Monday, 19 July, 2010

A hidden world, growing beyond control

The top-secret world the government created in response to the terrorist attacks of Sept. 11, 2001, has become so large, so unwieldy and so secretive that no one knows how much money it costs, how many people it employs, how many programs exist within it or exactly how many agencies do the same work.

These are some of the findings of a two-year investigation by The Washington Post that discovered what amounts to an alternative geography of the United States, a Top Secret America hidden from public view and lacking in thorough oversight.

After nine years of unprecedented spending and growth, the result is that the system put in place to keep the United States safe is so massive that its effectiveness is impossible to determine. The investigation's other findings include:
* Some 1,271 government organizations and 1,931 private companies work on programs related to counterterrorism, homeland security and intelligence in about 10,000 locations across the United States.

* An estimated 854,000 people, nearly 1.5 times as many people as live in Washington, D.C., hold top-secret security clearances.
* In Washington and the surrounding area, 33 building complexes for top-secret intelligence work are under construction or have been built since September 2001. Together they occupy the equivalent of almost three Pentagons or 22 U.S. Capitol buildings - about 17 million square feet of space.
* Many security and intelligence agencies do the same work, creating redundancy and waste. For example, 51 federal organizations and military commands, operating in 15 U.S. cities, track the flow of money to and from terrorist networks.
* Analysts who make sense of documents and conversations obtained by foreign and domestic spying share their judgment by publishing 50,000 intelligence reports each year - a volume so large that many are routinely ignored.
These are not academic issues; lack of focus, not lack of resources, was at the heart of the Fort Hood shooting that left 13 dead, as well as the Christmas Day bomb attempt thwarted not by the thousands of analysts employed to find lone terrorists but by an alert airline passenger who saw smoke coming from his seatmate.

They are also issues that greatly concern some of the people in charge of the nation's security. "There has been so much growth since 9/11 that getting your arms around that - not just for the DNI [Director of National Intelligence], but for any individual, for the director of the CIA, for the secretary of defense - is a challenge," Defense Secretary Robert M. Gates said in an interview with The Post last week.

In the Department of Defense, where more than two-thirds of the intelligence programs reside, only a handful of senior officials - called Super Users - have the ability to even know about all the department's activities. But as two of the Super Users indicated in interviews, there is simply no way they can keep up with the nation's most sensitive work.

"I'm not going to live long enough to be briefed on everything" was how one Super User put it. The other recounted that for his initial briefing, he was escorted into a tiny, dark room, seated at a small table and told he couldn't take notes. Program after program began flashing on a screen, he said, until he yelled ''Stop!" in frustration.

"I'm not aware of any agency with the authority, responsibility or a process in place to coordinate all these interagency and commercial activities," he said in an interview. "The complexity of this system defies description."

The result, he added, is that it's impossible to tell whether the country is safer because of all this spending and all these activities.

"Because it lacks a synchronizing process, it inevitably results in message dissonance, reduced effectiveness and waste," Vines said.

"We consequently can't effectively assess whether it is making us more safe."

The Post's investigation is based on government documents and contracts, job descriptions, property records, corporate and social networking Web sites, additional records, and hundreds of interviews with intelligence, military and corporate officials and former officials.

Most requested anonymity either because they are prohibited from speaking publicly or because, they said, they feared retaliation at work for describing their concerns. The Post's online database of government organizations and private companies was built entirely on public records.

The investigation focused on top-secret work because the amount classified at the secret level is too large to accurately track. Today's article describes the government's role in this expanding enterprise. Tuesday's article describes the government's dependence on private contractors. Wednesday's is a portrait of one Top Secret America community.

On the Web, an extensive, searchable database built by The Post about Top Secret America is available at washingtonpost.com/topsecretamerica. Defense Secretary Gates, in his interview with The Post, said that he does not believe the system has become too big to manage but that getting precise data is sometimes difficult. Singling out the growth of intelligence units in the Defense Department, he said he intends to review those programs for waste.

"Nine years after 9/11, it makes a lot of sense to sort of take a look at this and say, 'Okay, we've built tremendous capability, but do we have more than we need?' " he said. CIA Director Leon Panetta, who was also interviewed by The Post last week, said he's begun mapping out a five-year plan for his agency because the levels of spending since 9/11 are not sustainable.

"Particularly with these deficits, we're going to hit the wall. I want to be prepared for that," he said. "Frankly, I think everyone in intelligence ought to be doing that."

In an interview before he resigned as the director of national intelligence in May, retired Adm. Dennis C. Blair said he did not believe there was overlap and redundancy in the intelligence world.

 "Much of what appears to be redundancy is, in fact, providing tailored intelligence for many different customers," he said. Blair also expressed confidence that subordinates told him what he needed to know.

"I have visibility on all the important intelligence programs across the community, and there are processes in place to ensure the different intelligence capabilities are working together where they need to," he said.

Weeks later, as he sat in the corner of a ballroom at the Willard Hotel waiting to give a speech, he mused about The Post's findings.

"After 9/11, when we decided to attack violent extremism, we did as we so often do in this country," he said. "The attitude was, if it's worth doing, it's probably worth overdoing."

Outside a gated subdivision of mansions in McLean, a line of cars idles every weekday morning as a new day in Top Secret America gets underway. The drivers wait patiently to turn left, then crawl up a hill and around a bend to a destination that is not on any public map and not announced by any street sign. Liberty Crossing tries hard to hide from view.

But in the winter, leafless trees can't conceal a mountain of cement and windows the size of five Wal-Mart stores stacked on top of one another rising behind a grassy berm. One step too close without the right badge, and men in black jump out of nowhere, guns at the ready.

Past the armed guards and the hydraulic steel barriers, at least 1,700 federal employees and 1,200 private contractors work at Liberty Crossing, the nickname for the two headquarters of the Office of the Director of National Intelligence and its National Counterterrorism Center. The two share a police force, a canine unit and thousands of parking spaces.

Liberty Crossing is at the center of the collection of U.S. government agencies and corporate contractors that mushroomed after the 2001 attacks. But it is not nearly the biggest, the most costly or even the most secretive part of the 9/11 enterprise.

In an Arlington County office building, the lobby directory doesn't include the Air Force's mysteriously named XOIWS unit, but there's a big "Welcome!" sign in the hallway greeting visitors who know to step off the elevator on the third floor. In Elkridge, Md., a clandestine program hides in a tall concrete structure fitted with false windows to look like a normal office building.

In Arnold, Mo., the location is across the street from a Target and a Home Depot. In St. Petersburg, Fla., it's in a modest brick bungalow in a run-down business park. Every day across the United States, 854,000 civil servants, military personnel and private contractors with top-secret security clearances are scanned into offices protected by electromagnetic locks, retinal cameras and fortified walls that eavesdropping equipment cannot penetrate.

This is not exactly President Dwight D. Eisenhower's "military-industrial complex," which emerged with the Cold War and centered on building nuclear weapons to deter the Soviet Union. This is a national security enterprise with a more amorphous mission: defeating transnational violent extremists.

Much of the information about this mission is classified. That is the reason it is so difficult to gauge the success and identify the problems of Top Secret America, including whether money is being spent wisely. The U.S. intelligence budget is vast, publicly announced last year as $75 billion, 21/2 times the size it was on Sept. 10, 2001.

But the figure doesn't include many military activities or domestic counterterrorism programs. At least 20 percent of the government organizations that exist to fend off terrorist threats were established or refashioned in the wake of 9/11.

Many that existed before the attacks grew to historic proportions as the Bush administration and Congress gave agencies more money than they were capable of responsibly spending. The Pentagon's Defense Intelligence Agency, for example, has gone from 7,500 employees in 2002 to 16,500 today.

The budget of the National Security Agency, which conducts electronic eavesdropping, doubled. Thirty-five FBI Joint Terrorism Task Forces became 106. It was phenomenal growth that began almost as soon as the Sept. 11 attacks ended. Nine days after the attacks, Congress committed $40 billion beyond what was in the federal budget to fortify domestic defenses and to launch a global offensive against al-Qaeda.

It followed that up with an additional $36.5 billion in 2002 and $44 billion in 2003. That was only a beginning. With the quick infusion of money, military and intelligence agencies multiplied. Twenty-four organizations were created by the end of 2001, including the Office of Homeland Security and the Foreign Terrorist Asset Tracking Task Force.

 In 2002, 37 more were created to track weapons of mass destruction, collect threat tips and coordinate the new focus on counterterrorism. That was followed the next year by 36 new organizations; and 26 after that; and 31 more; and 32 more; and 20 or more each in 2007, 2008 and 2009. In all, at least 263 organizations have been created or reorganized as a response to 9/11.

Each has required more people, and those people have required more administrative and logistic support: phone operators, secretaries, librarians, architects, carpenters, construction workers, air-conditioning mechanics and, because of where they work, even janitors with top-secret clearances.

With so many more employees, units and organizations, the lines of responsibility began to blur. To remedy this, at the recommendation of the bipartisan 9/11 Commission, the George W. Bush administration and Congress decided to create an agency in 2004 with overarching responsibilities called the Office of the Director of National Intelligence (ODNI) to bring the colossal effort under control.

While that was the idea, Washington has its own ways. The first problem was that the law passed by Congress did not give the director clear legal or budgetary authority over intelligence matters, which meant he wouldn't have power over the individual agencies he was supposed to control. The second problem: Even before the first director, Ambassador John D. Negroponte, was on the job, the turf battles began.

The Defense Department shifted billions of dollars out of one budget and into another so that the ODNI could not touch it, according to two senior officials who watched the process. The CIA reclassified some of its most sensitive information at a higher level so the National Counterterrorism Center staff, part of the ODNI, would not be allowed to see it, said former intelligence officers involved.

And then came a problem that continues to this day, which has to do with the ODNI's rapid expansion. When it opened in the spring of 2005, Negroponte's office was all of 11 people stuffed into a secure vault with closet-size rooms a block from the White House. A year later, the budding agency moved to two floors of another building.

In April 2008, it moved into its huge permanent home, Liberty Crossing. Today, many officials who work in the intelligence agencies say they remain unclear about what the ODNI is in charge of. To be sure, the ODNI has made some progress, especially in intelligence-sharing, information technology and budget reform.

The DNI and his managers hold interagency meetings every day to promote collaboration. The last director, Blair, doggedly pursued such nitty-gritty issues as procurement reform, compatible computer networks, tradecraft standards and collegiality.

"I wasn't remembering any of it," he said. Underscoring the seriousness of these issues are the conclusions of retired Army Lt. Gen. John R. Vines, who was asked last year to review the method for tracking the Defense Department's most sensitive programs. Vines, who once commanded 145,000 troops in Iraq and is familiar with complex problems, was stunned by what he discovered.

But improvements have been overtaken by volume at the ODNI, as the increased flow of intelligence data overwhelms the system's ability to analyze and use it. Every day, collection systems at the National Security Agency intercept and store 1.7 billion e-mails, phone calls and other types of communications. The NSA sorts a fraction of those into 70 separate databases.

The same problem bedevils every other intelligence agency, none of which have enough analysts and translators for all this work. The practical effect of this unwieldiness is visible, on a much smaller scale, in the office of Michael Leiter, the director of the National Counterterrorism Center.

Leiter spends much of his day flipping among four computer monitors lined up on his desk. Six hard drives sit at his feet. The data flow is enormous, with dozens of databases feeding separate computer networks that cannot interact with one another. There is a long explanation for why these databases are still not connected, and it amounts to this:

It's too hard, and some agency heads don't really want to give up the systems they have. But there's some progress: "All my e-mail on one computer now," Leiter says. "

That's a big deal." To get another view of how sprawling Top Secret America has become, just head west on the toll road toward Dulles International Airport. As a Michaels craft store and a Books-A-Million give way to the military intelligence giants Northrop Grumman and Lockheed Martin, find the off-ramp and turn left.

Those two shimmering-blue five-story ice cubes belong to the National Geospatial-Intelligence Agency, which analyzes images and mapping data of the Earth's geography. A small sign obscured by a boxwood hedge says so.

Across the street, in the chocolate-brown blocks, is Carahsoft, an intelligence agency contractor specializing in mapping, speech analysis and data harvesting. Nearby is the government's Underground Facility Analysis Center. It identifies overseas underground command centers associated with weapons of mass destruction and terrorist groups, and advises the military on how to destroy them.

Clusters of top-secret work exist throughout the country, but the Washington region is the capital of Top Secret America. About half of the post-9/11 enterprise is anchored in an arc stretching from Leesburg south to Quantico, back north through Washington and curving northeast to Linthicum, just north of the Baltimore-Washington International Marshall Airport.

Many buildings sit within off-limits government compounds or military bases. Others occupy business parks or are intermingled with neighborhoods, schools and shopping centers and go unnoticed by most people who live or play nearby. Many of the newest buildings are not just utilitarian offices but also edifices "on the order of the pyramids," in the words of one senior military intelligence officer.

Not far from the Dulles Toll Road, the CIA has expanded into two buildings that will increase the agency's office space by one-third. To the south, Springfield is becoming home to the new $1.8 billion National Geospatial-Intelligence Agency headquarters, which will be the fourth-largest federal building in the area and home to 8,500 employees.

Economic stimulus money is paying hundreds of millions of dollars for this kind of federal construction across the region. It's not only the number of buildings that suggests the size and cost of this expansion, it's also what is inside: banks of television monitors. "Escort-required" badges. X-ray machines and lockers to store cellphones and pagers.

Keypad door locks that open special rooms encased in metal or permanent dry wall, impenetrable to eavesdropping tools and protected by alarms and a security force capable of responding within 15 minutes. Every one of these buildings has at least one of these rooms, known as a SCIF, for sensitive compartmented information facility. Some are as small as a closet; others are four times the size of a football field.

SCIF size has become a measure of status in Top Secret America, or at least in the Washington region of it. "In D.C., everyone talks SCIF, SCIF, SCIF," said Bruce Paquin, who moved to Florida from the Washington region several years ago to start a SCIF construction business. "They've got the penis envy thing going. You can't be a big boy unless you're a three-letter agency and you have a big SCIF."

SCIFs are not the only must-have items people pay attention to. Command centers, internal television networks, video walls, armored SUVs and personal security guards have also become the bling of national security.

"You can't find a four-star general without a security detail," said one three-star general now posted in Washington after years abroad. "Fear has caused everyone to have stuff. Then comes, 'If he has one, then I have to have one.' It's become a status symbol."

Among the most important people inside the SCIFs are the low-paid employees carrying their lunches to work to save money. They are the analysts, the 20- and 30-year-olds making $41,000 to $65,000 a year, whose job is at the core of everything Top Secret America tries to do.

At its best, analysis melds cultural understanding with snippets of conversations, coded dialogue, anonymous tips, even scraps of trash, turning them into clues that lead to individuals and groups trying to harm the United States.

Their work is greatly enhanced by computers that sort through and categorize data. But in the end, analysis requires human judgment, and half the analysts are relatively inexperienced, having been hired in the past several years, said a senior ODNI official. Contract analysts are often straight out of college and trained at corporate headquarters.

When hired, a typical analyst knows very little about the priority countries - Iraq, Iran, Afghanistan and Pakistan - and is not fluent in their languages. Still, the number of intelligence reports they produce on these key countries is overwhelming, say current and former intelligence officials who try to cull them every day.

The ODNI doesn't know exactly how many reports are issued each year, but in the process of trying to find out, the chief of analysis discovered 60 classified analytic Web sites still in operation that were supposed to have been closed down for lack of usefulness.

"Like a zombie, it keeps on living" is how one official describes the sites. The problem with many intelligence reports, say officers who read them, is that they simply re-slice the same facts already in circulation.

"It's the soccer ball syndrome. Something happens, and they want to rush to cover it," said Richard H. Immerman, who was the ODNI's assistant deputy director of national intelligence for analytic integrity and standards until early 2009.

"I saw tremendous overlap." Even the analysts at the National Counterterrorism Center (NCTC), which is supposed to be where the most sensitive, most difficult-to-obtain nuggets of information are fused together, get low marks from intelligence officials for not producing reports that are original, or at least better than the reports already written by the CIA, FBI,

National Security Agency or Defense Intelligence Agency. When Maj. Gen. John M. Custer was the director of intelligence at U.S. Central Command, he grew angry at how little helpful information came out of the NCTC. In 2007, he visited its director at the time, retired Vice Adm. John Scott Redd, to tell him so.

"I told him that after 41/2 years, this organization had never produced one shred of information that helped me prosecute three wars!" he said loudly, leaning over the table during an interview. Two years later, Custer, now head of the Army's intelligence school at Fort Huachuca, Ariz., still gets red-faced recalling that day, which reminds him of his frustration with Washington's bureaucracy.

"Who has the mission of reducing redundancy and ensuring everybody doesn't gravitate to the lowest-hanging fruit?" he said.

"Who orchestrates what is produced so that everybody doesn't produce the same thing?"

He's hardly the only one irritated. In a secure office in Washington, a senior intelligence officer was dealing with his own frustration. Seated at his computer, he began scrolling through some of the classified information he is expected to read every day:

CIA World Intelligence Review, WIRe-CIA, Spot Intelligence Report, Daily Intelligence Summary, Weekly Intelligence Forecast, Weekly Warning Forecast, IC Terrorist Threat Assessments, NCTC Terrorism Dispatch, NCTC Spotlight . . . It's too much, he complained.

The inbox on his desk was full, too. He threw up his arms, picked up a thick, glossy intelligence report and waved it around, yelling. "Jesus! Why does it take so long to produce?" "Why does it have to be so bulky?" "Why isn't it online?"

The overload of hourly, daily, weekly, monthly and annual reports is actually counterproductive, say people who receive them. Some policymakers and senior officials don't dare delve into the backup clogging their computers.

They rely instead on personal briefers, and those briefers usually rely on their own agency's analysis, re-creating the very problem identified as a main cause of the failure to thwart the attacks: a lack of information-sharing. The ODNI's analysis office knows this is a problem.

Yet its solution was another publication, this one a daily online newspaper, Intelligence Today. Every day, a staff of 22 culls more than two dozen agencies' reports and 63 Web sites, selects the best information and packages it by originality, topic and region. Analysis is not the only area where serious overlap appears to be gumming up the national security machinery and blurring the lines of responsibility.

Within the Defense Department alone, 18 commands and agencies conduct information operations, which aspire to manage foreign audiences’ perceptions of  U.S. policy and military activities overseas. And all the major intelligence agencies and at least two major military commands claim a major role in cyber-warfare, the newest and least-defined frontier.

"Frankly, it hasn't been brought together in a unified approach," CIA Director Panetta said of the many agencies now involved in cyber-warfare. "Cyber is tremendously difficult" to coordinate, said Benjamin A. Powell, who served as general counsel for three directors of national intelligence until he left the government last year. "Sometimes there was an unfortunate attitude of bring your knives, your guns, your fists and be fully prepared to defend your turf."

Why? "Because it's funded, it's hot and it's sexy." Last fall, U.S. Army Maj. Nidal Malik Hasan allegedly opened fire at Fort Hood, Tex., killing 13 people and wounding 30. In the days after the shootings, information emerged about Hasan's increasingly strange behavior at Walter Reed Army Medical Center, where he had trained as a psychiatrist and warned commanders that they should allow Muslims to leave the Army or risk "adverse events."

He had also exchanged e-mails with a well-known radical cleric in Yemen being monitored by U.S. intelligence. But none of this reached the one organization charged with handling counterintelligence investigations within the Army.

Just 25 miles up the road from Walter Reed, the Army's 902nd Military Intelligence Group had been doing little to search the ranks for potential threats. Instead, the 902's commander had decided to turn the unit's attention to assessing general terrorist affiliations in the United States, even though the Department of Homeland Security and the FBI's 106 Joint Terrorism Task Forces were already doing this work in great depth.

The 902nd, working on a program the commander named RITA, for Radical Islamic Threat to the Army, had quietly been gathering information on Hezbollah, Iranian Republican Guard and al-Qaeda student organizations in the United States. The assessment "didn't tell us anything we didn't know already," said the Army's senior counterintelligence officer at the Pentagon.

Secrecy and lack of coordination have allowed organizations, such as the 902nd in this case, to work on issues others were already tackling rather than take on the much more challenging job of trying to identify potential jihadist sympathizers within the Army itself.

Beyond redundancy, secrecy within the intelligence world hampers effectiveness in other ways, say defense and intelligence officers. For the Defense Department, the root of this problem goes back to an ultra-secret group of programs for which access is extremely limited and monitored by specially trained security officers.

These are called Special Access Programs - or SAPs - and the Pentagon's list of code names for them runs 300 pages. The intelligence community has hundreds more of its own, and those hundreds have thousands of sub-programs with their own limits on the number of people authorized to know anything about them.

All this means that very few people have a complete sense of what's going on. "There's only one entity in the entire universe that has visibility on all SAPs - that's God," said James R. Clapper, undersecretary of defense for intelligence and the Obama administration's nominee to be the next director of national intelligence.

Such secrecy can undermine the normal chain of command when senior officials use it to cut out rivals or when subordinates are ordered to keep secrets from their commanders. One military officer involved in one such program said he was ordered to sign a document prohibiting him from disclosing it to his four-star commander, with whom he worked closely every day, because the commander was not authorized to know about it. Another senior defense official recalls the day he tried to find out about a program in his budget, only to be rebuffed by a peer.

"What do you mean you can't tell me? I pay for the program," he recalled saying in a heated exchange. Another senior intelligence official with wide access to many programs said that secrecy is sometimes used to protect ineffective projects.

"I think the secretary of defense ought to direct a look at every single thing to see if it still has value," he said. "The DNI ought to do something similar." The ODNI hasn't done that yet.

The best it can do at the moment is maintain a database of the names of the most sensitive programs in the intelligence community. But the database does not include many important and relevant Pentagon projects. Because so much is classified, illustrations of what goes on every day in Top Secret America can be hard to ferret out.

But every so often, examples emerge. A recent one shows the post-9/11 system at its best and its worst. Last fall, after eight years of growth and hirings, the enterprise was at full throttle when word emerged that something was seriously amiss inside Yemen. In response, President Obama signed an order sending dozens of secret commandos to that country to target and kill the leaders of an al-Qaeda affiliate.

In Yemen, the commandos set up a joint operations center packed with hard drives, forensic kits and communications gear. They exchanged thousands of intercepts, agent reports, photographic evidence and real-time video surveillance with dozens of top-secret organizations in the United States.

That was the system as it was intended. But when the information reached the National Counterterrorism Center in Washington for analysis, it arrived buried within the 5,000 pieces of general terrorist-related data that are reviewed each day. Analysts had to switch from database to database, from hard drive to hard drive, from screen to screen, just to locate what might be interesting to study further.

As military operations in Yemen intensified and the chatter about a possible terrorist strike increased, the intelligence agencies ramped up their effort. The flood of information into the NCTC became a torrent. Somewhere in that deluge was even more vital data. Partial names of someone in Yemen. A reference to a Nigerian radical who had gone to Yemen.

A report of a father in Nigeria worried about a son who had become interested in radical teachings and had disappeared inside Yemen. These were all clues to what would happen when a Nigerian named Umar Farouk Abdulmutallab left Yemen and eventually boarded a plane in Amsterdam bound for Detroit.

But nobody put them together because, as officials would testify later, the system had gotten so big that the lines of responsibility had become hopelessly blurred. "There are so many people involved here," NCTC Director Leiter told Congress. "Everyone had the dots to connect," DNI Blair explained to the lawmakers.

 "But I hadn't made it clear exactly who had primary responsibility." And so Abdulmutallab was able to step aboard Northwest Airlines Flight 253. As it descended toward Detroit, he allegedly tried to ignite explosives hidden in his underwear. It wasn't the very expensive, very large 9/11 enterprise that prevented disaster. It was a passenger who saw what he was doing and tackled him.

"We didn't follow up and prioritize the stream of intelligence," White House counterterrorism adviser John O. Brennan explained afterward. "Because no one intelligence entity, or team or task force was assigned responsibility for doing that follow-up investigation."

Blair acknowledged the problem. His solution:
Create yet another team to run down every important lead. But he also told Congress he needed more money and more analysts to prevent another mistake. More is often the solution proposed by the leaders of the 9/11 enterprise.

After the Christmas Day bombing attempt, Leiter also pleaded for more - more analysts to join the 300 or so he already had. The Department of Homeland Security asked for more air marshals, more body scanners and more analysts, too, even though it can't find nearly enough qualified people to fill its intelligence unit now.

Obama has said he will not freeze spending on national security, making it likely that those requests will be funded. More building, more expansion of offices continues across the country.

A $1.7 billion NSA data-processing center will be under construction soon near Salt Lake City. In Tampa, the U.S. Central Command’s new 270,000-square-foot intelligence office will be matched next year by an equally large headquarters building, and then, the year after that, by a 51,000-square-foot office just for its special operations section.

Just north of Charlottesville, the new Joint-Use Intelligence Analysis Facility will consolidate 1,000 defense intelligence analysts on a secure campus. Meanwhile, five miles southeast of the White House, the DHS has broken ground for its new headquarters, to be shared with the Coast Guard. DHS, in existence for only seven years, already has its own Special Access Programs, its own research arm, its own command center, its own fleet of armored cars and its own 230,000-person workforce, the third-largest after the departments of Defense and Veterans Affairs. Soon, on the grounds of the former St. Elizabeths mental hospital in Anacostia, a $3.4 billion showcase of security will rise from the crumbling brick wards.

The new headquarters will be the largest government complex built since the Pentagon, a major landmark in the alternative geography of Top Secret America and four times as big as Liberty Crossing.


Thursday, 15 July, 2010

Government Policies Pushing U.S. Towards Depression

Despite several quarters of rising GDP, and the upbeat exertions of Administration spokespeople, the National Bureau of Economic Research (NBER) has yet to announce the recession is over. Their reluctance is well-founded. It is beginning to dawn on even the more optimistic analysts that the tepid growth we have seen over the past three quarters is only an interlude in an otherwise grave and prolonged recession. Moreover, the respite will cost dearly as the United States has racked up a generation worth of debt for dubious benefit.


The paltry number of new jobs currently being created still fall far short of the 375,000 per month needed to offset the 125,000 new entrants to the job market due to population growth and to erode the 8 million people laid off in the past year alone. Meanwhile, house prices continue to fall and credit continues to contract. With retail sales dropping in June and the Leading Economic Index (LEI) standing at minus 7.7 per cent, it should be clear that the US economy is heading back towards recession, following a temporary distortion created by some $1.3 trillion in federal stimulus. In short, the stimulus has failed.


While there can be no doubt that an increase in government spending will result in a boost to GDP figures, the evidence of history shows that such growth is short-lived. Unfortunately as leaders around the world look to tighten the reins on out of control spending, President Obama and his Democratic supporters in Congress believe that their stimulus actions have succeeded and should be redoubled. Armed with nothing more than faith in government and a belief that spending is both a means and an end, it appears that the US stimulus policy will continue. The net result of these efforts will not be a more vibrant economy, but the perpetuation of fear and confusion in the business community and the continuing expansion of deficits that will lead inevitably to higher taxes.


The more indebted an economy becomes, the greater the burden that must be borne by the wealth-creating private sector. Indeed, at the present rate of government debt-financing, the private sector will have to contribute some $2 trillion each year in interest costs alone. This money must be raised by taxation or inflation.


This week, in response to their fears of increased regulations, higher taxes, and greater government stewardship of the economy, discontent among business leaders flared into the open. Gathering in Washington, leaders of the US Chamber of Commerce lashed out at current regulatory changes in healthcare. In other forums, business executives and investors questioned the efficacy of the freshly passed financial regulation bill.


Academic economists have identified a phenomenon they call 'fiscal drag.' Their studies show that each dollar raised in taxation incurs a government cost (tax collection and spending administration) or reverse multiplier.


The Administration estimates that the expiration of the Bush-era tax cuts will raise additional revenues of some $1.5 trillion over the next decade. In addition, some economists estimate that the Obama Health Act will raise a further $500 billion over the same time period. Using the average reverse multiplier of two, this additional taxation of $2 trillion will suck a further $4 trillion out of the wealth-producing private sector by 2020, or some $400 billion each year.


By facing the stark reality of the above factors (as more and more clear thinking individuals are), it becomes increasingly clear that a continuation of the current Administration's policies will push America into a depression.


As America is still by far the largest international consumer, an American depression would likely reshape the entire global economy. In a world where a huge number of countries, businesses, and individuals are grossly indebted, any sustained crash in asset values could be catastrophic. The dollar would be threatened severely, leaving those who have invested in gold and silver as financial survivors.

Saturday, 3 July, 2010

Rethinking Iran-Contra: A Much Darker Story?

The Iran-Contra/ October Surprise was the missing link in a larger American political narrative

The conventional view of the Iran-Contra scandal is that it covered the period 1985-86, when President Ronald Reagan became concerned about the fate of American hostages in Lebanon and agreed to secretly sell weapons to Iran’s Islamist government to gain its help in freeing the captives.



Supposedly, the scheme went awry when White House aide Oliver North and other participants got carried away, including North’s decision to divert profits from the arms sales to another one of Reagan’s priorities, the Nicaraguan contra rebels whose CIA assistance had been cut off by Congress.

The Iran-Contra scandal was exposed in fall of 1986 after the shooting down of a North supply plane over Nicaragua and revelations in Lebanon of Reagan’s arms sales to Iran. A White House staff shake-up, including North’s firing, and some wrist-slaps from Congress for Reagan’s alleged inattention to details resolved the scandal, at least that was how Official Washington saw it.


The few dissenters who wouldn’t accept that tidy conclusion – such as Iran-Contra special prosecutor Lawrence Walsh – were mocked and marginalized by the news media, including the Washington Post (which ran an article concluding that Walsh’s consistency in pursuing the scandal was “so un-Washington” and that he would depart as “a perceived loser”).


But an accumulating body of evidence suggests that the traditional view of Iran-Contra was mistaken, that this conventional understanding of the scandal was like starting a novel in the middle and assuming you’re reading the opening chapter.


Indeed, it now appears clear that the Iran-Contra Affair began five years earlier in 1980, with what has often been treated as a separate controversy, called the October Surprise case, dealing with alleged contacts between Reagan’s presidential campaign and Iran.


In view of the latest evidence – and the crumbling of the long-running October Surprise cover-up – there appears to have been a single Iran-Contra narrative spanning the entire 12 years of the Reagan and Bush I administration, and representing a much darker story.


And it was not simply a tale of Republican electoral skullduggery and treachery, but possibly even more troubling, a story of rogue CIA officers and Israel’s Likud hardliners sabotaging a sitting U.S. president, Jimmy Carter.


Plus, with Washington’s failure to get at the larger truth about the Iran-Contra Affair, crucial patterns were set: Republicans acted aggressively, Democrats behaved timidly, and the U.S. national news media was transformed from Watergate-era watchdogs, to lapdogs and finally to guard dogs protecting national security wrongdoing.


In that sense, the Iran-Contra/October Surprise scandal represented the missing link in a larger American political narrative covering the sweep of several decades, explaining how the United States shifted away from a nation grappling with epochal problems, from energy dependence and environmental degradation to bloated military budgets and an obsession with empire.


For all his shortcomings and half-measures, President Carter had begun promoting solar and other alternative energies; he pushed conservation programs and worked to reduce the federal deficit; and abroad, he advocated greater respect for human rights and pulled back from the imperial presidency.


More on point, he cashiered many of the freewheeling Cold Warriors of the CIA and demanded land-for-peace concessions from Israel.


Unacceptable Dangers


Carter’s potential second term presented unacceptable dangers to some powerful interests at home and overseas. The CIA Old Boys (whom legendary CIA officer Miles Copeland deemed “the CIA within the CIA”) thought they understood the true national interests even if the lazy-minded public and weak-kneed politicians didn’t.


Israeli Prime Minister Menachem Begin and his Likud Party believed in a “Greater Israel” and were determined not to trade any more land conquered in the Six-Day War of 1967 for promises of peace with Palestinians and other Arabs. In 1980, Begin was still fuming over Carter’s Camp David pressure on him to surrender the Sinai in exchange for a peace deal with Egypt.


In other words, the deep-seated concerns of many influential forces intersected in 1980, all with a common desire to sink Carter’s reelection campaign. And the best way to do that was to undermine his efforts to gain the freedom of 52 American hostages then held in Iran. [For details, see Consortiumnews.com’s “The CIA/Likud Sinking of Jimmy Carter.”


The secret relationships, born of the 1980 hostage dealings, created the framework for the Reagan administration’s approval of Israel’s clandestine arms shipments to Iran beginning immediately after Reagan took office in 1981, just as the American hostages were finally released. Those initial Israeli arms sales gradually evolved into the Iran-Contra weapons transfers.


Thus, when the Iran-Contra scandal surfaced in fall 1986, the subsequent cover-up was not simply to protect Reagan from possible impeachment for violating the Arms Export Control Act and the congressional ban on military aid to the Nicaraguan contras, but from exposure of the even darker, earlier phase of the scandal, which would implicate Israel and the CIA

In authorizing the first investigation of Iran-Contra, Reagan’s Attorney General Edwin Meese set the chronological parameters as 1985 and 1986. Congressional inquiries also focused on that narrow time frame, despite indications that the scandal began earlier, such as the mystery of an Israeli-chartered arms flight that was shot down in July 1981 after straying into Soviet air space.


Only late in the Iran-Contra criminal investigation did Walsh and his investigative team begin suspecting that the only explanation for the futile arms-for-hostage dealings regarding Lebanon in 1985-86 – when each freed hostage was replaced by a new captive – was that the tripartite relationship of Iran-Israel-and-Reagan predated the Lebanese crisis, going back to 1980.


That was one reason why Walsh’s investigators asked George H.W. Bush’s national security adviser (and former CIA officer) Donald Gregg about his possible role in delaying the release of the hostages in 1980. His denial was judged deceptive by an FBI polygrapher.


‘People on High’


Nicholas Veliotes, Reagan’s assistant secretary of state for the Middle East, described his discovery of the earlier Iran connections after the Israeli plane went down in the Soviet Union in 1981.


“It was clear to me after my conversations with people on high that indeed we had agreed that the Israelis could transship to Iran some American-origin military equipment,” Veliotes said in an interview with PBS Frontline.


In checking out the Israeli flight, Veliotes came to believe that the Reagan camp’s dealings with Iran dated back to before the 1980 election.


“It seems to have started in earnest in the period probably prior to the election of 1980, as the Israelis had identified who would become the new players in the national security area in the Reagan administration,” Veliotes said. “And I understand some contacts were made at that time.”


Though some two dozen witnesses – including senior Iranian officials and a wide range of other international players – have expanded on Veliotes’s discovery, the pressure became overpowering in the final years of George H.W. Bush’s presidency not to accept the obvious conclusions. [For details of the evidence, see Robert Parry’s Secrecy & Privilege.]


It was easier for all involved – surely the Republicans but also the Democrats and much of the Washington press corps – to discredit the corroborated 1980 allegations. Taking the lead was the neoconservative New Republic.


In fall 1991, as Congress was deliberating whether to conduct a full investigation of the October Surprise issue, Steven Emerson, a journalist with close ties to Likud, produced a cover story for The New Republic claiming to prove the allegations were a “myth.”


Newsweek published a matching cover story also attacking the October Surprise allegations. The article, I was told, had been ordered up by executive editor Maynard Parker who was known inside Newsweek as a close ally of the CIA and an admirer of prominent neocon Elliott Abrams.


The two articles were influential in shaping Washington’s conventional wisdom, but they were both based on a misreading of attendance documents at a London historical conference which William Casey had gone to in July 1980.


The two publications put Casey at the conference on one key date – thus supposedly proving he could not have attended an alleged Madrid meeting with Iranian emissaries. However, after the two stories appeared, follow-up interviews with conference participants, including historian Robert Dallek, conclusively showed that Casey wasn’t at the conference until later.


Veteran journalist Craig Unger, who had worked on the Newsweek cover story, said the magazine knew the Casey alibi was bogus but still used it. “It was the most dishonest thing that I’ve been through in my life in journalism,” Unger later told me.


However, even though the Newsweek and New Republic stories had themselves been debunked, that didn’t stop other neoconservative-dominated publications, like the Wall Street Journal, from ladling out ridicule on anyone who dared take the October Surprise case seriously.

Peculiar Journalism


Emerson also was a close friend of Michael Zeldin, the deputy chief counsel for the House task force that investigated the October Surprise issue in 1992. Though the task force had to jettison Emerson’s bogus Casey alibi, House investigators told me Emerson frequently visited the task force’s offices and advised Zeldin and others how to read the October Surprise evidence.


Subsequent examinations of Emerson’s peculiar brand of journalism (which invariably toed the Likud line and often demonized Muslims) revealed that Emerson had financial ties to right-wing funders such as Richard Mellon Scaife and had hosted right-wing Israeli intelligence commander Yigal Carmon when Carmon came to Washington to lobby against Middle East peace talks.


In 1999, a study of Emerson’s history by John F. Sugg for Fairness and Accuracy in Reporting’s magazine “Extra!” quoted an Associated Press reporter who had worked with Emerson on a project as saying of Emerson and Carmon: “I have no doubt these guys are working together.”


The Jerusalem Post reported that Emerson has "close ties to Israeli intelligence." And “Victor Ostrovsky, who defected from Israel's Mossad intelligence agency and has written books disclosing its secrets, calls Emerson ‘the horn’ -- because he trumpets Mossad claims,” Sugg reported.


Yet, the way Washington was working by the end of the 12-year Reagan-Bush-41 era, there was little interest in getting to the bottom of a difficult national security scandal. The House task force simply applied some fantastical logic, such as claiming that because someone wrote down Casey’s home phone number on another key date that proved he was at home, to conclude nothing had happened.


Between the House task force’s finding of “no credible evidence” and the subsequent ridicule heaped on the allegations by major U.S. news outlets, the October Surprise case was cast aside as a “conspiracy theory,” which is how it is still categorized by Washington’s insiders and by Wikipedia.
However, subsequent disclosures have revealed that a flood of new evidence incriminating the Republicans arrived at the House task force in its final weeks, in December 1992, so much so that chief counsel Lawrence Barcella says he recommended that task force chairman, Rep. Lee Hamilton, D-Indiana, extend the investigation for several months. However, Barcella said Hamilton refused, citing procedural difficulties.


Instead, the incriminating evidence was simply kept from other task force members, and the investigation was shut down with a finding of Republican innocence. It even appears that a late-arriving report from the Russian government about its own intelligence on the case – corroborating allegations of a Republican-Iranian deal – was not even shown to Hamilton, the chairman.


When questioned this year, Hamilton told me he had no recollection of ever seeing the Russian report (though it was addressed to him) and Barcella added that he didn’t “recall whether I showed [Hamilton] the Russian report or not.” [See Consortiumnews.com’s “Key October Surprise Evidence Hidden.”]


According to other recent interviews, dissent within the task force over some of the irrational arguments being used to clear the Republicans was suppressed by Hamilton and Barcella. [See Consortiumnews.com’s “The Tricky October Surprise Report.”]


In other words, Official Washington preferred to sweep this unpleasant scandal under the rug rather than confront the facts and their troubling implications.


Yet, with Reagan remaining a conservative icon and his anti-government policies still in vogue among millions of Americans – slashing taxes for the rich, weakening corporate regulations, rejecting alternative energy, and expanding the military budget – the lost history of this broader Iran-Contra scandal has turned out to be a case that what the country didn’t know did turn out to hurt it.

Thursday, 1 July, 2010

The End of the U.S. Dollar’s Reign?

The U.S. dollar is facing tough times these days as talk of the dollar being discarded as the world’s reserve currency is becoming increasingly hard to ignore. Joseph Quinlan, chief market strategist at Banc of America, argues that the U.S. dollar’s reign will continue — but for all the wrong reasons.

In light of the U.S. dollar’s three-year swoon, many observers believe we are witnessing the beginning of the end of the dollar’s role as the world’s reserve currency.

That the dollar remains the best of the world’s currencies speaks volumes about the unbalanced and unsettled state of the global economy.

A number of interrelated factors support this view, ranging from America’s abysmal savings rate to the soaring U.S. trade deficit.


Unchecked, according to the consensus, current trends are putting the dollar’s role as the world’s dominant currency at risk.

If the dollar’s 60-year reign is in its twilight, then what other currency is in position to supplant or usurp the dollar’s role as the world’s reserve currency?


Requirements of a reserve currency

 
Obtaining reserve currency status is not easy. The requirements include a large and open economy, a well-developed and highly liquid financial market and a convertible and widely accepted currency in which large volumes of trade and commerce are transacted.


Political stability, a history of stable economic growth and a country of global importance or stature are also prerequisites.


Potential candidates



That said, in a world with more than 150 national currencies, viable candidates to supplant the U.S. dollar are slim, but I offer up a short list:




The dollar reigns by default. Benign neglect on the part of the rest of the world has left few, if any, challengers.
The euro is a serious contender to the dollar given the fact that Europe’s financial markets are deep and liquid and that the euro is fully convertible.



What also helps is that the EU economy is about the size of the U.S. economy and is an essential component of global trade.


Now the bad news. Europe is increasingly viewed as a dithering dysfunctional family, unwilling and unable to make tough economic decisions regarding future economic growth
European policies a concern


In just the past few months, the Stability and Growth pact has been watered down. The Lisbon agenda — a blueprint to increase EU competitiveness on the global scale by 2010 — has all but been abandoned. And the European Services Directive was rejected thanks to opposition from France and Germany.


The latter would have enhanced the competitiveness of Europe’s inefficient service sector and may have gone a long way in bolstering the attractiveness of the euro as a reserve currency.
EU Constitution in doubt

Fiscal tensions in Europe, coupled with numerous structural deficiencies — labor market rigidities, for instance — hardly make the euro more appealing than the dollar.
Both China's and Japan’s trade is largely denominated in U.S. dollars — and exports are increasingly a key ingredient of growth

Add to this the possibility of a French veto to Europe’s impending constitutional vote, the effect of which would not doom the euro, but would likely hamper efforts in creating a more unified and dynamic European Union.

Without a ratified constitution, the EU forgoes the opportunity to have a new full-time president, a single EU foreign minister and other institutions supportive of a strong currency. In the end, the prospects for the euro upending the U.S. dollar as the world’s reserve currency appear slim.
The Japanese yen


Japan’s currency is not a serious contender to the U.S. dollar for several reasons.


Firstly, Japan has long been governed by a political elite that has embraced domestic concerns far more than it has its global ambitions.
A formidable challenger?

In addition, the Japanese economy is highly export-dependent — and Japanese policymakers generally prefer a weak currency. Also, a great deal of Japan’s trade is still denominated in dollars.
Transnarency matters in achieving reserve currency status — and Switzerland fails on this score.
A formidable challenger?


In addition, the Japanese economy is highly export-dependent — and Japanese policymakers generally prefer a weak currency. Also, a great deal of Japan’s trade is still denominated in dollars.


Add to the above sluggish economic growth and a resistance to shifting the status quo and the yen hardly appears as a formidable relative to the dollar.


Also working against the yen are regional hostilities toward Japan, negative sentiments that would run counter to any move towards making the yen a regional or global reserve currency.
The Chinese yuan


China’s currency is often mentioned as a candidate to dethrone the U.S. dollar, although it would take decades — rather than just a few years — for the yuan to present a serious challenge to the greenback.

Presently, China possesses very few attributes that are supportive of a reserve currency.

A weak currency


The country’s capital account remains closed, the currency is non-convertible and the banking sector is fragile and in need of an overhaul.
It would take decades — rather than just a few years — for the yuan to present a serious challenge to the greenback.
China’s trade, like Japan’s, is largely denominated in U.S. dollars and exports are increasingly a key ingredient of growth. This portends a preference by China for a weaker — rather than a stronger — yuan.

Meanwhile, the recent diplomatic row between Japan and China, with bilateral relations hitting a multi-decade low, does nothing to engender added confidence in either the yen or yuan.
The Swiss Franc
The Swiss franc is certainly a strong currency, but I do not think it is a contender for reserve currency status since Switzerland’s financial system, in general, can be described as nothing short of opaque.


Transparency matters — and Switzerland fails on this score.
It’s the dollar by default

Call it a case of “been there, done that.” There is little appetite among the world’s major nations to revert back to a gold standard, given the limitations to monetary sovereignty that come with such an arrangement.
Europe is increasingly viewed as a dithering dysfunctional family — unwilling and unable to make tough economic decisions regarding future economic growth.
All the talk about the U.S. dollar losing its favor as the world’s reserve currency is just that — talk. The dollar reigns by default.



Benign neglect on the part of the rest of the world has left few, if any, challengers demonstrating the core competencies required to underwrite the world’s reserve currency.
Scanning the global horizon, there is know spot a viable alternative to the dollar.

That, of course, does not say much for Europe, Japan and Asia. That the dollar remains the best of the lot speaks volumes about the unbalanced and unsettled state of the global economy.

Stimulus or Austerity: The People vs. the Banks

The most powerful nations in the world met recently at the G-20 in Toronto and managed to agree on only one thing of significance: the need to reduce deficits, “half by 2013.” Implied by the statement is the need to lower deficits via “austerity,” meaning eliminating or reducing social programs.



Why does every mainstream political pundit or corporate CEO fanatically agree that reducing deficits is the most important thing to do now? Let Obama explain:


“… if financial markets are skittish and don't have confidence in a country's fiscal soundness, that is also going to undermine our recovery."


Apparently, the most important policy for the world economy cannot be said in plain English. What does Obama mean? Essentially, he is saying that “financial markets” should determine how wealth is distributed and how the economy is directed.

What are financial markets? And why must every country be at their mercy?

A financial market is anyplace the super-rich invest their money. It can be done through a bank, hedge fund, or a private equity firm, etc. The rich demand that their investments are safe and therefore are especially “skittish” at the slightest hint of inflation or other economic distress.


The rich who dominate financial markets advocate only one solution to balancing budgets: reducing or eliminating social programs. They ignore the other solution— a massive public works project— because it directly affects them in a negative way: raising taxes on the wealthy.


This raises another issue. The investors who control financial markets know that a day of reckoning is coming: the massive debt that was pushing forward the world economy for years needs to be paid back, and those who own the banks don’t want the responsibility. Better for millions of workers to sacrifice social services, pensions, wages, etc., than for thousands of rich investors to be taxed.


Some people will argue that it is counterproductive to tax the rich, since they will then choose not to invest their money, causing further harm to the economy. But this is already happening and happens every time a recession hits.


The New York Times describes one example of the rich hoarding their money, until better, profitable times return:


“Only on Wall Street, in the rarefied realm of buyout moguls, could you actually have too much money…. Private equity firms, where corporate takeovers are planned and plotted, today sit atop [are hoarding] an estimated $500 billion. But the deal makers are desperate to find deals worth doing…” (June 24, 2010).
Rich investors are not investing in companies because consumers are not buying the products that corporations produce. And where mainstream economists blame “consumer confidence” for this problem, the real issue remains “consumer impoverishment.”

It is the rich investor that lacks the “confidence” that the unemployed or low-waged worker can buy enough of the products produced by corporations. This is the problem that will continue to haunt the establishment economists, who will incessantly preach that the economy is on a perpetual verge of recovery.


This illusion of recovery is being instituted into government policy. The Obama administration has argued that federal stimulus money is only needed in small doses to put the economy back on track. With politicians agreeing that the recession is “basically over,” less stimulus money is being offered.


Indeed, Congress has had a terrible time passing the tiniest stimulus bill, which would extend unemployment benefits and help states with Medicaid costs. If such a bill is eventually passed, it will be a mere fraction of what is needed.


Because Obama insists that “reducing deficits” is the new governmental priority, the stimulus faucet will quickly dry up (since government stimulus is financed through deficit spending).


But for millions of U.S. workers, the debate over stimulus spending is not theoretical, but a matter of life and death. If no federal stimulus is passed— and the current one has virtually died in Congress— millions of unemployed people will have zero income. Meanwhile, the states budget crises will worsen, shutting off state-run health care, social services and education, while slashing public sector jobs by the thousands.


Both Democrats and Republicans agree that “financial markets” should dictate the economic policy of the U.S. The two parties disagree only to what degree and how quickly to implement the same policy.


The American labor movement must find an independent voice to demand that a stimulus bill be passed. Labor — especially public sector workers — must ally themselves with the unemployed, students and teachers, and other victims of the states’ budget crises who will suffer real tragedies unless a federal stimulus bill is passed.

 

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