Saturday, December 23, 2006

Worst week for stocks in 5 months - 1.1% fall for S&P 500; concerns of slowdown

Worst week for stocks in 5 months - 1.1% fall for S&P 500; concerns of slowdown
Copyright © 2006, Chicago Tribune and Bloomberg News
Published December 23, 2006

U.S. stocks had their biggest decline of the month and their worst week since July after the latest report on American manufacturing prompted concern the economy is slowing.

The market dropped for a third day after the government said durable goods orders, excluding transportation equipment, fell more than economists forecast. Trading on the New York Stock Exchange was the slowest this year, as investors left early for the Christmas Day holiday.

Alcoa Inc., the world's biggest aluminum producer, and Freeport-McMoRan Copper & Gold Inc. paced a retreat for raw-material stocks on concern factories may reduce output. Boeing Co. and Intel Corp. led the Dow Jones industrial average lower.

"Mainstream industrial America, which has been humming along at a good clip, is finally starting to slow," said Dan Bandi, who oversees $2.5 billion as chief investment officer at Integrity Asset Management in Independence, Ohio. "That has spooked some investors."

The Standard & Poor's 500 index ended the week down 1.1 percent, the worst five-day decline since July, on concerns a slowdown in manufacturing signals businesses are cutting production. The index on Friday lost 7.54, or 0.5 percent, to 1410.76.

The Dow lost 78.03, or 0.6 percent, to 12,343.22. The three-day losing streak for both averages is the worst since Nov. 3.

The Nasdaq composite index slid 14.67, or 0.6 percent, to 2401.18, falling for a fifth day, the worst streak since June.

Some 991 million shares changed hands on the New York Stock Exchange, the fewest for a full session in 2006.

The Dow average slipped 0.8 percent this week, while the Nasdaq declined 2.3 percent.

Alcoa slumped 6 cents, to $29.24. Freeport-McMoRan Copper & Gold Inc., which is buying Phelps Dodge Corp. to create the world's biggest copper producer, lost $1.01, to $53.84. Phelps Dodge retreated $1.31, to $116.90.

Boeing, the second-biggest maker of commercial aircraft, fell $1.18, to $88.76. Intel, the largest semiconductor company, slipped 29 cents, to $20.08. A measure of industrial companies fell 0.7 percent for the third-biggest decline in the S&P.

Financial Times Editorial - Wishing it could be Christmas every day?

Financial Times Editorial - Wishing it could be Christmas every day?
Copyright The Financial Times Limited 2006
Published: December 23 2006 02:00 | Last updated: December 23 2006 02:00

An unusual - perhaps unique - investment opportunity has arisen that is ideally suited for private equity investment. The target company owns an exclusive franchise, several valuable brands, its own production facilities and a carbon-free distribution network. There are also attractive opportunities for consolidation in its industry: the festive gift-giving business.

The company in question has been in business for more than 1,600 years, having been founded by Saint Nicholas, Bishop of Smyrna in Turkey. His first transaction was to deliver bags of gold down the chimney of a poor man, to provide his three daughters with dowries. Today the company is based in Lapland, Greenland and the North Pole at custom-built manufacturing sites where a dedicated workforce of elves produces gifts for hundreds of millions of children on all six continents.
Distribution now takes place on three dates: December 6 (St Nicholas's day), December 25 (Christmas day in western Christian churches) and January 7 (the eastern Orthodox Christmas day). Orders are received in the weeks preceding the appropriate festival by post, telephone, e-mail and - the oldest method - letters sent up chimneys. Gifts are delivered on sleighs drawn by reindeer, which makes no contribution to greenhouse gases.

The company is loss-making, since no way has been found to monetise its output (apart from the odd mince pie and glass of port left out for Santa's little helpers). Production costs are high, because it manufactures the gifts in high-cost locations and its facilities are underused - expensive equipment and a highly skilled workforce are idle for much of the year. It has also failed to exploit its intellectual property, charging no royalties for the use of trade marks such as Father Christmas, Santa Claus and Grandfather Frost.

Under new management, all this could change. First, the company should end production altogether, and transform itself into a pure retailer. It could then source all its gifts from low-cost countries such as China.

Second, it should move online and adopt a similar business model to Google. Customers would be required to order on the company's website, where they could search for the latest gifts - generating fees every time a paid-for search result was clicked. The company could also provide after-sales service on premium telephone numbers from a call centre in India

Third, the company should manage its trademarks properly. Retailers should pay royalties for running "Santa's grottoes", as should companies using Father Christmas to market products and the writers of songs such as "Santa Claus is Coming to Town". Strict measures should be taken against those who damage the brands - including the makers of films such asISaw Mommy Kissing Santa Claus.

Finally, there is considerable scope to acquire similar businesses associated with other religious festivals such as Hannukah, Diwali, Eid-al-Fitr and Chinese new year. Substantial economies of scale should be achieved, since the different festivals are spread throughout the year.

The attached business plan shows that at current low interest rates, the acquisition could be largely debt-financed - generating substantial returns for the equity investors. The offer closes in 12 days, and early expressions of interest would be appreciated. The commanding market position of the existing owners shows that this is a winner-takes-all business.

Housing downturn slows US growth

Housing downturn slows US growth
By Eoin Callan in Washington
Copyright The Financial Times Limited 2006
Published: December 21 2006 15:32 | Last updated: December 21 2006 15:32

The US housing downturn dented consumer spending more than previously thought in the third quarter and dragged down economic growth, government figures showed.

The economy grew by an annual rate of 2 per cent in the quarter compared to a prior estimate of 2.2 per cent, according to final statistics released on on Thursday.

The weaker-than-forecast growth was the result of a fall in investment in homes and weaker consumer spending on services, the Commerce Department said.

The threat to consumer confidence from the housing slowdown is one of the main risks to the US economy. However, the dimmer picture for the third quarter is unlikely to influence the Federal Reserve, which is already looking ahead to next year as it keeps interest rates on hold.

The central bank is cautiously optimistic that the economy will grow at a moderate pace next year and recover from an end-of-year downturn.

The Fed is also slightly more concerned about the threat of higher inflation than the risk to growth from the sharpest correction in the housing sector in 15 years.

The central bank is alarmed about stubbornly high increases in core prices and remains ready to raise rates to stem inflation, despite investor concern about the economic oultook.

The figures released on Thursday showed core prices - which exclude volatile food and energy costs - slowed to 2.2 per cent in the third quarter from 2.7 per cent in the second quarter.

But compared to a year ago, core prices rose by the fastest rate in more than 10 years, underlining the finely balanced risks to the economy, economists said.

Robert Mellman, an economist at JP Morgan, said the revisions to consumer spending estimates were “modest” and that inflation was in line with expectations.

The US slowdown is also killing off growth in the Canadian economy, according to Statistics Canada, which said on Thursday that economic activity stagnated in October after falling 0.4 per cent in September.

Friday, December 22, 2006

International Herald Tribune Editorial - Saner voices in Iran

International Herald Tribune Editorial - Saner voices in Iran
Copyright by The International Herald Tribune
Published: December 22, 2006

President Mahmoud Ahmadinejad of Iran has not been having a very good month, which is good news both for the beaten-down people of Iran and for the outside world.

The populist demagogue, it seems, is not so popular with important elements of Iranian society growing uneasy over the price Iran may have to pay for his belligerent pursuit of nuclear technology. This week, Ahmadinejad's oil minister acknowledged that foreign banks were pulling back from financing Iranian oil projects because of the worsening nuclear dispute.

The clearest evidence of Ahmadinejad's troubles came in last week's elections for municipal offices and the national council that oversees the work of Iran's supreme leader, Ayatollah Ali Khamenei. Ahmadinejad's supporters fared surprisingly poorly. The main gainers came from two very different opposition groups, one aligned with former President Ali Rafsanjani, an establishment conservative, and the other with remnants of the cautious reform movement led by former President Mohammad Khatami.

Rafsanjani, a venomous foe of Israel (with his own nuclear appetites), is so notorious for the corruption that marred his presidency that his political career had almost gone into eclipse. Khatami's followers are more high-minded, but still managed to fumble Iran's best chance for reform in decades. What distinguishes them from Ahmadinejad's supporters is their recognition that Iran exists in the real world. They understand that its future requires good relations with foreign investors, trade partners and educational institutions.

Ahmadinejad has been systematically dynamiting those relations, by defying the International Atomic Energy Agency and the United Nations and with his loathsome circus of Holocaust denial. Though meant to whip up voters, that travesty failed to save his supporters from electoral defeat.

Last week, in a remarkable show of courage, students at one of Tehran's elite universities openly denounced Ahmadinejad as a dictator and a fascist, forcing him to cut short his planned address.

Their anger had been stoked by a blatantly political purge of professors and students, a crackdown on basic personal freedoms, and worries that economic mismanagement and diplomatic provocations were blighting their future. Two weeks ago, the students chanted, "Forget the Holocaust — do something for us." Last week, one of them told a reporter: "A nuclear program is our right. But we fear that it will do more harm than good."

Indeed it would, and it is encouraging to hear from Iranians who recognize that threat. Washington needs to keep pushing for effective economic sanctions that will compel Ahmadinejad to recognize it as well.

Toyota set to lift crown from GM - '07 forecast indicates end of 81-year reign

Toyota set to lift crown from GM - '07 forecast indicates end of 81-year reign
By Martin Fackler
Copyright by The International Herald Tribune.
Published: December 22, 2006

TOKYO: Toyota Motor said Friday that it planned to sell 9.34 million vehicles next year, a figure that analysts said would be big enough to put it ahead of the troubled General Motors as the world's largest auto company.

Toyota reported global group sales this year of 8.8 million cars and trucks, below GM's forecast for 2006 sales of 9.2 million vehicles. But the figures Friday showed the two rival car giants on starkly different trajectories, with Toyota expecting to add a half million in vehicle sales in 2007, at a time when GM is closing plants and laying off workers.

Surpassing General Motors would be a crowning achievement for Toyota, a company that got its start in the 1930s by reverse-engineering GM and Ford cars, and that spent decades catching up with Detroit. It would also end GM's 81-year reign over the global auto industry, and mark another step in the rise of Asian carmakers.

But becoming the global leader would also have its pitfalls for Toyota, analysts warned. The Japanese automaker could become a victim of its own success and follow GM's decline, they said, if it grows complacent or lets quality control slip amid its rapid expansion. Being at the top could also make Toyota a fatter target for critics, particularly in the U.S. Congress, where the company's rise could fan a protectionist backlash, analysts said.

"Does being No. 1 matter? It matters for GM, and for America," said Hirofumi Yokoi, an auto analyst at CSM Asia. "It becomes a political issue when America gets passed in a core industry. Toyota will have to be even more sensitive and cautious in the U.S. market."

Toyota's emergence as No.1 would also realign the global auto industry. The Japanese car company would become the new industry benchmark, analysts said, and one that would be tough to match. While GM's strength in recent years has been its finance arm, Toyota's success is grounded in its formidable manufacturing prowess. As the world's most profitable carmaker, Toyota also has the cash to invest heavily in new technologies and products.

Analysts also said that reaching the top would not exhaust Toyota's opportunities for growth. They said the company would continue to gain in the American market, where higher gasoline prices have increased the popularity of smaller, more fuel-efficient vehicles. They said that Toyota was expanding in developing markets, particularly China, and into alternative-energy vehicles, like hybrid and fuel-cell technologies.

Toyota's rise would also prove a victory of sorts for its unique corporate culture, the so-called Toyota Way, which is rooted in an obsession with craftsmanship and constant improvement, or kaizen. Analysts said the Toyota Way would likely become enshrined as the industry's gold standard and the model to mimic or surpass for new challengers from South Korea and China.

"This proves that the Toyota Way is more than just an odd, quirky theory," said Chester Dawson, author of the book "Lexus: the Relentless Pursuit." "Being No.1 means Toyota now sets the standards that everyone has to beat."

For Toyota, the immediate concern appears to be avoiding any political fallout from passing GM. On Friday, Toyota's president, Katsuaki Watanabe, treaded lightly around the issue of his company's overtaking GM, while announcing it may open another factory in North America. At a press conference in Nagoya, near his company's Toyota City headquarters, Watanabe said passing GM "is just a question of results," and not a significant event for Toyota, according to Bloomberg News.

Toyota is also considering another factory somewhere in North America, Watanabe said. The company just opened a $1.28 billion pickup truck plant in San Antonio, Texas last month, and has another factory under construction in Woodstock, Ontario slated to open in 2008. Toyota has been building plants in the United States since the 1980s, partly to blunt trade criticism. The expanded production will help Toyota to meet U.S. sales gains without increasing exports from Japan, a Toyota executive vice president, Tokuichi Uranishi, said.

Watanabe also addressed Toyota's growing number of recalls this year, which have tarnished the company's reputation for sterling quality. In Japan alone, Toyota has recalled 1.2 million vehicles this year, prompting the Transport Ministry to order the company to improve quality control.

Analysts said the growing number of defects could seriously undermine the company in the long run.

"Now that it's Toyota's turn on top of the industry," said CSM's Yokoi, "Toyota has to figure out how to keep from following GM into decline."

So far, the defect problems have not slowed Toyota's pace of growth. The company said Friday that it and its affiliates expected to build 9.42 million cars and trucks next year, up from 9.04 million this year. The Toyota group includes two subsidiaries, the truck maker Hino Motors and a maker of compact cars, Daihatsu.

Toyota also gave a regional breakdown for its sales forecast for next year of cars built by the parent company that bear the Toyota and Lexus brands. The largest market will remain the United States, where sales are expected to rise 6 percent, to 2.68 million vehicles.

The company also said it expected a 9 percent rise in Europe and a 15 percent gain in Asia, including China.

Some analysts noted with irony that being No.1 had not helped the current title holder, GM, which posted $10.6 billion in losses last year.

"Being on top won't change anything in terms of share price or earnings," said Atsushi Kawai, an auto analyst at Mizuho Investors Securities in Tokyo. "In fact, if you look at who's been No.1 until now, you see that there really aren't many benefits at all."

N. Korea vows to build its 'deterrent' arsenal after talks end without progress

N. Korea vows to build its 'deterrent' arsenal after talks end without progress - North's threat comes after nuclear talks end without progress
By Joseph Kahn
Copyright by The International Herald Tribune
Published: December 22, 2006

BEIJING: Talks to end North Korea's nuclear weapons program closed Friday without tangible progress, and Pyongyang quickly renewed threats to "improve its nuclear deterrent."

American and Asian diplomats said that during five days of negotiations in Beijing, the North Korean delegation declined to discuss disarmament in formal sessions, insisting that it would do so only after the United States removed financial measures that have further isolated Pyongyang from the international economy.

China, the host for this and previous rounds of the inconclusive negotiations, said the participants in the talks — the United States, China, North Korea, South Korea, Japan and Russia — had agreed to "reconvene at the earliest opportunity." A U.S. official said the talks could resume early next year.

But the latest impasse may signal the increased difficulty — analysts say the near impossibility — of persuading North Korea to give up its nuclear program now that it has tested a nuclear device and declared itself a nuclear weapons state.

Christopher Hill, chief U.S. envoy at the talks, said the American side had not left "empty handed," arguing that North Korea had at least nominally recommitted itself to a 2005 draft accord to scrap its nuclear weapons. But he acknowledged that the latest round did little to bolster confidence in the six- party negotiating process.

"We are disappointed that we were unable to reach any agreement," Hill said Friday evening. "It was certainly a surprise that they refused to engage on the main issue before the six parties."

But he also suggested that the United States remain committed to finding a diplomatic solution.

"Diplomacy is not an easy task, but like many things in life you have to look at the alternatives," he said.

North Korea's chief negotiator, Kim Kye Gwan, blamed the United States for the stalemate. Referring to the Treasury Department's decision in 2005 to blacklist a bank based in Macao that held North Korean assets, he said financial penalties must be removed before Pyongyang would discuss steps to dismantle its nuclear weapons.

The United States "is using a tactic of both dialogue and pressure, carrots and sticks," Kim said. "We are responding with dialogue and a shield, and by a shield we are saying we will further improve our deterrent."

The Bush administration says the move against the Banco Delta Asia in Macao was triggered by North Korean counterfeiting of U.S. dollars and the laundering of proceeds from drug running and that it has no direct relationship to the nuclear talks.

Hill suggested that the North was using finances as the latest in a long string of excuses to avoid engaging seriously in the nuclear negotiations.

Warning on home-backed bonds

Warning on home-backed bonds
By Saskia Scholtes in New York
Copyright The Financial Times Limited 2006
Published: December 22 2006 02:00 | Last updated: December 22 2006 02:00

Bonds backed by risky US "subprime" mortgages were downgraded in record numbers in the fourth quarter, Fitch Ratings said yesterday, the latest in a series of ominous signals for the fast-growing sector.

Two such mortgage lenders have failed this month.

Subprime mortgages are higher-interest loans made to borrowers seen as risky because of their credit history or debt levels. The loans are often packaged into securities and sold to investors to help lenders reduce their risks. More than $500bn of these securities have been issued this year.

In recent months, a growing number of the underlying borrowers have fallen behind on payments. Fitch has downgraded 100 of these securities since October and expects further deterioration in 2007.

Grant Bailey, analyst at Fitch, said: "The environment for subprime became quite negative in the second half of 2006, because thesector is very sensitive to slowing house price appreciation."

When house prices are rising quickly, Mr Bailey said, struggling borrowers can refinance, consolidate their debt, or sell their homes. But the US housing market slump has meant borrowers have had far fewer options. This is reflected in an almost 50 per cent increase in serious delinquencies on subprime loans this year.

Mortgage lenders have relaxed lending standards in an effort to maintain volumes. Subprime mortgages have been big business for investment banks.

Akhil Mago, mortgage analyst at Lehman Brothers, said: "Excess capacity in the mortgage banking industry, coupled with dramatically lower risk aversion in the capital markets, has taken its toll on underwriting standards."

This means that the most recent crop of loans carry some of the highest risks.

A study from the Center for Responsible Lending foresees one in five subprime mortgages started over the past two years will foreclose.

Earlier this month, California-based Ownit Mortgage Solutions was the latest to shut its doors due to "unfavourable conditions of the mortgage industry".

Iraq stops Bush from staging a Reagan-stylerevival

Iraq stops Bush from staging a Reagan-stylerevival
By James Mann
Copyright The Financial Times Limited 2006
Published: December 22 2006 02:00 | Last updated: December 22 2006 02:00

Can President George W. Bush somehow manage to resuscitate his administration in his final two years in office, in the fashion that Ronald Reagan did in 1987-88? That seems to be the dream at the Bush White House. As he has in the past, the current president seems to be attempting to use the Reagan presidency as a model. The problem is that the comparison is preposterous.

It starts with a superficial similarity: Reagan's presidency hit its nadir six years into his presidency, amid the Iran-Contra scandal, much as the Bush presidency has reached a low point today. By the early months of 1987, the Reagan administration seemed to be in hopeless disarray. Mr Reagan fired his chief of staff; his national security adviser resigned; the previous national security adviser attempted suicide; Reagan's Central Intelligence Agency director was in the hospital on his deathbed; the Democrats had taken over the Senate; Congress was vigorously investigating the administration. Time Magazine's cover story for March 9 1987 asked: "Can Reagan Recover?" (It quoted a rising young Republican congressman named Newt Gingrich, who said: "He will never again be the Mr Reagan that he was before he blew it.") Yet Mr Reagan eventually left office on a high note. In his last two years, overcoming the opposition of conservatives in his own party, he negotiated and won Senate approval for an arms-control treaty banning an entire class of nuclear weapons. He held summits with Mikhail Gorbachev in Washington and Moscow that eased cold war tensions. In 1987, his administration persuaded Chun Doo Hwan, the South Korean president, to give way to democratic change.

The George W. Bush administration now seems to be hoping for a similar, Reagan-style turnround. The president may conceivably look for diplomacy to come up with something he can leave as a legacy - in North Korea, for example, or (after the goading of the Baker-Hamilton report) in the Middle East. In his rhetoric, Mr Bush may try to move towards the political centre by emphasising the themes he tried out in last year's State of the Union speech: that he is opposed to isolationism and protectionism.

Yet all these efforts seem likely to fail, for the simple reason that in both personal and political terms, Mr Bush has been profoundly different from Mr Reagan, in ways that go to the heart of Mr Bush's situation today.

The most obvious reason he will not be able to turn things round is that there is a war on: it will consume the administration's energies over the final two years. The Iraq war underscores the first and most important difference between the two presidents: Mr Reagan was extremely cautious about sending troops into conflict. His military intervention in Grenada was small-scale and quick; when American marines were killed in Lebanon, he reacted by quickly withdrawing the troops. The ideas that eventually became known as the "Powell doctrine" for the use of force - that US forces should be sent to war only under limited circumstances, on a carefully defined mission, in overwhelming numbers and with a clear understanding of how the conflict will end - were originally drafted in 1984 by Caspar Weinberger, defence secretary, for Mr Reagan. (Weinberger's military aide at the time was Colin Powell, who then embraced and updated Weinberger's rules when he became chairman of the joint chiefs of staff.) It was precisely these Reagan-era rules that the present Bush administration cast aside in going to war in Iraq.

Second, in foreign policy, Mr Reagan, in spite of his truculent rhetoric, took care not to rule out dialogue with adversaries. One of Mr Reagan's most hawkish advisers on Soviet policy, Richard Pipes, recalled in his memoir how, even amid the defence build-up of Reagan's early years and his denunciation of the Soviet Union as an "evil empire", he specifically warned his advisers that the administration should do nothing to "forego compromise and quiet diplomacy" with Moscow.

Third, as a politician Mr Reagan courted bipartisan support from the start of his administration. The thrust of his strategy was to win over Democrats in Congress, not humiliate them or draw partisan lines, as Mr Bush has. To be sure, Mr Reagan had a greater need to do this: he faced a Democratic House of Representatives throughout his presidency, while Mr Bush has until now possessed a Republican majority. Mr Reagan also knew that he had the ability, as a speaker, to go over the heads of Democratic congressmen to their constituents. But Mr Bush has been neither genial in dealing with Congress nor articulate in public, and thus has little chance of appealing for support in the way Mr Reagan did. In fact, the "Reagan Democrats" of the 1980s are precisely the sort of voters Mr Bush just lost in the November congressional elections.

Mr Bush still retains the considerable authority of the presidency and one should not underestimate the opportunities this gives any occupant of the White House to change course if he chooses, particularly in foreign policy. But Mr Bush will have to spend most of his remaining time in the White House dealing with the war on which he chose to stake his presidency.The idea that he can mount a Reagan-style recovery by 2008 is a mere -chimera.

The writer, author of Rise of the Vulcans: The History of Bush's War Cabinet, is author-in-residence at Johns Hopkins University's Paul H. Nitze School of Advanced International Studies

Rep. Goode not backing down over Koran flap

Lawmaker affirms Muslim remarks
By Joel Havemann
Copyright © 2006 Los Angeles Times
December 21, 2006

I do not apologize, and I do not retract my letter

WASHINGTON - Rep. Virgil H. Goode Jr. (R-Va.) on Thursday stood by his demand for strict immigration controls that he said would prevent Muslims from being elected to Congress and using the Koran during swearing-in ceremonies.
Islamic groups in the United States called on Republicans to repudiate Goode's remarks, which he first made in a letter attacking the use of the holy book in a ceremonial oath-taking next month by the first Muslim elected to the House. 'I do not apologize, and I do not retract my letter,' Goode said emphatically during a session Thursday with reporters in the southern Virginia town of Rocky Mount.

Questioned later on Fox News Channel's 'Your World,' he said, 'I am for restricting immigration so that we don't have a majority of Muslims elected to the House of Representatives.'

The incoming House member at the center of the controversy, Keith Ellison, told CNN's 'The Situation Room' on Thursday that he could trace his ancestors to Louisiana as far back as 1742. 'I'm about as American as they come,' said Ellison, who converted to Islam in college.

The Minnesota Democrat said he planned to use the Koran only as part of an unofficial individual swearing-in before friends and supporters. That event will follow the official ceremony in which all House members raise their right hands and pledge their allegiance to the Constitution and the laws of the United States, without resting their left hands on anything.
Goode said Thursday that he wrote the letter in response to constituents who e-mailed him about Ellison's decision to use the Koran. In the letter, he said his own ceremony would be different. 'When I raise my hand to take the oath on swearing-in day, I will have the Bible in my other hand,' Goode wrote. 'I do not subscribe to using the Koran in any way .
'If American citizens don't take up and adopt the Virgil Goode position on immigration, there will likely be many more Muslims elected to office and demanding the use of the Koran.'

In the letter, Goode said he favored halting illegal immigration and strictly curtailing legal immigration. In particular, he noted, he would halt the 50,000 'diversity visas' set aside each year for people from countries with few immigrants to the United States, saying they allow 'many persons from the Middle East to come to this country.'

'I fear,' he wrote, 'that in the next century we will have many more Muslims in the United States if we do not adopt the strict immigration policies that I believe are necessary to preserve the values and beliefs traditional to the United States of America.'

Goode's letter was dated Dec. 7 but only became public this week. Republican officeholders and the Republican National Committee have kept silent about Goode's comments, but Muslim organizations castigated him for religious insensitivity - and worse. 'Statements such as Rep. Goode's incite fear and mistrust between communities and misrepresent the contribution of a large segment of the American people,' James Zogby, the president of the Arab American Institute, said in a statement.

His group called on Goode to apologize, and the Council on American-Islamic Relations asked state and national Republican leaders to repudiate Goode's remarks. An RNC spokeswoman said the committee had nothing to say about the issue. Neither outgoing House Speaker J. Dennis Hastert (R-Ill.) nor his staff was available for comment. Rep. Rahm Emanuel (D-Ill.), chairman of the committee that helped his party recapture control of the House last month, said he hoped Goode would meet with Ellison.

'I think he'll see what I saw - a good American with good values, of a different faith, who's trying to do right by the people he represents,' Emanuel told Fox News Channel.

Goode is not the first Virginia Republican to talk his way into controversy in recent months. In August, Sen. George Allen used the word 'macaca' - which was perceived as a racial slur - to refer to a volunteer of Indian descent who was working for his opponent, Democrat Jim Webb. Before he made that comment, which was caught on videotape and posted on the Internet, Allen held a large lead in the polls; he lost a cliffhanger election in November. Ellison had little to say about the current controversy, instead urging all sides to pay attention to the one document to which everyone at the swearing-in of the new Congress subscribes.

'We all support one Constitution: one Constitution that upholds our right to equal protection, one Constitution that guarantees us due process under the law, one Constitution which says that there is no religious test for elected office in America,' he told CNN.

Immigration busts put employers in cross hairs

Immigration busts put employers in cross hairs
By Oscar Avila
Copyright © 2006, Chicago Tribune
Published December 22, 2006

WHITEWATER, Wis. -- Allen Petrie, the owner of Star Packaging, said he had to hire Mexican immigrants because no U.S.-born worker wanted to take items off assembly lines and place them in cardboard boxes.

Now that reliance on immigrant labor threatens to put one of this small town's most prominent businessmen in prison.

Petrie is charged with conspiring to commit identity theft, a felony, after local police took the unusual step of investigating illegal hiring. Police said much of his workforce allegedly used phony Social Security numbers to get their jobs. He has pleaded not guilty.

Star Packaging is among a host of companies across the nation now in the cross hairs. After years of inaction or wrist slaps, federal authorities have begun to round up illegal workers, impose million-dollar penalties and threaten executives with prison. Last week, agents arrested nearly 1,300 foreign-born workers at Swift & Co. meatpacking plants nationwide, the largest sweep in U.S. history.

The arrests give new weight to the Department of Homeland Security's stated mission to reduce illegal immigration by going after the job magnets that bring the workers into the U.S., a campaign that has gained momentum. The number of criminal charges stemming from federal workplace raids in fiscal 2006 topped 700, quadruple the previous year's total.

At the same time, more local governments are going after employers with local ordinances and state statutes. In Illinois, trustees in Carpentersville, for example, proposed a controversial ordinance to suspend the business licenses of employers that hire illegal immigrants, although local enforcement remains the exception.

Some labor advocates and lawmakers see the raids as more about politics than law enforcement. They said the crackdown is forcing companies to trample on labor rights as they seek to weed out illegal workers.

The Whitewater arrests happened much more quietly than the Swift raids, which were splashed on front pages across the country. But the shock waves rippling through this southeastern Wisconsin town are the same ones resonating in Grand Island, Neb., Marshalltown, Iowa, and other towns home to Swift plants.

"We need to face this reality, to be truthful," said Jorge Islas, a U.S. citizen from Mexico and president of Sigma America, a social service agency in Whitewater. "People don't want to accept that undocumented people are in our economy."

To get hired, workers must fill out a federal Homeland Security form, backed with documents that establish identity and work authorization. Some of the possible documents, such as Social Security cards and driver's licenses, are easy to forge.

When Congress passed an amnesty law in 1986, lawmakers were supposed to toughen penalties against employers. They didn't, and the undocumented workforce has hit 7 million, the Pew Hispanic Center says.

Now, with enforcement a top priority, immigration authorities pursued criminal charges against 718 employers and workers in fiscal 2006, up from 176 in the previous year and a tenfold jump from 2003. Agents arrested 3,667 immigrants at job sites for being in the country illegally, triple the previous year's total.

Officials said they are increasingly using wiretaps, paid informants and other sophisticated crime-fighting techniques. The Department of Homeland Security will increase funding for enforcement at job sites, a boost that will add manpower in Chicago too.

Indiana owner gets prison

Immigration officials in the Midwest have already completed some high-profile sweeps: arresting more than 1,000 employees of a pallet company called IFCO Systems, including 26 in Chicago. This month, the owner of an Indiana construction firm was sentenced to 18 months in prison and forfeited $1.5 million for employing illegal immigrants in seven states.

"And for every one of those we bring down, there is a multiplier effect with the rest of the companies that say, `I don't want to end up with our company's name in the headlines,'" said Tim O'Sullivan, assistant special-agent-in-charge of U.S. Immigration and Customs Enforcement's Chicago office.

Some employers are redoubling safeguards against hiring illegal immigrants.

Those who can prove they are complying with the law will soon be eligible for certification from the Department of Homeland Security. O'Sullivan said the certification will be good for businesses, much like a "Made in the U.S.A." label.

To get certification, businesses must let immigration authorities audit their employment records, train managers in spotting phony documents and sign up for an existing electronic system that instantly verifies the status of new hires. More than 10,000 firms have signed up.

When the Social Security Administration finds discrepancies between worker names and Social Security numbers, the agency sends letters to employers informing them.

n June, the Department of Homeland Security proposed a regulation that could hold employers liable unless they immediately rectify the "no-match letters." The department hasn't approved the regulation, and the law currently requires companies only to notify their employees about the mismatch.

But lawyers said employers are in a bind: ignoring the no-match letters might leave them more susceptible to federal charges while aggressive responses might result in discrimination complaints.

The UNITE-HERE labor union and other Chicago activists recently held a "tour of shame" against Cintas, the nation's largest uniform supplier, and other local companies that are threatening to fire workers who can't prove their legal status, even though the stricter, new regulation has not been adopted. Cintas said it is merely trying to follow the law.

Social Security warning

In Whitewater, police cited the Social Security no-match letters in pursuing criminal charges, saying the company had evidence that workers were using false identities to keep their jobs. Police said they discovered no-match letters in Star Packaging's files when they executed a search warrant.

Frank Lettenberger, Petrie's attorney, said Petrie did not knowingly hire illegal immigrants and did not urge or assist their use of false Social Security cards. Lettenberger also said Whitewater police unfairly targeted a businessman whose practices are not unusual.

The Whitewater bust was different because it was triggered by local police, not immigration agents. Police said they had a right to get involved because Petrie is charged with conspiracy to commit identity theft, which falls under their jurisdiction.

The arrests continue to resonate in the town of 14,000, where Main Street's antiques shops and cafes share the avenue with two Mexican general stores.

In an industrial park on a recent frigid night, several Mexican residents strung colored lights and tinsel on a flatbed truck, part of a float for the town Christmas parade. Guadalupe Nateras, one of the arrested Star Packaging employees, said they were trying to reaffirm their place in the community.

Nateras, 44, said she bought a Social Security card for $600 and is not looking for pity.

"We know we violated the law. We don't contest that," she said. "But if you go to any factory, to any business, in the United States, there are people just like us."


8 charged in Iraq massacre - Marines accused of killing 24

8 charged in Iraq massacre - Marines accused of killing 24
By Richard Marosi and Tony Perry, Tribune Newspapers: Los Angeles Times; Richard Marosi reported from Camp Pendleton and Tony Perry from Fallujah, Iraq
Copyright © 2006, Chicago Tribune
Published December 22, 2006

CAMP PENDLETON, Calif. -- Four Marines were charged Thursday with murder in connection with the deaths of 24 men, women and children last year in the Iraqi town of Haditha, and four officers were charged with failing to make accurate reports and thoroughly investigate the deaths.

The Nov. 19, 2005, incident in the insurgent stronghold in the Euphrates River valley is one of several in which U.S. personnel face criminal charges for killing innocent Iraqis. But the Haditha case is regarded as the most serious, both because of the numbers of victims and Marines involved and because the Marine Corps initially said the civilians had been caught in fighting between insurgents and U.S. forces.

The most serious accusations were leveled against Staff Sgt. Frank Wuterich, who was charged with the unpremeditated murder of 18 civilians, including six people killed inside a house after the squad leader ordered Marines under his command to "shoot first and ask questions later," and other charges.

The Marines allegedly went on a rampage after a roadside bomb exploded beneath a Humvee in their convoy, killing Lance Cpl. Miguel Terrazas and injuring two others. The Marines initially reported that 15 civilians died in an explosion and eight others were killed in a firefight.

Only after Time magazine published a story in March suggesting that the Marine account was false did the military begin its own investigation. The criminal investigation, largely by the Naval Criminal Investigative Service, led to the charges unveiled Thursday.

According to the charge sheet, Wuterich showed wanton disregard for human life when he gave the order to "shoot first and ask questions later" as he and other Marines were preparing to storm a house containing several people.

Marines are required to positively identify targets before an engagement, according to the charges.

The victims in Haditha included several women, six children and an elderly man in a wheelchair.

Marines face life in prison

Wuterich, 26, also allegedly made a false statement in connection with the deaths of four other Iraqis who came upon the Marine convoy in a car, stating that the men had fired on the convoy. Wuterich allegedly solicited another Marine to falsely state that the Iraqi men had been killed by Iraqi soldiers.

The case against the Marines may hinge on the so-called rules of engagement given to frontline Marines by their superiors.

Neal Puckett, Wuterich's defense attorney, expressed confidence that his client would be cleared. Innocent civilians did die, he said, but Wuterich acted in accordance with his training.

"Everything he did that day was in an effort to protect his fellow Marines after that [improvised explosive device] went off," said Puckett at a news conference after the charges were announced at Camp Pendleton.

Defense attorneys have said the Marines were following established rules of engagement by tossing fragmentation grenades into homes where insurgents were suspected of hiding, and then following up with bursts of M-16 fire.

Wuterich and three other Marines face charges of unpremeditated murder, which brings a maximum penalty of life in prison. They are from Kilo Company, 3rd Battalion, 1st Marine Regiment, 1st Marine Division, based at Camp Pendleton.

Other Marines charged in the case:

- Sgt. Sanick Dela Cruz, 24, was charged with the unpremeditated murders of five people.

- Lance Cpl. Justin Sharratt, 22, was charged with the unpremeditated murder of three Iraqis.

- Lance Cpl. Stephen Tatum, 25, was charged with the unpremeditated murders of two Iraqis, plus unlawfully killing four Iraqi civilians and assault.

None of the Marines was ordered confined during the upcoming preliminary hearings.

heresa Sharratt, mother of Justin Sharratt, denied her son was guilty.

"He said `Mom, we followed the rules of engagement,"' she said, adding that her son "still loves being a Marine, but they let him down."

In addition, four officers not at the scene were charged with failing to make accurate reports and thoroughly investigate the incident. They are Lt. Col. Jeffrey Chessani, 1st Lt. Andrew Grayson, Capt. Lucas McConnell, and Capt. Randy Stone. Grayson also was charged with making a false statement.

After the Time magazine story, then-Marine Commandant Gen. Michael Hagee went to Iraq to talk to frontline Marines about the need to use restraint and show respect for civilians and their property.

Marines learn the laws of war

In an e-mail this week to the Los Angeles Times, Lt. Gen. James Mattis, the convening authority in the case, said that "allegations of what took place in Haditha are not representative of the magnificent conduct our Marines demonstrate daily in a complex and challenging combat environment."

Young Marines need to "keep their ethical balance under morally bruising conditions," where enemy fighters often hide behind women and children, he said, adding that Marines show daily restraint "to preserve the lives of those they are sent to protect and defend; often incurring risk to themselves as they strive to protect the non-combatants on the battlefield."

Under the military system of justice, Mattis will play an enormous role in the case.

After preliminary hearings, called Article 32 proceedings, he will decide whether the case is strong enough for court-martial. If there is a conviction by jury or judge, he can overturn it. And he is the final arbiter of any plea bargains.

Marines receive lectures about the laws of war, and the need to protect non-combatants, before they leave the U.S. and also soon after they arrive in Iraq. Refresher courses are given periodically.

Even as the Haditha charges were being announced, Marines were being lectured at Camp Fallujah in Iraq about the laws of war and the rules of engagement.

The latter are classified rules that instruct Marines when it is appropriate to use deadly force, including how much verification is needed to determine that a threat justifies the use of weapons.

Priest charged in sex case - Will County clergyman accused of molesting brothers in 1990s

Priest charged in sex case - Will County clergyman accused of molesting brothers in 1990s
By Matthew Walberg and Manya A. Brachear
Copyright © 2006, Chicago Tribune
Published December 22, 2006

A Carmelite priest convicted of child molestation in Georgia in the 1970s has been indicted by a Will County grand jury on charges of sexually abusing two teenage brothers in the 1990s.

The indictment returned Thursday against Rev. Louis Rogge, 76, of Joliet charges him with four counts of aggravated criminal sexual abuse. He surrendered to the Will County Sheriff's Department and was released after posting 10 percent of his $40,000 bail, said Charles Pelkie, spokesman for State's Atty. James Glasgow.

Rogge was a "spiritual adviser" to a family when he abused one boy during the summer of 1996 and fondled his younger brother three years later, according to the indictment. The men, now 25 and 22, were 15 when the alleged abuse occurred, Pelkie said.

Rogge's case is, in a way, the Catholic Church's sex-abuse scandal writ small: abuse, followed by treatment and restoration to ministry, then more allegations.

Even before reports of abuse surfaced last year, Rogge had been relegated to private ministry and was prohibited from wearing clerical garb because he pleaded guilty to child molestation in Athens, Ga., in 1974, said Rev. John Welch, provincial for the Carmelites of the Most Pure Heart of Mary in Darien.

"That was apparently an incident with a family he knew," Welch said, adding records indicate Rogge was not in Athens in a religious capacity. "Basically, it was inappropriate touching--I think it was with a boy."

He was sentenced to 6 years' probation, but "after two years of counseling and other personal work, and having his ministry restricted to adults, in 1976, the remaining four years of probation were canceled," Welch said. "He was permitted--with the consultation of the counselors that were working with him--to return to ministry."

Allowing him to resume his ministry, "were the standards and policies of that day," Welch said.

Barbara Blaine, president of the Survivors Network of those Abused by Priests, said those standards and policies remained even after a church report in 1985 warned of the risk posed by perpetrators allowed to stay in ministry. The danger of recidivism among molesters has prompted law enforcement in many states to develop sex-offender registries and hold those convicted even after sentences end.

But Blaine said bishops continued to express faith in rehabilitation.

"If they did believe [in rehabilitation], they had no reason to," she said. "I suppose it's the same people who didn't want to believe the earth was round."

After pressure from victims' advocates and the scandal that erupted in the Boston archdiocese, the U.S. Conference of Catholic Bishops approved a zero-tolerance policy in 2002.

Rogge's case is unusual because fewer than 2 percent of priests accused of sexual abuse have faced criminal prosecution. That's largely because of problems with statutes of limitations; many of the allegations are decades old and not prosecutable, experts say.

"We believe this is the first case of sex abuse involving a Catholic priest to be charged in Will County since the Catholic sex abuse national scandal in 2002," Pelkie said.

Glasgow said it is almost a miracle that his office is able to prosecute the 1996 case because at that time, the statute of limitations for minors who were sexually abused expired one year after the 18th birthday.

"The case was close to expiring, but the Illinois General Assembly extended the statute to age 21," Glasgow said. "Then another amendment extended the statute to 10 years after your 18th birthday, and now it's 20 years.

"I think the legislature was reacting to a public outcry that prosecutors' hands were tied because victims of sex abuse, due to fear, embarrassment and repression, failed to come forward during the statute of limitations, and so criminal charges could not be brought. By extending it out until 20 years after the 18th birthday, it greatly expanded prosecutors' abilities to bring people who perpetrate sexual crimes against children to justice," Glasgow said.

Rogge began at the Darien provincial in 1994. He was not assigned to a parish or school, but worked with Carmelite missions, traveling around the country to provide his services to churches and ministries on a short-term basis.

In summer 2002, he was removed from that position after adoption of the Charter for the Protection of Children and Young People, which required that any priest who had a credible allegation of sexual abuse against him be removed from public ministry.

Welch, who was in Washington, D.C., at that time, said the order combed through its files and found Rogge's 1974 conviction. He was assigned to the provincial's archives department, where he currently works. Welch said Rogge has no public ministry.

Welch said Rogge is being represented by attorney Cynthia Giacchetti, who could not be reached for comment. He would not say where Rogge lived other than "he's living under supervision at a private residence where we have a Carmelite community. It's in Will County."

Pelkie and Welch said the religious order and diocese have been working with investigators.

"These allegations were made about him in September 2005. The family came to us, and then we notified the diocese of Joliet and they notified the state's attorney," said Welch, adding that the young men and their family have been offered counseling.

Welch said his order has instituted standards to protect children and works with an agency to audit and maintain those standards.

"We take these matters very seriously, and what we would like to do is ensure the safety of young people and children," he said. "We would like a just resolution of the allegations made [against Rogge] and healing for anybody affected by sexual abuse. That's our attitude toward these cases."

Welch said Rogge could remain a member of the order even if convicted. "It doesn't depend on the outcome of the case necessarily. Generally, in these cases, what would happen to the person would be removal from ministry. But that doesn't mean he would be excluded from the [Carmelite] community."

Welch said the order is like a family, in that "if your uncle gets in trouble, you don't necessarily exclude him from the family." He said only when a member "consistently ignores their commitments and responsibilities, then we would move toward exclusion from the brotherhood."


International Herald Tribune Editorial - Libya's legal farce

International Herald Tribune Editorial - Libya's legal farce
Copyright by The International Herald Tribune
Published: December 21, 2006

If Libya really wants to repair its tattered relations with the West, Muammar el-Qaddafi will need to intervene to prevent a terrible miscarriage of justice. This week, a Libyan court condemned to death six foreign medical workers on the widely discredited charge that they deliberately infected hundreds of children with the virus that causes AIDS. It was the second time in this case that a Libyan court has made that judgment.

This can only be deemed a travesty given expert testimony — by no less an authority than Luc Montagnier, a co-discoverer of HIV — that the outbreak started well before the five Bulgarian nurses and the Palestinian doctor had even arrived in Libya. The likely cause was an appalling lack of sanitary procedures at a hospital where the virus was spread, probably through contaminated needles or infected blood products. Patient records reportedly show that at least some of the children were infected either before or after the six foreign medical workers were on the scene.

With the case against the medical workers so flimsy, if not concocted, it is no wonder that more than 100 Nobel laureates and dozens of other eminent scientists have called for a new and fair trial. None of the exonerating evidence was even admitted in the latest trial.

Two factors seem to be driving these outrageously unfair verdicts. Libya is eager to deflect public outrage by blaming foreigners rather than the country's unsanitary hospitals. And the families of infected children, presumably egged on by the government, want to extract unwarranted compensation from the Bulgarian government or other donors — as much as $10 million per child, the amount Libya paid to each family of the victims killed in the 1988 bombing of Pan Am Flight 103.

Lawyers for the condemned say they will appeal to Libya's Supreme Court, which quashed a previous death sentence. If the court fails to do so again, the children's families have the power under Libyan law to grant clemency in return for compensation. Qaddafi should urge them to stop trying to extort big money. An international fund has already been set up to provide medical care for the children and better equipment for the hospital.

International Herald Tribune Editorial - Rudderless in Iraq

International Herald Tribune Editorial - Rudderless in Iraq
Copyright by The International Herald Tribune
Published: December 21, 2006

Anyone looking for new thinking on Iraq, or even candor, had to be disappointed by President George W. Bush's news conference Wednesday. Bush may want to defer unveiling his new strategy, but there will be no obliging pause in Iraq's unraveling.

The latest Pentagon status report confirms a spiraling death toll, ever deeper sectarian divisions and near total lawlessness on the streets of Baghdad, despite repeated U.S. vows to secure the capital. In a further sign of Iraq's descent, Baghdad is now getting less than seven hours of electricity a day, as insurgents and looters dismantle the power grid.

While Bush contemplates his fast- disappearing options, competing factions in the administration and the military have been less reticent about floating their ideas. Some urge a sharp, temporary increase in U.S. troop strength in Baghdad. Others argue that Iraqi forces should take the lead, whether or not they're ready. Still others talk about different ways of reconfiguring Iraq's dysfunctional governing coalition.

The problem is not so much with the specific proposals — some deserve serious consideration — as with the illusion that the political and military components of U.S. policy can be pursued in isolation from each other. That is the kind of made-in-Washington tunnel vision that produced the current disaster. Only a political strategy, embraced by Iraqis themselves and backed by U.S. military muscle, can have even a remote chance of altering events, and even that may be too late.

Consider the talk of a temporary escalation of U.S. forces to impose some order in Baghdad. That is guaranteed to fail, unless it is tightly integrated with a political strategy for producing an Iraqi government finally willing to move against Shiite militias and open a dialogue on national reconciliation. Without that, any temporary increase could slide seamlessly into a permanent escalation — something America's depleted ground forces cannot handle — with no chance of containing the chaos.

And while U.S. diplomats report hints that Iraq's top Shiite cleric, Grand Ayatollah Ali al-Sistani, might be willing to support a genuine national unity government, it remains unclear whether he would countenance any loss of power for Shiite fundamentalists — and whether Washington has any leverage left to influence his decision.

On Wednesday, Bush acknowledged the obvious and desperate need to rebuild America's overstretched ground forces, a subject he refrained from talking about so long as Donald Rumsfeld ran the Pentagon. But that will take time and won't be any help in Iraq. Bush also needs to acknowledge that his course there has reached a dead end. He needs to quickly define a new direction while he still has any choices left.

International Herald Tribune Editorial - Bush's immigration realism

International Herald Tribune Editorial - Bush's immigration realism
Copyright by The International Herald Tribune
Published: December 21, 2006

Every now and then the American public gets a glimpse of the George W. Bush who is a calm realist on immigration, a former governor of a border state who knows, likes and understands Hispanic immigrants. It's an identity sharply at odds with that of many other members of his Republican Party.

At his news conference Wednesday, Bush commented on the raids at Swift & Co., the meatpacking giant that, to nobody's surprise, seems to have had hundreds of illegal immigrants with forged papers on its low-skill work force. Bush did not condemn the detainees as border-crossing evildoers. He spoke with startling tolerance.

"The system we have in place has caused people to rely upon smugglers and forgers in order to do work Americans aren't doing," Bush said. "It is a system that, frankly, leads to inhumane treatment of people." He continued: "The best way to deal with an issue that Americans agree on — that we ought to enforce our borders in a humane way — is we've got to have a comprehensive bill."

Bush understands that many illegal immigrants are doing what they have to do to support families within a system that offers few routes to lawful entry. He understands that giving immigrants the opportunity to earn an honest foothold in America — the path to citizenship despised by restrictionists as "amnesty" — is not giving a reward to criminals. It is an attempt to fix a system that draws in millions of illegal immigrants each year, taking their labor but withholding hope.

Bush has shown a way to move the debate away from the "amnesty" trap by casting reform as a means to end an abusive system. It may sound shocking to say that illegal immigrants deserve better. But as long as America keeps swallowing them up into a broken, unjust system, they do.

Doctor helps Italian euthanasia activist to die- Conservatives seek arrest after doctor removes respirator

Doctor helps Italian euthanasia activist to die- Conservatives seek arrest after doctor removes respirator
By Ian Fisher
Copyright by The International Herald Tribune
Published: December 21, 2006

ROME: Piergiorgio Welby, who had eloquently begged Italy's leaders to let him end his life legally, died late Wednesday after a doctor sedated him and removed the respirator that had kept him alive for the last nine years.

But Welby, 60, an activist for euthanasia who suffered from muscular dystrophy for 40 years, died without the legal clarity he hoped to achieve. His decision to be removed from the respirator seemed a final challenge, which was quickly taken up in this Roman Catholic country with a deep institutional opposition to euthanasia.

Hours after his death was announced Thursday, conservative lawmakers demanded the doctor's arrest.

Luca Volonte, leader of the small Christian Democratic Party, which has strong ties to the Vatican, said that the death "cannot go unpunished, if only because it was committed in such a violent, scandalous and exploitative way."

He and others have accused the Radical Party of turning Welby's request to die into a political campaign on behalf of euthanasia and other choices for the sick to end their own lives.

Such a campaign was clearly the intent of Welby, who had strong ties to the party: Its leaders were present at his death and oversaw its announcement here Thursday, nearly three months after he sent an impassioned letter to Italy's president, Giorgio Napolitano, asking for greater rights for the terminally ill to end their lives.

Despite the calls for his arrest, the doctor, Mario Riccio, an anesthesiologist, said he was "serene" that he would not be prosecuted.

"The case of Piergiorgio Welby is not a case of euthanasia," he told reporters here. "It's a case of refusing treatment."

"It's not an exception that treatment is suspended," he said. "It happens every day," he said, if quietly and without the public attention of Welby's case.

In the weeks before he died, Welby had sought a judicial ruling that would clarify Italy's contradictory laws regarding unwanted medical treatment and allow him to die as he wished.

Direct forms of euthanasia, such as doctor-assisted suicide, are illegal in Italy. But the law allows patients, other than those with psychiatric problems and infectious diseases, to decline treatment they do not want.

Experts say, however, the law does not allow anyone to assist in a death, even by consent. Two recent legal decisions on Welby's case questioned the legality of a doctor's detaching life support, while upholding Welby's right to decline treatment.

Some experts said that Welby had the chance to appeal the rulings, but in the end, decided to die amid the legal ambiguity. Several weeks ago he said his medical treatment was an increasing "torture."

Welby, a poet who wrote thousands of blog entries on the rights of the terminally ill until a recent decline in his condition, died at his home in Rome at 11:30 p.m., Dr. Riccio said.

The doctor said that some 40 minutes before, he had injected Welby with sedatives, then at an unspecified time before his death, stopped the respirator. The cause of death, he said, was cardio- respiratory failure.

Welby died surrounded by his wife, Mina, who cared for him for years, other family and members of the Radical Party who had kept his case on the front pages of newspapers for months.

At the news conference, his sister Carla described herself as not interested in politics, yet she challenged Italy's leaders to "change very quickly" on cases like her brother's.

"I will say only that maybe no one understands what a weight it has been for us these 89 days," since Welby made his appeal to Italy's president, she said, "and how determined my brother was in what he was asking."

Emma Bonino, a Radical Party leader and minister in the center-left government of Prime Minister Romano Prodi, issued a more direct political appeal on behalf of stronger laws allowing sick patients to die. She criticized what she called the inaction of Italy's politicians on the issue.

"Piergiorgio Welby did not invent a phenomenon," she said. "He gave a voice to a reality — voice, body, suffering — to a reality that exists, and to which it is more simple, if more cruel, to close one's eyes."

Many political experts say that it is most unlikely that Italy would join Belgium, the Netherlands and Switzerland in Europe in legalizing more direct forms of euthanasia. (In the United States, Oregon allows doctors to prescribe lethal doses of medication to terminally ill patients who request it).

The Roman Catholic Church, which strongly opposes euthanasia, holds great influence among politicians and provides much medical care around Italy. The debate over Welby's case has, however, prompted a serious debate in Parliament over living wills, which would allow Italians to specify what medical treatment they would accept.

Chicago Sun Times Editorial - Good intentions gone too far

Chicago Sun Times Editorial - Good intentions gone too far
Copyright by The Chicago Sun Times
December 22, 2006

As is usually the case, the Rev. Michael Pfleger's heart is in the right place. But his proposal to have the state require every high school student in Illinois to undergo mandatory HIV testing violates individual rights.

The proposal faces several roadblocks. For one, medical records are protected under federal HIPAA laws, and the state's AIDS Confidentiality Act would have to be amended to allow mandatory testing.

Unlike immunizations that are mandated to protect students from contagious diseases spread by casual contact, HIV/AIDS is a disease that is spread through sexual intercourse, blood transfusions and contaminated hypodermic needles.

Because there is still a huge stigma surrounding HIV/AIDS, advocates have also opposed mandatory testing.

Unfortunately, the National Institutes of Health estimate that a quarter of all new AIDS cases occur in teens ages 13 to 19.

But after mandatory testing, what then? Will these teens be barred from school until they seek treatment? Will they be forced to reveal their status?

Rather than mandatory testing, we need a consistent public awareness campaign about teens and HIV/AIDS.

Allowing teens to make the right choices rather than making those choices for them is the real path to teen empowerment.

Thursday, December 21, 2006

International Herald Tribune Editorial - Only the jailers are safe

International Herald Tribune Editorial - Only the jailers are safe
Copyright by The International Herald Tribune
Published: December 20, 2006

Ever since the world learned of the lawless state of U.S. military prisons in Iraq, the administration has hidden behind the claim that only a few bad apples were brutalizing prisoners. President George W. Bush also has dodged the full force of public outrage because the victims were foreigners, mostly Muslims, captured in what he has painted as a war against Islamic terrorists bent on destroying America.

This week, The New York Times published two articles that reminded us again that the American military prisons are profoundly and systemically broken and that no one is safe from the summary judgment and harsh treatment institutionalized by the White House and the Pentagon after Sept. 11.

On Monday, Michael Moss wrote about a U.S. contractor who was swept up in a military raid and dumped into a system where everyone is presumed guilty and denied any chance to prove otherwise.

Donald Vance, 29, a navy veteran from Chicago, was a whistle-blower who prompted the raid by tipping off the FBI to suspicious activity at the company where he worked, including possible weapons trafficking. He was arrested and held for 97 days — shackled and blindfolded, prevented from sleeping by blaring music and round-the-clock lights. In other words, he was subjected to the same mistreatment that thousands of non- Americans have been subjected to since the 2003 invasion.

Even after the military learned who Vance was, they continued to hold him in these abusive conditions for weeks more. He was not allowed to defend himself at the Potemkin hearing held to justify his detention. But as an American citizen, he was at least allowed to attend his hearing. An Iraqi, or an Afghani, or any other foreigner, would have been barred from the room.

This is not the handiwork of a few out-of-control sadists at Abu Ghraib. This is a system that was created and operated outside American law and American standards of decency. Except for the few low-ranking soldiers periodically punished for abusing prisoners, it is a system without any accountability.

On Tuesday, David Johnston reported that nearly 20 cases in which civilian contractors were accused of abusing detainees have been sent to the Justice Department. So far, the record is perfect: not a single indictment.

Administration officials said that prosecutors were hobbled by a lack of evidence and witnesses, or that the military's cases were simply shoddy. This sounds like another excuse from an administration that has papered over prisoner abuse and denied there is any connection between Bush's decision to flout the Geneva Conventions and the repeated cases of abuse and torture. We hope the new Congress will be more aggressive on this issue than the last one, which was more bent on preserving the Republican majority than preserving American values and rights. The lawless nature of Bush's war on terror has already cost the United States dearly in terms of global prestige, while increasing the risks facing every American serving in the military.

Wednesday, December 20, 2006

Picano and Mock to Hold Book Discussions - New Reading added to the tour

Picano and Mock to Hold Book Discussions - New Reading added to the tour
Copyright by The Windy City News

Writers Carlos T. Mock and Felice Picano, will be holding a series of discussions and book release parties throughout the Midwest during mid-January.

Picano, who resides in Los Angeles, has published over 20 volumes of fiction, poetry, memoirs and other books. Considered a founder of modern gay literature along with the six other members of the Violet Quill Club, he also founded two publishing companies: the SeaHorse Press and Gay Presses of New York. Mock lives in Chicago with his life partner, Bill Rattan. Mock will be reading from his first novel, Borrowing Time: A Latino Sexual Odyssey, as well as his newly-released work, the thriller Mosaic Virus.

The two will hold readings on Sunday Jan. 14 at Gerber Hart Library, Mon., Jan. 15, at 7:30 p.m. at Barbara’s Bookstore at UIC, 1218 S. Halsted ( 312-413-2665 ) . The following night will feature the official book release party for Mock’s works at the glass bar at Sidetrack, 3349 N. Halsted, 5:30-7:30 p.m. They will also appear on Jan. 17 at the Acorn Theater, 107 Generations Drive, Three Oaks, Mich., at 7 p.m. ( 269-756-3879 ) as well as Jan. 18 at Affirmations Lesbian & Gay Community Center, 195 W. Nine Mile Rd. Ferndale, Mich., at 5 p.m. ( 248-398-7105 ) .

No RSVP is needed for the UIC gathering or the events in Michigan but one is required for the official party at Sidetrack. E-mail or call 773-561-6617.

Letters to the Editor: Open Letter to New Jersey Lawmakers by Carlos T Mock

Letters to the Editor: Open Letter to New Jersey Lawmakers
By Carlos T. Mock
Copyright Windy City Media Group and Carlos T Mock

Open Letter to New Jersey Lawmakers:

“N.J. Lawmakers Approve Civil Unions - Democratic Gov. Jon Corzine said he would sign the measure, which would extend to same-sex couples all the rights and privileges available under state law to married people. The bill passed the Assembly 56-19 and the Senate 23-12.” ( Associated Press )

Civil unions are not enough! Let us wed.

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” ( U.S. Declaration of Independence )

LET US WED! It rests on equality, liberty and even society. The case for allowing gays to marry begins with equality, pure and simple. Why should one set of loving, consenting adults be denied a right that other such adults have and which, if exercised, will do no damage to anyone else? Not just because they have always lacked that right in the past, for sure: Until 1969, in some American states it was illegal for African-American adults to marry white ones, but precious few would defend that ban now on grounds that it was “traditional.”

Another argument is rooted in semantics: Marriage is the union of a man and a woman, and so cannot be extended to same-sex couples. They may live together and love one another, but cannot, by this argument, be “married.” But that is to dodge the real question: Why not? Why obscure the real nature of marriage—which is a binding commitment, at once legal, social, and personal, between two people to take on special obligations to one another? If homosexuals want to make such marital commitments to one another and to society, then why should they be prevented from doing so while other adults, equivalent in all other ways, are allowed to do so?

Civil unions are to the gay movement what segregation was to the African-American movement—”separate but equal.” They were still second-class citizens. It is not OK to have a water fountain for the “colored” people and another for the white man. Each and every one of us should and must be allowed to drink from the same water fountain. Those are the basic principles secured by the Bill of Rights.

The importance of marriage for society’s general health and stability also explains why the commonly mooted alternative to gay marriage—the so-called civil union—is not enough. Those civil unions would be both wrong in principle and damaging for society.

Marriage, as it is commonly viewed in society, is more than just a legal contract. Moreover, to establish something short of real marriage for some adults would tend to undermine the notion for all. Why shouldn’t everyone, in time, downgrade to civil unions?

Now that really would threaten a fundamental institution of civilization!!!

Gay artists organize

Gay artists organize
By Paul Varnell
Copyright by The Chicago Free Press
December 20, 2006

Nearly 30 artists braved cool, drizzly weather to attend an organizational meeting of a Chicago gay artists group Dec. 12 at Tweet, 5024 N. Sheridan, nearly filling the small restaurant.

The artists were of all types—oil painters, watercolorists, pen and pencil artists, photographers and sculptors. There were also a brace of gallery owners and one playwright who said he hoped the group would be open to people in other arts, pointing out that plays often use artists as scenic designers.

Most of the artists seemed not to know one another. Co-founder Dan Zagotta, who facilitated the meeting, took time to give everyone a chance to state their name, the type of art they did and if they had had public exhibitions anywhere. A few of the artists brought along images of their work on iPods and shared them with people who asked about them after the meeting.

As an organizational meeting, some of the time was spent discussing the name, the scope of membership and the degree of institutional structure that might be required. Zagotta said he favored working toward a 501c3 non-profit organization, although he acknowledged that status had legal and economic complexities. Several of the artists, however, said that they would prefer a less formal structure on the order of a network for information-sharing and socializing.

The issue was left unresolved, perhaps to be taken up by a coordinating committee Zagotta said he wants to form.

A few of the artists said they had had public displays of their work at a gallery or friendly retail business, but many of the younger artists expressed frustration at not being able to find suitable display opportunities and said they hoped the group could provide ideas on how to go about finding exhibition opportunities. In response to questions, several also indicated a need for basic information, such as writing and sending out press releases.

Regarding display opportunities, Zagotta said officials at the Center on Halsted had expressed interest in promoting local gay artists in some way. In a later telephone interview, Chris Taylor, director of the Center’s community and cultural programs, and himself an artist, said he would be delighted to talk to the group about those possibilities.

Other activities members suggested for the group included inviting speakers from the arts community, supportively attending exhibitions of member artists, working with existing artist groups to promote members’ work and working toward a group show for members.

The next meeting is to be devoted primarily to giving artists an opportunity to display their art to one another, either “live” or on slides or digital display devices. The date in January will be announced by email to people who signed up and in the press.

Tuesday, December 19, 2006

International Herald Tribune Editorial - Playing down drug risks

International Herald Tribune Editorial - Playing down drug risks
Copyright by The International Herald Tribune
Published: December 19, 2006

It was bad enough when studies showed that the newest and most heavily promoted drugs for treating schizophrenia weren't worth their high cost. Now the disturbing tale of their excessive use has taken a tawdry turn with revelations that Eli Lilly, a pharmaceutical giant, has consistently played down the risks of its best-selling antipsychotic drug, Zyprexa, and has promoted it for unapproved uses.

Hundreds of internal Lilly documents that have surfaced in legal proceedings offer persuasive evidence that the company engaged in questionable behavior to prop up its best- selling drug, which creates almost 30 percent of Lilly's revenue.

Zyprexa belongs to a class of drugs that were billed as a significant advance over the first generation of antipsychotic drugs but turned out to have serious flaws. Zyprexa has a tendency to raise blood sugar and to promote obesity, both of which are risk factors for diabetes. Yet Lilly encouraged its sales representatives to play down these adverse effects when talking to doctors.

The documents also show that Lilly encouraged primary care physicians — far less sophisticated than psychiatrists in treating mental illness — to prescribe the drug for older patients with symptoms of dementia even though it was approved only for schizophrenia and bipolar disorder. It is illegal for companies to promote drugs for unapproved uses, but nearly every major drug company is under investigation for alleged efforts to do so.

Lilly contends that it has never promoted Zyprexa for unapproved uses and has always shown its marketing materials to the Food and Drug Administration, as required by law. Both claims ought to be tested in Congressional hearings that should focus on how well the industry complies with existing laws.

Boston Globe Editorial - Rethinking the death penalty

Boston Globe Editorial - Rethinking the death penalty
Copyright by The Boston Globe
Published: 2006-12-19 09:54:54

The United States may be slowly ridding itself of the urge to impose the death penalty, according to a study released last week. A protracted execution in Florida on Wednesday starkly illustrated one of the reasons for the change in attitude.

Angel Diaz was the 53rd and last person to be executed in the United States this year. He was strapped onto a gurney and given an injection that was supposed to kill him within 15 minutes, but he lay there squinting and grimacing, and seemed to be trying to speak. Prison officials had to give him a second injection, and it took him 34 minutes to die.

Governor Jeb Bush promised an investigation and suspended executions pending the results, but the exact reason for Diaz's ordeal ignores the wider question of whether execution by any method is right. The murder took place in 1979, and any deterrent effect has vanished. Thousands of people have been murdered in the state since then, yet only 64 have been executed. This hit-and-miss system offers no protection for society.

Other states are starting to accept this reality, according to a survey by the Death Penalty Information Center in Washington. Based on the Florida experience, it's easy to understand why. Florida abandoned the electric chair in 2000 in favor of lethal injections, but Diaz's prolonged death shows this method to be similarly inhumane. Even if a painless system were devised, the variation of sentencing across multiple jurisdictions is inherently arbitrary.

Support for capital punishment remains steady at two-thirds of those polled nationally, but when details are provided of the executions, that begins to erode. And when given a choice of execution or life without parole, a slight majority in a recent Gallup Poll favored the life sentence. This punishment would protect society while allowing for redress if a prisoner could show he was wrongly convicted.

Before he died, Diaz called his execution an act of vengeance. Perhaps, but given the 27-year lapse between crime and punishment, there was no public outcry for his death. His execution rather shows the capricious nature of a brutal act that should have no place in American society.

Attacks in Iraq at record levels

Attacks in Iraq at record levels
By David S. Cloud and Michael R. Gordon
Copyright by The International Herald Tribune
Published: 2006-12-19 10:01:04

WASHINGTON: A Pentagon assessment of security conditions in Iraq has concluded that attacks against American and Iraqi targets surged this summer and autumn to their highest level yet, and called violence by Shiite militants the most significant threat in Baghdad.

The report, which was issued Monday and covers the period from early August to early November, found an average of about 960 attacks against Americans and Iraqis every week, the highest level recorded since the Pentagon began issuing the quarterly reports in 2005, with the biggest surge in attacks against American-led coalition forces. That was an increase of 22 percent from the level for early May to early August, the report said.

While most attacks were directed at American forces, most deaths and injuries were suffered by the Iraqi military and civilians.

The report is the most comprehensive public assessment of the American-led operation to secure Baghdad, which began in early August. About 17,000 American combat troops are currently involved in the beefed-up security operation.

According to the Pentagon assessment, the operation initially had some success in reducing killings as militants concentrated on eluding capture and hiding their weapons. But sectarian death squads soon adapted, resuming killings in regions of the capital that were not initially targets of the overstretched American and Iraqi troops.

Shiite militias, the Pentagon report said, also received help from allies among Iraqi police forces.

"Shia death squads leveraged support from some elements of the Iraqi Police Service and the National Police who facilitated freedom of movement and provided advance warning of upcoming operations," the report said. "This is a major reason for the increased levels of murders and executions."

The findings were issued on the day Robert Gates was sworn in as defense secretary, replacing Donald Rumsfeld. At an afternoon ceremony at the Pentagon attended by President George W. Bush and Vice President Dick Cheney, Gates said he planned to travel to Iraq shortly to consult with military commanders as part of a broad administration review of Iraq strategy.

"All of us want to find a way to bring America's sons and daughters home again," Gates said. "But as the president has made clear, we simply cannot afford to fail in the Middle East. Failure in Iraq would be a calamity that would haunt our nation, impair our credibility and endanger Americans for decades to come."

Over all, the report portrayed a precarious security situation and criticized Shiite militias for the worsening violence more explicitly than previous versions had.

It said that the Mahdi Army, a powerful Shiite militia that Prime Minister Nuri Kamal al-Maliki has not confronted despite American pressure to do so, has had the greatest negative impact on security.

It is likely that Shiite militants are now responsible for more civilian deaths and injuries than terrorist groups are, the report said.

But the report also held out hope that decisive leadership by the Iraqi government might halt the slide toward civil war. While noting that efforts by Maliki to encourage political reconciliation among ethnic groups had shown little progress, it said that Iraqi institutions were holding and that members of the current government "have not openly abandoned the political process."

The Pentagon assessment, titled "Measuring Stability and Security in Iraq," is mandated by Congress and issued quarterly. The new report, completed last month, noted two parallel trends.

On the one hand, the Iraqi security forces are larger than ever, with 322,600 Iraqi soldiers, police officers and other security forces, an increase of 45,000 since August. Iraqi forces also have increasingly taken the lead responsibility in many areas of Iraq.

The growth in Iraqi capabilities, however, has been matched by increasing violence. That raises the question whether the American strategy to rely increasingly on the Iraqi forces to tamp down violence is failing, at least in the short term.

The Bush administration has decided to step up substantially the effort to train and equip the Iraqi forces. A major question being pondered by Bush is whether that is sufficient, or whether more American troops are needed in Baghdad to control the violence and stabilize the city.

According to the Pentagon, the weekly average of 959 attacks was a jump of nearly 160 from the previous three months. As a consequence, civilian deaths and injuries reached a record 93 a day.

Deaths and injuries suffered by Iraq's security forces also climbed to a new high, 33 a day, while American and other coalition deaths and injuries hovered at 25 a day, just short of the record in 2004, when the United States was involved in battles in Falluja and elsewhere.

he increase in violence coincided with the Islamic holy month of Ramadan, when there had previously been a temporary spike in attacks, but also reflected the deeper sectarian passions that have flared since an attack in February on a Shiite shrine in Samarra.

According to Pentagon data used in formulating the report, there were 1,028 sectarian "executions" in October. That is a slight dip from July, when there were 1,169 executions but a major increase since January, when there were 180. During this period, "ethno-sectarian incidents" have steadily risen, the report noted.

Security difficulties varied in different parts of the country.

While sectarian strife was the biggest problem in Baghdad, in Anbar Province it was attacks by Sunni militants. North of Baghdad, in Diyala and Bilad, terrorists linked to Al Qaeda have been battling the Mahdi Army, it says.

While Shiite militias are active, the group known as Al Qaeda in Mesopotamia is still a major threat, despite the death of Abu Musab al-Zarqawi, its leader. "The emergence of Abu Ayub al- Masri as lead of Al Qaeda in Iraq demonstrated its flexibility and depth, as well as its reliance on non-Iraqis," the report noted.

Indications of progress were few. The report credited the Iraqi government with taking "incremental" steps toward assuming more responsibility and said its security forces "have assumed more leadership in counterinsurgency and law enforcement operations." But it remained "urgent" for the Iraqi government "to demonstrate a resolve to contain and terminate sectarian attacks."

Crude oil production was 2.3 million barrels a day, 7.5 percent higher than in August but still below the government's goal of 2.5 million barrels. Average electricity output was 2 percent higher than it was over the summer.

Proponents of sending more troops to Iraq cited the report to argue that only Americans could ensure security in the short term and that more were needed. Critics said it showed that the initial effort by the American military to reinforce Baghdad had failed to stop the killing.

General James Conway, who took over this autumn as commandant of the Marine Corps, told reporters in Missouri on Saturday that, among other options, Bush was considering sending five or more combat brigades to Iraq, about 20,000 troops. Conway said he believed the Joint Chiefs would support such an increase as long as "there is a solid military reason for doing so." He said that sending more troops just to be "thickening the mix" in Baghdad would be a mistake.

Representative Ike Skelton, Democrat of Missouri, who will be the new chairman of the House Armed Services Committee, said he was opposed to sending more troops.

"Everything I've heard and everything I know to be true lead me to believe that this increase at best won't change a thing," he said, "and at worst could exacerbate the situation even further."

Carl Hulse contributed reporting.

Rebalancing the Economy - Most economists don't think the real-estate bust will lead to a recession.

Rebalancing the Economy - Most economists don't think the real-estate bust will lead to a recession.
By Robert J. Samuelson
© 2006 Newsweek, Inc.
Dec. 25, 2006 - Jan. 1, 2007 issue - Consider it a good omen. in October, the U.S. trade deficit dropped unexpectedly to $58.9 billion, about $5.4 billion less than in September. Although the largest cause was lower oil prices, strong American exports—up 14 percent from a year earlier—also contributed significantly. And that's exactly what the economy needs in 2007: an export surge. It would ward off recession and narrow today's dangerously large global trade imbalances. We need what economists call a "rebalancing" of our economy and the world's.

With unemployment at 4.5 percent, the U.S. economy is hardly ailing. But three threats cloud the outlook.

First, the real-estate bust. Speculation helped fuel the boom—and now it's payback time. In the past year, housing starts have dropped 27 percent and sales of new homes 25 percent. With buyers waiting to see how low prices go, inventories of unsold new homes have risen 14 percent. Some economists see recession. Falling home prices could weaken consumer confidence and spending. By the year-end 2007, unemployment will hit 6.3 percent, predicts Dean Baker of the Center for Economic and Policy Research.

Second, turmoil in the auto industry. Unpopular models, steep gas prices and high labor costs have forced huge cutbacks at Ford, General Motors and Chrysler. Pressures could intensify. Vehicle sales will decrease to 16.1 million units in 2007—the lowest since 1998, forecasts Moody's That would be down from 16.5 million in 2006 and almost 17 million in 2005. Since June, manufacturing jobs have dropped by 95,000; about 90 percent of the loss relates to autos and home building (lumber, furniture).

Finally—and most important—skewed trade. America has gorged on imports while other countries have become overly dependent on exports. In 2006, the United States will run a current account deficit of $878 billion, estimates the Organization for Economic Cooperation and Development (OECD). Meanwhile, China, Japan and Germany will record surpluses of $211 billion, $165 billion and $117 billion. (The "current account" is an expanded trade balance.) These huge imbalances could destabilize the world economy through a currency crisis or trade slump.

Although most economists think the Federal Reserve will engineer a "soft landing"—nudging inflation down while avoiding a recession—it may be a close call. The real question is whether the world moves toward a sturdier pattern of economic growth: stronger exports for the United States, stronger consumer spending elsewhere. The present pattern looks increasingly shaky, because it involves a perilous contradiction—other countries like selling to America, but they may choke on the resulting flood tide of dollars.

Until now, foreigners have reinvested most dollars in the United States. In the year ending in September, they bought about $1 trillion of U.S. stocks and government and corporate bonds, says David Wyss of Standard & Poor's. Private investors—not governments—made 85 percent of those purchases, he says. But if the preference for dollar investments subsides, U.S. stock and bond markets could weaken. The dollar might drop sharply against other currencies. The U.S. economy could suffer from a loss of wealth and confidence; foreign economies could suffer from a loss of exports.

That's the danger of today's trade patterns. In time, these will change. Even without India and China, developing countries are growing at about 5 percent annually. They will buy more machinery, aircraft and advanced instruments—the heart of U.S. exports. With growing middle classes, these countries will also probably focus more on their own consumers in the future; dependence on exports to the United States will decline. In 2000, all developing countries had 352 million people in households with incomes over $16,000, the World Bank estimates; by 2030, that's projected at 2.1 billion.

But next year is more iffy. Japan and China still seem wedded to export-led growth. A brighter spot is Europe, where domestic growth is accelerating. From 2001 to 2005, annual growth in the euro zone (the 12 countries using the euro) averaged only 1.4 percent. Now the OECD forecasts 2.2 percent in 2007 after 2.6 percent in 2006—and that might go higher. "In Germany," says Jean-Philippe Cotis, the OECD's chief economist, "people were scared to death about unemployment." If a falling jobless rate quiets their fears, they may spend more. That would be good news if it helps shrink those yawning trade imbalances.

Losing the War, as Well as the Battle

Losing the War, as Well as the Battle
By Fareed Zakaria
© 2006 Newsweek, Inc.
Dec. 25, 2006 - Jan. 1, 2007 issue - It's relatively easy these days to point out all the ways in which George W. Bush has been ill-informed, misguided and wrong about Iraq. And in case you run out of examples, the president provides fresh ones continually. But on one central issue, Bush has been right. He has argued from the start that a modern, liberal democratic Iraq would be an example, an inspiration and a spur for progress in the Middle East. The trouble is, the Iraq of today is having precisely the opposite effect. If Bush wants to save his freedom agenda, he needs to decouple it from Iraq.

For all his intellectual shortcomings, Bush recognized that the roots of Islamic terror lie in the dysfunctions of the Arab world. Over the last 40 years, as the rest of the globe progressed economically and politically, the Arabs moved backward. Decades of tyranny and stagnation—mostly under the auspices of secular, Westernized regimes like those in Egypt and Syria—have produced an opposition that is extreme, religiously oriented and, in some cases, violent. Its ideology is now global, and it has small bands of recruits from London to Jakarta. But at its heart it is an Arab phenomenon, born in the failures of that region. And it is likely only to be cured by a more open and liberal Arab culture that has made its peace with modernity. Look for example at two non-Arab countries, Malaysia and Turkey, whose people are conservative and religious Muslims. Both places are also reasonably successful economies, open societies and functioning democracies. As a result, they don't produce swarms of suicide bombers.

Iraq after Saddam presented a unique opportunity to steer history on a new course. But instead the Bush administration drove it into a ditch. As a result, the effort to create an Iraqi model for the Middle East has failed. No matter what happens over the next year or two, the country has developed into more of a warning about the dangers of democracy than a symbol of its promise. When people around the world—and, most important, in the region—look at Iraq, they see chaos, religious extremism and violence.

Donald Rumsfeld frequently says, as he did again in his last appearance at the Pentagon, that if you were to "fly over" Iraq as he does, you would see that the violence is greatly exaggerated. In fact, were Rumsfeld to have dared to brave the roads of Iraq—as reporters do every day—he would have discovered that the reverse is true.

The Iraq Study Group report—which Rumsfeld boasts he has not really read—points out that "there is significant underreporting of the violence in Iraq ... A murder of an Iraqi is not necessarily counted as an attack. If we cannot determine the source of a sectarian attack, that assault does not make it into the database. A roadside bomb or a rocket or mortar attack that doesn't hurt U.S. personnel doesn't count. For example, on one day in July 2006 there were 93 attacks or significant acts of violence reported. Yet a careful review of the reports for that single day brought to light 1,100 acts of violence."

Now look at the "safe" areas. The south of the country, which the administration claims is stable, is run by fanatical religious parties, militias and street gangs, most of whom impose Iranian-style restrictions on people's rights and liberties. For minorities (like Christians) and for women, the new Iraq has been one of persecution and punishment. In many Sunni areas in the center of the country, a Taliban-style puritanism is being enforced. Amid the chaos, the groups that can provide security tend to be the most thuggish and extreme in their political views. And wherever there are mixed populations—throughout Iraq's cities—a gruesome campaign of ethnic cleansing has produced hundreds of thousands of internal refugees. Almost 2 million Iraqis—8 percent of the population—have fled the country entirely.

In the wake of this "model," not a single Arab regime feels any pressure to reform. They say to their people, "Do you want a democracy like they have in Iraq?" (The refrain echoes beyond the region. Vladimir Putin makes the same point in Russia, to justify his own usurpations of power.) Look around. The Saudi royals are stronger than ever. Egypt's Hosni Mubarak has jailed his opponents. The Syrian regime, once troubled, is more confident. Iran is ascendant. And the United States has become radioactive. Were America to come out in favor of clean water, we would find people opposed in the Arab world today.

George W. Bush needs to understand that he now has to choose between Iraq and his broader Middle East project. Only by realizing that Iraq has gone awry and reducing America's involvement there can he credibly push a different, more incremental reform in other countries. If, instead, he insists on digging deeper in Iraq, America's war will drown out all else. For the sake of his own freedom agenda, President Bush must move beyond Iraq.