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Sunday, May 28, 2006

33 Miles of CRIME SCENE Tape?

Does anyone have a big roll of that bright yellow CRIME SCENE tape?

The way things are going right now, I think the smartest thing we could do is surround the entire Washington, D.C. area with the stuff, send everyone home, and wait for the November elections and hope we can start over.

This week's episode of "Constitutional Crisis - You Make the Call" is a joint production of both the Administrative and Legislative branches. In this week's episode, members of the House express OUTRAGE at a search and seizure of documents and a computer from the office of a Representative conducted after a legal search warrant is obtained by Justice Department officials through a normal review by a court in the Judiciary branch.

Restating more clearly, the Executive branch

* investigated a crime
* obtained VIDEOTAPE of a House member accepting $100,000 in cash
* found $90,000 dollars in frozen food boxes in the member's home
* subpoenaed the member to provide requested documents
* waited patiently for eight months for the member to comply with the subpoena
* petitioned a court for a search warrant with an 83 page afidavit
* obtained a valid search warrant
* executed the search warrant

In other words, the Administrative branch seemingly did everything by the book and for the right reason. A complete break from tradition for this Administration.

Of course, these are our politicians involved here so nothing could be that simple.

In a rare display of bi-partisan CYA, Speaker of the House Dennis Hastert (R) and House Minority Leader Nancy Pelosi (D) make a joint speech blasting the Justice Department and FBI for the search and seizure, citing a violation of the Separation of Powers between the Legislative and Executive branches.

In an even rarer display of Solomon-like patience and even-tempered judgment, President Bush unilaterally decided to seal all of the documents for 45 days until the constitutional scuffle can be sorted out.

Hmmmm. Who should we believe is right in this one?

It is Congress and the Bush Administration involved so I'm going to go with NO ONE.

Claims by William Jefferson and House members that the search and seizure constituted a violation of separation of powers are completely without merit. Many have cited the "Speech and Debate" clause of the Constitution which aims at ensuring members of the Executive branch and its law enforcement departments do not directly interfere with a Congressional member's ability to take part in debates on the floor of the House or Senate or interfere with their ability to actually vote on legislation.

The underlying intent of the Speech and Debate clause was to prevent the Executive branch from taking specific action against Legislative members that might prevent those members from taking action directly against the Executive branch via speaking on the floor of the House or Senate during debate of legislation or actual VOTING on legislation. For example, arrest of a House member prior to them entering the House chamber to vote on an Article of Impeachment would constitute a violation of the Speech and Debate clause. The clause was NOT intended to define a warrant-free bubble around any House or Senate member's office or personal belongings.

So why is President Bush attempting to "de-fuse" this political timebomb? His administration is in the right (for once), is it not?

Apparently, the demands by Congress to return the material seized in the search of William Jefferson's office have been seriously reviewed by the Justice Department. The return was contemplated so much that Attorney General Alberto Gonzales and three of his department heads within the Justice department threatened resignation if a decision was made to return the documents. Hmmmm. Another rare display of properly motivated principle on the part of a Bush appointee.

That puts President Bush in the awkward position of being absolutely correct on a legal issue that seems to threaten nearly every member of the Legislative branch. Of course, if the House and Senate were operating with even a semblance of ethics, no member would have a thing to worry about with warrants to search their offices. That's exactly the case made to the American public about our phone records, library card usage, and other private information, right?

Of course, the House and Senate are both highly corrupt and they have a great deal to fear from a more active criminal investigation of their dealings with lobbyists and campaign contributors. And that is where both Congress and the President wind up being completely wrong on this issue. President Bush's offer to seal the material seized from William Jefferson for 45 days is effectively an extra-constitutional deal with Congress: you keep ignoring my abuse of FISA law and massive telecommunications data mining and my Justice Department will come up with a way to give you some slack on potential prosecution for a legitimately investigated crime.

How perilous is this situation for Congress and the President? Both Democrats and Republicans could be in serious legal and political jeopardy if more robust investigations are pursued by law enforcement of recent corruption charges. If Bush shows some constitutional backbone in pursuing these investigations, he could trigger a more activist Congress to finally do its job in thwarting his extra-Constitutional activities and potentially trigger legal action or impeachment against him. If Bush caves in to Congress, he could lose the entire top staff of his Justice Department, requiring him to fill those vacancies with confirmation hearings in a a hostile Congress while allowing key Administration insiders to leave and unravel more information about the past six years.

It's kind of a lose-lose-lose situation for all involved. Congress, the Administration and We The People.


So, does anyone have about 34 miles of CRIME SCENE tape we can use? Of course, we might want to use WAR CRIME SCENE tape when wrapping the White House but that's a different topic.

Saturday, May 27, 2006

A Total Breakdown of Morality and Leadership

Per a flurry of recent news stories, the Marine Corps seems to have confirmed that four of its Marines conducted execution-style murders of 24 Iraqi civilians, including women and children, on November 26, 2005 in the Iraqi town of Haditha. A US official interviewed by the Los Angeles Times about event stated the evidence in the case points to "a total breakdown of morality and leadership." (#1)

The real question is where that breakdown originated.

In a joint press conference during British Prime Minister Tony Blair's May 25 visit to the United States, President Bush mentioned Abu Ghraib in response to a question about mis-steps and mistakes in Iraq:

And, you know, I think the biggest mistake that's happened so far, at least from our country's involvement in Iraq, is Abu Ghraib. We've been paying for that for a long period of time. And it's -- unlike Iraq, however, under Saddam, the people who committed those acts were brought to justice; they've been given a fair trial and tried and convicted. --- (#2)

This isn't much of an acknowledgement of what really went wrong with Abu Ghraib. Juxtaposed with his preceding comment about "dead or alive", it seems to imply the only reasons he regrets Abu Ghraib are that a) we got "caught" and b) it might have incited more insurgent attacks against coalition forces.

The real problems with what took place at Abu Ghraib were / are:

  • the torture was clearly, unequivocally IMMORAL under any circumstance

  • the torture took place over an extended period of time and was not "heat of battle"

  • the failure of military command to provide properly trained personnel for prison duty

  • the failure of military command to create controls that could have prevented the abuse

  • the nature of the abuse itself seemed very much in line with interrogation practices tacitly or directly endorsed by Rumsfeld and okayed by then-White House counsel Alberto Gonzales

  • the tactics used at Abu Ghraib are being used in other secret facilities operated around the world by the US.

In short, what happened at Abu Ghraib is not nearly so isolated in probability and reality after considering this Administration's strategy for conducting the war on terror. While the people who placed the hoods and took the photos have been prosecuted, the people who produced an environment for the abuse and provided the legal gray area in which the abuse could be "justified" in the minds of poorly trained soldiers have NOT been prosecuted.

Bush's comment implies his Administration learned NOTHING from Abu Ghraib. The facts coming out about the execution of 24 innocent civilians and fraudulent reports issued by the military claiming the deaths occurred in direct response to a road-side bombing PROVE the Bush Administration learned nothing from Abu Ghraib or from any other challenge coming from this self-inflicted disaster.

So where did the breakdown of morality and leadership originate? The only two choices that seem to jibe with the facts in evidence are:

  1. the choices of George Bush, Richard Cheney, Donald Rumsfeld and Condolezza Rice

  2. the choices of American voters when they re-elected Bush in 2004

These are not mutually exclusive choices.

The events in Haditha occurred NINETEEN MONTHS after the story of abuses at Abu Ghraib broken in April 2004. Surely that was enough time for the Bush administration to correct and communicate policies on treatment of "detainees" in American custody. Surely that was enough time for the Pentagon to conduct reviews of rules of engagement with all troops in Iraq and Afghanistan. Surely that was enough time for American voters to grasp the damage done to American's moral authority by our immoral conduct of the "war on terror" and make a better decision in the voting booth in November 2004.

Instead, American voters returned Bush to office for four more years when they knew Bush viewed the election as a referendum on his conduct of the war.

Instead, the Bush Administration continues to prosecute its self-proclaimed "war on terror" unencumbered by any consideration of legality or human rights. Bush made the following comment in his commencement speech at West Point in 2002:

We must take the battle to the enemy, disrupt his plans, and confront the worst threats before they emerge. (Applause.) In the world we have entered, the only path to safety is the path of action. And this nation will act. -- (#3)

Today, May 27, 2006, President Bush again addressed the West Point graduates and received applause for the following comment:
In the months that followed, I also made clear the principles that will guide us in this new war: America will not wait to be attacked again. We will confront threats before they fully materialize. We will stay on the offense against the terrorists, fighting them abroad so we do not have to face them here at home. -- (#4)

What lesson do you think our troops will internalize and act upon when they are deployed for patrols in a small town in a foreign country where no one speaks English, you've been dodging roadside bombs for six months, and you spot a suspicious shadow or unexpected flash of light?

America, this is not the last story of war crimes and atrocities you will hear of from the "war on terror."


#1) Los Angeles Times Story: http://www.latimes.com/news/nationworld/world/la-fg-marines27may27,0,7543928.story?coll=la-home-headlines

#2) Bush / Blair Press Conference Transcript: http://www.npr.org/templates/story/story.php?storyId=5433122

#3) Bush 2002 Commencement Address at West Point:

#4) Bush 2006 Commmencement Address at West Point:

Wednesday, May 24, 2006

A Modern Day Edgar Derby

For those that might not know or remember, Edgar Derby was a character in Kurt Vonnegut's novel Slaughterhouse-Five who served in the U.S. Army in Dresden, Germany. In the book, Edgar Derby was caught by Germans after uncovering a teapot amidst the rubble of a city where over 135,000 German civilians died in a firebombing raid by the Allies. The Germans executed Edgar Derby for looting. Vonnegut juxtaposed the setting and the "crimes" and the consequences to point out the utter pointlessness and madness of war.

The Wednesday, 5/24/2006 CBS Evening News had a story about a soldier whose experience in Iraq seems to illustrate the same maddening outcomes of war.

Twenty-one year old Specialist Kendell K. Frederick was serving in the U.S. Army Reserve's 983rd Battalion near Tikrit. Spec. Frederick came to America with his mother from Trinidad when he was 15 years old. He immediately enlisted in the Army out of high school and began trying to become a American citizen.

It appears he may have very well been killed as a direct result of his attempts to gain his citizenship and the typical bureaucratic foul-ups of both the military and immigration offices.

He completed paperwork to apply for citizenship but the paperwork was rejected because the Army clerk who took his fingerprints failed to sign beneath the prints as a witness so the forms were rejected by INS. Spec. Frederick was apparently riding with a convoy on October 19, 2005 to Camp Anaconda to resubmit his fingerprints on new paperwork. Instead, his vehicle was hit by a roadside bomb, killing him.

The United States granted him his citizenship post-humously during his funeral service at Arlington Cemetery.


Sometimes, words don't really do irony justice.

Sunday, May 21, 2006

Framing the Immigration Debate

Americans have had a week to consider President Bush's proposals for immigration reform and corresponding ideas coming out of the House and Senate. Like virtually every other issue facing the country, it seems both the Presidential and Congressional proposals are aiming more at wrapping the right poll-tested buzzwords around their proposals to placate their core supporters rather than itemizing key decision points to help clarify the debate and develop useful policies.

Here are a few areas that are crucial to creating a coherent policy on immigration that are either being cloaked in unproductive "hot-button" language or are being ignored entirely.

Security versus Economics

Some of the solutions proposed for the immigration problem have implied or stated that proper control of the border is essential to protect America from future terrorist attacks. A simple review of the facts surrounding the September 11, 2001 attacks can easily refute this argument. Every one of the 19 hijackers involved entered America in plain sight through normal transportation channels. The problem was that existing INS practices failed to reject their entry, despite the fact that many carried outright fraudulent visas or the wrong type of visa. After arriving here, some of the hijackers overstayed their visas well before 9/11/2001 yet were never contacted or forcibly removed from the country. (#1)

Building a fence from San Diego, CA to Brownsville, TX won't prevent terrorists from entering the United States and conducting attacks. The people bent on attacking America aren't short of money and don't need to sneak into the country. They can simply fly first class directly to Dulles and waltz right in or fly to Canada and come across that border. There are simply too many people with clean records and perfectly legal credentials who would be willing to come to the United States, hibernate for a few years to disappear from view, then attack us to make "border security" a successful strategy for thwarting terrorism within America.

The lack of a viable "security" rational for immigration policy means the best solutions to the problem must involve law enforcement and economic policy changes, not further militarization of our tactics. Use of National Guard forces simply buries more spending for what are essentially civilian functions within a bloated, poorly managed military budget.

Income Taxes versus Sales Taxes

Bruce Bartlett had a short but interesting comment in the May 19, 2006 edition of the WSJ about a potentially overlooked impact on state budgets resulting from policies for income taxes versus sales taxes. Texas and California are the two most populous border states with Mexico and absorb most of the costs of the extra education, healthcare, welfare and law enforcement problems resulting from illegal immigration. For 2006, California is expected to run a deficit of about $6 billion while Texas balanced its budget. (#2)

According to Bartlett, California and Texas have the same state sales tax rate yet California's dependency on state income taxes makes it less likely that illegal aliens working in an underground economy can be reached to pay taxes to cover the costs of services they use and impose on the state. Bartlett's point (which is a valid one) is that while sales taxes are viewed as highly regressive because low-income workers pay a far higher percentage of their income in taxes than high income workers, use of sales taxes ensures illegal immigrants do contribute SOMETHING to pay for the costs they impose on our host states.

Conservatives and liberals need to understand clearly the long term tradeoffs between tax policies and social spending policies. If you're a liberal who hates unfair, regressive sales taxes and fees, you cannot refuse to address the other half of the budget equation and allow a growing portion of the population to generate costs to government while escaping taxation to pay for it. If you're a conservative in favor of reduced income taxes to encourage economic creativity and entrepreneurialism, you cannot focus on sales taxes with classic "regressive" impacts to low-income workers while exploiting immigrant workers' shadow economy status for profit and gutting crucial spending on education that ensures American workers can keep pace with the productivity and expertise of workers in other countries.

Privacy versus Entitlements

Creation of a more secure national identity card has been frequently proposed as part of the solution to illegal immigration and undocumented workers. Use of some sort of RFID or biometric technology within the card has been suggested to make the card itself more fraud-proof and prevent the creation of a more cumbersome paperwork trail for businesses to research when hiring workers.

More Americans are learning the hard way about the flaws in current identity practices based around on Social Security numbers (which, by the way, are not supposed to be used as identification numbers according to Federal law, despite the fact that the government itself obviously uses them for many purposes besides tracking your Social Security payments and eligibility) or driver's license numbers. A thief with your SSN / driver's license # and your name or address can unearth your entire identity and ruin your credit overnight. However, there are also legitimate concerns about adopting a true national identity card with stronger protections that would be associated with even more personally identifiable information if it was ever compromised.

Any proposal for a secure national identity card will require Americans to make a serious choice between retaining more privacy and continued growth in spending on social programs and "entitlement programs" such as Social Security, Medicare, Welfare, etc. As it stands now, many of our most expensive state and federal programs amount to the operation of an exclusive, expensive country club that does absolutely nothing to check guests at the door. Not a very exclusive club. No real country club would stay in business with that business model. America won't either. We cannot continue operating expensive public programs without ensuring beneficiaries have contributed to those programs. Either the programs must be curtailed or you have to start checking people at the door. A stronger, more secure national identity card will help "check people at the door" before delivering any state or federal program benefits.

NOTE -- This is not a statement that immigrants in America (legal or illegal) are not entitled to basic legal and civil rights given to Americans. It merely reflects a crucial distinction between basic human / civil / legal rights that conceptually ensure things are not TAKEN from you as a human being and economic "rights" GIVEN to you as a citizen normally in exchange for having paid taxes into programs that provide those things.

A National Language versus Education

The past week's commotion in the Senate over recognition of English as the official language of the United States is another classic political substitution of motion for progress. You'd never know there was an election coming in November, would you?

"National Language" proponents couch their support in humanistic terms, stating that failure to learn English dooms immigrant works (legal or otherwise) to a career "ghetto" within the larger economy consisting of nothing but low-paying service jobs or grueling / unsafe construction and agricultural jobs. Proponents believe that requiring immigrants to learn English will open more opportunities within the larger economy thus making them more able to avoid exploitation in entry-tier jobs.

The entire "national language" fixation is misguided for the simple reason that it focuses on those already within America rather than other people considering entering the country illegally in search of work. The primary goal of any immigration reform is to stop the flow of new illegals. Future illegal workers won't be daunted by a requirement to learn English as long as jobs exist that don't require English, jobs exist that can be filled with fraudulent identification or with no identification, and as long as there are ways of entering the country. The "national language" debate focuses on an after-affect of the core problem after the core problem has already occurred.

The national language debate should really be reframed as a debate about education policies and education funding policies. "National Language" proponents argue that growing quantities of non-English speaking children are straining school budgets and classroom hours as schools attempt to provide some schooling in native languages to help "bootstrap" immigrant children into regular English curriculums. This is a valid, material concern. However, it isn't clear how much of these schools' core problem is the demand to teach classes in a foreign language versus the demand to teach the students in any language without an underlying tax base that adequately covers those obtaining the benefit from the public education.



#1) 9/11 Hijacker Visa Problems:

#2) California / Texas Budgets:

Sunday, May 14, 2006

The CIC Versus Congress / Courts - Deja Vu

Wow. It's déjà vu all over again. More details of another Bush Administration program come to light and claims of executive privilege and constitutional powers of the Commander In Chief immediately crop up. And in another case of déjà vu, a cursory review of the facts involved would seem to point out major flaws in the Bush Administration's practical and legal justifications for its actions.

The Practical Aspects of Call Mining

Let's give the Administration the benefit of the doubt for a moment and put aside the legal merits of mining billions of phone records for patterns of behavior that could unearth a terrorist cell operating within the US. Let's review the mechanics of the process, as best we can given what has been divulged and given what the Administration is still withholding.

According to the Administration, the NSA has been collecting calling/called party phone numbers and call durations for domestic calls from SBC/AT&T, Verizon and BellSouth since 9/11/2001. After a KNOWN terrorist is caught somewhere in the world, his effects (cell phones, computers, documents, land-line phone bills) are scanned for American phone numbers. Those numbers are then searched in this massive database to attempt to identify others with one, two, three or (????) degrees of separation from that original bad guy.

A story in Friday's WSJ quoted a former AT&T engineer in San Francisco describing how the data was likely collected. Even though telcos normally don't generate billing records on local calls, virtually every call (except those between lines served by a single switch) generate messages through SS7 Signal Transfer Points (STPs) to support features like caller ID, etc. The NSA installed equipment in co-location space in many hub phone switching locations then, with cooperation from the phone companies, plugged in traffic analyzer gear in the loop of those STPs to capture the data.

So can a database of nearly every local and long-distance call help catch a terrorist? Logically, of course it can, but practically? Many of the comments from the NSA and Administration indicate it cannot. Their premise is to use this data in reverse to identify a terror network AFTER a terrorist is identified; either through capture or his/her identity becomes obvious as a terrorist after the fact. No one is claiming they have enough artificial intelligence to look at billions of records and "detect" a pattern that means "terrorist about to attack on date X at location Y." So the program is about 99.9% aimed at reverse engineering a terrorist's contacts after the fact. How useful could the data be?

First, mapping a call to a phone number at a date/time doesn't ensure the identity of the person making or receiving that call can be determined. Most carriers offer pre-paid cellular phone services that at best require a credit card for purchase. The ease of obtaining a credit card via a stolen "pre-approved" solicitation or dumpster diving outside a restaurant means having the phone number of the caller or called party cannot guarantee a successful ID.

Second, if you work for a mid-sized or large business that uses a PBX, it is possible that any calls you make at work to numbers outside your company leave your company with a single calling party number. This isn't a state secret either. Your spouse probably already knows this from looking at the number shown on your home phone when you call to ask what's for dinner.

The real problem with the NSA phone call data mining from a "war on terror" perspective is that it assumes a relatively significant amount of communication from within a terrorist cell to its financial and strategic leaders that would "stick out" when the data is viewed in hindsight. From what I've read about those involved in the September 11 attacks, this assumption doesn't match reality. The whole purpose of operating under the "cell" model is to isolate knowledge of details so larger plans and ties cannot be unraveled if part of the cell is compromised. No one really knows for sure but it appears as though only 2 or 3 of the September 11 attackers actually KNEW what the plan was until maybe 3-4 months prior, and only 2-3 knew of the actual TARGET and DATE until maybe 1-2 weeks out. As a result, you won't have a "footprint" of 20 people making international calls getting strategy updates, checking on finances, etc., you might only have 1-3. The rest of the members of the cell not only might not know others in other cells, they might not even know others in the SAME cell until a few weeks or months before their attack date.

Much of the terrorist communication could also take place right out in the open in simple text email messages sent from a rotating set of free email accounts that never get used twice and that identify the next email address to send messages to via obscure (to us...) references to 7th century Islamic mythology / theology. If they wanted to get slightly more complicated, data could be embedded within GIF images that would be virtually impossible to trace. Again, I'm not divulging national security secrets here. Most of the "middle management" of these groups are college educated engineers who have at least passing familiarity with Internet technology that's been around for 6 years.

In short, the entire NSA phone monitoring program is likely flawed due to a fixation on DATA rather than INFORMATION. We probably still have thousands of actual PHONE CALLS still un-transcribed due to a lack of Arabic translators that would yield far more useful information. More cynically, we know the government has a horrendous track record for creating useful databases within a single agency with relatively small amounts of data (witness the FBI's failed modernization program from 2000-2002).

The Legal / Constitutional Issues

The legal and constitutional issues regarding the NSA program boil down to these key debates:

1) Is the collection of the information itself legal under existing intelligence law (FISA in particular)?

2) Has the Administration's operation of the program violated constitutional boundaries by leaving Congress in the dark?

On question #1, supporters of the "program" are quick to state that no names, addresses, or actual call content is being mined by the process. Of course, the names/addresses part of this argument is laughable since the vast majority of land-line telephone numbers are publically listed and searchable on Google. The FISA statute actually provides some cover for collection of this data since it excludes from the statute data used to bill or generate billing data.

Interestingly, the biggest chink in the armor of the legality of the data collection might lie in the refusal of Qwest to provide data to the program. Details are still sketchy but it appears as though former Qwest CEO Joseph Nacchio, when asked to provide data from Qwest, basically refused, asking the NSA "where is your FISA warrant?" According to the USA Today story that broke the whole issue,

The NSA's explanation did little to satisfy Qwest's lawyers. "They told (Qwest) they didn't want to do that because FISA might not agree with them," one person recalled. For similar reasons, this person said, NSA rejected Qwest's suggestion of getting a letter of authorization from the U.S. attorney general's office. A second person confirmed this version of events. -- (#1)

What does that say? The FISA court has only declined a handful (literally, 3-5 maybe) of requests and modified and approved a few hundred others out of THOUSANDS in its entire history since 1978. Had the NSA requested the warrants from the FISA court and had they been approved, they certainly would have been kept secret. It seems the NSA itself had material doubts about whether the program would be approved if permission were requested.

Rather than jeopardizing the entire program by asking FISA for warrants when one telco refused to surrender the data, the NSA kept quiet, used the data from those telcos sloppy enough to provide the data without customary, legal authorization and kept the program off the radar of FISA and Intelligence committees in Congress. The NSA even refused to get some sort of "cover" from another department within the Executive branch when it refused to involve the Justice Department and Attorney General's office. (At this point, I will decline to make the political cheap shot by stating that even an indicted ex-CEO seems to have more legal sense than people in the Bush Administration…SMILE)

What that REALLY says is that this Administration refuses to communicate even within the Administrative branch on matters of national security and constitutional law. Any process that could possibly thwart a plan senior officials have decided to pursue is assiduously avoided, even if the check comes from within what should be "the team." These people all work at the pleasure of the President.

I can't think of anything more damning of this President's leadership and decision-making skills than seeing yet more evidence he doesn't even trust his own Attorney General. We already knew he didn't trust his Secretary of State but this is JOHN ASHCROFT we're talking about. Ashcroft seemed pretty gung ho on the whole War on Terror the last time I checked.

On question #2, the Administration likely faces much greater problems. Supporters of the "program" quickly began making the rounds of the talking head shows on Thursday to state the usual talking points:

* we are harming our national security by even talking about this
* the program has helped nab terror suspects and already justified its existence
* most Americans approve of the plan once they hear the details, so what's the big deal?
* the appropriate members of the House and Senate WERE informed of "the program"

Okay, one at a time.

First, we are not harming national security by talking about this. Anyone familiar with the basics of telecommunications technology and regulation knows the Telecommunications Act of 1996 included regulations requiring all major telcos to implement new wire-tapping mechanisms within their digital switches (typically, Lucent 5ESS, Nortel DMS-100s, DMS-10s, Ericsson AXE-10s, etc.) that allowed digital wire-tapping on a nearly instantaneous basis without requiring actual physical wiretaps. Anyone who knows that had a pretty good idea that that capability was getting a pretty good (justifiable) workout after September 11, 2001. Frankly, I have pretty much assumed that capability was getting used even without warrants on international calls from suspected foreign nationals.

Second, in another example of one of my previously identified fallacies of the "War on Terror and Logic", the argument that this program has already helped thwart terrorist attacks is flawed. The government will never share information about those it has supposedly "identified" as terrorists under this program to PROVE its worth, yet if another terrorist attack occurs, the attack will be used as proof we need more of the same. If nothing bad happens, it succeeded. If something bad happens, we need more. FLAWED LOGIC.

Third, the fact that most Americans might approve of the program after the details are explained does not excuse the Administration from properly informing Congressional authorities about the execution of the plan. Do us average Americans have the "right" to know about the program? Probably not, but we only yield that right by assuming that a subset (not even ALL) of our elected legislative representatives ARE being informed about the actions of the other branches of government. That hasn't happened. (see next point).

Fourth, comments made by Senator Arlen Specter indicate the Administration has NOT fully informed the appropriate House and Senate Committees of the nature and extent of these monitoring programs. They have shared SOME of the information about SOME of the programs with SOME of the majority / minority leaders in the House and Senate. However, the LAW requires these types of programs to be discussed with the FULL membership of the House and Senate Intelligence committees, the bodies designated within the House and Senate to provide the constitutionally required oversight of top-secret processes operated by the Executive branch.

The Administration argues that operation of the NSA program and other intelligence matters fall under the powers provided to the "Commander in Chief" to control "command intelligence" and are outside the purview of the Legislative branch's authority. This argument is flawed. As I mentioned in a prior post (#2)


Clarification of Command Intelligence Within the Military -- Supporters of domestic spying believe that it involves identification of military threats to the United States and, as such, constitutes military "command intelligence" and can be authorized by the President via his role as CIC. The super-secret, super-strategic nature of this information leads many to believe the President has no obligation to share either the data gathered or information about the methods used to obtain it with Congress. The CIC function was assigned to the President simply to have a clear decision tree on military matters, not to allow the president to operate the military without Congressional oversight.

The War Powers Act should be amended to EXPLICITLY state that any intelligence categorized as COMINT is still subject to the oversight of Congress, including information gathered via theatre command, NSA, CIA, etc. Few argue the need to conduct domestic spying under certain circumstances, only that all such spying MUST be conducted within the informed oversight of Congress and the courts.

It is absolutely the President's right under the Constitution to make the final call on military tactics and responses but NOTHING in the Constitution allows him to hide from Congress WHAT information he is acting upon and HOW that information was obtained.


On the May 14 edition of Face the Nation, Arlen Specter specifically stated that one of his reasons for subpoenaing the CEOs of AT&T, Verizon and BellSouth about the NSA program is that they cannot refuse to testify --- "They can't claim executive privilege."

Arlen Specter has shown considerably more independence and principle regarding the conduct of this Administration than most of his colleagues in either party. (I'd be proud if he were Senator for my state.) If he knows the Administration has purposely and repeatedly withheld factual, complete information constitutionally required by Congress to perform its oversight functions, even if the underlying program might have been legal, isn't that reason enough to start playing hardball? I hope more of his colleagues step up and support him on this. Or do Republicans need to lose control of both the House and Senate before they recognize the damage Bush is doing to their party and the country?


If this particular NSA program were the FIRST and ONLY case in which the issue of executive privilege came into play, a pass might be in order. However, any claim of executive privilege involves conduct that touches upon crucial constitutional boundaries, power and national policy. The fact that executive privilege seems to come up with virtually EVERYTHING this administration touches should be a warning bell to anyone in Congress or in a voting booth.


#1) http://usatoday.com/news/washington/2006-05-10-nsa_x.htm?imw=Y
#2) http://boards.fool.com/Message.asp?mid=23626816 -- SOTU Alternatives: WAR POWERS

Is Sarbanes-Oxley Really a Problem?

Originally Posted: March 19, 2006 -- 7:14PM
Fool Boards Link: http://boards.fool.com/Message.asp?mid=23855506

Is Sarbanes-Oxley another regulatory impairment to business or cheap macroeconomic insurance for our economy?


The March 18, 2006 edition of the Wall Street Journal had three unrelated, yet totally related stories and op ed pieces.

* The Perfect Payday - a story about suspect option grants to execs
* GM Board Seeks Probe of Mistakes in Bookkeeping - (self-explanatory)
* Two Cheers for Nancy Pelosi - op ed about re-thinking Sarbanes-Oxley

Here's the Readers' Digest version of the three pieces. "The Perfect Payday" described analysis conducted by the WSJ which found one case where the CEO of Affiliated Computer Services was granted six consecutive stock option grants where the grant dates coincided with low-points in the company's stock price. The WSJ analysis indicated the odds of this occurring at random were worse than 1 in 300 MILLION.

The "GM Board" story described the announcement from GM on Friday that they found new accounting errors, would restate 2005 earnings from a loss of -8.6 billion to -10.6 billion (that's a $2 billion oopsie…) and would have to restate earnings as far back as 2000. In each case where errors were found, they were always in favor of reporting more revenue or profits.

The "Two Cheers" op ed discusses how Nancy Pelosi and Elliot Spitzer (of all people, per the tone of the piece) have begun addressing the "burden" imposed by Sarbanes - Oxley compliance on businesses of all sizes. The piece cites a figure of about $35 billion in compliance costs since its rules kicked in.


Let's review, shall we?

The key elements of the Sarbanes-Oxley act of 2002 were:

* a requirement that CEOs and CFOs personally sign off
on annual financial reports
* more detailed disclosure of compensation arrangements
for senior executives
* longer jail terms and stiffer financial penalties for
execs found to willfully fudge results
* prohibition from audit firms providing other consulting
services and actuarial advice to the firm
* bans on personal loans from the company to the officers
of the company
* a requirement for firms to produce an annual report on
the strength of its internal audit processes (section 404)
* stricter limits on trading by corporate insiders and
stronger reporting requirements for suspected insider

The act was passed in the wake of scandals at Enron, Tyco and other similar meltdowns and passed with landslide majorities in the House and Senate. Critics of the legislation are now claiming the act has drastically increased accounting expenses for existing public firms and discouraged economic growth by discouraging private firms from raising capital by going public and subjecting themselves to the rigor SOX requires.

One problem with measuring the "value" of SOX is that the nature of its focus is likely to encourage over-reporting of compliance costs while discourage reporting of actual disasters averted. Every public company has earmarked dollars in the past three years for projects to implement new processes required by (or assumed to be required by) SOX. These special project dollars often become a catch-all for other projects that have been ignored for other reasons but "now that the SOX team has dollars, we can claim it is related to SOX and get our pet project funded."

On the flip side, how many public companies are going to come forward and announce cases where a new SOX-based process uncovered a major mistake in the company's accounting that averted a major correction in its public books? NONE. For the same reason banks never disclose when they've been hacked or suspect internal breaches of security affecting customer information -- doing so would spook customers or investors. Unless the new SOX-based audits turn up mistakes in books they've already closed and now HAVE to go back and correct, you'll never hear of a SOX success story.

Now think back to GM restating its 2005 earnings and finding $2 billion more in losses. IN ONE YEAR! That's not including the impact of their restatements back to 2000. Let's assume for a minute that the $35 billion cumulative cost to date for SOX is correct. First of all, much of that cost is likely one-time retrofit costs at large Fortune 500 firms as they gutted / replaced antiquated IT systems for newer, more flexible tools. Second, the "value" of SOX is not only the cash value of mistakes identified and corrected due to reporting that SOX put in place. The value also includes the larger damage averted by a $2 billion mistake being nipped in the bud (if $2B counts as a "nip") rather than mushrooming into a complete collapse.

GM is currently worth about $11.95 billion. Let's say GM didn't have any motivation to find those accounting errors that added up to $2 billion and, instead, the executives believed everything was relatively hunky-dory and continued operating the company as they have a bit longer. Things continue to get worse then suddenly the company gets hit with a larger surprise in two years that suddenly spooks investors and bondholders alike, bankrupting the company. Failure to catch that $2 billion mistake could mean the economy sees $11.95 billion vanish. Of course, the $11.95 billion doesn't "vanish", it's just sitting in the wrong hands from an economic standpoint, much in the same way the billions dropped on telecommunications and dot-coms in the 1990s didn't vanish, it just got squandered laying fiber no one needed or building business with no customers.

In short, wouldn't it be preferable to hold GM and other large firms to a tighter standard on financial reporting so financial and strategic mistakes get caught early in time for corrections? Or would you rather allow them to run "unhindered", continue to file rosy annual reports, reward their executives handsomely the whole time for bogus results, then have them suddenly realize there's NOTHING in the tank, file bankruptcy and take 50,000 jobs and pensions and healthcare benefits for another 100,000 with them in a heartbeat?

Is being "pro-SOX" an anti-business stance? Not to me. It's common sense and a "sound-business" stance. No one wants American business to succeed more than me. Pensions will be non-existent when I retire. Social Security in its current form will be non-existent when I retire. I'll likely be on my own for healthcare when I retire. In an environment absent those benefits, the only things I expect for my retirement planning are

1) the possibility of stable employment until I retire,
2) stable financial markets in which to invest my savings
3) stable financial markets in which to leave my nest egg
as I draw on it during retirement

All of these require sound businesses and a growing economy. Neither of these conditions can exist if investors have lost their retirement savings in accounting frauds or are too spooked by accounting frauds to put their money into new equities or bonds.

The "invisible hand" only works in "perfect markets" with large numbers of producers and large numbers of consumers of goods and services. That's not what modern capitalist economies are producing. Instead we are concentrating enormous market and economic power in the hands of two to three hundred global companies with executives so overpaid and under-qualified that one of their compensation perks is tax advice to help them prepare their personal income taxes. I'm sorry, if you can't figure out how to file your personal income taxes on a typical $3 to $6 million salary, we shouldn't be trusting you at the helm of a multi-national, multi-billion dollar public company affected by convoluted tax rules, accounting rules, fluctuating exchange rates, etc. without some outside, independent adult supervision.

Maybe the Fool needs to open a new discussion board on corporate governance and "forensic investing" for individual investors. Maybe the "Ill-Gotten Booty" board?


Wednesday, May 10, 2006

It's Time To Declare War...

Originally Posted: April 16, 2006 -- 7:17 PM
Fool Boards Link: http://boards.fool.com/Message.asp?mid=23979952

A few humble ideas for kicking America's oil addiction.


It's time to declare war…

…On oil.

Here's why.

1) EVERY COUNTRY THAT HAS IT IS NUTS. -- Iran has about 4 million barrels of production capacity a day (equal to the total slack between supply and demand in world markets, by the way) and in their most recent democratic elections, voted for a government and president even more likely to wreak havoc on stability in the Middle east. Iraq has supplies that are likely to go underdeveloped as they attempt to avoid a civil war and cope with other domestic problems we made worse via our invasion. Venezuela is run by Hugo Chavez, noted anti-American nutjob.

Even our OPEC "allies" Saudi Arabia, Kuwait and the United Arab Emirates have threatened a flood of cheap oil if we make serious progress on development of alternative energy sources such as bio-fuels that would drastically curtail our demand for petroleum. They know investor capital for such research will dry up if oil prices drop to $30 barrel. How stupid is that? Think about it. You have corrupt regimes sitting on hundreds of HUNDREDS of BILLIONS of American petro-dollars while they are surrounded by Islamic extremists who would like to destroy them and all that wealth and take them back to a 7th century draconian Utopia. Literally, the only thing keeping them from being toppled and killed by internal rebellion is the United States AND THEY ARE THREATENING US if we try to take the tea kettle off "BOIL" by reducing demand. I wonder what the Arabic word for "chutzpah" is...

2) PEAK OIL ISN'T A THEORY, IT'S HERE. -- The United States consumes roughly 19 million barrels of oil per day out of total world use of about 80 million per day. (#1) Stated another way, 298 million Americans constitute 4.6 percent of the world population yet we USE 25 percent of the world's oil. (#2) Except for those few militant Islamic extremists dreaming of a 7th century Utopia, most of the world aspires to the same level of economic "success" we have. That success means cars, air conditioning, washers and dryers, home computers, and ownership of a big screen, hi-definition, THX-certified, 100 watt 5.1 surround sound home theater system that I'm sure will soon become a federal entitlement program. American energy consumption grows by 5% per year. China accounted for 9.8% of world energy demand in 2001 and their economy is growing by 8-10 percent annually. (#3) China has 4 times the population of the US. Do the math. It isn't pretty.

If you still don't think that we're at the peak of possible oil production, consider the fact that American oil companies, with all the billions they spend on research and exploration for new oil resources, have not built a single new oil refinery in the United States for about 25 years. Sure, they will publicly blame environmental regulations, etc., for pricing a new plant out of practicality, but come on... If the refineries built 25 years ago assuming gas prices in the $1.00 to $1.75 range are profitable under current regulations, why wouldn't a new plant be profitable with gas at $3.00? The reason new refineries have not been built is that there is no point building an asset with a 30-40 year life if you expect supplies of your major raw material (crude oil) to remain flat or go down.

3) WE DON'T HAVE A "RIGHT" TO FOREIGN OIL. -- Put the shoe on the other foot for a minute. Suppose some bug infestation arises from nowhere and wipes out 20 percent of the world wheat or corn crop. If Russia or Iran or some other competitor of the United States could not afford the spiked price, do they have a "right" to ours at the old price if their people are starving? A "right" that would justify them invading the United States to get it at a price they thought was "fair"? Of course not. So why does the United States continue pursuing political and military policies that assume the same is true for oil? If oil fields in Saudi Arabia start drying up, can we justify invading Saudi Arabia when oil hits $120/barrel to protect "our barrels" that we need? THEY'RE NOT OUR BARRELS!

4) YOU CAN'T EAT OIL. -- In the larger scheme of things, the United States really should be in the driver's seat on this issue. Most of the countries we are most dependent on for oil have virtually nothing else to sustain their economy. If we find alternatives to cut demand 20-30 percent, what are THEY going to do to replace that 20-30 percent reduction in income and continue doling out to their citizens to placate them? You can't eat oil. If demand for oil falls drastically, these countries won't HAVE any money to spend on building nuclear weapons programs or funding fundamentalist jihad groups, etc. If you know someone is trying to build a gun to hold to your head, STOP BUYING STUFF FROM HIM that gives him the money to build the gun! It's as simple as that.


So what would the war on oil look like?

NEW VEHICLE GUZZLER SURCHARGE -- Increase the gas guzzler surcharge on large trucks and SUVs to more accurately reflect the true cost to the United States of the energy consumed (wasted) by those vehicles. This new vehicle surcharge will instantly alter decision making by consumers looking for new vehicles, reducing demand for gas guzzlers, thereby decreasing incentives to automakers to continue making them. You still have the right to drive whatever you want but if you choose to commute 40 miles to work in a vehicle getting 12mpg, the cost of putting troops in middle east countries to protect the oil supplies fed to your tank needs to be paid for NOW, not by future generations via deficit spending.

This new guzzler fee truly needs to be a shocker to discourage new purchases of traditional V8 guzzlers. If only $1000 to $2000, those that can afford $40k + vehicles might not be discouraged. For the dis-incentive to be effective, it really needs to drastically outweigh the cost of putting a hybrid engine in the vehicle. I'm guessing some of the new trucks and SUVs being fitted with hybrid engines will probably be $3000 to $5000 extra so this new guzzler surcharge should be at least $6000. SUVs and trucks account for about 51 percent of all new vehicle sales (about 16.8 million total sales expected for 2006). Assuming half of the SUVs and trucks (about 4.3 million vehicles) qualify as guzzlers, if behavior didn't change, this surcharge would raise $25.7 billion yearly.

NOTE --- This surcharge might very well bankrupt GM, which only makes money on the giant SUVs. However, it is more than a small possibility GM will go bankrupt in 2-3 years anyway.

EXISTING VEHICLE GUZZLER SURCHARGE -- The problems with our energy consumption are serious enough where attacking the problem at the margins (new car purchase behavior) is not enough. Existing owners of gas guzzling vehicles must have an incentive to reduce the number of miles driven in those vehicles. A flat surcharge across all existing gas guzzlers regardless of miles driven would be too onerous and costly for individuals. Mere ownership of a guzzler or use of it to pick up stuff at the local home improvement center or drive the team to soccer practice is not the target. A surcharge collected yearly at the state level as part of annual vehicle inspections could provide all the data needed to impose a fee on all miles above 5000 miles per year (which would allow for a daily commute of about 19 miles --- still high for a low MPG behemoth) by vehicles rated by the EPA as getting less than 15 mpg city / 20 mpg highway.

A surcharge of $0.21 per mile above 5000 would roughly equate to a $2.50/gallon surcharge on a vehicle getting 12mpg. Per the US Census bureau in 2002, there were about 24 million SUVs and 38 million trucks on the road in the US. Assuming half (31 million) are the giant behemoths that would incur the guzzler charge and assuming they would average 7500 miles per year (probably low), this would raise $525 per vehicle or $16.3 billion yearly. (I'd like to include an exemption from this if the owner can prove the vehicle was used for car-pooling with at least 2 other passengers but that exemption would be too easy to defraud.)

UPDATE CAFE REQUIREMENTS -- The ludicrous MPG exemption for "trucks" that resulted in the SUV explosion needs to be eliminated. Any vehicle driven more than 7500 miles per year for anything other than construction or bulk delivery should get at least 30mpg highway / 20 mpg city.

IMPLEMENT A FRAUD-PROOF HYBRID AUTO TECHNOLOGY TAX CREDIT -- (A WatchingTheHerd oldie but goodie...). This would give auto makers positive incentives to make IMMEDIATE progress on reducing fuel consumption in a large number of vehicles on the street. The program would implement the following rules:

  1. you must sell 300,000 vehicles or 30% of your year's sales (whichever is higher)

  2. you have to hit this target for three straight years

  3. the vehicles involved must exceed 50 MPG highway / 35 MPG city

  4. the vehicles must meet all safety standards in effect as of 2006

  5. any money spent on R&D on this technology within the US counts towards the tax credit

  6. the tax credit is spread over 5 years beginning AFTER #2 is satisfied

  7. only the first two manufacturers to hit the target get the credit

  8. the benefit only kicks in if you have income and positive tax bills

Here's why the program would help. #1 and #2 ensure the technology has reached mass-market scale and appeal and wasn't just a one time fleet sale. #3 ensures a material improvement in fuel efficiency is produced. #4 ensures fuel economy doesn't cause safety to be sacrificed in the short term to win the credit. #5 gives an incentive to develop the technology HERE and produce new engineering / technology jobs. #6 ensures we begin benefiting from the program before the government starts paying for it. #7 ensures enough incentive is provided for two major manufacturers to develop the technology and have incentive to be a runner up instead of giving up that only Toyota (for example) would win, why try? #8 ensures the program doesn't encourage competitors to bet the farm and incur losses and wind up with tax REFUNDS. The money collected by the guzzler surcharges would in part cover the cost of this program.

WORK HOUR RESTRUCTURING FOR FORTUNE 100 COMPANIES -- The Federal government should mandate 20% telecommuting or 4-day/10-hour work weeks for Fortune 100 companies. I'm guessing the average non-factory worker in a typical Fortune 100 company spends at least 20 to 30 percent of their time weekly in meetings and conference calls. I'm also guessing that the vast majority of these workers are provided laptop computers so they can take work home (part of a separate, insidious plot by corporate America to get even more work out of us...). Finally, I'm guessing at least 70 percent of that demographic have decent broadband Internet service at home. Put these together and there is no reason why the average worker cannot work from home at least one day per week. This might actually boost American corporate productivity by reducing the number of time-wasting meetings and forcing people to actually WORK instead of meeting to TALK about working. Even if you can't guarantee everyone would stay put on their telecommute day, chances are they'll drive less than than their normal commute and do so outside of rush-hour, reducing overall congestion and fuel consumption.

TIGHTER ENERGY EFFICIENCY REQUIREMENTS FOR NEW RESIDENTIAL / COMMERCIAL CONSTRUCTION -- We already know we are going to waste billions trying to rebuild areas destroyed by Katrina. Given that entire cities of home stock are going to be repurchased, given that the areas require air conditioning at least 7 months of the year, and given that taxpayer dollars are funding much of the work, we should at least take advantage of the opportunity to make these areas a test bed for new building codes and more energy efficient homes and office space. Artificially increasing the demand for energy efficient furnaces, air-conditioners, appliances, etc. in this area might produce enough critical mass to drive nationwide trends for both builders and consumers.

RESTRICT PRIVATE CARS AT HIGH SCHOOLS -- Except for teenagers with jobs that begin IMMEDIATELY after work, there is no excuse for a high school with 900 students to have 300 cars sitting in the parking lot and compounding gaz-guzzling traffic jams for full-time workers from 7am to 8am every day. RIDE THE BUS. Period.

ALTER TRADE POLICIES TO SUPPORT ENERGY EFFICIENT TECHNOLOGIES -- Reducing American demand for oil won't do anything to starve the mid-east of cash for terrorism and nuclear programs if China absorbs all the slack by continuing to modernize their economy with mid 20th century industrial technologies. This is perhaps the toughest issue to resolve because anything we do to help China leapfrog to the latest energy technology helps them compete even more effectively with us for jobs than they already are. However, the sheer scale of Chinese demand for such technology may help accelerate pay-back periods for entrepreneurs who develop new technologies for lighting, engines, electrical generation, etc.



#1) United States / World Oil Consumption: http://energy.cr.usgs.gov/energy/stats_ctry/Stat1.html

#2) United States / World Population: http://www.census.gov/main/www/popclock.html

#3) Energy Consumption in China: http://www.eia.doe.gov/emeu/cabs/chinaenv.html

#4) US Vehicle Inventory & Use for 2002: http://www.census.gov/svsd/www/vius/2002.html

Lessons in Civics

Originally Posted: November 7, 2005 -- 12:00 AM
Fool Boards Link: http://boards.fool.com/Message.asp?mid=23265728

This post describes some key philisophical concepts that most Americans seem to have ingored when voting for the past quarter century.


A post on 10/27 (http://boards.fool.com/Message.asp?mid=835266) asked Democratic supporters to "take a stand", "be something besides negative", "start offering options" and "decide what your party believes is good for America".

Okay, I'll bite (again).

I consider myself "independent" and don't claim to (or want to) speak for the Democratic party. However, when Republicans control all three branches of government and the current political climate makes independent candidates unlikely to win office to introduce centrist policies, I feel obligated to point out flaws in majority thought that I feel are doing MAJOR long term damage to the country. I'd love to see people suggest SPECIFIC policies and provide SPECIFIC examples of HOW those policies will produce the desired result with minimal side effects. In fact, I think I've already done that on economic issues:

http://boards.fool.com/Message.asp?mid=22823833 (Problems with the Economy)
http://boards.fool.com/Message.asp?mid=23172927 (Bankruptcy and Game Theory)
http://boards.fool.com/Message.asp?mid=21919387 (Hidden Danger in Privatizing Social Security)

To really change the direction of the country and combat the toxic political climate, voters are going to have to think more philisophically about the role of government, problem solving strategies and how to use the levers of government to ensure officials in the government stay within those frameworks. We're not talking about voting for president of your high school student council. We're talking about voting for people who control nuclear tinker toys with OUR FLAG on them. This is kinda important.


Since 1980, the most consistent element of the Republican Party platform has involved the need to lower any and all taxes. When the economy is going well, tax rates need to be lowered to make it go better. When the economy is poor, tax rates need to be lowered to produce the proper incentives for investment, etc....

Part of the position is based upon a "moral" argument that says taking money away from individuals and giving it to a remote, unresponsive government is just wrong. It flies in the face of American individualism to have a government providing so many of our needs. More cynically, this position is supported as a way to "starve the beast" as a recognition of the fact that attempting to solve problems like poverty, drug abuse, teen pregnancy, etc. simply produces more of the problem.

Americans need to CAREFULLY consider this low-tax philosophy. If lower taxes are ALWAYS better no matter what the circumstances, what does this theory REALLY say? It says that the optimal amount of government is ZERO. That implies that economic growth has no upper limit and the tide floating all boats would continue to rise unbounded as taxes trend towards zero.

Do you REALLY believe in unlimited growth?

When analyzed like an economist, I think there is a fundamental upper bound in real GNP growth that can be achieved in any given year. The economic limit is directly related to a limit on human creativity and our ability to absorb change. No matter how brilliant an idea, the economy can only incorporate so much change per year without speculative bubbles overreaching the true consistent value being produced by the idea. Look at the hundreds of dot coms valued at tens / hundreds of millions that disappeared OVERNIGHT. Would lower taxes from 1996-2001 produced MORE growth? More REAL growth? No way. They would have simply fed the bubble and squandered BILLIONS laying thousands of miles of fiber optic cable to hundreds of failed businesses selling dog toys on a website.

More importantly, do you really believe in ZERO government?

What DO you think the role of government should be?

Before voting for a candidate who aims to cut government and return those dollars to you, shouldn't that candidate be able to identify the role they expect government to play? For me, government's responsibilities boil down to the

  1. protecting the borders of the nation from military threats

  2. faithful, consistent enforcement of all existing criminal / civil laws

  3. operation of a legislative body to create / amend the laws

  4. operation of a judiciary to settle criminal / civil disputes
    regarding existing law using consistent precedents and rules
    of evidence

  5. operation of sound, transparent systems for running elections

  6. management of a sound, unified, stable currency (store of value)

  7. operation of schools to ensure ALL citizens are provided equal
    opportunities to participate equally in the civic, ecomonic and
    cultural life of the nation -- this function also involves the
    responsibility to communicate the laws of the land

  8. providing "public goods and services" such as roads, sewers,
    immunizations, etc. where non-government market incentives fail to
    produce behavior deemed in society's best interest

  9. protecting society from "market failures" where normal economic
    forces fail to prevent private business from producing results
    detrimental to society as a whole -- things like rollover-prone
    SUVs with exploding tires, houses that burn down due to shoddy
    electrical work, etc.

Come up with your own list but please, make sure any candidate you vote for is bright enough to identify their list, suggest policies in sync with those priorities, and that a majority match yours.


Many of the problems introduced by government legislation result from people trying to solve problems without a clearly articulated philosphy of problem solving. An incoherent strategy produces incoherent policies that either fail to produce the intended direct effect or produce side-effects that often cancel out the main goal. Just once, I would like a politician of either party to explain their problem solving approach along the following lines:

  1. the government doesn't pick winners and losers (by giving
    tax breaks or enacting regulations that help or hinder
    specific business segments, technologies, etc.)

  2. the government ensures an even playing field by uniform,
    consistent enforcement of laws and regulations but
    is NOT responsible for ensuring "fair" outcomes

  3. when the government has to provide incentives to private
    industry to produce public benefits, those incentives
    should only be based on achievement of measurable
    criteria and provide the incentives in sync with or
    after the benefits are produced - no lump sum giveways
    PRIOR to the public seeing any benefit

  4. any proposed solution should produce at least two direct,
    measurable, related benefits to ensure we understand
    enough of the problem and its causes to create a
    sound, effective solution


I'm a big fan of the Founding Fathers. There is more insight into human behavior baked into the checks and balances of our Constitution than could fit into a thousand books on pyschology and economics.
However, the Founding Fathers didn't design an absolute fool-proof set of checks and balances. They don't function by their mere existance on paper. They only function in the presence of voters who understand how their government works and understand the intent of those checks and balances.

EVERYTHING about those checks and balances is designed to keep the overall "idea output" of government in the middle of the political spectrum. (Not the simple left / right or Democratic / Republican spectrum, but the full spectrum of political thought.) We have three branches of government with powers that allow any two to check the power of the third. We have powers delegated directly to the people EXCEPT where explicitly assigned to federal, state or local government. We have elected officials with terms designed to allow for quick (within 2 years) changes in popular opinion while imposing some inertia (6 year terms) to prevent short term panic changes in the direction of policy. The process doesn't rule out or prevent gradual movement of "the center" over time but ensures the government cannot swing one way or the other overnight.


I don't think they designed these balances merely to protect themselves at the time from the "tyranny" of their opponents because they didn't think they were assured of controlling the government for themselves. I think they actually had enough humility to understand no one philosophy would always be "right" and that a collective society and government that could remain open to ALL ideas would produce, in the aggregate, a better direction for society than allowing any one extreme color in the spectrum from assuming all power and excluding all other ideas.

If you understand this idea and believe in it, current trends in our elections and the day to day operation of our government (all branches) are of great concern.

Voters in both major parties have repeatedly engaged in "single issue voting" on specific hot button issues, failing to take into account or even acknowledge other positions of those candidates. What happens?

You have candidates for COUNTY government running on pro-life or pro-choice stances. Do you really think abortion issues are going to be decided at the local level? Shouldn't you instead be paying attention to that candidate's position on Tax Increment Financing (TIF) or emminent domain, which could DIRECTLY affect you based upon issues that county official can actually influence?

You have candidates for FEDERAL government winning elections on wedge issues (abortion, taxes) who do NOTHING in office for those issues or while providing them lip service, aid passage of other legistlation that does equal or more harm in other areas.

Both Republican and Democratic voters often state that their choices are often (always?) the "lesser of two evils" rather than a vote for someone they actually POSITIVELY like or agree with. In general, I agree that a "lesser" vote is better than no vote in that, at a minimum, it ensures our elected officials know we ARE paying some attention. However, Americans need to pay attention to the design of our government when making these "lesser" choices.

On a scale of 0 to 100, if you are a "50" voter and see party A publically suggestion solutions at "45" while party B suggests solutions at "60" and you try to pick the party closest to "50", voting for "A" consistently over time will not result in government policies in the "45" range. Why?

After 2 years, 4 years, 6 years (okay, 12 years at most) party A will control both the legislative and administrative branches, giving it the power to swing the judiciary, giving party A control over all three branches. At that point, it won't be the "45" policies that come out of party A, it will be the extreme positions ("0" to "20") since most party functions are controlled by the extreme base of the party. Having control of all three branches of government means more of those 0-20 policies will become law. Not exactly what you wanted, huh?

More importantly, single party dominance of all branches virtually assures the failure of the checks and balances within the government. Much of the daily functionality of our government (committee rules, debate rules, etc. in the House and Senate) are NOT dictated by the Constitution but by tradition and informal rules voted on by the members. If you distort the membership, you distort the rules that dictate how those bodies act.

Is this just my speculation on what could happen with an unchecked Bush administration? No. This is EXACTLY what happened when the Democrats controlled all three branches in the 60s. Drunken sailor spending (Great Society), broken checks and balances on information used in government decision making (Gulf of Tonkin), and misguided military adventures abroad (Vietnam). Single party government is bad regardless of the party in control.


A Hidden Danger in Privatizing Social Security

Originally Posted: January 16, 2005 -- 8:44 PM
Fool Boards Link: http://boards.fool.com/Message.asp?mid=21919387

This piece speculates how privatizing Social Security contributions could produce unintended, poorly understood changes in investment behaviors that could produce another bubble and destroy billions in retirement dollars.


A few thoughts to consider as the administration beats the drum on the inevitable collapse of Social Security.

We've already conducted a bit of a nationwide financial experiment on privitizing retirement plans. The 401k phenomenon.

401k retirement plans became very popular in the late 80s and early 90s with Fortune 500 companies, partly because they could afford to offer matching as a benefit and partly because many placed the funds for matches in company stock with 3-5 year vesting. 401k programs became TREMENDOUSLY popular with these companies in the 94-96 timeframe, when many companies (IBM, SBC, to name a few) started moving away from traditional fixed payment retirement plans and adopting "cash balance" plans.

At the time, the "cash balance" approach was sold as a way where younger workers could gain more from their years of service as they move from company to company every 3-5 years instead of working for one company for 20-30. With traditional retirement plans, most of the increase in value of the pension benefit occurs in the last 5-7 years of a VERY long stay at the company. Employees who leave with less then 10 years walk away with virtually no benefit so cash balance plans provided better value for "job hopper" employees.

What happened during this period?

BILLIONS of dollars began flowing into mutual funds managed by companies hired to run 401k plans for these companies. Since the mutual funds wanted to provide a better return than a savings account or CD, they felt obligated to invest them in SOMETHING to see if they could get a better return.

The cash kept coming. Since the contributions were based upon fixed percentage contributions of biweekly paychecks, the money kept flowing in regardless of prevailing market conditions. With the continued pressure of inflowing cash, the mutual funds kept trying to keep the money invested.

When you have this much cash sloshing in EVERY day and you keep investing it in the market, it becomes a self-fullfilling version of the rising tide floating all boats. I'm convinced this has a great deal to do with the insane market run-up from 1997 until April 2000.

The problem with this is that a simple, but far reaching regulatory / tax policy change began affecting the investment market by fundamentally altering traditional flows of investment capital. Even long term Wall Street "experts" began viewing the situation as a new world, one where we somehow solved the problem of the business cycle, market fluctuations, etc. Remember how things sounded back then?

This is the problem with making a radical change in Social Security.

Change too many variables at one time and NO ONE will understand the resulting impacts. Some segment of the economy will suddenly become awash in cash that seems to flow in regardless of the economic sense of the business or segment. More cash will flow in, then everyone will throw more of their personal cash in following the "sure thing." Then someone will figure out that selling dogfood on a website doesn't justify a $5 billion valuation or that being a middleman on energy futures provides zero value to the economy and things will collapse.

The problem with Social Security is that it provides critical benefits to EVERY taxpayer in the country. If we distort too much of the investment process in too short a time, the "herd" mentality will take over and take HUNDREDS OF BILLIONS in retirement assets with it. What will we have to show for it? Things like we got from the dot-com bubble. Enough fiber optic capacity for each child in America to download the entire Britney Spears music catalog 10,000 times in a day. New business to business applications that allow companies to share information with systems that cost $6 million to deploy instead of $500,000. (I'm being sarcastic but talk to anyone who worked for these companies during the boom... Much of it was a waste, though great fun.)

Probably the most pointless argument of the current administration? That young workers might only see a 3 percent return on their contributions. The administration is ABSOLUTELY correct that you cannot plan on dropping your retirement dollars in 3 percent returns and retire on it. Hoever, THAT'S NOT THE INTENT OF SOCIAL SECURITY. Social Security is intended to be the bottom tier of your retirement puzzle. If some other pieces of your retirement puzzle don't fall into place, you at least have that SS chunk with it's measly 3 percent "return". (I quote "return" because payouts are not really return on your contributions but funds from current payroll taxes.)

How many employees of Enron, WorldCom and other companies would love to have a measly 3 percent return on THEIR 401k contributions?

As an individual, I have zero confidence that significant Social Security benefits will be paid to me when I retire. However, I'm planning for that and have no problem with that -- I consider myself fortunate that I'm able to save what I think I'll need for a comfortable retirement. In the mean time, if you cut Social Security taxes now to give us a chance to save for ourselves, current yearly budget deficits will SKYROCKET above the already DISASTEROUS $400 billion levels, we'll still owe benefits to current retirees because no one will have the political courage to cut benefits or implement basic means testing to keep Donald Trump and Bill Gates from collecting, and the change in cash flows will likely produce another bubble that will wind up destroying BILLIONS of dollars in retirement savings. Like deja vu all over again.


"Things really ARE different this time. Just not for the reasons you think." -- WatchingTheHerd


Originally Posted: January 29, 2006 -- 7:38 PM
Fool Boards Link: http://boards.fool.com/Message.asp?mid=23627924

The second of two follow-ups for strategies for improving the State of the Union.


I posted a commentary on January 22 reflecting an alternative State Of the Union report.

http://boards.fool.com/Message.asp?mid=23593419 (An Alternative State of The Union Report)

I mentioned I'd follow it up with specific suggestions for improvement rather just whining about the status quo. You can read the first batch of suggestions at

http://boards.fool.com/Message.asp?mid=23626816 (SOTU Alternatives: WAR POWERS)

Here's the next batch covering military support and retirement / pension security.


A variety of actions could be taken to address current issues with staffing, equipment, weapons systems and chain of command issues in the military.

Improve pay within the military across the board (deployed, active duty and reservists). -- The 2006 military pay scale increase pay across the board by 3.1 percent. The pay grades available online indicate top pay for enlisted personnel ranges from $1814 (E-5 grade with less than 2 years) to $4022.10 (E-9 grade with over 10 years). That's a range of $21,768 to $48,265 per year. A 2003 supplementary spending bill (part of a $79 billion total) signed by President Bush increase combat pay from $150 to $225 per month and a Family Separation Allowance from $100 to $250 per month and another $100 for hardship duty in Iraq or Kuwait. THINK ABOUT THAT. $575 per month in extra compensation for serving in combat on top of base pay that amounts to chump change given the risks involved and toll on personnel and their families.

This isn't a criticism of Bush per se. This is a damning statement about how we as a country attempt to compensate people who are sacrificing a great deal by being in the military even if a shot never gets fired. Most members of the military aren't in it for the money and no amount of money could compensate them for their service. However, I would sure prefer having more money go to military personnel DIRECTLY than go through a corporation and employees not under the military's Uniform Code of Military Justice and chain of command.

DRASTICALLY curtail use of military contractors in combat. -- Doing so will reduce chain of command and accountability issues within war theatres. Typical daily pay rates for contractors of Blackwater, Halliburton, etc. can range from $350 to $1500 per day ($91,000 to $390,000 yearly for a 5 day week) for security forces, convoy protection. If the risk is great enough to warrant that kind of pay, the area is not stable enough to trust to non-military forces. That money should go to ACTIVE military personnel with current training and logistical support to provide the proper security. This by no means assumes that paying enlisted soldiers $70-90k for combat duty in any way "compensates" them for their service (nothing can really do that...) but it will likely improve our insight into what's happening on the ground (single chain of command), ensure responsibility for actions we take is clear and likely improve retention rates in the volunteer military.

Eliminate Stop-Loss Retention of Personnel -- Stop-loss practices increase the hardship faced by active military forces and their families and make prospective enlistees think long and hard about volunteering. If I sign up for a 5 year hitch and wind up deployed in year 5, I might get stuck serving an extra year or longer. With more work doled out to contractors, the work remaining for active duty forces is growing in "intensity". Given the financial and family sacrifices made by those in the military, we owe them at least the right to walk away when they've completed their hitch. Continued use of stop-loss policies will ultimately harm readiness and morale.

Eliminate the Osprey V-22 and build a reliable replacement for the Chinook. -- The Chinook choppers still in use date from 1964. I'm not sure it's possible to design a helicopter that can withstand the dust of a desert but current troop transport choppers seem to kill too many troops without an enemy shot. The Osprey has been a lemon from Day One and was nearly eliminated by Cheney as Defense Secretary in 1992 before it was revived by the Clinton Administration. It should have been left for dead.


Government is not responsible for ensuring specific dollar levels of financial security to individuals. Trends indicate Americans are clearly on their own going forward to save for retirement and manage that nest egg on their own. Most new workers acknowledge that responsibility (some happily). As companies move away from defined benefit pensions, they aren't giving that money to employees to invest themselves. The employees are going to have to save from current incoming and become even more watchful of their money. It then becomes government's responsibility to improve the management transparency of these investments by:

Improving protection of remaining pension funds in bankruptcy -- Bankruptcy law should be updated to put non-executive employees at the top of the pecking order for available pension funds. This change would prevent funds in remaining pension plans from being raided or squandered by executives and jeopardizing the retirements of even more employees. The pecking order might be

* retired employees
* employees with more than 20 years service
* remaining non-executive employees
* executives' normal retirement

The exact rules ("20 years service", whatever) can be argued but the aim is to ensure that employees who presumably have entered their "fixed income" years get top priority of remaining dollars, while employees who have a chance to make up for the loss of promised savings feel more of the pinch while executives, who are typically over-compensated anyway come last. If you're an executive making $200-300k per year (or $2-3M per year), you should have a lot more cushion to deal with losing your pension than line employees making $30-70k.

Nullifying all executive deferred compensation plans in the event of bankruptcy -- If senior executives were being paid enough money to sock some away outside 401ks, etc. on a tax deferred basis and the company went bankrupt, those executives clearly didn't deserve the oversized compensation to begin with. What better triggering event to eliminate those obligations than a bankruptcy filing? Any remaining cash in the company should go to creditors and non-executive employees, not towards completing the overpayment of the executives who led the company into bankruptcy.

Preventing pension funds for retired employees from being invested in company stock -- As employees of Enron and WorldCom now know and as most financial advisors will tell you, it is a really BAD idea to invest your 401k money in your own company's stock. You already depend on the company for your salary (and maybe its pension) so adding 401k savings to the list bets your entire financial picture on a single company. However, many companies who DO offer pensions actually invest the pension contributions they make in the company's own stock. When things go well, this boosts the company's stock, allows the company to expand, further improves returns, etc. This may be good for the company but it is bad financial policy for society as a whole if the company suddenly goes bankrupt leaving thousands of retirees with nothing. Companies should be required to gradually begin shifting funds associated with retiree pension benefits to mutual fund type investments rather than leaving those dollars in the company's stock.



2006 Military Pay Scale: http://www.dod.mil/dfas/money/milpay/pay/Web%20Pay%20Table%20Version%202006%20-%20updated.pdf

Combat Pay Bonuses: http://usmilitary.about.com/cs/moneymatters/a/combatzone.htm

Contractor Pay in Iraq: http://www.cnn.com/2004/WORLD/meast/04/01/iraq.contractor/

SOTU Alternatives: WAR POWERS

Originally Posted: January 29, 2006 -- 1:41 PM
Fool Boards Link: http://boards.fool.com/Message.asp?mid=23626816

One of two follow-ups for improving the State of the Union.


I posted a lengthy commentary (do I write any other kind? -- smile) on 2006/01/22 reflecting an alternative State Of the Union report.


In that post, I mentioned that rather than just whining from the sidelines without suggesting alternatives, I'd actually provide some suggestions of concrete polices that could address some of those issues.

Before some of the details, a few political comments.

First, being the minority doesn't obligate the minority to simply sit down in the back seat and shut up while the majority drives the country towards obvious problems. In the current climate, this seems to be a common theme of conservatives who like the status quo and think dissent is defeatism or aid and comfort to the "enemy."

Second, the minority (whichever side you're on) is OBLIGATED to speak up and propose alternatives, even if it lacks the votes to get them enacted, just to ensure a balance of ideas is presented to the public. The minority cannot withhold its ideas in a futile attempt to keep the other party from "stealing" them and taking credit. If the ideas are good enough, the public will figure out where they came from eventually.

Having stated that, conservatives need to remember that when you control all the levers of government, everything that comes out of government (pointless military adventures, wasteful spending, etc.) or fails to come out of government (emergency support after disasters, appropriate enforcement of industry, etc.) will be YOUR RESPONSIBILITY from a political standpoint when Americans finally wake up.

Are these suggested as "Democratic" or "Republican" proposals? I don't think Democrats can change enough of their inertia in one or two years to reorient the ship. I don't think Republicans have the courage to walk away from tactics and policies that appear (in the incredibly short term, political sense only) to be succeeding. Think of them as "Alternative" suggestions.

Here's the first of a few.



The language of the War Powers Act needs to be updated to reflect the realities of asymmetric security threats, terrorism and the relationships between military and law-enforcement responsibilities to meet these threats. Under the Constitution, the Congress is responsible for declaring war and providing funding for the military. Specifically,

To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

To provide and maintain a Navy;

To make Rules for the Government and Regulation of the land and naval Forces;

To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;

To provide for organizing, arming, and disciplining the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;

Under the Constitution, the President is granted authority as Commander in Chief of the military. Specifically,

The President shall be Commander in Chief of the Army and Navy of the United States, and of the Militia of the several States, when called into the actual Service of the United States; he may require the Opinion, in writing, of the principal Officer in each of the executive Departments, upon any subject relating to the Duties of their respective Offices, and he shall have Power to Grant Reprieves and Pardons for Offenses against the United States, except in Cases of Impeachment.

Read the above clauses again, CAREFULLY. They unambiguously state that the President is the commander in chief of military / militia forces once called into the actual service of the United States. They unambiguously state that only Congress has the power to DEPLOY any military force against foreign or domestic threats.

The WPA was enacted in 1973 as a response to the process (or lack thereof) that got us into Vietnam and allowed the war to escalate into an unproductive military and social disaster without ever formally declaring war. In the WPA, Congress attempts to reassert the language of the Constitution while recognizing present day war technology posed threats in scale / immediacy that might require military response before formal debate and a declaration of war.

Interestingly, section 4(b) reiterates that while it is the President's role as Commander in Chief to DIRECT the military once IN a war, it is the Congress' role to COMMIT the nation to war. Section 2(c) is the most important clause of the document and merits the most clarification. It states:

The constitutional powers of the President as Commander-in-Chief to introduce United States Armed Forces into hostilities, or into situations where imminent involvement in hostilities is clearly indicated by the circumstances, are exercised only pursuant to (1) a declaration of war, (2) specific statutory authorization, or (3) a national emergency created by attack upon the United States, its territories or possessions, or its armed forces.

So what constitutes a national emergency? More importantly, how do you identify when a national emergency ends?

September 11, 2001 was clearly a day that began a national state of emergency. We had four known hijacked airliners operated by unknown personnel with then-unknown support mechanisms. Attacks were conducted on four crucial targets and succeeded on three of four. Once the hijackers had been identified by name, it took about two weeks to retrace their steps from security check-in back to rental cars, hotels, apartments leased, flight schools attended, arrival flights into the country from Saudi Arabia, etc. and their links to Bin Laden. In the mean time, flights had resumed with much tighter security checks to counteract another sucker punch attack using the same tactics. At that point, we no longer had a national emergency from an unknown danger but (sadly) a new state of existence.

The Bush Administration clearly believes that

a) we are still in a state of emergency

b) The President's role as Command-in-Chief trumps all other Constitutional responsibilities of Congress and the Judiciary during a state of emergency

c) The existence of a declared state of war or implied state of war or "emergency" where military forces are engaged empowers the President to use powers as CIC across the entire spectrum of national policy and government action.

d) The President's role as CIC entitles him to manage military and intelligence policy without the oversight of Congress to protect "national security" and avoid indefinitely (forever?) divulging information that would risk the security of military forces or American citizens.

Even a novice reading of the above clauses from the Constitution would indicate the Founding Fathers never had any intention to grant such sweeping powers to the Executive branch. The WPA needs the following changes to restore the balance of power between Congress and the Executive branch.

Redefinition of the term State of Emergency -- The language of the WPA was clearly intended to allow the use of military forces to restore security and order after extraordinary events (attacks or otherwise). However, the identification of some new physical threat not previously understood CANNOT be used to declare a permanent state of emergency and certainly CANNOT be used to allow the President as CIC to direct military forces for indefinite periods of time combating indefinite "dangers" and "enemies."

The WPA should be amended to require Congress and the President, within 30 days of military deployment for a "state of emergency", to jointly agree upon an exact definition of the emergency condition and criteria that will identify the end of that state of emergency. If no such agreement can be reached, the deployment should be halted within 1 year.

Require a Declaration of War -- As written, the WPA virtually assures the United States will never formally declare war ever again. Congress will "authorize" the President to pursue all means to avoid war as a public stick towards the opponent, the President will "make all possible efforts" to solve a problem via diplomatic means, then deploy troops during a perceived emergency and troops will remain committed indefinitely without a clear mission. (Sound familiar?)

Neither Congress or the President should get off so easily. The WPA should be amended to REQUIRE Congress to formally declare war within 30 days any time the President deploys troops in a foreign nation. Doing so will hopefully ensure greater clarity in our mission and objectives and public buy-in and stop the current pattern of poorly planned, escalating commitments.

Clarification of Military versus Asymmetric Terrorist Threats -- Al Quieda and other groups clearly have no will, desire or courage to form a traditional military battalion and take on the 82nd Airborne or build a few ships and shoot it out with a Navy task force in the Indian Ocean. They cannot afford it nor does it suit their strategy. We cannot afford using full-blown military responses in response to potentially thousands of terrorist threats or actual attacks, nor is appropriate to allow the President to justify use of other powers as CIC in response to threats which cannot adequately be addressed by the military. An amended WPA should define explicit boundaries between military support services for military versus terrorist targets.

Clarification of Command Intelligence Within the Military -- Supporters of domestic spying believe that it involves identification of military threats to the United States and, as such, constitutes military "command intelligence" and can be authorized by the President via his role as CIC. The super-secret, super-strategic nature of this information leads many to believe the President has no obligation to share either the data gathered or information about the methods used to obtain it with Congress. The CIC function was assigned to the President simply to have a clear decision tree on military matters, not to allow the president to operate the military without Congressional oversight.

The WPA should be amended to EXPLICITLY state that any intelligence categorized as COMINT is still subject to the oversight of Congress, including information gathered via theatre command, NSA, CIA, etc. Few argue the need to conduct domestic spying under certain circumstances, only that all such spying MUST be conducted within the informed oversight of Congress and the courts.

It is absolutely the President's right under the Constitution to make the final call on military tactics and responses but NOTHING in the Constitution allows him to hide from Congress WHAT information he is acting upon and HOW that information was obtained.



The War Powers Act: http://www.cs.indiana.edu/statecraft/warpow.html

The United States Constitution: http://www.usconstitution.net/const.html