A More Conservative Union

Have You Seen this Man? An "Aged" Osama Bin Laden With Gray Hair, No Beard

RWGas — Fri, 15 Jan 2010 04:45:00 +0000

FBI Forensic Artists Produce Enhanced Mug Shot Photos of Top Terrorists.

Using sophisticated digital enhancement techniques, the FBI today published “aged progressed” mug shots of Osama bin Laden and 17 other top terrorists wanted by the U.S.

State Department, FBI Release Digitally Enhanced Photos Of Most Wanted Terrorist Suspects, Osama bin Laden

(State Department/FBI)

One version of bin Laden shows him with a full head of wavy gray and black hair, and a trim beard. No previous photo had shown him without a headdress covering his hair.
The second “aged processed” mug shot of bin Laden shows him with the long flowing beard that has been his trademark, although much grayer than previously seen.

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The FBI and the State Department, which administers the international rewards program called Rewards for Justice, said the enhanced photos were created by forensic artists at the FBI’s crime laboratory in Quantico, Virginia.
The FBI said its artists modified facial features and altered “grooming and cloth choices” in hopes the public might recognize bin Laden or any of the others.

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“These new images are powerful examples of how advances in technology and science can be used to help find and bring to justice wanted persons,” said Louis E. Grever, the head of the FBI’s Science and Technology Branch.
Despite a $25 million reward for information on his whereabouts, U.S. officials say they have not had a confirmed sighting of bin Laden in more than eight years.
The full list of the aged photos can be seen at the State Department Web site www.rewardsforjustice.net.

Blaming Israel First

RWGas — Wed, 13 Jan 2010 05:00:00 +0000

Business as usual at the U.N.

BY Peter Berkowitz

January 18, 2010, Vol. 15, No. 17

Tel Aviv
With the possible exception of the U.S. armed forces, no military in the history of warfare has made greater efforts in the face of grave national security threats to avoid the use of force or has tried harder, when obliged to fight, to protect noncombatants than the Israel Defense Forces. With the possible exception of the U.S. armed forces, no military has investigated itself as rigorously as the IDF. With the possible exception of the U.S. judiciary, no courts have done more to hold their military accountable than Israel’s. And with the possible exception of America, no democracy has gone further in wartime to legitimize dissent than Israel.
It is therefore a bitter irony, fraught with consequences for the legitimacy of international law, that—with the same possible exception—no country’s military, judiciary, and democracy have been the target of greater vilification for alleged human rights violations, war crimes, and crimes against humanity than Israel’s.
The continuing controversy over the Goldstone Report is a case in point.
In April 2009, the Geneva-based U.N. Human Rights Council appointed Richard Goldstone, judge of the Constitutional Court of South Africa and former prosecutor of the International Criminal Tribunals for the former Yugoslavia and Rwanda, to head a mission

to investigate all violations of international human rights law and international humanitarian law that might have been committed at any time in the context of the military operations that were conducted in Gaza during the period from 27 December 2008 and 18 January 2009, whether before, during or after.

On September 15, the mission released its 575-page report. The bulk was devoted to alleged Israeli misconduct in Operation Cast Lead, which aimed to stop the more than 12,000 rockets and mortars fired over eight years by Hamas and other armed Palestinian groups at civilian targets in southern Israel. The report firmly and in vivid detail accused the Jewish state of human rights violations, war crimes, and “actions” that “might justify a competent court finding that crimes against humanity have been committed.” Tentatively and briefly, the report also found that “it may be that the Palestinian combatants did not at all times adequately distinguish themselves from the civilian population” and that Palestinian rocket and mortar attacks on Israeli civilians “would constitute war crimes, and may amount to crimes against humanity.”

The document recommended that the Security Council require Israel and Palestinian authorities to report, within six months, on the investigations and prosecutions international law obliged them to carry out. Should Israel fail to make good progress, the report recommended that the Security Council refer the mission’s allegations to the prosecutor for the International Criminal Court. The report’s recommendations concerning the Palestinian authorities were decidedly more tepid.
On November 3, the U.S. House of Representatives, by a vote of 344-36, passed a nonbinding resolution rejecting the report as “irredeemably biased.” Two days later, the U.N. General Assembly, by a vote of 114-18, adopted the report and sent it to the Security Council.
The Security Council has declined to take action. But damage has been done. By pervasively insinuating that Israel is no better than, and in some respects worse than, the terrorists it battles, the Goldstone Report hands Islamic extremists another propaganda victory. Credulous European and American intellectual and political elites have already casually imbibed the opinion that Israel deliberately attacked civilian targets to terrorize Palestinians and destroy the foundations of civilian life in Gaza.
Goldstone’s mission was suspect in Israel’s eyes from the outset. The Human Rights Council that commissioned it is disreputable. It includes among its 48 members China, Cuba, Egypt, Pakistan, and Saudi Arabia; notwithstanding the gross violations of human rights of which many of its members are guilty, it has made a priority of condemning Israel. In addition, statements about Operation Cast Lead and the Israeli-Palestinian conflict made before their appointments by two of Goldstone’s three mission colleagues—Christine Chinkin, professor of international law at the London School of Economics, and Hina Jilani, advocate of the Supreme Court of Pakistan—could reasonably be seen as prejudging Israel’s guilt. And from the General Assembly’s 1975 resolution declaring Zionism a form of racism to the International Court of Justice’s 2004 ruling that Israel’s security barrier violated international law and must be dismantled, Israel has learned to expect from international bodies hypocrisy, slander, and scorn for its security.
Consequently, the Israeli government’s decision not to cooperate with Goldstone, while still controversial in Israel, was understandable. The mission’s mammoth report, written in unseemly haste, confirmed Israel’s doubts.
A careful reading thoroughly discredits the Goldstone Report. So demonstrated Hebrew University philosophy professor and New York University law professor Moshe Halbertal, a distinguished man of the Israeli left who helped draft the IDF’s ethics code, in a devastating New Republic critique. Here, three examples of the report’s biased and unscrupulous analysis must suffice.
- First, it presents as settled that, despite completely withdrawing from Gaza in 2005, Israel remains under international law an occupying power with attendant obligations because it controls Gaza’s borders. In reality, the legal question is very much in dispute. Israel’s famously progressive and activist Supreme Court has ruled that the country no longer occupies Gaza. And as Col. (Ret.) Daniel Reisner, former head of the IDF’s International Law Department, pointed out to me, even the International Committee of the Red Cross considers the question to be difficult and unresolved.
- Second, the report blames Israel for causing humanitarian suffering by imposing a blockade on Gaza. In the process it dismisses the heroic efforts the IDF made in the midst of last winter’s military operation that increased food, medicine, and fuel entering Gaza. Nor does it examine Hamas’s theft of these humanitarian supplies or exploitation of Israel’s daily humanitarian pauses to launch rockets at civilians in Israel and attack the IDF in Gaza. And the report fails to note that Egypt controls Gaza’s western border, imposing restrictions more severe than Israel’s—this although the mission itself entered Gaza through the Egyptian-administered Rafah crossing.

- Third, the report accuses Israel of violating the laws of war by killing more than 200 civilian Palestinian police officers. In so accusing, the report relied heavily on Palestinian testimony and ignored or dismissed openly available information showing that Hamas also assigned the police a military role and ordered them, in the event of a ground operation, to fight the IDF.
More generally, the Goldstone Report suffers from fatal methodological flaws. While subjecting Israeli accounts of wartime operations to hyper-exacting scrutiny and relentless skepticism, it routinely accepts Palestinian testimony of alleged Israel crimes at face value, rarely if ever wondering whether Gazans regarded representations to the mission as acts of resistance. This is of a piece with the report’s systematic failure to give due attention, as the laws of armed conflict direct, to military necessity, which in this case means the precautions feasible for reasonable IDF commanders to make in the harsh conditions of urban warfare against an enemy relentlessly striving to blur the distinction between civilians and combatants.
Finally, while the Goldstone Report goes to extravagant and irrelevant lengths to put Israel’s Gaza operation in context by discussing the larger sweep of the Israeli-Palestinian conflict, it barely mentions Hamas and glosses over the terrorism to which it is devoted. To understand Israel’s operation, however, it is crucial to grasp Hamas’s frequently reiterated determination to wage jihad to destroy Israel. It is also vital to appreciate that Hamas blatantly violates the laws of armed conflict by deliberately transforming Gaza City and other densely populated areas into military bases. From these locations, using its own people as human shields, Hamas launches its rockets and mortars at Israel’s civilian population—ensuring that Israeli operations aimed at ending those attacks will make Israel a killer of Palestinian civilians.

No doubt, like all armies, the IDF made errors in Operation Cast Lead. And in the infernal smoke and fire of asymmetric urban warfare its soldiers and officers may have committed crimes. In the short term, Israel’s Military Advocate General’s Corps continues to investigate allegations and to pursue substantial ones. A military task force established to examine the Goldstone Report’s allegations headed by Brigadier General Yuval Halamish expects to publish its findings at the end of January.
The long-term stakes, according to General Halamish, are high: “The fundamental problem applies not just to Israel but to all democratic nations—if they accept the Goldstone Report’s approach and conclusions, they will not be able to fight terror.”
Peter Berkowitz is the Tad and Dianne Taube senior fellow at the Hoover Institution, Stanford University.

U.S. Economy: Trade Gap Grows as Oil Prices Jump; Exports Climb

RWGas — Wed, 13 Jan 2010 04:58:00 +0000

By Courtney Schlisserman

Jan. 12 (Bloomberg) — The trade deficit in the U.S. widened in November more than anticipated as imports climbed faster than exports, pointing to a rebound in global demand that is fueling growth.
The gap expanded 9.7 percent to $36.4 billion, the highest level since January, from a revised $33.2 billion in October, Commerce Department data showed today in Washington. Imports increased 2.6 percent, reflecting a jump in oil prices, while exports rose to the highest level in a year.
Spending by American companies and consumers will continue to push up imports, while a 12 percent drop in the dollar since early March and growing economies overseas mean U.S. sales abroad may also improve. China’s move to cool its economy by raising bank reserve requirements caused stocks to tumble worldwide.
“There’s continued strong export growth ahead,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “On the import side, it’s logical that if U.S. companies are no longer running down their inventories that they’re going to need to import more.”
Stocks dropped, depressed by lower-than-anticipated earnings at Alcoa Inc. and China’s actions. The Standard & Poor’s 500 Index was off 0.7 percent to 1,139.52 at 11:14 a.m. in New York.
Median Forecast
Economists forecast the deficit would widen to $34.6 billion from a previously estimated $32.9 billion in October, according to the median of 76 projections in a Bloomberg News survey. Estimates ranged from gaps of $31 billion to $38.2 billion.
Excluding the influence of prices, which are the figures used to calculate gross domestic product, the trade gap increased to $40.7 billion in November from $38.3 billion the prior month. The average gap for the quarter so far, at $39.5 billion, is little changed from the third-quarter average of $39.4 billion, indicating trade will not have much influence on economic growth in the last three months of the year.
A rebound in global growth along with the dollar’s decline from a five-year high on March 5 against a basket of currencies from the nation’s biggest trading partners are fueling global demand for goods from companies like United Technologies Corp. and United Parcel Service Inc.
Exports increased 0.9 percent, the seventh consecutive gain, to $138.2 billion in November, reflecting increasing demand overseas for food and American-made automobiles and semiconductors.
Soybeans to China
Demand from China for American goods climbed to a record $7.3 billion, led by surging purchases of soybeans due to a drought in Argentina, according to the Commerce Department. The increase caused the U.S. deficit with the Asian nation to fall 11 percent to $20.2 billion.
American-made automobiles and parts, semiconductors and industrial machines were also in demand globally in November, today’s report showed. The increase in vehicle sales mainly reflects cross-border trade with Canada and Mexico to satisfy North American production.
United Technologies, the Hartford, Connecticut-based maker of Pratt & Whitney jet engines and Otis elevators, last month forecast 2010 per-share profit would increase in line with analyst estimates because of cost cuts and growth in emerging markets.
Contracts in Singapore
The company, which garners more than 60 percent of sales outside the U.S., sees improvement in regions including Asia, Chief Executive Officer Louis Chenevert told investors at a meeting on Dec. 10. The Otis unit announced two contracts Dec. 8 to supply, install and maintain 1,300 elevators in Singapore public housing.
Manufacturing in the U.S. expanded in December at the fastest pace in more than three years, the Institute for Supply Management said Jan. 4. Other reports showed factories in Europe and in China also strengthened last month.
Another report today showed confidence among U.S. small businesses decreased in December as the outlook for sales dimmed. The National Federation of Independent Business optimism index fell to 88, the lowest level in five months, the Washington-based group said.
The report signals that larger companies, which are more likely to benefit from growing global demand, are leading the U.S. economic recovery, said John Ryding, chief economist at RDQ Economics in New York.
Jobs Outlook
“If this conjecture turns out to be correct, it could be another factor hampering the decline in unemployment, given the importance of small businesses to the job creation process,” Ryding said in a note to clients.
The need to prevent inventories from falling even more as sales improve, and the global economic rebound, which is pushing up commodity costs, are contributing to the increase in imports.
Imports advanced 2.6 percent to $174.6 billion. Today’s report estimated petroleum prices rose to $72.54 a barrel in November, the highest level since October 2008. The increase in costs more than offset a drop in volumes as the U.S. imported 245 million barrels in November, the fewest since February 1999.
Americans also bought more consumer goods, computers and telecommunications equipment from overseas, signaling a revival in overall demand and business investment.
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

U.S. Shifts Iran Focus to Support Opposition

RWGas — Sat, 09 Jan 2010 04:50:00 +0000

By JAY SOLOMON

WASHINGTON — The Obama administration is increasingly questioning the long-term stability of Tehran’s government and moving to find ways to support Iran’s opposition “Green Movement,” said senior U.S. officials.
The White House is crafting new financial sanctions specifically designed to punish the Iranian entities and individuals most directly involved in the crackdown on Iran’s dissident forces, said the U.S. officials, rather than just those involved in Iran’s nuclear program.

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Sipa Press

The U.S. is seeking ways to help Iran’s opposition, led by figures such as Mahdi Karroubi (pictured).

U.S. Treasury Department strategists already have been focusing on Iran’s Revolutionary Guard Corps, which has emerged as the economic and military power behind Supreme Leader Ayatollah Ali Khamenei and President Mahmoud Ahmadinejad.

In recent weeks, senior Green Movement figures — who have been speaking at major Washington think tanks — have made up a list of IRGC-related companies they suggest targeting, which has been forwarded to the Obama administration by third parties.
Names on the list include Iran’s largest telecommunications provider, Telecommunication Company of Iran, which is majority-owned by the IRGC, and the Iranian Aluminum Co. A U.S. official involved in Iran said the administration wouldn’t comment on whether it was acting on the information.
American diplomats, meanwhile, have begun drawing comparisons in public between Iran’s current political turmoil and the events that led up to the 1979 overthrow of Shah Reza Pahlavi.
“In my opinion there are many similarities,” the State Department’s chief Iran specialist, John Limbert, told Iran-based listeners this week over U.S. government-run Radio Farda. “I think it’s very hard for the government to decide how to react to the legitimate and lawful demands of the people.”
Since the opposition movement’s demonstrations recently peaked after the death of reformist Islamic cleric Ayatollah Hossein Ali Montazeri, a number of Iran scholars in the U.S. said they have been contacted by senior administration officials eager to understand if the Iranian unrest suggested a greater threat to Tehran’s government than originally understood.

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Agence France-Presse/Getty Images

President Ahmadinejad

“The tone has changed in the conversation,” said one scholar who discussed Iran with senior U.S. officials. “There’s realization now that this unrest really matters.”

In a signal of the White House’s increased attention to Iran’s political upheaval, Secretary of State Hillary Clinton gathered over coffee at the State Department this week with four leading Iran scholars and mapped out the current dynamics, said U.S. officials. One issue explored was how the U.S. should respond if Tehran suddenly expressed a desire to reach a compromise on the nuclear issue. Mrs. Clinton asked whether the U.S. could reach a pact without crippling the prospects for the Green Movement.
U.S. allies are mixed in their response to the new focus. One senior Arab official said he told State Department officials this week they were deluded if they though Iran was close to experiencing a revolution reminiscent of the Shah’s overthrow. “The IRGC has its hands on the Iranian people,” the official said.
Israel, which faces the greatest security threat from Iran, says only widespread sanctions will effectively upend Tehran’s current political leadership. “Many Israeli experts have concluded that expansive sanctions will widen the schisms between the Iranian government and its people,” said Israel’s ambassador to Washington, Michael Oren.
Senior U.S. officials stressed in interviews this week that President Barack Obama isn’t moving toward seeking a regime change as its policy for Iran. Rather, these officials said, Washington remains committed to a dual-track approach of pursuing dialogue aimed at ending Iran’s nuclear program while applying increasing financial pressure if the talks fail.
Both the Obama administration and the Iranian dissidents have been wary of any direct contacts, due to fears such meetings could provide ammunition for Tehran. The regime and its supporters continue to put harsh pressure on the Green Movement; on Friday, progovernment demonstrators shot at a car carrying a leading opposition figure, Mahdi Karroubi. He escaped without harm, his Web site reported later.
Still, the White House’s re-evaluation of the Green Movement marks a significant evolution of Mr. Obama’s Iran policy since demonstrators began openly challenging President Ahmadinejad’s re-election in June, said diplomats and analysts.
“The Green Movement has demonstrated more staying power than perhaps some have anticipated,” said a senior U.S. official. “The regime is internally losing its legitimacy, which is of its own doing.”
The White House initially displayed caution in lending any vocal support to Iranian protesters, as many U.S. and European officials believed Tehran’s security forces would quickly suppress any wide-scale dissent. U.S. officials repeatedly stressed over the summer that the U.S. was prioritizing efforts to negotiate with Iran on its nuclear program over any rapid push for democratic change.
The U.S. response was so timid that some Iranian protesters openly challenged Mr. Obama. “Obama, Obama — either with us, or with them!” Tehran demonstrators were recorded chanting in November.
U.S. officials say that the White House’s policy has shifted, in part, due to the surprising resilience of the Green Movement in the face of the pervasive crackdown.
The Obama administration has increasingly voiced support for human rights in Iran as the demonstrations have continued. Mr. Obama used his Nobel Prize acceptance speech last month to forcefully call for the respect of human rights and civil liberties.
U.S. officials cite the White House’s public mourning of Mr. Montazeri’s death as perhaps the pivotal step in trying to forge common cause with the opposition.
“Do we expect the current government to be overthrown? I wouldn’t say that at the current time,” said a senior State Department official. “But a crack can certainly grow over time.”
Write to Jay Solomon at jay.solomon@wsj.com

The Meaning of al Qaeda’s Double Agent

RWGas — Fri, 08 Jan 2010 04:15:00 +0000

The jihadists are showing impressive counterintelligence ability that the CIA seems to have underestimated.

By REUEL MARC GERECHT

The recent death in Afghanistan of seven American counterterrorist officers, one Jordanian intelligence operative, and one exploding al Qaeda double agent ought to give us cause to reflect on the real capabilities of the Central Intelligence Agency and al Qaeda.
The report card isn’t good. America’s systemic intelligence problems were partially on display in the bombing at the CIA’s Forward Operating Base Chapman in Khost province. Worse, al Qaeda showed skill that had been lacking in many of its operations. In response, President Barack Obama will likely be obliged to adopt counterterrorist methods that could make his administration as tough as his predecessor’s.
Professionally, one has to admire the skill of suicide bomber Humam Khalil Abu-Mulal al-Balawi’s handlers. This operation could well have been months—if not longer—in the making, and neither the Jordanian intelligence service (GID), which supplied the double agent to the CIA, nor Langley apparently had any serious suspicion that al-Balawi still had the soul and will of a jihadist.
That is an impressive feat. The Hashemite monarchy imprisons lots of Islamic militants, and the GID has the responsibility to interrogate them. The dead Jordanian official, Sharif Ali bin Zeid, reportedly a member of the royal family, may not have been a down-and-dirty case officer with considerable hands-on contact with militants, but al-Balawi surely passed through some kind of intensive screening process with the GID. Yet the GID and the CIA got played, and al Qaeda has revealed that it is capable of running sophisticated clandestine operations with sustained deception.

Martin Kozlowski

Indeed, al Qaeda did to us exactly what we intended to do to them: use a mole for a lethal strike against high-value targets. In the case of al-Balawi, it appears the target was Ayman al Zawahiri, Osama bin Ladin’s top deputy. During the Cold War, the CIA completely dropped its guard in the pursuit of much-desired Cuban and East German agents. The result? Most of our assets were plants given to us by Cuban and East German intelligence. With al-Balawi supposedly providing “good” information about al Zawahiri and al Qaeda’s terrorist planning, a salivating CIA and the GID proved inattentive to counterintelligence concerns.
Whereas al Qaeda is showing increasing proficiency, the same cannot be said for the CIA. Competent case officers can get duped by a good double. And the GID, whose skill has been exaggerated in fiction and film and by Hashemite-stroked American case officers, isn’t a global service. Take it far from its tribal society, where it operates with admirable efficiency, and it is nothing to write home about.
The CIA uses the GID so often not because the Jordanians are brilliant but because the Americans are so often, at best, mediocre. The GID’s large cadre of English-speaking officers makes liaison work easy with Langley, which has never been blessed with a large number of Arabic-speaking officers, particularly within the senior ranks.

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Language issues aside, the now-deceased chief of Base Chapman should have kept most of her personnel away from al-Balawi, and should never have allowed seven officers to get that close to him at one time. Traditional operational compartmentation clearly broke down.
It is also highly likely that all of the CIA officers at Chapman—and especially the chief of base, who was a mother of three—were on short-term assignments. According to active-duty CIA officers, the vast majority of Langley’s officers are on temporary-duty assignments in Afghanistan, which usually means they depart in under one year. (The same is true for the State Department.) Many CIA officers are married with children and they do not care for long tours of duty in unpleasant spots—the type of service that would give officers a chance of gaining some country expertise, if not linguistic accomplishment.
Moreover, security concerns usually trap these officers into a limited range of contacts. Truth be told, even the most elemental CIA activity—meeting recruited agents or “developmentals” outside of well-guarded compounds—often cannot be done without contractor-supplied security. Without Blackwater, now renamed Xe, which handles security for Langley in Afghanistan, CIA case officers would likely be paralyzed.
The officers at Chapman were probably young. This isn’t necessarily bad. As a general rule, younger case officers do better intelligence-collection work than older colleagues, whose zeal for Third World field work declines precipitously as their knowledge and expertise in CIA bureaucratic politics increases. But experience does breed cynicism, which doesn’t appear to have been in abundance at the CIA base.
All of this reinforces the common U.S. military criticism of the Agency in Afghanistan and Iraq: It does not often supply the hard tactical and intimate personal and tribal portraits that military officers need to do their work. Army officers are generally among the natives vastly more than their CIA counterparts.
What does this all mean for President Obama? He did not come into office pledging to reform the CIA, only restrain it from aggressively interrogating al Qaeda terrorists. There is near zero chance that the president will attempt to improve the Agency operationally in the field. His counterterrorist adviser, John Brennan, is as institutional a case officer as Langley has ever produced. If Attorney General Eric Holder is so unwise as to bring any charges against a CIA officer for the rough interrogation of an al Qaeda detainee during the Bush administration, the president will likely find himself deluged with damaging CIA-authored leaks. Mr. Obama would be a fool to confront the CIA on two fronts.
But the president is likely to compensate for systemic weakness in American intelligence in substantial, effective ways. Mr. Obama has been much more aggressive than President George W. Bush was in the use of drone attacks and risky paramilitary operations. One can easily envision him expanding such attacks in Pakistan, Yemen and elsewhere. Visa issuances, airport security, and perhaps even FBI surveillance of American Muslim militants are likely to become much tougher under Mr. Obama than under Mr. Bush. President Obama will, no doubt, continue to say empirically bizarre things about Guantanamo’s imprisonment system creating jihadists, but his administration will now likely find another location to jail militants indefinitely. Too many of President Bush’s released detainees have returned to terrorism.
National Security Adviser James Jones has already described the 21st century as the liaison century, where intelligence and security services cooperate energetically. The CIA has often compensated for its internal weaknesses through liaising with foreigners. President Bush and then Central Intelligence Director George Tenet kicked these relationships into hyper-drive after 9/11; President Obama is likely to kick them even further. Mr. Obama may have foreclosed the possibility of the CIA again aggressively questioning jihadists, but he’s kept the door wide open for the rendition of terrorists to countries like Jordan, where the GID does not abide by the Marquess of Queensbury rules in its interrogations.
The deadly attack in Fort Hood, Texas, by Maj. Malik Hassan in November, the close call in the air above Detroit on Christmas Day, and now the double-agent suicide bombing in Khost have shocked America’s counterterrorist system. Mr. Obama surely knows that one large-scale terrorist strike inside the U.S. could effectively end his presidency. He may at some level still believe that his let’s-just-all-be-friends speech in Cairo last June made a big dent in the hatred that many faithful Muslims have for the U.S., but his practices on the ground are likely to be a lot less touchy-feely. This is all for the good. These three jihadist incidents ought to tell us that America’s war with Islamic militancy is far—far—from being over.
Mr. Gerecht, a former Central Intelligence Agency officer, is a senior fellow at the Foundation for Defense of Democracies.

What Does the Detroit Bomber Know?

RWGas — Thu, 07 Jan 2010 04:48:00 +0000

The president’s job is not detecting bombs at the airport but neutralizing terrorists before they get there.

By MICHAEL B. MUKASEY

There was much to celebrate in the providential combination of an incompetent terrorist and surpassingly brave passengers and crew who saved 288 people aboard Northwest Airlines flight 253 on Christmas Day. There is a lot less to applaud in the official reaction.
Well-deserved mockery has already been heaped on the move-along-folks-nothing-to-see-here tone of the administration’s initial pronouncements—from Janet Napolitano’s “the system worked,” to President Obama’s statement that Umar Farouk Abdulmutallab was an “isolated extremist.” This week brought little improvement.
The president acknowledged that the plot had been hatched in Yemen, but not without adding the misleading statement that Yemen faces “crushing poverty and deadly insurgencies.” That Yemenis have to cope with “crushing poverty” is irrelevant here. Abdulmutallab is the son of a wealthy Nigerian banker. Other jihadists, including the physician who blew himself up and killed seven CIA agents in Afghanistan last week, and indeed the millionaire Osama bin Laden, prove that poverty does not beget terrorists. “Deadly insurgencies” is a half-truth, which omits the fact that the Yemeni government itself has supported al Qaeda and continues to harbor at least two people—Jamal Ahmed Mohammed Ali al-Badawi and Fahad Mohammed Ahmed al-Quso—involved in the bombing of the USS Cole.
Then, too, there was the unfortunate metaphor chosen by a senior intelligence adviser to account for why a conspiracy helped along by at least two Guantanamo alumni had not been discovered before Abdulmutallab boarded the plane. There was, he said, “no smoking gun”—a clue one would expect to find after disaster strikes, not before. There were, as it happens, many smokeless but redolent clues lying about before the plane took off. These included Abdulmutallab’s father’s warning to the State Department that his son was being radicalized and had gone to Yemen; the one-way ticket purchased for cash; no luggage; and intercepted communication referring to a plot involving “the Nigerian” in Yemen.

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David Gothard

But it is not so much these gaffes as what they appear to reflect that gives serious cause for concern. Even as the initial spin was in progress, Abdulmutallab was chattering like a magpie to his FBI captors about having been trained by al Qaeda and about there being more where he came from.

Braggadocio aside, he was certainly aware of who had prepared the potentially deadly mix that was sewn in his underwear, who had trained him, where the training had taken place, whether there was in fact a South Asian man described by two other passengers who helped him talk his way on to the plane, and a good deal more. Such facts are valuable but evanescent intelligence. The location of people—and with it our ability to find and neutralize them—is subject to rapid change.
Had Abdulmutallab been turned over immediately to interrogators intent on gathering intelligence, valuable facts could have been gathered and perhaps acted upon. Indeed, a White House spokesman has confirmed that Abdulmutallab did disclose some actionable intelligence before he fell silent on advice of counsel. Nor is it any comfort to be told, as we were, by the senior intelligence adviser referred to above—he of the “no smoking gun”—that we can learn facts from Abdulmutallab as part of a plea bargaining process in connection with his prosecution.
Whatever that official thinks he knows about the plea bargaining process, he certainly should know that the kind of facts that Abdulmutallab might be expected to know have a shelf life that is a lot shorter than the plea bargaining process, assuming such a process ever gets started.
Holding Abdulmutallab for a time in military custody, regardless of where he is ultimately to be charged, would have been entirely lawful—even in the view of the current administration, which has taken the position that it needs no further legislative authority to hold dangerous detainees even for a lengthy period in the United States. Then we could decide at relative leisure where to charge him—whether before a military commission or before a civilian court. In Abdulmutallab’s case, it would hardly make a difference, given the nature of most of the evidence against him. (Although potential disclosure of the body of intercepted communications that included reference to “the Nigerian” could prove problematic if the prosecution were to be brought in a civilian court.)
Those considerations, however, are entirely academic because Abdulmutallab was proceeded against—if that is the correct description—in a civilian tribunal where the first step was to get him a lawyer who promptly put an end to his disclosures. The point is less where Abdulmutallab will eventually be prosecuted than what use could have been made of him as an intelligence source. No consideration whatsoever appears to have been given to where Abdulmutallab fits in the foreign contingency operation (formerly known as the global war on terror) in which we are engaged.
Most recently we have had the promise of more rigorous searches at the airport, along with a White House summit meeting that featured a furrowed brow, an earnest injunction to “do better” at “connecting dots,” an oddly benign reference to al Qaeda as our “agile adversary,” and a promise to suspend the transfer of prisoners to Yemen because of the “unsettled” situation in that country, accompanied by an emphatic recommitment to closing Guantanamo.
What the gaffes, the almost comically strained avoidance of such direct terms as “war” and “Islamist terrorism,” and the failure to think of Abdulmutallab as a potential source of intelligence rather than simply as a criminal defendant seem to reflect is that some in the executive branch are focused more on not sounding like their predecessors than they are on finding and neutralizing people who believe it is their religious duty to kill us. That’s too bad, because the Constitution vests “the executive power”—not some of it, all of it—in the president. He, and those acting at his direction, are responsible for protecting us.
There is much to worry about if they think that the principal challenge of the day is detecting bombs at the airport rather than actively searching out, finding and neutralizing terrorists before they get there.
Mr. Mukasey was attorney general of the United States from 2007 to 2009.

The Ramzi Yousef Standard

RWGas — Wed, 06 Jan 2010 04:23:00 +0000

The Administration has ways of making terrorists not talk.

The failed terrorist attack aboard Northwest Flight 253 is proving to be highly educational, not least about the Obama Administration and its pre-September 11 antiterror worldview. Yesterday, the White House reversed itself on repatriating Guantanamo detainees to chaotic Yemen, a step in the right direction. Now if it would only revisit its Ramzi Yousef standard for interrogating captured terrorists like Umar Farouk Abdulmutallab.
Ramzi Yousef, you may recall, was the mastermind of the first World Trade Center bombing in 1993 who is now serving a life sentence in a supermax prison in Colorado. The Obama Administration likes to cite his arrest, conviction and imprisonment as a model for its faith that the criminal justice system is the best way to handle terrorist detainees.
“Our courts and our juries, our citizens, are tough enough to convict terrorists. The record makes that clear,” said President Obama last May 21 at the National Archives. “Ramzi Yousef tried to blow up the World Trade Center. He was convicted in our courts and is serving a life sentence in U.S. prisons.”
On June 9, 2009, the Justice Department repeated the claim in a fact sheet arguing for handling terrorists in criminal courts:
“1993 World Trade Center Bombing: After two trials, in 1993 and 1997, six defendants were convicted and sentenced principally to life in prison for detonating a truck bomb in the garage of the World Trade Center, killing six people and injuring hundreds more. One of the defendants convicted at the second trial was Ramzi Yousef, the mastermind of the attack.”

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Associated Press

A criminal case study.

The World Trade Center trials were successful in winning convictions, and they were understandable because at the time we didn’t understand the war we were in. But more than a decade later, the real news in these Administration statements is what they don’t claim: Whether Ramzi Yousef told U.S. interrogators anything of actionable value about al Qaeda and its future terror plans.

We now know that when Yousef was captured, in 1995, al Qaeda leaders were working feverishly to attack American targets. Yousef’s uncle is none other than Khalid Sheikh Mohammed, the mastermind of 9/11 and one of Yousef’s co-conspirators in the failed Bojinka plot to blow up airliners across the Pacific Ocean.
Yet as far as we know, Yousef told U.S. interrogators little or nothing about KSM’s plots and strategy once he was in U.S. custody. This isn’t surprising, since once he was in the criminal justice system Yousef was granted a lawyer and all the legal protections against cooperating with U.S. interrogators. To this day, we don’t recall any official claim that Yousef has provided useful intelligence of the kind that KSM, Abu Zubaydah and other al Qaeda leaders later did when they were interrogated by the CIA.
All of this is directly relevant to the Administration’s rash decision to indict Abdulmutallab on criminal charges immediately after his arrest in Detroit on Christmas weekend. The Nigerian jihadist could have been labeled an enemy combatant, detained indefinitely, and interrogated with a goal of discovering who he had met in Yemen, whether other plots are underway, and much else that might be relevant to preventing the next terror attempt. This is a far higher priority than convicting Abdulmutallab and sending him to jail.
John Brennan, the top White House counterterrorism official, tried to defend the criminal indictment on the Sunday talk shows but mainly revealed the Administration’s confusion about the law and the uses of interrogation. Asked by David Gregory on NBC’s “Meet the Press” why Abdulmutallab wasn’t named an enemy combatant, Mr. Brennan said, “Well, because, first of all, we’re a country of laws, and what we’re going to do is to make sure that we treat each individual case appropriately.”
But there is nothing illegal about holding an enemy combatant indefinitely, as the Supreme Court has upheld and as the Obama Administration has argued in court.
When Mr. Gregory pressed about “additional intelligence that could be gleaned” by interrogation, Mr. Brennan replied:
“Well, first of all, we have different ways of obtaining information from individuals according to that criminal process. A lot of people, as they understand what they’re facing and their lawyers recognize that there is advantage to talking to us in terms of plea agreements, we’re going to pursue that. So—and we are continuing to look at ways that we can extract that information from him.”
A plea agreement? Mr. Brennan seems to be saying that now that he has a public defender, Abdulmutallab has clammed up. But the Administration might be able to coax him to talk if it offers him a lower sentence or some kind of other legal concession, even though he tried to kill nearly 300 people aboard an American airliner.
In other words, because the Obama Administration is loath to interrogate terrorists outside the criminal justice system, our only lever to get them to talk is offering a legal reprieve. This is bizarre to say the least, and self-destructive if it turns out that Abdulmutallab has information that could help prevent future attacks.
Mr. Brennan’s other defense on Sunday was that the Bush Administration also prosecuted terrorists as criminals on occasion, in particular shoe bomber Richard Reid and Zacarias Moussaoui. But Reid was captured only months after 9/11 when the system of military commissions wasn’t in place, and Moussaoui’s trial was a legal fiasco that took years to prosecute. In neither case did they provide intelligence that revealed anything close to what KSM did about al Qaeda.
The lesson of these cases, like that of Ramzi Yousef, is not that the criminal justice system can sometimes convict terrorists. It is that criminal prosecution is far less vital to U.S. security than is conducting the interrogations that can yield information that saves innocent lives.

Tehran Plans a Major Military Exercise

RWGas — Mon, 04 Jan 2010 05:08:00 +0000

Drill to Boost ‘Defensive Capabilities’ Coincides With Deadline Iran Has Set for West on Nuclear Offer

By CHIP CUMMINS

Iranian media on Sunday reported Tehran will conduct a large-scale defensive military exercise next month, coinciding with what government officials now say is a deadline for the West to respond to its counteroffer to a nuclear-fuel deal.
The commander of Iran’s ground forces, Brig. Gen. Ahmad-Reza Pourdastan, said the drill will be conducted by Iran’s army, in conjunction with some units of the Islamic Revolutionary Guard Corps, to improve “defensive capabilities,” Press TV, the English-language, state-run media outlet reported.

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Agence France-Presse/Getty Images

A candlelight vigil in Frankfurt, Germany, on Sunday commemorates victims who died during antigovernment demonstrations in Iran.

The report follows comments by Iran’s foreign minister Manouchehr Mottaki on Saturday, challenging Western nations to decide by the end of the month on counterproposals Tehran has floated to an internationally brokered nuclear-fuel deal. In the counterproposals, Iran has said it would agree to swap the bulk of its low-enriched uranium for higher enriched uranium, but in small batches and on Iranian soil.

Iranian officials also have named Turkey as a possible venue to swap the fuel. Iran has separately suggested it would be willing to buy enriched uranium from a third party.
The U.S. and Western allies have dismissed the counterproposals outright. In autumn, negotiators from Iran, the U.S., France, Russia and the International Atomic Energy Agency hammered out a proposed deal in which Iran would agree to ship out the bulk of its uranium to Russia, where it would be enriched and shipped back for use in a medical-research reactor. But Iranian officials refused to endorse the deal, despite a U.S.-imposed year-end deadline for Tehran to show progress in talks.
An IAEA spokesman declined to comment on the latest Iranian statements.
A European diplomat said that on Monday, the diplomatic year begins with a “review of measures the international community can use to increase its pressure on Iran” to begin serious negotiations.
The administration of U.S. President Barack Obama has said it would push for new sanctions against Iran early this year if Tehran didn’t respond positively to the nuclear-fuel deal. Israeli officials, meanwhile, have suggested they would strike militarily if they thought Iran was nearing nuclear-weapons capability.
Mr. Obama has “begun talking to our friends and allies to consider the next step in this process,” National Security Council Chief of Staff Denis McDonough said last week in Honolulu.
The U.S. is expected to push for United Nations-backed sanctions, despite uncertain support from Security Council members Russia and China. Washington is also consulting allies who might be willing to back sanctions outside the U.N., including Saudi Arabia and the United Arab Emirates.
Arab support would further isolate Iran from some of its closest trading partners. While Iran and its Arab neighbors along the Persian Gulf have long had testy relations, Tehran depends on Arab Gulf states for significant trade — in particular on the U.A.E.’s Dubai, a regional re-export hub.
Not all Arab neighbors are onboard with Washington’s sanction plans. In a heavily attended security conference in Manama early last month, Bahrain’s foreign minister said further Iranian sanctions wouldn’t be fair.
“I think the people of Iran have had enough,” Sheikh Khalid bin Ahmed Al Khalifa said to delegates, including Mr. Mottaki and top U.S. diplomats and military officials. Bahrain is a staunch American ally, hosting the U.S. Fifth Fleet.
Recent Iranian domestic unrest raises fresh challenges for the Obama administration in crafting any new sanctions. Officials must weigh measures that are tough enough to pressure the regime, but not too tough to enflame popular anger and shore up domestic support for President Mahmoud Ahmadinejad.
The original, IAEA-backed fuel proposal was embraced by Washington because it was seen as a first step in a longer negotiating process over Iran’s nuclear ambitions.
Iran says it is pursuing peaceful energy, but many officials in the West suspect it’s building weapons. The deal would have removed enough fissile material to delay the manufacture of any weapon for at least a short while.
Mr. Mottaki on Saturday said Iran would go ahead and produce and enrich its own fuel for the medical reactor if Western powers didn’t agree either to swap the fuel or to sell it enriched uranium.
The U.S. has rejected any proposal other than the one hammered out with the IAEA.
“The IAEA has a balanced proposal on the table that would fulfill Iran’s own request for fuel and has the backing of the international community,” Mike Hammer, a spokesman for the National Security Council, said in an emailed statement.
—Elizabeth Williamson and David Crawford contributed to this article. Write to Chip Cummins at chip.cummins@wsj.com

Democrats’ worst nightmare: Terrorism on their watch

RWGas — Sun, 03 Jan 2010 06:18:00 +0000

: The W.H. response to the attempt to blow up a flight to Detroit could rank as a low point for Barack Obama. Photo: AP

From the time he launched his campaign for president three years ago, Barack Obama had to consider how he would react to the first serious act of terrorism during the campaign, or if he won, on his watch. His fellow Democrats had been thinking about the moment even longer – since the September day in 2001 when attacks on the World Trade Center and Pentagon defined George W. Bush’s presidency and gave Republicans a decisive advantage on a defining political issue.

And yet the White House’s response to last week’s attempt to blow up a Northwest Airlines flight to Detroit could rank as one of the low points of the new president’s first year. Over the course of five days, Obama’s Obama’ reaction ranged from low-keyed to reassuring to, finally, a vow to find out what went wrong. The episode was a baffling, unforced error in presidential symbolism, hardly a small part of the presidency, and the moment at which yet another of the old political maxims that Obama had sought to transcend – the Democrats’ vulnerability on national security – reasserted itself.

“The presidency is sometimes about symbolism and not just substance,” said Bob Shrum, who help craft Senator John Kerry’s response to the late-October message from Osama bin Laden that was a pivotal point in the 2004 campaign – and learned a painful lesson in the uneven political playing field on the question of terrorism, at least at that time.

“Kerry reacted perfectly, but it probably cost us the election,” said Shrum, who said he thought Obama had effectively changed course after his aides’ overconfident appearance on the Sunday shows following the attempted attack.

Obama’s campaign was intensely familiar with the danger a potential terror incident posed to any Democratic candidate, and all the more to one who lacked Kerry’s military service and foreign policy experience. They did everything they could to compensate with a high-profile Senate focus on nuclear disarmament and a set of graybeard validators to vouch for Obama’s readiness to lead.

A terror attack during the 2008 campaign, allies and former aides said, would have drawn a response similar to the posture he eventually took toward the financial crisis, one drawn from “Obama’s DNA,” in the words of an ally: To put politics aside, stand with the sitting president and to, ultimately, appear presidential.

The attack never came. Terrorism virtually disappeared as an issue, despite the best efforts of Obama’s opponent, Republican Sen. John McCain, who had a distinct advantage over Obama on the issue because of his military experience. And Obama aced the politics of the campaign’s sole public crisis – the financial meltdown of September 2008 – projecting concern and solidarity, acting – as his advisers were at pains to point out – like a president should.
As president, Obama has been criticized by the left for adapting many Bush administration policies – on Iraq, Afghanistan, surveillance and secret detention. But when finally forced to confront national security situations directly, from a restive Iran to a near-miss attack, Obama’s characteristic caution has appeared tentative, and the vacuum he left was filled by a political food fight between Congressional Republicans and Democrats and, ultimately, his staff.

His staff’s first statement, released after Obama, vacationing in Hawaii, was informed of the news three hours after the suspect was taken into custody, was merely that the president was “closely monitoring” the situation and stressed that his schedule would not change.

The next day his aides informed reporters that he was continuing to receive updates from his top national security advisers and began to set the stage for press secretary Robert Gibbs to announce on the Sunday morning talk shows that Obama had ordered reviews of the terrorist watch-list system and airport security procedures.

But on Sunday Gibbs and Homeland Security Secretary Janet Napolitano also sought to reassure the traveling public that – despite questions about how the suspect had boarded the plane – the system of responding to a possible attack had “worked” after the fact. It was an understandable tone of reassurance for a country on the move because of the holidays. “Imagine if the president had freaked out,” the White House ally said, suggesting a dramatic Obama reaction could have provoked chaos in the air travel system.

But that was the moment when some Democrats began to grow concerned about the White House’s strategy.

The muted response, allies said, was aimed at denying al Qaeda a propaganda victory, and at demonstrating how little the terrorists can now disrupt Americans’ lives. “The president and his team have done a good job at handling the situation given the competing interests at play. He’s been forceful without the bellicose chest bumping of the last administration,” said Jim Manley, the chief spokesman for Senate Majority Leader Harry Reid. “One thing he’s got going for him is Republicans have no credibility on this issue when their sending out former Vice President Cheney you know they’ve hit the bottom of the barrel.”

Still, the response failed to reckon with the intense public interest in a story of repeated government failures and a near-fatal attack. Not to mention that Americans and flight crews were on edge – as evidenced in the detainment of a man who was in an airplane bathroom for too long and who authorities released once they learned he was just a businessman who’d gotten ill. The White House, already feeling heat for its Christmas Day response, had a spokesman quickly issue a statement when the man was taken into custody.

In Obama’s effective absence, Republicans began sharply attacking the administration, producing a partisan stand-off critics say could have been avoided.

“They should have approached it as a national security emergency requiring a bipartisan response, not a political response,” said Doug Schoen, a pollster who worked for President Bill Clinton in the 1990s. “He absolutely should have interrupted his vacation and absolutely should have gone back to Washington, and convened a high-level, bipartisan meeting.”

White House aides have repeatedly said there was never any discussion about Obama returning to Washington. Because of secure communications systems and by staff he brought with him to Hawaii, including his National Security chief of staff, he was perfectly able to stay on top of the situation from his vacation home in Kailua.

Aides also say Obama wouldn’t necessarily be working more on the issue if he were back in Washington. Yet they made a point of announcing Thursday that he will hold a high-level Situation Room meeting with Cabinet secretaries and top intelligence and security officials on Tuesday, the day after he’s expected to return. It’s a meeting aimed at projecting his concern with the situation and insistence that it not recur.

But the listlessness of an initial response remains a puzzle, coming as it did during the same week Obama rushed off of the golf course in the middle of a game, his presidential motorcade screaming down a Hawaii highway at top speed to deliver one of his golf partners to the house where the friend’s son had cut his chin on a surfboard.
Explanations of Obama’s low-key reaction in the face of a terror attack include the characteristic caution of a president who resists jumping to conclusions and being pushed to action. They also include the White House’s belief – disproven repeatedly in 2009 – that it can evade the clichéd rules of politics, which include a suspicion of Democratic leadership on national security. Only Sunday night, when criticism of the system “worked” comment was not going away, did White House aides realize their approach was not working and that they needed to shift course.

Others note that Obama does not like to interrupt his vacations, and that this isn’t the first time his preference for staying in Hawaii – a hard place for a quick round-trip flight – has cost him politically. In 1999, as an up-and-coming Illinois senator, he challenged Rep. Bobby Rush in a Democrat primary race that came to focus tightly on gun violence after Rush’s son was shot.

Obama, in Hawaii, missed a key vote on state gun control legislation in the state legislature, and wrote an unusually defensive column in the Hyde Park Herald defending his missed vote.

“Unfortunately, on Monday, December 27 — during an extremely short trip to visit my grandmother — my 18 month-old daughter Malia came down with the flu. By Tuesday, my daughter was feeling worse. I discussed the situation with my wife, and we determined that it was not advisable to take an eight-hour, red-eye flight back to Chicago with a sick baby. I also decided that I could not leave my wife alone with my daughter without knowing the seriousness of the baby’s condition, and without knowing whether they might be able to get a flight out of Hawaii before New Year’s Day” he wrote.

“I take my responsibilities as a parent very seriously. We hear a lot to talk from politicians about the importance of family values. Hopefully, you will understand when your stale senator tries to live up to those values as best he can.”

Nobody really did. Obama was pilloried for missing the vote, and Rush crushed him in the primary, the only defeat of the future president’s political career.

Ten years later, once again in Hawaii, Obama has not shown any public defensiveness about the growing chorus of critics. Indeed the only instance in which he addressed the criticism in the two five-minute statements he has delivered since the attempted attack occurred was to defend Napolitano. In his first statement, however, he made the case for not paying the attempted suicide bomber too much mind.

“The American people should remain vigilant, but also be confident,” Obama said December 28. “Those plotting against us seek not only to undermine our security, but also the open society and the values that we cherish as Americans. This incident, like several that have preceded it demonstrates that an alert and courageous citizenry are far more resilient than an isolated extremist.”

Markets fail. That’s why we need markets.

RWGas — Wed, 30 Dec 2009 21:25:00 +0000

It may sound odd, but only free and open markets, not government regulation, can quickly and effectively clean up the mess that markets sometimes make.

By Arnold Kling and Nick Schulz / December 28, 2009

Arlington, Va.; and Washington Two camps have fought the political and philosophical battle for influence over the economy in the United States for the past 100 years. They differ in their views over the nature of markets and government. And both are wrong.
One camp makes it sound as if markets can do no wrong. Their views were ascendant in the 1920s and again in the 1980s.
The other camp argues, “Markets fail, and that’s why we need government.” The idea is that markets are prone to excesses and imbalances and need the thoughtful, steadying hand of government to protect consumers and investors from flaws and uncertainties of the market. This camp believes that wise technocrats can and will bring order to the markets.
In the wake of the financial crisis that gave way to the broader economic downturn, the advocates of government involvement in the economy are once again on the march and traditional defenders of markets are in retreat. And so we have seen government advance its role with partial ownership of many big banks, with a take-over of automotive firms, with a large “stimulus” program, with proposals for cap-and-trade for carbon emissions, and with a major initiative on healthcare.
The traditional defenders of free markets have had a rough time getting a hearing lately. After all, it certainly appears as if markets don’t work in any meaningful sense. The Dow rises and plummets in harrowing fashion, the housing market balloons and then craters, financial services firms teeter on the edge of extinction one minute and swing to record profitability the next.
Surely, government can do better.
Or can it? Over the past two generations, a different view of markets and government has begun to emerge, one whose moment may have arrived. It is a view that believes both traditional camps have overlooked some important aspects of markets.
What’s more, it is a view that, if embraced, helps reinterpret market gyrations and government interventions in a way that better reflects reality. The view is subtle, but it has a profound influence on how the public and policymakers should think of markets and, ultimately, the role of government in the economy.
This view can be summarized as “Markets fail. That’s why we need markets.”
This seemingly paradoxical view is based on several overlapping strands of research in economics as it pertains to development, history, technology, business expansion, and new-firm formation. According to this view, entrepreneurs at work in the economy – in finance, high tech, manufacturing, services, and beyond – are constantly experimenting, creating new business models, techniques, and technologies that upend the established order of things.
Some new technologies and innovations are genuine improvements and are long-lasting welfare enhancers. But others are the basketball equivalent of pump fakes – they look like the real deal and prompt market actors to leap hastily into action, only to realize later that their bets were wrong.
Given this dynamic, markets are unpredictable, prone to booms and busts, characterized by bouts of exuberance that are rational or irrational only in hindsight.
But markets are also the only reliable mechanism for sorting out this messy process quickly. In spite of the booms and busts, markets drive genuine long-run innovation and wealth creation.
When governments attempt to impose order on this chaotic and inherently risky process, they immediately run up against two serious dangers.
The first is that they strangle new innovations before they can emerge. Thus proposals for a Consumer Financial Protection Agency, a systemic risk regulator, a public health insurance plan, a green jobs policy, or any attempt at top-down planning may do more harm than good.
The second danger has to do with the nature of political economy. Politics creates its own kind of innovators who can be as destabilizing to markets as market actors themselves – but in far more pernicious ways.
Economists call these political entrepreneurs “rent-seekers.” Rent-seekers gain wealth, not by creating it, but by channeling it through political favors. Examples include government-sponsored monopolies, “targeted” tax breaks for special industries, and legislative loopholes inserted by lobbyists.
The boom in housing and mortgage securities that ended so badly was fueled by government policies that were encouraged by rent-seekers in the real estate, home building, and mortgage finance industries.
Rent-seekers aren’t partisan. They used President Bush’s push for an ownership society to promote sketchy mortgage products. Before that, they used President Clinton’s push for a fairer economy to compel banks to make loans to poorer neighborhoods. In both cases, rent-seekers turned political slogans into profit, but at a steep cost to society when the boom ended.
The response to the current economic crisis has perpetuated and even intensified this process, as hundreds of billions of dollars of taxpayer funds have been used to prop up the very firms that took such reckless risks. The bigger the bad bet, the bigger the bailout.
This gets to the key difference between markets and governments. When innovation-driven excesses and imbalances are recognized in the marketplace, the system can correct itself quickly. This is less the case when government policy failure occurs.
Because political failure is less publicly tolerable than market failure, the temptation becomes for policymakers to avoid acknowledging their role in creating or perpetuating problems. Or they double down on bad bets. So rather than recognize the government’s central role in the housing boom and bust and quickly changing its ways, we see the federal policy apparatus continuing to throw good money after bad in the mortgage market and on Wall Street.
Markets fail; but they learn from their failures. That’s why we need markets. Government can promise to guarantee our prosperity; but only markets can really deliver.
Arnold Kling is an economist with the Mercatus Center’s Financial Markets Working Group at George Mason University. Nick Schulz is DeWitt Wallace Fellow at the American Enterprise Institute for Public Policy Research. They are coauthors of “From Poverty to Prosperity: Intangible Assets, Hidden Liabilities and the Lasting Triumph Over Scarcity.”