The attacks of September 11 have not only exposed the failures of our intelligence apparatus and the "blowback" problem of US foreign policy. They have also stripped bare how one branch of corporate America, the $273 billion airline industry, has successfully captured the government agency supposed to oversee it and bought off the people's watchdogs in Congress. This situation argues for far-reaching changes in how campaigns are financed and how government agencies are staffed.
The vulnerability of our airports can be traced, in part, to the role of the airline industry in lobbying year after year against any federal takeover of airport security and its insistence on contracting the work out to low-bidding companies that often pay little more than the minimum wage to the people who check passengers' luggage and X-ray their handbags. Last year the General Accounting Office found that starting salaries for screeners at all nineteen of the nation's largest airports was $6 per hour or less, with five boasting starting salaries of just $5.15 per hour. According to the Federal Aviation Administration (FAA), from May 1998 through April 1999 turnover at those same nineteen airports ranged from 100 percent to more than 400 percent. Argenbright, one of the four big companies that dominate the private airport security business in America, pleaded guilty in 2000 to several charges and agreed to pay $1.2 million in fines for falsifying records, doing inadequate background checks and hiring at least fourteen airport workers in Philadelphia who had criminal convictions for burglary, firearm possession, drug dealing and other crimes. In 1978, reports the New York Times, the FAA "found that screeners failed to detect guns and pipe bombs 13 percent of the time in compliance tests, while in 1987 the agency found that screeners missed 20 percent of the time. Since then, the agency has stopped releasing figures."
Despite these worrisome facts, the airlines and their lobby, the Air Transport Association (ATA), fought against any federal takeover of airport security because they didn't want to have to pay more for it and because they didn't want potential passengers scared off by longer lines or fears of a hijacking. And the FAA dragged its heels, in part because its mandate, written by a Congress addicted to millions in transportation-industry campaign contributions, has been not only to insure air safety but also to promote air travel. The airlines alone have given more than $65 million to federal candidates and parties since 1990, and spent roughly the same amount lobbying the federal government between 1997 and 2000.
Much of that boodle helped to weaken the implementation of new security procedures recommended by a 1996 presidential commission chaired by Vice President Al Gore, set up after the TWA 800 crash. For example, according to a report by Public Citizen, the commission's recommendation that the background of all airport employees be checked for criminal records was opposed by the industry because it would create administrative and financial burdens. Even Gore himself backed down on his commission's insistence that all bags be matched to passengers on all flights. The day after he wrote the ATA about his change of heart, campaign contributions started to pour in from the airlines to various Democratic Party committees at double their previous pace.
Many people in Washington have enriched themselves by maintaining this sordid status quo. Current or recent lobbyists for the airlines and/or the ATA include Linda Hall Daschle (wife of Senate majority leader Tom Daschle), Haley Barbour (former Republican National Committee chair), Harold Ickes (deputy chief of staff in the Clinton White House), Ken Duberstein (chief of staff for Ronald Reagan and a crony of Colin Powell), Nick Calio (now President Bush's Congressional liaison) and former Senators Dale Bumpers and Bob Packwood. Three recent FAA administrators, including Linda Hall Daschle, have come from the industry.
So far, nothing has changed in the wake of the September 11 attacks. According to Paul Hudson, director of the Aviation Consumer Action Project, Transportation Secretary Norman Mineta has "excluded all aviation security proponents, consumer or public representatives, air crash victim groups, former FAA security officials critical of aviation security and the manufacturers of advanced aviation security equipment from his advisory group" on new security measures, relying instead on the industry alone. The airlines finally came out in favor of federalizing airport screening, though by September 12 their lobbyists were already plotting the $15 billion taxpayer bailout. A month later, the thousands of laid-off employees, who lack a similarly well-heeled lobby, are still waiting to find out if they will get emergency unemployment, healthcare and job-training support.
Moving to exploit a shifting political landscape in the aftermath of the September 11 terrorist attacks on the World Trade Center and the Pentagon, President Bush's Congressional point man on free
At a time when the economy needs vast and purposeful help from the federal government, America faces a peculiar handicap: Neither political party really believes in liberal economic intervention or knows how to do it. Democrats are still not over their infatuation with Hooverite fiscal austerity--embracing budget surpluses, bemoaning deficit spending. Other than serving their wealthy friends, Republicans work at dismantling government's ability to steer and stimulate the private economy. Both parties are enthralled by the most conservative advisers, Federal Reserve Chairman Alan Greenspan and former Treasury Secretary Robert Rubin (now at Citigroup), who counsel caution. Democratic Senate majority leader Tom Daschle expressed doubts about any stimulus program, fearful that next year's budget might go into deficit.
This reluctance to act boldly will have to change very quickly. The economy was already in contraction before September 11. It needs hundreds of billions in new federal spending--yes, deficit spending--to counteract the great shrinkage under way in consumption and business investment. No one knows the severity of what's unfolding, but false optimism will make things much worse. Acting too fast and spending too much have economic risks, but none compare to what can unfold if Washington is too timid.
Back to basics. As John Maynard Keynes and American originals like Marriner Eccles, FDR's Fed chairman, taught, when the economic engine starts to seize up, government is the only force capable of jump-starting it--pulling idle capital into real investment while bolstering the incomes and confidence households need to buy things. It does this by borrowing the money from private sources--running large federal deficits financed by Treasury bonds--and spending the money in ways that generate waves of collateral economic activity. Deficit spending is not an unfortunate side effect. It is the necessary cure. America is especially vulnerable now to a deepening contraction because Washington is flush while companies as well as households, particularly those in the bottom half, are mired in debt. An aggressive government stimulus program is essential to regenerate the wherewithal--and the motivation--for business and families to renew their spending. If we are truly at war, the government must also do this in ways that renew social trust and a sense of equity. Patriotism cannot endure if the reigning ethos continues to be "winner takes all."
The $15 billion bailout for the airlines is a disgraceful start. Washington couldn't avoid aiding these terribly mismanaged companies, but it demanded nothing in return for the taxpayers or the workers being laid off by the tens of thousands. When Congress bailed out Chrysler twenty years ago, Lee Iacocca volunteered to work for $1 a year, labor got a seat on the board and the government took warrants in exchange for its cash infusion, later redeemed in full. This time hapless Democratic Party leaders refuse even to demand that the CEOs stop ripping up union contracts. The insurance industry is next in line for a handout, and there will be others. If more bailouts follow the same pattern, America's newfound unity will swiftly curdle into bitter resentments.
The agenda must be of sufficient scale to make a difference--and pump out money quickly. Top-end tax cuts, the Republican answer to all questions, are particularly inappropriate; companies and capitalists aren't likely to invest when consumers are cutting back. Particularly laughable is the reflexive Republican call for a capital gains tax cut, as if investors need an incentive to sell stocks.
The government's $40 billion emergency appropriation for reconstruction and the military is only a hesitant start. Washington should immediately ship $40 billion or $60 billion (or more) in revenue sharing to state governments that are being forced by balanced budget requirements to cut spending or raise taxes. And rather than cut domestic spending to pay for the huge bundle just approved for the Pentagon, Congress should fully fund domestic programs--particularly those in education, nutrition, housing and health. Congress should also act immediately to aid those workers being laid off through no fault of their own. A sensible program would extend unemployment insurance to thirty-six weeks and raise the average benefit to $300 a week. Special provisions are needed for short-term, contract and part-time workers, who would otherwise not be eligible for assistance. The Economic Policy Institute estimates that a decent unemployment insurance program might cost $30 billion a year.
On a grander scale, America has huge unfilled public investment needs that can easily cost more than $1 trillion over the next five years. The money can buy things people and society want and need:
§ Education. School boards have a backlog of thousands of desperately needed school construction and repair proposals. A $40 billion school fund could generate construction jobs and contracts across the country in a matter of weeks.
§ Health. One essential defense against terrorist attack with biological or chemical weapons is to rebuild our decayed public health infrastructure--laboratories, public hospitals and clinics, and properly staffed public health departments with modern computer and communications systems.
§ Transportation. To counter highway congestion and the nightmare of air travel, the country needs to develop alternatives like high-speed trains. This takes planning and time, but many projects are ready to go. For example, MAGLEV Inc., a Pittsburgh consortium, has been seeking federal funds to demonstrate a high-speed train that could get to Philadelphia in ninety minutes.
In addition, Congress can swiftly get money into the hands of those most likely to spend it. The next tax rebate can be targeted to low-wage workers who got nothing from the Bush tax cut; it would pump about $10 billion into the economy. The government could require all contractors to boost pay to a living-wage level. Aggressive new wage standards should be part of the government's quid pro quo for corporate bailouts. Indebted families need "stretched out" payment terms so they can keep spending.
After decades of conservative government, the list of needs and possibilities is long. Alert citizens must understand that it's time for Washington to act boldly, on a scale commensurate with the challenge. They must awaken Washington politicians from the stupor that suffocates imagination.
The Bush Administration is blocking efforts to rein in offshore banking.
Citigroup proclaims that its "private bankers act as financial architects,
designing and coordinating insightful solutions for individual client needs,
with an emphasis on personalized, confidential service." That is so colorless.
It might better boast, "We set up shell companies, secret trusts and bank
accounts, and we dispatch anonymous wire transfers so you can launder drug
money, hide stolen assets, embezzle, defraud, cheat on your taxes, avoid court
judgments, pay and receive bribes, and loot your country." It could solicit
testimonials from former clients, including sons of late Nigerian dictator Sani
Abacha; Asif Ali Zardari, husband of Benazir Bhutto, former prime minister of
Pakistan; El Hadj Omar Bongo, the corrupt president of Gabon; deposed
Paraguayan dictator Alfredo Stroessner; and Raul Salinas, jailed brother of the
ex-president of Mexico. All stole and laundered millions using Citibank
(Citigroup's previous incarnation) private accounts.
One lesser-known client, Carlos Hank Rhon of Mexico, has been the object of
a suit by the Federal Reserve to ban him from the US banking business. Hank
belongs to a powerful Mexican clan whose holdings include banks, investment
firms, transportation companies and real estate. Hank bought an interest in
Laredo National Bank in Texas in 1990. Six years later, when he wanted to merge
Laredo with Brownsville's Mercantile Bank, the Fed found that Citibank had
helped him use offshore shell companies in the British Virgin Islands to gain
control of his bank by hiding secret partners and engaging in self-dealing, in
violation of US law. One of the offshore companies was managed by shell
companies that were subsidiaries of Cititrust, owned by Citibank.
The Fed says that in 1993, Hank's father, Carlos Hank González, met
with his Citibank private banker, Amy Elliott, and said he wanted to buy a $20
million share of the bank with payment from Citibank accounts of his offshore
companies, done in a way that hid his involvement. Citibank granted him $20
million in loans and sent the money to his son Hank Rhon's personal account at
Citibank New York and to an investment account in Citibank London in the name
of another offshore company.
Citigroup spokesman Richard Howe said, "We always cooperate fully with
authorities in investigations, but we do not discuss the details of any
At press time, there were reports that Hank had negotiated a settlement
with the Fed, which the parties declined to confirm.
As Teamster/turtle ties fray, Hoffa faces Tom Leedham in his re-election bid.
Oklahoma pushes yet again for 'right to work' legislation.
The facts about Bush's tax cuts are being kept from the public.
Courtney Love's plea to fellow recording artists
to join her in the creation of a new musicians' guild, printed below,
is the latest blow to the beleaguered "Big Five
Finally, President Bush is "deeply worried" about the economy. Yep, in remarks last week, he even went so far as to observe that "the recovery is very slow in coming."