TOON

Whistling Past the Economic Graveyard

- Congressional Budget Office

For the top one percent, that's a pretty impressive period. For the next 19 percent, there's something happening. But for the bottom 80 percent, there's just very little going on in terms of real income growth. There was, however, pretty robust consumption growth fueled by the credit boom and declining savings rates. The current downturn is now threatening that and calling into question the sustainability and worth of the overall growth throughout the period. - Yglesias

Additional graphs:

http://www.cbo.gov/publications/collections/tax/2009charts.cfm

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Whistling Past the Economic Graveyard: The Audacity of Misplaced Hope

Arianna Huffington
June 15, 2009 - Huffington Post
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Is it possible to have too much hope? To be too optimistic? Yes, if that hope keeps you from facing -- and dealing with -- unpleasant realities.

That seems to be what's happening regarding the financial institutions responsible for the economic meltdown.

Let's start with the banks' toxic assets. When Tim Geithner unveiled the Public Private Investment Program, he said that dealing with these assets was a "core" part of solving the financial crisis.

But the banks would much rather keep pretending that their toxic assets are not that toxic, and worth much more than they really are -- a risky charade the relaxed mark-to-market rules allow them to continue to pull off.

So, last week, the PPIP program was apparently scrapped. Does this mean that the toxic assets are no longer a "core" part of the problem? Or that hoping they're no longer part of the problem will somehow make them no longer part of the problem?

"Hope sustains life, but misplaced hope prolongs recessions." So says Jim Grant, publisher of the Grant's Interest Rate Observer newsletter, whom I interviewed last week on Squawk Box. Because of misplaced hope, Grant says, business people, homeowners -- and administrations -- often refuse to admit the truth and take the painful steps necessary to turn things around.

On Wednesday, President Obama will lay out the details of his administration's plan to remake the financial regulatory system. Geithner and Larry Summers offered a sneak peak at the plan in an op-ed in today's Washington Post, proclaiming, "we must begin today to build the foundation for a stronger and safer system."

Among the proposals: "raising capital and liquidity requirements for all institutions"; "consolidated supervision by the Federal Reserve"; "robust reporting requirements on the issuers of asset-backed securities" including "strong oversight of 'over the counter' derivatives"; and providing "a stronger framework for consumer and investor protection across the board."

The devil, of course, will be in the details. And on how much muscle Obama puts behind pushing these measures through and ensuring they become law without being watered down. Especially at a time when the latest stock market bubble has undermined the urgent push for reform, which seems to have given way to a push to move on to other things and leave that little financial kerfuffle behind us.

And investors seem anxious to do the same. Witness the "fierce rally" in the collateralized loan obligation market. CLOs are made up of sliced and diced assets (including high-risk and junk loans) -- and are kissing cousins to the collateralized-debt obligations (i.e. crap) at the heart of the financial meltdown. But according to analysts at Morgan Stanley there has recently been a "remarkable change" in investor sentiment towards these securities, including an "exuberance" for the lowest grade junk being sold.

In other words, we are right back to risky business as usual. No harm, no foul. Let's get back to the fun we were having before this whole worldwide economic collapse thing started happening.

It puts a whole other spin on the audacity of hope.

Too many in Washington -- and in the media continue to take the well-being of Wall Street as the proper gauge for the well-being of the rest of America. Yes, the Dow is up 33 percent since March. But another 345,000 jobs were lost in May, raising the number of the unemployed to 14.5 million, and the unemployment rate to 9.4 percent. Since the start of the recession in December 2007, unemployment has almost doubled.

What's more, as this chart shows, over the past two decades, the top one percent of Americans has done very well in terms of wage growth. Things have not been nearly as good for everybody else.

Are the reforms going to be sufficiently fundamental to avoid a repeat of the boom and bust cycles, in which only a select few enjoy the boom and everybody else pays for the bust?

The American Empire Is Bankrupt

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Chris Hedges
June 15, 2009 - TruthDig.com

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This week marks the end of the dollar's reign as the world's reserve currency. It marks the start of a terrible period of economic and political decline in the United States. And it signals the last gasp of the American imperium. That's over. It is not coming back. And what is to come will be very, very painful.

Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as news while we endure the greatest economic crisis in our history, may have fooled us, but the rest of the world knows we are bankrupt. And these nations are damned if they are going to continue to prop up an inflated dollar and sustain the massive federal budget deficits, swollen to over $2 trillion, which fund America's imperial expansion in Eurasia and our system of casino capitalism. They have us by the throat. They are about to squeeze.

There are meetings being held Monday and Tuesday in Yekaterinburg, Russia, (formerly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance. Watch what happens there carefully. The gathering is, in the words of economist Michael Hudson, "the most important meeting of the 21st century so far."

It is the first formal step by our major trading partners to replace the dollar as the world's reserve currency. If they succeed, the dollar will dramatically plummet in value, the cost of imports, including oil, will skyrocket, interest rates will climb and jobs will hemorrhage at a rate that will make the last few months look like boom times. State and federal services will be reduced or shut down for lack of funds. The United States will begin to resemble the Weimar Republic or Zimbabwe. Obama, endowed by many with the qualities of a savior, will suddenly look pitiful, inept and weak. And the rage that has kindled a handful of shootings and hate crimes in the past few weeks will engulf vast segments of a disenfranchised and bewildered working and middle class. The people of this class will demand vengeance, radical change, order and moral renewal, which an array of proto-fascists, from the Christian right to the goons who disseminate hate talk on
Fox News, will assure the country they will impose.

I called Hudson, who has an article in Monday's Financial Times called "The Yekaterinburg Turning Point: De-Dollarization and the Ending of America's Financial-Military Hegemony." "Yekaterinburg," Hudson writes, "may become known not only as the death place of the czars but of the American empire as well." His article is worth reading, along with John Lanchester's disturbing exposé of the world's banking system, titled "It's Finished," which appeared in the May 28 issue of the London Review of Books.

"This means the end of the dollar," Hudson told me. "It means China, Russia, India, Pakistan, Iran are forming an official financial and military area to get America out of Eurasia. The balance-of-payments deficit is mainly military in nature. Half of America's discretionary spending is military. The deficit ends up in the hands of foreign banks, central banks. They don't have any choice but to recycle the money to buy U.S. government debt. The Asian countries have been financing their own military encirclement. They have been forced to accept dollars that have no chance of being repaid. They are paying for America's military aggression against them. They want to get rid of this."

China, as Hudson points out, has already struck bilateral trade deals with Brazil and Malaysia to denominate their trade in China's yuan rather than the dollar, pound or euro. Russia promises to begin trading in the ruble and local currencies. The governor of China's central bank has openly called for the abandonment of the dollar as reserve currency, suggesting in its place the use of the International Monetary Fund's Special Drawing Rights. What the new system will be remains unclear, but the flight from the dollar has clearly begun. The goal, in the words of the Russian president, is to build a "multipolar world order" which will break the economic and, by extension, military domination by the United States. China is frantically spending its dollar reserves to buy factories and property around the globe so it can unload its U.S. currency. This is why Aluminum Corp. of China made so many major concessions in the failed attempt to salvage its
$19.5 billion alliance with the Rio Tinto mining concern in Australia. It desperately needs to shed its dollars.

"China is trying to get rid of all the dollars they can in a trash-for-resource deal," Hudson said. "They will give the dollars to countries willing to sell off their resources since America refuses to sell any of its high-tech industries, even Unocal, to the yellow peril. It realizes these dollars are going to be worthless pretty quickly."

The architects of this new global exchange realize that if they break the dollar they also break America's military domination. Our military spending cannot be sustained without this cycle of heavy borrowing. The official U.S. defense budget for fiscal year 2008 is $623 billion, before we add on things like nuclear research. The next closest national military budget is China's, at $65 billion, according to the Central Intelligence Agency.

There are three categories of the balance-of-payment deficits. America imports more than it exports. This is trade. Wall Street and American corporations buy up foreign companies. This is capital movement. The third and most important balance-of-payment deficit for the past 50 years has been Pentagon spending abroad. It is primarily military spending that has been responsible for the balance-of-payments deficit for the last five decades. Look at table five in the Balance of Payments Report, published in the Survey of Current Business quarterly, and check under military spending. There you can see the deficit.

To fund our permanent war economy, we have been flooding the world with dollars. The foreign recipients turn the dollars over to their central banks for local currency. The central banks then have a problem. If a central bank does not spend the money in the United States then the exchange rate against the dollar will go up. This will penalize exporters. This has allowed America to print money without restraint to buy imports and foreign companies, fund our military expansion and ensure that foreign nations like China continue to buy our treasury bonds. This cycle appears now to be over. Once the dollar cannot flood central banks and no one buys our treasury bonds, our empire collapses. The profligate spending on the military, some $1 trillion when everything is counted, will be unsustainable.

"We will have to finance our own military spending," Hudson warned, "and the only way to do this will be to sharply cut back wage rates. The class war is back in business. Wall Street understands that. This is why it had Bush and Obama give it $10 trillion in a huge rip-off so it can have enough money to survive."

The desperate effort to borrow our way out of financial collapse has promoted a level of state intervention unseen since World War II. It has also led us into uncharted territory.

"We have in effect had to declare war to get us out of the hole created by our economic system," Lanchester wrote in the London Review of Books. "There is no model or precedent for this, and no way to argue that it's all right really, because under such-and-such a model of capitalism ... there is no such model. It isn't supposed to work like this, and there is no road-map for what's happened."

The cost of daily living, from buying food to getting medical care, will become difficult for all but a few as the dollar plunges. States and cities will see their pension funds drained and finally shut down. The government will be forced to sell off infrastructure, including roads and transport, to private corporations. We will be increasingly charged by privatized utilities—think Enron—for what was once regulated and subsidized. Commercial and private real estate will be worth less than half its current value. The negative equity that already plagues 25 percent of American homes will expand to include nearly all property owners. It will be difficult to borrow and impossible to sell real estate unless we accept massive losses. There will be block after block of empty stores and boarded-up houses. Foreclosures will be epidemic. There will be long lines at soup kitchens and many, many homeless. Our corporate-controlled media, already banal and
trivial, will work overtime to anesthetize us with useless gossip, spectacles, sex, gratuitous violence, fear and tawdry junk politics. America will be composed of a large dispossessed underclass and a tiny empowered oligarchy that will run a ruthless and brutal system of neo-feudalism from secure compounds. Those who resist will be silenced, many by force. We will pay a terrible price, and we will pay this price soon, for the gross malfeasance of our power elite.

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Chris Hedges writes a regular column for Truthdig.com. Hedges graduated from Harvard Divinity School and was for nearly two decades a foreign correspondent for The New York Times. He is the author of many books, including: War Is A Force That Gives Us Meaning, What Every Person Should Know About War, and American Fascists: The Christian Right and the War on America.  His most recent book is called, Empire of Illusion: The End of Literacy and the Triumph of Spectacle, and it will be out in July.

World Bank Loan Withdrawn From Brazilian Cattle Corporation

The US based Cargill corporation burns large areas of rainforest to prepare for soya plantations. (Greenpeace)

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Frank McDonald
June 15, 2009 - The Irish Times

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The International Finance Corporation (IFC), private lending arm of the World Bank, has withdrawn a $90 million loan to Brazilian cattle industry giant Bertin, following complaints that it was using the money to expand further into the Amazon region.

"It is good news that the World Bank is withdrawing these funds, yet scandalous that it was feeding a company that causes Amazon deforestation and climate change in the first place," said Paulo Adario, Greenpeace Brazil's Amazon campaign director.

The move came two weeks after a Greenpeace report, Slaughtering the Amazon, revealed that financial backing for the Brazilian cattle industry had turned it into the largest single source of deforestation in the world.

The report, based on a three-year undercover investigation, showed how Bertin and two other Brazilian companies supplying the global market with cattle products for top brands and supermarkets buy cattle from Amazon farms involved in illegal deforestation.

By helping Bertin to expand into the Amazon, Greenpeace said the IFC had been driving further destruction of the rainforest, a haven for biodiversity and one of the world's key defences against climate change because of its crucial role as a "carbon sink".

"For a bank that portrays itself as the 'knowledge bank', this was a very ill-conceived and thoroughly destructive use of its resources", Mr Adario said at the weekend. "It must now guarantee that it will not invest in such damaging projects in the future."

The last $30 million loan from the IFC will no longer be given to Bertin and it is anticipated that the World Bank subsidiary will ask that the $60 million it had already invested in the company be returned early.

Tropical deforestation is responsible for approximately 20 per cent of global greenhouse gas emissions, and Brazil has been ranked by Greenpeace as the world's fourth biggest "climate polluter".

Following the slow progress of climate talks in Bonn over the past two weeks, Greenpeace is calling on world leaders to "take personal responsibility for securing an effective climate-saving deal" by attending the UN Climate Summit in Copenhagen next December.

"This would include providing $110 million a year for developing countries to tackle the climate crisis, $40 million a year of which should go towards forest protection in return for commitments to end deforestation in the Amazon by 2015 and globally by 2020."

Last week, Brazilian president Lula da Silva announced that he would veto clauses in an Amazon land reform Bill that would legalise the landholdings of millions of people who have settled in the region - a move that could spur more deforestation.

"We want to be an example to the world in taking care of our own things," he said, adding that Brazil was now open to adopting targets to cut its own greenhouse gas emissions if rich countries agreed to do more.

Neo-Nazis are in the Army now

Iraq veteran Forrest Fogarty sailed through recruitment despite his neo-Nazi tattoos. (Photo: Salon)

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Why the U.S. military is ignoring its own regulations and permitting white supremacists to join its ranks.

Editor's note: Research support for this article was provided by the Nation Institute's Investigative Fund.

Matt Kennard
June 15, 2009 - Salon

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On a muggy Florida evening in 2008, I meet Iraq War veteran Forrest Fogarty in the Winghouse, a little bar-restaurant on the outskirts of Tampa, his favorite hangout. He told me on the phone I would recognize him by his skinhead. Sure enough, when I spot a white guy at a table by the door with a shaved head, white tank top and bulging muscles, I know it can only be him.

Over a plate of chicken wings, he tells me about his path into the white-power movement. "I was 14 when I decided I wanted to be a Nazi," he says. At his first high school, near Los Angeles, he was bullied by black and Latino kids. That's when he first heard Skrewdriver, a band he calls "the godfather of the white power movement." "I became obsessed," he says. He had an image from one of Skrewdriver's album covers — a Viking carrying a staff, an icon among white nationalists — tattooed on his left forearm. Soon after he had another white power symbol, a Celtic cross, emblazoned on his stomach.

At 15, Fogarty moved with his dad to Tampa, where he started picking fights with groups of black kids at his new high school. "On the first day, this bunch of niggers, they thought I was a racist, so they asked, 'Are you in the KKK?'" he tells me. "I said, 'Yeah,' and it was on." Soon enough, he was expelled.

For the next six years, Fogarty flitted from landscaping job to construction job, neither of which he'd ever wanted to do. "I was just drinking and fighting," he says. He started his own Nazi rock group, Attack, and made friends in the National Alliance, at the time the biggest neo-Nazi group in the country. It has called for a "a long-term eugenics program involving at least the entire populations of Europe and America."

But the military ran in Fogarty's family. His grandfather had served during World War II, Korea and Vietnam, and his dad had been a Marine in Vietnam. At 22, Fogarty resolved to follow in their footsteps. "I wanted to serve my country," he says.

Army regulations prohibit soldiers from participating in racist groups, and recruiters are instructed to keep an eye out for suspicious tattoos. Before signing on the dotted line, enlistees are required to explain any tattoos. At a Tampa recruitment office, though, Fogarty sailed right through the signup process. "They just told me to write an explanation of each tattoo, and I made up some stuff, and that was that," he says. Soon he was posted to Fort Stewart in Georgia, where he became part of the 3rd Infantry Division.

Fogarty's ex-girlfriend, intent on destroying his new military career, sent a dossier of photographs to Fort Stewart. The photos showed Fogarty attending white supremacist rallies and performing with his band, Attack. "They hauled me before some sort of committee and showed me the pictures," Fogarty says. "I just denied them and said my girlfriend was a spiteful bitch." He adds: "They knew what I was about. But they let it go because I'm a great soldier."

In 2003, Fogarty was sent to Iraq. For two years he served in the military police, escorting officers, including generals, around the hostile country. He says he was granted top-secret clearance and access to battle plans. Fogarty speaks with regret that he "never had any kill counts." But he says his time in Iraq increased his racist resolve.

"I hate Arabs more than anybody, for the simple fact I've served over there and seen how they live," he tells me. "They're just a backward people. Them and the Jews are just disgusting people as far as I'm concerned. Their customs, everything to do with the Middle East, is just repugnant to me."

Because of his tattoos and his racist comments, most of his buddies and his commanding officers were aware of his Nazism. "They all knew in my unit," he says. "They would always kid around and say, 'Hey, you're that skinhead!'" But no one sounded an alarm to higher-ups. "I would volunteer for all the hardest missions, and they were like, 'Let Fogarty go.' They didn't want to get rid of me."

Fogarty left the Army in 2005 with an honorable discharge. He says he was asked to reenlist. He declined. He was sick of the system.

Since the launch of the wars in Afghanistan and Iraq, the U.S. military has struggled to recruit and reenlist troops. As the conflicts have dragged on, the military has loosened regulations, issuing "moral waivers" in many cases, allowing even those with criminal records to join up. Veterans suffering post-traumatic stress disorder have been ordered back to the Middle East for second and third tours of duty.

The lax regulations have also opened the military's doors to neo-Nazis, white supremacists and gang members — with drastic consequences. Some neo-Nazis have been charged with crimes inside the military, and others have been linked to recruitment efforts for the white right. A recent Department of Homeland Security report, "Rightwing Extremism: Current Economic and Political Climate Fueling Resurgence in Radicalization and Recruitment," stated: "The willingness of a small percentage of military personnel to join extremist groups during the 1990s because they were disgruntled, disillusioned, or suffering from the psychological effects of war is being replicated today." Many white supremacists join the Army to secure training for, as they see it, a future domestic race war. Others claim to be shooting Iraqis not to pursue the military's strategic goals but because killing "hajjis" is their duty as white militants.

Soldiers' associations with extremist groups, and their racist actions, contravene a host of military statutes instituted in the past three decades. But during the "war on terror," U.S. armed forces have turned a blind eye on their own regulations. A 2005 Department of Defense report states, "Effectively, the military has a 'don't ask, don't tell' policy pertaining to extremism. If individuals can perform satisfactorily, without making their extremist opinions overt … they are likely to be able to complete their contracts."

Carter F. Smith is a former military investigator who worked with the U.S. Army Criminal Investigation Command from 2004 to 2006, when he helped to root out gang violence in troops. "When you need more soldiers, you lower the standards, whether you say so or not," he says. "The increase in gangs and extremists is an indicator of this." Military investigators may be concerned about white supremacists, he says. "But they have a war to fight, and they don't have incentive to slow down."

Tom Metzger is the former grand wizard of the Ku Klux Klan and current leader of the White Aryan Resistance. He tells me the military has never been more tolerant of racial extremists. "Now they are letting everybody in," he says.

The presence of white supremacists in the military first triggered concern in 1976. At Camp Pendleton in California, a group of black Marines attacked white Marines they mistakenly believed to be in the KKK. The resulting investigation uncovered a KKK chapter at the base and led to the jailing or transfer of 16 Klansmen. Reports of Klan activity among soldiers and Marines surfaced again in the 1980s, spurring President Reagan's Defense Secretary, Caspar Weinberger, to condemn military participation in white supremacist organizations.

Then, in 1995, a black couple was murdered by two neo-Nazi paratroopers around Fort Bragg in North Carolina. The murder investigation turned up evidence that 22 soldiers at Fort Bragg were known to be extremists. That year, language was added to a Department of Defense directive, explicitly prohibiting participation in "organizations that espouse supremacist causes" or "advocate the use of force or violence."

Today a complete ban on membership in racist organizations appears to have been lifted — though the proliferation of white supremacists in the military is difficult to gauge. The military does not track them as a discrete category, coupling them with gang members. But one indication of the scope comes from the FBI.

Following an investigation of white supremacist groups, a 2008 FBI report declared: "Military experience — ranging from failure at basic training to success in special operations forces — is found throughout the white supremacist extremist movement." In white supremacist incidents from 2001 to 2008, the FBI identified 203 veterans. Most of them were associated with the National Alliance and the National Socialist Movement, which promote anti-Semitism and the overthrow of the U.S. government, and assorted skinhead groups.

Because the FBI focused only on reported cases, its numbers don't include the many extremist soldiers who have managed to stay off the radar. But its report does pinpoint why the white supremacist movements seek to recruit veterans — they "may exploit their accesses to restricted areas and intelligence or apply specialized training in weapons, tactics, and organizational skills to benefit the extremist movement."

In fact, since the movement's inception, its leaders have encouraged members to enlist in the U.S. military as a way to receive state-of-the-art combat training, courtesy of the U.S. taxpayer, in preparation for a domestic race war. The concept of a race war is central to extremist groups, whose adherents imagine an eruption of violence that pits races against each other and the government.

That goal comes up often in the chatter on white supremacist Web sites. On the neo-Nazi Web site Blood and Honour, a user called 88Soldier88, wrote in 2008 that he is an active duty soldier working in a detainee holding area in Iraq. He complained about "how 'nice' we have to treat these fucking people … better than our own troops." Then he added, "Hopefully the training will prepare me for what I hope is to come." Another poster, AMERICANARYAN.88Soldier88, wrote, "I have the training I need and will pass it on to others when I get out."

On NewSaxon.org, a social networking group for neo-Nazis, a group called White Military Men hosts numerous contributors. It was begun by "FightingforWhites," who identified himself at one point as Lance Cpl. Burton of the 2nd Battalion Fox Company, but then removed the information. The group calls for "All men with military experience, retired or active/reserve" to "join this group to see how many men have experience to build an army. We want to win a war, we need soldiers." FightingforWhites — whose tagline is "White Supremacy will prevail! US Military leading the way!" — goes on to write, "I am with an infantry battalion in the Marine Corps, I have had the pleasure of killing four enemies that tried to kill me. I have the best training to kill people." On his wall, a friend wrote: "THANKS BROTHER!!!! kill a couple towel heads for me ok!"

Such attitudes come straight from the movement's leaders. "We do encourage them to sign up for the military," says Charles Wilson, spokesman for the National Socialist Movement. "We can use the training to secure the resistance to our government." Billy Roper, of White Revolution, says skinheads join the military for the usual reasons, such as access to higher education, but also "to secure the future for white children." "America began in bloody revolution," he reminds me, "and it might end that way."
 
When it comes to screening out racists at recruitment centers, military regulations appear to have collapsed. "We don't exclude people from the army based on their thoughts," says S. Douglas Smith, an Army public affairs officer. "We exclude based on behavior." He says an "offensive" or "extremist" tattoo "might be a reason for them not to be in the military." Or it might not. "We try to educate recruiters on extremist tattoos," he says, but "the tattoo is a relatively subjective decision" and shouldn't in itself bar enlistment.

What about something as obvious as a swastika? "A swastika would trigger questions," Smith says. "But again, if the gentlemen said, 'I like the way the swastika looked,' and had clean criminal record, it's possible we would allow that person in." "There are First Amendment rights," he adds.

In the spring, I telephoned at random five Army recruitment centers across the country. I said I was interested in joining up and mentioned that I had a pair of "SS bolts" tattooed on my arm. A 2000 military brochure stated that SS bolts were a tattoo image that should raise suspicions. But none of the recruiters reacted negatively, and when pressed directly about the tattoo, not one said it would be an outright problem. A recruiter in Houston was typical; he said he'd never heard of SS bolts and just encouraged me to come on in.

It's in the interest of recruiters to interpret recruiting standards loosely. If they fail to meet targets, based on the number of soldiers they enlist, they may have to attend a punitive counseling session, and it could hurt any chance for promotion. When, in 2005, the Army relaxed regulations on non-extremist tattoos, such as body art covering the hands, neck and face, this cut recruiters even more slack.

Even the education of recruiters about how to identify extremists seems to have fallen by the wayside. The 2005 Department of Defense report concluded that recruiting personnel "were not aware of having received systematic training on recognizing and responding to possible terrorists" — a designation that includes white supremacists — "who try to enlist." Participation on white supremacist Web sites would be an easy way to screen out extremist recruits, but the report found that the military had not clarified which Web forums were gathering places for extremists.

Once white supremacists are in the military, it is easy to stay there. An Army Command Policy manual devotes more than 100 pages to rooting them out. But no officer appears to be reading it.

Hunter Glass was a paratrooper in the 1980s and became a gang cop in 1999 in Fayetteville, North Carolina, near Fort Bragg. "In the early 1990s, the military was hard on them. They could pick and choose," he recalls. "They were looking for swastikas. They were looking for anything." But the regulations on racist extremists got jettisoned with the war on terror.

Glass says white supremacists now enjoy an open culture of impunity in the armed forces. "We're seeing guys with tattoos all the time," he says. "As far as hunting them down, I don't see it. I'm seeing the opposite, where if a white supremacist has committed a crime, the military stance will be, 'He didn't commit a race-related crime.'"

In fact, a 2006 report by the Army's Criminal Investigation Command shows that military brass consistently ignored evidence of extremism. One case, at Fort Hood, reveals that a soldier was making Internet postings on the white supremacist site Stormfront.org. But the investigator was unable to locate the soldier in question. In a brief summary of the case, an investigator writes that due to "poor documentation," "attempts to locate with minimal information met with negative results." "I'm not doing my job here," the investigator notes. "Needs to get fixed."

In another case, investigators found that a Fort Hood soldier belonged to the neo-Nazi group Hammerskins and was "closely associated with" the Celtic Knights of Austin, Texas, another extremist organization, a situation bad enough to merit a joint investigation by the FBI and the Army's Criminal Investigation Command. The Army summary states that there was "probable cause" to believe the soldier had participated in at least one white extremist meeting and had "provided a military technical manual … to the leader of a white extremist group in order to assist in the planning and execution of future attacks on various targets."

Our of four preliminary probes into white supremacists, the Criminal Investigation Command carried through on only this one. The probe revealed that "a larger single attack was planned for the San Antonio, TX after a considerable amount of media attention was given to illegal immigrants. The attack was not completed due to the inability of the organization to obtain explosives." Despite these threats, the subject was interviewed only once, in 2006, and the investigation was terminated the following year.

White supremacists may be doing more than avoiding expulsion. They may be using their military status to help build the white right. The FBI found that two Army privates in the 82nd Airborne Division at Fort Bragg had attempted in 2007 to sell stolen property from the military — including ballistic vests, a combat helmet and pain medications such as morphine — to an undercover FBI agent they believed was involved with the white supremacist movement. (They were convicted and sentenced to six years.) It found multiple examples of white supremacist recruitment among active military, including a period in 2003 when six active duty soldiers at Fort Riley, members of the Aryan Nation, were recruiting their Army colleagues and even serving as the Aryan Nation's point of contact for the state of Kansas.

One white supremacist soldier, James Douglas Ross, a military intelligence officer stationed at Fort Bragg, was given a bad conduct discharge from the Army when he was caught trying to mail a submachine gun from Iraq to his father's home in Spokane, Wash. Military police found a cache of white supremacist paraphernalia and several weapons hidden behind ceiling tiles in Ross' military quarters. After his discharge, a Spokane County deputy sheriff saw Ross passing out fliers for the neo-Nazi National Alliance.

Rooting out extremists is difficult because racism pervades the military, according to soldiers. They say troops throughout the Middle East use derogatory terms like "hajji" or "sand nigger" to define Arab insurgents and often the Arab population itself.