Thursday, March 3, 2011

A Self-Inflicted Wound

Why a Government Shutdown Would Imperil the Power of Congress


Congress should think twice before forcing a government shutdown as the consequences could be the loss of the power of Congress to control spending through authorization and appropriation bills.

Congress permitted President George W. Bush to accumulate new powers in the executive, and these powers have passed to Obama. Bush succeeded in establishing that as a wartime commander-in-chief he had the “inherent power” to disobey the laws against torture, spying on Americans without obtaining warrants, and indefinite detention. In addition, Bush used signing statements in ways inconsistent with his oath and obligation to uphold the laws of the United States, and he took the U.S. to war based on lies, deception, and fabricated “evidence,” an offense that qualifies as treason.

With these precedents, it is a simple matter for President Obama to declare that, with the U.S. at war in a world of growing instability, he has the inherent power to ignore the debt limit and to continue financing the government with the creation of new money by the Federal Reserve.

Congress could try to protect its loss of the power of the purse by impeaching Obama. But how credible would it be to impeach a wartime president who is using the same “inherent power” of his office that Congress permitted the previous president to use?

The powers that Bush asserted not only violated statutory law, but also set aside constitutionally guaranteed rights that are the essence of American liberty. Yet, Congress made no attempt to restrain him with impeachment. How then does Congress impeach a president who is merely using his power to keep a government at war operating?

As President Bush’s acts were not deemed impeachable offenses, it seems likely that Congress has lost its power to impeach through default.

Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury. His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at:

NATO's Inevitable War

To the Shores of Tripoli?

NATO's Inevitable War


In contrast with what is happening in Egypt and Tunisia, Libya occupies the first spot on the Human Development Index for Africa and it has the highest life expectancy on the continent. Education and health receive special attention from the State. The cultural level of its population is without a doubt the highest. Its problems are of a different sort. The population wasn’t lacking food and essential social services. The country needed an abundant foreign labour force to carry out ambitious plans for production and social development.

For that reason, it provided jobs for hundreds of thousands of workers from Egypt, Tunisia, China and other countries. It had enormous incomes and reserves in convertible currencies deposited in the banks of the wealthy countries from which they acquired consumer goods and even sophisticated weapons that were supplied exactly by the same countries that today want to invade it in the name of human rights.

The colossal campaign of lies, unleashed by the mass media, resulted in great confusion in world public opinion. Some time will go by before we can reconstruct what has really happened in Libya, and we can separate the true facts from the false ones that have been spread.

Serious and prestigious broadcasting companies such as Telesur, saw themselves with the obligation to send reporters and cameramen to the activities of one group and those on the opposing side, so that they could inform about what was really happening.

Communications were blocked, honest diplomatic officials were risking their lives going through neighbourhoods and observing activities, day and night, in order to inform about what was going on. The empire and its main allies used the most sophisticated media to divulge information about the events, among which one had to deduce the shreds of the truth.

Without any doubt, the faces of the young people who were protesting in Benghazi, men, and women wearing the veil or without the veil, were expressing genuine indignation.

One is able to see the influence that the tribal component still exercises on that Arab country, despite the Muslim faith that 95% of its population sincerely shares.

Imperialism and NATO – seriously concerned by the revolutionary wave unleashed in the Arab world, where a large part of the oil is generated that sustains the consumer economy of the developed and rich countries – could not help but take advantage of the internal conflict arising in Libya so that they could promote military intervention. The statements made by the United States administration right from the first instant were categorical in that sense.

The circumstances could not be more propitious. In the November elections, the Republican right-wing struck a resounding blow on President Obama, an expert in rhetoric.

The fascist “mission accomplished” group, now backed ideologically by the extremists of the Tea Party, reduced the possibilities of the current president to a merely decorative role in which even his health program and the dubious economic recovery were in danger as a result of the budget deficit and the uncontrollable growth of the public debt which were breaking all historical records.

In spite of the flood of lies and the confusion that was created, the US could not drag China and the Russian Federation to the approval by the Security Council for a military intervention in Libya, even though it managed to obtain however, in the Human Rights Council, approval of the objectives it was seeking at that moment. In regards to a military intervention, the Secretary of State stated in words that admit not the slightest doubt: “no option is being ruled out”.

The real fact is that Libya is now wrapped up in a civil war, as we had foreseen, and the United Nations could do nothing to avoid it, other than its own Secretary General sprinkling the fire with a goodly dose of fuel.

The problem that perhaps the actors were not imagining is that the very leaders of the rebellion were bursting into the complicated matter declaring that they were rejecting all foreign military intervention.

Various news agencies informed that Abdelhafiz Ghoga, spokesperson for the Committee of the Revolution stated on Monday the 28th that “‘The rest of Libya shall be liberated by the Libyan people’”.

“We are counting on the army to liberate Tripoli’ assured Ghoga during the announcement of the formation of a ‘National Council’ to represent the cities of the country in the hands of the insurrection.”

“‘What we want is intelligence information, but in no case that our sovereignty is affected in the air, on land or on the seas’, he added during an encounter with journalists in this city located 1000 kilometres to the east of Tripoli.”

“The intransigence of the people responsible for the opposition on national sovereignty was reflecting the opinion being spontaneously manifested by many Libyan citizens to the international press in Benghazi”, informed a dispatch of the AFP agency this past Monday.

That same day, a political sciences professor at the University of Benghazi, Abeir Imneina, stated:

“There is very strong national feeling in Libya.”

“‘Furthermore, the example of Iraq strikes fear in the Arab world as a whole’, she underlined, in reference to the American invasion of 2003 that was supposed to bring democracy to that country and then, by contagion, to the region as a whole, a hypothesis totally belied by the facts.”

The professor goes on:

“‘We know what happened in Iraq, it’s that it is fully unstable and we really don’t want to follow the same path. We don’t want the Americans to come to have to go crying to Gaddafi’, this expert continued.”

“But according to Abeir Imneina, ‘there also exists the feeling that this is our revolution, and that it is we who have to make it’.”

A few hours after this dispatch was printed, two of the main press bodies of the United States, The New York Times and The Washington Post, hastened to offer new versions on the subject; the DPA agency informs on this on the following day, March the first:

“The Libyan opposition could request that the West bomb from the air strategic positions of the forces loyal to President Muamar al Gaddafi, the US press informed today.”

“The subject is being discussed inside the Libyan Revolutionary Council, ‘The New York Times’ and ‘The Washington Post’ specified in their online versions.”

‘The New York Times’ notes that these discussions reveal the growing frustration of the rebel leaders in the face of the possibility that Gaddafi should retake power”.

“In the event that air actions are carried out within the United Nations framework, these would not imply international intervention, explained the council’s spokesperson, quoted by The New York Times”.

“The council is made up of lawyers, academics, judges and prominent members of Libyan society.”

The dispatch states:

“‘The Washington Post’ quoted rebels acknowledging that, without Western backing, combat with the forces loyal to Gaddafi could last a long time and cost many human lives.”

It is noteworthy that in that regard, not one single worker, peasant or builder is mentioned, not anyone related to material production or any young student or combatant among those who take part in the demonstrations. Why the effort to present the rebels as prominent members of society demanding bombing by the US and NATO in order to kill Libyans?

Some day we shall know the truth, through persons such as the political sciences professor from the University of Benghazi who, with such eloquence, tells of the terrible experience that killed, destroyed homes, left millions of persons in Iraq without jobs or forced them to emigrate.

On Wednesday, the second of March, the EFE Agency presents the well-known rebel spokesperson making statements that, in my opinion, affirm and at the same time contradict those made on Monday: “Benghazi (Libya), March 2. The rebel Libyan leadership today asked the UN Security Council to launch an air attack ‘against the mercenaries’ of the Muamar el Gaddafi regime.”

“‘Our Army cannot launch attacks against the mercenaries, due to their defensive role’, stated the spokesperson for the rebels, Abdelhafiz Ghoga, at a press conference in Benghazi.”

“‘A strategic air attack is different from a foreign intervention which we reject’, emphasized the spokesperson for the opposition forces which at all times have shown themselves to be against a foreign military intervention in the Libyan conflict”.

Which one of the many imperialist wars would this look like?

The one in Spain in 1936? Mussolini’s against Ethiopia in 1935? George W. Bush’s against Iraq in the year 2003 or any other of the dozens of wars promoted by the United States against the peoples of the Americas, from the invasion of Mexico in 1846 to the invasion of the Falkland Islands in 1982?

Without excluding, of course, the mercenary invasion of the Bay of Pigs, the dirty war and the blockade of our Homeland throughout 50 years, that will have another anniversary next April 16th.

In all those wars, like that of Vietnam which cost millions of lives, the most cynical justifications and measures prevailed.

For anyone harbouring any doubts, about the inevitable military intervention that shall occur in Libya, the AP news agency, which I consider to be well-informed, headlined a cable printed today which stated: “The NATO countries are drawing up a contingency plan taking as its model the flight exclusion zones established over the Balkans in the 1990s, in the event that the international community decides to impose an air embargo over Libya, diplomats said”.

Further on it concludes: “Officials, who were not able to give their names due to the delicate nature of the matter, indicated that the opinions being observed start with the flight exclusion zone that the western military alliance imposed over Bosnia in 1993 that had the mandate of the Security Council, and with the NATO bombing in Kosovo in 1999, THAT DID NOT HAVE IT”.

To be continued.

Wall Street Trash

More Trouble in Squanderville

Wall Street Trash


Bob, Frank and Freddie all bought identical houses in the same neighborhood in 2004. Each man paid $300,000 for his home.

Bob paid the whole $300,000 in cash. Frank put down 10% (or $30,000) and took out a $270,000 mortgage. Freddie paid $0-down on a 100% mortgage.

In 2005, home prices rose by 10% which means that Bob made 10% (or $30,000) on his original investment. Frank made 100% on the $30,000 he put down. Freddie made the biggest windfall of all--he made $30,000 in "pure profit".

Question: Which one these three men is most likely to be the banker?

If you guessed "Freddie", you're right. Banks don't like committing capital because it limits profitability. This is why the big banks have fought so ferociously for deregulation, so they're not constrained in the amount of money they can make (via credit creation) with little capital. Of course, when the banking system is propped atop tiny specks of capital, it becomes more wobbly and crisis prone. And, if asset prices suddenly nosedive--as they did when the subprimes exploded--the whole shebang can come crashing down.

The real root of the financial crisis was leverage. The banks were massively over-leveraged (some of them 40 to 1) just like our friend Freddie. This is no longer a matter of dispute. In testimony he gave to the Financial Crisis Investigation Commission (FCIC), Ben Bernanke admitted that 12 of the country's 13 largest banks were underwater.

"If you look at the firms that came under pressure in that period... only one... was not at serious risk of failure," Bernanke told the commission.

So, the banks borrowed too much and were gravely under-capitalized. So when asset prices fell, they were wiped out and the financial system crashed. It was not "the perfect storm" as Wall Street cheerleaders like to say. It was the inevitable outcome of risky behavior. There's nothing unusual about a bank run, especially when the banks are capital-depleted and acting like lunatics.

The housing market would not have collapsed if everyone had acted like Bob. (and paid in cash) In fact, things probably would have been fine if people merely put 10%-down, like Frank. The problem is Freddie. 0-down loans are inherently unsafe because they give the borrower an option to "walk away" if the market tumbles. If housing prices drop 15%, for example, the best business decision for Freddie is to leave the keys on the kitchen counter and find a cheap place to rent. In other words, 0-down creates an incentive to default. And, that's exactly what's happened.

When banks act like Freddie (over-leveraged), the situation is even more dangerous, because a run on the banks can crash the financial system and lead to a Depression. When subprime blew up, institutional investors tried to dump their mortgage-backed securities (MBS) at the same time. Trading stopped as everyone ran for the exits. The secondary market froze and the global financial system suffered a massive heart. Nearly three years later, and the patient is still in ICU on a drip-feed of zero-rates and QE2-nitro.

So, what did the banks learn from that near-death experience?

Nothing. In fact, they've rebuilt the same exact system that blew up less than 3 years ago. And, Ben Bernanke, Timothy Geithner and Barack Obama have helped them every step of the way. This is from Bloomberg:

"Bankers are fiercely resisting the suggestion that they use more equity (capital) and less debt in funding, even though this would reduce their dangerous degree of leverage...

Fixation with return on equity (ROE) also contributes to bankers' love of leverage because higher leverage mechanically increases ROE, whether or not true value is generated. This is because higher leverage increases the risk of equity, and thus its required return. Focus on ROE is also a reason bankers find hybrid securities, such as debt that converts to equity under some conditions, more attractive than equity....

...the structure of current capital requirements distorts banks' decisions. The structure, which is focused on the ratio of equity to so-called risk- weighted assets, might induce banks to choose investments in securities over lending, because securities with high credit ratings require less capital and thus allow more debt funding...

The proposed solutions that regulators in the U.S. are focused on, such as resolution mechanisms, bail-ins, contingent capital and living wills, are based on false hopes. They can't be relied on to prevent a crisis. Increasing equity funding is simpler and better than these pie-in-the-sky ideas." ("-Fed Runs Scared With Boost to Bank Dividends", Bloomberg)

What does this mean? It means that there are strong incentives for the banks to maximize borrowing and put the system at greater risk. It means that banks can't be as profitable by issuing loans to small businesses and homeowners. It means they would rather dabble in all manner of complex paper assets (so they can skim off huge salaries and bonuses) then provide money for productive activity that that creates jobs and revitalizes the country. It means that the financial system in its present configuration is just as dodgy and unstable as before. It means that we are headed for another meltdown.

Wall Street has a word for all of this. It's called "regulatory arbitrage", a fancy expression that means avoiding the rules and doing whatever-the-hell you want. This explains the widespread use of off-balance sheet operations, SIVs (structured investment vehicles), securitization, exotic derivatives contracts, and all of the other opaque debt-instruments that fall under the cheery rubric of "innovation."

All of these so-called innovations have one goal in mind, to maximize leverage so that profits can be derived from infinitesimal specks capital. The problem is, that when financial institutions are highly-geared (leveraged), it only takes the smallest downturn in the market to wipe them out. (Bloomberg: "If 95 percent of a bank's assets are funded with debt, even a 3 percent decline in the asset value raises concerns about solvency and can lead to disruption".)

And, guess what? The banks are still up to their old tricks. Take this for example (from the New York Times):

"When the mortgage securitization market collapsed amid a flood of defaults and foreclosures — many of them on loans that should not have been made — the cry arose for lenders to have "skin in the game." To properly align incentives, the argument went, those who make loans must suffer if the loan goes bad.

That principle was enacted by Congress last year in the Dodd-Frank law, but the mortgage industry managed to persuade legislators to insert an ill-defined loophole that would allow at least some mortgage loans — and perhaps nearly all of them — to escape the requirement that banks retain at least 5 percent of the risk....

Much of the banking industry has been pushing for an expansive definition that would leave few, if any, conventional loans subject to the skin-in-the-game requirement. To hear them tell it, there is virtually no way that any bank would make a mortgage loan at a reasonable rate if it had to share in any losses."

("Looks Like Banks Lose on Risk Plea", Floyd Norris, New York Times)

Got that? The banks still do not want to put one stinking dime behind the garbage paper they are creating. They are still fighting to securitize loans with no skin-in-the-game. See? They're all Freddies.

After the trillions in bail outs, one would think that the banks would be grateful. But, no. In fact, if the capital requirements are implemented, many of the banks may just pack up and leave. Here's the story in the Wall Street Journal:

"Some foreign banks are moving to restructure their U.S. operations to avoid one of the most-burdensome requirements of the new Dodd-Frank law.

In November, Barclays PLC quietly changed the legal classification of the U.K. bank's main subsidiary in the U.S. so that the unit would no longer be subject to federal bank-capital requirements. Several other banks based outside the U.S. are considering similar moves, according to people familiar with the matter.

The maneuver allows them to escape a provision of the financial-overhaul law that forces the pumping of billions of dollars of new capital into the U.S. entities, known as bank-holding companies.

"It's just not worth it to have all that capital trapped" in the holding company, said a New York lawyer who is advising banks on how to restructure....

Policy makers are demanding banks hold more capital and cash to help prevent a repeat of the financial crisis. But bank executives are worried that all the changes will crimp profits without making the financial system safer." ("Banks Find Loophole on Capital Rule", Wall Street Journal)

"Ingratitude, the marble-hearted beast!". Shakespeare must have known a few bankers in his day, too.

And, here's the corker; the banks are still broke. Aside from the fact that housing prices are falling sharply (increasing the banks loan losses) and that there will another 2 million foreclosures in 2011, the real condition of the banks books are still hidden from public view. Here's a glimpse from the WSJ's Michael Rapoport,:

"During the financial crisis, investors fretted over "toxic," hard-to-value assets that banks were carrying. Those fears have faded as bank profits have rebounded, loan delinquencies have declined, and bank stocks have soared 25% in the past five months.

But banks still hold plenty of the bad assets that once spooked investors: mortgage-backed securities, collateralized debt obligations and other risky instruments. Their potential impact concerns some accounting and banking observers.

In part due to those bad assets, the top 10 U.S.-owned banks had $13.8 billion in "unrealized losses" that have lasted at least a year in their investment portfolios as of Sept. 30, according to a Wall Street Journal analysis. Such losses are baked into banks' book value, but don't get counted against earnings as long as the banks believe the investments will later rebound. If those losses were assessed against earnings, it would have reduced the banks' pretax income for the first nine months of 2010 by 21%, according to the Journal analysis.

Unrealized losses are just one way in which the troubled assets obscure banks' true financial condition, accounting experts say....Another problem: Even when banks do take real charges because of their securities losses, accounting rules allow them to keep some of those charges from hurting their bottom line.

Making the picture even murkier, the value of many risky assets are based solely on the banks' own estimates—leaving valuations uncertain and, some critics say, overstated....

One problem centers largely on "Level 3" securities, illiquid investments that can't be easily valued using market prices. According to the Journal analysis, as of Sept. 30, the top 10 banks had $360.7 billion in "Level 3" securities. That amounts to 42.6% of the banks' shareholder equity, a pile of assets whose value is hard to verify." ("Toxic' Assets Still Lurking at Banks", Michael Rapoport, Wall Street Journal)

"$360.7 billion" in garbage assets and financial stocks are still in the stratosphere?!? No wonder Bernie Madoff called the whole thing a "Ponzi scheme".

No one knows the true condition of the banks books because the accounting fraud is so thick that's it's impossible to see through it. Here's the scoop from the WSJ on how the Financial Accounting Standards Board (FASB) caved in to Wall Street and gave them the go-ahead to lie as much as they want:

"The banks got what they wanted. Accounting rule makers on Tuesday dropped a plan to require banks to value loans using market prices.

That means investors will remain reliant on banks' own views of the worth of their assets. Those judgments proved seriously flawed during the financial crisis and left many with insufficient capital. Taxpayers, who as a result were called upon to bail out numerous institutions, also are left more vulnerable.

The Financial Accounting Standards Board's original proposal, put forward last spring, had called for banks to reflect market values in the total worth of their assets, which would affect their equity....Banks generally oppose the use of market prices because, they say, it makes their results more volatile. Their intense lobbying efforts against the proposal likely got a leg up after FASB Chairman Robert Herz, who had supported the plan, unexpectedly departed in August. FASB cited strong opposition it received in public comments in changing course.

Its decision means banks largely will continue to value loans as they do today, basing values on their original cost less a reserve to reflect the possibility of loss. FASB has yet to decide if the market value for loans will be disclosed on the balance sheet or buried in the footnotes, as they are now." ("Banks get the green-light to cook the books", Wall Street Journal)

So, imagine that you, dear reader, took out a loan at the bank by posting your $2.5 million dollar home in Beverly Hills and your custom Maserati for collateral. Now imagine that the banker decided to check up on your claim and found that you actually rode a rusty Schwinn bike to your job of collecting cans by the side of the freeway and lived in a cardboard lean-to next to the sewage-treatment plant. How long do you think it would take before the bank recalled your loan? Of course, if you were a banker and had an army of lobbyists working for you, you could lie to your heart's content and no one would be the wiser. But the truth remains: the banks are broke. The rest is smoke and mirrors.

One last thing: Along with the accounting shenanigans, the toxic assets, the non performing loans and the gigantic leverage, the banks are also hiding millions of REOs "off market" to keep housing prices from plunging even further. This "shadow inventory" will continue to be a drain on bank resources while keeping house prices "bouncing along the bottom" for years to come. Here's a clip from an article by Mark Whitehouse:

"Banks' vast pile of foreclosed homes doesn't appear to be diminishing. That's a troubling sign for the future of the housing market.

Back in April, this column tallied up all the foreclosed homes sitting in banks' inventory, as well as the "shadow" inventory of homes in the foreclosure process or on which owners had missed at least two mortgage payments. At the time, we reported that at the current rate of sales, it would take 103 months to unload it all.

Over the past six months, that number has actually risen. Banks managed to pare down the shadow inventory, but largely by taking possession of foreclosed homes. As of September, they owned nearly 994,000 foreclosed homes, up 21% from a year earlier. The shadow inventory stood at 5.2 million homes, down 7% from a year earlier. Grand total: 107 months of inventory.

The numbers aren't exactly comparable to the April analysis, as the providers of data have changed. The inventory data now come from RealtyTrac, the shadow inventory data from LPS Applied Analytics, and the sales data from Core Logic. But no matter how you slice it, the housing market faces almost nine years of foreclosure hangover.....

The mountain of foreclosed homes casts a long shadow." ("Number of the Week: 107 Months to Clear Banks' Housing Backlog", Mark Whitehouse, Wall Street Journal)

The dismal plight of the housing market hasn't changed much since Whitehouse wrote this article a couple months ago. The bleeding continues and prices are falling fast. If Obama doesn't come up with a remedy soon, the banks will be back on the front steps of the US Treasury with their begging bowls in hand. You can bet on it.

Botton line: The people who caused the financial crisis have reassembled the same system piece by piece paving the way for another massive meltdown.

Organized Labor vs. Public Opinion

Michael G. Franc

Organized Labor vs. Public Opinion
Union overreach is fracturing the Obama coalition.

Listen to the Audio Version

‘Polls show that the vast majority of people think that [Gov. Scott Walker of Wisconsin] has overreached. . . . His popularity has gone down. So he’s losing.” AFL-CIO president Richard Trumka said it on Meet the Press, so it must be true, right?

Not necessarily. More than one poll suggests that public-sector unions have picked a bad time to stage massive temper tantrums to defend the status quo. Most Americans are in no mood to preserve government workers’ inflated salaries and benefits. Indeed, ordinary Americans are not sold on the proposition that public-sector employees should even be allowed to form unions and go out on strike.

In a recent poll on the situation in Wisconsin, Scott Rasmussen found that 48 percent of voters take Gov. Scott Walker’s side in the budget dispute while 38 percent support the public-sector unions. And by a similar margin (49 percent to 38 percent), voters question whether public-sector employees should enjoy the legal right to strike. In this, they agree with Franklin D. Roosevelt, who denounced such strikes as “unthinkable and intolerable” because they look “toward the paralysis of Government by those who have sworn to support it.”

The poll reveals several sizable schisms in the electorate. Men support Governor Walker by a margin of 57 percent to 32 percent. Women side with the unions, though by a smaller margin (44 percent to 40 percent). Young voters are also pro-union, but their elders are decidedly not. Voters age 18–29 support the unions by 52 percent to 36 percent, while seniors side with Walker by a somewhat larger margin (54 percent to 32 percent). There are similar divisions by race and partisan affiliation.

To liberal strategists, this must look an awful lot like the traditional Democratic coalition of disproportionately young, female, minority, and poor voters, a coalition that, though formidable, has never quite constituted a majority of the electorate. To prevail in elections, Democrats have always had to win over additional constituencies. Ethnic union members and conservative Southerners, for example, were essential ingredients of FDR’s New Deal coalition.

More recently, Democrats won elections thanks to their appeal to elite voters, i.e., those with high incomes and lots of education. President Obama carried voters in households with incomes over $200,000 by 52 percent to 46 percent and absolutely dominated among those with post-graduate degrees, winning 58 percent of their votes. Constituting 17 percent of the electorate in 2008 and likely to continue growing as a share of the electorate, the over-educated are a force with which both parties must reckon.

But, when it comes to the budget and labor disputes at issue in Wisconsin, Obama’s majority coalition splinters. Specifically, voters in households with incomes over $100,000 are with Walker 50 percent to 38 percent. Even those with post-graduate degrees are with him by a margin of 48 percent to 43 percent.

Two other significant findings: The “other” category of race (those self-identifying as neither white nor African-American) breaks for the governor by a lopsided 65 percent–to–30 percent margin. And the bellwether group of political independents supports him by 56 percent to 31 percent. It’s never good news for liberals when these voters look a whole lot like conservative Republicans.

The most surprising finding? Voters in union households are split right down the middle. A plurality of 46 percent favor their union brothers and sisters, but 44 percent take Walker’s side. My theory is that union voters who work in the private sector see themselves primarily as stressed-out taxpayers, and therefore see things differently than their brethren in the public-sector unions (the Manhattan Institute’s Steve Malanga calls them “tax eaters”). Again, this is a dynamic that, if it were to spread to other states, could threaten the heretofore successful and unbreakable political formula of the modern union movement.

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My Optimism on the New Arab Revolt

My Optimism on the New Arab Revolt
It is time to discard the soft bigotry of low expectations.

Listen to the Audio Version

Unprecedented convulsions across the Middle East, from Morocco to Iran, prompt three reflections:

First, these rebellions fit into the context of a regional chessboard, what I call the Middle East cold war. On one side stands the “resistance” bloc led by Iran and including Turkey, Syria, Lebanon, Gaza, and Qatar; it seeks to shake up the existing order with a new one, more piously Islamic and hostile to the West. On the other side stands the status quo bloc led by Saudi Arabia and including most of the rest of the region (implicitly including Israel); it prefers things to stay more or less the way they are.

The former (but not Syria) have an agenda, the latter (except Israel) want primarily to enjoy the fruits of power. (Caged tigers, anyone? Or a private concert by Mariah Carey?) The former enjoy offering a vision, the latter can deploy guns, lots of them.

Second, while developments in Tunisia, Libya, Egypt, Yemen, and Bahrain have great significance, there are only two regional geo-strategic giants — Iran and Saudi Arabia — and both are potentially vulnerable. Discontent with the Islamic Republic of Iran became manifest in June 2009, when a rigged election brought massive crowds onto the streets. Although the authorities managed to suppress the “Green Movement,” they could not stifle it and it remains underground. Despite Tehran’s strenuous efforts to lay claim to the revolts across the region, portraying them as inspired by the Iranian revolution of 1978–79 and its own brand of Islamism, these revolts more likely will inspire Iranians to renew their assault on the Khomeinist order.

Were such a counter-revolution to succeed, the implications would go far beyond Iran, affecting the Non-Proliferation Treaty regime, Israeli security, Iraq’s future, the global energy market, and — perhaps most critical of all — the Islamist movement. Bereft of the most important “resistance” government, the Islamist movement worldwide would likely begin to decline.

The Kingdom of Saudi Arabia is no ordinary state. Its power lies in a unique combination of Wahhabi doctrine, control over Mecca and Medina, and oil and gas reserves. In addition, its leaders boast an exceptional record of outside-the-box policies. Still, geographical, ideological, and personnel differences among Saudis could cause its fall. The key question would then be: Fall to whom? Shiites who resent their second-class status and would presumably move the country towards Iran? Purist Wahhabis, who scorn the monarchical adaptations to modernity and would replicate the Taliban order in Afghanistan? Or both in the case of a split? Or perhaps liberals, hitherto a negligible force, who find their voice and lead an overthrow of the antiquated, corrupt, extremist Saudi order?

This latter thought leads to my third and most unexpected observation: The revolts over the past two months have been largely constructive, patriotic, and open in spirit. Political extremism of any sort, leftist or Islamist, has been largely absent from the streets. Conspiracy theories have been the refuge of decayed rulers, not exuberant crowds. The United States, Great Britain, and Israel have been conspicuously absent from the sloganeering. (Libyan strongman Muammar Qaddafi blamed unrest in his country on al-Qaeda spreading hallucinogenic drugs.)

One has the sense that the past century’s extremism — tied to such figures as Amin al-Husseini, Gamal Abdel Nasser, Ruhollah Khomeini, Yasser Arafat, and Saddam Hussein — has run its course, that populations seek something more mundane and consumable than rhetoric, rejectionism, and backwardness.

Pessimism serves as a career enhancer in Middle East studies and I am known for doom-and-gloom. But, with due hesitation, I see changes that could augur a new era, one in which infantilized Arabic speakers mature into adults. One rubs one’s eyes at this transformation, awaiting its reversal. So far, however, it has held.

Perhaps the most genial symbol of this maturation is the pattern of street demonstrators cleaning up after themselves. No longer are they wards of the state dependent on it for services; of a sudden, they are citizens with a sense of civic responsibility.

While I caution against premising foreign policies on this abrupt improvement, it would also be a mistake to discount it. The rebel movements need an opportunity to find themselves and to act as adults. Time has come to discard the soft bigotry of low expectations; speaking Arabic or Persian does not make one incapable of building democratic means to attain free ends.

— Daniel Pipes ( is director of the Middle East Forum and Taube distinguished visiting fellow at the Hoover Institution of Stanford University.

Wisconsin Is About Breaking Up the Union Racket

Wisconsin Is About Breaking Up the Union Racket
The Democrats are protecting their own campaign coffers. Not workers’ rights.

When the Wisconsin General Assembly voted to pass Gov. Scott Walker’s budget-repair bill, the Democratic legislators made themselves indistinguishable from the protestors surrounding the assembly floor.

They wore the same pro-union orange T-shirts. They behaved in the same sophomoric way, breaking out in a noisy, finger-pointing demonstration. They chanted the same ubiquitous word: “Shame!” They might as well have brought guitars onto the floor for a Woody Guthrie sing-along and touted “Walker = Hitler” signs.

In Wisconsin, it’s less that Democrats act to protect a special interest than that they belong to a special interest. A complete identification has long existed among state government, the public-sector unions, and the Democratic party. By seeking to break up this powerful, self-dealing nexus, Walker is “assaulting,” in President Barack Obama’s formulation, a partisan political machine dependent on the state for its functioning.

The fight in Wisconsin has focused on collective-bargaining rights, but that is not the main event. As Daniel DiSalvo of the City College of New York-CUNY notes in a Weekly Standard article, 24 states either don’t allow collective bargaining for public workers, or permit it for only a segment of workers. Even if Walker prevails, Wisconsin will allow more wide-ranging collective bargaining than these states.

Not to mention the federal government. Obama may lecture Walker about union rights, but he can go straight to Congress with a highly political proposal to freeze the pay of federal workers because they can’t collectively bargain for wages or benefits.

No, the most important measure at stake in Wisconsin is the governor’s proposal for the state to stop deducting union dues from the paychecks of state workers. This practice essentially wields the taxing power of the government on behalf of the institutional interests of the unions. It makes the government an arm of the public-sector unions. It is a priceless favor.

Wisconsin doesn’t collect dues for Elks lodges or the NRA. What makes these organizations different from public-sector unions is that people freely choose to join them and freely choose to pay their dues. They are truly voluntary organizations that don’t rely on the power of the state for their well-being. Walker wants to give members of public-sector unions a measure of this same autonomy.

Perhaps some of these members aren’t liberal Democrats, so they don’t want to pay dues — roughly $1,000 annually in the case of teachers — which will overwhelmingly go to funding and organizing for Democratic candidates. Perhaps some of them, regardless of their politics, want to spend that money on their families or other pressing needs. Walker will allow them to exercise a choice now closed to them. In most of 21st-century America, that surely sounds like common sense; for the unions, it sounds like a dire threat.

When Indiana governor Mitch Daniels ended collective bargaining and the automatic collection of dues in 2005, the number of members paying dues plummeted by roughly 90 percent. In 2007, New York City’s Transit Authority briefly stopped automatically collecting dues for the Transport Workers Union, and dues fell off by more than a third. Without these dues, the ability of public-sector unions to influence elections — what they care about most — drastically diminishes.

This is why Wisconsin Senate Democrats preferred to flee the state rather than stay and vote on a proposal that would curtail their fundraising and organizational base. They can dress up their opposition in the rhetoric of workers’ “rights,” but even if all collective bargaining were stripped from all Wisconsin public workers, they’d still have extensive civil-service protections. For Democrats, the issue is whether they can continue to rely on state government to grease an essential cog in their political machine.

Public-sector unions are a creature of government, and the Democrats are the party of government. The two of them have identical interests and worldviews, and both want to leverage government to swell their campaign coffers. How to characterize this? The word “shame” comes to mind.

Rich Lowry is editor of National Review. He can be reached via e-mail,

Palin vs. Romney

Palin vs. Romney
From the Feb. 21, 2010, issue of NR.

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Two potential candidates for the Republican presidential nomination have been described as “frontrunners”: former governors Mitt Romney and Sarah Palin. According to pollster Scott Rasmussen, they’re the candidates with the most supporters among likely Republican-primary voters: Romney has 24 percent, Palin 19 percent. Intrade, the prediction market, has them as the most likely nominees: Romney is given a 23 percent chance of winning, Palin 15 percent. Each of them has a claim to being “next in line”: Romney because he was arguably John McCain’s strongest rival for the nomination in 2008, Palin because she was his running mate.

So there is a non-trivial chance that the Republican nomination contest could come down to Palin vs. Romney, and that their conflict could define the primaries. And that’s very bad news for the Republican party. A campaign that pits the two against each other would divide the Republican party along each of its fault lines. Such a race would almost certainly become bitter and leave the eventual nominee damaged.

A Romney vs. Palin match-up would, for one thing, be a straight-up power struggle between the tea parties and the Republican establishment. Romney has avoided association with the tea parties and Palin has courted them. In a Palin vs. Romney race, the party establishment would rally behind him because it regards her as a certain loser in November 2012 — and fears that she would lose big enough to do damage to Republican congressional and gubernatorial candidates.

Other presidential candidates could bridge this divide. Gov. Mitch Daniels of Indiana, for example, might gain tea-party support because of his budget-cutting record, but also enjoys establishment support. Neither Palin nor Romney is likely to have the same breadth of appeal. Romney’s past liberal positions are likely to strike tea partiers as evidence that his conservative principles are insincere, and his championing of a health-care law in Massachusetts that strikingly resembles Obamacare will make them even more hostile. Palin, meanwhile, revels in the opposition of establishment figures. Their opposition is a key part of her strategy for mobilizing grassroots conservatives. Watching the party establishment line up behind Romney — and thus, from their point of view, behind Obamacare — would enrage the party’s populists.

Class is another increasingly uncomfortable fault line in the party (as Reihan Salam and I recently described in these pages). Romney’s supporters tend to be college-educated, while Palin draws her support from people who didn’t get college diplomas. In recent elections, upper-middle-class voters have left the Republican party in part because they regard it as dominated by yahoos and know-nothings. But other voters, particularly in the party’s base, resent what they see as a tendency to overestimate the importance of degrees from prestigious colleges. In the Delaware Senate race, populist candidate Christine O’Donnell started an ad by saying, “I didn’t go to Yale.” (Romney has two degrees from Harvard, Palin one from the University of Idaho.)

There would even be religious overtones to the conflict. Some voters find his Mormonism, and some voters find her evangelicalism, problematic. (And some voters would probably prefer to have a candidate without a strong religion at all, although few of them vote in Republican primaries.) Even if both candidates tried to keep the race from becoming a religious conflict, hotheaded supporters could draw them into one.

The 2008 presidential election was a festival of identity politics in both parties: upper-middle-class white women voted for Hillary Clinton, Mormons and rich people for Romney, evangelicals for Mike Huckabee, young and inexperienced voters for Barack Obama. If Romney and Palin are the top Republican contenders, the next presidential race could become even more tribal.

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Caught in the Middle East Minefield

Caught in the Middle East Minefield

Victor Davis Hanson

Caught in the Middle East Minefield
The administration is pursuing a confused Middle East policy.

America seems trapped in an exploding Middle East minefield.

Revolts are breaking out amid the choke points of world commerce. Shiite populations are now restive in the Gulf monarchies. Not far away, Iran’s youth are sick and tired of the country’s seventh-century theocracy. Astride the Suez Canal, Egyptian demonstrators just threw out the Mubarak regime. On the coast of the southern Mediterranean, Tunisia and Libya are in upheaval, just a few hundred miles from Europe.

The politics of rebellion are often bewildering. Theocrats in Iran, kings in the Gulf states and Jordan, dictators in Egypt and Tunisia, and thugs in Libya are all gone or threatened. Some, such as Mubarak, were often pro-American. Others, such as Libya’s Qaddafi, hate the United States. Calls for reform now come from a bewildering menu of protestors: Muslim extremists, secular pro-Western liberals, hard-core terrorists, and everyday people who just want a better life.

Strategic concerns frame almost every one of these upheavals. Israel may soon have enemies on all of its borders. Iran is close to getting a nuclear weapon. All the unrest reminds us that today’s supposed friend is tomorrow’s possible enemy — with no certainty about who will end up with a deposed strongman’s arsenal of weapons.

Proximity to Europe means millions of possible refugees could head north and westward. America either has military relations with or gives foreign aid to Egypt, Jordan, and the West Bank (and sometimes does both). Over the last decade, terrorists who have been caught in the United States plotting our destruction came almost exclusively from the restive Middle East.

Tens of thousands of American troops are dispersed throughout Iraq and the Gulf region. Oil-starved China has a hungry eye on these resource-rich, unstable states. More than half of the world’s daily supply of exported petroleum is shipped from the Middle East.

There are only a few constants in this welter of unrest. The common enemy is the autocracy that has impoverished and terrorized Middle Eastern populations for decades. Only a few governments in the general region that have democratic and legitimate governments — Israel and, to a much lesser degree, Turkey and Iraq — have escaped the most recent troubles.

What has been the American response to these crises? In a word, confused.

President Obama assured a savage Iranian theocracy in 2009 that we would not meddle in its internal affairs, amid apologies for our supposed sins more than 50 years ago during the height of the Cold War. In response, Iranian leaders brutally and unapologetically put down popular unrest.

The Obama administration announced at first that Hosni Mubarak was not, and then was, a dictator. It then declared, in temporizing Jimmy Carter fashion, that he should have left yesterday, now, soon, or in the fall. The Muslim Brotherhood was said to be variously suspect, not violent, a needed player in the transition — or apparently all that and more. Finally, we just shut up and assumed that the military coup that threw out Mubarak, suspended the constitution, and quieted the demonstrators would transition to consensual government — without installing another military strongman or allowing the Muslim Brotherhood to hijack the Egyptian revolution Iran-style.

For too long, Obama stayed quiet as Moammar Qaddafi slaughtered Libyans with tanks and artillery. A cynic might have concluded from Obama’s weak, “make no mistake” sermons that if a ruthless regime kills its own, hates America, and bars the press, the United States will appear indifferent. In contrast, if the strongman is more pro-American, allows protests, and lets in the BBC and CNN, then he sort of has earned our rebuke.

In other words, until only recently this administration did not have a consistent policy of promoting nonviolent evolution to constitutional and secular government across the Middle East. Cannot we oppose Iranian theocracy or Libyan thuggery with the same zeal that we showed in finally castigating the Mubarak dictatorship?

Meanwhile, as much of the world’s oil supply teeters on the brink, the Obama administration has stopped new drilling for seven years in the eastern Gulf of Mexico; halted further oil and gas exploration in many regions of Colorado, Utah, and Wyoming; and will not reconsider drilling in small but petroleum-rich areas of Alaska. Instead, we hear the same tired Van Jones–like fantasies about wind and solar power as gasoline prices approach $4 a gallon in recessionary times — with nightmarish scenarios of twice that price if the Persian Gulf descends into chaos.

It is past time for the Obama administration to speak in one voice — prudently, consistently, and forcefully — on behalf of nonviolent transition to secular constitutional government in the Middle East. Meanwhile, to preserve our autonomy and options, America in the short term needs to stop borrowing money and to drill like crazy for oil and natural gas, as we fast-track coal and nuclear power.

Anything less would be near-criminal negligence.

— Victor Davis Hanson is a senior fellow at the Hoover Institution, the editor of Makers of Ancient Strategy: From the Persian Wars to the Fall of Rome, and the author of The Father of Us All: War and History, Ancient and Modern.

Barack Obama repeating Jimmy Carter's mistakes

Barack Obama repeating Jimmy Carter's mistakes

Interior Secretary Ken Salazar is pictured. | AP Photo
Ken Salazar must issue the deepwater drilling permits the nation needs, the author writes. | AP Photo Close

You need to watch only a few minutes of cable news analysis to realize just how ludicrous our national energy policies have become. As escalating tensions and chaos unfold in Egypt, Libya and other Middle Eastern nations, one energy analyst suggested that if Libyan oil supplies were to fail, the United States would rely on Saudi Arabia for its oil needs. If that statement alone doesn’t put U.S. leaders on red alert, the looming national energy crisis may soon become reality.

The Obama administration is repeating the mistakes of President Jimmy Carter’s failed energy policies, which marred his term and stigmatized the 1970s. They are leading us straight into another national energy disaster.

the Obama administration believe this friction abroad underscores the need to move away from oil and gas entirely and shift to boutique forms of alternative energy. Their lack of political will to drill for oil and gas compromises our national security and jeopardizes economic recovery.

It skirts the colossal elephant in the room: Oil and natural gas produced here in the United States are likely to still account for at least 57 percent of domestic energy consumption by 2035. Not to mention that energy production here can relieve the U.S. from the dangerous grip of foreign petro dictators.

Unfortunately, this administration’s Department of the Interior, with the most anti-oil-and-gas record in U.S. history, is sabotaging any real chance of avoiding the pending energy crisis because of its continued hold on deepwater drilling permits in the Gulf of Mexico.

When Interior Secretary Ken Salazar heads before the Senate Energy and Natural Resources Committee on Wednesday, Americans — particularly the 9.2 million directly or indirectly working in the oil and gas industry — would be ill served if the question isn’t asked: Are the thousands, and counting, of out-of-work Americans in the Gulf region and beyond a worthwhile consequence of your department’s freeze?

The Interior Department’s six-month moratorium on offshore oil production has cost 8,169 jobs, according to a study by one Louisiana State University professor, along with more than $487 million in wages and nearly $98 million in forfeited state tax revenues in the Gulf states alone.

This doesn’t include the impact felt nationwide by truckers who transport goods, farmers who use oil to raise and harvest crops and working families paying more at the pump.

After the moratorium was nominally lifted last fall, the blow dealt by Interior’s subsequent permit freeze has been devastating. Not a single deepwater drilling permit has been issued since last year’s tragic oil spill. Unfortunately, there’s no relief in sight, given Salazar’s recent admission that he has no intention of issuing any drilling leases this year.

Message to the GOP: Austerity Is Not Enough

Message to the GOP: Austerity Is Not Enough

Republicans won't capture the White House without a pro-growth platform.


Yesterday Congress passed a resolution ensuring there will be no government shutdown for the next two weeks. But the threat will remain center stage unless Republicans and Democrats can agree on the budget for the remainder of this fiscal year. Who would be blamed if they can't?

Polls provide conflicting data. Democrats take hope from the Feb. 22 Gallup poll reporting that only 32% of Americans want politicians to "hold out" for cuts even if it means a shutdown (60% favor a compromise, and the rest express no opinion). Republicans are buoyed by a Feb. 24-25 Rasmussen survey reporting that 58% favor a partial shutdown until "Republicans and Democrats can agree on what spending to cut."

In this week's ABC/Washington Post poll, 35% say they'd blame President Obama if the "Republicans and the Obama administration can't agree on a budget," while 36% would blame the GOP. That's a significant shift from 1995, when the same poll reported only 27% would blame President Bill Clinton for a shutdown while 46% would blame House Speaker Newt Gingrich and congressional Republicans.

Associated Press

President Barack Obama signs the two-week funding bill averting a government shutdown.

Of course, Democrats could have passed the fiscal year 2011 budget last summer, when they had huge congressional majorities in both chambers. Whether their failure stemmed from their leaders' incompetence or a desire to protect fellow party members facing re-election from casting a vote, Democrats have only themselves to blame for the current crisis.

Still, Mr. Obama and his party have the upper hand. They want to protect their orgy of spending and force the GOP into shutting down the government. Republicans, who cut $42 billion from this year's budget by blocking an omnibus spending measure in December's lame duck session, strongly want to keep cutting. But they don't control the Senate or the White House.

The GOP can maximize its leverage in the upcoming vote on the debt ceiling by insisting on structural reforms. Some congressional Republicans are talking about pairing an increase in the debt ceiling with automatic spending cuts that kick in if the deficit exceeds a fixed target. This was done successfully under the Gramm-Rudman-Hollings Act of 1985 (amended in 1987). This law brought about significant spending restraint and put the country on a path toward a balanced budget until Congress abandoned the approach in 1990.

Still, dangers lurk for Republicans. If they focus only on austerity and neglect to offer a pro-growth message, their attempt to tame the budget will be of limited appeal and could prove to be their undoing.

Consider the United Kingdom. Thirteen months before the last British elections, Conservatives led with 45%, yet ended the campaign with 37% to Labour's 28% and the Liberal-Democrats' 23%. One explanation is that all three parties pledged austerity: Conservatives immediately, the Liberal-Democrats soon, and Labour down the road. None of the parties emphasized a prosperity agenda.

About Karl Rove

Karl Rove served as Senior Advisor to President George W. Bush from 2000–2007 and Deputy Chief of Staff from 2004–2007. At the White House he oversaw the Offices of Strategic Initiatives, Political Affairs, Public Liaison, and Intergovernmental Affairs and was Deputy Chief of Staff for Policy, coordinating the White House policy-making process.

Before Karl became known as "The Architect" of President Bush's 2000 and 2004 campaigns, he was president of Karl Rove + Company, an Austin-based public affairs firm that worked for Republican candidates, nonpartisan causes, and nonprofit groups. His clients included over 75 Republican U.S. Senate, Congressional and gubernatorial candidates in 24 states, as well as the Moderate Party of Sweden.

Karl writes a weekly op-ed for the Wall Street Journal, is a Newsweek columnist and is the author of the book "Courage and Consequence" (Threshold Editions).

Email the author atKarl@Rove.comor visit him on the web Or, you can send a Tweet to @karlrove.

Click here to order his new book,Courage and Consequence.

It is surely essential that Republicans justify spending cuts on fiscal and moral grounds. It is also essential to make the case for restoring robust growth and job creation.

The political genius of Ronald Reagan is that in 1980 he added a pro-growth emphasis (supply-side economics) to his economic message. In 1976, when Mr. Reagan unsuccessfully challenged President Ford, he concentrated more on austerity.

Americans today want to know what steps Republicans will take to create more jobs, bigger paychecks and greater prosperity. A good starting point for the GOP would be to outline a comprehensive tax reform that scrapes preferences out of the tax code and makes it simpler, flatter and fairer.

A Feb. 2-5 Gallup poll (its most recent on the issue) gave Mr. Obama a 27% approval rating on the deficit and 37% approval on his handling of the economy, making the president politically vulnerable. But as the incumbent, Mr. Obama has plenty of advantages and his West Wing political wizards will exploit them.

To prevail in 2012, the GOP needs a pro-growth candidate who represents a pro-growth party. Republicans must put front and center political leaders who can speak in compelling terms about opportunity as well as sacrifice. A message of austerity and prosperity is far more powerful than either one alone.

Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.

DEA sweep targets cartels in response to agent's slaying in Mexico

DEA sweep targets cartels in response to agent's slaying in Mexico

Drawing on firepower, savage intimidation, and cash, drug cartels have come to control key parts of the U.S.-Mexico border, as Mexican troops wage a multi-front war with the private armies of rival drug lords.

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MEXICO CITY - Thousands of U.S. agents and local police arrested and interrogated suspected associates of Mexican drug cartels across the United States on Thursday in response to the killing of a U.S. anti-narcotics agent in Mexico last week.

Agents with the Drug Enforcement Administration launched the operation Wednesday after the Mexican military announced the arrest of eight suspects in the death of Jaime Zapata, a special agent for the U.S. Immigration and Customs Enforcement agency, who was killed in a roadside ambush. Zapata was buried in Texas on Tuesday.

DEA officials said the sweep netted more than 100 suspects - most of them low-level - in Atlanta, Oakland, St. Louis, Denver, Detroit, San Antonio, San Diego, Chicago and New Jersey, as well as in Colombia, Brazil and Central America. The DEA said officers in the United States have confiscated $8 million in cash, more than 100 weapons and 200 pounds of cocaine.

The DEA action, widely reported Thursday in Mexico, is intended to send a strong message to Mexican mafias that U.S. agents are off-limits, officials said.

"We're doing what we always do. But a message was sent. We want to make sure the traffickers understand that we're going to unite to go after them," said Derek Maltz, special agent in charge of the DEA's special operations division.

Late Wednesday, Mexico President Felipe Calderon announced the arrest of Julian Zapata Espinosa, who allegedly told investigators the shooting was a result of "confusion" - that the gunmen either wanted to steal the armored sports utility vehicle the agent and a colleague were driving in or suspected they were enemy cartel members.


Mexico's attorney general revealed that the leader of the Zeta drug cell accused in the killing was arrested by the military in December 2009 after being found in possession of high-powered weapons, camouflage uniforms and fake badges but was released. In Mexico's dysfunctional legal system, many sensational arrests are followed by unpublicized releases.

Calderon and President Obama are scheduled to meet next week to discuss the U.S.-backed drug war in Mexico. Calderon this week defended the Mexican effort and labeled cooperation from the United States "notoriously insufficient."

"How can Americans cooperate?" Calderon asked. "By reducing drug use, which they haven't done. And the flow of weapons hasn't slowed, it has increased."

Assault rifle used in U.S. agent's killing in Mexico traced to Texas

Assault rifle used in U.S. agent's killing in Mexico traced to Texas

U.S. authorities say one of three men they arrested this week purchased an AK-47 at a Texas gun shop that was used in the attack last month that killed a Border Patrol agent and wounded his partner.


Pallbearers carry the casket of ICE agent Jaime Jorge Zapata, who was shot and killed in Mexico on Feb. 15. (Delcia Lopez / Associated Press / February 22, 2011)

Thomas Crowley, spokesman for the federal Bureau of Alcohol, Tobacco, Firearms and Explosives in Dallas, said the weapon was one of three used in the Feb. 15 attack on Agent Jaime Zapata and his partner, Victor Avila, who survived.

The Romanian-made AK-47 was purchased at a Texas gun store in October by Otilio Osorio, 22, whom federal authorities began investigating in connection with suspected weapons purchases on behalf of Mexican drug lords a month after the rifle was bought.

The discovery marked the second time in recent months that a federal agent has been killed by a gun linked to suspected arms traffickers in the U.S.

Two assault weapons found at the scene of a December shootout near Nogales, Ariz., that killed U.S. Border Patrol Agent Brian Terry were found to have been purchased at a gun store in Glendale, Ariz., in January 2010.

The two cases point up the extent to which cross-border arms trafficking, long blamed for fueling the drug violence in Mexico, is a growing threat to the law enforcement agents charged with halting the flow of guns, drugs and immigrants across the U.S.-Mexican border.

On Tuesday, the U.S. attorney's office in Dallas released two criminal complaints charging Osorio and his brother, Ranferi, 27, with possessing firearms with obliterated serial numbers. The brothers were arrested Monday at their home in Lancaster, Texas, along with their neighbor, Kelvin Leon Morrison, 25, who was charged with knowingly making false statements in acquiring a firearm and dealing in firearms without a license.

According to court affidavits, the three men delivered 40 firearms with obliterated serial numbers to an ATF informant near the Mexican border in November. Drug Enforcement Administration agents sought help arranging the delivery in connection with their investigation of the notorious Zetas drug cartel.

The weapon allegedly used in the attack on Zapata and Avila was purchased by Otilio Osorio on Oct. 10, authorities said, but that only became clear when forensics technicians this week were able to read the filed-off serial number.

"We had been looking at these people as gun traffickers," Crowley said, but agents were continuing to quietly investigate them until the discovery of the gun link over the weekend. "We had to mobilize because of the seriousness of the event, and went and got arrest warrants."

On Sunday, Mexican officials announced the arrest in the northern city of Saltillo of Sergio Mora, a purported regional head of the Zetas cartel, in connection with the shooting of Zapata and Avila. At least four other men are in custody.

Violent deaths in Mexico

Violent deaths in Mexico activist's family know no end

The Reyes family has become a case study of the unrelenting violence. Surviving kin angrily blame government officials for failing to protect a family 'so historically aggrieved.'

Family disappeared

Sara Salazar, at a news conference in Mexico City, is the mother of the slain Josefina Reyes, who became an activist after the 2008 kidnapping and killing of her son. (Miguel Tovar / Associated Press)

First they killed activist Josefina Reyes. Then her brother. Then they burned her mother's house. Two and a half weeks ago, gunmen dressed in black kidnapped Reyes' sister, sister-in-law and another brother.

On Friday, their bodies were discovered, shot and dumped on the side of a windswept road in Chihuahua state.

The Reyes family has become a case study of the unrelenting violence ravaging northern Mexico.

Surviving relatives Friday angrily blamed government authorities for failing to protect a family "so historically aggrieved."

"This is part of a growing wave of systematic harassment of the Reyes family by the state" and by criminal forces, the family said in a statement.

Carlos Gonzalez, spokesman for the Chihuahua state attorney general's office, said the bodies of Maria Magdalena Reyes, 45; Elias Reyes, 56; and his wife, Luisa Ornelas, 54; were discovered with handwritten signs suggesting that they had worked for drug traffickers — an allegation the family vehemently denied.

Other members of the Reyes family said they have been targeted because they are resisting a campaign by "outsiders" — presumably drug traffickers — to drive them and other families from their homes in the Juarez Valley around the town of Guadalupe, south of Ciudad Juarez. The region is coveted by organizations smuggling drugs into the United States, and Juarez has become Mexico's deadliest city as rival drug gangs battle for control despite a stepped-up presence of federal police and army forces.

"There are powerful interests that want to silence the Reyes family," Josefina's sister, Marisela, 39, said in an interview this week. She had come to Mexico City and erected a protest tent in front of the Senate to draw attention to her relatives' disappearance.

As is so often the case in Mexico, the story of the Reyes family's suffering is complex and not written in black and white.

Josefina Reyes became an activist after the 2008 kidnapping and slaying of her son. She openly blamed the army occupying parts of the Juarez Valley for her son's death. There were persistent reports at the time that he worked for one of the drug cartels disputing territory around Ciudad Juarez.

Reyes campaigned vociferously against alleged human rights abuse by the military. In January of 2010, an armed commando shot her in the head, making her one of an estimated seven human rights activists slain in Mexico in three years. There have been no arrests in the case, and Gonzalez, of the state attorney general's office, acknowledged again Friday that investigators had no leads.

Seven months after Josefina was killed, her brother, Ruben, was also shot to death.

On Feb. 7 of this year, about half a dozen gunmen pulled Elias and Maria Magdalena Reyes and Ornelas from their truck about 15 miles outside Ciudad Juarez in the early afternoon, according to witnesses.

Josefina Reyes' mother, Sara Salazar, was staging a protest outside government offices in Juarez on Feb. 15 when an armed group torched her house.

Under pressure from the family, authorities this week used dogs and search teams to look for the missing relatives. In the end, however, a passerby spotted the bodies and informed authorities.

Jorge Gonzalez Nicolas, a state prosecutor, said in a news conference that it appeared the victims had been dead for "several days" and that dirt on the bodies indicated they had probably been buried and then disinterred to be dumped by the road.

"It is important to make clear that they were apparently arranged there on the road moments before being spotted … possibly to lower the pressure" from a widening search, he said.

Gustavo de la Rosa, a veteran human rights activist who has been working as an intermediary between authorities and the family, echoed Amnesty International and other organizations in condemning the killings and demanding protection for the remaining Reyes family members.

"This is an aggression against defenders of human rights, because that is what this family was involved in," De la Rosa said.

He called on the army deployment in charge of the area to provide a full accounting of criminal activities in the Juarez Valley. "There are military forces that have been there six, seven months, and they must know something," he said.

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