Tuesday, December 2, 2008

Maleeha Lodhi: Fallout will hit Obama’s Afghan plan

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"The US should cease attacks in Pakistan, which have inflamed public opinion"

The terrorist attacks in Mumbai have dramatised how the urgent will often take precedence over the important for the incoming Obama administration.

The attacks have plunged relations between Pakistan and India into unpredictable territory just when a series of policy reviews in Washington are focussed on overhauling strategy in Afghanistan.

With Afghanistan in a "downward spiral" Washington is groping for a new strategy. It would do well to recall Lewis Carroll's famous line in Alice in Wonderland: "When you don't know where you are going, any road will take you there."

The Obama Administration will need to define both where it needs to go and the way out of the quagmire in Afghanistan.

Washington recognises that no country is more pivotal than Pakistan to its goals of defeating terrorism and stabilising Afghanistan. But this relationship is today held together only at the leadership level with the wider establishments and publics in both nations viewing the other with suspicion, even hostility. The trust deficit must be addressed as this will determine the quality of cooperation that Washington and Islamabad can mobilise to avert the chaos that now threatens to engulf the region.

President-elect Obama should break from the Bush legacy of treating Pakistan as hired help rather than valued ally. Pakistan has paid a heavy price for being America's frontline ally. Thousands of people, including 2,000 military personnel, have been killed in terrorist attacks since 2001. Economic losses are estimated at $34bn.

Three decades of strife in Afghanistan have taken a heavy toll on Pakistan. Bush's flawed Afghan strategy compounded by the fatal distraction of Iraq, widened the conflagration and pushed the war into Pakistan.

Obama has pledged a troop surge in Afghanistan. But without a fundamental change in strategy, this may increase the sense of occupation and mire the United States in a war without end. Moscow deployed more than 150,000 troops at the height of its occupation of Afghanistan and failed to avoid defeat.

A more realistic approach must start with redefining US goals, and distinguish between what is vital and attainable (disruption of terrorist networks) and what is desirable but best left for Afghans to undertake (transforming society).

So far Washington has lacked clarity about objectives and sought to eliminate terrorists, defeat the Taliban, transform society, and promote democracy.

This has fused Pashtun nationalism with Muslim radicalism, and fuelled the growing insurgency.

Over reliance on military force led to high civilian casualties and become a potent factor behind support for the Taliban.

A new strategy must seek to de-couple al-Qa'ida and the Taliban, engage the Taliban in a reconciliation process and hold out the offer for an eventual withdrawal of foreign forces in return for a cessation of attacks and support for the creation of a viable Afghan army. Bombing campaigns should be replaced by political accommodation and economic development.

A new Afghan grand assembly or Loya Jirga should be called to endorse this process. Washington should also help orchestrate a regional consensus to back this plan which should include Iran and Russia.

Washington should cease unilateral missile strikes into Pakistan's territory. These attacks have inflamed public opinion, undercut Pakistan's own counter-insurgency efforts and risk shattering ties with Islamabad. Instead the US should strengthen Pakistan's own capacity to fight militancy.

A new US approach should also recognise that Pakistan's stability depends not just on containing militancy but on strengthening the economy and on addressing its long adversarial relationship with India.

Economic help to Pakistan should be construed more in trade than in aid terms. The Obama administration should make a preferential trade deal for Pakistani textiles - the lifeblood of its economy - the centrepiece of economic assistance. Trade creates jobs and durable income which are more effective anti-terrorism tools than bombs and bullets.

Obama has already acknowledged the need to resolve the long-running Kashmir dispute to enable Pakistan to switch focus from India to counter-insurgency. Washington should launch a diplomatic initiative aimed at reaching an accommodation between Pakistan and India.

This may seem a daunting menu, but continuing with present policy promises to sink the region in a whirlpool of chaos.

Why the Automakers Won't Make Fuel-Efficient Cars, Even as the Price of Being Bailed Out

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By Robert Reich

Telling automakers to make more fuel-efficient cars as a condition of being bailed out is like telling Citigroup or any other big bank to issue more affordable loans to Main Street as a condition of being bailed out. It won't happen. Conditions like these make the public feel better about using their tax dollars to bail out private firms, but they're useless. Automakers, like the big banks, will do the minimum required, and you can bet their lawyers and lobbyists will find ever more clever ways of avoiding even that minimum. Without lots of buyers who want fuel-efficient cars, automakers won't produce them, period. (Without credit-worthy borrows able and willing to pay the costs of bank loans, they won't be issued, either.)

You might think that the recent memories of $5-a-gallon gas would transform nearly everyone into prospective buyers of hybrids that get more than 30 miles a gallon. Think again. Consumer memories are dreadfully short. With gas prices settling down to half that sum, buyers (to the extent they still exist in this recession) are moving back to SUVs and pickup trucks, which automakers are all too happy to provide given the larger profits that come with gas-guzzlers. We're witnessing a repeat of what occurred immediately after the oil crises of the 1970s. As soon as cheap gas was readily available, consumers who had said they wanted fuel efficiency went back to their old ways -- and so did the Big Three.

What to do? Short of a gas tax that would push prices back up to $5-a-gallon -- something deemed politically impossible -- the only way to get lots more fuel-efficient cars is to put the costs of the gas-guzzlers on to the automakers themselves, as part of a cap-and-trade system requiring the major sources of carbon-dioxide emissions to pay for them. This would give automakers a powerful incentive to make more fuel-efficient cars and price them far more attractively than the guzzlers, thereby attracting consumers to them.

But a conditional bailout that flies in the face of consumer demand won't work.

In Courtroom Showdown, Bush Demands Amnesty for Spying Telecoms

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By David Kravets

The Bush administration on Tuesday will try to convince a federal judge to let stand a law granting retroactive legal immunity to the nation’s telecoms, which are accused of transmitting Americans’ private communications to the National Security Agency without warrants.

At issue in the high-stakes showdown — set to begin at 10:00 a.m. PST — are the nearly four dozen lawsuits filed by civil liberties groups and class action attorneys against AT&T, Verizon, MCI, Sprint and other carriers who allegedly cooperated with the Bush administration’s domestic surveillance program in the years following the Sept. 11 terror attacks. The lawsuits claim the cooperation violated federal wiretapping laws and the Constitution.

In July, as part of a wider domestic spying bill, Congress voted to kill the lawsuits and grant retroactive amnesty to any phone companies that helped with the surveillance; President-elect Barack Obama was among those who voted for the law in the Senate. On Tuesday, lawyers with the Electronic Frontier Foundation are set to urge the federal judge overseeing those lawsuits to reject immunity as unconstitutional. At stake, they say, is the very principle of the rule of law in America.

"I think it does set a very frightening precedent that it’s okay for people to break the law because they can just have Congress bail them out later," says EFF legal director Cindy Cohn. "It’s very troubling."

The judge presiding over the case, U.S. District Judge Vaughn Walker of San Francisco, announced late Monday he wanted to discuss 11 questions (.pdf) at Tuesday’s hearing, one of which goes directly to the heart of the immunity legislation.

"Is there any precedent for this type of enactment that is analogous in all of these respects: retroactivity; immunity for constitutional violations; and delegation of broad discretion to the executive branch to determine whether to invoke the provision?," the judge asked.

Carl Tobias, a professor at the University of Richmond School of Law, says the immunity legislation, if upheld, "makes it possible to extend immunity to other areas of the law."

He agreed, for example, that it would not be far-fetched to imagine Congress immunizing ExxonMobil for the 1989 Valdez oil spill "for national security reasons." A jury awarded about $5 billion in punitive damages in that case, an amount the courts reduced to $500 million.

In the telecom immunity challenge, the government argues that the telecoms should not be punished, or suffer the threat of punishment, for a surveillance program that the Bush administration claims was designed only to fight terrorism. The government also denies the lawsuits’ allegations that the surveillance was a broad dragnet that sucked down Americans’ communications on a wholesale basis.

The administration also says the immunity is warranted because the lawsuits threaten to expose government secrets.

The EFF brought the original spying lawsuit in 2006 against AT&T, and has since been joined by dozens of others targeting the nation’s telecommunications companies.

The EFF’s case, which has been consolidated with the others in the U.S. District Court of San Francisco, includes so-called whistle-blower documents from a former AT&T technician. The EFF claims the documents describe a secret room in an AT&T building in San Francisco that is wired to share raw internet traffic with the NSA.

The government sought to dismiss the original EFF case, and others that followed, on the grounds that they threatened to expose state secrets. Judge Walker has ruled against the government, saying the case could proceed.

The government appealed. But before the appeal was decided, Congress on July 9 gave the president the power to grant immunity to the carriers.

The EFF is now challenging the immunity legislation on the grounds that it seeks to circumvent the Constitution’s separation of powers clause, as well as Americans’ Fourth Amendment rights against unreasonable searches and seizures.

"The legislation is an attempt to give the president the authority to terminate claims that the president has violated the people’s Fourth Amendment rights," the EFF’s Cohn says. "You can’t do that."

Two weeks ago, the administration told Walker in a court filing (.pdf) that the immunity legislation "represents the considered judgment of our nation’s political branches that, in the unique historical circumstances following the 9/11 attacks, telecommunications companies should not bear the burden of defending against claims that those companies assisted the government in its efforts to detect and prevent further terrorist attacks."

Congress, the government continued, "concluded that those companies should not face further litigation if they provided such assistance pursuant to a court order or a written certification, directive or request from a senior government official, or did not provide the alleged assistance."

The immunity law allows the government to file a classified brief with Judge Walker activating immunity for a particular communication company. Walker then has little power to deny the request, unless the judge finds the immunity legislation is itself unconstitutional.

Oral arguments in Walker’s courtroom are scheduled for 10 a.m. PST on Tuesday. Threat Level will cover the proceedings live.

Economy could add to Medicare woes

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Federal health officials estimate that the struggling economy will speed up by one to three years the exhaustion of the Medicare trust fund covering hospital and nursing home care.

Trustees for the Social Security and Medicare programs warned last March that the trust fund for Medicare Part A would become insolvent in 2019. But the chief actuary for Medicare said yesterday that the economy will probably generate less revenue through payroll taxes than the trustees had projected.

Once the trust fund is exhausted, the federal government will continue to pay for hospital care and other services, but it initially would only have enough money coming in to cover 78 percent of estimated costs.

Trustees issue a once-a-year report on the financial conditions for Social Security and Medicare. In the fall, the trustees get an update that tells them what is happening versus what their latest projection indicated. In the latest update, Medicare's top actuary braced the trustees for a deterioration in Medicare's finances. "Right now, we know that we're in the start of the recession. We don't yet know how severe it might be," Richard Foster, chief actuary for the Centers for Medicare and Medicaid Services, said in an interview. "We did a very, very rough estimate suggesting that because of the recession, the exhaustion date might advance anywhere from one to three years."

That estimate would place the exhaustion of the Part A trust fund between 2016 and 2018.

Foster said that higher unemployment, as well as smaller wage increases, are behind the projected drop in revenue for Medicare Part A. Services covered through the Part A trust fund include inpatient hospital care, nursing home care, hospice and home health.

Economic rescue could cost $8.5 trillion

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By Jim Puzzanghera

Heavy spending to battle the financial crisis is unlikely to abate soon. Analysts say next year's deficit could top $1 trillion.

With its decision last week to pump an additional $1 trillion into the financial crisis, the government eliminated any doubt that the nation is on a wartime footing in the battle to shore up the economy. The strategy now -- and in the coming Obama administration -- is essentially the win-at-any-cost approach previously adopted only to wage a major war.

And that means no hesitation in pledging to spend previously almost unimaginable sums of money and running up federal budget deficits on a scale not seen since World War II.

Indeed, analysts warn that the nation's next financial crisis could come from the staggering cost of battling the current one.

Just last week, new initiatives added $600 billion to lower mortgage rates, $200 billion to stimulate consumer loans and nearly $300 billion to steady Citigroup, the banking conglomerate. That pushed the potential long-term cost of the government's varied economic rescue initiatives, including direct loans and loan guarantees, to an estimated total of $8.5 trillion -- half of the entire economic output of the U.S. this year.

Nor has the cash register stopped ringing. President-elect Barack Obama and congressional Democrats are expected to enact a stimulus package of $500 billion to $700 billion soon after he takes office in January.

The spending already has had a dramatic effect on the federal budget deficit, which soared to a record $455 billion last year and began the 2009 fiscal year with an amazing $237-billion deficit for October alone. Analysts say next year's budget deficit could easily bust the $1-trillion barrier.

"I didn't think we'd see that for a long time," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "There's a huge risk of another economic crisis, a debt crisis, once we get on the other side of this one."

But the Bush administration and the economic team that Obama is rapidly assembling like a war Cabinet are vowing to spend whatever it takes to avoid a depression; they'll worry about the effect later.

"I don't think that there's any way of denying the fact that my first priority and my first job is to get us on the path of economic recovery, to create 2.5 million jobs, to provide relief to middle-class families," Obama told reporters last week.

"But as soon as the recovery is well underway, then we've got to set up a long-term plan to reduce the structural deficit and make sure that we're not leaving a mountain of debt for the next generation."

The mountain is already there, and rising faster than at any time since the 1940s, when the United States was fighting a global war.

Analysts say the current flood of red ink calls into question Obama's ability to launch programs such as middle-class tax cuts and a healthcare overhaul. In 1993, a deficit only a third the size of next year's projected $1 trillion prompted President Clinton to abandoned his campaign pledges of tax cuts.

Once the financial crisis eases, higher interest rates and soaring inflation will be risks. If they materialize, they could dramatically increase the government's borrowing costs to meet its annual debt payments. For consumers, borrowing could become more expensive even as the price of everyday items rise, holding back economic growth.

"We could have a super sub-prime crisis associated with the meltdown of the federal government," warned David Walker, president of the Peter G. Peterson Foundation and former head of the Government Accountability Office.

But even deficit hawks such as Walker acknowledge that the immediate crisis is priority No. 1. Just as with World War II, the government can worry about paying the bills once the enemy is defeated.

"You just throw everything you have at the problem to try to fix it as quickly as you can," said David Stowell, a finance professor at Northwestern University's Kellogg School of Management. "We're mortgaging our future to a certain extent, but we're trying to do things that give us a future."

Washington could wind up spending substantially less than the sum of the commitments. Though the total estimated cost of the government's efforts adds up to $8.5 trillion, only about $3.2 trillion has been tapped, according to an analysis by Bloomberg.

And not all the money committed is direct spending. About $5.5 trillion in loan guarantees and other financial backing by the Federal Reserve is included in the total.

"The only way those commitments would become obligations would be if the economy completely collapsed, in which case it's a whole new ballgame anyway," said John Steele Gordon, a business and economic historian.

The government even stands to make money on some expenditures, such as the $330 billion it has used to buy equity in banks and other financial institutions through the Treasury Department's Troubled Asset Relief Program.

In the $1.2-billion bailout of Chrysler in 1980, the government ended up gaining $311 million when it sold stock options back to the company three years later.

But the federal efforts to forestall a depression are still historic in scope.

A $1-trillion deficit next year would represent about 7% of the nation's total economic output, or gross domestic product. That would top the 5.9% reached during the height of the Great Depression in 1934 but would fall well short of the deficits of World War II. In 1943, the high point, the deficit amounted to 30% of GDP.

The national debt is soaring too. In September, the National Debt Clock in New York City ran out of digits as the figure ticked over $10 trillion. The debt is now larger than the 45% of GDP it reached at the end of the Great Depression, but less than in 1946, when war spending had pushed the debt to 129% of GDP, said Gordon, author of "Hamilton's Blessing: The Extraordinary Life and Times of Our National Debt."

There's a potentially crucial difference, however, between the spending then and the commitments now:

Much of the Depression-World War II spending was on industrial production -- building new factories and converting existing plants to produce tanks, planes and ships. Huge sums also went into developing new technologies.

Those investments, combined with pent-up consumer demand and savings from the lean war years, quickly led to budget surpluses and sharp economic growth in the late 1940s as the baby boom began.

Analysts warn not to expect that to happen again. This time the government spending is largely ethereal, with the Federal Reserve printing more money to inject liquidity into the financial system and keep banks and other institutions afloat. And savings rates are low.

"Too many Americans have overextended themselves with regard to credit and debt, and too many have been following the bad example of the government," Walker said. "It is imperative that we recognize that this country has been living beyond its means and that we face large and growing structural deficits even after we turn the economy around."

Walker said he understands the need to attack the financial crisis. But the spending only adds to the looming problems of unfunded Social Security and Medicare commitments as baby boomers begin to retire.

He noted that the Moody's bond-rating firm fired a shot across the government's bow in January with a warning that spending on entitlement programs poses a long-term threat to the triple-A rating for government bonds. And that was before the financial crisis.

Interest rates remain low because of the crisis. But they will rise, particularly when the U.S. government starts borrowing more money to cover its growing debt, analysts predict. That could cause inflation to increase as well.

"We could easily enter into a highly inflationary situation because of all the stimulus we have and all the borrowing we have once it works its way through the economy," MacGuineas said. "The single most important priority right now is to stabilize the economy . . . but it really means that there is a huge risk on the other side."

Paulson and Bernanke Spread the Wealth Around

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By Dean Baker

During the campaign, Barack Obama provoked a media flurry and right-wing outrage over his comment to Joe the Plumber about "spreading the wealth around." They told us that this view was contrary to the American Way, that this was socialism.

Given all the concern over Obama's ideas about spreading the wealth, it is remarkable how little attention is being given to Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke's much more ambitious effort to spread the wealth. They are putting in practice measures that swamp any plans put forward by Obama in the presidential campaign; yet, this massive government redistribution of wealth is drawing almost no attention whatsoever.

The basic story is that the Treasury and Fed together now control several trillion dollars of bailout funds. This money is being used with almost no accountability, especially with the Fed's portion of the bailout, which is by far the bulk of the funds.

Fortunes will be made or lost depending on how this bailout money is used. For example, Secretary Paulson just agreed to lend another $20 billion of the Treasury's bailout money to Citigroup.

In addition, the Federal Reserve Board agreed to guarantee up to $300 billion of presumably bad assets. This is an enormously valuable guarantee. If Citigroup had to arrange a comparable guarantee in the private market, it would almost certainly pay more than $30 billion a year.

This decision sent Citigroup's stock soaring. In the week since the bailout was announced, Citigroup's stock more than doubled, adding more than $25 billion to the company's capitalization. (The government could have bought the bank outright with the money it lent to Citi.) This is great news for Citigroup's shareholders, who would be holding almost worthless stock if Mr. Paulson had not been so generous.

Paulson's decision was also good news for Robert Rubin and other top executives at Citigroup. If the government had not stepped in, Citigroup would almost certainly be in bankruptcy and most of its highly paid executives would likely be out on the street.

Creditors of Citigroup also benefited. If Citigroup went into bankruptcy, their loans would be frozen for a period of time while the court determined what percentage of Citi's debts could be paid. At the end of this process, many creditors would only receive back a fraction of what they are owed.

The fact that money is being redistributed doesn't make it wrong to bail out Citigroup or any of the other companies now being aided by the various Fed and Treasury funds. We need to keep the financial system functioning. However, there is every reason in the world to be concerned about the extent to which these policies may be enriching the wealthy and well connected at the expense of the rest of us.

In the case of the Citi rescue, there was no obvious reason the shareholders should not be wiped out. They understood (or should have) that when they bought shares of the company that they could lose their whole investment if the company was poorly managed and went bankrupt. Similarly, there is no obvious reason that the management that wrecked Citi should not be thrown out and replaced with a more competent and lower paid team.

Even among creditors, there are serious grounds for concern. Many holders of Citi debt may have dumped their bonds for a small fraction of their face value because they did not know a bailout was imminent. On the other hand, those with more insight into the operations of the Fed and Treasury could have made enormous fortunes buying up debt, or shares of stock, at discount prices.

Of course, Citi is just a small portion of the bailout story, but the same issues arise everywhere. Corporations that would be out of business if the market were left alone are instead kept operating, courtesy of the taxpayers' dollars. Due to the secrecy surrounding the bailout, the taxpayers can't even know whose vacation homes and private jets they've saved. (How can we know if we should expect a thank you note?)

While we may not know the details, we can be fairly certain that many people are making millions, and some might be making hundreds of millions or even billions of dollars, as a result of the Fed and Treasury's bailouts. Money is being redistributed to those who are skillful in anticipating Fed and Treasury actions or, alternatively, who are politically connected or perhaps just lucky.

In other words, we are spreading the wealth around in a really big way right now, and most of it seems to be going upward. The amount at stake in the tax increases that President-elect Obama plans to put in place is almost certainly less than $50 billion a year. The money that is being redistributed upwards through this bailout may be 20 times as much.

The politicians and media types who were upset about Senator Obama's interference in the market should be yelling bloody murder about the bailout. Their silence shows that they care nothing about the market; they only care about ensuring that money flows upward. They are fine with "spreading the wealth around" as long as it lands with those already at the top.

Pentagon to deploy 20,000 troops on domestic “anti-terror” mission

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By Patrick Martin

The Pentagon has begun to implement plans for the mobilization of 20,000 regular Army troops in anti-terror operations alongside state and local forces, a dramatic change in US military operations within the borders of the United States.

Some 4,700 troops, a full combat brigade based at Ft. Stewart, Georgia, were made available to the US Northern Command on October 1. The remaining troops will be assigned to the Northern Command as they complete assignments in Iraq or Afghanistan and are redeployed home by 2011.

The October 1 deployment was reported in the Army Times newspaper but not otherwise noted in the national media. The larger mobilization for 2011 was reported on the front page of the Washington Post Monday morning, an indication that the Pentagon seeks wider publicity about the move in order to accustom the American public to the sight of uniformed troops in the streets.

The pretext for the increased militarization of American society is, as always, the danger of terrorism, and in this case, a "nuclear terrorist attack," although the Post added that some "other domestic catastrophe" could be the trigger for military action. While the article suggests that this means a natural disaster on the scale of Hurricane Katrina, there is no doubt that the social and economic consequences of the meltdown in financial markets could well qualify as a "domestic catastrophe" requiring military intervention.

The Bush administration has worked for years to undermine the Posse Comitatus Act, a federal law dating back to the post-Civil War Reconstruction period, barring the use of regular military forces for domestic policing duties. The only exceptions to this longstanding ban have been the use of the National Guard during natural disasters, and the deployment of federal troops during the ghetto riots of the 1960s.

Paul McHale, assistant defense secretary for homeland defense, said the use of 20,000 troops in a domestic deployment "would have been extraordinary to the point of unbelievable" before the terrorist attacks of September 11, 2001, according to the text of a speech given to the Center for Strategic and International Studies, a Washington think tank, quoted by the Post. He described the new policy as "a fundamental change in military culture."

Two additional brigades will be assigned to create a total of three response teams to address what the military calls a CBRNE event, for chemical, biological, radiological, nuclear or high-yield explosives. The teams are known in Pentagon jargon as CBRNE Consequence Management Response Forces, or CCMRF. Another 6,000 troops would be drawn from specialized groups of National Guard and reserve troops trained to respond to a CBRNE event.

A combat post training exercise involving elements of three brigades was held September 8-19, 2008. The forces represented in Operation Vibrant Response included the 1st Brigade Combat Team of the 3rd Infantry Division, the unit at Ft. Stewart; the 1st Medical Brigade, Fort Hood, Texas; and the 82nd Combat Aviation Brigade, Fort Bragg, N.C.

McHale told the Post that the armed units would still be subject to the Posse Comitatus Act and would not engage in security duties except those relating directly to the CBRNE event or to protecting themselves while so engaged.

According to the Post account, Deputy Defense Secretary Gordon England signed a directive in late 2007 providing $556 million over five years to fund the program. The Pentagon began a pilot project last month funded by the Federal Emergency Management Agency, in which civilian officials in five states—Hawaii, Massachusetts, South Carolina, Washington and West Virginia—would use military planners to help them develop disaster response plans.

When the Ft. Stewart unit was assigned to the Northern Command on October 1, the Army Times reported the event as "the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities." The unit returned from duty in Afghanistan last spring.

According to the Army Times, the troops would "learn new skills [and] use some of the ones they acquired in the war zone.... They may be called upon to help with civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack...."

The unit's commander, Col. Roger Cloutier, was quoted as follows: "It's a new modular package of nonlethal capabilities that they're fielding. They've been using pieces of it in Iraq, but this is the first time that these modules were consolidated and this package fielded, and because of this mission we're undertaking we were the first to get it."

The package includes equipment to stand up a roadblock; spike strips for slowing, stopping or controlling traffic; shields and batons; and beanbag bullets. It also includes the use of Tasers.

The deployment to NorthCom was made possible by the 2006 Defense Authorization Act, whose Section 1076 empowered President Bush to impose martial law in the event of a threat to "public order," regardless of its cause—i.e., potentially one produced by domestic political or social upheaval, not a terrorist attack.

That provision was drafted by the Republican chairman of the Senate Armed Services Committee, John Warner of Virginia, and the leading Democrat on the panel, Carl Levin of Michigan. According to one press account, the 2008 National Defense Authorization Act limited the power to declare martial law, but Bush issued a signing statement suggesting he did not accept those restrictions.

Both Democratic and Republican governors objected to Section 1076 as an unneeded expansion of presidential authority to federalize the National Guard and usurp the powers of state officials, according to a letter jointly signed by Governor Michael Easley of North Carolina, a Democrat, and Governor Mark Sanford of South Carolina, a Republican, in 2007.

UAW pledges to impose further job losses and concessions on auto workers

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By Joe Kishore

United Auto Workers president Ron Gettelfinger gave his most open pledge yet Sunday that the union would work to impose further sharp concessions on US auto workers.

Speaking to CNN's Wolf Blitzer on "Late Edition," Gettelfinger said the union is "prepared to go back to the bargaining table" and reopen the four-year labor agreements signed in 2007.

The UAW president's remarks came as Detroit's Big Three automakers were readying proposals to present to Congress on Tuesday that will include outlines for further downsizing and cost-cutting in the attempt to return the companies to profitability. According to a report in the New York Times Monday, these plans include a "significant shrinking" of GM's North American operations, including shutting more factories, eliminating brands and delaying or reneging on billions the company pledged to pay into a newly-established union-controlled fund for retiree health care benefits.

Both Democrats and Republicans have demanded concessions in return for any government loan to avert bankruptcy. The UAW bureaucracy completely accepts the consensus of the American political and media establishment, and is working behind the backs of its membership to negotiate cuts.

The contracts signed by the union last year imposed historic concessions on auto workers, including a fifty percent cut in wages for new-hires and so-called non-assembly workers, and the ending of employer-paid retiree health care benefits. But this was considered inadequate by the most powerful financial and political interests, which are using the crisis in the auto industry to destroy the conditions of auto workers and set a precedent for an attack on the entire working class.

In questioning Gettelfinger, Blitzer relied on the statements of prominent Democrats, including President-Elect Barack Obama, demanding "change" in the auto industry. He cited Obama's statement, "We can't just write a blank check to the auto industry. Taxpayers can't be expected to pony up more money for an auto industry that has been resistant to change."

Blitzer also cited a joint statement from House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid demanding that the auto companies present a plan for "long-term viability" and "a restructuring in the industry" in return for a loan.

In response, Gettelfinger pointed to the major concessions the union has already accepted in its 2005 and 2007 contracts. He made clear that the UAW would consider additional concessions, but asked for company management to accept nominal cuts as well. "We need the board members, the management, the suppliers, the dealers, the creditors and the equity holders to all come at the table to make sure that one group doesn't have to accept all the sacrifice." The UAW bureaucracy hopes such bogus claims of "equal sacrifice" will help it sell concessions to a skeptical and largely hostile membership.

Gettelfinger's pledge to "go back to the table" comes only one year after bitter contract disputes that pitted auto workers against the companies and the UAW. The contracts with GM, Ford and Chrysler included new two-tier wage and benefit structures that included starting pay for new workers of $14 an hour.

In exchange for pushing through concessions, the union secured control of a multi-billion dollar retiree health-care trust—a voluntary employees' beneficiary association (VEBA)—to which auto companies pledged to contribute less than half of their health-care liabilities.

Gettelfinger did not go into any details on his discussion with the Big Three management, but media reports have reported the jobs bank—which subsidizes laid off workers for a period of time—will be eliminated. An article in the Wall Street Journal on Monday ("Big Three Discuss Ending Idle-Workers Plan" by Matthew Dolan), reported, "The United Auto Workers union is in talks with some of Detroit's Big Three auto makers to stop a program that pays idled workers, people familiar with the matter said."

Earlier concessions have already substantially reduced the number of workers receiving benefits through the jobs bank. "The size of the revamped program ... has dropped to about 3,000 hourly employees" according to the Big Three. "That's down from 15,000 workers just two years ago, a trend largely driven by time restrictions put in place as part of current union contracts."

The elimination of the jobs bank is largely symbolic, however, and is seen as a down-payment from the union for far more sweeping concessions. The newspaper continued, "UAW officials, including its president Ron Gettelfinger, are said to understand that they are under pressure to deliver cost concessions. Mr. Gettelfinger ‘understands the UAW is part of the solution here,' a person close to the UAW president said. ‘He doesn't want to be characterized as the problem.'"

GM may also seek to alter the funding schedule for the VEBA program, which would threaten the health care benefits for hundreds of thousands of retirees and their dependents. Earlier this year, the union agreed to GM deferring a payment of $1.7 billion. Another payment of $4 billion is due in December 2009 and GM is reportedly seeking another delay.

As the number of unionized workers has declined—and with it the dues base of the UAW—the union bureaucracy sought out the VEBA as a new source of income. The VEBA is set to take over funding of retiree health benefits in 2010. If auto company funding for the VEBA is delayed or cut back, it will fall on the union to impose further cuts on retirees, or eliminate some benefits altogether.

The Big Three, including General Motors, are still considering bankruptcy as a possible option if a government loan is not secured. GM CEO Richard Wagoner is said to be opposed to the option, but according to a Wall Street Journal article on Monday ("GM and Board Race to Craft Convincing Viability Plan" by John Stoll), individuals on the board of directors are actively considering the possibility.

"‘Everything is on the table,' according to one person familiar with the board's thinking," the newspaper reported. "Following Mr. Wagoner's poor performance in Washington last month, the board began meeting more and taking more seriously its obligation to investigate other options," including Chapter 11 and the replacement of Wagoner.

Bankruptcy will mean concessions for auto workers as well, but in a different form. Existing contracts would be ripped up and concessions imposed by a bankruptcy judge.

US stock market plunges 680 points on signs of severe recession

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By Joe Kishore

The National Bureau of Economic Research, an independent economic body in the US, said Monday that the country has been in a recession for one year, since December 2007.

The NBER report combined with additional signs of deep global recession and looming depression, sent US stocks into another tailspin Monday, with markets suffering their biggest losses since October and the fourth-worst point drop for the Dow on record. The bureau is considered to be the arbiter for determining when the country is in a recession.

The Dow Jones Industrial Average fell nearly 680 points, or 7.7 percent, while the NASDAQ and the S&P 500 each fell nearly 9 percent. The drop wiped out half of last week's market surge, which was partly a response to President-elect Barack Obama's picks for top economic posts—picks highly favorable to Wall Street.

The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators." The NBER noted that payroll employment figures reached a peak in December 2007 and have declined every month since.

The statements of the NBER only confirm a trend that has become obvious in recent months, as indicator after indicator has shown a sharp drop in economic activity and consumer spending in the US as part of a severe global economic downturn.

Monday saw the release of several new reports along these lines.

The Institute for Supply Management (ISM) reported that its index of manufacturing activity fell to a 26-year low. The index fell to 36.2 from 38.9 in October, a steeper fall than expected by economists.

The Financial Times cited ING Financial Markets analyst James Knightly noting that the fall in the manufacturing report likely portends a sharp drop in employment for the month of November—a figure that will be released on Friday. The newspaper reported, "The ISM's employment component has fallen to a level consistent with a 150,000 drop in manufacturing payrolls, [Knightly] said, and with initial jobless claims continuing to surge, he expected to see total payrolls decline by around 400,000 in November and the unemployment rate pushing up to 6.9 percent."

In October, official unemployment in the US rose to 6.5 percent from 6.1 percent, with 240,000 jobs lost. The US Commerce Department also reported that construction spending fell by 1.2 percent last month, also more than expected. The spending decline was led by yet another drop in housing construction, which fell 3.5 percent. Nonresidential construction also fell by 0.7 percent.

US economic figures were accompanied by poor reports in other parts of the world. The Chinese purchasing managers index fell to 38.8 in November, from 44.6 in October. The index is at its lowest level since the measure's inception in 2005. Export growth in China has collapsed as a product of the economic decline in the US and Europe.

Manufacturing and sales figures in Europe were also sharply down. A purchasing managers survey in Europe showed manufacturing activity at its lowest level since the survey began in 1987. Major European markets were all down 5 to 6 percent on Monday.

Bank stocks led declines in the US, with Citigroup falling 22 percent, Merrill Lynch 23 percent, Goldman Sachs 17 percent, and Bank of America 21 percent.

JPMorgan Chase announced Monday that it would shed 9,200 jobs at Washington Mutual, the US bank that failed in September and was subsequently bought up by JPMorgan. The cuts amount to more than 20 percent of Washington Mutual's workforce. These come on top of thousands of job cuts already announced in the financial industry.

On November 17, banking giant Citigroup announced that it was cutting 53,000 jobs after four consecutive quarterly losses and just last week the government announced a $250 billion bailout on extremely favorable terms for the bank. A day later, Treasury Secretary Henry Paulson committed $800 billion to prop up the home mortgage and consumer credit markets.

These moves, bringing the amount of government commitments to some $8 trillion, reflect the disoriented and desperate maneuvers of the US government in response to an unprecedented crisis. On Monday, Paulson and Fed Chairman Ben Bernanke both announced that they stood ready to make further funds available for Wall Street in coordination with the incoming Obama administration.

The continued volatility in the markets expresses a fear on the part of investors that the government's various multibillion-dollar bailout plans have failed to stem a sharp economic downturn that threatens to drive the financial sector into further crisis.

Meredith Whitney, a prominent analyst at Oppenheimer, forecast on Monday that the credit card industry would cut lending by more than $2 trillion over the next year and a half.

In a column in the Financial Times, Whitney warned, "Capital destruction has been so intense that multi-trillions in capital raised by institutions through both private and public capital has gone to plug holes and not stabilise the effects of shrinking liquidity to corporations and consumers. More than $3,000bn (€2,365bn, £1,955bn) of available credit has been expunged from the markets and therefore corporate and consumer borrowers so far this year."

Whitney noted that the decline in credit card lending would have a major impact on consumer spending in the US, which is already down sharply. "We believe we are now entering a new era in the financial landscape that will be characterised by expanded forced consumer deleveraging, with a pronounced downshift in consumer spending," Whitney wrote in a separate note released on Monday.

Sales prospects for the Christmas season in the US look gloomy, despite initial reports of an increase in sales figures for "Black Friday," the day after Thanksgiving. Much of the early increase in sales—which dropped off on Saturday and Sunday—was driven by steep discounts that will likely hurt retail profits. Stocks for the major retailers were also down sharply on Monday.

The Cost of Hegemony is Beyond Reach

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By Paul Craig Roberts

Undeterred by massive budget deficits from wars, a falling economy, and financial bailouts, the US government has managed to start a new cold war with Russia. Last Friday, the Russian military announced that it was developing a new generation of ballistic missiles in response to the US government’s decision to deploy ballistic missile defenses in Poland and the Czech Republic.

The “peace dividend” that the Reagan-Gorbachev accord provided has been squandered by an arrogant American government seeking world hegemony.

In 2002 the Bush regime unilaterally withdrew from the Anti-Ballistic Missile Treaty that the US government signed with the Soviet Union in
1972. This treaty stabilized the “assured mutual destruction” that prevented the two military superpowers from initiating war, thus averting a nuclear holocaust for 30 years.

When the Soviet government released its Eastern European “captive nations,” the US government promised not to recruit the Baltic and Eastern European countries for NATO membership. The US government pledged that NATO would not be brought to Russia’s borders. There would be a neutral zone between the Western military alliance and Russia. The American government broke this promise as quickly as it could, bringing former constituent parts of the Russian empire into the American empire.

Last October Admiral Michael Mullen, Chairman of the US Joint Chiefs of Staff, went to Lithuania to give a guarantee to the Baltics of US military intervention in the event of a Russian attack. Like the British guarantee that Chamberlain gave Poland in 1939, a guarantee that precipitated World War II, Mullen’s guarantee is worthless unless the US government initiates nuclear war with Russia in defense of the tiny Baltic republics, which would be wiped out by the radiation fallout.

The US has tried to incorporate the Ukraine and Georgia, constituent parts of Russia for centuries, into NATO. To clear the way for NATO membership, the Bush regime encouraged the American puppet ruler of Georgia to cleanse provinces, attached to Georgia by Stalin, of Russians in order to end secessionist movements. When Russian troops drove the American and Israeli trained and equipped Georgian army out of the Russian parts of Georgia, the US government lied that Russia had invaded Georgia.

This malevolent lie was too much for the Russians and too much of the rest of the world. It was plain to all that the US, an aggressor state striving to encircle Russia with bases even to the edge of central Asia, had initiated a war that it then blamed on Russia. After Afghanistan, Iraq, Bush’s defense of Israel’s 2006 war criminal attack on Lebanon, and Bush’s false claims of an Iranian nuclear weapon, few, if any, countries any longer believe pronouncements of the US government. The US is regarded worldwide as an aggressor state that lies through its teeth.

This means that unless China decides to play the US and Russia off in order to emerge as the sole world power, there is no one to finance America’s side of the new cold war that the US government has created.

The only other way Washington can finance a new arms race with Russia is to cancel Social Security and Medicare, and to repudiate its massive foreign debts. If Washington does this, the likely result would be revolution at home and isolation internationally.

For decades Washington has prevailed because the US dollar is the reserve currency. It is the world’s money. This advantage allows Washington to purchase almost every other government. There are governments all over the world, from Europe to Egypt, from Ukraine to South Korea to Japan, that are owned by Washington. When Washington speaks of spreading freedom and democracy, Washington means it has purchased more governments to do its will.

These purchased governments do not represent their people. They represent American hegemony.

Now that the Great Hegemon is bankrupt and its economy is collapsing, thanks to unbridled greed, American influence is waning. The US dollar cannot survive the massive red ink that the US generates.

When the dollar collapses, the image of a strutting Washington as “the world’s only superpower” will evaporate. The evil that is the American government will find itself at war with its own people and those of the rest of the world.