Time for Obama to Start Spending Political Capital

.....

Lincoln Mitchell
June 18, 2009 - The Huffington Post

.....

Throughout his presidential campaign, but more notably, during his presidency, President Obama has shown himself to have an impressive ability to accumulate political capital. During his tenure in the White House, Obama has done this by reaching out to a range of constituencies, moderating some of his programs, pursuing middle of the road approaches on key foreign policy questions and, not insignificantly, working to ensure that his approval rating remains quite high.

Political capital is not, however, like money, it cannot be saved up interminably while its owner waits for the right moment to spend it. Political capital has a shelf life, and often not a very long one. If it is not used relatively quickly, it dissipates and becomes useless to its owner. This is the moment in which Obama, who has spent the first few months of his presidency diligently accumulating political capital, now finds himself. The next few months will be a key time for Obama. If Obama does not spend this political capital during the next months, it will likely be gone by the New Year anyway.

Much of what President Obama has done in his first six months or so in office has been designed to build political capital, interestingly he has sought to build this capital from both domestic and foreign sources. He has done this by traveling extensively, reintroducing to America to foreign audiences and by a governance style that has very cleverly succeeded in pushing his political opponents to the fringes. This tactic was displayed during the effort to pass the stimulus package as Republican opposition was relegated to a loud and annoying, but largely irrelevant, distraction. Building political capital was, or should have been, a major goal of Obama's recent speech in Cairo as well.

Significantly, Obama has yet to spend any of his political capital by meaningfully taking on any powerful interests. He declined to take Wall Street on regarding the financial crisis, has prepared to, but not yet fully, challenged the power of the AMA or the insurance companies, nor has he really confronted any important Democratic Party groups such as organized labor.

This strategy, however, will not be fruitful for much longer. There are now some very clear issues where Obama should be spending political capital. The most obvious of these is health care. The battle for health care reform will be a major defining issue, not just for the Obama presidency, but for American society over the next decades. It is imperative that Obama push for the best and most comprehensive health care reform possible. This will likely mean not just a bruising legislative battle, but one that will pit powerful interests, not just angry Republican ideologues, against the President.

The legislative struggle will also pull many Democrats between the President and powerful interest groups. Obama must make it clear that there will be an enormous political cost which Democrats who vote against the bill will have to pay. Before any bill is voted upon, however, is perhaps an even more critical time as pressure from insurance groups, business groups and doctors organizations will be brought to bear both on congress, but also on the administration as it works with congress to craft the legislation. This is not the time when the administration must focus on making friends and being liked, but on standing their ground and getting a strong and inclusive health care reform bill.

Obama will have to take a similar approach to any other major domestic legislation as well. This is, of course, the way the presidency has worked for decades. Obama is in an unusual situation because a similar dynamic is at work at the international level. A major part of Obama's first six months in office have involved pursuing a foreign policy that implicitly has sought to rebuild both the image of the US abroad, but also American political capital. It is less clear how Obama can use this capital, but now is the time to use it.

A cynical interpretation of the choice facing Obama is that he can remain popular or he can have legislative and other policy accomplishments, but this interpretation would be wrong. By early 2010, Obama, and his party will, fairly or not, be increasingly judged by what they have accomplished in office, not by how deftly they have handled political challenges. Therefore, the only way he can remain popular and get new political capital is through converting his current political capital into concrete legislative accomplishments. Health care will be the first and very likely most important, test.

The Good, the Bad, the Ugly: Financial Sector Regulation

.....

Robert Weissman
June 18, 2009 - CommonDreams.org

.....

There are major gaps and shortcomings in the Obama administration's financial regulatory proposals, formally released today, and the proposals alone leave the financial sector vulnerable to future crisis. Still, it's nice to be able to say that the proposal does contain meaningful reforms.

Whether those meaningful reform proposals become law is no sure thing, and will depend on the administration's willingness to stare down Wall Street -- which still retains immense political power, despite its partial self-immolation -- and on whether a mobilized public demands Congress act for consumers, not contributors.

The 85-page draft released today is qualitatively different than the bullet-point plans previously issued by the Treasury Department. It contains detailed proposals, spanning across the financial regulatory spectrum, not easily summarized. Here are only some key elements -- first, the good, then the bad.

The Good

1. The administration supports creation of a strong Consumer Financial Regulatory Agency.

It proposes to give this new agency very strong powers, and jurisdiction over consumer protection rules -- taking away authority from existing regulators (like the Federal Reserve) that have failed utterly to protect consumers. It favors simplicity and gives the new agency the authority to mandate financial firms offer "plain vanilla" loans along with the more complicated packages they prefer. It gives the agency authority to ban mandatory arbitration provisions that strip consumers' right to go to court for redress of scams and rip-offs. And it establishes that the new agency's rules will be a regulatory floor, with states permitted to adopt stronger protections.

2. The administration proposes to reduce speculative betting, through new standards on leverage.

One reason the financial crisis spun out of control was financial firms' excessive use of "leverage" -- borrowed money. Heavily leveraged, the top commercial banks and investment banks overreached with very risky loans and investments. The administration proposes that all systemically important financial firms be subjected to higher capital reserve standards (meaning they can rely less on borrowed money). The administration properly says these rules should apply to any systemically important firm, whether or not it is a bank. It defines systemically important as a firm "whose combination of size, leverage and interconnectedness could pose a threat to financial stability if it failed." There are still important details to be worked out here, including how much capital such firms must maintain. And there is the very worrisome element that it is the Federal Reserve that is given primary responsibility for overseeing these systemically important firms.

3. Through "skin-in-the-game" rules, the administration aims to prevent predatory and reckless lending.

One reason lenders were willing to make so many predatory and bad-quality mortgages -- including but not limited to the class of "subprime" loans -- was that mortgage originators did not hold on to the loans. Mortgage brokers cut deals on behalf of banks and non-bank originators, which in turn sold the resulting mortgages to other banks. These banks, in turn, sliced and diced the mortgages, combined them into packages of pieces of thousands of other mortgages, and sold them to all kinds of investors. Because the initial lender did not maintain an ongoing interest in the mortgage, they did not have any incentive to ensure they were making a quality loan.

The administration proposes that loan originators be required to keep, at minimum, a 5 percent exposure in loans.

4. The administration seeks power to take over failing, systemically important financial firms.

The government already has such "resolution" power for commercial banks. The Federal Deposit Insurance Corporation regularly takes control over failing banks and "resolves" them outside of the bankruptcy process. This typically means selling off the failing bank to another bank, often after separating its good assets from bad. FDIC is expert at this process, moves very quickly, and averts the harmful consequences from extended bankruptcy processes.

The government does not have the legal authority to undertake comparable measures for important non-bank firms. This includes investment banks (think Lehman Brothers) and insurance companies (think AIG). Giving the government resolution power for non-banks should help control financial panic.

The Bad

1. The administration does not propose to do anything serious about executive pay and top-level compensation for financial firms.

The administration does support "say-on-pay" proposals, which give shareholders the right to a non-binding vote on executive compensation. But a non-binding vote isn't worth too much; and, more importantly, shareholders are often willing to support excessive compensation while risky bets are paying off.

In terms of financial stability, the imperative is to do away with the Wall Street bonus culture, where executives and traders are given extraordinary bonuses -- often four or more times base salary -- based on annual performance. This bonus culture gives traders and executives alike an incentive to take big bets -- because they get massive payoff if things go well, and don't suffer if they go bad, or go bad sometime in the future.

This is a structural problem, not a symbolic one. Anyone who thinks pay isn't of overriding importance in financial regulation should have been set straight by the desperation of the bailed out Wall Street firms to pay back their loans from the government. That desperation is overwhelmingly tied to a desire to escape the extremely modest pay standards issued by the Obama administration.

Besides financial stability, there are important questions of economic justice and taxpayer rights related to executive compensation. The Wall Street hotshots -- including the major hedge fund players -- have paid themselves unfathomable amounts of money over the last decade. They have set an aspirational standard for other executives and professionals, and helped drive wealth and income inequality to outrageous and unhealthy levels. Ultra compensation should be taxed at very high rates; and, at a bare minimum, the loopholes that let hedge fund managers pay taxes at about half the rate of regular folks must be closed. The case for aggressive tax reform on ultra rich financiers was overwhelming last year; now, with the financial system completely dependent on taxpayer largesse, there shouldn't be anything left to debate. No one in finance can say they made their money just by working hard or being clever -- their system was saved by the government.

2. The administration does not propose structural reform of the financial sector.

Although it proposes some meaningful regulatory reform, and modest alteration of the structure of regulatory agencies, the administration does not propose to alter the structure of the financial sector itself.

There is no discussion of returning to Glass-Steagall principles, to separate commercial banking from other financial activities including the speculative world of investment banking. Glass-Steagall was adopted during the Great Depression, as a response to financial abuses that closely parallel those of the previous decade. Repeal of Glass Steagall -- following a decades-long erosion -- came in 1999, and helped pave the way for the present crisis.

Nor is there any discussion of shrinking the size of goliath financial firms. Everyone now recognizes the problem of too-big-to-fail and too-interconnected-to-fail financial firms. The administration proposes to deal with the problem through regulation alone; a more fundamental approach would break up giant firms (or at least commit to prevent further consolidation going forward).

Addressing structure and size is important not only because of the economic power accreted by the goliaths, but because of their political strength -- about which, see below.

3. The administration's approach to regulating financial derivatives is too timid.

To its credit, the administration proposes to repeal recent deregulatory statutes and establish regulation of financial derivatives. But its plan does not go far enough. It creates a regulatory exemption for customized derivatives -- a loophole that will create lots of business for corporate lawyers ready to change terms in derivative contracts so that they differ somewhat from standardized terms.

Nor does the administration propose to ban classes of dangerous financial instruments that cannot be justified. A clear example of a product that should be banned is a credit default swap -- a kind of insurance against a certain outcome, like the inability of a bondholder to make required payments -- in which neither party has a stake in the underlying transaction. Such credit default swaps have no insurance component, and are nothing more than bets -- but they are bets that can vastly exceed the value of the transaction being bet on, and can spread financial contagion, as AIG demonstrated. George Soros argues that all credit default swaps basically share this feature, and should be banned altogether.

The administration proposal also fails to require that exotic financial instruments be subjected to pre-approval requirements. Under such an approach, financial firms would be required to show that new instruments offer some social benefit, and do not pose excessive risk.

4. The administration does not propose to empower consumers.

There is enormous merit to the proposal for a Consumer Financial Products Agency. But it is not a substitute for giving consumers the power to organize themselves to advance their own interests. Simply mandating that financial firms include in bills and statements (whether mailed or e-mailed) an invitation to join an independent consumer organization would facilitate tens of thousands of consumers -- and likely many more -- banding together to make sure the regulators do their job, and to prevent Wall Street from "innovating" the next trick to scam borrowers and investors.

The Ugly

Identifying the merits and gaps in the administration's proposal is important. But the proposal does not exist in a vacuum, and it doesn't become law just because the administration has proposed it.

The Wall Street types don't know shame. Having benefited from literally trillions of dollars of taxpayer largesse, one might expect that they would be embarrassed to lobby on Capitol Hill. Or, that Members of Congress would be unsympathetic to their pleas.

But that's not how Washington works. Having spent $5 billion on political investments over the last decade, Wall Street continues to pour cash into the political process -- and those investments continue to pay handsomely.

To understand how things work, consider the fate of the proposal to give bankruptcy judges the power to adjust mortgages, so that they could reduce the principal owed on loans on homes now worth less than value of the loan. Then-candidate Barack Obama campaigned in favor of such "cram-down" provisions. In a rational world, banks would agree to these adjustments to principal on their own, because they do better if people stay in their homes and continue paying on the loan, rather than by forcing foreclosure. Not long ago, it was widely expected that cram-down would quickly become law. But the banks deployed their lobbyists, and this vital though totally inadequate measure was defeated in May. The Obama administration sat quietly by.

Now, Wall Street is already trashing the good parts of the administration's proposals.

"Congress is not going to impose a 'skin-in-the-game' requirement on all loans," Jaret Seiberg, an analyst with Washington Research Group, a division of Concept Capital, flatly tells American Banker.

The Chamber of Commerce and other industry groupings are attacking the idea of a Consumer Financial Product Agency, including with the extraordinary claim that it will improperly relieve consumers of their duty to do "due diligence" on financial products.

Hedge funds are hiring ever more lobbyists and floating the claim that the administration's requirements for some modest disclosure requirements for secretive hedge funds could do more damage than good. One purported reason: the disclosures may be too complicated for regular people to understand.

There's no question that Wall Street is going to mobilize -- is already mobilized -- to defeat the administration's positive proposals.

What remains very much in question is the administration's willingness to engage in bare-knuckled political fighting to defend these proposals, as well as whether the public will be mobilized to support these and other moves to control Wall Street.

A new public interest coalition -- Americans for Financial Reform -- aims to do just that, but they are fighting on occupied territory. As Senator Majority Whip Richard Durbin says, "the banks are still the most powerful lobby on Capitol Hill. And they frankly own the place."

.....

Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor,  and director of Essential Action.

Where Are They Now?

.....

Ex-Bush Loyalists Cash In

Nick Turse
June 18, 2009 - TomDispatch.com

.....

In May, the U.S. economy lost 345,000 nonfarm jobs, pushing the unemployment rate from 8.9% to 9.4%. According to official statistics, 14.5 million Americans are now looking for work and, as a recent headline at Time.com put it, "The jobs aren't coming back anytime soon." In fact, a team of economists at the San Francisco Federal Reserve Bank recently reported that "the level of labor market slack could be higher by the end of 2009 than at any other time in the post-World War Two period."

The news, however, is not altogether grim. While times are especially tough for teenagers (22.7% jobless rate) and blacks (14.9% jobless rate), one group is doing remarkably well. I'm talking about former members of the Bush administration who are taking up prestigious academic posts, inking lucrative book deals, signing up with speakers bureaus, joining big-time law firms and top public relations agencies, and grabbing spots on corporate boards of directors. While their high-priced wars, ruinous economic policies, and shredding of economic safety nets have proved disastrous for so many, for them the economic outlook remains bright and jobs are seemingly plentiful. In fact, many of them have performed the eye-opening feat of securing two or more potentially lucrative revenue streams at once during these tough financial times.

While it would likely take a small book to catalogue the fates of all former "loyal Bushies," a look at just a few of these fortunate folks indicates that not everybody was harmed by the Bush era.

The Memoirists

Many of the top figures of the Bush years are joining the ranks of (or reaffirming their credentials as) men and women of letters. Following in the footsteps of 2003-2006 White House Press Secretary Scott McClellan, who wrote the tell-some exposé, What Happened: Inside the Bush White House and Washington's Culture of Deception, is former Secretary of Defense Donald Rumsfeld (2001-2006). Now penning his life story for Sentinel, a conservative imprint of the Penguin Group, he has announced that he is forgoing an advance and donating all proceeds to charity. Similarly, 2006-2009 Treasury Secretary Henry Paulson is reportedly donating the "author's profits" from his forthcoming "insider's account of [his] experiences as Treasury Secretary." Many other former colleagues are, however, apparently intent on cashing in on their public service.

Last month, the New York Times reported that Rumsfeld's long-time pal, former Vice President Dick Cheney, "is actively shopping a memoir about his life in politics and service in four presidential administrations" and seeking multi-millions. In the same way, back in 2007, Bush's right-hand man Karl Rove, aka his "brain," agreed, for a reported seven figures, to write a memoir for Simon & Schuster's conservative imprint Threshold. Earlier this year, Bush's first term National Security Advisor and second term Secretary of State, Condoleezza Rice, signed a gaudy three-book deal, reportedly worth at least $2.5 million, with Random House's Crown imprint.

Following her to Crown (also the publisher of Barack Obama's Dreams from My Father and The Audacity of Hope) was former President Bush himself. His book, tentatively titled Decision Points, will reportedly recount "a dozen of the most interesting and important decisions in the former President's personal and political life" for a cool $7 million. Former First Lady Laura Bush has already inked a book deal with Scribner reportedly worth $3.5-5 million.

Only one prominent Bush loyalist who cared to try appears to have been unable to cash-in. In late 2008, the Wall Street Journal's Evan Perez reported that Alberto Gonzales, former White House counsel (2001-2005) and attorney general (2005-2007), "said he is writing a book to set the record straight about his controversial tenure as a senior official in the Bush administration," but could interest no publisher in the manuscript. This followed an earlier report in the New York Times that Gonzales had been "unable to interest law firms in adding his name to their roster..."

Law and Orders

One Bush administration lawyer who did land a job with a law firm was Gonzales's successor, Attorney General Michael Mukasey (2007-2009), who became a partner at Debevoise & Plimpton, a firm "offering sophisticated legal services" which "places the highest value on collaboration and interdisciplinary cooperation in order to provide clients with seamless representation across practice areas and across continents."

Tommy Thompson, Bush's Secretary of Health and Human Services from 2001-2005, is now a partner with Akin, Gump, Strauss, Hauer & Feld where he "focuses on developing solutions for clients in the health care industry, as well as for companies doing business in the public sector." Michael Chertoff, Secretary of Homeland Security from 2005–2009, is serving as "senior of counsel," and a "member of the White Collar Defense and Investigations practice group" at the firm of Covington & Burling.

Meanwhile, Harriet Miers, who served Bush from 2001-2007 as Staff Secretary, Deputy Chief of Staff, and Counsel to the President -- and whose Supreme Court bid crashed and burned in 2005 -- returned to Locke, Lord, Bissell & Liddell in May 2007 to serve as a member of the law firm's "Litigation and Public Policy sections." That firm is also home to Karin Torgerson, a partner who served as Special Assistant to President George W. Bush, one of several White House positions she held from 2003-2005.

Speak Easy

In addition to his book-writing duties, former President Bush recently signed on with the Washington Speakers Bureau, which already represents his wife. The Bureau is to arrange lucrative speeches for him worldwide. In fact, just last month, the New York Times reported that the former president had "earned more than an estimated $150,000" to "discuss national and international policy" alongside fellow former President Bill Clinton at the Metro Toronto Convention Center.

Together the Bushes joined a speakers' roster of former administration heavyweights, including Richard Armitage (Deputy Secretary of State, 2001-2005), John Bolton (U.S. Ambassador to the United Nations, 2005-2006), Andrew Card (White House Chief of Staff, 2001-2006), Ari Fleischer (White House Press Secretary, 2001-2003), Michael Mukasey, Colin Powell (Secretary of State, 2001-2005), Condoleezza Rice, Tom Ridge (Secretary of Homeland Security, 2003-2005), Donald Rumsfeld, and John Snow (Secretary of the Treasury, 2003-2006), as well as Bush family consigliere James Baker III.

Meanwhile, at Leading Authorities, another top-of-the-line speakers bureau, the list of ex-Bush loyalists includes Dan Bartlett (Counselor to the President, 2002-2007), Christopher Cox (Chairman of the Securities and Exchange Commission, 2005-2009), Ed Gillespie (Counselor to the President, 2007-2009), Porter Goss (Director of the Central Intelligence Agency, 2005-2006), Stephen Hadley (National Security Advisor, 2005-2009), Michael Hayden (Director of the Central Intelligence Agency, 2006-2009), Keith Hennessey (Director of the National Economic Council, 2007-2009), Dana Perino (White House Press Secretary, 2007-2009), and Margaret Spellings (Secretary of Education, 2005-2009).

A third lecturers' stable, the Leigh Bureau, boasts John Negroponte who served Bush as Ambassador to the United Nations, Ambassador to Iraq, Director of National Intelligence, and Deputy Secretary of State.

Talking Heads and Lobbyists

Some Bush loyalists have nabbed other sorts of speaking gigs. Karl Rove, for one, took a job as an analyst for Fox News. (He also writes a weekly op-ed for the Wall Street Journal and, in 2007, signed a two-year deal to be a columnist for Newsweek magazine.)

Ari Fleischer was hired as a media consultant to the Green Bay Packers in 2008 and serves as the president of Ari Fleischer Communications, Inc., which bills itself as a "unique media training and consultancy company [that] brings to the world of sports the lessons of how to successfully handle the toughest situations with the most aggressive reporters." (Clients reportedly include Major League Baseball, the Sporting Goods Manufacturers Association, and "several other leading sports figures.")

Many more Bush loyalists, however, are involved in another lucrative form of communication. For example, Michael Chertoff quickly launched the Chertoff Group, a consulting firm that "will advise clients on a range of security concerns, including cyber security, terrorism, fraud, border protection and supply-chain security." Tom Ridge, when not serving as a keynote-speaker-for-hire (as he did recently at the 2009 CoBank Energy Directors Conference in Colorado Springs, Colorado) is now a security and crisis-management consultant for his own firm, Ridge Global, whose self-professed "expertise encompasses risk management and global trade security, leadership guidance and strategic business generation, event security, crisis management and communications, campus security, technology innovation and integration and more."

In fact, a recent analysis by USA TODAY found that "more than one in four members of President George W. Bush's Cabinet have landed jobs with consulting or lobbying firms in which they can help clients navigate the departments they once oversaw." And it's not just heads of executive departments like Homeland Security who are cashing in.

John Ashcroft (Attorney General, 2001-2005) co-founded the Ashcroft Group, a strategic consulting firm that advises and invests "in companies in the security and law enforcement marketplaces." Not surprisingly, the firm has become a home for Bush loyalists like Juleanna Glover, who served on the senior staffs of then President-elect George W. Bush and Vice President Dick Cheney, and was then "the registered U.S. government affairs advisor for Iraq's first post-Saddam Hussein ambassador to the United States."

Recently, according to the Quad City Times, Jim Nussle, Bush's director of the White House Office of Management and Budget (2007-2009) "formed a company that will offer consulting, government relations and lobbying services." The Nussle Group, its website proclaims, "specializes in recruiting a talented team and developing creative solutions to assist clients in navigating the complicated and challenging intersections of public policy, government relations, public relations, international relations and politics."

According to his company bio, the senior policy director at lobbying powerhouse Dutko Worldwide, Gene Hickok, "joined the George W. Bush Administration as Under Secretary of Education. He became Deputy Secretary in 2003 [and] was an architect of the No Child Left Behind Act." And he isn't alone. Kent Sholars, a Senior Associate at Dutko, "was a political appointee during both terms of the administration of George W. Bush, serving as the Confidential Assistant to the Controller for the White House Office of Management and Budget (OMB) in Washington, DC," while Karen Yeager, a Dutko vice president, "serve[d] in the White House for President Bush in 2001."

Spin-Mistresses

Karen Hughes helped George W. Bush get elected in 2000 and, for the first two years of his first term, served him as a "counselor." In 2002, she left the White House to spend more time with her family in Texas. In 2004, however, she was back at work on Bush's campaign and then, in 2005, signed on as an undersecretary of state. In 2007, she left again, the White House said, "to spend more time with her family." Nonetheless, in 2008, she was in an office yet again, this time as Global Vice Chair at public relations giant Burson-Marsteller. In 2009, she was joined there by former White House Press Secretary Dana Perino, who now serves as Chief Issues Counselor for the company in the U.S.

Here, too, Michael Chertoff has gotten into the act. The announcement of the formation of the Chertoff Group, wrote the Wall Street Journal, "was made by the communications firm Burson-Marsteller, which said it formed an alliance with Mr. Chertoff."

Board to Death

Bush Administration officials have also been popping up on various boards of directors. Richard Armitage is perhaps typical. He sits on the board at military-corporate complex member ManTech International. He also serves on the boards of oil giant ConocoPhillips, "pharmaceutical and cosmeceutical" company Transcu Ltd., and his own firm, Armitage International, which, according to its website, provides "multinational clients with critical support in the areas of international business development, strategic planning, and problem-solving."

In April, chemical giant DuPont announced that Samuel Bodman, Secretary of Energy from 2005-2009 (and before that, Deputy Secretary of the Treasury, 2004-2005, and Deputy Secretary of the Department of Commerce, 2001-2004) had been elected to its board of directors.

That same month, former CIA chief Michael Hayden became a member of the Board of Directors of the National Interest Security Company, an "information technology, information management, and management technology consulting services" provider serving the U.S. Intelligence Community and the Departments of Defense, Homeland Security, and Energy. There, Hayden joined fellow former administration cronies Henry A. Crumpton (Coordinator for Counterterrorism at the State Department, 2005-2007) and Donald Kerr (Principal Deputy Director of National Intelligence, 2007-2009).

Meanwhile, Andrew Card not only serves on the board of directors of railroad giant Union Pacific, but has also turned up on the board of directors of the George W. Bush Presidential Library Foundation.

In the Tank

If you can't get a gig at a law firm, a PR agency, or on a corporate board of directors, there are always the nation's think-tanks to fall back into -- and they've become a shelter for more than a few Bush administration refugees in the Obama era. For example, after serving as a Deputy Assistant to the President and Deputy National Security Adviser in the Bush administration, Elliott Abrams has now joined the Council on Foreign Relations (CFR) as senior fellow for Middle Eastern studies.

Alongside Abrams at CFR are a number of officials who served during the Bush years, including Evan Feigenbaum, former Deputy Assistant Secretary of State for India, Nepal, Sri Lanka, Bhutan, and the Maldives; Paul Lettow, former senior adviser to the Under Secretary of State for Democracy and Global Affairs and the Senior Director for Strategic Planning and Institutional Reform on the National Security Council staff; and Dan Senor, an administration foreign policy advisor and senior advisor to the Coalition Provisional Authority in Iraq.

Meanwhile, the conservative Heritage Foundation is not surprisingly housing a large contingent of Bush loyalists, including Becky Norton Dunlop, who served as the chairperson of the Federal Services Impasse Panel (which handles disputes between government agencies and labor unions); Kim R. Holmes, Assistant Secretary of State for International Organization Affairs; Terry Miller, ambassador to the United Nations Economic and Social Council; Peter Brookes, Deputy Assistant Defense Secretary for Asian and Pacific Affairs; and Mike Gonzalez who, in 2005, left the Wall Street Journal to join the Bush administration where, according to his Heritage Foundation bio, he "wrote speeches for Securities and Exchange Commission Chairman Christopher Cox, then moved to the State Department in 2006 as communications adviser and speechwriter on European and Eurasian affairs" and even "helped craft an op-ed column… which appeared throughout Europe under the bylines of
Secretary of State Condoleezza Rice and Secretary of Defense Robert Gates."

Ivory Tower Power

While Gates stayed on to work for President Barack Obama, Rice is pursuing many different career paths. In addition to the lucrative book contracts and the speakers bureau gigs, she inked a deal for the William Morris Agency to represent her for "business initiatives in media, sports and communications." Rice also returned, as a professor of political science, to her old stomping grounds at Stanford University, where she had long taught and also, from 1993-1999, served as provost. Presumably in her spare time, she serves as the Thomas and Barbara Stephenson Senior Fellow on Public Policy at Stanford's conservative Hoover Institution.

Rice is actually following in the footsteps of Rumsfeld who served a stint, beginning in 2007, as "a distinguished visiting fellow" at the Hoover Institution. But Stanford is hardly the only academic bastion of former Bush-ites. For example, this year, John Negroponte headed back to his old alma mater, Yale University, to become the "Brady-Johnson Distinguished Senior Research Fellow in Grand Strategy and Lecturer in International Affairs at the Whitney and Betty MacMillan Center for International and Area Studies."

"Torture memo" author John Yoo, who served as Deputy Assistant Attorney General in the Office of Legal Counsel at the Department of Justice from 2001-2003, is, of course, a professor of law at the School of Law of that bastion of leftist radicalism, the University of California at Berkeley. (As Liliana Segura of AlterNet recently reported, he also just landed a gig as a columnist for the Philadelphia Inquirer.)

Hope on the Horizon

Last year, for many Americans, Barack Obama became synonymous with hope. (And last year, Obama's The Audacity of Hope as well as his Dreams from My Father earned him an eye-popping $2.4 million in royalties.) This year, for struggling job-hunters nationwide, it's former Bush administration officials who offer a glimmer of hope in tough economic times. Their ease in finding gainful employment suggests that, even if your prior work has been judged ruinous by many and been roundly repudiated, there's still hope for you on the job front.

Even former Vice President Cheney, a man about whom 55% of Americans hold an unfavorable opinion, has realistic prospects of receiving a multimillion dollar book deal. After all, his former boss is viewed unfavorably by 57% of Americans and look how he's done.

Since most jobless Americans don't have nearly the unfavorable polling numbers of Bush or Cheney, nor do they face the distant threat of possible war crimes prosecutions like John Yoo, they should perk up. Maybe the problem is that none of them have signed up with the right speakers bureau to discuss their disastrous life circumstances. Maybe they haven't had that extra little bit of help tweaking their book proposals for their proposed tell-littles and tell-nones. Maybe they hadn't thought to check with Burson-Marsteller, just in case a few top slots with grandiose titles are still open. Maybe the Hoover Institution will now extend distinguished visiting fellowships to a few of the residents of modern-day Hoovervilles.

With only former Attorney General Gonzales still out of work, grant the men and women of the Bush administration one thing: the best unemployment rate in the land. In but a few short months, they've managed to prove that, no matter how spectacularly you fail, those inside-the-Beltway never have to tighten a belt. In our world, they will always fail upwards -- generally in lucrative, prestigious, and glamorous ways.

.....

Nick Turse is the associate editor of TomDispatch.com and the recent winner of a Ridenhour Prize for Reportorial Distinction as well as a James Aronson Award for Social Justice Journalism.

TOON

Time to Subsitute Hemp for Oil

Help Save the Earth

.....

Every man-made fiber we wear, sit on, cook with, drive in, are by-products of the petroleum industry -- all of which could be replaced by hemp.

Dara Colwell
June 18, 2009 - AlterNet

.....

As the recession renews interest in the growing hemp marketplace as a potential boon for the green economy -- even Fox Business News has touted it -- hemp is becoming impossible to ignore.

But the plant's potential extends far beyond consumer-generated greenbacks. A low-input, low-impact crop, industrial hemp can play a significant role in our desperate shuffle to avoid catastrophic climate change.

"In terms of sustainability, there are numerous reasons to grow hemp," says Patrick Goggin, a board member on the California Council for Vote Hemp, the nation's leading industrial-hemp advocacy group.

Goggin launches into its environmental benefits: Hemp requires no pesticides; it has deep digging roots that detoxify the soil, making it an ideal rotation crop -- in fact, hemp is so good at bioremediation, or extracting heavy metals from contaminated soil, it's being grown near Chernobyl.

Hemp is also an excellent source of biomass, or renewable, carbon-neutral energy, and its cellulose level, roughly three times that of wood, can be used for paper to avoid cutting down trees, an important line of defense against global warming.

When it comes to hemp, environmental gains are inexorably intertwined with economic ones. The auto industry, hardly synonymous with being green but which has had the research dollars to apply new technology, can vouch for Goggin. For years European car makers have been using hemp-fiber-reinforced composite materials to replace fiberglass and in other components, such as door panels or dashboards. And now their American counterparts have joined in.

Blending hemp with plastics is not only cheaper for producers, but natural-fiber composites are roughly 30 percent lighter, which in turn leads to greater fuel efficiency for customers. And when they finally hit the junkyard, those parts partially biodegrade. Ford, General Motors, Chrysler, BMW, Mercedes-Benz and Honda all use this technology.

Now, where there are cars, there's fuel, or these days biofuel, which has become a contentious issue as America fights for energy independence while attempting to combat climate change.

Biofuels -- fuels derived from plants -- actually are nothing new. Rudolph Diesel, who invented the diesel engine, designed his machine to run on peanut oil, and his contemporary, Henry Ford, intended his Model-T to run on ethanol, of which hemp provided the major feedstock until the 1930s. Even Thomas Edison championed bio-based fuels, suspicious of the growing dominance of the petroleum industry, which boomed after America began taxing alcohol -- as both a beverage and a fuel -- to help pay for the Civil War.

To wean ourselves off foreign oil, the U.S. heavily subsidized the corn-based ethanol industry to the tune of $7 billion in 2006, according to zFacts, a Web site run by economist Steve Stoft.

Critics argue that the production of corn-based ethanol is problematic because corn consumes more energy from fossil fuels (such as petrochemical, nitrogen-based fertilizers) than it yields, and its production has a negative impact on the price and availability of edible corn, a staple in countries such as Mexico.

In 2007, because so many farmers north and south of the border switched to growing industrial corn, the price of corn flour in Mexico skyrocketed 400 percent, sending rioters into the streets. People need to eat and to do so, they have to be able to afford food, which begs the question: How green is ethanol when it deprives folk of basic food?

"In reality, corn isn't a viable option," says Goggin, who explains that hemp, which can be grown both as food and fuel -- its seeds, harvested for protein and essential amino and fatty acids, or for oil, which is converted into biodiesel -- has roughly four times the cellulose biomass potential of corn. "Compared to hemp, which can be harvested for multiple purposes, it's very inefficient."

As biomass, hemp can be converted into fuels such as methane, methanol and gasoline, which can help curb the world's growing appetite for palm oil used to make biodiesel, and which is having a colossally negative environmental impact.

In densely populated Indonesia, companies are draining local peat swamps and clearing virgin tropical forests, home to the endangered orangutan, to make room for palm oil plantations. This alone has resulted in 2 billion tons of carbon-dioxide emissions being released into the atmosphere a year, according to the conservation nonprofit Wetlands International.

The same is happening in Brazil's biodiverse cerrado region south of the Amazon, where sugar cane and soy plantations are replacing native vegetation. Deforestation now accounts for 25 percent of the world's greenhouse-gas emissions, according to the Global Canopy Program, an alliance of rainforest scientists based in Oxford, England. Tropical forests are essentially the planet's lungs -- and without lungs, well, it's a no-brainer ...

"If all the diesel engines today were converted to use hemp biodiesel, you could wipe out world hunger while providing a natural balance to global warming" says Paul Stanford of the Hemp and Cannabis Foundation, which has worked to end marijuana prohibition and restore industrial hemp.

As hemp, which has a short harvesting period (roughly 120 days for seed), grows it sequesters, or captures, carbon dioxide from the atmosphere. Because biofuels emit less carbon dioxide when burned, more carbon is actually absorbed by the plants used to produce it. So, as more hemp grows, more carbon dioxide would be sucked out of the atmosphere.

"Growing hemp would improve air quality -- isn't that good enough reason to do it?" says Chris Conrad, a respected authority on cannabis and industrial hemp and who wrote Hemp, Lifeline to the Future. Only Conrad, who also teaches at Oaksterdam University, America's only cannabis college, in Oakland, Calif., knows his question is rhetorical. America is the world's only industrialized nation to prohibit the growing of industrial hemp.

That's because the Drug Enforcement Administration has historically lumped hemp in with marijuana, although the plants are different breeds of Cannabis sativa, just as Great Danes and Chihuahuas are different breeds of Canine familiaris.

While hemp contains minute levels of THC, marijuana's psychoactive ingredient (compare 0.3 in Canadian industrial hemp versus 3-20 for medical marijuana), to get high you would have to smoke a whole field of it -- but you'd probably get a headache first. Still, because marijuana has been the most politicized plant in American history, a history of smear campaigns flaming public hysteria and far too lengthy to address here, hemp hasn't escaped the association with its distant cousin.

In 1937, America passed the Marijuana Tax Act, which criminalized cannabis and levied high taxes ($1 per ounce) on medical marijuana and industrial hemp. Although growing hemp wasn't technically disallowed, the law made it prohibitively expensive, so it fell into decline.

Hemp experienced a short resurgence during World War II, when the government launched an aggressive campaign to grow hemp in the face of a severe fiber shortage. In 1944, the National Farmers Union called for the widest use of hemp within the American market, according to documents on the North American Industrial Hemp Council Web site, for hemp was always considered an essential American crop -- as American as the first pair of Levi's made from hemp fiber in 1849.

But after the war, hemp production again faded away, perhaps because the DEA has always maintained it can't differentiate between industrial hemp and marijuana, a seemingly American shortcoming.

As it stands, we can't grow hemp but we can import it, and we do, in the form of clothing, bath towels, rugs, food and car components from Canada, China and Europe, which have utilized the crop to bolster their economies. Last year, annual hemp retail sales in North America amounted to $300 million.

Our legal quandary has hurt us economically, but the environmental impact is just as great. For example, California, an agricultural giant that nets $36.6 billion dollars a year, according to the California Department of Food and Agriculture, is the world's 12th-largest carbon emitter and a state with a reputation for being an environmental maverick.

In September 2006, California passed Assembly Bill 32, announcing its compliance with the Kyoto Protocol, a move Gov. Arnold Schwarzenegger celebrated by exclaiming, "The global warming debate is over!" But four days later, Schwarzenegger vetoed, for the second time, a bill to legalize the growth of industrial hemp, stating the measure conflicted with federal law.

If California, which grows cotton -- one of the most water and pesticide intensive crops in the world, could legally replace cotton with hemp, it could clean up the environment while supplying the domestic market with a crop that has thousands of applications. In 2005, cotton was worth $630 million to the state (although the industry is shrinking due to globalization). According to "Illegally Green: Environmental Costs of Hemp Prohibition," a report written by analyst Skaidra Smith-Heisters and issued by the Reason Foundation, hemp produces more fiber and uses half the irrigation water and nitrogen fertilizer that cotton does.

"If hemp was freed up of its legal hassles, it would encourage the business climate to implement small-scale solutions, and you would see all kinds of innovation coming from this," says Smith-Heisters.

But until industrial hemp is legalized, innovation will have to come from overseas, or over the Canadian border. "Our lack of infrastructure is a great disgrace. We were once the leader in hemp technology, and we voluntarily absented ourselves from one of the most important global resources that exists," says Conrad. "We'll keep losing and face economic and environmental collapse if we remain afraid of this plant."

Canada, which produces hemp for seeds, and Europe, which mainly produces hemp for fiber, are leading the way. At the end of May, the European Industrial Hemp Association held its sixth annual international conference in Wesseling, Germany, where experts, traders, cultivation consultants and investors met to exchange information about the latest developments concerning hemp. Of the 100 or so participants, less than a handful was American.

"It was disappointing not to see any American officials educating themselves about hemp, the struggles we're facing within the industry or for pure research-and-development purposes," says Anndrea Hermann, vice president of the Canadian Hemp Trade Alliance and a Missouri native. Hermann attended the EIHA conference and hopes one day hemp won't be seen as a specialty crop, but as a staple. "The conference was an opportunity to pick great minds."

And with hemp, there's growing opportunity. Among exciting developments is hempcrete, a generic term for hemp-based building material used to replace concrete. In France, which has grown industrial hemp without interruption, hemp plaster is common due to its high insulation properties.

Hemp can be made into almost any building material, including roofing, flooring, paint, insulation pipes and bricks. In addition, hempcrete tends to be stronger and absorb greater humidity while sequestering carbon dioxide. A joint venture with U.K.-based Lime Technology, American Limetec in Chicago is the first American company to distribute hemp-lime materials.

"Europe has already proven it can get the hemp market rolling, that it's viable and that it can be done sustainability. It makes sense for us to do it, too, though it will never happen until we get started -- and we can't until the federal government makes the distinction between hemp and marijuana," says Eric Steenstra, executive director of the Hemp Industries Association, which represents the domestic hemp industry and seeks to educate the public about hemp products. Steenstra says that every man-made fiber we wear or walk in, sit on or drive and fly in, or cook with are by-products of the petroleum industry -- and all of which could feasibly be replaced by hemp.

America seems to be getting closer to getting started. To date, 28 states have introduced hemp legislation, and 15 have passed it -- although that the legislation is not uniform. Some states have authorized studies of industrial hemp and its viability as an industry, some have legalized growing it (although they still face pressure from the DEA over permits) and others have asked the federal government to relax its laws against hemp.

Eight other states (Hawaii, Kentucky, Maine, Maryland, Montana, North Dakota, Vermont and West Virginia) have removed barriers to its production or research. Rep. Ron Paul, R-Texas, has reintroduced the Industrial Hemp Farming Act of 2009 to the House of Representatives, though what happens with the bill remains to be seen. And now that the Obama administration has announced an end to medical marijuana raids, hemp advocates are hopeful their window of opportunity is finally opening.

"We're getting close to the tipping point, and a large part of that is due to the work the states are doing. They're setting a precedent, which is the federalism our founding fathers dreamt of," says Goggin. Though hemp advocates are aware that America's insufficient infrastructure -- from the lack of processing plants to the dearth of businesses actually using in hemp in their products -- will require a massive coordinated effort, their optimism is growing as they push to get the plant legalized.

"Hemp is not going to solve all our problems, but it is an important piece of the puzzle. Why not use the resources available to assist us in the process of combating climate change?" says Goggin. "To blindly scapegoat and ignore hemp is backward thinking. At this point, we need to be forward thinking."

The Big Hate

.....

Paul Krugman
June 11, 2009 - The New York Times

.....

Back in April, there was a huge fuss over an internal report by the Department of Homeland Security warning that current conditions resemble those in the early 1990s — a time marked by an upsurge of right-wing extremism that culminated in the Oklahoma City bombing.

Conservatives were outraged. The chairman of the Republican National Committee denounced the report as an attempt to "segment out conservatives in this country who have a different philosophy or view from this administration" and label them as terrorists.

But with the murder of Dr. George Tiller by an anti-abortion fanatic, closely followed by a shooting by a white supremacist at the United States Holocaust Memorial Museum, the analysis looks prescient.

There is, however, one important thing that the D.H.S. report didn't say: Today, as in the early years of the Clinton administration but to an even greater extent, right-wing extremism is being systematically fed by the conservative media and political establishment.

Now, for the most part, the likes of Fox News and the R.N.C. haven't directly incited violence, despite Bill O'Reilly's declarations that "some" called Dr. Tiller "Tiller the Baby Killer," that he had "blood on his hands," and that he was a "guy operating a death mill." But they have gone out of their way to provide a platform for conspiracy theories and apocalyptic rhetoric, just as they did the last time a Democrat held the White House.

And at this point, whatever dividing line there was between mainstream conservatism and the black-helicopter crowd seems to have been virtually erased.

Exhibit A for the mainstreaming of right-wing extremism is Fox News's new star, Glenn Beck. Here we have a network where, like it or not, millions of Americans get their news — and it gives daily airtime to a commentator who, among other things, warned viewers that the Federal Emergency Management Agency might be building concentration camps as part of the Obama administration's "totalitarian" agenda (although he eventually conceded that nothing of the kind was happening).

But let's not neglect the print news media. In the Bush years, The Washington Times became an important media player because it was widely regarded as the Bush administration's house organ. Earlier this week, the newspaper saw fit to run an opinion piece declaring that President Obama "not only identifies with Muslims, but actually may still be one himself," and that in any case he has "aligned himself" with the radical Muslim Brotherhood.

And then there's Rush Limbaugh. His rants today aren't very different from his rants in 1993. But he occupies a different position in the scheme of things. Remember, during the Bush years Mr. Limbaugh became very much a political insider. Indeed, according to a recent Gallup survey, 10 percent of Republicans now consider him the "main person who speaks for the Republican Party today," putting him in a three-way tie with Dick Cheney and Newt Gingrich. So when Mr. Limbaugh peddles conspiracy theories — suggesting, for example, that fears over swine flu were being hyped "to get people to respond to government orders" — that's a case of the conservative media establishment joining hands with the lunatic fringe.

It's not surprising, then, that politicians are doing the same thing. The R.N.C. says that "the Democratic Party is dedicated to restructuring American society along socialist ideals." And when Jon Voight, the actor, told the audience at a Republican fund-raiser this week that the president is a "false prophet" and that "we and we alone are the right frame of mind to free this nation from this Obama oppression," Mitch McConnell, the Senate minority leader, thanked him, saying that he "really enjoyed" the remarks.

Credit where credit is due. Some figures in the conservative media have refused to go along with the big hate — people like Fox's Shepard Smith and Catherine Herridge, who debunked the attacks on that Homeland Security report two months ago. But this doesn't change the broad picture, which is that supposedly respectable news organizations and political figures are giving aid and comfort to dangerous extremism.

What will the consequences be? Nobody knows, of course, although the analysts at Homeland Security fretted that things may turn out even worse than in the 1990s — that thanks, in part, to the election of an African-American president, "the threat posed by lone wolves and small terrorist cells is more pronounced than in past years."

And that's a threat to take seriously. Yes, the worst terrorist attack in our history was perpetrated by a foreign conspiracy. But the second worst, the Oklahoma City bombing, was perpetrated by an all-American lunatic. Politicians and media organizations wind up such people at their, and our, peril.

Etheridge says marijuana ‘amazing’ medicine

.....

David Edwards and Stephen Webster
June 16, 2009 - The Raw Story

.....

Grammy Award-winning musician Melissa Etheridge told CNN that when she underwent chemotherapy following breast cancer surgery, it was not the cocktail of pharmaceutical drugs that helped her recover, but rather medical marijuana, the effects of which she called "amazing."

Etheridge was speaking to CNN's Anderson Cooper on Monday as part of a new "investigation" — introduced with a cloud of smoke, a blue pot leaf and the title "America's High" — into whether the plant should be legally available as medicine.

She described the pain of cancer therapy as being "like death" and "a general pain" with a complete loss of energy and appetite.

"[Marijuana] instantly — instantly — relieves the nausea … Relieves the pain," she said, emphasizing that "you don't take medicinal marijuana to get high."

"So, it, you weren't … You weren't getting high?" asked Cooper.

"No, it's not a high," Etheridge said. "It's a normal. And I could, all the sudden, get out of bed. I could go see my kids. It was … Amazing."

Though marijuana is commonly associated with being smoked to deliver its active chemical compounds, Etheridge took the drug dissolved in butter and spread on food, or as a vapor inhalant, every four hours while on chemo.

She considered the notion of experiencing a "gateway" effect — becoming addicted and somehow driven to try other, more potent drugs — was "laughable," but that she does keep up a prescription.

"The effects [of cancer treatment] on my gastrointestinal system, leaves me with … I have a really low tolerance for acid of any kind," she said. "So, acid reflux is a constant problem. I don't want to take the little pills that they give you, that have all the side-effects, to help with that."

She said that medicinal marijuana "totally and completely settles all that."

Osama bin Laden is a Dead Man

.....

Cenk Uygur
June 17, 2009 - Smirking Chimp

.....

Almost exactly three years ago I predicted the death of Abu Musab al-Zarqawi. And a month later he was dead. Sometimes you can see the handwriting on the wall. Zarqawi had gotten careless and had also turned the local population against him, which I figured would eventually catch up with him. And it did. Now, I see similar handwriting on the wall for Osama bin Laden.

Here are the clues that Osama's days are numbered:

1. In one of his latest tapes, he was asking for donations to his cause. This is not something that was part of the regular fare before. If they're desperate enough to attach that to a threat that was otherwise bragging about how they're going to rip us apart, then they might be running low on cash. It doesn't sound very menacing to beg for a handout. If they're running low on funds, then they could be in a world of trouble.

2. The Pakistani army is moving into South Waziristan as we speak. They've already cleared out the Swat valley. Bin Laden was so nervous about that, that he did a tape on the intricacies of Pakistani politics, railing against specific politicians and their strategic goals. Gee, I wonder why he knows so much about Pakistan and cares so much about the army's movement into these tribal areas. He hears footsteps.

3. The Taliban who have traditionally protected Al Qaeda leadership have alienated the local population in Pakistan by carrying out a series of terrorist attacks against respected tribal leaders and innocent civilians. When you lose the local population, you're living on borrowed time.

4. We have a smart president. In the seven years after 9/11, the Bush administration could not for the life of them get the Pakistani government to move against the Taliban or Al Qaeda, who had taken shelter in northern Pakistan. They got almost no results in rooting out those forces from the Swat and Waziristan areas. I don't know if it's because they didn't know what they were doing or it was because they didn't really care to try.

But now we have a president who actually cares to get the job done and apparently knows how to do it. I say that because of the facts on the ground. A Pakistani government that was considered weak and ineffectual in the five months since Obama's inauguration has somehow been able to muster up a massive campaign against the Taliban and Al Qaeda in the north. I don't know what the Obama administration did behind the scenes to get this done, but they did it. They got results.

So, now Al Qaeda is being squeezed from the north in Afghanistan and from the south in Pakistan. They might be running out of money and out of options. They have lost the good will of their hosts and might be in some serious trouble here. So, given these circumstances, I'm willing to go out on a limb again and say I think Osama bin Laden will be killed or captured within the year (killed is far more likely; he might even die of natural causes as he attempts to flee the area in deteriorating health). If the Pakistani army blazes through South Waziristan the way they did in Swat, it might be quicker than that.

One final prediction -- if this does come to fruition, the right-wing in America will fervently claim that Barack Obama had nothing to do with it and that any Republican president could have done the same, despite overwhelming evidence to the contrary.

Carter says Palestinians being treated ‘like animals’

.....

June 16, 2009 - Raw Story

.....

Former US president Jimmy Carter on Tuesday met Hamas leader Ismail Haniya in the Gaza Strip, where he called for a lifting of Israel's blockade, saying Palestinians are being treated "like animals."

Following the talks, Carter called for an end of "all violence" against both Israelis and Palestinians.

"This is holy land for us all and my hope is that we can have peace… all of us are children of Abraham," he said at a joint news conference with Haniya, prime minister of the Hamas government in the Palestinian enclave.

Hamas, a group pledged to the destruction of Israel which violently seized power in Gaza two years ago, is listed as a terrorist organisation by Israel, the United States and the European Union.

Carter was expected to pass on a letter from the parents of Gilad Shalit, an Israeli soldier seized by Gaza militants including Hamas in a cross-border raid almost three years ago, and who remains in captivity.

Earlier Carter denounced the Israeli blockade and the destruction wrought by its 22-day military offensive against Gaza in December and January.

"My primary feeling today is one of grief and despair and an element of anger when I see the destruction perpetrated against innocent people," Carter said as he toured the impoverished territory.

"Tragically, the international community too often ignores the cries for help and the citizens of Palestine are treated more like animals than like human beings," he said.

"The starving of 1.5 million human beings of the necessities of life — never before in history has a large community like this been savaged by bombs and missiles and then denied the means to repair itself," Carter said at a UN school graduation ceremony in Gaza City.

The United States and Europe "must try to do all that is necessary to convince Israel and Egypt to allow basic goods into Gaza," he said.

"At same time, there must be no more rockets" from Gaza into Israel, said Carter, who brokered the historic 1979 peace treaty between Israel and Egypt.

"I have to hold back tears when I see the deliberate destruction that has been wracked against your people," he said at a destroyed American school, saying it was "deliberately destroyed by bombs from F16s made in my country."

Israel's offensive killed more than 1,400 Palestinians and left large swathes of the coastal strip sandwiched between Israel and Egypt in ruins. Thirteen Israelis also died in the conflict.

"I feel partially responsible for this as must all Americans and Israelis," Carter said.

Israel has insisted that the Gaza blockade, which bars all but essential humanitarian supplies from entering the enclave, is necessary to prevent Hamas from arming, but human rights groups have slammed it as collective punishment.

Shortly after entering Gaza, Carter's convoy of white UN 4×4 vehicles stopped briefly in the area of Ezbet Abed Rabbo, one of the most ravaged during the Israeli onslaught at the turn of the year.

The massive destruction in the area has made it a regular stop for the succession of foreign dignitaries who have come to Gaza since the war.

As Carter briefly emerged from his vehicle to look at the damage, one resident ran up, yelling that he wanted to talk to the former US leader, and getting into a brief shoving match with bodyguards.

"They all come here and look at us like we're animals and then they go home," said Majid Athamna. "We're not animals, we're human beings."

"If he wants to come and visit us, he has to listen to us."

Stay the Course

Paul Krugman
Photo: Fred R. Conrad/The New York Times

.....

Paul Krugman
June 14, 2009 - The New York Times

.....

The debate over economic policy has taken a predictable yet ominous turn: the crisis seems to be easing, and a chorus of critics is already demanding that the Federal Reserve and the Obama administration abandon their rescue efforts. For those who know their history, it's déjà vu all over again — literally.

For this is the third time in history that a major economy has found itself in a liquidity trap, a situation in which interest-rate cuts, the conventional way to perk up the economy, have reached their limit. When this happens, unconventional measures are the only way to fight recession.

Yet such unconventional measures make the conventionally minded uncomfortable, and they keep pushing for a return to normalcy. In previous liquidity-trap episodes, policy makers gave in to these pressures far too soon, plunging the economy back into crisis. And if the critics have their way, we'll do the same thing this time.

The first example of policy in a liquidity trap comes from the 1930s. The U.S. economy grew rapidly from 1933 to 1937, helped along by New Deal policies. America, however, remained well short of full employment.

Yet policy makers stopped worrying about depression and started worrying about inflation. The Federal Reserve tightened monetary policy, while F.D.R. tried to balance the federal budget. Sure enough, the economy slumped again, and full recovery had to wait for World War II.

The second example is Japan in the 1990s. After slumping early in the decade, Japan experienced a partial recovery, with the economy growing almost 3 percent in 1996. Policy makers responded by shifting their focus to the budget deficit, raising taxes and cutting spending. Japan proceeded to slide back into recession.

And here we go again.

On one side, the inflation worriers are harassing the Fed. The latest example: Arthur Laffer, he of the curve, warns that the Fed's policies will cause devastating inflation. He recommends, among other things, possibly raising banks' reserve requirements, which happens to be exactly what the Fed did in 1936 and 1937 — a move that none other than Milton Friedman condemned as helping to strangle economic recovery.

Meanwhile, there are demands from several directions that President Obama's fiscal stimulus plan be canceled.

Some, especially in Europe, argue that stimulus isn't needed, because the economy is already turning around.

Others claim that government borrowing is driving up interest rates, and that this will derail recovery.

And Republicans, providing a bit of comic relief, are saying that the stimulus has failed, because the enabling legislation was passed four months ago — wow, four whole months! — yet unemployment is still rising. This suggests an interesting comparison with the economic record of Ronald Reagan, whose 1981 tax cut was followed by no less than 16 months of rising unemployment.

O.K., time for some reality checks.

First of all, while stock markets have been celebrating the economy's "green shoots," the fact is that unemployment is very high and still rising. That is, we're not even experiencing the kind of growth that led to the big mistakes of 1937 and 1997. It's way too soon to declare victory.

What about the claim that the Fed is risking inflation? It isn't. Mr. Laffer seems panicked by a rapid rise in the monetary base, the sum of currency in circulation and the reserves of banks. But a rising monetary base isn't inflationary when you're in a liquidity trap. America's monetary base doubled between 1929 and 1939; prices fell 19 percent. Japan's monetary base rose 85 percent between 1997 and 2003; deflation continued apace.

Well then, what about all that government borrowing? All it's doing is offsetting a plunge in private borrowing — total borrowing is down, not up. Indeed, if the government weren't running a big deficit right now, the economy would probably be well on its way to a full-fledged depression.

Oh, and investors' growing confidence that we'll manage to avoid a full-fledged depression — not the pressure of government borrowing — explains the recent rise in long-term interest rates. These rates, by the way, are still low by historical standards. They're just not as low as they were at the peak of the panic, earlier this year.

To sum up: A few months ago the U.S. economy was in danger of falling into depression. Aggressive monetary policy and deficit spending have, for the time being, averted that danger. And suddenly critics are demanding that we call the whole thing off, and revert to business as usual.

Those demands should be ignored. It's much too soon to give up on policies that have, at most, pulled us a few inches back from the edge of the abyss.

Audit Finds That US Overpaid Blackwater by Tens of Millions of Dollars

.....

Yochi J. Dreazen
June 16, 2009 - Wall Street Journal

.....

A government audit found that the State Department overpaid the contract-security firm once known as Blackwater Worldwide by tens of millions of dollars because the company failed to properly staff its teams in Iraq.

The report didn't identify any specific security breaches, but it said the State Department should have withheld at least $55 million in payments to the company because of the shortfalls.

The audit by the Special Inspector General for Iraq Reconstruction and the State Department's Inspector General said the firm didn't employ enough guards, medics, marksmen and dog handlers to fully man the teams, which were responsible for protecting the U.S. ambassador to Iraq and other high-level officials.

The failure to consistently field the right numbers of guards endangered the U.S. officials whom the company was being paid to protect, the report concluded.

"We believe the full manning of protective details is important to the safety of the principal being protected, as well as to the members of the protective details," the audit noted. "Insufficient manning exposed the department to unnecessary risk."

The audit also found that Blackwater, which this year changed its name to Xe, sometimes overcharged for airfare to and from Iraq and failed to properly account for some equipment received from the U.S. government.

Anne Tyrell, a company spokeswoman, said it had been "fully compliant with the terms and conditions of the contract." Ms. Tyrrell said the company believed it was entitled to all of the disputed $55 million.

Officials in the State Department's Diplomatic Security office, which oversaw the contract, referred questions to the department's Bureau of Administration, which declined to comment.

The audit is the latest report to raise questions about Blackwater, which was for years the best known Western contractor in Iraq. Under the new name, Xe, the company is seeking new contracts worth tens of millions of dollars in Afghanistan for services ranging from training Afghan personnel to flying cargo for the U.S. military.

Blackwater wound down its Iraq operations earlier this year, after the Iraqi government refused to renew its operating license because of a 2007 shooting incident involving one of its security teams in which 17 Iraqis died. In December, U.S. prosecutors charged five former Blackwater guards with manslaughter and weapons charges for their alleged roles in the incident. Families of several of the dead Iraqis have also sued Blackwater in federal court seeking financial compensation.

The company also faces civil and criminal scrutiny stemming from the alleged killing of an Iraqi guard by a Blackwater employee inside Baghdad's heavily protected Green Zone on Christmas Eve 2006.

In Afghanistan, four U.S. contractors affiliated with Xe are under U.S. military investigation in the shooting of a civilian vehicle in Kabul last month, wounding at least two Afghan civilians.

The company has said it is cooperating with the investigations into all three incidents but denied responsibility. When the five former guards were indicted in December, the company said it didn't believe "criminal violations occurred" but that the men should be held accountable for any wrongdoing. The company fired the guard involved in the Christmas Eve shooting, fined him thousands of dollars and sent him back to the U.S.

Last month, the company said it terminated the contracts of all four of the guards involved in the Kabul shooting.

Detainee says he lied to CIA in harsh interrogations

.....

Khalid Shaikh Mohammed, the self-proclaimed mastermind of the Sept. 11 attacks, told the U.S. military that he made up stories, documents show. The news could intensify the debate over interrogations.

Julian E. Barnes and Greg Miller
June 16, 2009 - Los Angeles Times

.....

Self-proclaimed Sept. 11 mastermind Khalid Shaikh Mohammed told U.S. military officials that he had lied to the CIA after being abused, according to documents made public Monday. The claim is likely to intensify the debate over whether harsh interrogation techniques generated accurate information.

Mohammed made the assertion during hearings at Guantanamo Bay, Cuba, where he was transferred in 2006after being held at secret CIA sites since his capture in 2003.

"I make up stories," Mohammed said, describing in broken English an interrogation probably administered by the CIA concerning the whereabouts of Al Qaeda leader Osama bin Laden. "Where is he? I don't know. Then, he torture me," Mohammed said of his interrogator. "Then I said, 'Yes, he is in this area.' "

Mohammed also appeared to say that he had fingered people he did not know as being Al Qaeda members in order to avoid abusive treatment. Although there is no way to corroborate his statements, Mohammed is one of the militants whom the CIA repeatedly subjected to the simulated-drowning technique known as waterboarding.

The newly released information could amplify calls for the Obama administration to make public more details about the treatment of terrorism suspects or allow a broader inquiry into the George W. Bush administration's interrogation policies. Monday's disclosure represented a rare allegation by a detainee that he had lied while being subjected to harsh practices.

A lawyer for the American Civil Liberties Union, which obtained the documents through a Freedom of Information Act lawsuit, said Mohammed's statements raised questions about the effectiveness of the CIA's interrogation program.

"It underscores the unreliability of statements obtained by torture," said Jameel Jaffer, director of the ACLU's National Security Project.

The CIA, however, took issue with the description of its interrogation techniques as torture and the assertion that they were not useful.

"The CIA plainly has a very different take on its past interrogation practices -- what they were and what they weren't -- and on the need to protect properly classified national security information," said Paul Gimigliano, an agency spokesman.

The bulk of the documents released Monday, consisting of transcripts of court hearings held at Guantanamo Bay for accused Al Qaeda members, had been previously released. But the Bush administration classified many parts of them, including detainees' allegations that they were abused while in CIA custody. The re-released transcripts remained heavily redacted, containing long passages of blacked-out text.

The ACLU expressed disappointment that President Obama, who has pledged greater openness, had decided to withhold so much of the information.

"The public has a right to know what took place in the CIA's secret prisons," Jaffer said, adding that the ACLU would continue to press in court for completely unclassified versions of transcripts from the Guantanamo Bay tribunals.

In addition to Mohammed's allegation that he had offered false information after being tortured, the documents contained some new details about the detention of terrorism suspects.

A newly declassified portion of Mohammed's transcript showed that the CIA apparently told him that he had no constitutional rights.

"This is what I understand he told me: You are not American and you are not on American soil," Mohammed said in the military hearing. "So you cannot ask about the Constitution."

Ben Wizner, the lead ACLU lawyer in the lawsuit seeking an unclassified version of the transcripts, said the fact that the CIA had previously sought to classify that statement was extraordinary.

"Why would the Bush administration suppress [Mohammed's] statement that he was told by the CIA that he was not protected by the Constitution?" Wizner said. "This was suppressed to avoid embarrassment."

The newly declassified material provided little new information on the treatment of another detainee, accused Al Qaeda facilitator Abu Zubaydah. He was captured in a violent raid on a Pakistani compound in March 2002.

On one page, the CIA declassified two paragraphs in which Abu Zubaydah complained about a lack of treatment for injuries he sustained in the shootout, including the loss of a testicle.

"They did not care about my injuries that they inflicted to my eye, to my stomach, to my bladder, and my left thigh and my reproductive organs," Abu Zubaydah said.

He went on to complain that he was "losing my masculinity. Even my beard is falling out, not from injuries but from the lack of treatment."

Wizner said the techniques the CIA used to interrogate Al Qaeda suspects were made public when the Obama administration this year released Justice Department legal memos authorizing them, so there was no reason to keep the detainees' testimony secret.

"There is only one explanation for the continued suppression. It is not to protect national security, it is to protect the CIA from accountability," Wizner said.

Despite the CIA's efforts to suppress prisoners' statements about their treatment, other sources have provided highly detailed accounts -- including a 2007 Red Cross report that surfaced publicly this year.

In that document, Abu Zubaydah described his reaction to being waterboarded, saying he thought he was going to die.

"I lost control of my urine," Abu Zubaydah told the Red Cross, according to the organization's report. "Since then I still lose control of my urine when under stress."

In the documents released Monday, Rahim Nashiri, who is accused of involvement in the bombing of the U.S. destroyer Cole in 2000, described the aftereffects of his questioning.

"Before I was arrested I used to be able to run about 10 kilometers," he said at the hearing in March 2007. "Now I cannot walk for more than 10 minutes. My nerves are swollen in my body."

And in another newly released portion of the transcript, he described how government officials would "drown me in water," a reference to the CIA's waterboarding technique.

More than 7 1/2 pages of the hearing transcript of Majid Khan, another accused Al Qaeda member, remained classified and appeared as one long block of blacked-out text. Among the few newly released statements of Khan's include his assertion that the evidence against him was a result of torture.

"In the end," he said, "any classified information you have is through [redacted] agencies who physically and mentally tortured me."

Water Risks Ripple Through the Beverage Industry

.....

Martinne Geller
June 16, 2009 - Reuters

.....

At New York's Del Posto, diners can share a $130 entree of wild branzino fish with roasted fennel and peperonata concentrato and a $3,600 bottle of Dom Perignon. They cannot share a bottle of Perrier or San Pellegrino water.

The Italian restaurant backed by celebrities Mario Batali and Joseph Bastianich is one of several shunning bottled water, along with the city of San Francisco and New York state.

"The argument for local water is compelling and obvious," said Bastianich, who is phasing out bottled water across his restaurant empire, which stretches to Los Angeles.

"It's about transportation, packaging, the absurdity of moving water all over the world," he said.

As environmental worries cut into sales from traditionally lucrative bottled water, beverage companies such as Coca-Cola, PepsiCo, Nestle and SABMiller are becoming more attuned to the risks of negative consumer environmental perceptions.

Water is becoming scarcer, raising a fear that so-far manageable price increases could spike and leading drink companies to take action to maintain access to water and fight their image as water hogs.

"Water is the new oil," said Steve Dixon, who manages the Global Beverage Fund at Arnhold & S. Bleichroeder, repeating what has become a mantra as climate change and population growth tax water supplies.

"As an investor, I'm not concerned about the reality," Dixon said, guessing there will always be enough water overall. "But I'm aware of the perceptions ... and you can't totally shrug it off because perceptions are important."

About a third of the world's people now live in areas of water stress, said Brooke Barton, manager of corporate accountability for Ceres, a network of environmental groups and investors seeking to address sustainability challenges. By 2025, she said it will be more like two-thirds.

COST

Water is still cheap, but that is changing.

"(Water) is currently not a very big cost. The issue is where it will it go in the future," said Andy Wales, head of sustainable development for brewer SABMiller, which used 94.5 billion liters of water in its latest fiscal year. That works out to 4.5 liters for every liter of beer it made.

Water and energy combined only made up 5 percent of its costs, overshadowed by brewing ingredients, bottling materials and labor. Still the brewer said water costs at a Bogota, Colombia plant are rising some 12 percent a year from increased soil being washed into the river as cattle grazing upstream causes deforestation.

New water pricing schemes are emerging, such as the European Union's Water Framework Directive that will tax water from 2010 to encourage more sustainable use.

Some 70 percent of the water the world uses is for agriculture, while industry uses 20 percent. But any industry reliant on agriculture -- from meat to jeans -- has more to wade through than its own use.

SABMiller is one of a few companies, including Coke and Pepsi, calculating "water footprints." It found that water used throughout its supply chain, such as to grow barley and hops, can be 34 times more than its use alone.

With 139 breweries on six continents, the brewer's total water use can range from about 40 liters for a liter of beer in Central Europe to 155 liters in South Africa. Using the smaller ratio as a proxy, SABMiller's entire "water footprint" was roughly 8.4 trillion liters of water last year, more than double what the small nation of Iceland used in 2004.

"In the long term we do see it as a risk," Wales said.

REPUTATION

As they face criticism, multinational drink companies are setting water conservation targets, building community wells and more efficient factories, working with locals on sustainable farming, water harvesting and reforestation and looking for new technologies to reduce their water consumption even as they make more drinks.

"For our type of business, or any that have a very direct link to water ... We've got to play that role," said Greg Koch, Coke's managing director of global water stewardship.

Within their own walls, nonalcoholic drink makers use one out of every 3,300 gallons, or 0.03 percent, of the groundwater used in the United States, according to the American Beverage Association. But its symbolism as a visible user puts the sector at the forefront of the fight over water resources, said Kim Jeffery, chief executive of Nestle Waters North America.

"Picking on our industry is like a gnat on the elephant," said Jeffery, whose 2003 contract to build a bottling plant in McCloud, California has been derailed by opposition from residents and groups concerned about the environmental impact and the threat of water privatization.

Nestle just began a 3-year study of the area's resources, but Jeffery said there is a good chance the project will never happen, due to changing economics and cold feet on both sides.

"At the end of the day, if they don't want us there, we won't be there," he said.

Tom Pirko, president of consulting firm Bevmark LLC, said it is key for companies to act in line with consumers' mindsets on such issues, since it is hard in such a crowded marketplace to regain support once it evaporates.

Coca-Cola learned that the hard way, after a drought in the Indian state of Kerala led to the closure of its bottling plant there amid criticism that it was sucking the water table dry.

Coke said its plant did not fuel the shortages, but an outcry still spread across the globe, with students in Britain and North America urging boycotts. Massachusetts' Smith College even severed a five-decade relationship with the company by refusing to let it bid for its soft drink contract.

"What we lost there was the social license to operate," Koch said. Environmental and community groups are still fighting to kick Coke out of other villages in India.

"When the consumer turns against you, you're dead," Pirko said.

CIA Axes $1000-A-Day Waterboarding Experts

Psychologists Bruce Jessen, left, and Jim Mitchell shaped the CIA's interrogation program of al Qaeda detainees, including Abu Zubaydah. Both refused to speak to ABC News citing confidentiality agreements with the U.S. government.(ABC News)

.....

'Architects' of Enhanced Interrogation Program Among Recent Contractor Purge

Matthew Cole
June 16, 2009 - ABC News

.....

The CIA has reportedly cut its ties to the two psychologists credited for being the architects of the CIA's brutal interrogation program after 9/11, a news report said yesterday. Dr. James Mitchell and Dr. Bruce Jessen, who suggested and supervised waterboarding at secret prisons around the world have been told their services are no longer needed. Mitchell and Jessen, according to their associates, boasted of being paid $1,000 a day by the CIA to oversee the use of the technique on top al Qaeda suspects.

Their firings came during a purge by CIA Director Leon Panetta of all contractors involved in the interrogation program. In early April, Panetta told CIA employees that contractors involved in the interrogation program and secret prisons were being "promptly terminated."

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

.....

Whistling Past the Economic Graveyard: The Audacity of Misplaced Hope

Arianna Huffington
June 15, 2009 - Huffington Post
.....

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?