Friday, January 28, 2011

Egyptian military deploys in Cairo under curfew as protests escalate

Anti-government protesters gather outside the ruling National Democratic Party headquarters, as it is engulfed by flames in Cairo, Egypt, Friday, Jan. 28, 2011. Tens of thousands of anti-government protesters poured into the streets of Egypt Friday, stoning and confronting police who fired back with rubber bullets and tear gas in the most violent and chaotic scenes yet in the challenge to President Hosni Mubarak's 30-year rule. (AP Photo/Tara Todras-Whitehill)

By Maggie Michael and Sarah El Deeb

CAIRO (AP) — Egypt's military deployed on the streets of Cairo to enforce a nighttime curfew after the sun set Friday on a day of rioting and violent chaos that was a major escalation in the challenge to authoritarian President Hosni Mubarak‘s 30-year rule.

In the strongest sign yet that the violent suppression of the largest anti-government protests in decades is costing Egypt the support of its key ally in Washington, the U.S. demanded an end to the crackdown and an administration official said America will review its stand on providing aid to Egypt based on unfolding events.

One protester was killed in demonstrations that stretched across nearly half the provinces in Egypt, bringing the death toll for four days of protests to eight.

Thousands in the capital Cairo defied the curfew and tried to storm two major government buildings — the state TV and the Foreign Ministry. The army escorted TV employees out of the building. Others were praying on the streets after nightfall to show defiance.

Flames rose up across a number of cities from burning tires and police cars. Even the ruling party headquarters in Cairo was ablaze in the outpouring of rage, bitterness and utter frustration with a regime seen as corrupt, heavy-handed and neglectful of grinding poverty that afflicts nearly half of the 80 million Egyptians. Hundreds were looting television sets and electric fans from the burning complex of buildings used by the ruling party.

A bank was also looted and Egypt‘s national carrier EgyptAir suspended flights to Cairo for 12 hours.

Internet and cell phone services, at least in Cairo, appeared to be largely cut off since overnight in the most extreme measure so far to try to hamper protesters form organizing. However, that did not prevent tens of thousands from flooding the streets, emboldened by the recent uprising in Tunisia — another North African Arab nation.

I can’t believe our own police, our own government would keep beating up on us like this,” said Cairo protester Ahmad Salah, 26. “I’ve been here for hours and gassed and keep going forward, and they keep gassing us, and I will keep going forward. This is a cowardly government and it has to fall. We’re going to make sure of it.”

Even Nobel Peace laureate Mohamed ElBaradei, one of the country’s leading pro-democracy advocates, was under house arrest after joining the protests.

It’s time for this government to change,” said Amal Ahmed, a 22-year-old protester. “I want a better future for me and my family when I get married.”

Story Continues →

Iranian Martyrs Book Found on Mexican Border as Beck Film Premieres

Iranian Martyrs Book Found on Mexican Border as Beck Film Premieres

They say it's better to be lucky than good. But on Thursday, Fox News host Glenn Beck may have been both. The night before, his pay-for Insider Extreme web site premiered "Rumors of War," an incendiary pseudo-documentary designed to drum up support for conflict with Tehran by claiming, among other things, "now the Iranians are positioning themselves, so they will be able at some point in time, to penetrate the southern borders of the United States with terrorists." Then almost on cue, the next morning a "Fox News Exclusive" ominously reported, "Iranian Book Celebrating Suicide Bombers Found in Arizona Desert." Immediately picked up by the conservative echo chamber, within hours Beck himself was reporting the story.

That extraordinarily happy coincidence for Beck and his right-wing allies started with a new flash from Thursday morning:

A book celebrating suicide bombers has been found in the Arizona desert just north of the U.S.- Mexican border, authorities tell Fox News.

The book, "In Memory of Our Martyrs," was spotted Tuesday by a U.S. Border Patrol agent out of the Casa Grande substation who was patrolling a route known for smuggling illegal immigrants and drugs.

Published in Iran, it consists of short biographies of Islamic suicide bombers and other Islamic militants who died carrying out attacks.

But while Fox quoted a Homeland Security statement which cautioned, "At this time, DHS does not have any credible information on terrorist groups operating along the Southwest border," Beck's employer left out some vital information that might cast some doubt on the growing Iranian threat south of the Rio Grande.

Those omissions included the fact that the worse-for-wear copy of "In Memory of Our Martyrs" was written not in Farsi or even Arabic, but in English. Listed on (pictured here), the book was published by Iranian Ministry of Islamic Guidance in 1982, the short book "contains biographies of Islamic suicide bombers, along with final letters they wrote to their families," presumably during Tehran's war with Iraq beginning in 1980.

Nevertheless, as CBS affiliate KPHO Channel 5 in Phoenix reported:

Still, the story has gone viral on the web, with blog posters suggesting this is proof Islamic terrorists who intend to do harm are using our porous border with Mexico to enter the United States.

Rep. Trent Franks, R-Ariz., called on the Obama administration to secure the border. "If terrorists ever come across our border with nuclear weapons... they (could) hold an entire city hostage," Franks said. "This book is a grave reminder of the mindset and intent of the indescribably dangerous enemy we face."

Within hours of the Fox story, the right-wing blogosphere was doing its best to warn of the reading list of the would-be Muslim martyrs in Mexico. Hot Air and Townhall predictably ratcheted up the warning. Then, Glenn Beck's own web site The Blaze amplified the threat, leading its story with "Fox News has an exclusive report detailing how a book celebrating suicide bombers has been found in the Arizona desert just north of the U.S.- Mexican border ." No surprise, The Blaze added a promotion for the Beck's "Rumors of War" documentary, which just happens to be a jeremiad on the same topic.

Editor's note: A portion of the recent documentary, "Rumor of War," released by Glenn Beck deals specifically with this topic. It discusses Iran's infiltration of Mexican drug cartels and the push to enter America through its southern border. That documentary can be viewed here.

By Thursday night, Glenn Beck himself completed the conservative news cycle of life on his own Fox News show:

I want you to know, there are enemies within our own borders. Did you see this FOX News exclusive today? An Iranian book celebrating suicide bombers has been found in the Arizona desert. Gee, you think?

The discovery of that book could be very bad news for the people of the United States of America. Or, given its almost miraculously timed appearance in the Arizona desert, very good news for Glenn Beck.

Mexican Authorities Seize Homemade Marijuana-Hurling Catapult

Mexican Authorities Seize Homemade Marijuana-Hurling Catapult At The Border

Mexican Authorities Seize Homemade Marijuana-Hurling Catapult At The Border Smuggling drugs into the U.S. has become a complicated and high-tech affair. But a group of Mexican drug runners recently applied an 8th-century approach to their profession, using a homemade, trailer-mounted catapult to hurl bales of marijuana over the border.

Mexican soldiers, tipped off by U.S. National Guard troops monitoring the area with surveillance cameras, seized a few dozen pounds of marijuana, a sport-utility vehicle, and the catapult it was towing near the small town of Naco near the Mexico-Arizona border on Friday. The smugglers had already fled the scene.

The catapult was found about 20 yards from the fence, standing roughly ten feet tall and prepped to launch several 4.4-pound bales of pot into the United States. And from what we can gather from the few grainy photos available, it looks like a legit piece of elementary medieval siege weaponry.

Mexican Authorities Seize Homemade Marijuana-Hurling Catapult At The Border Most puzzling is how to classify the lobbing of bulk marijuana across an international border using a machine of not-so-modern warfare. While it doubtless runs afoul of U.S. drug laws, from a diplomatic standpoint is this considered an act of war or a foreign aid package?

Wind and Release: The medieval marijuana slinger is capable of hurling 4.4 pound bales of pot over the U.S.-Mexico border fence

Mexican drug cartels go shopping for their guns in Arizona

Mexican drug cartels go shopping for their guns in Arizona

In Arizona, everyone is freaked out about the violence by Mexican drug cartels south of their border, which was one of the reasons we repeatedly heard from leading state officials as one of their excuses for passing SB1070.

But then it turns out that the ease with which you can buy a gun in Arizona is fueling that violence directly:

The seizure of more than 700 guns and the indictments of 34 people announced on Tuesday are further confirmation that Arizona has become an iron highway for weapons into Mexico, according to federal authorities.

Many legal purchases by straw buyers at Arizona gun stores are being financed and orchestrated by Mexico's Sinaloa cartel, federal officials said.

The cases announced Tuesday involved the purchases of many AK-47s, .50-caliber rifles and other semiautomatic weapons in single-day transactions at gun stores by straw buyers paid by the cartel, U.S. Attorney for Arizona Dennis Burke said.

"This is a huge problem in this state. It is a strange phenomenon," Burke said at a news conference at the Phoenix office of the Bureau of Alcohol, Tobacco and Firearms and Explosives. "Drug cartels go shopping for their war weapons here in Arizona."

At least 17 people were arrested Tuesday in five cases involving a joint crackdown by the ATF, Immigrations and Customs Enforcement, the Internal Revenue Service and the Phoenix Police Department.

Gee, I can remember when, a couple of years ago, Obama administration officials pointed out that many of the guns being used by the Mexican drug cartels were being originating in the USA -- and the NRA and Glenn Beck exploded in angry denial, implying that such imprecations upon the fine name of American arms sellers was an attack on the Constitution itself!

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Mexican drug cartels suspected in American missionary's slaying

Mexican drug cartels suspected in American missionary's slaying

Nancy Davis may have been attacked in Mexico for her truck, police say.

A 59-year-old American missionary was shot in the head and killed in northern Mexico, possibly because one of the local drug cartels coveted her heavy-duty pickup truck, authorities said Thursday.

Nancy Davis' husband, Sam, drove the bullet-riddled blue 2008 Chevrolet against traffic to the border Wednesday afternoon. He crossed the bridge into Pharr, Texas, where he told authorities that the couple had been ambushed about 70 miles south of the border on a Mexican highway by gunmen in a black pickup, according to the Pharr Police Department.

Davis was rushed to a hospital in McAllen, where she died. Friends told reporters she was a longtime missionary with vast experience in the increasingly dangerous area of northern Mexico, which has been racked by drug violence for several years. Local police said the type of truck the Davises drove was prized by Mexican cartels.

The shooting was reported to have taken place near the town of San Fernando, in Tamaulipas state. San Fernando was the site in August where 72 immigrants, mostly from Central America, were abducted and slain in the single largest massacre of Mexico's raging drug war.

Gunmen from the notorious Zeta cartel were suspected in the migrant massacre. They control much of Tamaulipas and are locked in a vicious battle with the rival Gulf cartel for supremacy.

The Davises had spent decades as missionaries in Mexico and owned a home in the nearby state of Nuevo Leon, friends told reporters. They had also founded a group called the Gospel Proclaimers Missionary Assn. in Weslaco, Texas.

The God's Missionary Church in Beavertown, Pa., alerted its congregation about the attack via Twitter. "Long time missionary Nancy Davis has gone to Heaven," the church said. "Serving in that country for over 35 years with her family, she has now given her very life for her people."

American authorities said the investigation was largely in Mexican hands. "Mexico being a sovereign nation, we ask the involved entities over there to aggressively pursue cases such as this," said Erik Vasys, an FBI spokesman.

The Mexican federal government condemned the shooting in a statement Wednesday evening, and the Tamaulipas state government did as well Thursday, while also pledging to cooperate with authorities investigating the killing.

Few crimes are ever resolved in Mexico, however, least of all in a violent state such as Tamaulipas, where cartels hold massive sway.

The attack revived concerns about violence from Mexico's drug wars spilling across the border. Crime has either dropped or held steady along most of the U.S. side of the border, which includes some of the safest parts of the country, according to FBI crime statistics. But there have been signs in recent months that the calm may not hold.

Katherine Cesinger, a spokeswoman for Texas Gov. Rick Perry, said the killing was a reminder of the need for greater border protection. "The federal government has not done nearly enough to secure the border," she said.

Opinion Journal: Wallison: Why I Dissented

AM Report: Unrest Spreads Across Middle East

Demographics Will Drive Global Economic Agendas

Economic Expansion Hits Four-Year High

A Two-Track Plan to Restore Growth

A Two-Track Plan to Restore Growth

Our economic wounds are self-inflicted. Changing fiscal and monetary policies could make a difference fast.

It's been three years since the financial crisis flared up and the recession began. Yet the unemployment rate is still over 9%—double what it was before the recession—and it's been stuck above 9% for 20 consecutive months. Why the extraordinarily high and prolonged unemployment? My research shows that discretionary government interventions—deviations from sound economic principles and policies—have been largely responsible.

Many government interventions occurred before the panic in the fall of 2008, but in the past two years the government doubled down. We have seen an $862 billion stimulus, an increase in federal spending to 25% from 21% of GDP, and a corresponding explosion of federal debt. We have the Fed's unconventional "quantitative easings": purchases of $1.25 trillion of mortgage backed securities and $900 billion of longer-term Treasury bonds. And we have seen hundreds of new regulations in the health and financial sectors.

The one-time stimulus payments to people did not jump-start consumption. The stimulus grants to states did not increase infrastructure spending. Cash for clunkers merely shifted consumption a few months forward. The Fed's purchases did not have a material impact on mortgage interest rates once changes in risks are taken into account. At best these actions had a small temporary effect that dissipated quickly, leaving a legacy of higher debt, a bloated Fed balance sheet and uncertainty—all of which slow growth and job creation.


None of this should be surprising. Well-known theories of consumption predict that temporary payments to households will not increase economic growth by much. Careful empirical studies of stimulus programs in the 1970s showed that stimulus grants to states did not increase infrastructure spending. A vast literature and experience from the 1970s show that discretionary monetary policy, as distinct from rules-based policy, leads to boom-bust cycles with ultimately higher unemployment and higher inflation. With sounder, more stable and more predictable monetary and fiscal policies in the 1980s and '90s we had long expansions and lower unemployment.

The best way to reduce unemployment is to restore sound fiscal and monetary policies. There are some welcome signs that the policy pendulum has begun to swing back in that direction. The recent election revealed deep concern about high debt, deficits and spending.

Three-fourths of business economists and one-half of academic economists say that easy monetary policy exacerbated the housing boom and bust that led to the financial crisis. Reactions to a second round of quantitative easing have been negative at home and abroad. The very word "stimulus" is now avoided by former proponents of spending stimulus. The recent agreement to extend existing income tax rates represents a shift to more predictable policies.

Unfortunately, the president's State of the Union speech raised doubts about the return to sound policy by stressing more government spending and criticizing further extensions of current personal income tax rates. So it is essential for policy makers to grab the policy pendulum, pull it back toward sound fiscal and monetary policy, and tie it in place so it never swings back again.

They should start by laying out a credible plan to reduce spending and stop the debt explosion. If spending as a share of GDP can be brought to 2000 levels and held there with entitlement reforms, then the budget can be balanced without employment-retarding tax-rate increases. A concrete goal should be to establish a long-term budget that the Congressional Budget Office (CBO) can credibly show would bring the debt-to-GDP ratio to 40%. If the plan is ready for this summer's CBO long-term projections, it will give an immediate boost to economic growth and job creation as uncertainty about debt sustainability falls. An example of what the CBO's next projection might look like is shown in the nearby chart of U.S. debt history along with the CBO's projections made in 2009, 2010 and, if the plan is ready, in 2011.

Some want to delay reducing government spending because of high unemployment and the fragile recovery. But there is no convincing evidence that a gradual and credible reduction in government purchases will increase unemployment. The history of the past two decades shows that lower government purchases as a share of GDP are associated with lower unemployment rates. A much better way to reduce unemployment is to encourage private investment. Over the past two decades, unemployment fell when investment increased as a share of GDP. (See the other nearby chart.)

Meanwhile, the Fed should lay out a plan for reducing its extraordinarily large balance sheet. To achieve a more predictable rules-based policy going forward, the Fed's objectives should be clarified. The Federal Reserve Act now says the Fed must "promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." But too many goals blur responsibility and accountability and they allow for confusing changes in emphasis from one goal to another.

Recently the multiple objectives have been used as a rationale for interventionist policies, such as QE2, an approach that Fed officials avoided in the 1980s and '90s. Such interventions can have the unintended consequence of increasing unemployment—as illustrated by the decisions to hold interest rates very low in 2003-2005, which may have caused a bubble and led to the high unemployment today.

It would be better for economic growth and job creation if the Fed's objective was simply "long-run price stability within a clear framework of economic stability." Such a goal would provide a foundation for strong employment growth and would not prevent the Fed from providing liquidity, serving as lender of last resort, and cutting the interest rate in a financial crisis or recession.

The Fed should also be required to report in writing and in hearings its strategy for monetary policy. Such a requirement was removed by Congress in 2000 and should be restored. But rather than reporting only on the monetary aggregates as in the past, the renewed requirement should focus on the strategy for setting interest rates. The Fed should establish its own strategy and report it to Congress.

The Fed would have the discretion to deviate from its strategy in a crisis. But if it does deviate it should be required to report the reasons. This approach provides a degree of political control and accountability appropriate for an independent agency without interfering in day-to-day operations. Such reforms will reverse the short-term focus of policy and help achieve sustained growth and job creation.

Mr. Taylor, a professor of economics at Stanford and a senior fellow at the Hoover Institution, is the author of "Getting Off Track: How Government Actions and Interventions Caused, Prolonged and Worsened the Financial Crisis" (Hoover Press, 2009). This op-ed was adapted from his testimony before the House Committee on Financial Services this week.

Curfew Set as Regime Defies U.S. Calls

Curfew Set as Regime Defies U.S. Calls

[2egypt0128] Getty Images

A protestor gestures to riot policeman in front of the l-Istiqama Mosque in Giza, Cairo. Thousands of police are on the streets of the capital and hundreds of arrests have been made in an attempt to quell anti-government demonstrations.

CAIRO—President Hosni Mubarak declared a curfew in riot-wracked Egyptian cities and army tanks began to enter streets to beat back protesters that took to the streets en masse Friday, as the Egyptian leader essentially defied U.S.'s recent urging to embrace reform.

The country's ruling regime faced its biggest challenge Friday. At scattered points across Egypt's sprawling capital, police used tear gas, bullets and batons while men in plainclothes wielded clubs against demonstrators. It was the fourth straight day of protests in Cairo and other cities across Egypt by demonstrators seeking an end to Mr. Mubarak's three-decade rule.

Friday's protests appeared to be the largest yet in Egypt, a country that has become a focal point for unrest that has spread to countries including Algeria, Yemen and Jordan after people across the region watched Tunisian demonstrators force the ouster of the country's president two weeks earlier.

WSJ's Jerry Seib reports the Middle East has fallen into a storm of violence, and the U.S. must delicately advise leaders and activists. Also, Kelly Crow on Christie's seeing a rebound in the high-end art market.

Egypt's military has been deployed on the streets of Cairo for the first time in the crisis, according to media reports. President Mubarak first declared a curfew in greater Cairo, Alexandria and Suez but later broadened it to cover the entire country, from 4 p.m. to 5 a.m. until further notice, state television reported.

In defiance of the curfew, thousands of protesters on Friday evening filled Cairo's Tahrir Square, the center of massive demonstrations Tuesday. Earier, police had withdrawn from the square, smashing car windows as they retreated. It wasn't clear if they were regrouping or making way for the military.

Also late Friday, thousands of protesters sought to storm the state TV building and the Foreign Ministry, the Associated Press reported. Nearby, some protesters were looted television sets and electric fans from the burning headquarters of the ruling National Democratic Party after the entire complex was set ablaze.

Egyptian security officials said Nobel Peace laureate Mohamed ElBaradei had been placed under house arrest, according to the AP. Mr. ElBaradei, who has sought to rally around him disparate opposition groups that fall outside the country's established opposition, returned to the country Thursday night after a month abroad, declaring he was prepared to lead the opposition to a regime change.

Internet, cell phone and other communications were spotty around the country, as the government appeared to have unplugged most means of communication—including social-networking sites Facebook and Twitter—that activists had been using to coordinate action across the country.

U.K.-headquartered Vodafone Group PLC said in a statement that all mobile operators in Egypt had been instructed to suspend services in parts of Egypt. Vodafone CEO Vittorio Colao said in comments to a Davos session on mobile devices that "Egyptian authorities" had asked the company to "turn down the network totally," a request he said appeared legitimate under Egyptian law.

With events rapidly in Egypt, the Obama administration sharply shifted its tone Friday, expressing "deep concern" over unfolding actions after Mr. Mubarak shut down Internet and cell services in the world's largest Arab country. "Fundamental rights must be respected, violence avoided and open communications allowed," State Department spokesman P.J. Crowley said on Twitter.

Secretary of State Hillary Clinton said the U.S. "wants to partner with the Egyptian people."

"People in the Middle East, like people everywhere, are seeking a chance to contribute and have a role in decisions that will shape their lives," Mrs. Clinton said at the State Department on Friday. "Leaders need to respond...The Egyptian government needs to understand that violence will not make these grievances go away."

Friday's demonstrations were planned by a loose grouping of opposition parties that had planned rallies on Tuesday, largely by spreading word by social-networking sites to Internet-savvy young Egyptians who turned out in the tens of thousands, Egypt's largest demonstration in decades. These people were joined more broadly on Friday, observers said, by a broader slice of Egyptian society.

The country's Muslim Brotherhood, an officially banned but influential opposition force, said on its website Friday that it would call its full numbers onto the streets. That was a marked change from Tuesday, when the Brotherhood endorsed the goal of the protests but refrained from urging its members to join in.

Egyptians Protest Again

Mohammed Abed/Agence France-Presse/Getty Images

With dusk descending on Cairo, protesters broke through a cordon of riot police guarding one of the key bridges in the center of the city and attempted to surge across the Nile River and reach Tahrir Square. The move is typical of the back-and-forth battles between riot police and demonstrators seeking to overcome a hostile security presence and unite in central locations across the sprawling city.

Police beat a hasty retreat after losing a position on the bridge that they had been holding all day in attempts stop people crossing the Nile to reach the central square where luxury hotels and national landmarks are located. But the troops quickly regrouped in defensive positions and demonstrators have not yet reached the square.

Tahrir Square has been a focal point for previous protests.

On Friday, amid the pop and hiss of teargas canisters, some demonstrators stopped and kneeled down to pray on the street. Others threw teargas canisters into office buildings in central Cairo, igniting a small fire in the Arab League headquarters. White smoke was seen billowing from the building.

Violent protest broke out wherever demonstrators gathered with riot police firing tear gas to prevent large groups from forming. From downtown Cairo's Semiramis Intercon hotel, smoke could be seen rising from at least three points across the city. A car burned in downtown's Ramses Square where police were subduing a large group of young men with tear gas and rubber bullets.

Smoke could be seen rising from the square, which borders the dense lower-class neighborhood of Masbiro.

The protests were planned to begin following noon prayers on Friday, a Muslim day of rest.

As the day began, protesters convened as planned at mosques around the city for Friday noon prayers. At Cairo's eminent Al Azhar mosque, the seat of Sunni Islamic learning and one of the oldest institutions of religious teaching in the world, regular noon prayers were truncated, running 20 minutes instead of the usual hour and a half. Security officials said they were instructed not to allow anyone to loiter outside the mosque following prayers.

"We will use force to disperse the people. We are not going to just let them walk the street," said one plainclothes officer. As worshippers filed out of the service under heavy security, a chant of "Allahu Akbar" or "God is great" rose from the exiting crowd. Once the mass of about 500 left the mosque, the chant changed to "the people want the regime to go," and "punish those people," a reference to the government.

"I couldn't be there on Tuesday, but I was inspired," said Mohammed Ahmed, 40, who was jogging along with protesters after he left the services at Al Azhar mosque. Mr. Ahmed said he had been impressed by the events in Tunisia, where a month of protests ended in the ouster of President Zine al-Abidine Ben Ali. "Why can't that happen here," said Mr. Ahmed.

The crowd of mostly men, many wearing the long beards that signal adherence to the ultra-conservative Salafi Islam, seemed united on the immediate goal of ousting Mr. Mubarak.

"I am not Muslim Brotherhood, I am not Salafi, I am not Christian, I am Egyptian," said one bearded man, when asked if his loyalties lay with the Islamist opponents of Egypt's government.

As demonstrators began marching towards the center of town, they were blocked by police in riot gear, who descended on the crowd with truncheons. As some protesters fled, others screamed for them to hold ground.

"Were not leaving," some yelled. "This is a legal protest, this is a peaceful protest."

Shop owners in the working class neighborhood of Attaba, normally the scene of a massive weekly market on Friday, shuttered their shops. When some among the assembled demonstrators began throwing rocks, the rest of the crowd quickly admonished them.

Chants of "peace" could be heard in many gatherings around the city. Crowds addressed the assembled policemen: "Hey helmets, we're your brothers, not terrorists," the crowd chanted rhythmically.

In many of the scuffles, protesters outnumbered police by as many as four to one. When police retreated, protesters cheered.

In one dramatic scene, a woman wearing an Islamic veil that covered her full face broke with a crowd of mostly young men and ran toward the police. As the crowd cheered, she picked up a live teargas canister and lobbed it back at police officers.

For hours on Friday, though, protesters seemed lost in downtown Cairo, stymied by police blockades assembled to keep them from reaching Tahrir Square.

Mr. ElBaradei joined protesters Friday after noon prayers, the AP reported. Police fired water cannons at him and his supporters. They used batons to beat some of Mr. ElBaradei's supporters, who surrounded him to protect him.

A soaking wet ElBaradei was trapped inside a mosque while hundreds of riot police laid siege to it, firing tear gas in the streets around so no one could leave. Tear-gas canisters set several cars ablaze outside the mosque and several people fainted and suffered burns.

When he returned home police stationed outside told him he was not allowed to leave again, the AP reported.

In shutting down Internet communications and sending security forces to violently confront protesters, the government of Mr. Mubarak was taking two steps the Obama administration in recent days explicitly asked it to avoid.

In addition to the communications restrictions, the government also took steps to limit protesters' ability to move around, closing the city's subway system.

Wall Street's Collapse to Be Mystery Forever

Wall Street's Collapse to Be Mystery Forever: Jonathan Weil


Jonathan Weil

To get to the heart of what went wrong with the report released yesterday by the Financial Crisis Inquiry Commission, check out its account on page 254 of how the largest investor in a cash fund managed by Bank of America suddenly pulled out $20 billion of its money in November 2007.

The withdrawal crippled the fund, which had $40 billion of assets at its peak, forcing Bank of America to step in and prop it up. The commission included a note about the episode in the back of its report.

“The identity of the investor has never been publicly disclosed,” it says. The note then referred readers to the source of the information: A couple of stories published in December 2007 by Bloomberg News and the New York Times.

And here I had thought the purpose of the commission’s inquiry was to uncover new facts that the public didn’t already know. Such as: The identity of the mystery investor that single- handedly kneecapped Bank of America’s Columbia Strategic Cash Portfolio, once the largest cash fund of its kind in the U.S. The commission had subpoena power. It should have been able to get this information. It didn’t, though.

This, in journalistic parlance, is what we call a clip job. And that’s the trouble with much of the commission’s 545-page report. There’s lots of breezy, magazine-style, narrative prose. But there’s not much new information.

You can tell the writers knew they were sprinkling MSG on a bunch of recycled material, too, by the way they described their sources. The text and accompanying notes often seem deliberately unclear about whether the commission had dug up its own facts, or was rehashing information already disclosed in court records, news articles or other congressional inquiries.

Old News

For instance, we’re told how a former Bear Stearns hedge- fund manager, Matthew Tannin, sent an e-mail in April 2007 to colleague Ralph Cioffi that said: “Looks pretty damn ugly.” (A few days later they told investors they were confident about their funds, which held subprime mortgage bonds.) The report cites the e-mail as the source for the quote. What it doesn’t say is that the e-mail came out in court records that were widely publicized in 2009.

The report does break some morsels of news. Before it imploded, Bear Stearns used to rely on “window dressing” to make its quarterly balance sheets look smaller. Moody’s Investors Service assumed a 4 percent annual increase in home prices to justify AAA ratings for mortgage-backed securities that later blew up. More such tidbits surely will emerge as reporters and bloggers plow through the report’s pages.

Stating the Obvious

The bulk of it, though, covers ground that was largely known, or at least not all that surprising. (I bought my copy at a local bookstore in Manhattan on Wednesday, the day before the commission’s intended release date, and spent the last two days reading it.)

The report’s conclusions were obvious: The financial crisis was man-made and avoidable. Regulators and credit-rating companies blew it. Banks and homeowners borrowed too much. Companies such as AIG and Lehman Brothers had horrible governance. Ethics and accountability broke down. The government panicked when the crisis hit in 2008. And so forth.

The lack of new insights dovetailed with the commission’s non-confrontational approach. More than 700 people granted interviews, most behind closed doors. Only seldom did the panel issue subpoenas.

Ferdinand Pecora, the chief counsel who led the Senate Banking Committee’s landmark hearings on the 1929 stock market crash, wrote a memoir years later called “Wall Street Under Oath.” A good title for this week’s report would be Wall Street on the Couch.” It remains to be seen whether the commission will make public all the investigative materials it accumulated, as the Pecora Commission did in 1934.

Predictable Failure

The FCIC’s failure was predictable from the start. To examine the causes of the financial crisis, Congress created a bipartisan panel of 10 political appointees led by Democrat Phil Angelides, a former California state treasurer. What was needed was a nonpartisan investigation directed by seasoned prosecutors (like Pecora was) who know how to cross-examine witnesses and get answers.

Whereas Pecora had no fixed deadline, Congress gave the crisis commission until December 2010 to complete its inquiry. Witnesses who didn’t want to cooperate fully could simply milk the clock. The panel got a budget of less than $10 million to investigate all the causes of the financial crisis. Lehman’s bankruptcy examiner got $42 million to produce a 2,200-page report on the failure of a single company.

This week’s report will serve a useful purpose. For anyone who doesn’t know much about the financial crisis, the book is a good, condensed version that’s worth reading, even if it doesn’t add much to the public’s body of knowledge.

“There is still much to learn, much to investigate, and much to fix,” the commission wrote in the preface to its report. That also would make a fitting epitaph.

Pessimism and Prospect

Pessimism and Prospect


[Excerpted from Politically Impossible (1971)]

A deplorable pragmatic tradition has developed under which economists have tended to inhibit careful exposition of "politically impossible" solutions. And that very inhibition has contributed to the "impossibility." Alternatively, economists have come to believe themselves not to be concerned with "political" issues, yet have in practice allowed a subconscious self-censorship to condition their thought and teachings — a censorship based on their tacit judgment of what electorates will welcome, stomach, or reject.

When they do declare categorically that a proposal is ''politically impossible," they are usually indirectly praising it, even if their real purpose is to destroy what is suggested. They are implying that it has to be renounced solely because politicians will not believe they will be able to persuade electorates (or those who finance their campaigns) to accept such a proposition; or else that — for other, less disinterested reasons — the politicians themselves will be unwilling to make the proposal an issue for public debate or discussion. But the harm wrought occurs chiefly when objections due to the supposed vote-acquisition defects of recommendations remain unexpressed.

The attitudes so created have been inclined to engender an unwarranted pessimism about the prospects of fundamental reform. We must never regard the opinions of voters on any issue important to their wellbeing as in any sense unalterable. That is why the explicit statement of proposals that are not pressed, or which are even categorically dismissed on account of evident current unacceptability, may be able to play so fruitful a role.

A long educative period may have to precede many fundamental reforms under democracy or even under other forms of government. Thus it would be possible for a Hindu statesman to condemn the caste system as an obstacle to a much-needed modernization without advocating its immediate eradication. He could state his case in nonemotive, dispassionate terms and commit himself to take no action without the widest general approval for any reform. In that way he could avoid provoking consternation and revolt.

The "Impossible" Does Happen

Nevertheless, the relative difficulty of getting changes accepted by the people prompts the question, expressed in Professor Philbrook's (rhetorical) words,

Should we not … distinguish among conceivable changes according to whether we stand some reasonable chance of actually effecting the necessary shift of attitude? Why waste effort by making suggestions which we cannot hope will be accepted?[1]

"The danger looming before the Western world is a gradual drift of free-enterprise countries toward a totalitarian concentration of economic power."

My answer to this question is weighted differently but is essentially the same as Professor Philbrook's. He points to the truth that proposals which most often seem to be least likely to be accepted by the people may be the most desirable. This is certainly a consideration that magnifies the importance of refusing to accept public opinion in any form as inevitable and unalterable.

But my own answer is empirically inspired. Changes in public opinion of a kind that nearly all experienced observers would have regarded earlier as "inconceivable" do occur in practice.

Schumpeter's almost-terrifying pessimism (in spite of his courageous realism) cannot be accepted. He gave no consideration whatsoever to the possibility that eventual discernment of the very perils to which he was pointing might lead, given the inspired political leadership necessary, to a sufficiently widespread democratic majority supporting reforms in the spirit of the "Tocqueville principle" and acceptance of the rule that all forms of scarcity contrivance (affecting skill acquisition as well as outputs) should be impartially suppressed because they cause recession, as well as for the regressive incidence. If the economists spoke out, such a solution could not be ruled out as "political impossibility."

Again and again in history the "unbelievable" has occurred when disaster has threatened. This generation has witnessed the formerly totalitarian-minded German people, confronted with the dismal prospects of 1946–1947, accepting the Erhard philosophy of "prosperity through competition," and enjoying the consequential "miracle recovery" of the following decade.

One illustration that threatened disaster may force a government to retreat from a policy long thought of as politically lucrative was the British Labour government's 1969 attempt to curb the abuses of strike-threat power. It proposed legislation then which would have been regarded ten years previously as "politically suicidal." Although its attempt failed, the volte-face had important consequences on opinion. Public attitudes now make it appear possible that the Conservative government will be able to win votes, rather than risk the near-certainty of losing them, by departing from what had been widely accepted as irreversible policy for generations.

Naturally, the proposals have had to be described to the electorate in terms that do not appear to threaten the careers of the union hierarchy or the status of the unions. The objective of the Industrial Relations Bill, in the prime minister's (Edward Heath's) words, is "not shackled trade unions, but free, strong and responsible trade unions." But it is now beginning to appear almost as though it will be "politically impossible" not to persevere with a bill that will effectively curb strike-threat power.

For the last election was won on the promise to end inflation, while the subsequent continuance of strikes has caused reluctant perseverance with the old policy of inflationary validation of duress-enforced labor costs, with prices generally still tending to rise (written in March 1971). The prime minister's opponents are already making political capital out of his having "failed to deliver," having themselves done everything in their power to obstruct delivery.[2]

That shrewd politician, Mr. William F. Buckley Jr. of New York, recently commented on the extraordinary fact that official encouragement of and official provision of facilities for birth control are now widely accepted in the United States, although for many years practically all politicians skated clear of the issue because they felt that any stand in defiance of religious opinion generally would be politically suicidal. Today not only is "family planning" officially promoted, but in several states abortions have been legalized.

Has the "Impossible" Become Imperative?

At other times, politicians seem to have had a sufficient sense of responsibility or a sufficient concern for their careers to stop short of precipitating disaster through capital consumption or runaway inflation. Thus, the Labour government in Britain was forced a few years ago to forego the rapid expansion of welfare services that electors had been promised because it feared that higher tax rates would reduce prospective tax revenues.

Labour politicians began to advocate the imposition of charges for services hitherto "free." And discussion of the government's predicament seems to have helped to create the climate of opinion that permitted the Conservative Party to win an election while pledged to halt inflation, to cut down on welfare expenditures, to impose welfare charges, and to reduce taxes.

The new policy in 1971 has again reversed a trend. Recipients of medical and dental services are now to be called upon to contribute more toward the cost — a reform that, significantly, has permitted more generous aid to the genuinely needy. What is important, however, is that the reversal of direction appears to have occurred just in time to have prevented disaster.

Making the "Impossible" Possible

In referring above to the "miracle recovery" of Germany, I suggested that the prospect of disaster was the main factor in permitting acceptance of the Erhard reforms. Now it seems to me that economic collapse will increasingly threaten the Western democracies if they try to persevere with their attempts to restore employment via inflation when everyone has come to expect inflation to occur.

As we have seen, this is what has been happening. The developing situation may well force an early choice between democracy, political and economic, on the one side and totalitarianism described as "democracy" on the other. If "stagflation" — recession in spite of inflation — eventually causes countries like Britain and the United States to be stampeded by the pressures of shortsighted thinkers and commentators, the intelligentsia would be most hurt in the beginning.

The danger looming before the Western world is a possible outcome of the gradual drift of traditionally free-enterprise countries toward a totalitarian concentration of economic power due to reactions to "stagflation." The drift originates in the almost self-perpetuating political weaknesses of which reluctant inflation is the consequence. Because governments have shrunk from the task of exposing the responsibility of the unions for chronic incipient recession, and have been able to hold off rapidly worsening unemployment only through inflation, society strives to protect the real value of its capital in the remaining sectors of the economy in which the price mechanism still operates with relative freedom.

Governments then feel compelled eventually to suppress such efforts. That is basically why "income policies" and other kinds of totalitarian control have to be resorted to. When the leaders of opinion realize the dangers, will fundamental reforms remain "politically impossible"?

Are We Isolationists? Yes and No

Are We Isolationists? Yes and No


"Isolationism does not mean that they will not voluntarily borrow from other cultures nor that they will surround themselves with parochial walls."

[This article is excerpted from chapter 11 of Out of Step (1962). An MP3 audio file of this article, narrated by Brad O'Connell, is available for download.]

When World War I broke out in 1914, the Chicago Tribune announced with considerable pride that it was sending a parcel of reporters to Europe to "cover" the battles and the capitals of the warring nations. This was something new in American journalism. What had constituted foreign news previously were reports of what royal families were doing, affairs in which peeresses were involved, or a "passion" murder. Most of these stories were taken bodily from the European press. In fact, my wife, before she was married, was engaged in getting up a European "letter" for a news agency with the aid of a pair of scissors and a paste pot. The New York Times, with some pretensions to internationalism even in those days, ran on an inside page a column entitled "Transatlantic Cable Dispatches to The New York Times"; it usually occupied about a half page and consisted of stories that could well have been lifted from European papers.

The American press did not go to the expense of sending correspondents to Europe because there was little public interest in European affairs, and as for Africa, Asia, and even Latin America, these were places one learned about in school geography. The country was isolationist. The people, judging from the front pages of the city newspapers, were interested in what went on with the neighbors, in local politics, in crop conditions and the weather. When Congress was in session, which was for a few months in the year, some of the debates were accorded prominence, but not too much; type for a three-column headline had not yet been invented.

The war, when we were finally drawn into it, was something of an adventure for most Americans. Three generations of Americans had come and gone since the country had experienced a full-fledged war; the Indian wars and a couple of "punitive" expeditions into Mexico and Central America were of interest only to the professional army, and the contest with Spain was in the nature of an opéra bouffe. The war in Europe was the real thing, brought into every home by means of the draft and involving a new instrument of war, the bond. Woodrow Wilson had glamorized the undertaking by dubbing it the "war to end all wars" and the "war to make the world safe for democracy"; this last phrase had all the earmarks of "manifest destiny," of the duty of imposing our brand of democracy on the benighted peoples of Europe, and thus appealed to our missionary zeal. Yet, the general feeling was that once we had licked the kaiser we could return to our wonted ways which, in sum, meant isolationism.

After the war, as usual, disillusionment set in. It was soon realized that the conquest of Germany did not mean the end of wars, but was probably the prelude to yet another one, and that our brand of democracy did not sit well with other peoples. The opposition in the Senate to Wilson's League of Nations reflected the attitude of the people who had had enough of involvement in the tangled mess of European diplomacy and wanted out. For 20 years thereafter pacifism was the ruling passion of the country; in novels, on the stage, in magazine articles and in college lecture halls the theme that war was inexcusable was repeated. The spirit of pacifism was reinforced by a resurgence of American isolationism, the feeling that nothing good could come to us from interfering in European internal matters, and that we would be better off minding our own business. It was this inbred isolationism that confronted Franklin D. Roosevelt when he set out to get us into World War II, and from which he was fortuitously delivered by Pearl Harbor.

Since then, isolationism has been turned (by our politicians, our bureaucracy, and their henchmen, the professorial idealists) into a bad word.

"Long before interventionism became a fixed policy of the government, American students went to Europe to complete their education and immigrants introduced their exotic foods to the American table. But these were voluntary adoptions…"

And yet, isolationism is inherent in the human makeup. It is in the nature of the human being to be interested first in himself and secondly in his neighbors. His primary concern is with his bread-and-butter problems, to begin with, and then in the other things that living implies: his health, his pleasures, the education of his children, wiping out the mortgage on the old homestead and getting along with his neighbors. If he has the time and inclination for it, he takes a hand in local charities and local politics. If something happens in his state capital that arouses his ire or his imagination he may talk to his neighbors about the necessity of reform — that is, if the reform happens to engage his interests. Taxation always interests him. But, events and movements that occur far away from his immediate circumstances or that affect him only tangentially (like inflation or debates in the UN) either pass him by completely or, if he reads about them in the newspapers, concern him only academically. A Minnesotan may take notice of a headline event in Florida, as a conversation piece, but he is vitally interested in what has happened in his community: a fire, a divorce case, or the new road that will pass through. How many people know the name of their congressman or take the slightest interest in how he votes on given issues?

It has become standard procedure for sociologists and politicians to take opinion polls and to deduce behavior patterns from such data. Yet it is a fact that the subject matters of these polls do not touch on matters in which the questionees are vitally interested but are topics in which the pollsters have a concern. Putting aside the possibility of so framing the questions as to elicit replies the pollsters want, the fact is that the pride of the questionees can well influence their answers. Thus, a housewife who has been asked for her opinion on South African apartheid, for instance, will feel flattered that she has been singled out for the honor and will feel impelled to give some answer, usually a predigested opinion taken from a newspaper editorial; she will not say honestly that she knows nothing about apartheid and cares less. On the other hand, if she were asked about the baking of an apple pie she would come up with an intelligent answer; but the sociologists are not interested in knowing how to bake an apple pie.

The scientist immersed in the laboratory will weigh carefully any question put to him regarding the subject matter of his science and will probably not come up with a yes-or-no answer; but, he is positive that the nation ought to recognize the Chinese communist regime, because he heard another scientist say so. The baseball fan who knows the batting average of every member of his team, on the other hand, will denounce the recognition of the regime because he has heard that the "reds" are no good. The student whose grades are just about passing will speak out boldly on the UN, reflecting the opinion of his professor on that organization. Everybody has opinions on international subjects, because the newspapers have opinions on them, and the readers like to be "in the swim." That is to say, interventionism is a fad stimulated by the public press and, like a fad, has no real substance behind it. If a poll were to be taken on the subject, should we go to war, the probability is that very few would vote for the proposition; yet, war is the ultimate of interventionism, and the opposition to it is proof enough that we are isolationist in our sympathies. A poll on the subject of isolationism — something like "do you believe we ought to keep out of the politics of other nations and ought to let them work out their problems without our interference?" — might bring out some interesting conclusions; but the politicians and the energumens of interventionism would prefer not to conduct such a poll. Our "foreign-aid" program has never been subjected to a plebiscite.

Isolationism is not a political policy, it is a natural attitude of a people. It is adjustment to the prevailing culture within a country, and a feeling of security within that adjustment. The traditions, the political and social institutions and the moral values that obtain seem good, the people do not wish them to be disturbed by peoples with other backgrounds and, what is more, they do not feel any call to impose their own customs and values on strangers.

This does not mean that they will not voluntarily borrow from other cultures nor that they will surround themselves with parochial walls. Long before interventionism became a fixed policy of the government, American students went to Europe to complete their education and immigrants introduced their exotic foods to the American table. But these were voluntary adoptions, even as we welcomed German and Italian operas and applauded the British lecturers who came here to decry our lack of manners. We certainly enjoyed the bananas and coffee imported from Latin American countries, and, while we might deplore their habit of setting up dictatorships, we felt no obligation to inject ourselves into their political affairs; that was their business, not ours.

"One flaw in the America First program was a tendency toward protectionism; the anti-involvement became identified with "Buy American" slogans and with high tariffs — that is, with economic, rather than political, isolationism."

This was the general attitude of the American people before the experiment in interventionism known as World War I. Before that event, Woodrow Wilson had taken leave of his senses in backing one revolutionary leader against another in Mexico, and had even sent the marines to support his choice; his excuse for opposing Huerta was that that leader had not been "democratically" elected, overlooking the fact that 80 percent of the Mexicans were simply incapable of making a choice, or of caring about it. From that interventionary exploit we garnered a mistrust of American intentions vis-à-vis Mexico which haunts us to this day. But, Wilson's urgency to introduce "democracy" in Mexico was purely a personal idiosyncrasy, shared by his political entourage but not by the American people. We cared little about which brigand — Huerta or Carranza — got to the top, and were stirred up only by the fact that a number of American boys were killed in Mr. Wilson's invasion.

When World War II got going in Europe and it became evident that Mr. Roosevelt was intent on getting us into it, a group of Americans organized the America First Committee for the purpose of arousing the native spirit of isolationism to the point of frustrating his intent. They were for keeping the nation neutral. For various reasons (particularly Pearl Harbor) their plan failed, even though at the beginning they gained the adherence of many Americans. One flaw in their program was a tendency toward protectionism; the anti-involvement became identified with "Buy American" slogans and with high tariffs — that is, with economic, rather than political, isolationism. Economic isolationism — tariffs, quotas, embargoes, and general governmental interference with international trade — is an irritant that can well lead to war, or political interventionism. To build a trade wall around a country is to invite reprisals, which in turn make for misunderstanding and mistrust. Besides, free trade carries with it an appreciation of the cultures of the trading countries, and a feeling of good will among the peoples engaged. Free trade is natural; protectionism is political.

The America First Committee's opposition to our entry into the war was based on political and economic considerations. It is a well-known fact that during a war the State acquires powers that it does not relinquish when hostilities are over. When the enemy is at the city gates — or the illusion that he is coming can be put into people's minds — the tendency is to turn over to the captain all the powers he deems necessary to keep the enemy away. Liberty is downgraded in favor of protection. But, when the enemy is driven away, the State finds reason enough to hold onto its acquired powers. Thus, conscription, which Mr. Roosevelt reintroduced at the beginning of the war, has become the permanent policy of the government; and militarism, which is the opposite of freedom, has been incorporated in our mores. Whether or not this eventuality was in Mr. Roosevelt's mind is not germane; it is inherent in the character of the State. Taxes imposed ostensibly "for the duration," have become permanent, the bureaucracy built up during the war has not been dismantled, and interventions in the economy necessary for the prosecution of war are now held to be necessary for the welfare of the people. This, plus the fact that we are now engaged in preparing for World War III, was the net result of our entry into World War II. Whichever side won, the American people were the losers.

"Free trade carries with it an appreciation of the cultures of the trading countries, and a feeling of good will among the peoples engaged. Free trade is natural; protectionism is political."

Aside from this necessary political consequence of our involvement, there was the further fact that our economy would suffer. More important than the direct effect of increased taxation was the indirect effect of inflation resulting from the sale of government bonds. Political duplicity and dishonesty reached the heights when these bonds were advertised as anti-inflationary. The prospective buyers were assured that their purchases would (a) help win the war, (b) make them a profit, and (c) avoid inflation — a strange appeal to their patriotism, their cupidity and their ignorance. It is true that the "savings" bonds, which could not be sold or borrowed upon, would delay their inflationary effect. But when the government redeemed them, at the will of the holders or at maturity, and was unable to resell these bonds to "savers," it would have to resort to borrowing from financial institutions, which would of course demand negotiable securities; these become inflationary. This result could have been anticipated by anyone with a grain of sense; but, during the war this grain was missing and the bonds sold. They sold in spite of an article called, "Don't Buy Government Bonds," which I published at the time. And the fiscal irresponsibility which the Roosevelt administration practiced before we got into the war was accelerated; it hasn't abated yet.

As isolationism is a natural attitude of the people, so interventionism is a conceit of the political leader. There does not seem to be area enough in the world to satiate his desire to exercise his power or, at least, his influence. Just as the mayor of a town hopes to become governor of his state, a congressman, or even president, so does the president or king of a country deem it his duty to look beyond the immediate job of running his country. Necessity limits the interventionary inclination of the head of a small country, unless, indeed, he finds a neighboring small country incapable of resisting his advances. But given a nation opulent enough to maintain a sizeable military establishment and an adequate bureaucracy, his sights are lifted beyond the borders. To be sure, his interest is always the enlightenment or the betterment of the people over whom he seeks to extend his dominion or influence, never to exploit them. Thus, Alexander the Great offered the benefits of Hellenic civilization to the peoples of Asia; the Roman legions carried Pax Romana at the tip of their spears; Napoleon imposed French "liberté, fraternité, égalité" on the peoples of Europe, whether they wanted it or not. Hitler tried to extend the influence of Aryanism, and the late British empire was built on the premise that a taste of English civilization would do the natives good.

"Foreign policy" is the euphemism that covers up this inclination toward interventionism. About the only foreign policy consistent with the natural isolationism of a people would be one designed to prevent interference of a foreign power in the internal affairs of the country — that is, protection from invasion. But, that is too limited in scope to satisfy the cravings of the government of a powerful country. Theodore Roosevelt's foreign policy was avowedly designed to spread among other peoples the benefits of American civilization — even at the end of a Big Stick. Without an income tax, he could do very little beyond the display of naval might to execute this purpose, and the job was undertaken by Woodrow Wilson. It is interesting to note that Mr. Wilson was by persuasion an antimilitarist and an isolationist; yet the exigencies of office induced him to lead the country into war and into the missionary purpose of spreading American democracy far and wide. He failed, partly because the peoples of the world were not willing to adopt the American tradition and partly because he could not break down American resistance to interventionism. It remained for Franklin D. Roosevelt, aided and abetted by a great depression and a great war, to do that. And now that a monstrous bureaucracy with a vested interest in interventionism is in control of our "foreign policy," the nation is committed to a program of interference in the affairs of every country in the world.

"It is interesting to note that Mr. Wilson was by persuasion an antimilitarist and an isolationist; yet the exigencies of office induced him to lead the country into war and into the missionary purpose of spreading American democracy far and wide."

Something new has been added to the technique of exporting our culture; instead of sending it abroad at the point of a bayonet, we (or rather our bureaucrats) are attempting to bribe the "underdeveloped" peoples into accepting it. But these peoples, accustomed as they are to their own traditions, their own customs, and their own institutions, seem to be unappreciative of our efforts, and the net result of our "foreign-aid" program (aside from supporting a free-spending bureaucracy) is to support the politicians of the recipient countries in a manner of living to which they are not accustomed. The current rationalization of this international dispensation of alms is that it is necessary to prevent the spread of communism. But communism is a way of life imposed on a people by their politicians; and if these, for their own purposes, choose communism, our "aid" simply enables them to make that choice. Meanwhile, the peoples of the world remain impervious to our brand of civilization; their loyalty to their own traditions is unimpaired by our largess; they remain isolationist. Adding insult to injury, they resent our intrusion into their manner of living, call us "imperialists," and impolitely ask our agents to go home.

In short, they ask us to return to the isolationism that, for over a hundred years, prospered the nation and gained for us the respect and admiration of the world.

Another Day Older and Deeper in Debt…

Another Day Older and Deeper in Debt…

If lawmakers are going to vote in favor of raising the debt ceiling, they should do it only in exchange for a change in the country’s direction.

Last year, Congress approved a $1.9 trillion increase of the debt limit to support the government's borrowing. This lifted the total amount the federal government could borrow to $14.3 trillion.

Now Congress needs more money, so the debate about the debt ceiling is making the front pages again. This time around, the federal government proposes that it be allowed to borrow an additional $700 billion to pay its bills, which would raise the national debt to $15 trillion (more than the size of our gross domestic product). This would support the federal government's borrowing through 2011.

Democrats spent a lot of money over the last two years, hence the two consecutive increases of the debt limit in just three months in 2009, and the biggest one-time increase of all time in 2010. But Democrats are not the only debt-friendly party. According to the Office of Management and Budget, the federal debt limit has been raised 98 times since 1940—more than once a year, on average. Under President Bush alone, Republicans voted to raise the debt limit by about $5.4 trillion.

When the statutory debt limit was instituted in 1939, its explicit goal was to limit congressional spending.

When the statutory debt limit was instituted in 1939, its explicit goal was to limit congressional spending. Its purpose is supposedly still the same today. Technically, if the debt nears its statutory limit, the Treasury Department cannot issue new debt to manage short-term cash flows or manage the annual deficit. The government may be unable to pay its bills.

This limit actually worked well for a while. The chart below shows increases in the federal debt and the statutory debt limit since 1940. From 1940 to the beginning of the 1980s, the debt and its limit grew slowly.

de Rugy 1.12.11

In the 1980s, however, both the debt and the limit started increasing at a faster rate. Since 2000, the debt limit has been increased ten times; in 2008 and 2009 it was increased twice in the same year. It was increased yet again last year. Now, Treasury Secretary Tim Geithner warns that the debt limit may be met again as early as March 31 this year.

As is frequently the case, lawmakers and pundits are arguing that they have to raise the limit because otherwise the country would default. Consider this recent quote by Austan Goolsbee, the chairman of the White House Council of Economic Advisers.

This is not a game. The debt ceiling is not something to toy with … If we hit the debt ceiling, that’s … essentially defaulting on our obligations, which is totally unprecedented in American history. The impact on the economy would be catastrophic … I don’t see why anybody’s talking about playing chicken with the debt ceiling. If we get to the point where you’ve damaged the full faith and credit of the United States, that would be the first default in history caused purely by insanity.

I agree that this is not a game. This way of reasoning, however, obscures the fact that the need to raise the debt ceiling is merely a symptom of a much bigger problem: Congress has been spending too much money for too long.

The consequences will be dramatic if the government fails to make some serious changes to the way it spends money and borrows money to pay for its daily consumption, if it does not change its practice of paying the interest on its debt by borrowing more and more, and if it continues its practice of making benefit promises it will never be able to deliver. Having to raise the debt ceiling is only a sign that Congress keeps failing to do what is necessary to get the nation’s finances in order.

If lawmakers are going to vote in favor of raising the debt ceiling out of fear of the immediate consequences, they should do it only in exchange for a change in the direction this country is going. For instance, they could vote yes in exchange for a credible commitment to reform Medicare, Medicaid, and Social Security, or in exchange for a solid cap on spending across the board (with no exceptions for pet projects, and applicable to all spending, not just new spending increases). They could also vote yes in exchange for a balanced-budget amendment. Whether it is politically difficult or not, it is a good time for action and change.

Veronique de Rugy is a senior research fellow at The Mercatus Center at George Mason University.

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