Saturday, January 31, 2009

Cost of the Bush era: $11.5 trillion

Original Link: http://articles.moneycentral.msn.com/Investing/StockInvestingTrading/cost-of-the-bush-era-11-point-5-trillion.aspx?page=all

By John Dyer, MSN Money

George W. Bush's presidency cost the country about $11.5 trillion, if we estimate liberally.

Of course, it's debatable how much blame the president should bear.

$150 billion surplus disappears

Over the past eight years, we've suffered calamities that were bound to damage the nation deeply: two recessions, the most lethal terrorist attacks ever on U.S. soil, the invasion of Iraq on dubious grounds, the near destruction of one of our most storied cities and, finally, the Wall Street meltdown.

Quiz: What cost the most?

Because the median U.S. household income is about $50,000, readers may have trouble grasping the concept of spending trillions.

For context, let's compare two cases of extraordinary spending under Bush.

After the Sept. 11 attacks, Washington pledged $22 billion to help rebuild in lower Manhattan. At the time, that sum sounded enormous. It was more than one-fourth of the $80 billion budget that New York state had adopted a month before. Though some called for even more aid, the country at large was satisfied that this response was adequate to cope with calamity on a colossal scale.

Oh, how far we've come.

In early October of 2008, Congress appropriated $700 billion to rescue Wall Street's financial institutions. Once that was done, the sky was the limit, and the numbers became dizzying.

And the spending won't stop after Bush leaves office Jan. 20.

Debt for future generations

In hopes of "breaking the momentum" of the current recession, President-elect Barack Obama is reportedly drafting a stimulus package that would cost the government as much $850 billion. If past is precedent, it's unlikely Obama will stop there.

Talk back: Where should we cut future U.S. spending?

The new administration is already expected to inherit a $1.2 trillion deficit from Bush. The stimulus package would add to that record-breaking number.

What should Obama do?

Picture an avalanche of cash disappearing into the Potomac.

Where has all the money gone? Here are five areas where Bush has approved massive outlays of taxpayer money.


Wall Street bailouts: $6 trillion

When the real-estate bubble burst, Wall Street collapsed, too. Starting with Bear Stearns in March, investment banks fell like dominoes, done in by overexposure to mortgage-backed securities. We're still sifting through the damage. But we know U.S. taxpayers are among the biggest losers.

In hopes of stanching the bleeding, the federal government has spent or put at risk approximately $6 trillion. True, a big part of that number reflects the government's purchase of securities that may actually yield a profit one day. Critics of this enormous commitment will point out that it has yet to produce any solid evidence of a turnaround in the economy's slide, while the Bush administration's apologists argue that, without such a commitment, the news would have been much worse.

The best-known aspect of this epic spending spree is the U.S. Treasury's $700 billion Troubled Assets Relief Program, whose remit has included purchasing so-called toxic securities, giving banks cash and helping Detroit automakers avoid bankruptcy.

But TARP, as the program is known, is just the tip of the iceberg.

The Treasury also gave $300 billion in guarantees for struggling Citigroup, poured $200 billion into Fannie Mae and Freddie Mac when officials seized the mortgage giants to prevent their bankruptcy, and granted an additional $50 billion in temporary guarantees to keep investors from pulling out of money market funds. Again, a guarantee doesn't necessarily mean the Treasury will actually spend the money. But that money is at risk, and that's taxpayer money.

The Federal Reserve has also been busy. Central bankers have said they could purchase as much as $1.3 trillion of commercial paper from nonfinancial companies to make sure businesses have the working capital they need in an environment where banks are hesitant to lend. The Fed has committed an additional $1 trillion to a variety of credit facilities designed to encourage banks to loosen up, from outright loans to banks, to purchases of securities backed by consumer credit, to $600 billion to buy securities backed by prime mortgages -- a move that knocked standard home loan rates down to 5%.

And there's more.

Among other federal rescue measures we have the Federal Deposit Insurance Corp.'s decision to guarantee as much as $1.4 trillion in interbank loans, $300 billion for the Federal Housing Administration to insure mortgages in danger of foreclosure and a $150 billion aid package for insurance giant American International Group.

A lot of the guarantees that have been made will never come into play; just making a guarantee usually does the trick, if it's the Federal Reserve speaking. Here is some more good news: Some of the government's crisis-related investments may actually prove profitable. Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities in Washington, believes the government could see a profit of $500 billion from stock dividends and the appreciation of stocks. Just remember, that's peanuts in this game.

There are other variables that complicate the picture on a similar scale. The federal government is on the hook for $5 trillion of debt that Fannie Mae and Freddie Mac underwrote. The two companies themselves hold only a third of that debt, Kogan said, so it's unclear what the taxpayer's ultimate liability will be there.

Also unclear is how the Wall Street bailout money is being spent. The Treasury has been reluctant to monitor how banks are using TARP funds, and the Fed has refused to name the recipients of its loans, arguing that naming names would undermine the health of the companies in question.

"It's a lot of money going out the door, with basically no public knowledge of it whatsoever," said Dean Baker, a co-director of the Center for Economic and Policy Research in Washington.

About $600 billion of the Fed's $1.3 trillion plan to buy commercial paper has been spent, Baker said. But the Fed won't say who has received that cash.

"People are making and losing fortunes depending on whether the Fed will buy their commercial paper," Baker said. "We should know what they're doing."

Iraq and Afghanistan: $3 trillion

The searches for Osama bin Laden in Afghanistan and for weapons of mass destruction in Iraq have morphed into occupations. So far, the U.S. has spent around $860 billion on both, according to the Congressional Budget Office.

But Harvard University professor Linda Bilmes and Nobel laureate Joseph Stiglitz of Columbia University say the agency is underestimating the tab. In their book, "The Three Trillion Dollar War" they claim Iraq will be far costlier.

Modern technology and medicine have kept U.S. deaths in these conflicts low, compared with previous wars, but tens of thousands of wounded soldiers will require taxpayer-supplied health care for years, said Bilmes, who served as an assistant secretary of commerce in the Clinton administration. Factoring in those benefits, replacement of worn-out hardware and other hidden bills, Bilmes and Stiglitz believe the real price for Iraq is $3 trillion.

That money hasn't been reinvested in the U.S. economy as mush as possibly expected, partly because of outsourcing by U.S. companies, Bilmes said. One example is construction company KBR, which used shell companies in the Cayman Islands to avoid payroll taxes.

"A dollar that is spent on a road is a dollar which has a multiplier," Bilmes said. "You have better roads. Whereas a dollar spent on a Malaysian contractor to do laundry doesn't help the U.S."

Tax cuts and deficit spending: $2 trillion

In 2001 and 2003, Bush signed legislation that cut taxes, much to the benefit of the affluent. The first cut was designed to help the economy after the Internet bubble collapsed. The second was to boost growth after the 2001 recession ended.

Kogan estimated the tax cuts have cost the Treasury $1.7 trillion in revenue to date. Of course, that may not be one bit disturbing to the taxpayers who've watched their tax bills go down. The only problem is, the cuts have been critical in opening up the gargantuan budget gap that Obama will face.

Because Bush did not reduce spending, Washington has paid about $265 billion in interest on loans to cover the lost revenue. So the $1.7 trillion in tax cuts really cost around $2 trillion.

Meanwhile, Bush increased deficit spending, incurring more debt service. Bush's expansion of Medicare drug benefits for the elderly, for example, cost around $130 billion, of which $10 billion was debt service between 2006 and 2008, said Kogan, of the Center on Budget and Policy Priorities.

"If some of this spending had been paid for by tax increases, then there wouldn't have been interest costs," he said. "But none of it was. We had tax cuts and spending increases."

In an e-mail, Treasury Department spokeswoman Brookly McLaughlin said Bush's tax cuts had helped the economy by allowing people to keep more of their wages and other earnings, increasing incentives to work, save and invest.

McLaughlin also cited an Office of Management and Budget/Haver Analytics study that compared federal spending as a share of gross domestic product under Bush and Franklin D. Roosevelt. Under Bush, spending grew from 18.4% of GDP in fiscal 2000 to 20.7% in fiscal 2008, the study said. FDR increased spending from 6.3% in fiscal 1932 to 43.6% in fiscal 1944.

Of course, Roosevelt was dealing with a full-blown depression and war against Germany and Japan.

Hurricanes Katrina and Rita: $270 billion

When Hurricane Katrina hit the Gulf Coast in 2005, New Orleans' levees gave way, and the city was inundated. Stories of survivors trapped in the Superdome and incompetence at the Federal Emergency Management Agency transformed the natural disaster into a national disgrace.

Katrina, along with Hurricane Rita soon after, cost about $270 billion, by some estimates. In Louisiana alone, officials said the hurricane destroyed $100 billion in property, shrank the state's economy by $80 billion and required $20 billion in local emergency relief.

Those figures don't include damages in other states, including communities that absorbed refugees fleeing the city. They also don't count the continuing costs of rebuilding the Big Easy.

FEMA has given $50 billion to Gulf Coast states, a spokesman said. The Army Corps of Engineers is spending $14 billion to upgrade levees, according to the agency's Web site.

Meantime, the Louisiana Recovery Authority is spending $10 billion in recovery efforts that include homeowners retrofitting their houses, for example.

"People are adding storm shutters and roof tie-downs so that they can make their homes more resilient," said Christina Stephens, an agency spokeswoman. "We're encouraging them to mitigate future loss."

9/11: $260 billion

New York City lost about $95 billion because of the Sept. 11 attacks, according to a 2002 report by City Comptroller William Thompson Jr.

That price tag includes costs associated only with New York: $22 billion to replace the World Trade Center, $65 billion in lost economic activity in the three years after the attacks and $9 billion in the human potential that disappeared when the hijackers killed 2,819 people in Manhattan -- a calculation that illustrates why economics is called the dismal science. It does not include Washington's $22 billion in aid.

Outside New York, the tragedy cost plenty. Kogan estimated that Bush spent about $140 billion on related nonmilitary measures, such as the creation of the Department of Homeland Security.

The approximate total of $260 billion does not include the damage wrought and lives lost on 9/11 at the Pentagon or in Pennsylvania, or money spent on preparedness by state and local governments and private industry. It also doesn't include the continuing losses associated with the vacant World Trade Center site, which housed as much office space as downtown Atlanta.

In other words, we're still paying for 9/11.

US roads, water and basic systems earn 'D' grade

Original Link: http://www.examiner.com/a-1818966~US_roads__water_and_basic_systems_earn__D__grade.html

WASHINGTON (Map, News) - America's roads, public transit and aviation have gotten worse in the past four years. Water and sewage systems are dreadful. The basic physical backbone of American society is barely above failing, a report by top engineers says.

It'll cost $2.2 trillion to fix America's ailing infrastructure, according to highlights of a report being released early, just as the House of Representatives readies its first vote on President Barack Obama's call for a massive economic stimulus spending package.

The country's roads, dumps, dams, bridges, schools and rail systems need lots of that money, say the engineers, who would get a piece of the pie in working on the repairs. Government officials are already aiming billions of dollars at those physical needs as part of what at the moment is a $825 billion economic stimulus package. But the engineers say that's not enough.

Overall, the American Society of Civil Engineers gives the U.S. physical backbone for everything from schools and parks to dams and levees a D. That's the same overall grade as the last time the group gave a report, in 2005, but it really is slipping from a "high D" to a "low D," said report chairman Andrew Herrmann.

Herrmann, an engineer with the New York firm Hardesty & Hanover, said his group is issuing the highlights of the report - the full document won't be out until late March - "to be relevant ... investing in our infrastructure will create jobs."

Of the 15 areas the engineers looked at, three got worse and only one got better. The three that worsened were all transportation oriented: aviation dropped from a D+ to a D; so did public transit; and America's intricate roadway system potholed from a D to a D-. Only the energy system improved, from a D to a D+.

In 2005, the engineers said it would cost what would be $1.7 trillion in current dollars to fix what's broken. Now the pricetag is up to $2.2 trillion.

"That just goes to show that waiting has cost money," Herrmann told The Associated Press on Tuesday evening. "We haven't made any progress in four years. If my kid came home with 11 Ds and 4 Cs, I know I wouldn't be happy."

America's solid waste system was the only C+ on the report card. Bridges got a C; parks and rail systems managed C-. The only D+ plus was for energy. Solid Ds went to aviation, dams, hazardous waste, schools and public transit. The worst grades, D-, went to drinking water, inland waterways, roads and sewage systems.

"That absolutely makes sense," said Granger Morgan, head of Carnegie Mellon University's engineering and public policy program and an expert who wasn't part of the 28-engineer panel that handed out the grades. Morgan said just traveling the world shows that American infrastructure, especially in transportation, "is certainly not in the same league as parts of the developing world and parts of Europe."

But just because the federal government is handing out lots of money and society's physical backbone needs plenty of repairs, that doesn't automatically mean the government should spend most of its dollars on things such as new roads and power plants, Morgan said. Often, building newer roads doesn't fix congestion, yet building better public transit would pay off more, he said. And spending on energy efficiency more than physical power plants makes sense, he added.

"One really needs to make these choices on a bit of solid engineering economics as opposed to emotion and rhetoric," Morgan said. "We've got an enormous pent-up need. The only message is: `Let's be careful to the extent that we can in the manner we spend the money.'"

And even though the pricetag to fix America's physical needs is $2.2 trillion over five years, it's really only half that bad because $1.1 trillion of that is already being spent or planned, Herrmann said. The biggest "gap" between what's being spent or planned and what's needed is an additional $548.5 billion in roads and bridges, the report said. Second is $189.5 billion for public transit.

"Do you realize we're driving on a lot of roads that were built during the Eisenhower Administration," Herrmann said.

The report, the first one issued since Hurricane Katrina flooded New Orleans, added America's 100,000 miles of levees as a new area of failing infrastructure. Levees, which hold back floodwaters, get a D minus grade, with the report saying, "The risk to the public health and safety from failure has increased."

Army suicides at 3-decade high

Original Link: http://seattletimes.nwsource.com/html/nationworld/2008687796_armysuicide30.html

By PAULINE JELINEK

Suicides among U.S. soldiers rose last year to the highest level in decades, the Army said Thursday.

At least 128 soldiers killed themselves in 2008. But the final count is likely to be considerably higher because 15 more suspicious deaths are being investigated, Army officials said.

A new training and prevention effort will start next week. Col. Elspeth Ritchie, a psychiatric consultant to the Army surgeon general, made a plea for more U.S. mental-health professionals to sign on to work for the military.

"We are hiring and we need your help," she said.

The new suicide figure compares with 115 in 2007 and 102 in 2006 and is the highest since record-keeping began in 1980. Officials calculate the deaths at a rate of roughly 20.2 per 100,000 soldiers, which is higher than the adjusted-civilian rate for the first time since the Vietnam War, officials said at a Pentagon news conference.

"We need to move quickly to do everything we can to reverse this disturbing ... number," Army Vice Chief of Staff Gen. Peter Chiarelli said.

Officials have said that troops are under unprecedented stress because of repeated and long tours of duty due to the simultaneous wars in Iraq and Afghanistan.

The stress has placed further burdens on an overwhelmed military health-care system also trying to tend to huge numbers of troops with post-traumatic stress, depression and other mental-health problems in addition to physical injuries.

Yearly increases in suicides have been recorded since 2004, when there were 64.

The statistics released Thursday cover soldiers who killed themselves while they were on active duty, including National Guard and Reserve troops who had been activated.

The previous year's rate of suicides — 18.8 per 100,000 soldiers — had also been the highest on record. But the new pace of 20.2 per 100,000 was the first time the rate surpassed the civilian number, when adjusted to reflect the Army's younger and male-heavy demographics.

The Centers for Disease Control and Prevention said the suicide rate for U.S. society overall was about 11 per 100,000 in 2004, the latest year for which the agency has figures. But the Army says the civilian rate is more like 19.5 per 100,000 when adjusted.

The new Army statistics follow a report earlier this month showing that the Marine Corps recorded more suicides last year than any year since the U.S.-led invasion of Iraq in March 2003.

That report said 41 Marines were possible or confirmed suicides in 2008, or 16.8 per 100,000 troops. The Marine rate remained unchanged from the previous year.

The numbers kept by the service branches don't include deaths after people have left the military. The Department of Veterans Affairs tracks those numbers and says there were 144 suicides among the nearly 500,000 service members who left the military from 2002-05 after fighting in at least one of the two wars.

A Look Back at Bush's Economic Missteps

Original Link: http://www.time.com/time/specials/packages/article/0,28804,1872229_1872230_1872231,00.html

By JUSTIN FOX

George Bush is leaving the White House with a dismal economic record. By almost every measure — GDP growth, jobs, median incomes, financial-market performance — he stacks up as probably the least-successful President on the economic front since Herbert Hoover.

It's not all Bush's fault. He inherited an inevitable recession in 2001, and even last year's financial collapse was to some extent the result of unsustainable trends in place long before he moved to Washington. Also, we generally give Presidents both more credit and more blame for economic outcomes than they probably deserve. As Bush mock-moaned in his final White House press conference, "Why did the financial collapse have to happen on my watch?"

His next words, though, were, "It's just pathetic, isn't it, self-pity?" So let's spare him the pity. As the decider in the White House for the past eight years, George Bush made some economic calls that don't look smart today. Here are eight of them.

1. The Return to Deficits

When President Bush took office in 2001, Republicans and Democrats in Washington had built a strong consensus on the need for fiscal responsibility. Bush blew that apart within a few months. With the country in a recession, a temporary return to deficits was inevitable. But Bush's tax cuts and spending increases — and clear disdain for the pay-as-you-go approach that had brought deficits down in the 1990s — brought a return to permanent deficits. These actions almost certainly didn't cause the current crisis, but they have left the Federal Government in a much weaker position to combat it.

2. Iraq

Doing a cost-benefit analysis on a war is awfully hard. There are just too many what-ifs. But the cost of invading and occupying Iraq has been staggeringly high — whether you believe the $3 trillion figure of economists Linda Bilmes and Joseph Stiglitz or side with the Congressional Budget Office estimate of a mere trillion or two. It's the biggest part of the explanation for the yawning Bush-era budget deficits. So even if you think the war did bring benefits to the U.S., they would have to be pretty gigantic to justify the cost.

3. Tax Cuts for the Rich

When Ronald Reagan slashed taxes on capital gains and high earners in the early 1980s, inflation was pushing the middle class into top tax brackets, financial markets had been stuck in a funk for 15 years and income inequality had been declining for almost five decades. Like him or not, the man's actions fit the times — and the U.S. economy boomed for most of his two terms in office. Bush came to Washington facing almost diametrically opposing economic conditions, yet he offered up the same solutions as Reagan. Guess what: they weren't what the economy needed.

4. Financial Regulation

The only major piece of regulatory legislation enacted during the Bush years was the Sarbanes-Oxley Act, which dramatically increased regulation of corporate financial disclosures. The really big regulatory changes being pointed to now as possible culprits for the crisis date back to Bush's predecessors: Bill Clinton, Ronald Reagan, even Jimmy Carter and Gerald Ford. So the popular Democratic refrain that "Bush-era deregulation" is to blame for our troubles is a little hard to square with the evidence. What is true is that most Bush-era financial regulators were less than enthusiastic about the very act of regulating, and that Bush's "ownership society" push glossed over a lot of potential dangers. Bush didn't cause the financial regulatory breakdown, but he didn't jump in to fix it either.

5. Telling Us to Go Shopping

After the 9/11 terrorist attacks, President Bush didn't call for sacrifice. He called for shopping. "Get down to Disney World in Florida," he said. "Take your families and enjoy life, the way we want it to be enjoyed." Taken on its own, this wasn't such a horrible sentiment. But Boston University historian Andrew Bacevich has made a convincing case that it was part of a broader pattern of encouraging financial irresponsibility. "Bush seems to have calculated — cynically but correctly — that prolonging the credit-fueled consumer binge could help keep complaints about his performance as Commander in Chief from becoming more than a nuisance," Bacevich wrote in the Washington Post in October. Now we're paying the bill.

6. Energy Policy

Not much to say here, except that there wasn't an energy policy. Again, this wasn't new to the Bush era. But with a years-long oil-price slide finally coming to an end not long before he took office, the President's (and Vice President's) unwillingness to take serious steps to reduce the country's dependence on fossil fuels left the country vulnerable and way behind the rest of the developed world in preparing for a post-oil future.

7. A State of Denial

Every Administration spins and sugarcoats the economic truth. But the Bush White House took this disingenuousness to new levels. The surest way to get yourself fired as a Bush economic adviser was to say something that was true. Paul O'Neill was ousted from Treasury for warning about deficits. Larry Lindsey was kicked out of the top White House economic job for predicting in 2002 that the Iraq war would cost $100 billion to $200 billion — far below the actual cost but much more than what the White House was officially projecting. This disdain for reality, and for expertise, pervaded the Bush economic approach, and made it impossible for the Administration to react intelligently to real-world economic problems like the housing bubble.

8. The Muddled Bailout

It could have been much, much worse. For the first time, Bush gave someone with more expertise than political bona fides — Treasury Secretary Henry Paulson — control over economic policy and didn't let the hacks in the White House undercut him. Paulson's financial rescue has been awfully messy and expensive, but one shudders to think what might have happened if his much weaker predecessor, John Snow, had still been in charge at Treasury when trouble struck. The main problem has been the ambivalence with which both Paulson and the White House have approached the financial rescue. They backed into it, never articulating clear principles for how it should work. That's yet another thing the new Administration is going have to rectify.

Shrinking Fast, GOP Now the Party of Rush Limbaugh, Sarah Palin and 'No!'

Original Link: http://news.aol.com/political-machine/2009/01/29/shrinking-fast-gop-now-the-party-of-rush-limbaugh-sarah-palin/

By David Knowles

A curious thing has happened to the Republican Party in the wake of its resounding defeat in the November elections. Rather than recalibrate and update its message to meet the challenges of the troubled times in which we live, it has decided to double-down on the philosophical bets that led to its recent losses. No greater evidence this bunker mentality can be found than in the de facto anointment of Rush Limbaugh to the ceremonial post of party king.

If it sounds far-fetched that a firebrand talk-show host actually wields this much power, consider the recent about face of the one Republican who actually had the nerve to criticize Limbaugh. Via CNN:

Republican Rep. Phil Gingrey of Georgia apologized Wednesday for criticizing conservative hosts Rush Limbaugh and Sean Hannity, assuring his supporters that "I am one of you."

"I regret and apologize for the fact that my comments have offended and upset my fellow conservatives--that was not my intent," Gingrey said in a statement.

Yes, it would be unthinkable to offend the man who makes a living offending people. But who are Gingrey's (and Limbaugh's) fellow conservatives these days? A new study by Gallup reveals an altered American landscape, one in which red state islands are increasingly surrounded by a sea of blue.

Here's Nate Silver's take:

That's right: just five states, collectively containing about 2 percent of the American population, have statistically significant pluralities of adults identifying themselves as Republicans. These are the "Mormon Belt" states of Utah, Idaho and Wyoming, plus Nebraska, plus Alaska. By contrast, 35 states are plurality Democratic, and 10 states are too close to call.

While the Mormon factor might, at first glance, seem like good news for Mitt Romney, the fact is that those areas will go Republican no matter who the party puts forth. Ditto for Alaska and Sarah Palin. The trick is in fielding a candidate who can win outside of the safe-zone.

Palin contends that she is that candidate, and this week took steps to prove it. Unveiling SarahPAC, the Alaska Governor continues her PR offensive on the country. But, as with much of the GOP's press materials, the offerings seem strangely retrograde and light on substance. To wit, while not offering a single policy proposal on her website, Palin-PAC boasts:

SarahPAC believes the Republican Party is at the threshold of an historic renaissance that will build a better future for all. Health care, education, and reform of government are among our key goals.

With all due respect, health care, education, and reform of government have been the key goals of every person to run for president for the last century (including Obama). Then again, in the absence of specific new ideas, there's always the fall back rhetorical stand: What Would Reagan Do? While that mantra seemed just dandy in last year's pre-crash primary season, calls for further deregulation don't sound so sweet anymore. So, without a viable way forward, the party has opted to repeat after Limbaugh. Yesterday, House Republicans cleared their collective throat and said "No!" to the new stimulus package.

"No," it turns out, might not be such a bad word to hear from the GOP. There's plenty in the stimulus bill that could use trimming and refining. But "No" won't win elections. "No" won't attract new voters. Matt Lewis put up an excellent assessment of the contest to see who will lead the RNC, and I'd agree with him that the people best suited for the job are the ones who see that there's a problem with the party, not those who send out racially-charged songs to their back-slapping constituents.

Meanwhile, Obama continues to garner headlines for reaching out to Republicans and attempting to build consensus across party lines. Yes, Americans are watching both parties. Should the stimulus fail to bring the country out of its economic mess in the next four years, they'll blame Obama and the Democrats. It's as simple as that. But waiting around and hoping things don't get better is one hell of a lousy strategy for rebuilding a party.

A Rich Income in ‘06 Was $263 Million

Original Link: http://dealbook.blogs.nytimes.com/2009/01/30/a-rich-income-in-06-was-263-million/

The income of the 400 wealthiest Americans swelled in 2006, soaring nearly 23 percent from the previous year, to an average of $263 million, according to data released Thursday by the Internal Revenue Service. Since 1996, this group has nearly doubled its share of all income earned in the United States.

The top 400 paid just more than $18 billion in federal income taxes in 2006, or an average of $45 million, on a record $105 billion in total income — the lowest effective tax rate in the 15 years since the agency began releasing such data.

That compares with nearly $1 trillion paid by all other individual taxpayers in 2006.

The gains for the richest took place amid a booming economy, in which hedge funds and private equity firms blossomed and the subprime lending machine went into high gear.

The rising wealth of the nation’s richest taxpayers, The New York Times’s Lynnley Browning writes, will most likely intensify debate among tax and policy analysts about the equitability of the tax code, which analysts say favors the ultrawealthy.

Tax cuts enacted by the Bush administration that benefit the wealthy are set to expire by 2011.

“Until recently, we had a financial system that rewarded investors, and we have a tax system that does as well,” Robert S. McIntyre, the director of Citizens for Tax Justice, told The Times.

Now wealthy people, he said, pay income tax rates well below those of working-class citizens because of a myriad of tax breaks. A lower capital gains tax, now at 15 percent, down from 28 percent in 1997, benefits investors with big portfolios.

The average adjusted gross income in 2006 of more than $263 million for the top 400 taxpayers compared with an average of $214 million in 2005. It was three and a half times what they earned in 1996, which was $74 million.

And their average tax rate continued to a 15-year low of 17 percent.

But their contribution to federal coffers rose slightly, to nearly 1.8 percent of total contributions by all individual taxpayers. About 130 million taxpayers file returns each year.

The growth in income came primarily from dividends and interest income, not rising salaries and wages. Capital gains income jumped to 63 percent of the adjusted gross income of the richest 400, up from 58 percent in the previous year.

As a percentage of their income, salaries and wages fell to 7.4 percent of their total income, down from more than 12.5 percent just two years earlier. But taxable interest as a percentage of their income rose to nearly 7.8 percent, the highest level since the dot-com boom era of 1995.

The higher income also came from a sharp rise in claims for foreign tax credits, typically through privately owned entities. Such claims rose in 2006 to an average $2.5 million from $1.7 million the year earlier, and quadruple the level in 1996.

More than half, or nearly 54 percent, of all the itemized deductions taken by the wealthiest were related to their charitable contributions, a figure roughly unchanged since 1996.

And while the top 400 wealthiest earned more deductions from their charitable contributions, such gifts still account for just 5.19 percent of all itemized charitable contributions by all taxpayers.

Sunday, January 25, 2009

Another Real Estate Crisis is About to Hit

Original Link: http://www.counterpunch.org/roberts01222009.html

By PAUL CRAIG ROBERTS

For a picture of the US real estate crisis, imagine New Orleans wrecked by Hurricane Katrina, and before the waters even begin to recede, a second Katrina hits.

The 1,120,000 lost US retail jobs in 2008 are a signal that the second stage of the real estate bust is about to hit the economy. This time it will be commercial real estate--shopping malls, strip malls, warehouses, and office buildings. As businesses close and rents decline, the ability to service the mortgages on the over-built commercial real estate disappears.

The over-building was helped along by the irresponsibly low interest rates, but the main impetus came from the slide of the US saving rate to zero and the rise in household indebtedness. The shrinkage of savings and the increase in debt raised consumer spending to 72% of GDP. The proliferation of malls and the warehouses that service them reflect the rise in consumer spending as a share of GDP.

Like the federal government, consumers spent more than they earned and borrowed to cover the difference. Obviously, this could not go on forever, and consumer debt has reached its limit.

Shopping malls are losing anchor stores, and large chains are closing stores and even going out of business altogether. Developers who borrowed to finance commercial ventures are in trouble as are the holders of the mortgages, derivatives and other financial junk associated with the loans.

The main source of the economic crisis is the infantile belief of US policymakers that an economy could be based on debt expansion. As offshoring moved jobs, incomes, and GDP out of the country, debt expanded to take the place of the missing income. When the offshored goods and services were brought back to be sold to Americans, the trade deficit rose, adding another level of financing for an economy that consumes more than it produces.

The growth of debt has outpaced the growth of real output. Yet, the solution offered by Obama’s economic team is to expand debt further. This is not surprising as Obama’s economic team consists of the very people who brought on the debt crisis. Now they are going to make it worse.

The unexamined question is: Who is going to finance the next wave of debt?

The US budget deficit for fiscal year 2009 already appears to be on a path to $2 trillion, and that is before Obama’s stimulus program. What we are looking at is a $3 trillion budget deficit if Obama’s program is enacted in time to impact the economy this year.

Foreign countries can finance a $500 billion US budget deficit out of their trade surpluses with the US. But foreigners do not have the funds to finance a US budget deficit in the trillions of dollars, and they would not finance such a deficit even if they had the funds. Foreigners are over-weighted in dollar holdings and prefer to lighten their holding than to add to them. America’s economic prospects are dim as are the dollar’s prospects as reserve currency. An annual budget deficit in the trillions of dollars makes the dollar’s prospects appear even dimmer.

The federal government’s likely solution to the debt problem will be to monetize the debt, that is, the government will finance its deficit by printing money. Debt will be inflated away. But for those Americans without jobs or whose incomes do not rise with inflation, life will be cruel.

Life is already cruel for Americans living on retirement savings. Not only has the stock market bust reduced their wealth by half, but also their remaining assets are producing no income. Interest rates are so low that debt instruments produce no income, and there are scant capital gains in the stock market. Retirees are living by consuming their capital.

America’s economic policy of low interest rates and debt expansion bodes ill for everyone living off their savings. Their future prospects are even worse as high inflation will destroy the value of their savings, especially if held in cash or debt instruments, including “safe” US Treasuries.

There are more intelligent ways to try to escape from the current crisis. However, the financial gangsters and their shills that Obama has put in charge of economic policy are thinking only of their own interest. What happens to the American people is not a concern.

A compassionate government would handle the crisis in this way:

The trillions of dollars in credit default swaps (CDS) should be declared null and void. These “swaps” are simply bets that financial instruments and companies will fail, and the bulk of the bets are made by people and institutions that do not hold the financial instruments or shares in the companies. The ideology that financial markets were self-regulating allowed illegal gambling free rein. There is no reason under the sun for taxpayers to bail out gamblers.

The bailout money, instead of being given to favored financial institutions to finance their acquisition of other institutions, should be used to refinance the defaulting mortgages. This would slow, if not stop, the growing inventory of foreclosed properties that is driving down home prices.

The mark-to-market rule should be suspended until the real values of the troubled properties and instruments can be determined. Suspension of the rule would prevent the failure of sound institutions and lessen the need for a bailout.

Interest rates have to be raised in order to encourage saving and to provide incomes to retirees.

To preserve the dollar’s status as reserve currency, a credible policy of reducing both budget and trade deficits must be announced. In the near term the budget deficit can be reduced by $500 billion by withdrawing from Iraq and Afghanistan and by cutting a bloated defense budget that represents the now unattainable goal of US world hegemony.

The trade deficit can be significantly reduced by bringing offshored jobs back to America. One way to do this is to tax corporations according to the value added to their output that occurs in the US. Corporations that produce their products for US markets abroad would have high tax rates; those that produce domestically would have low tax rates.

This approach to the economic crisis stands in marked contrast with the approach of the gangsters running US economic policy. The gangsters are using the crisis as an opportunity to steal from taxpayers and to finance their misdeeds and exorbitant salaries with Federal Reserve loans. Their shills among economists and the financial press tell the people that the solution is to fatten up the banks with funds so they will resume lending to an over-indebted public that will then return to the shopping malls.

This unrealistic approach to a serious crisis indicates a leadership crisis on top of an economic crisis.

Friday, January 23, 2009

Stuck in the Muddle

Original Link: http://www.nytimes.com/2009/01/23/opinion/23krugman.html

By PAUL KRUGMAN

Like anyone who pays attention to business and financial news, I am in a state of high economic anxiety. Like everyone of good will, I hoped that President Obama’s Inaugural Address would offer some reassurance, that it would suggest that the new administration has this thing covered.

But it was not to be. I ended Tuesday less confident about the direction of economic policy than I was in the morning.

Just to be clear, there wasn’t anything glaringly wrong with the address — although for those still hoping that Mr. Obama will lead the way to universal health care, it was disappointing that he spoke only of health care’s excessive cost, never once mentioning the plight of the uninsured and underinsured.

Also, one wishes that the speechwriters had come up with something more inspiring than a call for an “era of responsibility” — which, not to put too fine a point on it, was the same thing former President George W. Bush called for eight years ago.

But my real problem with the speech, on matters economic, was its conventionality. In response to an unprecedented economic crisis — or, more accurately, a crisis whose only real precedent is the Great Depression — Mr. Obama did what people in Washington do when they want to sound serious: he spoke, more or less in the abstract, of the need to make hard choices and stand up to special interests.

That’s not enough. In fact, it’s not even right.

Thus, in his speech Mr. Obama attributed the economic crisis in part to “our collective failure to make hard choices and prepare the nation for a new age” — but I have no idea what he meant. This is, first and foremost, a crisis brought on by a runaway financial industry. And if we failed to rein in that industry, it wasn’t because Americans “collectively” refused to make hard choices; the American public had no idea what was going on, and the people who did know what was going on mostly thought deregulation was a great idea.

Or consider this statement from Mr. Obama: “Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions — that time has surely passed.”

The first part of this passage was almost surely intended as a paraphrase of words that John Maynard Keynes wrote as the world was plunging into the Great Depression — and it was a great relief, after decades of knee-jerk denunciations of government, to hear a new president giving a shout-out to Keynes. “The resources of nature and men’s devices,” Keynes wrote, “are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for everyone a high standard of life. ... But today we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand.”

But something was lost in translation. Mr. Obama and Keynes both assert that we’re failing to make use of our economic capacity. But Keynes’s insight — that we’re in a “muddle” that needs to be fixed — somehow was replaced with standard we’re-all-at-fault, let’s-get-tough-on-ourselves boilerplate.

Remember, Herbert Hoover didn’t have a problem making unpleasant decisions: he had the courage and toughness to slash spending and raise taxes in the face of the Great Depression. Unfortunately, that just made things worse.

Still, a speech is just a speech. The members of Mr. Obama’s economic team certainly understand the extraordinary nature of the mess we’re in. So the tone of Tuesday’s address may signify nothing about the Obama administration’s future policy.

On the other hand, Mr. Obama is, as his predecessor put it, the decider. And he’s going to have to make some big decisions very soon. In particular, he’s going to have to decide how bold to be in his moves to sustain the financial system, where the outlook has deteriorated so drastically that a surprising number of economists, not all of them especially liberal, now argue that resolving the crisis will require the temporary nationalization of some major banks.

So is Mr. Obama ready for that? Or were the platitudes in his Inaugural Address a sign that he’ll wait for the conventional wisdom to catch up with events? If so, his administration will find itself dangerously behind the curve.

And that’s not a place that we want the new team to be. The economic crisis grows worse, and harder to resolve, with each passing week. If we don’t get drastic action soon, we may find ourselves stuck in the muddle for a very long time.

Wall Street Voodoo

Original Link: http://www.nytimes.com/2009/01/19/opinion/19krugman.html

By PAUL KRUGMAN

Old-fashioned voodoo economics — the belief in tax-cut magic — has been banished from civilized discourse. The supply-side cult has shrunk to the point that it contains only cranks, charlatans, and Republicans.

But recent news reports suggest that many influential people, including Federal Reserve officials, bank regulators, and, possibly, members of the incoming Obama administration, have become devotees of a new kind of voodoo: the belief that by performing elaborate financial rituals we can keep dead banks walking.

To explain the issue, let me describe the position of a hypothetical bank that I’ll call Gothamgroup, or Gotham for short.

On paper, Gotham has $2 trillion in assets and $1.9 trillion in liabilities, so that it has a net worth of $100 billion. But a substantial fraction of its assets — say, $400 billion worth — are mortgage-backed securities and other toxic waste. If the bank tried to sell these assets, it would get no more than $200 billion.

So Gotham is a zombie bank: it’s still operating, but the reality is that it has already gone bust. Its stock isn’t totally worthless — it still has a market capitalization of $20 billion — but that value is entirely based on the hope that shareholders will be rescued by a government bailout.

Why would the government bail Gotham out? Because it plays a central role in the financial system. When Lehman was allowed to fail, financial markets froze, and for a few weeks the world economy teetered on the edge of collapse. Since we don’t want a repeat performance, Gotham has to be kept functioning. But how can that be done?

Well, the government could simply give Gotham a couple of hundred billion dollars, enough to make it solvent again. But this would, of course, be a huge gift to Gotham’s current shareholders — and it would also encourage excessive risk-taking in the future. Still, the possibility of such a gift is what’s now supporting Gotham’s stock price.

A better approach would be to do what the government did with zombie savings and loans at the end of the 1980s: it seized the defunct banks, cleaning out the shareholders. Then it transferred their bad assets to a special institution, the Resolution Trust Corporation; paid off enough of the banks’ debts to make them solvent; and sold the fixed-up banks to new owners.

The current buzz suggests, however, that policy makers aren’t willing to take either of these approaches. Instead, they’re reportedly gravitating toward a compromise approach: moving toxic waste from private banks’ balance sheets to a publicly owned “bad bank” or “aggregator bank” that would resemble the Resolution Trust Corporation, but without seizing the banks first.

Sheila Bair, the chairwoman of the Federal Deposit Insurance Corporation, recently tried to describe how this would work: “The aggregator bank would buy the assets at fair value.” But what does “fair value” mean?

In my example, Gothamgroup is insolvent because the alleged $400 billion of toxic waste on its books is actually worth only $200 billion. The only way a government purchase of that toxic waste can make Gotham solvent again is if the government pays much more than private buyers are willing to offer.

Now, maybe private buyers aren’t willing to pay what toxic waste is really worth: “We don’t have really any rational pricing right now for some of these asset categories,” Ms. Bair says. But should the government be in the business of declaring that it knows better than the market what assets are worth? And is it really likely that paying “fair value,” whatever that means, would be enough to make Gotham solvent again?

What I suspect is that policy makers — possibly without realizing it — are gearing up to attempt a bait-and-switch: a policy that looks like the cleanup of the savings and loans, but in practice amounts to making huge gifts to bank shareholders at taxpayer expense, disguised as “fair value” purchases of toxic assets.

Why go through these contortions? The answer seems to be that Washington remains deathly afraid of the N-word — nationalization. The truth is that Gothamgroup and its sister institutions are already wards of the state, utterly dependent on taxpayer support; but nobody wants to recognize that fact and implement the obvious solution: an explicit, though temporary, government takeover. Hence the popularity of the new voodoo, which claims, as I said, that elaborate financial rituals can reanimate dead banks.

Unfortunately, the price of this retreat into superstition may be high. I hope I’m wrong, but I suspect that taxpayers are about to get another raw deal — and that we’re about to get another financial rescue plan that fails to do the job.

Sunday, January 18, 2009

Over 8 in 10 corporations have tax havens

Original Link: http://news.yahoo.com/s/ap/20090116/ap_on_go_co/tax_havens

By KEN THOMAS, Associated Press Writer

Eighty-three of the nation's 100 largest corporations, including Citigroup, Bank of America and News Corp., had subsidiaries in offshore tax havens in 2007, and some of the companies received federal bailout funding, a government watchdog said Friday.

The Government Accountability Office released a report that said Bank of America Inc., Citigroup Inc. and Morgan Stanley all had more than 100 units in countries that maintain low or no taxes. The three financial institutions were included in the $700 billion financial bailout approved by Congress.

Insurance giant American International Group Inc., which has received about $150 billion in bailout money, had 18 subsidiaries. JPMorgan Chase & Co. had 50 units and Wells Fargo & Co. had 18; both financial institutions received government bailout money.

Sens. Carl Levin, D-Mich., and Byron Dorgan, D-N.D., who requested the report, have pushed for tougher laws to fight offshore tax havens around the globe. Levin, who leads the Senate Permanent Subcommittee on Investigations, has estimated abusive tax havens and offshore accounts cost the U.S. government at least $100 billion a year in lost taxes.

"I think we should take action to shut down these tax dodgers and we will be introducing legislation to do just that," Dorgan said.

General Motors Corp., which received $13.4 billion from the federal rescue package, had 11 offshore subsidiaries while GM's financing arm, GMAC LLC, had two offshore units. GMAC, whose majority owner is private equity firm Cerberus Capital Management LP, received $5 billion from the Treasury Department in late December.

Citigroup said in a statement that it has more than 4,000 subsidiaries around the globe "which enables us to serve hundreds of millions of individuals and institutions in more than 100 countries." A News Corp. spokeswoman declined comment. Messages were left with several of the companies identified in the report.

Separately, the GAO said 63 of the 100 largest federal contractors maintain subsidiaries in 50 tax havens.

Levin noted that many competitors use the tax havens to varying degrees. PepsiCo Inc. has 70 subsidiaries while the Coca-Cola Co. has eight units. Caterpillar Inc. had 49 while Deere & Co. had three.

"We need to put an end to the use of offshore secrecy jurisdictions as tax havens," Levin said.

The GAO said the subsidiaries could be established in the countries "for a variety of nontax business reasons" and said having a business unit in one of the countries "does not signify that a corporation or federal contractor established that subsidiary for the purpose of reducing its tax burden."

Citigroup had 427 units in 23 countries, including 91 subsidiaries in Luxembourg and 90 in the Cayman Islands. Morgan Stanley had 273 units, News Corp. had 152 and Bank of America had 115. Procter & Gamble Co. had 83 subsidiaries and Pfizer Inc. had 80 in the jurisdictions.

Several major corporations have announced plans to leave Bermuda, a leading offshore business center, amid the global financial crisis and fears of tighter tax rules. Tyco Electronics Ltd., which makes electronic components, and Foster Wheeler Ltd., an engineering and construction company, are reincorporating in Switzerland — which has a tax treaty with the U.S. — for tax and other reasons. Covidien Ltd., a health care products company, is heading to Ireland.

Saturday, January 17, 2009

Norquist Compares The Corporate Tax Rate To Torture

Original Link: http://thinkprogress.org/2009/01/16/norquist-corporate-torture/

Earlier this month, National Journal’s John Maggs sat down with anti-tax crusader Grover Norquist to discuss the future of conservatism and the economy. Asked by Maggs about the tax cut proposals in President-elect Obama’s stimulus plan, Norquist said there was only one “real tax cut” in the plan, but that there are “two other tax cuts that the Democrats could do when they get stuck.”

Norquist then suggested expensing for all businesses and cutting the corporate rate, which he said in its current form is comparable to torture:

NORQUIST: The other tax cut you could do is cutting the corporate rate. The U.S. corporate rate is 35 percent; the European rate is 25 percent. Obama is a more international guy, so we should be close to the European average. We’ll stop torturing people, we’ll stop torturing corporations, and that will make us more like Europe.

This isn’t the first time Norquist has made an outlandish and offensive comparison. In 2003, Norquist compared the estate tax to the Holocaust, saying that they share the same “morality.” But not only is Norquist’s comparison contemptible, considering the very real moral and human cost of Bush’s torture policies, his idea of a corporate tax rate cut would be ineffective stimulus.

As the Center for American Progress’ Will Straw has pointed out, permanent corporate tax cuts have a poor track record for providing stimulus:

The track record for such steps is poor in general, but they are particularly ill-suited for a recessionary period. After all, the reason that businesses and individuals are not investing at the moment has little to do with the taxes they may pay in the future and everything to do with a fear of losing money because there is no demand in the economy, asset prices are highly volatile, and credit is hard to come by.

Citizens for Tax Justice has found that “every dollar lost from cutting the corporate income tax would increase real GDP by just 30 cents,” which is a stimulative effect that would hardly justify slashing the corporate rate.

Cost of the Bush era: $11.5 trillion

Original Link: http://finance.sympatico.msn.ca/investing/insight/article.aspx?cp-documentid=16828559

By John Dyer

The outgoing U.S. administration has presided over 8 years of disasters and crises with some of the biggest price tags America has ever seen.

George W. Bush's presidency cost the U.S. about $11.5 trillion, if we estimate liberally.

Of course, it's debatable how much blame the U.S. president should bear.

Over the past eight years, Americans have suffered calamities that were bound to damage the nation deeply: two recessions, the most lethal terrorist attacks ever on U.S. soil, the invasion of Iraq on dubious grounds, the near destruction of one of the country's most storied cities and, finally, the Wall Street meltdown.

Because the median U.S. household income is about $50,000, many people may have trouble grasping the concept of spending trillions.

For context, let's compare two cases of extraordinary spending under Bush.

After the Sept. 11 attacks, Washington pledged $22 billion to help rebuild in lower Manhattan. At the time, that sum sounded enormous. It was more than one-fourth of the $80 billion budget that New York state had adopted a month before. Though some called for even more aid, the country at large was satisfied that this response was adequate to cope with calamity on a colossal scale.

Oh, how far the country has come.

In early October of 2008, U.S. Congress appropriated $700 billion to rescue Wall Street's financial institutions. Once that was done, the sky was the limit, and the numbers became dizzying.

And the spending won't stop after Bush leaves office Jan. 20.

In hopes of "breaking the momentum" of the current U.S. recession, President-elect Barack Obama is reportedly drafting a stimulus package that would cost the American government as much $850 billion. If past is precedent, it's unlikely Obama will stop there.

* Talk back: Does Canada need a stimulus package?

The new U.S. administration is already expected to inherit a $1.2 trillion deficit from Bush. The stimulus package would add to that record-breaking number.

Where has all the money gone? Here are five areas where Bush has approved massive outlays of American taxpayer money.

Wall Street bailouts: $6 trillion
When the U.S. real-estate bubble burst, Wall Street collapsed, too. Starting with Bear Stearns in March, investment banks fell like dominoes, done in by overexposure to mortgage-backed securities. We're still sifting through the damage. But we know U.S. taxpayers are among the biggest losers.

In hopes of stanching the bleeding, the U.S. government has spent or put at risk approximately $6 trillion. True, a big part of that number reflects the government's purchase of securities that may actually yield a profit one day. Critics of this enormous commitment will point out that it has yet to produce any solid evidence of a turnaround in the American economy's slide, while the Bush administration's apologists argue that, without such a commitment, the news would have been much worse.

The best-known aspect of this epic spending spree is the U.S. Treasury's $700 billion Troubled Assets Relief Program, whose remit has included purchasing so-called toxic securities, giving American banks cash and helping Detroit automakers avoid bankruptcy.

But TARP, as the program is known, is just the tip of the iceberg.

The Treasury also gave $300 billion in guarantees for struggling Citigroup, poured $200 billion into Fannie Mae and Freddie Mac when officials seized the mortgage giants to prevent their bankruptcy, and granted an additional $50 billion in temporary guarantees to keep investors from pulling out of money market funds. Again, a guarantee doesn't necessarily mean the Treasury will actually spend the money. But that money is at risk, and that's U.S. taxpayer money.

The U.S. Federal Reserve has also been busy. Central bankers have said they could purchase as much as $1.3 trillion of commercial paper from nonfinancial companies to make sure businesses have the working capital they need in an environment where banks are hesitant to lend. The Fed has committed an additional $1 trillion to a variety of credit facilities designed to encourage banks to loosen up, from outright loans to banks, to purchases of securities backed by consumer credit, to $600 billion to buy securities backed by prime mortgages -- a move that knocked standard U.S. home loan rates down to 5%.

And there's more.

Among other U.S. federal rescue measures we have the Federal Deposit Insurance Corp.'s decision to guarantee as much as $1.4 trillion in interbank loans, $300 billion for the U.S. Federal Housing Administration to insure mortgages in danger of foreclosure and a $150 billion aid package for insurance giant American International Group.

A lot of the guarantees that have been made will never come into play; just making a guarantee usually does the trick, if it's the Federal Reserve speaking. Here is some more good news: Some of the U.S. government's crisis-related investments may actually prove profitable. Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities in Washington, believes the U.S. government could see a profit of $500 billion from stock dividends and the appreciation of stocks. Just remember, that's peanuts in this game.

There are other variables that complicate the picture on a similar scale. The American government is on the hook for $5 trillion of debt that Fannie Mae and Freddie Mac underwrote. The two companies themselves hold only a third of that debt, Kogan said, so it's unclear what the American taxpayer's ultimate liability will be there.

Also unclear is how the Wall Street bailout money is being spent. The Treasury has been reluctant to monitor how banks are using TARP funds, and the Fed has refused to name the recipients of its loans, arguing that naming names would undermine the health of the companies in question.

"It's a lot of money going out the door, with basically no public knowledge of it whatsoever," said Dean Baker, a co-director of the Center for Economic and Policy Research in Washington.

About $600 billion of the Fed's $1.3 trillion plan to buy commercial paper has been spent, Baker said. But the Fed won't say who has received that cash.

"People are making and losing fortunes depending on whether the Fed will buy their commercial paper," Baker said. "We should know what they're doing."

Iraq and Afghanistan: $3 trillion
The searches for Osama bin Laden in Afghanistan and for weapons of mass destruction in Iraq have morphed into occupations. So far, the U.S. has spent around $860 billion on both, according to the Congressional Budget Office.

But Harvard University professor Linda Bilmes and Nobel laureate Joseph Stiglitz of Columbia University say the agency is underestimating the tab. In their book, "The Three Trillion Dollar War" they claim Iraq will be far costlier.

Modern technology and medicine have kept U.S. deaths in these conflicts low, compared with previous wars, but tens of thousands of wounded soldiers will require taxpayer-supplied health care for years, said Bilmes, who served as an assistant secretary of commerce in the Clinton administration. Factoring in those benefits, replacement of worn-out hardware and other hidden bills, Bilmes and Stiglitz believe the real price for Iraq is $3 trillion.

That money hasn't been reinvested in the U.S. economy as mush as possibly expected, partly because of outsourcing by U.S. companies, Bilmes said. One example is construction company KBR, which used shell companies in the Cayman Islands to avoid payroll taxes.

"A dollar that is spent on a road is a dollar which has a multiplier," Bilmes said. "You have better roads. Whereas a dollar spent on a Malaysian contractor to do laundry doesn't help the U.S."

Tax cuts and deficit spending: $2 trillion
In 2001 and 2003, Bush signed legislation that cut taxes for Americans, much to the benefit of the affluent. The first cut was designed to help the U.S. economy after the Internet bubble collapsed. The second was to boost growth after the 2001 recession ended.

Kogan estimated the U.S. tax cuts have cost the Treasury $1.7 trillion in revenue to date. Of course, that may not be one bit disturbing to American taxpayers who've watched their tax bills go down. The only problem is, the cuts have been critical in opening up the gargantuan budget gap that Obama will face.

Because Bush did not reduce spending, Washington has paid about $265 billion in interest on loans to cover the lost revenue. So the $1.7 trillion in tax cuts really cost around $2 trillion.

Meanwhile, Bush increased U.S. deficit spending, incurring more debt service. Bush's expansion of Medicare drug benefits for the elderly, for example, cost around $130 billion, of which $10 billion was debt service between 2006 and 2008, said Kogan, of the Center on Budget and Policy Priorities.

"If some of this spending had been paid for by tax increases, then there wouldn't have been interest costs," he said. "But none of it was. We had tax cuts and spending increases."

In an e-mail, U.S. Treasury Department spokeswoman Brookly McLaughlin said Bush's tax cuts had helped the American economy by allowing people to keep more of their wages and other earnings, increasing incentives to work, save and invest.

McLaughlin also cited an Office of Management and Budget/Haver Analytics study that compared federal spending as a share of gross domestic product under Bush and Franklin D. Roosevelt. Under Bush, spending grew from 18.4% of GDP in fiscal 2000 to 20.7% in fiscal 2008, the study said. FDR increased spending from 6.3% in fiscal 1932 to 43.6% in fiscal 1944.

Of course, Roosevelt was dealing with a full-blown depression and war against Germany and Japan.

Hurricanes Katrina and Rita: $270 billion
When Hurricane Katrina hit the Gulf Coast in 2005, New Orleans' levees gave way, and the city was inundated. Stories of survivors trapped in the Superdome and incompetence at the U.S. Federal Emergency Management Agency transformed the natural disaster into a national disgrace.

Katrina, along with Hurricane Rita soon after, cost about $270 billion, by some estimates. In Louisiana alone, officials said the hurricane destroyed $100 billion in property, shrank the state's economy by $80 billion and required $20 billion in local emergency relief.

Those figures don't include damages in other states, including communities that absorbed refugees fleeing the city. They also don't count the continuing costs of rebuilding the Big Easy.

FEMA has given $50 billion to U.S. Gulf Coast states, a spokesman said. The Army Corps of Engineers is spending $14 billion to upgrade levees, according to the agency's Web site.

Meantime, the Louisiana Recovery Authority is spending $10 billion in recovery efforts that include homeowners retrofitting their houses, for example.

"People are adding storm shutters and roof tie-downs so that they can make their homes more resilient," said Christina Stephens, an agency spokeswoman. "We're encouraging them to mitigate future loss."

9/11: $260 billion
New York City lost about $95 billion because of the Sept. 11 attacks, according to a 2002 report by City Comptroller William Thompson Jr.

That price tag includes costs associated only with New York: $22 billion to replace the World Trade Center, $65 billion in lost economic activity in the three years after the attacks and $9 billion in the human potential that disappeared when the hijackers killed 2,819 people in Manhattan -- a calculation that illustrates why economics is called the dismal science. It does not include Washington's $22 billion in aid.

Outside New York, the tragedy cost plenty. Kogan estimated that Bush spent about $140 billion on related non-military measures, such as the creation of the U.S. Department of Homeland Security.

The approximate total of $260 billion does not include the damage wrought and lives lost on 9/11 at the Pentagon or in Pennsylvania, or money spent on preparedness by state and local governments and private industry. It also doesn't include the continuing losses associated with the vacant World Trade Center site, which housed as much office space as downtown Atlanta.

In other words, Americans are still paying for 9/11.

Forgive and Forget?

Original Link: http://www.nytimes.com/2009/01/16/opinion/16krugman.html

By PAUL KRUGMAN

Last Sunday President-elect Barack Obama was asked whether he would seek an investigation of possible crimes by the Bush administration. “I don’t believe that anybody is above the law,” he responded, but “we need to look forward as opposed to looking backwards.”

I’m sorry, but if we don’t have an inquest into what happened during the Bush years — and nearly everyone has taken Mr. Obama’s remarks to mean that we won’t — this means that those who hold power are indeed above the law because they don’t face any consequences if they abuse their power.

Let’s be clear what we’re talking about here. It’s not just torture and illegal wiretapping, whose perpetrators claim, however implausibly, that they were patriots acting to defend the nation’s security. The fact is that the Bush administration’s abuses extended from environmental policy to voting rights. And most of the abuses involved using the power of government to reward political friends and punish political enemies.

At the Justice Department, for example, political appointees illegally reserved nonpolitical positions for “right-thinking Americans” — their term, not mine — and there’s strong evidence that officials used their positions both to undermine the protection of minority voting rights and to persecute Democratic politicians.

The hiring process at Justice echoed the hiring process during the occupation of Iraq — an occupation whose success was supposedly essential to national security — in which applicants were judged by their politics, their personal loyalty to President Bush and, according to some reports, by their views on Roe v. Wade, rather than by their ability to do the job.

Speaking of Iraq, let’s also not forget that country’s failed reconstruction: the Bush administration handed billions of dollars in no-bid contracts to politically connected companies, companies that then failed to deliver. And why should they have bothered to do their jobs? Any government official who tried to enforce accountability on, say, Halliburton quickly found his or her career derailed.

There’s much, much more. By my count, at least six important government agencies experienced major scandals over the past eight years — in most cases, scandals that were never properly investigated. And then there was the biggest scandal of all: Does anyone seriously doubt that the Bush administration deliberately misled the nation into invading Iraq?

Why, then, shouldn’t we have an official inquiry into abuses during the Bush years?

One answer you hear is that pursuing the truth would be divisive, that it would exacerbate partisanship. But if partisanship is so terrible, shouldn’t there be some penalty for the Bush administration’s politicization of every aspect of government?

Alternatively, we’re told that we don’t have to dwell on past abuses, because we won’t repeat them. But no important figure in the Bush administration, or among that administration’s political allies, has expressed remorse for breaking the law. What makes anyone think that they or their political heirs won’t do it all over again, given the chance?

In fact, we’ve already seen this movie. During the Reagan years, the Iran-contra conspirators violated the Constitution in the name of national security. But the first President Bush pardoned the major malefactors, and when the White House finally changed hands the political and media establishment gave Bill Clinton the same advice it’s giving Mr. Obama: let sleeping scandals lie. Sure enough, the second Bush administration picked up right where the Iran-contra conspirators left off — which isn’t too surprising when you bear in mind that Mr. Bush actually hired some of those conspirators.

Now, it’s true that a serious investigation of Bush-era abuses would make Washington an uncomfortable place, both for those who abused power and those who acted as their enablers or apologists. And these people have a lot of friends. But the price of protecting their comfort would be high: If we whitewash the abuses of the past eight years, we’ll guarantee that they will happen again.

Meanwhile, about Mr. Obama: while it’s probably in his short-term political interests to forgive and forget, next week he’s going to swear to “preserve, protect, and defend the Constitution of the United States.” That’s not a conditional oath to be honored only when it’s convenient.

And to protect and defend the Constitution, a president must do more than obey the Constitution himself; he must hold those who violate the Constitution accountable. So Mr. Obama should reconsider his apparent decision to let the previous administration get away with crime. Consequences aside, that’s not a decision he has the right to make.

Thursday, January 15, 2009

Ideas for Obama

Original Link: http://www.nytimes.com/2009/01/12/opinion/12krugman.html

By PAUL KRUGMAN

Last week President-elect Barack Obama was asked to respond to critics who say that his stimulus plan won’t do enough to help the economy. Mr. Obama answered that he wants to hear ideas about “how to spend money efficiently and effectively to jump-start the economy.”

O.K., I’ll bite — although as I’ll explain shortly, the “jump-start” metaphor is part of the problem.

First, Mr. Obama should scrap his proposal for $150 billion in business tax cuts, which would do little to help the economy. Ideally he’d scrap the proposed $150 billion payroll tax cut as well, though I’m aware that it was a campaign promise.

Money not squandered on ineffective tax cuts could be used to provide further relief to Americans in distress — enhanced unemployment benefits, expanded Medicaid and more. And why not get an early start on the insurance subsidies — probably running at $100 billion or more per year — that will be essential if we’re going to achieve universal health care?

Mainly, though, Mr. Obama needs to make his plan bigger. To see why, consider a new report from his own economic team.

On Saturday, Christina Romer, the future head of the Council of Economic Advisers, and Jared Bernstein, who will be the vice president’s chief economist, released estimates of what the Obama economic plan would accomplish. Their report is reasonable and intellectually honest, which is a welcome change from the fuzzy math of the last eight years.

But the report also makes it clear that the plan falls well short of what the economy needs.

According to Ms. Romer and Mr. Bernstein, the Obama plan would have its maximum impact in the fourth quarter of 2010. Without the plan, they project, the unemployment rate in that quarter would be a disastrous 8.8 percent. Yet even with the plan, unemployment would be 7 percent — roughly as high as it is now.

After 2010, the report says, the effects of the economic plan would rapidly fade away. The job of promoting full recovery would, however, remain undone: the unemployment rate would still be a painful 6.3 percent in the last quarter of 2011.

Now, economic forecasting is an inexact science, to say the least, and things could turn out better than the report predicts. But they could also turn out worse. The report itself acknowledges that “some private forecasters anticipate unemployment rates as high as 11 percent in the absence of action.” And I’m with Lawrence Summers, another member of the Obama economic team, who recently declared, “In this crisis, doing too little poses a greater threat than doing too much.” Unfortunately, that principle isn’t reflected in the current plan.

So how can Mr. Obama do more? By including a lot more public investment in his plan — which will be possible if he takes a longer view.

The Romer-Bernstein report acknowledges that “a dollar of infrastructure spending is more effective in creating jobs than a dollar of tax cuts.” It argues, however, that “there is a limit on how much government investment can be carried out efficiently in a short time frame.” But why does the time frame have to be short?

As far as I can tell, Mr. Obama’s planners have focused on investment projects that will deliver their main jobs boost over the next two years. But since unemployment is likely to remain high well beyond that two-year window, the plan should also include longer-term investment projects.

And bear in mind that even a project that delivers its main punch in, say, 2011 can provide significant economic support in earlier years. If Mr. Obama drops the “jump-start” metaphor, if he accepts the reality that we need a multi-year program rather than a short burst of activity, he can create a lot more jobs through government investment, even in the near term.

Still, shouldn’t Mr. Obama wait for proof that a bigger, longer-term plan is needed? No. Right now the investment portion of the Obama plan is limited by a shortage of “shovel ready” projects, projects ready to go on short notice. A lot more investment can be under way by late 2010 or 2011 if Mr. Obama gives the go-ahead now — but if he waits too long before deciding, that window of opportunity will be gone.

One more thing: even with the Obama plan, the Romer-Bernstein report predicts an average unemployment rate of 7.3 percent over the next three years. That’s a scary number, big enough to pose a real risk that the U.S. economy will get stuck in a Japan-type deflationary trap.

So my advice to the Obama team is to scrap the business tax cuts, and, more important, to deal with the threat of doing too little by doing more. And the way to do more is to stop talking about jump-starts and look more broadly at the possibilities for government investment.

Sunday, January 11, 2009

Farewell to All That: An Oral History of the Bush White House

Original Link: http://www.vanityfair.com/politics/features/2009/02/bush-oral-history200902?printable=true&currentPage=all

by Cullen Murphy and Todd S. Purdum February 2009 With assistance from Philippe Sands.

January 20, 2001 After a disputed election and bitter recount battle in Florida whose outcome is effectively decided by the Supreme Court, George W. Bush is sworn in as the 43rd president of the United States. In foreign affairs he promises an approach that will depart from the perceived adventurism of his predecessor, Bill Clinton, in places such as Kosovo and Somalia. (“I think the United States must be humble,” Bush said in a debate with his opponent, Al Gore.) In domestic affairs Bush pledges to cut taxes and improve education. He promises to govern as a “compassionate conservative” and to be “a uniter, not a divider.” He comes into office with a $237 billion budget surplus.

On the day of the inauguration the White House chief of staff, Andrew Card, declares a moratorium on the Clinton administration’s last-minute regulations on the environment, food safety, and health. This action is followed in the coming months by disengagement from the International Criminal Court and other international efforts. Nonetheless, the early presumption is that the administration’s affairs are in steady hands, though some disquieting signs are noted.

In the Oval Office on January 20 the first President Bush and the new President Bush greet each other with the words “Mr. President.”

Revisit the first draft of history with our Bush-administration archive, “Mission Unaccomplished.” Illustration by Risko.
Dan Bartlett, White House communications director and later counselor to the president: It was a bitterly cold day. They got back to the residence from the inauguration. The president was going over to have his first moment in the Oval Office as president of the United States. And he called for his father because he wanted his father to be there when it happened. If I recall correctly, George H. W. Bush was soaking in the tub trying to warm up, because it had been so cold on the viewing stand. Not only did the former president quickly get out of the tub, but he put his suit back on, because he was not going to enter the Oval Office without a suit. His hair was still kind of wet.

Joschka Fischer, German foreign minister and vice-chancellor: We thought we were going back to the old days of Bush 41. And ironically enough Rumsfeld, but even more Cheney, together with Powell, were seen as indications that the young president, who was not used to the outside world, who didn’t travel very much, who didn’t seem to be very experienced, would be embedded into these Bush 41 guys. Their foreign-policy skills were extremely good and strongly admired. So we were not very concerned. Of course, there was this strange thing with these “neocons,” but every party has its fringes. It was not very alarming.

Lawrence Wilkerson, top aide and later chief of staff to Secretary of State Colin Powell: We had this confluence of characters—and I use that term very carefully—that included people like Powell, Dick Cheney, Condi Rice, and so forth, which allowed one perception to be “the dream team.” It allowed everybody to believe that this Sarah Palin–like president—because, let’s face it, that’s what he was—was going to be protected by this national-security elite, tested in the cauldrons of fire. What in effect happened was that a very astute, probably the most astute, bureaucratic entrepreneur I’ve ever run into in my life became the vice president of the United States.

He became vice president well before George Bush picked him. And he began to manipulate things from that point on, knowing that he was going to be able to convince this guy to pick him, knowing that he was then going to be able to wade into the vacuums that existed around George Bush—personality vacuum, character vacuum, details vacuum, experience vacuum.

Richard Clarke, chief White House counterterrorism adviser: We had a couple of meetings with the president, and there were detailed discussions and briefings on cyber-security and often terrorism, and on a classified program. With the cyber-security meeting, he seemed—I was disturbed because he seemed to be trying to impress us, the people who were briefing him. It was as though he wanted these experts, these White House staff guys who had been around for a long time before he got there—didn’t want them buying the rumor that he wasn’t too bright. He was trying—sort of overly trying—to show that he could ask good questions, and kind of yukking it up with Cheney.

The contrast with having briefed his father and Clinton and Gore was so marked. And to be told, frankly, early in the administration, by Condi Rice and [her deputy] Steve Hadley, you know, Don’t give the president a lot of long memos, he’s not a big reader—well, shit. I mean, the president of the United States is not a big reader?

March 6, 2001 Secretary of State Colin Powell tells reporters that the United States intends to “engage with North Korea to pick up where President Clinton and his administration left off.” The next day, Powell is forced by the administration to backpedal. Other early administration actions—abrogation of the Anti-Ballistic-Missile Treaty, abandonment of the Kyoto Protocol on climate change—signal that America’s way of doing business has changed. In time, Defense Secretary Rumsfeld will characterize traditional U.S. allies as “old Europe.”

Joschka Fischer, German foreign minister and vice-chancellor: During the Kosovo war we had developed a format which was, I think, one of the cheapest models for policy coordinating in the interests of the U.S. [Secretary of State] Madeleine Albright was in the driver’s seat, and the four European foreign ministers discussed with her on a daily basis how the war develops and so on. This was U.K., France, Italy, and Germany, together with the U.S., on the phone. We continued after the war, not every day, but this was the format, to discuss problems and understand the positions. And suddenly it stopped. We had very, very few—I don’t know, two or three times. Only for a very short period when Colin came in, and then it stopped, because the new administration was not interested any longer in a multilateral coordination.

Bill Graham, Canada’s foreign minister and later defense minister: My experience with Mr. Rumsfeld was: obviously an extremely intelligent person, with a lot of experience. But compared to Colin he was cold in terms of his personal relationships. He could have a sense of humor. I remember being at the famous Munich Security Conference that takes place every year. And I think Sergei Ivanov, who was the Russian defense minister at the time, went after him about some issue, and how the Americans had altered their position.

And Rumsfeld’s answer was “Well, that was the old Rumsfeld, and I am now the new Rumsfeld.” And of course it brought a great laugh. But he was terribly determined to have his way; there was no question about that.

One of his shticks—if I can call it that—at the nato meetings was always about caveats. He would pronounce the word “caveat” the way you and I might speak of some sort of sexual deviation. You know, people who had “caveats” were really evil, bad people.

Some caveats are not about an unwillingness to fight; some are about fundamental constraints on what you can do as a country. But Mr. Rumsfeld was not about listening and being cooperative. Mr. Rumsfeld was about getting the way of the United States, and don’t get in my way or my juggernaut will run over you.

May 16, 2001 A task force assembled and led by Vice President Dick Cheney unveils a blueprint for the administration’s energy program. The report, “National Energy Policy,” which had been in the works since shortly after the inauguration, calls for increased drilling for oil and more nuclear power. The energy task force becomes an immediate focus of controversy—and lawsuits—because its records and the list of advisers, mainly representatives of the oil and gas industries, are never divulged by the White House. The administration’s environmental policy is heavily politicized from the outset.

Rick Piltz, senior associate, U.S. Climate Change Science Program: Christine Todd Whitman, the E.P.A. administrator, was one of several people in the Cabinet, along with Treasury Secretary Paul O’Neill, who strongly supported a proactive position on climate change. And she was, I think, in Europe telling European governments that the U.S. position was to regulate carbon dioxide. And when she got back home, she had an interaction with the president in which she was very brusquely told that that was off the table. The turning point, essentially, was that Cheney grabbed hold of this issue and took down the whole notion of regulating CO2.


George W. Bush: “He always gets asked, Have you changed?,” says Dan Bartlett, a former counselor to President Bush, “and he instinctively recoils at that kind of question.” Photograph by Annie Leibovitz.



May 24, 2001 Vermont senator Jim Jeffords, a Republican, changes party, and control of the Senate shifts to the Democrats, making Tom Daschle the Senate majority leader and testing the administration’s public face of bipartisanship.

David Kuo, deputy director of the White House Office of Faith-Based and Community Initiatives: I went to a communications meeting the day after Jeffords switched. I remember feeling like I was looking at people who had won a reality-game ticket to head up the White House. There was this remarkable combination of hubris, excitement, and staggering ignorance.

Someone made the suggestion that perhaps the president should call the new majority leader. And it’s like, Well, I’m not sure that’s really necessary. Margaret Tutwiler [assistant to the president and special adviser for communications] was there, and I remember her sitting at the head of the table, her eyes just sort of wide, and she sort of lost it. She’s like, Are you fricking kidding me? She goes, The president of the United States calls the new majority leader. The president of the United States calls the new minority leader, right? The president does these things because, you know, these things have to be done.

And, you know, people around the table—Karl [Rove], Karen [Hughes]—all these people were like, Oh, well, do we have to? It was like an absolutely serious debate.

Noelia Rodriguez, press secretary to Laura Bush: In the first weeks after he took office, I was in those daily communications meetings, and the conversation I remember one morning turned to, you know, Tom Daschle was going to be coming to the White House—should we allow him to come in the door of the West Wing entrance, while the camera’s on, or should he come in on the side, so that cameras won’t see him? And I’m thinking, You know, the president should go out there and greet him just like he would if he was coming to his own house—which, by the way, it is. But they ended up having him come in on the side.

Mark McKinnon, chief campaign media adviser to George W. Bush: My view is that civility was a heartfelt, well-intended objective that went right off the rails the day of the recount. The recount poisoned the well from the beginning. A good number of people in this country didn’t believe Bush was a legitimate president. And you can’t change the tone under those circumstances. There was a genuine effort, and I think there was some early success with Ted Kennedy and the education stuff. But it was acrimonious from the beginning.

Matthew Dowd, Bush’s pollster and chief strategist for the 2004 presidential campaign: There is a toxic nature to Washington that thrives on food fights and thrives on controversy and thrives on people not getting along. But I don’t think that’s the biggest part of the problem. It’s like the old argument of: somebody’s thrown in jail, and then they blame it on their environment. You’ve got to bear some accountability, even in a bad environment, for having a strength of will and a capacity to bring diverse opinion and not be bubbled in. We too easily say, Blame it on the Washington culture. Well, Washington is made up of people. It’s not like there’s this, like—you know, it’s not like some Star Trek episode where some room made me do it.

Ari Fleischer, Bush’s first White House press secretary: After the recount, the disputed election, a lot of people said you needed to start to trim your sails: What are you going to cut back on as a way to show outreach to the other party? The president rejected that line of thinking, making the case that mandates are created by presidents with ideas, and he was going to follow through on the ideas that he ran on.

May 26, 2001 With big bipartisan majorities, Congress passes Bush’s $1.35 trillion package of tax cuts, the centerpiece of the administration’s economic program. The tax cuts are skewed heavily toward the affluent. Those making $1 million a year receive an average tax cut of $53,000. Those making $20,000 a year receive an average tax cut of $375. A second round of tax cuts will be enacted in 2003. By 2004 the budget deficit will exceed $400 billion.

David Kuo, deputy director of the White House Office of Faith-Based and Community Initiatives: When Bush announced his “compassionate conservatism” [during the 2000 campaign], Elizabeth Dole’s communications director mocked him. He goes, Oh, that’s a great thing if you want to be president of the Red Cross, right? And that man was Ari Fleischer. Those are the people that ended up populating the White House. When the president’s tax package first came through Congress and first came through the Senate Finance Committee, his promise to have a tax cut for charitable giving for people who don’t itemize their tax deductions wasn’t even in the plan. [Senator] Charles Grassley looked at this and went, Oh, gosh, there must have been some oversight. And he was the one who inserted it into the tax plan. And the White House is the one that pulled it out.

June 16, 2001 During a five-day foreign tour Bush meets with President Vladimir Putin, of Russia. After the meeting, in Slovenia, Bush declares, “I looked the man in the eye. I found him to be very straightforward and trustworthy.… I was able to get a sense of his soul.” By all accounts, including his own, Bush puts great stock in the primacy of personal relationships.

Noelia Rodriguez: I wish that more people could have seen the president the way I experienced him. Even if you don’t agree with him or respect his opinions or his decisions—strip that away, if you’re able to—he is a caring human being.

I brought my mom to the White House, to get a tour the day before Thanksgiving. The president came in and greeted her—it was a total surprise. And on the spot he invited us to go to Camp David for Thanksgiving. Of course, we went, and it was Disneyland for adults. We went to chapel services before dinner. I remember we got there early. A few minutes later the president walks in with Mrs. Bush and the family, and you could see him looking around, and he sees my mom in the distance, and he literally shouts at her from across the chapel, “Grace, come sit over here with me.” And at dinner, again, he sees her, and he says, “Grace, you’re going to sit over here next to me.” And he tilted the chair against the table so that nobody would take her place.

Ed Gillespie, campaign strategist and later counselor to the president: Picking up the phone, calling people who are visiting an ailing father in the hospital, personal notes to people whose child just had surgery. Things big and small. It’s hard to describe it all, but they are the kinds of things that do inspire great loyalty—and that’s not why he does it, by the way.

August 6, 2001 While vacationing at his ranch, in Crawford, Texas, Bush is given a Presidential Daily Briefing memorandum whose headline warns that the al-Qaeda terrorist leader, Osama bin Laden, is “determined to strike in U.S.” After being briefed on the document by a C.I.A. analyst, Bush responds, “All right, you’ve covered your ass now.”

Richard Clarke, chief White House counterterrorism adviser: We went into a period in June where the tempo of intelligence about an impending large-scale attack went up a lot, to the kind of cycle that we’d only seen once or twice before. And we told Condi that. She didn’t do anything. She said, Well, make sure you’re coordinating with the agencies, which, of course, I was doing. By August, I was saying to Condi and to the agencies that the intelligence isn’t coming in at such a rapid rate anymore as it was in the June-July time frame. But that doesn’t mean the attack isn’t going to happen. It just means that they may be in place.

On September 4, we had a principals meeting. The most telling thing for me about the attitude of these people was on the decision that had been pending for a long time to resume Predator [remote-controlled drone] flights over Afghanistan, and to now do what we couldn’t have done in the Clinton administration because the technology wasn’t ready: put a weapon on the Predator and use it as not only a hunter but a killer.

We had seen bin Laden when we had it in the Clinton administration, as just a hunter. We had seen him. So we thought, Man, if we could get this with a hunter-killer, we could see him again and kill him. So finally we have a principals meeting and the C.I.A. says it’s not our job to fly the Predator armed. And D.O.D. says it’s not our job to fly an unarmed aircraft.


Dick Cheney: “We thought we were going back to the old days of Bush 41,” says Joschka Fischer, the former German foreign minister. “So we were not very concerned.” Photograph by Annie Leibovitz.



I just couldn’t believe it. This is the chairman of the Joint Chiefs and the director of C.I.A. sitting there, both passing the football because neither one of them wanted to go kill bin Laden.

August 9, 2001 Bush issues a directive that permits federal funding for research on stem cells from human embryos—but only on the 60 stem-cell lines already in existence. That evening, he gives the first nationally televised speech of his presidency, explaining his decision. Five years later, Bush will use his veto power for the first time to kill legislation that would permit broader federal funding for stem-cell research. In the late summer of 2001, stem-cell research is the most contentious political question facing the nation.

Matthew Dowd, Bush’s pollster and chief strategist for the 2004 presidential campaign: I had done a poll that finished the morning of 9/11. I was going to go to Washington that day to present the findings to Karl [Rove]. The amazing thing about that is: not a single question was asked about foreign policy, terrorism, national security. In the poll I’d been sitting on, Bush’s approval I think was 51 or 52 percent. Twenty-four hours later his approvals are 90 percent.

September 11, 2001 Terrorists crash two commercial airliners into New York’s World Trade Center, bringing both buildings down with a loss of some 3,000 lives. A third aircraft crashes into the Pentagon, killing 184. A fourth aircraft, its likely destination the U.S. Capitol, is brought down by the passengers in a field in Pennsylvania. It is known quickly that the perpetrators are members of bin Laden’s al-Qaeda organization, based in Afghanistan, but the search for a connection to Saddam Hussein and Iraq begins immediately.

Sandra Kay Daniels, second-grade teacher at Emma E. Booker Elementary School, in Sarasota, Florida, whose classroom the president was visiting when he received news of the attacks: When he came into the classroom, our principal introduced him to the children, and he shook a couple of the kids’ hands and introduced himself, tried to kind of lighten the room up a little, because the kids were in awe. They were like little soldiers, quiet and just struck by the sight of the president. And he said, Let’s get started with reading. I’m here to celebrate you—maybe not those exact words, but that was the feeling in the room.

The story was “My Pet Goat” from our reading series. And we started our lesson. And all I remember is someone walking over to him, and I knew that was totally out of character, because this was a live broadcast and nobody was supposed to move. I mean, everybody was in their position. And when I saw this man, who I now know is Andy Card, walk over to him and whisper in his ear, I could see and I felt his whole demeanor change. It’s like he left the room mentally. He wasn’t there anymore mentally.

When it was time for the kids to read with him, he didn’t pick his book up. His book was sitting on the easel, and he didn’t pick it up. I knew something was wrong, but I didn’t know what was wrong. And I’m thinking all the time, O.K., President Bush, pick up your book, that type of thing, you know. The cameras are rolling. My kids are here. And he left us mentally. I knew I had to continue with the lesson, and I did. I’m a teacher. I’ve got eyes all around the room. I’ve got eyes in the back of my head. I see everything that goes on. And I’m thinking, O.K., he’ll join us in a minute. And he did.

Mary Matalin, assistant to the president and counselor to the vice president: My enduring memory is how calm people at the White House were, and focused on getting their job done. Right from the get-go, people were mature. That’s not the right word, but there wasn’t hand-wringing and hair on fire and Keystone Cops or anything like that. It was how you hope that any government would function. “Professional” doesn’t even scratch the surface. They were all so fully functioning and integrated in everything that they did. Everybody was confident in the other guy’s ability.

Richard Clarke: That night, on 9/11, Rumsfeld came over and the others, and the president finally got back, and we had a meeting. And Rumsfeld said, You know, we’ve got to do Iraq, and everyone looked at him—at least I looked at him and Powell looked at him—like, What the hell are you talking about? And he said—I’ll never forget this—There just aren’t enough targets in Afghanistan. We need to bomb something else to prove that we’re, you know, big and strong and not going to be pushed around by these kind of attacks.

And I made the point certainly that night, and I think Powell acknowledged it, that Iraq had nothing to do with 9/11. That didn’t seem to faze Rumsfeld in the least.

It shouldn’t have come as a surprise. It really didn’t, because from the first weeks of the administration they were talking about Iraq. I just found it a little disgusting that they were talking about it while the bodies were still burning in the Pentagon and at the World Trade Center.

Dan Bartlett, White House communications director and later counselor to the president: The real change in the president, in my opinion, didn’t actually happen until that Friday, when he traveled to New York. The situation on Tuesday was so—you really didn’t have time to reflect. In New York, the range of emotions that he went through—standing on the rubble, the bullhorn moment, but just as important, when he sat there in that room in private and met with those people who were still trying to learn the whereabouts of their loved ones, and hugging them, and where he got the badge.

He always gets asked, Have you changed?, and he instinctively recoils at that kind of question. But when something like this happens on your watch, there’s no way it can’t change you. It can’t not change your worldview—and it obviously changed his in a way that has been controversial for a lot of people.

September 18, 2001 Envelopes containing anthrax spores are mailed to media outlets in New York and Florida. This first attack is followed by a second, aimed at government offices in Washington. All together 5 people die and 22 are infected. The administration’s initial reaction, which turns out to be wrong, is to suggest that al-Qaeda is responsible. (It knows “how to deploy and use these kind of substances, so you start to piece it all together,” Cheney explains.)

Michael Brown, director of the Federal Emergency Management Agency: Very shortly after 9/11 I was leading a briefing in the Roosevelt room about smallpox. The president was there, the vice president. Condi was there. The president didn’t ask a lot of questions. Don’t get me wrong—he did ask some questions. But the majority of the questions came from either Condi or the vice president. As the president was leaving the room, he turned to everybody and said, God help us all. We should all say very strong prayers tonight for guidance. It really stuck in my head. You’re the president of the United States basically saying, I’m going to pray tonight, and I hope all of you pray, too, because this is much bigger than all of us.

September 27, 2001 At O’Hare International Airport, Bush advises Americans on what they can do to respond to the trauma of September 11: “Get on board. Do your business around the country. Fly and enjoy America’s great destination spots. Get down to Disney World in Florida. Take your families and enjoy life, the way we want it to be enjoyed.”

Matthew Dowd: He was given a great, great window of opportunity where everybody wanted to be called to some shared sense of purpose and sacrifice and all that, and Bush never did it. And not for lack of people suggesting various things from bonds to, you know, some sort of national service. Bush decided to say that the best thing is: Everybody go about their life, and I’ll handle it.

There’s this West Texas thing in him, which is the—you know: Bad people are comin’ to town. Everybody go back to their house. I’ll take the burden on. Which, you know, may work in a Western town, but doesn’t work for a country that wants to be part of that conversation.

Mary Matalin: There was so much to do that was more important than—I mean, looking back, the national-unity thing is important, but it was way more important to re-structure the intelligence communities, way more important to harden targets. Know what I mean? It was all hands on deck. We were working on other shit. Everyone’s pulverized and beat, and there’s 24 hours in a day, so woulda, coulda, shoulda, but, you know, there was no office to do “feel-good” stuff.

Matthew Dowd: Karl wasn’t receptive to ideas that would’ve called the country to certain things and brought them to a common purpose and a sense of shared sacrifice. Karl came from a perspective of: you defeat people in politics by calling one side bad and one side good.

Scott McClellan, deputy White House press secretary and later press secretary: I remember Karl Rove was out there talking at some events about how we’d use 9/11, run on 9/11 in the midterms, and that it was important to do so.

October 7, 2001 American and British forces begin an aerial campaign against Taliban-controlled Afghanistan, where al-Qaeda has its base, followed weeks later by a ground invasion. The Taliban government falls and al-Qaeda is routed from some of its strongholds. One person captured is John Walker Lindh, the so-called American Taliban. His handling proves to be a harbinger. The Defense Department’s general counsel, Jim Haynes, authorizes military intelligence to “take the gloves off.”

Jesselyn Radack, ethics adviser at the Department of Justice: I was called with the specific question of whether or not the F.B.I. on the ground could interrogate [Lindh] without counsel. And I had been told unambiguously that Lindh’s parents had retained counsel for him. I gave that advice on a Friday, and the same attorney at Justice who inquired called back on Monday and said essentially, Oops, they did it anyway. They interrogated him anyway. What should we do now? My office was there to help correct mistakes. And I said, Well, this is an unethical interrogation, so you should seal it off and use it only for intelligence-gathering purposes or national security, but not for criminal prosecution.

A few weeks later, Attorney General Ashcroft held one of his dramatic press conferences, in which he announced a complaint being filed against Lindh. He was asked if Lindh had been permitted counsel. And he said, in effect, To our knowledge, the subject has not requested counsel. That was just completely false. About two weeks after that he held another press conference, because this was the first high-profile terrorism prosecution after 9/11. And in that press conference he was asked again about Lindh’s rights, and he said that Lindh’s rights had been carefully, scrupulously guarded, which, again, was contrary to the facts, and contrary to the picture that was circulating around the world of Lindh blindfolded, gagged, naked, bound to a board.

October 26, 2001 Bush signs the USA Patriot Act, which among other things gives the government far-reaching powers to conduct surveillance. In addition, Bush will issue a secret executive order authorizing the National Security Agency to conduct warrantless wiretaps on American citizens and others living in the United States, bypassing the procedures mandated by Congress.

Jesselyn Radack, ethics adviser at the Department of Justice: When Ashcroft initially came on board as attorney general, he was a somewhat beleaguered person. He had just lost an election to a dead man [Mel Carnahan, his opponent in the Missouri senatorial race, who had been killed in a plane crash]. We were told that he liked to conduct things more in a top-down corporate manner, rather than with Janet Reno’s glasnost openness. The real shift came after 9/11. It wasn’t that we were sent a memo saying all the laws were out the window, but that was definitely the tone that pervaded the department.

November 1, 2001 A presidential executive order exempts presidents, vice presidents, and their designees from provisions of the 1978 Presidential Records Act and permits unclassified archived materials to be kept sealed in perpetuity, rather than being released after 12 years, as the law allows.

Robert Dallek, presidential biographer: I’ve testified twice before the House Oversight and Government Reform subcommittee, protesting this executive order. Now, there are two constraints that operate in relation to all executive materials. One is that if you’re going to violate someone’s privacy you are constrained from releasing the material. A much bigger issue is one of national security, and that’s what causes years to go by before many, many documents are released. So those are the two constraints.

But broadening this—and not only in relation to the president, but in relation to the vice president—reflects, I think, the Cheney proposition that the Watergate crisis put too many limitations on executive power.

And so we now have the issue of what sort of documentary record we’re going to find. I mean, this is a separate issue, I guess, but will they have sanitized the records?

November 13, 2001 Bush issues an order declaring that accused terrorists will be tried by secret military commissions that dispense with traditional rights and protections.

John Bellinger III, legal adviser to the National Security Council, and later to the secretary of state: A small group of administration lawyers drafted the president’s military order establishing the military commissions, but without the knowledge of the rest of the government, including the national-security adviser, me, the secretary of state, or even the C.I.A. director. And even though many of the substantive problems with the military commissions as created by the original order have been resolved by Congress in response to the Supreme Court’s decision in the Hamdan case, we have been suffering from this original process failure ever since.

December 2001 Osama bin Laden and many of his followers have taken refuge in the mountains of Tora Bora, on Afghanistan’s border with Pakistan, where an attempt to dislodge and capture them proves unavailing. A decision by Washington has the effect of allowing bin Laden to escape into the tribal areas of Pakistan.


Revisit the first draft of history with our Bush-administration archive, “Mission Unaccomplished.” Illustration by Risko.
Gary Berntsen, C.I.A. intelligence commander at Tora Bora: We knew he was there—he had fallen into the mountains with about a thousand of his followers. That’s why we threw a BLU-82 [the bomb known as a “daisy cutter”] at him. At one point we knew where he was; we allowed food and water to go in to him. And then we came in with a 15,000-pound device. Bin Laden was outside the lethal effects of that blast. I understand he was injured.

I got a message out and made my request for inclusion of what I believed was needed—800 Rangers. The army of the Eastern Alliance on the north side had blocking positions there, so al-Qaeda couldn’t get back out into Afghanistan. But I was always concerned about the Pakistani side. I explained clearly that this was our opportunity to, so to speak, kill the baby in the crib. I was very concerned about them breaking out [south] into Pakistan, because I knew, if they did that, containing this thing would be a significant problem.

Unfortunately, the decision was made at the White House to use the Pakistani frontier force. What the White House didn’t understand is that the frontier force had cooperated with the Taliban. So they used individuals who were very, very sympathetic to the Taliban to set up purported blocking positions.

December 17, 2001 Kellogg, Brown & Root, a subsidiary of Halliburton, where Dick Cheney had been C.E.O., is awarded a 10-year omnibus contract to provide the Pentagon with support services for everything from fighting oil-well fires to building military bases to serving meals. As defense secretary under George H. W. Bush, Cheney had pushed strenuously to outsource a variety of military functions to private contractors—part of a broader effort to transfer government functions of all kinds to the private sector.

Lawrence Wilkerson, top aide and later chief of staff to Secretary of State Colin Powell: Cheney brings this accumulation of power and ability to influence the bureaucracy to a fine art. He surpasses Kissinger even. This is all the more ironic because Cheney was the antithesis of this when he was chief of staff of the White House under Gerald Ford and when he was secretary of defense. He was very deferential. He was not trying to insinuate himself.

But he turns everything on its head and he becomes the power. And he does it through his network. This is a guy who’s an absolute genius at bureaucracy and an absolute genius at not displaying his genius at bureaucracy. He’s always quiet.

So are most of his minions, not all of them. [David] Addington [the vice president’s counsel] is brilliant, and Addington is a strange beast, and Addington is sort of the Ayman al-Zawahiri for Cheney, the brains trust. [Chief of Staff Lewis] Libby was the doer. Libby was a real bureaucrat’s dream.

January 8, 2002 Bush signs the No Child Left Behind Act, which, among other things, mandates that, in return for continued access to federal funding, states must institute standardized tests to ensure that students meet educational goals. The bill, co- authored by Senator Edward Kennedy, passed with a large bipartisan majority.

Margaret Spellings, Bush’s domestic-policy adviser and later secretary of education: George Bush ran for office as a different kind of Republican and called for some things like annual measurement, accountability, closing the achievement gap—things that other Republicans hadn’t talked about. I mean, the standard Republican stock fare was Abolish the Department of Education. So he had had some equities on an issue that few Republicans previous to him had really talked about, especially on behalf of poor kids.

I’ve learned a lot from [Ted Kennedy], and I think he’s the consummate legislator. He is a person of his word. I remember the very first time that the so-called Big Four—it was Kennedy, Jeffords, John Boehner, and George Miller—met in the Oval Office to talk about how we were going to proceed. It was in the first week of the administration. At the end of the meeting—after we had agreed that we really needed to get something done, we had to close the achievement gap, I’m really serious, I’m going to put my money where my mouth is, all of those sorts of things—the president, in closing the meeting, as the press was about to come in, said something like: You know, they’re going to ask us about vouchers. They’re going to—the press is going to try to find division immediately. And I am not going to talk about vouchers today. I’m going to say we talked about how we’re going to close the achievement gap.

And, you know, we got to work.

January 11, 2002 A new detention-and-interrogation center at Guantánamo Bay receives the first of an eventual 550 “unlawful combatants” from the war in Afghanistan and the broader war on terror. Guantánamo is chosen because it is not officially U.S. soil and thus provides a rationale for denying detainees protections under American and international law, creating a “legal black hole.”

Jack Goldsmith, legal adviser at the Department of Defense and later head of the Justice Department’s Office of Legal Counsel: After 9/11 the administration faced two sharply conflicting imperatives. The first was fear of another attack. This permeated the administration. Everyone felt it. And it led to the doctrine of pre-emption, which has many guises, but basically means that you can’t wait for the usual amounts of information before acting on a threat because it may be too late. They were really scared. They were afraid of what they didn’t know. They were very afraid they didn’t have the tools to meet the threat. And they had this extraordinary sense of responsibility—that they would be responsible for the next attack. They really thought of it as having blood on their hands, and that they’d be forgiven once but not twice.

On the other hand, there was a countervailing imperative, and that was the law, because there had grown up since the 70s—for a lot of good reasons—some extraordinary restrictions on presidential power and presidential war power, many of them embodied in criminal laws, many of them vague or uncertain, never having been applied before, certainly none of them ever applied in this new context. And there was enormous legal uncertainty about how far we could go.

John Bellinger III, legal adviser to the National Security Council, and later to the secretary of state: The Department of Justice often was the decisive voice on detainee matters, but the Justice Department really never lived up to its name. It was not the Department of Justice—it was often the Department of Litigation Risk, and they saw everything through the perspective of whether a decision might result in some kind of liability, whether someone might get sued or prosecuted. But that’s not the only role of the lawyer. The role of the lawyer is also to exercise good judgment and to look at long-term consequences, and ultimately to do what’s the ethically and morally correct thing.

January 29, 2002 In his State of the Union message, Bush invokes the specter of an “axis of evil”—Iraq, Iran, North Korea—and vows that the United States “will not permit the world’s most dangerous regimes to threaten us with the world’s most destructive weapons.” Afghanistan remains unstable, but resources and attention are shifting elsewhere.

Bob Graham, Democratic senator from Florida and chairman of the Senate intelligence committee: In February of ‘02, I had a visit at Central Command, in Tampa, and the purpose was to get a briefing on the status of the war in Afghanistan. At the end of the briefing, the commanding officer, Tommy Franks, asked me to go into his office for a private meeting, and he told me that we were no longer fighting a war in Afghanistan and, among other things, that some of the key personnel, particularly some special-operations units and some equipment, specifically the Predator unmanned drone, were being withdrawn in order to get ready for a war in Iraq.

That was my first indication that war in Iraq was as serious a possibility as it was, and that it was in competition with Afghanistan for matériel. We didn’t have the resources to do both successfully and simultaneously.

February 7, 2002 Bush issues an executive order denying any protections of the Geneva Conventions to Taliban and al-Qaeda detainees. The order comes after an intense behind-the-scenes battle pitting the State Department against the Justice Department, the Defense Department, and the Office of the Vice President.

Lawrence Wilkerson, top aide and later chief of staff to Secretary of State Colin Powell: Based on what the secretary and [State Department legal adviser] Will Taft were telling me, I think they both were convinced that they had managed to get the president’s attention with regard to what they thought was the governing document, the Geneva Conventions. I really think it came as a surprise when the February memo was put out. And that memo, of course, was constructed by Addington, and I’m told it was blessed by one or two people in O.L.C. [Office of Legal Counsel]. And then it was given to Cheney, and Cheney gave it to the president. The president signed it.

Jack Goldsmith, legal adviser at the Department of Defense and later head of the Justice Department’s Office of Legal Counsel: To conclude that the Geneva Conventions don’t apply—it doesn’t follow from that, or at least it shouldn’t, that detainees don’t get certain rights and certain protections. There are all sorts of very, very good policy reasons why they should have been given a rigorous legal regime whereby we could legitimatize their detention. For years there was just a giant hole, a legal hole of minimal protections, minimal law.

February 14, 2002 The Bush administration proposes a Clear Skies Initiative, which relaxes air-quality and emissions standards. This is followed by a Healthy Forests Initiative, which opens up national forests to increased logging. Climate change becomes a forbidden subject.

Rick Piltz, senior associate, U.S. Climate Change Science Program: At the beginning of the Bush administration, Ari Patrinos, a very senior science official who had run the Department of Energy’s climate-change research program for many years, and a half-dozen high-ranking federal science officials were brought together and told to explain the science and help develop policy options for a proactive climate-change policy for the administration. They moved into an office downtown, and they worked very hard and were briefing at the Cabinet level, in the White House. Cheney was there, Colin Powell was there, Commerce Secretary [Don] Evans was there. They were making the case on climate change.

And one day they were told: Take it down, pack it up, go back to your offices—we don’t need you anymore.

May 6, 2002 The effort to create an International Criminal Court, to which the United States and more than a hundred other nations have signed on, encounters a setback when Bush withdraws American participation by “unsigning” the I.C.C. treaty.

Luis Moreno-Ocampo, prosecutor of the International Criminal Court: When I started at the I.C.C., in 2003, the Bush administration appeared hostile towards the court, as though we were radioactive. But what started with hostility over time became less so. All of a sudden the court was seen to be useful. On Darfur, for example, the administration could have vetoed the Security Council vote referring Darfur to my office. They didn’t. That was a big change. But I’ve kept a respectful distance. They don’t give me intelligence. They cannot control me. When I received the U.N. Commission report on Darfur, inside the boxes there was a sealed envelope which appeared to contain classified U.S. information. We returned it to the U.S. Embassy, without opening it.

Ironically, the hostility has helped in my dealings with countries that might otherwise perceive me to be in the pocket of the Americans. It has been one positive factor in the Arab and African worlds. The U.S. distance from the court seems to have had the very opposite effect of that intended—of strengthening it.

June 1, 2002 In a graduation speech at West Point, Bush advances a new strategic doctrine of pre-emption, stating that the United States reserves the right to use force to deal with threats before they “fully materialize.” Preparations for war with Iraq are not yet publicly acknowledged, but earlier in the spring, as Condoleezza Rice discusses diplomatic initiatives involving Iraq with several senators, Bush pokes his head into the room and says, “Fuck Saddam. We’re taking him out.”


Donald Rumsfeld: “He’s sort of like a snake on a hot summer day sleeping on the road in the sun,” a Canadian general once observed. “If an eyelid flickers, you say it’s very animated.” Photograph by Annie Leibovitz.



July 23, 2002 Senior British defense, diplomatic, and intelligence officials meet in London to discuss the American position on war with Iraq. An account of the meeting, known as the Downing Street Memo, is drawn up by one of the participants, but remains secret for several years. In the meeting, Sir Richard Dearlove, the head of British intelligence, gives an assessment of his recent talks in Washington: “Bush wanted to remove Saddam, through military action, justified by the conjunction of terrorism and WMD. But the intelligence and facts were being fixed around the policy.”

Bob Graham, Democratic senator from Florida and chairman of the Senate Intelligence Committee: I asked George [Tenet, the C.I.A. director], What did the national intelligence estimate [N.I.E.] that we had done on Iraq tell us about what would be the conditions during the period of combat, what would be the conditions post-combat, and what was the basis of our information on the weapons of mass destruction? Tenet said, We’ve never done an N.I.E.

Paul Pillar, national intelligence officer for the Near East and South Asia at the C.I.A.: The makers of the war had no appetite for and did not request any such assessments [about the aftermath of war]. Anybody who wanted an intelligence-community assessment on any of this stuff would’ve come through me, and I got no requests at all.

As to why this was the case, I would give two general answers. Number one was just extreme hubris and self-confidence. If you truly believe in the power of free economics and free politics, and their attractiveness to all populations of the world, and their ability to sweep away all manner of ills, then you tend not to worry about these things so much.

The other major reason is that, given the difficulty of mustering public support for something as extreme as an offensive war, any serious discussion inside the government about the messy consequences, the things that could go wrong, would complicate even further the job of selling the war.

August 1, 2002 A secret memorandum prepared by Justice Department lawyers Jay Bybee and John Yoo sets out the limits on coercive interrogation by U.S. government officials of those captured in the war on terror, finding that there are essentially none. The memo abandons international constraints and raises the threshold of what constitutes “torture.”

September 8, 2002 In a television interview, Condoleezza Rice builds the case against Saddam Hussein by invoking the nuclear threat. “We know that he has the infrastructure, nuclear scientists to make a nuclear weapon.… We don’t want the smoking gun to be a mushroom cloud.” This assertion is echoed by Vice President Cheney, even though Iraq’s nuclear capability is widely questioned by numerous experts.

Sir Jeremy Greenstock, British ambassador to the United Nations and later the British special representative in Iraq: When I arrived in New York, in July 1998, it was quite clear to me that all the members of the Security Council, including the United States, knew well that there was no current work being done on any kind of nuclear-weapons capability in Iraq.

It was, therefore, extraordinary to me that later on in this saga there should have been any kind of hint that Iraq had a current capability. Of course, there were worries that Iraq might try, if the opportunity presented itself, to reconstitute that capability. And therefore we kept a very close eye, as governments do in their various ways, on Iraq trying to get hold of nuclear base materials, such as uranium or uranium yellowcake, or trying to get the machinery that was necessary to develop nuclear-weapons-grade material.

We were watching this the whole time. There was never any proof, never any hard intelligence, that they had succeeded in doing that. And the American system was entirely aware of this.

September 15, 2002 In an interview with The Wall Street Journal, the assistant to the president for economic policy, Lawrence Lindsey, estimates the cost of a war with Iraq to be in the neighborhood of $100 billion to $200 billion. Mitch Daniels, the director of the Office of Management and Budget, quickly revises the figure downward to $50 billion to $60 billion, and Defense Secretary Rumsfeld calls Lindsey’s estimate “baloney.” Lindsey is fired in December. Treasury Secretary Paul O’Neill is dismissed the same day. Years later, an analysis by Nobel-laureate economist Joseph E. Stiglitz and Harvard professor Linda J. Bilmes will estimate the cost of the Iraq war to be $3 trillion.

Ari Fleischer, Bush’s first White House press secretary: What happened was the president made the point to the staff that, if America ever goes to war, we go to war because it’s the right thing to do regardless of the cost. That is a moral issue, and so we should not be talking to anybody about how much it may or may not cost; the whole issue is, do you or don’t you go? And if you go, you pay whatever the cost is to win. The day the president dismissed Larry and Secretary O’Neill, I remember he said to me that he noticed that morning that everybody in the Situation Room was sitting up a bit straighter.

October 10–11, 2002 By an overwhelming vote, and at a politically delicate moment, Congress passes the Authorization for Use of Military Force Against Iraq Resolution, which gives the president a free hand to take military action. Hans Blix, the chief U.N. weapons inspector, invited to the White House before the vote, has as yet found no evidence that Iraq has an active program to produce biological, chemical, or nuclear weapons.

Bob Graham: Unlike the first George Bush, who had purposefully put off the vote on the Persian Gulf War until after the elections of 1990—we voted in January of 1991—here they put the vote in October of 2002, three weeks before a congressional election. I think there were people who were up for election who didn’t want, within a few days of meeting the voters, to be at such stark opposition with the president.

Hans Blix, chief U.N. weapons inspector for Iraq: The most remarkable thing was the talk that we had with the vice president before we were taken to Mr. Bush. To our surprise, we had no idea we would be taken to Mr. Cheney first, but we were, and we sat down, and I thought it was more a sort of a courtesy call before we went on to President Bush.

Much of it was a fairly neutral discussion, but at one point he suddenly said that you must realize that we will not hesitate to discredit you in favor of disarmament. It was a little cryptic. That was how I remembered it, and I think that’s also how Mohamed [El Baradei, the head of the International Atomic Energy Agency, who was present], remembered it. I was a little perplexed, because it was a total threat, after all, to talk about the discrediting of us. Later, when I reflected on it, I think what he wanted to say was that if you guys don’t come to the right conclusion, then we will take care of the disarmament.

November 4, 2002 Defying precedent, the Republicans make decisive gains in the midterm elections; the White House interprets the results as an across-the-board green light. In an interview with Esquire released in December, John J. Dilulio Jr., the former head of the Office of Faith-Based and Community Initiatives, complains that the “compassionate conservative” agenda is dead and that politics alone drives the White House.

David Kuo, deputy director of the White House Office of Faith-Based and Community Initiatives: I happened to be in the stairwell of the West Wing when the president was walking down, and he goes, Hey! He goes, Dilulio piece. He goes, Is this true? Is this … I mean, is this stuff … is this, is he right? What the hell’s goin’ on?

And whoever was with him at the time—it was probably Andy Card, Andy and Karl—they were like, Oh, no, no, no, no, no, it’s fine. We’ll get back to it. That afternoon we get a call from Josh Bolten, who was at the time the head of domestic policy, saying, O.K., we need to have a “compassion” meeting.

I’ll never forget the discussion—we’re sitting around the table, and someone says, I know what we should do. We should tackle chronic homelessness. I hear there are like 15,000 homeless people in America.

What can you say to that?

November 25, 2002 The Department of Homeland Security comes into being. The new department, an amalgam of nearly two dozen existing agencies, soon emerges as perhaps the most dysfunctional and unwieldy of all the federal departments. By presidential directive D.H.S. issues a daily color-coded advisory of “threat conditions.” Its secretary, Tom Ridge, later acknowledges that the alerts were sometimes heightened under pressure from the administration.

Michael Brown, director of fema, which becomes part of the Department of Homeland Security: Bush’s strength was—he would say to everybody in the room, Tell me what the problem is and I’ll make a decision. The detrimental aspect of that is the president would make a decision and in his mind it was over with. There was no changing course. The blinders are on. You had to work incredibly hard to get back in front of that line of sight to say, We need to take a different tack here.


Condoleezza Rice: “You thought you had the dream team of foreign-policy experts,” says Charles Duelfer, the former weapons inspector in Iraq, “but they weren’t a team at all.” Photograph by Annie Leibovitz.



I’m asked at one point for my input, and I basically say we should not have a Department of Homeland Security, because it’s going to be disruptive to create it in the midst of all of these things going on. [Later,] I remember being in the car alone with Bush, where I’m talking to him about the department and how it’s not working and how we really need to make some changes. And while I thought he may have been listening, I quickly came to the conclusion that he wasn’t, because his answer to it was: Well, we’re bringing in a new leader, a new secretary or deputy secretary, and he’ll be able to fix all these things.

He had made the decision, and we’re going forward. And if things aren’t working, we don’t need to revisit the original decision. We’ll just put somebody else in there.

David Kuo: Every time you had a conversation with him, he would make it clear the subject was important. Bush would say, I care about this. Let’s get this done. But it was like a ship whose wheel is not attached to the rudder.

December 2, 2002 Donald Rumsfeld signs off on a memo from the Defense Department’s legal counsel, Jim Haynes, permitting the use of aggressive interrogation techniques at Guantánamo, including stress positions, isolation, and sleep deprivation. Rumsfeld writes on the memo, “I stand for 8–10 hours a day. Why is standing limited to 4 hours?” The memo is eventually rescinded, after strenuous objections from the general counsel of the Navy, Alberto Mora, among others, but policies and practices continue to be influenced by the philosophy outlined in the earlier Bybee-Yoo “torture memo.”

Alberto Mora, navy general counsel: When I saw the [Haynes] memorandum, I thought this was all a mistake. My assumption going into my first meeting with Haynes was that once these mistakes were pointed out the authorization would be instantaneously reversed. So I had a meeting with Jim, in which I indicated that I felt the document authorized abusive treatment that included torture. Jim’s instantaneous response was that, no, it didn’t. I asked him to think carefully about this, and I took him through the analysis that this could be torture, that it would necessarily have legal repercussions, including to the military-commission process, and could also engender liability for all individuals associated with this process.

I spent about an hour with him, and my sense was that he’d be picking up the phone and calling the secretary to have those authorizations rescinded. The next day I flew to Miami for Christmas vacation, thinking the problem was solved. I then got a phone call saying that the reports of abuse were continuing. That’s when I realized that this was not a simple mistake but that, in fact, people had adopted this course of action consciously.

As soon as I got back, I requested a second meeting with Haynes, in which I took him through some of the same reasoning but in much greater detail. I also discussed much more heavily the potential liability of individuals involved in authorizing these kinds of techniques. I pointed out Secretary Rumsfeld’s handwritten notation at the bottom of the authorization page. I said, This may be a joke, but it would not be regarded as a joke potentially by a prosecuting attorney or a plaintiff’s attorney, and I said that this would lead to very painful cross-examination of Secretary Rumsfeld on the stand. The implication or allegation by opposing counsel would be that this constituted a wink and a nod to the interrogators. I closed by saying, Protect your client—thinking that was the most powerful message one attorney could deliver to another.

John Bellinger III, legal adviser to the National Security Council and later to the secretary of state: One of the great tragedies for this administration has been the damage caused by its detainee policies—the decision to set up Guantánamo without the involvement of the international community, the issuance of the president’s executive order creating military commissions, aspects of the C.I.A. interrogation program, the conduct of certain renditions [sending detainees to other countries for interrogation], and the decision about the inapplicability of the Geneva Conventions. The most serious error is not any of these decisions individually or even collectively, but the administration’s inability to change course as the magnitude of the problems caused by these decisions became apparent.

January 28, 2003 Bush delivers his State of the Union message and continues to make the case for war with Iraq. The speech includes the assertion, later shown to be based on a crude forgery, that Saddam Hussein has “recently sought significant quantities of uranium from Africa.” The administration had been warned that the information was unreliable.

Hans Blix, chief U.N. weapons inspector for Iraq: I think [Tony] Blair, whom I admire for many things and respect for many things, but when he went out and he talked about the Iraqis’ being able to use weapons of mass destruction within 45 minutes, now that went much too far.

There was another example, and that was the famous case of the alleged contract between Iraq and Niger for the import of yellowcake, uranium oxide. I was very curious about that, because I could not see why Iraq should at this stage, in 2002, want to import yellowcake. That’s a long, long way from the enriched nuclear materials they can use in a bomb. I didn’t suspect that there was a forgery behind it.

January 31, 2003 Bush meets at the White House with Tony Blair. A secret account of the meeting, written by Sir David Manning, Blair’s chief foreign-policy adviser and later ambassador to Washington, will become public three years later. The administration’s public stance is that it hopes to avoid war with Iraq. In the meeting, however, Bush and Blair agree on a start date for the war, irrespective of the outcome of U.N. inspections: March 10. Bush proposes that a pretext for war might be provided if an aircraft were painted with U.N. colors and sent in low over Iraq, in the hope that it would draw fire. According to the memo, Bush also “thought it unlikely that there would be internecine warfare between the different religious and ethnic groups” in Iraq once Saddam was removed from power.

Meanwhile, the Pentagon belatedly turns attention to planning for the aftermath of war.

Jay Garner, retired army general and first overseer of the U.S. administration and reconstruction of Iraq: When I went to see Rumsfeld at the end of January, I said, O.K., I’ll do this for the next few months for you. I said, you know, Let me tell you something, Mr. Secretary. George Marshall started in 1942 working on a 1945 problem. You’re starting in February working on what’s probably a March or April problem. And he said, I know, but we have to do the best with the time that we have. So that kind of frames everything.

February 5, 2003 Colin Powell appears before the United Nations Security Council to present evidence that Iraq is actively seeking to make or acquire weapons of mass destruction. In the ensuing months, it will emerge that, although Powell was unaware of the fact, many of his claims are unfounded.

Joschka Fischer, German foreign minister and vice-chancellor: I spoke over and over and over with Colin Powell. He always looked, I don’t know, not at me, but I could see the pain in his eyes. These are very powerful questions, he used to say. I understood. It meant: I have serious problems inside the administration.

Hans Blix: In March 2003, when the invasion took place, we could not have stood up and said, There is nothing, because to prove the negative is really not possible. What you can do is to say that we have performed 700 inspections in some 500 different sites, and we have found nothing, and we are ready to continue.

If we had been allowed to continue a couple of months, we would have been able to go to all of the some hundred sites suggested to us, and since there weren’t any weapons of mass destruction, that’s what we would have reported. And then I think that, at that stage, certainly the intelligence ought to have drawn the conclusion that their evidence was poor.

I now feel sorry for Colin Powell. He was given the material by the C.I.A., and we read in the newspapers how he threw out a lot of it. But he retained some. And then he came to the Security Council, and, of course, in a way, this was to tell the world that, Look, this is what we’ve found. We have the means to do it. The inspectors are very good boys and nice, and we listen to them, but they haven’t seen this, and this is what there is.

February 25, 2003 General Eric Shinseki, the army chief of staff, tells a congressional hearing that “something on the order of several hundred thousand soldiers” will be required to mount a successful occupation of Iraq. Deputy Defense Secretary Paul Wolfowitz publicly rebukes Shinseki, stating that the general’s estimate is “wildly off the mark.” Shinseki is forced to retire early.

Jay Garner: When Shinseki said, Hey, it’s going to take 300,000 or 400,000 soldiers, they crucified him. They called me up the day after that, Wolfowitz and Rumsfeld. They called me the next day and they said, Did you see what Shinseki said? And I said yes. And they said, Well, that can’t be possible. And I said, Well, let me give you the only piece of empirical data I have. In 1991, I owned 5 percent of the real estate in Iraq, and I had 22,000 trigger pullers. And on any day I never had enough. So you can take 5 percent—you can take 22,000 and multiply that by 20. Hey, here’s probably the ballpark, and I didn’t have Baghdad. And they said, Thank you very much. So I got up and left.

March 19, 2003 The Iraq war begins. Two weeks of “shock and awe” bombardment herald the invasion by ground forces. U.S. and British troops make up 90 percent of the “international coalition,” which includes modest support from other countries. The defeat of Iraqi forces is a foregone conclusion, but within days of the occupation Baghdad is beset by looting that coalition forces do nothing to stop. Rumsfeld dismisses the breakdown of civil order with the explanation “Stuff happens.” Kenneth Adelman, a Rumsfeld-appointed member of a Pentagon advisory board, and initially a supporter of the war, later confronts the defense secretary.


Revisit the first draft of history with our Bush-administration archive, “Mission Unaccomplished.” Illustration by Risko.
Kenneth Adelman, a member of Donald Rumsfeld’s advisory Defense Policy Board: So he says, It might be best if you got off the Defense Policy Board. You’re very negative. I said, I am negative, Don. You’re absolutely right. I’m not negative about our friendship. But I think your decisions have been abysmal when it really counted.

Start out with, you know, when you stood up there and said things—“Stuff happens.” I said, That’s your entry in Bartlett’s. The only thing people will remember about you is “Stuff happens.” I mean, how could you say that? “This is what free people do.” This is not what free people do. This is what barbarians do. And I said, Do you realize what the looting did to us? It legitimized the idea that liberation comes with chaos rather than with freedom and a better life. And it demystified the potency of American forces. Plus, destroying, what, 30 percent of the infrastructure.

I said, You have 140,000 troops there, and they didn’t do jack shit. I said, There was no order to stop the looting. And he says, There was an order. I said, Well, did you give the order? He says, I didn’t give the order, but someone around here gave the order. I said, Who gave the order?

So he takes out his yellow pad of paper and he writes down—he says, I’m going to tell you. I’ll get back to you and tell you. And I said, I’d like to know who gave the order, and write down the second question on your yellow pad there. Tell me why 140,000 U.S. troops in Iraq disobeyed the order. Write that down, too.

And so that was not a successful conversation.

Sir Jeremy Greenstock, British ambassador to the United Nations and later the British special representative in Iraq: The administration of Iraq never recovered. It was a vacuum in security that became irremediable, at least until the surge of 2007. And to that extent, four years were not only wasted but allowed to take on the most terrible cost because of that lack of planning, lack of resources put in on the ground. And I see that lack of planning as residing in the responsibility of the Pentagon, which had taken charge, the office of the secretary of defense, with the authority of the vice president and the president, obviously, standing over that department of government.

May 1, 2003 Aboard the aircraft carrier U.S.S. Abraham Lincoln, under a banner reading, mission accomplished, Bush proclaims that “major combat operations in Iraq have ended.” Meanwhile, decisions have been made that will inadvertently prolong major combat operations, chief among them the disbanding of the Iraqi Army. The responsibility for this decision, which is promulgated by the new U.S. administrator in Iraq, L. Paul Bremer III, remains unclear.

Jay Garner, retired army general and first overseer of the U.S. administration and reconstruction of Iraq: My plan was to not disband the Iraqi Army but to keep the majority of it and use them. And the reason for that is we needed them, because, number one, there were never enough people there for security. I mean, I’ll give you an example. My first day in Baghdad, I went to see Scott Wallace, who was the corps commander, the V Corps commander, and I said, Scott, I need a lot of help here on security. And he said, Let me show you my map. I walked over to the map. And he had 256 sites that day he was guarding that he had never planned on. He just didn’t have the force structure to do it.

So we said, O.K., we’ll bring the army back. Our plan was to bring back about 250,000 of them. And I briefed Rumsfeld. He agreed. Wolfowitz agreed. Condoleezza Rice agreed. George [Tenet] agreed. Briefed the president on it. He agreed. Everybody agreed.

So when that decision [to disband] was made, I was stunned.

Charles Duelfer, U.N. and U.S. weapons inspector in Iraq: One Iraqi colonel told me, You know, our planning before the war was that we assumed that you guys couldn’t take casualties, and that was obviously wrong. I looked at him and said, What makes you think that was wrong? He goes, Well, if you didn’t want to take casualties, you would have never made that decision about the army.

May 27, 2003 Bush signs legislation authorizing the President’s Emergency Plan for aids Relief (pepfar). He visits Africa, a main focus of the legislation, soon thereafter. pepfar commits some $15 billion for aids prevention and treatment over a period of five years. New York Times columnist Nicholas Kristof concludes, “Mr. Bush has done much more for Africa than Bill Clinton ever did.”

Michael Merson, M.D., international aids researcher, who has evaluated the relief program: Look, pepfar is the largest commitment ever made by any nation for a global health activity that’s dedicated to a single disease. I mean, that’s just not disputable. It has a prevention component, a treatment component, and a care component, but treatment is the centerpiece. The last number I’ve seen is that this initiative has led to treatment of more than 1.7 million people, most of them in Africa. Now, that’s not all the people who need treatment, but it’s a huge amount. pepfar at least tripled our aid flow to Africa—I’m talking about total aid flow.

August 19, 2003 A month after Bush indicates little concern about an insurgency in Iraq with the remark “Bring ‘em on,” a car bomb in Baghdad destroys the headquarters of the United Nations mission, killing the U.N. chief, Sergio Vieira de Mello. President Bush receives the news of the bombing while playing golf, and by his own account decides at that moment to give up the game in solidarity with troops serving in Iraq and Afghanistan (although two months later he plays a round at Andrews Air Force Base). The U.N.-headquarters bombing is seen as the start of the full-blown insurgency.

Jay Garner: I think a lot of the problem the president had is: people around him were doing what he said, and nobody was doing the analytical questioning of the things we were doing where you could do all the puts and takes and say, O.K., Mr. President, here’s all the pros to do this and here’s all the cons to do this, and here’s the likely outcome. Now, let’s make a decision.

I don’t think that ever happened. I never saw anything like that. And I think the Defense Department was enamored with what they felt they’d accomplished in Afghanistan with a very small force of basically special-ops guys and the air force. And they looked at it as a high-tech thing. Nation building is a low-tech thing. Get a whole bunch of you. Roll up your sleeves. Get a bunch of shovels, and then everybody goes out and busts their ass every day. We just didn’t have enough soldiers to do that.

January 23, 2004 David Kay, the chief U.S. weapons inspector, resigns his position, affirming his belief that no W.M.D. stockpiles will be found in Iraq; the following week he discusses his conclusions at the White House. Nine months later his successor, Charles Duelfer, will conclude officially that Iraq not only did not possess W.M.D. but did not have an active program in place to develop them. The structural supports of Powell’s U.N. presentation begin to crumble.


Karl Rove: “Karl came from a perspective of: you defeat people in politics by calling one side bad and one side good,” says Matthew Dowd, a onetime Bush-campaign strategist. Photograph by Annie Leibovitz.



Lawrence Wilkerson, top aide and later chief of staff to Secretary of State Colin Powell: Well, [Powell] got a telephone call each time a pillar fell. It was either John [McLaughlin, deputy C.I.A. director], calling Rich [Armitage], and Rich telling him, or it was George [Tenet] or John calling the secretary. And I remember this vividly because he would walk through my door, and his face would grow more morose each time, and he’d say, Another pillar just fell. I said, Which one this time? And, of course, the last one was the mobile biological labs.

Finally, when that call came, the secretary came through the door and said, The last pillar has just collapsed. The mobile biological labs don’t exist. Turned around and went back into his office.

David Kay, chief U.S. weapons inspector in Iraq: As we turned to the trailers, it was probably—I guess the single biggest shock I had during the entire inspection process, because I’d been powerfully moved by Powell’s statement to the Council. Well, when we started tearing it apart, we discovered it was not based on several sources. It was based on one source, and it was an individual [code-named Curveball] held by German intelligence. They had denied the U.S. the right to directly interview him. And they only passed summaries—and really not very good ones—of their interrogations with him. The Germans had refused to pass us his name even.

As you delved into his character and his claims, none of them bore any truth. The case just fell apart.

Joschka Fischer, German foreign minister and vice-chancellor: I was astonished that the Americans used Curveball, really astonished. This was our stuff. But they presented it not in the way we knew it. They presented it as a fact, and not as the way an intelligence assessment is—could be, but could also be a big lie. We don’t know.

April 13, 2004 At a press conference Bush is asked by John Dickerson of Time to name the biggest mistake he has made since 9/11. Bush is unable to come up with an answer. He replies, “I wish you would have given me this written question ahead of time, so I could plan for it.”

David Kay: He has a tremendous sense of calm and certitude about the positions he takes, and is unusually doubt-free about them. Most people, when they make monumental decisions, understand that they’re doing it under conditions of great uncertainty, and are not fully at the time really able to understand what the consequences might be—and that frightens them, or at least they have concern, disquietude about it. This president has none of that, as far as I can tell.

April 28, 2004 A televised report on 60 Minutes II reveals widespread abuse and humiliation of detainees by U.S. military personnel and private contractors at the Abu Ghraib prison in Iraq, dating back to October 2003 and known to the Defense Department since January.

Kenneth Adelman, a member of Donald Rumsfeld’s advisory Defense Policy Board: I said to Rumsfeld, Well, the way you handled Abu Ghraib I thought was abysmal. He says, What do you mean? I say, It broke in January of—what was that, ‘04? Yeah, ‘04. And you didn’t do jack shit till it was revealed in the spring. He says, That’s totally unfair. I didn’t have the information. I said, What information did you have? You had the information that we had done these—and there were photos. You knew about the photos, didn’t you? He says, I didn’t see the photos. I couldn’t get those photos. A lot of stuff happens around here. I don’t follow every story. I say, Excuse me, but I thought in one of the testimonies you said you told the president about Abu Ghraib in January. And if it was big enough to tell the president, wasn’t it big enough to do something about? He says, Well, I couldn’t get the photos. I say, You’re secretary of defense. Somebody in the building who works for you has photos, and for five months you can’t get photos—hello?

Lawrence Wilkerson: The twin pressures were from Rumsfeld, and they were: Produce intelligence, and the gloves are off. That’s the communication that went down to the field.

Matthew Dowd, Bush’s pollster and chief strategist for the 2004 presidential campaign: When Abu Ghraib happened, I was like, We’ve got to fire Rumsfeld. Like if we’re the “accountability president,” we haven’t really done this. We don’t veto any bills. We don’t fire anybody. I was like, Well, this is a disaster, and we’re going to hold some National Guard colonel responsible? This guy’s got to get fired.

For an M.B.A. president, he got the M.B.A. 101 stuff down, which is, you know, you don’t have to do everything. Let other people do it. But M.B.A. 201 is: Hold people accountable.

Bill Graham, Canada’s foreign minister and later defense minister: We were there in Washington for a G-8 meeting, and Colin suddenly phoned us all up and said, We’re going to the White House this morning. Now, this is curious, because normally the heads of government don’t give a damn about foreign ministers. We all popped in a bus and went over and were cordially received by Colin and President Bush. The president sat down to explain that, you know, this terrible news had come out about Abu Ghraib and how disgusting it was. The thrust of his presentation was that this was a terrible aberration; it was un-American conduct. This was not American.

Joschka Fischer was one of the people that said, Mr. President, if the atmosphere at the top is such that it encourages or allows people to believe that they can behave this way, this is going to be a consequence. The president’s reaction was: This is un-American. Americans don’t do this. People will realize Americans don’t do this.

The problem for the United States, and indeed for the free world, is that because of this—Guantánamo, and the “torture memos” from the White House, which we were unaware of at that time—people around the world don’t believe that anymore. They say, No, Americans are capable of doing such things and have done them, all the while hypocritically criticizing the human-rights records of others.

Alberto Mora, navy general counsel: I will tell you this: I will tell you that General Anthony Taguba, who investigated Abu Ghraib, feels now that the proximate cause of Abu Ghraib were the O.L.C. memoranda that authorized abusive treatment. And I will also tell you that there are general-rank officers who’ve had senior responsibility within the Joint Staff or counterterrorism operations who believe that the number-one and number-two leading causes of U.S. combat deaths in Iraq have been, number one, Abu Ghraib, number two, Guantánamo, because of the effectiveness of these symbols in helping recruit jihadists into the field and combat against American soldiers.

July 22, 2004 The bipartisan 9/11 commission—whose creation was fiercely opposed by the administration—issues its report. It provides a detailed reconstruction of events leading up to the attacks, and of the attacks themselves; an earlier staff report found “no credible evidence” of a link between al-Qaeda and Iraq. The final report also determines that many warning signs of an impending attack were ignored.

Lawrence Wilkerson: John [Bellinger] and I had to work on the 9/11-commission testimony of Condi. Condi was not gonna do it, not gonna do it, not gonna do it, and then all of a sudden she realized she better do it. That was an appalling enterprise. We would cherry-pick things to make it look like the president had been actually concerned about al-Qaeda. We cherry-picked things to make it look as if the vice president and others, Secretary Rumsfeld and all, had been.

They didn’t give a shit about al-Qaeda. They had priorities. The priorities were lower taxes, ballistic missiles, and the defense thereof.

Lee Hamilton, former Indiana congressman and vice-chair of the 9/11 commission: Intelligence reform was our big recommendation. The principal conclusion we reached was that the 15 or 16 agencies of the intelligence community did not share information and that there had to be some mechanism put in place to force the sharing of information. In the intelligence business, you don’t get, or you usually don’t get, information saying that the terrorists are going to strike at nine in the morning in the World Trade towers in New York City on September 11. You get bits and pieces of information that have to be put together.

We knew, for example—when I say we, I mean the F.B.I. in Minneapolis knew—that those guys in flight-training school were more interested in flying the airplane than they were in taking off and landing. They knew that. Who didn’t know it? The director of the F.B.I. didn’t know it. The director of the C.I.A. did know it. His response was that it was none of his business. Technically correct, because his business is foreign intelligence.

That’s one of many, many examples.

November 2, 2004 Election Day. Bush defeats Kerry by a margin of three million popular votes and 35 electoral votes. In a press conference two days later Bush says, “I earned capital in the campaign, political capital, and I now intend to spend it. It is my style.”

Mark McKinnon, chief campaign media adviser to George W. Bush: The interesting thing about both Bush campaigns is that they strategically defied conventional wisdom and turned it on its head. In 1999, on the old “right track, wrong track” question, which we ask on every poll—the reason we ask it is because it determines whether or not it’s a change environment or a status-quo environment—in 1999, the “right track” was 65 percent or 70 percent, which under conventional wisdom would indicate that it was a great environment for the Democrats and for Al Gore. The strategic challenge we had was—we were in the position of trying to argue everything’s great, so it’s time for a change, right?

Flash forward to 2004. It’s just the opposite. This time, the “wrong track” is like 65 or 70 percent. We’re in a very difficult war, uncertain economy, and so now we’re in the strategic position of saying, you know, everything’s all screwed up. Stay the course. We’re all f’d up. Stay the course.

November 15, 2004 Colin Powell announces his resignation as secretary of state. He is succeeded by Condoleezza Rice, who will in time have limited success charting a new direction on issues such as Iran and North Korea.

Lawrence Wilkerson, top aide and later chief of staff to Secretary of State Colin Powell: I’m not sure even to this day that he’s willing to admit to himself that he was rolled to the extent that he was. And he’s got plenty of defense to marshal because, as I told [former defense secretary] Bill Perry one time when Bill asked me to defend my boss—I said, Well, let me tell you, you wouldn’t have wanted to have seen the first Bush administration without Colin Powell. I wrote Powell a memo about six months before we were leaving, and I said, This is your legacy, Mr. Secretary: damage control. He didn’t like it much. In fact, he kind of handed it back to me and told me I could put it in the burn basket.

But I knew he understood what I was saying. You saved the China relationship. You saved the transatlantic relationship and each component thereof—France, Germany. I mean, he held Joschka Fischer’s hand under the table on occasions when Joschka would say something like, You know, your president called my boss a fucking asshole. His task became essentially cleaning the dogshit off the carpet in the Oval Office. And he did that rather well. But it became all-consuming.

I think the clearest indication I got that Rich [Armitage] and he both had finally awakened to the dimensions of the problem was when Rich began—I mean, I’ll be very candid—began to use language to describe the vice president’s office with me as the Gestapo, as the Nazis, and would sometimes late in the evening, when we were having a drink—would sometimes go off rather aggressively on particular characters in the vice president’s office.

Charles Duelfer, U.N. and U.S. weapons inspector in Iraq: You thought you had the dream team of foreign-policy experts, but they weren’t a team at all. Some of the wags over at the Department of Defense would call John Bolton’s office over at State the “American Interests Section.” Very funny, but it showed you how badly divided this administration had become.

Lawrence Wilkerson: The imbalance is huge. The Pentagon now gets three quarters of a trillion dollars every year and State gets $35 billion. Rumsfeld remarked one time, I lose more money than you get. He has two and a half million men. State is not even a combat brigade, you know?

Bill Graham, Canada’s foreign minister and later defense minister: We came out of our meeting, and our nato ambassador said, “Oh, Mr. Rumsfeld was really quite cordial and animated today.” And [one of our generals], his remark was something like: Oh, he’s sort of like, it’s like a snake on a hot summer day sleeping on the road in the sun. If an eyelid flickers, you say it’s very animated.

December 26, 2004 An undersea earthquake off the western coast of Sumatra—the second-largest earthquake ever recorded—unleashes a wave of tsunamis throughout the Indian Ocean, killing more than 200,000 people. Bush orders the U.S. Navy to spearhead emergency relief efforts, which are widely praised. Distracted elsewhere, the administration’s Asian initiatives are otherwise few. There is one clear beneficiary.

Kishore Mahbubani, Singapore’s former ambassador to the United Nations: The Chinese never said so, because they are the best geopolitical strategists in the world, but it was immediately obvious that with 9/11 the U.S.-China relationship improved. The Chinese were smart. They didn’t put any real obstacles in the way of action in Afghanistan, and even if they strongly opposed the war in Iraq, they did so in a way that minimized the difficulties for the U.S. I saw that firsthand, in the period after the invasion was over, when the U.S. needed a Security Council resolution to get the oil sales flowing again. They got the resolution, and I remember asking a U.S. diplomat which country had been most helpful in getting the resolution passed. China, he replied. That 2003 resolution was a double win for the Chinese leaders: they obtained valuable political goodwill from the Bush administration, which translated into gains on the Taiwan issues, and they helped to ensure that American troops would remain bogged down in Iraq for a long time.

The Chinese have been brilliant in playing the Bush years. Asia is one part of the world where many will see George Bush in a positive light, although not necessarily for the reasons he may have wished.

February 2, 2005 In his State of the Union address, Bush starts spending his political capital with a plan to take the Social Security system in the direction of privatization by allowing individuals to divert payments to their own retirement accounts. The partial-privatization scheme is widely opposed—the public sees reliable benefits at risk—and in the end the proposal goes nowhere. Meanwhile, despite significant turnout by Evangelicals in the election, faith-based initiatives make little headway on the president’s agenda.

David Kuo, deputy director of the White House Office of Faith-Based and Community Initiatives: After the 2004 election they cut the White House faith-based staff by 30 percent, 40 percent, because it became clear that it had served its purpose.

There’s this idea that the Bush White House was dominated by religious conservatives and catered to the needs of religious conservatives. But what people miss is that religious conservatives and the Republican Party have always had a very uneasy relationship. The reality in the White House is—if you look at the most senior staff—you’re seeing people who aren’t personally religious and have no particular affection for people who are religious-right leaders. Now, at the end of the day, that’s easy to understand, because most of the people who are religious-right leaders are not easy to like. It’s that old Gandhi thing, right? I might actually be a Christian myself, except for the action of Christians.

And so in the political-affairs shop in particular, you saw a lot of people who just rolled their eyes at everyone from Rich Cizik, who is one of the heads of the National Association of Evangelicals, to James Dobson, to basically every religious-right leader that was out there, because they just found them annoying and insufferable. These guys were pains in the butt who had to be accommodated.

June 7, 2005 Documents emerge indicating that the decision to withdraw from the Kyoto Protocol on climate change, in 2001, was influenced by the Global Climate Coalition, an industry group with ties to Exxon. One State Department letter to the coalition states: “Potus [president of the United States] rejected Kyoto in part based on input from you.” Several days later, Philip Cooney, a former American Petroleum Institute lobbyist and the chief of staff of the president’s Council on Environmental Quality, resigns after it is revealed that he had edited government reports to downplay the threat of climate change. Cooney takes a job at Exxon.

Rick Piltz, senior associate, U.S. Climate Change Science Program: In the fall of 2002, I was doing something I’d been doing for years, which was developing and editing the [Climate Change Science Program’s] annual report to Congress. And it had been drafted with input from dozens of federal scientists and reviewed and vetted and revised and vetted some more.

And then it had to go for a White House clearance. It came back to us over the fax machine with Phil Cooney’s hand markup on it. I flipped through it and saw right away what he was doing. You don’t need to do a huge amount of re-writing to make something say something different; you just need to change a word, change a phrase, cross out a sentence, add some adjectives. And what he was doing was, he was passing a screen over the report to introduce uncertainty language into statements about global warming. The political motivation of it was obvious.

June 24, 2005 Mahmoud Ahmadinejad is elected president of Iran, a country whose regional sway has been enhanced by the implosion of neighboring Iraq under U.S. occupation. Iran steps up its efforts to enrich uranium, and Bush states more than once that he will not rule out the use of force if Iran seeks to develop nuclear weapons.

Joschka Fischer, German foreign minister and vice-chancellor: The big problem was that the administration was in a permanent state of denial—that they are doing the job for Tehran. That’s another irony, a very tragic one. Because if you look to the basic parameters of Iran’s capability or strategic strength, this is not a superpower—they’re far from a superpower. They never could have achieved such a level of dominance and influence if they would have had to rely only on their own resources and skills. America pushed Iran in that way.

I was invited to a conference in Saudi Arabia on Iraq, and a Saudi said to me, Look, Mr. Fischer, when President Bush wants to visit Baghdad, it’s a state secret, and he has to enter the country in the middle of the night and through the back door. When President Ahmadinejad wants to visit Baghdad, it’s announced two weeks beforehand or three weeks. He arrives in the brightest sunshine and travels in an open car through a cheering crowd to downtown Baghdad. Now, tell me, Mr. Fischer, who is running the country?

Hans Blix, chief U.N. weapons inspector for Iraq: In my experience of negotiations, about the worst you can do is to humiliate the other side. And I think that this is one error that has been with the U.S.—they reject any talk with Ahmadinejad because he is someone who is regarded as a rogue and playing to the galleries and so forth.

Lee Hamilton, former Indiana congressman and vice-chair of the 9/11 commission: I was in the Congress when we began talking to members of the Supreme Soviet under the old Soviet Union. I’d get up and give a speech. My Soviet counterpart would get up and give a speech. Then we’d toast each other with vodka and say that we were for peace in the world and prosperity for our grandchildren, and then we’d go home. And we did that year after year after year. After doing it 10 or 15 years, we put aside the speeches and we began to talk with one another. That was the beginning of the thaw.

It might not take 40 years with the Iranians, but it’s going to take a long time. You’re going to have to have patience. You have to put on the table not just our agenda but their agenda as well. But the conversation is critical, and I don’t know how you deal with differences without talking to people. If you know a way to solve problems without talking to people, let me know, because I haven’t found out about it yet.

August 29, 2005 Hurricane Katrina, one of the most powerful hurricanes ever recorded, strikes the Gulf Coast. The storm surge breaches the levees in New Orleans; the city is flooded and eventually evacuated amid a complete breakdown of civil order. Bush flies over the city on his way back from a fund-raiser out West. Days later, visiting the destruction as relief efforts falter, the president praises the fema director, Michael Brown: “Brownie, you’re doing a heckuva job.”

Bush vows to rebuild New Orleans, and Brown, whose performance is widely criticized, is effectively fired; the president’s approval rating sinks to 39 percent. Three years after Katrina the population of New Orleans will have dropped by one-third. The city’s defenses against storms and floods will remain a vulnerable patchwork.

Dan Bartlett, White House communications director and later counselor to the president: Politically, it was the final nail in the coffin.

Matthew Dowd, Bush’s pollster and chief strategist for the 2004 presidential campaign: Katrina to me was the tipping point. The president broke his bond with the public. Once that bond was broken, he no longer had the capacity to talk to the American public. State of the Union addresses? It didn’t matter. Legislative initiatives? It didn’t matter. P.R.? It didn’t matter. Travel? It didn’t matter. I knew when Katrina—I was like, man, you know, this is it, man. We’re done.

Michael Brown, director of fema, which becomes part of the Department of Homeland Security: There were two things that went wrong with Katrina. One is personal on my part. I failed after having briefed the president about how bad things were in New Orleans and telling him that I needed the Cabinet to stand up and pay attention. When that didn’t happen, I should’ve leveled with the American public instead of sticking to those typical political talking points about—how we’re working as a team and we’re doing everything we can. I should’ve said this thing is just not working. Probably would’ve been fired anyway, but at least it would’ve caused the federal government to stand up and get off their butts.

The second thing that happened was this. [Homeland Security Secretary Michael] Chertoff inserted himself into the response, and suddenly I had this massive bureaucracy on top of me. I should have basically told Chertoff to kiss off, that I would continue to deal directly with the president. But he’s the new kid on the block and the White House deferred to him, and it gave me no choice but to work through him, which then scoped things down and caused it to just completely implode on itself.

Lee Hamilton, former Indiana congressman and vice-chair of the 9/11 commission: When you have a disaster strike, you have to have someone in charge. They didn’t have anybody in charge in New York during 9/11. They didn’t have anybody in charge in Katrina. And you get a mess.

Politically it’s a very difficult thing. You’ve got the counties, the cities, and the federal government and all the rest to work it out. Nobody wants to give up authority prior to the fact. The governor of Louisiana wants to be in charge. The governor of Mississippi wants to be in charge. The mayor of New Orleans wants to be in charge. You’ve got 50 other cities that want to be in charge. I have come to the view in these massive disasters—like Katrina or New York on 9/11—that the federal government has to be in charge because they’re the only one that has the resources to deal with the problem.

But presidents don’t like to stomp on governors and override them. When these kinds of problems are not resolved, people die.

December 6, 2005 nasa scientist James Hansen gives a lecture on climate change at a meeting of the American Geophysical Union, in San Francisco. nasa reacts by ordering his future public statements to be vetted in advance. Earlier in the year Rick Piltz had resigned from the Climate Change Science Program over other instances of political interference.

Rick Piltz, senior associate, U.S. Climate Change Science Program: To me, the central climate-science scandal of the Bush administration was the suppression of the National Assessment of Climate Change Impacts report. In the 1997–2000 time frame, the White House had directed the Global Change Research Program to develop a scientifically based assessment of the implications of climate change for the United States. It was a vulnerability assessment: If these projected warming models are correct, what’s going to happen? And over a period of several years a team made up of eminent scientists and other experts produced a major report. To this day, it remains the most comprehensive effort to understand the implications of global warming for the United States.

And the administration killed that study. They directed federal agencies not to make any reference to the existence of it in any further reports. Through a series of deletions it was completely excised from all program reports from 2002 onward. It was left up on a Web site. There was a lawsuit filed by the Competitive Enterprise Institute, which is an ExxonMobil-funded “denialist” group, demanding that the report be deleted from the Web. Myron Ebell of the institute said, Our goal is to make that report vanish.

December 16, 2005 The New York Times reveals the existence of a massive warrantless-surveillance program conducted on American soil. Bush contends that the September 2001 war-on-terror authorization by Congress—“to use all necessary and appropriate force” against relevant “nations, organizations, and persons”—effectively gives the president unlimited power to act. Other kinds of snooping occur inside the administration.

Lawrence Wilkerson, top aide and later chief of staff to Secretary of State Colin Powell: The Cheney team had, for example, technological supremacy over the National Security Council staff. That is to say, they could read their e-mails. I remember one particular member of the N.S.C. staff wouldn’t use e-mail because he knew they were reading it. He did a test case, kind of like the Midway battle, when we’d broken the Japanese code. He thought he’d broken the code, so he sent a test e-mail out that he knew would rile Scooter [Libby], and within an hour Scooter was in his office.

December 30, 2005 Bush signs into law the Detainee Treatment Act. The legislation was passed by Congress in order to prohibit the inhumane treatment of prisoners, but Bush appends a “signing statement” laying out his own interpretation and indicating that he is not otherwise bound by the law in any meaningful way. This is one of more than 800 instances in which Bush deploys signing statements to finesse congressional intent.

Jack Goldsmith, legal adviser at the Department of Defense and later head of the Justice Department’s Office of Legal Counsel: Every president in war time and in crisis—Lincoln, Roosevelt, John F. Kennedy, just to name three—exercised extraordinarily broad powers. They pushed the law and stretched the law and bent the law, and many people think they broke the law. And we’ve largely forgiven them for doing so because we think that they acted prudently in crisis. So Lincoln—he did all sorts of things after Fort Sumter. He spent unappropriated moneys. He suspended the writ of habeas corpus.

Now, there’s a way of looking at the Cheney-Addington position on executive power which is not unlike some of the most extreme assertions of Lincoln and Roosevelt. But there are important differences. One is that both Lincoln and Roosevelt coupled this sense of a powerful executive in times of crisis with a powerful sense of a need to legitimate and justify the power through education, through legislation, through getting Congress on board, through paying attention to what one might call the “soft” values of constitutionalism. That was an attitude that Addington and I suppose Cheney just did not have.

The second difference, and what made their assertion of executive power extraordinary, is: it was almost as if they were interested in expanding executive power for its own sake.

June 29, 2006 The Supreme Court in Hamdan v. Rumsfeld rules that detainees at Guantánamo have rights under the Geneva Conventions, including fundamental rights of due process. Two months later, Murat Kurnaz, a Turkish citizen and legal resident of Germany who had been held at Guantánamo for nearly five years, will be released from custody and flown back to Germany.

John le Carré, novelist and former intelligence officer whose novel A Most Wanted Man was inspired by the Kurnaz case: Murat Kurnaz, a German-born-and-educated Turkish resident of Bremen, in northern Germany, by trade a shipbuilder, was released from Guantánamo on 24 August 2006 after four years and eight months without charge or trial. He was 24 years old. In December 2001, at the age of 19, he had been arrested in Pakistan, sold by the Pakistanis to the Americans for $3,000, and tortured for five weeks and nearly killed at an interrogation center in Kandahar before being flown in chains to Cuba. His family was first informed of his situation in January 2002. Despite repeated brutal treatment and repeated interrogation at Guantánamo, no evidence was found to link him with terrorist activities, a fact acknowledged by both U.S. and German intelligence. Yet it took years of intense lobbying by lawyers, family, and NGOs to secure his release.

Two weeks after Murat’s release, I was in Hamburg to take part in a television discussion on the anniversary of al-Qaeda’s attack on America. A woman journalist attached to the program had been assigned the task of looking after Murat while the program’s producers prepared a documentary about him. Would I like to meet him? I would, and spent two days listening to him in a hotel suite in Bremen. Despite a disgraceful campaign of innuendo orchestrated by the complicit German authorities, I shared the view of practically everyone who had met him that Murat was remarkably truthful and was a reliable witness to his own tragedy.

September 21, 2006 The Environmental Protection Agency declines to tighten regulations on annual emissions of soot.

November 7, 2006 The Republicans suffer a stinging defeat in the midterm elections; Democrats take control of both the House and Senate. The following day, Rumsfeld resigns as defense secretary. He is replaced by Robert Gates.

November 26, 2007 Secretary of State Rice convenes a Middle East peace conference in Annapolis, Maryland. The Bush administration had from the outset paid scant attention to the Israeli-Palestinian conflict, and attempts by Rice to revive the peace process come to little.

Anthony Cordesman, national-security analyst and former official at the Defense and State Departments: In reality, a great deal of what Secretary Rice did seems to have been based as much on a search for visibility as any expectation of real progress. The fact was that you did not have to contend with Chairman Arafat, but you did have to contend with a deeply divided Israel, which was far less willing to accept or make compromises over peace. And with the Palestinian movement, which was moving toward civil war. The United States can only make serious progress when both the Israelis and Palestinians are ready to move toward peace. Setting artificial deadlines and creating yet another set of unrealistic expectations did not lay the groundwork for sustained real progress. It instead created new sources of frustration and again made people throughout the Arab and Muslim world see the United States as hypocritical and ineffective.

December 6, 2006 The independent Iraq Study Group, chaired by former secretary of state James Baker and former congressman Lee Hamilton, issues a report setting out 79 recommendations for the future conduct of the Iraq war. The report is brushed aside by the president. Lawrence Eagleburger, one of the group’s members, says of Bush after the report is delivered, “I don’t recall, seriously, that he asked any questions.”

Alan K. Simpson, former senator from Wyoming and a member of the Iraq Study Group: It was an early-morning session, seven a.m., I think, breakfast, the day we trotted it out. And Jim and Lee said, Mr. President, we will—and Dick was there, Cheney was there—just go around the room, if you would, and all of us share with you a quick thought? And the president said fine. I thought at first the president seemed a little—I don’t know, just maybe impatient, like, What now?

He went around the room. Everybody stated their case. It just took a couple minutes. I know what I said. I said, Mr. President, we’re not here to present this to vex or embarrass you in any way. That’s not the purpose of this. We’re in a tough, tough situation, and we think these recommendations can help the country out. We’ve agreed on every word here, and I hope you’ll give it your full attention. He said, Oh, I will. And I turned to Dick, and I said, Dick, old friend, I hope you’ll gnaw on this, too. This is very important that you hear this and review it. And he said, I will, I will, and thanks.

Then the president gave an address not too far after that. And we were called by [National-Security Adviser Stephen] Hadley on a conference call. He said, Thank you for the work. The president’s going to mention your report, and it’ll be—there will be parts of it that he will embrace, in fact, and if he doesn’t happen to speak on certain issues, you know that they’ll be in full consideration in the weeks to come, or something like that. And we all listened with a wry smile.

We figured that maybe 5 of the 79 recommendations would ever be considered, and I think we were pretty right.

Lee Hamilton: Cheney was there, never said a word, not a—of course, the recommendations from his point of view were awful, but he never criticized. Bush was very gracious, said we’ve worked hard and did this great service for the country—and he ignored it so far as I can see. He fundamentally didn’t agree with it. President Bush has always sought, still seeks today, a victory, military victory. And we did not recommend that. The gist of what we had to say was a responsible exit. He didn’t like that.

December 7, 2006 The Justice Department fires seven United States attorneys without explanation. Attorney General Alberto Gonzales calls the controversy an “overblown personnel matter,” but the legal battle over the firings plays out to this day as it becomes clear that the attorneys were fired for having insufficient partisan zeal. Harriet Miers, the White House counsel, and Karl Rove are cited for contempt of Congress when they refuse a summons by the House Judiciary Committee to discuss the firings.

David Iglesias, former U.S. attorney in New Mexico and one of the fired prosecutors: When I got the phone call, on Pearl Harbor Day, it came completely out of the blue. Mike Battle, the head of the executive office of U.S. attorneys, said very directly, Look, you know, we want to go a different way, and we’d like you to submit your resignation by the end of next month. I said, What’s going on? Mike said, I don’t know, I don’t want to know. All I know is that this came from on high.

I knew that U.S. attorneys were only asked to resign essentially for misconduct, and I knew I hadn’t committed any misconduct. I knew my office was doing well by the Justice Department’s internal metrics. Logically that only left one possibility, which was politics.

I started thinking back to, well, Who within the party have I angered? The first thing that came to mind were two very inappropriate phone calls that I got in October 2006. One was from Congresswoman Heather Wilson. She called me directly on my cell phone and was snooping around, asking about sealed indictments. I was very vague in my answer and basically gave her reasons why U.S. attorneys can seal something. She seemed very unsatisfied.

Approximately two weeks later, I got a second phone call. This one was from Pete Domenici, who had been my sponsoring senator, and he called me at home. He started asking about the political-corruption cases [against Democrats] and matters he’d been reading about in the local media. He just came out and asked me point-blank, Are these going to get filed prior to November?, and I was absolutely stunned by that question. I tried to be responsive without violating any regulations or rules myself, and I told him I didn’t think so. At which point he said, I’m very sorry to hear that, and then he hung up the phone. I had a very sick sense in my stomach.

December 20, 2006 In a news conference Bush states that the year ahead will “require difficult choices and additional sacrifices.” Noting that it is important to maintain economic growth, he adds, “I encourage you all to go shopping more.”

January 10, 2007 Bush announces a surge in American troop strength in Iraq, from 130,000 to more than 150,000. The aim is to suppress the level of violence and overt sectarian strife and thus to provide a breathing spell in which the Iraqi government can make progress toward a set of stated political benchmarks. By fall the level of violence has indeed subsided—observers disagree on why—though many of the political benchmarks remain unmet.

Anthony Cordesman, national-security analyst and former official at the Defense and State Departments: We can all argue over the semantics of the word “surge,” and it is fair to say that some goals were not met. We didn’t come close to providing additional civilian-aid workers that were called for in the original plan. And often it took much longer to achieve the effects than people had planned. But the fact was that this was a broad political, military, and economic strategy, which was executed on many different levels. And credit has to go to General Petraeus, General Odierno, and Ambassador Crocker for taking what often were ideas, very loosely defined, and policies which were very broadly stated, and transforming them into a remarkably effective real-world effort.

It’s important to note that we made even more mistakes in Afghanistan than we did in Iraq. We were far slower to react, but in both cases we were unprepared for stability operations; we had totally unrealistic goals for nation building; at a political level we were in a state of denial about the seriousness of popular anger and resistance, about the rise of the insurgency, about the need for host-country support and forces; and we had a singularly unfortunate combination of a secretary of defense and a vice president who tried to win through ideology rather than realism and a secretary of state who essentially stood aside from many of the issues involved. And in fairness, rather than blame subordinates, you had a president who basically took until late 2006 to understand how much trouble he was in in Iraq and seems to have taken till late 2008 to understand how much trouble he was in in Afghanistan.

June 28, 2007 Bush’s immigration plan, a bipartisan effort that represents the most ambitious attempt to overhaul U.S. immigration policy in a generation, goes down to defeat in the Senate. The most controversial element is a provision that would permit an estimated 12 million illegal aliens already in the United States to take steps to legalize their status, with citizenship an eventual possibility. The provision enrages many in Bush’s own party, who call it amnesty and see it as a security threat.

Mark McKinnon, chief campaign media adviser to George W. Bush: My suspicion would be that that is a real regret [of the president’s]. It’s an issue we talked about early on in the 2000 campaign, and he was told by advisers that it was the third rail, or maybe the fourth rail—Social Security’s the third rail. But it’s also an issue that attracted people like me to him. Centrist types, independent types in Texas were attracted to him because he was a Republican who was talking about a limited yet appropriate role for government on issues like education and immigration. Immigration was one of his most heartfelt issues.

Dan Bartlett, White House communications director and later counselor to the president: The repercussions of that decision by our party are going to be felt for decades. As I sit here in Austin, I see the demographic changes that are happening in our state—in less than 20 years, Hispanics are going to be a majority of the population. And we are on the wrong side of that issue. It’s that simple.

January 1, 2008 As the new year begins, the United States is faced with an accelerating economic crisis. The price of oil will soon top $100 a barrel for the first time in history, driven by rising demand in the developed world and in India and China—and by the prospect of continuing Middle Eastern uncertainties. Although the fact will not be established for another year, when the National Bureau of Economic Research issues its December 2008 report, the U.S. economy has entered a recession.

The catalyzing event is the collapse of the subprime-mortgage market. During the past 12 months there have been nearly 1.3 million foreclosure filings. The losses flow upward. In March, J. P. Morgan Chase and the Federal Reserve Bank of New York provide massive emergency loans to prevent a default by Bear Stearns, one of the nation’s largest financial institutions; Bear Stearns is ultimately absorbed by J. P. Morgan. A cascade of economic woe ensues.

Some regulators had been warning for years about the threat posed by bad mortgages and the housing market, but steps to tighten the rules were successfully opposed by lenders.

Robert Shiller, Yale economist who warned of a housing bubble: The Bush strategists were aware of the public enthusiasm for housing, and they dealt with it brilliantly in the 2004 election by making the theme of the campaign the ownership society. Part of the ownership society seemed to be that the government would encourage home ownership and, therefore, boost the market. And so Bush was playing along with the bubble in some subtle sense. I don’t mean to accuse him of any—I think it probably sounded right to him, and the political strategists knew what was a good winning combination.

I don’t think that he was in any mode to entertain the possibility that this was a bubble. Why should he do that? Attention wasn’t even focused on this. If you go back to 2004, most people were just—they thought that we had discovered a law of nature: that housing, because of the fixity of land and the growing economy and the greater prosperity, that it’s inevitable that this would be a great investment. It was taken for granted.

John C. Dugan, comptroller of the currency A lot of mortgages got made to people who could not afford them and on terms that would get progressively worse over time, and that created the seeds of an even bigger problem. As the whole market became even more dependent on house-price appreciation, when house prices flattened and then started to decline the whole situation began to unravel. The question you have to ask yourself: Why did credit become so easy? Why would lenders make mortgages that became increasingly less likely to be repaid?

Part of the answer is that there was a huge chunk of the mortgage market that was not regulated to any significant extent. The overwhelming proportion of subprime loans were being done in entities that were not banks and not regulated as banks—I’m talking here about mortgage brokers and non-bank mortgage lenders that could originate these mortgages and then sell them to Wall Street firms that could package them into new kinds of mortgage securities, which arguably could take into account the lower credit risks and still be salable to investors worldwide.

Unfortunately, the theory was not in accord with the reality. Although they thought they had accurately gauged that risk, they too were in fact depending—when you get to the bottom of it—on house prices continuing to go up and up and up. And they did not.

Henry Paulson, secretary of the Treasury: I easily could imagine and expected there to be financial turmoil. But the extent of it, O.K., I was naïve in terms of—I knew a lot about regulation but not nearly as much as I needed to know, and I knew very little about regulatory powers and authorities. I just had not gone into it in that kind of detail. This’ll be the longest we’ve gone in recent history without there being turmoil, and given all the innovation in the private pools of capital and the over-the-counter derivatives and the excesses around the world, we figured that when there was turmoil, and these things were tested for the first time by stress, it would be more significant than anything else.

I said at the time, I have a concern that every rally we’re going to have in the financial markets will be a false rally until we break the back of the price correction in real estate. And these things are never over until you have a couple of institutions go that surprise everyone. Bear Stearns can hardly be a shock.

But having said that, it’s one thing to see it intellectually and it’s another to see where we are.

June 12, 2008 The Supreme Court in Boumediene v. Bush strikes down a provision in the Military Commissions Act, ruling that the denial of the right to petition for habeas corpus is unconstitutional.

July 9, 2008 The annual summit of the G-8 nations, held in Japan, concludes with a tepid pledge to cut greenhouse gases by 50 percent by the year 2050. It is the last G-8 summit that Bush attends. He bids farewell to the other heads of state with the words “Good-bye from the world’s greatest polluter.”

July 30, 2008 As the subprime-mortgage crisis continues to ripple through the economy, Bush signs emergency legislation to rescue the mortgage giants Fannie Mae and Freddie Mac. A Wall Street bailout will follow in October. The budget deficit for the year is expected to exceed $1 trillion.

Ari Fleischer, Bush’s first White House press secretary: [The housing bubble] was not on my radar screen. Now, after everything broke with Fannie and Freddie, I guess the White House released some document that, if I remember it, said the president 17 times cited Fannie and Freddie problems going back to the initial budget that we submitted in 2001. So the wonks were onto it, but in the post-9/11 world and then the Iraq-war world, all the visible focus, all the news, was on other issues. I think it just got drowned out and it didn’t get met with any sense of urgency from people in both parties.

August 8, 2008 Russia invades the Republic of Georgia. Bush says in a Rose Garden appearance that the United States “stands with” Georgia. Bush makes his comments during a brief stop in Washington between a trip to Beijing for the Olympics and a vacation at his ranch in Crawford. Since taking office Bush has spent more than 450 days at the Crawford ranch and more than 450 days at Camp David. During the last six months of his presidency, Bush is largely absent from public view, even as the economic crisis continues to build.

September 1, 2008 Republicans meet in St. Paul to nominate John McCain as their presidential candidate; with an approval rating in the polls hovering below 30 percent, Bush becomes the first sitting president since Lyndon Johnson not to appear at his own party’s nominating convention. (He had been scheduled to attend, but his appearance was canceled when a hurricane once again threatened the Gulf Coast.) The president travels to Gettysburg for a tour of the battlefield, accompanied by his wife, Laura, and a number of former aides—Alberto Gonzales, Karl Rove, Karen Hughes, and Harriet Miers. Among the guides are Gabor Boritt, a Lincoln scholar, and his son Jake Boritt, a filmmaker.

Jake Boritt, filmmaker and Gettysburg tour guide: We’re standing in front of the Virginia monument, which is more or less where Robert E. Lee ordered Pickett’s Charge from. When Lee invaded the North, his hope was that he could get far enough in, win a great battle, demoralize the Northern will to fight, and then there would be pressure on Lincoln to stop the war. Everybody in the North was terrified. Lincoln was not. He was looking at it as an opportunity, because finally Lee was going to be off his home turf in Virginia. Lincoln was actually excited at the possibility that the Confederate Army was invading Pennsylvania. And Bush said, Well, did the president say, “Bring it on”?

We do this one thing where you line people up shoulder to shoulder to show how the Confederates moved across a mile-long field to attack the Union line. So we lined them up—it was roughly 20 people, all mostly important White House people, and you’re pretending you’re shooting at ‘em with cannon shells as you pretend to take them out.

October 3, 2008 After much wrangling, and with a sense of urgency and dismay, Congress passes the Emergency Economic Stabilization Act, which authorizes the secretary of the Treasury to spend $700 billion to shore up U.S. financial institutions and otherwise address the fallout from the subprime-mortgage crisis.

Eric Cantor, G.O.P. congressman from Virginia and Republican chief deputy whip: It was almost as if panic had struck the capital. When the news came out about how dire the situation was, not only for the U.S. capital markets but for the global financial scene, [there was real worry that] all the sort of nightmare scenarios that one learned in school could actually be occurring. I was a little bit concerned, though, about the haste with which the administration was moving, given the enormity of the package that they were proposing to bring to the Hill in a matter of days. The amount of money was so gargantuan—more than what Social Security spends in a year. It was really unheard of. In hindsight I can see now that the panic was such that they felt they needed to do whatever was possible to make sure that we did not have a repeat of the Great Depression. I felt like the weight of the world and the weight of the national economy and the well-being of every family across this country was resting on our shoulders. The level of anxiety and panic found on the face of Secretary Paulson, [Federal Reserve Board] Chairman [Ben] Bernanke—you could see in person that it was severe. I do not think that anyone foresaw the level of seriousness of the problem we were faced with.

November 4, 2008 Barack Obama is elected president in an electoral-college landslide. The Republicans lose at least seven seats in the Senate and a score in the House, dashing Karl Rove’s hopes of a permanent Republican majority. As the administration prepares to leave office, it promulgates a raft of “midnight” orders to weaken environmental, health-care, and product-safety regulations. The unemployment rate is nearly 7 percent and rising. Income inequality is at the highest level since the 1920s. As of a week before the election, the stock market had lost a third of its value over a period of six months.

Revisit the first draft of history with our Bush-administration archive, “Mission Unaccomplished.” Illustration by Risko.
Ed Gillespie, campaign strategist and later counselor to the president: Politics goes in cycles, and my old boss, [Mississippi governor] Haley Barbour, who was a mentor to me, has a saying that in politics nothing’s ever as good or as bad as it seems.

Dan Bartlett, White House communications director and later counselor to the president: At the end of the day I think the divisiveness of this presidency will fundamentally come down to one issue: Iraq. And Iraq only because, in my opinion, there weren’t weapons of mass destruction. I think the public’s tolerance for the difficulties we face would’ve been far different had it felt like the original threat had been proved true. That’s the fulcrum. Fundamentally, when the president gets to an approval rating of 27 percent, it’s this issue.

Lawrence Wilkerson, top aide and later chief of staff to Secretary of State Colin Powell: As my boss [Colin Powell] once said, Bush had a lot of .45-caliber instincts, cowboy instincts. Cheney knew exactly how to polish him and rub him. He knew exactly when to give him a memo or when to do this or when to do that and exactly the word choice to use to get him really excited.

Bob Graham, Democratic senator from Florida and chairman of the Senate Intelligence Committee: One of our difficulties now is getting the rest of the world to accept our assessment of the seriousness of an issue, because they say, You screwed it up so badly with Iraq, why would we believe that you’re any better today? And it’s a damn hard question to answer.

Meanwhile, the Taliban and al-Qaeda have relocated, have strengthened, have become a more nimble and a much more international organization. The threat is greater today than it was on September the 11th.

David Kuo, deputy director of the White House Office of Faith-Based and Community Initiatives: It’s kind of like the Tower of Babel. At a certain point in time, God smites hubris. You knew that right around the time people started saying there’s going to be a permanent Republican majority—that God kinda goes, No, I really don’t think so.

Matthew Dowd, Bush’s pollster and chief strategist for the 2004 presidential campaign: You know, the headline in his presidency will be missed opportunity. That is the headline, ultimately. It’s missed opportunity, missed opportunity.