's long intelligence shadow; but, even if he is serious, he will have his work cut out for him. In the meantime, the Pentagon continues to churn out "intelligence" which is, politely put, suspect -- from torture-induced confessions of terrorism suspects to exposés of the Iranian origins of sophisticated explosive devices found in Iraq.

5. The Pentagon as Domestic Disaster Manager: When the deciders in Washington start seeing the Pentagon as the world's problem solver, strange things happen. In fact, in the Bush years, the Pentagon has become the official first responder of last resort in case of just about any disaster -- from tornadoes, hurricanes, and floods to civil unrest, potential outbreaks of disease, or possible biological or chemical attacks. In 2002, in a telltale sign of Pentagon mission creep, President Bush established the first domestic military command since the civil war, the U.S. Northern Command (Northcom). Its mission: the "preparation for, prevention of, deterrence of, preemption of, defense against, and response to threats and aggression directed towards U.S. territory, sovereignty, domestic population, and infrastructure; as well as crisis management, consequence management, and other domestic civil support."

If it sounds like a tall order, it is.

In the last six years, Northcom has been remarkably unsuccessful at anything but expanding its theoretical reach. The command was initially assigned 1,300 Defense Department personnel, but has since grown into a force of more than 15,000. Even criticism only seems to strengthen its domestic role. For example, an April 2008 Government Accountability Office report found that Northcom had failed to communicate effectively with state and local leaders or National Guard units about its newly developed disaster and terror response plans. The result? Northcom says it will have its first brigade-sized unit of military personnel trained to help local authorities respond to chemical, biological, or nuclear incidents by this fall. Mark your calendars.

More than anything else, Northcom has provided the Pentagon with the opening it needed to move forcefully into domestic disaster areas previously handled by national, state and local civilian authorities.

For example, Northcom's deputy director, Brigadier General Robert Felderman, boasts that the command is now the United States's "global synchronizer -- the global coordinator -- for pandemic influenza across the combatant commands." Similarly, Northcom is now hosting annual hurricane preparation conferences and assuring anyone who will listen that it is "prepared to fully engage" in future Katrina-like situations "in order to save lives, reduce suffering and protect infrastructure."

Of course, at present, the Pentagon is the part of the government gobbling up the funds that might otherwise be spent shoring up America's Depression-era public works, ensuring that the Pentagon will have failure aplenty to respond to in the future.

The American Society for Civil Engineers, for example, estimates that $1.6 trillion is badly needed to bring the nation's infrastructure up to protectable snuff, or $320 billion a year for the next five years. Assessing present water systems, roads, bridges, and dams nationwide, the engineers gave the infrastructure a series of C and D grades.

In the meantime, the military is marching in. Katrina, for instance, made landfall on August 29, 2005. President Bush ordered troops deployed to New Orleans on September 2nd to coordinate the delivery of food and water and to serve as a deterrent against looting and violence. Less than a month later, President Bush asked Congress to shift responsibility for major future disasters from state governments and the Department of Homeland Security to the Pentagon.

The next month, President Bush again offered the military as his solution -- this time to global fears about outbreaks of the avian flu virus. He suggested that, to enforce a quarantine, "One option is the use of the military that's able to plan and move."

Already sinking under the weight of its expansion and two draining wars, many in the military have been cool to such suggestions, as has a Congress concerned about maintaining states' rights and civilian control. Offering the military as the solution to domestic natural disasters and flu outbreaks means giving other first responders the budgetary short shrift. It is unlikely, however, that Northcom, now riding the money train, will go quietly into oblivion in the years to come.

6. The Pentagon as Humanitarian Caregiver Abroad: The U.S. Agency for International Development and the State Department have traditionally been tasked with responding to disaster abroad; but, from Indonesia's tsunami-ravaged shores to Myanmar after the recent cyclone, natural catastrophe has become another presidential opportunity to "send in the Marines" (so to speak). The Pentagon has increasingly taken up humanitarian planning, gaining an ever larger share of U.S. humanitarian missions abroad.

From Kenya to Afghanistan, from the Philippines to Peru, the U.S. military is also now regularly the one building schools and dental clinics, repairing roads and shoring up bridges, tending to sick children and doling out much needed cash and food stuffs, all civilian responsibilities once upon a time.

The Center for Global Development finds that the Pentagon's share of "official development assistance" -- think "winning hearts and minds" or "nation-building" – has increased from 6% to 22% between 2002 and 2005. The Pentagon is fast taking over development from both the NGO-community and civilian agencies, slapping a smiley face on military operations in Iraq, Afghanistan, and beyond.

Despite the obvious limitations of turning a force trained to kill and destroy into a cadre of caregivers, the Pentagon's mili-humanitarian project got a big boost from the cash that was seized from Saddam Hussein's secret coffers. Some of it was doled out to local American commanders to be used to deal with immediate Iraqi needs and seal deals in the months after Baghdad fell in April 2003. What was initially an ad hoc program now has an official name -- the Commander Emergency Response Program (CERP) -- and a line in the Pentagon budget.

Before the House Budget Committee last summer, Gordon England, the Deputy Secretary of Defense, told members of Congress that the CERP was a "particularly effective initiative," explaining that the program provided "limited but immediately available funds" to military commanders which they could spend "to make a concrete difference in people's daily lives." This, he claimed, was now a "key part of the broader counter insurgency approach." He added that it served the purpose of "complementing security initiatives" and that it was so successful many commanders consider it "the most powerful weapon in their arsenal."

In fact, the Pentagon doesn't do humanitarian work very well. In Afghanistan, for instance, food-packets dropped by U.S. planes were the same color as the cluster munitions also dropped by U.S. planes; while schools and clinics built by U.S. forces often became targets before they could even be put into use. In Iraq, money doled out to the Pentagon's sectarian-group-of-the-week for wells and generators turned out to be just as easily spent on explosives and AK-47s.

7. The Pentagon as Global Viceroy and Ruler of the Heavens: In the Bush years, the Pentagon finished dividing the globe into military "commands," which are functionally viceroyalties. True, even before 9/11, it was hard to imagine a place on the globe where the United States military was not, but until recently, the continent of Africa largely qualified.

Along with the creation of Northcom, however, the establishment of the U.S. Africa Command (Africom) in 2008 officially filled in the last Pentagon empty spot on the map. A key military document, the 2006 National Security Strategy for the United States signaled the move, asserting that "Africa holds growing geo-strategic importance and is a high-priority of this administration." (Think: oil and other key raw materials.)

In the meantime, funding for Africa under the largest U.S. military aid program, Foreign Military Financing, doubled from $10 to $20 million between 2000 and 2006, and the number of recipient nations grew from two to 14. Military training funding increased by 35% in that same period (rising from $8.1 million to $11 million). Now, the militaries of 47 African nations receive U.S. training.

In Pentagon planning terms, Africom has unified the continent for the first time. (Only Egypt remains under the aegis of the U.S. Central Command.) According to President Bush, this should "enhance our efforts to bring peace and security to the people of Africa and promote our common goals of development, health, education, democracy, and economic growth in Africa."

Theresa Whelan, assistant secretary of defense for African affairs, continues to insist that Africom has been formed neither to facilitate the fighting of wars ("engaging kinetically in Africa"), nor to divvy up the continent's raw materials in the style of nineteenth century colonialism. "This is not," she says, "about a scramble for the continent." But about one thing there can be no question: It is about increasing the global reach of the Pentagon.

Meanwhile, should the Earth not be enough, there are always the heavens to control. In August 2006, building on earlier documents like the 1998 U.S. Space Command's Vision for 2020 (which called for a policy of "full spectrum dominance"), the Bush administration unveiled its "national space policy." It advocated establishing, defending, and enlarging U.S. control over space resources and argued for "unhindered" rights in space -- unhindered, that is, by international agreements preventing the weaponization of space. The document also asserted that "freedom of action in space is as important to the United States as air power and sea power."

As the document put it, "In the new century, those who effectively utilize space will enjoy added prosperity and security and will hold a substantial advantage over those who do not." (The leaders of China, Russia, and other major states undoubtedly heard the loud slap of a gauntlet being thrown down.) At the moment, the Bush administration's rhetoric and plans outstrip the resources being devoted to space weapons technology, but in the recently announced budget, the President allocated nearly a billion dollars to space-based weapons programs.

Of all the frontiers of expansion, perhaps none is more striking than the Pentagon's sorties into the future. Does the Department of Transportation offer a Vision for 2030? Does the Environmental Protection Agency develop plans for the next fifty years? Does the Department of Health and Human Services have a team of power-point professionals working up dynamic graphics for what services for the elderly will look like in 2050?

These agencies project budgets just around the corner of the next decade. Only the Pentagon projects power and possibility decades into the future, colonizing the imagination with scads of different scenarios under which, each year, it will continue to control hundreds of billions of taxpayer dollars.

Complex 2030, Vision 2020, UAV Roadmap 2030, the Army's Future Combat Systems – the names, which seem unending, tell the tale.

As the clock ticks down to November 4, 2008, a lot of people are investing hope (as well as money and time) in the possibility of change at 1600 Pennsylvania Avenue. But when it comes to the Pentagon, don't count too heavily on change, no matter who the new president may be. After all, seven years, four months, and a scattering of days into the Bush presidency, the Pentagon is deeply entrenched in Washington and still aggressively expanding. It has developed a taste for unrivaled power and unequaled access to the treasure of this country. It is an institution that has escaped the checks and balances of the nation.

Frida Berrigan is a Senior Program Associate at the New America Foundation's Arms and Security Initiative. She is a columnist for Foreign Policy in Focus and a contributing editor at In These Times magazine. She is the author of reports on the arms trade and human rights, U.S. nuclear weapons policy, and the domestic politics of U.S. missile defense and space weapons policies. She can be reached at berrigan@newamerica.net.

Iraq: The "Subprime" War

Iraq: The "Subprime" War

Caroline Fourest

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Three trillion dollars is the probable cost of the war in Iraq, according to Nobel Economics Laureate Joseph Stiglitz and Harvard Professor of Public Finance Linda Bilmes. Recently released in the United States, their book, "The Three Trillion Dollar War," has just come out in France (Fayard, 300 p., 22 euros). The two economists have taken official expenses into account, but they also cover collateral and obscured expenses, which they elucidate through a forward-looking budget that anticipates the war's macroeconomic effects. Most notably, they have calculated what veterans' medical care will cost, including disability pensions, post-traumatic stress disorder and other mental health treatments affecting some several hundred thousand American soldiers. That calculation may seem cold and cynical given the number of deaths - both direct and indirect - we're already having so much trouble quantifying. But this detour through concrete economics was necessary to wake up our nerves deadened by the daily announcements of deaths in Iraq - a rendezvous that has become as banal as the weather forecast.

"What's it doing in Iraq today?"

"Ten dead in an attack."

"Huh, like yesterday.... But they had forecast a lull."

"What can I tell you; there's no change in the seasons anymore!"

Among the reasons that explain this nervous disorder, let us recall that the Iraqi victims of attacks are killed by jihadists, not by Americans. Their madness does not, however, wash away the Bush administration's original sin: to have invaded Iraq without any thought for the consequences. This collateral damage is quantifiable. As a bonus, several factors that have spiked the cost of the war will have repercussions on the rest of the world. The first involves the privatization of the military. There are at this very moment 100,000 private contractors on the ground in Iraq charged with securing the activities of the Iraqi and American armies. Not only do these security companies cost taxpayers dearly, but this privatization of the military relieves governments at war of accountability, opens the door to crimes which those governments wash their hands of, enriches over-armed mercenaries, and consequently increases the risk of instability at a global level.

Another exacerbating factor involves the way the war has been financed. Wars used to be financed by taxes once, which had the benefit of bringing their weight to bear on the generation that decided to go to war and consequently of pushing citizens to want to bring them to a close. The Bush administration, however, chose to finance this war by borrowing. Which will cost a great deal in interest expenses, but which also, once again, contributes to relieving the warmongers of accountability. Americans have decidedly been treated like children. They were lied to about the presence of weapons of mass destruction; they are still being lied to about the cost of the war - which the Bush administration continues to evaluate at around $800 billion. That's the subprime technique. They thought they'd take revenge on al-Qaeda with a lightning war. Now they find themselves indebted over several generations with a variable rate loan ... and since the American economy remains the global benchmark, we'll all be paying the bill, even if we were against this war.

For - as we are well aware - the latest inflationary incident in this turning of the tables involves the take-off in oil prices. Some paranoid people believe the Bush administration is Machiavellian enough to have invaded Iraq with an eye to supplying itself with cheap black gold. It didn't make any such sophisticated plan. It remains nonetheless the case that private oil and oil service companies like Halliburton - and their shareholders like Vice President Dick Cheney - have profited from the conflict, which poses questions about the contacts between the economic milieus that may profit from a war and the political world that holds the cards in hand to start one.

All these considerations would not have the same appalling effect had this war at least been good for something. Yet it has done nothing but undermine America's moral credit. Can America still be considered the world's premier democratic power? All the checks and balances that were its glory and made it great have blown up. Freedom of the press wasn't able to prevent the lie that was at the origin of the war. The Supreme Court includes new judges chosen by the Bush administration to close their eyes on Guantanamo. Now how can a country give lessons to other countries about human rights when it itself practices torture? When it passed up on the Security Council's opinion to conduct a preventative war based on a mistaken intuition, the United States not only lost money, it dirtied its own "world policeman" uniform. Stuck in a quagmire and indebted, it no longer has the means to intimidate Bachar Al-Assad. Not to mention the jihadists and Islamists who are making the most of a new outdoor training camp. Nor the war in Afghanistan which we're going to lose because of the dissipation of forces. Nor the political Islamists whose proselytism is spreading. September 11 could have become Islamism's tomb. But by responding to terrorism with an illegitimate and mistargeted war, the United States has more than anything else helped Islamists turn the world into a mass grave.

Foreclosures in Military Towns Surge at Four Times U.S. Rate

Foreclosures in Military Towns Surge at Four Times U.S. Rate

By Kathleen M. Howley

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U.S. Air Force Technical Sergeant Jeffrey VerSteegh, who repairs F-16 jets for the 132nd Fighter Wing, departed Des Moines, Iowa, in April for his third tour in Iraq. The father of four may lose his home when he returns.

The four-bedroom farmhouse he and his wife, Kathleen, own near the Iowa State Fairgrounds went into default in December after their monthly mortgage costs doubled to $1,100. Kathleen missed work because of breast cancer and they struggled to keep up the house payment, falling behind on other bills. Their bankruptcy was approved by the court a week after VerSteegh left for Iraq.

In the midst of the worst surge in mortgage defaults in seven decades, foreclosures in U.S. towns where soldiers live are increasing at a pace almost four times the national average, according to data compiled by research firm RealtyTrac Inc. in Irvine, California. As military families like the VerSteeghs signed up for the initial lower rates and easier terms of subprime mortgages, the number of people taking out Veterans Administration loans fell to the lowest in at least 12 years.

‘‘We've never faced a situation like this, not in the Vietnam War, World War II, or the Korean War, where so many military are in danger of losing their homes,'' said Paul Sullivan, executive director of Veterans for Common Sense, a Washington-based advocacy group started in 2002 by Iraq and Afghanistan War veterans. ‘‘No one asked them for their credit score when we asked them to fight for us.''

Military Foreclosures

Foreclosure filings in 10 towns and cities within 10 miles of military facilities, including Norfolk, Virginia, home of the Navy's largest base, rose by an average 217 percent from January through April from a year earlier. Nationally, the rate was 59 percent in the same period, according to RealtyTrac, which tallies bank seizures, auctions and default notices.

The biggest surge was in Columbia, South Carolina, home to Fort Jackson, where the Army trains recruits for combat in Afghanistan and Iraq. Properties in some stage of foreclosure rose 492 percent from a year earlier, RealtyTrac said. The second-biggest increase was 414 percent in Woodbridge, Virginia, next to the Marine Corps Base Quantico.

Foreclosure filings tripled in the cities surrounding Norfolk Naval Base and the Camp Pendleton Marine Corps Base near Oceanside, California, RealtyTrac said. Havelock, North Carolina, site of Marine Corps Air Station Cherry Point, saw foreclosures more than double.

Weak Credit

Military families were targeted as customers during the boom in subprime lending because their frequent moves, overseas stints, and low pay meant they were more likely to have weak credit ratings, said Rudi Williams of the National Veterans Foundation in Los Angeles. In 2006, at the peak of U.S. subprime lending, the number of VA loans fell to barely a third the level of two years earlier, according to VA data.

VA loans totaled 135,000 last year, its fourth consecutive annual decline.

An Army or Marine Corps sergeant with four years of experience makes $27,000 a year, plus combat pay of $225 a month, according to the 2008 Military Authorization Act, which increased basic pay rates 3.5 percent from a year ago.

Soldiers authorized to live off-base also receive a housing allowance that this year starts at about $500 a month, 7.3 percent higher than in 2007, paid even when they are deployed. Counting the stipends, they still fall short of the 2007 median U.S. household income of $59,224 as measured by the National Association of Realtors in Chicago.

Legislative Effort

‘‘Think about how much stress comes with a foreclosure, and then imagine you're walking the same tightrope while being employed in Baghdad,'' said Paul Rieckhoff, 33, the head of Iraq and Afghanistan Veterans of America and a former 1st lieutenant with the Army's 3rd Infantry Division.

The Servicemembers' Civil Relief Act protects soldiers and sailors from losing homes for nonpayment of mortgages only while on active duty and for 90 days after they return home. Members of Congress, including Senator Johnny Isakson, a Georgia Republican, and Representative Bob Filner, a Democrat from California, are trying to extend that to a year, saying three months isn't enough.

Another flaw in the current law is it puts the burden on the soldiers, sailors or the families they left behind to come up with the paperwork and notify the bank, said Sullivan of the Washington Veterans' group. Unlike in other wars, members of the military often are able to telephone home or receive e-mails, creating a ‘‘morale problem'' as they try to deal with foreclosure notices, he said.

VA Mortgages

‘‘It's heartbreaking to see people struggling with a foreclosure while they or someone they love is in a war zone, or when they're trying to adjust after coming back from one,'' said Sullivan, a Cavalry Scout with the Army's 1st Armored Division during the 1991 Gulf War.

Lenders aren't required to keep records on the status of non-government loans to military members or veterans, said Mike Frueh, the VA's assistant director for loan management in Washington. Judging solely by data on VA mortgages, active military and veterans in the current housing slump are getting into trouble with their home loans at a pace only slightly above the civilian rate, he said.

The share of VA mortgages in foreclosure was 1.12 percent in the fourth quarter, compared with 0.96 percent for so-called prime borrowers with the highest credit scores, the Washington- based Mortgage Bankers Association said in a March 6 report.

‘Stench of Death'

‘‘My data comes from those that have VA loans, and we haven't seen, as I understand it, a big jump'' in foreclosures, said James Peake, the Secretary of Veterans Affairs in Washington, in a May 20 interview.

The increase may yet be coming: the share of VA loans with payments 30 days or more overdue was 6.49 percent in the fourth quarter, double the rate of 3.24 percent for prime borrowers. The share of VA mortgages more than 90 days overdue was 1.54 percent, also double the prime rate, according to the bankers' report.

Monique Kelly, a disabled Iraq War veteran, said she is on the verge of adding to those VA delinquency numbers. The former Army staff sergeant in the First Armored Division paid her May mortgage bill halfway through the month and said she won't be able to make June's payment for her house in Owings Mills, Maryland.

Kelly, designated disabled by the VA because of post- traumatic stress disorder, said she bought the property in January for $305,000 and had to spend $10,000 fixing structural problems that were not disclosed to her.

‘‘We fought for our country, and now we have to fight to save our homes,'' said Kelly. ‘‘After living with the stench of death in Iraq, it seems like we shouldn't have to face problems like this when we come back.''

Help for Veterans

The VA has nine regional loan centers in the U.S. that last year provided counseling for 85,000 veterans who had problems with government-backed mortgages, Frueh said. He said he contacted Kelly to see if he can help her.

Counselors also try to help veterans who fall behind on non- VA loans, he said, though they don't track the number of those cases.

‘‘We will always try to intercede on a veteran's behalf,'' said Frueh. ‘‘If they have a VA-guaranteed loan, we can do more for them.''

Military families or veterans refinancing a mortgage have limited resources for VA-backed loans, Frueh said. The government can only guarantee refinanced veteran loans up to $144,000, Frueh said. The median price of a U.S. home was $219,000 last year, according to the Chicago-based National Association of Realtors.

‘No Hope'

The law gives military personnel the right to have interest rates temporarily lowered to 6 percent on loans incurred prior to entering active service. To apply for protection, they have to send copies of their military orders to their mortgage servicing companies, even if they are on the front lines. The VerSteeghs in Iowa didn't know about that option, said Kathleen.

Before leaving for Iraq, the 43-year-old VerSteegh called the Bush Administration's Hope Now program created to help people facing foreclosure, his wife said.

‘‘We got no hope from Hope,'' and no information about the potential interest-rate deduction, according to Kathleen VerSteegh.

San Francisco-based Wells Fargo & Co., the servicer of the VerSteegh mortgage, removed the VerSteegh property from foreclosure in April after receiving a copy of the husband's active duty orders, said Debora Blume, a spokeswoman for the bank's mortgage unit, in an e-mailed statement. Kathleen VerSteegh, 42, said they weren't notified of the change. The mortgage had gone into foreclosure on Dec. 31, Wells Fargo said.

Refinancing Plans

Wells Fargo ‘‘is working with Mrs. VerSteegh to reduce her monthly payment during this time of financial hardship,'' Blume said.

Like many U.S. borrowers who got adjustable mortgages, the VerSteeghs planned to refinance into a better loan before their initial rate of 6.45 percent, fixed for two years, reset in December 2006. U.S. home values began to decline about six months before their first adjustment.

The so-called margin, a fixed charge added to the loan's index to determine interest rate resets, is 5.25 percent, about double the typical margin for an adjustable mortgage. Their loan is indexed to Libor, the London Interbank Offer Rate.

‘‘We refinanced so we could get new windows and do some work on the house,'' she said. ‘‘We assumed we'd have no problem getting another loan, but then it blew up in our faces.''

Now they can't apply to refinance into a VA mortgage because they owe more on the house than it's worth and ‘‘our credit is shot,'' said VerSteegh.

Bonus Army

The last time veterans lost homes to this extent was during the Great Depression, said Sullivan of Veterans for Common Sense. The so-called Bonus Army of almost 20,000 World War I ex-soldiers marched on Washington in June 1932 to demand early payment of certificates granted for service.

U.S. infantry and cavalry regiments under the command of General Douglas MacArthur attacked their encampment with bayonets and sabers to disburse them.

VerSteegh, who gets to speak to her husband by telephone for 15 minutes once a week, said she tries to reassure him that everything on the home front is going well, even as she struggles with the threat of foreclosure and her health problems. She's eight weeks into a course of chemotherapy treatments for breast cancer and had a double mastectomy on March 14.

VerSteegh said she doesn't know exactly where her husband is, just that he's somewhere near Baghdad.

‘‘I don't tell him the whole story, because he has to focus on his job,'' she said. ‘‘The guys in his unit are depending on him.''


 Foreclosure Filings Near Military Bases from January to
April, Compared With a Year Earlier:
Columbia, South Carolina: 492%
Woodbridge, Virginia: 414%
Triangle, Virginia: 363%
Oceanside, California: 182%
Norfolk, Virginia: 155%
Havelock, North Carolina: 133%
Carlsbad, California: 131%
Barstow, California: 120%
Columbus, Georgia: 102%
Twentynine Palms, California: 73%
U.S. Total: 59%

Consumer Confidence Falls as Home Values Decline

Confidence Falls as Home Values Decline

By Bob Willis

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Confidence among American consumers fell in May to the lowest level since 1992 as the two-year housing slump showed no sign of bottoming.

The Conference Board's confidence index declined more than forecast to 57.2, the New York-based research group said today. The S&P/Case-Shiller home-price index dropped 14.4 percent in March from a year earlier, the most since the figures were first published in 2001. Separate figures from the Commerce Department showed sales of IND' ))">new homes were the second-lowest since 1991 in April.

The slide in home values, along with gasoline near $4 a gallon and rising unemployment, threatens to hobble the consumer spending that accounts for more than two-thirds of the economy.

‘‘When confidence is as bad as it is on the consumer side, it's hard to believe we're going to be buying a lot of homes in the near term,'' said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis, Minnesota. ‘‘The drag from home-price declines, the credit crunch and oil prices will probably be more severe than some had forecast earlier in the year.''

Stocks initially rallied after the government's report on new home sales exceeded economists' forecasts, and then surrendered some of the gains later. The Standard & Poor's 500 homebuilder index was up 0.3 percent at 346.9 at 12:28 p.m. in New York. Ten-year Treasury note yields rose to 3.89 percent from 3.84 percent at last week's close.

Economists forecast the Conference Board's measure would fall to 60, according to the median of 68 forecasts in a Bloomberg News survey, from a previously reported 62.3. Estimates ranged from 57 to 63.

Waning Optimism

The Conference Board's index of present conditions dropped to 74.4 in May from 81.9 in April. A gauge of IND' ))">expectations for the next six months declined to 45.7 from 50.0 the prior month, the report showed. The projected inflation rate a year from now soared to a record 7.7 percent, the survey showed.

‘‘Until you start to see some declines in energy prices and labor markets come back, these numbers are going to look pretty soggy,'' Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina, said in a Bloomberg Television interview.

Sales of new homes increased 3.3 percent in April after readings for the prior month were revised lower, the Commerce Department's report showed. The April sales pace was an annual 526,000 homes, compared with a 509,000 rate in March that was the lowest in 17 years.

Economists forecast new home sales would drop to a 520,000 annual pace from an originally reported 526,000 rate the month earlier, according to the median estimate.

Inventories Drop

One bright spot is that inventories decreased. The supply of homes at the current sales rate dropped to 10.6 months' worth from 11.1 months in March. The number of homes completed and waiting to be sold decreased to 181,000, the fewest since July.

The median sales price last month increased 1.5 percent from April 2007 to $246,100. The figures can be influenced by changes in the mix of sales at the regional level. For that reason, economists prefer price measures that track the same house over time, such as the S&P/Case-Shiller index.

Property values may drop more than 30 percent from their peak in 2006, Robert Shiller, an economics professor at Yale University and co-creator of a housing-price index, said in an interview with the London-based Times last month.

Half Way

The measure was down 17 percent through March, from the record set in July 2006.

The percentage of consumers planning to buy a home in the next six months dropped to 2.1 percent from 2.5 percent, the Conference Board's survey showed.

The share of consumers who said jobs are plentiful fell to 16.3 percent from 17.1 percent last month. Those saying jobs are hard to get increased to 28.0 percent from 27.9 percent.

Employers cut 20,000 workers in April, bringing the decline in payrolls so far this year to 260,000, according to the Labor Department.

The proportion of people who expect their incomes to rise over the next six months decreased to 13.4 percent, the lowest level since records began in 1967, according to the Conference Board survey. The share expecting more jobs dropped to 8.7 percent from 8.8 percent.

Industrywide U.S. sales of cars and light trucks fell to 4.83 million in the first four months of the year, the lowest level since 1995, according to Autodata Corp. in Woodcliff Lake, New Jersey. Ford Motor Co. has said sales may drop to a 15-year low of 14.7 million in 2008.

Auto Sales

‘‘With the prospect of $4-a-gallon gasoline on the horizon, this combination of economic stress with the gasoline prices is really having an impact on overall volume,'' Michael Jackson, chief executive officer at AutoNation Inc., the largest U.S. car retailer, said in an interview with Bloomberg Radio last month from Fort Lauderdale, Florida.

Consumer spending will probably rise at a 0.5 percent annual pace in the April-to-June period, the smallest gain since the fourth quarter of 1991, according to the median estimate of economists surveyed by Bloomberg News earlier this month.

Another confidence measure, the Reuters/University of Michigan index of consumer sentiment issued last week, fell in May to the lowest level in almost 28 years.

Federal Reserve officials, in minutes of their April 30 policy meeting released last week, lowered their 2008 economic growth projection by a percentage point to 0.3 percent to 1.2 percent.

‘‘Growth in consumer spending appeared to have slowed to a crawl in recent months and consumer sentiment had fallen sharply,'' the minutes said.

US Academic Deported and Banned for Criticizing Israel

US Academic Deported and Banned for Criticizing Israel

By Toni O'Loughlin

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Norman Finkelstein, the controversial Jewish American academic and fierce critic of Israel, has been deported from the country and banned from the Jewish state for 10 years, it emerged yesterday. Finkelstein, the son of a Holocaust survivor who has accused Israel of using the genocidal Nazi campaign against Jews to justify its actions against the Palestinians, was detained by the Israeli security service, Shin Bet, when he landed at Tel Aviv's Ben Gurion airport on Friday.

Shin Bet interrogated him for around 24 hours about his contact with the Lebanese Islamic militia, Hizbullah, when he travelled to Lebanon earlier this year and expressed solidarity with the group which waged war against Israel in 2006. He was also accused of having contact with al-Qaida. But Finkelstein rejected the accusations, saying he had travelled to Israel to visit an old friend.

"I did my best to provide absolutely candid and comprehensive answers to all the questions put to me," he told an Israeli newspaper in an email exchange.

"I am confident that I have nothing to hide. Apart from my political views, and the supporting scholarship, there isn't much more to say for myself: alas, no suicide missions or secret rendezvous with terrorist organisations. I've always supported a two-state solution based on the 1967 borders. I'm not an enemy of Israel."

Finkelstein is one of several scholars rejected by Israel in the increasingly bitter divide in academic circles, between those who support and those who criticise its treatment of Palestinians.

Last year, Israel's most contentious "new historian", Ilan Pappe, left his job as senior lecturer in political science at the University of Haifa after he endorsed the international academic boycott of Israeli institutions, provoking the university president to call for his resignation.

Finkelstein was also refused tenure last year at Chicago's DePaul University for attacking several staunch Israel supporters and academics such as Harvard law professor, Alan Dershowitz.

The Association for Civil Rights in Israel said the deportation of Finkelstein was an assault on free speech.

"The decision to prevent someone from voicing their opinions by arresting and deporting them is typical of a totalitarian regime," said the association's lawyer, Oded Peler.

"A democratic state, where freedom of expression is the highest principle, does not shut out criticism or ideas just because they are uncomfortable for its authorities to hear. It confronts those ideas in public debate."

Finkelstein said he was held in a cell and encountered "several unpleasant moments with the guards" and that eventually he borrowed the mobile phone of another detainee and called a friend who in turn called a lawyer.

Although entitled to appeal against the entry ban, Finkelstein said he would not contest it.

House Votes to Ban Pentagon Propaganda: Networks Still Silent

House Votes to Ban Pentagon Propaganda: Networks Still Silent

By Josh Silver

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You probably didn't hear about the House voting to ban Pentagon propaganda last Thursday -- since the television networks have once again conveniently failed to cover the story.

But in a surprise move, a 2009 defense policy bill passed with an amendment, sponsored by Rep. Paul Hodes (D-N.H.), that outlaws the Defense Department from engaging in "a concerted effort to propagandize" the American people. The measure would also force an investigation by the Government Accountability Office (GAO) into efforts to plant positive news stories about the war in U.S. media.

An April 20 front-page New York Times article first reported how the Pentagon cultivated and coached more than 75 former military officers who became regulars on Fox News, CNN, the broadcast networks, and even NPR. One week later, the Pentagon announced that it would suspend the "briefing" program pending an internal review, which is continuing. On May 13, watchdog Media Matters documented that analysts in the Pentagon's program appeared or were quoted in major outlets more than 4,500 times.

If the Senate also passes the propaganda ban, it will send a strong message to the Pentagon and other government agencies that the Congress will not allow the continued manipulation of public opinion.

But let's not forget that this is just the most recent major government propaganda revelation in recent years. In March 2005, the New York Times revealed that several federal agencies were producing fake "video news releases" that local television stations aired as if they were bona fide news reports.

Two months before that, several "payola pundits" were discovered to be receiving lucrative government PR contracts to opine in favor of Bush administration policies -- without disclosing their financial arrangement. Armstrong Williams was the poster-child, with his $240,000 contract from the Department of Education to promote the president's "No Child Left Behind Act."

It is crucial to understand that with or without the Pentagon's program, there will always be well-credentialed analysts pushing to get on the air who are eager to toe the administration's line for fame, ideology or money. And the right is historically much better at training them and getting them in front of cameras.

But at the end of the day, it is the television newsroom producers and "bookers" - and the executives who hire them -- who decide who gets on TV and who doesn't. And the vast majority of them consistently turn to government officials, major politicians and party insiders. They seldom turn to dissenting voices, critical public interest advocates and fierce critics of government policy.

On May 5, MSNBC's Chris Matthews revealed that "all my bosses [were] … basically pro-war during the war. … and I was up against that." Again, a major revelation ignored by most of the press that explains the culture that subsumed every major network newsroom.

On Friday, the GAO said it had already begun looking into the program and would provide a legal opinion. On the same day, the inspector general's office at the Defense Department also announced that it would investigate the Pentagon program.

The House spending bill will be taken up by the Senate after next week's recess, and legislators will have to insert a similar amendment. The White House has threatened to veto the entire bill, citing concerns with several provisions.

Congress should hold high-profile hearings to get to the bottom of the Pentagon program and force the issue into the news. If the networks won't cover it, at least C-SPAN will.

Two things are certain. First, consolidated, corporate media is failing to provide critical journalism, and is aiding and abetting government propaganda. Second, this is not the last time this media blight will rear its ugly head, and as long as it does, the American public will continue to be led by the nose to support disastrous wars, policies and politicians.

Josh Silver is the Executive Director of Free Press, a national, nonpartisan organization that he co-founded with Robert McChesney and John Nichols in 2002 to engage citizens in media policy debates and create a more democratic and diverse media system.

Iraq War May Have Increased Energy Costs Worldwide by a Staggering $6 Trillion

Iraq War May Have Increased Energy Costs Worldwide by a Staggering $6 Trillion

By Geoffrey Lean

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The invasion of Iraq by Britain and the US has trebled the price of oil, according to a leading expert, costing the world a staggering $6 trillion in higher energy prices alone.

The oil economist Dr Mamdouh Salameh, who advises both the World Bank and the UN Industrial Development Organisation (Unido), told The Independent on Sunday that the price of oil would now be no more than $40 a barrel, less than a third of the record $135 a barrel reached last week, if it had not been for the Iraq war.

He spoke after oil prices set a new record on 13 consecutive days over the past two weeks. They have now multiplied sixfold since 2002, compared with the fourfold increase of the 1973 and 1974 "oil shock" that ended the world's long postwar boom.

Goldman Sachs predicted last week that the price could rise to an unprecedented $200 a barrel over the next year, and the world is coming to terms with the idea that the age of cheap oil has ended, with far-reaching repercussions on their activities.

Dr Salameh, director of the UK-based Oil Market Consultancy Service, and an authority on Iraq's oil, said it is the only one of the world's biggest producing countries with enough reserves substantially to increase its flow.

Production in eight of the others -- the US, Canada, Iran, Indonesia, Russia, Britain, Norway and Mexico -- has peaked, he says, while China and Saudia Arabia, the remaining two, are nearing the point at of decline. Before the war, Saddam Hussein's regime pumped some 3.5 million barrels of oil a day, but this had now fallen to just two million barrels.

Dr Salameh told the all-party parliamentary group on peak oil last month that Iraq had offered the United States a deal, three years before the war, that would have opened up 10 new giant oil fields on "generous" terms in return for the lifting of sanctions. "This would certainly have prevented the steep rise of the oil price," he said. "But the US had a different idea. It planned to occupy Iraq and annex its oil."

Chris Skrebowski, the editor of Petroleum Review, said: "There are many ifs in the world oil market. This is a very big one, but there are others. If there had been a civil war in Iraq, even less oil would have been produced."

David Strahan: What happens next? The expert's view

At just under 86 million barrels per day, global oil production has, essentially, stagnated since 2005, despite soaring demand, suggesting that production has already reached its geological limits, or "peak oil".

Recession in the West may not provide relief on prices. There is increasing demand from countries such as China, Russia and the Opec countries, whose consumers are cushioned against rising prices by heavy subsidies. The future could unfold in a number of ways:

Oil price collapses

Fuel subsidies could suddenly be scrapped, dousing demand. Cost pressures have forced Malaysia, Indonesia and Taiwan to cut them, but China is hardly strapped for cash. Opec producers are under no pressure to abolish subsidies; as the oil price rises they get richer. Prospect: very unlikely.

Peace could break out in Iraq, the long-disputed oil law agreed, and international oil companies start work on the world's largest collection of untapped oil fields. Prospect: vanishingly unlikely.

Oil price stabilises or moderates

Deep recession in the West might cut oil consumption enough to offset growth in the developing world and Opec, or even engulf them too, softening prices. Prospect: unlikely in the short term.

Oil price soars

Russian oil output has gone into decline; Saudi Arabia has shelved plans to expand production capacity, and advisers to the Nigerian government predict its output will fall by 30 per cent by 2015. More news like this, expect oil at $200 a barrel. Prospect: likely.

Big oil producers will increasingly divert exports for home consumption. Opec, Russian and Mexican exports expected to fall, pushing oil to $200 by 2012. Prospect: highly likely.

The writer is author of 'The Last Oil Shock', John Murray, lastoilshock.com

Peak oil

After 150 years of growth, the oil age is beginning to come to an end. "Peak oil" is the common term for when production stops increasing and starts to decline. At that point what have been ever-expanding and cheap supplies of the resource on which all modern economies depend become scarcer and more expensive, with potentially devastating consequences.

Pessimists believe that production has passed its peak. Optimists say it may be 20 years or so away -- which would give us some time to prepare -- but are now muted. Last week the hitherto optimistic International Energy Agency admitted that it may have overestimated future capacity. Chris Skrebowski, editor of 'Petroleum Review' and once an optimist himself, believes that the world is now in "the foothills of peak oil". Prices may ease a bit over the next few years, but then the real crunch will come. The price then? "Pick a number!"

Travel

Oil provides 95 per cent of the energy used in transport, so this will be hit hard and soon. People are likely to go on using their cars, but airlines are expected to be the first to suffer. On Thursday, British Airways' chief executive Willie Walsh declared that the era of cheap flights was over, suggesting that those environmentalists who have made them their main target for combating climate change may have been wasting their breath.

At least three carriers have already gone bust this year. Last week, American Airlines said it was cutting routes, laying off staff, and charging US passengers $15 to check in a bag because of a $3bn rise in its fuel bills. Even Michael O'Leary, chief executive of Ryanair, says the oil price is "really hurting". On Thursday, Credit Suisse analysts said his company would slip into the red if oil prices rose just a little more, to $140 a barrel.

Cars

The world's biggest oil well, it is said, lies beneath Detroit. US vehicles get an average of only 25 miles per gallon. Dramatically improving this would do more to ease the oil crunch than any likely new discovery. But new measures recently approved by Congress would increase the average only to the 35mpg already being achieved by China. Europe does better, if not well enough, at 44mpg.

Rising fuel prices are already beginning to drive change. Sales of 4x4s are plummeting in both the US and Britain, and those of hybrids -- which do 60mpg are soaring. As the price climbs further, manufacturers will unlock long-prepared plans for much more efficient vehicles. "Plug-in" hybrids, charged up with electricity overnight, save another 45 per cent in petrol consumption. Further down the line is the "hypercar" -- made of tough, light plastic -- which could cross the US on a single tankful.

Houses

All new houses in Britain will have to be zero carbon -- burning no fossil fuels such as oil -- by 2016, the Government announced, and housebuilders are struggling to meet the target. At present the standard can be reached only at great expense, but the industry is confident of bringing the cost down as mass production kicks in. It is even more important to adapt existing homes.

The key step is to super-insulate the house to make it as energy-efficient as possible -- and only then to provide renewable energy sources. Solar water heaters, ground source heat pumps and boilers powered by wood pellets are favourites. Rooftop windmills do not work well enough yet. Photovoltaic panels, which get electricity from the sun, are expensive but their price should come down. Britain has lagged behind other countries. Soaring energy prices should shake things up.

Shopping

Effectively, almost everything is partially made of oil, and so is going to get more expensive. About 10 calories of oil are burned to produce each calorie of food in the US, and farming a single cow and getting it to market uses as much as driving from New York to Los Angeles. Some 630g of fuel is used to produce every gram of microchips.

The cult of local, seasonal produce will enter the mainstream, as everyone learns about food miles and a modern-day Dig for Victory grips gardeners -- bad news for the farm workers overseas who provide 95 per cent of our fruit and half our vegetables. Trips to out-of-town supermarkets will seem extravagant, heralding a high street renaissance and a new surge in online grocery shopping, and soon we'll all be eating our own potatoes.

Third World

Poor countries and their peoples will be hit by a devastating double whammy as both their fuel and food prices increase. Last year, when oil cost only about half as much, countries from Nepal to Nicaragua were hit by fuel shortages. At least 25 of the 44 sub-Saharan nations are facing crippling electricity shortages.

As oil is used in agriculture, its increased cost will also drive up the price of food, making more and more people go hungry. Worse, expensive petrol is bound to increase the drive towards biofuels made from maize and other crops, which then brings the world's poorest people into competition with affluent motorists for grain -- a contest they cannot win. Just one fill-up of a 4x4's tank with ethanol uses enough grain to feed one person for a year.

Emerging economies

China and India and other developing countries will help to drive up demand for oil and compete for scarce supplies. This has already helped to raise prices: demand for oil from Western countries has actually fallen over the past two years, but the emerging economies have more than made up the slack. And they have the money to do so.

Chinese and Indian consumers have so far been insulated from the effects of the price increase by heavy government subsidies, and their industrial revolutions and rapid growth are largely fueled by oil. There is little sign that the growth in demand will slacken These countries are also likely to follow the time-honored Western tradition of making deals with oil-exporting countries -- and backing unpleasant regimes -- to try to secure supplies.