Political Correctness is Torture
By Andrew BreitbartHere we go again. The latest poster conservative for political-correctness-run-amok in a country careening downhill on left-wing, Democratic cruise control is Republican congresswoman Virginia Foxx.
Mrs. Foxx's impropriety: The thought crime of arguing against "hate crime" laws by pointing out that Matthew Shepard - the tragic icon attached to the legislation - represents a salient argument against enacting them.
Mr. Shepard, the gay Wyoming teenager robbed and savagely beaten to death by drug-addled thugs in 1998, is the emotionally charged posthumous force behind the movement to pass hate crime laws. He got that way after a relentless, decadelong mainstream media, Madison Avenue and Hollywood propaganda campaign to make his death a symbol of just-beneath-the-surface sadistic intolerance toward homosexuals.
Three films, a documentary, a play and songs by Melissa Etheridge, Tori Amos and Elton John have made the gay-martyr case a high truth of pop culture. The thematically related "Boys Don't Cry" and "Brokeback Mountain" reinforced the narrative that gays like Mr. Shepard are regularly isolated for cruel and unusual attacks.
But the congresswoman is not buying the Hollywood hype. "The hate crimes bill was named for [Shepard], but it's really a hoax that continues to be used as an excuse for passing these bills," Mrs. Foxx said on the House floor last week. Immediately, Democrats sought out their unapologetic allies in the media to force Mrs. Foxx into a perfunctory, skin-saving apology.
"The term 'hoax' was a poor choice of words used in the discussion of the hate crimes bill," she said. "Referencing these media accounts may have been a mistake, but if so, it was a mistake based on what I believed were reliable accounts."
Even though she had the facts to make a strong case, Mrs. Foxx apologized. She realized that the PC media cabal had another sucker conservative in its cross-hairs. Yet apologies are never enough as the Democrat Media Complex trotted out Mr. Shepard's mother, Judy, to make sure that no one else can raise an objection to the controversial legislation.
Mrs. Foxx has been "apologizing for semantics, but not her sentiment, her insensitivity or her ignorance," Mrs. Shepard told MSNBC's Rachel Maddow. "Everyone knew Matthew's murder was a hate crime, but it couldn't be prosecuted as a hate crime. We couldn't call it a hate crime. Getting this bill passed in the House brings gay rights up to the level of equality."
Judy Shepard like other tragic symbols Cindy Sheehan, the Jersey Widows and Max Cleland are trotted out by Democrats to make their arguments not with facts and reason but with the threat that if you disagree with them, you will be publicly shamed as a "hater." This pathetic strategy works as Mrs. Foxx's instant apology illustrates.
While the basic facts of the Shepard case are accepted and the culprits are in prison for life, the motivation for the crime - as with most crimes - is not easily decipherable. But in 2004, ABC News stumbled upon a story that raised some doubt about the cut-and-dry narrative that's been relentlessly pushed by the identity-politics obsessed.
Elizabeth Vargas interviewed murderers Aaron McKinney and Russell Henderson along with the cast of characters involved with the case. Mrs. Vargas appeared on "The O'Reilly Factor" to summarize her story:
"The prosecutor who prosecuted these crimes says that he never believed it was a hate crime. He believes it was a drug crime. Aaron McKinney, according to Aaron McKinney himself and to several other witnesses, was coming down from a five-day methamphetamine binge. He freely admits he not only used methamphetamine but dealt them, sold them. Five days up with no sleep, strung out on drugs, desperate to buy more, desperate to rob somebody to get money to buy more drugs. This was the motive, according to Aaron McKinney and the other witnesses."
One needn't bring in medical experts to explain that a five-day drug binge is not good on the body, mind and soul. Meth-fueled violent crime is a sad cliche of modern American life, yet hate crime advocates who use Mr. Shepard as their ultimate weapon want to overlook the obvious and insist on arguing the unprovable. When the case that is used to make the case for hate crime law is so fundamentally weak, what does it say about the law's very premise?
No one will ever know exactly why Matthew Shepard was killed. It's too bad that most of his advocates are against the death penalty. Because McKinney and Henderson deserve a fate worse than life behind bars.
Mrs. Foxx joins me and gay journalist Andrew Sullivan as public figures who refuse to accept the Shepard mythology. We choose not to impugn Mr. Shepard's memory or grant his murderers committed a "hate crime," when it cannot be proved. The left will not accept this because it is built around divisive identity politics. It dismisses "E Pluribus Unum," America's formerly helpful marketing slogan, and promotes strategies that ensure the fault lines of ethnicity, gender and sexual orientation are exploitable for political gain.
On college campuses, in newsrooms and now in the highest corridors of power, with Barack Obama in the Oval Office, the politically correct left is wielding its weaponry with the confidence that it can take down any group, anyone or anything. The thought police are now officially in charge.
The real hate crime these days is the Orwellian intimidation wielded by the left against those that don't think the way they do. It's worse than waterboarding.
Blond on blonde: Mrs T’s unassailable legacy
In the course of researching this article I approached an intelligent 15 year-old girl. She had been born three years after Margaret Thatcher left office. She had never seen her in action. She had no personal memories of any of the great controversies of the Thatcher epoch. And, therefore, she struck me as a perfect source for an understanding of the full semiotic range of the words "Margaret Thatcher" in the minds of young people today. This schoolgirl had been taught by good left-liberal teachers. She had read the papers and listened all her life to the BBC, and she had the normal British teenager's range of cultural references. I tried a word-association test. "So what do you think," I asked her, "when I say the words 'Margaret Thatcher' "? She paused, and then she said: "Billy Elliott."
And there, my friends, you have the cultural war that continues to this day – 30 years after she came to power – over the legacy of Britain's first female prime minister. Not since Napoleon has a nation been so divided over the merits of a former leader. For millions of young people who have watched Billy Elliott, Thatcher is the evil, boss-eyed termagant whose disastrous economic philosophy was responsible for the break-up of ancient Hovis-ad mining communities, and whose awful blurtings of right-wing dogma inspired all that was basest in human nature. She was a semi-ludicrous mixture of Boudicca and Queen Victoria, who whipped up her folk to ecstasies of cretinous Brussels-bashing. She was the creator the Yuppies and Essex Man, and the spiritual godmother of all the red-braced spivs and champagne-guzzling wide boys who have done so much damage with their greed and their recklessness – and it is a measure of her totemic status that people manage to blame her for the credit crunch almost two decades after she left office.
You try going on the BBC's Question Time and announcing that you are a Thatcherite. You will see the audience scratching and raging and panting like flea-ridden gibbons because Thatcher is a boo-word in British politics, a shorthand for selfishness and me-first-ism, and devil-take-the-hindmost and grinding the faces of the poor. The Lib Dems recently shoved a leaflet through my door, and the worst they could say about Gordon Brown was that he had invited Margaret Thatcher to tea at Downing Street. So, for the benefit of all 15 year-olds who are brought up on the BBC and who have derived the impression from Billy Elliott that she was a brute who sent riot police to smash the miners' strike, it is time to spool back 30 years to 1979 – when I turned 15 myself – and remember what an amazing job she did.
I have somewhere a rather pretentious painting I did in 1975. It shows the white cliffs of Dover on a very drizzly day, as seen from the deck of an approaching Townsend Thorensen ferry. The caption is, "Welcome to Britain, home of the economic crisis." It is very hard to explain to young people the atmosphere of morbid self-pity that used to hang over Britain in the Seventies. British brands that had once been the envy of the world – machines whose manufacturers had out-engineered the Wehrmacht – had been reduced to laughing stocks, their reputations destroyed by a lethal combination of management inertia and union militancy. The country had so drifted from an understanding of free-market economics that Tony Benn actually tried to revive the motorbike industry with a sort of crazed commie collective at Meriden. There were endless strikes, and three-day weeks, and power cuts, and looming over it all was the Cold War – and the constant anxiety that we would somehow be embroiled in a conflict with the nasty, militaristic and totalitarian Soviet Union, a horrible place of gulags and lawless persecutions. Our food was ranked among the worst in Europe – by the British middle classes themselves.
Our children's teeth were ruined by a diet of Spangles, Curly-Wurlies and Tizer, and our weather was lousy. Mrs Thatcher set about changing virtually everything, except possibly the weather. Now, don't get me wrong. I was never one of those acnoid Tory boys who had semi-erotic dreams about Margaret Thatcher. She never visited me at night in her imperial-blue dress and bling and magnificent pineapple-coloured hair. I never imagined her leaning over me and parting her red lips to whisper about monetarism and taming union power. But, even as an apathetic and cynical teenager, I could see that she was doing some tough things, and the moment I came down most vehemently on her side was the Falklands conflict of 1982. So many people I knew seemed to think she was wrong, and bellicose. I remember my grandfather frequently saying that he was going to shoot her. You will still meet left-wing bores who say that she deliberately ignored the "Peruvian Peace Plan". And yet what she did was so clear and so right.
The Argentinian junta had taken by violence a British protectorate, in clear contravention both of international law and the wishes of the islanders. It took fantastic balls to send the antiquated British Navy half-way round the world, and risk disaster on those desolate beaches and moors. It took nerves of steel to sink the Belgrano, and, frankly, I don't think there were any other Tory politicians who would have done it. She showed a streak of absolute ruthlessness in defence of British interests, and, as the Eighties went on, it was clear that she was broadly right about the economy as well. Together with Norman Tebbit, she did what Barbara Castle had tried and failed to do – to dethrone the union bosses and give British industry a chance.
By the time Arthur Scargill took the miners out on strike, I was firmly on her side. He was simply increasing the difficulties of a declining industry, and what the script of Billy Elliott will not tell you is that Scargill never held a proper ballot. By the end of the Eighties, she had cut taxes and the economy was roaring away; and it wasn't just that the country as a whole seemed to have recovered some of its confidence and standing in the world. Individuals were able to take control of their destiny in a new way. They were no longer completely beholden to local authorities for their housing: they could buy their own homes, and to this day, as any Tory canvasser will tell you, there are people across Britain who will always vote Tory in thanks for that freedom alone.
She gave people the confidence to buy shares, to start their own businesses, to move on and up in society – and there was more social mobility under Margaret Thatcher than there has been since. She was a liberator, and she gave the Labour party such an intellectual thrashing that they ended up changing their name. In some ways, the most significant political legacy of Margaret Thatcher is New Labour (now being abolished by Gordon Brown). Yes, she was provocative, and there are huge numbers of people who will never forgive her for saying that "there is no such thing as society. There are men and women, and there are families." It sounds frighteningly atomistic and strident, and does not seem to reflect the duty we all owe to each other.
But she believed she had to shatter the post-war consensus that the solution to every problem was always an expansion of the state. Indeed, she did not think much of the word consensus itself, since it was not only too Latinate for her taste but also because it probably masked a conspiracy by cowardly politicians to dodge the hard questions, and, if you look at the consensus that now exists around, say, academic selection, you can see that she is right.
Margaret Thatcher will always divide the British people, not least since we are ourselves divided. There is a part of us that will always dislike the acquisitive, appetitive instincts she seemed to espouse, and yet we also recognise that they are essential for economic success. More than any leader since Churchill, she said thought-provoking things about the relationship between the state and the individual. Some of them were unpalatable, some of them were exaggerated. But much of what she said was necessary, and it took a woman to say it.
What Jack Kemp Accomplished
What Jack Kemp Accomplished
The congressman from Buffalo changed his party and the country for the better.
by Fred Barnes
Jack Kemp was a speaker in search of an audience. But unlike most of Washington, including the city's journalists, Kemp had something important to say. He may have been embarrassed about his academic background--he was a physical education major at Occidental College in California--but the truth was he knew more about economics and what worked in the real world to create growth and jobs than almost anyone else in town.
Absent this, Kemp might have been just another garrulous, likeable Republican on Capitol Hill. But because he knew what he was talking about and events proved him to be correct, he was the most influential House member of the past half-century. Was there anyone in Congress who achieved more? I can't think of anyone.
Here are the four things I give Kemp credit for:
1) Popularizing tax cuts as the best and most reliable way to spur economic growth and create jobs.
2) Persuading Ronald Reagan to adopt a 30 percent reduction in individual income tax rates initially as the main domestic message of his campaign in 1980 and then as the top priority of his presidency.
3) Transforming Republicans from an effete country-club party into a broad-based party with appeal to middle and working class voters.
4) Making, along with Reagan, Republicans the optimistic, positive party of ideas.
That would be an impressive set of accomplishments for a president or a powerful senator. But Kemp managed this as a young House member in the 1970s who never rose to an official position of leadership in Congress. He did it by the power of relentless persuasion and the force of an overpowering personality.
Kemp, a California native, was elected from Buffalo, New York, after he retired from professional football as the quarterback of the Buffalo Bills. The year was 1970, not a particularly good one for Republicans.
He taught himself economics, mainly through reading, and became the champion of tax cuts. (Kemp also mastered the difficult subjects of monetary policy and international economics.) He collected a contentious group of free market economists, so-called supply siders, as advisers and began a crusade to slash tax rates. He was tireless. In 1978, then-Republican national chairman Bill Brock took up the cause, thanks to Kemp, and urged Republican candidates to campaign on the 30 percent tax cut. Many did and Republicans picked up House and Senate seats.
Kemp would have been the logical Republican presidential nominee in 1980, except for one thing. Ronald Reagan, the favorite of the conservative movement, was still around. So Kemp deferred to Reagan. At the GOP convention, his supporters sought to get Reagan to pick Kemp as his vice presidential running mate. But Reagan chose George H.W. Bush, who eight years later defeated Kemp for the 1988 nomination.
By then, Kemp's most influential years were behind him, though he was still active as a proselytizer for tax cuts and for a Republican party with a populist streak. And he remained an enormously popular figure, not just among Republicans and conservatives.
There was a reason for his enduring appeal: Kemp was a good-hearted man who put his philosophy and his cause above personal ambition. His overriding concern was for others and for America.
Kemp died on Saturday at 73. He leaves a large family and a wife, Joanne, who has been enormously influential in her own way, conducting a weekly Bible study in their home for more than 30 years and leading an untold number of people to faith in Jesus Christ as their Savior.
Goldman Sachs Foreshadowed UAW’s Chrysler Coup
Commentary by Kevin Hassett
May 4 (Bloomberg) -- I feel like I have seen this bad gangster movie before.
In the opening scene, a naive investor buys some bonds, explaining to his staff that they are a sound investment secured by hard assets. Even if the company goes under, the investor explains, bond investors stand to get about 80 percent of their money back.
The next day, a government official calls and offers to buy up the bonds at 33 cents on the dollar, while giving controlling interest in the company to the labor unions. The investor refuses. That night, a man shows up at his home.
“We’re not saying anything bad is going to happen to you,” the tough says, “but the big boss is going to be very disappointed in you if you don’t take the deal. By the way, how’s your little girl? Is she still going to school down on Federal Street?” The investor caves.
The evolution of the Chrysler LLC bankruptcy seemed almost as bad. The Obama administration brokered a deal that gave labor unions a 55 percent equity stake in Chrysler, putting their interests ahead of the secured interests of bondholders.
The bondholder response to the deal was positively creepy.
Politicians were probably offering them a worse deal than they could expect to get in bankruptcy court. Bondholders that have been participating in the government bailout program for banks -- and thus are especially susceptible to political pressure -- agreed to accept the deal. But many of the independent investors balked.
‘Financial Sacrifices’
The reasoning of the hold-outs was captured in a statement by OppenheimerFunds Inc., which said the government “unfairly asked our fund shareholders to make financial sacrifices greater than those being made by unsecured creditors.”
Stories circulated that the Treasury Department exerted extreme pressure behind the scenes when investors refused to take the deal. Public pressure was exerted as well.
President Barack Obama went to the podium to criticize the recalcitrant investors, and Democratic Representative John Dingell of Michigan pressed the threats even harder: “The rogue hedge funds that refused to agree to a fair offer to exchange debt for cash from the U.S. Treasury -- firms I label as the ‘vultures’ -- will now be dealt with accordingly in court,” Dingell said.
All the government stops were being pulled out to present the United Auto Workers with a sweetheart deal that, incredibly, gives its retiree health-care fund majority ownership of Chrysler.
Yes, those are the same workers who pushed the firm toward bankruptcy in the first place with their extraordinarily generous compensation packages. DaimlerChrysler AG’s average cost to employ a UAW worker in 2006, including benefits, was 1.7 times that of Japanese automakers, according to company estimates.
Expensive to Fire
Firing that worker is expensive, too. The 2007 collective- bargaining agreement required the automakers to pay up to $140,000 in severance to a worker whose position was eliminated and who agreed to leave with no additional benefits.
The spectacle should sicken any fair-minded citizen, especially since organized labor contributed about $68 million to Democrats in the last election cycle.
The sad truth is there is enough data on the government rescue efforts to indicate decisively that OppenheimerFund would have received a much better deal if it was politically well- connected. It’s an especially good idea to have connections in both parties.
For comparison’s sake, consider the treatment of Goldman Sachs Group Inc.
When American International Group Inc. crumbled, threatening Goldman Sachs with huge losses, the government stepped in and made the firm whole. It funneled a whopping $12.9 billion to Goldman Sachs through the AIG bail-out.
Part of Club
Might the government have been so generous because Henry Paulson, Treasury secretary under President George W. Bush, and Robert Rubin, an Obama adviser, are both former Goldman Sachs men?
Maybe it’s just a coincidence, but time after time, it is precisely the politically well-connected players who present so much systemic risk that the government needs to protect them at all costs.
Obama recently conceded to an interviewer that “the only thing less popular than putting money into banks is putting money into the auto industry.” With Democrats riding a winning streak, it’s clearly a political risk he is willing to take.
If this were a Hollywood production, a virtuous politician played by Tom Hanks or Jimmy Stewart would speak out against the bailouts and sweep the corruption out of Washington.
Sadly, in real life, it seems there is nobody in either party ready to stand up and fill that role.
(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He was an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election. The opinions expressed are his own.)
American History
American History Is Not What They Say
Americans have been warring with each other for more than a century over the contents of the American-history textbooks used in the nation's high schools and colleges. Nor is the reason far to seek. If, as seems to be the case, these textbooks encompass one hundred percent of the information that most high school and college graduates in this country will ever encounter on the subject of American history, the American-history wars would appear to be well worth fighting. For what Americans know and understand about the history of the society in which they live will determine the degree of their willingness to honor and preserve its ideals and traditions. More than that: it will determine what they regard as the ideals and traditions of their society. It will determine nothing less than the kind of society they will seek to strengthen and perpetuate.
Until very recently, however, the range of the conflict over American-history textbooks was narrow indeed. All sides tacitly agreed that the story of the United States was the triumphant tale of a people fervently devoted to peace, prosperity, and individual liberty; a people left utterly untempted by opportunities of the kind that had led so many other nations down the ignoble road of empire; a people who went to war only as a last resort and only when both individual liberty and Western civilization itself were imperiled and at stake. There had been injustices along the way, of course — the Native Americans had been grossly mistreated, as had the African Americans. Women had been denied the vote and even the right to own property. Yet these injustices had been corrected in time, and the formerly mistreated groups had been integrated into full citizenship and full participation in the liberty, prosperity, and peace that were the birthright of every American — the very same liberty, prosperity, and peace that had made America itself a beacon of hope to the entire world.
So the consensus view of American history has long had it, at any rate. And so almost all the textbooks involved in the American-history wars waged before the 1980s had it, too. The only question at issue back then, really, was whether any given textbook gave one or another of the various formerly aggrieved groups what was felt to be its proper due. Was the suffering of the Native Americans (or the African Americans or the women) detailed at sufficient length? The many contributions the African Americans (or the women or the Native Americans) had made to American culture — contributions without which American culture would simply not be the same — were these detailed sufficiently? The nobility of the female (or the Native American or the African American) leaders who helped bring about recognition of their people's rights — was this sufficiently stressed?
Then, a little over a quarter-century ago, the terms of the debate changed — radically. One might say the opening salvo in the new American-history wars was fired by Howard Zinn, in the form of a textbook entitled A People's History of the United States. First published in 1980, this volume is still in print, was reissued in a revised, updated, "20th Anniversary Edition" in the year 2000, and has become one of the most widely influential college-level textbooks on American history currently in use in this country. Today, Zinn faces intensified competition, however, not only from peddlers of the traditional, America-as-pure-and-virtuous-beacon-of-liberty-prosperity-and-peace version of our past, but also from a number of other writers who have, in varying degree, adopted the rather different view of American history that Zinn himself promotes.
This alternative vision sees America's past as a series of betrayals by political leaders of all major parties, in which the liberal ideals on which this country was founded have been gradually abandoned and replaced by precisely the sorts of illiberal ideals that America officially deplores. In effect, say Howard Zinn and a growing chorus of others, we have become the people our founding fathers warned us (and tried to protect us) against. And what may be the most significant fact about this alternative or "revisionist" view of American history is the remarkably hospitable reception it has enjoyed both from the general public and from the selfsame educational establishment that only a few short years ago was assiduously teaching students something else entirely.
How can we account for this? Why, suddenly, is there a substantial market for a version of American history quite unlike anything most Americans had ever encountered? Why are the combatants in the current American-history wars so different from each other, so different in their fundamental assumptions about America? Why are the current wars so much bloodier (figuratively speaking), so much more intense, than ever before?
It seems to me that the correct answer to this question is complex and multifaceted. It seems to me that several different forces are at work here simultaneously, combining synergistically to produce the "single" effect we call "our current American-history wars." One of these forces is generational change. It was in the 1980s that college and university history departments came to be dominated by a new generation of historians — historians who had earned their PhDs in the 1960s and '70s and who had been strongly influenced in their thinking about American history by a group of "revisionist" historians, the so-called "New Left Historians," whose books were widely popular and widely controversial at that time. These "New Left Historians" — William Appleman Williams, Gabriel Kolko, Gar Alperovitz, and a number of others — had in turn been strongly influenced by an earlier group of "revisionists" — the so-called "New Historians" or "Progressive Historians" — whose most prominent figures included Charles A. Beard and Harry Elmer Barnes.
Another of the forces involved in the recent heating up of the perennial American-history wars was the brilliant critical and popular success, during the 1970s and early 1980s, of the first three books in Gore Vidal's six-volume[1] "American Chronicle" series of historical novels about the United States. Burr (1973), 1876 (1976), and Lincoln (1984) were enormous successes. They proved beyond any doubt that the public would not rise up in indignation and smite any author who dared to question the motives and the wisdom of even the most venerated American presidents. They proved that there was, in fact, a substantial market for just such skepticism about the glorious American past.
Partisans of the America-as-pure-and-virtuous-beacon-of-liberty-prosperity-and-peace mythology attacked Vidal's novels, of course, but Vidal made it quite clear in a couple of detailed replies to his critics (first published in the New York Review of Books) that he knew at least as much about the history of the periods he depicted in his novels as any of them did — PhD's and members of the professoriate though they might be.
Still, doubts lingered in more than a few minds. First there was the problem of Vidal's well-known political views and his high-profile activities as a polemicist and proselytizer for those views. Could a man so opinionated be counted upon to provide an objective account of America's past? Second, there was the problem of historical fiction. Was it really advisable to take any work of fiction seriously as a source of information about history? Fiction was … well, you know — fiction.
It was "made up." How could we rely on any information we picked up about the events of the past from reading such a work?
To answer these questions properly, it will be necessary to take a brief but closely focused look at the discipline of history itself. How does a historian go about determining the truth as regards the past? Is the historian's methodology in any way similar to the fiction writer's? Is the work the historian writes in any way similar to a novel? Is it really appropriate to dismiss historical fiction as "made up," while looking to the writings of historians for an objective assessment of past events?
And so we begin…
Politics this week
Politics this week
Swine flu spread from Mexico, where it was reported to have claimed more than 170 lives, to at least ten other countries, prompting the World Health Organisation to declare a pandemic imminent. Mexican authorities ordered a halt to all non-essential activities for five days from May 1st. Some airlines halted flights to the country and some governments urged their citizens not to travel to it. See article
The incumbent president, Rafael Correa, won Ecuador’s presidential election, with 52% of the vote compared with 28% for Lucio Gutiérrez, his nearest rival. His party also won a legislative majority. Mr Correa has hugely increased social spending but now faces lower oil prices and falling remittances from some 2m Ecuadoreans abroad.
Colombia’s intelligence agency sacked 11 of its officials over their alleged involvement in illegal eavesdropping on judges, journalists and politicians, bringing to 33 the number fired because of the scandal since February.
Happy 100 days, Mr President
As Barack Obama marked 100 days in the White House, his job approval ratings, at 68%, were higher than for any other recent president at this stage. The latest New York Times/CBS poll also found that 72% of Americans were optimistic about the next four years with Mr Obama as president. See article
Mr Obama got a further boost when Senator Arlen Specter of Pennsylvania announced that he would switch parties and run for re-election as a Democrat in 2010. Assuming he wins, which is likely, his defection will increase to 59 the number of seats the Democrats control in the Senate. They could reach the magic filibuster-proof 60 if Al Franken is ever officially declared the winner of last November’s Minnesota race. See article
The Supreme Court ruled that the government could threaten broadcasters with fines over even a single swear-word on live television. It refused to say whether a new ruling by the Federal Communications Commission, that “fleeting expletives” are indecent, was an affront to the constitutional guarantee of free speech.
Arguments continued over the Obama administration’s release of classified memos detailing “enhanced interrogation” techniques. Last year’s Republican presidential candidate, John McCain, said he did not think it necessary to release further documents purporting to show the effectiveness of such methods in gleaning information.
The White House apologised after a presidential jet accompanied by a fighter aircraft flew low and close to tall buildings, causing consternation in lower Manhattan, with some workers fleeing their offices. The jet was being filmed for a promotional video.
Form an orderly queue, please
The Social Democrats triumphed in Iceland’s election, so Johanna Sigurdardottir will continue as prime minister. She promised to seek to join the European Union quickly, but her coalition partner is against. There may be a referendum before any application is made. See article
Albania formally applied to join the European Union too, though it may take years to get in. Elsewhere in the western Balkans, applications from Macedonia and Montenegro are pending, and Croatia’s membership talks have stalled.
The candidate of Vladimir Putin’s ruling party easily won election as mayor of Sochi, in Russia. The election was closely watched because the Kremlin promised it would be fair, and because Sochi is holding the 2014 winter Olympics. Opponents said it was rigged.
The European Court of Justice upheld a decision by a court in Cyprus to allow a Greek-Cypriot who fled after the Turkish occupation of northern Cyprus in 1974 to reclaim land that was later sold to a British couple. Turkish-Cypriots said the decision would harden opposition to plans to reunite the island.
Nine Turkish soldiers were killed in a landmine explosion in south-eastern Turkey. The army blamed Kurdish terrorists from the PKK rebel group.
So near, so far
South Africa’s ruling African National Congress won just under 66% of the vote in a general election. When the new parliament meets on May 6th, it is sure to elect the ANC’s leader, Jacob Zuma, as the country’s president. But by narrowly failing to win two-thirds of the seats, it will not be able on its own to change the constitution. See article
Three car bombs exploded in quick succession in Iraq’s capital, Baghdad, on April 29th, killing at least 41 people and wounding a further 70 or so.
The Sudanese government sentenced 82 men to death for their alleged involvement in an attack a year ago on the capital, Khartoum, by the Justice and Equality Movement, a Darfur rebel group. Human-rights organisations argue that their trials were grossly unfair.
Back to battle
After fierce criticism from senior American officials of its “abdication” to the Taliban in parts of the country, Pakistan’s army attacked militants in the North-West Frontier Province (NWFP). It accused the Taliban of breaking an agreement reached in February under which sharia law would be adopted in large parts of NWFP’s Malakand division in return for their laying down their arms. See article
Sri Lanka’s army defied calls from foreign governments for a humanitarian pause in its campaign against Tamil Tiger rebels. It dismissed as a ploy a unilateral ceasefire called by the rebel Tamil Tigers, and continued its advance into the last few miles of Tiger-controlled territory. The United Nations estimated that 50,000 civilians remained trapped with the Tigers. See article
North Korea, rejecting appeals to rejoin six-party talks on its nuclear programme, said that it was once again reprocessing spent fuel rods at its nuclear plant at Yongbyon. It threatened to carry out nuclear and missile tests unless the United Nations apologised for the Security Council’s criticism of its recent rocket launch.
Taiwan said it would attend the UN’s World Health Assembly in May, signalling China’s agreement to its participation for the first time since it lost its UN seat to China in 1971. The breakthrough followed talks in China at which further steps were taken to promote commercial ties. See article
Feeling a bit better?
Global health
Feeling a bit better?
From Economist.com
Despite appearing less severe, swine flu could still pose a grave danger to the world
“THERE is evidence that we are going downward.” That was the hopeful message conveyed on Sunday May 3rd by Jose Angel Cordova, Mexico’s health minister, about the danger posed by the outbreak of swine flu that has spread around the world in recent days. If he is right, it would certainly come as a relief to anxious governments and worried populations everywhere.
The A/H1N1 virus, a previously unknown bug comprised of avian, swine and human influenza viruses, has been spreading rapidly from the outbreak’s epicentre in Mexico. On Sunday the World Health Organisation (WHO) reported that Mexico had over 500 confirmed cases of human infection, including 19 deaths. Across the border 226 cases have been confirmed in the United States, including a death in Texas of a recently arrived Mexican; Canada has confirmed 85 moderate cases. Dozens of other non-lethal cases have now been confirmed in 18 countries. The virus has been detected across Europe, and more cases have popped up as far afield as New Zealand, Hong Kong and South Korea.
The spread, though not (yet) the lethality, of this outbreak has been so rapid that the WHO has already raised its pandemic alert level from three to five on a scale of that goes to six. If evidence surfaces of an independent cluster of self-sustaining cases in a region outside the Americas (one not dependent on travellers from Mexico for its perpetuation), the WHO will raise the warning to the highest level, signalling a global pandemic. The earlier scare over avian flu arising from outbreaks in Asia never made it past a three on this scale, chiefly because that bug is not able to hop from person to person effectively.
In contrast, this new swine flu not only jumps easily among humans, but also has now demonstrated the worrying ability to jump back into pigs too. On Sunday Canadian officials confirmed that a farm worker in Alberta who had recently returned from Mexico appears to have infected pigs on an industrial farm in that province with A/H1N1. The pigs and workers on that farm have been cordoned off for observation, as it is theoretically possible that the bug will mutate yet again while in the swine and return to humans in a more dangerous form.
Given all this and the accompanying media frenzy, it is perhaps not surprising that there has been overreaction in some quarters—and, rather cruelly, a backlash against Mexico itself. Egypt declared that it would slaughter all domestic pigs, a move which angered the country’s Coptic Christians who raise most of that swine; when they protested, the authorities pelted them with tear gas. Russia and China imposed bans on imports of North American pork. This was roundly denounced by both health experts, who have noisily insisted that eating cooked pork poses no health risk whatsoever, and trade experts, who argue that the ban may violate international accords.
The overreaction extends to an unfair vilification of Mexico, which in fact has handled this outbreak in a laudably transparent and competent manner. In America, some commentators blamed Mexican illegal immigrants for the outbreak and demanded the closing of the border. Though the WHO has made clear that travel bans will not be effective in containing this virus, a number of countries have curtailed flights from Mexico and singled out Mexican travellers for special attention or quarantine upon arrival. So extreme has been the reported harassment in China that Mexican diplomats have lodged formal protests with the authorities there.
It is not surprising then that Mexican officials are desperate to show that they have the crisis under control. Mr Cordova claims that the outbreak in his country is “in its declining phase” as fewer worrisome new cases make it to hospital, suggesting that the worst has passed. On Sunday health officials in America, the country hardest hit after Mexico, also seemed to sing a similar tune. Richard Besser, the acting director of Centres for Disease Control, reassured Americans that his agency “is seeing encouraging signs that this virus so far is not looking more severe than a strain that we would see in seasonal flu.”
Alas, such proclamations, however reassuring, may well prove premature. It is far too early to say whether this new virus is really going into abatement. The optimists point out that it has proved relatively mild outside Mexico thus far. Even if that remains the case for weeks or months, and it is too early to draw that conclusion, history suggests that is no reason for complacency. The initial outbreak of Spanish flu in 1918 was mild, but it returned in lethal form months later, killing many millions. Margaret Chan, the WHO’s boss, reined in the optimists this week, observing wisely that “it may come back…the world should prepare for it.”
Firms Face Tighter Tax Rules
Firms Face Tighter Tax Rules
Obama Plan Aims to Limit Use of Offshore Havens by Multinationals and the Wealthy
JOHN D. MCKINNONJESSE DRUCKER
WASHINGTON -- The Obama administration is rolling out details Monday of what aides are calling a far-reaching crackdown on offshore tax avoidance, targeting many U.S.-based multinational corporations and wealthy individuals.
President Barack Obama will flesh out a proposal included in his February budget blueprint seeking to curb the practice of parking foreign earnings in offshore tax havens indefinitely. By some estimates, $700 billion or more in U.S. corporate earnings have accumulated in overseas accounts in recent years.
![[Barack Obama]](http://s.wsj.net/public/resources/images/HC-GL648_Obama_BV_20090401111900.gif)
Barack Obama
The plan to be announced Monday will go further. It aims to change the legal treatment of offshore subsidiaries and structures that companies have used to avoid not only U.S. taxes, but taxes in other developed countries as well.
In addition, the administration will strive to tighten rules that have encouraged thousands of Americans to open offshore bank accounts in an effort to duck U.S. taxes. The plan would increase information reporting and tax withholding as well as penalties, and make it harder for foreign account-holders to win cases in court. The administration promised new enforcement tools to crack down on tax-haven abuse.
"What we really have is a system that is in many ways broken," a senior administration official said Sunday, one that "allows people to play games...to almost completely avoid paying taxes on active foreign earnings."
The sweep of the administration's plan took some tax experts by surprise, and foreshadows potential fights with big businesses later this year over some of their most cherished breaks, particularly as Congress looks for revenue to pay for new initiatives.
"There absolutely will be" opposition from business, particularly if the administration doesn't allow a suitable adjustment period, said Phil West, a lawyer with Steptoe & Johnson LLP, who was international tax counsel for the Treasury Department under President Bill Clinton.
The president's announcement comes as he prepares to release a more detailed budget blueprint later this week. And the high-level attacks on big business follow a series of White House broadsides on corporate practices. Mr. Obama riled Wall Street last week by crafting a bankruptcy deal for Chrysler LLC that favored the United Auto Workers union over a series of lenders.
White House officials said the latest proposals simply follow through on Mr. Obama's frequent criticism that current U.S. tax rules encourage multinationals to move jobs overseas. The new tax plan also aims to increase incentives for job creation in the U.S., they said, noting that some of the money raised would be used to cover the cost of extending a soon-to-expire federal tax credit for research costs.
Many of Mr. Obama's proposals will require congressional approval. And while Democrats control both houses of Congress, many members of his own party have expressed reluctance about raising taxes, so prospects for the proposals are uncertain, even though none would take effect until 2011.
A senior Republican aide termed the proposals a "revenue grab," predicting they could end up driving more corporate operations overseas. Some or all of the changes could become fodder for broader tax reform next year.
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"If rules are changed on tax deferral and we are taxed in the U.S. on non-U.S. profit, this significant additional U.S. tax cost would adversely impact our ability to invest and grow our business in the U.S....and to compete against our foreign competitors who are not subject to this U.S. tax," said John Earnhardt, a Cisco Systems Inc. spokesman.
The president's tax announcement, to be made with Treasury Secretary Timothy Geithner, is part of an administration plan to raise as much as $210 billion in extra tax revenue over the next decade, in an effort to trim budget deficits and pay for job-creation incentives and other programs.
The plan takes aim at a range of financial practices that have combined to erode the U.S. tax base in recent decades. As money has become more readily transferable -- and aggressive tax planning more widespread -- it has become easier for companies and individuals to take advantage of low taxes as well as lack of transparency in many offshore havens.
In one big change, the administration is aiming to curb a practice commonly known as "deferral," which U.S. multinationals use to shave their tax bills on their overseas operations.
Under current law, U.S. companies can defer taxes indefinitely on the many of the profits they say they have earned overseas until they "repatriate" that money back to the U.S. The administration seeks to sharply limit the tax deductions that companies taking advantage of deferral can take.
Still, the proposal is far less dramatic than what many companies had feared: a complete repeal of the deferral regime.
The proposal to be announced Monday also would clamp down on some other overseas tax-avoidance techniques that are widely used by U.S. multinationals.
The Obama administration wants to overhaul what it describes as a much-abused set of regulations known as the "check-the-box" rules. These give companies great latitude in deciding where exactly their subsidiaries should be taxed. Those rules have encouraged companies to take further advantage of low-tax haven countries with their offshore subsidiaries.
The administration also wants to toughen rules governing the tax credits that the U.S. grants companies to offset taxes they pay to foreign governments. That system has become the subject of elaborate gaming, U.S. tax officials say.
Overall, the deferral proposal would raise about $60.1 billion through 2019, according to the administration's estimates. Unlike a similar proposal in the House, it wouldn't affect research deductions, a likely victory for some industries such as pharmaceuticals. The reform of check-the-box rules would raise about $86.5 billion through the same period. The changes in foreign-tax-credit rules would raise about $43 billion. The changes to crack down on individual bank accounts would raise $9 billion.
The current U.S. rules for corporations carry enormous benefits for companies. Unlike most deferred taxes, those stemming from foreign earnings don't cut into a company's bottom line as long as they are considered "permanently reinvested" overseas.
The result can have a huge impact on a company's bottom line. The pharmaceutical and technology industries are particular beneficiaries.
Economic Optimism Lifts Stocks
Economic Optimism Lifts Stocks
Stocks staged a broad-based gain on Monday as investors awaited the results of stress tests on major banks and placed fresh bets on an economic recovery.
Economic data Monday were better than expected. Construction spending rose for the first time in six months during March, while pending sales of existing homes rose 3.2% in March.
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At 10:59 a.m., the Dow Jones Industrial Average was higher by 168.1 points. The Nasdaq Composite Index jumped 1.6%. The S&P 500 gained 2%, helped by gains in all its sectors. Basic-materials stocks jumped 4.7% as a group, while energy and financial stocks rose more than 3%.
Consumer names also fared well, extending a recent streak in which they've benefited from investors' qualified optimism that the U.S. economy's slide is slowing. The S&P 500's consumer-discretionary sector was up 3.1%.
In a note to clients on Monday, Ed Yardeni, president of Yardeni Research, noted that the S&P's consumer-discretionary sector has registered the biggest profit surprise so far in the first-quarter earnings season, which is more than two-thirds over. The discretionary names that have reported profits so far have more than doubled analysts' expectations, helping the S&P as a whole to post a 9.5% positive surprise, on pace for its best showing since early 1988.
Mr. Yardeni said that the results of the earnings season so far have been encouraging, though like many investors, he's skeptical that major indexes can continue their torrid run in the near term.
"A range-bound market seems more likely than either a bear or a bull market for a while, though I see more upside than downside down the road," he wrote.
Stocks were generally stronger overseas, with markets in Asia climbing after data showed an improvement in Chinese manufacturing activity. Hong Kong's Hang Seng Index jumped 5.5%, reclaiming the 16,000-point level for the first time since mid-October. Markets in Japan were closed for a holiday. In Europe, stocks made modest gains. Markets in the U.K. were also closed for a holiday.
Airline stocks rose on hopes that travel demand would withstand the swine flu outbreak. The World Health Organization moved closer to declaring the new strain a global pandemic, but health officials cautioned that declaring a pandemic doesn't mean the disease, which has proven mild outside of Mexico, is deadly to most people or will sweep the entire globe.
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Bloomberg News/LandovRonald York Jr., center, works on the floor of the New York Stock Exchange in New York May 4.
Delta Air Lines shares were up more than 9%, Continental Airlines rose more than 14% and Southwest Airlines climbed 3.1%. Cruise-ship operator Carnival gained 7.8%.
Financial stocks were generally higher ahead of the expected release later this week of the results of the government's stress tests of key banks. Citigroup was up 4% and Bank of America advanced 5.9%. The banks were reported to be seeking to raise $10 billion in capital each. U.S. Bancorp and Wells Fargo rose 6.5% and 10.4%, respectively, after Warren Buffett said they are strong banks.
General Motors rose 2.2% as Fiat Chief Executive Sergio Marchionne stepped up his plan to acquire a majority stake in GM's German unit Opel. Mr. Marchionne is expected to meet senior German government officials in Berlin on Monday. Fiat shares surged in European trading.
The Next Housing Bust
The Next Housing Bust
Everyone knows how loose mortgage underwriting led to the go-go days of multitrillion-dollar subprime lending. What isn't well known is that a parallel subprime market has emerged over the past year -- all made possible by the Federal Housing Administration. This also won't end happily for taxpayers or the housing market.
Last year banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100% taxpayer guarantee. Many of these have the same characteristics as subprime loans: low downpayment requirements, high-risk borrowers, and in many cases shady mortgage originators. FHA now insures nearly one of every three new mortgages, up from 2% in 2006.
The financial results so far are not as dire as those created by the subprime frenzy of 2004-2007, but taxpayer losses are mounting on its $562 billion portfolio. According to Mortgage Bankers Association data, more than one in eight FHA loans is now delinquent -- nearly triple the rate on conventional, nonsubprime loan portfolios. Another 7.5% of recent FHA loans are in "serious delinquency," which means at least three months overdue.
The FHA is almost certainly going to need a taxpayer bailout in the months ahead. The only debate is how much it will cost. By law FHA must carry a 2% reserve (or a 50 to 1 leverage rate), and it is now 3% and falling. Some experts see bailout costs from $50 billion to $100 billion or more, depending on how long the recession lasts.
How did this happen? The FHA was created during the Depression to help moderate-income and first time homebuyers obtain a mortgage. However, as subprime lending took off, banks fled from the FHA and its business fell by almost 80%. Under the Bush Administration, the FHA then began a bizarre initiative to "regain its market share." And beginning in 2007, the Bush FHA, Congress, the homebuilders and Realtors teamed up to expand the agency's role.
The bill that passed last summer more than doubled the maximum loan amount that FHA can insure -- to $719,000 from $362,500 in high-priced markets. Congress evidently believes that a moderate-income buyer can afford a $700,000 house. This increase in the loan amount was supposed to boost the housing market as subprime crashed and demand for homes plummeted. But FHA's expansion has hardly arrested the housing market decline. The higher FHA loan ceiling was also supposed to be temporary, but this year Congress made it permanent.
Even more foolish has been the campaign to lower FHA downpayment requirements. When FHA opened in the 1930s, the downpayment minimum was 20%; it fell to 10% in the 1960s, and then 3% in 1978. Last year the Senate wisely insisted on raising the downpayment to 3.5%, but that is still far too low to reduce delinquencies in a falling market.
Because FHA also allows borrowers to finance closing costs and other fees as part of the mortgage, the purchaser's equity can be very close to zero. With even a small drop in prices, many homeowners soon have mortgages larger than their home's value -- which is one reason FHA's defaults are rising. Every study shows that by far the best way to reduce defaults and foreclosures is to increase downpayments. Banks know this and have returned to a 10% minimum downpayment on their non-FHA loans.
In a rational world, Congress and the White House would tighten FHA underwriting standards, in particular by eliminating the 100% guarantee. That guarantee means banks and mortgage lenders have no skin in the game; lenders collect the 2% to 3% origination fees on as many FHA loans as they can push out the door regardless of whether the borrower has a likelihood of repaying the mortgage. The Washington Post reported in March a near-tripling in the past year in the number of loans in which a borrower failed to make more than a single payment. One Florida bank, Great Country Mortgage of Coral Gables, had a 64% default rate on its FHA properties.
The Veterans Affairs housing program has a default rate about half that of FHA loans, mainly because the VA provides only a 50% maximum guarantee. If banks won't take half the risk of nonpayment, this is a market test that the loan shouldn't be made.
These reforms have long been blocked by the powerful housing lobby -- Realtors, homebuilders and mortgage bankers, backed by their friends in Congress. They claim FHA makes money for taxpayers through the premiums it collects from homebuyers. But keep in mind these are the same folks who said taxpayers weren't at risk with Fannie Mae and Freddie Mac.
A major lesson of Fan and Fred and the subprime fiasco is that no one benefits when we push families into homes they can't afford. Yet that's what Congress is doing once again as it relentlessly expands FHA lending with minimal oversight or taxpayer safeguards.
Easy Credit and the Depression
Easy Credit and the Depression
What caused this recession? We still don't have a simple explanation. Such is the uncertainty sapping the country's confidence that in a recent Rasmussen Reports poll only 53% of Americans said they prefer capitalism to socialism; 27% were unsure and 20% preferred socialism.
Before seeking political asylum in free-market Hong Kong, consider reading a new book that critiques what went wrong with capitalism, written in order to save it. Judge Richard Posner's "A Failure of Capitalism: The Crisis of '08 and the Descent into Depression" is noteworthy. As a longtime University of Chicago professor and father of the free-market-based law-and-economics movement, Judge Posner makes an unlikely critic of capitalism. But as author of some 40 books and as the most frequently cited federal appeals court jurist, he is also one of our most original and clearheaded thinkers.
Who's to blame and who's responsible for the recession? Judge Posner, who calls it a depression, distinguishes between the roles played by government and the private sector. "Although financiers bear the primary responsibility for the depression," he writes, "I do not think they can be blamed for it -- implying moral censure -- any more than one can blame a lion for eating a zebra. Capitalism is Darwinian." A pragmatic explanation for behavior that looks irrational in retrospect shows that it was logical, based on incentives at the time. Blame lies elsewhere: "The responsibility for building the fences that prevent an economic collapse as a result of risky lending devolves on the government."
As Judge Posner told me in an interview, "The role of bankers is to operate banks, which is inherently a risky business. It's not to save the economy." But he disagrees that government is chiefly responsible. Banks are responsible in the sense that as each financial firm made rational choices for itself, such as embracing new credit instruments, these choices in aggregate created huge risk to the system.
Unlike responsibility, blame goes to those in government for creating the credit bubble, and then failing to have a contingency plan when the economy was headed off the rails. "Even if the risk of this depression was 1%, the effect of it occurring was so serious that the blame must go to regulators who were too slow."
The conventional wisdom is that very smart bankers misunderstood their own interests. In a capitalist system, if you can't trust self-interest, what can you trust? Judge Posner instead reminds us that shareholders would have punished individual banks that failed to take advantage of low interest rates and seemingly safe, mortgage-backed securities. Likewise, consumers acted rationally over the years to accept offers of mortgages they couldn't afford, given the low risk of a burst bubble.
"At no stage need irrationality be posited to explain what happened," Judge Posner writes. Instead, this was a case of "intelligent businessmen rationally responding to their environment yet by doing so creating the preconditions for a terrible crash." He chiefly blames the Federal Reserve, for "cheap credit."
Judge Posner, who shares an influential blog with Chicago Nobel prize-winning economist Gary Becker, proposes a partly psychological definition of a depression: "A steep reduction in output that causes or threatens to cause deflation and creates widespread public anxiety and, among the political and economic elites, a sense of crisis that evokes extremely costly efforts at remediation."
The causes include failures of information at many levels. "Even though the financial industry has more information bearing on the likelihood of a depression than the government does, it has little incentive to analyze that information," Judge Posner writes. The models for assessing the riskiness of mortgage-backed securities failed, but at any one time the chances of a bubble resulting in a depression were remote. Likewise, "investors had limited information about the riskiness of individual mortgages, and there was insufficient experience with large-scale subprime lending to enable the risk of default of subprime mortgages to be assessed with confidence."
If we can agree that the private sector is responsible but the government gets the blame, we can move on to prevention. A streamlined set of regulators with access to public and private information should be charged with tracking systemic risk. We also need clear, predictable rules for how the Federal Reserve and other regulators would respond to various risk situations, which would give financial markets clearer rules of the road. Under this view, Washington's on-the-fly approaches to banks, autos and other industries risks further undermining confidence.
Even capitalism's staunchest supporters recognize that it cannot function unless government plays its proper part. If all the players, including regulators and bankers, can accept their rightful share of blame and responsibility, we can begin to prevent future failures.
Haiti Starts Over Again
Haiti Starts Over Again
Close your eyes and imagine you are the new prime minister of a poor Caribbean country. Yours is not a run-of-the-mill, low-income nation but one so destitute that last year the Associated Press reported that children were being fed cookies made of "dried yellow dirt" to relieve their hunger.
There are few roads connecting markets; electricity and potable water are luxuries; gang violence, corruption and drug trafficking have overwhelmed the justice system and crimes go unpunished. To make matters worse, remittances from the U.S. have been hard hit by recession.
For decades tyrants have ruled your country, first from the right and then the left. Now a young democracy is budding and the desperate masses are depending on your government to bring about order and the conditions for economic opportunity. Where do you start?
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Associated PressHaitian Prime Minister Michele Pierre-Louis
For Haitian Prime Minister Michèle Pierre-Louis, this is not a parlor game but the real-time question she has had to think about every day since taking office in September. Last month, Ms. Pierre-Louis joined Journal editors for lunch in New York to explain her government's priorities. I expected to hear a plea for foreign aid. But the PM surprised me by talking about the sanctity of contracts, the importance of attracting investment, and the woes caused by a broken judiciary.
Talk up hope for Haiti and most people think you are naïve. The country has none of the cultural norms that conventional wisdom says are required to construct democratic institutions. Plus, it's flat broke.
All true. Yet things didn't have to get this bad. They did because when Haitians had a shot at democracy in 1990, they instead got a despot named Jean Bertrand Aristide. During the time he ran the country as a strongman, Haiti had a contract with a U.S. telecom company called Fusion. Its board included Joseph P. Kennedy II, who was a friend of Aristide and invited the Haitian to his second wedding. The board also included a number of Democratic Party honchos. Fusion's contract allowed it to carry long-distance calls to Haiti Teleco, the state-owned monopoly, at less than 25% of the Federal Communications Commission settlement rate at the time.
Rebuilding Haiti
2:52Americas columnist Mary Anastasia O'Grady discusses Haitian Prime Minister Michèle Pierre-Louis's challenge in trying to rebuild the Carribbean country's economy.
All we know is that while Fusion was racking up the discount minutes on one of the region's busiest telecom routes, Aristide terrorized his nation, both as president and as the power behind President René Preval. President Bill Clinton, who had restored the Aristide presidency after a coup d'etat, tolerated the abuses.
Telephone revenues were one of Haiti's few sources of hard currency. But when Aristide was driven from the country in 2004, the interim government opened Teleco's books and allegedly found that the company had been rifled, according to a lawsuit filed in South Florida. Haiti had to start over from scratch. Mr. Kennedy has since moved on to working with Venezuela's Hugo Chávez in the oil business.
Haitian tradition holds that the country needs foreign aid to get back on its feet. Ms. Pierre-Louis does not disagree. The main reason for her trip to the U.S. was a "donors' conference" where Haiti racked up $324 million in new pledges of assistance.
But the PM seems to also understand that the aid bucket is leaky at best. At the Journal she talked up private investment as the key to a meaningful reduction in misery. "We need investors," she said, "because we need to create jobs. And to get investors, whether they are from the private sector in Haiti or international, they have to have confidence." She insisted that any change in fixed-line telephony laws would stress competition.
Like Mr. Preval, who is president again, the PM hails from Haiti's left. George Soros was a big giver to the grass-roots organization she ran previously, and she was once an Aristide ally. But she broke with him over his use of destitute youths to carry out his political violence.
Now as PM she emphasizes public security, which has improved since Aristide left; kidnappings dropped sharply last December. She proudly recounted to me her decision to remove a wealthy developer from the prime government land he had invaded to build slums. This makes her different. Enforcing the rule of law is not the usual practice of anyone in Haiti who wants to have a political career.
Another unpopular goal on the PM's agenda is confronting drug-trade corruption in the judiciary and politics. Citing Haiti's recent seizure of $1 million in cash, she says, "Imagine what you can do with that much money in Haiti." The drug problem, she notes, undermines equality before the law, and Haiti needs U.S. help in fighting back.
Ms. Pierre-Louis may need help too. She doesn't have a political base, Bill Clinton is showing renewed interest in Haiti (not good), and powerful local interests want her out. She might survive if those who truly care about Haiti realize that her defeat would be a grave loss for her country. Hopefully this includes the U.S., which has enormous influence in Haiti and also should want to see the Western Hemisphere's poorest country get off its knees.
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