By DICK MORRIS & EILEEN MCGANN
If only terrorists would be so accommodating as not to change cell phones, the new curbs on the Patriot Act being pushed by Democrats in Congress would not be so dangerous. But, unfortunately, even a book entitled Terrorism for Dummies would tell them to use multiple cell phones to plot their mayhem.
In the aftermath of Oklahoma City, President Clinton asked Congress for authority to order roving wiretaps, targeting the terror suspect rather than one specific phone. If he changed phones, the FBI could tap each new phone he used without getting a separate warrant. Congress unwisely and unaccountably refused. But when President Bush renewed the request, after 9-11, Congress included the authorization in the Patriot Act. But this provision and many other essential investigatory tools is subject to sunset at the end of the year. Unless affirmatively renewed by Congress, they will lapse.
Drug enforcement agents have long used roving wiretaps but anti-terror investigators will not be able to use them if Congress doesn't extend the authority. Our anti-terror investigators will be back to the one phone-one warrant rule.
Former Bush Attorney General Michael B. Mukasey, writing in an op-ed in Friday's Wall Street Journal notes that roving wiretaps "helped thwart a plot earlier this year to blow up synagogues in Riverdale, New York." Yet liberal Democrats are fighting the renewal of the roving wiretap authority as part of a broad offensive against the very Patriot Act provisions which have kept us safe (often by narrow margins) since 9-11.
Other liberal targets include the statute which allows terror investigators to apply for court orders to search business records in national security investigations. The Democrats want to limit this authority to instances in which investigators can prove that their target is an agent of a foreign power. Since terrorists are unlikely to register under FARA (Foreign Agent Registration Act), one wonders how investigators are supposed to be able to prove that they are foreign agents before they can investigate them! Even though investigators can only search the business records if they get the approval of the court, this safeguard does not impress the liberals. Ironically, the IRS can access these very same business records if they are connected with a tax investigation whether or not a foreign agent is involved. But terror investigators will have to face a more daunting hurdle.
Another sunsetting provision under attack is the so-called "lone wolf authority" which allows investigators to launch a probe even if they cannot prove, before they start, that the target is connected to a terrorist group. Again, the liberals would put the horse before the cart and demand proof before an inquiry could begin.
Other liberal targets include limiting the use of National Security Letters - in effect subpoenas - in terror investigations.
The fact is that there has not been a single instance of reported abuse of these investigative powers by counter-terrorist agents. No records have even been turned over the other government agencies like the IRS or the DEA. No leaks have appeared in the media. No citizen's privacy has been compromised by publication of his secrets in the newspapers.
On the other hand, the list of terror attacks that have been prevented by using these authorities is extensive. Most recently, these tools helped stop Najibullah Zazi from loading backpacks with lethal explosives and detonating them on New York City subways.
Will Obama endorse these crippling amendments? Will Democrats like Senators Gillibrand and Schumer who come from endangered states like New York back them?
Heaven help the Democratic Party and President Obama if these debilitating amendments pass or if the authority to use this statute lapses and another terrorist attack takes place! Heaven help the victims too!
I hope you join me in my firm conviction that now is the time to fight back against the out of control Federal Reserve and continued Wall Street plundering of our tax dollars.
The threat isn’t hard to see -- just look all around us. Our constitutional principles and freedoms are being assaulted at every turn. More bailouts, trillion dollar “stimulus” plans, huge new debt burdens for our children, simply printing money to cover our failed policies -- I could go on and on. You and I both know that President Obama is going to keep going and going unless someone puts a stop to the madness.
But the good news is there is a way to fight back. And that fight starts today -- by “Auditing the Fed” and showing the American people just how the Fed has abused its power, debauched the dollar, and helped strangle our economy.
Because I know you are a friend in Liberty, I wanted you to be among the first people contacted by Campaign for Liberty for the vital fight against the out of control Federal Reserve.
Please read the enclosed letter from my friend and Campaign for Liberty’s President, John Tate. John isn’t just a friend of mine. He’s also a patriot with years of experience getting things done in politics. Now he’s agreed to take up the fight in a way I cannot -- by leading the fight for Liberty on the outside, while I do battle in the halls of Congress.
I trust you’ll find this battle to expose the out of control Fed worth your support.
For Liberty,
Congressman Ron Paul
Dear Friend of Liberty,
Trillions of dollars are being stolen from the U.S. taxpayer.
Right now, you and I are seeing the worst plundering of a country’s wealth in the history of civilization, led by an out of control Federal Reserve.
But together you and I CAN put a stop to it all.
With your help (including submitting the petition linked below to your Congressman and Senators) today, Representative Ron Paul, Senator Jim DeMint and Campaign for Liberty are ready to fight back, by taking the battle straight to the heart of the problem – the Federal Reserve itself.
Just think about the scope of the problem for a minute: The massive, outrageous amount of dollars committed to the economic bailouts in recent months totals:
More than the socialist New Deal ... More than the entire Iraq debacle ... More than the 1980’s savings and loan mess ... More than the Korean War ...
When will it all end?
It’s time you and I put a stop to a renegade Federal Reserve by exposing the Fed's out of control actions to the American people. And Congressman Ron Paul and Senator Jim DeMint have a bill before Congress to do just that, known as the "Audit the Fed" Bill (HR 1207 and S 604).
That’s why it’s vital you click here to submit your “Audit the Fed” petition in support of Congressman Paul’s bill.
You see, Audit the Fed already has almost 300 cosponsors!
Now is the time to make sure your Congressman and Senators feel the heat to support the Audit the Fed bill!
If you and I don’t act today, I’m afraid this crisis will end with the economic ruin of every man, woman and child in America.
Today, nearly 13 TRILLION in taxpayer dollars in bailouts and loans has been agreed to by Congress, the Bush and Obama Treasury Departments, and the out of control Fed.
So is it really any wonder more and more folks are starting to realize the Washington, D.C. establishment is hurtling us toward complete economic disaster?
Whether it’s watching a phony “stimulus” package get rammed into law or watching Congress pass a $700 BILLION bank “bailout” under threat of martial law, the American people are agitated and increasingly angry.
That means it’s a perfect time to unleash the pressure of MILLIONS of outraged Americans on the out of control Fed!
So please click here to sign the petition linked below urging your Congressman and Senators to cosponsor and seek roll call votes to pass the Audit the Fed Bill!
As I know you’re aware, the Federal Reserve is shrouded in secrecy. Their meetings are off-limits to the public. Their inner workings are off-limits to the public.
And just recently, the Federal Reserve told Congress “NO WAY” when asked to account for $2 TRILLION in taxpayer-backed loans!
Well, why do you think they refused?
They know coming clean with Congress and the American people on how they doled out that two TRILLION dollars would result in an anti-Fed firestorm.
So can you imagine the impact of a full-scale audit? You and I will finally be able to show the American people that the Federal Reserve System leads to:
*** Constant economic crises -- the housing crisis and the resulting chaos is just one example of an economic bubble created by centrally-planned interest rates and money manipulation;
*** The destruction of the middle class -- as fuel, food, housing, medical care and education costs soar, everyone who is NOT on the government dole is forced to make do with less as the value of their money slowly decreases;
*** Currency destruction -- history shows us that riots, violence and full-scale police states can result when people finally realize our money isn’t worth the paper it’s printed on and REFUSE to accept it.
And unless you and I do end the madness in Washington, D.C., we may be closer than we’d like to think to learning that history lesson firsthand -- right here in our own streets.
That’s why your commitment to helping pass the Audit the Fed Bill –- and helping Campaign for Liberty fight this battle -- is so vital.
Just a few months ago, there was no chance of passing any legislation like the Audit the Fed Bill. So I guess there has been one “CHANGE.”
You see, with the piling up of trillions of dollars in out of control “bailouts” of Wall Street and international bankers, even many politicians in Washington want to show you they’re “being responsible.”
What better way for Congress to do this than by auditing the Federal Reserve to account for the trillions stolen from the U.S. taxpayers?
More and more Congressmen are already feeling the pressure and are signing up to support this bill. I’ve even received word this bill could move in the next few weeks in the U.S. House.
When that happens, you and I must be ready to fight.
And, it’s both a bill we CAN pass, and one that is vital to exposing the massive corruption and dollar manipulation at the Federal Reserve.
You see, after regulating, taxing, spending, borrowing and printing us into what looks like the worst recession in decades, establishment politicians and power brokers are assuring us they’re working hard to “fix” our economic woes. What is their solution? You guessed it. More of the same!
And even if the Audit the Fed Bill is defeated this time, just forcing a vote is a win/win situation.
Can you imagine how many politicians will pay the price at the ballot box in 2010 when you and I tell the American people their Congressman somehow lost trillions of taxpayer dollars and refused to even LOOK for it?
Now we just need to show Congress the American people demand action on the Audit the Fed Bill. Here’s how we plan to do that.
First, we’re already busy contacting up to five million activists nationwide through mail, phones and email to generate petitions to the U.S. Congress demanding action on Ron Paul's Audit the Fed Bill.
But that’s just the beginning. We’ll work the talk radio stations and grant local media interviews to ratchet up the pressure even further on Congress.
And a few days before the vote, if we have the resources, we’d also like to run hard-hitting targeted radio, TV and newspaper ads.
This entire program is designed to send this one, CLEAR message to Congress: Any politician who votes against the Federal Reserve Audit should look for another job.
But such a massive effort won’t be easy -- or cheap.
So in addition to submitting your petition, I also hope you’ll agree to make a contribution of $1000, $500, $250, or $100 to Campaign for Liberty.
If $100 is too much to ask right now, please make a contribution of $50 or even $25 today. Every dollar will help, and every dollar will go to this vital fight.
I know times are hard, but if we don’t take action, the America we see in just a few years could look far worse than even the one we see today.
Can I count on you to join the fight to AUDIT THE FED by clicking here to sign the petition, and by making a generous contribution of $1000, $500, $250, $100, $50 -- or whatever you can afford -- to Ron Paul’s Campaign for Liberty?
Sincerely,
John F. Tate
President
P.S. Please submit the petition urging your Congressman and Senators to cosponsor and seek roll call votes on Rep. Ron Paul's Audit the Fed Bill TODAY!
With Congress spending like never before, and TRILLIONS of new dollars being created out of thin air, it’s never been more important the Federal Reserve’s abuses are exposed to the American people once and for all. And, along with submitting your petition, please make a contribution of $1000, $500, $250, $100, or $50 to Campaign for Liberty TODAY!
Schumpeter
Thriving on adversity
Some companies are finding opportunities in the recession
JUST after Barack Obama was elected president, his incoming chief of staff, Rahm Emanuel, told a conference of American captains of industry, “You never want a serious crisis to go to waste.” Here’s hoping his audience was paying attention, because recessions—particularly gut-wrenching slumps like this one—provide as many opportunities for business people as they do for politicians. Although they are often called “slowdowns”, recessions shake things up rather than slowing them down. They reward strengths and expose weaknesses, create new opportunities and kill old habits, release pent-up energy and destroy old business models. Distressed assets can be bought for a song, talented people hired cheaply and new ideas given an airing.
The most striking example of this was the Depression. Most people think of the 1930s as an economic desert littered with foreclosure signs and unemployment queues. But for the canny few it was a huge opportunity. DuPont invested heavily in research and development (R&D) and hired unemployed scientists. By the late 1930s 40% of its sales were from products that were less than a decade old—including world-changing inventions such as nylon and synthetic rubber. Procter & Gamble (P&G) invested so heavily in radio advertising that it created a new artistic form, the soap opera. The list of companies which took off during the Depression includes Revlon, Hewlett-Packard (now HP), Polaroid and Pepperidge Farms, the last of which was founded by a society lady whose husband was a victim of the Wall Street crash.
More recent recessions have produced a similar pattern of creative destruction. Two studies by management consultants show that they dramatically rearranged the pecking order of companies in many fields. Bain & Company discovered that twice as many firms made the leap from “laggards” to “leaders” (ie, from the bottom quartile of companies in their industry to the top quartile) during the recession of 1991-92 than during non-recessionary times. McKinsey discovered that one-third of banks and two-fifths of big American industrial companies dropped out of the first quartile of their industries in the recession of 2001-02. These shake-ups can have long-lasting consequences: more than 70% of the companies that made big strides during the previous recession in the Bain study preserved their gains during the subsequent boom, whereas fewer than 30% of the companies that lost ground were able to make it up.
What about the current recession? A great deal is still up in the air, of course. But it is possible to get some idea of the sorts of companies that are doing well and the kinds of strategies they are pursuing. The most obvious winners are established giants: market leaders that entered the recession with cash in their pockets and sound management systems under their belts. These companies are reaping rewards from investors who are skittish about shakier rivals. They are also using their corporate muscle to squeeze their costs (for example, by negotiating cheap rates for advertising) and so win market share from their competitors. BCG, another consultancy, notes that 58% of companies that were among the top three in their industry had rising profits in 2008 and only 30% saw their profits decline. In contrast, only 21% of companies outside the top three had rising profits, and 61% had falling profits.
McDonald’s is simultaneously sharpening its appeal to its core customers, even introducing computer systems that allow its outlets to adjust their prices to local economic circumstances, and moving upmarket with lattes and salads. Asda, a British supermarket chain, is building 14 new stores and hiring 7,000 new workers. PepsiCo has taken direct control of two of its biggest bottling companies, at a cost of $6 billion. Many big companies are also taking advantage of bargain-basement prices to make acquisitions. That is wise: a BCG study of mergers and acquisitions in America in 1985-2001 found that deals done during a recession generated about 15% more return to shareholders than those that took place during a boom.
Spend it to make it
A second group of winners is made up of companies with a record of innovation. Despite seeing its revenues fall by 23% in the last quarter of 2008 compared with the last quarter of 2007, Intel is continuing to invest heavily in innovation. Craig Barrett, the company’s former boss, insists, “You can’t save your way out of a recession; you have to invest your way out.” P&G is launching its biggest expansion in its 170 years, opening 19 new factories around the world and investing heavily in new ideas, despite disappointing recent results. IBM is holding a series of “innovation jams” designed to squeeze ideas out of its employees.
A third group consists of companies which are using the recession to reposition themselves. Cisco is speeding up its transformation from a backroom network plumber into a much more versatile internet giant, using its cash reserves to snap up start-ups in new fields and expand its business portfolio. Repositioning is a strategy that has paid off dramatically in the past. When the Soviet Union collapsed, plunging Finland into economic turmoil, Nokia’s response was to abandon 90% of its businesses to concentrate on telecoms, particularly mobile phones.
There is also every reason to believe that the current recession will produce lots of upstarts. The Kauffman Foundation, which studies entrepreneurship, points out that about half of Fortune 500 and Inc. 500 companies (lists of the biggest and fastest-growing firms in America, respectively), including such household names as FedEx, CNN and Microsoft, were founded during recessions or bear markets. A disproportionate number of these upstarts produced industry-changing ideas that established companies failed to appreciate until it was too late. Indeed, business is more likely to take advantage of this “serious crisis” than the world’s politicians.
Greece's election
An emphatic win
George Papandreou’s Pasok is victorious in Greece’s election
IN THE run up to the general election in Greece opinion polls showed that the Panhellenic Socialist Movement (Pasok) was poised for a comeback amid growing popular discontent over the faltering economy. Yet the scale of its landslide victory after the poll on Sunday October 4th has surprised seasoned political observers and delighted its supporters.
George Papandreou, Pasok’s leader, had worried that left-wing voters backing small parties would undermine his chances of winning an absolute majority. Greece’s system of proportional representation could have caused him problems too. But 43.9% of voters backing the party, giving it 160 seats in the 300-member parliament, which means Pasok has a clear run at reform.
Mr Papandreou is the third member of a Greek political dynasty to hold the prime minister’s job. His late father, Andreas, founded Pasok, and his grandfather (also called George) held office briefly during the 1960s. The latest Mr Papandreou to become prime minister is a moderate socialist who has worked to shift the party towards the centre, in spite of opposition from hardline nationalists. His electoral triumph, the biggest since Pasok first came to power in 1981, goes against the grain of a recent decline in support for social democratic parties across Europe.
The centre-right New Democracy party took 33.5% and 91 seats—its worst-ever showing at the polls. Costas Karamanlis, the prime minister who called the snap election to fend off party infighting and bolster a wafer-thin parliamentary majority, immediately resigned as its leader. Greece’s Communists, supported mostly by elderly voters, took 7.5% and 21 seats, leaving Syriza, a splinter group backed by disaffected young left-wingers, with 4.6% and 13 seats. Laos, a far-right party that takes a tough line on immigration, increased its share of the vote to 5.6% and won 15 seats by pulling in votes from disaffected conservatives. The Greens, with 2.5%, failed to cross the 3% threshold to win seats in parliament.
Mr Papandreou lived in Sweden as a teenager—his father took refuge in Stockholm after his exile by the country’s military junta—and studied in America and Britain. This has given him a more international outlook than most Greek politicians. Indeed his main achievement in his previous role as Greece’s foreign minister was to launch a decade-long rapprochement with Turkey, Greece’s old enemy and rival for control of the Aegean Sea. His foreign-policy skills will soon get another test over Macedonia and Cyprus.
Under the conservatives Greece infuriated America by vetoing Macedonia's entry to NATO until it agrees to change what it is called. The name of the impoverished northern neighbour is regarded as implying a territorial challenge to the Greek province of the same name. Pasok was swift to announce that President Barack Obama was the first foreign leader to congratulate Mr Papandreou on his election. Mr Papandreou, a keen supporter of Balkan solidarity, will face pressure from America to resolve the 20-year-old dispute within months if his relations with Mr Obama are to remain as friendly.
Cyprus poses another challenge. Talks on reunifying the island are meandering, one of many matters complicating Turkey’s aspirations to join the European Union. Mr Papandreou, a strong supporter of a federal Cyprus, may at least get talks moving more swiftly.
Yet the most urgent and difficult task facing Mr Papandreou is fixing Greece’s economy. The country he is set to lead is sinking into recession just as economies elsewhere in the euro area are starting to pick up. Tourists have stayed away this season and the earnings of Greece’s shipping industry have been hit by the global downturn. Greece’s budget deficit could reach double figures this year. Public debt exceeds 100% of GDP, only Italy is in a worse state in the euro area.
Mr Papandreou has promised stimulus of up to €3 billion ($4.4 billion) to accelerate recovery. As part of the package he is likely to keep a campaign promise of above-inflation increases in wages and benefits for public-sector workers. Mr Papandreou claims that he will find the funds by cracking down on tax evaders (as most incoming governments promise) and increasing the tax burden on the rich. Unless he can improve Greece’s economy soon he could well face the social unrest that blighted the latter part of his predecessor’s term in office.
Divide and Conquer
Obama must split Caracas from Cuba.
By Jorge Castañeda
There is little question that in the field of foreign policy, Latin America is far from being a priority for the Obama administration. Iran, Afghanistan, and Pakistan are more pressing. The problem is that the situation in Latin America is getting complicated, and it is intersecting with crises in other parts of the world that are far more important right now for the United States. Two key issues, which by themselves could be minor, are demanding Washington's attention because they are part of a broader picture that includes Latin America but is not restricted to the region.
The first issue is the Honduran mess—there is no other term for it. The coup that toppled Manuel Zelaya in June was a coup, and wasn't. He was the president, and he was dumped on a plane and shipped off to Costa Rica by the military. But no one was jailed, the powers that be in the country supported his ouster, the scheduled elections have not been canceled, and his overthrow took place because he was seeking to remain in power indefinitely, though legally. Once that occurred, his friends—Hugo Chávez in Venezuela, Daniel Ortega in Nicaragua, the FMLN in El Salvador, Evo Morales in Bolivia, Rafael Correa in Ecuador, and, chiefly, the Castro brothers in Cuba—made his restoration a matter of life and death in Latin America.
The hemisphere's democracies saw no alternative but to align themselves with the rest in opposing the coup. Rightly so, in part: military removals of elected presidents must be opposed. But Obama misstepped. Instead of seeking to stake out a different position from his strange bedfellows, he persisted in aligning the U.S. with them, in full consultation with Brazil and Mexico, even as the Cuban intelligence services—by all accounts, with the help of the Venezuelans and the Nicaraguans, and the complicity of the FMLN in El Salvador—orchestrated Zelaya's clandestine reentry into Honduras and his asylum at the Brazilian Embassy. Now Washington and Brazil, its chief ally in Latin America, are confronted with a hot pupusa, as the Salvadorans would say: the Americans cannot restore him to office by force or sanctions, and the Brazilians cannot expel Zelaya from their embassy, where he has established his headquarters.
The second and far broader issue at stake is what Obama intends to do about a Latin American left that is more substantively divided, but more rhetorically united, than ever. This is a left where the hardline faction, and parts of the more moderate camp, are acquiring international commitments that are problematic at best and dangerous at worst. Chávez's bark is far worse than his bite, but the latter is not bad, either. He has purchased enormous amounts of weapons from the Russians, made huge trade deals with the Chinese, and is almost certainly triangulating financial and commercial deals with Iran, helping it get around U.N. Security Council sanctions.
What should Washington do? Across-the-board confrontation will lead nowhere, and "engagement" with Chávez will produce the same results as with Iran's Mahmoud Ahmadinejad: none whatsoever. Just being nice is fine, especially since the U.S. has not been so for decades—but atonement, as justified as it is in the Latin American case, is not a foreign policy.
Perhaps Obama should pursue a two-track approach, which could actually work. First, he might truly radicalize U.S. policy toward Cuba: lift the embargo unilaterally, allow travel by all Americans, normalize diplomatic relations, and settle claims generously. He might also really crack down on Chávez and friends by demanding an end to the arms race, to Venezuelan support for opposition groups throughout the hemisphere, and to human-rights violations and infringement of individual freedoms in Venezuela, as well as calling for a clear break between Chávez and Iran.
Havana and Chávez are closely aligned; Zelaya would never have made it to the Brazilian Embassy in the Honduran capital without Cuban logistical aid, and Chávez himself would probably not survive politically or otherwise without the island's security apparatus that permanently surrounds him. But an end to the embargo could begin to split apart Havana and Caracas, and it is probably the only intelligent policy Washington has available to it. The worst that could happen is that it doesn't work. Is anything else working?
Castañeda is a former foreign minister of Mexico, Global Distinguished Professor at New York University, and a fellow at the New America Foundation.
Money in War-Ravaged Iraq
There has been much ado concerning the Federal Reserve's doubling of the monetary base this past year. Many believe a currency crisis or hyperinflation of the dollar is imminent. Some go as far as to say that this crisis will destroy America.
While I concede that a currency crisis would certainly mean a much lower quality of life for most Americans in the short term, I also have great faith in the individual's ability to take action in uncertain times. Free men operating in a free market do find solutions to even the largest crises.
In 2007 I did a seven-month deployment to Iraq. I was posted in multiple farming and fishing villages in al Anbar province. However, I do not wish to discuss the war or national defense. I want to concentrate on what, in my estimation, was a much more important issue to the people in the villages: money.
These villages were rebuilding from the horrors of the war. A great amount of wealth had been destroyed, not bank accounts, mind you, but real wealth: houses, cars, trucks, fishing boats, and farmland.
In the villages, houses and boats needed to be repaired or rebuilt, roads needed attention, and parents wanted to get their children back in school. In order to do all these wonderful things, a medium of exchange was needed. Unfortunately, or fortunately, depending onhow you look at it, the villagers did not put much faith in the paper money printed by the government in Baghdad.
As this was an agrarian society the villagers turned to a time-tested medium of exchange: livestock. In the villages all households had some sheep, and the more affluent houses had very large herds. Goods were exchanged, debts repaid, and business contracts agreed upon all using sheep as money.
The al Anbar Province is a desert environment and good farmland is only available 500 to 1000 meters off the Euphrates River. The villages where I served are located in the palm groves of the Euphrates River just south of the Haditha Dam.
The river water, while great for crops and livestock, was not ideal for human consumption, and therefore clean drinking water became a very valuable commodity. The bottled water brought in from the larger cities was one of the most sought-after commodities in the village, and I soon noticed villagers pricing items in not only sheep, but bottles of drinking water as well.
Then there was the standard wartime medium of exchange: cigarettes. The villagers smoked cigarettes every evening with chai tea. They were bought in the cities and brought back by the truck load. As a result they were not as valuable as sheep or bottled water; however they served as small change for the villagers.
These three moneys all circulated in the villages free of any government mandate or oversight. The exchange rate also fluctuated free of mandate. Sheep were the most stable commodity as they were held and bred in the villages.
Bottled water and cigarettes were transported in from the cities. This transport was subject to logistical difficulties, and therefore their value fluctuated. Farmers and fisherman also drank much more water in the summer months, which had a great effect on its value. As individuals built up more savings in the form of bottled water and cigarettes, the values of these currencies became more stable but were still subject to greater fluctuations than were sheep.
With these three free market currencies, I watched village markets grow, farmers increase productivity, fisherman save capital in order to improve or build new boats, and young couples commission houses to be built with borrowed money. All this progress was made possible through the real savings of valuable commodities.
So, for those who are deeply worried about a currency crisis in the United States, I bear a positive message. When a currency fails, as long as there is no outside coercion implemented, individuals will act and find sound money in what is around them. Gold and silver will certainly be prime candidates, but even in small towns with limited access to these precious metals, there is an infinite supply of sound money available.
Depending on the situation and location of the community, a form of sound money might spring from anywhere.
Howard Buffett: A Man of the Old Right
Wearing a pair of round eyeglasses, and with his hair slicked and combed to one side, the thirty-nine-year-old securities trader from Omaha, Nebraska, searched for something to say. Reporters pressed him for a reaction.
His name was Howard Buffett,[1] and he had just unseated Democrat Representative Charles McLaughlin in the 1942 elections. The young man's surprise was evident. After digging into his pockets for a pencil and paper, he finally admitted that "all I fixed up was [a statement] conceding my defeat."[2]
Two years later, he would again cruise to victory on the back of Nebraska's vehement anti–New Deal opinion.[3] Overall, Buffett served four terms in the US House of Representatives, fighting for a return to sound money and against federal interference in the economy and overseas. He is perhaps the best example of an Old Right politician and he deserves the attention of modern libertarians.
Upon arriving in Washington, DC, Buffett was appointed to serve on the House Banking and Currency Committee. It was not long before he took issue with one wartime creation in particular: the Office of Price Administration (OPA). Its job was to impose price controls to stabilize retail consumer prices. By 1946 the war was won but the office remained in operation. Buffett demanded hearings to look into its elimination.
He argued that the OPA had created a "spreading condition of industrial and social chaos." In particular, Buffett noted that the government's price fixing had contributed to
the lumber shortage and the dismantling of mills, accentuating the housing shortage; a steady decline in butter production and its virtual disappearance from normal distribution centers; general disappearance of soybean, corn and other grains from normal trading channels.[4]
That the OPA brought about shortages in the market is unsurprising and in direct agreement with economic theory:[5] Fixing a maximum price allows buyers to purchase a particular good or service for less than what it would sell for in the free market — otherwise there would be no need to put a ceiling on the price.
First, this increases demand for the good or service in question. With the same wealth and income, the buyer sees the lower price and decides that he can afford to increase consumption. While a lucky few will attain the good or service for less than they would have paid, the overall effect is for demand to outstrip supply. Fix the price ceiling low enough and no matter how abundant the good or service might be, excessive demand will create a shortage.
Second, price controls also impact supply as marginal, less-efficient companies are unable to earn a sufficient profit. They cut back on production or go out of business entirely. Economist George Reisman added that the "same price control that drives [the less efficient companies] out of business restricts the profits of the more efficient producers and deprives them of the incentive and also the capital required for expansion." The tendency, then, is for even the best companies to go broke.[6]
Buffett saw the elimination of the small-time producer as a direct result of the OPA's policies. The Chicago Tribune reported Buffett's charge: "Several congressmen during the debate on the extension of the life of OPA mentioned the fact that during three years [1941–1943] of rationing and price regulation 507,100 small businesses became extinct."[7]
An additional concern of those opposed to price controls was the power they gave to central governments over the economic lives of citizens. Once the price system no longer balanced supply and demand, some other mechanism had to decide who got what. Huge lines were one such mechanism: those with the time to wait end up "outbidding" others for the good or service. The other mechanism was cronyism. The well connected avoided the lines and took advantage of political control of the economy to get at supplies first.
Buffett continued to assail the notion of price fixing. Although the OPA was abolished in 1947, it reappeared under the name Office of Price Stabilization during the Korean War. The conflict was different but the economic fallacy remained the same.
Government price controls not only distorted the incentives of entrepreneurs and consumers, but failed to achieve their supposed goal: ending inflation. Interviewed by the New York Times in 1952, Buffett reminded readers that price fixing "is a fake remedy for inflation and makes inflation worse by concealing and postponing its effects. It will ultimately destroy the free market that is the base on which American freedom rests."[8]
Economic common sense, however, was not much appreciated in Washington, DC. In 1948 Drew Pearson of the Washington Post placed Howard Buffett on the "Don't Re-elect" list, calling him "a jack-of-all issues, a run-at-the-mouth politician and bedrock reactionary."[9] It would be hard to find a politician who does not "run-at-the mouth," but it seems clear Buffett had managed to ruffle a few feathers in the press.
Buffett, however, would make his mark in the Old Right talking about what he new best: money. In May 1948, the Commercial and Financial Chronicle ran an article Buffett wrote, entitled "Human Freedom Rests on Gold Redeemable Money." It is among the most cogent and concise arguments against fiat money available.
Buffett began by acknowledging that readers might think it odd to connect freedom, seemingly a political idea, with the economic idea of a gold standard. He noted, however, that "one of the first moves by Lenin, Mussolini and Hitler was to outlaw individual ownership of gold." Americans at the time no doubt quickly connected this to Roosevelt's 1933 decision to suspend private ownership of gold.
The ability to redeem paper currency into gold money, Buffett argued, gave individuals the freedom to move around the world because gold had an accepted value anywhere.[10] By going off the gold standard, a government deprived its citizens of that freedom and prevented them "from laying away purchasing power for the future. [The citizen] becomes dependent upon the goodwill of the politicians for his daily bread."
But more than an exit strategy or protector of independence, Buffett felt the gold standard provided Americans with the only effective check on budgetary excess. As long as the federal government could print as much money as it liked, no politician on earth could resist the temptation to spend.
Buffett compared politics to business. Just as any businessman would throw someone out of his office for suggesting he manufacture a product that could only be sold at a loss, so politicians resist any idea that will lose them votes. With an early appreciation for public-choice theory, Buffett wrote that
Congress is constantly besieged by minority groups seeking benefits from the public treasury. Often these groups control enough votes in many Congressional districts to change the outcome of elections. And so Congressmen find it difficult to persuade themselves not to give in to pressure groups.
Although attentive to the threat of rule by the well-organized minority, Buffett also understood the problem was more systemic. It was not enough to send the right people, people with "intestinal fortitude," to Congress to stop the spending. Fiat money meant that any person, however principled, simply lacked the necessary tools to curb budgetary growth. Buffett explained:
With a restoration of the gold standard, Congress would have to again resist handouts. That would work this way. If Congress seemed receptive to reckless spending schemes, depositors' demands over the country for gold would soon become serious. That alarm in turn would quickly be reflected in the halls of Congress. The legislators would learn from the banks back home and from the Treasury official that confidence in the Treasury was endangered.
Under a gold standard, "printing-press-paper money" can be turned into the bank in exchange for a specified amount of gold. In theory, that specified amount of gold constricts the government's capacity to print more paper money without a corresponding increase in gold. Many times, however, the government cannot resist the temptation to spend and bets, in essence, that no one will notice there are more paper dollars circulating than gold in the vaults — that is, no one will notice the inflation.
What Buffett recognized is that once people suspect inflation, they can go to the bank and start exchanging paper for gold. As gold flows out and paper piles up inside the banks, the politicians will have to stop their profligate ways.
While citizens could make a run on the central bank to enforce greater monetary responsibility, foreign governments tended to be the ones to do the job. Economist Murray Rothbard explained that
a country's Central Bank would generate bank credit expansion; prices would rise; and as the new money spread from domestic to foreign clientele, foreigners would more and more try to redeem the currency in gold. Finally, the Central Bank would have to call a halt and enforce a credit contraction in order to save the monetary standard.[11]
In sum, the gold standard "acted as a silent watchdog to prevent unlimited public spending."[12]
By controlling government's ability to expand the money and credit supply, the gold standard kept the inflation tax under wraps. In an address to constituents, Buffett said:
Remember the bank closings up to 1933? And all the money people lost in busted banks? For years those losses — a real tragedy — were favorite campaign oratory of New Dealers. Large as those losses were, they were peanuts compared with the losses now being forced on United States savings bond holders. During 1950 alone United States savings bonds lost $3,600 million in purchasing power. By contrast, all losses by bank depositors from 1921 through 1933 totaled $1,900 million.[13]
While there is no such thing as perfectly stable purchasing power in a dynamic, changing world, the gold standard removed control of it from the political arena. The loss Buffett referred to resulted from government printing notes and issuing credit. The greater amount of money and credit in circulation, the less each individual unit of money or credit can purchase.
The first users of the newly created financial resources benefitted at the expense of later users because they were able to purchase goods and services before their prices increased. In this way, inflation worked as a tax on those further removed from government spending.
Buffett rescued William Graham Sumner's phrase "the Forgotten Man" to describe those suffering from the inflation tax: "far away from Congress," he wrote, "is the real forgotten man, the taxpayer who foots the bill. He is in a different spot from the tax-eater or the business that makes millions from spending schemes." ]
Buffett made a point of referring to the "real forgotten man," because during the 1930s Franklin D. Roosevelt had stolen Sumner's idea and twisted its meaning. Instead of the taxpayer, Roosevelt used "the forgotten man" to mean the poor and unemployed. Suddenly, rather than condemning government taking the forgotten man's meager resources to finance lavish public-spending programs, Roosevelt's forgotten man justified that taking to support the downtrodden.[14]
The only way the forgotten man could protect his earnings from profligate politicians was to exchange his paper money for gold. That Roosevelt eliminated the individual's "right to protect himself" from inflation seemed to Buffett to endanger the very foundation of the country:
But, unless you are willing to surrender your children and your country to galloping inflation, war and slavery, then this cause demands your support. For if human liberty is to survive in America, we must win the battle to restore honest money. There is no more important challenge facing us than … the restoration of your freedom to secure gold in exchange for the fruits of your labors.[15]
His concern over the government's ambition to plan the economy and strip individuals' right to impose sound fiscal and monetary practices on politicians extended to the realm of foreign affairs. Buffett railed against the state's efforts to scare the citizen into submission. Recalling Mencken's warning that "the whole aim of practical politics is to keep the populace alarmed," Buffett denounced the banging of "war drums" in 1948 during the coup in Czechoslovakia.
In a letter to constituents, he maintained that "the Administration wanted to put through a draft law for compulsory military servitude. They wanted the people frightened — so that Congress could be bludgeoned into ending freedom for our young men. The scare worked."[16]
Roosevelt had signed the first peacetime conscription bill into law in 1940, establishing the Selective Service System.[17] Congress allowed it to expire in 1947, but soon found there were not enough volunteer soldiers to meet the Defense Department's needs. In response, Congress passed the 1948 draft act, to which Buffett objected.
These young men would soon be fighting and dying in Korea and Vietnam. However, in an off-the-record meeting in the spring of 1948, Admiral Hillenkoetter, Chief of the Central Intelligence Agency, had told Buffett that "signs of offensive war by Russia in the foreseeable future were completely lacking." And in public hearings in April of that same year, Senator Stuart Symington said of the selective service bill, "I have not read it very carefully … we are primarily interested in selective service because the army wants it."[18]
The Wall Street Journal criticized Buffett's letter for handing "the Russians as neat a propaganda weapon as they could contrive." The paper went on to admit that while the fears were indeed exaggerated, that fact should not diminish in anyone's eyes the real danger posed by Soviet expansionism. In particular, the Journal chastised Buffett for his "extremism"[19] and explained that his words "can only serve to weaken support for necessary defense. It just gives the Communists new ammunition to convince other peoples that the warmongers are in Wall Street."[20]
Four months later, Buffett was again trying to block America's "march into militarism." He spoke on the House floor against the Truman administration's plan for universal military training.
The Chicago Tribune noted that by committing itself to various mutual defense pacts, stationing six divisions in Europe, having 3.5 million men under arms, sending 200,000 soldiers to the Korean peninsula and requesting the largest defense budget in history (some $52 billion — $353.2 billion in 2008 dollars),[21] the United States was much further along the road to war than in 1941. It also warned that "when the leaders of a nation forge a mighty instrument for war, they do not let it rust out of idleness." [22] This was exactly Buffett's worry.
In November of 1951, Buffett decided not to seek reelection.[23] He returned to work at his investment firm in Omaha until his death in 1964. In his free time, Buffett still pushed for those policy issues dear to his heart. Two years after leaving the House of Representatives, Buffett joined the nonprofit organization For America, which promoted peace and national defense, opposed "all forms of totalitarianism," and hoped to "preserve solvency, sovereignty, freedom and independence of the United States."[24]
Former Sears Roebuck & Co. chairman Gen. Robert E. Wood and Notre Dame University law professor Clarence E. Manion were the founders of For America. Other members included Chicago Tribune editor Roger McCormick, a vehement anti–New Dealer, and Frank Chodorov, publisher of the monthly broadsheet Analysis and author of what would become a classic libertarian text, The Income Tax: Root of All Evil, released in 1952.[25] What is most interesting about For America is that, ten years later, Clarence Manion became the driving force persuading Barry Goldwater to run for president; and Goldwater then relied on Robert Wood for help.
Overall, in his staunch defense of economic liberty, the gold standard, and noninterventionism, Howard Buffett was an exemplary member of the Old Right.
The Whole Foods founder talks about his Journal health-care op-ed that spawned a boycott, how he deals with unions, and why he thinks CEOs are overpaid.
By STEPHEN MOORE
"I honestly don't know why the article became such a lightning rod," says John Mackey, CEO and founder of Whole Foods Market Inc., as he tries to explain the firestorm caused by his August op-ed on these pages opposing government-run health care. "I think a lot of people who got angry haven't read what I actually wrote. There was a lot of emotional reaction—fear and anger. I just wanted to get people to think about whether there was a better way to reform the system."
Mr. Mackey has flown into Washington, D.C., for a board meeting of the Global Animal Partnership, a group that advocates for the humane treatment of animals. There was no private jet: He arrived on Southwest Airlines from Austin, Texas, and he bought the "Wanna Getaway" bottom basement fare. "I barely got the last aisle seat," he says. While in town he stays in the bedroom of his regional president, who lives in Maryland.
For the 12th straight year, Mr. Mackey's company has been praised as one of the "100 Best Companies to Work For" by Fortune Magazine. Whole Foods sells healthy food, practices "socially responsible trade," and prides itself on promoting foods that are grown to support "biodiversity and healthy soils." Mr. Mackey donates 5% of company profits to charity and has been one of America's loudest critics of runaway compensation on Wall Street. And he pays himself $1 a year. He would seem to be a model corporate citizen.
Yet his now famous op-ed incited a boycott of Whole Foods by some of his left-wing customers. His piece advised that "the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us closer to a complete government takeover of our health-care system." Free-market groups retaliated with a "buy-cott," encouraging people to purchase more groceries at Whole Foods.
Why did he write the piece in the first place?
"President Obama called for constructive suggestions for health-care reform," he explains. "I took him at his word." Mr. Mackey continues: "It just seems to me there are some fundamental reforms that we've adopted at Whole Foods that would make health care much more affordable for the uninsured."
What Mr. Mackey is proposing is more or less what he has already implemented at his company—a plan that would allow more health savings accounts (HSAs), more low-premium, high-deductible plans, more incentives for wellness, and medical malpractice reform. None of these initiatives are in any of the Democratic bills winding their way through Congress. In fact, the Democrats want to kill HSAs and high-deductible plans and mandate coverage options that would inflate health insurance costs.
The Whole Foods health-care story has been largely ignored by proponents of a government-run system. But it could be a template for those in Washington who want to drive down costs and insure the uninsured.
Mr. Mackey says that combining "our high deductible plan (patients pay for the first $2,500 of medical expenses) with personal wellness accounts or health savings accounts works extremely well for us." He estimates the plan's premiums plus other costs at $2,100 per employee, and about $7,000 for a family. This is about half what other companies typically pay. "And," he is quick to add, "we do cover pre-existing conditions after one year of service."
Whole Foods also puts several hundred dollars into a health savings account for each worker.This money can be used to cover routine medical expenses, like drug purchases or antismoking programs. If that money is not used in a year, the workers can save the money to pay for expenses in later years.
This type of plan does not excite proponents of a single-payer system, who think that individuals can't make wise health-care choices, and that this type of system is "antiwellness" because it discourages spending on preventive care.
Mr. Mackey scoffs at that idea: "The assumption behind that is that people don't care about their own health, and that somebody else has to—a nanny or somebody—has to take care of me because people are too stupid to make these decisions themselves. That's not been our experience. We find our team members [employees], not surprisingly, seem to care a whole lot about their health."
Not surprisingly, Mr. Mackey is a fanatic about healthy eating. "A healthy diet is a solution to many of our health-care problems. It's the most important solution. How much sugar do you think Americans consume?" he asks. I shrug and he rattles off the statistics: "Every man, woman and child consumes, on average, 43 teaspoons of sugar a day. In 13 days that adds up to a five-pound bag of sugar."
"We can spend all the money we want on bypass surgeries, chemotherapy and diabetes, but . . . two-thirds [of Americans] are overweight, one-third are obese." He's on a roll: "And it's not that they have to shop at a Whole Foods Market. But people need to eat whole food plant foods, primarily . . . whole grains, fruits, vegetables, nuts and seeds. That diet supports our lives. We ought to live to be 90 or 100 without getting any diseases."
Healthy eating, curbing the obesity epidemic—it's hard to find much of anything Mr. Mackey says that's controversial. But the health-care reform lobby continues to attack Whole Foods as if he were an apostate.
In response to the hullabaloo, Mr. Mackey has been understandably defensive. In early September, he wrote about the op-ed on his blog: "I gave my personal opinions. Whole Foods has no official position on the issue." So I ask him, does he regret writing the article? "I regret the controversy that it caused for Whole Foods, but I don't regret writing it, because I think what I said is true and it needed to be said. I wasn't seeing anyone else saying it."
Then he adds, half-jokingly: "I've written one op-ed piece in 31 years. It might be 31 more before I write another one."
I ask if he thinks the attacks were instigated by unions. While many other grocery chains are unionized, Whole Foods is not. "Well, the unions have had an adversarial relationship with us," he replies. "I don't think all the protests are strictly union-based, but I do think the unions have contributed to that. I think they've piled on and in some cases are orchestrating some of it." He says he can't divulge private information about whether the boycott hurt sales, but the stock hasn't taken any hit.
"I sometimes think that unions don't understand that we live in a free society and people have the right to not select union representation if they don't want it. I oftentimes hear things like 'Whole Foods is preventing people from unionizing,' which is a lie. That's illegal. We can't prevent anyone from unionizing," Mr. Mackey says.
So why aren't they choosing it? "Because it's not in their best interest," he insists. "We have better benefits and higher pay" than Whole Foods' unionized competitors. "We wish the unions would respect people's right to not have a union." Do they keep agitating? "Yeah, they do."
John Mackey is unlike any other Fortune 500 CEO I have met. He's got ruffled, curly hair, is thin and amazingly fit. He recently completed a three-week hike on the Appalachian Trail. He dresses casually, and his demeanor is almost always laid back. But his close friends say, don't let that fool you. Mr. Mackey is fiercely competitive and hates to lose—two traits that help a lot in business.
His odyssey from a long-haired counterculture anticapitalist in the early 1970s to running a company that now has $8 billion in sales and 280 stores—is a remarkable tale in itself. He attended the University of Texas where he studied philosophy and religion. "I never got my college degree," he admits proudly.
He started Whole Foods in 1978 with one store in Austin with $45,000 of seed capital raised from families and friends. "We lost half of it in the first year and then made $5,000 the next year." He wanted to double down and asked the board to put up more money to expand and build bigger stores. "And of course they thought I was nuts. 'You lost half of our money in the first year.'"
The fledgling CEO convinced them that "if we don't grow, we probably won't survive." The first major super store in 1980 was a success "almost by 3 o'clock on the day it opened." It's been an upward trajectory of profits and sales ever since.
"Before I started my business, my political philosophy was that business is evil and government is good. I think I just breathed it in with the culture. Businesses, they're selfish because they're trying to make money."
At age 25, John Mackey was mugged by reality. "Once you start meeting a payroll you have a little different attitude about those things." This insight explains why he thinks it's a shame that so few elected officials have ever run a business. "Most are lawyers," he says, which is why Washington treats companies like cash dispensers.
Mr. Mackey's latest crusade involves traveling to college campuses across the country, trying to persuade young people that business, profits and capitalism aren't forces of evil. He calls his concept "conscious capitalism."
What is that? "It means that business has the potential to have a deeper purpose. I mean, Whole Foods has a deeper purpose," he says, now sounding very much like a philosopher. "Most of the companies I most admire in the world I think have a deeper purpose." He continues, "I've met a lot of successful entrepreneurs. They all started their businesses not to maximize shareholder value or money but because they were pursuing a dream."
Mr. Mackey tells me he is trying to save capitalism: "I think that business has a noble purpose. It's not that there's anything wrong with making money. It's one of the important things that business contributes to society. But it's not the sole reason that businesses exist."
What does he mean by a "noble purpose"? "It means that just like every other profession, business serves society. They produce goods and services that make people's lives better. Doctors heal the sick. Teachers educate people. Architects design buildings. Lawyers promote justice. Whole Foods puts food on people's tables and we improve people's health."
Then he adds: "And we provide jobs. And we provide capital through profits that spur improvements in the world. And we're good citizens in our communities, and we take our citizenship very seriously at Whole Foods."
I ask Mr. Mackey why he doesn't collect a paycheck. "I'm an owner. I have the exact same motivation any shareholder would have in the Whole Foods Market because I'm not drawing a salary from the company. How much money does anybody need?" More to the point, he says, "If the business prospers, I prosper. If the business struggles, I struggle. It's good for morale." He hastens to add that "I'm not saying anybody else should do what I do."
Well, that's not exactly true. Mr. Mackey has been vocal in his opposition to recent CEO salaries. "I do think that it's the responsibility of the leadership of an organization to constrain itself for the good of the organization. If you look at the history of business in America, CEOs used to have much more constraint in compensation and it's gone up tremendously in the last 30 years."
He bemoans the trend that once a Fortune 500 CEO made about 25 times the average worker pay, and now that's climbed to 300 times average employee pay. He says this violates the principle of "internal equity—what your leadership is getting paid relative to everyone else in the organization."
But there's one other institution John Mackey thinks needs a makeover—and that's government. He describes what the Federal Reserve has done with massive money creation as "debauchery of the currency." He thinks the bailouts were a travesty.
"I don't think anybody's too big to fail," he says. "If a business fails, what happens is, there are still assets, and those assets get reorganized. Either new management comes in or it's sold off to another business or it's bid on and the good assets are retained and the bad assets are eliminated. I believe in the dynamic creativity of capitalism, and it's self-correcting, if you just allow it to self-correct."
That's something Washington won't let happen these days, which helps explain why Mr. Mackey felt compelled to write that the Whole Foods health-insurance program is smarter and cheaper than the latest government proposals. As he races out the door to catch a flight to spread the gospel of conscious capitalism elsewhere, I only hope he gets an aisle seat. He deserves it.
Mr. Moore is senior economics writer for The Wall Street Journal editorial page.
Time for a TARP Exit Strategy
The remaining $330 billion should go to deficit reduction.
JOHN THUNE
A year ago our country was in the midst of a serious crisis, with large financial institutions teetering on the edge of bankruptcy. There was a very real danger credit markets would freeze and the economy would grind to a halt.
Faced with that threat, Congress passed the Troubled Asset Relief Program (TARP) to help stabilize the economy. Originally designed and proposed as a straightforward measure to help failing banks get toxic assets off their books while they regained their financial footing, TARP was subsequently used by the Treasury Department to acquire extensive ownership interests in private businesses.
Our financial markets are no longer in free fall and the crisis has receded. Yet we now find ourselves in a troubling situation where the federal government is a major owner of more than 600 U.S. financial institutions and banks, as well as two auto makers, an international insurance conglomerate, and numerous other businesses.
President Obama has become the de facto CEO of large chunks of our economy, with the power to hire and fire executives, dictate salaries, declare what products should be made, and decide winners and losers in the marketplace. The inherent conflicts of interest are enormous and should be a concern to all Americans.
It is time to bring an end to the TARP emergency measures and come up with an exit strategy to get government out of the business of running businesses. The administration owes the American people a timeline for how it will do this.
The Treasury secretary has the authority to either allow the program to expire at the end of this year or extend it into next fall. Ending TARP this year is a vital first step to getting the federal government out of these expensive and risky entanglements in private industry.
Shutting down TARP would also ensure we don't risk losing more taxpayer dollars. The latest report by the TARP Congressional Oversight Panel found that approximately $330 billion of the $700 billion limit is currently untapped. Allowing TARP to end this year and cancelling that remaining $330 billion would remove the inevitable temptation to spend it. With a budget shortfall expected to hit a record $1.6 trillion this year and a staggering $9 trillion over the next 10 years, we should be looking for every possible way to reduce the risk we are taking on behalf of taxpayers.
Once the administration has allowed the TARP authority to expire, it should lay out a plan to sell its stake in these private companies. The plan should allow some flexibility so the Treasury can divest these assets prudently. But there needs to be an aggressive timeline so that we can get out of these businesses as soon as possible.
Without a date certain, the government's unprecedented entanglement in the private sector could drag on for years with more vague reassurances from the Treasury department that things will change "soon." If the administration cannot come up with a plan on its own, then Congress has a responsibility to act.
To that end I've introduced the Government Ownership Exit Plan, which would ensure that the federal government sells its ownership stake within a reasonable time frame. Whether we move forward under a plan developed by the administration or the legislative framework I've introduced is not important. It simply needs to be done.
We also need to ensure that any TARP funds recouped from the sale of assets are dedicated to deficit reduction, not more spending or more government takeovers. TARP was created in response to a very specific—and temporary—financial emergency. It was never intended to become a $700 billion slush fund for whatever business experiment the administration sets its eyes on.
This dangerous mixture of politics and industry is bad for business, bad for the economy, and bad for the American taxpayer. TARP has run its course. The time for ending it is now.
Mr. Thune is a Republican senator from South Dakota.
Iran's Big Victory in Geneva
We are now even further from eliminating Tehran's threat.
JOHN BOLTON
The most widely touted outcome of last week's Geneva talks with Iran was the "agreement in principle" to send approximately one nuclear-weapon's worth of Iran's low enriched uranium (LEU) to Russia for enrichment to 19.75% and fabrication into fuel rods for Tehran's research reactor. President Barack Obama says the deal represents progress, a significant confidence-building measure.
In fact, the agreement constitutes another in the long string of Iranian negotiating victories over the West. Any momentum toward stricter sanctions has been dissipated, and Iran's fraudulent, repressive regime again hobnobs with the U.N. Security Council's permanent members. Consider the following problems:
• Is there a deal or isn't there? Diplomacy's three slipperiest words are "agreement in principle." Iran's Ambassador to Britain exclaimed after the talks in Geneva, "No, no!" when asked if his country had agreed to ship LEU to Russia; it had "not been discussed yet." An unnamed Iranian official said that the Geneva deal "is just based on principles. We have not agreed on any amount or any numbers." Bargaining over the deal's specifics could stretch out indefinitely.
Other issues include whether Iran will have "observers" at Russian enrichment facilities. If so, what new technologies might those observers glean? And, since Tehran's reactor is purportedly for medical purposes, will Mr. Obama deny what Iran pretends to need to refuel it in 2010?
• The "agreement" undercuts Security Council resolutions forbidding Iranian uranium enrichment. No U.S. president has been more enamored of international law and the Security Council than Mr. Obama. Yet here he is undermining the foundation of the multilateral campaign against Tehran's nuclear weapons program. In Resolution 1696, adopted July 31, 2006, the Security Council required Iran to "suspend all enrichment-related and reprocessing activities, including research and development." Uranium enriched thereafter—the overwhelming bulk of Iran's admitted LEU—thus violates 1696 and later sanctions resolutions. Moreover, considering Iran's utter lack of credibility, we have no idea whether its declared LEU constitutes anything near its entire stockpile.
By endorsing Iran's use of its illegitimately enriched uranium, Mr. Obama weakens his argument that Iran must comply with its "international obligations." Indeed, the Geneva deal undercuts Mr. Obama's proposal to withhold more sanctions if Iran does not enhance its nuclear program by allowing Iran to argue that continued enrichment for all peaceful purposes should be permissible. Now Iran will oppose new sanctions and argue for repealing existing restrictions. Every other aspiring proliferator is watching how violating Security Council resolutions not only carries no penalty but provides a shortcut to international redemption.
• Raising Iran's LEU to higher enrichment levels is a step backwards. Two-thirds of the work to get 90% enriched uranium, the most efficient weapons grade, is accomplished when U235 isotope levels in natural uranium are enriched to Iran's current level of approximately 3%-5%. Further enrichment of Iran's LEU to 19.75% is a significant step in the wrong direction. This is barely under the 20% definition of weapons-grade, highly enriched uranium (HEU). Ironically, Resolution 1887, adopted while Mr. Obama presided over the Security Council last week, calls for converting HEU-based reactors like Iran's to LEU fuel precisely to lower such proliferation risks. We should be converting the Tehran reactor, not refueling it at 19.75% enrichment.
After Geneva, the administration misleadingly stated that once fashioned into fuel rods, the uranium involved could not be enriched further. This is flatly untrue. The 19.75% enriched uranium could be reconverted into uranium hexafluoride gas and quickly enriched to 90%. Iran could also "burn" its uranium fuel (including the Russian LEU available for the Bushehr reactor) and then chemically extract plutonium from the spent fuel to produce nuclear weapons.
The more sophisticated Iran's nuclear skills become, the more paths it has to manufacture nuclear weapons. The research-reactor bait-and-switch demonstrates convincingly why it cannot be trusted with fissile material under any peaceful guise. Proceeding otherwise would be winking at two decades of Iranian deception, which, unfortunately, Mr. Obama seems perfectly prepared to do.
The president also said last week that international access to the Qom nuclear site must occur within two weeks, but an administration spokesman retreated the next day, saying there was no "hard and fast deadline," and "we don't have like a drop-dead date." Of course, neither does Iran. Once again, Washington has entered the morass of negotiations with Tehran, giving Iran precious time to refine and expand its nuclear program. We are now even further from eliminating Iran's threat than before Geneva.
Mr. Bolton, a senior fellow at the American Enterprise Institute, is the author of "Surrender Is Not an Option: Defending America at the United Nations and Abroad" (Simon & Schuster, 2007).
Turning the carbon screws on businesses so they lobby Congress for cap and trade.
'In recent years, many Americans have had cause to wonder whether decisions made at EPA were guided by science and the law, or whether those principles had been trumped by politics," declared Lisa Jackson in San Francisco last week. The Environmental Protection Agency chief can't stop kicking the Bush Administration, but the irony is that the Obama EPA is far more "political" than the Bush team ever was.
How else to explain the coordinated release on Wednesday of the EPA's new rules that make carbon a dangerous pollutant and John Kerry's cap-and-trade bill? Ms. Jackson is issuing a political ultimatum to business, as well as to Midwestern and rural Democrats: Support the Kerry-Obama climate tax agenda—or we'll punish your utilities and consumers without your vote.
The EPA has now formally made an "endangerment finding" on CO2, which will impose the command-and-control regulations of the Clean Air Act across the entire economy. Because this law was never written to apply to carbon, the costs will far exceed those of a straight carbon tax or even cap and trade—though judging by the bills Democrats are stitching together, perhaps not by much. In any case, the point of this reckless "endangerment" is to force industry and politicians wary of raising taxes to concede, lest companies have to endure even worse economic and bureaucratic destruction from the EPA.
Ms. Jackson made a show of saying her new rules would only apply to some 10,000 facilities that emit more than 25,000 tons of carbon dioxide each year, as if that were a concession. These are the businesses—utilities, refineries, heavy manufacturers and so forth—that have the most to lose and are therefore most sensitive to political coercion.
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The idea is to get Exelon and other utilities to lobby Congress to pass a cap-and-trade bill that gives them compensating emissions allowances that they can sell to offset the cost of the new regulations. White House green czar Carol Browner was explicit on the coercion point last week, telling a forum hosted by the Atlantic Monthly that the EPA move would "obviously encourage the business community to raise their voices in Congress." In Sicily and parts of New Jersey, they call that an offer you can't refuse.
Yet one not-so-minor legal problem is that the Clean Air Act's statutory language states unequivocally that the EPA must regulate any "major source" that emits more than 250 tons of a pollutant annually, not 25,000. The EPA's Ms. Jackson made up the higher number out of whole cloth because the lower legal threshold—which was intended to cover traditional pollutants, not ubiquitous carbon—would sweep up farms, restaurants, hospitals, schools, churches and other businesses. Sources that would be required to install pricey "best available control technology" would increase to 41,000 per year, up from 300 today, while those subject to the EPA's construction permitting would jump to 6.1 million from 14,000.
That's not our calculation. It comes from the EPA itself, which also calls it "an unprecedented increase" that would harm "an extraordinarily large number of sources." The agency goes on to predict years of delay and bureaucratic backlog that "would impede economic growth by precluding any type of source—whether it emits GHGs or not—from constructing or modifying for years after its business plan contemplates." We pointed this out earlier this year, only to have Ms. Jackson and the anticarbon lobby deny it.
Usually it takes an act of Congress to change an act of Congress, but Team Obama isn't about to let democratic—or even Democratic—consent interfere with its carbon extortion racket. To avoid the political firestorm of regulating the neighborhood coffee shop, the EPA is justifying its invented rule on the basis of what it calls the "absurd results" doctrine. That's not a bad moniker for this whole exercise.
The EPA admits that it is "departing from the literal application of statutory provisions." But it says the courts will accept its revision because literal application will produce results that are "so illogical or contrary to sensible policy as to be beyond anything that Congress could reasonably have intended."
Well, well. Shouldn't the same "absurd results" theory pertain to shoehorning carbon into rules that were written in the 1970s and whose primary drafter—Michigan Democrat John Dingell—says were never intended to apply? Just asking. Either way, this will be a feeble legal excuse when the greens sue to claim that the EPA's limits are inadequate, in order to punish whatever carbon-heavy business they're campaigning against that week.
Obviously President Obama is hellbent on punishing carbon use—no matter how costly or illogical. And of course, there's no politics involved, none at all.
Chávez imports Ahmadinejad's ideology to Latin America.
By MARY ANASTASIA O'GRADY
Columnist's name
Sometimes I ask myself if Hitler wasn't right when he wanted to finish with that race, through the famous holocaust, because if there are people that are harmful to this country, they are the Jews, the Israelites.
David Romero Ellner
Executive Director
Radio Globo, Honduras, Sept. 25, 2009
Meet one of Honduras's most vocal advocates for the return of deposed president Manuel Zelaya to office. He's not your average radio jock. He started in Honduran politics as a radical activist and was one of the founders of the hard-left People's Revolutionary Union, which had links to Honduran terrorists in 1980s. A few years ago he was convicted and served time in prison for raping his own daughter.
Today Mr. Romero Ellner is pure zelayista, hungry for power and not ashamed to say so. This explains why he has joined Venezuela's Hugo Chávez and Mr. Zelaya in targeting Jews. Mr. Chávez has allied himself with Iran to further his ability to rule unchecked in the hemisphere. He hosts Hezbollah terrorists and seeks Iranian help to become a nuclear power. He and his acolytes cement their ties to Iranian dictator Mahmoud Ahmadinejad by echoing his anti-Semitic rants.
The Honduras debate is not really about Honduras. It is about whether it is possible to stop the spread of chavismo and all it implies, including nuclear proliferation and terrorism in Latin America. Most troubling is the unflinching support for Mr. Zelaya from President Barack Obama and Democratic Sen. John Kerry—despite the Law Library of Congress review that shows that Mr. Zelaya's removal from office was legal, and the clear evidence that he is Mr. Chávez's man in Tegucigalpa. On Thursday, Mr. Kerry took the unprecedented step of trying to block a fact-finding mission to Honduras by Republican Sen. Jim DeMint, who is resisting Mr. Obama's efforts to restore Mr. Zelaya to power.
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Associated Press
Venezuela's Hugo Chávez embraces Iran's Mahmoud Ahmadinejad.
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Mr. Zelaya, recall, was arrested, deposed and deported on June 28 because he violated the Honduran Constitution. He snuck back into the country on Sept. 21 and found refuge at the Brazilian Embassy in the capital. Mr. Romero Ellner's calumny against Jews was a follow-up to Mr. Zelaya's claim that he was being "subjected to high-frequency radiation" from outside the embassy and that he thought "Israeli mercenaries" were behind it.
The verbal attack on Jews from a zelayista is consistent with a pattern emerging in the region. Take what's been going on in Venezuela. In the earliest years of Chávez rule, a Venezuelan friend, who is a Christian, confessed his fears to me. "In his speech, he always tries to create hate between groups of people," my friend told me. "He loves hate speech."
For a decade, Venezuelans have been force-fed the strongman's view of economic nationalism laced with this divisive language. Venezuelans are encouraged to seek revenge against their neighbors. Crime has skyrocketed.
The Jewish community has been targeted as Mr. Chávez's relationship with Mr. Ahmadinejad has blossomed. In 2004, I reported on a police raid at a Jewish school for young children in Caracas. The pretext was a "tip" that the school was storing weapons. No weapons were found, but the community was terrorized.
In recent years, Venezuela and Iran have signed joint ventures estimated to be worth $20 billion. There are similar pacts, estimated at $10 billion, between Iran and Venezuelan satellite, Bolivia. Both South American countries accused Israel of genocide in Gaza in 2008 and cut diplomatic ties. Mr. Chávez's tirades against Israel during that time emboldened his street thugs. In January 2009, vandals broke into a temple in Caracas and desecrated the sacred space with graffiti calling for the death of Jews.
The Americas in the News
Get the latest information in Spanish from The Wall Street Journal's Americas page.
New York District Attorney Robert Morgenthau recently gave a speech to the Brookings Institution in which he said "Iran and Venezuela are beyond the courting phase. We know they are creating a cozy financial, political and military partnership, and that both countries have strong ties to Hezbollah and Hamas."
Iran has courted Honduras as well. When Mr. Zelaya was still in power, the Honduran press reported that his foreign minister Patricia Rodas met with high-ranking Iranian officials in Mexico City. That raised plenty of eyebrows in Central America.
Neither Venezuela nor Honduras has any history of anti-Semitism. But with Mr. Chávez importing Mr. Ahmadinejad's despicable ideology and methods, an assault on the Jewish community goes with the territory.
Honduras recognizes that it was a mistake to deport Mr. Zelaya after he was arrested. But it argues that fears of zelayista extremism and use of violence as a political tool in the months leading up to June 28 provoked desperation. Mr. Romero Ellner—whose radio station was closed down by the government last week—provided exhibit A with his remarks. If the U.S. State Department is opposed to the exile, let it call for Mr. Zelaya to be put on trial now that he is back in Honduras. It has no grounds to demand that democratic Honduras restore an anti-Semitic rabble rouser to power.
Bank Upgrade Lifts Stocks
Financial stocks posted a sharp rally thanks to an upgrade from Goldman Sachs, but gains elsewhere were subdued as earnings season loomed.
The Dow Jones Industrial Average was up 53 points, or 0.6%, at 9540, helped by a 3.1% gain in J.P. Morgan Chase. Bank of America was up 2.5% after The Wall Street Journal reported that the bank's board will meet this week to pick an emergency chief executive in case legal turmoil forces Kenneth D. Lewis to step down before year end as planned.
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The Nasdaq Composite Index gained 0.7%. The S&P 500 was up 0.8%, led by a 2.1% gain in its financial sector.
Analysts at Goldman Sachs indicated that they are more optimistic about large U.S. banks, raising their coverage view on the sector to attractive from neutral. Wells Fargo shares were up about 5.3% after Goldman upgraded the bank to buy. Capital One Financial, which Goldman added to its conviction buy list, gained nearly 5.4%.
In economic news, new data on U.S. service-sector activity were stronger than expected. The Institute for Supply Management said its monthly non-manufacturing index rose to 50.9 in September, up from 48.4 in August. The measure's recent rise above 50 means that it is now signaling growth in overall activity.
Later in the week, companies will begin reporting third-quarter earnings results, with Alcoa due to report late Wednesday. Alcoa shares were recently up 1.9%.
For the third quarter, analysts are expecting companies in the S&P to show a 25% decline in combined profits, slightly better than the 27% decline in the second-quarter, according to Thomson Reuters data.
Traders have said that a rise in revenue and sales in the latest round of reports would be a sign of clear progress after second-quarter profit gains at some bellwether companies driven largely by cost cutting. Hopes are waning for such a gain in the corporate top line, however.
"If we do get anything, it will be modest. We'll have to scrape through," said Michael Thompson, managing director of Standard & Poor's risk strategies group in New York. "Right now, I'm very concerned about consumption," which is the key driver of profits at many companies.
Overseas, European markets were mixed. Asia markets were mostly lower as investors there reacted to the weak U.S. jobs data released on Friday.
The dollar was weaker against the euro and the yen. Crude-oil futures were off by less than a dollar, at $68.93 a barrel. Treasury prices rose.
Suicide Bomber Attacks World Food Program Offices in Pakistan
MATTHEW ROSENBERG REHMAT MEHSUD
MINGORA, Pakistan -- A suicide bomber infiltrated a heavily fortified U.N. office in Pakistan's capital, Islamabad, Monday, setting off a blast that killed at least three people, police said.
Those killed in the attack on the offices of the World Food Program included an Iraqi woman working for the UN and two Pakistanis, said Bin Yamin, a senior Islamabad police official.
Media persons and volunteers are seen outside the offices of the World Food Program after an explosion in Islamabad.
He said police suspected the bombing was carried out by the Taliban. The militants have repeatedly bombed Pakistan's major cities and recently threatened to launch a fresh wave of attacks if Pakistan's military did not back off threats to invade the South Waziristan tribal region, a major Taliban and al Qaeda stronghold on the Afghan border.
Police and witnesses said the bombing shattered windows and gutted much of the building, which lies tucked away behind cement and metal barriers in a quiet and leafy part of the capital that is home to many diplomats and high-ranking government officials.
There was no immediate UN comment on the bombing.
Mr. Yamin said the attack was carried out by a suicide bomber who detonated his explosives in the lobby of the WFP building, a two-storey converted house. He said police at the scene found body parts believed to have belonged to the assailant.
The initial death toll was low compared with recent bombings in Pakistan. But the location and target -- a UN office a few miles from the presidential palace -- were heavily symbolic. The government has struggled to protect Islamabad, and Monday's bombing took place in one of the most heavily policed parts of the city.
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