Eric Holder unleashes a special counsel on U.S. war fighters - link to original article

‘It would be unfair to prosecute dedicated men and women working to protect America for conduct that was sanctioned in advance by the Justice Department.” –Attorney General Eric Holder, April 2009

“Justice Department Names Prosecutor to Reopen CIA Abuse Cases” –Wall Street Journal, yesterday

Wall Street Journal 

AUGUST 25, 2009

Mr. Holder had it right the first time. His about-face yesterday, compounded by his release of a 2004 internal CIA report on that agency’s handling of terrorists, opens a political war that President Obama, the CIA and above all the country will live to regret.

This is a trap the Administration set for itself. Mr. Obama and his team have attempted to appease their political left by publicly denouncing the Bush Administration’s national security policies, even as they claimed to want to forget the past. Their disparagement has only fed the liberal demand for Bush prosecutions and increased the pressure on Mr. Holder to appoint a prosecutor.

Justice threw kerosene on those politics yesterday with its release of findings compiled by the CIA’s inspector general in 2004 about the agency’s detention and interrogation of terrorists. The ACLU had won a court order for their release. We were still reading its hundreds of pages at deadline, but most of the supposedly damning details had already been leaked. The new bits include the fact that interrogators threatened terrorists with a gun shot in a nearby room, with a power drill and cigarette smoke, and against Khalid Sheikh Mohammed’s family. We suspect millions of Americans will be shocked to learn that these unshocking details are all that the uproar over “torture” is about.

The CIA itself commissioned the IG review early in the first Bush term, the agency sent an unredacted copy to the Senate and House Intelligence Committees in 2004, and the entire membership of both those committees was given access to the report in 2006. The CIA also sent the report to the Department of Justice in 2004, referring allegations of abuse for potential prosecution. Current CIA Director Leon Panetta, in a note yesterday to agency employees, pointed out that “career” prosecutors (not Bush appointees) evaluated each of those claims “carefully and thoroughly, sometimes taking years to decide if prosecution was warranted or not.”

The DOJ brought only one case, convicting a CIA contractor who beat a detainee who subsequently died. In no other case did Justice attorneys decide that a prosecution was warranted. This is no surprise, given that most of the techniques outlined in the CIA report had been approved by superiors and declared to be legal in official legal opinions.

Yet none of this counted for much yesterday, as Mr. Holder used the report’s release as an occasion to appoint federal prosecutor John Durham as a special counsel to re-open the cases for potential criminal prosecutions. His decision was supported by a recommendation from Justice’s Office of Professional Responsibility, which has been complaining about CIA practices for five years and now finally has a willing ear in the new Attorney General.

By naming Mr. Durham, who is already investigating destroyed CIA videotapes, Mr. Holder suggested this was merely an expansion of an existing probe and would be limited in scope. He described Mr. Durham’s task as a mere “preliminary review” of overseas interrogations, which may not result in any charges.

We hope he’s right, but special prosecutions, once unleashed, have often been impossible to control. Mr. Durham may well begin by examining isolated cases where CIA interrogators are accused of breaking the law, such as the CIA employee who supposedly fired a gun in a room close to a detainee, in an attempt to make the detainee believe a colleague had been executed. This threat of potential imminent death may have violated some statute, though it was used against men who were thought to have information that could save innocent American lives. But Mr. Durham will be under enormous pressure to investigate everyone up and down the CIA chain of command, starting with those who merely followed the legal opinions, and going all the way to senior CIA officials such as former Director George Tenet and other Bush Administration officials.

Mr. Holder’s decision has already re-energized demands to prosecute the Bush lawyers who wrote the legal opinions that authorized enhanced interrogations. As New York liberal Representative Jerry Nadler declared recently, going after the CIA interrogators who “waterboarded” a detainee with “eight ounces” of water rather than the Bush lawyers who decreed they could only use three ounces, would be “terrible.”

All of this will further demoralize a CIA that has already been stigmatized by House Speaker Nancy Pelosi and other Democrats as an agency populated by rogues who lied to Congress. This is the same agency that Mr. Obama and all Americans are counting on wage a war against al Qaeda and deter future terrorist attacks. The message that Mr. Holder’s criminal probe will send to thousands of men and women is that they had better not do anything remotely controversial on behalf of American safety, even with a lawyer’s permission. This war against our own war fighters comes just as President Obama’s counterterror escalation in Afghanistan is getting more difficult.

***

By threatening to prosecute CIA officials, the Obama Administration is taking ownership of future troubles in a way that will only do itself harm. Like the Church and Pike probes of the 1970s, Americans will once again see that the Democratic Party cares as much or more about settling scores against fellow Americans as it does about fighting the war on terror. Mr. Holder yesterday acknowledged that his decision to reopen the old CIA wounds would be “controversial.” He will soon learn how much.

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Our greatest president remembered, warts and all - Link to original article

BY GLENN GARVIN 

ggarvin@MiamiHerald.com

The Miami Herald - Feb 8, 2009 

• American Experience: The Assassination of Abraham Lincoln, 9-10:30 p.m. Monday, WPBT-PBS 2 

• Looking for Lincoln, 9-11 p.m. Wednesday, WPBTPBS 2 

• Stealing Lincoln’s Body, 9-11 p.m. Feb. 16, History Channel corpus and tries civilians in military courts. He blocks newspapers from publishing anything he considers damaging to national security — defined rather loosely — and spies on citizens’ telecommunications. 

    You probably didn’t real-See if any of this sounds familiar: A president plunges the country into a war he expects to end within weeks, but four years later, it’s still bloodily dragging on. He suspends the writ of habeas ize George W. Bush and Abraham Lincoln had that much in common, did you? To be fair, there are important differences between the two. When The New York Times and Wall Street Journal were about to run stories on U.S. spying in the war on terrorism, Bush merely tried to talk them out of it. Lincoln actually shut down hundreds of newspapers. 

    And while Bush ordered military trials for only a couple of dozen detainees, most of them foreigners captured on or near combat zones, Lincoln jailed thousands of American citizens. Most were arrested far from any battlefield, sometimes for such ‘‘offenses’’ as saying, ‘‘I wouldn’t wipe my [butt] with the Stars and Stripes.’’ 

    Another important difference: While Bush limped from office last month with the lowest popularity ratings of any American president, Lincoln is a mythical figure who’s regularly named the greatest president in history in polls of historians. 

    The creation of the Lincoln myth is at the heart of three engrossing documentaries airing over the next two weeks, timed to coincide with the 200th anniversary of his birth on Feb. 12. Looking for Lincoln probes how presidents as different in politics and temperament as Franklin Roosevelt, Ronald Reagan, Bill Clinton and George W. Bush can all claim inspiration from Lincoln. 

The Assassination of Abraham Lincoln examines how the president’s murder transformed his reputation. And 

Stealing Lincoln’s Body 

explores some of the weirder manifestations of the Lincoln obsession. 

‘LOOKING FOR LINCOLN’ 

    The most ambitious and captivating of the three is Looking for Lincoln, written and hosted by Henry Louis Gates. The Harvard literary scholar, who is black, grew up idolizing Lincoln as the Great Emancipator, only to suffer jolting disillusion when he learned the president was a racist who didn’t believe in social or political equality for blacks. 

    ‘‘He seemed to draw a distinction between freedom on the one hand and equality on the other,’’ says Gates, noting that during Lincoln’s famous debates with Stephen Douglas, he opposed letting blacks vote, serve on juries or marry whites. Even Lincoln’s Emancipation Proclamation was less an act of racial liberation than a military tactic aimed at disrupting the South’s economy; it only applied to slaves in the Confederacy, not the border states allied with the North. 

    As disconcerting as Lincoln’s real racial beliefs may be to anyone raised on the Emancipator myth, they are not terribly hard to reconcile. Lincoln was not only a man of his time, steeped in its deep racism, but also a politician keenly aware of the dangers of tacking too far from the mainstream. Even so, Lincoln’s beliefs were evolving; by the time of the assassination, he even supported limited black suffrage. 

    More puzzling to Gates is Lincoln’s cavalier disregard for the U.S. Constitution and civil liberties. The military draft he ordered (America’s first), the kangaroo courts and ruthless suppression of dissent, were so deeply unpopular at the time that Lincoln himself expected to lose his 1864 bid for reelection. (He was saved only by the Union army’s ruthless drive through Georgia, which convinced voters that the war was nearly over.) 

    ‘‘In Lincoln’s case, much of the most heated criticism that dogged him during the Civil War has been forgotten,’’ says Gates. ‘‘Today he basks in history’s glow, a moral giant.’’ 

    Lincoln, Gates concludes, comforted himself with the idea that he would be properly judged not by voters but by history itself, which wouldn’t consider the way he pushed the levers of power, only the results. That’s a view that has understandably appealed to other American presidents in troubled times, including the most recently departed occupant of the White House. 

    ‘‘I am a president who has been accused of excessively using presidential power,’’ Bush tells Gates. ‘‘I would defend my decisions and continually defend them, and so it’s hard for me to be critical of any of the decisions Lincoln made. . . . I do think that history will end up judging any president in the whole, as opposed to a particular decision.’’ If that sounds like saying the ends justify the means, is it really any different than the historians who anoint Lincoln as a great president for keeping the Union together, regardless of how he did it? 

‘THE ASSASSINATION 

OF ABRAHAM LINCOLN’ 

    If Gates was surprised at how quickly the public doubts about Lincoln were forgotten, John Wilkes Booth, the gunman whose story is recounted in The Assassination of Abraham Lincoln, was downright astonished. 

    An actor who imagined himself larger than life since boyhood, Booth expected to finally fulfill his heroic destiny by killing a president whom many Americans regarded as a tyrant. Hiding out in the days after the assassination, he was appalled to see that newspapers were portraying him not as a liberator but as a cowardly traitor. 

    Ironically, by martyring Lincoln, Booth probably did more to cleanse his reputation than a thousand modern spinmasters could have accomplished. ‘‘It was with the assassination that the myth of Abraham Lincoln was born,’’ notes one historian in Assassination. ‘‘Lincoln was not uniformly liked or beloved during his presidency. Millions of people hated him. Once he was assassinated, everything changed.’’ 

‘STEALING 

LINCOLN’S BODY’ 

    Just how strongly and strangely beloved he became is the subject of Stealing Lincoln’s Body, which recounts the obsessive spasm of national grief that followed his death. The man whose reelection seemed in doubt just five months earlier was now proclaimed such a genius that his brain was removed and weighed to see if it was significantly heavier than other men’s. It wasn’t. That’s one lesson about Lincoln future presidents might want to remember.

Wall Street Journal - link

Feb 19, 2008

The Central Asian Republic of Kyrgyzstan experienced a cyber attack last month that took down its two largest Web sites. But that’s small beer compared to what happened to the Pentagon and several other U.S. agencies in 2007, when cyber attackers successfully hacked into their computer systems, including Defense Secretary Robert Gates’s email.

Welcome to the brave new world of cyber war, an area where the U.S. lacks the dominance it enjoys in traditional military arenas. President Obama’s recent appointment of Melissa Hathaway to head a 60-day cyber security review is a sign that he is serious about stepping up the battle in cyber space.

Like other forms of terrorism, cyber war offers an attacker asymmetrical advantages and can be used by individuals as well as governments to debilitate and confuse civilian and military targets. The more governments and economies rely on the Internet, the more vulnerable they become. Michael McConnell, the recently departed National Intelligence Director, called cyber security “the soft underbelly of this country.”

The Bush Administration made some progress, such as last year’s executive order creating the Comprehensive National Cyber Security Initiative. This highly classified $6 billion program aims to secure the dot-gov and dot-mil domains by instituting basic security measures for federal agencies. These include installing improved monitor programs — known as “Einstein” — to detect intrusions on federal computers, for example, and sharing attack information across federal departments.

The U.S. government deflects low-level cyber attacks every day. Many are seeking sensitive information, such as weapon designs or classified communications. Security experts say most hackers who target Washington appear to operate from China, although the nature of the Internet makes it impossible to know for certain. In 2007, the government reported nearly 13,000 information security attacks, more than twice the number in 2006. Brigadier General John Davis, deputy commander of the cyber security unit at U.S. Strategic Command, told us his mission deals with millions of cyber “events” every day, although not all of these turn out to be attacks.

Cyber attacks can also be coupled with conventional warfare, which is what happened in Georgia in August. Even before Russian tanks rolled over the border, hackers — probably Russian — probed Georgian government Web sites and took several down. Russian hackers are also believed to have attacked Estonia in 2007, freezing government and private information systems, including banks, for days, apparently in retaliation for Estonia’s decision to remove a historic Russian statue.

The U.S. hasn’t experienced such a coordinated and sustained attack, but no one is sure what would happen if it did. A known vulnerability is America’s power grid, which could be disrupted for months by a sophisticated cyber attack, experts say. In telecommunications, banking and transportation, it’s harder to predict how great the damage would be; the current season of the TV program “24″ is showcasing some of the more unpleasant possibilities. It makes sense that one of Ms. Hathaway’s first tasks is overseeing an assessment of the country’s vulnerabilities.

The task is complicated by the lack of a legal framework that defines cyber war and security standards. It isn’t clear whether the government can dictate security standards for private industry or if federal agencies can probe private networks to determine their safety. If you thought the debates over warrantless wiretapping were heated, get ready for fireworks over cyber security.

Responsibility for U.S. cyber security is shared across many federal agencies. The Departments of Defense and Homeland Security, the FBI, the CIA, armed services and others all have cyber security projects. A successful counterterrorism strategy has to be decentralized to some degree, but better coordination is needed. A good defense also requires a shift in mentality for anyone with access to sensitive computer systems — even an ordinary flash drive can become a weapon if handled carelessly.

The experiences of Estonia and Georgia show that cooperating with allies to share information — and possibly coordinate counterattacks — is an important element of any response. Cyber warriors typically take control of computers in a third country, from which they launch their attacks. Negotiating agreements on cyber security with allies will also help make the U.S. more secure.

Mr. Obama released a statement on homeland security last month saying he would “declare the cyber infrastructure a strategic asset.” That’s a start. As the attacks on Kyrgyzstan remind, an aggressive response to the cyber threat can’t come soon enough.

FISA sets the record straight.

Wall Street Journal - link

Jan 16, 2009

Ever since the Bush Administration’s warrantless wiretapping program was exposed in 2005, critics have denounced it as illegal and unconstitutional. Those allegations rested solely on the fact that the Administration did not first get permission from the special court created by the 1978 Foreign Intelligence Surveillance Act. Well, as it happens, the same FISA court would beg to differ.

In a major August 2008 decision released yesterday in redacted form, the Foreign Intelligence Surveillance Court of Review, the FISA appellate panel, affirmed the government’s Constitutional authority to collect national-security intelligence without judicial approval. The case was not made public before yesterday, and its details remain classified. An unnamed telecom company refused to comply with the National Security Agency’s monitoring requests and claimed the program violated the Fourth Amendment’s restrictions on search and seizure.

But the Constitution bans only “unreasonable” search and seizure, not all searches and seizures, and the Fourth Amendment allows for exceptions such as those under a President’s Article II war powers. The courts have been explicit on this point. In 1980, the Fourth Circuit Court of Appeals held in Truong that “the Executive need not always obtain a warrant for foreign intelligence surveillance.” The FISA appeals court said in its 2002 opinion In re Sealed Case that the President has “inherent authority to conduct warrantless searches to obtain foreign intelligence information” and took “for granted” that “FISA could not encroach on the President’s constitutional power.”

FISA established a process by which certain domestic wiretaps in the context of the Cold War could be approved, not a limit on what wiretaps were ever allowed. Though the decision applies only to the stopgap FISA measure in place between 2007 and 2008, it sets a precedent.

For all the political hysteria and media dishonesty about George W. Bush “spying on Americans,” this fight was never about anything other than staging an ideological raid on the President’s war powers. Barack Obama ought to be thankful that the FISA court has knocked the bottom out of this gambit, just in time for him to take office.

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How about some pro bono work for the government?

By WILLIAM MCGURN

Wall Street Journal - Dec 16, 2008 - Link to original article

Within the ranks of our leading law schools, law firms and legal centers, it would be hard to find a cause more popular than the detainees of Guantanamo Bay. Every lawyer wants his own detainee or detainee group. The result is that dozens of the world’s most dangerous men now have their own legal Dream Teams.

In this context, wouldn’t it be refreshing to hear the dean of some Ivy League law school, or a partner in a white-shoe law firm, stand up and say these words: “As part of our pro bono commitments, we hereby offer our services to the overworked men and women trying to keep our nation safe from terrorist attack.”

You can imagine the reaction. Back in 2007, we had a taste when a Defense Department official suggested that corporate America might look askance at the high-priced law firms devoting their time and talents to those held at Gitmo. In accord with long-established Beltway rituals of public penance, this official soon published “An Apology to Detainees’ Attorneys” in the Washington Post — and soon after resigned. Notwithstanding what this outcome said about the real balance of power, the incident only confirmed the lawyers’ view of themselves as lonely Davids taking on Goliath.

Well, maybe not as lonely as they like to make out. In the popular mind, the 200 or so Guantanamo detainees filing for habeas corpus in federal district courts are up against the full powers of the United States government. And they are. But practically speaking, this means that 60 or so Justice Department lawyers are handling the bulk of that legal load.

Against these 60 attorneys are arrayed some of our nation’s most prestigious private firms. Last year, at a dinner at Washington’s Ritz-Carlton hotel, the National Legal Aide Defender Association bestowed its “Beacon of Justice Award” on 50 law firms for their pro bono work on behalf of the detainees. These firms included WilmerHale; Jenner & Block; Sutherland, Asbill & Brennan; Paul Weiss Rifkin; Mayer Brown; Weil, Gotshal & Manges; Dechert; Pepper Hamilton; Venable; Perkins Coie; Hunton & Williams; and Fulbright Jaworski. These firms in turn are joined by law professors from Stanford, Yale and Northwestern right on down to Fordham.

The imbalance was illustrated by a scene last week at the federal courthouse building in Washington, D.C. There Judge Thomas Hogan was to consider rules governing the habeas corpus petitions of the detainees. That meant half a dozen Justice Department lawyers waiting in a room packed wall-to-wall with high-priced partners — many backed up by legions of associates, outside legal experts, human-rights centers, and concerned law students.

Andrew McCarthy, the former assistant U.S. attorney who successfully prosecuted some of those responsible for the first World Trade Center attack in 1993, knows the disparity firsthand. His organization, the Foundation for the Defense of Democracies, is one of the few filing in defense of the government. “When we file an amicus,” he says, “it goes on top of a three-inch pile. Against that is a 20-foot stack of thick amicus [briefs] written by everyone from the American Civil Liberties Union to [Yale Law School Dean] Harold Koh.”

Now, nothing against those who simply want to ensure those at Gitmo have access to a good lawyer. And if Seton Hall Law School wants to hold teach-ins featuring the poetry of these men — one of whom murdered more than a dozen people in a suicide bombing in Mosul after his release — well, that’s the school’s business. But with all these top-flight lawyers providing separate defenses for each detainee or detainee group, the good men and women at the Department of Justice might stand a little outside help.

There are some very practical areas where this help could make a difference. One good start could include volunteering a few talented partners or legal scholars go through all the amicus briefs and offer their own analysis. Given that the judges have cited these briefs in their rulings, having some high-powered legal minds review the arguments could be a big help.

There are more than 200 habeas corpus cases pending in the federal court in Washington, D.C. This is a tremendous burden for the Justice lawyers and the staff working the cases. It’s hard to imagine that the Justice Department would turn down the help — or that federal judges would not recognize that their courts stand to benefit from it.

The work is not glamorous, and it certainly would not generate the human-rights awards some of these firms have collected for their Guantanamo work. But helping out Justice would be a service to both the country and the rule of law. And it might even protect Barack Obama from the last thing he will want to do as president: setting jihadi terrorists free on American soil.

Write to MainStreet@wsj.com

Here’s how to hold the detainees elsewhere, without damaging U.S. security.

By THOMAS B. WILNER

Link to original Wall Street Journal article

Dec 22, 2008

There has been a lot of media hand wringing recently about all the difficult problems that must be solved in order to close Guantanamo. It’s not so complicated.

First, closing the detention facility there does not mean that we cannot detain people. Guantanamo is only a place. But it is a place chosen by the Bush administration for a single purpose: to avoid the law. Because it is outside our borders, the administration argued that prisoners held there were beyond the jurisdiction of our courts and the protections of the Constitution. The Supreme Court has now rejected those arguments.

In the meantime, Guantanamo has stained our reputation around the world.

There are approximately 250 prisoners still at Guantanamo. They fall into two basic categories. The first, by far the smallest (probably less than 40 detainees) is made up of people accused of being al Qaeda fighters who have planned or engaged in violent acts against innocent civilians. Doing so is a crime, and anyone who intentionally engages in or materially supports those acts should be tried, convicted and imprisoned. Our courts are fully capable of doing so. They have rendered 145 convictions in terror-related cases in the past. And their decisions have far greater credibility than any jerry-rigged commission system ever could.

There is no need for “new rules” to handle classified information. Congress has already established detailed rules and procedures in the Classified Information Protection Act. They carefully balance the defendant’s right to be informed of the charges against him with the government’s need to protect classified information from disclosure. Those procedures have worked in the past and would work again. There is also no need for specialized, extra-constitutional “national security courts.”

Some worry that we won’t be able to convict hardened al Qaeda criminals because the evidence against them was extracted by torture and can’t be used in court. If that is a problem, it exists only for a limited group. We can avoid the problem in the future by not torturing people. In any event, no actual case has been identified where the government would be precluded from obtaining a conviction against a known al Qaeda operative because most of the significant evidence was obtained through torture. True, Khalid Sheikh Mohammed said a lot of things under torture. But he has also freely admitted that he is an al Qaeda fighter.

The second, and by far the largest, category of prisoners at Guantanamo consists of more than 200 men who are being detained for allegedly having fought in Afghanistan. A country may detain individuals who fight against it in an armed conflict, either as members of the enemy’s armed forces or as civilians who directly participated in the hostilities. These people are not criminals; they are detained to prevent them from returning to the fight.

We now know, however, that many Guantanamo detainees never fought against anyone; they were simply turned over by Northern Alliance and Pakistani warlords for bounties of up to $25,000. For almost seven years they have been held without a fair hearing or opportunity to demonstrate those facts. The Supreme Court ruled last June in Boumediene v. Bush that these men have the constitutional right to prompt hearings to determine if there is adequate reason for detaining them. Since that decision, lower courts have reviewed the cases of 23 detainees and have found no credible basis for detaining 22 of them.

Very few court hearings have taken place, however, as government lawyers sought delay after delay. That might be an appropriate legal strategy in some cases, but it is simply outrageous here, where people have been held for nearly seven years. The government should promptly present its cases.

But our government should do more than that. A team of qualified, nonpolitical officials from the appropriate agencies should promptly conduct a detailed review of the classified files of each detainee to weed out the many baseless cases, so that there is no need to present them to courts conducting a habeas corpus hearing. Such a review could be completed within a few weeks. No outside “blue-ribbon” panel is required. No delay in the ongoing cases is necessary.

At the end of the reviews and hearings, a small number of detainees may be found to have participated in hostilities in Afghanistan. Yet after almost seven years we should take a hard look at the likelihood any of them would return to the battlefield. Many were conscripted into service against their will, or served only as cooks or drivers or clerks, or were involved in tribal warfare rather than a fight against us. Some participated in the battle only in the sense that they were fleeing Afghanistan after the bombs began to fall. Why should these people continue to be imprisoned while the two detainees the government first charged with war crimes as Guantanamo’s “worst of the worst,” David Hicks and Salim Hamdam, are now home with their families after serving their sentences?

The great majority of the detainees — close to 200 — want to return to their home countries. Those countries want them back and will take responsibility for them. We can reduce Guantanamo’s population significantly simply by sending home detainees who had no business being imprisoned in the first place. And we should.

Setting aside those who may be subject to criminal charges, we would then be left with about 50 detainees who cannot return home because of fear of torture. Many, such as the Chinese Uighurs, are admittedly innocent people detained by mistake. Other countries are unwilling to take them because we’ve been unwilling to do so ourselves. To convince others to accept them, we must accept some ourselves.

Attorney General Michael Mukasey has opposed that, stating in a recent op-ed in this paper that these people “should not be permitted to jump the immigration line and enter this country.” How myopic and callous! These people have been wrongly detained by our country for almost seven years. Granting some of them sanctuary is the least we can do, particularly when it will help close Guantanamo. It is a problem the incoming Obama administration can readily solve.

Mr. Wilner was counsel of record to Guantanamo detainees in the Supreme Court’s Rasul v. Bush and Boumediene v. Bush rulings.

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Entrepreneurship was taken for granted. Now we’re seeing a lot less of it.

By MICHAEL S. MALONE

Link to original Wall Street Journal article

Even as economic losses and unemployment levels mount, America’s most effective engine for wealth and job creation is being dangerously — perhaps fatally — compromised.

For more than 30 years the entrepreneurship-venture capital-IPO cycle centered in Silicon Valley has generated new wealth, commercialized innovation, and created new companies and industries. It’s also spun off millions of new jobs. The great companies created by this process — Intel, Apple, Google, eBay, Microsoft, Cisco, to name just a few — have propelled most of the growth in the U.S. economy in the last two decades. And what began as a process almost exclusively available to scientists and engineering Ph.D.s became open to just about anyone with a good business plan and a healthy dose of entrepreneurial drive.

At its best, the cycle is self-perpetuating. Entrepreneurs come up with a new idea, form a team, write a business plan, and then pitch their idea to venture capitalists. If they’re persuaded, the VCs invest, typically through several rounds during which the start-up company must meet performance benchmarks. Should the company succeed, it then makes an initial public offering of stock.

The IPO can reward the founders and venture-capital investors, and enables the general public to participate in the company’s success. Thousands of secretaries, clerks and technicians at these companies also have come away from the IPO richer than they ever dreamed. Meanwhile, some of those gains are invested in new venture funds, and the cycle begins again.

It has been a system of amazing efficiency, its biggest past weakness being that it sometimes (as in the dot-com “bubble”) creates too many companies of dubious viability. Now, this very efficiency may be proving to be its downfall.

From the beginning of this decade, the process of new company creation has been under assault by legislators and regulators. They treat it as if it is a natural phenomenon that can be manipulated and exploited, rather than the fragile creation of several generations of hard work, risk-taking and inventiveness. In the name of “fairness,” preventing future Enrons, and increased oversight, Congress, the SEC and the Financial Accounting Standards Board (FASB) have piled burdens onto the economy that put entrepreneurship at risk.

The new laws and regulations have neither prevented frauds nor instituted fairness. But they have managed to kill the creation of new public companies in the U.S., cripple the venture capital business, and damage entrepreneurship. According to the National Venture Capital Association, in all of 2008 there have been just six companies that have gone public. Compare that with 269 IPOs in 1999, 272 in 1996, and 365 in 1986.

Faced with crushing reporting costs if they go public, new companies are instead selling themselves to big, existing corporations. For the last four years it has seemed that every new business plan in Silicon Valley has ended with the statement “And then we sell to Google.” The venture capital industry is now underwater, paying out less than it is taking in. Small potential shareholders are denied access to future gains. Power is being ever more centralized in big, established companies.

For all of this, we can first thank Sarbanes-Oxley. Cooked up in the wake of accounting scandals earlier this decade, it has essentially killed the creation of new public companies in America, hamstrung the NYSE and Nasdaq (while making the London Stock Exchange rich), and cost U.S. industry more than $200 billion by some estimates.

Meanwhile, FASB has fiddled with the accounting rules so much that, as one of America’s most dynamic business executives, T.J. Rodgers of Cypress Semiconductor, recently blogged: “My financial statements are a mystery, even to me.” FASB’s “mark-to-market” accounting rules helped drive AIG and Bear Stearns into bankruptcy, even though they were cash-positive.

But FASB’s biggest crime against the economy and the American people came when it decided to measure the impossible: options expensing. Given that most stock options in new start-up companies are never worth anything, this would seem a fool’s errand. But FASB went ahead — thereby drying up options as an incentive for people to take the risk of joining a young company and guaranteeing that the legendary millionaire secretaries would never be seen again.

Not to be outdone, the SEC has, through the minefield of “full disclosure” requirements and other regulations, made sure that corporate directors would never again have financial privacy and would be personally culpable for malfeasance anywhere in the company. This has led to a mass exodus of talented people from boards of directors in places like Silicon Valley. Full disclosure was supposed to make boards more responsible. Instead, it has made them less competent.

The most important government actions to foster business creation were the 1978 Steiger Amendment, which cut taxes on capital gains to 28% from 49%, and President Ronald Regan’s tax cuts, which reduced them still further to 20%. These tax cuts unleashed the PC and consumer electronics booms of the 1980s, just as the Taxpayer Relief Act of 1997 restored the 20% rate and did the same for the Internet economy in the late 1990s.

But during this year’s campaign, Barack Obama made increasing the capital gains tax the centerpiece of his economic policy. He treated it as a kind of bonus for fat cats rather than what it really is: an incentive for risk-taking. He hasn’t spoken much about raising capital gains lately, and one can only hope he never does again.

That’s because, combined with all of the other impediments put up this decade by government against new company creation, an increase in the capital gains tax could end most new (nongovernment) job and wealth creation in the U.S. for a generation. If Mr. Obama is serious about getting the country out of this recession using something more than public make-work projects, he should restore the integrity of the new company creation cycle: rewrite full disclosure, throw out options expensing, make compliance with Sarbanes-Oxley rules voluntary, and if he won’t cut it, then at least leave the capital gains tax rate alone.

Otherwise, Mr. Obama might end up being remembered as the second Herbert Hoover, not the next FDR.

Mr. Malone, a columnist for ABCNews.com, is the author of “The Future Arrived Yesterday,” forthcoming from Crown Business.

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Why Pennsylvania leads the nation in teacher walkouts.

Link to original article on Wall Street Journal

Dec 22, 2008

Teachers unions routinely claim that the interests of students are their top priority. So we would be interested to hear how the Pennsylvania affiliate of the National Education Association explains the proliferation of teacher walkouts in the middle of the school year.

According to a recent study by the Allegheny Institute, Pennsylvania is once again the worst state in the country for teacher strikes. No less than 42% of all teacher walkouts nationwide occur in the Keystone State, leaving kids sidelined and parents scrambling to juggle work and family, potentially on as little as 48 hours notice required by state law.

The strikes take place despite the state’s ranking in the top 20% nationwide for teacher salaries in 2006-2007 — the most recent data available — with an average of $54,970. Those paychecks go even further when adjusted for the state’s cost of living compared to top-spending school districts in places like California.

Pennsylvania taxpayers aren’t pleased. Last year, a bill to prohibit teacher strikes was introduced in the state legislature by Todd Rock and 28 co-sponsors, only to be sidelined thanks to union opposition. According to a group called Stop Teacher Strikes, 75% of state legislators between 2004 and 2006 received teacher union money. The office of Governor Ed Rendell, who received more than $500,000 in teachers union political action committee cash for his 2006 re-election bid, called the strike ban a “radical response” to the problem.

That “radical” revision is actually similar to the rule in 37 states that have passed laws banning teacher strikes. Under the text of the strike bill, due to be reintroduced in January, teachers would have to give up two days of pay for each day they are out on strike. Under current law, Pennsylvania teachers see no adverse consequences from a walkout. In New York by contrast, the Taylor law punishes unions that walk off the job with fines and other penalties. According to the Allegheny Institute, similar strike laws have been upheld in the courts and have eliminated walkouts in states like Georgia, North Carolina and Tennessee.

Stop Teacher Strikes identifies 110 school districts in Pennsylvania that are currently under immediate risk of strike — and more than 100 more whose contracts will expire by next summer. And while the number of strikes in Pennsylvania fell in 2007-2008, the time kids were furloughed during each strike rose to an average of almost 13 days. That’s a sizeable chunk of the school year.

For too many teachers, the motto seems to be: When in doubt, walk out. The burden of enduring a strike then falls on families in which both parents need to work. The disruption is used as negotiating leverage by the unions, which know that parents will besiege school districts with calls begging them to settle. This amounts to a form of legal extortion. If Pennsylvania’s teachers want to educate kids about justice and equity, they can start by ending a strategy that uses students as pawns to extract more taxpayer dollars.

OPENING ARGUMENT

THOSE WHO RUN OUR SCHOOLS AND HEALTH CARE SYSTEMS ARE PARALYZED BY FEAR OF BEING HAULED INTO COURT.

National Journal magazine

Saturday, Dec. 20, 2008

by Stuart Taylor Jr.

Link to original article

It’s no secret that America’s public schools, health care system, and lawsuit industry — among other institutions — are broken. After decades of alarming reports and reform efforts, they still cost far more, and with worse results, than those of almost all other developed countries. And President-elect Obama’s hope of changing things dramatically for the better faces an uphill battle.

A big part of the reason, New York City lawyer-author-civic leader Philip Howard writes in a forthcoming book, Life Without Lawyers: Liberating Americans From Too Much Law, is that our institutions and their leaders are paralyzed by tangles of legal rules and diverted “from doing what we think is right” by fear of being unfairly hauled into court.

“We will never fix our schools, or make health care affordable, or re-energize democracy, or revive the can-do spirit that made America great,” Howard writes, “unless American law is rebuilt to protect freedom in our daily choices.” By this he means freeing ourselves from “the confusion of good judgment with legal proof.”

“Washington is paralyzed,” writes Philip Howard, by “decades of accumulated law, beyond the influence of anyone except special interests.”

Reprising the themes of Howard’s best-selling Death of Common Sense in 1995, Life Without Lawyers also proposes some far-reaching remedies, designed in part to affirmatively define and protect the freedom of people in positions of authority to fulfill their responsibilities in their own way. To be published on January 12, its 191 pages are crammed with telling cases, anecdotes, and data. It brims with insights into how “rights” that were created to prevent “unfairness by those in authority” are now “guaranteeing unfairness to the common good.”

Howard, who is a senior partner in the New York City office of Covington & Burling and chairs Common Good, a legal reform organization that he founded in 2002, has convinced an ideologically eclectic array of leaders that he is on to something. Life Without Lawyers carries admiring blurbs by New York City Mayor Michael Bloomberg, former Sen. Bill Bradley, former Harvard University President Derek Bok, and former House Speaker Newt Gingrich.

The book focuses especially on our schools, health care system, and lawsuit industry — which itself plagues schools, as illustrated by the ban on running in playgrounds that one Florida county adopted after having to settle 189 playground lawsuits in five years, and health care, as demonstrated by the surge in childhood obesity caused in part by overcautious playground safety rules.

• Lawsuits. The modern American approach to litigation includes “letting anyone sue for almost anything,” Howard explains, with endless proceedings in cases that judges would once have dismissed out of hand. This is “supposedly neutral [but] in fact tilts the scales in favor of whoever is in the wrong. Defendants can coerce an unfair settlement by dragging their feet, and plaintiffs can extort settlements by suing for ruinous damages irrespective of actual loss or fault.”

The book traces how the “rights revolution” of the 1960s and ’70s, initially a shield against abuses of power by government and business, has morphed into an engine of abusive and often fraudulent lawsuits that allows “self-interested parties to invoke legal power unilaterally to threaten the livelihoods of other free citizens.”

This “tyranny of the angry individual,” Howard writes “turns our rights upside down…. The lawyers pretend that they’re Robin Hood, with the modern twist that they keep much of the money for themselves.”

One reductio ad absurdum was the $54 million lawsuit against a Washington dry cleaner accused of losing an administrative law judge’s pants. The multimillion-dollar claim was obviously frivolous. But the courts kept it alive for more than two years of legal wrangling at a cost of over $100,000 in legal fees, exhausting the savings of and inflicting misery on the store’s Korean-born owners. No wonder only 16 percent of respondents in a 2005 Harris poll commissioned by Common Good said they would trust justice if someone brought a baseless claim against them.

The incremental tort reforms pushed by business and physicians groups won’t fix the fundamental problem, in Howard’s view. What’s needed, he says, is to “restore the authority of judges to draw legal boundaries,” by dismissing unreasonable lawsuits at the outset and penalizing those who bring them. He also suggests creating independent “risk commissions” to propose guidelines identifying activities that should be immune from lawsuits.

• Schools. Despite massive reform efforts, “reading scores in elementary and high schools have stayed flat for almost 40 years. In that period, the ranking of American students has consistently fallen relative to their peers in other developed countries.”

Why? In large part because literally thousands of bureaucratic rules imposed by local, state, and federal governments prevent good teachers and principals from using their best judgment on what works; because “due process” and special-education rules have made it very difficult to remove disruptive students; and because labor contracts have made it almost impossible to fire bad teachers.

Disorder is “at epidemic level” in many schools, Howard writes. In Public Agenda surveys, more than 40 percent of high school teachers have said they sometimes spend more time trying to keep order than teaching, and nearly 80 percent of middle and high school teachers said they have been threatened with lawsuits or accused of rights violations by students. Another survey found that one in seven teachers in urban schools had been physically assaulted by students. Some have been seriously injured. Principals send disruptive students back to class for fear of being sued or dragged through endless hearings. In New York City, more than 60 steps and legal considerations are required to suspend a student for more than five days.

Such disorder is not a big problem in most parochial and charter schools, or in other developed countries, Howard writes, because “teachers in those schools have the authority to enforce values of common civility.”

Meanwhile, “the toxic combination of union protectionism and the 1960s expansion of due process” have brought us to a point where “years of legal argument — years — are required to get rid of a bad teacher.”

How to fix all this? Legislatures should “shove the rulebooks aside” and purge law from the routine daily life of schools, and liberate teachers and principals to act on their own best judgment. This should include the freedom to remove disruptive students without hearings or fear of lawsuits and fire teachers without litigation over tenure.

Would this risk unfairness to some? Sure. But that would beat the unfairness to all students of disorderly classrooms and bad teachers. And as a check, independent committees of parents, students, and/or teachers could be created to overturn disciplinary decisions. Committees including union officials could be empowered to overrule unfair teacher firings.

• Health care. The legacy costs dragging down General Motors “are feathers compared with what’s weighing down health care,” Howard says in an interview. His book cites data showing that “unnecessary care — motivated by legal fear, greed, and ineffective variations in care — accounts for upwards of 30 percent of the total bill. Defensiveness seeps into daily decisions like an acid, corroding professional instincts of what’s right.”

This includes “a sea of forms and waivers” that waste doctors’ (and patients’) time, unneeded tests and procedures, and distrust between doctor and patient, all driven by fear of malpractice lawsuits, which often win monetary settlements even though the doctors did nothing wrong.

“Health care can’t be fixed,” argues Howard, unless we establish special “health courts” for medical malpractice claims, staffed by expert judges and neutral expert witnesses, with expedited proceedings, incentives for early settlements, and written opinions to establish and enforce consistent standards of care, rather than jury verdicts that vary from case to case. The result, he predicts, would be compensation for more people, fewer big-dollar pain-and-suffering awards, and dramatically lower legal expenses. Patients groups as well as providers support pilot projects of this kind.

• Washington. “Washington is paralyzed,” Howard writes, by “decades of accumulated law, beyond the influence of anyone except special interests that scurry around the baseboards making sure nothing ever changes.” It “can only be fixed from the outside,” he argues, by mobilizing “a national coalition of citizen leaders to propose an overhaul of government” and build public pressure for change.

He has had a taste of the current paralysis up close, in meetings in which a House Democratic leader dismissed his proposal for a health court pilot project out of hand because “the lawyers are against it.” A Bush political adviser rejected it because the president preferred to push a doomed damage-cap bill and then blame the Democrats when it failed.

Howard’s diagnoses may be a touch hyperbolic. His prescriptions will strike many as hopelessly utopian and others as unnecessary at a time when a man elected on a platform of changing Washington is about to take power.

But Life Without Lawyers makes a powerful case that unless leaders from outside the world of politics overpower the entrenched special interests that dominate both major political parties, even Barack Obama will have little chance of transforming Washington — and no chance at all of fixing our schools, health care, or stultifying legal culture.