You are on page 1of 369

Contents

1. "States and Federalism." CQ Researcher (October 15, 2010): 845-868. 2. "Redistricting Debates." CQ Researcher (February 25, 2011): 169-192. 3. "Public-Employee Unions." CQ Researcher (April 8, 2011): 313-336. 4. "Campaign Finance Debates." CQ Researcher (May 28, 2010): 457-480. 5. "Financial Misconduct." CQ Researcher (January 20, 2012): 53-76. 6. "Income Inequality." CQ Researcher (December 3, 2010): 989-1012. 7. "Student Debt." CQ Researcher (October 21, 2011): 877-900. 8. "Energy Policy." CQ Researcher (May 20, 2011): 457-480. 9. "Aging Population." CQ Researcher (July 15, 2011): 577-600. 10. "Health-Care Reform." CQ Researcher (June 11, 2010): 505-528. 11. "Census Controversy." CQ Researcher (May 14, 2010): 433-456. 12. "Foreign Aid and National Security." CQ Researcher (June 17, 2011): 529552. 13. "U.S.-Pakistan Relations." CQ Researcher (August 5, 2011): 653-676. 14. "Afghanistan Dilemma." CQ Researcher (August 7, 2009): 669-692.
15.

"Government Secrecy." CQ Researcher (February 11, 2011): 121-144.

CQ
A
arrested, detained or stopped for possible law violations.

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

States and Federalism


Is the federal government usurping states powers?
rizona enacted Medicaid cuts early this year only to have the action countermanded by the Obama administrations recently passed health care law. Arizona is now one of 20 states challenging the

new law as unconstitutional. Meanwhile, the state is also tangling with the federal government over national immigration policy. The cases highlight the recurrence of high-profile clashes over federal power and state prerogatives playing out against the backdrop of sharp political attacks on the administration and declining confidence in government at all levels. One federal judge has upheld the new health care law, but the states suits challenging the law are advancing. Meanwhile, the Supreme Court is set to hear a challenge by business and civil rights groups to Arizonas tough law on hiring illegal aliens even as the state is appealing a lower court ruling that blocks its new measure requiring local law enforcement officers to check the immigration status of anyone
Tea Party members and other supporters of Arizonas tough, new immigration law rally against illegal immigration in Phoenix on July 31. The Justice Department has sued to invalidate the law, arguing it conflicts with the federal governments power over immigration matters.

I N S I D E

THIS REPORT
THE ISSUES ....................847 BACKGROUND ................854 CHRONOLOGY ................855 CURRENT SITUATION ........860 AT ISSUE........................861 OUTLOOK ......................863 BIBLIOGRAPHY ................866 THE NEXT STEP ..............867

CQ Researcher Oct. 15, 2010 www.cqresearcher.com Volume 20, Number 36 Pages 845-868
RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

STATES AND FEDERALISM


THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
Oct. 15, 2010 Volume 20, Number 36

847

Is the federal government taking on too much power from the states? Does the federal health care law infringe on the powers of the states? Do state and local immigration laws infringe on federal powers?

848 852

Confidence in State, Federal Governments Lags Fifty-nine percent of Americans have limited confidence. Arizona Law Blocked by Federal Judge U.S. law preempts parts of tough anti-immigration law, judge says. Chronology Key events since 1972. Will Staggering New Medicaid Costs Hit the States? Dueling studies examine the impact of new health care reform law. Hearing Set on InmateRelease Order in California Can a federal court order the state to reduce its prison population? At Issue Is the Obama administration taking too much power from the states?

MANAGING EDITOR: Thomas J. Colin

tcolin@cqpress.com

BACKGROUND

854 856 859

Dual Sovereigns The Constitution reserved power for both the national and state governments. New Federalisms Republican Presidents Nixon and Reagan sought to return power to the states. Federal Powers Both Presidents George W. Bush and Barack Obama overrode state interests.

855 856

kkoch@cqpress.com Thomas J. Billitteri, tjb@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Roland Flamini, Sarah Glazer, Alan Greenblatt, Reed Karaim, Barbara Mantel, Patrick Marshall, Tom Price, Jennifer Weeks DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT-CHECKING: Eugene J. Gabler, Michelle Harris INTERN: Maggie Clark

ASSISTANT MANAGING EDITORS: Kathy Koch

858

A Division of SAGE

861

PRESIDENT AND PUBLISHER:

John A. Jenkins
Copyright 2010 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except; (Jan. wk. 1) (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE Publications. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-4277737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

CURRENT SITUATION

860 862

Health Suits Advancing Several states are challenging the new health care law. Immigration Cases Set Challenges to two tough Arizona statutes are being closely watched.

FOR FURTHER RESEARCH

865 866 867 867

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

OUTLOOK

863

Federalisms Meanings Todays collaborative federalism involves overlapping state and federal powers.

Cover: Getty Images/John Moore

846

CQ Researcher

States and Federalism


BY KENNETH JOST
and local immigration policies throughout the country, the suit says. 2 r i z o n a G o v. J a n The two issues are as curBrewer worked hard rent as the upcoming 2010 with the states legmidterm congressional elecislature to come up with tions. Republican candidates $1.1 billion in spending cuts and activists in the diffuse early this year to avoid a big Tea Party movement are debudget deficit in 2011. A big picting the health care overchunk of savings came from haul as a massive power grab eliminating health care coverby the federal government at age for 47,000 low-income the expense of state prerogachildren and 310,000 childless tives and individual rights. Along adults. with immigration-control adThis is the most signifivocacy groups, they are also cant streamlining of state govblaming Washington for the ernment ever undertaken, the failure to seal U.S. borders Republican chief executive from illegal immigrants and said as she signed a series of urging the feds to get out of budget bills on March 19. the way of state and local Only a few days later, howgovernments wanting to adopt ever, Arizonas budget-cutting tougher policies. 3 effort ran headlong into PresiThe conflicts over federdent Obamas plan to cover al and state powers, howmost of the estimated 50 milever, are also as old as the lion Americans without health Republic itself. The ConstiPresident Obama signs new health care reform insurance. Under the health tution, drafted in the sumlegislation on March 23, 2010, providing insurance for care overhaul that Congress mer of 1787, called for resome 30 million uninsured Americans. Twenty states have sued to invalidate the controversial legislation, passed and Obama signed into placing the weak national claiming the added costs it requires amounts to an law on March 23, states are government created by the unconstitutional intrusion on the states sovereignty. prohibited from reducing their Articles of Confederation with current health care funding. a federal system of divided The short version is that states are by the GOP-controlled legislature powers between the national and state locked into their existing programs at was necessary to solve a crisis we governments, known as federalism. the moment the president signs the bill, did not create and the federal gov- The new national government was to Monica Coury, spokeswoman for the ernment has refused to fix the cri- be stronger, but how much stronger Arizona Health Care Cost Containment sis caused by illegal immigration and was unclear. The issue was fiercely System, told the Arizona Republic on Arizonas porous border. debated in the state-by-state battles The very same day, Obama in Wash- that led up to ratification of the Conthe eve of Obamas signing. The agency operates the states Medicaid system, the ington called the law misguided and stitution nine months later. federal-state health care program for pledged an administration review of From the beginning there was amits implications. The Justice Depart- biguity in the Constitution, says Timlow-income persons. 1 Barely a month later, Brewer found ment followed through on July 6 by othy Conlan, a professor of political herself in another power struggle with filing a federal court suit in Phoenix science at George Mason University in Washington as she signed a contro- to invalidate the law as conflicting Fairfax, Va., and author of two books versial immigration law on April 23 with the federal governments plenary and numerous articles on federalism, making it a state crime to be in the power over immigration matters. The And the scope of ambiguity has grown country illegally and requiring local Constitution and the federal immi- over time as weve been forced to police to enforce federal immigration gration laws do not permit the de- adapt an 18th-century document to the law. Brewer said the law passed velopment of a patchwork of state realities of 20th-century government. 4

THE ISSUES

www.cqresearcher.com

AFP/Getty Images/Saul Loeb

Oct. 15, 2010

847

STATES AND FEDERALISM


Condence in Government Lags
Fifty-nine percent of Americans have limited or no condence in either the federal or their state government (top graph). In ve economically stressed states Arizona, California, Florida, Illinois and New York a majority of voters say they can trust their state governments only some of the time (chart).
How much condence do you have in federal/state government?

Federal
1% 41% 59% 1%

State
41%

59%

A lot or some

Little or none

Not sure

How much of the time do you think you can trust your state government to do what is right?
Just about always 4% 3 4 2 3 Most of the time 29% 15 27 17 16 Only some of the time 60% 70 59 71 67

State Arizona California Florida Illinois New York

Never 6% 10 8 9 12

Dont know 1% 2 2 1 2

* Figures may not total 100 due to rounding. Sources: Voter Condence in Big Banks, Corporations & Wall Street Even Lower Than That of Government, Zogby, February 2010, www.zogby.com/news/Read News.cfm?ID=1817; Facing Facts: Public Attitudes and Fiscal Realities in Five Stressed States, Pew Center on the States, October 2010, www.pewcenteronthe states.org/uploadedFiles/PCS_PPIC.pdf?n=4566

Federal powers have grown over time, particularly since the 1930s, when President Franklin D. Roosevelt put Washington into the economicrecovery and regulation business. The Supreme Court initially struck down

some of FDRs legislative initiatives, but reversed course in 1937. The federal government clearly has grown in power since 1938, says Robert A. Schapiro, a professor of constitutional law at Emory University

School of Law in Atlanta. The scope of federal regulation has increased, Schapiro adds, but the scope of state regulation has also increased. Roosevelt set the pattern for Democratic presidents, including John F. Kennedy and Lyndon B. Johnson in the 1960s, of being associated with expanding the scope and size of the federal government. Two Republican successors, Richard M. Nixon and Ronald Reagan, countered with federalism reforms that purported to transfer power back to the states. Conlan notes, however, that both of the GOP chief executives also adopted some policies that centralized powers in Washington. Today, Obama and his fellow Democrats in Congress are under fierce criticism for supposedly expanding federal powers and spending to unprecedented levels. No governmentcontrolled health care, read one commonly seen placard at a Tea Party rally in Washington on Sept. 12. Another: The more the government takes, the le$$ we make. Cut taxes + spending now! Experts with differing political views say the attacks are overdrawn. Like most administrations, [Obamas] is somewhat conflicted, says Jonathan Adler, a conservative law professor at Case Western Reserve University in Cleveland. In some areas, the administration has sought to be responsive to the desire of the states to do their own thing. But in other areas, the administration has certainly been aggressive in maintaining federal supremacy to preempt state actions. Doug Kendall, president of the consumer-oriented Constitutional Accountability Center in Washington, agrees. The administrations record could be viewed as pointing in a couple of directions, Kendall says. He notes that the administration issued a policy statement early in 2009 generally pledging to minimize the use of the doctrine of federal preemption to supersede state laws. But he acknowledges that the

848

CQ Researcher

administration has vigorously claimed called federalism revolution began to referred to by the acronym PPACA or, preemption to override some of the peter out, however, at the turn of the pejoratively, as Obamacare will flurry of state and local immigration century. After five years in office as cost states so much money that it inlaws passed in the past few years. (See Rehnquists successor, Chief Justice fringes on their power to control their At Issue, p. 861.) John G. Roberts Jr. has shown little own affairs. The administration, along Adler, Kendall and others also note interest in the area. with health reform advocates, conthat Obamas Republican predecessor, The court does have several federal- tends that any additional costs for George W. Bush, pursued several ism-related cases on its calendar for states will be minimal and will be offpower-centralizing policies despite the the current term, however, including set by other savings. GOPs general assoThe administrations ciation with favoring challenge to Arizonas states interests over newest immigration law Washingtons. There is also advancing in the wa s a d r a m a t i c courts. U.S. District growth of federal Judge Susan Bolton ismandates under sued an injunction on Bush, Conlan says. July 28 blocking the law Whether overfrom going into effect as drawn or not, disscheduled at 12:01 a.m. content with Obama the next day. The federadministration polial appeals court in San cies is fueling interFrancisco is scheduled est in ambitious but to hear the states appeal long-shot campaigns Nov. 1. (See box, p. 852.) to rewrite the U.S. As the court cases Constitution to limit proceed and the confederal power. Some gressional elections apconservatives are proach, here are some pressing a campaign of the major questions to get the required being debated: number of states Demonstrators block a street in downtown Phoenix on July 30 to protest 34 to call on ConIs the federal govArizonas tough new immigration law requiring local police to enforce gress to convene a ernment taking on federal immigration law. Gov. Jan Brewer said the law was necessary constitutional contoo much power to solve a crisis we did not create and the federal government has refused to fix the crisis caused by illegal immigration and vention, a procedure from the states? Arizonas porous border. never before used to Four weeks after an amend the nations upset win in Alaskas foundational document. Meanwhile, a a closely watched challenge to Ari- Republican primary, U.S. Senate candilibertarian-minded Georgetown Univer- zonas controversial law tightening pro- date Joe Miller used a nationwide telesity law professor is drawing attention hibitions against employers hiring il- vision appearance on Sept. 19 to call for a proposed constitutional amend- legal aliens. The federal appeals court for cutting back the size of the federal ment to allow two-thirds of the states in San Francisco upheld the law. The government. The first thing that needs to repeal a federal law unless Congress U.S. Chamber of Commerce, along with to be done, the Tea Party-backed canreenacts it in the face of the states op- immigrant-rights groups and the U.S. didate told host Chris Wallace on Fox position. (See story, p. 850.) government, is asking the justices to News Sunday, is, again, restricting the Federalism issues routinely end up strike the law down. The case will be growth and actually reversing the growth in the courts, often at the Supreme argued on Dec. 8. of government and, in the process, transCourt. In the 1990s under Chief JusMeanwhile, federal judges in two ferring power back to the states. tice William H. Rehnquist, the court states are considering suits by states Anxiety about the size of the federbreathed new life into federalism challenging the new health care law. al government had been growing since principles with several decisions that The states say the Patient Protection Obamas early months in office when Continued on p. 851 trimmed federal powers. The so- and Affordable Care Act sometimes
AFP/Getty Images/Mark Ralston

www.cqresearcher.com

Oct. 15, 2010

849

STATES AND FEDERALISM

States Look to Article V to Limit Federal Power


Conservative advocates push for a state-led convention to amend Constitution.
onservative scholars and activists, frustrated with mounting federal debt and expansion of federal powers, are looking to an unused provision in the Constitution for a remedy. They want to convene a convention under Article V, which permits applications from two-thirds of the states (now 34) to force Congress to call a convention where state delegates would debate constitutional amendments. To ratify the proposed amendments, three-fourths of the state legislatures (38) would then have to approve them. This current debt is unconscionable, says Bill Fruth, an economist and founder of 10 Amendments for Freedom, a Florida-based advocacy group working to create a convention to propose a balanced budget amendment. An amendment is necessary to force Congress to stop borrowing. They wont do it themselves, so we have to force them, Fruth says. Randy Barnett, a law professor at Georgetown Law Center, agrees. People are looking for levers to pressure Congress, says Barnett. We cant rely on Congress to police themselves or for the courts to police Congress, so Article V provides an alternate way of reining in federal power. Barnett, a prominent advocate of limiting federal power, is also pushing his own proposed constitutional amendment to allow two-thirds of the states to repeal a law passed by Congress. The repeal would take effect unless Congress decided to reenact the measure, with only a simple majority required. As Barnett explained in an op-ed in The Wall Street Journal, the amendment would effectively force Congress to take a second look at a new law if a solid majority of states opposed it. The op-ed was co-authored by William J. Howell, speaker of the Virginia House of Delegates, who said he would introduce the measure in a coming session. 1 Paradoxically, efforts to block the proposed convention are being led by conservative groups that also want to limit federal power but worry about the risk of potentially damaging changes to the Constitution. Lobbying by the Eagle Forum and the far-right John Birch Society have prompted at least 13 states to withdraw their applications for conventions in the last decade. There is no provision in the Constitution for how a convention would run, says Republican New Hampshire state Rep. Tim Comerford, who sponsored a successful effort in the 2010 legislative session to rescind a pending convention application. Comerford began his efforts after learning about the dangers of a constitutional convention from a John Birch Society video, Beware of Article V. The only constitutional convention we ever had was the original one, and that was a runaway convention because

they set out to amend the Articles of Confederation and wound up creating a whole new document, says Comerford. A new convention could put the First and Second Amendments any of the Constitution under fire. Virginia Sloan, director of The Constitution Project, a nonpartisan group that fosters discussion of constitutional issues, is also critical of the convention process. In the construction of the Constitution, the framers were trying to avoid people using the Constitution as a political tool, says Sloan. Most people are reluctant to support an amendments convention because we could destroy what we have. Calling for an amendments convention is nothing new. In the 1960s and again in the 80s, 32 of the 34 states needed sought to establish a convention, proposing, respectively, amendments on legislative reapportionment and balanced budgets. In both cases, the fear of a runaway, free-for-all convention motivated Congress to address the issues. This time, experts are not convinced that the threat of a convention will compel Congress to act. My prediction is no, says Robert G. Natelson, a senior fellow in constitutional jurisprudence at the Denver-based Independence Institute, which describes itself as a free-market, pro-freedom think tank. I hear some people say, Maybe Congress will just cave, but I think people who want to apply for a convention should be prepared for a convention. Organizing a convention comes with many obstacles. When you call a convention, you have to do a lot of organization beforehand, and you need a way of sharpening the issues, says Jack Balkin, a law professor at Yale University. Its a very tall order. Also, Balkin says, if a convention is held and actually sends proposed amendments to the states, they are very difficult to pass, as proven by the struggle and eventual failure to add the Equal Rights Amendment to the Constitution. As of Sept. 1, 20 state legislatures have voted to force Congress to hold an amendments convention. Fruths 10 Amendments for Freedom plans to have sponsors in all 50 state legislatures in January 2011 introduce the groups petition for a convention. The ramifications of calling a convention could be huge. The mere fact of having a convention would set all eyes on constitutional issues, says Balkin. Even if the convention failed, those issues would be setting the political agenda. It would suck all the air out of the political room. Maggie Clark
1 Randy Barnett and William J. Howell, The Case for a Repeal Amendment, The Wall Street Journal, Sept. 16, 2010, p. A23.

850

CQ Researcher

Continued from p. 849

he proposed a $900 billion stimulus plan to try to lift the country out of the recession that began while Bush was president. Obama agreed to trim the request to gain Republican votes needed to pass the bill in the Senate. As enacted, the American Recovery and Reinvestment Act of 2009 provided $787 billion in stimulus divided between tax breaks for individuals and businesses; funds for education, health care and entitlement programs, including unemployment benefits; and funds for federal contracts, grants and loans. Meanwhile, the administration was also continuing the financial industry bailout the Troubled Asset Relief Program or TARP that had been enacted in the final months of the Bush administration. And with General Motors, the nations largest automaker, on the verge of financial collapse, Obama decided in June 2009 effectively to force the company into a federal bankruptcy court for reorganization, with the government acquiring a 60 percent ownership stake. The government had no shortage of interest from states for funds from the economic stimulus. Officials in the states most directly affected also generally backed the governments financial rescue plans for Wall Street (New York) and GM (Michigan). Emory law professor Schapiro finds the states support for the expanded federal roles unsurprising. Often what the federal government is trying to do is the same thing the state governments are trying to do, he says. Its just that the federal government can do it more effectively. On regulatory issues, Obama reversed the Bush administrations stance of invoking federal preemption to supersede state laws or state court rulings. The Bush administration was completely hostile to regulation at the state level, says Kendall of the Constitutional Accountability Center. The administration signaled the shift toward what is sometimes called pro-

gressive federalism with a decision in January 2009 to allow California and other states to set their own standards on greenhouse gases from cars and trucks. Later, Obama cautioned agency and department heads against issuing regulations that preempted state laws without clear federal statutory authority. Obamas memo, issued in May 2009, favorably quoted Supreme Court Justice Louis Brandeis observation that states can serve as a laboratory for novel social and economic experiments. 5 Obama also revised another Bush policy initiative that intruded on state prerogatives: the No Child Left Behind Act, with its combination of curriculum and testing mandates and financial penalties for non-performing schools. The act was challenged in court on states rights grounds but upheld. Federalism expert Conlan calls the law unquestionably the most intrusive federal policy on elementary and secondary education since the Great Society, and perhaps ever. Instead of using mandates and penalties, the Obama administration is promoting education reform in the states through a $4.35 billion competitive grant program known as Race to the Top. Eleven states and the District of Columbia have been selected to receive grants two in March, the others in late August based on detailed proposals that generally hewed to the administrations support for charter schools and performance-based pay for teachers. In all, 40 states and the District of Columbia submitted applications for the funds. 6 Despite some states-minded shifts, the administrations reputation on federalism among Republicans and conservatives today appears to be uniformly negative, largely because of the state mandates in the health care law and the immigration policy stance. Writing in The American Spectator in July, Andrew Cline, editorial page editor of the conservative New Hampshire Union Leader, de-

nounced what he calls the administrations crazy quilt federalism. 7 In similar vein, Gene Healy, a vice president at the libertarian Cato Institute and columnist for the Washington Examiner, accuses the administration of fair-weather federalism. The administration allows states license when theyre pursuing policies that the Obama administration and its supporters favor and brings the hammer down when theyre doing policies that [the administration opposes]. Healy says the Obama administration is not unique in adopting an inconsistent attitude toward state-federal relations. Its quite common for politicians to wave the 10th Amendment flag, he says. The Bush administration, Healy says, was quite abysmal on federalism. As examples, he notes the Bush policies of challenging state initiatives in California on medical marijuana and in Oregon on assisted suicide. Emory law professor Schapiro says the policy shifts from one administration to another indicate that federalism provides no fixed answer on the respective powers of the federal and state governments. Federalism debates have often been policy debates in constitutional language, he says. To the extent that some states dont like what the federal government is doing, thats the issue. Does the federal health care law infringe on the powers of the states? On the day before President Obama was to sign the federal health care law, Florida Attorney General Bill McCollum promised to file a suit challenging the act as an infringement of states rights immediately afterward. The legislation would cost the states billions of dollars and go far beyond any unfunded mandate weve ever seen, McCollum said on March 22. Anything that really manipulates the states like this, he continued, is unconstitutional under the 10th

www.cqresearcher.com

Oct. 15, 2010

851

STATES AND FEDERALISM

Arizona Law Blocked by Federal Judge


U.S. law preempts parts of tough anti-immigration law, judge says.

ajor provisions of Arizonas Support Our Law Enforcement and Safe Neighborhoods Act have been blocked from going into effect by a federal judges ruling on July 28. U.S. District Judge Susan Bolton in Phoenix ruled that federal law preempts provisions in four sections of the controversial act that: Require law enforcement officers to make a reasonable attempt to determine the immigration status of a person stopped, detained or arrested if there is a reasonable suspicion that the person is unlawfully present in the United States; and require verification of the immigration status of any arrested person before release. The provision, Bolton said, is likely to burden legally present aliens and to impermissibly burden federal resources and redirect federal agencies away from the priorities they have established. Create a crime for the failure to apply for or carry alien registration papers. The provision, Bolton ruled, alters the penalties established by Congress under the federal registration scheme. Create a crime for an unauthorized alien to solicit, apply for or perform work. The provision, the judge said, conflicts with a comprehensive federal scheme. . . . Authorize the warrantless arrest of a person if there is prob-

able cause to believe the person has committed a public offense that makes the person removable from the United States. Bolton found a substantial likelihood that officers will wrongfully arrest legal resident aliens under the provision. The judge found two challenged provisions were not preempted and could be enforced. Those provisions: Create a separate crime to transport or harbor an unlawfully present alien or encourage or induce an unlawfully present alien to come to or live in Arizona. Permit impoundment of vehicles used in the transporting or harboring of unlawfully present aliens. Many other provisions of the law remain enforceable because the government did not seek to enjoin them. They include a provision creating a new crime of stopping a motor vehicle to pick up day laborers if the action impedes normal traffic. The states appeal of the issuance of the preliminary injunction is to be heard by a panel of the Ninth U.S. Circuit Court of Appeals in San Francisco on Nov. 1. Kenneth Jost
Source: United States v. Arizona, CV10-1413-PHX-SRB, July 28, 2010, http://docs. justia.com/cases/federal/district-courts/arizona/azdce/2:2010cv01413/535000/87/.

Amendment, under the sovereignty of the states. The Obama administration is vigorously defending against Floridas federal court suit, now joined by 19 other states, and a similar suit filed separately by Virginia. Supporters of the health care law and many legal experts voice doubts about the statesrights challenge, though some experts see a stronger basis for attacking the laws individual-insurance mandate. In any event, the two federal judges hearing the cases one in Pensacola, the other in Alexandria have both signaled they are unlikely to dismiss the suits at an early stage. 8 Supporters of the law sharply dispute the opponents claims, including the claimed fiscal impact on the states. The law expands health insurance coverage by requiring participating states and all do participate to extend Medicaid eligibility beginning

in 2014 to a new, nationwide standard: all adults with incomes up to 133 percent of the federal poverty level. The new requirement is projected to add 16 million to 22 million people to Medicaid rolls nationwide. The federal government will pay 100 percent of the cost of new enrollees for the first three years, with the percentage declining gradually to 90 percent in 2020 and future years. The change amounts to a massive expansion of the states Medicaid programs, according to Robert Alt, a senior legal fellow and deputy director of the Center for Legal Studies at the conservative Heritage Foundation. Representatives of states are genuinely concerned about how much more this is going to cost, Alt says, and whether or not its simply going to bankrupt them. John Holahan, director of the Health Policy Research Center at the

liberal-oriented Urban Institute, calls the argument by the objecting states grotesquely flawed. The new law, he says, would mean a small increase in state Medicaid spending but would also allow states to reduce current spending in several areas notably, unreimbursed medical care for the uninsured. The savings, Holahan says, will be more than enough to offset the new spending under the law. In their lawsuits, the states contend that the new law fundamentally changes the Medicaid program from a voluntary federal-state partnership into a compulsory top-down federal program. In its reply, the government says the new law imposes valid conditions on the states acceptance of federal aid comparable to changes in Medicaid rules enacted periodically since the program was created in 1965. Health policy experts on both sides agree with the states argument that

852

CQ Researcher

participation in Medicaid is, in practical terms, obligatory. Thats been true for a long time, says Holahan. No state has ever seriously considered walking away from [the program]. Two legal experts on federalism, however, say they doubt that the states coercion argument will carry the day. The legislation is a dramatic assertion and exercise of federal authority, says Adler, the conservative law professor at Case Western Reserve. Even so, Adler says, the states spending arguments are difficult to make. Conlan, a more centrist-minded federalism expert, is also dubious. Theres no question that the law does entail new opportunities and responsibilities for the states, he says. But he calls the states arguments overdrawn. In its brief, the government says that the Supreme Court has never struck down a federal state-aid program on the grounds that a condition for receiving the assistance was coercive. The states are also challenging provisions of the new law for the states to establish health-insurance exchanges to offer moderately priced insurance coverage for small businesses and individuals. The states depict the provisions as mandatory and, on that basis, as an impermissible command to operate a federal regulatory program. The government counters that the states in fact are free to decide whether or not to create the insurance exchanges. The states are also attacking the most politically contentious aspect of the new law: the individual health insurance mandate. In their suit, the states call the provision an unprecedented encroachment on the sovereignty of the Plaintiff States and the rights of their citizens. The government calls the claim premature and denies the states legal standing to bring the claim. But on the laws merits the government says the mandate is a valid exercise of Congress authority to regulate the market in health care.

The Heritage Foundations Alt says the argument contradicts federalism principles. If the Commerce Clause were read this broadly, then the federal government could do anything, he says. Emory law professor Schapiro calls it surprising for the states to raise a sovereignty-based argument against a regulation affecting individuals, not the states themselves. But he adds, Its a little late in the day for states to say that health is a local matter. Do state and local immigration laws infringe on federal powers? When two illegal aliens were involved in a fatal shooting in the small town of Hazleton in northeastern Pennsylvania in 2006, Mayor Lou Barletta responded by proposing a local ordinance aimed at making his city the toughest place in the United States for illegal immigrants. As approved by the town council, the Illegal Immigration Relief Act provided for lifting the business license of any company that employed or the rental license for any landlord that rented housing to an illegal alien. The ordinance was promptly challenged by Hispanic residents and immigrant-rights groups, blocked from going into effect and now has been struck down by a federal appeals court as conflicting with federal law. In a massive, 188-page decision on Sept. 9, a three-judge panel of the Third U.S. Circuit Court of Appeals said that it was required to intervene when states and localities directly undermine the federal objectives embodied in statutes enacted by Congress. 9 The appeals court ruling conforms to the general view, dating to the 19th century, that federal law is preeminent on immigration matters. But critics of the federal governments inability in recent years to stem the influx of undocumented aliens insist that states and localities are on sound ground in passing laws that they say will strengthen the enforcement of federal laws.

The primary responsibility for immigration policy and immigration enforcement rests with the federal government, says Ira Mehlman, national media director for the Federation for American Immigration Reform (FAIR). But Congress has made it clear over the years that they welcome state and local cooperation in enforcing immigration laws. As one example, Cory Andrews, a senior litigation counsel with the conservative Washington Legal Foundation (WLF), points to an immigration law passed in 1995 and known as section 287(g) that authorizes state and local law enforcement officers to perform immigration law enforcement functions. WLF filed a friend-of-thecourt brief supporting the Hazleton ordinance as well as the Arizona employersanctions law pending before the Supreme Court. Immigrant-rights advocates say the states have far less power to deal with immigration-related matters. The federal government has supreme power over anything that touches on who can enter the country and the conditions under which they may remain, says Karen Tumlin, managing attorney with the Los Angeles-based National Immigration Law Center. State attempts to legislate in that area are strictly prohibited. Tumlin acknowledges section 287(g) but notes that the provision permits agreements between the federal government and local law enforcement only if local officers receive specialized training from federal agents. As with the health care issue, experts Conlan and Adler both doubt the states arguments despite the differences in their political perspectives. Both scholars acknowledge the states concerns about the impact of illegal immigration but question the states authority to take on enforcement responsibilities themselves. The federal government is failing perhaps to adequately perform one of its constitutional responsibilities; says

www.cqresearcher.com

Oct. 15, 2010

853

STATES AND FEDERALISM


Conlan. The corollary of that is not that [the states] get to address immigration. That does not follow constitutionally. States may have legitimate policy complaints about federal enforcement, Adler says, but that does not mean that the states can enact their own policies. If the federal government believes that the immigration laws are to be enforced in a particular way, he says, the federal government has the ability to make that a national rule. Despite the legal doubts, state and local governments have enacted well over 1,000 immigration-related laws in the past six years. Many but not all of the laws have been struck down or blocked from going into effect. The Supreme Court will have its first chance to rule on the recent spate of laws during the current 2010-2011 term when the justices hear a challenge to Arizonas tough 2007 employersanctions law on Dec. 8. The case, Chamber of Commerce v. Whiting, pits business and civil rights groups challenging the law against Arizona and groups favoring a tougher stance against illegal immigration. The federal appeals court in San Francisco upheld the law. Schapiro, the Emory law professor, acknowledges the federal governments argument for preempting state and local laws aimed at more stringent enforcement of federal laws may seem paradoxical. Its a hard argument to make, he says. In briefs in the Hazleton case and the two cases challenging Arizona laws, the government argues that overenforcement by state and local governments risks burdening aliens legally in the United States, deterring employers or landlords from hiring or renting to legal aliens and overwhelming federal resources to enforce immigration laws. The appeals court in the Hazleton case credited those arguments. The laws employment provisions created an obstacle to federal policy, the court said, by emphasizing enforcement but not the anti-discrimination protections included in the federal employer sanctions law. As for the housing provisions, the court said that regulation of the residency of immigrants was clearly within the exclusive domain of the federal government. In Hazleton, Mayor Barletta is vowing to appeal the decision. I have said repeatedly over the years that the main line of defense against illegal immigration is to eliminate the availability of jobs to illegal aliens, Barletta said on the day of the decision. If illegal aliens have no place to work, they will self-deport. prohibition on any tax or duty on exports from other states. In urging ratification of the Constitution, James Madison and Alexander Hamilton stressed in The Federalist Papers the continued importance of the states. In Federalist 45, Madison said the federal governments powers were few and defined, while the states were numerous and indefinite. In Federalist 51, Hamilton argued that the federal structure would help preserve liberty. The different governments will control each other, he wrote. 11 Under Chief Justice John Marshall (1801-1835), the Supreme Court generally upheld federal powers, including an 1819 decision that gave a broad but not unlimited reading to Congress authority to enact all laws . . . necessary and proper for . . . the execution of its enumerated powers and limited the states ability to interfere with those powers. Under Chief Justice Roger Taney (1835-1864), the court tilted slightly toward the states. Taneys dual federalism is illustrated in a pair of immigration-related cases, a decade apart. One upheld as a proper exercise of a states police powers a law requiring ship masters to provide the names and other information about disembarking passengers. The other struck down a state law imposing a tax on those beginning a voyage. 12 The Civil War and the post-Civil War amendments established a national policy on an issue that the Constitution had left to the states: slavery. The 14th Amendment also laid the basis for expansion of federal powers by prohibiting the states from denying to any person equal protection or due process. The late-19th century Industrial Revolution also encouraged Congress to exercise its Commerce Clause powers, sometimes to protect nationwide enterprises such as the railroads and sometimes to safeguard workers or consumers from exploitative practices by business. The Supreme Court,
Continued on p. 856

BACKGROUND
Dual Sovereigns
he Constitution established a national government with some powers defined specifically and others more generally, but it also preserved state governments with most but not all of their residual powers retained. Over the course of two centuries, the federal government has grown in size and scope, but so too state governments. Congress and presidents have naturally gravitated toward federal solutions to perceived national problems but with the ever-present constraint of political and public support for states prerogatives. The Supreme Court at times limited federal powers somewhat, but since the 1930s has generally upheld the growing federal role exemplified in direct regulation and in conditions attached to federal aid to states. 10 The Constitution sets forth in Article I Congress so-called enumerated powers, including most significantly the power to tax and spend and to regulate interstate and foreign commerce. Article I also includes some limitations on the states, including a

854

CQ Researcher

Chronology
1970s-1980s 2000-Present Federalism reform is persisPresidents George W. Bush and
tent theme in Washington, state capitals. 1972 Congress passes and President Richard M. Nixon signs general revenue sharing for state, local governments. 1981 Budget Reconciliation Act signed by President Ronald Reagan consolidates federal grant programs, cuts overall state aid. 1987 Supreme Court says Congress can require states to set minimum drinking age at 21 as condition to receive highway construction funds.

Barack Obama push centralizing policies in Washington despite nods to state prerogatives; federalism revolution stalls at Supreme Court. 2001 President Bush wins congressional approval of No Child Left Behind Act; measure establishes national standards on curriculum, testing, school performance; Bush signs into law Jan. 8, 2002; act is challenged in court but upheld. 2002 Help America Vote Act establishes nationwide minimum election standards, provides funds to replace punch-card, lever-based voting systems (Oct. 22). 2005 Real ID Act, requiring states to adopt uniform procedures for drivers licenses as individual identification (May 11). . . . Supreme Court rules federal drug laws preempt state measures to legalize medical marijuana; ruling seen as retreat from Rehnquists federalism revolution (June 6). 2006 Hazelton, Pa., enacts ordinance to punish employers for hiring or landlords for renting to illegal aliens; measure is one of hundreds enacted by state or local governments over several years to counter illegal immigration. 2007 Arizonas Legal Arizona Worker Act makes it a crime for illegal alien to seek employment in state and puts employer out of business for second offense of hiring illegal

alien; act is challenged by business, civil rights groups but upheld by federal appeals court in September 2008. 2008 Democrat Barack Obama elected after presidential campaign with minimal attention to state-federalism issues. 2009 Obama makes health care overhaul a major domestic policy goal; works with Congress to craft bill to expand Medicaid eligibility with federal financing, use states to create health insurance exchanges to provide affordable coverage for individuals, small businesses. 2010 Obama signs Patient Protection and Affordable Care Act into law (March 23); Virginia files suit same day challenging law as violating state law barring individual health insurance mandate; Florida files suit next day, challenging act as unconstitutional because of fiscal impact on state. . . . Arizonas Support Our Law Enforcement and Safe Neighborhoods Act (SB 1070) requires police to determine immigration status of any person arrested or stopped (April 23); federal judge, ruling in suit by U.S. government, enjoins major provisions as preempted by federal immigration law (July 28). . . . Hazelton ordinance struck down on preemption grounds by federal appeals court (Sept. 9). . . . Federal judge in Detroit upholds health care law (Oct. 7); suits by states still pending. . . . Federal appeals court to hear appeal in SB 1070 case (Nov. 1). . . . Supreme Court to hear challenge to Arizonas employer sanctions law (Dec. 8).

Federalism revolution at Supreme Court limits federal power. 1995 Congress passes and President Bill Clinton signs Unfunded Mandates Act, limiting new federal mandates on states without federal funding (March 22). 1995-2000 Chief Justice William H. Rehnquist leads Supreme Court in limiting Congress ability to force state governments to administer regulatory programs, protecting state governments from damage suits for violating federal law and limiting Congress use of Commerce Clause power to regulate noneconomic matters.

1990s

www.cqresearcher.com

Oct. 15, 2010

855

STATES AND FEDERALISM

Will Staggering New Medicaid Costs Hit the States?


Dueling studies examine impact of new health care reform law.
ebraska spends about $742 million a year in its Medicaid program to provide health care to low-income persons. In August, Gov. Dave Heineman released an actuarial study claiming that the states costs could increase by somewhere between $526 million and $766 million over the next 10 years under the new federal health care reform law enacted in March. Heineman, a Republican, called the price tag from the state-commissioned study staggering and shocking and urged Congress to repeal or substantially modify the law. Heineman also supports Nebraskas participation with other states in a federal court suit in Florida challenging the constitutionality of the law. A study by researchers at the liberal-oriented Urban Institute, however, estimates Nebraskas added costs much lower: $106 million to $155 million. And the report notes that Nebraska will receive more than $2 billion in new federal matching funds during the period under the law. 1 The dueling cost studies are highly dependent on differing assumptions about new Medicaid enrollment and health care cost trends. The price tags figure not only in political debate but also in the federal court case. Florida, the lead plain-

tiff in the case, is claiming that it faces $4 billion in additional Medicaid costs from 2014 when the law is to take effect through 2019. Floridas suit says the added cost a price the state simply cannot afford to pay represents an unconstitutional intrusion on the states sovereignty. The Urban Institute researchers, however, estimate a substantially lower price tag: $1.2 billion to $2.5 billion. Overall, they estimate the states will pay about $21 billion for Medicaid expansion through 2019 with the federal government picking up the lions share: $444 billion. With different but somewhat comparable projections, the nonpartisan Congressional Budget Office says the federal price tag for expanding Medicaid and the Childrens Health Insurance Program (CHIP) put at $434 billion represents just under half of the estimated $938 billion increase in total healthcare spending under the law. The other costs include $464 billion in subsidies for individuals and small businesses and $40 billion in small-employer tax credits. 2 The Medicaid expansion costs represent the price for setting a national household income standard of Medicaid eligibility at 133 percent of the poverty level: $29,300 for a family of four or $14,400 for a single person. Currently, eligibility varies

Continued from p. 854

however, often set itself against economic regulation by either the federal or state governments in a laissezfaire period that extended into the 1930s. The court struck down or limited some federal laws by narrowly defining commerce as trade, not manufacturing. But it also struck down some state laws notably, limits on working hours as infringing on constitutionally protected property rights. Federal powers were lastingly expanded in the 1930s as President Franklin D. Roosevelt pushed through Congress and later won Supreme Court approval of the now-familiar laws regulating the economy and creating some elements of a social safety net. In three critical decisions in 1937 that overturned prior rulings, the court upheld the National Labor Relations Act, a federal unemployment compensation law and the Social Security Act for old-age benefits.

The court also upheld state wage-andhour laws and, in 1941, similarly upheld the federal Fair Labor Standards Act. 13 A year later, the court gave its most expansive construction to Congress commerce power by enforcing a production quota on a farmers cultivation of wheat solely for his own use with no intention of selling it. Congress power, the court wrote in Wickard v. Filburn, extended to any activity that exerts a substantial effect on interstate commerce. 14 The New Deal and post-New Deal laws and programs did not, however, reduce the states to nonentities. Indeed, the unemployment compensation system upheld in 1937 was to be administered by the states. Instead, the federal government worked through the states in what has been called cooperative federalism. The federal governments revenueraising powers allowed it to expand

its role from providing technical assistance to state governments to bestowing financial grants aimed at furthering federal goals, typically with significant conditions attached. These programs grew in FDRs so-called Second New Deal (mid-1935 to 1939); under his Democratic successor, Harry S. Truman (1945-1953); and, despite his supposed conservatism, under the Republican president, Dwight D. Eisenhower (1953-1961). By 1960, historian David B. Walker counts some 132 grant-in-aid programs with total outlays to the states of $6.8 billion nearly triple the amount at the start of Eisenhowers presidency. 15

New Federalisms
ederalism reform became a persistent theme in Washington and state capitals in the second half of the

856

CQ Researcher

greatly between states. Many Southern states provide Medicaid only for persons well below the poverty level, while a few Northeastern states extend Medicaid to families with incomes as high as 150 percent of the poverty level. The federal government currently pays about half the costs of Medicaid in the wealthiest states and a larger fraction in less-wealthy states. Under the new law, the federal government will pick up 100 percent of the cost of newly eligible Medicaid participants for the first three years 2014 to 2016 with the percentage declining gradually to 90 percent in 2020 and subsequent years. In a critical report, two health care experts at the conservative Heritage Foundation say the reimbursement provision amounts to an attempt to appease state lawmakers. They put the total cost of Medicaid expansion for the states at $33 billion, including $12 billion in administrative costs. And while they acknowledge that state lawmakers may view the provision as a relatively good fiscal deal, they also warn that state taxpayers will face higher tax bills . . . not just for the state costs but for the federal costs as well. 3 John Holahan, director of the Urban Institutes Health Policy Research Center, says, however, that states will save money by

spending less on uncompensated care for uninsured individuals. State spending on health care for low-income children will also be reduced, he says, because many will gain coverage under the insurance exchanges to be established under the law. I dont agree that states will be worse off financially, Holahan concludes. Kenneth Jost
The eight-page report by Milliman, Inc., dated Aug. 16, 2010, is available at www.governor.nebraska.gov/news/2010/08/pdf/Nebraska%20Medicaid% 20PPACA%20Fiscal%20Impact.pdf. The report by Urban Institute researchers John Holahan and Irene Headen, Medicaid Coverage and Spending in Health Reform, Henry J. Kaiser Family Foundation, May 2010, www.kff.org/ healthreform/upload/Medicaid-Coverage-and-Spending-in-Health-ReformNational-and-State-By-State-Results-for-Adults-at-or-Below-133-FPL.pdf. For coverage, see these stories by Nancy Hicks in the Lincoln (Neb.) Journal Star: Medicaid expert says states report flawed, Sept. 16, 2010, p. B1; Nebraska Medicaid costs likely to soar, Aug. 19, 2010, p. A1. 2 Congressional Budget Office figures cited in Landmark: The Inside Story of Americas New Health-Care Law and What It Means for Us All, by The Staff of The Washington Post (2010), p. 173. Other background drawn from the chapter, Medicaids Expansion: The Impact on the States, pp. 163-168. 3 Edmond F. Haismaier and Brian C. Blaise, Obamacare: Impact on the States, Heritage Foundation, July 1, 2010, p. 3, http://thf_media.s3.amazonaws.com/ 2010/pdf/bg2433.pdf.
1

20th century. Officials at both levels endeavored to find the right balance between federal and state responsibilities and to manage federal-state programs more efficiently and more effectively. Two Republican presidents in particular, Nixon (1969-1974) and Reagan (19811989), adopted policies aimed at returning powers to the states. State governments became more influential with increased revenue and administrative modernization, but they remained subject to mandates from Washington established by Congress or the executive branch and generally upheld by the Supreme Court. 16 The number and dollar amounts of federal aid programs grew, and their management became more complex, under the two Democratic presidents of the 1960s, Kennedy and. Johnson. The increased complexity of federal aid prompted proposals for intergovernmental reform under Johnson and that

Nixon developed and adopted as a signature domestic policy goal. Initially, Nixon pushed to consolidate federal aid in block grants. He broadened the effort with a proposal for general revenue sharing with state and local governments that Congress cleared for his signature in October 1972. The fiveyear, $30 billion program gave broad discretion to state and local officials. As George Mason professor Conlan notes, however, the Nixon presidency also saw a dramatic increase in federal regulations aimed at state and local governments notably, in the areas of environmental protection, health planning and highway construction. 17 Reagan opened his presidency by proposing a major federalism reform: a consolidation of scores of federal grant-in-aid programs into nine block grants. States were to get more discretion but also to suffer a significant cut in overall federal aid. After a con-

tentious congressional debate, Reagan got most of what he asked for in the Omnibus Budget Reconciliation Act of 1981. But he failed in subsequent efforts to consolidate more categorical programs into block grants. Reagan also failed with a bold plan announced in December 1981 for the federal government to take over Medicaid funding while giving the states responsibility for 43 other programs, including welfare and many other social services. The proposal fell under criticism from social service advocates and from many state officials who viewed it as requiring state tax increases. The administration also promised to ease regulatory restrictions on state governments. Nevertheless, the administration supported spending mandates that effectively required states to raise limits on trucking weights and to adopt a uniform minimum drinking age of 21. By the end of the 1980s, Conlan says, the

www.cqresearcher.com

Oct. 15, 2010

857

STATES AND FEDERALISM

Supreme Court to Consider Order to Reduce Prison Crowding


Hearing set on inmate-release order in California.
an a federal court order the state to reduce its prison population? California prisons have been filled to nearly double their capacity over the past decade. Now the state is now facing a federal court order to reduce inmate population by around 40,000 within a two-year period. California officials, however, are urging the Supreme Court to set aside the order as a misapplication of a law Congress passed specifically to make it difficult for federal judges to issue inmate-release decisions. Seventeen other states are backing Californias appeal. The order, issued by a special three-judge federal district court in August 2009, would require California to reduce its inmate population to 137.5 percent of the prisons combined designed capacity of 84,000. The court found that the population cap to be met through a combination of early releases and diversions of low-risk offenders at sentencing was needed to ensure constitutionally adequate medical and mental health care for state prisoners. 1 In appealing the decision, California contends that the threejudge court failed to follow the restrictions of the Prison Litigation Reform Act, which Congress passed in 1996 establishing new procedural and substantive restrictions on inmate-release orders by federal courts. Specifically, the law requires any inmate-release

order to be issued by a three-judge court, not an individual judge, and only after any remedial order by a single judge has been given reasonable time to remedy any constitutional violations. The law also requires that overcrowding be found to be the primary cause of a constitutional violation and that no other relief will remedy the violation. 2 Congress passed the law in response to lobbying by state attorneys general and district attorneys in the wake of a controversial federal court order requiring release of thousands of inmates from Philadelphia jails over a period of years. What we were asking, explains Sarah Vandenbraak Hart, a deputy Philadelphia district attorney who helped draft the law, was that they make a prison release order an absolute last resort remedy and only if absolutely necessary to remedy an ongoing constitutional violation. Lawyers for the California inmates contend the three-judge court followed the laws requirements. Congress succeeded in making it harder . . . but not impossible for courts to issue release orders, says Donald Specter, director of the Prison Law Office, a Berkeley-based inmate rights organization. They set the threshold, and our position is that weve met the threshold. Federal court orders in so-called institutional litigation have long been a bane of the states. State governments can find

number of new intergovernmental regulatory provisions enacted at the federal level surpassed the number for any previous decade. 18 The regulatory spike underlay the Clinton eras most important federalism reform: the Unfunded Mandates Reform Act of 1995. With some exceptions notably, civil rights statutes the act requires Congress to specify the cost of any new mandate on state and local governments and permits a point of order against any mandate unless fully funded in the bill. The act began with bipartisan cosponsorship when Democrats controlled the House and Senate in 1993; it won enactment in 1995 after Republicans had gained control of both chambers, but only after the GOP majorities had beaten back a string of weakening, Democratic-backed amendments. In signing the bill, President Bill Clinton called it historic, but

Conlan says that as in the Reagan era Congress and the White House continued to establish new regulatory mandates despite the professed reform. In the meantime, the Supreme Court had dealt two major blows to state prerogatives in federalism cases. In 1985, the court ruled that Congress could require state governments to follow minimum-wage and overtime requirements of federal labor law. The decision overturned a ruling favoring state governments on the issue a decade earlier. Then in 1987, the court upheld the federal law to withhold highway construction aid to any state that did not set the minimum drinking age at 21. In a 7-2 decision written by Chief Justice William H. Rehnquist, the court ruled the law a proper exercise of Congress spending power even though Congress had no authority to regulate the drinking age directly. 19

In the 1990s, however, Rehnquist led a revival of federalism principles to benefit states. In one line of decisions, the court prohibited Congress from requiring state or local governments to administer federal regulatory systems notably, the background check for gun purchasers. In another, the court held state governments immune from money-damage suits for violating federal law, including the federal wage and hours act. And in a pair of decisions written by Rehnquist, the court limited Congress power to use the Commerce Clause to regulate non-economic activity. One ruling struck down the federal Gun Free School Zones Act, which made it a crime to possess a gun within a minimum distance of a school. Another struck down a provision of the Violence Against Women Act that allowed victims of gender-motivated violence to sue their assailants in federal

858

CQ Researcher

themselves on the losing end of decisions that not only require wide-ranging and sometimes expensive changes in operation of programs and facilities but also expose them to sixor seven-figure attorney fee awards to lawyers on the other side. In a significant decision in April, the Supreme Court ordered a lower court to reconsider a $10.5 million fee award to public-interest lawyers for a case that forced broad changes in the states foster care system. 3 The court order in the California case came after more than a decade of litigation over medical care for state inmates in separate cases filed before single-judge courts in Sacramento and San Francisco. The two district courts decided in 2007 to convene a three-judge court as provided in the 1996 law after finding medical care still constitutionally deficient. The threejudge court presided over a trial from November 2008 to February 2009 before issuing its 185-page decision on Aug. 4, 2009. The state says the order, which has been stayed pending the Supreme Court appeal, would require release of between 38,000 and 46,000 inmates. In its appeal, the state contends the requirements for a three-judge court were not met and the cases should be sent back to the separate district courts. In accepting the appeal on June 14, the Supreme Court said it would consider the jurisdictional issue at the same time as

the merits of the case. Oral arguments, now set for Nov. 30, will feature two highly regarded Supreme Court advocates: Carter Phillips for the state and Paul Clement, U.S. solicitor general under President George W. Bush, for the inmates. In his brief for the inmates, Specter discounts the potential impact of the case on other states, describing Californias prison crisis as unique. But he also discounts the states concerns about improper federal court intrusion into prison systems. Federalism is not a one-way street, Specter says. It doesnt mean only that states have rights. It also means that federal courts have obligations to enforce constitutional rights against the states. Kenneth Jost
1

The decision came in two consolidated cases: Coleman v. Schwarzenegger (medical care), Plata v. Schwarzenegger (mental health care), CIV S-90-0520 LKK JFM P, U.S. Dist. Ct., N.D./E.D. Calif., Aug. 4, 2009, www.caed.uscourts. gov/caed/Documents/90cv520o10804.pdf. For coverage, see Carol J. Williams, State gets two years to cut 43,000 from prisons, Los Angeles Times, Sept. 5, 2009, p. A1. The appeal at the Supreme Court is Schwarzenegger v. Plata, 091233; background and briefs on SCOTUSBlog: www.scotusblog.com/casefiles/cases/schwarzenegger-v-plata/?wpmp_switcher=desktop. 2 The act is codified at 18 U.S.C. 3626. Background at http://en.wikipedia. org/wiki/Prison_Litigation_Reform_Act. 3 The decision is Perdue v. Kenny A., 559 U.S. (April 21, 2010), www. supremecourt.gov/opinions/09pdf/08-970.pdf.

court. In both cases, Rehnquist said Congress had infringed on the states traditional police powers. 20

Federal Powers
ederalism concerns have been given a low priority in Washington in the 21st century under two presidents of different parties: Republican George W. Bush and Democrat Barack Obama. Bush pursued centralizing policies on a range of issues despite his background as a former governor and the GOPs professed support for state prerogatives. The Supreme Court also appeared to step back from its resistance to expanding federal powers even after two appointments by Bush. Obama took office with some nods to the states, but he stirred strong opposition from many states to his health care reform and then

set the administration against state and local laws aimed at strengthening immigration enforcement. 21 Bush trampled on federalism concerns with his signature domestic policy initiative: education reform. The No Child Left Behind Act mandated student testing, imposed curriculum and teacher standards and threatened non-performing schools with penalties up to takeover by independent operators. Some states called the law unconstitutional, but court challenges failed to invalidate it. States also complained about the strictures in two other major laws: the Help America Vote Act, which set federal standards for voting and voter registration, and the Real ID Act, which established new requirements for state drivers licenses. All three laws provided some funds for the mandated changes, but education authorities in particular said federal aid fell short of the promised amounts.

The Bush administration overrode state interests in several other areas. Siding with business interests, the administration repeatedly interpreted federal laws or regulations to preempt state laws or court suits. On social issues, the administration won enactment of a nationwide ban on so-called partial birth abortions and pushed unsuccessfully for a constitutional amendment to ban same-sex marriages. The administration also attempted to use federal drug law to nullify Oregons assistedsuicide initiative, but the Supreme Court in 2006 rejected the attempt. 22 A year earlier, the high court had stepped back from its federalism stance of the 1990s with a decision upholding federal power to override a California initiative permitting medical use of marijuana. With Rehnquist and Justice Sandra Day OConnor among three dissenters, the court in June 2005 held that the

www.cqresearcher.com

Oct. 15, 2010

859

STATES AND FEDERALISM


government can ban private, noncommercial use of marijuana because of its potential impact on the admittedly illegal market in the drug. 23 OConnor retired and Rehnquist died later that year. As their successors, Bush chose John G. Roberts Jr. as chief justice and Samuel A. Alito Jr. as OConnors replacement, two Eastern conservatives less identified with federalism issues than the two Westerners they followed. Neither Obama nor his Republican opponent, Sen. John McCain of Arizona, made federalism a major issue as such in the 2008 presidential campaign. But both men professed support for states interests in the area, according to an assessment by federalism experts John Dinan and Shama Gamkhar. McCain selfidentified as a federalist to explain, for example, his opposition to a constitutional amendment to ban same-sex marriage. Obama identified himself with some of the states criticisms of No Child Left Behind. And both men buttressed their health care proposals by citing state initiatives: Obama pointed to Massachusetts Gov. Mitt Romneys universal coverage plan, McCain to Indiana Gov. Mitch Daniels market-oriented approach. 24 Early in his presidency, Obama made gestures and took some concrete actions favorable to states interests. In a meeting in February 2009, he promised the states governors to try to make their lives easier, not harder. As part of his economic-stimulus plan, Obama proposed and eventually won congressional approval of substantial aid to financially beleaguered states with few strings attached. Obama also reversed some Bush decisions to give states more discretion significantly, to pursue liberal policies in such areas as childrens health and air pollution control. And Attorney General Eric H. Holder Jr. announced in February 2009 that the Justice Department would discontinue raids on medical marijuana dispensaries in the 13 states that had legalized the practice. The administration worked to accommodate the states interests during the yearlong struggle that ended in March 2010 with enactment of the health care law. Broadening eligibility for Medicaid was always seen as the principal vehicle for expanding health insurance coverage, but from the outset the federal government was to bear most of the cost. Obamas proposal included a variety of mandates for health insurers, but states continued to have principal responsibility for insurance regulation. Republicans and conservatives opposed to the bill cited the fiscal impact on the states in their arguments, but the issue was overshadowed by the individual insurance mandate and, at the end, by arguments over the potential for government-subsidized abortions under the law. 25 Meanwhile, the administration was weighing a request made by the Supreme Court in November 2009 to state the governments view on the challenge to Arizonas employer-sanctions law. The governments brief, filed on May 28, marked the first time the government had weighed in against any of the flurry of state and local immigration laws enacted in the last few years. The brief pointed to the number of similar laws in urging the justices to hear the case. It went on to argue that Arizonas law disrupt[s] a careful balance that Congress struck between preventing employment of illegal aliens and preventing discrimination against racial or ethnic minorities. A month later, the court agreed to hear the case, setting the stage for arguments by years end. 26 insurance mandate even as it awaits pivotal developments in two similar suits by states that federal judges refused to dismiss at the earliest stage. In a ruling on Oct. 7, U.S. District Judge George Caram Steeh in Detroit accepted the administrations basic legal argument that Congress could require individuals to purchase health insurance as part of its power to regulate interstate commerce. When viewed in the aggregate, Steeh said, individual decisions to buy health insurance or go without have clear and direct impacts on health care providers, taxpayers, and the insured population who ultimately pay for the care provided to those who go without insurance. 27 Steehs ruling came in a case filed by the conservative Thomas More Law Center and several Michigan residents, one of 15-20 cases challenging the health care law, according to a compilation by the Justice Department. The ruling came as two higher-profile challenges by state governments were proceeding in federal courts in Virginia and Florida. U.S. District Judge Henry Hudson is scheduled to hear legal arguments in Richmond, Va., on Oct. 18 in competing motions for summary judgment by the state of Virginia and the federal government. Hudson had rejected the governments motion to dismiss the case in a 32-page opinion on Aug. 2 that called the applicable legal precedents informative but inconclusive. Meanwhile, U.S. District Judge Roger Vinson in Pensacola, Fla., was due to rule by his self-announced deadline of Oct. 14 on the governments similar motion to dismiss the suit by Florida and 19 other states challenging the health care law. In a hearing on Sept. 14, Vinson appeared sympathetic to the states claim about their costs once the law takes full effect in 2014. Doesnt this really put all 50 states on the short end of the stick? Vinson asked the governments attorney at one point.
Continued on p. 862

CURRENT SITUATION
Health Suits Advancing
he Obama administration is applauding a federal judges ruling upholding the new individual health

860

CQ Researcher

At Issue:
Is the Obama administration taking on too much power from the states?
yes

ROBERT ALT
SENIOR LEGAL FELLOW AND DEPUTY DIRECTOR, CENTER FOR LEGAL & JUDICIAL STUDIES, THE HERITAGE FOUNDATION
WRITTEN FOR CQ RESEARCHER, OCTOBER 2010

DOUG KENDALL
PRESIDENT, CONSTITUTIONAL ACCOUNTABILITY CENTER
WRITTEN FOR CQ RESEARCHER, OCTOBER 2010

he Obama administration has used federal authority in a schizophrenic fashion: making illegitimate claims of authority to achieve desired ends, while disavowing legitimate authority where doing so proved beneficial to favored special interests. From a constitutional and policy perspective, this is the worst of both worlds. The most audacious claim of federal authority comes in the health care mandate, which requires all individuals to purchase health insurance or pay a penalty enforced through the tax code. Despite Speaker Nancy Pelosis incredulity to a press question asking where Congress found the constitutional authority for the mandate she responded, Are you kidding? Congress is still subject to the requirements of the Constitution, which grants to Congress limited and enumerated legislative powers. Where, then, does the Obama administration point to as its constitutional justification for this sweeping new authority? It claims that Congress has the authority to regulate individual acts of not purchasing a product (i.e., not entering into commerce) pursuant to Congress authority to regulate wait for it interstate commerce. The term unprecedented is thrown around lightly, but here I use the literal meaning this assertion of authority has no precedent. There is simply no example in federal law which supports this usurpation. Indeed, the first federal court to hear a challenge noted that [n]o reported case from any federal appellate court has extended the Commerce Clause or Tax Clause to include the regulation of a persons decision not to purchase a product. While in health care the Obama administration suffers from delusions of grandeur, in the area of federal regulatory preemption that is, the authority to set uniform regulations for products that actually are in interstate commerce to avoid a patchwork of 50 different regulations the administration has an inferiority complex. The administration has asserted a narrow view of preemption in a memorandum to the heads of all executive agencies and has disclaimed federal authority in court filings. This decision might seem difficult to understand in light of the previously bold assertions of federal authority until one realizes that this position is advantageous to the trial lawyers (major donors to the Obama administration), who find it easier to win cases if courts and juries are not bound by blanket federal product-liability requirements. As these examples suggest, the administrations assertions of federal authority are not circumscribed by the Constitution, but by political expediency.
no

yes no
Oct. 15, 2010

he charge that the Obama administration has concentrated too much power in the federal government is not only unsupportable, it is in important respects counter-factual. Early in his presidency, President Obama issued a sweeping policy memorandum that reaffirmed the critical role that state and local governments play in protecting the health and safety of their citizens and directed executive branch officials to review every regulation adopted in the past 10 years to scrub them of language that inappropriately displaced states. Obamas shift in policy has led to reversal of several Bush administration policies and has empowered states to take a lead in a whole host of areas where state-level innovation is most needed, from environmental regulation to drug laws to financial reform. In one prominent example, the Obama administration granted California its long-sought waiver of federal preemption, restoring this state to its historic role as a pathbreaker in the regulation of auto emissions. Even President Obamas health care reform law is an example of balancing the need for a national solution with the benefits that accompany state innovation. Learning from state experiences, such as the Massachusetts plan signed into law by then-Gov. Mitt Romney, the new health care law preserves the states regulatory flexibility by (1) allowing states to form their own insurance exchange or join with a regional exchange; (2) giving states significant discretion over plan specifics like whether to cover abortion; and (3) permitting states to set up their own programs with or without an individual mandate so long as certain requirements are met. Only when the Constitution explicitly places sole power with the national government such as the provision that gives the federal government the power to make uniform rules for immigration and naturalization has the Obama administration jealously guarded federal power and challenged the ability of states like Arizona to create their own system of immigration enforcement. Reviewing these actions collectively, President Obama has appropriately balanced state-level innovation with national interests, viewing federalism as a structure for allocating government power in ways that improve how the government serves its citizens rather than as a zero-sum struggle between the national government and the states. Even when confronting issues of clear national concern, such as health care reform, the Obama administration has recognized the critical role states play in our federal system. The result is federalism at its best and a government that works better for everyone.

www.cqresearcher.com

861

STATES AND FEDERALISM


Continued from p. 860

In his opinion, Hudson, who was appointed to the federal bench by President George W. Bush in 2002, preliminarily upheld the states standing to bring the case in order to give effect to its law, the Virginia Health Care Freedom Act, prohibiting any individual health insurance mandate. On the merits, Hudson said the government had failed at this stage to overcome the states constitutional arguments against the law. No reported case from any federal appellate court, the judge wrote, has extended the Commerce Clause or the Tax Clause to include the regulation of a persons decision not to purchase a product, notwithstanding its effect on interstate commerce. 28 The case, Virginia ex rel. Cuccinelli v. Sebelius, is being brought in the name of Virginias conservative Republican attorney general, Ken Cuccinelli. He depicted Hudsons ruling as a significant setback for the Obama administration. In her comments, Health and Human Services (HHS) Secretary Kathleen Sebelius emphasized the preliminary nature of the ruling. The two sides recapitulated their arguments in parallel, competing motions for summary judgment filed with the court on Sept. 3 in advance of the Oct. 18 hearing. The health care mandate issue also figured prominently in the Sept. 14 arguments in the Florida case before Judge Vinson, a Reagan appointee to the federal bench in 1983. 29 For the states, Washington attorney David Rivkin argued that Congress has no authority to regulate citizens decisions not to buy health insurance. Congress can regulate commerce, he said. But Congress cannot create it. For the government, Ian Gershengorn, a deputy assistant United States attorney general, countered that uninsured individuals nevertheless use medical services. This is not telling people you have to buy a product, he said. Its saying this is how you have to pay for your health care.

On the fiscal issue, Blaine Winship, representing Florida, said the new law transformed Medicaid beyond its original purpose. Its quite a budget buster for us, he said. Gershengorn countered that any state can opt out of Medicaid. The states position, he added, would prevent Congress from making any changes in the program. Vinson, however, appeared sympathetic to the states. The states are in a catch-22 situation, the judge said, because the government dominates the ability to raise income. Expectations that Vinson would reject the governments effort to dismiss the case were fed by his decision to schedule further arguments on Dec. 16. Vinson rejected an effort by four states to join the suit on the federal governments side but said he would reconsider the issue later. The Florida and Virginia suits had been the most closely watched of the various challenges to the new health care law, including two previously dismissed on procedural grounds. In his ruling in the Michigan case, Judge Steeh rejected the administrations procedural arguments that the challengers lacked legal standing to bring the suit and that the suit was premature. He went on in a 20-page ruling, however, to say that Congress had a rational basis to conclude that, in the aggregate, decisions to forego [sic] insurance coverage in preference to pay for health care out of pocket drive up the cost of insurance. A Justice Department spokeswoman voiced satisfaction with the ruling. We welcome the courts decision upholding the health care reform statute as constitutional, said spokeswoman Tracy Schmaler. Robert J. Muise, senior trial counsel for the Thomas More Law Center, told The New York Times the case was set up nicely for appeal. 30

Immigration Cases Set

losely watched challenges to two Arizona statutes aimed at tougher

enforcement of federal immigration laws are being readied for oral arguments soon before federal appellate courts. The Ninth U.S. Circuit Court of Appeals, with jurisdiction over nine Western states, is set to hear arguments during the week of Nov. 1 in Arizonas effort to reinstate its law enacted in April making it a state crime to be in the country in violation of federal immigration laws. Meanwhile, the Supreme Court is due to hear arguments on Dec. 8 from business and immigrants rights groups seeking to invalidate the 2007 law stiffening the penalties for employers who hire illegal aliens. Both laws are being challenged under the doctrine known as preemption as intruding on the federal governments primacy over states on immigrationrelated matters. The justices are also hearing three other preemption cases this fall testing the relationship of state and federal laws in arbitration, auto safety and vaccine safety. The Ninth Circuit will be reviewing the July 28 ruling by federal judge Bolton in Phoenix that blocked major provisions of the act from going into effect. In her ruling, Bolton, appointed to the bench by President Clinton in 2000, acknowledged the states interest in controlling illegal immigration and addressing the concurrent problems with crime. But, she continued, it is not in the public interest for Arizona to enforce preempted laws. 31 Boltons ruling blocked the most controversial parts of the law, including a requirement that state and local law enforcement officers determine the immigration status of anyone arrested, detained or stopped that they reasonably suspect is unlawfully present in the country. The ruling also blocked the new state crime of failing to carry alien registration papers. And it enjoined the provision making it a crime for illegal immigrants to apply for a job. Immigration rights advocates hailed the ruling. Its a victory for the community, Lydia Guzman, president of

862

CQ Researcher

Somos America (We Are America), said. Gov. Brewer voiced disappointment but called the ruling a bump in the road and vowed a quick appeal. The Ninth Circuit set an expedited briefing schedule in the case with arguments to be heard by a three-judge panel on Nov. 1. Earlier, a three-judge Ninth Circuit panel upheld Arizonas employer-sanctions law in a unanimous, 23-page opinion in September 2008. 32 The business and immigrant rights groups challenging the law argued that it created the risk of conflict preemption because state courts could rule differently on an aliens status than federal immigration authorities would. They also said that an express preemption clause precluded the state from revoking an employers business license because the federal law prohibited any penalties other than those provided there. Writing for the court, Judge Mary Schroeder, a Clinton appointee, rejected the challengers arguments. She said the speculative, hypothetical possibility of a conflict with federal law was insufficient to invalidate the law in its entirety. As for the license-revocation provision, she said it fell within an exception in the federal law for licensing provisions. She also found no conflict with federal law in the state acts requirement that employers use the voluntary federal E-verify system to verify a job applicants status. The Supreme Court agreed to hear the case on June 28. The Chamber filed its opening brief on Sept. 1, followed a week later by friend-of-thecourt briefs from the U.S. government, business groups, immigrant rights groups and a major labor union: the Service Employees International Union. The states brief and any supporting briefs were to be filed in October. In the other preemption cases, the high court will decide these issues being closely watched by business and consumer groups as well as state governments:

Can the victim of a vaccine-related injury sue the manufacturer in state court for a design defect despite the no-fault, administrative system established by the National Vaccine Injury Compensation Act? (Bruesewitz v. Wyeth; argument: Oct. 12.) Does the Federal Arbitration Act prevent a state from requiring that any consumer arbitration agreement permit the use of classwide arbitration allowing the consolidation of claims by all similarly situated persons? (AT&T Mobility v. Concepcion; argument: Nov. 9.) Do federal auto safety laws block an accident victim from suing a manufacturer in state court for failing to install a lap/shoulder belt in the middle back seat when not required to do so by federal regulations? (Williamson v. Mazda Motor of America; argument: Nov. 3.)

OUTLOOK
Federalisms Meanings
he Framers of the Constitution created a government unlike any other before. Federalism was our Nations own discovery, Supreme Court Justice Anthony M. Kennedy has written. The Constitution, Kennedy said, split the atom of sovereignty between the national and state governments, with each protected against incursion by the other. 33 In their deliberations, the Framers strove to divide powers between a strong and stable federal government and states whose prerogatives were to be protected from incursion by the new national government. Writing in Federalist No. 37, James Madison described the process of partitioning the respective powers of the federal and state governments as arduous. Now more than two centuries later, federalism issues remain contentious, but the context is much changed. The

dual federalism concept of the 19th century has been displaced by usages such as cooperative or collaborative federalism that describe powers and responsibilities intertwined among rather than partitioned between Washington and state capitals. In his book, Polyphonic Federalism, Emory law professor Schapiro sees this overlapping of power as promoting the traditional federalism values of responsiveness, selfgovernance and liberty. 34 Legislative debates and court challenges in todays major federalism controversies, however, still tend to be waged under the old zero-sum game concept of dividing rather than sharing power. State officials challenging the new health care law attack the fiscal impact of Medicaid expansion with little acknowledgment in their public comments of the joint federal-state structure of the program since its inception. From the opposite perspective, the business groups that press for federal preemption to supersede state law give no recognition to the states role in the 20th century in promoting stronger protections for workers, consumers and the general public ultimately to the benefit, not the detriment, of business itself. Meanwhile, Americans are evincing middling confidence at best in government at all levels. For several years, polls have been detecting declining public confidence in the federal government generally. But a recent Zogby International poll found public trust in state governments no higher with only a minority of respondents placing much trust in either Washington or their own state government. (See graph, p. 848.) Health care and immigration illustrate reasons for the publics angst. The inability to stem the rising cost of health care or the continuing flow of illegal immigration test the publics belief in the power of government to deal with contemporary problems. Ironically, the loudest voices in the debates are complaining that the federal government is taking on too much power to try to confront them.

www.cqresearcher.com

Oct. 15, 2010

863

STATES AND FEDERALISM


This is a classic example of what seems to be a growing pace of volatility in our system, says George Mason professor Conlan. This is like a case of whiplash. It was not that long ago when people were talking about this era of devolution, or returning power to the states. The court cases on the health care law are proceeding against the backdrop of strong political criticism by Republican lawmakers, many of whom are campaigning for Congress by promising to repeal and replace it. Neither the GOP lawmakers nor the states in their lawsuits provide details on how they would replace the law if successful in their goal of knocking it out. If the law stays on the books, a definitive Supreme Court decision is likely to be at least two years away. Meanwhile, immigrant rights groups that challenge tough-minded state and local laws acknowledge the problem of illegal immigration but look for a solution to the unlikely prospect of Congress and the president agreeing on some form of legalization as part of a broad overhaul of immigration law. For their part, the groups that support the states initiatives take no note of the Obama administrations sharp increase in deportations a record 392,000 during the year that ended Sept. 30, an increase of 81,000 over the number in President Bushs final year in office. 35 In Schapiros metaphor, however, these conflicts should be seen not as discordant, but euphonious the arguments and power struggles apt to lead to better policies with broader support in the long run. The state of federalism today, Schapiro says, is good. Its good when the question of allocation of power in the United States is debated.
John Schwartz, Obama Seems to Be Open to a Broader Role for States, The New York Times, Jan. 30, 2009, p. A16. 6 For background, see Kenneth Jost, Revising No Child Left Behind, CQ Researcher, April 16, 2010, pp. 337-360. 7 Andrew Cline, Obamas Crazy-Quilt Federalism, The American Spectator, July 13, 2010, http://spectator.org/archives/2010/07/13/obamascrazy-quilt-federalism/print. 8 The cases are Florida v. U.S. Dept of Health and Human Services, No. 3:10-cv-91-RV/EMT, Virginia ex rel. Cuccinelli v. Sebelius, U.S. Dist. Ct., E.D. Va., 3:2010cv00188. McCollum was interviewed for White House Brief, allpoli ticsradio.com, March 22, available on You Tube: www.youtube.com/watch?v=TzRqc8MrGtc. 9 The case is Lozano v. City of Hazleton, 073531, 3d Circuit, Sept. 9, 2010, www.ca3.us courts.gov/opinarch/073531p.pdf. Documents and updates can be found on the American Civil Liberties Unions website: www.aclu. org/immigrants-rights/anti-immigrant-ordinanceshazleton-pa. For coverage, see Julia Preston, Court Rejects a Citys Effort to Restrict Immigrants, The New York Times, Sept. 10, 2010, p. A12. 10 Background drawn in part from David B. Walker, The Rebirth of Federalism: Slouching toward Washington (2d ed., 2000). See also Michael Greve, Real Federalism: Why It Matters, How It Could Happen (1999). For a succinct overview, see Federalism in Kenneth Jost, Supreme Court from A to Z (4th ed., 2007), pp. 189-190. 11 The Federalist Papers are online at the Library of Congress Thomas website: http://thomas. loc.gov/home/histdox/fedpapers.html. 12 The cases are McCulloch v. Maryland, 17 U.S. 316 (1819); New York v. Miln, 36 U.S. 102 (1837); and Passenger Cases (Smith v. Turner, Norris v. Boston), 48 U.S. 283 (1849). 13 The cases are National Labor Relations Board v. Jones & Laughlin Steel Corp, 301 U.S. 1 (1937); Steward Machine Co. v. Davis, 301 U.S. 548 (1937) (unemployment compensation); Helvering v. Davis, 301 U.S. 619 (1937) (Social Security); West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937) (state minimum wage); United States v. Darby Lumber Co., 312 U.S. 100 (1941) (Fair Labor Standards Act). See individual entries in Melvin I. Urofsky and Paul Finkelman, Landmark Decisions of the U.S. Supreme Court (2d ed.), 2007. 14 The case is Wickard v. Filburn, 317 U.S. 111 (1942). 15 See Walker, op. cit., p. 99.

Notes
Quoted in Casey Newton, End of Kids Care could cost state billions from feds, The Arizona Republic (Phoenix), March 23, 2010, p. A1; see also Casey Newton, Budget for 2011 signed by Brewer, ibid., March 19, 2010, p. B1. 2 The case is United States v. Arizona, U.S. Dist. Ct., Ariz., 2:2010cv01413, http://dockets. justia.com/docket/arizona/azdce/2:2010cv0141 3/535000/. See Jerry Markon and Michael D. Shear, Justice Dept. sues Arizona over law, The Washington Post, July 7, 2010, p. A1. For coverage of the laws enactment, see Craig Harris, Alia Beard Rau and Glen Creno, Center of the storm, The Arizona Republic (Phoenix), April 24, 2010, p. A1. 3 For background on the Tea Party, see Peter Katel, Tea Party Movement, CQ Researcher, March 19, 2010, pp. 241-264. 4 Conlans books are listed in Bibliography. For previous coverage, see Kenneth Jost, States and Federalism, CQ Researcher, Sept. 13, 1996, pp. 793-816. 5 Memorandum for the Heads of Executive Departments and Agencies, May 20, 2009, www.whitehouse.gov/the_press_office/Presi dential-Memorandum-Regarding-Preemption/. For coverage, see Philip Rucker, Obama curtails Bushs policy of preemption, The Washington Post, May 22, 2009, p. A3. See also
1

About the Author


Associate Editor Kenneth Jost graduated from Harvard College and Georgetown University Law Center. He is the author of the Supreme Court Yearbook and editor of The Supreme Court from A to Z (both CQ Press). He was a member of the CQ Researcher team that won the American Bar Associations 2002 Silver Gavel Award. His previous reports include Abortion Debates and Revising No Child Left Behind. He is also author of the blog Jost on Justice (http:// jostonjustice.blogspot.com).

864

CQ Researcher

16 Background drawn from Walker, op. cit.; Timothy Conlan, From New Federalism to Devolution: Twenty-Five Years of Intergovernmental Reform (1998). 17 Ibid., pp. 85-91. 18 Ibid., pp. 259-260. 19 The cases are Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985), overruling National League of Cities v. Usery, 426 U.S. 833 (1976); and South Dakota v. Dole, 483 U.S. 203 (1987). 20 The decisions include Printz v. United States, 527 U.S. 598 (1999) (gun background checks); Alden v. Maine, 527 U.S. 706 (1999) (Fair Labor Standards Act); United States v. Lopez, 514 U.S. 549 (1995) (Gun-Free School Zones Act); United States v. Morrison, 529 U.S. 598 (2000) (Violence Against Women Act). 21 Background drawn in part from Tim Conlan and John Dinan, Federalism, the Bush Administration, and the Transformation of American Conservatism, Publius: The Journal of Federalism, Vol. 37, No. 3 (winter 2007), pp. 279-303, http://publiusoxfordjournals.org; and Tim Conlan and Paul Posner, Inflection Point? Federalism and the Obama Administration, paper presented to American Political Science Association, September 2010, http://papers.ssrn. com/sol3/papers.cfm?abstract_id=1642264. 22 The decision is Gonzales v. Oregon, 546 U.S. 243 (2006). 23 The decision is Gonzales v. Raich, 545 U.S. 1 (2005). 24 John Dinan and Shama Gamkhar, The State of American Federalism 2008-2009: the Presidential Election, the Economic Downturn, and the Consequences for Federalism, Publius: The Journal of Federalism, Vol. 39, No. 3 (winter 2009), pp. 369-407, http://publius. oxfordjournals.org. Dinan teaches at Wake Forest University, Gamkhar at the University of Texas-Austin. 25 For a full account, see Landmark: The Inside Story of Americas New Health Care Law and What It Means for All of Us, by the staff of The Washington Post (2010). 26 The governments brief can be found on SCOTUSBlog: www.scotusblog.com/wp-content/ uploads/2010/05/09-115_cvsg-grant-limited.pdf. 27 The case is Thomas More Law Center v. Obama, 10-CV-11156, U.S. Dist. Ct. E.D. Mich., Oct. 7, 20910, www.mied.uscourts.gov/ News/Docs/09714485866.pdf. For coverage, see Lyle Denniston, Health insurance mandate upheld, SCOTUSBlog, Oct. 7, 2010, www.scotus blog.com/2010/10/health-insurance-mandateupheld/.

FOR MORE INFORMATION


10 Amendments for Freedom, 2740 S.W. Martin Downs Blvd., Suite 235, Palm City, FL 34990; (772) 781-6112; 10amendments.org. Nonprofit working to amend the Constitution by proposing initiatives that will restrain the power of Congress. Constitution Project, 1200 18th St., N.W., Suite 1000, Washington, DC 20036; (202) 580-6920; www.constitutionproject.org. Seeks consensus solutions to difficult legal and constitutional issues through dialogue across ideological and party lines. Federation for American Immigration Reform, 25 Massachusetts Ave., N.W., Suite 330, Washington, DC 20001; (202) 328-7004; www.fairus.org. Promotes immigration reform through increased border security and limits on the number of immigrants allowed per year. Heritage Foundation, 215 Massachusetts Ave., N.E., Washington, DC 20002; (202) 546-4400; www.heritage.org. Conservative think tank advocating for a smaller federal government role. National Conference of State Legislatures, 7700 E. First Place, Denver, CO 80230; (303) 364-7700; www.ncsl.org. Provides research and technical assistance for policy makers to exchange ideas on pressing state issues. National Immigration Law Center, 3435 Wilshire Blvd., Los Angeles, CA 90010; (213) 639-3900; www.nilc.org. Defends the rights and opportunities of low-income immigrants and their families. Urban Institute, 2100 M St., N.W., Washington, DC 20037; (202) 833-7200; www.urban.org. Research and education think tank working for sound public policy and effective government. We Are America Alliance, 1050 17th St., N.W., Washington, DC 20036; (202) 463-9222; www.weareamericanalliance.org. Advocacy group for immigrant civic engagement, formed after 2006 pro-immigration rallies.
The judges decision in Virginia ex rel. Sebelius is available at http://docs.justia.com/ cases/federal/district-courts/virginia/vaedce/3: 2010cv00188/252045/84/. All other case documents are also on the site. For coverage, see stories by Rosalind S. Helderman, U.S. judges allows Va. health care lawsuit to move ahead, The Washington Post, Aug. 3, 2010, p. A2; Va. begins courtroom assault on health care law, ibid., July 2, 2010, p. B1. 29 Quotes from these stories: N.C. Aizenman, A first step in health care suit, The Washington Post, Sept. 15, 2010, p. A4.; Kevin Sack, Suit on Health Care Bill Appears Likely to Advance, The New York Times, Sept. 15, 2010, p. A20; Kris Wernowsky, Health care suit lives to see another day, Pensacola News Journal, Sept. 15, 2010. 30 See Kevin Sack, Judge rules health law is constitutional, The New York Times, Oct. 8, 2010. 31 The decision in United States v. Arizona can be found at http://docs.justia.com/cases/ federal/district-courts/arizona/azdce/2:2010cv 01413/535000/87/. Reaction drawn from news coverage: Nicholas Riccardi and Anna
28

Gorman, Judge blocks key parts of Arizona immigration law, Los Angeles Times, July 29, 2010, p. A1. 32 The decision in what was then known as Chicanos por la Causa, Inc. v. Napolitano can be found at www.ca9.uscourts.gov/datastore/ opinions/2008/09/17/0717272.pdf. Janet Napolitano, then governor of Arizona, is now U.S. secretary of Homeland Security. For materials on the Supreme Court case, now known as Chamber of Commerce v. Whiting, see www. scotusblog.com/case-files/cases/chamber-ofcommerce-of-the-united-states-v-candelaria/? wpmp_switcher=desktop. 33 U.S. Term Limits v. Thornton, 514 U.S. 779 (1995) (Kennedy, J., concurring). 34 Robert A. Schapiro, Polyphonic Federalism: Toward the Protection of Fundamental Rights (2009), p. 177. 35 See Shankar Vedentam, U.S. deportations reach record high, The Washington Post, Oct. 8, 2010, p. A10; Julia Preston, Deportations From U.S. Reach a Record High, The New York Times, Oct. 8, 2010, p. A21.

www.cqresearcher.com

Oct. 15, 2010

865

Bibliography
Selected Sources
Books
Conlan, Timothy J., From New Federalism to Devolution: Twenty-Five Years of Intergovernmental Reform, Brookings Institution Press, 1998. A professor at George Mason University traces and analyzes federalism reforms from the 1970s through the mid-1990s. Includes detailed notes. The book is a continuation of Conlans earlier title, New Federalism: Intergovernmental Reform from Nixon to Reagan (Brookings Institution Press, 1988). In acknowledgments, Conlan foreswore writing a third edition, but he has continued to write articles on the topic (see below). Greve, Michael S., Real Federalism: Why It Matters, How It Could Happen, AEI Press, 1999. The conservative activist-scholar, now at the American Enterprise Institute, argues that a revival of federalism possible but not inexorable is needed to counter centralizing tendencies and protect citizens liberty and welfare. Includes detailed notes. Holahan, John, Alan Weil, and Joshua M. Wiener (eds.), Federalism and Health Policy, Urban Institute Press, 2003. The book comprehensively details the respective roles of federal and state governments in setting and implementing health policy in the United States. Holahan is director of the institutes Health Policy Research Center; Weil was director of its New Federalism Project; Wiener a principal research associate. Notes and references with each chapter. Schapiro, Robert A., Polyphonic Federalism: Toward the Protection of Fundamental Rights, University of Chicago Press, 2009. The Emory law professors theory of polyphonic federalism views the organizational principle of multiple, overlapping decision-making authorities as the best means to promote responsiveness, self-government and liberty. Walker, David B., The Rebirth of Federalism: Slouching toward Washington (2d. ed.), Chatham House, 2000 (originally published 1995). The book traces the history of American federalism and analyzes its condition at the end of the Clinton presidency. Walker, now retired, was a professor at the University of Connecticut and Bowdoin College after having worked for many years with the Advisory Commission on Intergovernmental Relations. Includes detailed notes. servatism, Publius: The Journal of Federalism, Vol. 37, No. 3 (winter 2007), pp. 279-303, http://publiusoxford journals.org (subscription required). Conlan and coauthor Dinan, an associate professor of political science at Wake Forest University, write that President George W. Bush is the latest in a string of presidents to sacrifice federalism concerns for the pursuit of specific policy goals at the federal level. The issue included nine other articles assessing the Bush presidencys impact on federalism in such specific areas as education, environmental policy, preemption and federal assistance to states. Conlan, Tim, and Paul Posner, Inflection Point? Federalism and the Obama Administration, paper presented to American Political Science Association, Washington, D.C., Sept. 2-5, 2010, http://papers.ssrn.com/sol3/papers. cfm?abstract_id=1642264. Conlan and George Mason University colleague Posner write that President Obama is practicing nuanced federalism, with some areas of unprecedented federal reach alongside impressive examples of intergovernmental consultation and deference to state regulatory prerogatives. Greenblatt, Alan, Federalism in the Age of Obama, State Legislatures, July/August 2010, pp. 26-28, www. ncsl.org/?tabid=20714. The article, published in the magazine of the National Conference of State Legislatures, examines the Obama administrations exploitation of states fiscal woes to press them to implement initiatives in education, health care and other areas. Greenblatt, a former staff writer for Governing, is a CQ Researcher contributing writer. The online edition includes a Q&A with Paul Posner, a federalism expert at George Mason University.

Reports and Studies


2010 Immigration-Related Laws and Resolutions: JanuaryJune 2010, National Conference of State Legislatures, July 20, 2010, www.ncsl.org/default.aspx?TabId=20881. The report traces the growth in the number of immigrationrelated laws passed by the states since 2005 and categorizes the nearly 200 laws passed by state legislatures during the 2010 legislative season. Thomas, Kenneth R., Federalism, State Sovereignty, and the Constitution: Basis and Limits of Congressional Power, Congressional Research Service, Feb. 1, 2008, http://assets.opencrs.com/rpts/RL30315_20080201.pdf. The 24-page report by a CRS legislative attorney summarizes Supreme Court decisions governing the extent and the limits of federal power vis--vis the states from the early days of the Constitution to the present.

Articles
Conlan, Tim, and John Dinan, Federalism, the Bush Administration, and the Transformation of American Con-

866

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Health Care Reform
Buchanan, Wyatt, Overhaul May Cost California Billions, The San Francisco Chronicle, March 28, 2010, p. A1. The significant and expensive burden of implementing key provisions of the new health care law falls to the individual states. Eagan, Colleen M., Virginia Could Be Key In Health Care Bills Downfall, Daily News Leader (Virginia), July 2, 2010. The right to make laws pertaining to the freedom to not purchase health care falls under the purview of state governments, according to the Constitution. Rau, Nate, States Rights Debate Concerns Some AfricanAmericans, The Tennessean, May 2, 2010. The Tennessee state legislature is looking for ways to cast aside the new federal health care law, raising the concerns of African-Americans. Zapler, Mike, Despite Some Relief to Cover the Uninsured, Health Care Bill Offers Few Concessions to California, San Jose (California) Mercury News, March 18, 2010. The federal health care law could cost California $3 billion annually in higher costs for the poor. Crowding, Los Angeles Times, Jan. 13, 2010, p. A3. A panel of three federal judges has approved a court-ordered plan by California Gov. Arnold Schwarzenegger to reduce overcrowding in the states prisons by 40,000 inmates. Walsh, Denny, Supreme Court Denies Prison Appeal, Sacramento Bee, Jan. 20, 2010, p. A4. The U.S. Supreme Court has rejected Californias appeal of a lower courts order that the state draft and submit plans to reduce its prison population.

Public Confidence
Fram, Alan, and Jennifer Agiesta, Poll Finds Little Trust In Institutions, Lewiston (Idaho) Morning Tribune, Sept. 17, 2010. Banks and Congress are among the most distrusted institutions in the United States, while the military and small businesses are the most trusted. Mannings, Ashley, and Brad Bumsted, Public Integrity Panel Proposed to Restore Confidence in Pennsylvania, Pittsburgh Tribune Review, July 27, 2010. A group of bipartisan legislators in Pennsylvania has proposed a Public Integrity Commission in order to restore confidence in the states government after corruption charges were filed against two dozen lawmakers and staffers. Robertson, William S., High-Performance Government Essential to Restore Trust, Federal Times, May 10, 2010, p. 23. Only 22 percent of citizens believe that the federal government can be trusted most of the time, according to a survey by the Pew Research Center.

Immigration Laws
Hutchinson, Asa, Court Dismisses State Role, The Washington Times, Aug. 18, 2010, p. B1. The federal government has not exclusively preempted the states role in the enforcement of immigration standards, according to the former Arkansas congressman. Preston, Julia, A Ruling In One State, A Warning for Others, The New York Times, July 29, 2010, p. A14. The federal governments challenge to Arizonas immigration laws serves as a warning to other jurisdictions that want to enact similar measures. Savage, David G., Arizonas Immigration Law Not Likely to Survive, Los Angeles Times, July 9, 2010, p. A10. The federal government has exclusive control over the issue of immigration rights, according to many legal experts.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

Prison Crowding
Runner Asks Court to Reverse Federal Order, Daily Press (California), Aug. 31, 2010. California Republican state Sen. George Runner and other conservative lawmakers have asked the U.S. Supreme Court to reverse a federal order requiring the state to reduce its prison population because of inadequate inmate health care. Rothfeld, Michael, Judges OK Gov.s Plan on Prison

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

Oct. 15, 2010

867

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10 Closing Guantnamo, 2/09 Affirmative Action, 10/08

Education
Housing the Homeless, 12/09 Bilingual Education, 12/09 Value of a College Education, 11/09

Health/Safety
Preventing Obesity, 10/10 Health-Care Reform, 6/10 Caring for Veterans, 4/10 Earthquake Threat, 4/10 Breast Cancer, 4/10

Environment/Society

Crime/Law
Drone Warfare, 8/10 Prosecuting Terrorists, 3/10 Prisoner Reentry, 12/09 Interrogating the CIA, 9/09 Legalizing Marijuana, 6/09

Impact of the Internet on Thinking, 9/10 Politics/Economy Social Networking, 9/10 Abortion Debates, 9/10 Financial Industry Overhaul, 7/10 Reality TV, 8/10 Jobs Outlook, 6/10 Water Shortages, 6/10 Campaign Finance Debates, 5/10 Teen Pregnancy, 3/10 Gridlock in Washington, 4/10 Youth Violence, 3/10 Tea Party Movement, 3/10

Upcoming Reports
Animal Intelligence, 10/22/10 Democrats Future, 10/29/10 Blighted Cities, 11/5/10

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Will new reforms limit gerrymandering?

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

Redistricting Debates

he once-every-decade process of redrawing legislative and congressional districts is getting under way in state capitals around the country. To start, Sun Belt states will gain and Rust Belt states will lose seats in

the U.S. House of Representatives. But win or lose, states have to redraw lines to make sure that legislative and congressional districts have equal populations and give fair opportunities to minority groups. The process is intensely political, with parties maneuvering for advantage and incumbents seeking to hold on to friendly territory. Republicans are in a good position after gaining control of legislatures in a majority of states last November. But demographic trends, especially the growth of Latino populations in some states, may limit the GOPs opportunities. In addition, California and Florida will be operating under new rules pushed by good-government groups that seek to limit gerrymandering, line-drawing for purely partisan reasons. After redistricting plans are completed, many will be challenged in court, where outcomes are difficult to predict.
State Auditor Elaine Howe selects one of the first eight members of the bipartisan California Citizens Redistricting Commission on Nov. 18. Those eight then picked six more members. The commission will redraw state legislative and congressional districts in time for the 2012 elections.

I N S I D E

THIS REPORT
THE ISSUES ....................171 BACKGROUND ................178 CHRONOLOGY ................179 CURRENT SITUATION ........184 AT ISSUE........................185 OUTLOOK ......................187 BIBLIOGRAPHY ................190 THE NEXT STEP ..............191

CQ Researcher Feb. 25, 2011 www.cqresearcher.com Volume 21, Number 8 Pages 169-192
RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

REDISTRICTING DEBATES
THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
Feb. 25, 2011 Volume 21, Number 8

171

Should partisan gerrymandering be restricted? Should district lines be drawn to help minorities get elected? Should redistricting be done by independent commissions instead of state legislatures?

172

GOP Has Grip on Redistricting Authority Twenty-three states will have their districts redrawn by Republican-controlled legislatures. Twelve Seats Shift in Reapportionment Process Ten states will lose a total of 12 seats in the U.S. House of Representatives; eight others gain. Rules of the Road for California Redistricting Ballot measures creating the California Citizens Redistricting Commission bar districts drawn for partisan reasons. Chronology Key events since 1908.

MANAGING EDITOR: Thomas J. Billitteri

tjb@cqpress.com

173

BACKGROUND

kkoch@cqpress.com CONTRIBUTING EDITOR: Thomas J. Colin tcolin@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Sarah Glazer, Alan Greenblatt, Barbara Mantel, Tom Price, Jennifer Weeks
DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT CHECKER: Michelle Harris

ASSISTANT MANAGING EDITOR: Kathy Koch

178 180

Political Thickets Supreme Court rulings led to a flood of reapportionment and redistricting suits. Legal Puzzlers Supreme Court decisions in the 1980s and 90s allowed challenges to partisan gerrymandering and racial redistricting. Crosscurrents The post-2000 redistricting cycle sparked new political and legal challenges.

176

179 180

A Division of SAGE

182

Underrepresented Voters Get No Help in Court Plea for equal congressional districts across state lines is rejected. Bringing Redistricting to the Big Screen Gerrymandering, an 81minute documentary, takes a mostly critical look at the practice of mapping districts to help friends and hurt foes. At Issue Should redistricting be done by independent commissions?

PRESIDENT AND PUBLISHER:

John A. Jenkins
DIRECTOR, REFERENCE SOLUTIONS:

Todd Baldwin
Copyright 2011 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except: (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

CURRENT SITUATION

183

184 186

Advantage: Republicans The GOP is poised to gain or hold ground in the 2012 elections, but Democratic challenges are expected. Forecast: Cloudy Californias new redistricting commission faces a summer deadline for legislative and congressional redistricting.

185

FOR FURTHER RESEARCH

189 190 191 191

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

OUTLOOK

187

Not a Pretty Picture? Some districts zig and zag without apparent logic a pattern likely to persist.

Cover: AP Photo/Rich Pedroncelli

170

CQ Researcher

Redistricting Debates
BY KENNETH JOST
says Dai, one of five Democrats on the partisan-balanced commission. Part of the problem eet Cynthia Dai: is the politicians have had the high-tech manageright to pick the voters inment consultant in stead of voters picking politiSan Francisco, Asian-American, cians, which seems like a very outdoor adventurer, out lesbian, big myth in our democracy. registered Democrat. Ward, one of the five regisMeet Michael Ward: chirotered Republican commispractor in Anaheim, Calif., sioners, agrees. The condidisabled veteran, former polytion of California is evidence graph examiner, Native Amerthat politicians draw districts ican, registered Republican. that serve their own interests Dai has been interested in and not necessarily first and politics since 1984, when she foremost the communities that helped register voters before they serve, he says. reaching voting age herself. Completing the commisWard has worked with college sions membership are four Republican groups since his people unaffiliated with either undergraduate days. of the two major parties. The Despite their interests, maps to be drawn by the comneither Dai nor Ward had mission, due to be completever held or sought public ed by Aug. 15, must meet a office until last year. For the series of criteria, including to next year, however, they and the extent practicable com12 other Californians, most pactness. But the commission with limited if any political is specifically prohibited from A poster promotes Gerrymandering, a documentary experience, will be up to their favoring or discriminating released last fall that sharply criticizes the controversial necks in politics as members against any incumbent, canpractice of drawing congressional districts to help of the states newly estabdidate or political party. The political friends and hurt foes. Jeff Reichert, a selflished Citizens Redistricting final maps must be approved described liberal who made the film, says he wants Commission. 1 by a bipartisan supermajority more people involved in the redistricting process. Along with the rest of the of the commission, with votes states, California must redraw from at least three Democrats, With the redistricting cycle just get- three Republicans and three indepenits legislative and congressional maps in 2011 to make districts equal in ting under way, Californias citizens dents. (See box, p. 176.) population according to the latest U.S. commission provides a high-profile test No one knows how the experiment Census Bureau figures. The every-10- of the latest idea for reforming the will work. Its fair to say that the year process is required to comply often-discredited process. By taking the mechanism that we came up with is with the Supreme Courts famous one job away from the state legislature not simple, but were hopeful that it person, one vote rule, which requires through ballot measures approved in will work out, says Derek Cressman, districts to be divided according to 2008 and 2010, California voters Western regional director for the pubpopulation so each person is equally sought to cut out the bizarre maps lic interest group Common Cause. represented in government. The intricate and unsavory deal-making that good- Along with the states former Republine-drawing invites political maneuver- government groups say prevent the lican governor, Arnold Schwarzenegger, ing of all sorts, including the practice public from ousting incumbents or Californias Common Cause chapter known as gerrymandering irregu- holding them accountable for their was the driving force behind Propolarly shaping district maps specifically performance in office. sition 11, which in 2008 created the Theres a fair amount of cynicism new commission to redraw state legislato help or hurt a political party or inabout how California is being run now, tive districts. dividual officeholder or candidate.

THE ISSUES

www.cqresearcher.com

Green Film Company

Feb. 25, 2011

171

REDISTRICTING DEBATES
GOP Has Grip on Redistricting Authority
Republicans control 23 of the state legislatures that draw either state or congressional districts or both, including Nebraskas nominally nonpartisan legislature; Democrats control only 12. Legislatures in seven states with redistricting authority are split, with each of the major parties having a majority in one of the chambers. Eight states use commissions to draw both legislative and congressional lines; ve others use commissions just for congressional redistricting. Congressional Redistricting Authority by State
Wash. Mont. N.D. S.D. Idaho Wyo. Neb.** Nev. Calif. Ariz. Okla. N.M. Texas Ark. **** La.
Miss.

Minn. Wis.
Mich.

N.H. Vt. N.Y.


Maine *

Ore.

Iowa
Ill. Ind.

Utah

Colo.****

Kan.

Mo.

Ohio Pa.**** **** W.Va. Va. Ky. N.C. S.C.

Mass. R.I. *** Conn. N.J. Del. Md.

Tenn.

D.C.

Ala.

Ga.

Alaska ****

Fla.

Hawaii

Republicans control legislature; Republican governor Republicans control legislature, Democratic governor Split legislature. Democrats control legislature; Democratic governor Democrats control legislature; Republican governor Commission or board

* Advisory commission submits initial plan. Legislature must pass plan or an alternative by 2/3 vote. ** Legislature technically nonpartisan, but Republican. *** Governor is independent, but served in the U.S. Senate as a Republican.

**** Use commissions for state legislative redistricting authority but not congressional. Sources: National Conference on State Legislatures; U.S. Department of Justice Civil Right Division; U.S. House of Representatives

With approval of the measure, California became the second state, after Arizona, to establish a citizens redistricting commission. Arizonas commission, created through a ballot initiative approved in 2000, has responsibility for legislative and congressional districts. California voters in
* The commission is also charged with drawing the four districts for the states Board of Equalization, which administers the states tax laws.

2010 approved a second measure, Proposition 20, that gave the commission power over congressional districts too. * Redistricting is an arcane process that stirs more interest among political junkies than the general public. But experts say the decennial line-drawing helps shape voters relationships with their elected officials and can affect the balance of power between rival political parties. This is one of the most im-

portant events in our democracy, says Kristen Clarke, co-director of the political participation group for the NAACP Legal Defense and Educational Fund, a major advocacy group for AfricanAmerican interests. 2 The redistricting cycle flows out of the Constitutions requirement that seats in the U.S. House of Representatives be apportioned among the states according to an enumeration of the population the census to be conducted every 10 years (Article I, Section 2). Under the figures released by the U.S. Census Bureau in December, eight states will gain and 10 will lose House seats to be filled in the 2012 election. The new apportionment has the potential to strengthen the Republican majority that the GOP gained in November 2010. States gaining seats are mostly in the Republican-leaning Sun Belt in the South and West, while states losing seats are mostly in the Democraticleaning Rust Belt in the Northeast and Midwest. (See map, p. 173.) Thanks to gains in state elections in November, Republicans are positioned to take control of the microlevel line-drawing of congressional and state legislative districts in a near majority of the states. Among states where legislatures draw either congressional or legislative maps or both, Republicans have undivided control in 19, including Nebraskas nominally nonpartisan unicameral legislature; Democrats in only eight. Republicans are in the best position ever in the modern era of redistricting, says Tim Storey, a veteran redistricting expert with the National Conference of State Legislatures. (See map, left.) Democrats are disadvantaged not only because they lost ground at the polls in November but also because some states with Democratic-controlled legislatures most notably, California assign redistricting to non-legislative boards or commissions. Democrats are going to have less influence [in Cali-

172

CQ Researcher

fornia] than they had in the past, says Charles Bullock, a professor of political science at the University of Georgia in Athens. In fact, Californias post-2000 redistricting is Exhibit No. 1 in the reformers case against the prevailing practice of allowing state lawmakers to draw their own districts as well as those of members of Congress. In the reformers view, Democrats and Republicans in the state legislature agreed on district lines aimed at protecting incumbents of both parties a socalled bipartisan gerrymander. Supporters of the new citizens commission say the legislative plan worked as the lawmakers intended. In the five elections from 2002 through 2010, only one of the states 53 congressional seats changed hands. The districts represent the legislators interest, not the voters, says Cressman of Common Cause. Some redistricting experts, however, discount the reformers complaints about self-interested line-drawing. The effect of redistricting in the incumbency advantage is unclear, says Nathan Persily, director of the Center for Law and Politics at Columbia University Law School in New York City. Incumbents win not only because they draw the district lines, but for all kinds of reasons. Political calculations in redistricting are also limited by legal requirements dating from the Supreme Courts socalled reapportionment revolution in the 1960s. In a series of decisions, the justices first opened federal courts to suits to require periodic redistricting by state legislatures and then mandated congressional and legislative districts to be equal in population within each state. The Voting Rights Act, passed in 1965, has also played a major role in redistricting. In particular, the acts Section 5 requires that election law changes in nine states and local jurisdictions in seven others be precleared with the

Twelve Seats Shift in Reapportionment Process


Ten states will lose a total of 12 seats in the U.S. House of Representatives during reapportionment. Those seats will be reallocated among eight other states, with Texas and Florida the big winners. They will gain four and two seats, respectively.
States Gaining or Losing House Seats in Reapportionment Process
+1
Wash. Ore. Idaho Mont. N.D. S.D. Wyo. Neb. N.H. Vt. Wis.
Maine

Minn.

-1
Mich.

-1
Iowa

N.Y. -2 -1 Pa. -1

Mass. R.I. Conn.

+1
Nev. Calif.

+1
Utah

Colo.

Kan. Okla.

-1
Mo.

-2 -1 Ind. Ohio Ill.


Ky.
Tenn.

W.Va.

N.J. -1 Va. Del. Md. D.C.

+1
Ariz.

N.M.

Ark.
Miss.

N.C.

+1
Ala.

+1 S.C.
Ga.

+4
Texas

La.

-1 +2
Fla.

Alaska

Hawaii

Source: Apportionment of the U.S House of Representatives Based on the 2010 Census, U.S. Census Bureau

Justice Department or a federal court in Washington, D.C. Beginning with the post-1990 redistricting cycle, the Justice Department used its leverage to pressure states into drawing majorityminority districts to protect AfricanAmericans and Latinos voting rights, with some of the districts very irregularly shaped. The Supreme Court limited the practice somewhat, however, with rulings in the 1990s that bar the use of race or ethnicity as the predominant factor in a districts boundaries. 3 African-American and, in particular, Latino groups are looking for more minority opportunity districts in the current redistricting cycle. I hope we will have an increase in the number of districts where Latinos can elect candidates of their choice, says Arturo Vargas, executive director of the National Association of Latino Elected and Appointed Officials (NALEO). Among the states being closely watched is Texas, which will gain four House

seats in large part because of the states growing Hispanic population. The Supreme Court decisions limiting racial line-drawing came in suits filed by white voters and backed by groups opposed to racial preferences, including the Washington-based Project on Fair Representation. Edward Blum, the groups president, says it will bring similar legal challenges if it sees evidence of unconstitutional racial gerrymandering in the current redistricting. As Blum acknowledges, however, the Voting Rights Act requires some consideration of race, nationwide, to prevent what is termed retrogression new districts that reduce the ability of minority groups to elect their preferred candidate. Race must be one factor among many that line drawers use, says Clarke with the Legal Defense Fund. It has joined with the Mexican American Legal Defense and Educational Fund (MALDEF) and the Asian American Justice Center in publishing

www.cqresearcher.com

Feb. 25, 2011

173

REDISTRICTING DEBATES

Over the next year, 14 Californians, all with post-graduate degrees but most with limited if any political experience, will redraw the states legislative and congressional maps as members of the states newly established Citizens Redistricting Commission. Here they pose for an official photograph midway through a three-day public meeting Feb. 10-12. Michael Ward, a chiropractor, presided as rotating chair; Connie Galambos Malloy, a community organizer, is to his right. Others standing, left to right, are Jodie Filkins Webber (attorney), Gabino Aguirre (city councilman; retired high school principal), Vincent Barabba (online-commerce consultant), Michelle DiGuilo (stay-at-home mom), Maria Blanco (foundation executive), Peter Yao (ex-city council member; retired engineer), Cynthia Dai (management consultant), Libert Gil Ontai (architect), Jeanne Raya (insurance agent), Angelo Ancheta (law professor), Stanley Forbes (bookstore owner) and M. Andre Parvenu (urban planner). The panel includes four Asian-Americans, three Hispanic-Americans, one African-American, one Native American and five whites.

a 78-page booklet aimed at educating and mobilizing minority communities on redistricting issues. Increased public participation is also the goal of good-government groups, including Common Cause and the League of Women Voters. There are a lot of opportunities for greater public participation and better maps, says Nancy Tate, the leagues executive director. In addition, two reform-minded academics George Mason University political scientist Michael McDonald and Harvard University quantitative social scientist Micah Altman have formed the straightforwardly named Public Mapping Project to put mapping data and software into the hands of interest groups, community organizations and even students to propose redistricting plans. The goal, McDonald says, is to allow redistricting to be done out of peoples homes.

Despite the reformers hopes, one longtime redistricting expert doubts that public or media pressure will carry much weight as state legislatures go about their work. I dont see state legislatures buckling much to that, says Peter Galderisi, a lecturer in political science at the University of CaliforniaSan Diego. In most situations, they dont have the direct ability to influence this at all. As state legislatures and redistricting commissions get down to work, here are some of the major questions being debated: Should partisan gerrymandering be restricted? Texas Republicans chafed for more than a decade under the post-1990 congressional redistricting, a Democraticdrawn plan that helped Democrats hold a majority of the House seats through

the decade. When Republicans gained control of both houses of the state legislature and the governorship in 2002, it was payback time. Despite an attempted boycott by outnumbered Democrats, the GOP majorities approved an artful plan aimed at giving Republicans an edge wherever possible. In the first election under the new map, the GOP in 2004 gained 21-11 control of the states congressional delegation. Democrats cried foul and argued all the way to the U.S. Supreme Court that the plan was a partisan gerrymander that violated Democratic voters constitutional rights. The justices could not agree on a legal rule to govern gerrymandering, however, and left the map intact except to require redrawing a majority Latino district in the Rio Grande Valley. The ruling in the Texas case marked the third time that the Supreme Court

174

CQ Researcher

had entertained a constitutional claim against gerrymandering and the third time that the justices failed to give any guidance on when, if ever, federal courts could strike down a partisan power-grab as going too far. 4 Legal experts say the judicial impasse is likely to continue. Justice Anthony M. Kennedy straddles the divide between four conservatives uncomfortable with or opposed to gerrymandering challenges altogether and four liberals unable to agree on a standard to police the practice. Four-anda-half justices have demonstrated that they dont want to deal with this, and the other four-and-a-half cannot agree on how to deal with it, says Justin Levitt, an associate professor at Loyola Law School in Los Angeles who formerly worked on redistricting issues at the Brennan Center for Justice at New York University School of Law. For many political scientists, the effort to control gerrymandering through the courts is simply at war with U.S. political traditions dating back to the 19th century. Weve gotten used to the fact that when one party controls, you get partisan gerrymanders, says Galderisi at UC-San Diego. With courts on the sidelines, the critics of partisan gerrymandering are looking to two approaches in the current redistricting cycle to control the practice. The California citizens commission and the citizens commission created in Arizona for the post2000 cycle take the job away from legislators and establish guidelines, including geographically compact districts. In Florida, reform groups, allied with major Democratic interest groups, won adoption of constitutional amendments in November that prohibit the legislature from drawing districts with the intent to favor or disfavor a political party or an incumbent. Bullock, the University of Georgia professor, says the commission approach has the potential to create more competitive districts, one of the

main goals of the gerrymandering critics. (Competitiveness is one of the criteria in Arizona, though not in California.) But longtime political expert Thomas Mann, a senior fellow in governance studies at the Brookings Institution in Washington, says geographically compact districting schemes do not necessarily increase competitiveness because like-minded voters often live in the same neighborhood. In some states, youve got to do real gerrymandering to create more competitive districts, Mann says. In Florida, even supporters of the anti-gerrymandering amendment acknowledge doubts about how faithfully the Republican-controlled legislature will comply with the provision. Your guess is as good as mine, says Ellen Freidin, a Miami attorney-activist who headed the Fair Districts Florida campaign for the amendments. Meanwhile, some political scientists see the command not to favor or disfavor an incumbent in drawing district lines as a logical impossibility. Either its going to favor them or disfavor them, says Thomas Brunell, a professor of political science at the University of Texas at Dallas. Its got to be one of those things. Brunell, in fact, takes the contrarian position of opposing the maximization of competitive districts. In his book Redistricting and Representation, Brunell argues that competitive elections are not essential for good government and in fact increase voter discontent. The more competitive the district, the more upset voters you have, he says. 5 For incumbents, partisan gerrymandering may actually have a downside, according to UC-San Diegos Galderisi, if likely party voters in one district are spread around to enhance the partys chances of winning in others. Incumbents dont feel well off unless they have a comfortable margin of victory, he says. In fact, cutting political margins too thin in a particular district can result in

a partys loss of a once-safe seat a process that redistricting expert Bernard Grofman at the University of CaliforniaIrvine calls a dummymander. In the current cycle, Galderisi thinks Republicans may take that lesson to heart and concentrate on protecting the gains they made in November. A lot of efforts are going to be to shore up new incumbents rather than engage in traditional partisan gerrymanders, he says. McDonald, the George Mason University political scientist in the Public Mapping Project, says that with so much political volatility in the last few elections, Democrats and Republicans alike will be more interested in political security than partisan advantage. Incumbents are going to want safer districts, he says. Should district lines be drawn to help minorities get elected to office? Rep. Luis Gutierrez, a Chicago Democrat, has represented since 1993 a congressional district that only a redistricting junkie could love. Dubbed the ear muff district, Illinois-4 includes predominantly Latino neighborhoods from close-in suburbs along the citys southern border and other Latino neighborhoods in Chicago itself that are connected only by a stretch of the Tri-State Tollway. The district was drawn that way in 1991 not to help or hurt an individual officeholder or candidate but to comply with the federal Voting Rights Act. In a city with a history of racially polarized voting and a state with no previous Hispanic member of Congress, Latinos were entitled to a majority Latino district, a federal court ruled. But the new map had to avoid carving up the majority African-American districts that lay between Latino neighborhoods. This is not gerrymandering, the Mexican American Legal Defense and Educational Fund explains, but rather protecting voting rights. 6 Latino and African-American groups will be working again in the current

www.cqresearcher.com

Feb. 25, 2011

175

REDISTRICTING DEBATES
Rules of the Road for California Redistricting
Ballot measures creating the California Citizens Redistricting Commission to redraw the states legislative and congressional maps set out mandatory criteria and prohibited districts aimed at helping or hurting an incumbent, candidate or political party. Districts must:
Have reasonably equal population, except where deviation is required to comply with the federal Voting Rights Act. Comply with the Voting Rights Act. The law prohibits race- or ethnicity-based interference with voting rights Be geographically contiguous. Respect the geographic integrity of any county, city, neighborhood or community of interest to the extent possible. Communities of interest do not include relationships with political parties, incumbents or political candidates. Be drawn to encourage geographical compactness to the extent practicable. Be drawn, to the extent practicable, so that each state Senate district encompasses precisely two Assembly districts. The commission is prohibited from considering an incumbents or candidates residence in drawing district lines. Districts shall not be drawn for the purpose of favoring or discriminating against an incumbent, political candidate, or political party.
Source: California Citizens Redistricting Commission, http://wedrawthelines.ca.gov/ downloads/voters_rst_act.pdf

redistricting cycle to try to protect minority incumbents and increase opportunities for minority candidates. We know that Latinos have increased significantly in population, says Nina Perales, MALDEFs litigation director. We hope to see a redistricting that fairly reflects that growth. With the African-American population growing less rapidly, Clarke says the NAACP Legal Defense Fund will first be looking to ensure that existing opportunities are not taken away. In particular, Clarke says LDF wants to guard against the possibility that the Supreme Courts most recent decision on racial redistricting is not misinterpreted to call for dismantling so-called crossover or influence districts districts where a racial or ethnic minority comprises less than a majority of the

population but can form coalitions with white voters to elect a candidate. For their part, critics of racial redistricting would like to see less attention to race and ethnicity in map-drawing. Blum, with the Project on Fair Representation, says district maps should be drawn without access to racial and ethnic data and checked only at the end to see whether redistricters had inadvertently reduced minority voting rights. The Supreme Court has played the lead role in shaping the current law on racial redistricting. In a trio of decisions in the 1990s, the court struck down oddly shaped, majority-minority congressional districts in Georgia, North Carolina and Texas on the grounds that race or ethnicity was the predominant factor in drawing them. But the court in 1998 upheld the Illinois redistricting

with the majority-Latino earmuff district. And in 2001 the court ruled in effect that redistricters may draw a majority-minority district if done for a partisan purpose in the specific case, to make the district Democratic. 7 The post-2000 redistricting generated fewer major decisions on racial redistricting, but the courts 2009 ruling on a North Carolina legislative map troubles minority groups. The decision, Bartlett v. Strickland, required the redrawing of a once majority-black legislative district that had been reconfigured in a way to prevent the African-American population from falling below the threshold needed to form a crossover district. In a splintered 5-4 decision, the Supreme Court said a racial or ethnic minority could not challenge a redistricting map as impermissible vote dilution under the Voting Rights Act unless it comprised a majority of the districts population. 8 The ruling is not an invitation to dismantle existing influence districts, says Clarke. Majority-minority districts along with influence and crossover districts continue to represent some of the most diverse constituencies in our country. Minority groups bristle at the criticism of racial line-drawing as gerrymandering. They argue that oddly shaped districts are often the only way to bring together communities of interest. People dont live in squares, circles and triangles, says Vargas, with the Latino officeholders group. So its hard to draw districts that have nice geometric shapes. Blum counters that the dispersal of ethnic and racial minorities from central cities into suburbs forces redistricters to ignore geographic communities in order to create majorityminority districts. What you have to do is draw a district that basically harvests African-Americans block by block, neighborhood by neighborhood, all across the county or across multiple counties, Blum says. That breaks up communities of interest that are far more powerful in America

176

CQ Researcher

today than cobbling together these racially apartheid homelands. As in Chicago, some of the linedrawing may come in areas with Latino, African-American or Asian-American neighborhoods in close, sometimes overlapping, proximity. Both Clarke and Perales acknowledge the potential for cross-racial tensions but say their groups aim to work cooperatively. In any event, redistricting experts say minority groups have a huge stake in the maps to be drawn. Racial and ethnic minorities have historically been disadvantaged by deliberate efforts to mute their voices in redistricting cycles, says Costas Panagopoulos, an assistant professor of political science at Fordham University in New York City and executive editor of the magazine Campaigns and Elections. Minority groups want to be sure that that does not happen this time. Should redistricting be done by independent commissions instead of state legislatures? As head of Arizonas first citizens redistricting commission, Steve Lynn spent thousands of hours over the past decade redrawing legislative and congressional districts in Arizona and defending the new maps in federal and state courts. Lynn, a utility company executive in Tucson who says he is both a former Democrat and former Republican, counts the commissions work a success: no judicial map-drawing, more opportunities for minorities and in his view at least more competitive districts. Surprisingly, however, Lynn voted against Proposition 106 when it was on the Arizona ballot in 2000. Back then, he had no quarrel with the state legislature doing the job. Today, Lynn endorses independent commissions, but somewhat equivocally. Its one way to do it, Lynn told a redistricting conference sponsored by the National Conference of State Legislatures in late January. Its not the only way to do it. Either way can work. 9

Thirteen states now have redistricting commissions or boards with primary responsibility for drawing legislative districts; seven of those also have responsibility for drawing congressional districts. * Apart from the Arizona and California citizen commissions, the other bodies consist of specifically designated officeholders or members chosen in various ways by political officeholders with an eye to partisan balance. Five other states have backup commissions that take over redistricting in the event of a legislative impasse; two others have advisory commissions. Two of the non-legislative bodies are long-standing: Ohios, created in 1850; and the Texas backup commission, established in 1947. McDonald, the George Mason professor with the Public Mapping Project, says those commissions and others created in the 1960s and since were designed to make sure that redistricting was completed on time, not to divorce the process from politics. Indeed, McDonald says, there is no evidence that the commissions, despite their description as bipartisan, have reduced the kind of self-interested or partisan line-drawing that gives redistricting a bad name. By contrast, the Arizona and California commissions consist of citizens who apply for the positions in screening processes somewhat akin to college admissions. Candidates must specify that they have not served within a specified time period in any party position or federal or state office. In Arizona, applicants for the fivemember commission are screened by the appellate court nominating commission, which approves a pool of 25 candidates: 10 Republicans, 10 Democrats and five independents. From that pool, the majority and minority leaders of the state House of Repre* The number includes Montana, which currently has one House member, elected at large; Montana lost its second House seat after the 1990 census.

sentatives and Senate each pick one member; those four then pick one of the independents to serve as chair. Californias process is even more complex. The state auditors office screens candidates, forming a pool of 60, equally divided among Republicans, Democrats and independents. Those lists are provided to legislative leaders, who can strike a total of 24 applicants. The auditors office then chooses the first eight commissioners by randomly pulling names from a spinning basket: three from each of the major parties and two independents. Those eight then pick six more: two Democrats, two Republicans and two independents. Cressman, with Common Cause, acknowledges the complexity of the process. It is challenging to come up with a system that gives you a combination of expertise and diversity and screens out conflict of interest and selfinterest, he says. Opponents of Californias Proposition 11 cited the complexity in campaigning against the ballot measure in 2008. They also argued the commission would be both costly and politically unaccountable. In 2010, opponents qualified an initiative to abolish the commission, which appeared on the same ballot with the measure to expand the commissions role to congressional redistricting. The repealer, Proposition 27, failed by a 40 percent to 60 percent margin. Political veterans in California continue to complain about the commission in private. But longtime redistricting expert Bruce Cain, a professor of political science at the University of California-Berkeley and now executive director of the universitys Washington, D.C., program, publicly challenged the commission approach in a presentation to the state legislators group in January. Cain told the legislators that commissions result in added costs because of the need to train commission

www.cqresearcher.com

Feb. 25, 2011

177

REDISTRICTING DEBATES
members, hire additional staff and consultants and hold extra rounds of public hearings. In any event, Cain said that reformers oversell the likely benefits of commissions. Commissions cannot avoid making political judgments and are as likely as legislatures to run afoul of legal requirements, he says. It doesnt matter whether you have a pure heart, Cain concludes. If you wind up with a plan thats unfair to one group or another, youre going to have trouble. Cressman is optimistic about the California commission, which heard from a series of experts in training sessions in January and held its first public hearing in February. They have a lot of expertise, Cressman says. They strongly reflect the diversity of California. And they are quite ready to attack their job quite seriously. Still, experts across the board profess uncertainty about whether the California commission will deliver on the supporters promise of a fairer redistricting plan. Its a very open question whether those hopes will be realized, says Douglas Johnson, president of the National Demographics Corporation, which consults on redistricting issues for governments and public interest groups. Johnson himself helped draft the initiative. famous one person, one vote requirement of mathematical equality strict for congressional districts, slightly relaxed for legislative lines. The rulings redressed the underrepresentation of urban and suburban voters, but they also forced legislatures and the courts into the political thicket of redistricting every 10 years. 10 The political uses of redistricting date back more than two centuries. Patrick Henry engineered district lines in an unsuccessful effort to prevent the election of his adversary James Madison to the House of Representatives in the nations first congressional vote in 1788. The salamander-shaped district that Gov. Elbridge Gerry crafted for an 1812 legislative election in Massachusetts gave birth to the pejorative term gerrymander for politically motivated line-drawing.* Through the 19th century, Congress passed laws requiring representatives to be elected in contiguous, singlemember districts. A 1901 act re-enacted in 1911 specified that districts also be compact and contain as nearly as practicable an equal number of inhabitants. The provisions went unenforced, however. Most notably, the House failed to act on a committees recommendation to bar a representative elected in 1908 from a malapportioned Virginia district redrawn earlier in the year to his benefit. 11 Twice in the first half of the 20th century, the Supreme Court also balked at enforcing reapportionment requirements. In 1932, the court rejected a suit by Mississippi voters challenging the congressional district map drawn by the state legislature on the ground that it violated the 1911 acts requirements. The majority opinion held that the 1911 law had lapsed; four justices went further and said the federal courts should not have entertained the suit. The high court adopted that lat* Gerry pronounced his name with a hard g, but gerrymander came to be pronounced with a soft g.

BACKGROUND
Political Thickets

he modern era of redistricting began in the 1960s when the Supreme Court intervened to force an end to state legislatures decades-long neglect of the obligation to redraw legislative and congressional districts to reflect population changes. In a series of decisions, the court first opened the federal courts to redistricting suits and then laid down the

ter position in 1946 in turning aside a suit by Illinois voters challenging a congressional map as violating a state law requiring equal-population districts. Writing for a three-justice plurality in Colegrove v. Green, Justice Felix Frankfurter sternly warned against judicial review. Courts ought not to enter this political thicket, Frankfurter wrote. A fourth justice joined in a narrower opinion, while three justices said in dissent they would have allowed the suit to go forward. 12 The Supreme Court reversed direction in its landmark ruling in a Tennessee case, Baker v. Carr, in 1962. With Frankfurter in dissent, the court detailed Tennessees failure to reapportion state legislative districts since 1901 and found urban voters entitled to use the Equal Protection Clause to challenge the malapportionment in federal court. The ruling went only so far as to send the case back to a lower court for a full trial, but in short order the Supreme Court went further. In 1963, it struck down Georgias countyunit system for apportioning state legislative seats on the grounds that it disadvantaged large urban counties. The concept of political equality, Justice William O. Douglas wrote in the 8-1 ruling, can mean only one thing one person, one vote. A year later, the court applied the equal-population requirement to congressional districts and to both chambers of bicameral state legislatures. 13 The Supreme Courts rulings opened the door to a flood of reapportionment and redistricting lawsuits in the states. By one count, more than 40 states faced legal challenges by the time of the 1964 decisions. State legislatures across the country became more representative of the growing urban and suburban populations. In Tennessee, for example, both the House of Representatives and the Senate elected urban members as speakers at the turn of the decade. The rulings also affected
Continued on p. 180

178

CQ Researcher

Chronology
Before take hands-off 1960 Congress, courts
approach to reapportionment, redistricting lapses. 1908 House of Representatives refuses to enforce equal-population requirement, allows seating of member chosen from malapportioned district in Virginia. 1932 Supreme Court rejects voters suit challenging malapportioned Mississippi congressional districts. 1946 Supreme Court rejects voters suit challenging malapportioned Illinois congressional districts.

gressional districting plan because of 3 percent population variation (1969), but later allows nearly 10 percent variation for state legislative districts (1973).

commission (Prop. 106). 2001 Supreme Court upholds creation of majority African-American district in North Carolina; motivation was partisan, not racial, court finds. 2001-2004 Republican-controlled Pennsylvania legislature redraws congressional districts to GOPs benefit (2001); Republicans gain 12-7 majority in state delegation (2002); Supreme Court rejects Democrats challenge to plan; in splintered ruling, Justice Kennedy leaves door open to gerrymandering suits (2004). 2003-2006 Republican-controlled Texas legislature reopens congressional districts, draws new map to GOPs benefit (2003); Republicans gain 21-11 majority in state delegation (2004); Democrats challenge rejected by Supreme Court (2006). 2008-2010 California voters approve citizens commission to redraw state legislative districts (Prop. 11); two years later, add congressional redistricting to commissions responsibility (Prop. 20). 2009 Supreme Court says states may reduce minority voters influence if they constitute less than majority of voters in district. 2010 Florida voters approve antigerrymandering constitutional amendments (Nov. 2). . . . House seats shift from Northeast, Midwest to South, West (Dec. 21). 2011 States begin work on redistricting. . . . Louisiana, Mississippi, New Jersey, Virginia to hold legislative elections in November.
Feb. 25, 2011

1980s-1990s Supreme Court allows suits to


challenge partisan gerrymanders, racial line-drawing. 1980-1982 Supreme Court says Section 2 of Voting Rights Act prohibits only intentional discrimination; two years later, Congress adds effects test to prohibit any election law changes that abridge right to vote because of race. 1983 Supreme Court strikes down congressional map with 1 percent variation between districts. 1986 Supreme Court, in Indiana case, says federal courts can entertain suits to challenge legislative districting as partisan gerrymander; on remand, Republican-drawn plan is upheld against Democratic challenge. 1993-1996 Supreme Court allows white voters suit to challenge majority AfricanAmerican congressional district in North Carolina (1993). . . . Later rulings strike down majority-minority districts in Georgia (1995), North Carolina (1996), Texas (1996).

1960s-1970s Supreme Courts one-person,


one-vote revolution forces states to redraw legislative and congressional districts. 1962-1964 Supreme Court says federal courts can entertain suits to challenge state legislatures failure to reapportion (1962). . . . Adopts one-person, one-vote requirement for state legislative districts (1963). . . . Applies equal-population requirement to House seats, both chambers of state legislatures (1964). 1965 Voting Rights Act prohibits interference with right to vote based on race (Section 2); imposes preclearance requirements for election law changes on nine states, local jurisdiction in seven others (Section 5). 1969-1973 Supreme Court strikes down conwww.cqresearcher.com

2000s

Redistricting reform proposals advance. 2000 Arizona voters approve creation of independent citizens redistricting

179

REDISTRICTING DEBATES

Underrepresented Voters Get No Help in Court


Its pretty clear that this is not equal and its not as equal as practicable.
he Constitution created the House of Representatives with 65 members, each representing no more than 30,000 people. Today, the House has 435 members, and their districts average about 710,000 constituents, according to the 2010 census. That average conceals a wide variation from one state to another. Delawares only congressman, freshman Democrat John Carney, represents about 900,000 people. In Wyoming, the states only member of Congress, two-term Republican Cynthia Lummis, represents about 563,000 people. 1 One person, one vote requires congressional districts to be equal in population within each state so that each person is equally represented in government. But the constitutional provision allotting one seat to each state combines with the need to round some fractions up and others down to make mathematical equality impossible from state to state. Plaintiffs from five of the states disadvantaged in House seats under the 2000 census Delaware, Mississippi, Montana, South Dakota and Utah filed suit in federal court in Mississippi to challenge the disparities as a violation of their rights to equal representation in Congress. At the time, Montana had more than 900,000 people, just below the threshold then needed for a second House seat.

We believe that its pretty clear that this is not equal and its not as equal as practicable, says Michael Farris, a constitutional lawyer in Northern Virginia and well-known conservative activist. Farris, a home-schooling advocate, recruited the plaintiffs for the case after being approached by another homeschooling father in the area. In defending the suit, the government argued that complete elimination of the interstate disparities would require an astronomical increase in the size of the House. The number of House seats has been fixed since 1911 except for temporary increases to accommodate new states: Arizona and New Mexico in 1912, Alaska and Hawaii in the late 1950s. Farris countered that an increase of as few as 10 seats would have reduced state disparities by half. And he noted that the British House of Commons has more than 500 members for a country with 62 million residents one-fifth of the U.S. population of 308 million. The government also contended that the suit raised a political question that, in effect, was none of the federal courts business. Ruling last summer, the three-judge district court hearing the case held that the plaintiffs had no right to equal representation in the House. We see no reason to believe that the Constitution as originally understood or long applied imposes the requirements

Continued from p. 178

membership in the U.S. House of Representatives, if somewhat less dramatically. After the 1970 reapportionment, one study found that the number of members from rural districts had dropped from 59 to 51 while the number from urban and suburban districts rose from 147 to 161. 14 In further cases, the court confronted how close to equal districts had to be to meet the one-person, one-vote test. For Congress, the court required strict and later stricter equality. In 1969, the justices rejected a Missouri redistricting plan because it resulted in as much as a 3.1 percent variation from perfectly equal population districts. Years later, the court in 1983 rejected, on a 5-4 vote, a New Jersey plan with less than 1 percent variation in population because the state had offered no justification for the discrepancies. States were given somewhat more leeway. In

a pair of decisions in 1973, the court upheld Connecticut and Texas plans with variances, respectively, of 7.8 percent and 9.9 percent. And in 1983, on the same day as the ruling in the New Jersey case, the court upheld a Wyoming plan that gave each county at least one member in the state House of Representatives despite the large variation in district population that resulted. 15

Legal Puzzlers
he Supreme Court in the 1980s and 90s confronted but gave only puzzling answers to two secondgeneration redistricting issues: whether to open federal courts to challenges to partisan or political gerrymandering or to racially or ethnically based line-drawing. On the first issue, the court ostensibly recognized a constitutional claim against partisan gerrymandering, but gave such

little guidance that no suits had succeeded in federal courts by the turn of the 21st century or, indeed, have since. On the second issue, the court in a series of decisions in the 1990s allowed white voters to challenge racially or ethnically based districting plans and eventually barred using race or ethnicity as the predominant motive in redrawing districts. The political gerrymandering issue reached the Supreme Court in a challenge by Indiana Democrats to a state legislative redistricting plan drawn by Republicans after the 1980 census that helped fortify GOP majorities in the 1982 elections. A federal district court agreed with the Democrats that the plan violated the Equal Protection Clause because it was intentionally designed to preserve Republicans dominance. The Supreme Court ruled, 6-3, in Davis v. Bandemer (1986) that the suit presented a justiciable claim

180

CQ Researcher

of close equality among districts in different States that the Plaintiffs seek here, the court wrote in the July 8 ruling. 2 On appeal, the Supreme Court rejected the suit even more firmly by setting aside the district courts ruling with instructions to dismiss the case altogether. The court gave no explanation, but Farris says he assumed the justices decided the case on political-question grounds. Farris is not the only advocate for increasing the size of the House. In an op-ed essay in The New York Times, two professors argued that a significantly larger House would allow representatives to be closer to their constituents, reduce the cost of campaigns and limit the influence of lobbyists and special interests. Its been far too long since the House expanded to keep up with population growth, New York University sociologist Dalton Conley and Northwestern University political scientist Jacqueline Stevens wrote. As a result, Conley and Stevens contended, the House has lost touch with the public and been overtaken by special interests. 3 Farris also believes a larger House would be politically more responsive and, in his view, more conservative. Bigger districts create more liberal legislators, he says. The more it costs to campaign, the more beholden you are to people who want something from government.

Farris also warns that the disparities in the size of districts will increase over time. But he acknowledges that another court challenge may meet the same fate as his and that House members are unlikely to vote, in effect, to reduce their power by increasing the bodys size. The foxes have been given complete control of the henhouse, he says. In the meantime, however, one of the states with the greatest underrepresentation under the 2000 apportionment Utah will be picking up a seat in the 2012 election. Under the new apportionment, Utahs four representatives will have about 692,000 constituents each, slightly below the national average. Delaware, Montana and South Dakota each remains well above the average district size, while Mississippis four districts have about 744,000 people each, only slightly above the national average. Kenneth Jost
1 For an interactive map showing average size of House districts state by state, see the Census Bureaus website: http://2010.census.gov/2010census/data/. 2 Clemons v. Department of Commerce, No. 3:09-cv-00104 (U.S.D.C. N.D. Miss.), July 8, 2010, www.apportionment.us/DistrictCourtOpinion.pdf. For coverage, see Jack Elliott Jr., Judges reject lawsuit to increase size of House, The Associated Press, July 9, 2010. 3 Dalton Conley and Jacqueline Stevens, Build a Bigger House, The New York Times, Jan. 24, 2011, p. A27.

that is, one that federal courts could hear. Only two of the six justices, however, agreed that the Indiana Democrats had proved their case. As a result, the case was sent back to the lower court, with no guidelines and for an eventual ruling against the Democrats. Challengers in gerrymandering cases over the next two decades were similarly unsuccessful. 16 The Supreme Court first encountered a racial gerrymander in the late 1950s in a case brought by AfricanAmerican voters who, in effect, had been carved out of the city of Tuskegee, Ala., by new, irregular municipal boundaries. The court in 1960 ruled unanimously that district lines drawn only to disenfranchise black voters violated the 15th Amendment. 17 The Voting Rights Act, passed and signed into law five years later, went further by specifically prohibiting interference with the right to vote (Sec-

tion 2) and forcing states and counties with a history of discrimination against minorities to preclear any election or voting changes with the Justice Department or a federal court in Washington (Section 5). The Supreme Court upheld the act, but in 1980 held that Section 2 barred election law changes only if shown to be intentionally discriminatory. Two years later, Congress amended Section 2 by adding a results or effects test that prohibits any voting or election law change, nationwide, that denies or abridges anyones right to vote on account of race or color. In applying the law to a North Carolina legislative redistricting case, the court crafted a three-part test for a so-called vote dilution claim. Under the so-called Gingles test, a plaintiff must show a concentrated minority voting bloc, a history of racially polarized voting and a change that diminishes the minority voters ef-

fective opportunity to elect a candidate of their choice. 18 Under President George H. W. Bush, the Justice Department interpreted the act in advance of the 1990 redistricting cycle to require states in some circumstances to draw majority-minority districts. Along with other factors, including incumbent protection and partisan balance, the requirement resulted in some very irregularly shaped districts. White voters challenged the district plans in several states, including North Carolina, Georgia and Texas, and won favorable rulings from the Supreme Court in each. The 1993 ruling in Shaw v. Reno reinstated a challenge to a majority-black district created by stitching together AfricanAmerican neighborhoods in three North Carolina cities. Subsequent rulings threw out majority-black districts in Georgia in 1995 and in Texas in 1996. In the Georgia case, the court declared that

www.cqresearcher.com

Feb. 25, 2011

181

REDISTRICTING DEBATES
a district map could be invalidated if race was shown to be the predominant factor motivating the legislatures decision to place a significant number of voters within or without a particular district. 19 With a new decade beginning, however, the court recognized an escape hatch of sorts for states drawing majority-minority districts. In Hunt v. Cromartie, the court in 2001 upheld North Carolinas redrawing of the disputed majority-black 12th Congressional District in the center of the state. A lower federal court had found the district lines still to be facially race driven, but the Supreme Court instead said the states motivation was political rather than racial aimed at putting reliably Democratic, AfricanAmerican voters in the district. The message of the ruling, as New York Times reporter Linda Greenhouse wrote at the time, was that race is not an illegitimate consideration in redistricting as long as it is not the dominant and controlling one. 20 The racial line-drawing combined with demographics to increase minority representatives in Congress. The number of African-Americans in the House of Representatives increased from 26 in 1991 to 37 in 2001, and the number of Hispanics from 11 to 19. 21 Minority groups hoped to continue to make gains in the new cycle. Meanwhile, states braced for more litigation as the new redistricting cycle got under way. In the 1990s, 39 states were forced into court to defend redistricting plans on substantive grounds. 22 Most were upheld, but some legislatures were forced to redraw lines. And courts took over the process altogether in a few states, most notably California. There, a Democratic-controlled legislature and a Republican governor deadlocked at the start of the decade, forcing the California Supreme Court to appoint a team of special masters to draw the legislative and congressional maps.

Crosscurrents
he post-2000 redistricting cycle brought a new round of political fights and legal challenges along with the nations first experience in Arizona with an independent citizens redistricting commission. As in the previous decade, state or federal courts in many states forced legislatures to redraw redistricting plans or drew redistricting plans themselves after legislative impasses. Arizonas independent commission itself faced protracted litigation over its plans but ended with its maps left largely intact. The Supreme Court, meanwhile, retreated somewhat from its activist posture of the 1990s. The court declined twice to crack down on partisan gerrymandering, while its rulings on racial line-drawing gave legislatures somewhat more discretion to avoid drawing favorable districts for minorities. 23 Arizonas Proposition 106 grew out of discontent with a Republican-drawn redistricting plan in 1992 that solidified GOP control of the legislature while giving little help to the states growing Hispanic population. The ballot measure gained approval on Nov. 7, 2000, with 56 percent of the vote after a campaign waged by good-government groups, including Common Cause and the League of Women Voters, and bankrolled by a wealthy Democratic activist. The congressional and legislative plans drawn by the five-member commission were challenged in court by Democrats and minority groups for failing to create enough competitive districts. In state court, the congressional map was upheld, while the legislative map was initially ordered redrawn. In a second ruling, however, the state court in 2008 found the commission had given sufficient consideration to competitiveness along with the other five criteria listed in the measure. In other states, redistricting was still being played as classic political hard-

ball. In Pennsylvania, a GOP-controlled legislature and Republican governor combined in 2001 to redraw a congressional map after the loss of two House seats that helped the GOP win a 12-7 edge in the states delegation in the 2002 election. The Democratic challenge to the Pennsylvania plan went to the Supreme Court, where the justices blinked at the evident partisan motivation. Justice Kennedys refusal to join four other conservatives in barring partisan gerrymandering suits left the issue for another day. But the four liberals failure to agree on a single standard for judging such cases gave little help to potential challengers in future cases. 24 Two years later, the Texas redistricting case produced a similarly disappointing decision for critics of partisan gerrymandering. Preliminarily, the court found no bar to Texass middecade redistricting. On the gerrymandering claim, Kennedy wrote for three justices in finding that the new map better corresponded to the states political alignment than the previous districts; two others Antonin Scalia and Clarence Thomas repeated their call for barring gerrymandering challenges altogether. Kennedy also led a conservative majority in upholding the breaking up of African-American voters in Dallas and Houston, but he joined with the liberal bloc to find the dispersal of Latino voters in the Rio Grande Valley a Voting Rights Act violation. 25 In other Voting Rights Act cases, the Supreme Court and lower federal courts generally moved toward giving state legislators more leeway on how to draw racial and ethnic lines. In 2003, the high court upheld a Democratic-drawn plan in Georgia that moved African-American voters out of majority-black legislative districts to create adjoining influence districts where they could form majorities with like-minded voters. In the North Carolina case six years later, however, the court made plain that legislators were also free to decide not to create

182

CQ Researcher

Bringing Redistricting to the Big Screen


I would like to see more people involved in the redistricting process.
The film cost mid-six figures to produce, Reichert says, with eff Reichert, a self-described left-wing political junkie, remembers being both fascinated and outraged at the politi- much of that money coming from folks in California who had cal shenanigans that Texas Republicans carried out to worked on the reform effort. The reformers made good use of redraw congressional districts to their benefit in 2003. Reichert, the investment. In 2010, supporters of the 2008 ballot initiative who was working with a film-distribution company at the time, put their weight behind a new effort Proposition 20 to began to think of going behind the camera himself to bring the give the citizens commission responsibility for congressional redistricting as well. The supporters bought 660,000 copies of somewhat arcane subject of redistricting to the big screen. I just couldnt shake it, Reichert says today of his urge to Reicherts DVD to send to California voters before the November make Gerrymandering, an 81-minute documentary released to midterm elections. Proposition 20 passed, with a better margin than its predecessor two years earlier. theaters in fall 2010. I thought there was The film drew some attention when a way of making a movie out of this. shown in festivals in spring and summer True to its origins, the film takes 2010. The reviews on Rotten Tomatoes, a a hard and mostly critical look at legpopular movie-fan website, are mixed. islators time-dishonored practice of Sincere but slick, one commenter writes. drawing district lines to help ones New York Times film critic Stephen Holdfriends and hurt ones foes. 1 Presien faulted the Proposition 11 story as dents of both parties Democrats sloppily told and took Reichert to task John F. Kennedy and Barack Obama for failing to show anyone in defense of and Republicans Ronald Reagan and redistricting practices. 2 George H. W. Bush denounce the practice in the films opening. The Reichert makes no apologies for the Texas story is told at length, with films one-sided critique of gerrymansemicomic efforts by outvoted Democdering. Documentary filmmakers arent rats to decamp to Oklahoma to deny journalists, he says. I have a perspecRepublicans a quorum needed to comtive. I would like to see more people plete their legislative coup. involved in the redistricting process. The film gains more structure and Still, Reichert takes a time-will-tell attitude immediacy from the successful effort toward Californias experiment with citizenin 2008 to pass Californias Proposidrawn district lines and reform efforts in Documentary filmmaker Jeff Reichert tion 11, a ballot initiative to create an other states. Some will succeed, he says, and defends Gerrymanderings one-sided independent citizens redistricting comsome wont. For now, however, a lot of examination of redistricting practices. mission charged with drawing state people feel that redistricting isnt working. A lot of people feel that redistricting legislative boundaries. Gov. Arnold isnt working, he says. Kenneth Jost Schwarzenegger, the face of the initiative, and state Common Cause Executive Director Kathay Feng, the organizational mastermind, are presented as crusaders 1 For background, see the films website: www.gerrymanderingmovie.com. for the public good. Pass Proposition 11, placards read, to 2 Stephen Holden, The Dark Art of Drawing Political Lines, The New York Times, Oct. 15, 2010, p. C18. hold politicians accountable.

such crossover or influence districts. In that case, a lower state court had interpreted the Voting Rights Act to require concentrating minority voters even if they did not constitute a majority in the district. 26 As the decade neared an end, new attention was focused on reform proposals. In California, Gov. Schwarzenegger had made redistricting reform a

major issue since taking office in 2003. In 2005, voters rejected by a 3-2 margin his ballot measure, Proposition 77, to give redistricting authority to a panel of retired judges. Three years later, Schwarzenegger worked closely with Common Cause and the League of Women Voters to push the more complex citizens commission proposal, Proposition 11. In a crucial deci-

Green Film Company

sion, supporters sought to neutralize potential opposition from members of Congress by leaving congressional redistricting in the legislatures hands. The plan won approval by fewer than 200,000 votes out of 12 million cast (51 percent to 49 percent). Two years later, with House Democrats focused on midterm elections, the measure to add congressional redistricting to the

www.cqresearcher.com

Feb. 25, 2011

183

REDISTRICTING DEBATES
commissions authority, Proposition 20, passed easily. In Florida, reformers suffered a setback mid-decade when the state supreme court barred a redistricting proposal in 2005 as violating the states singlesubject rule for initiatives. The redrawn proposals, on the ballot in November 2010 as Amendments 5 and 6, set out parallel criteria for the legislature to follow in redrawing legislative and congressional districts: contiguous, compact where possible, not drawn to favor or disfavor an incumbent or political party and not drawn to deny racial or language minorities the equal opportunity to participate in the political process and elect representatives of their choice. Fair Districts Florida received major contributions from teachers unions; the opposition group, Protect Our Vote, got the bulk of its money from the states Republican Party. The measure passed with 62.6 percent of the vote. the drivers seat when it comes to drawing lines. But Jeffrey Wice, a Democratic redistricting attorney in Washington, says pressure by good-government groups for greater transparency and public participation adds a new element that may reduce partisan gerrymandering. Were too early in the game to predict winners and losers, Wice says. Theres no simplicity in this process. Out of eight states picking up House seats in the current reapportionment, Republicans control both houses of the state legislature and the governors offices in five, including the two biggest gainers: Texas, with four new seats, and Florida, with two. The GOP also has undivided control in Georgia, South Carolina and Utah, each picking up one seat. All five states currently have majority-Republican delegations. Republicans also have undivided control in three states to lose seats: Ohio, giving up two seats, as well as Michigan and Pennsylvania. In those states, Republican lawmakers are likely to draw maps to try to avoid losing House seats in the currently majorityGOP delegations. Democrats start the congressional redistricting process with significantly less leverage. They have undivided control of redistricting machinery in none of the three other states to gain seats. Arizona and Washington both use bipartisan commissions to redraw congressional districts. In Nevada, Democrats have majorities in both legislative chambers, but Republican Gov. Brian Sandoval could veto a redistricting plan approved by the legislature. Among states losing seats, Democrats have undivided control only in Illinois, where Republicans currently have an 11-8 majority in the House delegation, and Massachusetts, where Democrats hold all nine current House seats. In New York, which loses two seats, Democrats control the Assembly and Republicans the Senate setting the stage for a likely deal in which each party yields one House district. Louisianas legislature is also divided, with Republicans in control in the House and the two parties tied with one vacancy in the Senate. Democrats hold only one of the states current seven House seats. In Missouri, a Republican-controlled legislature will draw congressional districts, but Democratic Gov. Jay Nixon has to sign or veto any plan approved by lawmakers. New Jersey, the one other state losing a House seat, uses a bipartisan commission. Democrats have a 7-6 majority in the states current congressional delegation, but the state is losing population in the predominantly Democratic north and gaining population in Republican areas to the west and south. California poses the biggest question mark for the 2012 congressional districts. The states current congressional map favors Democrats, who hold 35 of the 53 House seats. Democrats also hold a nearly 2-to-1 majority in both legislative chambers. A chart presented to the Citizens Redistricting Commission in an early training session shows that congressional districts in predominantly Democratic Los Angeles and San Francisco are now underpopulated, while districts in some Republican areas such as the socalled Inland Empire to the east of Los Angeles are overpopulated. 27 As a result, Los Angeles and San Francisco could lose seats or at least shed voters to adjoining districts. The commission has pointedly avoided deciding so far whether or to what extent to use the existing legislative and congressional districts as a starting point for the new maps. But commission members Ward and Dai both stressed that the ballot measures creating the commission specifically prohibit any consideration of protecting incumbents. The idea of creating competitive districts, Ward adds, seems to be unanimous among the commissioners.
Continued on p. 186

CURRENT SITUATION
Advantage: Republicans

epublican control of congressional redistricting machinery in major states adding or losing House seats puts the GOP in a favorable position to gain or hold ground in the 2012 elections. But Democrats will try to minimize partisan line-drawing and lay the groundwork for court challenges later. The November 2010 elections gave Republicans undivided control of 25 state legislatures plus Nebraskas nominally nonpartisan unicameral body. Democrats control 16, while eight other states have divided party control between two chambers. Republicans control more legislatures, says Columbia law professor Persily. They are in

184

CQ Researcher

At Issue:
Should redistricting be done by independent commissions?
yes

DEREK CRESSMAN
WESTERN REGIONAL DIRECTOR, COMMON CAUSE
WRITTEN FOR CQ RESEARCHER, FEBRUARY 2011

BRUCE E. CAIN
HELLER PROFESSOR OF POLITICAL SCIENCE, UNIVERSITY OF CALIFORNIA, BERKELEY, AND EXECUTIVE DIRECTOR, UC WASHINGTON CENTER
WRITTEN FOR CQ RESEARCHER, FEBRUARY 2011

hroughout 2011, states will redraw their political districts in a process usually controlled either directly or indirectly by state legislators, the very people with the most to gain or lose from the outcome. The process will almost always cater to incumbent or partisan self-interests. Too often, it also will divide communities, dilute the political strength of ethnic voters and virtually guarantee re-election for the vast majority of incumbents. Unable to hold politicians accountable, too many voters will be left feeling powerless, and citizen participation in politics will suffer. Reforming this dysfunctional process is fundamental to restoring both a truly representative government and one that can solve societal problems. When voters are disengaged and stay home on election day, legislators have little incentive to act, whatever the issue. Gerrymandering manipulating district lines in a way that essentially predetermines election results has been with us since the early days of our republic. Today, its more sophisticated, and more sinister, than ever. Using powerful computer-mapping software, legislators and their political consultants can draw boundaries that remove a potential opponent from a district, add or subtract voters of a certain ethnicity, bring in big donors or concentrate members of an opposing party in a single district to reduce their overall representation. Elections in the ensuing decade are so predetermined that there is little left for voters to choose. This is a mess best addressed by turning over redistricting to independent, citizen commissions whose members have no stake in where the lines are drawn. California recently made this move, creating a citizens commission of five Democrats, five Republicans and four independent or minor-party voters. The new law requires the panel to make compliance with the federal Voting Rights Act a priority and avoid splitting communities. The commission is prohibited from drawing districts to aid any incumbent legislator off-the-record. Most important, the commission has to conduct all hearings in public, with no offrecord conversations about maps allowed. Other states have created similar panels, though none go as far as California to wring partisanship and self-interest from the redistricting process. And while no commission can be expected to produce maps that please everyone, any effort that shifts the focus of redistricting toward the voters interest in accountable, effective government and away from the politicians interest in self-preservation and partisan advantage is a step in the right direction.
no

yes no
Feb. 25, 2011

eplacing legislative redistricting with independent commissions is high on the reform agenda, but is it really so obviously irrational or shameful for a state to resist this trend? Even the most independent commissions, such as those in Arizona and California, have peculiar issues. Most basically, there is the composition problem. Legislatures are imperfectly reflective of state populations, but they are at least democratically elected and relatively large. Commissions are both appointed (in Californias case by an odd, convoluted mix of jury selection and college application-style procedures) and small (making it harder to reflect population diversity). If there is controversy over the lines, as there usually is, these composition disputes can figure prominently in the ensuing litigation. For good and bad reasons, commissions tend to be more expensive. There are high costs associated with being more open and independent. Greater transparency means more hearings and outreach efforts, which are costly and time consuming to set up, and the yield in terms of broad public participation as opposed to the usual interested groups will likely be low. And given that any association with political parties or elected officials is grounds for exclusion by virtue of excessive political interest, commissions cannot borrow from legislative and political staff. They must hire consultants instead. Commissions are also no less likely to end up in lawsuits or political controversies. Redistricting is inherently political, involving choices and trade-offs related to race, communities of interest, the integrity of city and county boundaries, the number of competitive seats and so on. However one chooses, someone is going to feel aggrieved. Commissioners cannot be sequestered like jury members or insulated from political influences. Doing without political or incumbency data only means making controversial decisions blindly, not avoiding them. The losers in redistricting disputes will derive little consolation from the commissions efforts at impartiality by empirical blindness, which is why commissions to date have been no more successful in avoiding legal challenges. On the other side, the sins of legislative redistricting have been grossly exaggerated. Partisan redistricting is rare, and in states with term limits, redistricting is less important than it used to be. Studies show that effects of redistricting on competition and party polarization are marginal at best, casting doubt on the hyperventilated assertions of commission advocates. So adopt a commission if you must, but expect no miracles. Just be prepared to pay the consultants bills.

www.cqresearcher.com

185

REDISTRICTING DEBATES
mal public-input meetings to be held before In some Republimaps are drawn, as they can-controlled states, are being drawn and demographics may again after the maps limit the GOPs opare completed. portunity to gain Proposition 20, the ground. In particular, 2010 ballot measure, esLatino advocacy tablished an Aug. 15 groups believe that deadline for the maps Texas will be required to be certified to the to make two of the states secretary of state. four new congresBut commission memsional districts majorber Dai explains that to ity Latino. That allow time for public nowould benefit Detice and for preclearance mocrats since Latinos five of the states in Texas and elseEd Cook, legal counsel for the Iowa Legislative Services Agency, displays a counties are subject to where have been map Feb. 9 that is being used to help draw new congressional district the Voting Rights Acts voting predominantly lines in the state. Iowa is losing a seat in the U.S. House of Representatives Section 5 the comDemocratic in recent during reapportionment. Unique among the states, Iowa essentially missions target date for elections. assigns legislative and congressional redistricting to professional staff, subject to legislative enactment and gubernatorial approval. completion is July 25. In Virginia, a difThe four states with ferent demographic We do believe were behind sched- legislative elections this year are all change the growth of the Northern Virginia suburbs surrounding Washing- ule, says Ward, the Anaheim chiro- moving to get redistricting maps up for ton, D.C. is seen as a possible ben- practor who held the rotating position decisions in March or April. In New Jersey, the 10-member legefit for Democrats in redrawing the ex- of chair for the commissions Feb. 10isting 11 House seats despite the GOPs 12 sessions. Given the compressed islative redistricting commission control of the redistricting machinery. time line, I dont believe you can ever with five members appointed by each of the Democratic and Republican Northern Virginia is seen as more liber- be on schedule. As in California, redistricting is still state chairs is holding a series of al than rural counties in the states south and west, some of which are losing pop- in initial stages in most states, but is public hearings aimed at submitting ulation, according to the Census Bureau. moving faster in the four that must re- a map by an early April deadline. draw legislative lines quickly because The two delegations have been workof general elections scheduled this fall ing on tentative maps, says Alan and primary elections beginning this Rosenthal, a professor of political scisummer. Besides New Jersey, the oth- ence at Rutgers University in Newark, alifornias new Citizens Redistricting ers are Louisiana, Mississippi and Vir- who is a likely candidate to be named Commission is just getting organized ginia Southern states with divided by the states chief justice as a tieeven as a midsummer deadline looms legislatures and significant African- breaker if the commission reaches an for the 14 map-drawing neophytes to American populations. Under the Vot- impasse. The separate commission to complete the nations largest legislative ing Rights Act, all three must have re- redraw New Jerseys congressional disdistricting maps precleared by either tricts to be reduced from 13 to 12 and congressional redistricting. The commission spent two-and-a- the Justice Department or a federal has not been appointed yet. In Louisiana, the legislatures govhalf days in mid-February working on court in Washington. The California commission is work- ernmental affairs committees were due housekeeping matters without touching on any of the politically sensitive ing on an ambitious series of four pub- to complete eight public hearings issues members will face in redraw- lic sessions in each of nine regions in around the state by March 1; the legising lines for 53 congressional districts, the state, with informational or edu- lature was then to convene on March 40 state Senate districts and 80 state cational workshops to explain the re- 20 in special session to redraw legislaAssembly districts in the nations most districting process hoped to begin in tive and congressional districts. MisMarch. Plans then call for more for- sissippis Standing Joint Committee on populous state
Continued from p. 184

Forecast: Cloudy

186

CQ Researcher

AP Photo/Charlie Neibergall

Reapportionment also held public hearings in February, with an announced plan to bring redistricting proposals to the floor of each chamber in early March. In Virginia the General Assemblys Joint Reapportionment Committee set up an Internet site in December for public comment on redistricting proposals and then laid plans for a special session to begin April 6. Meanwhile, Republican Gov. Bob McDonnell fulfilled a campaign pledge on Jan. 9 by appointing a bipartisan, 11-member advisory commission on redistricting. The commission plans to propose legislative and congressional redistricting plans by April 1, but the legislature will not be bound to follow the recommendations. Meanwhile, political skirmishes are breaking out in other states. Litigation is already under way in Florida over the newly passed anti-gerrymandering ballot measures. Two minority-group members of Congress filed a federal court suit immediately after the election challenging Amendment 6 on congressional redistricting as a violation of the Constitution and the Voting Rights Act. Reps. Mario Diaz-Balart, a Hispanic Republican, and Corrine Brown, an African-American Democrat, argue standards for congressional district-drawing are up to Congress, not the states; in addition, they say the Voting Rights Act requires protection for already-elected minority legislators. Separately, supporters of the amendment have filed suit against Republican Gov. Rick Scott for failing to submit Amendment 6 to the Justice Department for preclearance. 28 In other states, Democratic legislators in New York are pressing the GOP-controlled state Senate to stick to pre-election campaign pledges by Republican members and candidates to support an independent commission to redraw lines. In Michigan, a coalition of reform groups is urging the GOP-controlled legislature to allow

more public input by posting any redistricting maps on the Internet at least 30 days before taking action. And in Illinois, Democratic Gov. Pat Quinn is weighing whether to sign a bill approved by the Democraticcontrolled legislature to require four public hearings on any redistricting proposal and, significantly, to require creation of minority group-protective crossover and influence districts where feasible.

OUTLOOK
Not a Pretty Picture?
he 20 most gerrymandered congressional districts in the United States selected by the online magazine Slate present an ugly picture of the redistricting process. The boundaries of the districts 16 of them represented by Democrats as of 2009 zig and zag, twist and turn and jut in and out with no apparent logic. 29 To redistricting expert Storey, however, many of the districts amount to marvels of political-representation engineering. As one example, Storey points to Arizona-2, which stretches from the Phoenix suburbs to the states northwestern border and then connects only by means of the Colorado River to a chunk of territory halfway across the state to the east. As Storey explains, the safely Republican district was drawn in the post-2000 cycle to include a Hopi reservation while placing the surrounding reservation of the rival Navajo nation in an adjoining district. And the districting scheme was crafted not by a politically motivated legislature but by the then brand-new independent citizens redistricting commission. Among Slates list of worst districts are others drawn to connect minority

communities, such as Illinois-4 (majority Hispanic) and several majority African-American districts in the South (Alabama-7, Florida-23, North Carolina12). Lines that look funny may represent real communities without any partisan motivation, says Loyola law professor Levitt. There are reasons why districts arent pretty, adds Cynthia Canary, director of the Illinois Campaign for Political Reform. But people want pretty. The people who want pretty may well be disappointed again with the post-2010 redistricting cycle despite the concerted efforts of reform-minded groups and experts to improve the process. This is going to be hardball politics, Sherri Greenberg, a professor at the University of Texas Lyndon B. Johnson School of Public Affairs in Austin and a former Texas legislator, says of the states redistricting process just now under way. This is a process that creates enemies, not friends. In California, however, members of the Citizens Redistricting Commission are professing optimism that they can reach a bipartisan agreement on maps that are both fairer and more competitive than the existing legislative and congressional districts. There really has been no evidence of partisanship among the commissioners, says Dai, one of the Democratic members. Asked whether a bipartisan agreement is doable, Republican commissioner Ward replies simply: Undoubtedly, yes, it is doable. Reformers are similarly hopeful about the likely outcome of the antigerrymandering measures in Florida. Its going to stop the most egregious gerrymanders, says MacDonald, the professor who co-founded the Public Mapping Group. But John Ryder, the Tennessean who heads the Republican National Committees redistricting committee, says the Florida measures with the stated prohibition against helping or hurting a political party or candidate defy logic. Its simply an unenforceable standard, he says.

www.cqresearcher.com

Feb. 25, 2011

187

REDISTRICTING DEBATES
Latino advocacy groups have high hopes and expectations for the current round of redistricting. MALDEF president Thomas Saenz predicts nine new majority-Hispanic districts, including two in Texas. Perales, the groups litigation director, makes clear that MALDEF is prepared to go to court to defend plans that increase Latinos political influence and challenge any that do not. For her part, the NAACP Legal Defense Funds Clarke declines to predict whether the redistricting cycle will help elect more African-Americans to the next Congress. We dont have quotas, Clarke says. But she stresses that the Legal Defense Fund is closely monitoring developments in states to try to prevent dismantling existing influence districts as well as those with majority black population. Politically, experts are predicting Republican gains in the 2012 congressional elections, thanks to geographic shifts as well as political control of redistricting machinery in close to half the states. Galdaresi, the UCIrvine professor, expects the GOP to pick up seven to 15 House seats. Political pros profess uncertainty. I think it takes a pretty good crystal ball to predict what the net effect of redistricting is, the RNCs Ryder says. Democratic attorney Wice thinks public pressure may reduce Republicans ability to engineer favorable plans. Its not over by any means to give the Republicans the final word, he says. Whatever happens in the first round, many, perhaps most, of the redistricting plans will be headed for a second round in the courts. Its hard not to predict litigation in redistricting, says Perales. Somebodys always unhappy after the plan is done. Increased public participation may influence the process not only in legislatures and commissions but also in the courts, according to Norman Ornstein, a longtime Congress watcher now at the conservative American Enterprise Institute think tank. Courts will have more information to use in evaluating or drawing maps, he says. But the calls for more public participation will be a challenge to citizen groups. This is an incredibly complex topic, says Canary. Nobody out in the public knows why it is so complicated.
4 The Texas case is League of United Latin American Citizens (LULAC) v. Perry, 548 U.S. 399 (2006). The previous cases are Vieth v. Jubelirer, 541 U.S. 267 (2004); and Davis v. Bandemer, 478 U.S. 109 (1986). 5 Thomas Brunell, Redistricting and Representation: Why Competitive Elections Are Bad for America (2008). 6 The quote is from a power-point presentation, Redistricting 101, by the Brennan Center for Justice and MALDEF, dated Feb. 23, 2010, www.midwestredistricting.org/. The court case is Hastert v. State Board of Elections, 777 F.Supp. 634 (N.D. Ill. 1991). For coverage, see Thomas Hardy, GOP in clover as federal judges approve congressional remap, Chicago Tribune, Nov. 7, 1991, p. 2. 7 The first three decisions are Miller v. Johnson, 515 U.S. 900 (1995) (Georgia); Shaw v. Hunt, 517 U.S. 889 (1996) (North Carolina); and Bush v. Vera, 517 U.S. 952 (1996) (Texas). The Supreme Court summarily upheld the Illinois plan in King v. Illinois Board of Elections, 522 U.S. 1087 (1998). The final ruling is Hunt v. Cromartie, 532 U.S. 234 (2001). For a summary compilation, see Redistricting Disputes, op. cit., p. 228. 8 The citation is 556 U.S. 1 (2009). 9 The Arizona Independent Redistricting Commissions website is at www.azredistricting. org/?page=. 10 For a comprehensive overview, see Reapportionment and Redistricting in Guide to Congress (6th ed., 2008), pp. 1039-1072. See also The Right to an Equal Vote in David G. Savage, Guide to the U.S. Supreme Court (5th ed., 2010), Vol. 1, pp. 640-653. 11 Edward W. Saunders was elected from Virginias 5th congressional district in 1908 after Floyd County was transferred to the adjoining 6th district. The transfer left the 5th district with significantly less population than the 6th. Saunders opponent, who would have won the election in the district as previously drawn, challenged Saunders seating on the ground of the 1901 apportionment act; a committee recommended the challenger be seated, but the House did not act on the recommendation. See Reapportionment and Redistricting, op. cit., p. 1049. 12 The Mississippi case is Wood v. Broom, 287 U.S. 1 (1932). The citation for Colegrove v. Green is 327 U.S. 549 (1946). The dissenting justices were Hugo L. Black, William O. Douglas and Francis Murphy. 13 See Baker v. Carr, 369 U.S. 186 (1962); Gray v. Sanders, 372 U.S. 368 (1963); Wesberry v.

Notes
1 Dais and Wards background taken in part from their application for the positions, posted on the California Citizens Redistricting Commissions website: http://wedrawthelines.ca.gov//. 2 For previous CQ Researcher coverage, see Kenneth Jost, Redistricting Disputes, March 12, 2004, pp. 221-248; Jennifer Gavin, Redistricting, Feb. 16, 2001, pp. 113-128; Ronald D. Elving, Redistricting: Drawing Power With a Map, Feb. 15, 1991, pp. 98-113. 3 For background, see Nadine Cohodas, Electing Minorities, CQ Researcher, Aug. 12, 1994; pp. 697-720.

About the Author


Associate Editor Kenneth Jost graduated from Harvard College and Georgetown University Law Center. He is the author of the Supreme Court Yearbook and editor of The Supreme Court from A to Z (both CQ Press). He was a member of the CQ Researcher team that won the American Bar Associations 2002 Silver Gavel Award. His previous reports include States and Federalism and Campaign Finance Debates. He is also author of the blog Jost on Justice (http://jostonjustice.blogspot.com).

188

CQ Researcher

Sanders, 376 U.S. 1 (1964); Reynolds v. Sims, 377 U.S. 533 (1964). 14 Jack L. Noragon, Congressional Redistricting and Population Composition, 19641970, Midwest Journal of Political Science, Vol. 16, No. 2 (May 1972), pp. 295-302, www.jstor.org/pss/2110063. 15 The cases are detailed in Savage, op. cit., pp. 646-650. 16 The citation is 478 U.S. 109 (1986). 17 The case is Gomillon v. Lightfoot, 364 U.S. 339 (1960). 18 The decision is Thornburg v. Gingles, 478 U.S. 30 (1986); the earlier ruling is Mobile v. Bolden, 446 U.S. 55 (1980). 19 For a summary compilation, with citations, see Redistricting Disputes, op. cit., p. 228. 20 See Linda Greenhouse, Justices Permit Race as a Factor in Redistricting, The New York Times, April 19, 2001, p. A1. 21 Redistricting Disputes, op. cit., p. 233. 22 Outline of Redistricting Litigation: The 1990s, National Conference of State Legislatures, www.senate.mn/departments/scr/redist/redout. htm. 23 Coverage drawn in part from Outline of Redistricting Litigation: The 2000s, National Conference of State Legislatures, www.senate. mn/departments/scr/redist/redsum2000/redsum 2000.htm. 24 The case is Vieth v. Jubelirer, op. cit. For a comprehensive account, see Kenneth Jost, Supreme Court Yearbook 2003-2004. 25 The case is LULAC v. Perry, op. cit. For a comprehensive account, see Kenneth Jost, Supreme Court Yearbook 2005-2006. See also Steve Bickerstaff, Lines in the Sand: Congressional Redistricting in Texas and the Downfall of Tom DeLay (2007). 26 The decisions are Georgia v. Ashcroft, 539 U.S. 461 (2003); Bartlett v. Strickland, op. cit. 27 Karin MacDonald and Nicole Boyle, Redistricting California: An Overview of Data, Processes and GIS, Statewide Database_Berkeley Law, p. 53, http://wedrawthelines.ca.gov/ downloads/crc_public_meeting_20101130_train ing_karin_mac_donald_nicole_boyle.pdf. 28 See Marc Caputo and Lee Logan, Redistricting Amendment Challenged, St. Petersburg Times, Nov. 4, 2010, p. 4B; Steve Bousquet, Scotts Action May Stall Ban on Gerrymandering, ibid., Jan. 26, 2011, p. 1B. 29 See The 20 Most Gerrymandered Districts, Slate, www.slate.com/id/2274411/slideshow/ 2208554/fs/0//entry/2208555/. The unsigned, undated slide show was apparently posted in 2009.

FOR MORE INFORMATION


Asian America Justice Center, 1140 Connecticut Ave., N.W., #1200, Washington, DC 20036; (202) 296-2300; www.advancingequality.org. Organization founded in 1991 to advance human and civil rights of Asian Americans. Brennan Center for Justice, New York University Law School, 161 Sixth Ave., 12th Floor, New York, NY 10013; (646) 292-8310; www.brennancenter.org. Nonpartisan public policy and law institute founded in 1995 that focuses in part on voting rights and campaign and election reform. Common Cause, 1250 Connecticut Ave., N.W., #600, Washington, DC 20036; (202) 833-1200; www.commoncause.org. Nonpartisan public-interest advocacy organization founded in 1970. League of United Latin American Citizens, 2000 L St., N.W., Suite 610, Washington, DC 20036; (202) 833-6130; www.lulac.org. Organization founded in 1929 to advance the economic condition, educational attainment, political influence, housing, health and civil rights of the U.S. Hispanic population. League of Women Voters, 1730 M St., N.W., Suite 1000, Washington, DC 200364508; (202) 429-1965; www.lwv.org. Nonpartisan organization founded in 1920 to promote government reform through education and advocacy. Mexican American Legal Defense and Educational Fund, 634 S. Spring St., Los Angeles, CA; (213) 629-2512; www.maldef.org. Leading Latino civil rights advocacy organization, founded in 1968. NAACP Legal Defense and Educational Fund, 99 Hudson St., 6th Floor, New York, NY 10013-6289; (212) 965-2200; http://naacpldf.org. Nonprofit civil rights law firm founded in 1940. National Association of Latino Elected and Appointed Officials, 600 Pennsylvania Ave., S.E., Suite 230, Washington, DC 20003; (202) 546-2536; www.naleo.org. Organization founded in 1976 as a national forum for Latino officials. National Conference of State Legislatures, 7700 E. First Place, Denver, CO 80230; (303) 364-7700; www.ncsl.org. Bipartisan organization that provides research, technical assistance and other support for legislators and legislative staff in the states, commonwealths and territories. Project on Fair Representation, 1150 17th St., N.W., #910, Washington, DC 20036; (703) 505-1922; www.projectonfairrepresentation.org. Legal defense fund founded in 2005 to support litigation that challenges racial and ethnic classifications and preferences in state and federal courts. Public Mapping Project, Prof. Michael MacDonald, George Mason University, Department of Public and International Affairs, 4400 University Drive 3F4, Fairfax, VA 22030-4444; www.publicmappingproject. A project founded for the post2010 redistricting cycle to make census data and redistricting software available to general public. The two major political parties national committees: Democratic National Committee, 430 South Capitol St., S.E., Washington, DC 20003; (202) 863-8000; www.dnc.org. Republican National Committee, 310 1st St., S.E., Washington, DC 20003; (202) 863-8500; www.rnc.org.

www.cqresearcher.com

Feb. 25, 2011

189

Bibliography
Selected Sources
Books
Brunell, Thomas, Redistricting and Representation: Why Competitive Elections Are Bad for America, Routledge, 2008. A professor at the University of Texas at Dallas argues that competitive elections are not vital for effective representation, but in fact increase the number of people who are left unrepresented in Congress. Includes notes, references. Bullock, Charles S. III, Redistricting: The Most Political Activity in America, Rowman & Littlefield, 2010. A professor at the University of Georgia summarizes background information on congressional and legislative redistricting and examines the strategies and tactics of a process that he says is inevitably political if in control of elected officials. Includes notes. Cox, Gary W., and Jonathan N. Katz, Elbridge Gerrys Salamander: The Electoral Consequences of the Reapportionment Revolution, Cambridge University Press, 2002. The authors argue that, contrary to conventional wisdom, the reapportionment revolution of the 1960s onward was not without political consequence but had two lasting effects: strengthening the Democratic advantage in the U.S. House of Representatives and the advantage of incumbents over challengers. Cox is a professor emeritus at the University of California-San Diego, Katz a professor at the California Institute of Technology. Includes notes, references Galderisi, Peter F. (ed.), Redistricting in the New Millennium, Lexington Books, 2005. The 14 essays by 18 contributors include overviews of events through the turn of the 21st century, detailed examination of race and redistricting and case studies of redistricting in several states. Editor Galderisi is a lecturer at the University of California-San Diego. Includes notes, 12-page bibliography. Winburn, Jonathan, The Realities of Redistricting: Following the Rules and Limiting Gerrymandering in State Legislative Redistricting, Lexington Books, 2008. A professor at the University of Mississippi examines the realities of redistricting as seen in four institutional settings: unified partisan control of the state legislature; divided partisan control; partisan commission; and bipartisan commission. Includes selected bibliography. Yarbrough, Tinsley, Race and Redistricting: The ShawCromartie Cases, University Press of Kansas, 2002. A professor at East Carolina University chronicles the decadelong fight over congressional redistricting in North Carolina that first recognized constitutional objections to racially drawn district lines but ended with upholding a plan with district lines drawn to take race into account to some degree. Includes chronology, short bibliographical essay.

Articles
Reapportionment and Redistricting, in Guide to Congress (6th ed.), CQ Press, 2007, pp. 1039-1072, http:// library.cqpress.com/congressguide/toc.php?mode=guidestoc&level=3&values=Part+VII%3A+Congress+and+the+Elec torate~Ch.+33++Reapportionment+and+Redistricting (purchase required). The chapter provides a comprehensive overview of developments in regard to congressional reapportionment and redistricting from the Constitutional Convention through the mid-2000s. Includes select bibliography.

Reports and Studies


The Impact of Redistricting in YOUR Community: A Guide to Redistricting, NAACP Legal Defense and Educational Fund/Asian American Justice Center/Mexican American Legal Defense and Educational Fund, 2010. The 78-page guide covers redistricting practices and policies as they affect racial and ethnic minorities. Includes state-bystate listing of contact information for redistricting authorities. Levitt, Justin, A Citizens Guide to Redistricting, Brennan Center for Justice at New York University School of Law, 2010, http://brennan.3cdn.net/7182a7e7624ed5265d_6im 622teh.pdf. The 127-page guide published by the nonpartisan public policy and law institute covers from an often critical perspective the basics of current redistricting practices and outlines current reform proposals. Includes additional resources, notes, other appendix materials. Levitt is now an associate professor at Loyola Law School in Los Angeles. Redistricting Law 2010, National Conference of State Legislatures, 2009. The 228-page guide covers current redistricting practices, step by step and subject by subject. Includes notes, extensive appendix materials.

On the Web
GovTrack, www.govtrack.us/congress/findyourreps. xpd. This private, unofficial website includes well-organized, state-by-state information and maps on congressional districts and current members of Congress. Note: For earlier works, see Bibliography in Kenneth Jost, Redistricting Debates, CQ Researcher, March 12, 2004, p. 243.

190

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Commissions
Morales, Maricela, and Dave Rodriguez, Redistricting Panel Requires Diversity, Ventura County (Calif.) Star, Nov. 30, 2010, www.vcstar.com/news/2010/nov/29/re districting-panel-requires-diversity/. A California commission that intends to draw legislative districts fairly must reflect the states racial and ethnic diversity. Roh, Jane, Redistricting Committee At Odds Before Hearing, Courier-Post (Cherry Hill, N.J.), Jan. 27, 2011, www.courierpostonline.com/article/20110127/NEWS01/10 1270331/Redistricting-committee-at-odds-before-hearing. Political maneuvering is threatening to undermine the bipartisan nature of the New Jersey redistricting commission. Schmidt, Katie, Redistricting Commission Picks Chair, The Olympian (Wash.), Jan. 28, 2011, www.theolympian. com/2011/01/28/1523621/redistricting-commission-picks. html. Washingtons redistricting commission has selected a chairwoman who says the states redistricting process is less political and less prone to gerrymandering than that of many other states. to a lawsuit filed with the states Supreme Court. Schneider, Mike, US Reps. Challenge Floridas Redistricting Law, The Associated Press, Nov. 3, 2010. Two members of Congress claim an amendment to the Florida Constitution that sets forth rules for drawing congressional districts doesnt fairly represent blacks and Hispanics.

Minorities
Grado, Gary, No Redistricting Commission Yet in Arizona, But Maneuvering Under Way,Arizona Capitol Times, Jan. 21, 2011, newsok.com/lawsuit-challenges-oklahomasredistricting-revision-plan-okd-by-voters-in-sq-748/article/ 3535088. The Arizona Minority Coalition For Fair Redistricting is seeking competitive balance between majority and minority ethnic groups in districts where most voters are minorities. Wetterich, Chris, Bill Would Give Public Bigger Say in Redistricting, State Journal-Register (Springfield, Ill.), Dec. 6, 2010, p. 1. A proposed Illinois bill would require the legislature to draw district maps that protect minorities in districts where they may not have enough votes to elect a lawmaker but are numerous enough to influence the outcome. Yen, Hope, Minority Surge Sparks U.S. Population Growth, Detroit Free Press, Feb. 4, 2011, p. A3, www. freep.com/article/20110204/NEWS07/102040327/Minor ity-surge-sparks-U-S-population-growth. The growth of the U.S. Hispanic population will inevitably lead to the election of more Hispanic officials once the redistricting process is completed.

Gerrymandering
Friedman, Matt, Tea Partiers Want Say in Drawing District Map, Star-Ledger (Newark, N.J.), Jan. 23, 2011, p. 15, www.theolympian.com/2011/01/28/1523621/redistrictingcommission-picks.html. Tea Party followers in New Jersey want to provide input in the redistricting process. Zito, Salena, Redistricting Aint What It Used to Be, Pittsburgh Tribune Review, Dec. 26, 2010, www.pitts burghlive.com/x/pittsburghtrib/opinion/s_715284.html. Gerrymandering has become easier with the availability of high-tech computer modeling of voter behavior.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

Lawsuits
Bakst, Brian, Democrats Head to Court Over Minn. Political Map,The Associated Press, Jan. 14, 2011, lacrosse tribune.com/news/local/govt-and-politics/article_1cd0ba 75-32e8-5eba-9fae-f4cfbbd642ac.html. Four Democrats have filed suit in U.S. District Court seeking intervention in the redistricting process. McNutt, Michael, Lawsuit Challenges Redistricting Panel, The Oklahoman, Jan. 25, 2011, p. 3A, newsok.com/law suit-challenges-oklahomas-redistricting-revision-plan-okdby-voters-in-sq-748/article/3535088. Leaving independent voters out of a commission to redraw Oklahomas legislative districts is unconstitutional, according

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

Feb. 25, 2011

191

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Government Secrecy, 2/11 Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10 Closing Guantnamo, 2/09

Education
Crime on Campus, 2/11 Career Colleges, 1/11 Bilingual Education, 12/09 Value of a College Education, 11/09

Health/Safety
Genes and Health, 1/11 Food Safety, 12/10 Preventing Bullying, 12/10 Preventing Obesity, 10/10 Health-Care Reform, 6/10 Caring for Veterans, 4/10

Environment/Society

Crime/Law
Cameras in the Courtroom, 1/11 Death Penalty Debates, 11/10 Drone Warfare, 8/10 Prosecuting Terrorists, 3/10 Legalizing Marijuana, 6/09

Managing Nuclear Waste, 1/11 Politics/Economy Animal Intelligence, 10/10 Impact of the Internet on Thinking, 9/10 Lies and Politics, 2/11 Social Networking, 9/10 Income Inequality, 12/10 Abortion Debates, 9/10 Blighted Cities, 11/10 Reality TV, 8/10 Jobs Outlook, 6/10

Upcoming Reports
Alzheimers and Dementia, 3/4/11 Women and Sports, 3/11/11 Downsizing Prisons, 3/18/11

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Are the current attacks justified?

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

Public-Employee Unions

ublic-employee unions, which represent somewhat over one-third of the nations 21 million government workers, have come under pointed attacks in several states. Republican governors in Wisconsin and Ohio

won passage of laws to limit the scope of collective bargaining between unions and government agencies. They say the moves are needed to bring workers pay under control to help ease state and local budget deficits. Union leaders and their Democratic allies say the measures take away workers rights for the purpose of reducing unions political influence. The legislative battles have touched off broad debates about whether government workers are overpaid. Most economists say government workers wages and salaries are generally not out of line, but benefits and pensions are often more generous than those in the private sector. Unfunded pension liabilities are a looming problem for many states, and governors of both parties are calling for changes to trim the costs.
Gov. Scott Walkers plan to restrict collective bargaining for government workers in Wisconsin draws heavy union opposition and a smattering of support during a rally at the state capitol in Madison on March 5. Lawmakers approved the sweeping measure a week later, but it is on hold pending a legal challenge.

I N S I D E

THIS REPORT
THE ISSUES ....................315 BACKGROUND ................322 CHRONOLOGY ................323 CURRENT SITUATION ........328 AT ISSUE........................329 OUTLOOK ......................331 BIBLIOGRAPHY ................334 THE NEXT STEP ..............335

CQ Researcher April 8, 2011 www.cqresearcher.com Volume 21, Number 14 Pages 313-336


RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

PUBLIC-EMPLOYEE UNIONS
THE ISSUES

CQ Researcher
Public-Sector Unions Hold Steady Membership rose slightly in past decade. Key Provisions of Wisconsin Bill Governors overhaul of publicemployees rights on hold. State Employees Get Smaller Slice of Pie Workers portion of state expenditures has declined. Public-Employee Unions Are Major Donors They give one-fourth of federal election campaign funds. Chronology Key events since 1912. Pension Woes Blamed on Wall Street Crash Its a little perverse to be looking to unions as the main scapegoat. Federal Pay Freeze Sparks Partisan Bickering Obama cites budget savings, but GOP says plan includes costly pay raises. Support Wanes for Wisconsin Governor Most voters now back publicemployee unions. At Issue Should states limit collective bargaining by public-sector unions?
April 8, 2011 Volume 21, Number 14

317 318 319 320 323 324

315

Should public employees have the right to collective bargaining? Are public employees overpaid, underpaid or fairly paid? Do public-employee unions wield undue political influence?

MANAGING EDITOR: Thomas J. Billitteri

tjb@cqpress.com

BACKGROUND

kkoch@cqpress.com CONTRIBUTING EDITOR: Thomas J. Colin tcolin@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Sarah Glazer, Alan Greenblatt, Barbara Mantel, Tom Price, Jennifer Weeks
DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT CHECKER: Michelle Harris

ASSISTANT MANAGING EDITOR: Kathy Koch

322 325 327

Forging Solidarity Public employees began organizing in the 1800s. Holding Ground Public-sector unions flourished at centurys end. Taking Flak GOP victories in November sparked anti-union moves.

A Division of SAGE

PRESIDENT AND PUBLISHER:

CURRENT SITUATION

John A. Jenkins

326

DIRECTOR, REFERENCE SOLUTIONS:

328 330

Continuing Fights Battles over union bills in Wisconsin, Ohio are moving to new arenas. Wavering Views Public opinion about government workers appears malleable.

Todd Baldwin
Copyright 2011 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except: (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

327 329

OUTLOOK

331

Troubled Times Economic insecurity sparks anti-labor sentiment.

FOR FURTHER RESEARCH

333
SIDEBARS AND GRAPHICS

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

316

Most States Allow Collective Bargaining Public-sector unions can negotiate in 31 states.

334 335 335

Cover: Getty Images/Justin Sullivan

314

CQ Researcher

Public-Employee Unions
BY KENNETH JOST
Action Fund. The evidence strongly suggests that conservative attempts to restrict teven Reid worked as public-sector union rights and a consumer-complaint slash government employee investigator for the state compensation are driven by of Wisconsin for 27 years bemotives other than budget fore retiring with a $2,000-anecessity, Madland writes. 2 month pension in 2007. He (See chart, p. 319.) might have earned more in The Wisconsin act does the private sector, but he felt sharply increase state employdrawn to public service ees contributions for health inand to the promise of a good surance and retirement benefits, pension at age 55. amounting to about an 8 perAs the son and grandson cent pay cut. But Reid says the of longtime union members, budget issues were a smokeReid joined Local 33 of the screen for Walkers real purAmerican Federation of State, pose undermining the states County and Municipal EmDemocratic Party by weakployees (AFSCME) on his first ening its political ally, publicday on the job. sector unions. Though he is retired, Reid Public workers are willis proud to be standing by the ing to help with this deficit, union that stood by him. In Reid says. But cutting back on mid-February he began driving union rights, he says, looks on weekends from his home like an opportunity for the Wisconsin Gov. Scott Walker speaks at the state capitol in in the village of Eden to the Republicans to do real damage Madison on March 11 after signing his controversial bill state capital in Madison to join to the other party. limiting collective bargaining rights of public-employee with his union brothers and Walkers bill is only one of unions. The bill is one of several proposals being pushed sisters and others in protestseveral proposals being pushed by Republican governors or legislators aimed at curbing public-sector unions. ing a crackdown on publicby Republican governors or legemployee unions by Republiislators aimed at curbing pubcan Gov. Scott Walker. publican officials and GOP supporters lic-employee unions. In Ohio, newly electElected in November 2010 in a link states fiscal woes to what they call ed Gov. John Kasich on March 30 won wave of state-level GOP victories in overly generous compensation packages legislative approval of a measure to elimlegislative and gubernatorial balloting, for government workers. Unaffordable inate collective bargaining over health Walker proposed and won hard-fought and unsustainable salaries, pensions benefits and some working conditions legislative approval of a bill that vir- and other benefits for unionized gov- and to make strikes by public workers tually eliminates collective bargaining ernment workers are a substantial part illegal, with a stiff penalty. As of late by public-employee unions except of the problem, U.S. Chamber of Com- March, a database compiled by the Napolice and firefighters. The measure, merce President Thomas J. Donohue tional Conference of State Legislatures delayed from taking effect pending a wrote recently. 1 showed some 300 bills on public-sector court challenge, also bars payroll deThe liberal Center for American labor issues introduced in 37 states. 3 ductions for union dues and requires Progress counters that state budget The surge in activity reflects conunions to win approval from workers deficits are due primarily to lost rev- servatives strategy to turn the antiin a certification election every year. enue from the recession. Personnel costs government feeling and economic angst (See box, p. 318.) are actually a smaller percentage of shared by many Americans into tangiIn introducing the measure Feb. 11, state budgets than they were 20 years ble legislative victories against publicWalker called it a budget repair bill, ago, according to David Madland, di- employee unions. Theres a general aimed at reducing the states $137 mil- rector of the American Worker Project feeling thats been whipped up by conlion budget deficit. Nationally, other Re- with the Center for American Progress servatives, and particularly Republican
Getty Images/Justin Sullivan

THE ISSUES

www.cqresearcher.com

April 8, 2011

315

PUBLIC-EMPLOYEE UNIONS
Most States Allow Collective Bargaining
Thirty-one states and the District of Columbia allow unions representing state employees to bargain with the state over their members wages, hours and conditions of employment. An additional 10 states allow bargaining for some state and/or local employees. Nine states do not allow public workers to bargain collectively. Collective Bargaining by Public-Sector Unions, 2010
Wash. Mont. N.D. S.D.* Idaho Wyo. Neb. Nev. Calif. Ariz. Okla. N.M. Texas Ark.
Miss.

Minn. Wis. Iowa


Ill. Mich.

N.H. Vt.
Maine

Ore.

N.Y. Pa.

Mass. R.I. Conn. N.J. Del. Md. D.C.

Utah

Ind. Ohio Ky.


Tenn. W.Va.

Colo.

Kan.

Mo.

Va. N.C. S.C.

La.

Ala. Ga.

Alaska
Fla.

Bargaining allowed for all state employees Bargaining allowed for some state and/or local employees No bargaining allowed for public employees

Hawaii

* Hours and conditions of employment only

Source: Public Sector Collective Bargaining Laws, American Federation of State, County and Municipal Employees, www.afscme.org/members/11075.cfm.

governors, that public employees are privileged, says Richard Kearney, a professor at North Carolina State Universitys School of International and Public Affairs in Raleigh and author of a leading text on public-sector unions. 4 The stakes for the nations 7.6 million unionized public workers, ranging from sanitation workers and teachers to state university professors and federal-government scientists are high. The stakes for the labor movement as a whole are also high. With the percentage of unionized workers in the private sector in sharp decline, public workers now comprise roughly half of union members in the country. But the percentage of unionized public workers roughly 40 percent today has remained relatively flat for decades. 5 (See bar graph, p. 317.)

Opponents say Walkers bill, with its curbs on collective bargaining and other restrictions, is effectively aimed at busting the public unions. Sure, says Steve Kreisberg, national collective bargaining director for AFSCME (commonly pronounced as AF-SMEE). I think theyve stated as much. With the stakes so high, Walkers proposal provoked a fierce, nationally televised battle waged by labor unions proud of Wisconsins role in pioneering public-employee rights and by Democratic lawmakers resentful of their relegation to minority status following last Novembers elections. The weekend after Walker unveiled the proposal, Reid was one of an estimated 150 people who converged on Madison to protest the bill. Police estimated the crowd at 85,000 on March 13 fol-

lowing the bills enactment. Pro-Walker supporters appear to have numbered in the hundreds, at most. 6 The legislatures approval of the bill came only after outnumbered Democratic senators staged a three-week boycott. The so-called Gang of 14 decamped across the Illinois border to deny the Republican-controlled Senate the 20-member quorum needed to pass a budget-related bill. With a 19-vote majority in the 33-seat chamber, Republicans needed at least one Democrat in attendance to approve the bill as introduced with a number of budgetrelated provisions. But with Walkers approval, Republicans circumvented the Democrats boycott by stripping out the budget provisions on March 9, with only minimal public notice. Senate Majority Leader Scott Fitzgerald sent the bill without Senate passage to a joint AssemblySenate conference committee, which removed the budget provisions and then returned the measure to the Senate for approval minutes later. The lone Democrat present, Assembly Minority Leader Peter Barca, complained that the conference committee met with less than the 24-hour notice required under the states open-meetings law. 7 The Senates approval of the bill on an 18-1 vote with one Republican voting against it set the stage for the Assembly to follow suit the next day and Walker to sign it on March 11. But Democratic officials in Dane County (Madison) filed suit the same day to block the law. County Executive Kathleen Falk and county board Chairman Scott McDonell argued the law should be voided because the conference-committee session failed to comply with the openmeetings law. Judge Maryann Sumi issued a temporary restraining order on March 18 blocking the law from going into effect pending further proceedings, now due to resume in May. With the Wisconsin law still in court, labor unions and their supporters continued to argue with critics and opponents

316

CQ Researcher

about the issues. To unions, the limits on collective bargaining eliminate rights won slowly over the last 60 years, the same rights enjoyed by private-sector workers and protected by international workerrights guarantees. The unions adversaries insist that the analogy to private-sector workers is inapt and that in practice public-employee unions have exploited collective bargaining rights and their political clout to win overly generous compensation packages. The opposing sides differ as well on whether public employees are generally overpaid or underpaid. In general, economists appear to agree that most state and local government workers lag behind private-sector counterparts with comparable education in terms of wages or salaries, but enjoy somewhat better health and retirement benefits. Using different methodologies, experts from different ideological positions come to differing conclusions on how to compare the overall compensation. The opposing sides differ as well on responsibility for the shortfalls in public-employee pension funds that loom for many states red and blue alike. There is a pension tsunami coming down the pike, says Daniel DiSalvo, a professor of political science at City College of New York who follows public-sector labor issues. Walker epitomizes the critics view that public employees have won overly generous health and retirement benefits with far lower contributions than private-sector workers have to pay for their benefits. Unions say the shortfall results from the recessions impact on pension funds and inadequate funding by some states in recent years. (See sidebar, p. 324.) In Wisconsin, Walker appeared to have enjoyed public support at the start of the fight, but polls indicate gains by the unions in the weeks since. (See graph, p. 327.) The debate has raised peoples attention to the role that unions play in society, says William Jones, an associate professor of history at the

Public-Sector Unions Hold Steady


Membership in public-employee unions grew slightly over the past decade while private-sector unions declined by about a fourth (top). The proportion of public employees belonging to a union changed little during that period, while the percentage of unionized privatesector employees fell sharply (bottom).
(in thousands)

Union Membership in the U.S., 1999-2010

10

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Public sector Private sector

Percentage of Workforce Belonging to Unions


40% 37.3% 30 20 9.4% 10 0 36.2%

Source: unionstats.com Barry T. Hirsch and David A. Macpherson

6.9%

1999

2010

University of Wisconsin in Madison who is writing a history of AFSCME. Retired complaint investigator Reid is fully aware of the sharp divisions over the issues. In the cluster of six houses where he lives, three families are Democrats and three are Republicans and they are not talking to each other these days. Here are some of the arguments being heard on the major issues in the debate: Should public employees have the right to collective bargaining over pay, benefits and pensions? Indiana Gov. Mitch Daniels marked his first full day in office on Jan. 11, 2005, by rescinding collective bargaining rights for the states 25,000 employees. The Republican governors move reversed a policy that three Democratic predecessors had followed under executive orders for the previous 15 years. Daniels depicted the action then as needed to restructure the states child-

welfare bureau. Six years later, the potential GOP presidential contender sees a broader purpose in curbing publicsector unions. Public jobs grew while private jobs were lost, public salaries went up while private sector salaries are shrinking, Daniels told a Republican fundraiser in Cincinnati Feb. 23, referring to the era since widespread recognition of collective bargaining for public-employee unions. Its time to interrupt that loop in the public interest, Daniels said. 8 Daniels comments came as his fellow Republican governors in Wisconsin and Ohio were urging GOP-controlled legislatures to approve new restrictions on public-employee unions in their states. In those states, as in Indiana earlier, unions and their allies say the moves eliminate important worker rights, while supporters say restrictions on unions are needed to cut costs and make government more efficient. Public employees should have the same bargaining rights as every other

www.cqresearcher.com

April 8, 2011

317

PUBLIC-EMPLOYEE UNIONS
Key Provisions of Wisconsins New Bill
Wisconsin Gov. Scott Walker requested and won legislative approval of a broad overhaul of state and municipal employees collective bargaining rights and provisions governing public-employee unions. Walker signed the bill March 11, but a state court judge has blocked it from going into effect pending a ruling on a lawsuit alleging that the state Senate failed to comply with the states open-meeting law two days earlier before voting on the measure. Here are the major provisions:
Restricts collective bargaining for state and municipal employees except police and reghters to base wages. No collective bargaining for health benets or pensions. Limits increase in base wages to the percentage change in Consumer Price Index. Increases employee contribution for health benets. Family coverage under lowest tier would increase to $208 per month from $78. Requires employees to contribute 5.8 percent of pay to retirement system. Currently, most employees pay 0.2 percent. Mandates study due by June 30, 2012, on offering employees option of a dened-contribution 401(k)-type retirement plan. Requires annual certication election for union to represent designated workers. Union would be decertied unless it receives at least 51 percent of all workers in collective bargaining unit, not just those voting. Initial certication elections were to have been held April 1; the date is now uncertain because of the legal challenge to the act. Limits collective bargaining agreements to one year, not two years as under current law. Collective bargaining agreements cannot be extended. Prohibits payroll deductions for union dues except for public-safety employees. Provides for employee to be discharged for participating in a strike or other concerted work actions, including sit-downs, slowdowns or mass sick calls.
Source: Wisconsin State Legislature, http://legis.wisconsin.gov/2011/data/acts/11Act 10.pdf.

employee in society, says AFSCME collective bargaining director Kreisberg. If they want to work together in the bargaining process, they should have the same right as any other worker in America. I dont believe theyre rights, counters Matt Seaholm, director of the Wisconsin chapter of Americans for Prosperity, a low-tax advocacy group that has supported Walkers legislation. Its a privilege for public-sector unions to have collective bargaining

ability with government and, frankly, with the taxpayers. That privilege has been abused. In the past, union rights for public employees were seen by opponents as an infringement of government sovereignty. That argument is rarely heard today. Instead, critics of public-employee unions argue that the unions combined economic and political clout results in overly favorable deals for public workers when bargaining with government officials and managers.

The trouble with collective bargaining for public employees is theres no one with skin in the game on the other side of the table, says Chris Chocola, a former two-term Republican congressman from Indiana and now president of the Club for Growth, another low-tax advocacy group. The people agreeing on one side bear no consequence. Collective bargaining for public employees results in pay that you could not get in an arms-length negotiation, says Stephen Bainbridge, a professor at UCLA Law School and a former senior fellow at the Heritage Foundation, a conservative think tank in Washington. It gets you the kind of gross pension benefits that you see around the country. Pro-labor experts scoff at the picture of unions overpowering complacent government officials and managers. Tired arguments, says North Carolina States Kearney. There are constraints on public employees, he continues. When the public perception is that the unions have been too successful and have generated wages, benefits and working conditions that are out of step with those in the private sector, then there can be a reaction. The problem is not that the unions exist, says Henry Farber, a professor of economics in the industrial relations section at Princeton University in Princeton, N.J. The problem is inadequate discipline on the governments side. The solution is not to kill the union. Kreisberg similarly rejects the argument that government managers are more willing to grant union demands than private companies. Its easier to make a profit than to raise a tax, he says. He also notes that in many states pensions are set by legislatures, not through collective bargaining. Thats the biggest myth out there right now, he says. That unions have somehow negotiated fat pensions. Defending the Wisconsin legislation, Seaholm initially says that it leaves bargaining over wages intact and only

318

CQ Researcher

eliminates negotiations over pensions and benefits. Under questioning, however, he acknowledges that the bill allows bargaining over wages only for raises up to the cost-of-living increase. With that provision, the bill basically abolishes collective bargaining, Kreisberg retorts. Lets not mince words. Walker and other critics are tapping into a sentiment widely shared by the public at large that public-employee unions have gotten the upper hand. In some states, the relationship [between state government and publicemployee unions] is slightly out of whack, says DiSalvo of the City College of New York. To correct the imbalance, DiSalvo favors either restricting collective bargaining rights or limiting unions political influence. If one could restrict one or the other, it could bring things back into equilibrium, he says. But Thomas Kochan, a professor of management and director of the Institute for Work and Employment Research at the Massachusetts Institute of Technologys Sloan School of Management in Cambridge, says restricting collective bargaining is not the solution. The beauty of collective bargaining is standards, he says. That doesnt eliminate politics, but there are standards. To go back to the law of the jungle and pure politics is very, very shortsighted. Are public employees, in general, overpaid, underpaid or fairly paid? With the Wisconsin collective bargaining bill stalled, USA Today stepped into the debate on March 1 with a front-page story listing the state as one of 41 where public workers earn more than private-sector employees. Quoting figures from the Commerce Departments Bureau of Economic Analysis (BEA), the newspaper said that state and local government workers in Wisconsin earn $50,774 per year on average, about $1,800 more than the average for private-sector workers.

State Employees Get Smaller Slice of Pie


The portion of state expenditures devoted to pay and benets for state employees was lower in 2008 than in 1992, but on the rise. Salaries, Wages and Benets as a Share of Total State Expenditures, 1992-2008

(percentage) 25%

20

15

1992

1994

1996

1998

2000

2002

2004

2006

2008

Source: David Madland and Nick Bunker, State Budget Decits Are Not an Employee Compensation Problem, Center for American Progress Action Fund, March 2011, www.americanprogressaction.org/issues/2011/03/pdf/statebudgetissuebrief.pdf.

The Commerce Department data were also said to show that public employees compensation has grown faster than the earnings of private workers since 2000, primarily because of the rising value of benefits. Only in the seventh paragraph, however, did the story note that the earnings comparisons did not adjust for specific jobs, age, education or experience. Unions sharply criticized the story, but so did many economists and media watchers. Within the story, Jeffrey Keefe, an associate professor of economics at Rutgers University in New Brunswick, N.J., called the analysis misleading because it did not reflect factors such as education that result in higher pay for public employees. In a critique later that day, the progressive media-monitoring group Fairness and Accuracy in Reporting (FAIR) made the same point, calling the comparison entirely meaningless. 9 As the episode illustrates, comparisons between public- and private-sector compensation are both statistically complex and emotionally charged. When The New York Times tried to answer the question of which side earns more, it presented a package of charts that began with the BEA comparison but

continued with other data showing government workers more likely to be white-collar and better-educated than private-sector workers as a whole. 10 A wide range of economists agree that the widespread public perception of government workers as overpaid is inaccurate. I dont think public employees are overpaid, says Princetons Farber. Pay levels are fairly comparable, he says, a bit higher for lowskilled workers, lower for high-skilled workers. Along with others, however, Farber also points out that public employees generally have better health and pension benefits than private-sector workers. Economists trying to take account of all factors still come to differing conclusions. Keefe has written a series of papers, published by the liberal Economic Policy Institute in Washington, that conclude state employees are generally undercompensated in relation to private-sector workers nationally and in Wisconsin and several other states. In Wisconsin, for example, Keefe found that state workers have a 5 percent gap in total compensation compared to privatesector workers. Conservative economists Andrew Biggs of the American Enter-

www.cqresearcher.com

April 8, 2011

319

PUBLIC-EMPLOYEE UNIONS
Public-Employee Unions Are Major Donors
Unions representing police, reghters and other government employees contribute about one-fourth of the donations to federal election campaigns. Yearly amounts have ranged from $15 million to $27 million over the past decade. Public-Sector Union Contributions to Federal Election Campaigns, 2000-2010
13 97 0 25 2 34 70 5, $1 40 1
(percentage of total contributions)

29

06

7,

,9

$2

11 3

4,

$2

25 2000 2002

2004

$1

5,

2006

2008

$1

9,

12

7,

5,

82

7,

2010

Source: Public Sector Unions, OpenSecrets.org, www.opensecrets.org/industries/ indus.php?cycle=2010&ind=P04#contribtrends.

prise Institute (AEI) and Jason Richwine of the Heritage Foundation find instead that Wisconsin government workers have a 10 percent pay premium over private-sector employees. 11 The dueling studies agree generally in finding private-sector workers better paid except for less-skilled bluecollar workers and public-sector workers with better pension benefits. But Biggs argues that Keefe underestimates pensions value by calculating their worth not on the basis of the ultimate benefit but the states current contribution. Because state pension funds generally perform well, the current contribution understates the eventual value of the retirement benefit to the employee, he says. In their study, Biggs and Richwine also credit state workers with additional compensation a 15 percent pay premium in the form of greater job security than private-sector workers. Job security pulls them ahead, Biggs says. But Keefe says Biggs and Richwine offer no justification for any job-security premium, much less 15 percent. Similar arguments over federal workers compensation were aired in a

March 9 hearing by the House Oversight Subcommittee on Federal Workforce, U.S. Postal Service, and Labor Policy. Subcommittee chairman Dennis Ross, a Florida Republican, opened by calling federal workers pay not in line with the private sector. But John Berry, director of the Office of Personnel Management (OPM), rejected what he called the myth that federal workers as a whole are overcompensated. At the hearing, Biggs and Heritage Foundation senior policy analyst James Sherk presented studies showing a substantial 30 percent to 40 percent premium for federal workers over private-sector counterparts even after adjusting for factors such as education and experience. But Colleen Kelly, president of the National Treasury Employees Union, noted that under both Republican and Democratic administrations, the Presidents Pay Agent has concluded that federal workers have a pay gap of about 20 percent compared to private employees. * 12
* The Presidents Pay Agent is composed of the secretary of Labor and the directors of OPM and the Office of Management and Budget.

$2

0,

53

30%

In Wisconsin, Walker and his supporters focused on the benefits issue. A television ad paid for by the Wisconsin Club for Growth, an economically conservative advocacy group unaffiliated with the national organization of the same name, commended Walker for fighting to make public workers pay their fair share. 13 Walkers legislation requires government workers to pay half of the contribution toward retirement benefits 5.8 percent of their paychecks, up from 0.2 percent and 12.6 percent of the cost of health insurance. AFSCME leaders in Wisconsin and Washington have said throughout the controversy that they were willing to negotiate increased contributions. While were certainly going to share in the sacrifices, Martin Beil, executive director of Wisconsins AFSCME Council 24, said in a video message Feb. 26, we will not under any circumstances surrender our right to collectively bargain or organize as a union. 14 Do public-employee unions wield undue political influence? Public-sector unions are big players in federal and state campaigns, and they play overwhelmingly for Democrats. So Wisconsin party leaders on both sides of the aisle see high political stakes in the debate over Gov. Walkers union legislation. I consider organized labor to be the backbone of the Democratic Party, Mike Tate, state party chairman, told the Wisconsin State Journal as the union bill was pending in early March. Part of Scott Walkers strategy is to weaken the infrastructure of the Democratic Party. Senate Majority Leader Fitzgerald appeared to confirm Tates accusation a few days later as he finally maneuvered the bill through the chamber. If we win this battle, and the money is not there under the auspices of the unions, Fitzgerald told Fox News on March 9, certainly what youre going to find is President Obama is going to have a . . .

7,

320

CQ Researcher

8,

much more difficult tions of our government. time getting elected We extol trade unions and winning the state everywhere else in the of Wisconsin. 15 world except when they Over the past 10 are in the United States. years, AFSCMEs poBy reducing publiclitical action commitemployee unions coltee ranks 13th among lective bargaining role, PACs in giving to Walkers legislation federal candidates, threatens to reduce with $9.4 million in their membership. In the total contributions, six years since Daniels according to the move in Indiana to reCenter for Responscind collective bargainsive Politics, a Washing with state employington group that ees, dues-paying union monitors campaign members dropped from finance. All but a 16,408 in 2005 about tiny fraction of the two-thirds of the states donations 97 perpublic-employee workcent went to force to 1,409, acDemocrats. In Wiscording to the Wisconconsin, too, publicsin State Journal. 17 employee unions Two distinctive provigive predominantly sions in Walkers bill go to Democratic officefurther toward underseekers about 73 mining unions by elimicents of every dolnating payroll deductions lar given, according for union dues and reto an analysis by the quiring unions to face Firefighter and union supporter Tom Ullom registers his opposition to Wisconsin Democcertification elections SB 5, a bill limiting collective bargaining rights for government workers racy Campaign preevery year. Walker argued in Ohio, during Gov. John Kasichs State of the State address in pared for the State that getting rid of the Columbus on March 8. Kasich signed the bill three weeks later, but it is Journal. 16 dues check-off would on hold pending a possible referendum on the measure. The bill is one of several proposals being pushed by Republican governors or help offset workers inCritics of publiclegislators aimed at curbing public-employee unions. creased costs for health employee unions and retirement benefits. see the campaign giving as part of a system that uses people who are running for politi- He said annual certification elections money and votes to get government cal office, says UCLAs Bainbridge. will force unions to prove their value officials to do their bidding, both at In states with a Democratic majority, to workers. Labor-oriented experts are sharply the bargaining table and in the poli- he says, youve got the unions and cy arena. They blame teachers unions, their lackeys on either side of the critical of the elections provision. Its totally outside of the mainstream of for example, nationally for bottling up bargaining table. Union officials and their supporters collective bargaining statutes in the school reforms that threaten educators insist the picture of influence-peddling is United States or Canada, says Martin job security. When you combine the realities overdrawn. Wheres the evidence that Malin, a professor of law and director of campaign finance with collective that occurs? asks AFSCMEs Kreisberg. of the Institute for Law and the Workbargaining in the public sector, you Wheres the evidence that [unions in- place at Chicago-Kent College of Law, Illinois Institute of Technology. end up with a situation in which fluence] is corrosive? Labor unions are a bulwark in favor Its simply nutty, says MITs Kochan. you have very powerful, very wealthy unions, such as the teachers union, of democracy, Kreisberg continues. Youre going to have a perpetual elecfinancing political campaigns of the Theyre part of the democratic institu- tion process.
Getty Images/Mike Munden

www.cqresearcher.com

April 8, 2011

321

PUBLIC-EMPLOYEE UNIONS
Even critics of public-sector unions Federal shipyard workers organized view the provision as punitive. Clearly, as early as the early 1800s and achieved an election costs money and takes up their first notable success with a strike time, says DiSalvo of City College of at the naval shipyard in Washington, New York. That is money and time that D.C., in 1836 that prompted President from the unions point of view could be Andrew Jackson to grant their demand dedicated to expressing its interest. Tofor a 10-hour day. The New York Letter gether, he says, the election and dues ublic employees in the United States Carriers formed in 1863 and, with help check-off provisions amount to a huge have organized to promote their from the Knights of Labor, became a one-two punch against unions. interests since the 1800s, often in the national organization by 1890. At the While supportive local level, teachers orof unions, Princeganized into the Natons Farber says he tional Education Assowould like to limit ciation in 1870, initially their political clout. as a mutual-aid society They really shouldand later as a quasint be contributing union seeking to ease to the people theyre various regulations and negotiating with, restrictions on educators. Farber says. The Police and firefighters simmanagement should ilarly organized mutualnot be beholden to aid societies in the late the union. He con1800s that later evolved cedes, however, into modern unions. that U.S. Supreme Civil-service laws Court rulings on passed by Congress and campaign finance, many states in the late including a January 19th century reduced AFL-CIO President Richard Trumka rallies union members and 2010 decision guarsome abuses of political community activists at New Jerseys capitol in Trenton on Feb. 25 to anteeing unions patronage in the hiring support opponents of Wisconsin legislation restricting collective and corporations and firing of public embargaining. Trumka also blasted cuts in benefits for New Jersey government workers proposed by Republican Gov. Chris Christie. the right to spend ployees. But the Nationfreely in election al Association of Letter campaigns, make it impossible to keep face of resistance from local supervi- Carriers increasing activism prompted public-sector unions out of political sors and government officials. Civil ser- Postmaster General William Wilson in contests. 18 vice reforms in the late 19th century 1895 to forbid postal employees from In Wisconsin, Walkers push for the gave some workers protections from lobbying in Washington. President union bill provoked a fight vigorously politically motivated hiring and firing. Theodore Roosevelt in 1902 expanded waged on the streets, in print and on Only in the 20th century, however, did the gag rule to all federal employees. radio and TV. Bainbridge says the public-employee unions win the right The postal workers responded with a outcome bodes well for other anti- to advocate on the full range of work- public campaign supported by the union proposals. If you have the place issues. The mid-20th century saw American Federation of Labor that won stomach to wage this fight, it is a cities and then states recognize collective congressional approval in 1912 of the fight that Republicans can win, he bargaining rights for public employees; Lloyd-LaFollette Act, guaranteeing federal says. But Kreisberg thinks unions can the federal government partially followed employees right to lobby the governregain footing if they shift the terms suit in 1962 by recognizing federal- ment. The act laid the groundwork for of the debate. Its really easy to beat employee unions. But the advance of formation of other federal-employee up on teacher unions or employee public-employee unions halted in the unions, including the National Federaunions, he says. But when you ask mid-1970s with the failure of a fed- tion of Federal Employees in 1917 and people how they feel about teachers eral bill to guarantee collective bar- the American Federation of Government or firefighters, [approval ratings are] gaining rights for government work- Employees in 1932. much higher. ers at all levels. 19 Continued on p. 324

BACKGROUND
Forging Solidarity

322

CQ Researcher

Bloomberg/Getty Images/Emile Wamsteker

Chronology
Before 1950 Government workers organize,
but have limited rights. 1912 Lloyd-LaFollette Act guarantees federal workers right to lobby government. 1919 Boston police strike incites anti-union sentiment in public. 1935, 1937 President Franklin D. Roosevelt signs National Labor Relations Act, guaranteeing union rights to private sector (1935); in later letter, says collective bargaining as usually understood cannot be transplanted into public service (1937). Late 1940s Government employment begins to grow after World War II.

1971 Postal workers are granted right to bargain over pay. 1976 Federal bill to grant collective bargaining rights to all state and local government workers fails in Congress.

2002 At Bushs insistence, Department of Homeland Security (DHS) is created with president given authority to waive collective bargaining rights. 2003, 2005 Governors in three states rescind collective bargaining: Kentucky (2003); Indiana, Missouri (2005). 2006 Federal appeals court in Washington says Bush administration went too far in curbing collective bargaining with DHS employees. 2007 Missouri Supreme Court rules state constitution guarantees bargaining rights for state workers. 2009 Democrat Barack Obama elected president; federal employee unions expect favorable climate. 2010 Republican New Jersey Gov. Chris Christie wins passage of laws to require teachers to contribute to health insurance (March), limit police, firefighter raises (December). . . . Republicans gain majority in House of Representatives; win majority of governorships, state legislatures (Nov. 2). . . . In new economic and political climate, Obama announces two-year pay freeze for civilian federal workers as budgetcutting step (Nov. 29). 2011 Republican Govs. Scott Walker in Wisconsin and John Kasich in Ohio win passage of omnibus bills to curb collective bargaining for state and local workers (March 11, 30); Wisconsin law blocked by legal challenge; opponents eye referendum on Ohio law.

1977-2000

Public-sector unions make some gains, suffer some setbacks. 1977 Unionization rate for government employees is around 40 percent. 1978 Civil Service Reform Act codifies federal workers right to unionize. 1980 Most states allow collective bargaining for government workers. 1981 Air traffic controllers strike; President Ronald Reagan fires controllers, decertifies union. 1993 President Bill Clinton expands bargaining rights for federal workers. 2000 Unionization rate for government workers holds at around 37 percent.

1950s-1976
Government workers gain collective bargaining rights. Early 1950s About 10 percent of public employees belong to unions. 1958 New York Citys Little Wagner Act grants collective bargaining rights to public-employee unions. 1959 Wisconsin is first state to pass collective bargaining law for government workers. 1962 President John F. Kennedy signs executive order guaranteeing federal workers right to unionize and collectively bargain, but not over pay.

2001-Present Public-employee unions take hits


from Republican administrations in Washington, several states. 2001 President George W. Bush rescinds Clinton order on bargaining.

www.cqresearcher.com

April 8, 2011

323

PUBLIC-EMPLOYEE UNIONS

Pension Woes Blamed on Wall Street Crash, Not Unions


Its a little perverse to be looking to unions as the main scapegoat.
ublic-employee unions are being blamed for underfunded pension plans for state and local government workers. But two Washington research centers lay most of the blame on losses in the stock market and cuts in contributions by state and local governments. The nonpartisan Pew Center on the States warned in February 2010 that states faced a cumulative $1 trillion gap in covering pensions and health benefits for state and local workers: $452 billion in unfunded liabilities for pensions and $587 billion for health benefits, as of December 2008. The Washington-based center warned that the gap would grow unless states brought down costs or set aside enough money to pay for benefits. 1 In a more recent report, the liberal-leaning Center for Economic Policy and Research (CEPR) concluded that most of what it calculated as $647 billion in unfunded pension liabilities stemmed from the two-year stock market plunge from 2007 to 2009. The Washington-based center listed a second major cause as reduced contributions by states during the downturn. 2 Unions play only a minor role in both reports. The Pew Center report notes that unions have resisted moves to increase contributions or reduce future benefits in some states, but it found a greater willingness to accept changes than in the past. The CEPR report, written by co-director Dean Baker, does not mention unions. In an interview, he says unions havent played much of a role. The economy went off the cliff, Baker says. That wasnt the unions. That was bad management of the financial system, bad regulatory management. That wasnt school teachers and firefighters. Its a little perverse to be looking to unions as the main scapegoat. Jack Dean, a conservative pension-reform advocate who publishes the website pensiontsunami.com, does cite the unions

stance as a factor in causing pension funding problems, but he says state and local governments share the blame. The unions have gotten us into this situation, but thats what theyre designed to do, says Dean, a former journalist who began monitoring public pensions in 2004 and is now affiliated with the conservative California Public Policy Center in Santa Monica. We cant fault them for doing what they were set up to do. We need to watch them more closely and prevent them from driving us into bankruptcy. 3 Both the Pew and CEPR reports show wide variations among the states pension funds. California, the nations most populous state, has the biggest pension shortfall or overhang $75 billion, according to the CEPR report. Illinois, with $65 billion, and New Jersey, with $43 billion, rank second and third. Surprisingly, perhaps, the state where public unions are under severest attack Wisconsin gets high marks in both reports. Pew cites Wisconsin as one of four states along with Florida, New York and Washington with fully funded pension plans. The CEPR report shows Wisconsin with a minimal $193 million in unfunded pension liabilities. Wisconsin looks pretty good in the scheme of things, says Baker. Public workers federal, state and local generally enjoy better pension benefits than private-sector workers as a whole, experts agree. Union leaders say the benefits often amount to deferred compensation in exchange for forgoing current wage or salary increases. Critics say government officials agree to boost pension benefits because they satisfy unions while pushing the fiscal impact of the increases into the future. Contrary to the picture drawn by critics, however, a pension expert has found limited correlation between union strength and pension levels. In research to be published in the Journal of Pension Economics and Finance, economist Sylvester Schieber found,

Continued from p. 322

Public-sector unionism suffered a decades-long setback, however, with the public backlash against the Boston police strike of 1919. After calling out the Massachusetts National Guard, Gov. Calvin Coolidge, later U.S. president, famously declared, There is no right to strike against the public safety a view reflected in the widespread bans on public-employee strikes today. By the 1930s, public-employee organizing picked up, as exemplified by the founding of the Wisconsin State Employees Association in 1932, predecessor of present-day AF-

SCME. But the University of Wisconsins Jones notes that AFSCME did not initially list collective bargaining as one of its goals. At the federal level, President Franklin D. Roosevelt supported public workers right to organize, but, in a letter widely quoted by public-employee union critics today, said that collective bargaining as usually understood cannot be transplanted into the public service. He also opposed militant tactics, including strikes. 20 Public unions gained solid footing after World War II with the growth of state and local public employment and

the gradual recognition of collective bargaining rights by local and state governments. In 1958, New York Citys Democratic mayor, Robert F. Wagner Jr. whose father, as a U.S. senator, sponsored the private-sector National Labor Relations Act granted collective bargaining rights to city workers. A year later, Wisconsins Democratic governor, Gaylord Nelson, later a U.S. senator, won enactment of the first statewide collective bargaining law. President John F. Kennedy continued the favorable trend for public workers in 1962 by signing an executive

324

CQ Researcher

addition, the retirement age was for example, that Colorado increased from 55 to 62, the minhas the most generous penimum years of service for pension benefits even though it sion vesting from five years to 10 has a relatively low 25 perand the use of overtime capped cent unionization rate among in calculating benefits. public workers. Pension-reformer Dean gives Several states with high the unions only grudging credunionization rates do have it. Theyve gone along with relatively high pension bensome of the changes, and thats efits, including, in descendbecause theyve seen the handing order, New York, Ohio, writing on the wall. The probNew Jersey, California and Conservative pension-reform advocate Jack Dean blames both lem is that the changes being Wisconsin. But Georgia, unions and state and local governments for pension problems. made are in most cases tweaks. with a low unionization rate But Baker says the pension shortfalls are generally manof 15 percent, ranked third-highest in pension benefits. I was ageable, especially if the stock market avoids another reversal. surprised by the result, Schieber told The New York Times. 4 Both Baker and Pew Center research director Kil Huh say You do have states that have serious situations, he says, but states should be moving toward fully funded pensions those are the exceptions. through some combination of steps, beginning with keeping Kenneth Jost up their own contributions. Baker says that state and local payments to pension funds have averaged $6.9 billion less 1 Pew Center on the States, The Trillion-Dollar Gap, February 2010, http:// than withdrawals for the past three years. Huh says states were already considering or adopting such downloads.pewcenteronthestates.org/The_Trillion_Dollar_Gap_final.pdf. 2 Dean Baker, The Origins and Severity of reforms as reducing benefits, changing the retirement age for Economic and Policy Research, February the Public Pension Crisis, Center 2011, www.cepr.net/documents/ and requiring employee contributions. Nineteen states adopt- publications/pensions-2011-02.pdf. ed such changes in 2010, he says, in some instances with 3 PensionTsunami: A Project of the California Public Policy Center, www. pensiontsunami.com/. The site focuses on California but includes extensive union support. reports and commentary on pension issues in other states as well. As one example, Ken Brynien, president of New Yorks Public 4 Mary Williams Walsh, The Burden of Pensions on States, The New York Employees Federation, notes that public-sector unions worked with Times, March 11, 2011, p. B1. Schieber ranked pension benefits by the reDemocratic Gov. David Paterson on a package of changes in 2009. placement rate that is, the percentage of a workers income replaced by the benefit. Colorados pensions replaced 90 percent of a retirees income; New employees are now required to contribute 3 percent of their Wisconsins, 57 percent. paychecks to their pension throughout their period of service. In

order that explicitly guaranteed federal workers right to organize and bargain collectively, though not over pay. Dissatisfied with some of its restrictions, unions won favorable changes later in revised executive orders issued by two Republican presidents: Richard M. Nixon (1969, 1971) and Gerald R. Ford (1975). Meanwhile, the National Association of Letter Carriers had won the right to bargain collectively over pay as an implicit payback for settling the 1970 postal strike and supporting the reorganization of the Postal Service as an independent government corporation.

Public employees were making gains in pay and benefits, and public unions were growing. By the mid-1970s, nearly one-third of public-sector workers were unionized, compared to about 10 percent in the 1950s. 21 But unions militancy notably, the increasing number of strikes in the 1960s and early 70s was also engendering a backlash. Then in 1976, unions suffered a crushing disappointment at the federal level with the failure of legislation to guarantee union and collective bargaining rights to state and local workers nationwide. Oddly, the bill failed not be-

cause of lack of support in Congress, according to Georgetown University historian Joseph McCartin, but because of a Supreme Court decision casting doubt on its constitutionality. McCartin says the bills death marked the turning point of the once expansive public-sector labor movement. 22

Holding Ground
ublic-sector unionism held its own during the final decades of the 20th century even as private-sector unions

www.cqresearcher.com

www.fullertonsfuture.org

April 8, 2011

325

PUBLIC-EMPLOYEE UNIONS

Federal Pay Freeze Sparks Partisan Bickering


Obama cites budget savings, but GOP says plan includes costly pay raises.

acing tough budget negotiations with the new Republicancontrolled Congress, President Obama found a quick way in November to cut federal spending: a two-year pay freeze for civilian federal workers. Federal-employee unions complained, while Republicans begrudgingly gave the move tepid support. Three months later, however, Republican lawmakers are complaining the freeze still allows federal workers to get step increases graduated pay hikes within each of the 15 defined civil service grades that they estimate will cost $1 billion for the current fiscal year. 1 In announcing the move on Nov. 29, Obama tried to cushion the blow by praising federal workers, but said the times required all of us . . . to make some sacrifices. He said it would save $2 billion a year. Federal union leaders sharply criticized the move. Very disappointed, Colleen Kelly, president of the National Treasury Employees Union, told The Washington Post. John Gage, president of the American Federation of Government Employees, called the move a public relations gesture that would amount to peanuts in savings. The American people didnt vote to stick it to a VA nursing assistant making $28,000 a year or a border patrol agent earning $34,000 per year, Gage added. Rep. Jason Chaffetz, a Utah Republican who was then ex-

pected to head the House Oversight Subcommittee on Federal Workforce, U.S. Postal Service, and Labor Policy, called the move a good start. (The post eventually went to Floridas Dennis Ross.) But in a subcommittee hearing three months later, House Oversight and Reform Committee Chairman Darrell Issa, a California Republican, sharply challenged Office of Personnel Management Director John Berry on Obamas move. There is no freeze because of the step increases, Issa said. The truth is there will be pay raises. Berry said he would oppose barring step increases for federal workers because that would cause some workers to leave the government for private-sector jobs. Under friendly questioning later from Democrat Danny Davis of Illinois, Berry said federal workers deserved credit for forgoing pay raises. They were the first ones who were asked to step up to the plate and make a sacrifice, he said. Kenneth Jost
1

Coverage drawn in part from Seth McLaughlin, GOP pushes total pay freeze, The Washington Times, March 10, 2011, p. A4; Lisa Rein and Perry Bacon Jr., Obama proposes 2-year pay freeze, The Washington Post, Nov. 30, 2010, p. A1; Joe Davidson, Presidents salary freeze for federal workers gets cold reception, ibid., p. B3. For Obamas remarks, see Remarks by the President on the Federal Employee Pay Freeze, Nov. 29, 2010, www.whitehouse.gov/thepress-office/2010/11/29/remarks-president-federal-employee-pay-freeze.

shrank in size and political clout. Federal workers won statutory protection of union rights, while state and local governments continued to enact or enlarge collective bargaining rights for their workers. Public-sector unions grew to surpass 7 million members by centurys end, but the percentage of government workers enrolled in unions was essentially flat. And public-employee unions vulnerability to political attack was vividly demonstrated by President Ronald Reagans decision to break a nationwide air controllers strike in 1981 in his first year in the White House. Congress solidified federal workers rights somewhat as part of the Civil Service Reform Act of 1978. The acts Title VII separately entitled the Federal Service Labor Management Statute codified federal workers right to organize and slightly expanded

the scope of collective bargaining previously established by executive order. The act also created the Federal Labor Relations Authority (FLRA) to interpret and administer the act, with a general counsel to prosecute unfair labor practices under the law. While protecting workers organizing rights, the act also reinforced federal managers control over personnel policy, including hiring, promotions and work assignments. Wages and hours remained outside the scope of bargaining, but the law allowed without requiring bargaining over procedures for managers to use in exercising their powers. 23 State and local government workers continued to make incremental gains as well, but with difficulty. The number of states with collective bargaining rights for at least some government workers increased from 16 as

of the mid-1960s to 29 by 1980. Victories were hard-fought. In Florida, for example, the legislature passed a statewide collective bargaining law in 1974 only under duress, six years after the states supreme court found bargaining rights guaranteed under the state constitution. California was one of several states to pass a statewide law, in 1977, after first having extended bargaining rights to specific categories of employees. In some states for example, Indiana in 1989 bargaining rights were established by executive order after legislative efforts failed. By the end of the century unions had strengthened some of the laws, but the total number of states with collective bargaining rights remained around 30. Public unions waged their organizing and lobbying efforts under the cloud cast by the 1981 strike by the Professional

326

CQ Researcher

Air Traffic Controllers Organization (PATCO) and Reagans forceful reaction to the work stoppage. The union, formed in 1968, had had a stormy relationship with the Federal Aviation Administration (FAA) for years. In 1981, members voted 20-1 against accepting a proposed contract with a 32-hour workweek and maximum $59,000 salary; on Aug. 3, some 12,000 controllers staged a nationwide walkout. Reagan, former president of the Screen Actors Guild, declared the job action illegal, fired the striking controllers, hired new ones and decertified the union. The union got little public support, and supervisors along with military and nonstriking civilian controllers kept planes in the air without crippling reductions in flights. Years later, in 1987, a new union, the National Air Traffic Controllers Organization, was formed with an explicit no-strike pledge in its charter. 24 The PATCO strike was actually exceptional. The number and length of strikes have fallen since the days of public-union militancy in the 1960s and 70s. In fact, 13 states have laws today permitting public-employee strikes, typically with exceptions for police and firefighters; Kearney, the North Carolina State professor, says that the bans are ineffective in preventing strikes and that strikes are actually more frequent in states that ban work stoppages than in those with permissive laws. 25 Whatever the law, however, striking public employees typically draw little public support since the inconvenience to transit riders or parents of school children is easier to understand than the details of labor negotiations. Throughout the period, and to date, public-sector labor relations have remained a partisan issue in Washington and in many state capitals. President Bill Clinton, a Democrat, gave federal unions a small victory in 1993 with an executive order that required agencies to bargain on the issues left optional in the 1978 law. The act also called for the establishment of labor-management

Support Wanes for Wisconsin Governor


A majority of Wisconsin voters initially supported Republican Gov. Scott Walkers effort to curtail bargaining rights for government workers, but public support for the plan has declined. Most voters now back the states public-employee unions. Do you support the unions or Gov. Scott Walker when it comes to weakening collective bargaining rights?

Unions

56%

Not sure/no opinion

3%

Gov. Scott Walker

41%
Source: Wisconsin Poll: Support for Budget Cutting, Not for Weakening Collective Bargaining Rights, Rasmussen Reports, March 3, 2011, www.rasmussenreports.com/ public_content/politics/general_state_surveys/wisconsin/wisconsin_poll_support_for_ budget_cutting_not_for_weakening_collective_bargaining_rights.

partnerships throughout the executive branch, collaborations that the administration later credited with promoting innovation and productivity. President George W. Bush, a Republican, rescinded the order on Feb. 17, 2001 less than a month after taking office. 26 Later, Bush adopted an aggressive, anti-union stance on a more protracted issue: union rights for workers in the newly created Department of Homeland Security. Bush proposed the creation of the new department a consolidation of agencies in several departments in the aftermath of the Sept. 11, 2001, attacks on the World Trade Center and Pentagon. As enacted, the law gave the president the authority to waive collective bargaining rights for designated employees on national security grounds. Bush and GOP lawmakers said the president needed flexibility in structuring the new department. In a key vote, the House of Representatives approved the provision on a party-line vote, 229-201, before final passage on July 26, 2002. The Democratic-controlled Senate passed a

bill without the provision, but Bush prevailed by vowing to veto the measure without it. 27

Taking Flak
he Bush administrations attack on worker rights at the federal level presaged a period of similar pressure on public-employee unions in the states. Republican governors in three states Kentucky, Indiana and Missouri rescinded collective bargaining rights previously granted by executive order. Other states moved to limit bargaining with teachers unions over such issues as class size or teacher evaluations. Public-employee unions limited the damage somewhat by winning favorable court rulings, including a victory over the Bush administrations restrictions on bargaining for Homeland Security employees. But GOP victories in state elections in November 2010 touched off a new round of antiunion moves in several states, including the contentious battle fought most dramatically in Wisconsin.

www.cqresearcher.com

April 8, 2011

327

PUBLIC-EMPLOYEE UNIONS
In contrast to the open-ended scope of bargaining in the private sector, state laws for public employees had long taken some issues off the table. In the 1990s, school-reform issues prompted legislatively enacted limits on bargaining with teachers in such states as Illinois, Michigan, Oregon and Wisconsin. Oregons law, for example, barred bargaining not only on class size and teacher evaluations but also on dress and grooming standards and personal conduct such as smoking and chewing gum. The Michigan Supreme Court in 1995 upheld the constitutionality of the bargaining restrictions enacted there. The Ohio Supreme Court struck down a law challenged by state university faculty that barred bargaining over instructional workload, but the U.S. Supreme Court in 1999 reinstated the measure. By 2008, an education group reported that most states limited teacher bargaining to economic issues, such as wages, hours, health benefits and the like. 28 GOP governors in Kentucky, Indiana and Missouri went further in the 2000s by revoking collective bargaining rights granted by executive orders issued by Democratic predecessors. In Kentucky, Republican Ernie Fletcher rescinded collective bargaining rights on his first day in office in December 2003 following a campaign pledge to reduce state personnel costs. Indianas Daniels and Missouri Gov. Matt Blunt followed suit shortly after taking office in January 2005. Blunt had vowed in his campaign to rescind the executive order issued by his Democratic predecessor in 2001. Blunts action was later undone, however, by the Missouri Supreme Court. In a 2007 ruling, the court held that a provision in the state constitution guaranteeing collective bargaining rights for employees extended to public as well as private-sector workers. 29 In Washington, the National Treasury Employees Union had won a more significant victory a year earlier when the U.S. Court of Appeals for the District of Columbia Circuit struck down the Bush administrations effort to all but abolish bargaining rights for Homeland Security employees. The administration argued the new department needed flexible personnel rules to deal with the range of post-9/11 security issues. But in a unanimous ruling, the three-judge appeals panel said the administration had gone too far by claiming a power to unilaterally abrogate existing labor contracts and limit collective bargaining to individual employee grievances. The provisions, Judge Harry Edwards wrote, plainly violate the statutory command in the Homeland Security Act that the department ensure collective bargaining for its employees. 30 With Democrat Obama in the White House, public-sector unions breathed a sigh of relief in regard to federal labor-management relations in 2009. A year later, however, New Jersey became the first of the battleground states when public-employee unions clashed with a sacrifice-demanding Republican chief executive: Gov. Chris Christie. Christie, a federal prosecutor who ousted a scandal-tainted Democrat, made attacks on public-employee unions his signature issue throughout 2010. Working with a Democratic-controlled legislature, Christie won passage of a law in March that, among other provisions, required teachers to pay 1.5 percent of their pay for health insurance, as state employees already did. In December, he also signed an act limiting local police and firefighters to 2 percent pay increases if union-management talks hit an impasse. 31 With the GOP gubernatorial and legislative victories in the November 2010 balloting, Walker in Wisconsin and Kasich in Ohio became the highestprofile of the new combatants with public-employee unions. In Ohio, GOP state Sen. Shannon Jones introduced an omnibus measure, Senate Bill 5 (SB 5), on Feb. 9 that, among other changes, would eliminate collective bargaining for state workers, take health insurance out of collective bargaining for municipal employees and remove binding arbitration for police and firefighters in event of a breakdown in negotiations. The next day, Kasich said he was working on his own bill, which would include a provision to fire striking workers. 32 Walker unveiled his proposal in a news conference in Madison the next day, Feb. 11, calling it necessary to trim the states budget deficit and avoid layoffs. I get why unions make sense in the private sector, Walker said in explaining the bill. But at the public level, its the government, its the people, who are the ones who are the employers. Republican legislators applauded the proposal, but it drew fierce criticism from union leaders and some municipal leaders. Dane County executive Falk called it a draconian plan. Theres a fair and responsible way to do this, Falk said. Walker, she said, chose a sledgehammer. 33

CURRENT SITUATION
Continuing Fights
he bitter fights over public-employee union bills in Ohio and Wisconsin are moving into new arenas with political battles possible for the rest of the year. Wisconsins bill is on hold at least until late May pending the legal challenge under the states open-meetings law. In the meantime, opponents are circulating petitions to try to recall eight Republican senators who voted for the measure. Supporters countered by starting drives to recall eight of the 14 Democrats whose boycott stalled passage of the bill for three weeks.

Continued on p. 330

328

CQ Researcher

At Issue:
Should states limit collective bargaining by public-sector unions?
yes

JAMES SHERK
SENIOR POLICY ANALYST IN LABOR ECONOMICS, HERITAGE FOUNDATION
WRITTEN FOR CQ RESEARCHER, APRIL 2011

DAVID MADLAND
DIRECTOR, AMERICAN WORKER PROJECT, CENTER FOR AMERICAN PROGRESS ACTION FUND
WRITTEN FOR CQ RESEARCHER, APRIL 2011

ederal law does not allow the FBI, CIA or Secret Service to collectively bargain. Is this is a mistake? Collective bargaining gives public unions a monopoly on the governments workforce. It means government can only employ workers on union terms. This often conflicts with serving the public. Last year, Milwaukee Public Schools laid off Megan Sampson, the districts Outstanding First Year Teacher. Why? The school district was short of money, and Milwaukees education union refused concessions. The union preferred having a few teachers lose their jobs to having all teachers contribute toward their health insurance. That forced the district to close its deficit with layoffs. Under union rules, those layoffs occur strictly on the basis of seniority. So goodbye, first-year teacher Megan Sampson. Her excellence in teaching children did not matter. The union sacrificed education quality to protect the pay and job security of its senior members. That is its job. Unions exist to get more for their members, not serve the public good. This is acceptable in the private sector. Unions there negotiate over business profits, so competition holds them in check. If they get too greedy, they know they will drive their customers away. The government is different. Government employees do not need unions. Civil service laws already ensure they get treated fairly. Further, competition does not restrain government unions. The government has no competitors and earns no profits. Government unions bargain over tax dollars. As long as the government does not go bankrupt they can keep demanding more. They do. Unions make firing government employees exceedingly difficult. That keeps ineffective teachers and abusive social workers on the job. In many states government union members retire in their mid-50s at taxpayer expense. Unions push the government to put their interests above the publics. Historically, even champions of the labor movement thought this a bad idea. George Meany, the first president of the AFLCIO, believed that collective bargaining is impossible in government. President Franklin D. Roosevelt agreed. He considered a government-employee strike unthinkable and intolerable. Government should serve the public interest, but unions want their interests to come first. They should not get a monopoly on the government workforce to insist that happens. Union organizing is far less important than effectively educating children or stopping terrorists.
no

yes no
April 8, 2011

ublic-sector workers deserve the right to unionize and collectively bargain with their employers. And governments, like corporations, sometimes need to be reminded by organized workers to treat their employees fairly. Indeed, the Rev. Martin Luther King Jr. traveled to Memphis in 1968 to help city sanitation workers gain recognition for their union as they faced low pay, terrible working conditions and racist supervisors. Even the conservative icon Ronald Reagan recognized that public-sector workers should be able to collectively bargain. Reagan signed a bill to grant municipal and county employees the right to do so when he was governor of California. The only reason our country is debating whether publicsector unions should exist is because of an orchestrated political campaign that is trying to use budget deficits as a cover to weaken a political opponent. This smear campaign is deceptive and dangerous. Opponents claim that public-sector employees are overpaid and are the main drivers of state budget deficits. Both accusations are false. Studies that compare the compensation of public-sector workers to similar private-sector workers controlling for things like education levels find that public employees are actually underpaid. Total compensation including wages and benefits is less for government workers. Only the erosion of privatesector job quality makes the comparison even somewhat close. Further, employee compensation is not busting state budget deficits. My research shows that state budget deficits are the result of the Great Recession and that employee compensation as a share of government spending has actually declined over the past decades. Nor are public-sector unions newly powerful, as opponents argue. Public unionization rates remain at the same level as in the late 1970s. The absence of collective bargaining does not ensure a balanced budget, either. States with very low levels of public-sector unionization such as Texas, Louisiana and South Carolina have some of the largest budget shortfalls as a share of their economy. Finally, collective bargaining is used to negotiate the sharing of pain as well as gain. And government workers are in fact sharing the pain. Significant government jobs have been cut since the recession began. Those still employed in nearly every state have seen cuts in pay and benefits or furloughs. The bottom line: All workers deserve the right to collectively bargain and negotiate for fair wages and decent working conditions on relatively equal footing with their employer.

www.cqresearcher.com

329

PUBLIC-EMPLOYEE UNIONS
Continued from p. 328

Ohios new law, SB 5, is also on hold pending a possible referendum on the measure in November. Opponents have 90 days from Gov. Kasichs signature of the bill on March 30 to gather at least 231,149 signatures of registered voters to put the measure on the Nov. 8 ballot for approval or disapproval. In Wisconsin, the fight over the labor bill may cost a Republican-appointed state supreme court justice his bid for re-election in April 5 balloting that ended with the outcome in doubt. JoAnne Kloppenburg, an assistant state attorney general, held a 204-vote lead over Justice David Prosser in complete but unofficial returns reported by The Associated Press in mid-afternoon on April 6. Labor, liberal and Democratic groups backing Kloppenburg had portrayed the race as a referendum on Gov. Walker. A recount was expected, possibly several weeks in the future. 34 Opponents of the Wisconsin labor bill are marking at least one success: After gathering more than 21,000 signatures 5,000 more than needed they forced a recall vote against state Sen. Dan Kapanke, a LaCrosse Republican in his second four-year term. Other recall efforts have until the end of April to gather the needed number of signatures. 35 The recall petitions have to be verified by the states Government Accountability Board, with an election held within six weeks after verification. In Wisconsins history, five legislators have faced recalls, and two have been defeated. One expert doubts any of the current recalls will succeed. The big uncertainty is how long people will remain angry, says Michael Kraft, a professor of political science at the University of Wisconsin-Green Bay. Its a different world today from when people were demonstrating in front of the Capitol. In Ohio, opponents of SB 5 may be planning to ask rank-and-file union

members to help fund a referendum campaign with projected costs of up to $20 million. The Columbus Dispatch reported that an email from Larry Wicks, the executive director of the Ohio Education Association, said members may be charged a one-time assessment of $50 to finance the campaign. A similar message from the president of the Columbus firefighters union said a $100 assessment was to be considered on April 7. In his email, Wicks said at least $20 million would be needed for an effective campaign. 36 The 90-day waiting period for a law to take effect in Ohio is standard except for budget measures, according to Mike McClellan, a spokesman for the Ohio secretary of states office. Opponents have until July 1 to submit the needed number of signatures, equal to 6 percent of the total vote cast in the most recent gubernatorial election. The secretary of states office has 20 days to verify the signatures. Kasich won election in November with 49 percent of the vote and a narrow, 77,000-vote margin over the Democratic incumbent, Ted Strickland. A poll in late March showed Kasichs approval at 30 percent shockingly low, according to Alexander Lamis, an associate professor of political science at Case Western Reserve University in Cleveland and co-editor of a book on Ohio politics. 37 Still, Lamis says labor unions will be challenged to defeat the collective bargaining law in a referendum. We certainly have strong labor unions, he explains. But labor has lost a lot of strength. The jobs arent there anymore.

Wavering Views

ublic opinion about government workers appears to be highly malleable even as lawmakers in several states continue to push proposals to limit collective bargaining or other rights of public-employee unions.

Various polls published as the Wisconsin and Ohio legislatures considered bills to limit public-employee unions registered support for requiring government workers to pay more toward health and retirement benefits. But the surveys also found opposition to restricting collective bargaining rights for the unions representing those workers. The most recent nationwide poll finds that the unions have what the Gallup organization called a slight edge over governors in what the survey characterized as disputes over collective bargaining policies and state budgets. In a telephone survey of slightly more than 1,000 respondents March 25-27, 48 percent said they agreed more with state-employee unions while 39 percent agreed with more with governors. Thirteen percent favored neither side or had no opinion. 38 The USA Today/Gallup survey showed a sharp partisan split on the issue, with 70 percent of Democrats favoring unions and 65 percent of Republicans siding with governors. Independents were close to evenly split: 45 percent favored unions, 40 percent governors. Young people (18-34) sided with unions by a better than 2-to-1 margin; unions had a narrow edge among the 35-55 age group, while those over 55 split evenly. In its analysis, Gallup noted previous polls that found opposition to restricting collective bargaining rights but mixed opinions on whether publicemployee unions are helpful or harmful on balance to states. Today, the analysis continued, neither the governors nor the unions appear to have a strong advantage in the court of public opinion nationally, but the unions do have the slight edge. Two earlier nationwide surveys registered mixed views about public employee unions. Polls by The New York Times/CBS News and NBC News/Wall Street Journal both found about 60 percent of respondents opposed to taking away or eliminating what both surveys called collective bargaining rights. The Times/CBS poll also found

330

CQ Researcher

a 56 percent majority opposed to cutting the pay or benefits of public employees to reduce budget deficits. On the other hand, the NBC/Journal poll found solid support for requiring public employees to contribute more toward retirement benefits (68 percent) and health insurance (63 percent). A majority 58 percent also said it would be acceptable to freeze public employees salaries for one year. And a 37 percent plurality in The Times/CBS survey said that public-employee unions have too much influence on American life and politics. 39 One poll in Ohio indicates the importance of the phrasing of questions in surveys on the issues. The Quinnipiac University poll found a 48 percent to 41 percent plurality opposed to bills limiting collective bargaining, but opposition increased to 54 percent among a different sample asked about a bill to limit collective bargaining rights. 40 The Gallup survey noted a significant difference in the split of opinion depending on how closely respondents were following the issues. Those following them very closely were almost evenly divided (49 percent to 48 percent in favor of unions); groups paying less attention registered strong support for unions: 52 percent to 41 percent among those following somewhat closely and 45 percent to 31 percent among those following not closely or not at all.

OUTLOOK
Troubled Times
rising tide lifts all boats, President John F. Kennedy liked to remark in talking about the shared benefits of a growing economy. In a sinking ship, however, the often used idiom is, Every man for himself. For the past four years, the U.S. econ-

omy has been foundering instead of being lifted up with a rising tide. The housing bubble burst, big banks failed, the economy stalled and unemployment reached nearly 10 percent. With so much economic insecurity, many Americans were open to arguments that government employees were being spared most of the pain thanks to their unions unfairly exploiting their political and economic power. The Wisconsin and Ohio laws give effect to the widespread view that publicsector workers should be paying more for health and retirement benefits. But the detailed provisions go much further to limit the power of public-employee unions at the collective bargaining table and in the political arena. Experts sympathetic to the labor movement see the laws, and the political attacks behind them, as a prelude to a long fight. Were headed for a prolonged period of conflict and labor war if the Wisconsin model drives this in the future, says MIT professor Kochan. You just cant attack workers rights in as bald a fashion as they did in Wisconsin and not get the kind of backlash weve seen. This is not an issue the unions are going to give up on, says Kearney at North Carolina State. These states could be the death knell of collective bargaining. Critics of public-employee unions likewise expect continued conflict. As long as the states are in serious financial difficulty, this will remain a political issue, says UCLAs Bainbridge. I suspect this is not going to go away at the end of the 2012 election cycle. Union leaders, however, are professing optimism about the likely course of the issues. I think this anti-union wave has crested, says AFSCMEs Kreisberg. He expects some Wisconsin senators to be recalled and the Ohio bill to be repealed by referendum. Well be seeing repercussions, he warns. AFSCME president Gerald McEntee goes further. With the Wisconsin bill pending, he predicted that labor leaders would harness the energy from the anti-Walker protests and turn it into a real resur-

gence for labor. But DiSalvo, the union critic at City College of New York, is dubious. Maybe theres energy, but I dont quite see the avenue that that energy is going to take, he says. 41 In Wisconsin, Walkers supporters are celebrating their victory, even while the bill is in limbo pending a court challenge of uncertain outcome. The first round goes to the taxpayer, says Seaholm with Americans for Prosperity, and were going to keep fighting until the taxpayers ultimately win. For state employees, the Wisconsin law is conversely a defeat. Many are apparently considering voting with their feet before current collective bargaining contracts expire and the laws provisions start to bite. The states Department of Employee Trust Funds reports that it is experiencing an extremely high volume of calls, emails, and in-person contacts from Wisconsin Retirement System members who are considering retiring on a relatively short timeline. 42 Already retired, former consumercomplaint invesitgator Reid regrets what he sees as the implication of the controversy. We seem to have lost the willingness to help each other out, Reid says. Instead of dragging people down, we should be lifting people up.

Notes
Tom Donohue, Governors Show Leadership on Budgets, ChamberPost, Feb. 24, 2011, www. chamberpost.com/2011/02/governors-showleadership-on-budgets/. For background, see Alan Greenblatt, State Budget Crisis, CQ Researcher, Sept. 11, 2009, pp. 741-764. 2 David Madland and Nick Bunker, State Budget Deficits Are Not an Employee Compensation Problem: The Great Recession Is to Blame, Center for American Progress Action Fund, March 10, 2011, p. 2, www.americanprogress action.org/issues/2011/03/pdf/statebudget issuebrief.pdf. Bunker is a special assistant with the centers economic policy team. 3 National Conference of State Legislatures, Collective Bargaining and Labor Union Legislation data base, www.ncsl.org/default.aspx? TabId=22275.
1

www.cqresearcher.com

April 8, 2011

331

PUBLIC-EMPLOYEE UNIONS
4 See Richard Kearney, Labor Relations in the Public Sector (4th ed.), 2009. 5 For background on the labor movement, see these CQ Researcher reports: Pamela M. Prah, Labor Unions Future, Sept. 2, 2005, pp. 709-732; Kenneth Jost, Labor Movements Future, June 28, 1996, pp. 553-576. 6 See Sandy Cullen and Patricia Simms, Passage Prompts Massive Turnout, Wisconsin State Journal, March 13, 2011, p A1; Samara Kalk Derby, Protests Draw Opponents of Bargaining Proposal, ibid., Feb. 14, 2011. Some other details throughout report drawn from or verified by Wisconsin State Journal coverage in February and March. 7 Mary Spicuzza and Clay Barbour, GOPs Quick Maneuvers Push Bill Through Senate, ibid., March 10, 2011, p. A1. 8 Quoted in Sharon Coolidge, Daniels: Ohio can follow Indianas lead, The Cincinnati Enquirer, Feb. 24, 2011. For the 2005 action, see Kevin Corcoran and Mary Beth Schneider, Daniels ends union pacts for 25,000, The Indianapolis Star, Jan. 12, 2005, p. A1. 9 Dennis Cauchon, Wisconsin one of 41 states where public workers earn more, USA Today, March 1, 2011, p. 1A. Fairness & Accuracy in Reporting, Why Does USA Today Hate Public Workers?, March 1, 2011, www.commondreams. org/newswire/2011/03/01-7. 10 Are State and Local Government Employees Paid Too Much?, The New York Times, March 7, 2011, p. A13. 11 Jeffrey H. Keefe, Are Wisconsin Public Employees Over-compensated?, Economic Policy Institute, Feb. 10, 2011, www.epi.org/publica tions/entry/6759/; Andrew Biggs and Jason Richwine, Government vs. unions: Are states public employees overpaid?, Milwaukee JournalSentinel, March 10, 2011, www.jsonline.com/ news/opinion/117753788.html. 12 David Madland and Nick Bunker, State Budget Deficits Are Not an Employee Compensa-

tion Problem: The Great Recession Is to Blame, Center for American Progress Action Fund, March 10, 2011, p. 2, www.americanprogress action.org/issues/2011/03/pdf/statebudgetissue brief.pdf. Bunker is a special assistant with the centers economic policy team. 13 Club for Growth Wisconsin, http://wicfg. com/index.cfm/m/3/s/3.cfm. 14 AFSCME Council 24 SEPAC, Feb. 26, 2011, http://wseusepac.blogspot.com/2011/02/videomessage-marty-beil-executive.html. 15 Tate quoted in Mark Pitsch, Walker Going After Backbone of Democratic Party, Wisconsin State Journal, March 6, 2011, p. A1; Fitzgeralds broadcast appearance is posted here: www.newsvideoclip.tv/msnbc-breakingnews-nbc-news-breaking-news/quoted. 16 Pitsch, op. cit. 17 Doug Erickson, Union Membership Plunged in Indiana Following Change, Wisconsin State Journal, March 11, 2011, p. A1. 18 The decision is Citizens United v. Federal Election Commission, 558 U.S. (2010). For background, see Kenneth Jost, Campaign Finance Debates, CQ Researcher, May 28, 2010, pp. 457-480. 19 For a compact historical overview, see Richard Kearney, op. cit., pp. 13-21. 20 For the complete letter, written to the president of the National Federation of Federal Employees as Congress was considering a never-enacted ban on federal collective bargaining, see American Presidency Project, University of California-Santa Barbara, www.presi dency.ucsb.edu/ws/index.php?pid=15445#axzz 1GhcV0NpV. 21 See Karen DeYoung, Public Employee Militancy, Editorial Research Reports, Sept. 19, 1975, p. 688; William A. Korns, Unionization of Public Employees, Editorial Research Reports, July 10, 1957, p. 506. 22 See Joseph A. McCartin, A Wagner Act for Public Employees: Labors Deferred Dream

About the Author


Associate Editor Kenneth Jost graduated from Harvard College and Georgetown University Law Center. He is the author of the Supreme Court Yearbook and editor of The Supreme Court from A to Z (both CQ Press). He was a member of the CQ Researcher team that won the American Bar Associations 2002 Silver Gavel Award. His previous reports include States and Federalism and Campaign Finance Debates. He is also author of the blog Jost on Justice (http://jostonjustice.blogspot.com).

and the Rise of Conservatism, 1970-1976, The Journal of American History, June 2008, pp. 123-148. 23 See Kearney, op. cit., pp. 193-195; Congress Approves Civil Services Reform, CQ Almanac 1978, pp. 813-815, http://library.cqpress.com/cq almanac/document.php?id=cqal78-1237364& type=hitlist&num=0. 24 See Kearney, op. cit., pp. 250-252. 25 Ibid., pp. 231-236. 26 Executive Order 12871 (Clinton); Executive Order 13203 (Bush). See ibid., p. 55. 27 Homeland Department Created, CQ Almanac 2002, pp. 7-3 7-8. See also David Firestone, Divided House Approves Homeland Security Bill, With Limited Enthusiasm, The New York Times, July 27, 2002, p. A1. 28 See Education Commission of the States, State Collective Bargaining Policies for Teachers, January 2008, www.ecs.org/html/ Document.asp?chouseid=3748. The Michigan decision is Michigan State AFL-CIO v. Michigan Employment Relations Commission, 212 Mich.App. 472 (1995); the U.S. Supreme Court decision is Central State University v. American Association of University Professors, 526 U.S. 124 (1999). 29 The decision is Independence-National Education Association v. Independence School District, 223 S.W.3d 131 (Mo. 2007). The ruling overturned a 1947 decision that interpreted the provision to apply only to private-sector workers. For coverage, see Paul Hampel, Government workers win right to bargain, St. Louis Post-Dispatch, May 30, 2007, p. A1. 30 The ruling is National Treasury Employees Union v. Chertoff, 452 F.3d 839 (D.C. Cir. 2006). For coverage, see Eric Weiss, Appeals court vetoes Bush plan to alter U.S. personnel rules, The Washington Post, June 28, 2006, p. 23. 31 See Ginger Gibson, Christie puts pen to pay limits, The Times (of Trenton), Dec. 22, 2010, p. A1; Angela Delli Santi, Christie signs pension bill, ibid., March 23, 2010, p. A9. For contrasting views of Christies actions and statements on public-employee unions, see Matt Bai, When I Run Out of Fights to Have, Ill Stop Fighting, The New York Times Magazine, Feb. 27, 2011, p. 32; Richard Prez-Pea, Christies Talk Is Blunt, but Not Always Straight, The New York Times, March 11, 2011, p. A1. 32 See Joe Hallett and Jim Siegel, Kasich: You strike, you get punished, The Columbus Dispatch, Feb. 11, 2011, p. A1; Jim Siegel, Unions in a Fight, ibid., Feb. 10, 2011, p. A1. 33 Walker quoted in Jason Stein and Patrick Marley, Walker calls for cuts or big layoffs, Mil-

332

CQ Researcher

waukee Journal Sentinel, Feb. 12, 2011, p. A1; Falk quoted in Dean Mosiman, Civic Leaders Slam Draconian Plan, Wisconsin State Journal, Feb. 12, 2011, p. A1. 34 Larry Sandler and Patrick Marley, Supreme Court race too close to call; Kloppenburg has narrow lead over Prosser, Milwaukee Journal Sentinel, April 6, 2011, www.jsonline.com/news/ statepolitics/119308059.html. This report went to press in late afternoon April 6. 35 Coverage and background drawn from Chris Hubbuch, Petitions Delivered in Kapanke Recall Effort, Wisconsin State Journal, March 29, 2011, p. A7. Hubbuch is a reporter for the LaCrosse Tribune. 36 Joe Vardon, Unions want members to pay for SB 5 referendum, The Columbus Dispatch, April 5, 2011. 37 Ohio Women Lead in Disapproval of New Governor, Quinnipiac University Poll Finds; Voters Oppose Efforts to Curb Unions, March 23, 2011, www.quinnipiac.edu/x1284.xml?ReleaseID =1570&What=&strArea=;&strTime=0. 38 Gallup Poll, More Americans Back Unions Than Governors in State Disputes, April 1, 2011, www.gallup.com/poll/146921/americansback-unions-governors-state-disputes.aspx. USA Today published a summary of the survey on April 1 in its online feature OnPolitics, http://content.usatoday.com/communities/on politics/post/2011/04/gallup-poll-governorsunions-wisconsin-ohio-/1. 39 See Michael Cooper and Megan Thee-Brenan, Majority in Poll Back Employees in Public Unions, The New York Times, March 1, 2011, p. A1; NBC/WSJ poll: 62% against stripping public employees bargaining rights, First Read, MSNBC, March 2, 2011, http://firstread.msnbc. msn.com/_news/2011/03/02/6171265-nbcwsjpoll-62-against-stripping-public-employeesbargaining-rights. The Wall Street Journals account of the poll made only a brief reference to the public-employee union issue but suggested the survey showed public opinion tipping against Wisconsin Gov. Scott Walker. See Neil King Jr. and Scott Greenberg, Poll Shows Budget-Cuts Dilemma, The Wall Street Journal, March 3, 2011, p. A5. 40 Quinnipiac University poll, op. cit. 41 McEntee quoted in Steven Greenhouse, Organized Labor Hopes Attacks by Some States Help Nurture Comeback, The New York Times, March 6, 2011, sec. 1, p. 17. 42 Advisory, State of Wisconsin, Department of Employee Trust Funds, updated April 5, 2011, http://etf.wi.gov/news/Retiring%20on%20Short %20Notice%202%20_2_.pdf.

FOR MORE INFORMATION


Here are some of the major unions representing public-sector workers, with membership figures as provided by websites or other sources: American Federation of Government Employees, 80 F St., N.W., Washington, DC 20001; (202) 737-8700; www.afge.org (250,000). American Federation of State, County and Municipal Employees (AFSCME), 1625 L St., N.W., Washington, DC 20036-5687; (202) 429-1000; www.afscme.org (1.6 million). American Federation of Teachers, 555 New Jersey Ave., N.W., Washington, DC 20001; (202) 879-4400; www.aft.org (1.5 million). Fraternal Order of Police, 701 Marriott Drive, Nashville, TN 37214; (615) 399-0900; www.grandlodgefop.org/ (325,000). International Association of Fire Fighters, 1750 New York Ave., N.W., Suite 300, Washington, DC 20006; (202) 737-8484; www.iaff.org (298,000). National Education Association, 1201 16th St., N.W., Washington, DC 20036; (202) 833-4000; www.nea.org (3.2 million). National Treasury Employees Union, 1750 H St., N.W., Washington, DC 20006; (202) 572-5500; www.nteu.org (90,000). Service Employees International Union, 1800 Massachusetts Ave., N.W., Washington, DC 20036; (202) 350-6600; www.seiu.org (2.2 million). Other organizations that follow public-employee union issues: AFL-CIO, 815 16th St., N.W., Washington, DC 20006; (202) 974-8222; www.aflcio.org. Major labor federation formed in 1955 and representing 12.2 million workers. Americans for Prosperity, 2111 Wilson Blvd., Suite 350, Arlington, VA 22201; (866) 730-0150; www.americansforprosperity.org. Advocacy organization to promote principles of entrepreneurship and fiscal and regulatory restraint. Center for American Progress, 1333 H St., N.W., #1, Washington, DC 20005; (202) 682-1611; www.americanprogress.org. Advocacy group founded in 2003 to promote progressive ideas and policies. Center for Economic and Policy Research, 1611 Connecticut Ave., N.W., Suite 400, Washington, DC 20009; (202) 293-5380; www.cepr.net. Research and publiceducation organization to promote debate on important social and economic issues. Club for Growth, 2001 L St., N.W., Suite 600, Washington, DC 20036; (202) 955-5500; www.clubforgrowth.org. National network to promote pro-growth economic policies; unaffiliated with state organizations bearing same name. Crossroads GPS, P.O. Box 34413, Washington, DC 20043; (202) 706-7051; www.crossroadsgps.org. Policy and grassroots advocacy organization focusing on key economic and legislative issues. Employment Policy Research Network, c/o Labor and Employment Relations Association, University of Illinois, Urbana-Champaign, School of Labor and Employment Relations, 504 E. Armory Ave., Champaign, IL 61820; (217) 244-0725; www.employmentpolicy.org. A network of 120 researchers at 40 research institutions, launched in early 2011, that publishes evidence-based research on the state of work and employment in the United States. Heritage Foundation, 214 Massachusetts Ave., N.E., Washington, DC 20002; (202) 546-4400; www.heritage.org. Research and educational think tank founded in 1973 to promote conservative policies. U.S. Chamber of Commerce, 1615 H St., N.W., Washington, DC 20062; (202) 659-6000; www.uschamber.com. Nonprofit organization representing business interests before Congress, federal agencies and the courts.

www.cqresearcher.com

April 8, 2011

333

Bibliography
Selected Sources
Books
Freeman, Richard, and Casey Ichniowsky (eds.), When Public Sector Workers Unionize, University of Chicago Press, 1988. Editors Freeman and Ichniowsky open the collection of articles with an overview that concludes public-sector unions increase government employment, raise wages of unionized and non-union workers alike and increase expenditures in unionized departments. Freeman is a professor of economics at Harvard University, Ichniowski a professor at Columbia Universitys Graduate School of Business; both also are associated with the National Bureau of Economic Research. Kearney, Richard, Labor Relations in the Public Sector (4th ed.), CRC Press, 2009. The book covers labor relations in the public sector from historical, economic and political perspectives. Includes 24-page list of references. Kearney is a professor of government at North Carolina State University. Malin, Martin H., Ann C. Hodges and Joseph E. Slater, Public Sector Employment: Cases and Materials (2d ed.), West, 2011. The law school casebook comprehensively covers the law of public-sector employment, including the right to organize, collective bargaining, administration of agreements and strikes. Malin is a professor at Chicago-Kent College of Law, Hodges at University of Richmond School of Law and Slater at University of Toledo College of Law. The first edition of the casebook, published in 2004, was co-authored by Joseph R. Grodin, June M. Weisberger and Malin. Nesbitt, Murray B., Labor Relations in the Federal Government Service, Bureau of National Affairs, 1976. Although dated, the book provides a thorough history of labor relations policy for the federal workforce up to the mid-1970s. Edwards, Chris, Public-Sector Unions, Cato Institute, March 2010. The director of tax-policy studies at the Washington-based libertarian think tank argues that collective bargaining should be banned in the public sector to give policymakers greater flexibility and improve government efficiency. Lewis, Finlay, Should Unionizing Be a Private Right?, CQ Weekly, March 14, 2011, p. 565. The story ties proposals to curb public-employee unions as a means to reduce state and local budget deficits to the larger debate over the right of government workers to unionize and bargain collectively over pay, benefits and working conditions. Orr, Andrea, Scapegoating public sector workers, Economic Policy Institute, March 8, 2011, www.epi.org/analysis_and_ opinion/entry/scapegoating_public_sector_workers/. The web editor for the liberal Washington-based think tank says the debate over public-employee unions stems from a single false argument that government workers are to blame for state budget crises.

Reports and Studies


Lewin, David, et al., Getting It Right: Empirical Evidence and Policy Implications from Research on Public-Sector Unionism and Collective Bargaining, Employment Policy Research Network, March 16, 2011, www.employmentpoli cy.org/. The 32-page report, a collaboration of 10 scholars, reviews evidence on issues of public-employee compensation and benefits, public-employee strikes and public-sector collective bargaining. Much of the current debate is based on incomplete or inaccurate understanding, the authors say, and far too much is ideologically driven. Lead author Lewin is a professor at UCLAs Anderson School of Management.

Wisconsin Resources
Gov. Scott Walker and his major union adversary in the battle over Senate bill 10, American Federation of State, County and Municipal Employees Council 24, both have extensive material about the bill on websites. The media center page on the governors website has various releases about the socalled budget repair bill beginning Feb. 11: http://walker.wi. gov/mediaroom.asp?locid=177. SEPAC, the unions political arm, has information about what it calls the anti-collective bargaining bill on its website: www.wseu-sepac.org/. Several newspapers have had thorough ongoing coverage, including the Wisconsin State Journal (Madison), http://host.madison.com/wsj/, and the Milwaukee Journal Sentinel, www.jsonline.com/. In addition, the Wheeler Report is a blog aggregator of state news: www.thewheelerreport.com/.

Articles
DiSalvo, Daniel, The Trouble With Public Sector Unions, National Affairs, fall 2010, www.nationalaffairs.com/publi cations/detail/the-trouble-with-public-sector-unions. An assistant professor of political science at City College of New York argues that the cost of public-sector pay and benefits, combined with hundreds of billions of dollars in unfunded pension liabilities for retired workers, requires limiting public-employee unions or even reopening the question of whether government workers should enjoy the privilege of collective bargaining.

334

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Budget Deficits
Borreca, Richard, If You Thought Hawaiis Budget Deficit Was Bad . . . Honolulu Star-Advertiser, Jan. 4, 2011, www. staradvertiser.com/editorials/20110104_If_you_thought_ Hawaiis_budget_deficit_was_bad.html. Hawaiis budget deficit is expected to increase when a furlough of state workers ends in July 2011. Greenhouse, Steven, A Watershed Moment for PublicSector Unions, The New York Times, Feb. 19, 2011, p. A14, www.nytimes.com/2011/02/19/us/19union.html. Republican Gov. Scott Walker of Wisconsin says he wants to curb health and pension plans for public-sector employees because they drive the states budget deficit higher. Tan, Sandra, Amherst Budget Panel Projects Deficit of $9 Million in 2012, Buffalo (N.Y.) News, March 15, 2011, p. B5, www.buffalonews.com/city/article367326.ece. The town of Amherst, N.Y., has a lower-than-expected budget deficit after officials failed to negotiate union contracts, leaving many public-sector employees without a raise. grew at twice the rate as that of their private-sector counterparts between 2000 and 2009. Stafford, Diane,State Employees Salaries Lagging,Kansas City Star, March 4, 2011, p. A9, www.kansascity.com/2011/ 03/03/2697285/state-employees-salaries-lagging.html. Public employees in Missouri are underpaid by about 16 percent compared to private-sector workers in the state.

Political Influence
Canham, Matt, Chaffetzs Biggest Donors: Unions, Salt Lake Tribune, July 31, 2010, www.sltrib.com/sltrib/politics/ 50024849-90/chaffetz-postal-unions-money.html.csp. Public-sector unions, which overwhelming donate to Democrats, are the biggest source of campaign contributions for Rep. Jason Chaffetz, a Utah Republican. Scanlon, Terrence, Meet Big Unions New Boss, The Washington Times, May 11, 2010, p. B1, www.sltrib.com/ sltrib/politics/50024849-90/chaffetz-postal-unions-money. html.csp. The new president of the Service Employees International Union may scale back the organizations tendencies to get involved in politics. Wong, Queenie, Unions Rally Their Members, Sacramento (Calif.) Bee, Sept. 6, 2010, p. A3, www.sacbee.com/2010/09/ 06/3008086/unions-politicking-for-brown.html. Public-employee unions in California have spent more than $18 million to help Democrat Jerry Brown become governor.

Collective Bargaining
Daniel, Rob, Group Rallies for Public Employees, Education, Iowa City Press-Citizen, March 3, 2011, p. A3, www. press-citizen.com/article/20110303/NEWS01/103030328/ Group-rallies-public-employees-education. Union members in Iowa are demanding that Republican Gov. Terry Branstad not cut the collective bargaining rights of public employees. Maynard, Melissa, and Josh Goodman, States Mixed on Union Bargaining, The Olympian (Wash.), March 7, 2011, p. A1, www.theolympian.com/2011/03/07/1569092/statesmixed-on-union-bargaining.html. States tend to change their collective bargaining rules frequently, and often without much opposition. Meagher, Chris,Collective Bargaining in Crosshairs,Santa Barbara (Calif.) Independent, Feb. 10, 2011, p. 9, www.in dependent.com/news/2011/feb/10/collective-bargainingcrosshairs/. The president of the California Center for Public Policy is seeking to introduce a ballot measure to end collective bargaining for city, county and state employees.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

Compensation
Howes, Daniel, Gov Puts Public Employee Pay Under Scrutiny, Detroit News, Jan. 28, 2011, p. A1. The total compensation of Michigans public employees

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

April 8, 2011

335

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Government Secrecy, 2/11 Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10 Closing Guantnamo, 2/09

Education
Crime on Campus, 2/11 Career Colleges, 1/11 Value of a College Education, 11/09

Health/Safety
Downsizing Prisons, 3/11 Genes and Health, 1/11 Food Safety, 12/10 Preventing Bullying, 12/10 Preventing Obesity, 10/10 Health-Care Reform, 6/10

Environment/Society

Crime/Law
Cameras in the Courtroom, 1/11 Death Penalty Debates, 11/10 Drone Warfare, 8/10 Prosecuting Terrorists, 3/10 Legalizing Marijuana, 6/09

Wind Power, 4/11 Women and Sports, 3/11 Politics/Economy Managing Nuclear Waste, 1/11 Animal Intelligence, 10/10 Redistricting Debates, 2/11 Impact of the Internet on Thinking, 9/10 Lies and Politics, 2/11 Social Networking, 9/10 Income Inequality, 12/10 Reality TV, 8/10 Blighted Cities, 11/10

Upcoming Reports
Organ Donations, 4/15/11 Artificial Intelligence, 4/22/11 School Reform, 4/29/11

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Should regulations be loosened further?

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

Campaign Finance Debates

he Supreme Courts controversial decision in January allowing corporations to spend unlimited amounts from their own treasuries in federal elections has raised the stakes for supporters and opponents of

campaign finance regulation. Critics of campaign finance laws are citing the so-called Citizens United decision in an array of court cases aimed at loosening the restrictions on fund-raising or spending by political committees and advocacy groups. Meanwhile, supporters of campaign finance regulation are hoping Congress or the states will pass legislation to limit the impact of the Supreme Court decision. Two leading congressional Democrats are sponsoring a bill to impose new requirements for corporations that spend money on congressional or presidential elections. Republicans, who stand to benefit from increased corporate spending in the years midterm congressional elections, are opposing the proposal. Advocates and experts on both sides are also waiting for final rulings in two cases where lower courts struck down state public financing schemes.
A 2007 documentary produced by the conservative group Citizens United aimed at derailing Hillary Clintons presidential aspirations led to a sweeping Supreme Court ruling announced in January striking down limits on corporate campaign spending in congressional and presidential races.

I N S I D E

THIS REPORT
THE ISSUES ....................459 BACKGROUND ................465 CHRONOLOGY ................467 CURRENT SITUATION ........472 AT ISSUE........................473 OUTLOOK ......................475 BIBLIOGRAPHY ................478 THE NEXT STEP ..............479

CQ Researcher May 28, 2010 www.cqresearcher.com Volume 20, Number 20 Pages 457-480
RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

CAMPAIGN FINANCE DEBATES


THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
May 28, 2010 Volume 20, Number 20

459

Should Congress require increased disclosure of corporate and union spending in political campaigns? Should the ban on soft money contributions to political parties be eased? Should public campaign financing be extended or ruled unconstitutional?

460 461 463

Spending Rose After Soft Money Ban Political action groups stepped up their spending. Majority Back Spending Limits on Corporations Most favor reinstating limits. The Citizens United Ruling: Political Speech Rights for Corporations Key passages from the majority and dissenting opinions. Parties Raised More Soft Money Until Prohibited Unregulated funds were used increasingly until the McCainFeingold law. Chronology Key events since 1907. How Hillary: The Movie Changed Campaign Finance Law The Supreme Court overruled two precedents in striking corporate spending limits. Looking for Impact of Public Campaign Financing Does Arizonas system encourage non-traditional candidates? At Issue Do campaign finance laws unduly restrict political speech?

BACKGROUND

tcolin@cqpress.com ASSISTANT MANAGING EDITOR: Kathy Koch kkoch@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Thomas J. Billitteri, Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Rachel Cox, Sarah Glazer, Alan Greenblatt, Reed Karaim Barbara Mantel, Patrick Marshall, Tom Price, Jennifer Weeks
DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT-CHECKING: Eugene J. Gabler,

MANAGING EDITOR: Thomas J. Colin

465 466 470

Regulating Campaigns Congress has regulated federal election campaigns since the mid-19th century. Finding Loopholes The Supreme Court did not uphold limits on campaign spending. Continuing Debates Although the Supreme Court upheld McCainFeingold, debates over the law continue.

464

Michelle Harris

467 468

A Division of SAGE

PRESIDENT AND PUBLISHER:

John A. Jenkins
Copyright 2010 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except; (Jan. wk. 1) (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE Publications. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-4277737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

CURRENT SITUATION

470 473

472 474

Watching the Courts An upcoming ruling could ease federal restrictions on soft money. Moving in Congress? The Senate may hold the key to new disclosure requirements on corporate political spending.

FOR FURTHER RESEARCH

477 478 479 479

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

OUTLOOK

475

No Truce in Sight Warring sides in the campaign finance debates remain far apart.

Cover: Citizens United

458

CQ Researcher

Campaign Finance Debates


BY KENNETH JOST
important role in federal elections since enactment of the McCain-Feingold campaign fiavid Keating is not nance law in 2002. 2 shy about getting into The controversial law tough political fights. formally, the Bipartisan CamAs executive director of the paign Reform Act (BCRA) Club for Growth, a political bars federal officeholders and organization that promotes political parties from solicitpro-growth policies, limited ing unregulated soft money government and low taxes, for party-building activities. It Keating has helped direct hunalso limited the ability of cordreds of thousands of dollars porations and unions to pay into congressional campaigns. for thinly disguised campaign His specialty: backing hardcommercials on television durline conservatives against moding election season. erate Republicans. The Supreme Court upheld The club funneled around the law in 2003 in a decision $1 million into a special House known as McConnell v. FEC race in upstate New York in but has reversed course in November 2009, hoping to three rulings since Chief Jushelp Conservative Party nomtice John G. Roberts Jr. took inee Doug Hoffman in the office in 2005. In the most rethree-way contest. The spendcent, Roberts helped forge a ing helped force the Repub5-4 majority on Jan. 21 in striklican candidate, Assemblying down the laws prohibiwoman Dede Scozzafava, out tion on independent campaign Chief Justice John G. Roberts Jr. helped forge the Supreme of the race, though Hoffman spending by corporations or Courts new stance on campaign finance, voting with eventually lost to Democrat unions. Five days later, Presithe 5-4 majority in the Citizens United case. President Obama said the ruling will open the floodgates for Bill Owens. dent Obama denounced the special interests, including foreign corporations, to Now, the club can take decision, Citizens United v. Fedspend without limit in our elections. But Senate credit for besting another eral Election Commission, in Republican leader Mitch McConnell of Kentucky called GOP mugwump*: three-term his State of the Union address. the ruling an important step in restoring the First Republican Sen. Robert BenWith Roberts and five other Amendment rights of corporations. Polls show the American public strongly opposed to the ruling. nett of Utah. The organizajustices seated below him, the tion spent about $175,000 on president said the ruling will advertising, mailers, robo-calls and or- for renomination. 1 Two hard-line con- open the floodgates for special interganizing over the past few months at- servatives will now vie for the nomi- ests, including foreign corporations, to tacking Bennett, among other things, nation in a primary on June 22. spend without limit in our elections. 3 for voting for the financial industry Keating is a bit shy, however, about (Excerpts, p. 463; story, p. 468.) bailout and co-authoring a bipartisan disclosing his groups campaign spendThe courts new stance on campaign health care overhaul plan. ing. In September 2007, the club paid finance law reflects and reinforces a backWith Tea Party activists out in force, a $350,000 civil fine to the Federal Elec- lash led mostly by Republicans and conGOP delegates assembled in state con- tion Commission (FEC) for failing to servatives. Regulating campaign finance vention in Salt Lake City on May 8 re- register as a political committee or to is now going to hit a brick wall, says jected the 76-year-old incumbents bid report its contributions and expendi- Jan Baran, a Washington lawyer who tures. The case was part of the FECs has represented Republicans in several * The Mugwumps were Republicans who crackdown on so-called 527s polit- challenges to campaign finance laws. Supporters of campaign finance supported Democrat Grover Cleveland in the ical committees named after the Tax 1884 presidential election; the term came to Code section governing their operations regulations say the critics are seeking refer to party bolters generally. which have played an increasingly to dismantle laws dating from the early

THE ISSUES

www.cqresearcher.com

Getty Images/Mario Tama

May 28, 2010

459

CAMPAIGN FINANCE DEBATES


Spending Rose After Soft Money Ban
Independent campaign-related expenditures by political action groups shot up in 2004, the rst federal election year after enactment of the Bipartisan Campaign Reform Act (BCRA). The increase is seen as an unintended effect of the acts prohibition on the raising or spending of unregulated soft money by political parties. Independent spending is expected to increase further under the Supreme Courts decision in Citizens United v. Federal Election Commission, which allows corporations and unions to use money from their general treasuries to support or oppose political candidates. Independent Campaign-related Spending by Political Action Groups (in $ millions)
500 400 300 200 100 0

$440.3 $316.7 $36.7 2000 $20.2 2002 2004 2006 2008 $268.4

Source: Federal Election Commission data from Center for Responsive Politics, www.opensecrets.org/indexp/index.php

20th century that were strengthened in the 1970s after the Watergate scandals and are still needed today to limit the influence of special interests in federal elections. The challenges are a part of a systematic, long-term litigation offensive mounted by deeppocketed interests who are opposed to any type of regulation of political spending, says Tara Malloy, associate legal counsel of the bipartisan, Washingtonbased Campaign Legal Center. Keating is behind one of the new challenges: a federal court suit filed on behalf of the newly formed SpeechNow.org and aimed at knocking out contribution limits and reporting requirements for political committees that make independent expenditures in federal elections. In March, the U.S. Court of Appeals for the District of Columbia Circuit unanimously struck down the contribution limits but upheld disclosure requirements. In his opinion for the court, Chief Judge David Sentelle cited the Supreme

Courts conclusion in January that independent campaign spending poses no risk of corrupting federal candidates or officeholders. Given this analysis from Citizens United, Sentelle wrote in the March 26 decision, we must conclude that the government has no anti-corruption interest in limiting contributions to an independent expenditure group such as SpeechNow. 4 The Supreme Court is sending a strong deregulatory signal, and it is not lost on the lower courts, says Rick Hasen, a professor at Loyola Law School in Los Angeles who supports campaign finance regulation. His blog compiles developments on campaign and election law. 5 The high courts Citizens United decision provoked sharply divergent reactions the day of its release. Obama said the ruling amounted to a green light for a new stampede of special interest money. But Senate Republican leader Mitch McConnell of Kentucky, the lead plaintiff in the earlier case challenging

BCRA, said the ruling was an important step in restoring the First Amendment rights of corporations. Four months later, however, many experts are predicting no in-rush of corporate money into congressional campaigns. I do not believe that forprofit corporations are sitting on piles of money that they wish to put into their public-affairs budgets, says Michael Malbin, president of the Campaign Finance Institute, a research center at George Washington University in Washington, D.C. Still, congressional Democrats are pushing legislative proposals aired in House and Senate committee hearings in May that would require additional disclosure of corporate spending in federal campaigns. The lead sponsor of the Senate bill, New York Democrat Charles Schumer, says the measure would shine a light on the flood of spending unleashed by the Citizens United decision. Thomas Donohue, president of the U.S. Chamber of Commerce, calls the companion House measure sponsored by Rep. Chris Van Hollen, D-Md., a thinly veiled attempt to hijack the political playing field to his advantage on the eve of midterm elections. 6 Meanwhile, campaign finance deregulators are pressing an array of court cases seeking to roll back federal or state laws that supporters say limit the influence of wealthy individuals and wellfinanced special interests or encourage wider participation by small donors. In one case, the Republican National Committee (RNC) is seeking to carve out exceptions to the soft-money ban in the McCain-Feingold law. A three-judge federal court in Washington rejected the RNCs plea, saying it was bound by the Supreme Courts 2003 decision upholding the provision. 7 Two state systems for partial public financing of campaigns Arizonas and Connecticuts are also facing constitutional challenges in federal courts. The Roberts Court has given some help

460

CQ Researcher

to opponents of public financing with a ruling in 2008 that struck down the so-called Millionaires Amendment in the McCain-Feingold law. The ruling in Davis v. Federal Election Commission struck down a provision that raised contribution limits for congressional candidates if they were running against wealthy, high-spending candidates financing their own campaigns. The 5-4 majority found that the scheme improperly burdened the political speech rights for self-financing candidate. The legal challenges are playing out against a continuing debate about the effects of public financing and continuing public resistance to the idea. Supporters say the plans, which typically tie public funding to spending limits, help reduce the impact of campaign cash on candidates and officeholders. Opponents say the plans force taxpayers to finance candidates they do not support and burden candidates who want to run with private instead of public financing. 8 (See sidebar, p. 470.) The opposing sides also differ about BCRAs effects on the political system. Supporters say it has changed politics for the better, in particular by eliminating soft money. That whole spectacle of having wealthy interests buy access and influence by making huge soft money contributions has been effectively shut down, says Donald Simon, general counsel for Democracy21, a pro-campaign finance reform group. But Bradley Smith, a former Republican-appointed FEC chairman and head of the deregulatory-minded Center for Competitive Politics, says BCRA has failed in the goals claimed by its supporters when enacted and since. I dont think anybody can say that politics is better, that government is better or that influence has been tamed, says Smith, who is also a professor at Capital University Law School in Columbus, Ohio. As these debates continue, here are some of the specific questions pending in Congress and the courts:

Majority Back Spending Limits on Corporations


Most Americans disagree with the Supreme Courts decision to allow corporations to spend freely in federal elections. Do you agree or disagree with the Supreme Courts decision to allow corporations to spend freely to support candidates in federal elections?
50% 40 30 20
10% Total Democrat Republican Independent 14% 11%11% 11% 5% 49% 44%44% 44%

23% 21%22% 19%

19% 18% 13% 12%

10 0

6%

4%

Strongly agree

Moderately agree

Moderately disagree

Strongly disagree

Not sure

Would you support or oppose an effort by Congress to reinstate limits on corporate and union spending on election campaigns?
60% 50 40 30 20 10 0

52%

20%
Support strongly Support somewhat

14%
Oppose strongly

9%
Oppose somewhat

Sources: Angus Reid Public Opinion, online poll conducted Jan. 27-28, 2010, among 1,003 Americans (question 1); ABC News/Washington Post telephone poll, Feb. 4-8, 2010, among random national sample of 1,004 adults (question 2).

Should Congress require increased disclosure of corporate spending in political campaigns? Voters trying to make up their minds in congressional races in 2008 got nearly $100 million worth of advice from commercials paid for by independent groups unaffiliated with political parties or candidates campaigns. But voters would have been hard-pressed to figure out, for example, that ads praising lawmakers for passing the State Childrens Health Insurance Program and sponsored by Americas Agenda:

Health Care for Kids were paid for by the pharmaceutical industry. Nor would they have known that labor unions bankrolled the commercials criticizing Rep. Lincoln Diaz-Balart, R-Fla., broadcast in the name of Patriot Majority. 9 The Supreme Courts decision in the Citizens United case in January opens the door to more such advertising by allowing corporations and unions to spend unlimited amounts from their own treasuries directly urging a vote for or against specific candidates in congressional or presidential elections.

www.cqresearcher.com

May 28, 2010

461

CAMPAIGN FINANCE DEBATES


Before Citizens United, corporate- or union-funded ads during election season could mention congressional candidates by name but had to stop short of urging a vote for or against a candidate. Unable to overturn the Supreme Court ruling by statute, Democratic members of Congress are responding with legislation to require additional disclosure for any campaign-related advertising paid for by corporations or unions. The Schumer-Van Hollen bill, dubbed the DISCLOSE Act (Democracy Is Strengthened by Casting Light On Spending in Elections), would require the head of a corporation or union running a political ad to personally appear in the commercial, just as federal candidates are now required to do in their campaign ads. In addition, the proposal would require that ads sponsored by independent groups that receive corporate or union funds list the groups top five sources of financing. The CEO of the top funder would also have to appear in the ad. And political committees would have to report all donors who give more than $1,000 in a given year. Our bill will follow the money, Schumer, the former head of the Democratic Senatorial Campaign Committee, said in a statement. In cases where corporations try to mask their activities through shadow groups, we drill down so that the ultimate funder of the expenditure is disclosed. Four Democrats joined in cosponsoring Schumers bill. In the House, Van Hollen attracted two Republican cosponsors: Michael Castle of Delaware and Walter Jones of North Carolina. But Senate GOP leader McConnell typified Republican reaction to the bill by accusing the Democrats of trying to keep business interests from speaking out in the upcoming midterm elections. The bill, McConnell said, is about election advantage, plain and simple. 10 Campaign finance reform advocates say the disclosures will help voters. Lets make sure the American people have a clear and accurate understanding of whos spending what to influence American politics, says Meredith McGehee, policy director of the Campaign Legal Center. Then let them make up their own minds. Critics of campaign finance regulations say the proposal is actually aimed at discouraging corporations from paying for campaign ads. Its multiple, redundant, burdensome disclosure, says attorney Baran. And the circumstances suggest that the purpose of the redundancies and the burdens is not disclosure but to discourage speech. Malbin with the Campaign Finance Institute agrees that disclosure requirements will discourage corporations from paying for political ads. Most corporations prefer not to [be identified], Malbin says. They like to pass their money through trade associations or other kinds of organizations. Some election law experts doubt that corporations are eager to get involved in political races at all. Most people in corporate America are under more pressure not to engage in politics than they are to engage in politics, says James Portnoy, chief counsel for corporate and government affairs at Kraft Foods and a former FEC official and Democratic staffer on Capitol Hill. But Portnoy predicts what he calls thirdparty push by trade associations and political consultants to get corporations to spend on political races. In fact, the Chamber of Commerce announced plans within two months after the Citizens United decision to spend at least $50 million on political races and related activities this year, a 40 percent increase over what the Chamber spent in 2008. 11 The pro-regulation Brennan Center for Justice at New York University School of Law cited the Chambers plans in testimony before the House Administration Committee as evidence of the need for disclosure of what the group called black-box spending by corporations. But Michael Toner, a corporate lawyer in Washington and former Republican-appointed FEC chairman, warned the committee that the various disclosure provisions in the bill would almost certainly result in litigation challenging the requirements as unconstitutional under the Citizens United decision. 12 Should the ban on soft money contributions to political parties be eased? The eventual enactment of the McCain-Feingold law in 2002 stemmed in large part from public disgust with the soft-money scandals of the mid- and late-1990s. In the most dramatic example, President Bill Clinton hosted White House coffees for well-heeled donors and corporate execs who repaid the hospitality with five- and sixfigure donations to Democratic Party committees. Republican Party fund-raisers were also found to be hitting up bigmoney donors with promises of special access to officeholders. The contributions were termed soft money because they were outside the hard limits of campaign finance law, which bar corporate contributions to candidates and limit individual contributions to what is now around $3,000. The donations ostensibly went for general party-building purposes, not federal elections. In 1998 the Senate Committee on Governmental Affairs ended its investigation of Clintons fundraising by saying that soft money had led to a meltdown of the campaign finance system. McCain-Feingold sought to end the soft-money system by generally prohibiting federal officials and candidates and national and state party officials from raising the unregulated funds. In upholding the provisions in 2003, the Supreme Court said Congress had ample evidence to believe that softmoney contributions had a corrupting influence or gave rise to an appearance of corruption.

462

CQ Researcher

Now, the Republican National Committee which unsuccessfully challenged the soft-money ban in the earlier case wants the courts to carve out exceptions. The RNC is seeking legal clearance to solicit unlimited sums from any source to use in supporting state candidates, state redistricting efforts, grassroots lobbying efforts on major issues and its general operating expenses. The RNCs attorneys argue that none of the listed activities are unambiguously related to federal elections. But in addition they argue that the Supreme Courts new ruling rejects the anticorruption rationale relied on seven years ago in upholding the soft-money ban. The prevention of access and gratitude is not a cognizable anti-corruption interest, said James Bopp, a lawyer in Terre Haute, Ind., who represented Citizens United up to the time of the Supreme Court arguments. Defending the ban, lawyers for the FEC and for the Democratic National Committee, which intervened in the case, argue that Citizens Uniteds ruling on independent expenditures has no bearing on the validity of the ban on raising soft money. In any event, they add, a lower court has to follow the Supreme Courts earlier decision unless overruled by the justices themselves. The three-judge court that heard the case upheld the soft-money ban and rejected the RNCs proposed exceptions. But the court pointedly noted in its March 26 decision that the Supreme Court could refine or modify its earlier ruling as the Court sees fit. 13 Critics of campaign finance regulations hope the Supreme Court will do just that. The soft-money ban on parties is a mistake both constitutionally and as a political matter, says Smith with the Center for Competitive Politics. The vast majority of people [who give money] have no intention of corrupting officeholders. They just want good government. Supporters say the court should stick

The Supreme Courts Citizens United Ruling: Political Speech Rights for Corporations
The Supreme Courts 5-4 decision in Citizens United v. Federal Election Commission struck down a provision of the Bipartisan Campaign Reform Act (BCRA) that barred unions or corporations from spending money to advocate the election or defeat of a candidate for federal ofce except through a separately organized political action committee. The decision overruled part of the courts earlier decision in McConnell v. Federal Election Commission (2003) upholding the provision; it also overruled a 1990 decision, Austin v. Michigan State Chamber of Commerce, which upheld a state law prohibiting corporations from spending on state election campaigns.

No sufcient governmental interest justies limits on the political speech of nonprot or for-prot corporations.
Justice Anthony M. Kennedy (majority opinion)

While American democracy is imperfect, few outside the majority of this Court would have thought its aws included a dearth of corporate money in politics.
Justice John Paul Stevens (dissenting opinion)
Source: Citizens United v. Federal Election Commission, www.supremecourt.gov/ opinions/09pdf/08-205.pdf

with its earlier decision. The RNC suit is nothing more than simply trying to get a second bite at the apple, says Democracy 21s Simon, who is representing Rep. Van Hollen as an intervenordefendant in the case. Theres really nothing new here. The RNC has filed its appeal with the high court; the FEC is due to file its response the week of May 24. In the meantime, however, the FEC has issued an advisory opinion to a Democratic group working on redistricting issues that those activities do not bear on federal elections. On that basis, the agency told the National Democratic Redistricting Trust that members of Congress can raise funds for the group without regard to the soft-money ban. 14

The anti-regulation Center for Competitive Politics applauds the FECs stance on the issue. The advisory opinion demonstrates that some political activities simply are not for the purposes of influencing elections, says Steve Hoersting, the centers vice president. Lawyers with the Campaign Legal Center opposed the FECs ruling and note that the agency has argued in the RNC case that redistricting activities are in connection with a federal election. But Paul Ryan, who handles FEC matters for the center, says the agencys new stance does not necessarily affect the issues in the RNC case because the soft-money ban for national party committees is broader

www.cqresearcher.com

May 28, 2010

463

CAMPAIGN FINANCE DEBATES


Parties Raised More Soft Money Until Prohibited
Both the Democratic and Republican parties came to rely increasingly on unregulated soft money during the 1990s and through the 2000 and 2002 election cycles. The Bipartisan Campaign Reform Act (BCRA), also known as the McCain-Feingold law, generally prohibits federal ofceholders and candidates and national party committees from raising funds outside the hard limits of federal campaign nance law. The Supreme Court upheld the soft money ban in 2003, but the Republican National Committee has a pending legal challenge seeking to permit national party units to raise soft money for some state-related political activities. Hard and Soft Money Raised by National Party Committees
(BCRA prohibited committees from raising soft money in 2002.) Hard Soft Total (in $ millions) $32.9 47.5 $100.5 172.5 $256.6 261.1 $137.0 242.0 $208.9 504.3 $469.5 622.7 Percentage of Soft Money Raised 24.0% 19.6 43.3% 34.2 53.2% 41.9

1992 1996 2000 2004 2008

$104.1 194.5 $108.4 331.8 $212.9 361.6 $576.2 657.1 $599.1 640.3

Democrat

Sources: Federal Election Commission, Brookings Institution

Republican

than the prohibition on soft-money raising by federal candidates or officeholders. In any event, the Campaign Legal Centers Malloy says the Supreme Court should reject any of the exceptions the RNC is asking for. It would be a loophole that would essentially swallow the rule, she says. But Republican attorney Baran thinks the current blunderbuss ban on soft money is likely unconstitutional because it is not narrowly tailored, as needed to survive constitutional scrutiny. We should be able to take soft money to pay for our rent, he says.

Should public campaign financing be extended or ruled unconstitutional? Arizona has had its fair share of political scandals, but nothing tops the AzScam affair of the early 1990s. Seven state legislators were forced from office after having been caught on tape agreeing to accept bribes in return for supporting legalized gambling. The memory of that scandal helped campaign finance reformers in 1998 win Arizona voters approval of a public financing plan. The Clean Election Act, an initiative approved with 51 percent of the vote,

provides public funds to candidates for state office after they meet a qualifying threshold of private $5 contributions. As with other plans, candidates who take public funds have to agree to spending limits, but a participating candidate gets additional funds if outspent by a non-participating opponent. A decade later, the system is under legal attack. U.S. District Court Judge Roslyn Silver in Phoenix ruled the system unconstitutional in January, based in part on the Supreme Courts decision striking down BCRAs Millionaires Amendment. The system burdens the political speech rights of candidates who do not accept public funds, Silver said, because their spending could trigger an extra public subsidy for their opponents. The Ninth U.S. Circuit Court of Appeals reversed that decision in a ruling on May 21, but the plaintiffs are expected to ask the U.S. Supreme Court to hear the case. 15 Opponents of public financing are also hoping the New York-based Second Circuit appeals court will uphold a lower court decision striking down Connecticuts public financing scheme. In ruling the system unconstitutional in August, U.S. District Court Judge Stefan Underhill in Bridgeport, Conn., focused mostly on the burden that third-party candidates faced to qualify for public funds. 16 Apart from the particulars of public financing schemes, opponents flatly disagree about using taxpayer money for political campaigns. The governments job should be to ensure equal access to the polls, not equal resources for candidates, says Bill Maurer, a Seattle attorney with the libertarian Institute for Justice representing the plaintiffs in the case. Supporters say public financing reduces what they see as candidates unhealthy dependence on special interests for the money needed to run a campaign. Public financing schemes are very important to fair and open elections because they take private

464

CQ Researcher

money out of the system, says Malloy with the Campaign Legal Center. The center has participated in both the Arizona and Connecticut cases defending the public financing plans. Maurer says the Arizona scheme is clearly unconstitutional under the Supreme Courts ruling on the Millionaires Amendment. Malloy disagrees and notes that out of five federal appeals court rulings on public financing schemes, only one court has ruled against the plans. The Supreme Court gave a green light to public financing schemes in its first modern campaign finance ruling, Buckley v. Valeo, the 1976 decision that upheld post-Watergate contribution limits but struck down spending limits for candidates. The court upheld the newly enacted presidential public financing scheme on the grounds that it relieved major-party candidates from the rigors of soliciting private contributions. The court also said the voluntary taxpayer check-off system to earmark money for the system facilitated and encouraged public participation in the political process. 17 Opponents believe public financing does not accomplish either of the goals of increasing participation or reducing undue influence by moneyed interests. The idea that tax funding is going to get rid of these problems is not true, says Smith with the Center for Competitive Politics. The presidential system itself is in trouble. In 2008, President Obama passed up public funds in the primary and general elections rather than accept the spending limits; he was the first candidate to opt out of the system for the general election since it began in 1976. We had presidential public finance, but it didnt work, says attorney Baran. Despite those criticisms, advocates of public financing are not merely defending the idea but pushing to expand it. Fred Wertheimer, president of Democracy 21, a campaign-finance reform group in Washington, wants to

make the presidential system more attractive by giving candidates a multiple match for money they raise through small donations. Wertheimer, a veteran of campaign finance debates as former president of the public interest group Common Cause, also calls for expanding public financing along similar lines to congressional races. Meanwhile, a group of reform-minded experts wants to skirt some of the legal and political difficulties of public financing by tying taxpayer subsidies not to fixed spending limits but to lower contribution limits for participating candidates. The plan coauthored by Campaign Finance Institute president Malbin and three others would encourage candidates to raise money through small contributions by multiplematching those amounts. As an example, New York Citys system along these lines provides a 6-to-1 match for privately raised small contributions. Nothing would go to a politician automatically, says Malbin, whose coauthors are Colby College political science professor Anthony Corrado, congressional scholar Thomas Mann of the Brookings Institution and Norman Ornstein, a resident scholar at the American Enterprise Institute. Every dollar that goes to a politician should go because a donor who cannot afford a lot has given money. The match makes it more meaningful to the candidate and gives the candidate more of a reason to go after it. 18 Maurer acknowledges the proposal reduces somewhat the First Amendment problem of public financing tied to spending limits, but he still objects to taxpayer funding for candidates in principle and in practice. What we are talking about here is forcing people who do not want to finance campaigns to do so, he says. In addition, he says, the subsidies will act as little more than a crutch for lazy, inept or unappealing candidates who no longer have to work as hard to craft an attractive message in order to run a competitive campaign.

BACKGROUND
Regulating Campaigns
ongress has been passing laws to regulate federal election campaigns almost since the beginning of mass electoral politics in the mid-19th century. The various laws have succeeded in protecting federal workers from blatant solicitations for contributions, kept corporations and unions from giving direct financial support to congressional and presidential candidates and in recent decades provided detailed information about campaign contributions and spending. But those laws have not succeeded in stemming the rising cost of campaigns nor prevented corporations, unions and interest groups from devising new methods for making their influence felt in federal elections. 19 The mass campaigns that began with Andrew Jackson in 1828 drew some of their financing initially from assessments on federal workers or patronage seekers. Congress acted to stem the practice, initially with an 1867 law of limited effect that prohibited assessments on navy yard workers. With abuses and public criticism continuing, Congress in 1876 barred presidential appointees from soliciting funds from federal workers. Then in 1883 Congress created the civil service system and included in the law a still-in-effect ban on any political solicitations of all civil service federal workers. Corporations became the next major source of campaign cash, especially for the politically dominant Republican Party. The GOP kingmaker Mark Hanna methodically assessed companies for support for the Republicans pro-business policies, helping to raise the unprecedented sum of $3 million for each of William McKinleys successful presidential campaigns in 1896 and 1900.

www.cqresearcher.com

May 28, 2010

465

CAMPAIGN FINANCE DEBATES


Theodore Roosevelt denied accusations of hitting up corporations during his 1904 campaign, but evidence after the election of corporations giving prompted him to ask Congress in 1905 for a law against bribery and corruption to ban corporate contributions in federal campaigns. Roosevelt devoted little effort to the issue, but Congress passed the measure in 1907 thanks in part to lobbying by the first campaign finance reform group: the National Publicity Law Organization. The organizations continued lobbying resulted in 1910 and 1911 in the first two broad measures regulating federal elections. The Federal Corrupt Practices Act more commonly, the Publicity Act of 1910 required reporting of contributions and expenditures in House races by party committees operating in two or more states, but only after elections. The act, passed by a Republican-controlled Congress, was strengthened in 1911 after Democrats gained control of the House. The 1911 measure required pre-election disclosure of finances in House and Senate races.* It also established spending limits a provision that Republicans cynically added to try to kill the bill. Congress returned to the topic in the wake of the Teapot Dome scandal in the 1920s. The Federal Corrupt Practices Act of 1925 required quarterly reports, even in non-election years, of contributions to candidates and multistate political committees. It also reenacted spending limits, which the Supreme Court had struck down in 1921 on the grounds that Congress had no authority to regulate political primaries. (The court changed its stance on the issue in 1941.) The disclosure provisions proved ineffective because of the lack of any enforcement mechanism; the spending limits were,
* Some states adopted direct election of senators in advance of the ratification of the 17th Amendment in 1913, which substituted popular election for election by state legislatures as provided in the original Constitution.

according to Colby College professor Corrado, universally ignored. 20 Labor unions became a source of campaign cash for Democrats during Franklin D. Roosevelts presidency in the 1930s. Their role stirred opposition from Republicans, who joined with antiRoosevelt southern Democrats in 1943 in adding to a wartime labor measure a ban on union contributions to federal elections. After Republicans gained control of Congress in the postwar 1946 election, the ban became permanent as part of the Taft-Hartley Act, passed over the veto of Democratic President Harry Truman. Labor had already begun circumventing the ban, however, with the creation by the Congress of Industrial Organizations (CIO) of the Committee on Political Education (COPE) the first political action committee. Union political action committees (PACs) proliferated in the 1950s, prompting corporations and trade associations to follow suit beginning in the 1960s. The rise in campaign spending, spurred by the advent of TV advertising, led Congress in 1966 to approve a presidential public financing scheme, but the next year it passed a new bill to put the scheme on hold. With continuing controversy about both contributions and total spending, Congress crafted a broader measure in 1971. The Federal Election Campaign Act signed by President Richard M. Nixon in February 1972 set spending and contribution limits and specified availability of regular disclosures from House and Senate officers or, for presidential campaigns, from the General Accounting Office (now, the Government Accountability Office). Two years later, after Nixons resignation in the Watergate scandals, Congress wrote a broader, more detailed measure. The Federal Election Campaign Act Amendments of 1974 included tightened contribution and spending limits, created a presidential public financing system and established the FEC as an independent agency to enforce and interpret the law. The

Supreme Court carved a major hole in the law in 1976, however, with its ruling in Buckley v. Valeo striking down spending limits by candidates or independent groups as an infringement of First Amendment-protected political speech. Contribution limits, also challenged on First Amendment grounds, were upheld as preventing corruption or the appearance of corruption. 21

Finding Loopholes
he Supreme Courts decision upholding limits on campaign contributions but not on spending by candidates or individuals combined with the still standing bans on corporate or union contributions to shape campaign finance developments for the next quartercentury. The period saw the advent of so-called issue ads funded by corporate and labor interests that skirted the ban on campaign contributions by avoiding explicit endorsement of candidates. Political parties also took advantage of an FEC ruling to raise unregulated soft money for general operations, not specific campaigns. The protracted effort to curb both practices culminated in 2002 in enactment of the McCain-Feingold law, which the Supreme Court narrowly upheld a year later. Corporate PACs proliferated during the period thanks in part to an FEC ruling in 1975 that permitted companies to use treasury funds to establish and administer the organizations. Colby Colleges Corrado notes that from 1974 to 1986 the number of PACs registered with the FEC nearly quadrupled to more than 4,000 while the amounts they contributed to candidates increased eightfold from $12.5 million to $105 million. Corporate giving was institutionalized as never before, according to Smith at the Center for Competitive Politics, despite the ban on corporate contributions. 22 Meanwhile, the Supreme Court in 1985 ruled

Continued on p. 468

466

CQ Researcher

Chronology
Before 1960
First federal campaign finance laws go largely unenforced. 1907 Tillman Act prohibits corporations from contributing to federal candidates. 1910-11 Publicity Acts require disclosure of contributions, spending by candidates for Congress; 1911 law also establishes spending limits. 1947 Taft-Hartley Act prohibits labor unions from contributing to federal candidates.

1976 Supreme Court in Buckley v. Valeo upholds contribution limits, strikes down spending limits; upholds presidential public financing. 1978 Supreme Court strikes state law prohibiting corporations from spending on state ballot initiative. Late 1970s FEC rulings allow political parties to use unregulated soft money for party-building, get-out-the-vote.

fund-raising represents meltdown of campaign finance system.

2000-Present Major campaign finance reform


law passed by Congress; law narrowed by Supreme Court; some presidential candidates opt out of public financing. 2000 Republican George W. Bush opts out of public financing for primaries. 2002-2003 Bipartisan Campaign Reform Act (McCain-Feingold) passed by Congress, signed by President George W. Bush; act bans soft-money raising by political parties, federal officeholders and candidates; prohibits corporations, unions from election-time issue advertising except through PACs. . . . Supreme Court upholds law in 5-4 decision in December 2003. 2007 Supreme Court, 5-4, narrows ban on corporate- or union-funded issue advertising. 2008 Democrat Barack Obama becomes first major party candidate to opt out for general election. 2010 Supreme Court, 5-4, strikes down ban on corporate spending in campaigns (Citizens United v. FEC). . . . Federal appeals court invalidates contribution limits for independent groups. . . . Challenges to state public financing plans argued in federal appeals courts. . . . Republican National Committee asks Supreme Court to ease soft-money ban. . . . Congress considers bill to add disclosures for corporate political spending.

1980s-1990s Roles of soft money, outside


groups grow; bills to close loopholes proposed, but fail. Mid-1980s FEC rulings allow advocacy groups to distribute voter guides without counting them as campaign contributions if they avoid express advocacy. 1985 Supreme Court says nonprofit, ideological corporations can spend on federal campaigns if they accept no corporate, union funds. 1990 Supreme Court upholds state law prohibiting corporations from spending on political campaigns. 1995 AFL-CIO ad campaign targets vulnerable House Republicans in 1996 election; business groups follow suit. Mid- to late 1990s President Bill Clinton hosts soft money contributors in White House; Republicans also use access to hit up soft-money donors; Senate committee says Clinton

1960s-1970s Campaign spending increases;


calls for stronger federal laws. 1971-72 Federal Election Campaign Act of 1971 approved by Congress; sets contribution, spending limits; signed by President Richard M. Nixon Feb. 7, 1972. . . . Watergate break-in (June 17, 1972); investigations show illegal campaign contributions were used to pay off burglars. 1974 Federal Election Campaign Act Amendments tighten spending, contribution limits; establish presidential public financing; create Federal Election Commission (FEC); law challenged on constitutional grounds. 1975 FEC ruling allows corporations to use funds to create, administer political action committees (PACs); number of PACs quadruples over next decade.

www.cqresearcher.com

May 28, 2010

467

CAMPAIGN FINANCE DEBATES

How Hillary: The Movie Changed Campaign Finance Law


The Supreme Court overruled two precedents in striking corporate spending limits.
n the surface, the 90-minute documentary that the conservative group Citizens United produced on Hillary Rodham Clinton late in 2007 appeared aimed at derailing her front-running campaign for the Democratic presidential nomination. But Hillary: The Movie was also aimed at a second target: federal campaign finance provisions that limited the rights of corporations to spend money to influence congressional or presidential elections. The video, never widely distributed, played no part in the demise of Clintons candidacy. But a legal challenge sparked by the documentary resulted more than two years later in a sweeping Supreme Court decision, Citizens United v. Federal Election Commission, which freed corporations from any restrictions on using their own money for independent spending in federal, state or local political campaigns. 1 Founded in 1988 by Republican activist David Bossie, Citizens United had grown two decades later into a $12 million organization that had produced overtly conservative films on a variety of topics. Bossie, who had worked on a congressional investigation of President Bill Clinton in the 1990s, decided in 2007 to take on Hillary Clintons quest for the presidency. Completed in December, the documentary opened by describing Clinton as steeped in sleaze and linked her to claimed abuses during her husbands presidency. It also criticized Clintons record as a senator from New York. With the video in the can, Bossie began plans for in-theater screenings, DVD sales and distribution on a video-on-demand channel. Short commercials were prepared to promote the video. The plans ran afoul of provisions in the Bipartisan Campaign

Reform Act (BCRA), the 2002 law also known as the McCainFeingold Act after its principal Senate sponsors: John McCain, RAriz., and Russell Feingold, D-Wis. BCRA prohibited corporations from helping to pay for electioneering communications, defined as radio or television commercials referencing a candidate for federal office around the time of a primary or general election. Citizens United was itself organized as a nonprofit corporation and had also accepted some corporate funding for the video. To preempt any enforcement of BCRAs requirements, Citizens filed suit against the Federal Election Commission (FEC) in federal court in Washington. The suit did not ask that the provisions be invalidated, only that the court rule that the provisions could not be constitutionally applied to the movie or the planned advertisements. Citizens contended that the video was exempt from the electioneering provision because it did not expressly call for Clintons defeat. It also argued that disclosure of donors required under the law would expose them to retaliation. Under BCRAs provisions, the suit was tried before a three-judge district court, which sided with the FEC in ruling that the video amounted to express advocacy against Clinton and could not be shown on the videoon-demand channel because of the corporate funding. The case reached the Supreme Court a year later in March 2009 with a new lawyer, Theodore Olson, representing Citizens United. Olson, who as U.S. solicitor general had successfully defended BCRA before the court in 2003, argued that the law was aimed at short, punchy ads, not feature-length documentaries. Some liberal justices asked how the court could draw a line.

Continued from p. 466

that nonprofit, ideological groups organized as corporations could spend their own funds on campaigns without forming a PAC as long as they did not accept corporate or union contributions. The FEC opened the door to soft money with advisory opinions in the late 1970s that state or national parties could raise money for general party activities or voter turnout drives outside the limits on individual contributions or corporate or union donations. By the end of the 1980s, soft money had become a major component of national election financing, according to Corrado. By 2000, soft money accounted for more than half of the

funds raised by the Democrats national committees and more than 40 percent of the amounts raised by their Republican counterparts. 23 The loophole for campaign-time issue advertising stemmed from a footnote in the Buckley decision that spared spending from regulation if ads did not explicitly call for electing or defeating a named candidate. Federal courts applied this express advocacy test in the 1980s, for example, to allow anti-abortion groups to distribute voter guides without counting them as campaign contributions. Unions and then corporations banned from direct campaign spending exploited the regulatory gap in the 1990s, beginning with the

AFL-CIOs $35 million ad buy in 1995 aimed at vulnerable Republican House members. By the end of the decade, business organizations, other advocacy groups and political party committees themselves were spending big, unregulated sums on election-time ads, typically negative attacks on the record of an incumbent up for reelection. The Supreme Court, meanwhile, had created additional gaps in campaign regulation. In 1985, the court struck down a $1,000 limit on independent spending by political action committees; a decade later, the court in 1996 allowed political parties to spend unlimited sums in congressional races if the spending was not coordinated with the candidate.

468

CQ Researcher

porations, do not give rise to But Olsons adversary, corruption or the appearance of deputy solicitor general Malcorruption, he wrote. colm Stewart, faced stronger Kennedy similarly rejected doubts from conservative justwo other justifications for a tices when questioning led ban: protecting shareholder inhim into a reply that the govterests or preventing the disernment could go so far as torting effects of spending by to prohibit corporate funding wealthy corporations. And he of a book even if it conSupreme Court Justice Anthony M. Kennedy wrote the rejected as impractical and tained only one sentence admajority opinion in Citizens United. burdensome the alternative of vocating a vote for or against allowing a corporation to esa candidate. Thats increditablish a separate political action committee with voluntary ble, Justice Samuel A. Alito Jr. said. The justices kept the case under advisement for more than contributions to pay for political activities. In a 90-page dissenting opinion, Justice John Paul Stevens exthree months and then requested a new round of arguments specifically addressing whether to overrule the 2003 decision upholding coriated the conservative majority for passing over narrower grounds BCRA, McConnell v. FEC, as well as the courts 1990 decision, for a decision and for overturning precedents. The decision, he Austin v. Michigan State Chamber of Commerce, upholding state said, would undoubtedly cripple the ability of ordinary citizens, bans on corporate spending on elections. 2 In the new round of Congress and the States to adopt even limited measures to proarguments, in September, conservative justices, including Chief Jus- tect against corporate domination of the electoral process. tice John G. Roberts Jr., seemed intent on a broad ruling. Kenneth Jost The 5-4 decision, announced on Jan. 21, 2010, rejected several possible narrow grounds to rule for Citizens United be1 The incomplete citation is 558 U.S. (2010). Comprehensive background fore striking down BCRAs limits on corporate spending and and documents are available on SCOTUSWiki, a companion to SCOTUSBlog: overruling the two precedents. www.scotuswiki.com/index.php?title=Citizens_United_v._Federal_Election_Com For the majority, Justice Anthony M. Kennedy said indepen- mission. This account adapted from Kenneth Jost, Supreme Court Yearbook 2009-2010 (forthcoming November 2010). dent campaign spending could not be restricted on the same 2 The citations are McConnell, 540 U.S. 93 (2003); and Austin, 494 U.S. 652 anti-corruption grounds used to limit direct campaign contribu- (1990). For a full account of McConnell, see Kenneth Jost, Supreme Court tions. Independent expenditures, including those made by cor- Yearbook 2003-2004 (2004).

Earlier, the court in 1978 had given corporations the right to spend their own money on campaigns related to state ballot measures. In 1990, however, the court ruled that states and, by implication, the federal government could bar corporations from spending on races for political office. The 5-4 decision in Austin v. Michigan State Chamber of Commerce said that states had a compelling interest in eliminating the corrosive effect of political war chests amassed with the aid of the legal advantages given to corporations. Throughout the 1990s, sentiment grew among policymakers, advocacy groups and experts that the campaign finance system was broken and major changes

were needed. By the end of the decade, reform-minded members of Congress had coalesced around a proposal with two major parts: bans on soft money and corporate- or union-financed issue advertising during campaign season. Republican opposition blocked the measure at the end of the decade, but the logjam was broken in 2001 and 2002 thanks to the Democrats control of the Senate and publicity linking soft-money donations by the head of the Enron Corp. to access on energy issues. The McCain-Feingold law finally cleared the House and then the Senate in February and mid-March 2002. No sooner had President George W. Bush signed the bill than opponents

filed a constitutional challenge to the measure in federal court. The opponents were led by McConnell, the Kentucky Republican, but also included advocacy groups ranging from the Chamber of Commerce and AFL-CIO to the American Civil Liberties Union (ACLU) and National Rifle Association (NRA). In December 2003, the Supreme Court upheld all but two minor provisions of the act. Dividing 5-4 on the two major issues, the court upheld the ban on soft money by national parties as a way to prevent the potential . . . for undue influence on federal officeholders by campaign donors. The court also upheld the laws provisions that corporations and unions

www.cqresearcher.com

AFP/Getty Images/Chip Somodevilla

May 28, 2010

469

CAMPAIGN FINANCE DEBATES

Looking for Impact of Public Campaign Financing


Does Arizonas system encourage non-traditional candidates?
wo weeks after enactment of Arizonas controversial law giving local police power to check for immigration violators, The Washington Posts liberal columnist Ruth Marcus came up with a possible explanation for the measure: the states system of public financing for state legislative candidates. Quoting Arizonans from across the political spectrum, Marcus said public financing had enabled non-traditional candidates to run for legislative seats, displacing the vetting role of business groups and party leaders. The result in the predominantly Republican state, she wrote, was to elect extreme candidates and to leave moderate Republicans all but extinct. Within a few days, a national advocate of public financing wrote to the newspaper to say: Rubbish. Nick Nyhart, chief executive and president of Public Campaign, said that in fact just over half of the legislators who voted for the measure had run with public funds compared to 80 percent of those who voted against the measure. 1 A scholar who has studied public financing schemes also discounts Marcus explanation. Fatuous, says Kenneth Mayer, a professor of political science at the University of Wisconsin in Madison. I dont see how you can make that inference. But Mayer goes on to say that it is difficult to say anything definitive about the impact of public financing in Arizona or the two other states with similar systems: Maine and Connecticut. The systems, he says, are too new and too few to give political scientists enough evidence to prove their effects in terms of competitiveness, participation, voter turnout or policy outcomes. Allison Hayward, an assistant professor of law at George Mason University in Fairfax, Va., who has studied the Arizona system, agrees. Once you control for all the factors you know, she says, what you end up with is noise.

The difficulties, however, do not prevent advocates, academics and observers from arguing about the effects of public financing, both the claimed benefits and alleged costs. Supporters believe public financing makes elections more competitive and officeholders more accountable to voters. Opponents say the systems have failed to realize those goals while costing taxpayers and burdening candidates who choose not to participate. Studies of the systems Arizonas and Maines adopted by initiative and in use since 2000 and Connecticuts enacted by the legislature for the 2008 election date from 2003. 2 A General Accounting Office (GAO) study requested by Congress found no notable increases in competitiveness, voter participation or voter perceptions of interest group influence but cautioned that it was too early to draw causal linkages to changes, if any. With three election cycles to study, Mayer and two colleagues at Wisconsin concluded in 2006 that the Arizona and Maine systems did increase competitiveness of legislative elections. Specifically, they found that public funding increased the pool of candidates, increased the likelihood of a competitive race for incumbents and reduced the incumbency reelection rates of incumbents but only marginally. This study was funded by the liberal JEHT Foundation. Looking only at Arizona for the same three elections, Hayward came to opposite conclusions. In a study commissioned by the Arizona-based Goldwater Institute, a conservative-leaning think tank, Hayward found incumbency reelection rates unchanged and the number of candidates reduced. She also found no increase in voter participation and no change in the tone of campaigns. Two years later, a study of the Arizona system by Public Campaign focused on the donors that candidates used to meet the qualifying threshold for public funds. (Legislative candidates have to get donations of at least $5 from at least 210 donors.) In com-

could pay for election-time issue ads on television termed electioneering communications in the law only from separate PACs, not out of their own treasuries. Justices in the majority found the provision would have little effect on pure issue advertising.

Continuing Debates

he legal and policy debates over McCain-Feingold have continued despite the Supreme Courts decision upholding the law. The law shut off

political parties solicitation of soft money, but critics said money flowed instead to independent groups less accountable to the public than the parties. Opponents of the law won a significant victory from the Supreme Court with two new justices since the 2003 ruling narrowing the ban on corporate- or union-funded issue ads. The court followed with two rulings that explicitly invalidated McCainFeingold provisions, including the decision in January to allow direct corporate or union spending in congressional or presidential campaigns.

Supporters of the law cite the demise of the soft-money system as an undoubted accomplishment of the law. By 2000, soft-money had come to account for more than half of the money for Democratic national party committees and more than 40 percent for Republican committees. After the law took effect, the parties fundraising totals increased Democrats more than Republicans with all of the funds now subject to donor contribution limits. One result: a greater percentage of money raised from small donations, lower percentages from large contributions.

470

CQ Researcher

parison to donors in federal For their parts, scholars Hayelections, the groups reward and Mayer come to differsearcher found that the donors ing conclusions about the Arifor state legislative candidates zona scheme I cant be a were more racially, ethnicalsupporter of this program bely and geographically diverse. cause I dont see that it does any Today, Nyhart cites the of the good things that people need to attract a relatively say they want it to do, Hayward large number of small consays. But Mayer looks favorably Police officers monitor a protest against Arizonas tributors as one of the syson public financing. I think it controversial new immigration law at the tems overlooked benefits. can have positive effects. state Capitol in Phoenix on April 23, 2010. Candidates spend a lot of Kenneth Jost time talking to ordinary voters to get the small contributions, he says. The actual effects of the Arizona system are a central issue in 1 Ruth Marcus, Arizonas clean-vote surprise, The Washington Post, May 5, the recent constitutional challenge to the plan. 3 In their suit chal- 2010, p. A21; Nick Nyhart, Dont blame Clean Elections, ibid., May 11, 2010, p. A14. lenging the system several legislators and legislative candidates who 2 These studies are referenced in the story: Nancy Watzman, All Over the Map: did not participate in the system said their political-speech rights Small Donors Bring Diversity to Arizonas Elections, Public Campaign, May 20, were infringed because their opponents would have higher spend- 2008, www.publicampaign.org/sites/www.publicampaign.org/files/%20aotm_report_ 05_20_08_final_web.pdf; Allison R. Hayward, Campaign Promises: A Six-year ing limits depending on how much they spent in their races. Review of Arizonas Experiment with Taxpayer-financed Campaigns, GoldIn her opinion ruling the system unconstitutional, U.S. Dis- water Institute, March 28, 2006, www.goldwaterinstitute.org/Common/Files/ trict Court Judge Roslyn Silver voiced doubt about the claims Multimedia/935.pdf; Kenneth R. Mayer, Timothy Werner and Amanda Williams, Do Public Funding Programs Enhance Political Competition?, in she called them unsettling but still found a substan- Michael P. McDonald and John Samples (eds.), The Marketplace of Democracy: tial burden on the plaintiffs First Amendment rights. Apply- Electoral Competition and American Politics (2006); General Accounting Office, Reform: Early Experience of Two States That Offer Full ing the strictest standard of constitutional review, she went on Campaign FinancePolitical Candidates, May 2003, www.gao.gov/new.items/ Public Funding for to find that the system did not serve what she said was the d03453.pdf. For discussion and other background, see Clean Elections, Wikipedia, http://en.wikipedia.org/wiki/Clean_Elections. only legitimate governmental interest: preventing corruption. 3 The case is McComish v. Brewer. For court rulings and pleadings, affidavits The Ninth Circuit, however, reversed Silvers decision and upand briefs by the plaintiffs, see the Goldwater Institute, www.goldwaterinstitute. held the Arizona system. The system imposes only a minimal bur- org/case/68. Briefs for the state defendants are not online. den on First Amendment rights, Judge Wallace Tashima wrote for 4 McComish v. Bennett, May 21, 2010, www.ca9.uscourts.gov/datastore/opinions/ the three-judge panel, and bears a substantial relation to the States 2010/05/21/10-15165.pdf. important interest in reducing quid pro quo political corruption. 4

The law also had the unintended but perhaps foreseeable effect of dramatically increased independent spending by political groups outside candidates official campaigns. The so-called 527s listed $36.7 million in independent campaign expenditures in the 2000 presidential election year, according to the Center for Responsive Politics, a reformminded research center. In 2004 after BCRAs enactment the amount increased nearly ninefold to $316.7 million. The big spenders included such established organizations as the Democratic and Republican governors asso-

ciations and labor-backed funds, but also newer outfits such as the proDemocratic America Coming Together and MoveOn.org and the pro-Republican Progress for America and Swift Vets and POWs for Truth. In 2008, the groups spending increased again to $440.3 million, according to the center. 24 Meanwhile, the public financing system for presidential elections was gradually breaking down as candidates decided to forgo public subsidies rather than accept the spending limits imposed as part of the scheme. Republican George W. Bush in 2000 be-

came the first major candidate to opt out of public financing for primary races; John Kerry and Howard Dean followed suit in their 2004 Democratic primary contest. Then in the 2008 campaign Obama became the first candidate to opt out for both the primary and general elections. Obamas phenomenal success in Internet-based fundraising from small donors helped propel him to victory over his Democratic rival, Hillary Rodham Clinton, who also declined public subsidies, and then over Republican nominee John McCain. McCain,

www.cqresearcher.com

Getty Images/John Moore

May 28, 2010

471

CAMPAIGN FINANCE DEBATES


who had kept his primary campaign alive thanks to public financing, attacked Obama for going back on a pledge to stay in the public financing system. Obama countered that the spending limits were unrealistic and the system needed an overhaul. 25 The Supreme Courts new ruling on issue ads stemmed from a legal action by an anti-abortion group, Wisconsin Right to Life, which wanted to run ads criticizing Sen. Russ Feingold, D-Wis., in advance of the Democrats 2006 reelection bid. In Roberts first term as chief justice, the court in January 2006 held that its earlier ruling did not foreclose inditrict outside Buffalo, N.Y. Davis argued the law penalized him for exercising his political-speech rights by raising the contribution limits for his opponent. By a 5-4 vote, the court agreed. The law, Justice Samuel A. Alito Jr. wrote for the majority, impermissibly burdens [Davis] First Amendment right to spend his own money for campaign speech. 27 The same conservative majority formed in the Citizens United case to deal a much bigger blow to the law that campaign finance reformers had worked so hard to enact. The challenge to the law arose over Citizens Uniteds plans for screenings in 1990 that had upheld state laws prohibiting corporate spending on elections. For the four dissenters, Justice John Paul Stevens emphasized that the law actually allowed corporate-organized PACs that raised money voluntarily from shareholders, employees and others. He warned that the ruling would lead to corporate domination of the airwaves before elections.

CURRENT SITUATION
Watching the Courts
upporters and opponents of campaign finance regulation are watching court cases in Washington and around the country for rulings that may determine the fate of federal regulation of political groups, federal restrictions on soft money and state and local public financing systems. In the case with perhaps the broadest implications, attorneys representing SpeechNow.org are asking a federal district judge in Washington to give immediate effect to the appeals court decision in its favor lifting individual contribution limits to the organization. The motion filed May 14 asked Judge James Robertson to issue an immediate, nationwide injunction to block the Federal Election Commission (FEC) from enforcing the contribution limits that the U.S. Court of Appeals for the District of Columbia Circuit struck down in a unanimous, nine-judge ruling on March 26. 28 Institute for Justice attorney Steve Simpson filed the motion without waiting for the FEC and U.S. solicitor generals office to decide whether to appeal the case to the U.S. Supreme Court. Simpson cited the impending primary

Government may not suppress political speech on the basis of the speakers corporate identity. Justice Anthony M. Kennedy

vidual challenges to application to the law. When the case returned to the court the next year, many of the groups that had earlier challenged the law joined in successfully urging the justices to narrow its scope. With Roberts writing the main opinion, the court allowed corporations or unions to fund election-time issue ads on television as long as the ad did not unmistakably call for the election or defeat of a named candidate. Dissenters said the ruling amounted to overturning the earlier decision. 26 The court delivered another blow to McCain-Feingold a year later by striking down the Millionaires Amendment. The provision was challenged by Jack Davis, a wealthy businessman who spent more than $3 million in two unsuccessful congressional campaigns in a rural and suburban dis-

and DVD sales of a video, Hillary: The Movie, sharply critical of Clinton while she was the frontrunner in the race for the Democratic presidential nomination. Citizens United, a small, conservative group founded in 1988 by longtime GOP activist David Bossie, was organized as a corporation and accepted a small amount of corporate funds. That funding brought the plan into conflict with BCRAs prohibition on corporatefunded election advocacy. The courts ruling, however, broadly invalidated BCRAs prohibition on independent corporate spending on elections. Government may not suppress political speech on the basis of the speakers corporate identity, Justice Anthony M. Kennedy wrote for the majority. The decision overruled part of the McConnell decision as well as an earlier decision

Continued on p. 474

472

CQ Researcher

At Issue:
Do campaign finance laws unduly restrict political speech?
yes

SEAN PARNELL
PRESIDENT, CENTER FOR COMPETITIVE POLITICS
WRITTEN FOR CQ RESEARCHER, MAY 15, 2010

FRED WERTHEIMER
PRESIDENT, DEMOCRACY 21
WRITTEN FOR CQ RESEARCHER, MAY 24, 2010

or decades, lawmakers and advocates on different ends of the political spectrum have understood that restricting money in politics limits First Amendment rights. This understanding led President Harry Truman to veto the Taft-Hartley Act in 1947, which banned independent ads by both unions and corporations. In his veto message, Truman called the expenditure ban a dangerous intrusion on free speech. Limiting money spent on politics infringes on the First Amendment because effective political speech requires money. This principle applies whether a citizen-activist copies a flyer for distribution, a candidate purchases radio ads or an interest group reserves TV time to promote its agenda. The DISCLOSE Act, an effort to undo the Supreme Courts recent Citizens United decision, is a textbook example of how regulation and limits can stifle political speech. Current law already requires disclosure of contributions intended for political ads, but this bill would force private associations of citizens to reveal their donors and members even those who give for purposes other than politics. The intent is to chill unwelcome criticism by exposing donors to harassment and retaliation, reminiscent of the state of Alabamas demands during the civil rights era that the NAACP reveal its donors and members. The DISCLOSE Act would also require many ads to feature disclaimers that would consume up to half the ad without providing any additional information, dramatically limiting the amount of political speech. Another provision would ban American companies with as little as 20 percent foreign ownership from speaking, and another would ban speech by companies that have government contracts over $7 million. These provisions illustrate how campaign finance regulation can be used as a partisan weapon to silence foes while permitting allies to speak. This sloppily written bill seems designed to sow confusion among speakers, as a provision was inserted to not require FEC interpretation of the 84-page bill before midterm elections. One self-styled reformer recently sought to reassure bloggers that under the DISCLOSE Act they most likely would not face an FEC investigation if they praised or supported federal candidates, inadvertently making our point that uncertainty along with the specter of potential criminal investigation would deter unsophisticated grassroots groups. The ability of campaign finance laws to stifle political speech is clear. Americans should resist the latest siren call of reform and instead side with the First Amendment.
no

yes no
May 28, 2010

xisting campaign finance laws protect our democracy from corruption and the appearance of corruption (contribution limits); provide information to citizens to allow them to make informed choices in elections (disclosure laws); and provide candidates with an alternative way of financing their elections (public financing systems). In the Supreme Courts landmark decision in Buckley v. Valeo (1976), the Court held that limits on contributions to candidates and parties, disclosure laws and public financing of elections are constitutional and do not unduly restrict political speech. The Court upheld contribution limits as a necessary legislative concomitant to deal with the reality or appearance of corruption inherent in a system permitting unlimited financial contributions. The Court said that To the extent that large contributions are given to secure a political quid pro quo from current and potential office holders, the integrity of our system of representative democracy is undermined. Similarly the Court in Buckley, and consistently in later cases, including Citizens United v. Federal Election Commission, upheld the constitutionality of campaign finance disclosure requirements against claims that disclosure would chill speech. The Court stated in Buckley that disclosure provides the electorate with information as to where political campaign money comes from and how it is spent by the candidate in order to aid the voters in evaluating those who seek federal office. In the case of public financing, the Court in Buckley said the presidential public financing system is a congressional effort, not to abridge, restrict, or censor speech, but rather to use public money to facilitate and enlarge public discussion and participation in the electoral process, goals vital to a selfgoverning people. In contrast, the Court in Buckley found limits enacted in 1974 on campaign spending by candidates and by individuals to be unconstitutional. In the recently decided Citizens United case, the Supreme Court by a 5 to 4 vote went further and ignored two decades of past Supreme Court decisions issued after Buckley to strike down a law in existence for more than 60 years that banned corporate spending to influence federal elections. In so doing, the Court unleashed unprecedented amounts of corporate influence-seeking money on our elections. The Courts indefensible judicial activism in Citizens United contradicted positions taken by past presidents, past Congresses and the Supreme Court itself, all of whom concluded the corporate spending ban was necessary to prevent government corruption.

www.cqresearcher.com

473

CAMPAIGN FINANCE DEBATES


Continued from p. 472

season as the reason for expedited action. He said a nationwide injunction was needed because the FEC in the past has enforced challenged regulations in some federal circuits even after sustaining an adverse ruling elsewhere. In the original suit, SpeechNow president Keating and two other libertarian activists said they wanted to donate to the organization more than the $5,000 currently permitted under federal campaign finance law. Keating and Edward Crane, founder and president of the libertarian Cato Institute, both said they wanted to give $5,500; Fred Young, a retired businessman in Wisconsin and current Cato board member, planned to contribute $110,000. The governments reply to the motion is due by May 28. Meanwhile, both sides have until June 24 to decide whether to ask the Supreme Court to review the decision. The appeals court rejected SpeechNows effort to invalidate the mandatory disclosure of donors. Simpson says his clients have not decided whether to appeal that part of the ruling. For the government, review by the Supreme Court would raise the risk of extending its defeat and lifting contribution limits for all political groups. Meanwhile, the Republican National Committee is asking the Supreme Court to speed up action on its appeal of the decision rejecting its plea to raise unregulated soft money for state elections and redistricting activity. The RNC filed its appeal on April 23 and added a motion asking the court preemptively to limit any extension of time if requested by the FEC to make sure the justices can consider the appeal before the summer recess begins at the end of June and to set an expedited briefing schedule if the case is scheduled for argument. 29 In the motion, Citizens United attorney Olson said the RNC and other plaintiffs are suffering irreparable harm to their First Amendment rights because

of the McCain-Feingold laws restrictions on soft money. In a reply filed May 4, Rep. Van Hollen, as an intervenordefendant, opposed any expedited briefing schedule. The congressman argued that even with a shortened time for briefs, the case could not be decided before the November elections. Plaintiffs challenging the Arizona public financing system are now studying a possible appeal to the Supreme Court after the Ninth Circuits decision reinstating the scheme. In the May 21 decision, the three-judge panel rejected the plaintiffs claims of a chilling effect from the system. The matching funds provision does not actually prevent anyone from speaking in the first place or cap campaign expenditures, senior circuit judge Wallace Tashima wrote. Meanwhile, opposing lawyers are waiting for a ruling from the Second Circuit appeals court on Connecticuts public financing system after the lower federal court ruled it unconstitutional in August 2009. The case was argued on Jan. 13 before a panel of two Democratic-appointed judges and one Republican appointee.

Moving in Congress?
he Senate appears to hold the key to the proposed legislation to impose new disclosure requirements on corporate spending in political campaigns as House leaders have the Democratic-written bill on a fast track in their chamber. The House bill and a companion bill in the Senate (HR 5175, S 3295) are being called the DISCLOSE Act for Democracy Is Strengthened by Casting Light on Spending in Elections. The House bill, which also bars political spending altogether by major federal contractors, was expected to reach the House floor during the week of May 24 before the beginning of Congress Memorial Day recess, according

to House Administration Committee Chairman Robert A. Brady, D-Pa. Brady commented after the committee approved the measure on a party-line vote on May 20. The committee, with a 6-3 Democratic majority, approved the bill late in the afternoon after voting down successive Republican-drafted amendments that, among other things, would have delayed the effective date until after the November congressional elections. 30 With Democrats holding a 255-177 majority, approval by the full House was regarded as a virtual certainty despite strong opposition from business groups. Few Democratic defections were expected on a bill with strong partisan implications. No action had been scheduled on the companion Senate bill as of May 24, according to a spokeswoman for the Senate Rules Committee. The lead sponsor of the Senate bill is the committees chairman, Sen. Charles E. Schumer, D-N.Y. Despite a 59-41 Democratic majority, Senate rules give Republicans more opportunities to delay or bottle up the measure. Senate GOP Leader McConnell led Republican criticism of the bill when it was introduced in early May. The bills disclosure requirements and government contractor restrictions are aimed at countering the effects of the Supreme Courts Citizens United decision in January freeing corporations to use corporate funds to support or oppose congressional or presidential candidates. Before the ruling, corporations or unions could spend in federal elections only by first forming a separate political action committee funded by voluntary contributions. Brady noted that even while striking down part of the McCain-Feingold law, the court upheld by an 8-1 vote the acts disclosure requirements. Americans have the right to know who is paying to influence their vote and potentially impacting the direction of

474

CQ Researcher

our nation, Brady said after the committee mark-up. The bill would require disclosure of independent spending related to federal elections even if the advertisement or publication did not expressly call for the election or defeat of a named candidate. Spending would have to be reported to the FEC within 24 hours for any spending of $1,000 or more within the 20 days before an election. Corporations, unions or nonprofit political groups that make at least $10,000 in campaign-related expenditures in a year would generally be required to report all donors of $1,000 or more. Donors would be permitted to specify that contributions could not be used for campaign-related activities. An organization that transfers funds to another entity for campaign-related purposes would have to disclose the transfer. Under the bill, radio or television advertising by independent groups would have to include a disclaimer recorded by the chief executive officer of the corporation or comparable officer of a union or nonprofit group taking responsibility for the ad. For advertising sponsored by a coalition, the top funder of the ad would have to appear. The bills pay-to-play provision would bar big federal contractors from federal campaign-related expenditures altogether. The provision originally applied to companies with contracts greater than $50,000, but the committee approved a Democratic-written amendment to raise the threshold to $1 million. The bill also seeks to limit the influence of foreign-owned corporations by barring expenditures by a company if a foreign national owns 20 percent or more of stock, if a majority of board of directors members are foreign nationals or if foreign nationals can control a U.S. subsidiarys decisionmaking or activities with respect to U.S. elections.

OUTLOOK
No Truce in Sight
here are two things that are important in politics, Mark Hanna, the Republican kingmaker of the Industrial Age and the first of the highfinance bundlers of campaign cash, famously said. The first is money, and I cant remember the second. Hannas unembarrassed strongarming of corporations to pay to play in national politics fueled outrage that resulted in the passage of the 1907 law prohibiting corporations from contributing cash to candidates for federal offices. That law remains on the books, but the Supreme Courts decision in the Citizens United case frees corporations to spend money independently of candidates campaigns to try to sway voters in races for Congress or the presidency. The courts decision invalidated not only a major section of the recently enacted McCain-Feingold law but also laws prohibiting corporate spending in political races in about half the states. Critics fear a rush of corporate spending, made through shadowy political committees, that will tilt politics toward moneyed interests. As one example, they cite the $1 million that the software company Intuit, publisher of TurboTax, spent in an unsuccessful effort in 2006 to defeat California Controller John Chiang because of his support of a free, online taxpreparation program for low-income taxpayers. 31 Campaign finance deregulators cast themselves as advocates of free political speech against self-styled reformers who demagogue corporations, limit information for voters and turn campaigns into a legal and bureaucratic quagmire. The Founding Fathers

would be shocked at what people have to go through now to speak out at election time, says the Club for Growths Keating. The proposed legislation to require more disclosure of independent campaign spending by independent groups and their funding sources would add more rules. Supporters say the information will help voters evaluate the groups political messages. Opponents say the real purpose is to discourage corporations from speaking at all. Campaign finance reformers would go further for example, by requiring shareholder approval of corporate spending on political campaigns. That legislation proved too problematic for Congress to take on, at least for now. All the more problematic is legislation to provide public financing of congressional candidates. Public financing bills were introduced in March 2009 by leading Democratic lawmakers Senate Majority Whip Dick Durbin of Illinois and House Democratic Caucus Chairman John Larson of Massachusetts but never advanced beyond a single hearing in the House. 32 In describing their own similar public financing proposal for states, the Campaign Finance Institutes Malbin and his coauthors lamented what they called the stale two-sided battleground of campaign finance issues. They voiced the hope to move the dispute out of the courts and for both of the warring sides to accept the goals voiced by the other: to prevent corruption and to protect free speech. 33 Whatever their hopes, campaign finance debates four months later appear no fresher and the warring sides no closer to a truce, much less an entente. Theyre very clear that their goal is to disrupt the entire campaign finance apparatus from A to Z, the Campaign Legal Centers McGehee says of the groups challenging campaign finance laws in court.

www.cqresearcher.com

May 28, 2010

475

CAMPAIGN FINANCE DEBATES


The idea thats just intolerable to them, counters Smith from the Center for Competitive Politics, is maybe we should just stop meddling with this. The idea that we should let it go just cannot be tolerated.
2000, pp. 257-280; and Kenneth Jost, Campaign Finance Reform, Feb. 9, 1996, pp. 121-144. 4 The case is SpeechNow.org v. Federal Election Commission, D.C. Cir., March 26, 2010, http:// pacer.cadc.uscourts.gov/docs/common/opinions/ 201003/08-5223-1236837.pdf. 5 See Election Law Blog; http://electionlaw blog.org/. 6 Both quoted in Kim Geiger and Clement Tan, Democrats unveil election spending bill, Los Angeles Times, April 30, 2010, p. A2. 7 The decision is Republican National Committee v. Federal Election Commission, U.S. District Court for the District of Columbia, March 26, 2010, www.fec.gov/law/litigation/ rnc_opinion_3judge.pdf, discussed infra. 8 The cases are McComish v. Bennett (Arizona), decided May 21 by the Ninth U.S. Circuit Court of Appeals, background and documents available at www.goldwaterinstitute.org/case/68; and Green Party of Connecticut v. Garfield, pending before the Second U.S. Circuit Court of Appeals, background and documents available at www.aclu.org/free-speech/judge-rules-con necticut-campaign-finance-law-unconstitutional. 9 Fredreka Schouten, Independent groups spend more than candidates in some contests, The Associated Press, Oct. 10, 2008. The Federal Election Commission cited the $100 million figure as the total of independent group spending in the 2008 campaign in its reply brief at the Supreme Court in Citizens United v. FEC, p. 12. 10 For Schumers statement, see Senate Democrats Unveil Legislation To Limit Fallout From Supreme Court Ruling That Allows Unlimited Special-Interest Spending On Elections; Announce Plan For Senate Passage By July 4, April 29, 2010, http://schumer.senate. gov/record.cfm?id=324343&. McConnell is quoted in Geiger and Tan, op. cit. 11 Quoted in Dan Eggen, U.S. Chamber sets sights on Democrats in advance of midterm elections, The Washington Post, March 16, 2010, www.washingtonpost.com/wp-dyn/content/ article/2010/03/16/AR2010031602040.html. 12 Toner appeared in person before the House Committee on House Administration on May 11, 2010; full witness list, statements, and biographies available at http://cha.house.gov/view_hear ing.aspx?r=67. The Brennan Center submitted written testimony, co-authored by Susan Liss and others, available at www.brennancenter.org/con tent/resource/testimony_on_the_disclose_act/. 13 Republican National Committee v. Federal Election Commission, op. cit. Other documents from both sides also available on the FEC site. Background on the soft-money ban is drawn from the Supreme Courts decision in McConnell v. FEC, op. cit. 14 The opinion, signed by vice chairman Cynthia Bauerly, is available on the FECs website: http://saos.nictusa.com/saos/searchao?SUB MIT=ao&AO=3047. 15 The district court decision in the Arizona case, then called McComish v. Brewer, is available on the Web site of the Goldwater Institute, www.goldwaterinstitute.org/Common/Img/ Silver%20Decision2%20%282%29.pdf, along with other pleadings and affidavits by the plaintiffs; information about the Citizens Clean Election Commission, which administers the law, can be found at www.azcleanelections.gov/home.aspx. The Ninth Circuits decision, McComish v. Bennett, is available at www.ca9.uscourts.gov/data store/opinions/2010/05/21/10-15165.pdf. 16 The decision is Green Party v. Garfield, available on the website of the American Civil Liberties Union, www.acluct.org/downloads/Green PartyDecisionAug27.pdf, along with some other documents. For coverage, see Edmund Mahony, State Law Is Revoked; Federal Judge Rules It Unconstitutional; Campaign Finance Reform, Hartford Courant, Aug. 28, 2009, p. A1. 17 The citation is 424 U.S. 1 (1976). The justices vote on public financing was 6-2, with Chief Justice Warren E. Burger and then-Associate Justice William H. Rehnquist dissenting. 18 Anthony J. Corrado, Michael J. Malbin, Thomas E. Mann and Norman J. Ornstein, Reform in an Age of Networked Campaigns, Campaign Finance Institute/American Enterprise Institute, Brookings Institution, January 2010, www.cfinst.org/books_reports/Reformin-an-Age-of-Networked-Campaigns.pdf.

Notes
1 For background, see Peter Katel, Tea Party Movement, CQ Researcher, March 19, 2010, pp. 241-264. 2 Account drawn from these sources: Mark Z. Barabak, Utahs front in civil war, Los Angeles Times, Nov. 14, 2009, p. A14 (spending in New York race); David Weigel, How the Club for Growth beat Bob Bennett, Right Now (blog), May 10, 2010, http://voices.washingtonpost. com/right-now/2010/05/how_the_club_for_ growth_beat_b.html; Matthew Mosk, Club for Growth is fined, The Washington Post, Sept. 6, 2007, p. A4. In settling the FEC case, the Club for Growth claimed a good-faith belief that it was not subject to registration and disclosure requirements. 3 The earlier decision is McConnell v. Federal Election Commission, 540 U.S. 93 (2003). For an account, see Kenneth Jost, Supreme Court Yearbook 2003-2004. Citizens United is available on the Supreme Court website: www.supreme court.gov/opinions/09pdf/08-205.pdf. For background on campaign finance issues, see these CQ Researcher reports: Thomas J. Billitteri, Campaign Finance Reform, June 13, 2008, pp. 505528; Kenneth Jost, Campaign Finance Showdown, Nov. 22, 2002, pp. 969-992; Mary H. Cooper, Campaign Finance Reform, March 31,

About the Author


Associate Editor Kenneth Jost graduated from Harvard College and Georgetown University Law Center. He is the author of the Supreme Court Yearbook and editor of The Supreme Court from A to Z (both CQ Press). He was a member of the CQ Researcher team that won the American Bar Associations 2002 Silver Gavel Award. His previous reports include Women in Politics and Electing the President. He is also author of the blog Jost on Justice (http://joston justice.blogspot.com).

476

CQ Researcher

19 Background drawn in part from Anthony Corrado, Money and Politics: A History of Federal Campaign Finance Law, in Corrado, et al., The New Campaign Finance Sourcebook (2005), pp. 7-47; Bradley A. Smith, Unfree Speech: The Folly of Campaign Finance Reform (2001), pp. 17-38. 20 Corrado, op. cit., p. 15. 21 For a new account of the history, impact and survival of the decision, see Richard L. Hasen, The Nine Lives of Buckley v. Valeo, in Richard W. Garnett and Andrew Koppelman, First Amendment Stories (forthcoming, 2010), available at http://papers.ssrn.com/sol3/papers. cfm?abstract_id=1593253. 22 Corrado, op. cit., p. 31; Smith, op. cit., p. 36. 23 Corrado, op. cit., p. 32; data from Center for Responsive Politics, cited in Jost, Campaign Finance Showdown, op. cit., p. 973. 24 Data from Center for Responsive Politics, Independent Expenditures, www.opensecrets. org/indexp/index.php. 25 For background, see Billitteri, op. cit. 26 The cases are Wisconsin Right to Life v. Federal Election Commission, 546 U.S. 410 (2006); Federal Election Commission v. Wisconsin Right to Life, 551 U.S. 449 (2007). For accounts, see the respective editions of The Supreme Court Yearbook. 27 Davis v. Federal Election Commission, 554 U.S. --- (2008). 28 For coverage and a link to the motion, see Lyle Denniston, Citizens United sequel moves along, SCOTUSBlog, May 14, 2010, www.scotusblog.com/2010/05/citizens-unitedsequel-moves-along/. 29 For coverage and a link to the motion and appeal, see Lyle Denniston, No quick ruling on GOP appeal, SCOTUSBlog, April 23, 2010, www.scotusblog.com/2010/04/no-quick-rulingon-gop-appeal/. For the later motion, see Lyle Denniston, Fast track on soft money opposed, ibid., May 4, 2010, www.scotusblog.com/ ?s=RNC+v.+FEC. 30 For coverage, see Charlene Carter, Panel Approves Bill That Would Provide New Rules for Political Spending, CQ Weekly, May 24, 2010, p. 1285. 31 See Shane Goldmacher, New rules, new tactics in U.S. races, Los Angeles Times, Feb. 24, 2010, A3. 32 See Bart Jansen, Public Campaign Financing Proposal Draws Bipartisan Backing, CQ Today, March 31, 2009. 33 Corrado, et al., op. cit., p. 1.

FOR MORE INFORMATION


AFL-CIO, 815 16th St., N.W., Washington, DC 20006; (202) 637-5000; www.aflcio.org. National trade union coalition calling for a ban on soft money contributions in national politics. Brennan Center for Justice, New York University School of Law, 161 Avenue of the Americas, 12th Floor, New York, NY 10013; (212) 998-6730; www.brennancenter.org. Public policy group that focuses on issues such as judicial elections, campaign finance and voting rights. Campaign Finance Institute, 1990 M St., N.W., Suite 380, Washington, DC 20036; (202) 969-8890; www.cfinst.org. Group affiliated with The George Washington University that conducts research and makes policy recommendation on campaign finance. Campaign Legal Center, 1640 Rhode Island Ave., N.W., Suite 650, Washington, DC 20036; (202) 736-2200; www.campaignlegalcenter.org. Nonprofit group that focuses on campaign finance and elections, political communication and government ethics. Cato Institute, 1000 Massachusetts Ave., N.W., Washington, DC 20001; (202) 8420200; www.cato.org. Conservative public policy research foundation supporting uncapped corporate financing of campaigns. Center for Competitive Politics, 124 S. West St., Suite 201, Alexandria, VA 22314; (703) 894-6800; www.campaignfreedom.org. Nonprofit group co-founded by former Federal Election Commission Chairman Bradley Smith that is critical of the McCain-Feingold law. Center for Responsive Politics, 1101 14th St., N.W., Suite 1030, Washington, DC 20005-5635; (202) 857-0044; www.opensecrets.org. Nonpartisan group that tracks money in politics and its effect on elections and public policy. Democracy 21, 2000 Massachusetts Ave., N.W., Washington, DC 20036; (202) 355-9600; www.democracy21.org. Research organization working to reduce the influence of big money in politics and ensure the fairness of elections. Democratic National Committee, 430 S. Capitol St., S.E., Washington, DC 20003; (202) 863-8000; www.democrats.org. Provides agenda geared toward expanding opportunity for all Americans and supporting honest and accountable government. Institute for Justice, 901 N. Glebe Rd., Suite 900, Arlington, VA 22203; (703) 682-9320; www.ij.org. Libertarian civil liberties law firm litigating against freespeech restrictions. Public Campaign, 1133 19th St., N.W., Suite 900, Washington, DC 20036; (202) 293-0222; www.publicampaign.org. Nonpartisan organization that promotes campaign reform that reduces the role of special-interest money in politics. Republican National Committee, 310 First St., S.E., Washington, DC 20003; (202) 863-8500; www.gop.com. Seeks to protect free speech and reduce the influence of government. U.S. Chamber of Commerce, 1615 H St., N.W., Washington, DC 20062; (202) 659-6000; www.uschamber.com. Supports free enterprise before Congress, the White House, courts and regulatory agencies.

www.cqresearcher.com

May 28, 2010

477

Bibliography
Selected Sources
Books
Corrado, Anthony, Thomas E. Mann, Daniel R. Ortiz and Trevor Potter, The New Campaign Finance Sourcebook, Brookings Institution Press, 2005. Four leading experts on campaign finance, all supportive of regulation, join in providing a concise overview of, among other topics, the history and current status of campaign finance law; First Amendment limits on campaign finance regulation; and the role of the Federal Election Commission (FEC) in enforcing campaign finance laws. A concluding chapter offers proposals for reform. Includes chapter notes. Corrado is professor of government at Colby College, Mann a senior fellow at Brookings, Ortiz a law professor at the University of Virginia and Potter an attorney in Washington and former FEC chairman. Samples, John, The Fallacy of Campaign Finance Reform, University of Chicago Press, 2006. The director of the Cato Institutes Center for Representative Government mounts a strong attack on campaign finance laws, most of which he says should be cause for lamentation. Includes detailed notes. Slabach, Frederick G. (ed.), The Constitution and Campaign Finance Reform: An Anthology (2d ed.), Carolina Press, 2006. Twenty-three experts representing a range of views and experiences provide essays around three major topics: classifying campaign contributions and expenditures as speech; defining governmental interests in campaign finance regulation; and considering alternative methods of regulation. Includes chapter notes. Slabach is dean emeritus and professor of law at Texas Wesleyan University School of Law. Smith, Bradley, Unfree Speech: The Folly of Campaign Finance Reform, Princeton University Press, 2001. Smith, then a professor at Capital University Law School, was completing work on this strongly argued critique of campaign finance laws just as President Bill Clinton was naming him as a Republican nominee to the FEC. Chapters include an historical overview, critiques of regulation and of public financing and analyses of constitutional issues. Includes detailed notes, list of court cases and 15-page bibliography. Smith has returned to the law school; he is also founder and chairman of the Center for Competitive Politics. by Democratic lawmakers, Sen. Charles Schumer of New York and Rep. Christopher Van Hollen of Maryland, as severely burdensome of the right to engage in political speech and advocacy.

Reports and Studies


Corrado, Anthony J., Michael J. Malbin, Thomas E. Mann and Norman J. Ornstein, Reform in an Age of Networked Campaigns: How to foster citizen participation through small donors and volunteers, Campaign Finance Institute, January 2010. The authors, two campaign finance experts and two longtime Washington observers, propose a new approach to public campaign financing aimed at increasing the importance of small donors. The plan would tie taxpayer subsidies to a candidates qualifying threshold of low-level contributions, provide a multiple match for those contributions and lower contribution limits for candidates accepting the subsidies. Includes notes, detailed tables. Corrado is a professor of political science at Colby College, Malbin is director of the Campaign Finance Institute at George Washington University and Mann and Ornstein are resident scholars at the Brookings Institution and American Enterprise Institute, respectively. Hebert, J. Gerald, and Tara Malloy, Challenges to Campaign Finance and Disclosure Laws Multiply After Citizens United Ruling from Roberts Court, Campaign Legal Center, May 21, 2010, www.clcblog.org/blog_item-329.html. The 5,000-word backgrounder on the centers blog summarizes, from a campaign finance reform perspective, litigation and legislative developments following the Supreme Courts Citizens United decision. The posting triggered a pointed reply from the deregulatory-oriented Center for Competitive Politics about the CLCs funding (Hypocrisy and smears typical of the Campaign Legal Center, May 21, 2010, www.campaignfreedom.org/newsroom/detail/hypocrisy-andsmears-typical-of-the-campaign-legal-center); the CLC responded in turn (Talk About Hypocrisy!! CCPs Secret Funding Unrefuted by Poorly Researched Diatribe, May 24, 2010, www.clcblog.org/blog_item-330.html.)

On the Web
The Federal Election Commission maintains a comprehensive, well-organized and up-to-date Web site detailing contributions and expenditures in federal campaigns along with records of the commissions advisory opinions, regulations and litigation (www.fec.gov). The site includes a page summarizing the Bipartisan Campaign Reform Act (BCRA), the FECs regulations and advisory opinions under the act and litigation relating to the act (http://fec.gov/pages/ bcra/bcra_update.shtml).

Articles
Former FEC Commissioners, Chuck Schumer vs. Free Speech, The Wall Street Journal, May 19, 2010, p. A19. An op-ed signed by eight former members of the Federal Election Commission criticizes the DISCLOSE Act sponsored

478

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Free Speech
Biskupic, Joan, Supreme Court Cases Test Speech Rights and More, USA Today, March 30, 2010, p. 1A. Free-speech cases have not historically divided the Supreme Court along ideological lines, but the decision in Citizens United v. Federal Election Commission may suggest a shift. Horner, John, Government of the Corporations, By the Corporations, For the . . . , The Gazette (Colorado), Feb. 3, 2010, A15. The recent Citizens United decision confuses the paper persons of corporations with the real persons of citizens. Sleeper, Jim, Corporate Free Speech? Since When? The Boston Globe, Sept. 5, 2009, p. A11. No corporation can be the kind of citizen or speaker that the First Amendments writers intended to protect. Smith, Rodney A., High Court Aided Free Speech But Should Have Gone Further, The Washington Times, Feb. 17, 2010, p. A2. The Founding Fathers wanted everyone, including corporations, to freely participate in the election process. Von Drehle, David, Campaign Finance and the Court, Time, Feb. 8, 2010, p. 14. The Supreme Courts decision on corporate campaign contributions upholds the First Amendment or sells politics into bondage, depending on your view. Murray, Matthew, Court Upholds Soft Money Ban for Now, Roll Call, March 29, 2010. A three-judge panel has upheld an 8-year-old ban on unlimited soft money contributions to political parties. Woolfolk, John, Divided San Jose Council Votes to Keep Soft Money Ban in Place, San Jose Mercury News, Aug. 11, 2009. The California city will maintain its controversial cap on soft money contributions to independent political committees, despite concerns over igniting legal feuds.

Spending Disclosures
Kirkpatrick, David D., Democrats Try to Rebuild CampaignSpending Barriers, The New York Times, Feb. 12, 2010, p. A19. Democrats are trying to impose a series of spending restrictions and disclosure requirements many based in current laws to combat the Supreme Courts recent campaign finance decision. Mendoza, Mariecar, Council Poses New Disclosure Policies, Desert Sun, Dec. 30, 2009, p. B1. Indian Wells, Calif., is requiring council members to announce in public session what contributions they have received in the past 12 months from individuals directly involved in decisions being made by the council. Riskind, Jonathan, The More Disclosure, the Better, Columbus (Ohio) Dispatch, Feb. 7, 2010, p. 5G. Politicians must make sure that disclosure and disclaimer requirements mandated by the Supreme Court actually mean something.

Public Campaign Financing


Hay, Kiera, City Financing of Campaigns Start Debated, Albuquerque Journal, Aug. 4, 2009, p. 4. Santa Fe, N.M., city council members are debating the need to have a public campaign financing system in 2010. Knox, Bill, A Vote for Public Campaign Financing, News & Record (North Carolina), Jan. 20, 2010, p. A10. Public campaign financing can relieve candidates from dialing for dollars and allow them to concentrate on the issues. Sanders, Jim, Proposition 15: Public Campaign Funds, Sacramento Bee, May 21, 2010, p. A3. Proposition 15 in California would allow candidates for secretary of state in 2014 and 2018 to obtain public campaign funds.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

Soft Money
Dolinski, Catherine, Parties Rake in Oil, Gas Cash, Tampa Tribune, Oct. 17, 2009, p. 1. Oil and gas companies have stepped up contributions to Floridas political parties through the soft money loophole.

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

May 28, 2010

479

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10 Closing Guantnamo, 2/09 Affirmative Action, 10/08

Education
Housing the Homeless, 12/09 Bilingual Education, 12/09 Value of a College Education, 11/09 Financial Literacy, 9/09

Health/Safety
Caring for Veterans, 4/10 Earthquake Threat, 4/10 Breast Cancer, 4/10 Modernizing the Grid, 2/10 Sleep Deprivation, 2/10 Professional Football, 1/10

Environment/Society
Teen Pregnancy, 3/10 Youth Violence, 3/10 Sex Scandals, 1/10 Animal Rights, 1/10 Women in the Military, 11/09 Conspiracy Theories, 10/09

Crime/Law
Prosecuting Terrorists, 3/10 Prisoner Reentry, 12/09 Interrogating the CIA, 9/09 Examining Forensics, 7/09 Legalizing Marijuana, 6/09

Politics/Economy
Census Controversy, 5/10 Gridlock in Washington, 4/10 Tea Party Movement, 3/10 State Budget Crisis, 9/09

Upcoming Reports
Jobs of the Future, 6/4/10 Health-Care Reform, 6/11/10 Water Crisis, 6/18/10

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Is government action tough enough?

Researcher
Published by CQ Press, an Imprint of SAGE Publications, Inc.

www.cqresearcher.com

Financial Misconduct

he United States is slowly coming out of the worst financial crisis since the Great Depression, but many Americans want tougher law enforcement against the companies and executives they say created the mess.

Four years after the crisis began, no prominent financial executives have been prosecuted. Civil charges were brought against major banks for misleading investors by packaging subprime mortgages with insufficient disclosure, but a federal judge recently rejected a proposed settlement as too lenient. Meanwhile, major mortgage lenders are negotiating a potential multibillion-dollar settlement over allegations of improper home foreclosures. Some states, however, are balking at banks request for protection from subsequent lawsuits. Many experts say the government has failed to devote adequate resources to prosecuting wrongdoers. But some also acknowledge that certain activities that triggered the crisis were not necessarily illegal.
Raj Rajaratnam, founder of the now-defunct Galleon Group, leaves court on May 11, 2011, after his conviction on fraud and conspiracy charges. Prosecutors said he used insider information from Wall Street contacts to make more than $70 million over six years at his once high-flying hedge fund. He was sentenced to 11 years in prison.

I N S I D E

THIS REPORT
THE ISSUES ......................55 BACKGROUND ..................62 CHRONOLOGY ..................63 CURRENT SITUATION ..........68 AT ISSUE..........................69 OUTLOOK ........................70 BIBLIOGRAPHY ..................74 THE NEXT STEP ................75

CQ Researcher Jan. 20, 2012 www.cqresearcher.com Volume 22, Number 3 Pages 53-76
RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

FINANCIAL MISCONDUCT
THE ISSUES
sists it could not have known the bubble would burst.

CQ Researcher
Jan. 20, 2012 Volume 22, Number 3

55

Was illegal conduct a major cause of the financial crisis? Was government action tough enough in prosecuting wrongdoing? Should mortgage lenders be punished for their role in improper foreclosures?

MANAGING EDITOR: Thomas J. Billitteri

tjb@cqpress.com

SIDEBARS AND GRAPHICS

56 57 58

SEC Targets Insider Trading More than 500 cases have been brought by the Securities and Exchange Commission. Financial Crisis Sparks SEC Charges Misconduct laid to executives, companies. Madoff Eluded SEC for 16 Years Despite tips, agency failed to halt his $18 billion Ponzi scheme. Financial Fraud Prosecutions on the Decline Number of cases dropped sharply in past 20 years. Chronology Key events since 1933. Test Drive for Wiretaps in Insider-Trade Case Galleon Fund founder made more than $70 billion illegally. At Issue Will the Financial Protection Bureau help consumers?

BACKGROUND

kkoch@cqpress.com CONTRIBUTING EDITOR: Thomas J. Colin tcolin@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Sarah Glazer, Alan Greenblatt, Barbara Mantel, Jennifer Weeks
DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT CHECKER: Michelle Harris

ASSISTANT MANAGING EDITOR: Kathy Koch

62 65 66

Policing the Markets Regulation of banking, housing and securities dates from the Great Depression. Losing Control Widespread financial misconduct hit the U.S. beginning in the 1980s. Digging Out After the financial crisis, prosecutors pursued wrongdoers, and lawmakers sought to prevent another financial meltdown.

60 63 64 69

An Imprint of SAGE Publications, Inc.

VICE PRESIDENT AND EDITORIAL DIRECTOR, HIGHER EDUCATION GROUP:

Michele Sordi
DIRECTOR, ONLINE PUBLISHING:

Todd Baldwin
Copyright 2012 CQ Press, an Imprint of SAGE Publications, Inc. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except: (March wk. 5) (May wk. 4) (July wk. 1) (Aug. wks. 3, 4) (Nov. wk. 4) and (Dec. wks. 3, 4). Published by SAGE Publications, Inc., 2455 Teller Rd., Thousand Oaks, CA 91320. Annual full-service subscriptions start at $1,054. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Thousand Oaks, California, and at additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

CURRENT SITUATION

68 70

Blaming Fannie, Freddie? Top executives of the two mortgage giants are charged with fraud. New Agency Under Way Republicans are challenging Richard Cordrays appointment to head the Consumer Financial Protection Bureau.

FOR FURTHER RESEARCH

73 74 75 75

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

OUTLOOK

70

No Way to Know? The financial industry in-

Cover: AFP/Getty Images/Emmanuel Dunand

54

CQ Researcher

Financial Misconduct
BY KENNETH JOST
and Citigroup alike by refusing to sign off on the accord. In a 15-page decision, Rakoff he Securities and Exblasted the agency for allowchange Commission ing Citigroup to resolve the (SEC) exuded conficomplaint without admitting dence last fall when it anallegations that, the judge nounced a $285 million settleadded, had been inadequatement with the financial ly laid out. The settlement was conglomerate Citigroup for pocket change for Citigroup, misleading investors about a Rakoff said, while the agency $1 billion package of toxic was seeking only a quick mortgages sold in early 2007. headline instead of fulfilling its In its 25-page complaint statutory mission to see that filed Oct. 19, the federal the truth emerges. 1 agency depicted Citigroup as Rakoffs rebuff to one of hatching a devious scheme the key federal agencies to offload around $500 milcharged with protecting the lion of subprime mortgages public from financial misconto institutional investors duct came just six days bewithout disclosing that Citi fore a nationally televised news would be betting that the program blasted the U.S. Juspackage would go bust. tice Department for failing to Which it did. The investors prosecute high-level executives hedge funds and others responsible for the financial lost several hundred milcrisis. The CBS program 60 lions of dollars when the Minutes showcased wouldAngelo Mozilo, founder of Countrywide Financial package defaulted in Nobe whistleblowers from CitiCorp., testifies before a congressional committee in vember 2007, according to group and Countrywide Fi2008. The next year the Securities and Exchange the SEC. But Citigroup pocknancial, the nations largest Commission charged Mozilo with securities fraud and insider trading for selling off his Countrywide stock eted $160 million in profits mortgage lender until its coldespite his worries about the quality of subprime loans by selling the mortgages lapse in 2008. Former CountryCountrywide had helped create and popularize. with the expectation they wide executive Eileen Foster In 2010, Mozilo agreed to pay a $67.5 million fine and would plunge in value along and former Citigroup vice presnever again serve as a director or officer with the original $34 million ident Richard Bowen told corof a publicly traded company. management fee for strucrespondent Steve Kroft that the the SECs enforcement action against Justice Department had shown no inturing and marketing the package. The SEC had successfully brought Citigroup. The case had been assigned terest in hearing their accusations. 2 similar securities-fraud complaints with- to a federal judge in New York, Jed Rakoff, The unrelated episodes exemplify in the past 15 months against two other who The New York Times pointed a sentiment widely shared by the pubWall Street giants: Goldman Sachs and JP out had previously taken a hard line lic that the financial crisis stemmed at Morgan Chase. The allegations under- on SEC settlements. In February 2010, least in part from violations of the law scored one dark side of the housing- Rakoff had approved a $150 million and that the government has failed to market bust that led to the financial cri- settlement the agency negotiated with bring the wrongdoers to justice. We sis of 2008. Big financial firms trading Bank of America for inadequate disclo- know there are insiders within the in securitized mortgages tried to profit sure about the details of its acquisition companies who say there is strong evor shield themselves from losses by con- of the former investment firm Merrill idence that the companies committed cealing their own fears that many of the Lynch, but only after criticizing the deal criminal wrongdoing that should have as half-baked justice at best. mortgages were likely to default. warranted prolonged investigations and The caveat proved to be prophetic. that should have resulted in actions by Some news accounts, however, noted one potential stumbling block for On Nov. 28, Rakoff stunned the SEC now, says Russell Mokhiber, editor of

THE ISSUES

www.cqresearcher.com

AFP/Getty Images/Tim Sloan

Jan. 20, 2012

55

FINANCIAL MISCONDUCT
SEC Targets Insider Trading
The Securities and Exchange Commission has brought more than 500 insider-trading cases against individuals and entities over the past 10 years, including 57 in scal 2011. Defendants include hedge fund managers, corporate insiders, attorneys and government employees who allegedly traded securities on nonpublic information.
(No. of cases)

80 70 60 50 40 30 20 10 0

SEC Actions Against Insider Trading FY2002-FY2011 61 50 42 50 46 47 37 53 57

59

FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011

Source: Year-by-Year SEC Enforcement Actions, Securities and Exchange Commission, www.sec.gov/news/newsroom/images/enfstats.pdf

Corporate Crime Reporter, a Washington, D.C.-based newsweekly founded in 1987. And we have no actions. The SEC and Justice Department both reject the criticism. The SEC has brought charges against 87 companies and individuals stemming from the financial crisis, including 39 CEOs, chief financial officers or other senior officers. The agency, which can bring civil but not criminal charges, said financial penalties and other monetary recovery in the actions total nearly $2 billion. 3 (See graph, p. 57.) In the 60 Minutes program, Assistant Attorney General Lanny Breuer, who heads the departments Criminal Division, insisted the government was pursuing investigations without any outside interference, but noted the difficulties of making a criminal case. I find the excessive risk-taking to be offensive, Breuer said. I find the greed that was manifested by certain people to be very upsetting. But because I may have an emotional reaction and I may personally share the same frustration that American people all over the country are feeling, that in and of itself doesnt mean we bring a criminal case. 4

Legal experts acknowledge some of the difficulties of bringing criminal prosecutions in cases based on complex and arcane financial transactions. Indeed, the government suffered a black eye in its most high-level prosecution when a federal jury acquitted two hedge fund managers at the defunct investment firm Bear Stearns of obstructing justice in November 2009. Still, many experts agree with the public perception that the government could and should do more. They arent bringing as many cases against public firms for [misleading] financial statements as they could, says Jennifer Arlen, a securities law expert at New York University Law School. And they havent been as aggressive in going against senior individuals as they could. William Black, an associate professor of economics and law at the University of Missouri-Kansas City and a former federal regulator, strongly seconds Rakoffs criticism of the SEC practice of allowing defendants to settle complaints without admitting wrongdoing. When something doesnt work and doesnt work profoundly, you really should reconsider, says Black, who worked with the former Office

of Thrift Supervision in cleaning up the savings and loan crisis of the 1980s. And the SEC hasnt worked for a very long time. Some experts, however, dispute the widespread assumption that criminal conduct was at the heart of the financial crisis. People think that because theres a scandal that people ought to go to jail, says Thomas Gorman, a Washington lawyer who publishes a blog on SEC litigation. Thats not necessarily true. The SEC has helped win prison sentences for some Wall Street figures by referring insider-trading cases to the Justice Department for prosecution. Most notably, Raj Rajaratnam, the head of the Galleon Group hedge fund, was sentenced to 11 years in prison in October for orchestrating a large insidertrading scheme at Galleon over a sixyear period. Rajat Gupta, a prominent Wall Streeter formerly at Goldman Sachs, was indicted later that month for tipping off Rajaratnam to valuable inside information about corporate deals. (See sidebar, p. 64.) In the latest insider-trading case, the U.S. attorneys office in Manhattan announced charges on Jan. 18 against a prominent hedge fund manager and six others in a scheme that allegedly netted nearly $62 million in illicit profits in 2008 and 2009 rivaling the $70 million-plus in illicit gains that Rajaratnam was alleged to have realized. Anthony Chiason, co-founder of Level Global Investors LP, was charged along with others in a plot that allegedly used inside information from a paid tipster at Dell, the big computer maker, to trade in Dell stock. The tipster and two others pleaded guilty and were cooperating with authorities, the U.S. attorneys office said. 5 Apart from the insider-trading cases, however, the only prominent Wall Street figure to be prosecuted successfully since the financial crisis hit is Bernard Madoff, who is now serving a 150-year prison sentence for turning

56

CQ Researcher

his wealth-management business into a Ponzi scheme that cost investors $18 billion or more. Madoffs prosecution brought no kudos to the SEC, however. A report by the SECs inspector general showed the agency failed to detect Madoffs crimes despite a succession of ever-more-detailed tips going as far back as 1992. (See sidebar, p. 58.) Madoffs offenses were tangential, however, to the financial crisis. To date, no prominent executive who played a central role in the events leading up to the crisis has been prosecuted. The SEC did file civil complaints in December, however, against the former chief executives and four other top managers of the two government-sponsored mortgage lenders: Fannie Mae and Freddie Mac. The complaint, announced on Dec. 17, charges the executives with misleading investors about the extent of subprime mortgages in their portfolios. The SEC is appealing Rakoffs rejection of its proposed Citigroup settlement, but at the same time somewhat revising its policy of allowing defendants to avoid admitting wrongdoing in resolving civil complaints. Under a new policy announced Jan. 6, the SEC will not allow a defendant to stand mute on the substance of a civil complaint if it already has admitted wrongdoing in a related criminal case. 6 Meanwhile, the nations biggest banks are squared off with attorneys general from all 50 states over legal remedies for allegedly having used improper procedures to evict delinquent borrowers from their homes as the financial crisis deepened. The banks had been close to an agreement last summer, calling for a $20 billion settlement, but some states balked at their demand to be shielded from any further liability. Another federal agency also is entering the field of policing financial misconduct with President Obamas appointment of a director for the newly established Consumer Financial Protection Board (CFPB). Obama named former Ohio Attorney General Richard

Financial Crisis Sparks SEC Charges


The Securities and Exchange Commission has charged 87 entities and individuals including 45 CEOs or other senior corporate ofcers with nancial misconduct in connection with the nancial crisis that began in 2008. Penalties and other monetary relief total nearly $2 billion. SEC Enforcement Actions Related to Financial Crisis*
Number of entities and individuals charged Number of CEOs, CFOs and other senior corporate officers charged Total penalties, disgorgement and other monetary relief * As of Dec. 16, 2011 Source: SEC Enforcement Actions Addressing Misconduct That Led to or Arose From the Financial Crisis, Securities and Exchange Commission, December 2011, www.sec.gov/spotlight/enf-actions-fc.shtml 87 45 $1.97 billion

Cordray to head the new agency on Jan. 4, using his power to make a recess appointment after Senate Republicans had stalled action on the nomination. GOP senators disputed the move, saying the Senate was technically in session. The legal wrangling masks a bigger issue, however, about whether the agencys powers to regulate nonbank financial institutions such as payday lenders will actually benefit consumers. (See At Issue, p. 69.) As the various legal proceedings continue, here are some of the questions being debated: Was illegal conduct a major cause of the financial crisis? Ralph Cioffi and Matthew Tannin were pulling down seven-figure salaries for managing hedge funds for the Wall Street firm Bear Stearns until the funds, heavily invested in mortgage securities, went belly up in July 2007. Federal prosecutors charged the two with securities fraud in June 2008, alleging that they knowingly misled investors about the funds exposure to potentially toxic assets. Cioffi and Tannin defended themselves in a three-week trial in fall 2009 by contending that they and their funds

were victims of an unforeseeable market meltdown. Federal court jurors apparently agreed, finding the pair not guilty after barely six hours deliberation. Columbia University securities law expert John Coffee called the result a total rebuff to the prosecution. 7 The too-clever-by-half financial deals that came crashing down in the summer and fall of 2008 naturally led many of the victims investors left holding the bag, homeowners stuck with underwater mortgages to assume that laws had been violated. But experts and financial-crisis watchers from President Obama down caution that illegal conduct was not necessarily to blame. Answering a question at a press conference on Oct. 6 about the lack of major prosecutions, Obama replied: One of the biggest problems about the collapse of Lehmans a reference to the investment bank Lehman Brothers, which declared bankruptcy in September 2008 and the subsequent financial crisis and the whole subprime lending fiasco is that a lot of that stuff wasnt necessarily illegal, it was just immoral or inappropriate or reckless. 8 Assessing the verdict in the Bear Stearns case, financial journalists Bethany McLean and Joe Nocera voiced a similar view.

www.cqresearcher.com

Jan. 20, 2012

57

FINANCIAL MISCONDUCT

Madoff Eluded SEC for 16 Years


Despite tips, agency failed to halt $18 billion Ponzi scheme.
he Securities and Exchange Commission (SEC) got its first tip about something fishy in Bernard Madoffs investment operations in 1992. The next, very detailed tip came in 2000, followed by four more reports before Madoff sons accusations against their father in December 2008 finally got the agency to stop what appears to have been the largest Ponzi scheme in U.S. history.* The missed opportunities to stop a scheme that bilked investors out of $18 billion in cash and higher amounts in claimed but nonexistent profits are catalogued in a damning report issued in late August 2009 by the SECs inspector general. SEC investigators repeatedly failed to grasp the significance of tipsters information, according to the 450-page report, and never took some rudimentary steps that could have verified the suspicions. 1 Two years later, the agency confirmed on Nov. 11 that it had disciplined eight employees for mishandling the investigation, but fired no one. A ninth employee resigned before disciplinary action could be taken, according to The Washington Posts account. Victims of Madoffs fraud denounced the disciplinary steps as inadequate. 2 Madoff, now 73, is serving a 150-year sentence in a federal prison in North Carolina even as a court-appointed trustee seeks to recover and return to victims some of the misappropriated funds. As of December, an estimated $11 billion had been recovered. 3 The inspector generals report clears the SEC of any conflicts of interest or inappropriate interference in the investigations but ends with an understated critique of the agencys thoroughly botched response to tips it received.

* A Ponzi scheme, named after the early 20th-century swindler Charles Ponzi, is a fraudulent investment operation in which investors are paid gains from money deposited by new investors. The schemes typically collapse when new investors cannot be recruited or a large number of investors try to cash out all at once.

The SEC never properly examined or investigated Madoffs trading and never took the necessary, but basic, steps to determine if Madoff was operating a Ponzi scheme, the report states. Had these efforts been made with appropriate followup at any time beginning in June 1992 until December 2008, the SEC could have uncovered the Ponzi scheme well before Madoff confessed. The report prompted sharp criticism of the agency from members of Congress from both parties. Sen. Charles E. Schumer, DN.Y., said the report showed a level of incompetence unseen since [the Federal Emergency Management Agencys] handling of Hurricane Katrina. Sen. Charles Grassley, R-Iowa, said the agencys utter failure to follow up on the tips was further evidence of a culture of deference toward the Wall Street elite. 4 The SEC was properly chastised, says Thomas Gorman, a Washington lawyer who publishes a blog on SEC litigation. They had multiple opportunities to find that case. They simply failed to analyze the information. Jennifer Arlen, a securities law professor at New York University, is more sympathetic to the agencys investigators difficulties in dealing with what she calls huge numbers of tips of varying quality and credibility. Theyre making tradeoffs between, Here are these things that I know something wrongs going on, and Heres something big but it could be something or it could be nothing. The first of the tips against Madoff came in June 1992 from customers of an investment firm suspicious that the firm was claiming 100% safe investments with extremely high and consistent rates of return. The firms investments, it turned out, were managed exclusively by Madoff. Inexperienced investigators suspected a Ponzi scheme, the inspector generals report states, but failed to conduct a thorough investigation. Eight years later, the SEC received the first of three detailed complaints about Madoff from Harvey Markopolos, a securities executive-turned-independent financial fraud investigator in Boston. Markopolos reports grew from an eight-page complaint in May

Much of what took place during the crisis was immoral, unjust, craven, delusional behaviorbut it wasnt criminal, McLean and Nocera write in their book, All the Devils Are Here. 9 Other experts, however, are less inclined to give a legal pass to the companies and individuals whose actions helped topple respected Wall Street firms, forced the government to bail out the nations biggest banks, caused

millions of homeowners to lose their homes and left hundreds of thousands of others owing more than their homes were worth. Accounting-control frauds drove this financial crisis, as they did the two prior financial crises: the Enron era fraud [of the early 2000s] and the S&L debacle, says Black, the former regulator from the S&L crisis. What caused the crisis was overwhelmingly garden-

variety fraud, which can and should be prosecuted. Fraud was widely seen as a major factor in the 1980s S&L crisis, but the extent to which fraud caused the collapse of so many thrift institutions defies simple calculation. Early on, the government suggested that fraud was a factor in 70 to 80 percent of the thrift failures. But a study by the Resolution Trust Corporation, the government-

58

CQ Researcher

in January 2008 and declined 2000 to a longer version in to reopen it after receiving the October 2005 with the headreport about double sets of line, The Worlds Largest books two months later. Hedge Fund Is a Fraud. Madoffs scheme finally unIn each report, Markoporaveled when he confessed in los said he had attempted but December 2008 to his sons, failed to replicate Madoffs Andrew and Mark, who reclaimed returns based on MadBernard Madoff, once a prince of Wall Street, pleaded ported him to federal authorioffs reports of his investment guilty to running a Ponzi scheme that bilked investors out ties. Madoff was arrested on strategy. Markopolos has forceof $18 billion. He is serving a 150-year prison sentence. Dec. 10; he pleaded guilty on fully criticized the agency in March 12, 2009, to 14 federal interviews and in his firstfelonies, including securities fraud. In court, Madoff said he person account, No One Would Listen, published in 2010. 5 By the third of his reports, Markopolos was being taken seri- began his Ponzi scheme in 1991. Judge Denny Chin sentenced ously by SEC investigators, according to the inspector generals him three months later. Madoff has apologized for his conduct, but his son Andrew report. They focused, however, more on the question of whether Madoff needed to register as an investment adviser than on whether has said he will never forgive his father. Mark Madoff committed suicide by hanging himself in his Manhattan apartment. he was operating a Ponzi scheme as Markopolos believed. In addition, the report states, SEC investigators failed to take He was found dead on Dec. 11, 2010, two years to the day the basic step of attempting to verify through third parties after his fathers arrest. whether Madoff actually was making the trades that he said Kenneth Jost he was making. A simple inquiry . . . could have immediately revealed the fact that Madoff was not trading in the volume 1 Investigation of Failure of SEC to Uncover Bernard Madoffs Ponzi Scheme he was claiming, the report states. Other complaints came to the SEC from a respected hedge Public Version, U.S. Securities and Exchange Commissions Office of Investigations, Aug. 31, 2009, www.sec.gov/news/studies/2009/oig-509.pdf. The fund manager, an anonymous informant and a concerned cit- executive summary is found at pp. 20-41. For coverage, see David Stout, izen, who first contacted the agency in December 2006 and Report Details How Madoffs Web Ensnared S.E.C., The New York Times, 3, 2009, p. again in March 2008. The last communication included the Sept.Failure, The B1; Zachary A. Goldfarb, The Madoff Files: A Chronicle of SEC Washington Post, Sept. 3, 2009, p. A1. damning detail later confirmed that Madoff kept two sets 2 See David S. Hilzenrath, SEC disciplines 8 employees for Madoff failures, of records, the most interesting of which is on his computer The Washington Post, Nov. 12, 2011, p. A1; SECs disciplinary steps in Madoff case enrage fraud victims, The Washington Post, Nov. 17, 2011, p. A17. which is always on his person. 3 See Even when SEC investigators began probing his operations, 2011, Diana B. Henriques, A Lasting Shadow, The New York Times, Dec. 12, Business, p. 1. Madoff, the one-time chairman of the NASDAQ stock exchange, 4 See Sean Lengell, Schumer: Boost SECs budget to fight fraud, The Washfended them off in an interview, according to the report, by ington Times, Sept. 4, 2009, p. 9; Marcy Gordon, SEC bungled Madoff lording his credentials and knowledge over the less experi- probes, agency watchdog says, The Associated Press, Sept. 3, 2009. 5 Harry Case, Gaytri enced agency personnel. Supervisors closed the investigation Ocrant, Markopolos with FrankA TrueNeil Chelo, ThrillerKachroo, and Michael No One Would Listen: Financial (2010).

owned company organized to manage the assets of the failed thrifts, estimated more conservatively that fraud played a significant role in the failure of about a third of the institutions. Officials estimated that fraud was to blame for about 10 percent to 15 percent of net losses from the crisis. 10 Any firm conclusion about how much fraud or other illegal conduct was to blame for the latest financial

crisis is years away. For now, Arlen, the New York University professor, acknowledges uncertainty. It does seem to me clear that there were disclosure problems, Arlen says, but Im not yet in a position to know whether the problems relate to judgment calls that are inherently part of the accounting profession or to actual fudging. Lawyers who defend white-collarcrime cases voice doubts about the

extent of fraud in the recent events. In most of these cases, I dont see fraud, says David Douglass, a Washington lawyer and chair of the government enforcement and compliance committee of the defense bar organization DRI. In most of these cases, I see why people would be unhappy with the results, but its not fraud. Youre talking about companies taking huge risks, companies being hugely

www.cqresearcher.com

AFP/Getty Images/Timothy A. Clary

Jan. 20, 2012

59

FINANCIAL MISCONDUCT
Financial Fraud Prosecutions on the Decline
Federal prosecutions for nancial institution fraud have declined sharply over the past 20 years. They totaled 1,251 in the rst 11 months of scal 2011 and were projected to reach 1,365 for the full year if trends continued. That would be 29 percent fewer than in 2006 and 58 percent fewer than a decade ago. Criminal Fraud Prosecutions of Financial Institutions FY1991-FY2011
3,500 3,000 2,500 2,000 1,500 1,000 500 0

3,138

3,227 1,912 1,349

FY1991

FY2001

FY2006

FY2011

Source: Transactional Records Access Clearinghouse, Syracuse University, November 2011, trac.syr.edu/tracreports/crim/267/

leveraged, says Gorman, the lawyer with the securities litigation blog. You might categorize that as reckless mismanagement or breach of fiduciary duty, but its not criminal. Even years from now, any assessment of the issue may be elusive, in part because of the difficulties of proving fraud or financial wrongdoing in court. It is enormously problematic for prosecutors to prove beyond a reasonable doubt that the executives of a company acted with fraudulent intent, says Michael Perino, a professor at St. Johns University School of Law in Jamaica, N.Y., and a former Wall Street litigator. That is what you need to show a criminal prosecution under the federal security law. But Black points out that federal regulatory agencies have referred far fewer cases for possible prosecution in the current scandal than the 10,000plus criminal referrals that were made during the S&L crisis. As of November 2011, Black counted no referrals from the Office of Thrift Supervision, three from the Office of the Comptroller of the Currency and three from the Federal Reserve. 11

Yes, these are difficult cases, Black says. But, he adds, Without criminal referrals there are no police on elite white-collar criminals. Have federal agencies been tough enough in prosecuting financial wrongdoing? Angelo Mozilo helped found Countrywide Financial in 1969 and built it over the next three decades into the largest lender of single-family home loans in the country. By 2006, however, Mozilo was worrying about a possible decline in home prices and the quality of some of the subprime loans his company had helped create and popularize. Publicly, however, Mozilo voiced confidence in his company right up to its collapse in late 2007 and acquisition in January 2008 by Bank of America at the fire-sale price of $4 billion. As the storm clouds grew, the SEC in June 2009 charged Mozilo in a civil suit with securities fraud and insider trading for selling off his stock in Countrywide. In October 2010, the SEC negotiated a settlement with Mozilo that included a $67.5 million fine and a per-

manent ban on his serving as a director or officer in a publicly traded company. Robert Khuzami, director of the SECs Division of Enforcement, said the record penalty was a fitting outcome in the case. But observers noted that the agreement allowed Mozilo to avoid any admission of wrongdoing. And the governments criminal investigation was quietly shelved a few months later. 12 The decision to bring no criminal charges against Mozilo exemplifies what The New York Times called in a 4,000word overview last spring the dearth of prosecutions in connection with the financial crisis. 13 The story by two of the Times veteran financial reporters, Gretchen Morgenson and Louise Story, noted that under President George W. Bush, Attorney General Michael Mukasey declined to create a nationwide task force on financial crimes as was done during the S&L crisis. A task force created by Obamas attorney general, Eric Holder, was given a broad mandate but no additional resources. Black, who was prominently quoted in the story, continues to speak out about the lack of prosecutions. There has been no prosecution of an elite Wall Street figure who played a major role in the crisis, Black says today. Thats an astonishing fact. Statistics compiled by the private Transactional Records Access Clearinghouse at Syracuse University show an uninterrupted, decade-long decline in the number of federal prosecutions for financial institution fraud. In a report in late 2011, the clearinghouse showed more than 3,000 such prosecutions per year in the 1990s but only 1,349 for fiscal 2011. 14 (See graph, above.) In the 60 Minutes segment, former Countrywide vice president for fraud investigations Eileen Foster said there was systemic fraud at the company specifically, loan officers approving mortgages based on forged or manipulated statements of borrowers incomes and assets. However, she told

60

CQ Researcher

correspondent Kroft, she was never interviewed by the Justice Department. In the second part of the segment, Richard Bowen, a former senior vice president in Citigroups consumer-lending division, said he warned Citis top executives in November 2007 that a high percentage of mortgages in its portfolio were defective and that the company was understating its financial risks. Kroft went on to suggest that Citis CEO Vikrim Pandit and Chief Financial Officer Gary Crittenden may have violated a central provision of the post-Enron Sarbanes-Oxley Act by certifying inaccurate financial statements to the SEC. Kroft quoted the company as defending the statements. Commenting generally, New York Universitys Arlen sharply criticizes the failure to bring legal actions against individual executives. You cant safeguard the market unless securities fraud doesnt pay, and it has to not pay for the individuals who do it, Arlen says. You need people to be personally afraid of the consequences of lying. SEC officials insist the agency is not shying away from going after individual executives. In announcing the civil suit against the former Fannie Mae and Freddie Mac executives, enforcement chief Khuzami promised that all individuals would be held accountable for financial misrepresentations regardless of their rank or position. 15 The SEC also is touting its recent crackdown on insider-trading cases. In testimony to congressional committees in December, Khuzami described insider trading as one of the Division of Enforcements highest priorities and listed several initiatives aimed at spotting suspicious trading patterns and abusive market practices. 16 Private lawyers Douglass and Gorman both give the SEC credit for its insider-trading initiatives. Its aggressive and innovative, says Douglass. It captured the attention of the business community. Overall, however, Douglass,

an assistant U.S. attorney before going into private practice, calls the governments prosecution policies in the financial crisis feckless. Insider trading should be prosecuted, but I dont think you can link insider-trading cases to these other kinds of fraud, Douglass says. It undermines peoples faith in the legal system when prosecutors say theyre going to hold people accountable and they fail to do so. Should mortgage lenders be punished for their role in improper foreclosures? Among the more than 5 million home foreclosures since the financial crisis, banks and other mortgage lenders are now known to have completed a substantial number with procedures more akin to a factory assembly line than to a court of law. Banks, lenders and mortgage-servicing companies acknowledge the practice dubbed robo-signing when first disclosed in October 2010 where loan officers routinely signed foreclosure papers en masse without having read them. Consumer advocates and some state attorneys general say the procedures amounted to foreclosure fraud. Major banks admitted but somewhat minimized the problems even as they halted foreclosures for a while in order to clean up procedures. Investigations by news organizations and others, however, indicate that robo-signing and other documentation discrepancies continue. 17 Banks hoping to put the issue behind them have been negotiating with representatives of state attorney general offices since spring 2011, looking to a multibillion-dollar settlement that would also limit their liability in further investigations. An accord looked close last fall, but the likelihood of agreement dimmed as some state attorneys general split off from the talks to take a tougher line. In the most significant development, Massachusetts Attorney General

Martha Coakley sued the nations five largest mortgage lenders in state court on Dec. 1. The 57-page complaint charges the banks Bank of America, Citigroup, GMAC Mortgage and its parent company Ally Financial, JP Morgan Chase and Wells Fargo with having seized properties unlawfully. It asks for a court order that they change their practices and correct defects in previous foreclosures. 18 In announcing the suit, Coakley said she pulled out of the settlement talks because the banks had failed to take responsibility for what she called the devastation on individual homeowners and communities. Critics of the lenders practices similarly say the proposed settlement which is being pushed by the Obama administration would allow the banks to escape accountability for throwing people out of their homes without proper procedures. We should have prosecutions, says Yves Smith, who writes critically about financial industry news on the popular blog Naked Capitalism. You dont settle unless you know what the crime was, she continues. The attorneys general dont know what theyre settling for, so they dont have any bargaining leverage. Smith sharply criticizes the banks effort to limit further legal exposure. The banks have continued to ask for more and more and more, she says. Black, the law professor and former S&L regulator, agrees. I would not have believed it possible in the United States that we would actually immunize them, Black says. Banks involved in the negotiations have generally declined to comment about the talks. Spokesmen for three of the banks Bank of America, JP Morgan Chase and Wells Fargo all expressed disappointment with the filing of the Massachusetts suit. We continue to believe that the collaborative resolution rather than continued litigation will most quickly heal the housing market and help drive economic

www.cqresearcher.com

Jan. 20, 2012

61

FINANCIAL MISCONDUCT
recovery, BofA spokesman Lawrence Grayson said. GMAC was more combative. GMAC Mortgage believes it has strong legal and factual defenses, the company said in a statement, and will vigorously defend its position in court. 19 The value of the proposed settlement as reported could reach $25 billion if all 50 states participate, most of it apparently in the form of principal write-downs, interest-rate reductions and other benefits to homeowners. Some cash penalties could be imposed on the banks. The settlement would be reduced if some states most notably, California balk at the accord. 20 California is one of five states all with Democratic attorneys general that have pulled out of the talks to pursue separate legal actions. Besides Massachusetts, the others are Delaware, Nevada and New York. Obama administration officials, including Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan, have been pushing the settlement in the interest of stabilizing the banks and the housing market. Without commenting on the specifics of the proposed settlement, Christopher Mayer, a real estate finance expert at Columbia Business School, agrees on the importance of resolving the issues. Settling this is incredibly important because theres an enormous backlog of delinquent mortgages, Mayer says. The process of doing nothing is a loser for everybody. We need to reduce uncertainty. Mayer says most of the foreclosures are justified in economic terms. The vast, vast majority of people who are involved are people who are not paying their mortgages, he says. But Smith insists that the banks actions are more than innocent mistakes. These are not mistakes, she says. They happened on too large a scale to be mistakes.

BACKGROUND
Policing the Markets
ederal regulation of the banking, housing and securities industries dates from the Great Depression, the economic calamity touched off by the stock market crash of 1929 that cost millions of Americans their homes, farms, jobs or life savings. The legislative and regulatory regimes set up to insure bank deposits, protect investors and support home mortgages appeared to serve the countrys financial system well for half a century. By the 1970s, however, the Supreme Court began to balk at some of the SECs expansive applications of anti-fraud rules. Since then, marketplace changes have combined with deregulatory initiatives and out-and-out dishonesty to jolt the financial system, first in the 1980s and twice already in the 21st century. 21 The stock market crash of October 1929 a 25 percent drop in two days came unexpectedly after a decade of boom times. The subsequent congressional investigation documented abuses that, if known, might have foretold the collapse in particular, risky investments in securities by banks. Over a four-year period, 43 percent of the 24,970 U.S. banks failed or were merged out of existence. 22 The investigation by the so-called Pecora Commission named after its lead investigator, Ferdinand Pecora helped build support for new laws regulating banking and securities. The Glass-Steagall Act, passed in 1933, separated commercial from investment banking and also established the Federal Deposit Insurance Corporation (FDIC) to insure individual depositors accounts. In the same year, Congress passed the Securities Act, which required disclosure of financial information by companies is-

suing stock or other securities. A year later, the Securities Exchange Act created the SEC, regulated securities trading and gave the SEC power to write anti-fraud rules. Congress also sought to bolster home mortgages. The Federal Home Owners Loan Corporation was created in 1933 to repurchase foreclosed homes and reinstate former mortgages; the Federal Housing Administration was established in 1934 to insure those mortgages. Meanwhile, deposit insurance was extended in 1934 to savings and loan associations, the main source of mortgage funds. Then in 1938, the Federal National Mortgage Association dubbed Fannie Mae was founded as a government-sponsored enterprise to invest in mortgages. Fannie Mae was transformed into a private corporation in 1968; that change prompted Congress two years later to create a competitor: the Federal Home Loan Mortgage Corporation, dubbed Freddie Mac. Despite congressional and law enforcement investigations, the Depressionera financial turmoil spawned only a small handful of criminal prosecutions, according to St. Johns professor Perino. The point of the Pecora Commission was to show that the laws and regulations were inadequate, he explains. The highest profile prosecutions failed. Bank executive Charles Mitchell of National City Bank was found not guilty of tax evasion; utility tycoon Samuel Insull of Commonwealth Edison was acquitted of mail fraud and antitrust charges. The only big name to go to prison was Richard Whitney, president of the New York Stock Exchange from 1930 to 1935, who embezzled money from the exchanges gratuity fund to cover heavy investment losses. He pleaded guilty to state charges in 1938 and served three years in prison. The banking and securities regulations remained controversial through the 1930s. In a memoir, Pecora warned in 1939 against allowing Wall Street to
Continued on p. 64

62

CQ Researcher

Chronology
Before 1960 Federal regulation of banks,
securities established. 1933, 1934 Financial disclosure required to offer stock, other securities (Securities Act). . . . Commercial, investment banking separated; federal deposit insurance instituted (Glass-Steagall Act). . . . Securities and Exchange Commission (SEC) established. 1938 Federal National Mortgage Association (Fannie Mae) created by Congress; becomes private company in 1968; Federal Home Loan Mortgage Corporation (Freddie Mac) established as competitor in 1970.

Mid-1980s Hundreds of S&Ls fail; speculative loans, looting by executives blamed. 1989 Congress reregulates thrift industry, approves bailout of failed S&Ls (Financial Institutions Reform, Recovery and Enforcement Act). . . . Bailout cost later put at $88 billion; more than 1,800 S&L officials prosecuted, more than 1,000 sent to prison. 1996, 1998 Congress limits private securitiesfraud suits in federal, state courts. 1999 Congress repeals Glass-Steagall; allows banks, securities firms to merge (Gramm-Leach-Bliley).

Mae, Freddie Mac (Sept. 7). . . . Lehman Brothers declares bankruptcy (Sept. 15). . . . Treasury Secretary Henry Paulson strong-arms major banks to agree to bailout; Congress OKs plan (Emergency Economic Stabilization Act) (September/October). . . . Bernard Madoff charged with Ponzi scheme (Dec. 10). 2009 Madoff pleads guilty (March 12); later sentenced to 150 years in prison. . . . SEC Office of Inspector General says investigators could have stopped Madoff after first tip in 1992 (Aug. 31). . . . Bear Stearns hedge fund managers acquitted (Nov. 9). 2010 Goldman Sachs agrees to $550 million penalty in marketing subprime mortgages (July 15). . . . DoddFrank Act gives government more power to seize failing banks; creates Consumer Financial Protection Bureau (July 21). . . . Countrywide founder Angelo Mozilo settles with SEC for $67.5 million (Oct. 15). 2011 Meltdown could have been avoided, Financial Crisis Inquiry Commission says; Republican members file dissent (Jan. 27). . . . Hedge fund manager Raj Rajaratnam convicted in insider-trading case (May 11); later draws 11-year sentence; two dozen others convicted. . . . JP Morgan Chase agrees to $154 million penalty for rigged subprime mortgage package (June 21). . . . Citigroup agrees to $285 million settlement in toxic mortgage deal (Oct. 19), but judge balks at deal (Nov. 28). 2012 President Obama uses recess appointment to name Richard Cordray to head Consumer Financial Protection Bureau; Republican senators object (Jan. 4).

1960s-1970s SEC becomes more aggressive,


meets Supreme Court resistance. 1961 SEC prescribes disclose or abstain rule to bar insider trading. 1976 Supreme Court rules that securities fraud requires intent to deceive, not mere negligence.

Early 2000s Enron, accounting scandals


followed by reforms. 2001 Enron forced into bankruptcy after accounting frauds; top executives later prosecuted, convicted. 2002 Congress requires top executives to personally certify financial statements, creates agency to oversee accounting profession (Sarbanes Oxley).

1980s-1990s 2008-Present Savings and loan crisis: govern- Financial crisis freezes markets,
ment bailout, tightened rules. 1980, 1982 Congress passes, two presidents sign legislation to deregulate thrift industry to aid competition with commercial banks. brings financial overhaul, calls for tougher government action. 2008 Government forces Bear Stearns firesale to JP Morgan Chase (March 16). . . . Government takes over Fannie

www.cqresearcher.com

Jan. 20, 2012

63

FINANCIAL MISCONDUCT

Test Drive for Wiretaps in Insider-Trading Case


Galleon hedge fund founder made more than $70 billion in illegal gains.

ederal prosecutors in New York City have used wiretaps and a wired informant to help win more than two dozen convictions in a sprawling insider-trading investigation, including a record-setting prison term against the billionaire hedge-fund founder at the center of the case. Dozens of recorded telephone calls provided the critical evidence that netted Raj Rajaratnam an 11-year prison sentence after his May 11 conviction in federal court in New York on nine counts of insider trading and five counts of conspiracy. Rajaratnam, founder of the now defunct Galleon Group, made more than $70 million in illegal profits over a six-year period, according to prosecutors, by trading on inside information gathered from multiple contacts in Wall Street and corporate circles. 1 One of Rajaratnams major sources is alleged to have been Rajat Gupta, a friend and former head of the giant consulting firm McKinsey & Co. Gupta was charged in a six-count indictment unsealed on Oct. 26 with passing valuable inside information to Rajaratnam from his position as a director with Goldman Sachs, a big investment firm constantly involved in potential corporate mergers and acquisitions. Among the lesser figures in the investigation was Brien Santarlas, formerly a patent attorney with a New York law firm, whose secretly recorded conversations with other conspirators helped win convictions in June of a key stock trader linked to Rajaratnam and two other defendants. Santarlas, who pleaded

guilty to securities fraud charges in November 2009, was given a reduced, six-month sentence on Nov. 30, 2011, based on his cooperation with the prosecution. 2 The governments first extensive use of wiretaps in an insider trading case a tactic usually associated with organized crime and public corruption investigations is one of the issues being raised on appeal by lawyers for Rajaratnam. Patricia Millett, a Washington lawyer and veteran appellate litigator, previewed her argument in an unsuccessful attempt in late November to win bail for Rajaratnam pending appeal. Millett told a panel of the Second U.S. Circuit Court of Appeals on Nov. 30 that the government had not filed a proper request for the taps. Assistant U.S. Attorney Jonathan Streeter said the requests had been proper and noted that the trial judge had considered the issue before admitting the tapes at the start of Rajaratnams seven-week trial. The appeals court denied bail for Rajaratnam the next day without comment. 3 The prosecution made the most of the tapes during the trial. You heard the defendant commit his crimes time and time again in his own words, Assistant U.S. Attorney Reed Brodsky said in closing arguments. Former government lawyers had praise after the verdict for the tactic. Prosecutors took wiretaps for a test drive, and Id say it was a resounding success, Stephen Miller, a former federal prosecutor in private practice in Philadelphia, told The Associated Press. 4

Continued from p. 62

go back to the time before Uncle Sam stationed a policeman at its corner. 23 Over the next several decades, however, the regulatory regimes appeared to gain general acceptance. With FDIC insurance, runs on banks by worried depositors became a relic of history. Investors grew accustomed to the financial disclosures required from companies issuing securities. By the 1950s and 60s, the SEC was being criticized not for over- but for under-regulating. President John F. Kennedy responded to a report by former SEC Chairman James Landis that called for strengthening regulatory agencies by increasing the SEC staff and appointing an activist-minded corporate law expert, William Cary, as chairman. Cary laid the basis for the SECs insider-trading enforcement with an ad-

ministrative ruling in November 1961 sanctioning a broker who sold a companys stock based on advance word of a dividend cut that he learned from a partner who was on the companys board of directors. The ruling in In re Cady, Roberts & Co. established a so-called disclose or abstain rule: insiders had to disclose material information about a companys finances or abstain from trading on the basis of the information. In 1968 the rule gained judicial endorsement from the New York-based Second U.S. Circuit Court of Appeals in a case, SEC v. Texas Gulf Sulphur Co., where company insiders had bought up stock and stock options in advance of an announcement of a major discovery of copper and zinc deposits. The appeals court interpreted the anti-fraud Rule 10b-5 to require that all investors have relatively equal access to material information. 24

The Supreme Court, which left the Texas Gulf Sulphur ruling in place by rejecting the companys appeal, had been generally supportive of SEC authority since the 1930s but began to shift in the 1970s. In a succession of rulings, the court cut back on SEC litigating positions. In 1976, for example, the court ruled 6-2 that the SECs anti-fraud rule required proof of an intent to deceive, not mere negligence. A 1980 ruling rejected the SECs attempt to expand the definition of insider to include people with no fiduciary relationship to the company. 25 Despite the adverse court rulings, however, the SEC increased its insider-trading enforcement, thanks in part to the creation of a computerized tracking system to monitor stock trading, corporate filings and news items. 26

64

CQ Researcher

Cutillo, who like Santarlas Santarlas, who got into pleaded guilty to a single count the insider-trading racket of conspiracy, was sentenced in October 2007 as a on June 30 to 30 months in young associate at the prison. Both lawyers apologized New York office of the at sentencing for their offenses. Boston-based firm Ropes I know what I did was terri& Gray, agreed to coopFormer Goldman Sachs director Rajat Gupta is facing bly wrong, Cutillo said in the erate with the governcharges of passing inside information to hedge fund June 30 hearing. Five months ment in his first meeting founder Raj Rajaratnam, who was convicted on fraud and later, Santarlas said he was with FBI agents in Noconspiracy charges in connection with his making ashamed, embarrassed and vember 2009. He admit$70 million in illegal profits. humiliated about what he had ted being paid for tips about pending corporate deals gathered from confidential done. Its something Ill never forgive myself for, he said. information at his firm. In the later trial, Santarlas testified Kenneth Jost that he was instructed to use a prepaid cell phone to relay information and then to cut the phone into pieces and 1 Press releases on individual developments in the case can be found by throw the pieces into the river. date on the website of the U.S. attorney for the Southern District of New Santarlas testified, along with fellow lawyer-turned-tipster York: www.justice.gov/usao/nys/pressreleases/. Details on Rajaratnams trial from Tom Hedge fund Arthur Cutillo, in the trial of stock trader Zvi Goffer, who had and conviction taken inside-trade Hays and Larry Neumeister, May 11, 2011. founder convicted in case, The Associated Press, worked for Rajaratnam before starting his own firm. Goffer and 2 See Larry Neumeister and Tom Hays, NY jury convicts 3 in NYC hedge two others who worked for him his brother Emanuel and fund trial, ibid., June, 13, 2011; Tom Hays, Tipster sentenced in NYC inlawyer Michael Kimelman were convicted on June 13 on sider trading case, ibid., Nov. 30, 2011. 3 Larry multiple counts of securities fraud and conspiracy. Zvi Goffer Dec. 1, Neumeister, Fund boss loses bid to stay free during appeal, ibid., 2011. later received a 10-year prison sentence, Emmanuel Goffer a 4 Quoted in Larry Neumeister and Tom Hays, Wiretaps key in conviction three-year term, and Kimelman a 30-month sentence. of ex-hedge fund giant, ibid., May 11, 2011.

Losing Control

wice over the next quarter century, the United States experienced seeming epidemics of financial misconduct, followed each time by strengthened federal regulation and criminal prosecutions of prominent corporate executives. The savings and loan crisis of the 1980s required a $100 billion federal bailout to stabilize the thrift industry. By one count, more than 100 executives were prosecuted for various offenses. The accounting scandals of the early 2000s forced thousands of companies to revise their financial statements and led to prison terms for several top corporate managers. Meanwhile, Congress and the Supreme Court significantly tightened the rules governing civil suits for securities fraud while Con-

gress also approved legislation to loosen regulation of abstruse financial instruments known as derivatives. The S&L crisis stemmed from the competitive pressure on the thrifts created by the rise in interest rates in the late 1970s and a regulatory cap on interest they could pay on deposits. To aid the thrifts, Congress in 1980 and 1982 passed deregulatory legislation that, among other provisions, uncapped interest rates for most deposits, permitted adjustable-rate mortgages and allowed more speculative investments. Initially, the thrifts seemed to fare well, but many investments went bad as the real estate boom subsided. The thrifts also fell prey to high-flying entrepreneurs, some of whom simply looted the funds for personal benefit. By the end of the decade, more than 1,000 had failed, sticking the government

with a $100 billion bailout bill. By 1995, the Justice Department had conducted 1,852 prosecutions of S&L officials, with 1,072 sentenced to prison. 27 Congress and President George H. W. Bush responded to the S&L crisis by enacting the Financial Institutions Reform, Recovery and Enforcement Act of 1989. In addition to authorizing the $100 billion bailout by the newly established Resolution Trust Corporation, the law revamped deposit insurance, raised capital requirements for thrifts and placed them under the authority of the newly established Office of Thrift Supervision within the Treasury Department. In contrast to the heightened regulation of the thrift industry, Congress and the Supreme Court were erecting barriers in the 1990s to private lawsuits aimed at enforcing federal securities

www.cqresearcher.com

Getty Images/Spencer Platt

Jan. 20, 2012

65

FINANCIAL MISCONDUCT
laws. Congress responded to business- fectively repealed the Glass-Steagall nies to issue restatements, and a few community complaints about suppos- Act by allowing banks and financial other top executives faced criminal edly baseless securities class action suits holding companies to own both com- charges. The image of a corporate by enacting, over President Bill Clin- mercial banking and securities firms crime wave was heightened by a spike tons veto, the Private Securities Liti- as well as insurance companies. A in unrelated cases of garden-variety ingation Reform Act of 1996. The act year later, the Commodity Futures sider trading and misappropriation of raised the initial burden of proof for Modernization Act blocked the Com- corporate funds. 30 private securities-fraud suits to proceed modity Futures Trading Commission Even as criminal prosecutions were and tightened various rules governing from asserting regulatory authority getting under way, Congress and Presfederal class action suits. When plain- over the complex financial instruments ident George W. Bush responded by tiffs lawyers tried to circumvent the known as over-the-counter derivatives. overhauling corporate accounting praclaw by bringing suits in state courts, Clinton signed both measures after tices. The bipartisan Sarbanes-Oxley Act Congress responded named after its prinwith a second law, cipal Senate and House the Securities Litigasponsors included tion Uniform Stanprovisions to strengthdards Act, effectively en auditors indepenpreempting state dence from corporate court jurisdiction boards and to require over securities cases. top executives to take Earlier, the Supreme individual responsibility Court in 1994 had isfor the accuracy of fisued a closely dividnancial statements. It also ed ruling that barred established a new, quasiextending civil liabilindependent agency, ity for aiding and the Public Company Acabetting securities counting Oversight fraud to outsiders, Board, to oversee accounting firms complisuch as accountants, ance with the act. In attorneys or other With Richard Cordray at his side, President Obama addresses staffers at signing the bill, Bush professionals. 28 In the new Consumer Financial Protection Bureau on Jan. 6, 2012. called it the most far1997, however, the Obama used a recess appointment to install the former Ohio attorney reaching reforms of court boosted both general as the agencys head after Republicans blocked action on the American business pracprivate and criminal nomination. Cordray is laying out an aggressive initiative for the agency despite potential legal challenges to his appointment. tices since the time of enforcement against Franklin D. Roosevelt. insider trading by endorsing the SECs so-called misappropriation theory, which they had won bipartisan support in barred anyone not just corporate Congress. insiders from trading on confidenThe financial scandals of the early tial company information. The ruling 2000s were embodied most dramatihe financial crisis of 2008 in United States v. OHagan upheld the cally in the story of Enron, a Housformed under the surface for 57-count conviction of a Minneapolis ton-based energy trading company several years before emerging into lawyer who made $4.3 million in prof- that used creative accounting tricks to public view in March when the govits while trading in Pillsbury stock in conceal shaky finances until being ernment forced the sale of cashadvance of a planned tender offer by forced late in 2001 to issue financial strapped Bear Stearns to JP Morgan a corporate client of his firm. 29 restatements and then seek bankrupt- Chase for a paltry $2 a share. By As the decade ended, Congress ap- cy protection. Top Enron executives years end, Lehman Brothers had colproved two additional deregulatory were prosecuted, along with the com- lapsed, Fannie Mae and Freddie Mac initiatives that helped set the stage panys outside accounting firm Arthur had been nationalized and the nations for the later financial crisis. The Andersen. Similar accounting scandals nine biggest banks had been ordered Gramm-Leach-Bliley Act of 1999 ef- forced a succession of other compa- to take billions in bailouts in exchange

Digging Out

66

CQ Researcher

Getty Images/Michael Reynolds-Pool

for a commitment to unfreeze the frozen credit markets. Government regulators and federal prosecutors then went to work, looking for culpability. The government won some significant victories but endured constant second-guessing from critics about the pace of investigations and the penalties imposed. 31 Meanwhile, Congress was working on legislation aimed at preventing another financial meltdown. As signed into law by President Obama on July 21, 2010, the Wall Street Reform and Consumer Protection Act more commonly, the Dodd-Frank Act after its principal Senate and House sponsors gives the government more power to seize and wind down big financial firms. It also requires companies that sell mortgage-backed securities generally to retain at least 5 percent of the risk of the products. The bill also mandates regulation of over-thecounter derivatives and requires hedge funds to register with the SEC. And it established the Consumer Financial Protection Bureau as an independent agency within the Federal Reserve to enforce consumer-protection laws against not only banks and mortgage lenders but also credit card issuers, payday lenders and other financialservice companies. 32 The charges against the ex-Bear Stearns hedge fund managers Cioffi and Tannin in June 2008 marked the first financial crisis-related prosecution to hit Wall Street directly. The pair were arrested June 19 on a fraud and conspiracy indictment based largely on e-mails showing undisclosed doubts about their funds strength. Mark Mehrson, head of the FBIs New York office, told reporters the case was about premeditated lies to investors and lenders. Lawyers for Cioffi and Tannin foreshadowed their successful defense by insisting their clients were victims of an unexpected crisis in financial markets. After the acquittals, a former Enron fraud prosecutor told The

New York Times that the verdict showed the weakness of relying on smoking gun e-mails to make a white-collar crime case. 33 Once in office, the Obama administration made a public show of going after financial misconduct with the creation of an interagency task force on financial fraud in November 2009. Holder, accompanied by SEC Chairwoman Mary Schapiro and Cabinet colleagues Geithner from Treasury and Donovan from HUD, promised that the task force would be relentless in investigating and prosecuting corporate and financial wrongdoing. But Black, the Missouri law professor, notes that in addition to the task force getting no additional resources, its mission was extended beyond Wall Street. In April 2011, for example, a task force working group was formed to study the causes of rising oil and gas prices. 34 The SEC, meanwhile, was achieving some success with civil actions carrying nine-figure settlements in cases against Goldman Sachs and JP Morgan Chase. Both companies were charged with securities fraud by misleading investors in subprime mortgage packages. The $550 million settlement that Goldman agreed to in July 2010 was described as one of the biggest penalties in SEC history. The agency charged Goldman with marketing a package of mortgages picked by the prominent hedge fund manager, John Paulson, who later bet against the bonds. News reports after the settlement disclosed that the five-member agency had split along party lines in initiating the complaint and approving the settlement, with three Democrats in favor and two Republicans against. Almost a year later, the agency won a $154 million settlement against Morgan in a similar case. In both cases, the firms neither admitted nor denied wrongdoing. 35 Despite complaints in the press and from observers about the lack

of prosecutions, the government was winning some significant convictions. It won a big case in April 2011 when a federal jury in Alexandria, Va., convicted Lee Farkas, the former majority owner of the big mortgage company Taylor, Bean & Whitaker, in a $3 billion fraud that toppled the Florida-based firm as well as the Alabama-based Colonial Bank. Farkas was sentenced on June 30 to 30 years in prison. 36 In May 2011, the government notched a higher-profile victory with the conviction of prominent hedge fund manager Rajaratnam on 14 counts of securities fraud and conspiracy. Rajaratnam received an 11-year prison sentence in October said to be the longest ever for insider trading even as Gupta, one of his sources, a former chief executive of the giant consulting firm McKinsey & Co., was awaiting trial himself for insider trading. 37 The SEC was still basking in the publicity glow from the Rajaratnam and Gupta cases when Judge Rakoff caught the agency by surprise by rejecting the proposed settlement with Citigroup. Two weeks later, on Dec. 15, the SEC announced that it would ask the Second U.S. Circuit Court of Appeals to overturn Rakoffs decision. We believe the district court committed legal error by announcing a new and unprecedented standard that inadvertently harms investors by depriving them of substantial, certain and immediate benefits, enforcement chief Khuzami said in a statement accompanying the court filing. 38 The next day, the agency shifted from defense to offense with its civil complaint charging the former Fannie and Freddie executives with fraud. The executives misled investors by understating their exposure to subprime mortgages, Khuzami said. In a briefing, Khuzami said the case was the 38th action brought by the commission in connection with the financial crisis. 39

www.cqresearcher.com

Jan. 20, 2012

67

FINANCIAL MISCONDUCT

CURRENT SITUATION
Blaming Fannie, Freddie?
he SECs fraud complaint against the former Fannie Mae and Freddie Mac executives is renewing the debate over the government-sponsored mortgage companies responsibility for the subprime mortgage crisis, even as lawyers for the defendants call the charges baseless. The parallel complaints, filed in federal district court in New York City, charge the former chief executives and two other ranking executives at each of the companies with making materially false and misleading public disclosures by understating the companies exposure to subprime mortgage loans. Named in the 59-page complaint against Fannie Mae executives are former CEO Daniel Mudd; Enrico Dallavecchia, former chief risk officer; and Thomas Lund, former executive vice president of Fannies single-family mortgage business. The 49-page complaint against Freddie Mac executives names former CEO Richard Syron; Patricia Cook, former executive vice president and chief business officer; and Donald Bisenius, executive vice president for its singlefamily business. The suits both seek disgorgement of profits, unspecified civil penalties and other necessary and appropriate relief, which could include bans on their serving as officers or directors of publicly traded companies. The Fannie Mae case was assigned to Judge Robert Carter, the Freddie Mac case to Judge Richard Sullivan. 40 None of the defendants has filed any response to the complaints, but Mudd and lawyers for Syron denied the allegations after the SEC announcement. The SEC is wrong, and I look forward

to a court where fairness and reason not politics is the standard for justice, Mudd said. Representing Syron, attorneys Thomas Green and Mark Hopson contended Freddies filings had no shortage of meaningful disclosures. They called the SECs case fatally flawed and without merit. 41 The cases apparently will turn on how broadly to define the risks of unconventional loans offered by the two mortgage companies during the twoyear period covered in the complaints up to their takeover by the government in August 2008. A chart accompanying the SECs news release depicts Fannie as reporting $8 billion and Freddie $6 billion in subprime exposure as of secondquarter 2008, when their actual exposure to risky loans was $110 billion and $250 billion, respectively. In the Fannie Mae complaint, the agency elaborates that its disclosures did not include so-called Alt-A reduceddocumentation mortgages and loan products targeted to borrowers with weaker credit histories also known as Expanded Approval or EA loans. Such loans, the complaint states, were exactly the type of loans that investors would reasonably believe Fannie Mae included when calculating its exposure to subprime loans. Similarly, the Freddie Mac complaint says the company failed to include loans referred to internally as subprime, otherwise subprime or subprime-like. The role played by the two mortgage giants sometimes referred to as government-sponsored enterprises or GSEs had been a partisan issue on Capitol Hill and elsewhere since the financial crisis emerged. Republicans and conservative experts argued that Fannie and Freddie led mortgage lenders into the subprime swamp in order to satisfy 1990s-era statutory and regulatory mandates to provide access to affordable housing. Democrats generally defended the affordable-housing mandates and depicted the mortgage companies problems as due to profit-driven reck-

lessness. Days after the SEC filing, Peter Wallison, a longtime critic of the GSEs and a senior fellow at the conservative American Enterprise Institute (AEI), wrote in an op-ed in The Wall Street Journal that the legal actions vindicated his critique. For the first time in a government report, the complaint has made it clear that the two government-sponsored enterprises (GSEs) played a major role in creating the demand for low-quality mortgages before the 2008 financial crisis, Wallison wrote. 42 In a sharp reply to Wallisons argument even before the op-ed appeared, New York Times columnist Joe Nocera argued that Wallison was wrong in blaming the two GSEs for what he called imagined mistakes. Fannie and Freddie got into subprime mortgages, with great trepidation, only in 2005 and 2006, and only because they were losing so much market share to Wall Street, Nocera wrote. He went on to call the SECs case extraordinarily weak, insisting that the agency was exaggerating the amount of risky loans and ignoring the companies relatively low default rates. 43 As part of the legal action, the SEC agreed not to prosecute the two companies, and both agreed to cooperate with the agency in pursuing the case. The filing appeared to be drawing generally positive reaction. Appearing on the PBS NewsHour, Lynn Turner, a former SEC chief accountant, called the complaints a very positive development that showed the government is willing to go after and hold accountable the people at the very top. 44 Less approvingly, Black, the former regulator from the S&L crisis, acknowledges that the agency has a lower burden of proof in a civil case than the government would have in a criminal case. But he still complains about the lack of criminal prosecutions. The Department of Justice still has failed to prosecute any of the elite accounting-control frauds that drove this crisis, he says.
Continued on p. 70

68

CQ Researcher

At Issue:
Will the Financial Protection Bureau benefit consumers?
yes

ROBERT L. BOROSAGE
CO-DIRECTOR, CAMPAIGN FOR AMERICAS FUTURE
WRITTEN FOR CQ RESEARCHER, JANUARY 2012

DIANE KATZ
RESEARCH FELLOW IN REGULATORY POLICY, HERITAGE FOUNDATION
WRITTEN FOR CQ RESEARCHER, JANUARY 2012

he best tribute to the potential of the Consumer Financial Protection Bureau (CFPB) is the millions the banking lobby expended in an unrelenting campaign to block its creation and cripple it once it was established. The reason for the resistance is simple. The CFPB has one mission: to protect consumers against abuse by large banks and other previously unregulated nonbank financial institutions. The CFPB consolidates consumer protections previously scattered across the federal government into one agency devoted to their enforcement. Every other financial regulatory agency gives priority to protecting the safety and soundness of the banks they supervise. The result, witnessed to catastrophic effect in the housing bubble, has been an utter failure to protect consumers, allowing what the FBI called an unchecked epidemic of fraud in subprime mortgages that cost consumers trillions and drove the economy into recession. One of CFPBs priorities will be to police nonbanking institutions, particularly the payday lenders that levy obscene charges effective interest rates of 400 percent or more and onerous penalties and fees on the most vulnerable workers who live paycheck to paycheck. If it simply exposes the big banks engaged in these practices, while requiring and enforcing clear notice of costs, the CFPB can make a dramatic difference. Already the CFPB is stepping up scrutiny of lenders peddling loans to students at profit-making colleges, many of which project 50 percent default rates. The CFPB also has set up special sections to monitor abuses of seniors and active-duty military personnel who are often targeted by predatory lenders. The CFPB already has begun to develop clear know before you owe notifications of terms for mortgages, credit cards and student loans. Currently consumers sign forms that are purposefully too long, detailed and arcane to be read or understood. By forcing simplification, the CFPB will allow consumers to police the tricks and traps now used on unwary borrowers. Despite the claims of the bank lobby and Republicans, the concern about the CFPB isnt that it is unaccountable, but that it will be constrained by budgetary limits and unique oversight requirements. Its rule-making can be overturned by a Financial Oversight Council, made up of traditional banking regulators, all more concerned about protecting the solvency of banks than fairness to consumers. But an active CFPB will garner immense public support as it cracks down on financial predators. No wonder the banking lobby continues to try to weaken it.
no

yes no
Jan. 20, 2012

ome unknown number of individuals may benefit from the Consumer Financial Protection Bureau (CFPB). But the new agencys unparalleled powers magnified by an absence of accountability bodes ill for most consumers. President Obamas recess appointment of Richard Cordray to direct the bureau demonstrates the indiscretion to which the CFPB is prone. To the extent its regulations unduly restrict the availability of financing, economic growth will be constricted. And when unnecessarily stringent regulation raises the cost of credit, consumers are forced to find alternatives that entail greater cost and risk than conventional sources. Researchers have long documented these dynamics, which are also inherent in other provisions of the Dodd-Frank regulatory statute. For example, the so-called Durbin amendment, which imposed price controls on the fees that banks charge retailers to process debit card transactions, has led to higher fees for checking accounts and other bank services. Higher fees, in turn, force low-income Americans from banks and to less conventional lenders of the very sort regulatory advocates warn against. Imbued with ill-defined powers and unparalleled independence, the bureau is the epitome of regulatory excess. Well-intended or otherwise, its proponents are wholly invested in saving us from ourselves, and thus disposed to overreach. That increases the likelihood that consumers will be lulled into a false sense of security and makes the absence of bureau oversight all the more problematic. The CFPB is ensconced within the Federal Reserve, its funding set by statute. Therefore, its budget is not subject to the same congressional control as most other federal agencies. And the bureaus status within the Fed also effectively precludes presidential oversight. Its accountability is also minimized by the vague language of its statutory mandate. It is empowered to punish unfair, deceptive and abusive business practices. While unfair and deceptive have been defined in other regulatory contexts, the term abusive is largely undefined, granting the CFPB officials inordinate discretion. The financial crisis did not result from any lack of regulation over consumer financial products. Therefore, creation of the CFPB will not help to prevent a future crisis. But it will limit consumer choices. Congress should abolish the CFPBs funding mechanism and subject it instead to congressional control, strike the undefined term abusive from the list of practices under CFPB purview, and require the bureau to apply definitions of unfair and deceptive practices in a manner consistent with consumer choice.

www.cqresearcher.com

69

FINANCIAL MISCONDUCT
Continued from p. 68

New Agency Under Way


he head of the new Consumer Financial Protection Bureau is promising to make full use of the agencys regulatory and enforcement powers even as Republicans and industry groups challenge his recess appointment to the post. Its a valid appointment, Richard Cordray said in remarks to the Brookings Institution on Jan. 5, the day after President Obama named him to the position. Im now director of the bureau. 45 Cordray, a former Ohio attorney general, is signaling an initial priority to extend federal regulation to what he calls in a press release the thousands of socalled nonbanks. The non-depository financial businesses include mortgage lenders, mortgage servicers, payday lenders, consumer reporting agencies, debt collectors and money-services companies such as currency exchanges and travelers check and money order issuers. This is an important step forward for protecting consumers, Cordray said in a Jan. 5 release. Holding both banks and nonbanks accountable to consumer financial laws will help create a fairer, more transparent market for consumers. It will create a better environment for the honest businesses that serve them. And it will help the overall economic stability of our country. 46 The debate over Obamas invocation of his recess-appointment power adds to the controversies surrounding the new agency, created as part of the Dodd-Frank Act passed by the Democratic-controlled Congress and signed by the president in 2010. Senate Republicans had blocked action on Cordrays nomination and Obamas previous selection of Harvard law professor Elizabeth Warren in an effort to change the structure and powers of the agency as provided in the law. Warren, now running as a Democrat for the U.S. Senate seat from Massachusetts, was a prime architect of the new agency.

Obama named Cordray the day after the Senate formally convened on Jan. 3 (as required by law) and then resumed a long holiday break. But the Senate had been conducting pro forma sessions every two to three days during the interval. Minority Leader Mitch McConnell of Kentucky and other GOP senators say the Senates pro forma sessions during the period barred the president from invoking his power under the Constitution to fill positions while the chamber is in recess. A week after the appointment, the Justice Department released a memorandum from the Office of Legal Counsel supporting Obamas action. [T]he convening of periodic pro forma sessions in which no business is to be conducted does not have the legal effect of interrupting an intrasession recess, assistant attorney general Virginia Seitz wrote in the 23-page opinion. Administration officials said Seitz had summarized her conclusion to Obama before his appointment. Seitz acknowledged substantial arguments on the opposite side and possible litigation risks to the action. Sen. Charles Grassley of Iowa, ranking Republican on the Judiciary Committee, called the memorandum unconvincing. 47 The law establishes the CFPB as an independent agency within the Federal Reserve to be headed by a single director. Senate Republicans want to provide instead for a multimember board, comparable to other regulatory agencies. They also criticize the agencys independent budget authority. Democrats counter that Republicans should have tried to amend the law instead of blocking action on the nomination. If valid, Obamas recess appointment would allow Cordray to stay in the post through the remainder of the year. In assuming the office, Cordray is making special efforts to solicit input from consumers and whistleblowers. In a two-minute video posted on the CPFB web site (www.consumerfinance. gov), Cordray personally invites consumer complaints. Tell us your story

today, he says in closing. In his remarks at Brookings, Cordray said the agency will make clear that there are real consequences to breaking the law. A week later, Cordray briefed reporters on plans to scrutinize the student loan business, particularly nontraditional lenders to students at for-profit and trade schools. Cordray said the bureau has seen evidence of loans made by lenders even though they knew borrowers would be unlikely to be able to pay off the loans. 48

OUTLOOK
No Way to Know?
en Bernanke wrapped up his first meeting as chairman of the Federal Reserve Board of Governors in March 2006 with cautious optimism about what he described as the cooling in the housing market. Transcripts of the March 27-28 meeting released in accord with the Feds practice five years afterward show Bernanke expected the economys strong fundamentals to offset any reduced spending from homeowners as house prices sagged. I think it would take a very strong decline in the housing market to substantially derail the strong momentum for growth that we are currently seeing in the economy, Bernanke concluded. 49 Instead of the soft landing that Bernanke predicted, the United States decades-long housing bubble burst dramatically and plunged the nation into recession by the end of 2007. Four years later, the economy has yet to recover. Many victims of the recession those who lost their jobs, homes or both naturally blame mortgage lenders and other financial institutions for driving the market catastrophically to unsustainable levels. The financial industry has respond-

70

CQ Researcher

ed in general by insisting that it did not know and could not have known that the bubble would burst as it did. In the industrys view, all of the people at banks and investment firms who sliced and diced mortgages into marketable investment packages hardly could have known that they were selling what turned out to be toxic assets. The law enforcement agencies going through the wreckage chiefly, the SEC and Justice Department at the federal level have found plenty of cases of unmistakable financial misconduct, such as Bernard Madoffs giant Ponzi scheme or the flurry of insider-trading cases. In one of the most recent cases, the government is trying to determine what happened to $1.2 billion in customer money when the New York-based brokerage firm MF Global headed into bankruptcy in October 2011. 50 The SEC also has found evidence of deception at some of the nations banks in marketing securitized mortgages deception that could amount to fraud under federal securities law. Two banks, Goldman Sachs and JP Morgan Chase, agreed to nine-figure payments to resolve such charges, and Citigroup was prepared to do the same until Judge Rakoff balked at the settlement. But the SEC may face an uphill fight in making a similar case against the former Fannie Mae and Freddie Mac executives if they contend that they cannot be held responsible for failing to spot the housing market crash that Bernanke and his Federal Reserve colleagues did not see coming. Based on his experience in the S&L crisis, Black thinks the evidence of prosecutable garden-variety fraud is there for the looking. He sees a lack of political will to pursue cases. Its the Wall Street folks who were the frauds, and nowadays they are the leading contributors to both parties, he says. At the Justice Department, Breuer denies any political interference. This Department of Justice is acting absolutely independently, he told correspondent

Kroft in the 60 Minutes interview. Every decision thats being made by our prosecutors around the country is being made 100 percent based on the facts of that particular case and the law that we can apply. 51 Gorman, the Washington lawyer and SEC litigation blogger, thinks the critics are exaggerating the extent of criminal activity involved. Its one thing to run your business in a reckless way, Gorman says. Its another thing to actually violate the law. Washington defense lawyer Douglass thinks the government itself is to blame for feeding the public perception of serious wrongdoing. If they think theres fraud, they should go out and build those cases, he says. Its not that hard. Its just a heavy lift. The government has been pretty ineffective, says David Skeel, a professor of corporate law at the University of Pennsylvania in Philadelphia. The pattern of enforcement and nonenforcement has been depressing, to put it mildly. When Skeel was interviewed for The New York Times overview in March 2011, he said the lack of prosecutions led to the whole perception that Wall Street was taken care of, and Main Street was not. Today, he says he is hopeful but pessimistic that the government will improve on its record. My fear is that two years from now the 2007-2008 crisis will seem to have been a long time ago, Skeel says. The sense of urgency that regulators ought to have about stepping in will have dissipated.

Notes
1 The decision is U.S. Securities and Exchange Commission v. Citigroup Global Markets, Inc., 11 Civ. 7387 (JSR), U.S. Dist. Ct., S.D.N.Y., Nov. 28, 2011, www.scribd.com/doc/74040 599/Rakoff-Citigroup. For coverage, see Edward Wyatt, Judge Rejects an S.E.C. Deal With Citigroup, The New York Times, Nov. 29, 2011, p. A1; David S. Hilzenrath, Judge rebukes SEC on Citigroup deal, The Wash-

ington Post, Nov. 29, 2011, p. A1. For the SEC press release, and links to the complaint, see Citigroup to Pay $285 Million to Settle SEC Charges for Misleading Investors About CDO [Collateralized Debt Obligation] Tied to Housing Market, Oct. 19, 2011, www.sec.gov/ news/press/2011/2011-214.htm. For coverage, see Edward Wyatt, Citigroup to Pay Millions to End Fraud Complaint, The New York Times, Oct. 20, 2011, p. B1. For coverage of the Bank of America case, see Louise Story, Banks Deal With S.E.C. Is Approved, The New York Times, Feb. 23, 2010, p. B1. 2 Prosecuting Wall Street, 60 Minutes, Dec. 4, 2011, www.cbsnews.com/8301-18560_162-57336 042/prosecuting-wall-street/?tag=contentMain; cbsCarousel (video, script, and Web extras). 3 SEC Charges Stemming From Financial Crisis, Oct. 19, 2011, www.sec.gov/news/press/ 2011/2011-214-chart-stats.pdf. For background on the financial crisis, see these CQ Researcher reports: Marcia Clemmitt, Financial Industry Overhaul, July 30, 2010, pp. 629-652; Thomas J. Billitteri, Financial Bailout, Oct. 24, 2008, pp. 865-888, updated July 30, 2010; Kenneth Jost, Financial Crisis, May 9, 2008, pp. 409-432. 4 Prosecuting Wall Street, op. cit. The interview with Breuer ends the segment. 5 Manhattan U.S. Attorney and FBI Assistant Director-in-Charge Announce Charges Against Seven Investment Professionals for Insider Trading Scheme That Allegedly Netted more than $61.8 Million in Illegal Profits, U.S. Attorney, Southern District of New York, Jan. 18, 2012, www.justice.gov/usao/nys/pressreleases/Janu ary12/newmantoddetalchargespr.pdf; Jenny Strasburg, Michael Rothfeld and Susan Pulliam, Federal Officials Charge Seven in Insider Probe, The Wall Street Journal, Jan. 18, 2012, http:// online.wsj.com/article/SB100014240529702044 68004577168450897919374.html?mod=WSJ_hp_ LEFTTopStories. 6 See Edward Wyatt, S.E.C. Changes Policy on Firms Admissions of Guilt, The New York Times, Jan. 7, 2012, p. B1. 7 Quoted in E. Scott Reckard, Pair are cleared of fraud charges, Los Angeles Times, Nov. 11, 2009, p. B1; see also Zachery Kouwe and Dan Slater, 2 Bear Stearns Funds Leaders Are Acquitted, The New York Times, Nov. 11, 2009, p. A1. For an account of the rise and fall of the funds, see Bethany McLean and Joe Nocera, All the Devils Are Here: The Hidden History of the Financial Crisis (2010), pp. 285-295. 8 News Conference by the President, Oct. 6, 2011, www.whitehouse.gov/the-press-office/2011/ 10/06/news-conference-president.

www.cqresearcher.com

Jan. 20, 2012

71

FINANCIAL MISCONDUCT
McLean and Nocera, op. cit., p. 362. McLean is a contributing editor at Vanity Fair, Nocera a columnist with The New York Times. 10 See Kitty Calavita, Henry N. Pontell, and Robert H. Tillman, Big Money Crime: Fraud and Politics in the Savings and Loan Crisis (1997), p. 29. 11 Quoted in Bruce Maiman, Occupy protest should focus on the bank, Sacramento (Calif.) Bee, Nov. 8, 2011. 12 For coverage, see Gretchen Morgenson, Leading Magnate Settles Charges for $67 Million, The New York Times, Oct. 16, 2010, p. A1; Walter Hamilton and E. Scott Reckard, Countrywide execs settle fraud charges, Los Angeles Times, Oct. 16, 2010, p. A1. Under an indemnification agreement, Bank of America will pay $20 million of Mozilos fine. Background drawn from McLean and Nocera, op. cit., passim, esp. pp. 219-221, 230-31. 13 Gretchen Morgenson and Louise Story, A Financial Crisis With Little Guilt, The New York Times, April 14, 2011, p. A1. 14 Criminal Prosecutions for Financial Institution Fraud Continue to Fall, Transactional Records Access Clearinghouse, Nov. 15, 2011, http://trac.syr.edu/tracreports/crim/267/. The report showed 1,251 prosecutions for the first 11 months of fiscal 2011; a separate update for the final month (September 2011) showed 98 more, for a total of 1,349. The pictured chart projected 1,365 cases. 15 SEC Charges Former Fannie Mae and Freddie Mac Executives With Securities Fraud, Dec. 16, 2011, www.sec.gov/news/press/2011/ 2011-267.htm. For coverage, see David S. Hilzenrath and Zachary Goldfarb, SEC charges ex-Fannie, Freddie chiefs, The Washington Post, Dec. 17, 2011, p. A1; Azam Ahmed and Ben Protess, Ex-Fannie, Freddie Chiefs Accused of Deception, The New York Times, Dec. 17, 2011, p. A1. 16 Statement on the Application of Insider
9

Trading Law to Trading by Members of Congress and Their Staffs, testimony to Senate Committee on Homeland Security and Government Affairs, Dec. 1, 2011, www.sec.gov/ news/testimony/2011/ts120111rsk.htm. Khuzami delivered similar testimony to the House Committee on Financial Services on Dec. 6. 17 Background drawn in part from RoboSigning Paperwork Breakdown Leaves Many Houses in Foreclosure Limbo, PBS NewsHour, Oct. 6, 2010, www.pbs.org/newshour/bb/busi ness/july-dec10/foreclosures_10-06.html; Scot J. Paltrow, Banks Continue Robo-Signing Foreclosure Practices In Spite Of Promises to the Contrary: Investigation, Reuters Thomson, July 18, 2011, updated Sept. 17, 2011, published in Huffington Post, www.huffington post.com/2011/07/18/robo-signing-foreclosurebanks_n_902140.html?page=1/. 18 The lawsuit is Commonwealth v. Bank of America et al., Suffolk County Superior Court, B.L.S. 1-4363, www.mass.gov/ago/docs/press/ ag-complaint-national-banks.pdf. The suit is also against Mortgage Electronic Registration System Inc., a widely used mortgage recording firm, and its parent company. For coverage, see Jenifer B. McKim, State sues big US lenders, Boston Globe, Dec. 2, 2011, p. 1; Gretchen Morgenson, Massachusetts Sues 5 Major Banks Over Foreclosure Practices, The New York Times, Dec. 2, 2011, p. B1. 19 Reactions from McKim, op. cit., and Morgenson, op. cit. (Dec. 2, 2011). 20 See Ruth Simon, Nick Timiraos and Dan Fitzpatrick, Banks in Push for Pact, The Wall Street Journal, Dec. 13, 2011, p. C1. 21 Some background drawn from Fair to All People: The SEC and the Regulation of Insider Trading, Nov. 1, 2006, www.sechistorical.org/ museum/galleries/it/. 22 Cited in Robert J. Samuelson, Fed bashing slander, The Washington Post, Dec. 12, 2011, p. A21. For background, see Hoyt Gim-

About the Author


Associate Editor Kenneth Jost graduated from Harvard College and Georgetown University Law Center. He is the author of the Supreme Court Yearbook and editor of The Supreme Court from A to Z (both CQ Press). He was a member of the CQ Researcher team that won the American Bar Associations 2002 Silver Gavel Award. His previous reports include Financial Crisis and Corporate Crime. He is also author of the blog Jost on Justice (http://jostonjustice. blogspot.com).

lin, Wall Street: 40 Years After the Crash, Editorial Research Reports, Oct. 8, 1969, and Richard Boeckel, Stock Exchanges and Security Speculation, Editorial Research Reports, Feb. 1, 1930; both available in CQ Researcher Plus Archive. 23 Ferdinand Pecora, Wall Street Under Oath: The Story of Our Modern Money Changers (1939), p. xi. For Perinos account of the commissions investigation, see The Hellhound of Wall Street: How Ferdinand Pecoras Investigation of the Great Crash Forever Changed American Finance (2010). 24 The citation is 401 F.2d 833 (2nd Cir. 1968). The Supreme Court declined to hear the companys appeal. 25 The cases are Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976); Chiarella v. United States 445 U.S. 222 (1980). 26 See story by Judith Miller, no headline available, The New York Times, March 7, 1980, sec. 4, p. 1 (SEC begins crackdown on insiders). 27 U.S. Department of Justice, Attacking Financial Institution Fraud: A Report to the Congress of the United States, June 30, 1995, June 30, 1995, cited by incomplete name in Gillian Tett, Insight: A Matter of Retribution, Financial Times, Sept. 30, 2009. 28 The decision is Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164 (1994). For coverage, see Kenneth Jost, Supreme Court Yearbook, 1993-1994. 29 The citation is 521 U.S. 642 (1997). For coverage, see Jost, Supreme Court Yearbook, 1996-1997. 30 For background, see Corporate Crime, op. cit. For a later listing of some companies implicated, see Perry E. Wallace, Accounting, Audit and Audit Committees After Enron, et al.: Governing Outside the Box Without Stepping Off the Edge in the Modern Economy, Washburn Law Review, Vol. 94 (January 2004), pp. 102-103 & accompanying notes. 31 For a dramatized overview of the events of 2008, see Frontline, Inside the Meltdown, PBS, originally aired Feb. 17, 2009, www.pbs. org/wgbh/pages/frontline/meltdown/. 32 See Brady Dennis, Obama ushers in new financial era, The Washington Post, July 22, 2010, p. A13; Historic Financial Overhaul Creates Bureau, Expands Oversight of Banks, 2010 CQ Almanac, pp. 3-3 to 3-9. 33 Mehrson, defense lawyers Edward Little (Cioffi) and Susan Brune (Tannin) quoted in Tom Hays, 2 Former Bear Stearns Hedge Fund Managers Charged, The Associated Press, June 20, 2008; ex-Enron prosecutor John

72

CQ Researcher

Hueston quoted in Kouwe and Slater, op. cit. 34 Government releases: SEC, www.sec.gov/ news/press/2009/2009-249.htm; Justice Department: www.justice.gov/opa/pr/2011/April/11ag-500.html. 35 See Sewell Chan and Louise Story, S.E.C. Settling Its Complaints With Goldman, The New York Times, July 16, 2010, p. A1; David S. Hilzenrath, J.P. Morgan to pay $153.6 million to settle fraud suit, The Washington Post, June 22, 2011, p. A14. 36 For the trial, see Matthew Barakat, Jury convicts exec in $3B mortgage fraud case, The Associated Press, April 19, 2011. 37 For the trial, see Tom Hays and Larry Neumeister, Hedge-fund founder convicted in inside-trade case, The Associated Press, May 11, 2011. 38 See Edward Wyatt, Citing Legal Error, S.E.C. Says It Will Appeal Rejection of Citigroup Settlement, The New York Times, Dec. 16, 2011, p. B3. 39 Quoted in Ahmed and Protess, op. cit. 40 The cases are SEC v. Mudd et al., Case No. 11 CIV 9202 (S.D.N.Y., Dec. 18, 2011), www.sec.gov/litigation/complaints/2011/comppr2011-267-fanniemae.pdf; SEC v. Syron et al., Case No. CIV 9201 (S.D.N.Y., Dec. 18, 2011), www.sec.gov/litigation/complaints/2011/comppr2011-267-freddiemac.pdf. 41 Mudd quoted in Andrew Strickler and Josh Bernstein, FBI Launches Probe of Fannie, Freddie, The Daily, Dec. 17, 2011, www.thedaily.com/page/2011/12/17/121711-news-fanniefredie-1-2/; Syrons lawyers quoted in Ahmed and Protess, op. cit. 42 Peter J. Wallison, The Financial Crisis on Trial, The Wall Street Journal, Dec. 21, 2011, p. A19. Wallison served under President Ronald Reagan as general counsel for the Treasury Department and White House counsel and played a significant role in the administrations unenacted proposals to deregulate the financial services industry. As a member of the Financial Crisis Inquiry Commission, he joined with other Republican appointees in dissenting from the majority report. 43 Joe Nocera, An Inconvenient Truth, The New York Times, Dec. 20, 2011, p. A33. See also Joe Nocera, The Big Lie, ibid., Dec. 24, 2011, p. A21. 44 Former Fannie, Freddie Officials Face Significant Fraud, Lying Charges, PBS NewsHour, Dec. 16, 2011 (interview by Judy Woodruff), www.pbs.org/newshour/bb/business/july-dec 11/fanniefreddie_12-16.html. 45 See Edward Wyatt, New Consumer Chief

FOR MORE INFORMATION


American Bankers Association, 1120 Connecticut Ave., N.W., Washington, DC 20036; 1-800-226-5377; www.aba.com. Nations largest banking trade association. Campaign for Americas Future, 1825 K St., N.W., Suite 400, Washington, DC 20006; 202-955-5665; www.ourfuture.org. Progressive political organization that opposes the influence of financial institutions in politics. Consumer Financial Protection Bureau, 1500 Pennsylvania Ave., N.W., Washington, DC 20220; 202-435-7000; www.consumerfinance.gov. Independent agency within Federal Reserve that enforces consumer-protection laws against banks, mortgage lenders, credit card issuers, payday lenders and others. Department of Justice, 950 Pennsylvania Ave., N.W., Washington, DC 20530; 202-514-2000; www.justice.gov. Federal executive department responsible for enforcing laws against financial misconduct. Heritage Foundation, 214 Massachusetts Ave., N.E., Washington, DC 20002; 202546-4400; www.heritage.org. Conservative think tank working to repeal financial reforms it says interfere with free enterprise. Mortgage Bankers Association, 1919 Pennsylvania Ave., N.W., Washington, DC 20006; 202-557-2700; www.mbaa.org. National association promoting residential and commercial real estate markets and increased homeownership. Securities and Exchange Commission, 100 F St., N.E., Washington, DC 20549; 202-942-8088; www.sec.gov. Federal agency that oversees publicly traded companies and enforces securities laws. U.S. Chamber of Commerce, 1615 H St., N.W., Washington, DC 20062; 202-6596000; www.uschamber.com. Lobbying group for businesses and trade associations.
Promises Strong Agenda, The New York Times, Jan. 6, 2012, p. B3; Suzh Khimm, Cordray Proceeds Despite Appointment Challenges, The Washington Post, Jan. 6, 2012, p. A16. See also Edward Wyatt, Appointment Clears the Way for Agency to Act, The New York Times, Jan. 5, 2012, p. A16. 46 Consumer Financial Protection Bureau launches nonbank supervision program, Jan. 5, 2012, www.consumerfinance.gov/press release/consumer-financial-protection-bureaulaunches-nonbank-supervision-program/. See also Peggy Twohig and Steve Antonakes, The CFPB launches its nonbank supervision program, Jan. 5, 2012 (blog), www.consumer finance.gov/the-cfpb-launches-its-nonbanksupervision-program/. 47 The memorandum is entitled Lawfulness of Recess Appointments During a Recess of the Senate Notwithstanding Periodic Pro Forma Sessions, Jan. 6, 2012, www.justice.gov/olc/ 2012/pro-forma-sessions-opinion.pdf. Grassley is quoted in Charlie Savage, Justice Dept. Defends Obama Recess Appointments, The New York Times, Jan. 13, 2012, p. A19. See Lyle Denniston, First challenge on new Obama appointees, SCOTUSBlog, Jan. 13, 2012, www. scotusblog.com/2012/01/first-challenge-on-newappointees/. 48 See Edward Wyatt, Some Lenders to Students to Face Greater Scrutiny, The New York Times, Jan. 13, 2012, p. B3. For background, see Marcia Clemmitt, Student Debt, CQ Researcher, Oct. 21, 2011, pp. 877-900; and Barbara Mantel, Career Colleges, CQ Researcher, Jan. 7, 2011, pp. 1-24. 49 Meeting of the Federal Open Market Committee, March 27-28, 2006, www.federalreserve. gov/monetarypolicy/files/FOMC20060328meet ing.pdf. Bernankes concluding comments begin at p. 95. For coverage, see Zachary A. Goldfarb, As financial crisis brewed, Fed appeared unconcerned, The Washington Post, Jan. 13, 2012, p. A1; Binyamin Appelbaum, Inside the Fed in 06: Coming Crisis, and Banter, The New York Times, Jan. 13, 2012, p. A1. 50 See Ben Protess and Azam Ahmed, U.S. Inquiry of MF Global Gains Speed, The New York Times, Jan. 10, 2012, p. B1. 51 Prosecuting Wall Street, op. cit.

www.cqresearcher.com

Jan. 20, 2012

73

Bibliography
Selected Sources
Books
McLean, Bethany, and Joe Nocera, All the Devils Are Here: The Hidden History of the Financial Crisis, Portfolio/Penguin, 2010. Veteran business journalists trace the origins and course of the financial crisis of 2008 from the invention of securitized mortgages through the proliferation of subprime mortgages and their dispersal to financial institutions and investors with limited disclosure of the financial risks. McLean is a contributor editor to Vanity Fair, Nocera a columnist for The New York Times. No notes or bibliography. Morgenson, Gretchen, and Joshua Rosner, Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon, Times Books, 2011. The book focuses critically on the role played by Fannie Mae, the giant, government-sponsored mortgage company, in marketing subprime mortgages, especially loans written by its primary partner, Countrywide Financial. Morgenson is a Pulitzer Prize-winning reporter and columnist for The New York Times; Rosner is a consultant and early critic of the role of Fannie Mae and the other government-sponsored mortgage company, Freddie Mac. No notes or bibliography.

On the Web
Chasing the Devil Around the Stump: Securities Regulation, the SEC, and the Courts, SEC Historical Society, Dec. 1, 2011, www.sechistorical.org/museum/galleries/ctd/. The gallery in the SEC Historical Societys virtual museum and archive provides a compact, up-to-date overview of the Securities and Exchange Commissions regulatory activities and philosophy in the context of court decisions that alternately approve or disapprove of the agencys efforts at expansive enforcement. For a longer historical account, see the earlier gallery, Fair to All People: The SEC and the Regulation of Insider Trading, Nov. 1, 2006, www.sechistorical. org/museum/galleries/it/.

Books on the Financial Crisis


The financial crisis of 2008 and the developments that led up to it have been chronicled and analyzed in a veritable flood of books. Here is a list of some that have drawn the most attention, with brief notations of the topics covered; all have been republished in paperback. Cohan, William E., House of Cards: A Tale of Hubris and Wretched Excess on Wall Street, Doubleday, 2009. [Bear Stearns] -, Money and Power: How Goldman Sachs Came to Rule the World, Anchor, 2011. Lewis, Michael, The Big Short: Inside the Doomsday Machine, W.W. Norton, 2010. [bond and real estate derivative markets] Lowenstein, Roger, The End of Wall Street, Reed Elsevier, 2010. [2008 financial collapse] Sorkin, Andrew Ross, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System and Themselves, Viking, 2009. [2008 financial collapse] Tett, Gillian, Fools Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe, Free Press, 2009. Wessel, David, In Fed We Trust: Ben Bernankes War on the Great Panic, Crown Business, 2009. [Federal Reserve] Zuckerman, Gregory, The Greatest Trade Ever: The Behindthe-Scenes Story of How John Paulson Defied Wall Street and Made Financial History, Broadway Books, 2009. [hedge fund manager Paulson].

Articles
Prosecuting Wall Street, 60 Minutes (Steve Kroft, correspondent; James Jacoby, producer), CBS News, Dec. 4, 2011, www.cbsnews.com/8301-18560_162-57336042/prose cuting-wall-street/?tag=contentMain;cbsCarousel. Two whistleblowers former executives with Countrywide Financial and Citigroup tell Kroft that they know of financial misconduct at their former companies but have not been questioned by government investigators. Morgenson, Gretchen, and Louise Story, A Financial Crisis With Little Guilt, The New York Times, April 14, 2011, p. A1. The 4,000-word story details, in text and informative graphics, the lack of criminal prosecutions against companies or individuals involved in the financial crisis.

Reports and Studies


The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, January 2011, www.gpoaccess.gov/fcic/fcic.pdf. The congressionally appointed panel concluded that the financial crisis could have been avoided if the financial industry and public officials had heeded warnings and properly understood and managed evolving risks in the financial system. Republican members of the commission did not support the conclusions.

74

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Financial Crisis
Chan, Sewell, Crisis Panels Report Parsed Far and Wide, The New York Times, Jan. 28, 2011, p. B1, www.nytimes. com/2011/01/28/business/economy/28inquiry.html. The government-appointed Financial Crisis Inquiry Commission has concluded that the crisis was caused by a bias toward deregulation by government officials and mismanagement by financiers who failed to perceive risks. Thomas, Bill, et al., What Caused the Financial Crisis? The Wall Street Journal, Jan. 27, 2011, p. A21, online. wsj.com/article/SB1000142405274870469800457610450 0524998280.html. Critics say the financial crisis stemmed from more than a simple lack of Wall Street regulations. The Securities and Exchange Commission is considering legal action against Standard & Poors for an inflated rating of a 2007 mortgage debt offering. Holan, Angie Drobnic, Bankers Largely Escape Prosecution, St. Petersburg (Fla.) Times, Oct. 10, 2011, p. A1, www.tampabay.com/news/politics/national/michael-moorescorporate-crime-claim-mostly-true/1196036. Filmmaker and activist Michael Moore told Occupy Wall Street protesters that no bankers or CEOs have been arrested for bringing down the economy in 2008.

Regulations and Reforms


Frank, Barney, A Thousand Cuts, The Boston Globe, July 30, 2011, p. 11, articles.boston.com/2011-07-30/boston globe/29833822_1_financial-reform-wall-street-reformconsumer-financial-protection-bureau. Republicans are trying to undo financial reform that the public broadly supports, says the former chairman of the House Financial Services Committee. Isaac, William M., Deregulation Gone Awry, The Washington Times, April 11, 2011, p. B4, www.washingtontimes. com/news/2011/apr/8/deregulation-gone-awry/?page=all. Repealing the Dodd-Frank law without delivering a serious alternative would have negative consequences for Republicans, says a former chairman of the Federal Deposit Insurance Corporation. Wichert, Bill, Senator Underestimated Wall Street Reforms, Star-Ledger (Newark, N.J.), Dec. 19, 2011, p. 3. A New Jersey state senator has criticized the lack of effective reforms following the collapse of major investment banks.

Insider Trading
Harris, Larry, Dont Let the Insiders Rule, Los Angeles Times, Oct. 17, 2011, p. A15, articles.latimes.com/2011/ oct/17/opinion/la-oe-harris-rajaratnam-20111017. Lifting restrictions on insider trading would make problems related to financial disclosure worse, argues a University of Southern California finance professor. Lattman, Peter, In Galleon, Prison Term Seen As Test, The New York Times, Sept. 20, 2011, p. B1, dealbook. nytimes.com/2011/09/19/in-galleon-insider-case-prisonterm-is-seen-as-test/. The prosecution of hedge-fund magnate Raj Rajaratnam is widely seen as a litmus test of how serious an offense insider trading will be regarded. Sandy Smith, John F., Insider Trading Still an Issue, Atlanta Journal-Constitution, May 22, 2011, p. D2. Insider trading is wrong and illegal because other investors dont get access to the same beneficial information, says the chair of the Institute for Research in the Social Sciences at Stanford University.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

Legal Action
Avalos, George, Feds File Charges Against Execs of Failed United Commercial Bank, Contra Costa (Calif.) Times, Oct. 11, 2011. Federal authorities allege that top executives of a San Franciscoarea bank concealed the extent of loan losses during the height of the financial crisis. Gordon, Marcy, SEC May Act Against S&P for 07 Debt Rating, The Boston Globe, Sept. 27, 2011, p. 8, www. boston.com/realestate/news/articles/2011/09/27/sec_may_ act_against_sp_for_07_debt_rating/.

MLA STYLE
Jost, Kenneth. Remembering 9/11, CQ Researcher 2 Sept. 2011: 701-732.

APA STYLE
Jost, K. (2011, September 2). Remembering 9/11. CQ Researcher, 9, 701-732.

CHICAGO STYLE
Jost, Kenneth. Remembering 9/11. CQ Researcher, September 2, 2011, 701-732.

www.cqresearcher.com

Jan. 20, 2012

75

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Remembering 9/11, 9/11 Government Secrecy, 2/11 Cybersecurity, 2/10 Press Freedom, 2/10

Education
Digital Education, 12/11 College Football, 11/11 Student Debt, 10/11 School Reform, 4/11 Crime on Campus, 2/11

Health/Safety
Military Suicides, 9/11 Teen Drug Use, 6/11 Organ Donations, 4/11 Genes and Health, 1/11 Food Safety, 12/10 Preventing Bullying, 12/10

Crime/Law
Eyewitness Testimony, 10/11 Legal-Aid Crisis, 10/11 Computer Hacking, 9/11 Class Action Lawsuits, 5/11 Cameras in the Courtroom, 1/11 Death Penalty Debates, 11/10

Environment/Society
Fracking Controversy, 12/11 Water Crisis in the West, 12/11 Googles Dominance, 11/11 Managing Public Lands, 11/11 Prolonging Life, 9/11

Politics/Economy
Occupy Movement, 1/12 Reviving Manufacturing, 7/11 Foreign Aid and National Security, 6/11 Lies and Politics, 2/11

Upcoming Reports
Youth Volunteering, 1/27/12 Presidential Election, 2/3/12 Medical Errors, 2/10/12

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Income Inequality
Is the gap between rich and poor getting wider?

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

York Daily News. Indeed, most analysts agree incomes of the very rich have been pulling away from all others in recent decades. The average pretax income for the bottom 90 percent of households is almost $900 below what it was in 1979, while the average pretax income for the top 1 percent is $700,000 higher. Having a wealthy class with very large amounts of disposable money is valuable not harmful to society, some argue. But others say the recent winner-take-all economy helped trigger the massive recession, leaving most people with stagnant incomes. Meanwhile, Republicans argue that Bush-era tax cuts on top earnings should be extended to stimulate the economy, while many Democrats back extensions only for lower earners.
A homeless woman asks for money amid the affluence of New York City, where the gap between rich and poor is said to be greater than in India.

recent Census Bureau report brought a flurry of press attention to the widening gap between rich and poor. The gap in New York City is widening and is now bigger than in India, noted the New

I N S I D E

THIS REPORT
THE ISSUES ....................991 BACKGROUND ................998 CHRONOLOGY ................999 CURRENT SITUATION ......1004 AT ISSUE......................1005 OUTLOOK ....................1007 BIBLIOGRAPHY ..............1010 THE NEXT STEP ............1011

CQ Researcher Dec. 3, 2010 www.cqresearcher.com Volume 20, Number 42 Pages 989-1012


RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

INCOME INEQUALITY
THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
Dec. 3, 2010 Volume 20, Number 42

991

Is income inequality growing in the United States? Does increasing economic inequality harm society? Should the government act to limit inequality?

992 993 996

Richest Americans Have Biggest Share of Income The rich control 18 percent of Americans total income. Tax Rates Drop for Highest Earners Taxes for richest Americans dropped to 17 percent. Rich Got Richer While Poor Lagged Americas top 1 percent earned an average of $1.3 million in 2007. Bleak Futures Await Those with Limited Education You need to target kids who are coming out of prison for the first time. Chronology Key events since 1868. Is Upward Mobility Still Possible? Research suggests its becoming more difficult. Courts Open Door to BigMoney Political Donors Do the rich wield more political power than the poor? At Issue Should tax cuts on high earnings be extended?

MANAGING EDITOR: Thomas J. Colin

tcolin@cqpress.com

BACKGROUND

998 1000 1004

All That Glitters Corruption and income inequality reached new heights during the Gilded Age. Inequality Rises An increase starting in around 1980 took economists by surprise. Winners Take All Some scholars blame the competitive U.S. economy for income disparities.

kkoch@cqpress.com Thomas J. Billitteri, tjb@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Roland Flamini, Sarah Glazer, Alan Greenblatt, Reed Karaim, Barbara Mantel, Patrick Marshall, Tom Price, Jennifer Weeks
DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT-CHECKING: Eugene J. Gabler,

ASSISTANT MANAGING EDITORS: Kathy Koch

997

Michelle Harris INTERN: Maggie Clark

999 1000 1002 1005

A Division of SAGE

PRESIDENT AND PUBLISHER:

John A. Jenkins
DIRECTOR, REFERENCE SOLUTIONS:

CURRENT SITUATION

Todd Baldwin
Copyright 2010 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except; (Jan. wk. 1) (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE Publications. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-4277737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

1004 1006

Policies Debated Income inequality simmers beneath many of the hottest election-year economic debates. Ambivalent Public? Polls suggest there is support for propping up lower-income people.

FOR FURTHER RESEARCH

OUTLOOK

1009 1010 1011 1011

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

1007

Progressive Era Redux? In the early 20th century, the nation came together to rein in rampant inequality.

Cover: Getty Images/Spencer Platt

990

CQ Researcher

Income Inequality
BY MARCIA CLEMMITT
Citigroup, the financialservices conglomerate, concurs. As of 2006, the richest Census Bureau report 10 percent of Americans acreleased in September count for 43 percent of inbrought a brief flurry come, and 57 percent of net of press attention to rising inworth, based on Federal Recome inequality in America. serve data, says a Citigroup The gap between rich and analysis. The United States, poor in New York is getting Canada, Australia and the worse, noted the New York United Kingdom have seen Daily News. In 2009, 18.7 perthe rich take an increasing share cent of New York Citys popof income and wealth over the ulation lived in poverty, and last 20 years, to the extent that the median household income the rich now dominate income, fell to $50,033, from $51,116 wealth and spending. The in 2008, even as the combined distribution of wealth the worth of the citys 58 richest value of ones assets such as residents rose by $19 billion. real estate and stocks, minus As a result, the earnings gap ones debts continues to be among New Yorkers is now even more aggressively skewed larger than the gap in India than income, it said. 4 and the African nation of But having an economic Burkina Faso, Joel Berg, exclass with very large amounts ecutive director of the New of disposable money is valuYork City Coalition Against able not harmful to soA Ferrari complements the conspicuous consumption on Hunger, told the paper. 1 ciety, some argue. Thats bedisplay along Rodeo Drive in Beverly Hills, Calif. Experts The finding that income cause only the very richest agree the rich are pulling away from other Americans, inequality is increasing is can make the investments vital but not all think its a problem. Some say investments by generally accepted by anato building businesses and drithe wealthy stimulate the economy by building lysts across the political specving demand for labor, wrote businesses and driving demand for labor, but others say the result has been a severe recession and trum, with the exception of George Reisman, a professor stagnant incomes for most Americans. libertarian commentators, emeritus of economics at who argue that no existing data set Center on Budget and Policy Priori- Pepperdine University, in Malibu, Calif. accurately depicts how money is dis- ties (CBPP) a liberal-leaning think In a market economy, the wealth of tributed. What provokes debate in all tank. 2 the rich . . . is overwhelmingly investAfter-tax incomes also have risen ed in means of production, that is, in quarters, however, is whether steep income inequality in an industrialized more for the highest earners, says CBPP. factories, machinery and equipment, nation is something to worry about and, From 1979 to 2007, the average after- farms, mines, stores, and the like. 5 if it is, what policies would address it tax income of the top 1 percent of Other analysts question that propoearners nearly quadrupled, from sition. Weve had a natural experieffectively. The main story is that the very rich $347,000 to over $1.3 million, a 281- ment recently with what can happen have been pulling away from all others percent increase, based on data from to the economy when the richest peoin income over the past three decades, the nonpartisan Congressional Budget ple make extraordinary gains comOffice. Over the same period, the after- pared to others, says Yale University most analysts agree. The average pretax income for the tax income of the middle fifth of the political scientist Jacob S. Hacker. Weve bottom 90 percent of households is population rose from $44,100 to had a winner-takes-all economy for a almost $900 below what it was in $55,300, or 25 percent, while the bot- while, and its provided limited bene1979, while the average pretax income tom fifth saw its average after-tax in- fits, leaving the country with a severe for the top 1 percent is over $700,000 come grow from $15,300 to $17,600, recession and virtually stagnant inabove its 1979 level, according to the or 16 percent. 3 comes for most people.

THE ISSUES

www.cqresearcher.com

Getty Images/David McNew

Dec. 3, 2010

991

INCOME INEQUALITY
Richest Americans Have Biggest Share of Income
The top 1 percent of income earners in the United States control nearly 18 percent of Americans total income, the worlds highest such concentration. In 1949, however, the top American earners lagged behind those of several other countries, including Indonesia, Germany and the United Kingdom. Share of Earnings of Top 1% Income Earners in Select Countries, 1949 and 2005
Indonesia Argentina Ireland Netherlands India Germany United Kingdom Australia United States Canada Singapore New Zealand Switzerland France Norway Japan Finland Sweden Spain Portugal Italy China 0% 5 10 15 20
Share of Total Earnings of Top 1%

1949 2005

Source: Anthony B. Atkinson, et al., Top Incomes in the Long Run of History, National Bureau of Economic Research, January 2010

Simmering debates over rising income inequality in America not to mention the solvency of Social Security and the growing federal deficit lie behind many of this years policy and political battles. At the heart of the debates is the system of taxing income: In the Unit-

ed States each additional increment of an individuals income is taxed at a different rate in a so-called marginal tax scheme; marginal income tax rates on higher earnings are generally higher known as a progressive taxation scheme. And while many liberals this year have called for raising the

marginal tax rate on the highest earners, thats a bad idea, said Sen. Joseph Lieberman of Connecticut, a former Democrat who became an independent during a tough reelection campaign a few years ago. To me, these are the people we need to be protecting their income to spend and invest to spur growth and job creation. The fact is that the top 3 percent of . . . earners account for 25 percent of the consumption in our economy. 6 But history casts doubt on whether holding down taxes on the highest earnings boosts the economy, said Cenk Uygur, a journalist and political commentator on the Internet and the Sirius Satellite Radio show The Young Turks. From 1925 to 1931, the highest marginal tax rate was as low as it has almost ever been between 24-25 percent. And between 20032010, the highest marginal tax rate was also at one of its lowest points 35 percent, he said. So what happened . . . ? The Great Depression and the Great Recession. 7 The current high-profile debate over whether Social Security benefits must be cut to keep future federal budgets in balance is skewed by lack of attention to growing income inequality, argued Robert Kuttner, founder and co-editor of the liberal magazine The American Prospect. Social Security is funded by payroll taxes on earnings beneath a certain cap around $107,000 in 2010. In other words, people who earn above $107,000 only pay Social Security tax on that $107,000. Thus, lower-earning people pay a much higher percentage of their income to sustain the system than high earners, he said. If you want to get Social Security well into the black for the indefinite future, the easiest way is to restore wage growth among low earners, which would boost Social Securitys take. Instead, recent earnings growth has gone almost entirely to people whose incomes are high above the cap and

992

CQ Researcher

thus hasnt helped at all to shore up Social Security, he wrote. 8 As economists, lawmakers and the public debate whether economic inequality should be an important publicpolicy agenda item, here are some questions being asked: Is income inequality growing in the United States? In recent years, many analysts have come to agree that income inequality is rising, mostly because incomes of the top earners have skyrocketed. However, some say that studies that find very high inequality are based on incomplete or misleading data. In comparisons that include peoples spending, for example, the effective income gap between the rich and poor is narrower, say some economists. Contrary to what some other studies find, poor households systematically pay less than richer households for identical goods . . . in part because they shop in cheaper stores and in part because they pay less for the same goods even in the same store, most likely by buying things on sale, wrote University of Chicago professor of economics and business Christian Broda, U.S. Department of Agriculture economist Ephraim Leibtag and Columbia University professor of Japanese economy David E. Weinstein. As a result, poorer people effectively have higher-value incomes, something that most research fails to acknowledge, they argue. When the differential spending is taken into account, poverty rates turn out to be less than half of the official numbers. 9 Income studies generally examine households, not individuals, and changes in household size over the years mean that supposed inequality problems are much lower than many estimate, wrote Stephen J. Rose, a research professor at the Georgetown University Center on Education and the Workforce. Americans today are more likely to live in single-adult households than they were 30

Tax Rates Drop for Highest Earners


The average income of the top 400 American households increased from $71 million in 1992 to $357 million in 2007 a 403 percent rise while the effective tax rate dropped from 26 percent to 17 percent. By comparison, the bottom 90 percent of earners saw their income rise from about $29,000 to about $33,000 a modest 14 percent increase. Income and Tax Rates of 400 Highest-Income American Households, 1992-2007
Average income in 2009 dollars
(in millions)

Effective tax rate 26.4% 29.9 22.0 22.8 18.2 16.6

1992 1995 1998 2001 2004 2007

$71.5 $71.6 $125.0 $158.8 $196.2 $356.7

Source: David Cay Johnston, Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data, Tax.com, February 2010

years ago, so actual per-person earnings growth for middle-class people is considerably higher than other studies suggest, he said. 10 The most recent statistics that indicate poverty is rising dont depict longterm poverty but recession-related job loss, argued Atlanta-based, nationally syndicated libertarian radio host and commentator Neal Boortz. If youre out of work, you have no income. Snap! Youre living in poverty. It doesnt matter what your net worth actually is or if you own $3 million homes free and clear. 11 The evidence is incontrovertible that American income inequality has increased . . . since the 1970s, said Robert J. Gordon, a professor of economics at Northwestern University. Nevertheless, its rise has been exaggerated since the most recent increase consists entirely of a tiny group of very high earners pulling far ahead of everyone else. Analysis of census and tax data reveals that there was no in-

crease in inequality after 1993 in the bottom 99 percent of the population, and the remaining increase . . . can be entirely explained by the behavior of incomes in the top 1 percent. 12 Many other commentators, however, including some conservatives, stress that the income gap that opened between 1980 and 2000 is indeed very wide. Income inequality is real; its been rising for more than 25 years, said President George W. Bush in 2007. Furthermore, the gap is serious enough to warrant careful watching, said Bush. 13 This growth in wage inequality is one of the most spectacular and consequential developments of our time, partly because most people have expected that economic development and modernization would create more economically equitable societies, said David B. Grusky, director of Stanford Universitys Center for the Study of Poverty and Inequality, and Kim A. Weeden, an associate professor of sociology at Cornell University. 14

www.cqresearcher.com

Dec. 3, 2010

993

INCOME INEQUALITY
Data from both . . . income tax returns and . . . W-2 records tell a simple and similar story to the tale of inequality told by analysis of census figures, which is often criticized to some extent correctly for including data on too few people, said Gary Burtless, a senior fellow at the center-left Brookings Institution think tank. The relative incomes and the relative wages of top income recipients have been increasing much faster than the incomes and wages of people further down in the distribution. W-2 records show that an earner in the top .01 percent of the income distribution made 46 times as much as the countrys median wage earner in 1990, but 81 times as much in 2005, for example. 15 Does increasing economic inequality harm society? Most analysts agree that a certain amount of income inequality is valuable because it gives people incentives to work hard and try out new business ideas, in hopes of reaping big rewards. However, many are skeptical that current U.S. inequality levels are risk free or contribute much to building the economy. Some international data suggest that countries with more extreme income inequality experience faster economic growth overall, said Brookings Burtless. From 1990 to 2000, economic growth in the G-7 countries Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, whose top finance officials have met regularly since 1976 was fastest in the United States and the United Kingdom, the countries that also experienced the fastest growth in inequality, he said. While not constituting conclusive evidence, this fact is at least consistent with the view that the rapid rise in U.S. inequality has contributed to the relatively good performance of American output and employment since the late 1970s. 16 While its true that the share of national income going to the richest 20 percent of households has risen, and families in the lowest fifth saw their piece of the pie fall, income statistics dont tell the whole story of Americans living standards, which provide evidence that rising income inequality is highly compatible with a system that produces a better life for all, wrote W. Michael Cox, director of the ONeil Center for Global Markets and Freedom at Southern Methodist University and senior fellow at the Federal Reserve Bank of Dallas, and Richard Alm, an economics writer. Today, large majorities of Americans enjoy the convenience of once-unheard-of consumer goods like cars and clothes dryers while most are employed in clean, well-lit, and air-conditioned environment[s], unlike in the past, they said. 17 Furthermore, a far more direct measure of American families economic status [rather than tax or census data] household consumption indicates that the gap between rich and poor is far less than most assume, and that the abstract, income-based way in which we measure the socalled poverty rate no longer applies to our society, they said. In 2006, while the income ratio between the highest- and lowest-earning quintiles was 15 to one, the spending ratio was only four to one, demonstrating the similarity in living standards. Lowerincome families can spend more than many believe because they have access to various sources of spending money that doesnt fall under taxable income, including sales of property like homes and cars and securities that are not subject to capital gains taxes, insurance policies redeemed, and the drawing down of bank accounts, they pointed out. 18 But markets that produce income inequalities at the present scale are in fact failed markets, inefficient because they provide unreasonably high levels of return what economists dub rents to some people who dont deserve so much, argues Grusky, at Stanfords Center for the Study of Poverty and Inequality. For example, some top executives win extremely high paydays not because they lead their companies to prosper beyond expectations but due to various sweetheart deals and the machinations of corporate governing boards who approve outsize CEO payments because theyre personally beholden to the executives, he argues. International studies conducted over the past decade by the Organization for Economic Co-operation and Development have found no evidence that inequality may be conducive to growth in OECD countries, as some had suggested, said OECD SecretaryGeneral Angel Gurria. On the contrary, our work shows that greater inequality stifles upward mobility between generations, making it harder for talented and hard-working people to get the rewards they deserve. And the resulting inequality of opportunities . . . inevitably impacts economic performance as a whole. 19 Some fear that having too much income concentrated at the top compromises the ability of a democracy to give equal political voice to all citizens. In international studies, nations with wider income inequality often have political structures in which fewer people have an equal voice and there is less government accountability, said Nancy Bermeo, a professor of comparative politics at Oxford University, in England. 20 The ability of citizens to influence public policy is the bottom line of democratic government, but in recent decades in the United States the ability to influence policy has skewed toward the most affluent people, whose priorities often dont coincide with those of people who earn less, said Martin Gilens, an associate professor of politics at Princeton University. 21 Based on survey data from 1981 to 2002, on issues where Americans

994

CQ Researcher

with different income levels differ in their policy preferences, actual policy outcomes strongly reflect the preferences of the most affluent but bear virtually no relationship to the preferences of poor or middle-income Americans. So stark is this finding that it may call into question the very democratic character of our society, according to Gilens. 22 With money concentrated at the top, there may be a demand for private jets and yachts, but you need a healthy middle-income group to drive the massive consumption that promotes real economic growth, said Kemal Dervis, director of the global economy and development division at the Brookings Institution. 23 Furthermore, when we see income inequality rising, we ought to start looking for bubbles fast-rising prices in some investment sector like the Internet stock bubble of the 1990s and the housing bubble of the 2000s, said Mark Thoma, a professor of economics at the University of Oregon. Such investment bubbles arent sustainable because they ultimately price things beyond their value and out of reach of too many buyers, and their collapse leads to heavy losses and, often, economic recessions. 24 Rising inequality also played another role in sparking the financial-market crash and recession, according to University of Chicago professor of finance Raghuram Rajan. Because policy makers have few tools available for directly raising incomes, Washington took the dangerous step of subsidizing large numbers of high-risk mortgage loans such as no-down-payment loans to people who may have had limited ability to pay, out of concern that the American dream might be slipping away from many people as inequality increased, he said. Those actions helped create the swelling bubble of mortgage debt that exploded when some people began defaulting on their risky loans, said Rajan. 25

Should the government act to limit inequality? Not surprisingly, those who argue that income inequality boosts the economy strongly oppose government actions intended to limit its growth or redistribute incomes. Meanwhile, analysts who argue that inequality is risky dont necessarily agree about policies to address it. Democrats are right about one thing: I can afford to pay more in taxes, said Harvard economics professor N. Gregory Mankiw. My income is not in the same league as superstar actors and hedge fund managers, but I have been very lucky. . . . I dont have trouble making ends meet, and indeed, I could go so far as to say I am almost completely sated. . . . Nonetheless, neither high earnings nor large inherited estates should be subject to higher taxes because such taxes would sap the incentive of top professionals to work hard, Mankiw said. 26 Mankiw noted that he is regularly offered opportunities to earn extra money, but if Bush-era tax rates were raised, the resulting gains for him and for his children who will inherit the money down the line would be too small to provide an incentive for him to take those extra jobs, he wrote. The same would hold true for other highincome taxpayers whose services you enjoy, like movie actors, pop singers, blockbuster novelists, top surgeons, and orthodontists, Mankiw argued. As they face higher tax rates, their services will be in shorter supply. . . . Dont let anyone fool you into thinking that when the government taxes the rich, only the rich bear the burden. 27 Attempts to put a floor under the lowest income, such as a minimum wage, also harm society, said Art Carden, an assistant professor of economics and business at Rhodes College in Memphis. A higher minimum wage is likely to exacerbate rather than mitigate social inequalities because when potential hires arent permitted to compete intensely for jobs

by offering to work for very low wages, then firms can discriminate on the basis of something other than productivity, he argued. 28 With no minimum wage set, a historically disadvantaged jobseeker, such as Crackhead Carl, a middle-aged African-American male who was just released from jail, could win a job over Tad Vanderbilt Rockefeller, a flaxen-haired white teenager from an affluent suburb even from a racially biased employer simply by accepting a rock-bottom wage, said Carden But with a minimum wage in place, Carl could offer a racially biased employer no incentive to hire him rather than Tad, he explained. 29 Many scholars say that if greater economic equity is the goal, its hard to imagine it coming about without government action. What are the pathways to create a more equal society? Taxation, education and health care, says Dan Ariely, a professor of behavioral economics at Duke University. Theres nothing anti-capitalist about saying that the sharp edges of capitalism should be softened by government, says Yales Hacker. A quick look around the globe shows that capitalism is consistent with a lot of different ways of organizing the economy, including some with high taxes and strict regulations. The wide variation in income-inequality ratios in countries with market economies show that high U.S. ratios arent simply the inevitable product of a market economy, he says. In 2008, the ratio between the pay of the average CEO and the average worker was 319 to one in the United States but only 11 to one in Japan, 12 to one in Germany, and 47 to one in Mexico, suggesting that the U.S. distribution is out of line with those in other market economies, including some that are doing fairly well economically, such as Germany, according to the progressive Institute for Policy Studies. 30

www.cqresearcher.com

Dec. 3, 2010

995

INCOME INEQUALITY
Rich Got Richer While Poor Lagged
The top 1 percent of American earners took in an average of $1.3 million after taxes in 2007, nearly a 300 percent increase over 1979. By contrast, income for the bottom 20 percent of earners rose only 16 percent over the same period. Average After-tax Income, 1979 and 2007 (in 2007 dollars)
Income category Lowest fifth Second fifth Middle fifth Fourth fifth Top fifth Top 1 percent 1979 $15,300 $31,000 $44,100 $57,700 $101,700 $346,600 2007 $17,700 $38,000 $55,300 $77,700 $198,300 $1,319,700 % change 16% 23% 25% 35% 95% 281% $ change $2,400 $7,000 $11,200 $20,000 $96,600 $973,100

Source: Arloc Sherman and Chad Stone, Income Gaps Between Very Rich and Everyone Else More Than Tripled in Last Three Decades, New Data Show, Center on Budget and Policy Priorities, June 2010

In the past, strong economic growth has proven to be compatible with high tax rates on top earnings, argued Clinton administration Secretary of Labor Robert Reich, a professor of economics at the University of California, Berkeley. Under President Dwight Eisenhower (whom no one would have accused of being a radical) it was 91 percent. Now its 36 percent, the lowest its been in more than 80 years. 31 The highest earners have benefited disproportionately from recent workplace productivity gains, so taxing top earnings higher would seem only fair, suggested Northwesterns Gordon and Ian Dew-Becker, a doctoral candidate at Harvard University. Between 2001 and 2004, for example, the U.S. labor force produced an explosion in productivity over 3 percent a year higher productivity gains than at any other period since World War II, they wrote. Nevertheless, median family income actually fell by 3.18 percent from 1999 and 2004, and for the whole period of rising productivity between 1995 and 2004, increased annually by only 0.9 percent, compared to an annual rate

of productivity gains in non-farm businesses of 2.9 percent, they said. 32 During this period of skyrocketing productivity, only the top 10 percent of the income distribution enjoyed a growth rate of total real income . . . equal to or above the average rate of economywide productivity growth. Thus, the no-brainer solution to central social objectives including the budget deficit, Social Security and health care is to raise taxes on the top 1 percent by a major amount, say from 33 to 50 percent, Gordon and Dew-Becker recommended. 33 I know many well-educated professionals convinced that nobody works as hard as they do, wrote Jonathan Cohn, senior editor of The New Republic. . . . But Ive met many people at the bottom of the income ladder who work just as hard, for far less reward. Between 1980 and 2005, the richest 1 percent of Americans got more than four-fifths of the countrys income gains. Does anybody seriously believe that the other 99 percent didnt deserve to take home a much larger share? 34

An investment in postsecondary skills training and education for people who cant find jobs in an increasingly technology-based job market would ease income inequality by holding wages for high-skill jobs down a bit as the supply of skilled workers came closer to meeting the full demand, says Anthony P. Carnevale, a research professor at the Georgetown University Center on Education and the Workforce. The 11 million or so low-income, dislocated or imprisoned adults with an immediate ability to benefit from new training programs are the low-hanging fruit, he wrote. 35 Government policy should focus on education rather than any direct means of redistributing income such as through tax policy, wrote University of Chicago economists Kevin M. Murphy and Gary S. Becker, winner of the 1992 Nobel Prize for economics. Taxing higher incomes is tantamount to taxing college tuition while giving subsidies for dropping out of high school, a strategy no one would recommend, Murphy and Becker write. Instead, the public should focus attention on how to raise the fraction of American youth who complete high school. 36 Not everyone is sure that education funding will help ease inequalities. The last 15 years have actually seen significantly slower job growth in high-earnings growth sectors than in the economy at large, wrote James K. Galbraith, a professor of government, and J. Travis Hale, a graduate student, at the University of Texas, Austin. So even if large numbers of young people acquire the skills needed to advance, there is no evidence that the economy will provide them with suitable employment. Moreover, investments in education presuppose that we know, in advance, what education should be for. For example, students who studied information technology in the mid-1990s were lucky; those completing similar degrees in 2000 faced unemployment. 37
Continued on p. 998

996

CQ Researcher

Bleak Futures Await Those with Limited Education


You need to target kids who are coming out of prison for the first time.

eople up to age 30 who only have a high school diploma or less are in trouble, potentially facing a lifetime of incomes sagging farther and farther behind those of people with a college education or technical training, says Timothy M. Smeeding, a professor of public affairs and economics at the University of Wisconsin, Madison. They face a bleak future because most of the traditional roads to a middle-class income for people with that level of education, such as manufacturing, have dried up. The resulting large oversupply of workers must fight for jobs with low skill requirements, driving down the wages for those positions even further and increasing the nations income inequality, Smeeding says. When the recession ends, it will become clear that there is no work for these people, except jobs like waiting table or mowing lawns. We have to get more people employed or well lose a whole generation. We need to get the less-skilled people to work before they all turn to crime, Smeeding says. Worse, among young men with a high school education or less, 73 percent are fathers by age 30. Furthermore, a high school dropout is likely to have 2.7 children, compared to the 1.9-child average for college graduates, creating a huge additional economic disadvantage for children of low-skilled parents. If after 1983 the country had continued to produce bachelors and associates degree holders at the same rate of increase as it did in earlier years, there would be 10 million more such degree holders competing for high-skill jobs, and the income distribution would look like it did in 1979, according to Anthony P. Carnevale, director of the Georgetown University Center on Education and the Workforce. Instead, high school graduation rates stalled beginning in the mid-1970s and even dropped in some years, curtailing the number of people eligible for post-secondary training, even as the rates of high school graduates who went to college rose. The workplace income gap between high-skilled and low-skilled employees relates more to specific occupations, such as engineering, than to education itself, says Carnevale. For example, you can get a 13-month certificate in engineering and earn more than a significant chunk of people with B.A.s, he says. Its access to an occupation that makes the difference, and education gets you that access. The country needs to produce more people with post-secondary education, especially in technical fields, Carnevale says. Are we going to be able to do that? Its doubtful. Unlike with K-12 education, we tend to see higher education as something families do, not as a public good, and the result is that its tough to expand higher-education opportunities and especially tough to bridge a spending gap between institutions we have huge differentials in spending, he says. The Obama administration is taking a different and somewhat more promising tack than previous administrations, understanding that community colleges and public universities are where the students and the voters are, says Carnevale.

Meanwhile, the premium salaries that go to college-educated people increase income inequality, representing a market failure in the education system, says David B. Grusky, director of Stanford Universitys Center for the Study of Poverty and Inequality. In a rational market, schools would see rising demand for post-secondary education and open up more spots, says Grusky. Any rational market will do that. If a car manufacturer sees more demand, the company increases production of cars. But universities, especially high-status schools like Stanford, are likely to continue to limit their spots, despite increasing demand, because by doing so the degrees and certificates their graduates obtain will be worth higher salaries in a marketplace where demand for the degrees outstrips supply, he explains. As a result, the salary return for a college degree is too high today, and the college-educated people are getting a free ride, Grusky says. We havent had substantial investments in public higher education for a long time, but making them could help, he says. Young people coming out of jail and prison, who are overwhelmingly urban teenagers, face the worst lifetime income gap, says Smeeding. I told our governor that you need to target kids who are coming out of prison for the first time, help them get jobs. Because if they dont get a job quickly, within a few weeks theyll be career criminals, and since three of four are fathers, helping them is a twofer. The widespread incarceration of young men mostly AfricanAmerican but also Latino and white men who have a high school education or less is driving increased social and economic inequality in our society that is sizable . . . enduring and intergenerational, said sociologists Bruce Western at Harvard and Becky Pettit at the University of Washington, Seattle. The social and economic penalties that flow from incarceration are accrued by those who already have the weakest economic opportunities, and their prison records impose additional significant declines in earnings and employment that affect them and their children. 1 Ironically public-spending trends over the past several decades have reinforced these inequality-creating trends, especially at the state level. For example, 30 years ago, 10 percent of Californias general fund went to higher education and 3 percent to prisons. Today, higher educations share has dropped to 8 percent, and nearly 11 percent goes to prisons, so that the state spends more on inequality-increasing incarcerations than on inequalityreducing education. 2 Marcia Clemmitt
1 Bruce Western and Becky Pettit, Incarceration and Social Inequality, Daedalus, summer 2010, p. 8. 2 Rising Above the Gathering Storm, Revisited: Rapidly Approaching Category 5, Members of 2005 Rising Above the Gathering Storm Committee, National Academies of Sciences and Engineering and Institute of Medicine, 2010, www.nap.edu/catalog/12999.html.

www.cqresearcher.com

Dec. 3, 2010

997

INCOME INEQUALITY
Continued from p. 996

BACKGROUND
All That Glitters
t the end of the 18th century, the young United States was known as the best poor mans country in the world, with fertile farmland plentiful enough for most people to earn a decent living and little of either extreme poverty or extreme wealth to be found. 38 A century later, however, with the industrial age booming, the United States experienced the first of three eras of very high income inequality. The first stretched from around 1870 through the early 1900s and was characterized by ostentatious spending by industrial titans, even as poverty deepened. Humorist and social critic Mark Twain and essayist and novelist Charles Dudley Warner dubbed the period the Gilded Age in their 1873 novel satirizing the corruption in Washington that accompanied what the authors depicted as a mad national scramble after wealth, at the expense of other values. 39 Gradually, unease grew about economic inequality that might threaten the countrys cherished reputation as a land where all residents had the chance to rise. In hopes of demonstrating that Americans at all income levels were enjoying the fruits of booming industry, University of Wisconsin statistician Willford I. King launched the first major study of U.S. wealth and income distribution, publishing two books on the subject. King unhappily reported, however, that economic inequality was steeper than he had expected, with the richest 1 percent of the population taking home about 15 percent of the national income in 1910, giving the wealthiest Americans an income hundreds or even thousands of times greater than that of a working-class citizen. 40

It is easy to find a man in almost any line of employment who is twice as efficient as another employee, but it is very rare to find one who is ten times as efficient, mused King. It is common, however, to see one man possessing not ten times but a thousand times the wealth of his neighbor, largely due to some peoples greater facility of taking advantage of . . . laws and circumstances to acquire property rights and the fact that wealth tends to breed wealth, he wrote. Is the middle class doomed to extinction, and shall we soon find the handful of plutocrats, the modern barons of wealth, lined up squarely in opposition to the property-less masses? 41 The vast sums of heritable wealth amassed by industrialists also posed a danger to society if they were simply passed on to the next generation, opined steel magnate Andrew Carnegie in his 1889 essay The Gospel of Wealth. In many cases the bequests are so used to become only monuments of . . . folly. Far better to establish a charitable institution that pursues a public good thats in accordance with the wealth earners own ideas, said Carnegie, whose own fortune established universities, libraries, museums, research institutions, a pension fund for his former employees and the think tank Carnegie Endowment for International Peace. 42 Leeriness about the rising concentration of income and the political corruption it might spawn built support among the middle and upper classes for a so-called Progressive Era in politics, which brought new regulations for business and the modern-day progressive federal income tax, which taxes higher earners at a higher percentage, among other changes. Congress had levied an income tax in 1861, to help pay for the Civil War. The tax withstood a court challenge but was eventually repealed when military needs lessened. In 1894, Congress enacted a second income tax, in the form of a 2 percent levy on all incomes over $4,000 (the equivalent of around

$100,000 today), aimed at harnessing some of the income of the richest Americans for public purposes. 43 But this time a Supreme Court divided 5-4 struck down the tax a year later. The Constitution barred Congress from enacting any so-called direct federal tax a tax based on ownership, such as the ownership of property unless it would be paid proportionately by the states according to their population, said the court. Unlike the earlier court, the 1895 Supreme Court deemed the income tax such an ownership tax. 44 Proponents were not long deterred, however. In 1909, President William Howard Taft proposed the 16th Amendment to the Constitution to allow Congress to enact a tax on income from any source, such as property or wages without apportioning the tax among states based on population. By February 1913 the amendment had been ratified by the required 36 out of the 48 states. The fortunes of the Gilded Age had largely deflated by 1920, mainly because of capital losses related to catastrophic events like World War I rather than Progressive Era reforms, according to Thomas Piketty, a professor at the Paris School of Economics, in France, and Emmanuel Saez, a professor of economics at the University of California, Berkeley. 45 In the 1920s, however, both the stock market and the nations top incomes began soaring again, and income inequality reached another peak in 1929. The crash of financial markets late in that year, and the Great Depression that followed, cut this second period of inequality very short, however. A number of factors kept economic inequalities from rising steeply again until around 1980, including the loss of capital by the wealthy during the Depression, World War II, and government actions to bolster lower earners and tax the wealthy more. The stability in income equality, where wages rose with national productivity for a generation after the Second World War, was the result of policies that
Continued on p. 1000

998

CQ Researcher

Chronology
1860s-1910s 1930s-1960s 2000s U.S. productivity Income and wealth inequality During the Depression, govern- continues to increase, but gains
increase to unprecedented levels in the Gilded Age. 1868 Massachusetts-born writer Horatio Alger publishes Ragged Dick, the first of dozens of popular Alger novels depicting the American dream of poor boys rising to wealth through talent and hard work. 1889 In The Gospel of Wealth, industrialist Andrew Carnegie urges rich people to endow charities rather than passing their money on to their children. 1894 Congress passes a 2 percent tax on incomes over $4,000 (about $100,000 today); the Supreme Court deems it unconstitutional a year later. 1913 The Constitutions 16th Amendment, permitting Congress to enact a federal income tax, is ratified by the required 36 out of 48 states. 1915 In the largest such study to date, University of Wisconsin statistician Willford I. King reports that the richest 1 percent of Americans get at least 15 percent of the income.

ment safety-net programs support low earners; in World War II the top income tax rate rises to over 90 percent. 1932 President Herbert Hoover raises top income tax rate to 63 percent. 1935 Supreme Court strikes down a minimum-wage law. 1938 Fair Labor Standards Act sets federal minimum wage at 25 cents an hour and survives a court challenge. 1959 Since 1950, the percentage of Americans in poverty has dropped from 32 to 22 percent, and median family income has risen 43 percent.

go mostly to highest earners. During the economys expansion from 2002-2007, the top 1 percent of earners capture twothirds of income gains. 2003 Top marginal tax rate is cut to 35 percent. 2006 Richest 10 percent of Americans account for 57 percent of the nations net worth. 2007 Since 1979, the average after-tax income for the top 1 percent of earners nearly quadruples, rising from $347,000 to more than $1.3 million; after-tax income for the bottom fifth averages $17,600, up 16 percent from 1979. 2008 Ratio between the pay of the average CEO and the average worker is 319 to one in the United States, 11 to one in Japan, 12 to one in Germany and 47 to one in Mexico. 2010 Since 1979, the average pretax income has dropped $900 for the bottom 90 percent of households but risen $700,000 for the top 1 percent. . . . The nations growing income gap since 1993 is entirely accounted for by soaring incomes for the top 1 percent of earners. . . . Large majorities of Americans support raising the minimum wage and taxing the wealthy more and creating a more equal income structure, such as that in Sweden; Republicans, who oppose these actions, nevertheless regain control of the House of Representatives in the midterm elections.

1970s-1980s Inequality rises as top incomes


soar, high school graduation rates stagnate and computers and automation squeeze out middle-earning manufacturing and other jobs. 1973 High school graduation rates peak. 1979 U.S. manufacturing employment peaks at 21.4 million workers. 1981 President Ronald Reagan fires 11,000 striking members of the air traffic controllers union, helping to weaken the power of organized labor. . . . Reagan persuades Congress to pass the largest tax cuts in U.S. history.

1920s

Income inequality rises again. The top marginal income tax rate is at an all-time low 25 percent. 1929 Driven by a growing economic bubble at the top, the stock market booms, and then crashes.

www.cqresearcher.com

Dec. 3, 2010

999

INCOME INEQUALITY

Is Upward Mobility Still Possible?


Research suggests its becoming more difficult.
he gap between rich and poor may be wider than ever in the United States, but the U.S. remains, in the dreams of many, a land of equal opportunity where talent and hard work are the tickets to a better future for anyone. Current data suggest, however, that the dream may have faded a bit. The U.S. today has a lower rate of intergenerational mobility than Europe, and that would be a surprise to most Americans, says Richard J. Murnane, a professor of education and society at the Harvard Graduate School of Education. The key reason for this is the difficulty the poor face trying to get the education they need to get into occupations that would allow them to move ahead, according to Murnane. Americans have an optimistic faith in the ability of individuals to get ahead within a lifetime or from one generation to the next, believing this much more strongly than people in other countries, wrote Julia B. Isaacs, a policy fellow at the Brookings Institution, a center-left think tank. In a survey of people from 27 countries, for example, only 19 percent of Americans thought that coming from a rich family was essential or very important to getting ahead, compared to a median of 28 percent in all the other countries. 1 In reality, however, Americans are much less likely to move from one economic level to another than people in many other countries, said Isaacs. In a study of eight of the most highly industrialized countries, the link between parents earnings and childrens economic attainment was strongest in the United States and the United Kingdom, where it takes an average of

six generations for wealthy families economic advantage to stop influencing the economic status of their children, she reported. In Canada, Norway, Finland and Denmark, by contrast, it takes only three generations to cancel out the effects of being born into a wealthy family. 2 Being born at the top or the bottom of the income distribution affects people much more in the United States than in Canada, said Miles Corak, a professor of economics at Canadas University of Ottawa. For example, in the United States, 22 percent of sons born to fathers in the bottom tenth of the income distribution remain in the bottom tenth as adults, while 18 percent move up only into the next decile; in Canada only 16 percent of those born into the bottom decile stay there and 14 percent move up to the next decile. A similar stickiness holds for the top-earning decile, Corak said. 3 Race plays a major role in trapping people at the bottom of the ladder, according to a 2009 report from the Pew Charitable Trusts Economic Mobility Project. About 47 percent of black children born to families in the middle fifth of the income distribution fall into the bottom fifth as adults, compared to only 16 percent of middle-income white children. 4 Some analysts further argue that society has built-in mechanisms to keep people from high-earning families from falling out of their spots. For example, in a recent analysis of so-called legacy college admissions, Richard D. Kahlenberg, a senior fellow at the Century Foundation, a liberal think tank, reports that at selective colleges alumni children generally make up 10 to 25 percent

Continued from p. 998

began in the Great Depression with the New Deal and were amplified by both public and private actions after the war, wrote Massachusetts Institute of Technology professor of urban economics Frank Levy and professor of economics Peter Temin. 46 For example, in the early days of the Depression President Herbert Hoover raised marginal tax rates for the highest earnings from 25 to 63 percent. Then, in 1936, President Franklin D. Roosevelt, architect of the New Deal, raised the top rate to 79 percent, with the goal of narrowing the income distribution. 47 The first federal minimum wage was enacted in 1933, but the Supreme Court struck it down in the 1935 case Schechter Poultry Corp. v. United States. 48 In 1938,

Congress passed another minimum-wage law, which has survived legal challenge. Meanwhile, the National Labor Relations Act of 1935 often called the Wagner Act, for its sponsor Sen. Robert F. Wagner, D-N.Y. endorsed the right of workers to unionize, strike and engage in collective bargaining with management while limiting the means employers could use to fight unions. 49

Inequality Rises
hen the most recent new era of rising inequality began, around 1980, many were surprised. As Galbraith at the University of Texas explained, the very essence of being a developed nation lies in industrialization,

long believed to foster both democracy and the emergence of a stable, middleclass working population, paid at rates which vary only by the range of skills in the workforce. By contrast, the very essence of underdevelopment is not poverty per se but a skewed income and wealth distribution with a few very wealthy people at the top and the vast majority of people struggling below. 50 Nevertheless, in the past three decades the United States and to a lesser extent other industrialized countries, especially Canada and the United Kingdom, have seen a rise of economic inequality whose cause analysts struggle to understand. Initially, suspicion focused on supplyand-demand trends in the workforce stemming from increased immigration

1000

CQ Researcher

of the student body. Since the proportion of alumni children each college accepts varies little from year to year, that suggests an informal quota system, he says. Statistical analysis suggests, he says, that being a legacy boosts a students chance of admission to a selective school by about 20 percentage points say, from a 40-percent to a 60-percent chance over a non-legacy student with a similar transcript and scores. 5 The existence of such a strong tradition of legacy admissions by the most selective colleges whose graduates also may have a leg up in many job markets is especially damaging to African-American and Hispanic students, for example, who have been underrepresented at Americas most prestigious colleges in the past and thus will continue to get no legacy boost for several generations to come, Kahlenberg said. 6 Many conservative and libertarian analysts, however, argue that, as with many purported measures of economic inequality, researchers who find low economic mobility in the United States look at the wrong studies and interpret them too narrowly. Some studies show high mobility, said Jagadeesh Gokhale, a senior fellow at the libertarian Cato Institute, and Pamela Villarreal, a graduate student fellow at the conservative National Center for Policy Analysis. For example, a study has shown that between 1984 and 1994 almost two-thirds of families in the lowest tenth of the income ladder in 1984 had reached a higher rung 10 years later, they pointed out. Meanwhile, 47 percent of the families in the top tenth of earners in 1984 had fallen to a lower decile 10 years later. 7

Furthermore, wealth is highly mobile in the United States, where most fortunes are earned, rather than inherited, write Gokhale and Villarreal. On Forbes magazines annual list of the 400 richest Americans, for example, the vast majority of the 2,218 people listed from 1995 to 2003 87 percent made the cut for only one or two years during the period, they note, indicating that most of the very top earners dont hold onto their top incomes long, as others climb to take their place. 8 Marcia Clemmitt
Julia B. Isaacs, International Comparisons of Economic Mobility, Economic Mobility Project, Pew Charitable Trusts, February 2008, www.economicmobility. org/assets/pdfs/EMP_InternationalComparisons_ChapterIII.pdf. 2 Ibid. 3 Miles Corak, Chasing the Same Dreams, Climbing Different Ladders, Economic Mobility Project, Pew Charitable Trusts, January 2009, www.pewtrusts.org/ uploadedFiles/wwwpewtrustsorg/Reports/Economic_Mobility/EMP_Chasing %20the%20Same%20Dream_Full%20Report_2010-1-07.pdf. 4 Renewing the American Dream: A Road Map to Enhancing Economic Mobility in America, Economic Mobility Project, Pew Charitable Trusts, November 2009, www.economicmobility.org. 5 Richard D. Kahlenberg, 10 Myths About Legacy Preferences in College Admissions, The Chronicle of Higher Education, Sept. 22, 2010, http://chronicle.com. 6 Ibid. 7 Jagadeesh Gokhale and Pamela Villarreal, Wealth, Inheritance and the Estate Tax, NCPA Policy Report No. 289, September 2006, www.ncpa.org/pub/ st/st289. 8 Ibid.
1

and more women workers. Recent analyses find that these suspect trends dont tell the whole story, however. For example, since women first began entering the workplace in large numbers, beginning in the 1970s, studies show that theyve actually outperformed men on average when it comes to moving out of moderately skilled jobs and into higher-level, better-paid occupations, said journalist Timothy Noah in a recent series of articles in the online magazine Slate. That statistic means that womens employment isnt holding workers wages down substantially. 51 Immigration, meanwhile, has had some effect in holding down wages for low-skilled workers, but its overall contribution to inequality is less than expected.

In 2000, the average income of a native-born high school dropout was about 7.4 percent lower than it would have been that year had the immigration that occurred between 1980 and 2000 never occurred, concluded George J. Borjas, a professor of economics and social policy at Harvard. Immigration depressed the incomes of high school graduates by only 2.1 percent over the two-decade period, however, Borjas said. 52 It appears that only about 5 percent of the overall increase in income inequality observed over the past three decades is due to immigration, according to Noah. 53 A bigger culprit may be what scholars call skill-based technological change (SBTC) technology-driven changes in the skills workers need to get good jobs,

especially as many medium-skill jobs, such as manufacturing, move overseas in a globalized economy where companies can pay people less to do the same work in less-developed economies. The American economy grew rapidly and its people grew together from World War II to about 1973, wrote Harvard economists Claudia Goldin and Lawrence F. Katz. Each generation of Americans achieved a level of education that greatly exceeded that of the previous one, and this situation allowed businesses based on new technologies to find enough high-skilled workers. At the same time, the emergence of new, larger cohorts of skilled Americans generally created a demand and supply balance in the workforce that kept skilled workers salaries from rising too high and

www.cqresearcher.com

Dec. 3, 2010

1001

INCOME INEQUALITY

Courts Open Door to Big-Money Political Donors


Do the rich wield more political power than the poor?

n the 2010 campaign season, a single political action committee (PAC) poured $600,000 into the Nevada Senate race on behalf of the Republican challenger, Sharron Angle, who came close to unseating Senate Democratic Majority Leader Harry Reid on Nov. 2. Big spending by PACs is nothing new in political campaigns, but the Ending Spending Fund that operated in Nevada represents a new wrinkle a PAC funded by a single big donor. 1 Two 2010 court rulings the Supreme Courts controversial January decision in the so-called Citizens United case and a March ruling by the U.S. Court of Appeals for the District of Columbia Circuit in Speechnow.org vs. the Federal Election Commission cleared the way for outside donors to pour unlimited funds into elections, as long as they dont coordinate with political candidates or party committees. 2 Outside donors can now sponsor election advertising, for example, without abiding by older campaign rules, such as individual-donor spending limits. That opens the door for a PAC like the Ending Spending Fund, bankrolled by J. Joseph Ricketts, the Omaha-based founder of the discount online stock brokerage Ameritrade. 3 This new avenue for wielding political clout is part of a historical trend over the past several decades that is consolidating disproportionate political power in the hands of the richest citizens, some scholars argue. The Founding Fathers believed in political equality, meaning that whether one is rich or poor would determine a persons market power but not their power in the democracy, says Jacob S. Hacker, a professor of political science at Yale University. I believe were falling quite dramatically short of this, as wealthier people have gradually developed institutional means like PACs and lobbies to see their favored policies enacted into law and regulation, and the government has become more friendly to these efforts, he says. There may exist mechanisms or pathways of influence by which a very small set of oligarchs rich people who wield political power could, to a far greater extent than their numbers alone would suggest, have a major impact on policy outcomes, wrote Northwestern University political scientists Benjamin I. Page and Jeffrey A. Winters. They point to the many highly professionalized and extremely expensive lobbying or-

ganizations that have sprung up in Washington since the mid20th century, mostly representing business and professional groups. Meanwhile, once-powerful labor unions now represent only about 15 percent of the U.S. workforce, mostly government workers. The pluralist dream of balance among competing interest groups is thus largely discredited, while those who are able and willing to invest large sums of money in increasingly professional and expensive lobbying efforts have a big advantage, they argue. 4 Politicians increasing need for fundraising has helped lobbies to increase the power of big-money business interests, wrote Hacker and Paul Pierson, a professor of political science at the University of California, Berkeley. For example, beginning in the 1970s, television advertising and modern public-opinion polling allowed candidates to reach unheard of numbers of people with messages shrewdly crafted to tap into voters prime desires. The ads and the pricey political consultants whom candidates hired to poll and develop campaign strategies greatly increased politicians reliance on big-money donors, Hacker and Pierson argue. 5 Based on decades of detailed polling data on different income groups, its clear that when the opinions of the poor diverged from those of the well-off, the opinions of the poor ceased to have any apparent influence: If 90 percent of poor Americans supported a policy change, it was no more likely to happen than if 10 percent did, according to political scientist Martin Gilens at Princeton University. 6 By contrast, when well-off people supported a policy change, it was three times more likely to occur than if they opposed it. Furthermore, the middle class did not fare much better than the poor when their opinions departed from those of the welloff. When median-income people strongly supported a policy change, it had hardly any more chance of occurring than a change that they strongly opposed, Gilens said. 7 The policy preferences of wealthy people tend to diverge from those of other citizens on various issues, according to Page, who has begun an extensive study of this question. His preliminary work finds that 58.8 percent of the richest Americans in the top 4 percent of income identify as Republicans, for

thus driving income inequality compared to low-skilled workers because many people could compete for high-skilled occupations, Katz and Goldin wrote. 54 Historically, education has been the primary pathway of upward mobility in the United States, says Richard J. Murnane, a professor of education and society at the Harvard Graduate School of

Education. In 1973, the United States had the highest high school graduation rate among OECD [Organization for Economic Co-operation and Development] countries, but the education engine stopped in the mid-1970s as high school graduation rates stalled, he says. Levels of income inequality depend very strongly on the supply and

demand for skills, at least among people between the 10th and the 90th percentile of the income distribution, says David Autor, an economist at the Massachusetts Institute of Technology. For example, in the early 1970s, when the huge Baby Boom generation saw a rising proportion of its members go to college, wages for higher-skilled

1002

CQ Researcher

example, compared to 36.1 percent of others. Very high-income Americans are more likely than others to be liberal or libertarian on social issues favoring abortion rights and the right of atheists to teach, for example. But they are more likely than others to be conservative on economic issues, not favoring government efforts to reduce economic inequalities. 8 In the 2010 midterm elections, high earners showed a strong preference for Republican candidates and, presumably, policies, while 58 percent of those earning $30,000 or less and 52 percent of those earning between $30,000 and $50,000 voted for Democratic candidates, according to a Wall Street Journal analysis. The Republican preference strengthened all the way up the income ladder, with 52 percent of those earning between $50,000 and $75,000 voting GOP; 56 percent of the $75,000 to $200,000 earners; and a whopping 62 percent of those earning over $200,000. 9 Conservative and libertarian analysts remain skeptical that economic clout helps some gain undue political influence. While highly educated people wield greater influence, it is very difficult to see how income in excess of the threshold necessary to receive a high-quality education adds much to most peoples pool of political resources, said Will Wilkinson, a research fellow at the libertarian Cato Institute. Ideologically motivated wealthy Americans are limited by the menu of preexisting organizations, prevailing ideas and the supply of ideologically congenial labor, he argued. No amount of money can buy you a think tank with your politics if there is no one with your politics to work in it. 10 Capitalism might indeed preclude democracy if capitalism meant that rich people really were a permanent class, wrote Council on Foreign Relations Senior Fellow Amity Shlaes. But one capitalist idea (the railroad, say) brutally supplants another (the shipping canal), and within a few generations . . . this supplanting knocks some parties out of the top tier and elevates others to it. 11 A focus on the dangers of wealth concentration simply provides a political justification for encouraging envy, a state that leads to neglect of family and friends, community involvement and charitable work and bolsters an empty materialism, wrote Jeffrey M. Jones, assistant director of Stanford Universitys Hoover Institution, a conservative public-policy research organization, and Daniel Heil, a graduate student at Pepperdine University. 12

Ironically, when Americans become aware that income inequality is on the rise, that knowledge actually sways the voting public away from liberal policies aimed at decreasing inequality, according to Nathan J. Kelly, an assistant professor of political science at the University of Tennessee, Knoxville, and Peter K. Enns, an assistant professor of government at Cornell University, in Ithaca, N.Y. In the United States, public opinion moves in a conservative direction in response to income inequality, among both rich and poor Americans, potentially making income inequality a self-reinforcing phenomenon, they wrote. 13 Marcia Clemmitt
Amanda Terkel, The One-Person Funded Super PAC, Huffington Post blog, Oct. 22, 2010, www.huffingtonpost.com. 2 The cases are Citizens United v. Federal Election Commission, 130 S.Ct. 876 (2010), www.law.cornell.edu/supct/html/08-205.ZS.html and Speechnow.org, et al. v. Federal Election Commission, No. 08-5223, http://pacer.cadc.uscourts.gov/com mon/opinions/201003/08-5223-1236837.pdf. For background, see Kenneth Jost, Campaign Finance Debates, CQ Researcher, May 28, 2010, pp. 457-480. 3 Terkel, op. cit. 4 Jeffrey A. Winters and Benjamin I. Page, Oligarchy in the United States? Perspectives on Politics, December 2009, p. 731. 5 Jacob S. Hacker and Paul Pierson, Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class (2010), p. 171. 6 Quoted in ibid., p. 111. 7 Ibid. 8 Benjamin I. Page and Cari Lynn Hennessy, What Affluent Americans Want From Politics, paper delivered to the American Political Science Association, annual meeting, Washington, D.C., Sept. 2-5, 2010, www.russellsage.org/sites/all/ files/u4/Page%20%26%20Hennessy%2C%20What%20Affluent%20Americans%20 Want%20from%20Politics.pdf. 9 Democratic Coalition Crumbles, Exit Polls Say, The Wall Street Journal online, Nov. 3, 2010, http://online.wsj.com/article/SB1000142405274870377 8304575590860891293580.html?KEYWORDS=voters+election+2010#project%3 DEXITPOLL101102%26articleTabs%3Dinteractive. 10 Will Wilkinson, Thinking Clearly About Economic Inequality, Policy Analysis No. 640, Cato Institute July 14, 2009, www.cato.org. 11 Amity Shlaes, An Age of Creative Destruction, The Wall Street Journal online, Oct. 29, 2010, http://online.wsj.com. 12 Jeffrey M. Jones and Daniel Heil, The Politics of Envy, tech-archives.net website, Aug. 21, 2009, http://sci.tech-archive.net. 13 Nathan J. Kelly and Peter K. Enns, Inequality and the Dynamics of Public Opinion: The Self-Reinforcing Link Between Economic Inequality and Mass Preferences, American Journal of Political Science, October 2010, p. 855.
1

workers temporarily fell somewhat. In the mid-1970s, as high school graduation rates stalled and smaller generational cohorts attained adulthood behind the Baby Boomers, the supply of high-skill workers began to shrink compared to the growing demand for them in technology-based industries, Autor says. At that point, we began

to get a [wage] premium for college grads, and their rising incomes helped increase income inequality. At the same time, the advent of the computer age allowed automation of virtually any repetitive task so that middleskill jobs like bookkeeping, many manufacturing jobs and even many computer programming and sales positions

gradually evaporated from the workplace or shifted overseas, explains Carnevale, at Georgetowns Center on Education and the Workforce. With high school graduation rates stagnant, a growing pool of U.S. workers are left to compete for low-skilled jobs like security guards and home-health workers, where the large supply of available workers drives

www.cqresearcher.com

Dec. 3, 2010

1003

INCOME INEQUALITY
down wages further, Carnevale says. In 1973 the majority of people with a high school education or less were in the middle 40 percent of the income distribution solidly middle class, says Carnevale. Now that number is below 30 percent. People with B.A.s, by contrast, have remained in the middle class, and about a third have moved into the top 30 percent of incomes, he says. This workforce polarization that drives income inequality is evident in European Union and OECD countries, too, says Autor. very top earners. For one thing, financial-industry executives make up nearly 20 percent of the people with salaries in the top 1 percent of the U.S. income distribution, and it strains credulity to say they are . . . the talented tamers of technological change whove benefited from skillbased technological workplace change, write Yales Hacker and University of California, Berkeley, political scientist Paul Pierson. The financial crisis demonstrated that plenty of the so-called financial innovations that their complex computer models helped spawn proved to be just fancier (and riskier) ways of . . . benefiting from short-term market swings, not the true innovation that markets presumably reward. 58 Over the past several decades, wealthy business interests have organized into lobbies, political action committees (PACs) and think tanks, at the same time as the main organizations that once represented the working class labor unions have shrunk, leaving some business sectors like finance with enormous power to influence government policies, Hacker and Pierson argue. Furthermore, beginning in the 1970s, TV ads and pricey opinion-poll surveying became a necessity for political campaigns, greatly increasing politicians need for high-dollar contributors and increasing those contributors influence in Washington, they contend. As a result, government policy has grown much more generous toward the fortunate. Financial deregulation didnt just happen, nor did tax policy that saw corporate and inheritance taxes as well as marginal taxes on high incomes drop significantly, says Hacker. The government has made and remade markets by law and regulation, and the much smaller income differentials that prevail in every other market-based industrialized economy make clear that U.S. income inequalities result from policy choices, he says. For example, not market forces alone but deliberate government policies drove the precipitous decline in U.S. union membership that began just after World War II when more than one in three workers was a union member and continues today, when about one in nine is, and most union members are government, not private-sector, workers, Hacker says. While unions arent blameless in their own demise, and globalization has realigned markets, over the past few decades Congress, state legislatures and successive White Houses dragged their feet on measure after measure that would have strengthened unions bargaining power, he says. The result is the loss of a key political force that was broadly representative of the middle class in a way that no other large, politically influential organization has been a key source of voter turnout and a counterweight in boardrooms to represent the interests of middle- and low-wage workers, Hacker says. Economic troubles fueled lawmakers increasingly business- and wealth-friendly policies beginning in the late 1970s, said University of Arizona professor of sociology and political science Lane Kenworthy. Stagflation slow economic growth combined with rising prices and high unemployment and a surge in imports had turned [Americans longheld] optimism [about the economy] to worry, and the underlying pessimism persisted through the late 1990s, making policy makers more willing to entertain the pleas of business interests, whatever they might be. 59

Winners Take All


ther scholars point to a different trend as the key driver of income inequality a winner-takeall economy in which a few high earners rack up income gains that far outstrip those of everyone else. There was no increase in inequality after 1993 in the bottom 99 percent of the population, and the remaining increase . . . can be entirely explained by the behavior of incomes in the top 1 percent, said Northwesterns Gordon. 55 Unlike in the Gilded Age, it wasnt investment income but high-rising salaries for people like top executives and Hollywood stars that fueled the outsized gains at the top, according to Piketty and Saez. 56 Some argue that superstar salaries simply represent a new, globalized market rationally presenting very high rewards to people whose wares sell to tens of millions of people worldwide. I think there are people, including myself at certain times in my career, who because of their uniqueness warrant whatever the market will bear, said Leo J. Hindery, a managing partner of the New York City-based private equity fund InterMedia Partners. 57 But others say that government structures and policies not just market forces have played a large role in the U.S. shift of income toward the

CURRENT SITUATION
Policies Debated

lthough few members of Congress or candidates in the hotly


Continued on p. 1006

1004

CQ Researcher

At Issue:
Should tax cuts on high earnings be extended?
yes

ALAN REYNOLDS
SENIOR FELLOW, CATO INSTITUTE
WRITTEN FOR CQ RESEARCHER, NOVEMBER 2010

CHUCK MARR
DIRECTOR OF FEDERAL TAX POLICY, CENTER ON BUDGET AND POLICY PRIORITIES
WRITTEN FOR CQ RESEARCHER, NOVEMBER 2010

n 2001, Congress assembled a time bomb with a 10-year fuse. Unless the lame duck Congress acts with atypical urgency, all tax cuts enacted in 2001-2003 will vanish on Dec. 31. If lawmakers fail to defuse the tax time bomb by the end of the year, withholding taxes will increase dramatically. Moreover, if lawmakers and the president cant agree on a solution by years end, the top tax on dividends would jump from 15 percent to 39.6 percent, ensuring a stock market crash. The estate tax would jump to 55 percent with only a $1 million exemption. Marginal tax rates would rise by 3-5 percentage points across the board. President Obama has appeared eager to hurl himself on top of this bomb. He threatened economic homicide and political suicide by threatening to veto any solution that did not impose much higher taxes on two-earner couples and small businesses earning more than $250,000. Yet the president has had eight months to enact the tax hikes in his 2011 budget. If he couldnt do it then, he certainly cant now. Everyone knows this is playing with fire. The targets of Obamas planned tax increases account for a fourth of all consumer spending, and a greater fraction of entrepreneurship and investment. Christina Romer, formerly Obamas top economic adviser, found that a U.S. tax increase amounting to 1 percent of gross domestic product (GDP) reduces real GDP by nearly 3 percent within three years, with employment falling 1.1 percent. Harvard economists Alberto Alesina and Silvia Ardagna found that fiscal adjustments, those based upon spending cuts and no tax increases, are more likely to reduce deficits . . . [and] less likely to create recessions. Under the fanciful assumption that Obamas tax hikes on the rich did no damage to the economy, his plan is estimated to raise $35 billion next year. That would cover the budget deficit for just nine days. This is all risk and no reward. The White House is now rumored to be willing to compromise on legislation that postpones the presidents planned tax hikes on upper-income families while supposedly making permanent all other Bush tax cuts. That may not be the ideal solution, but it buys time for the new Congress to tackle the budget in an economy that is rising slowly rather than falling fast.
no

yes no
Dec. 3, 2010

etting President Bushs tax cuts for incomes over $250,000 expire on schedule at the end of December is the right move from the standpoint of both equity and economic efficiency. Recent decades have witnessed a stunning shift in incomes from the middle class to those few at the top. Between 1980 and 2005, about 80 percent of the countrys total income gains went to the top 1 percent of the population, according to a report by MIT researchers Frank Levy and Peter Temin. Moreover, while incomes stagnated for middle-class Americans in recent decades, they surged for the wealthy in stark contrast to the decades between the mid-1940s and mid-1970s, when income growth was widely shared. The average middleincome American family had $13,000 less after-tax income in 2007 than it would have had if incomes of all groups had grown at the same average rate since 1979. Tax policy is one of the best tools we have to help offset the troubling trend of growing inequality. Unfortunately, President Bushs tax cuts have had the opposite effect, providing much larger benefits both in dollar terms and as a percentage of income to people at the very top than to middleand lower-income people. In fact, people making more than $1 million a year get an average of about $129,000 each year from the Bush tax cuts, according to the Urban Institute-Brookings Institution Tax Policy Center. The main reason, of course, is the large tax cuts targeted specifically at high-income households. Extending the tax cuts for high-income people would only make inequality worse. (High-income people would still benefit from an extension of the so-called middle-class Bush tax cuts, since the first $250,000 of their income would be taxed at the lower marginal tax rates.) Extending the high-end tax cuts doesnt make sense from an economic perspective, either. The Congressional Budget Office (CBO) rated it the least cost-effective of 11 options for boosting economic growth and job creation. A far better alternative would be to extend President Obamas Making Work Pay tax credit, which is targeted to people who live paycheck-to-paycheck but is also scheduled to expire at the end of December. This would generate two to three times the economic growth and job creation as extending the high-end Bush tax cuts, according to CBO. The right course, then, would be to let the high-end Bush tax cuts expire, locking in significant long-term budgetary savings, while temporarily extending the Making Work Pay credit while the economy remains weak.

www.cqresearcher.com

1005

INCOME INEQUALITY
Continued from p. 1004

contested 2010 elections have specifically addressed the question of whether growing economic inequality is bad or good, the issue simmers beneath many of the hottest election-year debates, including taxes, the minimum wage and the power of unions. In light of the countrys fiscal problems, many Democrats in Congress, along with President Obama, have called for the wealthiest to take on a greater share of the public burden. In a heated debate that remained unresolved when Congress adjourned its main session in the fall to campaign, the White House and most Democrats backed the idea of extending Bushera tax cuts for family earnings under $250,000 and letting the cuts expire for dollars earned above that level. 60 In order to save our children from a future of debt, we will . . . end the tax breaks for the wealthiest 2 percent of Americans, said Obama. 61 But Republicans and some conservative Democrats argue that high-earners money is the key driver of the whole economy. History shows and good economic theory shows, if you reduce taxes, youre going to have more economic activity, said Republican Minnesota Gov. Tim Pawlenty, on CBS News Face the Nation on Oct. 31. If you dont extend those Bush tax cuts all of them its going to send a very negative signal, said Pawlenty, who is reportedly mulling a run for the White House in 2012. 62 Most recently, the White House reportedly favors a plan to temporarily extend the cuts for earnings over $250,000 while extending the cuts permanently for earnings under that amount. With Congress in upheaval following the elections, its not clear whether lawmakers will tackle the issue in the final days of the 2010 lame duck session, when most newly elected members wont yet be seated. Conservative candidates campaigning around the country this fall spoke

out against government mechanisms intended to push the income distribution more in favor of lower earners. John Raese, West Virginias Republican nominee for the Senate, and Joe Miller, the Republican nominee for Senate in Alaska, for example, argued that the Constitution does not give Congress the power to set a minimum wage for the nation but reserves that power for states. 63 (Similar arguments were made on the two occasions when Congress enacted federal minimum-wage laws, in 1933 and 1938. The Supreme Court struck down the first law as unconstitutional in 1935, 64 but upheld the 1938 Fair Labor Standards Act in a unanimous 1941 decision, U.S. v. Darby. 65) Linda McMahon, the Republican nominee for Senate in Connecticut, opposed increasing the minimum wage, and Rand Paul, Republican nominee for the Senate in Kentucky, suggested a very cautious approach to minimum-wage increases. 66 How big a role candidates views on income redistribution played in election results isnt clear, but for these Senate hopefuls the results were mixed: Paul won his race; Raese, McMahon and Miller lost, but Miller is contesting his narrow defeat to write-in candidate Republican Sen. Lisa Murkowski, the incumbent. Meanwhile, four states voted on ballot measures in November that would slow the growth of unions, and all the measures were approved. Voters in Arizona, South Carolina, South Dakota and Utah approved making a secret vote by workers the sole allowable means of determining whether an authorized workplace union has been formed, outlawing an alternative practice that requires an employer to recognize that a union has been formed any time a majority of workers have signed cards authorizing union formation. 67

Ambivalent Public?

he public, meanwhile, remains both confused and ambivalent about

the underlying question of whether economic inequalities are worrisome. It is usually only left-leaning rich people that care about inequality in the U.S., said Carol Graham, a senior fellow at the Brookings Institution think tank. 68 Nevertheless, some polling suggests that the public may be fairly supportive of government policies to prop up lower incomes, in particular. For example, an October poll found 67 percent of respondents favoring an increase in the minimum wage from its current $7.50 an hour to $10 an hour, even including a majority 51 percent of Republicans. Among people who identified themselves as belonging to the Tea Party, however, 50 percent opposed the increase and 47 percent supported it. 69 Underlying the ambivalence is the fact that few Americans accurately gauge the level of income inequality, some researchers say. The public tends to guess right about lower- and middle-income wages, but few seem aware of how high the highest salaries actually are, reports Benjamin I. Page, a professor of decision making in Northwestern Universitys political science department, and Lawrence R. Jacobs, a professor of political studies at the University of Minnesota. The average person surveyed estimated $250,000 to be the annual income for a heart surgeon and $500,000 for the CEO of a large corporation. The guesses were well off the mark, especially for CEOs. The average heart surgeon earns over $400,000, while the CEOs of Standard & Poors 500 companies average over $14 million in annual income. 70 Even professional economists generally underestimate current levels of inequality, says Dukes Ariely. This finding isnt surprising, says Michael I. Norton, an associate professor of business administration at Harvard Business School. As an average person, we dont really see the very rich or their wealth. Its in trusts

1006

CQ Researcher

and other financial forms that make it mostly invisible. People dont see very poor people in their lives, either. At the same time, the public generally believes that society would be more just if incomes varied a bit less widely, says Norton, who, along with Ariely, conducted a recent study asking people how they would like to see income distributed in a hypothetical society, if they knew that they would be placed into that society at some random spot. When you ask people a specific question about a tax cut or some other proposal, you tend to have a very hostile debate. So we stepped back and looked at a very broad level of what kind of society people actually desire, and when we did that, people agreed a lot, Norton says. When shown unlabeled diagrams that actually depicted the income distributions of the United States and Sweden where inequality is much lower than in the United States fully 92 percent of Americans surveyed preferred to live in the unlabeled country with the Swedish distribution, says Ariely. Furthermore, when you look at the apparently differing ideology of Republicans and Democrats, the differences in how members of the two parties answered the question are very, very small, with 90 percent of Republicans opting for the Swedish distribution, compared to 93 percent of Democrats. A desire for overall fairness seems to be the key motivation for most, says Norton. When people are asked about how theyd redistribute societys wealth, they dont just give it to poor, they give it to everybody, and the main sentiment people express is the rich just have somewhat too much. When it comes to taking that broad vision and boiling it down to policy, though, thats very hard to do, Norton acknowledges. At both the macro and the micro level, people have certain ideas about what they want their lives to be, but very often our decisions go the other way.

OUTLOOK
Progressive Era Redux?
hether the American economy will continue the trend toward greater inequality or adopt policies to rein in the widening gap is unclear, and lawmakers and the public vary widely in their views of which course is preferable and what policies might change things for the better. If you look back at the 1890s ultimately there was a reaction to it, there was a cycle that saw an era of progressive taxation and other measures to limit the income inequalities that marked the Gilded Age, says Northwesterns Page. A lot of these reforms were undertaken by the upper middle class and even some wealthier people, he says. And there does now seem to be something in the air that could portend a similar shift to progressive policies, as billionaires like Microsoft founder Bill Gates and investor Warren Buffett suggest that the wealthy should devote large portions of their estates to charitable and public purposes, he says. 71 Indeed, in the Progressive Era, the economic problems dwarfed those we have today, but the nation still came together to shape national policies to overcome them and to rein in rampant inequality, says Yales Hacker. The same thing could happen today, Hacker says. Whatever pessimism I have is not over the scope of the problem but over the lack of a widespread recognition that a problem of inequality exists, he says. We have really only begun to have this debate. We are where we were on climate change a few decades ago. Hacker focuses on government policies related to unions, taxation and business regulation as keys to keeping economic inequalities at a reasonable level, but MITs Autor worries

that such a focus might leave Americans thinking that the whole thing is out of our hands. The best cure for extreme inequality is education because it creates economic opportunity, he says. We havent been keeping pace with the demand for skilled labor, and bolstering technical education and skills training for more young people could go a long way toward rebuilding the American workforce and the businesses that support it, he says. This issue may not matter much to businesses, most of which can locate anywhere in the world that a skilled workforce exists, but it matters greatly to our prosperity. The stagnant buying power of middle- and lower-earning Americans is a severe, growing problem for the wealthiest Americans, whether they realize it or not, says Max Fraad Wolff, an economics writer and commentator who teaches at the New School University Graduate Program in International Affairs. Business leaders may bank on the emergence of global markets to replace U.S. buying power, but thats not a winning strategy, he says. What we know is that Americans can sell to Americans, Wolff says. In this early phase of modernization [in emerging economies like China and India] what it means to be modern is to be Americanized, but in the early history of the United States being modern meant being Europeanized, too, he says. Eventually American pride overtook that, and that will happen to currently modernizing countries like China, too. That makes bolstering the average Americans earning power a critical issue for U.S. businesses, he says.

Notes
1 Christina Boyle, Rich-Poor Gap Grows in the City, Daily News [New York], Sept. 29, 2010, p. 5.

www.cqresearcher.com

Dec. 3, 2010

1007

INCOME INEQUALITY
Ibid. Arloc Sherman and Chad Stone, Income Gaps Between Very Rich and Everyone Else More Than Tripled in Last Three Decades, New Data Show, Center on Budget and Policy Priorities, June 25, 2010, www.cbpp.org. 4 Ajay Kapur, Niall Macleod and Narendra Singh, Revisiting Plutonomy: The Rich Getting Richer, Industry Note, Citigroup, March 5, 2006. 5 George Reisman, For Society to Thrive, the Rich Must Be Left Alone, Mises Daily blog, Ludwig von Mises Institute, March 2, 2006, http://mises.org. 6 Sen. Joseph Lieberman, press statement, Sept. 13, 2010, http://lieberman.senate.gov. 7 Ibid. 8 Robert Kuttner, What Planet Are Deficit Hawks Living On? Huffington Post blog, Nov. 14, 2010, www.huffingtonpost.com. 9 Christian Broda, Ephraim Leibtag and David E. Weinstein, The Role of Prices in Measuring the Poors Living Standards, Journal of Economic Perspectives, spring 2009, http:// faculty.chicagobooth.edu/christian.broda/web site/research/unrestricted/z30002092155p%20% 282%29.pdf. 10 Stephen Rose, Five Myths About the Poor Middle Class, The Washington Post, Dec. 23, 2007, www.washingtonpost.com. 11 Neal Boortz, Nine in 10 Politicians Will Rip This Column, Atlanta Journal-Constitution online, Sept. 17, 2010, www.ajc.com. 12 Robert J. Gordon, Misperceptions About the Magnitude and Timing of Changes in American Income Inequality, National Bureau of Economic Research, Working Paper 15351, September 2009. 13 Growing Unequal? Income Distribution and Poverty in OECD Countries, Organization for Economic Co-operation and Development, October 2008, www.oecd.org/els/social/inequality. 14 David B. Grusky and Kim A. Weeden, Is Market Failure Behind the Takeoff in Inequality?
3 2

forthcoming in David B. Grusky and Szonja Szelenyi, eds., The Inequality Reader: Contemporary and Foundational Readings in Race, Class, and Gender, 2nd ed. 15 Gary Burtless, Comments on Has U.S. Income Inequality Really Increased? Jan. 11, 2007, www.brookings.edu/views/papers/burtless/2007 0111.pdf. 16 Gary Burtless, Has Widening Inequality Promoted or Retarded U.S. Growth? Canadian Public Policy, January 2003, p. S185, www.irpp. org/events/archive/jan01/burtless.pdf. 17 Ibid. 18 W. Michael Cox and Richard Alm, You Are What You Spend, The New York Times, Feb. 10, 2008, www.nytimes.com. 19 Angel Girria, remarks delivered at OECD conference in Paris, France, Oct. 21, 2008, www.oecd.org. 20 Conference Report: Poverty, Inequality, and Democracy, Network of Democracy Research Institutes, Bratislava, Slovakia, April 2628, 2009, p. 2, www.wmd.org/ndri/ndri.html. 21 Martin Gilens, Inequality and Democratic Responsiveness, Public Opinion Quarterly, 2005 (Special Issue), pp. 778-796, http://poq.oxford journals.org/content/69/5/778.full. 22 Ibid. 23 Quoted in Emily Kaiser, Special Report: The Haves, the Have-nots, and the Dreamless Dead, Reuters, Oct. 22, 2010, www.reuters. com/article/idUSTRE69L0KI20101022. 24 Quoted in ibid. 25 Quoted in David Wessel, Professor Finds Many Fault Lines in Crisis, The Wall Street Journal, April 22, 2010, http://online.wsg.com. 26 N. Gregory Mankiw, I Can Afford Higher Taxes. But Theyll Make Me Work Less, New York Times, Oct. 9, 2010, www.nytimes.com. 27 Ibid. 28 Art Carden, The Minimum Wage, Discrimination, and Inequality, Mises Daily blog, Ludwig von Mises Institute, Jan. 19, 2009, http://mises.org.

About the Author


Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include Gridlock in Washington and Financial Industry Overhaul.

Ibid. Sidney Weintraub, U.S. Tolerance of Income Inequality, Issues in International Political Economy, Center for Strategic and International Studies, January 2010, www.csis.org. 31 Robert Reich, The Perfect Storm that Threatens American Democracy, Huffington Post blog, Oct. 18, 2010, www.huffingtonpost.com. 32 Ian Dew-Becker and Robert J. Gordon, Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income, paper presented at the Brookings Institution panel on economic activity, Sept. 8-9, 2005, www.brookings.edu/es/commentary/jour nals/bpea_macro/forum/200509bpea_gordon.pdf. 33 Ibid. 34 Jonathan Cohn, Moral Arguments for Soaking the Rich, The New Republic online, Oct. 17, 2010, www.tnr.com. 35 Anthony P. Carnevale, Postsecondary Education and Training As We Know it Is Not Enough, paper prepared for a Georgetown University/Urban Institute conference on poverty, Jan. 15, 2010, www.urban.org/uploadedpdf/ 412071_postsecondary_education.pdf. 36 Gary S. Becker and Kevin M. Murphy, The Upside of Income Inequality, The American: A Magazine of Ideas online, The American Enterprise Institute, May/June 2007, www.ameri can.com. 37 James K. Galbraith and J. Travis Hale, The Evolution of Economic Inequality in the United States, 1969-2007, University of Texas Inequality Project, Working Paper 57, Feb. 2, 2009, http://utip.gov.utexas.edu/papers.html. 38 Claudia Goldin and Lawrence F. Katz, The Race Between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005, May 2009, www.eco nomics.harvard.edu/faculty/katz/files/Chapter8_ NBER_1.pdf. 39 Mark Twain and Charles Dudley Warner, The Gilded Age: A Tale of Today (1873). 40 Timothy Noah, The Great Divergence, Part One, Slate, Sept. 3, 2010, www.slate.com/id/ 2266025/entry/2266026. 41 Willford I. King, The Wealth and Income of the People of the United States (1915), p. 60, http://books.google.com/books?id=dmFsmjETqIC&pg=PA287&lpg=PA287&dq=%22willford +i+king%22+%22the+wealth+and+income+of+ the+people+of+the+united+states%22&source= bl&ots=0hVvJxnasb&sig=ilCydUCzxxTa1YW85i 40XnS7ZAA&hl=en&ei=Y8HFTK36CMH7lwf BhokG&sa=X&oi=book_result&ct=result&resn um=5&ved=0CCAQ6AEwBA#v=onepage&q=ef
30

29

1008

CQ Researcher

ficient&f=false. 42 Andrew Carnegie, The Gospel of Wealth and Other Timely Essays (1901), p. 10, http:// books.google.com/books?id=gAGvb5vIh-AC& printsec=frontcover&dq=%22the+gospel+of+ wealth%22&source=bl&ots=DMxn1bs71e&sig= 7CUUj34D-ignVkYztYo05sC0Rf4&hl=en&ei=JM TFTPjVMoSBlAeV_cED&sa=X&oi=book_result &ct=result&resnum=4&ved=0CCkQ6AEwAw#v =onepage&q&f=false. 43 For background, see 16th Amendment to the Constitution: Federal Income Tax (1913), National Archives and Records Administration website, www.ourdocuments.gov/doc.php?flash =old&doc=57. 44 Pollack v. Farmers Loan and Trust Company, 157 U.S. 429, www.law.cornell.edu/supct/ html/historics/USSC_CR_0157_0429_ZS.html. 45 Thomas Piketty and Emmanuel Saez, The Evolution of Top Incomes: A Historical and International Perspective, Working Paper 11955, National Bureau of Economic Research, January 2006, http://elsa.berkeley.edu/~saez/ piketty-saezAEAPP06.pdf. 46 Frank Levy and Peter Temin, Inequality and Institutions in 20th Century America, MIT Industrial Performance Center, Working Paper, June 27, 2007, www.economics.harvard.edu/ faculty/katz/files/Chapter8_NBER_1.pdf. 47 Ibid. 48 Schechter Poultry Corp. v. United States, 295 U.S. 495, www.law.cornell.edu/supct/html/his torics/USSC_CR_0295_0495_ZS.html. 49 Levy and Temin, op. cit. 50 James K. Galbraith, Inequality and Economic and Political Change, University of Texas Inequality Project, Working Paper 51, Sept. 21, 2008, http://utip.gov.utexas.edu/papers.html. 51 Noah, op. cit. 52 Ibid. 53 Ibid. 54 Goldin and Katz, op. cit. 55 Gordon, op. cit. 56 Piketty and Saez, The Evolution of Top Incomes, op. cit. 57 Quoted in Louis Uchitelle, The Richest of the Rich, Proud of a New Gilded Age, The New York Times, July 15, 2007, www.nytimes.com. 58 Jacob S. Hacker and Paul Pierson, WinnerTake-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class (2010), p. 46. 59 Lane Kenworthy, Business Political Capacity and the Top-heavy Rise in Income Inequality: How Large an Impact? Politics & Society, June 2010, p. 255.

FOR MORE INFORMATION


Cato Institute, 1000 Massachusetts Ave., N.W., Washington, DC 20001-5403; (202) 842-0200; www.cato.org. Analyzes economic issues from a libertarian point of view. Center on Budget and Policy Priorities, 820 First St., N.E., Suite 510, Washington, DC 20002; (202) 408-1080; www.cbpp.org. Liberal-leaning think tank that analyzes economic policy implications for low- and moderate-income families. Economic Mobility Project, The Pew Charitable Trusts, 901 E St., N.W., 10th Floor, Washington, DC 20004; www.economicmobility.org. Nonpartisan group studying trends in economic and social mobility. Emmanuel Saezs website, http://elsa.berkeley.edu/~saez. Analysis by University of California, Berkeley, economist supports many arguments about fast-rising income inequality. Ludwig von Mises Institute, 518 West Magnolia Ave., Auburn, AL 36832-4528; (334) 321-2100; http://mises.org. Organization of libertarian economists who argue that economic inequalities are both smaller and less troubling than many believe. My Budget 360 website, www.mybudget360.com/home. Advertising-supported online investment magazine posts data and analysis on economic inequalities. Too Much website, Program on Inequality and the Common Good, Institute for Policy Studies, 1112 16th St., N.W., Suite 600, Washington, DC 20036; (202) 2349382; http://toomuchonline.org. A liberal think tanks website posting news and commentary about economic inequality. U.S. Census Bureau, 4600 Silver Hill Road, Washington, DC 20233; (301) 763-4636; www.census.gov. Federal agency publishes periodic reports and analysis on the economy, including income distribution. University of Texas Inequality Project, http://utip.gov.utexas.edu. Austin-based group studying economic inequality around the world.

For background, see Richard Wolf, How the Tax Cut Debate Affects You, USA Today, Sept. 21, 2010, www.usatoday.com. 61 Quoted in ibid. 62 Transcript, Face the Nation, CBS News, Oct. 31, 2010, www.cbsnews.com/htdocs/pdf/ FTN_103110.pdf. 63 Adam Cohen, Could the Courts Outlaw the Minimum Wage? Time online/CNN, Oct. 20, 2010, www.time.com. 64 A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935). www.law.cornell.edu/supct/ html/historics/USSC_CR_0295_0495_ZS.html. 65 U.S. v. Darby, 312 U.S. 100 (1941), http://case law.lp.findlaw.com/cgi-bin/getcase.pl?court= us&vol=312&invol=100. 66 Cohen, op. cit. 67 For background, see Anti-Union Ballot Measures Target Workers Rights, AFL-CIO

60

NOW blog, Oct. 27, 2010, and James Parks, Corporate-Backed, Anti-Union Secret Ballot Measures Pass in Four States, AFL-CIO NOW blog, Nov. 4, 2010, http://blog.aflcio.org. 68 Quoted in Kaiser, op. cit. 69 Arthur Delaney, Two-Thirds of Americans Support Raising Minimum Wage: Poll, Huffington Post blog, Oct. 6, 2010, www.huffington post.com. 70 Benjamin I. Page and Lawrence R. Jacobs, Economic Inequality and the American Public, paper delivered at a conference at the Federal Reserve Bank of Chicago, April 2-3, 2008, http://ctcp.edn.depaul.edu/HGEwebsite/Ab stracts/BenjaminPage_Paper.pdf. 71 For background see Peter Katel, Philanthropy in America, CQ Researcher, Dec. 8, 2006, pp. 1009-1032.

www.cqresearcher.com

Dec. 3, 2010

1009

Bibliography
Selected Sources
Books
Cox, W. Michael, and Richard Alm, Myths of Rich and Poor: Why Were Better Off Than We Think, Basic Books, 2000. Cox, a senior fellow at the Dallas Federal Reserve Bank, and Alm, a business reporter, argue that higher living standards for all Americans offset any increases in income inequality that have occurred over the past few decades. Hacker, Jacob S., and Paul Pierson, Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class, Simon & Schuster, 2010. Professors of political science at Yale (Hacker) and the University of California, Berkeley (Pierson), argue that the widening income gap has not occurred mainly because lower-educated workers dont have the skills to compete for jobs in a technological workplace but because the U.S. government has gradually adopted many policies that support the growth of income and wealth at the top. Scholars from across the ideological spectrum examine research showing that social and economic mobility have been diminishing in the United States compared to other nations, despite the widespread belief that Americans have greater equality of opportunity than elsewhere. Lindsey, Brink,Paul Krugmans Nostalgianomics: Economic Policies, Social Norms, and Income Inequality, Cato Institute, 2009, www.cato.org/pub_display.php?pub_id=9941. The libertarian think tanks vice president for research argues that U.S. income dispersion resulted from technological change that keeps low-skilled workers out of many jobs, not from economic or social policies and practices like tax rates or unionization of labor. Norton, Michael I., and Dan Ariely, Building a Better America One Wealth Quintile at a Time, forthcoming, Perspectives in Psychological Science, www.people.hbs. edu/mnorton/norton%20ariely%20in%20press.pdf. When surveyed about their preferred society, large majorities of Americans across demographic groups and the political spectrum opt for an income distribution less skewed toward the top than the current U.S. distribution. Sherman, Arloc, and Chad Stone, Income Gaps Between the Very Rich and Everyone Else More Than Tripled in Last Three Decades, New Data Show, Center on Budget and Policy Priorities, June 25, 2010, www.cbpp.org. In an examination of tax and wage data from the nonpartisan Congressional Budget Office, analysts from a liberalleaning think tank report that U.S. income is more concentrated at the very top of the economic ladder than at any time since 1928, with the income gap between the richest 1 percent of Americans and the lowest three-fifths more than tripling between 1979 and 2007. Weintraub, Sidney, U.S. Tolerance of Income Inequality, Issues in International Political Economy, Center for Strategic & International Studies, January 2010, http:// csis.org/files/publication/issues201001.pdf. A political economist from a bipartisan foreign-policy think tank argues that U.S. citizens and policy makers tolerate and even promote greater economic inequality than people in many other developed nations consider fair or economically efficient. Wilkinson, Will, Thinking Clearly About Economic Inequality, Cato Institute Policy Analysis 640, July 14, 2009, www.cato.org/pub_display.php?pub_id=10351. A research fellow at the libertarian think tank argues that income statistics are a misleading measure of economic inequality and that dispersion of incomes has little relation to either human welfare or social justice.

Articles
Kaiser, Emily, Special Report: The Haves, the Have-nots, and the Dreamless Dead, Reuters, Oct. 22, 2010, www.reuters.com/article/idUSTRE69L0KI20101022. By examining parallels between two eras when economic inequality ran high in the United States the 1920s and the 2000s economists struggle to understand why both periods preceded huge crashes of the financial markets and lengthy economic depressions. Noah, Timothy, The Great Divergence, Slate, September 2010, www.slate.com/id/2267157/. In a 10-part series, a reporter for the online magazine discusses recent research examining the possible causes and effects of rising economic inequality.

Reports and Studies


Income, Poverty, and Health Insurance Coverage in the United States: 2009, Current Population Reports, U.S. Census Bureau, September 2010, www.census.gov/prod/ 2009pubs/p60-236.pdf. This government report finds that the median household income did not change from 2008 to 2009 but that the poverty rate increased. Isaacs, Julia B., Isabel V. Sawhill and Ron Haskins, Getting Ahead or Losing Ground: Economic Mobility in America, Economic Mobility Project/Brookings Institution/Pew Charitable Trusts, October 2008, www.brookings.edu/ ~/media/Files/rc/reports/2008/02_economic_mobility_saw hill/02_economic_mobility_sawhill.pdf.

1010

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Government Action
Blumner, Robyn, Republicans Keep Pushing Class War, Chicago Sun Times, Sept. 19, 2010, p. A22. Under Democratic leadership, real incomes have increased more than under Republicans for both the poor and upper middle class. Frank, Robert H., Income Inequality: Too Big to Ignore, The New York Times, Oct. 17, 2010, p. BU5. Government economists who say we should cast aside questions about inequality often advocate for policies such as tax cuts for the rich, which increase inequality substantially. Story, Louise, Slicing the Pie, The New York Times, Aug. 22, 2010, p. WK5. Income disparities between the rich and the poor have widened as government regulations have eased and investment bank failures have risen. Silverberg, Kathy, Some Wealthy Americans Put Their Money Where the Need Is, Sarasota (Florida) Herald Tribune, Aug. 20, 2010, p. A10. Some wealthy political candidates may view spending on campaigns as a way to improve the lot of many Americans.

Threats
Abate, Tom, Middle Class Squeezed Out As U.S. Income Gap Grows, The San Francisco Chronicle, Sept. 26, 2010, p. D1. Working-class incomes have stagnated for so long that ordinary consumers have lost the buying power to pull the country out of a recession. Benjamin, Colin, Are We Asking the Poor and Middle Class to Eat Cake? Michigan Chronicle, Oct. 13, 2010, p. A6. Many analysts believe that income inequality may have been the root cause of the countrys most recent recession. Gruener, Garrett, Uncle Sam Gets His Sliver, Los Angeles Times, Sept. 20, 2010, p. A19. When income inequality gets too far out of balance, the wealthy end up saving too much. Large, Jerry, The Ills Inequality Brings, Seattle Times, Jan. 14, 2010, p. B1. Economic inequality can lead to problems such as teenage pregnancy, youth violence, heart disease and depression. Pearlstein, Steven, The Costs of Rising Income Inequality, The Washington Post, Oct. 6, 2010, p. A13. Too much inequality appears to reduce global competitiveness and long-term growth.

Growth
Coclanis, Peter A., Were Seeing More Inequality, News & Observer (North Carolina), Aug. 9, 2010. Over the past decade income inequality has increased and the opportunity for upward mobility has dwindled. Dodge, Kenneth A., Make CEOs Help the Little Guy, Pittsburgh Post-Gazette, Feb. 7, 2010, p. B1. Income inequality in the U.S. has risen to become more than double the level of most European countries. Kotkin, Joel, The End of Upward Mobility? Newsweek, Jan. 26, 2009, p. 64. The gap between the rich and the poor is growing in the United States. Tucker, Randy, and Ken McCall, Income Inequality Highest in Montgomery County, Dayton (Ohio) Daily News, Sept. 29, 2010, p. A5. In one Ohio county, the top 20 percent of households has grown to earn nearly half of all the income in the region.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

Political Aspects
Eggen, Dan, A Surge in PACs at the Last, The Washington Post, Oct. 30, 2010, p. A4. Loosened regulations have allowed wealthy individuals to significantly influence elections. Havelock, John, The Powerful Make Rules That Benefit Themselves, Anchorage Daily News, Sept. 25, 2010. New campaign-finance rules allow wealthy individuals to contribute to elections without limit.

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

Dec. 3, 2010

1011

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10 Closing Guantnamo, 2/09 Affirmative Action, 10/08

Education
Housing the Homeless, 12/09 Bilingual Education, 12/09 Value of a College Education, 11/09

Health/Safety
Preventing Obesity, 10/10 Health-Care Reform, 6/10 Caring for Veterans, 4/10

Environment/Society

Politics/Economy

Crime/Law
Death Penalty Debates, 11/10 Drone Warfare, 8/10 Prosecuting Terrorists, 3/10 Prisoner Reentry, 12/09 Legalizing Marijuana, 6/09

Animal Intelligence, 10/10 Blighted Cities, 11/10 Impact of the Internet on Thinking, 9/10 U.S.-British Relations, 11/10 Social Networking, 9/10 Democrats Future, 10/10 Abortion Debates, 9/10 States and Federalism, 10/10 Reality TV, 8/10 Financial Industry Overhaul, 7/10 Water Shortages, 6/10 Jobs Outlook, 6/10 Teen Pregnancy, 3/10 Campaign Finance Debates, 5/10

Upcoming Reports
Bullying, 12/10/10 Food Safety, 12/17/10 For-Profit Colleges, 1/7/11

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Student Debt
Is the college-loan system fair?

Researcher
Published by CQ Press, an Imprint of SAGE Publications, Inc.

www.cqresearcher.com

money from loan programs for students who borrow for graduate and professional school and students who pay back loans on time to Pell Grants for low-income students. The government has implemented several new programs to make the loan system fairer, including making payments easier for lower-wage earners and providing federal loans directly to borrowers rather than through banks, to avoid subsidizing commercial institutions. However, some consumer advocates say unless education debt can be forgiven through bankruptcy proceedings, as most other debt can, the system will never be fair to student borrowers. Meanwhile, tuition continues to rise, and total higher-education debt has surpassed credit-card debt for the first time, rising to $830 billion in mid2010 and continuing to climb.
Costumed as the Master of Degrees and holding a ball and chain representing his college-loan debt, unemployed graduate Gan Golan attends the Occupy D.C. protest in Washingtons Freedom Plaza on Oct. 6, 2011. It was one of several demonstrations around the country protesting corporate greed and the gap between rich and poor.

s Congress tries to reduce the federal debt, it is forcing federal loan and grant programs for higher education to fight for scarce dollars. In negotiations this summer over the debt ceiling, lawmakers shifted

I N S I D E

THIS REPORT
THE ISSUES ....................879 BACKGROUND ................885 CHRONOLOGY ................887 CURRENT SITUATION ........892 AT ISSUE........................893 OUTLOOK ......................894 BIBLIOGRAPHY ................897 THE NEXT STEP ..............898

CQ Researcher Oct. 21, 2011 www.cqresearcher.com Volume 21, Number 37 Pages 877-900
RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

STUDENT DEBT
THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
Oct. 21, 2011 Volume 21, Number 37

879

Are students incurring too much education debt? Is rising college debt limiting who attends and completes college? Has the increasing availability of education loans driven up college costs?

880

Students at For-Profit Schools Have Most Debt More than half of bachelordegree recipients at for-profit institutions borrowed at least $30,500 in 2007-2008. Loans Make Up Half of Financial Aid More than $129 billion in undergraduate financial aid was distributed in the 2007-2008 academic year, half in loans. College Debt Heaviest for Moderate-Income Students Low-income students pay a smaller share of the sticker price, on average. Default Rates Highest at For-Profit Colleges High cost and limited career prospects are blamed. Chronology Key events since 1944. Colleges Challenged to Give Students More Value Rising student debt fuels call for tuition cuts, better education. Tips on Taming the College-Debt Monster Track costs and pay highinterest loans first. At Issue Are students borrowing more than their educations are worth?

MANAGING EDITOR: Thomas J. Billitteri

tjb@cqpress.com

881

BACKGROUND

885 888 890

Private System U.S. colleges started out relying on private tuition rather than tax-supported loans and grants. Borrower, Beware? Consumer safeguards for education loans shrank even as student loans increased. Consumer Protections New laws made direct government lending possible.

kkoch@cqpress.com CONTRIBUTING EDITOR: Thomas J. Colin tcolin@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Sarah Glazer, Alan Greenblatt, Barbara Mantel, Tom Price, Jennifer Weeks
DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT CHECKER: Michelle Harris

ASSISTANT MANAGING EDITOR: Kathy Koch

883 884 887 888 891 893

An Imprint of SAGE Publications, Inc.

VICE PRESIDENT AND EDITORIAL DIRECTOR:

Jayne Marks
DIRECTOR, ONLINE PUBLISHING:

Todd Baldwin
Copyright 2011 CQ Press, an Imprint of SAGE Publications, Inc. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except: (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5). Published by SAGE Publications, Inc., 2455 Teller Rd., Thousand Oaks, CA 91320. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress. com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Thousand Oaks, California, and at additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

CURRENT SITUATION

892 894

Debt and Deficits Congress has agreed to cut student loan programs to reduce federal debt. More Students, More Loans More students are getting post-secondary training, increasing education debt.

FOR FURTHER RESEARCH

OUTLOOK

896 897 898 899

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

894

Explosive Debt? Many policymakers advocate further expansion of post-secondary schooling, which would boost debt even higher.

Cover: AP Photo/Jacquelyn Martin

878

CQ Researcher

Student Debt
BY MARCIA CLEMMITT
requirements far more onerous than those for mortgage and car-loan borrowers. For ew York City lawyer example, it is exceedingly difRobert Applebaum ficult, if not impossible, for stugraduated from law dents pleading hardship to school in 1998 with more delay repayment or have loans than an impressive diploma. forgiven through bankruptcy He also was saddled with even though consumer $80,000 in student loans. borrowers can declare insolOver the next five years, as vency and wipe their debt Applebaum delayed repayslate clean. ment while working as an And unlike consumer debtors assistant district attorney, inwho fall into arrears, college terest drove the balance to borrowers can have their Social $100,000. Security and other federal benStill making payments efits garnished an especial11 years after graduation, ly frightening prospect for older Applebaum had a brainstorm. students attending college to reWhy, he wondered, shouldnt train for employment. the federal government forSome consumer advocates give student loans as a way say recent legislative changes, to stimulate the economy? such as easier payment opWith the stroke of the tions for lower-income students Presidents pen, millions of and loan forgiveness for those Americans would suddenly working in public-service jobs, have hundreds, or in some cases should make borrowing less thousands, of extra dollars . . . risky. However, college loans every month . . . to spend, made by private lenders unreads a petition Applebaum affiliated with federal loan University of California students in Los Angeles protest placed online at the liberal acprograms lack such options. the UC Board of Regents decision in November 2009 to tivist site Moveon.org. 1 Thus, say critics, as tuitions raise undergraduate tuition 32 percent. More increases in the past 18 months have pushed up tuition by another Applebaums proposal may continue rising, the sheer 17.6 percent. For the first time in history, student debt be quixotic, but his story size of college debt, public for higher education is higher than the nations creditpoints to what many experts and private, poses greater ficard debt. Congress has passed some reforms aimed at see as a growing crisis in nancial risk to students and making the loan system fairer for lower-income higher education: As college their families. students, but critics say lawmakers need to do more. and university enrollments Few argue that education mushroom and tuition soars, they say, cent nearly four times the inflation borrowing is bad in itself. Indeed, boostcollege is fast becoming unaffordable rate between 1982 and 2005 and ing attendance and graduation have to tens of thousands of current and has been climbing 4 percent to 8 per- long been national goals. But collegecent annually since. 3 prospective students. loan experts debate whether students, Student loans should help people, on the whole, are borrowing too much. Student debt surpassed credit-card debt in June 2010 for the first time in says Lauren Asher, president of the InMany students incur debt that will history, rising to about $830 billion stitute for College Access and Success, never pay dividends in higher wages or nearly 6 percent of the nations a research and advocacy group in or greater job satisfaction, argued annual economic output. Meanwhile, Oakland, Calif. That purpose is lost Richard Vedder, an economics profesnew student loans surpassed $100 bil- when people face the prospect of sor at Ohio University, in Athens, and lion for the first time in the 2010-2011 debt they can never repay. director of the Center for College AfWhats more, critics complain that fordability and Productivity, a think academic year. 2 As loans have rocketed, so has tuition: It exploded 375 per- many student borrowers face repayment tank in Washington. About 45 percent

THE ISSUES

www.cqresearcher.com

Getty Images/David McNew

Oct. 21, 2011

879

STUDENT DEBT
Students at For-Prot Schools Have Most Debt
More than half of bachelor-degree recipients at four-year for-prot institutions carried education debt of $30,500 or more during the 2007-2008 academic year, compared with 24 percent of those at private four-year institutions and 12 percent at public four-year schools. Only 4 percent of degree recipients at the for-prot schools were debt-free, compared with 28 percent at the private schools and 38 percent at the public institutions. Education-Loan Debt for Bachelors Degree Recipients, 2007-2008
(Percentage of students with debt)

60% 50 40 30 20 10 0

53% 43% 28%

48% 38% 24%

51%

12% 4%
For-profit four-year institutions Private nonprofit four-year institutions Public four-year institutions*

No debt

Cumulative debt less than $30,500

Cumulative debt of $30,500 or more

* Percentages do not total 100 because of rounding. Source: Sandy Baum and Patricia Steele, Who Borrows Most? College Board, 2010, advocacy.collegeboard.org/sites/default/les/Trends-Who-Borrows-Most-Brief.pdf

of those who go to a four-year college dont complete a bachelors degree in six years, so their investment isnt particularly good because they spend years earning less than college graduates, Vedder said. 4 Ross Rubenstein, an associate professor of public administration at Syracuse Universitys Maxwell School, calls student loans a human-capital investment that, for most, will likely pay lifetime dividends of higher wages and better quality of life. Still, he says, beyond the big-picture theoretical idea is the question of whats the appropriate level of debt. Donald Heller, a professor of education at Pennsylvania State University, has a more optimistic view. He acknowledges heightened concern that

high unemployment and lagging wages make it difficult for students to see a return on their education investment. But, he says, we have to remember that the vast majority of people getting bachelors degrees are getting jobs and have better employment odds than people without degrees. When people question whether degrees are worth their cost, I ask, whats the alternative? Heller says. Furthermore, he says, earnings data show that having some college is better than no college. Government grants and other aid often can help low-income students reduce their borrowing. Families with annual earnings of about $75,000 typically are the first to seek loans be-

cause they arent eligible for needbased aid. But it is not always the middle class that suffers most. In a bid to induce their best students to attend in-state schools, Georgia and Missouri, among others, handed out education grants based on good grades rather than student need. And although the switch to meritbased state aid has slowed in the economic downturn, the trend has forced many low-income students many of whom are the first in their families to attend college to borrow more, divide their time between work and classes or quit school altogether when they run out of money. On balance, says Heller, lower-income students still bear more of the brunt of paying for school. And, he says, because many of these students are reluctant to borrow, many of them go part time and work while enrolled. But research shows that working beyond a minimal number of hours greatly increases the risk of dropping out. Even when financially struggling students dont drop out, they often take far longer than four years to complete their degrees adding to the cost of their education, experts note. Sandy Baum, a professor emerita of economics at Skidmore College, in Saratoga Springs, N.Y., and a longtime college-funding analyst for the College Board, says that while declining fouryear completion rates are a problem, its hard to know whether they stem from rising tuition costs. But, she adds, we know that we cant continue this trend of tuition increases that are rapid and huge forever because the steep increases make it impossible for families to plan and save for school. While many economists say soaring tuition fuels college debt, some argue the opposite is true: that the growing availability of governmentsubsidized college loans has induced schools to hike tuition in a drive to increase revenue. That prospect flows quite logically from an understanding

880

CQ Researcher

of how colleges operate, wrote Andrew Gillen, research director for the Center on College Affordability and Productivity. First, he wrote, any additional resources obtained by a school will be spent at least partly on services and amenities aimed at enhancing the schools reputation and competing for the best students. That might mean shelling out big money to attract famous professors or to build wellequipped gymnasiums for students use, he wrote. Then, Gillen argued, a vicious cycle begins. As improvements are added, tuition climbs, and the higher tuition qualifies students to obtain still larger subsidized loans to pay the growing bill. As the school rakes in more tuition dollars, it spends them the next year on more improvements. Ultimately, Gillen argued, this arms race in spending . . . reduces access and affordability the exact opposite of what [grant and loan programs] intend. 5 But not all experts agree. The argument that college prices rise mainly in response to students ability to pay is way too simple-minded, says Robert B. Archibald, an economics professor at the College of William and Mary, in Williamsburg, Va. I dont think the link between price and the availability of loans holds up at all. Manufacturers have used technology to increase productivity, but industries like higher education rely on highly skilled workers college professors who cant be replaced by machines, Archibald says. No wonder, then, he says, that the cost of college has climbed at a far faster rate than for goods like clothing and cars. Its no coincidence that the price of services such as higher education has increased more rapidly than the price of goods, Archibald says. As students and policymakers mull a future of rising debt, here are some of the questions being asked:

Loans Make Up Half of Financial Aid


More than $129 billion in undergraduate nancial aid was distributed in the 2007-2008 academic year, half in loans from the federal government and private sources. Grants, work-study payments and tax breaks that helped families pay for higher education made up the other half of the total. Sources of Financial Aid for U.S. Undergraduates (in $ billions, 2007-2008)
Federal work study

2% ($2.8)
Federal grants

Federal loans

35% ($45.6) 15% ($18.9) 16% ($20.7)


Institutional grants

Private loans

15% ($19.4)
Tax benefits

5% ($6.3)
Private grants State grants

5% ($7.2)

7% ($8.5)

Source: Donald E. Heller and Claire Callender, Institutional Bursaries in England and the United States: A Comparative Analysis, Organization for Economic Cooperation and Development, September 2010, www.oecd.org/dataoecd/49/58/ 46130211.pdf

Are students incurring too much education debt? Many analysts call current educationdebt levels truly alarming, arguing that college loans saddle students with longterm burdens that can affect their choice of jobs and ability to shoulder other responsibilities such as mortgages. Others, however, contend that while total debt is high by historical standards, the average students debt is reasonable in light of potential higher lifetime wages that education offers. A growing number of students find their debt unmanageable, reported the finance website Smart Money. Nearly 10 percent of federal student-loan borrowers defaulted during the two years ending Sept. 30, 2010, mean-

ing they failed to make a payment on their loans for more than 270 days. That was a leap from a 7 percent default rate in 2008. Much of the increase came at for-profit colleges, where 15 percent of borrowers defaulted, up from 11.6 percent two years earlier. 6 A substantial number of college graduates end up taking jobs for which college education is not really a prerequisite, making any debt they incurred to get the education essentially a waste, argued Ohio Universitys Vedder. Twelve percent of the mail carriers in the United States today have college degrees. 7 But others warn against dismissing the value of student loans.

www.cqresearcher.com

Oct. 21, 2011

881

STUDENT DEBT
The returns of going to college wrote Adam Looney and Michael Lately, a lot of the public discussion is geared towards panic, are still high enough to justify some Greenstone, of the Hamilton Prosome of which results from focus- debt, Toutkoushian says. But, he adds, ject, a study group on economic deing on the wrong statistics about an oft-cited statistic that puts the velopment at Brookings. 9 debt, says Baum of Skidmore Col- wage premium for a bachelors deStill, while student loans may pay lege. Many recent news stories have gree at $1 million is too high. The off in the long run, many analysts say focused on the total amount of debt $1 million figure compares bachelors- the tandem trends of rising debt and thats out there, but that number in- degree holders with people who have rising tuitions are highly worrisome. evitably has risen steeply in recent a high-school diploma leaving out College sticker prices are too high, years because of climbing enroll- those who have some college but no and debt will continue to rise, says degree, he says. A more accurate Penn States Heller. ments, she says. Furthermore, Baum says, while it number is about $500,000, still Borrowing really works for a lot makes sense to be concerned about worth the debt most graduates incur, of people, but theres a growing segthe minority of students who rack up Toutkoushian says. ment for whom it becomes probvery high debts, the lematic, especially typical bachelors those who dont obstudent is borrowing tain their degrees or $25,000 or less certificates, adds Laura about $5,000 less W. Perna, a professor than the average car at the University of loan in 2009. 8 Pennsylvanias GraduJennifer Delaney, ate School of Educaan assistant profestion, in Philadelphia. sor of educational Increasingly, student organization and loans are the fallback leadership at the source for college fiUniversity of Illinois nancing, as taxpayer at Urbana-Chamdollars and parental paign, argues that contributions pay less a shift has ocof the bill, many say. curred in peoples The need-based aid thinking about how available isnt keeping college should be up with rising costs, and Sixteen-year-old Bianca Gutierrez and other Hispanic students from the New Design Charter School attend the Cash for College convention funded, with many the countrys anti-tax atin Los Angeles on Dec. 8, 2010. The convention helps low-income now seeing stutitude is limiting pubstudents find funding for college. The College Board recently reported dents future inlic subsidies at the same that only 19.2 percent of Latino college students ages 24-35 come as the most time that many govgraduate, less than half the national average. important funding ernment officials are source. Our student-aid system is Two scholars at the Brookings demanding higher rates of college based on the idea that parents will Institution, a centrist think tank in attendance and completion, says Edhelp, but the volume of loans and Washington, compared the wage pre- ward St. John, a professor at the Unithe debt levels tell us that theres a mium from a college degree to his- versity of Michigans School of Edugreater and greater reliance on stu- torical earnings on stocks and other cation, in Ann Arbor. dents and their future employment investments. On average, the benFurthermore, many families, by neto pay for school by borrowing against efits of a four-year college degree cessity or choice, are picking up a are equivalent to an investment that smaller portion of the tab. Says Baum, future income, she says. That approach can make sense, al- returns 15.2 percent per year When the grandparents of todays colthough the size of the college wage more than double what stocks lege students went to college, you just premium is often overstated, espe- earned since 1950, and more than assumed that you worked hard and cially by public officials, says Robert five times the returns on corporate paid for it. In the interim, people startK. Toutkoushian, a University of Geor- bonds, gold, long-term government ed to assume that the government gia professor of higher education. bonds and residential real estate, would pay for it.
Getty Images/Kevork Djansezian

882

CQ Researcher

Does rising college debt limit who attends and completes college? Increasing the number of Americans who graduate from college or other post-secondary training programs has been deemed a national goal for decades, but many experts worry that rising college debt is undermining that aim. History suggests that when people worry about their ability to pay for college, it deters them from applying, says Donald Hossler, a professor at Indiana Universitys School of Education, in Bloomington, and director of the research center at the National Student Clearinghouse, an organization founded by the nations colleges and universities to collect national student data. Hossler recalls that in the 1980s, when false rumors circulated that Congress was about to cut federal Pell Grants for low-income students, some low-income people didnt even apply for college. Data from the 1970s through the 1990s show that financial concerns play a major role in college decisions, especially for students from low- and middle-income families earning less than about $70,000 a year, says Michael Lovenheim, an assistant professor of public finance at Cornell University in Ithaca, N.Y. Families financial resources affect where and whether students attend college and whether they complete degrees, he says. Whats more, evidence suggests that this effect is growing over time, Lovenheim says. Among the 2007-08 graduating class at four-year public colleges, about 62 percent of families carried loans, according to FinAid, a consumerassistance website. The average cumulative debt per student, including so-called federal PLUS loans borrowed by parents to help foot their childrens college costs, was $23,227. 10 At a public four-year university today, students from low-income families typically face an annual net cost of $11,700 after need-based grants are factored

Debt Heaviest for Moderate-Income Students


Students and families with moderate incomes often incur the heaviest college debt. At a typical public university costing $80,000 for a four-year degree, a low-income student can expect to receive about $43,000 in aid, including need-based federal Pell grants, and to need an additional $37,000. But a student in a moderate-income family earning $50,000 to $60,000 per year can expect to receive only about $16,000 in aid, leaving a shortfall of about $64,000. Typical Costs and Financing for a Four-year Public University Low-income student
Cost of four-year degree Grants and work-study available Amount remaining $80,000 $43,200 $36,800

Moderate-income student
Cost of four-year degree State and university need-based grants plus federal work-study grants Federal grants Amount remaining $80,000 $16,200 $0 $63,800

Source: The Rising Price of Inequality, Advisory Committee on Student Financial Assistance, June 2010, chronicle.com/items/biz/pdf/acsfa_rpi.pdf

in, according to the Advisory Committee on Student Financial Assistance, an independent panel jointly appointed by Congress and the secretary of Education. Students from lower-middleincome families earning just above the federal Pell Grants cutoff incur annual net college costs of $18,450. As a result, families with moderate incomes, which dont qualify for need-based aid, typically borrow about 75 percent more than low-income families do, the panel calculated. 11 The figures are staggering and have a profound effect on the decision-making of qualified high-school graduates as to whether and where to attend college, the panel said. 12 Yet some analysts worry that an outsized focus on debt not debt itself will discourage some students from applying. News stories about student

debt often make it seem that borrowing for education ruins your life, as if its the same as running up a big bill on a trip to the Caribbean, says Skidmore Colleges Baum. Numerous studies have found that so-called debt aversion can push students to take on such excessive working hours that they drop out or avoid college altogether. The problem is especially acute in some minority communities. 13 St. John at the University of Michigan says the picture is changing somewhat, so that debt aversion is not quite the problem it used to be. By and large, African-American students are no longer as reluctant to borrow as in the past, he says. However, he adds, Latinos still have more debt aversion than others, with collegecompletion rates likely suffering for it.

www.cqresearcher.com

Oct. 21, 2011

883

STUDENT DEBT
Default Rates Highest at For-Prot Colleges
For-prot colleges accounted for 12 percent of college enrollment but 48 percent of student-loan defaults in the 2008-2009 academic year. By contrast, students at two-year public colleges accounted for 40 percent of college enrollment but less than 20 percent of defaults. College Enrollment and Three-year Default Rates*
Percentage of enrollment/defaults

putting them out of reach for many, he says. We need to have a discussion about that. Has the increasing availability of education loans driven up college costs? In 1987, William J. Bennett, President Ronald Reagans Education secretary, wrote that while making federal college grants and subsidized loans more available did not cause college price inflation, . . . there is little doubt that it helps make it possible. 16 Today, as college costs and student debt rise, debate over that proposition grows louder. Some economists argue that increasing access to college funding especially loans, which are available to rich and poor students alike creates a vicious cycle: As more money flows to students, colleges are induced to raise their prices, which in turn causes the government to increase its limits on subsidized loans, and so on. Without anybody intending this, the subsidized student-loan programs actually incentivize states to raise tuition, says Northwesterns Weisbrod. Anything that makes it less expensive for a student to attend makes it easier for a school to raise the tuition. When Bennetts piece was published, I disagreed with it, but I changed my mind, says Hauptman, the policy consultant. I dont see grants pushing school-spending increases because they arent big enough, but there is a correlation between loans and pricing. Just as the increased availability of mortgage loans helped drive up home prices in recent years, Hauptman argues, increased availability of subsidized loans can help boost college prices. Early results of a study of for-profit schools suggest that institutions with students eligible for federal grants and subsidized loans have higher tuition than comparable schools where students arent eligible, says Stephanie R.

50% 40 30 20 10 0

48% 40% 32% 16% 19% 21% 12%

12%

Share of enrollment

Share of defaults
Type of School
For-profit Public two-year Public four-year Private nonprofit

* Percentage of student borrowers who began repaying loans in 2008 and had defaulted within three years. Enrollment was in 2008-2009. Source: For-Prot College Student Loan Default Rates Soar, Project on Student Debt, February 2011, project onstudentdebt.org/les/pub/TICAS_3YR_CDR_NR.pdf

A new report from the College Board finds that only 19.2 percent of Latino students ages 24-35 who begin college complete it, far below the national average of just over 40 percent. 14 So far, however, researchers are still seeing a higher number of people going to college and finishing than in the past, says the University of Georgias Toutkoushian. Indeed, the number of bachelors and associates degrees and the proportion of the workforce that attains them both have risen continually, says Arthur M. Hauptman, an independent public-policy analyst in Arlington, Va., who has advised the World Bank, several federal agencies and more than two dozen national governments on higher-education finance. In 1970, about 10 percent of Americans over age 25 had attended four years of college,

compared with about 30 percent today, he says. 15 While debt may not deter many people from enrolling, it is subtly changing the way a college education is viewed, says Burton A. Weisbrod, an economics professor at Northwestern University in Evanston, Ill. It was always true there were college majors that were not going to open doors to high incomes, he says, pointing as examples to sociology and art history. Yet, in the past, such studies were widely viewed as worthwhile because they were seen as vital to American culture and helped create better voters, he says. As education debt rises, however, students who are struggling financially will increasingly seek to major in subjects that lead to high-wage professions, Weisbrod argues. Thatll work against the humanities, potentially

884

CQ Researcher

Cellini, an assistant professor of pub- [the pharmaceutical giant] Pfizer and good to pass up. These new, inflated lic policy and public administration at try to get a job, but they wont get sticker prices are then published as George Washington University in Wash- the work if to save money the col- the schools base tuition rates, even ington. However, the research, which lege said, Well do chemistry using though only a handful of people acshe is conducting with Claudia Goldin, nothing but [old-fashioned] beakers and tually pay them, he says. a Harvard University economics pro- test tubes. fessor, doesnt reveal whether the The unpredictability of technology pricier institutions are just better trends also is driving up costs, Archibald schools using the funds to provide says. At William and Mary, for examstudents with superior training or are ple, we spent a whole lot of money simply capturing more money for wiring every dorm room to link to themselves, Cellini says. the Internet just before technological While some economists see a con- change meant we had to put wirenection between loan and grant avail- less hubs everywhere instead. While ability and rising tuition, others de- that double spending could be pernlike most other countries, the Unitbunk the idea of a link. All high-skill ceived as wasteful, its not clear how ed States built a higher-education service industries including not schools could avoid it, he says. system that is supported more by prionly higher education but also health Still, Archibald says, while loans vate money much of it in the form care and legal services have raised arent driving up costs, a financial-aid of tuition than public dollars. But their prices in reas more and more lowcent decades for income students enroll, reasons that have efforts to maintain that little or nothing to private support have do with rising demade education loans mand or availability increasingly prevalent of funds, they argue. in the college-finance When you purequation. 18 chase a personal U.S. colleges started service like a hairout as private entities, cut, you are pursays William and Marys chasing the time of Archibald. Indeed, William the barber, and and Mary, founded in there are limited 1693 and now part of things he or she Virginias system of state can do to shorten colleges and universities, The University of Phoenix, an online, for-profit institution, maintains a satellite office in Raleigh, N.C., above. Nearly 10 percent of federal the experience that was private until 1906, student-loan borrowers defaulted during the two years ending Sept. 30, will not be perhe says, and just before 2010, up from 7 percent in 2008. Much of the increase came at World War II half of ceived as a reducfor-profit colleges, where 15 percent of borrowers defaulted U.S. students attended tion in the quality during the same two-year period. private colleges. of the haircut, wrote A century or more ago, when colWilliam and Marys Archibald and fel- arms race among some colleges lege attendance was confined mainly low economics professor David H. Feld- might be. man. The same is true of college If youre a school thats not Ivy to the very well-off, reliance on priteaching and other professions with League but close, you offer big fi- vate tuition rather than tax-supported highly educated workforces, such as nancial aid to nab a potential Yalie loans and grants may have been the law, they argued. 17 who may end up being a Rhodes worlds fairest system, Archibald sugIn addition, says Archibald, colleges Scholar and boost your schools rep- gests. England, by contrast, required must constantly upgrade expensive utation, he says. To lure students from taxpayers to subsidize university costs technology to prepare students ade- more prestigious schools, a college for a tiny elite mostly students from quately for tomorrows workplaces. will raise its own stated full sticker upper-class families, he notes. In the United States, tax-supported Take chemistry, for example, he says. price, then offer prized students disThese students are going to go to counts that appear to be deals too efforts to expand the college system

BACKGROUND
Private System

www.cqresearcher.com

www.SayPeople.com

Oct. 21, 2011

885

STUDENT DEBT
and therefore the number of graduates began, albeit slowly, in the mid-19th century. In 1862, for example, the federal government granted states federal land to establish technical colleges, forerunners of many of todays state colleges and universities. Public support for college attendance expanded sharply after U.S. involvement in World War II (1941-1945). The so-called G.I. Bill, which provided tuition subsidies to military veterans, was the largest public initiative to date. Beginning in the late 1950s, other tax-funded higher education initiatives burgeoned. In 1957, the Soviet Union launched Sputnik, the first manmade Earth-orbiting satellite, and the following year Congress passed and President Dwight D. Eisenhower signed into law the National Defense Education Act. It contained programs to improve math, science and language training and post-secondary education, plus the National Defense Student Loan Program for low-income students. The program, precursor of todays low-interest Perkins loans through which post-secondary institutions disburse federal loans to needy students, was the first explicitly aimed at helping students from poor families attend college. It provided for direct loans from a designated tax-supported fund. Lawmakers expanded college lending in 1965 with a new program under which private banks made loans that were guaranteed by the federal Treasury. Robert Shireman, chief consultant for California Competes, a group in San Francisco that advocates for increased public support for higher education, says one reason for enlisting banks was to help keep student loans off the governments books. Under federal budget rules, a direct loan counted as a total loss to the Treasury in the year it was made, even though most of it would be paid back with interest, Shireman wrote. By contrast, so-called guaranteed loans from private banks, which the government agreed to reimburse if students defaulted, did not count as immediate government costs. 19 In 1965, Congress established the Guaranteed Student Loan Program, which subsidized low-income students by paying the interest on their loans from government funds while they were attending school or otherwise deferring repayment. Moderate-income students also could get loans, but without the interest subsidies. In 1978 students at all income levels became eligible for nonsubsidized loans, and in 1980 the government agreed to guarantee private lenders against borrower defaults in a new loan program PLUS, Parent Loans for Undergraduates. The programs came to represent an attempt to leverage both public and private funding to expand post-secondary education, says Baum of Skidmore College. The principle behind this split responsibility, in which the government pays upfront and students pay more down the road, is that college-educated adults will make more money than others, so you can argue that they should pay for [their education] rather than taxpayers. Several federal need-based collegegrant programs also target lower-income students. They include the Educational Opportunity Grant, enacted in 1965, and the Basic Educational Opportunity Grant forerunner of todays Pell Grants in 1972. But with college costs and enrollments rising steeply, loans have gained ground on grants as the main source of funding. And that, says St. John of the University of Michigan, gradually has turned a college education into an individual debt burden for average Americans rather than a shared public responsibility. Thats emblematic of how the conception of the public role in education has changed over the six-plus decades since the federal government began subsidizing college attendance, he says. Both the percentage of students borrowing and the amounts they borrow have swollen recently. At for-profit colleges, for example, 92 percent of students borrowed in the 2007-2008 academic year, up from 61.3 percent in 1995-1996. 20 In 1996, 23,000 students owed at least $40,000 in college loans, but by 2008, more than 200,000 did. 21 The United States, Canada and South Korea are the only countries that commit 2 percent or more of annual gross domestic product to higher education. The United States tops the list, at 2.9 percent, of which 1.9 percent consists of private resources, including tuition payments and charitable donations, a higher private share than any other country. 22 The bulk of enrollment, however, has shifted from private to public colleges and universities in recent decades, says Hauptman, the policy consultant. In 1950, half of college students attended private colleges, while only a fifth do today. The growth of tuition and fees as a proportion of total revenues at public colleges and universities is one of the most marked trends in postsecondary finance in recent decades in the U.S. as well as in many other countries, Hauptman wrote. Tuition payments now fund more than a third of the educational activities of public institutions in the United States, up from a tenth 30 years ago, he said. Proportions vary widely among states, from 13 percent in New Mexico to 77 percent in Vermont, Hauptman wrote. 23 A state-university president is said to have quipped that once we were a state university, then we were a statesupported university, now were statelocated, observes Philip G. Altbach, director of the Center for International Higher Education at Boston College. Nevertheless, I dont think the public side is quite as privatized as some
Continued on p. 888

886

CQ Researcher

Chronology
1940s-1970s 1980s-1990s Federal-aid programs improve Controversies grow over whether
access to higher education, which previously has been funded mainly by private dollars. 1944 First major federal college-aid program, the G.I. Bill, offers tuition payment to veterans. 1950 Fifty percent of students attend private colleges. 1958 National Defense Education Act creates the first federal college-loan program, for low-income students. 1965 Expanded federal loan program provides nonsubsidized loans to middleincome students and covers some interest payments for low-income student borrowers. New privatelender college loans are launched, with banks protected by the government from losses if students default. 1970 About 10 percent of Americans over age 25 have attended four years of college. 1972 Student Loan Marketing Association (Salle Mae) established as a government-sponsored enterprise to buy student loans from private lenders to free up banks to make more loans. 1976 Congress bars student loans from being written off through bankruptcy for five years after graduation. 1978 Congress makes students of any income eligible for federal loans. federal loan programs harm students while enriching lenders and driving up college costs. New for-profit colleges spring up. 1980 Government protects private lenders against loss in new Parent Loans for Undergraduate Students program. 1986 Federal Loan Consolidation Program permits consolidation of college loans into one debt with lower monthly payments, longer repayment period. 1987 Reagan administration Secretary of Education William J. Bennett argues in The New York Times that federally subsidized loans help drive college-price inflation. 1993 New direct government-loan program to compete with federally guaranteed bank loans. . . . Income-contingent repayment option for direct loans introduced. 1996 Congress permits Sallie Mae to become a private company. 1998 Colleges with high default rates are barred from federal loan programs.

2007 New York Attorney General Andrew Cuomo alleges private-lender kickbacks to universities and financialaid officers; accused universities and banks reach financial settlement, agree to new conduct code. . . . Congress adds new incomebased repayment option for direct loans. . . . More than 61 percent of students at four-year public colleges carry education debt (including borrowing by parents). 2010 Total college debt rises to $830 billion, surpasses total credit-card debt. . . . Volume of new federal college loans tops $100 billion for first time in 2010-2011 school year. . . . Congress replaces federally guaranteed private-lender loan program with direct federal loans, effective July 1, 2010, and, starting in July 2014, eases terms of incomebased repayment. . . . Twenty percent of nations students attend private colleges. . . . Loan defaults by students who attended for-profit colleges soar 30 percent over previous two-year period. 2011 To free up money for Pell grants for low-income students, congressional and White House debt-ceiling negotiators end loan-interest subsidies for graduate- and professionalschool students and eliminate incentives for on-time repayment. . . . About 30 percent of Americans over age 25 have attended four years of college. . . . Tuition for 2011-2012 in the University of California system is 18 percent higher than in previous year and 80 percent higher than in 2007-2008. . . . Beginning this month, all college websites must post net-price calculators for prospective students.

2000s

College debt and tuition soar. 2005 Tough, new law bans virtually all discharge of college debt through bankruptcy proceedings.

www.cqresearcher.com

Oct. 21, 2011

887

STUDENT DEBT

Colleges Challenged to Give Students More Value


Rising student debt fuels call for tuition cuts, better education.
ith a growing number of students facing big debts when they leave college, calls are increasing for educational institutions to do more to provide value for tuition dollars. Public-college tuitions just cant keep going up at the rate they have, even though the net prices that people actually pay havent gone up as rapidly, says Sandy Baum, a professor emerita of economics at Skidmore College, in Saratoga Springs, N.Y., and a longtime college-funding analyst for the College Board. Theres little doubt that many colleges are overspending and could cut costs, say many education-policy experts. When some people on a faculty are teaching only one course a semester, one obvious answer is to get them teaching more, says Arthur M. Hauptman, an independent publicpolicy consultant in Arlington, Va. Others argue, however, that cutting costs can be easier said than done. Im skeptical about ideas for things that can reduce costs dramatically, such as increasing online education, says Donald Hossler, a professor at the Indiana University School of Education, in Bloomington. For one thing, much online instruction would likely take place in introductory courses and at community colleges, where lower-income, less-prepared and younger students likely need more personal intervention to succeed, not less, Hossler says. I think we will see pretty high dropout rates if thats all we can offer them. Recently, institutional spending has risen faster in a relatively small cost category dubbed student services than for the biggestticket spending items, such as teaching, says Douglas A. Webber, a doctoral student in economics at Cornell University and a researcher at Cornells Higher Education Research Institute.

Webber defines student services as anything outside of the classroom that encourages student engagement with school, such as counseling, tutoring, clubs and student publications. While many see such services as potential sources of cost cuts, Webber says a solution that looks good in theory may be more complicated in practice. At current spending levels, extra dollars spent on student services pay off better in improved student retention and achievement than equivalent investments in teaching, especially at schools with many lower-income students, he says. In the current system, states award funding to public colleges and universities based on cost lists that schools submit. But with prices skyrocketing, more discriminating judgment is required, says Hauptman. Lawmakers themselves wouldnt necessarily make the judgment calls but might instead assemble panels of academic experts to set reasonable compensation for different sorts of college investments, he suggests. The rates would be based on how much those investments furthered such public goals as increasing the proportion of entering freshmen who complete their degrees, Hauptman says. Expensive institutions should also be required to make financial contributions, given the fact that taxpayers must pony up money in advance for loans and students must pay back those debts for years afterward, Hauptman argues. Under current rules, a schools sticker price, which only a handful of the very richest students actually pay, determines how big a federal loan students may obtain, Hauptman says. Basically, a loan is capped at the difference between the schools sticker price and a students estimated family contribution, calculated according to the governments Free Application for Student Aid (FAFSA). A student with $30,000 in resources who attends a school with a $50,000 sticker price is authorized to borrow $20,000

Continued from p. 886

say, says Hauptman. The University of Virginia, for example, claims that only about 8 percent of its funding comes from the state. But when funding for educational activities only rather than research and a UVA-affiliated hospital is counted, a third to a half consists of state dollars, he estimates.

Borrower, Beware?
ven as the students loan burden grew, consumer protections for education loans shrank.

The strict repayment conditions facing todays student borrowers are a far cry from the gentler atmosphere previous generations remember, wrote New York Times business columnist Joe Nocera. Nocera graduated in 1974 with about $8,000 in debt and a journalism degree, and in 2007 he recalled constantly falling behind on my payments. The bank . . . would send a stern notice whenever I got too far behind, which would prompt me to cobble together a few payments by skipping some other bill. However, it never raised my interest rate as punishment,

nor did I ever have to pay any late fees. My chronic tardiness didnt even affect my credit rating. And had I defaulted, I would not have had my wages garnished, or been stuck with the debt if I had filed for bankruptcy. All of which can happen today. 24 To keep private lenders cash flowing and to reimburse the Treasury in cases when the government must pay a bank after a borrower defaults on a guaranteed loan, Congress has enacted stricter rules for education loans than for most other lending. In 1976, Congress barred writing off education loans through bankruptcy

888

CQ Researcher

colleges should be held accountable for, from the government, for example. To and how to measure that performance, pressure colleges to think twice beisnt easy. Effective assessment of student fore pushing sticker prices sky high, learning is complex and multifaceted, students might instead be permitted said Christine M. Keller, executive directo borrow half the difference $10,000 tor of Voluntary System of Accountabili with the school required to disty, a membership group of public colcount its sticker price by the other leges and universities. A top-down $10,000, Hauptman suggests. approach that imposes a one-size-fits-all Furthermore, when colleges see . . . method of judging schools educathe need to spend more to provide tional accomplishments would be countheir services, Why do they raise terproductive. 1 tuitions rather than increasing enrollments to pay for it? Hauptman And while colleges are accused of asks. Adding more tuition-paying stuengaging in a pricey institutional arms dents is just as valid a means to inrace in their quest for prestige and betAn Iowa State University student reads crease revenue as increasing inditer students, more than just the instituthe student paper. Institutional spending vidual tuitions, he says. But while tions may be to blame. has risen faster for student services, such community colleges and some other It would be nice to think that stuas clubs and student publications, than lower-tier public colleges are required dents are making their decisions about for big-ticket items such as teaching. to follow that course, higher-priced school on the basis of pedagogy, but, schools seldom do, he says. The focus of faculty members in fact, many are not, says Robert K. Toutkoushian, an educais to keep enrollment down, but I think we need a more tion professor at the University of Georgia. Instead, decisions fundamental discussion of how rising costs are funded. about which school to attend often are influenced by factors School accountability is really important, says Deanne Loonin, that are costly for schools to accommodate. For students, it staff attorney at the Student Loan Borrower Assistance Project may be, I have my own bathroom, he says. And for parents: at the National Consumer Law Center in Boston. With students The grounds are kept well. accumulating ever-greater debt to attend college, schools should Marcia Clemmitt care about their completion rates and take more responsibility for ensuring that students who enter get what theyre pay- 1 Christine M. Keller, statement to the National Advisory Committee on Ining for, she says. stitutional Quality and Integrity, June 8, 2011, www.voluntarysystem.org/ Higher-education groups say that figuring out exactly what docs/news/Keller-VSA_NACIQI_comments_060911.pdf.
Getty Images/Steve Pope

for five years following graduation. Lawmakers extended that period to seven years in the 1990s, and in 2005 they made it nearly impossible to use bankruptcy to discharge any college loans, including bank loans not guaranteed by the federal government. Other lender protections include guaranteeing that banks . . . get back not just the principal but the interest should a student default. It took all the risk out of lending, wrote Nocera. 25 The tough rules are justified, said J. Douglas Cuthbertson, a McLean, Va., lawyer who represents the National

Council of Higher Education Loan Programs, a trade group for financial institutions that make student loans. He told a House Judiciary subcommittee in 2009 that if hardship exemptions were easy to get, student borrowers could enjoy the benefits of their education, then seek bankruptcy without ever attempting to repay. That would convert a student loan . . . into a scholarship and cause banks to stop lending for education, Cuthbertson said. 26 John A. Hupalo, managing director of Boston-based Ramirez Capital Managers and an adviser to banks and

other groups on setting up student-loan programs, told the Judiciary panel last year that, in fact, college loans are the most consumer friendly products in the marketplace. Features include the absence of prepayment penalties for borrowers who wish to pay ahead of schedule, and . . . opportunities for borrowers to stop making payments for a period of time, he said. 27 Other experts disagree. Deanne Loonin, a staff attorney at the Student Loan Borrower Assistance Project at the National Consumer Law Center in Boston, acknowledges that in the past

www.cqresearcher.com

Oct. 21, 2011

889

STUDENT DEBT
10 to 15 years, loan policies have be- mistakenly billed him multiple times Department of Education must reimcome much more liberal at the front for what should have been a one-time burse the lending bank, the governend about who can get how much late-payment fee and apparently lost ment can easily recoup the money and money as loan limits and eligibility his request for an economic-hardship then some by pursuing the student all restrictions have been lifted. But at suspension, Collinge wrote. 28 the way into retirement. The governthe same time, she says, weve steadiThe analogy to subprime [mortgage] ment has no incentive to help stuly increased the governments collec- loans is a good one for student loans, dents and lenders work out a paytion power. Collinge says. Just as easy-seeming mort- ment plan, he argues. Loonin points out that the govern- gage terms drove up home prices, he ment can even seize money from a said, the availability of education loans low-income student borrowers Social fuels consumer demand that helps drive Security benefits and Earned Income up the price of college. And in both Tax Credit, a federal program designed situations, Collinge says, people got ducation lending has been an exto help needy families. Garnishing that involved in a form of debt that they traordinarily profitable business, money contradicts another policy goal dont understand, with multiple loan wrote Fortune magazine reporter Bethany reducing poverty, she says. provisions that run up the total that McLean in 2007. Sallie Mae, for examThere should ple, had had one of the also be more due highest rates of return on process, to give peoshareholder investments ple the opportunity of any American comto challenge rulings pany and compensated about their qualifiits executives handcation for hardship somely, paying CEO Alexemptions, Loonin bert Lord more than $200 says. And she wants million between 1999 and more relief for peo2004, McLean wrote. 29 ple affected by abuBut consumer consive practices such cerns that the loan inas fraud by schools dustry put profits above that, for example, students have led to make false claims several changes over about the value of the past 20 years, notheir degrees. tably instituting incomeAlan Collinge related repayment plans became a studentand limiting private loan reform advobanks role in college cate after penalties lending. In 2007 New York Attorney General Andrew Cuomo revealed what he In the early 1990s the and interest pushed called an unholy alliance in which colleges and college officials Clinton administration $38,000 in college accepted kickbacks for naming certain banks preferred lenders for argued that direct loans debt to $50,000 and student loans. Financial-aid officers at several universities, including from the federal govthen $95,000 folColumbia and Johns Hopkins, resigned. Some universities and lenders, including Citibank, agreed to settlements that included financial ernment, rather than lowing temporary penalties and pledges to submit to a new industry conduct code. banks, were safer for payment deferments students and cheaper while he finished degree requirements in aerospace en- must be paid. College loans dont rep- for taxpayers because they eliminatgineering and then was unemployed, resent a price bubble that can pop, ed subsidies to commercial lenders. he said in a 2010 book, The Student but borrowers experience a complete That view prevailed, and in 1993 Conloss of faith in a government lending gress passed the Student Loan Reform Loan Scam. A bureaucracy that seemed hostile system supposedly intended to help Act, giving universities the option of offering direct federal loans rather than to borrowers compounded his difficul- people, he said. Furthermore, Collinge complained loans offered through banks. The law ties, he wrote. The big loan-originating and collections company Sallie Mae that when a student defaults and the also introduced a program for lower-

Consumer Protections

890

CQ Researcher

Getty Images/Michael Nagle

Tips on Taming the College-Debt Monster


Track costs and pay high-interest loans first, experts say.
oaring college tuition is translating into bigger education loans, so college-bound students must mull their highereducation choices more carefully than ever. Here are some tips from experts: Consider alternatives. Deciding between a four-year college and a cheaper two-year community college should be based on more than just money. If you know youre going for a bachelors degree, starting at a four-year school may be the better choice, says Douglas A. Webber, a doctoral student in economics at Cornell University and a researcher at Cornells Higher Education Research Institute. But for professional fields that dont necessarily require four years, such as nursing, he says, community college certificate programs are often undervalued. They cost less than comparable programs at four-year schools, so theyre well worth considering, Webber says. Shopping around among two-year colleges also is important, says Stephanie R. Cellini, an assistant professor of public policy at George Washington University in Washington. For example, if a for-profit college in your area advertises a certificate you want, such as in auto mechanics, its worth checking to see if a community college near you offers it, too, because community colleges are the lowest-cost option, Cellini says. Find out whether you qualify for aid, such as needbased federal Pell grants, so you dont foreclose the option of attending a favorite school too early. Students simply dont know what aid is available and may simply write off the possibility of attending some schools because they dont think they can afford their advertised sticker prices, says Donald Heller, an education professor at Pennsylvania State University in State College. Very few students pay those sticker prices, however, and lowincome students never do because need-based grants are available, Heller says. Starting this October, all colleges must post socalled net-price calculators on their websites to help students figure out their bottom-line cost. The calculators factor in grants, loans and upfront costs, and the figures are adjusted to reflect discounts based on the financial status of students families. Although the calculators arent perfect, they can provide a much better sense of actual costs than the estimates available in the past. 1 Too often overlooked in the financial-planning stage is the question of how are you going to live? says Sandy Baum, a Chicagobased independent education consultant and longtime College Board

analyst. Living expenses run about $12,000 to $15,000 a year, which can give you a lot of added debt, she says. Borrow your permitted maximum through federal loan programs before considering private loans, which have much higher interest rates and dont allow the deferred or income-related payments or loan-forgiveness programs that apply to most federal loans. Keep careful records of your borrowing. People are making these huge financial decisions, and a lot of times they dont even realize how big, because loans are so easy to get, says Webber. Track the lender, balance and repayment status of each loan. These details will determine your options for repayment schedules and loan forgiveness down the line, advises the Oakland, Calif.-based Project on Student Debt. Details matter. For example, different loans have different grace periods the amount of time you can wait after leaving school before you must make your first payment. The federal website http://studentaid. ed.gov/PORTALSWebApp/students/english/index.jsp provides information about federal aid and loan programs and allows you to manage and track your personal financial-aid application process, loans and more. Make savvy choices about repayment, suggests financial analyst Mark Kantrowitz, publisher of the college-aid website FinAid. Paying off your debt as soon as possible will save on interest, and the best way to cut interest costs is to pay off the loan with the highest after-tax interest rate first. If you have both federally guaranteed and private loans or have used a credit card to pay some college expenses, the highest-interest loan and thus your first target for repayment should be the credit-card or private-lender loan, Kantrowitz said. 2 Marcia Clemmitt
For background on net price calculators, see Daniel de Vise, Calculating the Net Price of College, Washington Post blogs, March 17, 2010, http://voices. washingtonpost.com/college-inc/2010/03/more_on_the_net_price_of_colle. html, and Tim Johnson, Colleges Unveiling Net Price Calculators, Burlington Free Press [Vermont] blogs, Sept. 27, 2011, http://blogs.burlingtonfreepress. com/highered/2011/09/27/colleges-unveiling-net-price-calculators. 2 Mark Kantrowitz, Best Strategies for Paying Off Debt Quicker, Fastweb. com, Oct. 11, 2010, www.fastweb.com/financial-aid/articles/2747-best-strategiesfor-paying-off-debt-quicker.
1

wage borrowers that pegged payments on direct loans to income. But many in the financial industry, along with many political conservatives, opposed direct loans. The government is not as well positioned as banks to manage risk, market stu-

dent loans or service ongoing lending, wrote Douglas Holtz-Eakin, a former chief of the Congressional Budget Office who served as economic adviser to Presidents George H. W. and George W. Bush and to the Consumer Bankers Association. Budget

estimates pegging direct government loans as cheaper for taxpayers failed to capture their true costs, including lost income-tax revenues from private lenders, he wrote. 30 For more than a decade, the studentloan industry fought hard to induce col-

www.cqresearcher.com

Oct. 21, 2011

891

STUDENT DEBT
leges to stick with federally guaranteed ple. Its good, but not as good as it bank loans. But those efforts backfired could be, says Skidmores Baum. Delaney of the University of Illinois in 2007, when then-New York Attorney General Andrew Cuomo revealed what complains that the programs require he called an unholy alliance in which students to opt in rather than being colleges and college officials accepted automatically enrolled a problem kickbacks for naming preferred lenders. she says guarantees that relatively few Financial-aid officers at universities students will be covered. Another 2010 provision fulfilled a including Columbia, in New York City, Johns Hopkins, in Baltimore, and the longtime Democratic goal replactudent-loan programs continue to University of Texas, at Austin, resigned. ing federally guaranteed bank loans play a role in heated debates over Some universities and lenders, includ- with direct federal loans. The provi- federal spending. In negotiations between ing banking giant Citibank, agreed to sion, which applies to loans made in Congress and the White House this sumsettlements that included financial July 2010 or later, will work better for mer over raising the federal debt ceilpenalties and pledges to submit to a consumers and taxpayers because it ing the amount Congress authorizes cuts out fees charged by private in- the government to borrow collegenew industry conduct code. 31 Over the past few years, Congress stitutions acting as middlemen, sup- loan programs took a hit as negotiators has changed the federal education-loan porters argue. Private lenders can still struggled to find money to shore up the programs in ways Pell Grant program for that many analysts low-income students. say should make On Aug. 2, lawmakthem less onerous, ers passed and President at least for future Obama signed the Budborrowers and some get Control Act of 2011, past ones eligible to raising the debt ceiling opt into the new reto forestall a government payment plans. default. 33 Negotiators In 2007, Conauthorized a temporary gress created a loan$17 billion boost in Pell forgiveness program Grant funds for 2012 for some student and 2013, in part to redebtors who go place expiring increases into public-service passed in 2009 and 2010 jobs and added an as part of economicincome-based restimulus and health-care payment option for reform bills. direct loans to the The Pell increase isnt New York University graduates celebrate commencement at Yankee Stadium on May 18, 2011. Education experts generally agree that one it had passed in a done deal, however. while the cost of obtaining a college degree may pay off in the long run, 1993. It allowed Congress ultimately must the dual trends of rising debt and rising tuition are becoming borrowers to opt into make additional spendincreasingly problematic, especially for low-income students who rack a repayment plan ing cuts elsewhere beup large debt and those who dont obtain degrees or certificates. that caps payments fore it can appropriate at 15 percent of discretionary income make college loans, but no new edu- the funds. An appropriations bill recentand forgives any remaining debt after cation loans made by banks will be af- ly approved in the Republican-led House, 25 years. Then last year Congress low- filiated with any federal loan-guarantee for example, would trim $44 billion from ered the cap to 10 percent of income program. Pell over 10 years by limiting eligibility, The 2010 changes are hugely sig- according to the advocacy group Instiand shortened the pay period to 20 years, nificant, says Delaney. Im not sure tute for College Access and Success. 34 beginning July 1, 2014. 32 Many higher-education analysts wel- well fully understand their significance Whats more, in passing the Budget come the plans that offer lower-income for a long time, but its the biggest Control Act, Congress eliminated propeople smaller monthly payments but thing thats happened in student aid grams offering loan-interest subsidies say they wish they covered more peo- for 30 years. Continued on p. 894

CURRENT SITUATION

Debt and Deficits

892

CQ Researcher

Getty Images/Steven Vlasic

At Issue:
Are students borrowing more than their educations are worth?
yes

ALAN COLLINGE
FOUNDER, STUDENTLOANJUSTICE.ORG
WRITTEN FOR CQ RESEARCHER, OCTOBER 2011

NEAL MCCLUSKEY
ASSOCIATE DIRECTOR, CENTER FOR EDUCATIONAL FREEDOM, CATO INSTITUTE
WRITTEN FOR CQ RESEARCHER, OCTOBER 2011

resident Obama made it clear in his State of the Union address that two areas of focus going forward will be education and fixing what is broken in the federal government. The most meaningful way for the president to demonstrate this on both fronts lies in the federal student-loan system. Like subprime lending, the student-lending system has been corrupted deeply, enabling college prices to rise faster than both housing and health care over the past three decades. Today, we owe an astounding $1 trillion in student debt, and instead of decreasing in the slow economy, borrowing has accelerated massively to keep pace with record-breaking tuition increases. Unlike loans for housing, student loans were stripped of bankruptcy protections and nearly every other consumer protection Americans assume is there when they borrow. At the same, time, Congress gave the student-lending system collection powers so draconian that big lenders, guarantors and likely even the Department of Education have made far more money on defaults than healthy loans. This is not tolerable in this or any other country. On this there is no debate. As Harvard Law Professor Elizabeth Warren, who established the governments new Consumer Finance Protection Bureau, put it: Its impossible to buy a toaster that has a one-in-five chance of exploding, but similar standards arent imposed on financial products. Indeed, education-loan defaults have been greater than one in four for many years and are probably between 30 percent and 40 percent today, yet the Department of Education has not warned the public. Congress, too, needed to know this as they debated whether to raise loan limits time and again. But they were shown only misleading cohort rates that reflected a small fraction of the true default rate. As a result, students now borrow far more than their educations are worth, and they (and often their co-signing relatives) are being decimated financially. Ultimately, the removal of bankruptcy protections is the root of this mess, and their immediate return is the solution to both the exploitation of borrowers and the prices being charged to all students, rich and poor. Economists and true conservatives everywhere should agree with this assertion. Student debt is a top issue in the protests going on around the country this fall, demonstrating that the public is unlikely to tolerate for much longer the political and administrative games that perpetuate this harm.
no

yes no
Oct. 21, 2011

ooking at the basic facts, college students are not absorbing more debt than their educations are worth. But that doesnt mean debt shouldnt be much smaller. While methodologies for calculating it are hotly debated, the college-earnings premium is generally considered to be substantial. On the high end, the Census Bureau estimates expected lifetime earnings to be $1.1 million greater with a bachelors degree than just a high-school diploma. Low-end estimates between $100,000 and $300,000 also suggest that debt pays off. Why? Because the average debt for graduates is only $24,000, so most are paying only a modest price for the return in additional wages at least $100,000, even by the most conservative estimates. Those, though, are just basic averages. There is much that they miss. First, many students enroll in college, incur debt, but never finish their studies, failing to obtain the degree that is crucial to increased earnings. Indeed, the six-year graduation rate for first-time, full-time students enrolled in four-year institutions is just around 57 percent, and most who do not finish in six years probably never will. Then theres what a degree does. Rather than indicating mastery of valuable skills, it often signals to employers only that the possessor has some basic positive traits, such as threshold levels of intelligence or perseverance. The extent to which that is the case varies greatly by major as do earnings but generally speaking, paying for college is a very expensive way just to indicate that youll show up at work on time. Proving this, to be fair, is tough, because we have no comprehensive measures of what students actually learn in college. What we do have, though, is discouraging. The National Assessment of Adult Literacy shows markedly decreasing literacy rates for college grads between 1992 and 2003. Meanwhile, research by academics Richard Arum and Josipa Roksa, authors of Academically Adrift: Limited Learning on College Campuses, suggests that 45 percent of four-year college students learn little in their first two years, and 36 percent nearly nothing in four years. Finally, theres price inflation: Going into debt might be worthwhile, but the levels shouldnt be nearly as high as they are. College prices have inflated at astronomical rates over the last several decades, at least in part because student aid, including grants and cheap federal loans, enable it. Give students an extra dollar, and schools raise tuition by a buck. So does a degree pay off handsomely? Generally, yes. Does that mean debt levels are just right? No way.

www.cqresearcher.com

893

STUDENT DEBT
Continued from p. 892

for graduate- and professional-school enrollees and interest reductions on loans that students pay on time. 35 Student-loan programs have long been part of Washington debt-reduction debates, but with new loans all using government rather than private funds, many may see the matter in a new light. In the past, observed the online magazine Inside Higher Ed, because significant proportions of the programs profits flowed to banks and other lenders, slashing [the programs] to increase spending on grants to students or even to pay down the federal deficit was often portrayed as taking money from fat cat companies and using it for students or other public purposes. Today, however, with commercial lenders removed from the picture, it is clearer than ever before that cutting loan programs actually means taking money from cashstrapped borrowers themselves. 36 Meanwhile, taxpayer funding for public colleges in at least some states is drying up. And as the economic downturn lingers and federal stimulus funds wind down, state lawmakers are resisting tax hikes to shore up higher education. 37 That means tuitions at public colleges will likely rise, fueling further increases in student debt. In the University of California system, for example, 2011-2012 tuition will rise 18 percent from 2010-2011 and more than 80 percent from 2007-2008, according to Equal Justice Works, a Washington-based advocacy group that promotes access to education. 38

More Students, More Loans

We are in a new era where resources dont seem endless, and nobodys found a cheap way to pay for a college education, says Indiana Universitys Hossler. As a result, lots of countries, both developing and industrialized, are looking into loans, including countries such as the United Kingdom that formerly relied on tax revenues rather than students tuition loans, says Boston Colleges Altbach. Countries looking to expand the use of student debt are unlikely to use the U.S. system as a model, though, says independent analyst Hauptman. More likely models are Australia and New Zealand, where student borrowers are automatically enrolled in plans that are administered through the tax system and base repayment amounts on students post-graduate incomes. While those nations face their own struggles over how heavily government should subsidize higher education and how much individual debt is acceptable, their systems are far preferable to the U.S. approach, Hauptman contends. But others criticize schemes that base loan repayment on income, arguing that they are merely stealth methods of shifting more college costs from society at large to individual students. Low earners end up paying more in interest than high earners who can pay off their loan relatively quickly, said the Canadian Federation of Students, a student-advocacy group in Ottawa that has opposed income-contingent repayment plans in Canada. Many women, in particular, might end up with a lifelong debt sentence because women earn less on average than men, the group said. 39

he biggest higher-education trend, in the United States and elsewhere, is the ever-growing number of students who get post-secondary training. But as costs outpace public funding, the trend sets education debt on a permanent upward path, worldwide.

OUTLOOK
Explosive Debt?

ven as college costs rise, many policymakers are calling for expansion

of post-secondary schooling to create a better-prepared pool of workers to build tomorrows economy. But college-price increases, coupled with policies encouraging more people to complete postsecondary training, will continue to raise questions about how heavily taxpayers are willing to subsidize higher education and how much debt students can be expected to shoulder. The nation faces a huge dilemma, says the University of Pennsylvanias Perna. How do we balance these budgets and achieve our goals for improving college-completion rates in the face of declining revenues? You can become paralyzed by the magnitude of the problem. Experts say some states that have been basing student aid on recipients grades rather than financial need may be starting to back away from that policy, concerned that it isnt expanding access to college. But, says Penn States Heller, in the nation as a whole I dont expect to see merit-based aid back off a trend that could continue to bode ill for cash-strapped students lacking top-tier grades but who nonetheless seek a college degree. Even as students pay more to attend college, look for the nature of higher education to change. Huge class sizes, reflecting colleges struggles to accommodate enrollment surges, will be one manifestation, says Northwesterns Weisbrod. In a class with 500 students rather than a class of 20, youll be less likely to assign papers, for example, so there is a quality issue, he says. The nature of education is changing as we try to make it available to everybody. In such a climate, requiring individuals to take on more and more debt for schooling will eventually lose political support, Weisbrod argues. Leaders will come to realize that you cant have a successful program of encouraging college graduation if you are saddling people with unworkable debt to do it.

894

CQ Researcher

St. John of the University of Michigan says loans have become very important because they enable the working class to get post-secondary training. Still, he says, there are ways to work within a problematic system to move toward something thats fairer. But student debtor and activist Collinge thinks it may take a nearrevolution to get there. Congress seems unlikely to take a serious step, such as restoring bankruptcy protection, he says. On Capitol Hill, theyre scared of the power of the higher-education establishment, including colleges, private lenders and even the Department of Education, Collinge asserts. All have vested interests in opposing such largescale changes, he says. As debt burdens become untenable for more students, the federal programs supposedly intended to help people pay for college will become a national joke, Collinge predicts. Nobody will pay. There could be a national strike. It could get very dodgy at that point, as Americans suffer a loss of faith in a major governmentlending system.

Notes
1 For background, see MoveOn.org, U.S. Rep. Promoting Student Loan Debt Forgiveness, The Daily Caller, Sept. 15, 2011, http://daily caller.com/2011/09/15/moveon-org-u-s-reppromoting-student-loan-debt-forgiveness; Carolyn Elefant, Law Student Organizing Loan Forgiveness Drive, Legal Blog Watch, March 26, 2009, http://legalblogwatch.typepad.com/ legal_blog_watch/2009/03/law-student-orga nizing-loan-forgiveness-drive.html; Robert Applebaums Bio, Robert Applebaum.com, www. robertapplebaum.com/content/robert-apple baums-bio. 2 Mark Kantrowitz, Total College Debt Now Exceeds Total Credit Card Debt, Fastweb, Aug. 11, 2010, www.fastweb.com/financial-aid/ articles/2589-total-college-debt-now-exceedstotal-credit-card-debt. 3 The 1982-2005 data are from Patrick M. Callan, College Affordability: Colleges, States

Increase Financial Burdens on Student and Families, Measuring Up 2006: The National Report Card on Higher Education, National Center for Public Policy and Higher Education, http://measuringup.highereducation.org; more recent figures are from Trends in College Pricing, College Board, p. 3. 4 Quoted in Korva Coleman, Is a College Education Worth the Debt? NPR, Sept. 1, 2009, www.npr.org/templates/story/story.php?story Id=112432364. 5 Andrew Gillen, Financial Aid in Theory and Practice: Why It Is Ineffective and What Can Be Done About It, Center for College Affordability and Productivity, April 2009, www. centerforcollegeaffordability.org/uploads/Finan cial_Aid_in_Theory_and_Practice%281%29.pdf. 6 Annamaria Andriotis, For Student Borrowers, a Hard Truth, SmartMoney, Sept. 16, 2011, www.smartmoney.com/borrow/student-loans/ for-student-borrowers-a-hard-truth-131611895 5339/?link=SM_hp_ls4e. For background, see Barbara Mantel, Career Colleges, CQ Researcher, Jan. 7, 2011, pp. 1-24. 7 Quoted in Coleman, op. cit. 8 Car-Financing Basics, Money-Zine.com, www. money-zine.com/Financial-Planning/Leasingor-Buying-a-Car/Car-Financing-Basics. 9 Michael Greenstone and Adam Looney, Where Is the Best Place to Invest $102,000 In Stocks, Bonds, or a College Degree? Brookings Institution website, June 25, 2011, www.brookings.edu/papers/2011/0625_edu cation_greenstone_looney.aspx. 10 Student Loans, FinAid, www.finaid.org/loans. 11 The Rising Price of Inequality: How Inadequate Grant Aid Limits College Access and Persistence, Advisory Committee on Student Financial Assistance, June 2010, http://chronicle. com/items/biz/pdf/acsfa_rpi.pdf. 12 Ibid. 13 For background, see Paving the Way: How Financial Aid Awareness Affects College Ac-

cess and Success, The Institute for College Access & Success, October 2008, http://project onstudentdebt.org/fckfiles/Paving_the_Way.pdf, p. 7. 14 The College Completion Agenda: 2011 Progress Report, Latino Edition, The College Board, October 2011, http://completionagenda. collegeboard.org/sites/default/files/latino_pdf/ progress_report_latino_2011.pdf. 15 For background, see David Moltz, Is Completion the Right Goal? Inside Higher Ed, Feb. 16, 2011, www.insidehighered.com/news/ 2011/02/16/scholars_debate_merits_of_com pletion_agenda. 16 William J. Bennett, Our Greedy Colleges, The New York Times, Feb. 18, 1987, www.ny times.com/1987/02/18/opinion/our-greedycolleges.html. 17 Robert B. Archibald and David H. Feldman, Avoiding Tunnel Vision in the Study of Higher Education Costs, College of William and Marry Department of Economics Working Paper Number 53, June 2007, http://ideas.repec.org/p/cwm/wpaper/53.html. 18 For background, see Charlene Wear Simmons, Student Loans and Higher Education, California Research Bureau, January 2008, www.library.ca.gov/crb/08/08-002.pdf; History of Student Financial Aid, FinAid, www.finaid. org/educators/history.phtml; and the following CQ Researcher reports: Thomas J. Billitteri, The Value of a College Education, Nov. 20, 2009, pp. 981-1004; Marcia Clemmitt, Student Aid, Jan. 25, 2008, pp. 73-96; and Tom Price, Rising College Costs, Dec. 5, 2003, pp. 10131044. 19 Robert Shireman, Straight Talk on Student Loans, University of California, Berkeley, Occasional Paper Series, 2004, http://cshe.berkeley. edu/publications/publications.php?id=66. 20 Web Tables for Trends in Student Financing of Undergraduate Education: Selected years, 1995-96 to 2007-08, National Cen-

About the Author


Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include School Reform and Regulating Credit Cards.

www.cqresearcher.com

Oct. 21, 2011

895

STUDENT DEBT
ter for Education Statistics, U.S. Department of Education, January 2011, http://nces.ed.gov/ pubs2011/2011218.pdf. 21 Lisa Wade, Number of College Students Owing $40,000+ in Loans, 1996-2008, Sociological Images, May 23, 2010, http://thesociety pages.org/socimages/2010/05/23/number-ofcollege-students-owing-40000-in-school-loans1996-2008. 22 Arthur M. Hauptman and Young Kim, Cost, Commitment and Attainment in Higher Education: An International Comparison, Jobs for the Future, May 2009, www.jff.org/publications/ education/cost-commitment-and-attainmenthigher-ed/836. 23 Arthur M. Hauptman, Thirty Per Cent Hold Bachelors Degrees, Federations Magazine, Forum of Federations, June/July 2007, www. forumfed.org/en/products/magazine/vol6_num2/ special_us.php. 24 Joe Nocera, The Profit and the Pauper, The New York Times, July 29, 2007, www.ny times.com/2007/07/29/education/edlife/nocera. html?pagewanted=all. 25 Ibid. 26 J. Douglas Cuthbertson, testimony before the House Judiciary Subcommittee on Commercial and Administrative Law, Sept. 23, 2009, http://judiciary.house.gov/hearings/pdf/Cuth bertson090923.pdf. 27 John A. Hupalo, testimony before the House Judiciary Subcommittee on Commercial and Administrative Law, April 22, 2010, http:// judiciary.house.gov/hearings/pdf/Hupalo100 422.pdf. 28 Alan Collinge, The Student Loan Scam: The Most Oppressive Debt in U.S. History and How We Can Fight Back (2010), pp. vii-ix. 29 Bethany McLean, The Surprising Profits of Student Loans, CNN Money, April 16, 2007, http://money.cnn.com/2007/04/16/news/com panies/pluggedin_mclean_sallie.fortune/index. htm. 30 Douglas Holtz-Eakin, Budget-Scoring Barriers to Efficient Student Loan Policy, paper prepared for Consumer Bankers Association, et al., December 2006, www.studentloanfacts. org/NR/rdonlyres/65DDECF9-3020-4C6A-8C8FB568556FEA64/7398/BudgetScoringBarriersto EfficientStudentLoanPolicy.pdf. 31 For background, see Karen W. Arenson and Diana Jean Schemo, Report Details Deals in Student Loan Industry, The New York Times, June 15, 2007, www.nytimes.com/2007/ 06/15/washington/15loans.html. 32 For background, see Mark Kantrowitz, President Obama Proposes Capping Student Loan

FOR MORE INFORMATION


Advisory Committee on Student Financial Assistance, 80 F St., N.W., Suite 413, Washington, DC 20202-7582; 202-219-2099; www2.ed.gov/about/bdscomm/ list/acsfa/edlite-index.html. Independent expert panel that issues in-depth analyses of and advises the federal government on financial aid for higher education. The Center for College Affordability and Productivity, 1150 17th St., N.W., Suite 910, Washington, DC 20036; 202-375-7831; http://centerforcollegeaffordability.org. Independent, nonprofit think tank that analyzes college finances and spending. Delta Project on Postsecondary Education Costs, Productivity and Accountability, 1250 H St., N.W., Suite 700, Washington, DC 20005; 202-349-4143; www.deltacostproject.org. Research group studying ways to hold down college costs and improve productivity in higher education. FinAid, www.finaid.org. Independent, advertising-supported news and information website about loans and other college-finance issues, run by financial analyst Mark Kantrowitz. Project on Student Debt, Institute for College Access and Success, 405 14th St., 11th Floor, Oakland, CA 94612; 510-318-7900; http://projectonstudentdebt.org. Independent research and education group. Sallie Mae, 888-272-5543 and 317-570-7397; www.salliemae.com. Publicly traded corporation, no longer government-chartered, that provides, manages and services education loans and education-savings plans. Student Loan Borrower Assistance Project, National Consumer Law Center, 7 Winthrop Square, Boston, MA 02110-1245; 617-542-8010; www.studentloanborrow erassistance.org. Foundation-supported information and education center on student loans. StudentLoanJustice.org, http://studentloanjustice.org. Grassroots group that advocates greater consumer protections for student borrowers, including the right to discharge student loans in bankruptcy. StudentLoans.gov, https://studentloans.gov. Government information portal about federal education loans.
Payments at 10 Percent of Discretionary Income, Fastweb, Jan. 25, 2010, www.fastweb. com/financial-aid/articles/2057-president-obamaproposes-capping-student-loan-payments-at10-of-discretionary-income. 33 For background, see Stephen Burd and Jason Delisle, A Temporary, Albeit Tenuous, Reprieve for Pell Grants, Higher Ed Watch, New American Foundation, July 28, 2011, http:// higheredwatch.newamerica.net/blogposts/2011/ a_temporary_albeit_tenuous_reprieve_for_pell_ grants-55499. 34 House FY12 Appropriations Bill Cuts Pell Grants by $44 Billion: Reduces College Access, Penalizes Work and Hurts the Neediest Students, The Institute for College Access and Success, Oct. 11, 2011, http://ticas.org/files/ pub/House_FY12_Approps_Bill_one-pager.pdf. 35 Isaac Bowers, Make Sense of the Debt Ceiling Jabberwocky, U.S. News & World Report blogs, Aug. 10, 2011, www.usnews.com/ education/blogs/student-loan-ranger/2011/08/ 10/make-sense-of-the-debt-ceiling-jabberwocky. 36 Libby A. Nelson and Doug Lederman, Loans and the Deficit, Inside Higher Ed, July 18, 2011, www.insidehighered.com/news/2011/ 07/18/increased_student_loan_interest_rates_to_ reduce_deficit_and_probably_not_expand_grants. 37 For background, see Erica Williams, Michael Leachman and Nicholas Johnson, State Budget Cuts in the New Fiscal Year Are Unnecessarily Harmful, Center on Budget and Policy Priorities, July 28, 2011, www.cbpp.org/ cms/index.cfm?fa=view&id=3550. 38 Bowers, op. cit. 39 Study Now, Pay Forever: Income Contingent Repayment Loan Schemes, Canadian Federation of Students, Winter 2007, www.cfsfcee.ca/html/english/research/factsheets/fact sheet-icr.pdf.

896

CQ Researcher

Bibliography
Selected Sources
Books
Cohen, Arthur M., and Carrie B. Kisker, The Shaping of American Higher Education: Emergence and Growth of the Contemporary System, 2nd Edition, Jossey-Bass, 2009. Cohen, a professor emeritus of higher education at the University of California, Los Angeles, and education-policy consultant Kisker put the development of the U.S. higher-education system from the early 1600s to the 21st century into its social and economic context, focusing on the continued push to expand access and examining the recent privatization trend. Collinge, Alan, The Student Loan Scam: The Most Oppressive Debt in U.S. History and How We Can Fight Back, Beacon Press, 2010. A student-debt activist chronicles the growth of the educationloan business and accompanying federal bureaucracy, which he argues have profited on the backs of student debtors. Weisbrod, Burton A., Jeffrey P. Ballou and Evelyn D. Asch, Mission and Money: Understanding the University, Cambridge University Press, 2008. Weisbrod, a professor of economics at Northwestern University, and his coauthors describe how colleges fund their academic activities with a complicated revenue mix that includes tuition, private donations, taxpayer dollars and proceeds from commercialtype activities, such as research and intercollegiate sports. Education as students repay their loans far exceed the loans cost, making student-loan programs a hot business.

Reports and Studies


The Rising Price of Inequality: How Inadequate Grant Aid Limits College Access and Persistence, Advisory Committee on Student Financial Assistance, June 2010, www.im magic.com/eLibrary/FIN_AID/US_ED/A100630R.pdf. Too few need-based grants are available to ensure that qualified low- and moderate-income students can complete college, says a federal advisory panel. Abernathy, Pauline, Drowning in Debt: Financial Outcomes of Students at For-Profit Colleges, Institute for College Access, June 7, 2011, http://projectonstudentdebt. org/files/pub/Abernathy_testimony_June_7_2011.pdf. For-profit career colleges have the highest proportion of students with debt, says the vice president of a student-debt research and advocacy group. Carey, Kevin, and Erin Dillon, Drowning in Debt: The Emerging Student Loan Crisis, Education Sector, July 2009, www.educationsector.org/sites/default/files/publications/ CYCT_Drowning_In_Debt.pdf. As tuitions soar, more students are taking on the riskiest kind of education debt non-federally guaranteed private-lender loans, write analysts at an independent think tank. Cunningham, Alisa F., and Gregory S. Kienzl, Delinquency: The Untold Story of Student Loan Borrowing, Institute for Higher Education Policy, March 2011, www.ihep.org/assets/files/publications/a-f/DelinquencyThe_Untold_Story_FINAL_March_2011.pdf. Analysts for a nonprofit group say policymakers remain unaware of the seriousness of student-debt problems because federal statistics dont reveal that many borrowers temporarily fall behind in their payments. Vedder, Richard, The Coming Revolution in Higher Education, Center for College Affordability and Productivity, October 2010, www.centerforcollegeaffordability.org/ uploads/Revolution_in_Higher_Ed.pdf. The combination of rising tuitions, rising debt and pressure for more Americans to complete college may soon force colleges to demonstrate that they provide value for the dollar, says the founder of a nonprofit group that advocates for accountability in higher education.

Articles
Byrne, John A., Wharton MBA 2013: The Class the Loans Fell On, CNN Money, Aug. 22, 2011, http://management. fortune.cnn.com/tag/tuition-payments. At the University of Pennsylvanias Wharton School, members of the MBA class of 2013 will be the first to owe more than $100 million in education debt, including interest, when they complete their degrees. Chavkin, Sasha, Education Department Backs Away From Fix to Help Disabled Student Borrowers, Pro Publica, August 2011, www.propublica.org/article/edu cation-department-backs-away-from-fix-to-help-disabledstudent-borrowers/single. Students who become disabled after taking out loans can be excused from repayment, but the Education Department hesitates to adopt a simplified disability-certification process. Nelson, Libby A., and Doug Lederman, Loans and the Deficit, Inside Higher Ed, July 18, 2011, www.inside highered.com/news/2011/07/18/increased_student_loan_ interest_rates_to_reduce_deficit_and_probably_not_expand_ grants. The revenues flowing to banks and the Department of

From the CQ Researcher Archive:


Financial Support for Higher Education, May 5, 1948; Costs of Education, May 25, 1959; College Financing, Feb. 24, 1971; Whats Behind High College Price Tags, May 19, 1989.

www.cqresearcher.com

Oct. 21, 2011

897

The Next Step:


Additional Articles from Current Periodicals
College Costs
Alex, Patricia, No End in Sight for the Rising Cost of College, The Record (Bergen County, N.J.), Oct. 29, 2010, p. A1. There are few signs that the rising cost of college will abate anytime soon as states continue to contend with budget shortfalls and the lingering recession, according to education experts. Pender, Kathleen, College Websites Help Tally Potential Net Costs, The San Francisco Chronicle, March 24, 2011, p. D1, articles.sfgate.com/2011-03-24/business/291 80780_1_calculator-financial-aid-postsecondary-schools. Congress has ordered almost all post-secondary schools to post a net price calculator on their websites so potential students can know the full price of attending college after financial-aid awards are given. Pender, Kathleen, Figuring Out College Costs, Financial Aid, The San Francisco Chronicle, April 3, 2011, p. E1, articles.sfgate.com/2011-04-03/business/302 26162_1_federal-loans-private-loans-perkins-loans. Financial-aid award letters that follow admission offers suggest to students that they will be able to afford a specific school, but they actually offer little insight into the actual cost of attendance. Reinwald, Christina, College Costs Force Saving, The Boston Globe, Aug. 23, 2011, p. 5, articles.boston.com/ 2011-08-23/business/29919338_1_college-costs-publiccolleges-and-universities-massachusetts-educational-financ ing-authority. The rapidly rising cost of college is forcing many Massachusetts parents to adjust expectations and approaches to financing their childrens education. Sider, Alison, Rises in Tuition Outpace Inflation, Arkansas (Little Rock) Democrat-Gazette, Sept. 10, 2011. Tuition and fees at Arkansas public colleges and universities rose faster than inflation in the past five years at all but six institutions, according to legislative auditors. Stokes, Stephannie, Higher Tuition Unfairly Burdens Graduates With Huge Debt, Seattle Times, April 20, 2011, p. A17, seattletimes.nwsource.com/html/opinion/2014 817000_stephannie20.html. Students fortunate enough to get accepted into state universities will face annual tuition hikes, according to a University of Washington student. gazette.com/pg/11282/1180806-298-0.stm?cmpid=MOSTE MAILEDBOX. Rising student-debt levels coupled with dismal employment prospects have left many students wondering whether they will be able to repay their loans. Kress, Adam, Arizona Student Debt Grows, Remains Below Average, Phoenix Business Journal, May 11, 2011, www.bizjournals.com/phoenix/news/2011/05/11/arizonastudent-debt-grows-below.html. The average student-loan debt in Arizona rose in 2011 to more than $28,000, or about $1,500 more than the 2010 level. The increase was slightly less than the national average hike. Lewin, Tamar, College Loans Weigh Heavier on Graduates, The New York Times, April 12, 2011, p. A1, www. nytimes.com/2011/04/12/education/12college.html. Student-loan debt is expected to surpass $1 trillion in 2011 as more students go to college and a growing share of them borrow money to do so. Price, Margaret, Big Squeeze for Grads: Student Loans Rise, Job Opportunities Dim, The Christian Science Monitor, Oct. 5, 2011, www.csmonitor.com/Business/2011/ 1005/Big-squeeze-for-grads-Student-loans-rise-job-oppor tunities-dim. Todays graduates are having to pay back larger student loan amounts despite the dim prospects of landing employment after graduation. Simon, Anna, More Graduates Leave School Carrying a Large Debt Load, Greenville (S.C.) News, April 18, 2011. Rising student-debt levels mean that many of todays graduates will be making payments when their kids are taking loans out for college. Young, Steve, S.D. First in College Debt, Argus Leader (Sioux Falls, S.D.), Oct. 23, 2010. More than three-quarters of students who graduated from South Dakota colleges in 2009 had debt, the highest level in the nation, according to the Project on Student Debt.

Loan Defaults
Alaimo, Jessica, College Students Taking More Loans, More Likely to Default, Newark (Ohio) Advocate, May 22, 2011, www.newarkadvocate.com/article/20110522/NEWS01/10 5220303/College-students-taking-more-loans-more-likelydefault. Recent graduates are more likely than past graduates to default on their loans within three years because the poor economy is providing fewer jobs.

Debt Levels
Grant, Tim, Students Facing Mounting College Debt, Pittsburgh Post-Gazette, Oct. 9, 2011, p. A9, www.post-

898

CQ Researcher

Bregel, Emily, Loan Defaults Sting Nurses, Chattanooga (Tenn.) Times Free Press, Jan. 18, 2011, p. A1, www.times freepress.com/news/2011/jan/18/loan-defaults-sting-nurses/. Dozens of Tennessee nurses have had their licenses suspended for ignoring their student loans under new enforcement of a decade-old statute. Field, Kelly, Government Doesnt Profit From StudentLoan Defaults, Budget Analysis Shows, The Chronicle of Higher Education, Feb. 14, 2011, chronicle.com/article/ Budget-Footnote-Government/126373/. The White House budget indicates that the government expects to make 17 cents on every dollar of guaranteed student loans that default, but the figure doesnt account for the time it takes the government to collect the loans. Martinez, Michael, Nevada College Student Loan Defaults Under National Average, Reno (Nev.) GazetteJournal, Feb. 28, 2011. The 10.8 percent federal student-loan default rate at Nevadas four-year universities has lagged behind the nearly 14 percent nationwide default rate since 2008. Rosen, Steve, Unpaid Student Loan Debt Looms As National Crisis, Kansas City Star, Sept. 24, 2011, p. A16, www. kansascity.com/2011/09/23/3162790/unpaid-studentloan-debt-looms.html. Default rates on federal student loans for higher education are now at their highest since 1997, according to the U.S. Department of Education. Singletary, Michelle, Student Loan Debt Isnt Always a Smart Investment, The Washington Post, March 27, 2011, p. G1. About a quarter of student-loan borrowers in financial difficulty keep default and delinquency at bay by postponing repayment. Travis, Scott, 8% of Student Borrowers Default on Debt in 2 Years, Sun-Sentinel (Fort Lauderdale, Fla.), May 30, 2011, p. A1, articles.sun-sentinel.com/2011-05-30/news/flsouth-florida-college-debt-20110530_1_national-defaultrate-college-access-success-student-loan-debt. More than 40 percent of student-loan borrowers are delinquent at least once in their first five years of repayment, according to the Institute for Higher Education Policy.

Choi, Candice, Studying Strategies to Graduate From Student Loans Would Be Wise, Honolulu Star-Advertiser, July 11, 2011, www.staradvertiser.com/business/2011 0711_Studying_strategies_to_graduate_from_student_loans_ would_be_wise.html. Many students become complacent about student loans because repayments dont begin until after a six-month grace period following graduation. Kristof, Kathy M., Grads Must Handle Student Loans Well, Los Angeles Times, Nov. 14, 2010, p. B3, articles. latimes.com/2010/nov/14/business/la-fi-perfin-20101114. Missing just one student loan payment can ruin a credit score, and a bad credit score can lead to higher costs for other loans. Mulkins, Phil, On Student Loans, Theres No Escape From Repayment, Tulsa (Okla.) World, Sept. 23, 2011, p. E3, www.tulsaworld.com/news/article.aspx?subject id=15&articleid=20110923_15_E3_bDearA133674. Unlike most consumer loans, student loans cannot be discharged in bankruptcy, and the government and private lenders can sue to collect. OConnor, Brian, Carve Away At That Student Loan Debt, Detroit News, Nov. 1, 2010, p. D1. Student-loan consolidation used to be more advantageous when rates were variable, but with most loan rates now fixed, consolidation could raise monthly payments for many college students with outstanding loans. Yip, Pamela, Congrats on That College Degree: Now Pay Up, Dallas Morning News, May 23, 2011, p. D1. One of the first steps in paying back student loans is adopting good financial habits that will last.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

MLA STYLE
Jost, Kenneth. Remembering 9/11, CQ Researcher 2 Sept. 2011: 701-732.

Repayment
Block, Sandra, Tips to Handle Student Loans, USA Today, May 27, 2011, p. B3, www.usatoday.com/MONEY/ usaedition/2011-05-27-Personal-Financerepaying-studentloans_ST_U.htm. The best way to avoid the negative consequences of student-loan default is to take charge of repayment right away.

APA STYLE
Jost, K. (2011, September 2). Remembering 9/11. CQ Researcher, 9, 701-732.

CHICAGO STYLE
Jost, Kenneth. Remembering 9/11. CQ Researcher, September 2, 2011, 701-732.

www.cqresearcher.com

Oct. 21, 2011

899

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Remembering 9/11, 9/11 Government Secrecy, 2/11 Cybersecurity, 2/10 Press Freedom, 2/10

Education
School Reform, 4/11 Crime on Campus, 2/11 Career Colleges, 1/11 Value of a College Education, 11/09

Health/Safety
Military Suicides, 9/11 Teen Drug Use, 6/11 Organ Donations, 4/11 Genes and Health, 1/11 Food Safety, 12/10 Preventing Bullying, 12/10

Crime/Law
Eyewitness Testimony, 10/11 Legal-Aid Crisis, 10/11 Computer Hacking, 9/11 Class Action Lawsuits, 5/11 Cameras in the Courtroom, 1/11 Death Penalty Debates, 11/10

Environment/Society
Prolonging Life, 9/11 Extreme Weather, 9/11 Aging Population, 7/11 Nuclear Power, 6/11 Business Ethics, 5/11 Artificial Intelligence, 4/11

Politics/Economy
Reviving Manufacturing, 7/11 Foreign Aid and National Security, 6/11 Public-Employee Unions, 4/11 Lies and Politics, 2/11

Upcoming Reports
Children and Poverty, 10/28/11 Googles Dominance, 11/4/11 Public Lands, 11/11/11

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Energy Policy
Should the U.S. use more clean-energy sources?

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

G
still needed.

asoline prices are rising above $4 per gallon in many parts of the United States, causing stress for consumers and political finger-pointing. Conservatives say that government overregulates

energy companies and limits domestic production, while liberals want to repeal tax breaks for oil companies. But the larger problem is that the United States has an energy-intensive economy and depends heavily on imported oil. The Obama administration, with support from environmentalists, argues that the U.S. needs to use more clean-energy sources, and that investing in these industries will generate high-tech jobs and export revenues. Republicans in Congress want to cut federal energy spending and rely on market forces to determine which fuels and technologies succeed. Complicating the issue, many forms of energy receive various kinds of government support, although budget debates could provide an opportunity to rethink whether longstanding energy subsidies are
President Barack Obama, speaking at a solar power facility in Arcadia, Fla., has set a goal of generating 80 percent of the nations electricity from cleaner, alternative-energy sources by 2035.

I N S I D E

THIS REPORT
THE ISSUES ....................459 BACKGROUND ................466 CHRONOLOGY ................467 CURRENT SITUATION ........471 AT ISSUE........................473 OUTLOOK ......................475 BIBLIOGRAPHY ................478 THE NEXT STEP ..............479

CQ Researcher May 20, 2011 www.cqresearcher.com Volume 21, Number 20 Pages 457-480
RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

ENERGY POLICY
THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
May 20, 2011 Volume 21, Number 20

459

Is a shift away from fossil fuels necessary? Can clean-energy sources compete? Is the United States in a global clean-energy race?

460 461 462 464

Oil Imports Outpace Domestic Production U.S. imported nearly 10 million barrels per day in 2010. Energy Sources Fit Different Demands Petroleum is used mainly for transportation. Fracking Dirties Image of Natural Gas Drilling Gasland documentary shows flammable drinking water. Fossil Fuels Are Big Carbon Emitters All produce carbon dioxide and other pollutants when burned. Chronology Key events since 1953. Tax Breaks, Other Federal Aid Benefit Energy Firms Obama seeks to end $4 billion in subsidies. Subsidies Favor Fossil Fuels Most federal energy subsidies went to traditional energy firms. At Issue Should the government end tax breaks for oil and gas production?

tjb@cqpress.com ASSISTANT MANAGING EDITOR: Kathy Koch kkoch@cqpress.com tcolin@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel
CONTRIBUTING WRITERS: Sarah Glazer, Alan Greenblatt, Barbara Mantel, Tom Price, Jennifer Weeks DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT CHECKER: Michelle Harris CONTRIBUTING EDITOR: Thomas J. Colin

MANAGING EDITOR: Thomas J. Billitteri

BACKGROUND

466 469 470 470

Cheap and Abundant Fossil fuels have long powered the U.S. economy. Oil Shocks The Arab embargo in 1973 ended the era of cheap oil. Greener Energy In the late 1980s scientists began calling for sharp cuts in fossil-fuel use. Seesawing Policies President George W. Bush sought to boost supplies of oil, gas and coal.

467 468 469 473

A Division of SAGE

PRESIDENT AND PUBLISHER:

CURRENT SITUATION

John A. Jenkins DIRECTOR, REFERENCE SOLUTIONS: Todd Baldwin


Copyright 2011 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except: (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

471 472 474

Budget Focus Negotiators could shape a more proactive national energy policy. What Is Clean Energy? Designing a national clean-electricity standard (CES) will be difficult. GHG Regulations Clean-energy advocates seek to regulate greenhouse gas emissions.

FOR FURTHER RESEARCH

477 478 479 479

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

OUTLOOK

475

How Green? Theres limited agreement on the role of green sources.

Cover: Getty Images/Zach Boyden-Holmes

458

CQ Researcher

Energy Policy
BY JENNIFER WEEKS
mental standards imposed after the BP spill. 2 The debate is as much s Americans mark about money as it is about the one-year anenergy and the environment. niversary of the DeepA key issue is whether, as water Horizon oil disaster, conservatives argue, the fedconservationists see a eral government should conpainful irony. At the same tinue to provide oil and gas time that Americans acproducers with tax subsidies knowledge the environmenthat total some $4 billion per tal damage along the Gulf year. (See At Issue, p. 473.) coast, political leaders remain Many analysts believe it is locked in a titanic struggle unlikely that Congress will over the future of national settle the issue before the 2012 energy policy a struggle presidential election and that that essentially pits fossil fuels the battle could even outlast against clean energy. a shift in congressional party The Obama administration control or a change in adis pressing for more federal ministrations. But others are investment in renewable enoptimistic that Congress will ergy, such as solar and wind act this year. I think $5 a galpower, and emerging techlon gasoline is the best innology such as clean coal centive I know to find a raplants that could capture and tional energy plan that would bury their greenhouse gas create jobs, make us more Oil rig workers symbolize the environmental and emissions. 1 Congressional Reenergy independent, clean up political battles being waged over the nations energy publicans, on the other hand, the air, Sen. Lindsey Graham, future. Republicans acknowledge the potential danger of offshore drilling, as reflected in last years Gulf oil spill, advocate increased developR-S.C., said in March. 3 but say a failure to produce more domestic oil, coal and ment of domestic oil and natEnergy debates for the past natural gas will cost jobs and leave the U.S. too ural gas and other carbontwo years have been pretty dependent on foreign oil producers. Democrats say based energy sources. catastrophic theyve taken failing to pursue alternative energy sources will hasten The stakes in the debate an issue that historically has enclimate change and squander opportunities to sell new energy technologies to other countries. are huge and far-reaching. joyed pretty strong bipartisan Democrats say a failure to support and created a war dypursue alternative energy sources will gy demand, cant begin to substitute namic around it, says Jason Grumet, heighten global damage from climate for oil and coal in handling the na- president of the Bipartisan Policy Cenchange, make the nation increasingly tions energy needs. ter, a think tank that proposes policies Last week President Barack Obama designed to win support from Republibeholden to unstable foreign oil producers and hurt the economy, in part made several concessions in the face cans and Democrats. We need to probecause of lost opportunities to sell of Republican pressure to expand do- mote more constructive dialogue. new environmentally friendly energy mestic energy production. Obama anDebate over how to meet U.S. ennounced that annual auctions would ergy needs has simmered for several technologies to other countries. Republicans, however, say a failure begin for oil and gas leases in Alaskas decades, intensifying when supplies grow to produce more domestic oil, coal National Petroleum Reserve, and that short and prices rise. Today federal agenand natural gas will cost jobs and eco- the federal government would speed cies are still cleaning up damage from nomic growth. They, too, worry about up a review of possible impacts from the Gulf oil disaster, which spilled neardependence on foreign oil producers offshore drilling along the Atlantic coast. ly 5 million barrels of crude into rich but say renewable and other new tech- He also said that current offshore lease- fishing grounds, and political turmoil in nologies, which together supply only holders would have additional time to the oil-rich Middle East has driven gasoabout 8 percent of the nations ener- meet new, tighter safety and environ- line prices above $4 per gallon, lend-

THE ISSUES

www.cqresearcher.com

Stock Photo

May 20, 2011

459

ENERGY POLICY
Oil Imports Outpace Domestic Production
The United States imported nearly 10 million barrels of oil per day in 2010 71 percent more than was produced domestically. Imports have exceeded domestic production over the past two decades and reached a high in 2006 of more than 12 million barrels daily. U.S. Petroleum Production and Imports, 1974-2010 (in millions of barrels per day) (millions of barrels)
15 12 9 6 3
1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Net imports Dometic production

Source: Oil: Crude and Petroleum Products Explained, U.S. Energy Information Administration, October 2010, www.eia.doe.gov/energyexplained/index.cfm?page= oil_home#tab2

ing support to President Obamas argument that the nation needs to wean itself from fossil fuel. To create markets for alternative energy, Obama has set a goal of generating 80 percent of the nations electricity from cleaner fuels by 2035, including renewable energy, nuclear power, clean coal plants and natural gas, which is less polluting than oil and coal but not completely free of environmental effects. The United States of America cannot afford to bet our long-term prosperity, our long-term security on a resource that will eventually run out, and even before it runs out will get more and more expensive to extract from the ground, Obama said. 4 Declaring in his State of the Union address in January that this is our generations Sputnik moment, he said investing in clean energy and other high-tech industries would strengthen our security, protect our planet, and create countless new jobs for our people. Yet, conservatives argue that the nations federal deficit ($1.3 trillion in 2010), 9 percent unemployment rate and relatively young stage of alternative-energy development all lend support to their

view that traditional energy sources represent the best way to secure the nations long-term energy future. Wishful thinking about magic bullet alternatives is not going to heat and cool our homes, get us where we need to go, and power the businesses that provide jobs, said Rep. Fred Upton, R-Mich., chair of the House Energy and Commerce Committee. Reflecting the view of many congressional Republicans, Upton said the Obama administration was spending too much money on energy efficiency and renewable energy and not enough on fossil fuel development. The reality is we still need fossil fuels and will continue to do so for the foreseeable future, he said. 5 However, clean-energy advocates point out that as well-established industries, fossil fuels have competitive advantages that make it hard for newer technologies to compete, even if those alternatives are environmentally preferable. Its cheap to finance polluting energy, because big utilities have been building coal and gas plants for a long time, so the market understands them and they can get low-

cost capital, says Bracken Hendricks, a senior fellow at the Center for American Progress, a liberal think tank in Washington. Renewable energy projects often are seen as more risky ventures, so they have higher costs. Also, fossil fuels dont pay for the environmental harms they cause. We underestimate risk and overestimate benefits of fossil fuels, and do the opposite for renewables. The energy debate doesnt always split neatly along party lines many legislators in both parties support nuclear energy, for example, despite this springs nuclear disaster in Japan but congressional support for Obamas renewable- and clean-energy agenda has come almost exclusively from Democrats. In 2009-2010, Democratic majorities in the House and Senate tried to limit greenhouse gas emissions and require polluters to buy permits for their excess emissions. This system, known as cap-and-trade, was a top priority for environmentalists and was widely expected to push the U.S. toward cleaner energy sources by making it more expensive to generate energy from fossil fuels. The House passed a cap-and-trade bill in 2009 albeit by a razor-thin margin but the Senate did not act. Opponents argued that putting a price on greenhouse gas emissions would make energy more expensive and harm the economy as it struggled to recover from the recession. 6 Republicans, who gained control of the House and expanded their Senate ranks from 41 seats to 47 in 2010, have other ideas. Most want to focus on established, large-scale energy sources in particular, oil and gas produced from domestic sources, plus nuclear power, which now supplies 20 percent of the nations electricity and 9 percent of its total energy. Many advocate cutting government support for energy efficiency and renewable energy, arguing that these sources should compete on their own.

460

CQ Researcher

On April 5, House Budget Committee Chairman Paul Ryan, R-Wis., released a long-term budget plan that would slash federal spending for social programs, defense and research and development. The plan would reduce spending on energy from about $8 billion per year, as Obama proposed in his 2012 budget request, to $1 billion per year. Ryan said the plan rolls back expensive handouts for uncompetitive sources of energy, calling instead for a free and open marketplace for energy development, innovation and exploration. 7 Nearly all Republicans and some Democrats oppose limiting greenhouse gas emissions. But Obama is using the Environmental Protection Agency to regulate those emissions under the Clean Air Act, citing a 2007 Supreme Court ruling that the EPA has such authority. 8 That move has further polarized Republicans and Democrats and made compromise on an energy policy more elusive. Yet critics on both sides of the ideological divide argue that more delay in crafting a comprehensive energy policy could make the United States more dependent on unstable foreign producers and less competitive in the global marketplace. National energy policy since the 1970s has stumbled, marked by uncertain goals and shifting priorities, an inability to measure the impact of our choices, and a stark lack of accountability across the government, a Bipartisan Policy Center task force, led by former senators and Cabinet-level officials, declared in April. The group called for clear, achievable energy objectives that gradually shift the U.S. economy away from oil. Our nation does not want for a lack of ideas, it said. What we suffer is a lack of discipline and follow-through. 9 As the Obama administration, Congress and interest groups debate what kind of energy strategy the U.S. should pursue, here are some issues they are considering:

Energy Sources Fit Different Demands


More than 70 percent of petroleum is used in cars, diesel locomotives and other modes of transportation. Twenty-two percent is used for industrial power. By contrast, only 3 percent of natural gas and 12 percent of renewable sources are used for transportation, but natural gas outpaces petroleum as a source of residential and commercial energy. More than 90 percent of coal is used to generate electricity.
(Percentage of energy used)

Energy Flow by Source and Sector, 2009


93% 100%

100 80 60 40 22% 20 5%1% 0 Petroleum 3% Natural gas 0% 7% 32%35% 30% 72%

53% 26% 12% 1% 9% 0%0% 0% Renewable energy Nuclear electric power

Coal

Energy Source Type of Use Source: Annual Energy Review 2009, U.S. Energy Information Administration, August 2010, www.eia.doe.gov/totalenergy/data/annual/ pdf/aer.pdf
Transportation Industrial Residential and commercial Electric power

Is a shift away from fossil fuels necessary? President Obamas energy policy calls for more production from a variety of energy sources, including domestic oil and natural gas and nuclear power. 10 But it also assumes that the nation needs to shift to a clean-energy future that emphasizes energy efficiency, renewable fuels and other advanced lowcarbon and carbon-free technologies. Instead of subsidizing yesterdays energy sources, we need to invest in tomorrows, Obama said in his weekly radio address on April 23. In the long term, Obama asserted, investing in clean, renewable energy is the key to helping families at the pump and reducing our dependence on foreign oil. 11 Obamas proposed budget for fiscal 2012 would eliminate $4 billion in yearly tax subsidies for fossil fuel production and

spend the money on clean-energy sources instead. 12 The shift to clean-energy sources is widely supported by scientists, who say the burning of fossil fuels and other human activities are major causes of global climate change. A 2010 review of climate research by the congressionally chartered National Academies of Science put it bluntly: Climate change is occurring, is caused largely by human activities and poses significant risks for and in many cases is already affecting a broad range of human and natural systems. 13 Many conservatives argue, however, that the core goal of U.S. energy policy should be to deliver abundant, low-cost energy, which is most readily available from fossil fuels. We want energy to be cheap, and we want a surplus, says Kenneth Green, a scholar at the American Enterprise Institute, a

www.cqresearcher.com

May 20, 2011

461

ENERGY POLICY

Fracking Dirties Image of Natural Gas Drilling


Gasland documentary shows flammable drinking water.
atural gas is widely hailed as a clean fuel because when burned it produces much lower levels of conventional air pollutants and carbon dioxide than oil or coal. And in contrast to nuclear power plants which generate electricity without producing any carbon dioxide or conventional air pollutants gas-fired electric plants can be built much more quickly and at lower costs. But natural gas is stirring controversy because of an increasingly popular method of extracting it from deep inside the earth. Called hydraulic fracturing, or fracking, the approach involves pumping millions of gallons of water and chemicals under high pressure into rock formations to crack them open and let gas flow upward. Many landowners complain that fracking is polluting drinking water supplies with chemical additives and flammable methane, the main component of natural gas. 1 Drillers add many types of chemicals to fracking water to help dissolve rock, reduce friction or for other purposes. And when fracking fluids flow to the surface, they can carry dissolved metals and salts from underground. 2 Fracking has been in use since 1947, but only recently have energy developers combined it with another technique horizontal drilling to extract vast quantities of natural gas trapped in underground shale formations. Horizontal drilling allows developers to drill thousands of feet into the earth, then turn the drill sideways to penetrate gas formations trapped tightly between rock layers. Between 2000 and 2006, production from shale gas formations grew at an average rate of 17 percent annually. Then, as methods improved, production surged, rising at an average yearly rate of 48 percent through 2010. 3 The natural gas industry estimates that fracking and horizontal

drilling have increased available domestic supplies from about 60 years worth to at least 100 years supply at current levels of production. Yet fracking has stirred alarm in localities where it is being used. Controversy has been most intense in states located over the Marcellus Shale, an immense formation of gas-rich sedimentary rock that stretches from upstate New York through parts of Pennsylvania, Ohio and West Virginia. In Pennsylvania alone, more than 2,400 gas wells were drilled in 2006-2010 using either fracking or conventional methods. 4 State officials welcomed the economic activity, but media investigations documented widespread problems, including spills of contaminated wastewater and pollution escaping into drinking water. 5 The documentary film Gasland showed homeowners lighting their tap water on fire to demonstrate how much methane it contained. 6 The natural gas industry, which issued a detailed rebuttal of charges in Gasland, argues that fracking takes place at levels well below the water table and does not threaten human health or the environment. 7 No allegations of fracking contaminating drinking water have been proven, says Bruce Vincent, chair of the Independent Petroleum Association of America. He argues that the flammable tap water shown in Gasland was caused by naturally occurring methane. Fracking has moved into areas that arent used to gas development, which is raising concern from local communities, Vincent says. Our industry needs to get out and do a better job of educating and communicating so that people understand how the process works and see the economic benefits. Just this month, however, four Duke University scientists published the first peer-reviewed study linking fracking to contaminated drinking water. The researchers sampled 68 wells

conservative think tank in Washington. Were a wealthy country, and we can pay more for oil than China or India. Renewables are simply more expensive than fossil fuels, are slower to deploy and are slower to ramp up in times of economic prosperity. Unlike many congressional Republicans, Green does not deny that climate change is occurring, although he thinks its near-term effects may have been overstated. In his view renewable energy is too small-scale to be a solution. The trivial role that low-carbon energy sources could conceivably play in the energy economy would do virtually noth-

ing to influence the climate, except for nuclear power, which is the only noncarbon source of electricity that could be deployed at a large enough scale to displace coal, he asserts. Even then, there would have to be a global dash to nuclear power, which is unlikely given the disaster in Japan. The oil and gas industry and its supporters seek to boost domestic production, which they say will be more reliable than relying on imports. In the past several years, improved drilling techniques and other technical advances have enabled energy producers to extract large quantities of

natural gas from once inaccessible sources, especially shale formations. That has driven down prices and increased supplies of natural gas, which accounts for 25 percent of the nations total energy supply. Natural gas is an American treasure, says Bruce Vincent, chair of the Independent Petroleum Association of America. Technical advances have allowed us to unlock an incredible resource that can fuel the country for a long time, and we should take advantage of it. Those new extraction techniques specifically, a method called hydraulic

462

CQ Researcher

near gas-production sites 1 Natural gas is a mixture of hydroin Pennsylvania and New carbon gases but is typically 70 to 90 percent methane. See What is Natural York and found that water Gas?, www.naturalgas.org. from wells within one kilo2 For background see Jennifer Weeks, meter of drilling had much Water Shortages, CQ Researcher, June 18, 2010, pp. 529-552. higher levels of dissolved 3 Annual Energy Outlook 2011, U.S. methane than water from Energy Information Administration, wells farther away. The April 26, 2011, p. 2, www.eia.doe.gov/ forecasts/aeo/pdf/0383%282011%29.pdf. methanes chemical signa4 Bryan Walsh, Could Shale Gas ture was consistent with gas Tap water containing methane gas is ignited Power the World? Time, March 31, 2011, from nearby wells and unin the documentary film Gasland. www.time.com/time/health/article/0,85 derground shale formations. 99,2062331,00.html. The scientists did not find evidence that fracking fluids were 5 Buried Secrets: Gas Drillings Environmental Threat, Pro Publica, Dec. 2, 2010, www.propublica.org/series/buried-secrets-gas-drillings-environmental-threat; contaminating groundwater. 8 Ian Urbina, Drilling Down, The New York Times, Feb. 27-April 8, 2011, The gas industry argued that the study lacked key data that http://topics.nytimes.com/top/news/us/series/drilling_down/index.html?scp=2& would be needed to validate its conclusions, but federal reg- sq=fracking%20radioactive&st=cse. 6 Jeremy Egner, Muckraking Road Movie on Natural Gas Drilling, The New ulators are stepping up oversight of fracking. 9 Currently the York Times, June 21, 2010, http://artsbeat.blogs.nytimes.com/2010/06/21/aprocess is almost entirely regulated at the state level, but the muckraker-targets-onshore-drilling/. Environmental Protection Agency is reviewing the drilling methods 7 The Energy You Need, the Facts You Demand, Energy in Depth, June 9, impacts on drinking water. In April Robert Perciasepe, EPA 2010, www.energyindepth.org/2010/06/debunking-gasland/. 8 Stephen G. Osborn, et al., Methane Contamination of Drinking Water Acdeputy administrator, accused companies that had injected frackcompanying Gas-Well Drilling and Hydraulic Fracturing, Proceedings of the ing fluids containing diesel fuel underground without permits National Academy of Sciences, Early Edition, published online May 9, 2011, of violating the Safe Drinking Water Act, which limits under- www.pnas.org/content/early/2011/05/02/1100682108. ground injection of fluids. 10 Fracking is exempt from federal 9 Bryan Walsh, Another Fracking Mess for the Shale-Gas Industry, Time, May regulation under the act except for one additive diesel fuel, 10 9, 2011, www.time.com/time/health/article/0,8599,2070533,00.html. Mike Soraghan, Fracking for Natural Gas With Diesel Violated Law, EPA which contains several toxic compounds. Says, The New York Times, April 13, 2011, www.nytimes.com/gwire/2011/04/ And this month Energy Secretary Steven Chu created an- 13/13greenwire-fracking-for-natural-gas-with-diesel-violated-81979.html?scp=3& sq=fracking%20diesel&st=cse. other expert panel to review impacts from fracking and rec- 11 John M. Broder, Fracture on Fracking, The New York Times, May 6, 2011, ommend ways to make the process cleaner and safer, with ini- http://green.blogs.nytimes.com/2011/05/06/fracture-on-fracking/?scp=2&sq= tial recommendations due by August. 11 fracking%20diesel&st=cse. Jennifer Weeks
Gaslandthemovie.com

fracturing, in which developers pump millions of gallons of fluid underground to crack open rock formations have triggered protests in areas where opponents say they are polluting drinking water supplies. (See sidebar, above.) Nonetheless, many experts say natural gas gradually will replace a significant fraction of older coal-fired power plants over the next 20 to 30 years.
14

Oil, which accounts for 37 percent of the nations total energy supply, poses problems as well. It is more carbon intensive than natural gas and produces air pollutants that are ingre-

dients in smog and acid rain. Moreover, since oil is traded on a global market, supply disruptions anywhere in the world can create shortages and price spikes. Foreign oil is a myth, says Grumet of the Bipartisan Policy Center. Even if the U.S. produced all the oil it needed, our economy would be just as impacted when oil prices rose worldwide as it is now. Although regulation of greenhouse gas emissions has stalled in Washington, the United States continues to negotiate with other countries over ways to slow long-term climate change. If those talks eventually lead to limits on greenhouse

gases, the three main carbon-based fuels oil, natural gas and coal will become more expensive and the United States will need alternatives. Just because we wont have a carbon policy in the next couple of years doesnt mean that we wont face greenhouse gas limits 10 years out, says Bruce Biewald, president of Synapse Energy Economics, a consulting firm in Cambridge, Mass. We need to think carefully about the impact of federal energy policies and try to drive investments in a forward-looking direction, instead of locking ourselves into 30- or 40-year-old technologies.

www.cqresearcher.com

May 20, 2011

463

ENERGY POLICY
Fossil Fuels Are Big Carbon Emitters
When burned, all fossil fuels produce carbon dioxide, the main greenhouse gas, and sulfur dioxide and nitrogen oxides pollutants that contribute to acid rain and smog. But emissions from combustion of natural gas are signicantly lower than those from coal or oil. Hydropower and nuclear plants do not produce greenhouse gases or conventional air pollutants during energy generation. Average Air Emissions by Energy Source
(Emissions in pounds per megawatt hour)

2,500 2,249 2,000 1,500

Carbon dioxide Sulfur dioxide Nitrogen oxides

1,672 1,135
Getty Images/Andreas Rentz

1,000 500

13
0

12

0.1 1.7

Coal

Oil Energy Source

Natural gas

Source: Air Emissions, Environmental Protection Agency, December 2007, www.epa.gov/cleanenergy/energy-and-you/affect/air-emissions.html

Can clean-energy sources compete? Although renewable energy provides less than 8 percent of total U.S. energy today, experts say that share could grow substantially over the next several decades. Some renewable fuels are more advanced and affordable than others, but many types are competitive now with conventional energy at good sites that is, places that are sunny enough to generate significant solar power, breezy enough to generate substantial wind power or rich in some other renewable resource. Wind, biomass power, and geothermal energy are used worldwide, says Bobi Garrett, senior vice president at the U.S. Department of Energys National Renewable Energy Laboratory in Colorado. Wind is the fastest-growing renewable and can compete economically with conventional sources in many markets. Electricity from solar power costs about four times as much as other sources, but in February the Energy Depart-

ment announced an initiative called SunShot, which seeks to make solar power competitive by 2020. Thats a stretch goal and a grand challenge, but its not unreasonable, says Garrett. Theres been a lot of investment in the underlying science in recent years, and we can draw on it to make new breakthroughs. And, she points out, solar power is already costeffective in some areas, such as the Southwest, where peak sunlight hours match up with peak electricity demand periods (for example, on hot summer afternoons). But skeptics argue that solar and wind power and other clean technologies cannot compete without federal support. Renewables basically rely on subsidies, says the American Enterprise Institutes Green. Without supports, they just dont get built. Estimates of the value of government energy measures vary widely. According to one study, from the early 1970s through 2003 solar, wind, bio-

mass and geothermal energy received more than $38 billion in broadly defined federal support. 15 The Environmental Law Institute, a research and education group in Washington that works to strengthen environmental protection, calculates that from fiscal 2002 through 2008, renewable fuels received $29 billion in more narrowly defined federal subsidies that is, direct spending or tax breaks. 16 However, the federal government spends much more money on fossil fuels and nuclear power than on renewables. From the early 1970s through 2003, oil received more than $302 billion in federal support, followed by coal ($80 billion) and nuclear power ($63 billion). 17 From 2002 through 2008, the Environmental Law Institute estimates that traditional fossil fuels received more than $70 billion in federal subsidies. 18 Clean-power advocates argue that these subsidies to large, mature industries make it hard for new, cleaner sources to compete. Subsidies can help young industries that are growing and developing overcome certain cost barriers, says Hendricks of the Center for American Progress. They can also be very destructive when they give windfall profits to mature industries. Renewable energy is receiving subsidies to drive its costs down and make it more competitive. Most producers agree that as technology matures, that support should sunset. On a truly level playing field without subsidies, renewables would do quite well. Oil and gas producers argue, however, that the tax breaks their industry receives are not subsidies at all. They are cost-recovery mechanisms, similar to what other industries get, says Vincent, at the Independent Petroleum Association of America. A subsidy is designed to help something become commercially competitive in a market where it otherwise wouldnt be. Programs such as SunShot seek to help companies in new industries grow

464

CQ Researcher

from early pilot opranked the United States erations to largesecond after China in its scale commercial spring 2011 Renewable operations that can Energy Country Attracattract funding from tiveness Indices, which major private inrank nations based on vestors. Advocates how strongly their laws, say that helping new regulations and investtechnologies scale ment climates support up in this way is renewable energy desmart policy. Under velopment. Other counour last major retries rounding out the search grant from top 10 are Germany, the Department of India, the United KingEnergy, we comdom, Italy, France, Spain, mercialized six Canada and Portugal. major innovations China surpassed the within a three-year United States in mid-2010, Steam from the cooling towers at the Limerick Generating Station, contract, including but Ernst & Young noted a nuclear power plant in Pottstown, Pa., rises over a high-efficiency panels some positive U.S. develnearby neighborhood. and high-efficiency opments, including Presphotovoltaic cells, says Julie Blunden, successes, the popular Motley Fool in- ident Obamas proposed goal of generexecutive vice president at SunPower, vestment website rated the company ating 80 percent of the nations electricity a San Jose, Calif., company that de- as a Rising Star. Motley Fools report from clean sources by 2035. 22 We absolutely are in a race, says signs and manufactures solar-energy noted that renewable energy compasystems. Thats a great return on fed- nies still depend heavily on govern- Hendricks of the Center for American ment support and are fairly risky in- Progress. Some of the fastest innovaeral dollars. In April SunPower and a partner vestments. Still, it argued, the market tion in the energy sector is happencompany opened a jointly operated for alternative energy wont go away. ing around clean tech in areas like the plant in Milpitas, Calif., that will man- . . . There are myriad reasons why so future of the auto industry, energy ufacture 75 megawatts of highly effi- many people all over the globe are storage and materials science. If we cient solar panels for homes and power looking for better, cleaner, cheaper al- lose leadership here, we will lose leadership much more broadly. plants annually. At the plant opening, ternatives to fossil fuels. 20 U.S. manufacturers have moved Democratic Gov. Jerry Brown signed production abroad for decades in search a bill expanding Californias renewable Is the United States in a global of cheap labor, but Hendricks argues electricity standard, which now requires clean-energy race? Investment in clean-energy indus- that clean-energy companies have other utilities to generate one-third of their tries has surged worldwide in the past reasons for looking overseas. China power from renewable sources. 19 Earlier this year SunPower won a five years, rising from $51.7 billion in has made a bigger commitment to encontract to generate and deliver more 2004 to $243 billion in 2010. 21 Cur- ergy efficiency and renewable energy than 700 megawatts of solar power to rently China and Europe are the largest than the U.S. has, he asserts. Beijing Southern California Edison, one of Cal- growth centers for clean power. Many just issued a five-year plan with very ifornias largest utilities, for resale to observers worry that if the United States specific targets for adopting different the utilitys customers. We came in at does not give clean energy enough types of energy efficiency in buildings a price that was competitive with a support, it will lose the chance to be and for building systems like highnew natural gas plant, Blunden says. a global leader and forfeit jobs and speed rail and a smart grid. The U.S. Thats something we could never investment to other countries. Ulti- doesnt have a planned economy like have achieved if we hadnt been able mately, some warn, America might re- China, but our current energy policies to scale up our manufacturing and if place its dependence on foreign oil are making it hard for clean energy we hadnt had Californias renewable with dependence on imported green- companies to build a clean economy power technologies. because theyre not getting predictable electricity standard driving demand. Consulting firm Ernst & Young market signals. Based partly on SunPowers recent
AFP/Getty Images/Stan Honda

www.cqresearcher.com

May 20, 2011

465

ENERGY POLICY
Michael El-Hillow, owner of Evergreen Solar, the third-largest U.S. manufacturer of solar panels, cited Chinas offer of extremely low-interest loans on favorable terms from state-owned banks in his decision to close Evergreens main factory in Massachusetts early this year and shift production to a plant it owned in Wuhan, China. El-Hillow made the move despite having received more than $58 million in incentives from Massachusetts to locate there. 23 Massachusetts officials were angry at the companys decision but said the U.S. government was not doing enough to compete with China on clean energy. The federal government has brought a knife to a gun fight, said Ian Bowles, the states former secretary of energy and environmental affairs. 24 Others say, however, that the spread of green-technology industries is good for the United States even if the systems are manufactured elsewhere. Chinas investments offer spillover benefits to the rest of the world, UCLA economics professor Matthew Kahn wrote in The New York Times. In Kahns view, Chinas massive investments will push clean-energy costs down and make items like solar panels cheaper for everyone who wants them. 25 Conservatives dismiss the Obama administrations efforts to compare U.S.China competition in clean energy to the Sputnik-era space race. [I]t is true that China is spending money on energy hand over fist, argued analysts Nicolas Loris and Derek Scissors of the conservative Heritage Foundation think tank. But China has very little to show for it. Massive regulatory intervention and tens of billions of dollars in annual spending on green energy have produced results that are drastically inferior to those of the United States both economically and environmentally and have left China falling behind rather than marching ahead, contrary to the popular myth. 26 One of the largest U.S. manufacturing companies, General Electric, is betting heavily on solar power. In April GE announced that it would invest $600 million to build the largest solar panel production plant in the nation. The factory, whose location is yet to be chosen, is expected to open in 2013 and employ some 400 workers. Although many solar companies are struggling to compete with inexpensive mass-produced silicon panels from China, GE plans to produce a different type: thin-film panels that convert sunlight to electricity somewhat less efficiently than silicon but are less expensive to make. 27 America excels at research and development and at innovation, and U.S. solar companies that are succeeding have developed distinctive technologies, says SunPowers Blunden. The question is whether they can grow at the pace at which Chinese companies are growing. Growth begets cost reduction, which begets competitiveness. We need policies that will make it possible for companies in the U.S. to make longterm investments in research and development that will drive our costs down and help us be competitive. war economic boom and expansion of the Interstate Highway System. To meet growing demand, developers started drilling for oil in the Gulf of Mexico. But U.S. domestic oil production peaked in 1970. As yields began to decline, the United States cultivated links with oil-producing countries in the Middle East and North Africa and relied increasingly on oil imports. The natural gas industry grew more slowly because the federal government set price ceilings starting in 1954, based on where gas was produced. This policy sought to protect consumers, but prices were set so low that producers had little incentive to enter the market. As a result, natural gas was not widely sold outside of major producing states such as Texas in the 1950s and 60s. But the federal government fostered another large-scale energy industry during this time: nuclear power, an outgrowth of the top-secret Manhattan Project to develop an atomic bomb during World War II. Congress allowed private utilities to own nuclear reactors starting in 1954. In 1957 it passed the PriceAnderson Act, which capped private liability for reactor accidents at $560 million. This step sought to allay energy companies fear that they would have to pay for potentially massive damages if an accident occurred at a commercial nuclear plant. By 1970, 20 reactors were operating, and dozens more were under construction. Through the 1950s most Americans viewed rapid economic growth and high consumer spending as positive trends. But it gradually became clear that prosperity was fouling air and water and damaging natural resources. In a preface to a 1965 expert study, President Lyndon B. Johnson observed, Pollution is now one of the most pervasive problems of our society. 28 The backlash affected some big energy projects. In 1966, when federal officials proposed building hydropower dams on the Colorado River that would
Continued on p. 469

BACKGROUND
Cheap and Abundant
ince the Industrial Revolution in the 1800s, fossil fuels have provided most of the energy that drives the U.S. economy. Coal fueled factories, heated homes and powered trains and ships in the 19th century. In the early 1900s a drilling boom in Texas introduced a new, versatile source: oil. And energy companies started developing natural gas (which was often found along with oil deposits) during World War II, both for energy and as an integral part of making chemicals and fertilizer. Oil surpassed coal as Americas primary fuel in 1950, driven by the post-

466

CQ Researcher

Chronology
1950s-1960s U.S. relies on coal and oil, starts
to develop nuclear power. 1953 President Dwight D. Eisenhower proposes Atoms for Peace program. 1957 Price-Anderson Act limits nuclear plant owners liability.

1978-79 Revolution in Iran halts oil exports, triggering a second global oil shock. . . . Congress begins deregulating natural gas prices. . . . Explosion and partial core meltdown at Pennsylvanias Three Mile Island nuclear power plant undercut public support for nuclear energy. 1986 Major accident at Chernobyl nuclear plant in Ukraine further intensifies safety fears. 1989 Exxon Valdez runs aground in Alaskas Prince William Sound, spilling 11 million gallons of oil.

2000s

National energy policy focuses on production under a Republican administration, then on energy efficiency and low-carbon sources under President Obama. 2001 President George W. Bush advocates more use of fossil fuels and nuclear power. 2005 Energy Policy Act of 2005 provides loan guarantees and tax credits for new nuclear reactors and extends industrys liability protection. 2007 Supreme Court rules that the Environmental Protection Agency can regulate carbon dioxide as a pollutant under the Clean Air Act. 2009 House passes carbon cap-and-trade legislation, but Senate fails to move a similar bill. . . . Congress approves more than $26 billion in economic stimulus funds for clean-energy development and deployment. 2010 Coal mine explosion in West Virginia kills 29 workers. . . . BPs Macondo well in the Gulf of Mexico suffers a blowout and spills nearly 5 million barrels of oil. . . . Republicans win control of the House and press for major federal spending cuts. 2011 After a massive earthquake and tsunami, three reactors at Japans Fukushima nuclear power station suffer partial core meltdowns. Used fuel rods at another reactor overheat, releasing radiation into the air. . . . Unrest in North Africa and Middle East drives oil prices well above $100 per barrel.

1970s-1980s Arab oil shocks temporarily


boost support for conservation and alternative fuels, but renewable sources struggle to reach commercial scale. 1970 U.S. oil production peaks at 11.3 million barrels per day and begins gradual decline. . . . Environmentalists hold first Earth Day partly in response to major undersea oil well leak near Santa Barbara, Calif., on April 22, 1969. 1973 Arab members of Organization of Petroleum Exporting Countries (OPEC) embargo oil exports to the U.S., sparking a national energy crisis. 1975 Congress creates the Strategic Petroleum Reserve to reduce the impact of future oil shortages, and adopts Corporate Average Fuel Economy standards. 1977 President Jimmy Carters energy plan aims to reduce dependence on oil imports through conservation and efficiency standards. . . . Oil from Alaskas North Slope reaches markets.

1990s

Environmental concerns dominate energy-policy debates. Natural gas becomes an increasingly popular alternative to oil and coal. 1990 Congress amends Clean Air Act to limit pollution from electric power plants through a cap-and-trade system. 1992 World Environmental Summit in Rio de Janeiro, Brazil, adopts Framework Convention on Climate Change to cut greenhouse gas emissions voluntarily. . . . Energy Policy Act of 1992 increases U.S. investments in energy efficiency, renewable energy and alternative fuels. 1997 Clinton administration signs Kyoto Protocol, pledging the U.S. to cutting greenhouse gas emissions 7 percent below 1990 levels by 2012; Senate refuses to ratify the treaty.

www.cqresearcher.com

May 20, 2011

467

ENERGY POLICY

Energy Companies Receive Tax Breaks, Other Federal Aid


Obama seeks to end $4 billion in benefits.
nergy producers receive an abundance of government subsidies and other benefits, from grants and tax breaks to research programs and rules requiring federal agencies to buy certain types of fuel to operate vehicles and heat offices. Budget analysts typically define subsidies as policies that cost the U.S. Treasury money: direct payments, such as cash grants, and tax breaks, which represent income that the government chooses not to collect. But many other government policies also benefit specific fuels or technologies. For example, in 2005 Congress required refiners to blend certain amounts of renewable fuel mainly cornbased ethanol into gasoline, and lawmakers expanded the policy in 2007 to include bio-based diesel fuel. For 2011 the rule requires use of nearly 14 billion gallons of biofuels. 1 Because ethanol is more expensive to produce than gasoline, consumers pay the extra cost at the pump. In addition, oil companies receive a tax credit for every gallon of ethanol they blend into gasoline, and domestic ethanol producers are protected by tariffs that block cheaper imports. 2 President Obama has called for ending eight tax provisions that benefit the oil and natural gas industries at a total cost of about $4 billion annually. Most of the expected revenue ($3.38 billion per year) would come from three programs: Tax write-offs in place since 1913 for certain drilling costs, such as labor expenses and drilling fluids. Ending the writeoffs would generate $1.9 billion in additional federal tax revenue in 2012, or nearly $12.5 billion from 2012 through 2021. Depletion allowances in place since 1926 allow producers to deduct 15 percent from their gross income to compensate for the reduction in supply of a finite resource oil and natural gas. If the allowance ended, producers would pay $607 million more in taxes in 2012, or an additional $11.2 billion from 2012 through 2021. Deductions for domestic manufacturing enacted in 2004 allow oil and natural gas companies to deduct 6 percent of their net income for production in the U.S. The program is intended to lower labor costs and stimulate employment. Ending it would generate $902 million in additional tax revenue in 2012, or about $18.3 billion in the 2012-2021 period. 3 Other energy sources also receive subsidies. The nonpartisan Environmental Law Institute estimates that renewable fuels received almost $29 billion between 2002 and 2008, including: $11.5 billion in tax credits to refiners for blending fuel ethanol into gasoline; $5.4 billion in production tax credits for electricity generation from wind, solar, biomass and other renewable fuels; $5 billion in payments to farmers for growing corn used to make ethanol; and $294 million in low-cost federal financing for public utilities that distribute electricity from federally owned hydropower dams. 4 The institute notes that tax credits for renewable energy pro-

duction were time-limited, while most large tax subsidies for fossil fuels are permanent tax code provisions. 5 Federal spending for research and development also helps many energy sources by paying for some work on basic science and new technologies. The Department of Energy (DOE) spends about $2 billion each year for applied R&D in energy efficiency, renewable energy, fossil fuels and nuclear power systems. DOE also spends about $4 billion for basic research on fundamental issues, such as energy storage and high-energy physics. From 1978 through 2008, DOE spent $57.5 billion on energy research and development, not including basic research. At its spending peak, in 1978, when the United States was reacting to severe oil shocks in the Middle East, DOE spent $6 billion on energy R&D. Through the next two decades that figure fell drastically to a low of $505 million in fiscal 1998 before rising gradually to its current level. However, when spending is adjusted for inflation, DOE is spending far less on energy R&D today than it did 30 years ago. 6 Another major policy that benefits the nuclear industry is the Price-Anderson Act, enacted in 1957, which requires utilities to buy a set amount of primary insurance (currently $375 million) for each nuclear plant and to contribute to a secondary insurance pool for the entire U.S. nuclear industry, which currently stands at about $12.6 billion. If an accident causes damages higher than this amount, however, Congress is responsible for deciding how to pay any higher costs. The nuclear industry argues that Price-Anderson has not cost taxpayers any money since it was enacted. 7 But critics argue that if nuclear operators had to carry full, private liability insurance, the cost of nuclear power would be much higher. 8 According to the Government Accountability Office, No credible quantification of the value [of this liability limit] is available. Jennifer Weeks
1 U.S. Environmental Protection Agency, Regulation of Fuels and Fuel Additives: 2011 Renewable Fuel Standards, Federal Register, Dec. 9, 2010, p. 76791. 2 Tom Doggett and Charles Abbott, Senate Votes to Extend Ethanol Subsidy for 2011, Reuters, Dec. 15, 2010. 3 Summarized from Robert Pirog, Oil and Natural Gas Industry Tax Issues in the BY2012 Budget Proposal, Congressional Research Service, March 3, 2011, www.nationalaglawcenter.org/assets/crs/R41669.pdf. 4 Estimating U.S. Government Subsidies to Energy Sources: 2002-2008, Environmental Law Institute, September 2009, pp. 21-24, 5 Ibid., p. 3. 6 Advanced Energy Technologies: Budget Trends and Challenges for DOEs Energy R&D Program, U.S. Government Accountability Office, March 5, 2008, www.gao.gov/new.items/d08556t.pdf. 7 Price-Anderson Act Provides Effective Public Liability Insurance at No Cost to the Public, Nuclear Energy Institute, June 2010, www.nei.org/resourcesand stats/documentlibrary/safetyandsecurity/factsheet/priceandersonact/. 8 Nuclear Power: Still Not Viable Without Subsidies, Union of Concerned Scientists, executive summary, February 2011, p. 9, http://earthtrack.net/files/up loaded_files/nuclear%20subsidies_summary.pdf.

468

CQ Researcher

Continued from p. 466

have flooded more than 100 miles of the Grand Canyon, thousands of people protested and the project was canceled. Then in 1969 an undersea wellhead off Santa Barbara, Calif., leaked 200,000 gallons of oil, contaminating 35 miles of coastline. The disaster helped to catalyze the first Earth Day rally in 1970 and led to state and federal bans on new offshore drilling along much of the U.S. coastline.

Subsidies Favor Fossil Fuels


Federal energy subsidies totaled $101.5 billion from 2002 to 2008, according to the Environmental Law Institute. Nearly 70 percent of the total more than $70 billion went to traditional fossil-fuel producers, such as oil and natural gas companies. Federal Subsidies for Fossil Fuels and Renewable Energy, 2002-2008
Carbon capture and storage

2.3% ($2.3 billion)

Oil Shocks
he era of cheap oil ended on Oct. 20, 1973, when Arab members of the Organization of Petroleum Exporting Countries (OPEC) cut off oil exports to the United States after it supported Israel in the Yom Kippur War. The embargo, which lasted six months, raised the prices of gasoline, home heating oil and other petroleumbased products and energy-intensive processes, triggering a deep economic recession in the United States from 1973-75. In response, President Richard M. Nixon imposed gasoline rationing for the first time since World War II. To reduce dependence on oil imports, the Nixon administration started building a pipeline to bring crude oil from Alaskas Prudhoe Bay to the Lower 48 states. In 1975 Congress imposed the first Corporate Average Fuel Economy (CAFE) standards on automakers, requiring them to raise the fuel efficiency of new passenger cars to 27.5 miles per gallon on average by 1987. Congress also created the federally owned Strategic Petroleum Reserve and started deregulating oil prices so that they would rise to market levels. Shortly after taking office in 1977, President Jimmy Carter delivered a blunt speech about Americas energy options. The oil and natural gas we rely on for 75 percent of our energy are running out, Carter warned. Each

Traditional fossil fuels

Corn ethanol

16.6% ($16.8 billion)


Traditional renewables

69.2% ($70.2 billion)

12% ($12.2 billion)


* Percentages do not total 100 due to rounding. Source: Energy Subsidies Black, Not Green, Environmental Law Institute, September 2009, www.eli.org/pdf/Energy_Subsidies_Black_Not_Green.pdf

American uses the energy equivalent of 60 barrels of oil per person each year. Ours is the most wasteful nation on earth. Just as coal had replaced wood in the 19th century as the worlds primary fuel, and oil and gas had later supplanted coal, Carter argued that it was time to shift again this time to strict conservation and reliance on coal (which the United States still had in abundance) and to renewable sources like wind and solar power. 29 Carters words spurred Congress to create a Cabinet-level Department of Energy and approve new energy-efficiency standards and tax incentives for investments in renewable energy sources, such as solar, wind and geothermal power. To encourage more domestic energy production and let prices rise to market levels, Carter also deregulated natural gas prices. Some of these steps worked. For example, the share of U.S. electricity generation produced from oil

dropped from 20 percent to 3 percent as utilities switched to natural gas and coal. 30 Others were less successful. Notably, developers received tax credits for wind- and solar-power projects based on how much money they invested, not on actual electricity generated, so some facilities were built haphazardly and performed poorly. 31 In another setback, Pennsylvanias Three Mile Island nuclear plant suffered a hydrogen explosion and partial meltdown in 1979. The accident undercut public support for nuclear power, which was already reeling from massive cost overruns and construction delays. 32 The Iranian Revolution in the winter of 1978-79 brought a militant, fundamentalist Islamic regime to power in Tehran, shutting off Iranian oil exports and triggering a new wave of worldwide panic-buying and price spikes. The outbreak of the Iran-Iraq War in 1980 severely damaged both countries oil industries, worsening the shortage.

www.cqresearcher.com

May 20, 2011

469

ENERGY POLICY
In the 1980s, President Ronald Reagan asserted that markets, not government, were key to meeting energy needs and reviving the economy. Reagan speeded up deregulation of oil and natural gas prices and slashed subsidies for renewable energy. Symbolically, he also had solar panels that had been installed during Carters term removed from the White House roof. In spite of this philosophical shift, U.S. oil consumption fell in the early 1980s in response to high world prices. But as other oil-producing countries entered the market and made up for Iran and Iraqs lost output, prices fell, and energy use rose again. Prince William Sound in March 1989, spilling 11 million gallons of oil and contaminating more than 1,000 miles of shoreline. In 1990 Congress amended the Clean Air Act to address smog- and ozone-forming emissions produced by electric power plants that burned fossil fuels. President Bush supported a market-based approach that capped emissions of sulfur dioxide (SO2), one of the most serious pollutants, and allowed sources to buy and sell emission allowances. Over the next decade, this system reduced SO2 emissions by nearly 30 percent from 1990 levels. The cost for the program had been projected at $4.6 billion, but actual reductions cost only about $1 billion, partly because polluters were allowed to choose the most cost-effective way to meet their emission targets. 34 Bush supported other voluntary efforts to conserve energy and reduce pollution moves that he said also would lower greenhouse-gas emissions. But he argued that too much uncertainty existed about the scale and timing of climate change to take more aggressive action. 35 Bushs successor, President Bill Clinton (1993-2001), opposed opening ANWR to oil and gas exploration, and he used his executive authority to protect public lands in other regions from energy development. Clinton also proposed higher funding for energy efficiency and renewable fuels and supported action to reduce GHG emissions. In 1997 the Clinton administration signed the Kyoto Protocol, which committed the United States to reducing greenhouse gas emissions to 7 percent below 1990 levels by 2012. But Republican majorities in Congress opposed budget increases for low-carbon energy research, and the entire Senate passed a resolution opposing the Protocol, so Clinton never submitted it for ratification.

Seesawing Policies
resident George W. Bush (20012009), who had followed his fathers early career path into the oil business, switched the focus back to increasing energy supplies and argued that the case for global warming had not been proven. Bushs energy policy called for boosting supplies of oil, gas and coal, plus expansion of nuclear power. His administration moved to reduce barriers to energy production on public lands, lobbied vigorously for energy development in ANWR and called for building a new generation of nuclear power reactors. Bush cut spending on energy efficiency and renewable sources, except for hydrogen power for vehicles and electricity production a long-term goal that its sponsors did not expect to produce results before 2020. 36 Congressional Democrats and environmental advocates harshly criticized the Bush energy plan for emphasizing production over conservation and downplaying the environmental impact of energy development. During the 2008 presidential campaign, high gasoline prices brought energy issues to the forefront. Sen. John McCain, R-Ariz., the Republican nominee, and his running mate, Alaska Gov. Sarah Palin, called for more domestic oil production, leading chants of Drill, baby, drill! at campaign rallies. Illinois Sen. Barack Obama, the Democratic nominee, proposed strategies to move away from oil, including government investments to develop and commercialize cleaner energy sources and higher fuel-economy standards for automobiles. 37 As president-elect, Obama promised action on these issues, even though oil prices had fallen sharply from their summer peak of $147 per barrel. The United States could not afford complacency just because oil was cheap for the moment, Obama argued.

Greener Energy

n the late 1980s scientists began to speak publicly about a new concern: global warming, driven mainly by human activities that were raising the concentrations of greenhouse gases (GHGs) in the atmosphere. By far, the largest human-driven contribution to climate change was carbon dioxide emissions from fossil-fuel combustion. It is time to stop waffling so much and say that the evidence is pretty strong that the greenhouse effect is here, NASA scientist James Hansen told a Senate committee in a widely publicized June 1988 hearing. Hansen and other panelists called for sharp cuts in fossil-fuel use to avoid impacts such as severe droughts and melting of polar ice caps. 33 President George H. W. Bush (198993), who had worked in the oil industry in Texas as a young man, maintained Reagans focus on increasing energy supplies. Bush supported opening the Arctic National Wildlife Refuge (ANWR) to oil and gas exploration, but this policy lost support after the tanker Exxon Valdez ran aground in Alaskas

470

CQ Researcher

We go from shock to trance, Obama said a week after the election. You know, oil prices go up, gas prices at the pump go up, everybody goes into a flurry of activity. And then the prices go back down, and suddenly we act like its not important, and we start, you know, filling up our SUVs again. And, as a consequence, we never make any progress. Its part of the addiction, all right. That has to be broken. Now is the time to break it. 38
AFP/Getty Images/STR

CURRENT SITUATION
Budget Focus
fter several years of polarized debate over energy and climate change, some observers are cautiously hopeful that Congress will take constructive steps to ease U.S. dependence on oil and shape a more proactive national energy policy. Negotiations over federal spending could provide a framework. I think there will be energy legislation before the 2012 elections, especially if gasoline prices keep rising, says Grumet of the Bipartisan Policy Center. It wont be comprehensive, but there are opportunities. For example, our national political dialogue will be driven by debt issues for the next few years. Theres growing concern that our tax system is not encouraging economic growth. We might see energy pricing or a carbon tax emerge in a debate over tax reform. Budget concerns could also reshape energy subsidies. Saying I dont like yours, you dont like mine isnt a constructive approach, Grumet contends. We should take it as given that when Congress decided to devote taxpayer money to a specific energy

Oil Shocks and Spills


Iranian protestors display a poster of religious leader Ayatollah Khomeini during a demonstration in Tehran against the shah in January 1979 (top). The Iranian Revolution in the winter of 1978-79 brought a militant fundamentalist Islamic regime to power, shutting off Iranian oil exports and triggering a new wave of worldwide panic buying and price spikes. Tugboats tow the oil tanker Exxon Valdez after it went aground in Alaskas Prince William Sound in March 1989, spilling 11 million gallons of crude oil and contaminating more than 1,000 miles of shoreline (bottom).

www.cqresearcher.com

May 20, 2011

471

AFP/Getty Images/Chris Wilkins

ENERGY POLICY
source, it had a legitimate purpose. But many of the policies we have now were passed years ago. Why dont we go back and try to identify what their purpose was, and whether were achieving those ends efficiently? If were not, we can save money by reforming subsidies that arent working. So far, however, both parties have engaged in angry debates over oil and gas subsidies. Democrats have seized on the issue as a way to show But oil companies have resisted these critiques, which Exxon Mobil CEO Rex Tillerson called misinformed and discriminatory at a May 12 hearing of the Senate Finance Committee. 41 Republicans argue that raising taxes on oil companies (their wording for eliminating the provisions at issue) will reduce domestic production and drive up gasoline prices. But some key figures have wavered. In April, when House Speaker John ural gas industries was an acceptable way to reduce the federal deficit, and 57 percent supported significantly cutting subsidies to build new nuclear power plants. 44 On May 17, the Senate voted 5248 to reject a Democratic resolution to cut five tax breaks for oil companies, but Democrats vowed to pursue the issue as part of negotiations over reducing the federal deficit. 45

What is Clean Electricity?


We go from shock to trance. . . . You know, oil prices go up, gas prices at the pump go up, everybody goes into a flurry of activity. And then the prices go back down, and suddenly we act like its not important, and we start, you know, filling up our SUVs again.
Barack Obama President, United States of America
s of April 2011, 29 states plus the District of Columbia and Puerto Rico had adopted legally binding renewable portfolio standards (RPSs), which require utilities to generate specific percentages of their electricity from renewable fuels by certain dates. Another seven states have nonbinding renewable electricity targets. 46 These measures have created growing market demand for renewable energy since the early 1990s. The U.S. does not have a national RPS, although Congress has debated proposals for the past decade. The American Clean Energy and Security Act of 2009 (the House-passed cap-and-trade bill) would have established a national RPS requirement of 20 percent by 2020. In the Senate, Energy Committee Chairman Jeff Bingaman, D-N.M., has proposed a 15 percent RPS several times, most recently in late 2010. Regions like the Pacific Northwest, where most electricity comes from hydropower, are more receptive to a national RPS than areas like the Midwest that rely heavily on fossil fuels. President Obamas proposal for an 80 percent clean-electricity standard (CES) by 2035 defines the target much more broadly. It includes natural gas plants with newer, more efficient designs; nuclear power; and coal-burning plants that would capture and store their carbon emissions. The Obama admin-

concern over gasoline prices and federal spending. They cite former Shell Oil CEO John Hofmeister, who asserted publicly in February that with oil prices high, tax subsidies were not an issue in large energy companies production decisions in other words, that companies did not need subsidies to persuade them to drill more wells. 39 While families across the country are being squeezed, your industry is doing better than ever. And yet the U.S. government continues to dole out $4 billion a year in tax breaks to your companies. These subsidies are not sustainable, and we intend to end them, five Senate Democrats wrote to the CEOs of Exxon Mobil, Chevron, ConocoPhillips, Shell, and BP in May. 40

Boehner, R-Ohio, was asked about the issue during a television interview, he answered, We certainly ought to take a look at it. . . . Were in a time when when the federal government is short on revenues. We need to control spending, but we need to have revenues to keep the government moving. And they ought to be paying their fair share. 42 Boehner quickly backtracked, but in May House Budget Committee chair Ryan said of his long-term budget plan, We go after fossil fuel subsidies, we go after renewable subsidies. We propose to go after all that stuff. 43 And the public is receptive to cutting energy subsidies. In a February NBC News/Wall Street Journal poll, 74 percent of respondents thought that eliminating tax credits for the oil and nat-

Continued on p. 474

472

CQ Researcher

At Issue:
Should the government end tax breaks for oil and gas production?
yes

STEVE KRETZMANN
EXECUTIVE DIRECTOR, OIL CHANGE INTERNATIONAL, WASHINGTON, D.C.
WRITTEN FOR CQ RESEARCHER, MAY 2011

LEE FULLER
VICE PRESIDENT OF GOVERNMENT RELATIONS, INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA, WASHINGTON, D.C.
WRITTEN FOR CQ RESEARCHER, MAY 2011

ets start with what we agree on. America needs energy for transport, light and heat. America needs to reduce its spending. The questions are, how we are going to get energy in the future, and how we are going to use our limited government funds? Roughly 10 percent of global oil production is here at home, despite the fact that the U.S. has only 2 percent of global reserves. But as President Bush noted in 2005, with $55 [per barrel] oil we dont need incentives to the oil and gas companies to explore. Oil is more than twice that price today, and the justification for phasing out subsidies is at least twice as strong. President Obama has proposed eliminating $4 billion annually in oil subsidies. While these are not all the subsidies that this mature and very profitable industry enjoys, they are some of the most obvious. Responsible policymakers are of course concerned about what impact removing these subsidies (an act the industry deceptively calls imposing new taxes) will have on domestic production, jobs and consumers at the pump. The short answer to those three questions is little to none. Our reliance on foreign oil has been a fact since the 1970s, and no amount of additional drilling or subsidies is going to change that. The only way to end our reliance on foreign oil is to end our dependence on all oil. According to the Treasury Department, removing these domestic subsidies will reduce U.S. oil production less than one half of 1 percent and increase exploration and production costs less than 2 percent. Considering the price that the domestic industry receives for crude has more than doubled over the past several years, the industry should be able to afford that without laying anyone off or jacking up the price at the pump. The global oil market, not the domestic industry, determines gas prices. The Treasury Department estimates that subsidy removal would cause a loss of less than one-tenth of 1 percent in global oil supply and thus would have no impact on global or U.S. prices. Many think that money saved from subsidies removed should simply be used to offset the deficit toward the goal of a balanced budget. Others think that at least some of these funds should help level the playing field for clean energy. But thats a different discussion, for another day hopefully soon.
no

yes no
May 20, 2011

olicymakers in Washington are, once again, talking about raising taxes on U.S. producers of oil and natural gas tax increases that have been proposed for the last three years and have been soundly rejected. Contrary to popular belief, these tax proposals do not target Big Oil, but instead go after 18,000 American independent oil and natural gas producers, who on average employ only 12 workers. American production activities are dominated by these independent producers, who drill 95 percent of the nations natural gas and oil wells, accounting for 67 percent of total U.S. natural gas and oil production. Americas independents are dedicated to finding and producing Americas energy resources, creating jobs, generating revenues and supplying reliable and affordable energy all across the United States. In fact, a recent IHS Global Insight study showed that independent oil and natural gas producers operating onshore in the United States accounted for nearly 4 million American jobs in 2010, a number that represents more than 3 percent of the total U.S. workforce. Very few industries have the potential to create as many better-than-average-paying jobs as quickly and effectively as we do. The study also projects that onshore independents will return more than $930 billion to state, local and federal governments in the form of taxes, rents and royalties over the next 10 years all driven by a forecast that predicts an ever-expanding role for U.S. independents in developing more onshore wells and delivering greater volumes of reliable and affordable oil and natural gas to American consumers. However, these positive forecasts cannot be realized if the government raises taxes on these producers, which will consequently reduce capital investments. Historically, independent producers have reinvested as much as 150 percent of their American cash flow back into new American production. Drilling costs are a key component of capital-expenditure budgets for independent producers. Without the ability to expense these ordinary and necessary business costs, an independent would have to reduce its drilling budget by 20 to 35 percent almost immediately. Increasing taxes on independent producers will reduce capital investment in the industry. It also will result in fewer jobs, reduce revenue to federal and state treasuries, hurt American retirees whose mutual funds, pension plans and IRAs are invested in oil and gas companies and harm American energy security.

www.cqresearcher.com

473

ENERGY POLICY
for developing energy efficiency and CES idea shapeless and argued that istration estimates that about 40 percent renewable electricity sources. You can it would undercut existing congresof U.S. electricity comes from clean do this by dividing a clean-electricity sional efforts while doing little to build sources today and that that share can standard into tiers and allocating spe- new coalitions. 48 cific shares of generation to renewbe doubled by 2035. Adding those sources could expand able electricity and energy efficiency, support, since most regions have some he says. Without doing that, a cleanof those resources. Importantly, how- electricity standard wont do enough. On March 21, Sens. Bingaman and lean-energy advocates have anothever, carbon capture and storage for er tool available: regulating greenpower plants has not been commer- Lisa Murkowski, R-Alaska, the top Recialized in the United States yet, al- publican on the Senate Energy Com- house gas emissions (GHGs) as polluthough the Energy Department is mittee, released a white paper on how tants under the Clean Air Act. This funding research and 25 demonstra- to design a CES. The paper illustrated a approach would have a similar impact common criticism of Obamas CES pro- to cap-and-trade legislation: It would limit tion projects at industrial sites. 47 how much carbon dioxDesigning a naide and other GHGs poltional CES will be luters could release, which extremely complex, would make low-carbon since the rules will and carbon-free energy have major impacts sources more attractive. on utilities finances Carbon dioxide and (especially for small other GHGs have not tracompanies) and on ditionally been regulatmarket demand for ed this way because they various fuels. A were not thought to have major concern is direct harmful impacts on whether natural gas health or the environment. would dominate a But as scientists painted clean-energy portan increasingly detailed folio, since it propicture of impacts from duces fewer carbon extreme climate change emissions than fos(including droughts, sil fuels and generfloods and heat waves), ates electricity and Congress failed to more cheaply than A coal scraper works at the American Electric Power Co. plant in New Haven, W. Va. In 2009 the facility became the first coal-fired power pass laws limiting GHG nuclear power or plant in the nation to capture a portion of its carbon dioxide emissions emissions, activists startmany renewables. and inject them underground. The U.S. has the worlds largest coal ed addressing the issue The Obama adreserves and 1,500 coal-fired electricity generating plants. through the courts. ministration has proIn a case brought by Massachuposed to award half credits for elec- posal: that it was too vague. Is the goal tricity from combined cycle natural to reduce greenhouse gas emissions, setts and 11 other states, the U.S. gas plants, which are highly efficient. lower electricity costs, spur utilization of Supreme Court ruled in 2007 that the But some experts worry that natural particular assets, diversify supply, or some Environmental Protection Agency had gas could crowd out other, less-mature combination thereof? Bingaman and authority to regulate carbon dioxide Murkowski asked, inviting comments and other greenhouse gases. 49 As the sources that are even cleaner. Clean Air Act requires, the court diWe could meet an 80 percent clean- from industry and advocates. Its a pretty good rule of thumb that rected EPA to conduct a study of electricity goal almost entirely by substituting natural gas generation for if you cant lay out the goals of your pol- whether GHGs in the atmosphere enpower from old coal plants, says the icy clearly, youre unlikely to design it dangered public health and welfare. Center for American Progresss Hen- well, wrote journalist David Roberts in In late 2009 the agency released a dricks. Instead, Hendricks recommends the online environmental magazine formal finding, based on technical studdeveloping a renewable electricity stan- Grist. In contrast to Bingamans 2010 ies, that carbon dioxide and other dard that will create a predictable path recent RPS proposal, Roberts called the GHGs in the atmosphere threaten the
Continued from p. 472

GHG Regulations

474

CQ Researcher

AFP/Getty Images/Saul Loeb

public health and welfare of current and future generations. 50 Although President Obama supported congressional action on climate change as the best way to address the issue, EPA Administrator Lisa Jackson announced in December 2010 that the agency would issue rules to limit GHGs, since it was clear that there would not be enough votes in the new Congress to address the problem through legislation. 51 But opponents including most congressional Republicans and some Democrats say that doing so would have the same impacts that they had predicted earlier from a capand-trade bill: driving energy prices up and hurting the economy. Studies estimated that a cap-andtrade national energy tax would produce job losses in the millions. Yet EPA is unilaterally acting to impose the very same types of policies that Congress rejected [in 2009-2010], House Energy and Commerce Committee chair Upton asserted in a March 1 hearing. 52 Some legal experts disagree with that view. EPA regulation is not capand-trade by another name. Its far less efficient, and if we had done a comprehensive cap-and-trade approach, we would be dealing with these major pollution sources more effectively, says Scott Schang, vice president of the Environmental Law Institute. On April 7 the House voted 255-172 to block EPA from regulating GHGs under the Clean Air Act. 53 No Republicans voted against the bill, and 19 Democrats, mostly from Midwestern and Southern states, supported it. The White House issued a statement saying Obama would veto the bill if it reached his desk, but the Democrat-controlled Senate was not expected to take it up. Next, opponents may try to deny EPA funds in the final 2012 budget to regulate GHGs. But Schang says that approach would not end the debate. Defunding EPA doesnt repeal requirements under the Clean Air Act, so companies would still have to comply with the law.

States implement the Clean Air Act and issue permits, and Congress cant regulate the states, so defunding EPA could really complicate the issue, he says. Moreover, Schang notes, an extended fight over this issue will leave the power industry in limbo. Utilities hate uncertainty, and they dont know what to do here. They have to make multibillion-dollar decisions about power plant investments. Thats not fair to them, he says.

OUTLOOK
How Green?

ndustry leaders and advocates generally agree that growing Americas energy supply and reducing reliance on imported oil are high priorities. But theres less consensus over how large a role green sources should play, and how quickly the U.S. needs to develop cleaner fuels. We need an all of the above strategy. World energy needs are growing, and it will be challenging to keep supplies growing at the same pace, says the Independent Petroleum Association of Americas Vincent. Energy policy should encourage the development of oil and gas resources, because they will be the main sources for decades. Eventually, well develop technology that will let us power society in other ways, like advanced nuclear power and renewables. We cant rule anything out, but we need to be practical about how much of the equation they can provide. Environmentalists want more aggressive efforts to shift away from dirty sources. We need to reduce emissions from existing fossil fuels. That means making sure that natural gas is produced and transported to minimize leakage, so we get its full low-carbon benefits. It also means closing old, dirty coal plants and replacing them with cleaner resources,

says Jim Marston, energy program director with the Environmental Defense Fund, a national environmental advocacy group. We also need to put more money into next-generation fuels, and set modest requirements [in a national cleanor renewable energy standard] that will create economies of scale for solar, geothermal and wind power, Marston continues. You can believe in the market and understand that there are market failures that prevent these new resources from getting into the market and going to scale. Energy choices will be shaped by the ongoing national debate over how to reduce U.S. budget deficits and stimulate economic growth. Many Democrats and Republicans agree that we need to invest in advanced technology, says the Bipartisan Policy Centers Grumet. But with total spending shrinking, federal support for energy research and development will have to show significant returns to win support. Were going to have to find the right balance of investments in our most critical needs, with an eye toward those that protect our nation and that create jobs but at a much lower funding level, Rep. Steve Womack, R-Ark., said at a House Appropriations subcommittee hearing on Energy Department programs in March. 54 Unexpected events around the world may roil the U.S. energy debate even more. For example, many observers speculate that the post-earthquake meltdowns at Japans Fukushima nuclear reactor will undercut nascent support in the United States for new investments in nuclear power. But the National Renewable Energy Laboratorys Garrett draws a broader lesson from Fukushima. The accident in Japan suggests that government should have an ongoing role in all energy technologies, she says. As you move forward in time, you face new challenges, and government can accelerate transitions from the status quo to new ways of

www.cqresearcher.com

May 20, 2011

475

ENERGY POLICY
doing things. Government can speed transitions that need to happen.
Blueprint for a Secure Energy Future, March 30, 2011, pp. 4-8, www.whitehouse.gov/ sites/default/files/blueprint_secure_energy_ future.pdf. 11 Weekly radio address, April 23, 2011, www. whitehouse.gov/the-press-office/2011/04/23/ weekly-address-instead-subsidizing-yesterdaysenergy-sources-we-need-inv. 12 Blueprint for a Secure Energy Future, op. cit., p. 39. 13 National Research Council, Advancing the Science of Climate Change (National Academies Press, 2010), p. 3, www.nap.edu/catalog. php?record_id=12782. 14 Massachusetts Institute of Technology, The Future of Natural Gas (2010), http://web.mit. edu/mitei/research/studies/report-natural-gas. pdf; Dave Roberts, Chart of the Day: The U.S. Energy Mix in 2035, Grist, April 22, 2011, www.grist.org/climate-energy/2011-04-22-chartof-the-day-the-u.s.-energy-mix-in-2035. 15 Roger H. Bezdek and Robert M. Wending, A Half Century of U.S. Federal Government Energy Incentives: Value: Distribution, and Policy Implications, International Journal of Global Energy Issues, vol. 27, no. 1 (2007), p. 43. This figure includes spending for geothermal energy ($5.7 billion), which the article counts separately from other renewable fuels ($32.6 billion). 16 Estimating U.S. Government Subsidies to Energy Sources: 2002-2008, Environmental Law Institute, September 2009, www.eli.org/ Program_Areas/innovation_governance_ener gy.cfm. 17 Bezdek and Wending, op. cit., p. 43. 18 Environmental Law Institute, op. cit., p. 3. 19 Ian Bauer, Governor Dedicates Solar Plant, San Jose Mercury-News, April 13, 2011. 20 Alyce Lomax, Rising Star Buy: SunPower, Fool.com, Jan. 11, 2011, www.fool.com/investing/ general/2011/01/11/rising-star-buy-sunpower. aspx.
10

Notes
No commercial-scale clean-coal plant is currently operating in the United States. For background, see Jennifer Weeks, Coals Comeback, CQ Researcher, Oct. 5, 2007, pp. 817-840, and David Hosansky, Wind Power, CQ Researcher, April 1, 2011, pp. 289-312. 2 John M. Broder, Obama Shifts to Speed Oil and Gas Drilling in U.S., The New York Times, May 14, 2011, p. A1. 3 Jean Chemnick, Climate: Rising Oil Prices Demand Bipartisan Cooperation On Energy, Graham Says, E&E News, March 8, 2011. 4 Remarks by the President on Americas Energy Security, Georgetown University, March 30, 2011, www.whitehouse.gov/the-press-office/2011/ 03/30/remarks-president-americas-energy-security. 5 Statement prepared for delivery, http://re publicans.energycommerce.house.gov/Media/ file/Hearings/Energy/031611/Upton2.pdf. 6 For background see Marcia Clemmitt, Energy and Climate, CQ Researcher, July 24, 2009, pp. 621-644. 7 John Collins Rudolf, Clean Energy Is a Target of Ryan Budget Plan, The New York Times, April 6, 2011, http://green.blogs.nytimes.com/2011/ 04/06/clean-energy-is-a-target-of-ryan-budget-plan/; Paul Ryan, The GOP Path to Prosperity, The Wall Street Journal, April 6, 2011, http://online. wsj.com/article/SB10001424052748703806304576 242612172357504.html. 8 The case is Massachusetts v. Environmental Protection Agency, 549 U.S. 497 (2007). 9 An Open Letter to the American People and Americas Leaders: A New Era for U.S. Energy Security, April 12, 2011, www.bipartisan policy.org/library/energy-project/open-letter.
1

About the Author


Jennifer Weeks is a Massachusetts freelance writer who specializes in energy, the environment, science and technology. She has written for The Washington Post, Audubon, Popular Mechanics and more than 50 other magazines and websites and worked for 15 years as a public policy analyst, congressional staffer and lobbyist. She has an A.B. degree from Williams College and masters degrees from the University of North Carolina and Harvard.

Clean Energy Investment Storms to New Record in 2010, Bloomberg New Energy Finance, Jan. 11, 2011, http://bnef.com/Down load/pressreleases/134/pdffile/. 22 Ernst & Young, Renewable Energy Country Attractiveness Indices, Issues 26 (August 2010) and 28 (February 2011), www.ey.com/Publi cation/vwLUAssets/Renewable_energy_country_ attractiveness_indices_-_Issue_28/$FILE/EY_ RECAI_issue_28.pdf. 23 Todd Wallack, Plant Will Shut After $58m in State Aid, The Boston Globe, Jan. 12, 2011, http:// articles.boston.com/2011-01-12/business/2933 8294_1_evergreen-solar-plant-state-funds. 24 Keith Bradsher, Solar Panel Maker Moves Work to China, The New York Times, Jan. 14, 2011, www.nytimes.com/2011/01/15/business/ energy-environment/15solar.html. 25 Matthew E. Kahn, How We Gain From Chinas Advances, The New York Times, Jan. 18, 2011, www.nytimes.com/roomfordebate/2011/ 01/18/can-the-us-compete-with-china-on-greentech/how-we-gain-from-chinas-advances. 26 Nicolas Loris and Derek Scissors, Chinas Sputnik Moment, Heritage Foundation, Jan. 21, 2011, http://origin.heritage.org/Research/ Commentary/2011/01/Chinas-Sputnik-Moment. 27 GE Invests $600m to Build Largest US Solar Plant, Reuters, April 8, 2011. 28 Restoring the Quality of Our Environment: Report of the Environmental Pollution Panel, Presidents Science Advisory Committee, White House, November 1965, p. iii, http://dge.stan ford.edu/labs/caldeiralab/Caldeira%20down loads/PSAC,%201965,%20Restoring%20the%20 Quality%20of%20Our%20Environment.pdf. 29 Televised address by President Jimmy Carter, April 18, 1977, online at www.pbs.org/wgbh/ americanexperience/features/primary-resources/ carter-energy/. 30 Stephen Hoff, Was Jimmy Carter Right? Cleveland Plain Dealer, Oct. 1, 2005, www. energybulletin.net/node/9657. 31 Joshua Green, The Elusive Green Economy, The Atlantic, July/August 2009, www.the atlantic.com/magazine/archive/2009/07/theelusive-green-economy/7554/. 32 Michael Grunwald, Three Mile Island at 30: Nuclear Powers Pitfalls, Time, March 27, 2009, www.time.com/time/nation/article/0,8599,1888 119,00.html. 33 Philip Shabecoff, Global Warming Has Begun, Expert Tells Senate, The New York Times, June 24, 1988, www.nytimes.com/1988/ 06/24/us/global-warming-has-begun-experttells-senate.html.

21

476

CQ Researcher

National Research Council, Air Quality Management in the United States (2001), pp. 199-202. 35 Larry Parker and John Blodgett, U.S. Global Climate Change Policy: Evolving Views on Cost, Competitiveness, and Comprehensiveness, Congressional Research Service, Jan. 29, 2009, pp. 5-7, http://assets.opencrs.com/rpts/RL30024_ 20090129.pdf. 36 For background, see Mary H. Cooper, Alternative Energy, CQ Researcher, Feb. 25, 2005, pp. 173-196. 37 Council On Foreign Relations, Barack Obama, www.cfr.org/experts/world/barackobama/b11603#6. 38 Andrew Revkin, Obama on the Shock to Trance Energy Pattern, The New York Times, Nov. 17, 2008, http://dotearth.blogs.nytimes. com/2008/11/17/obama-on-shock-to-tranceenergy-pattern/. 39 Amy Harder, Ex-Shell CEO Says Big Oil Can Live Without Subsidies, National Journal.com, Feb. 11, 2011, www.nationaljournal. com/daily/ex-shell-ceo-says-big-oil-can-livewithout-subsidies-20110211. 40 Democrats Urge Oil CEOs to Admit They No Longer Need Taxpayer-Funded handouts, Use Money to Cut Deficit Instead, online at http://menendez.senate.gov/newsroom/press/ release/?id=649ae0ba-6219-4fa6-9173-e1cc83a 135a0. 41 John M. Broder, Oil Executives, Defending Tax Breaks, Say Theyd Cede Them if Everyone Did, The New York Times, May 12, 2011, www.nytimes.com/2011/05/13/business/13oil. html?_r=1&hp. 42 Jonathan Allen and Darren Goode, Boehner Gaffe Creates Dem Opening, Politico.com, April 26, 2011. 43 Evan Lehmann, Ryan, the Republicans Budget Hawk, Opposes Tax Breaks for Clean Energy and Oil, The New York Times, May 9, 2011, www.nytimes.com/cwire/2011/05/09/09 climatewire-ryan-the-republicans-budget-hawkopposes-tax-73991.html?scp=1&sq=ryan%20 tax%20breaks%20clean%20energy%20oil%20& st=cse. 44 Study # 11091, Hart/McInturff, February 2011, pp. 15-16, http://online.wsj.com/public/ resources/documents/wsj-nbcpoll03022011.pdf. 45 Carl Hulse, Senate Refuses to End Tax Breaks for Big Oil, The New York Times, May 18, 2011, p. A1. 46 Database of State Incentives for Renewables & Efficiency, Summary Maps RPS Policies, www.dsireusa.org/summarymaps/index.cfm?ee= 1&RE=1.

34

FOR MORE INFORMATION


American Petroleum Institute, 1220 L St., N.W., Washington, DC 20005; (202) 682-2000; www.api.org. National association for the oil and natural gas industry. Center for American Progress, 1333 H St., N.W., 10th Floor, Washington, DC, 20005; (202) 682-1611; www.americanprogress.org. Liberal think tank that advocates in fields including energy and the environment. Environmental Defense Fund, 257 Park Ave. South, New York, NY 10010; (800) 684-3322; www.edf.org. National advocacy group known for promoting market-based solutions to environmental challenges. Institute for 21st Century Energy, 1615 H St., N.W., Washington, DC 20062; (202) 463-5558; www.energyxxi.org. Research initiative affiliated with the U.S. Chamber of Commerce that advocates strategies to ensure affordable, reliable and diverse energy supplies, improve environmental stewardship, promote economic growth and strengthen national security. Lawrence Berkeley National Laboratory, 1 Cyclotron Road, Berkeley, CA 94720; (510) 486-4000; www.lbl.gov. Laboratory of the U.S. Department of Energy, managed by the University of California, that conducts unclassified research on subjects including energy efficiency and advanced energy technologies. MIT Energy Initiative, Massachusetts Institute of Technology, 77 Massachusetts Ave., E19-307, Cambridge, MA 02139-4307; (617) 258-8891; http://web.mit.edu/mitei/. University-wide initiative at MIT designed to help transform the global energy system through research, classroom teaching and campus energy-use reductions. Synapse Energy Economics, 22 Pearl St., Cambridge, MA 02139; (617) 661-3248; www.synapse-energy.com. Research and consulting firm specializing in energy, economic and environmental issues that works to inform sound regulatory and policy decisions. U.S. Department of Energy, 1000 Independence Ave., S.W., Washington, DC 20585; (202) 586-5000; www.energy.gov. Manages research, development and policy initiatives to meet U.S. energy needs. Key offices for energy supply include Energy Efficiency and Renewable Energy, Fossil Energy and Nuclear Energy.
U.S. Department of Energy, Office of Fossil Energy, Carbon Sequestration, http://fossil. energy.gov/sequestration/. 48 David Roberts, Bingaman Tries to Make Policy Out of Obamas Hopey-Changey Clean Energy Standard, Grist, March 23, 2011, www. grist.org/energy-policy/2011-03-23-bingamantries-to-make-policy-out-of-obama-clean-energystandard. 49 Massachusetts v. Environmental Protection Agency, 549 U.S. 497 (2007), www.supreme court.gov/opinions/06pdf/05-1120.pdf. 50 U.S. Environmental Protection Agency, Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, Dec. 7, 2009, www.epa.gov/ climatechange/endangerment.html.
47

Matthew L. Wald, E.P.A. Says It Will Press on With Greenhouse Gas Regulation, The New York Times, Dec. 23, 2010, www.nytimes.com/ 2010/12/24/science/earth/24epa.html. 52 Hearing of the Energy and Power Subcommittee, March 1, 2011, http://energycom merce.house.gov/hearings/hearingdetail.aspx? NewsID=8270. 53 H.R. 910, the Energy Tax Prevention Act of 2011. 54 House Committee on Appropriations, Subcommittee on Energy and Water Development, hearing March 31, 2011, http://appropriations. house.gov/_files/033111EnergyandWaterARPAE LoanGuaranteeWomack.pdf.

51

www.cqresearcher.com

May 20, 2011

477

Bibliography
Selected Sources
Books
Buchar, David, The Rough Guide to the Energy Crisis, Rough Guides, 2010. A senior research fellow at the Oxford Institute for Energy Studies surveys current energy choices and options for shifting to cleaner sources. Hofmeister, John, Why We Hate the Oil Companies: Straight Talk from an Energy Insider, Palgrave Macmillan, 2010. A former president of Shell Oil argues that U.S. energy debates are polarized and that a Federal Energy Resources Board is needed to plan and manage the nations energy system. Madrigal, Alexis, Powering the Dream: The History and Promise of Green Technology, Da Capo Press, 2011. A journalist shows that American innovators have refined many green energy concepts for decades, including wind and geothermal power and electric cars, but inconsistent policies have often kept them from expanding to a large scale. National Research Council, Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use, National Academies Press, 2010. The study, conducted in response to a congressional request, concludes that energy production and use cause billions of dollars in damages yearly that are not reflected in energy prices. Harder, Amy, Can Obama Budget a Clean Energy Future? National Journal, Feb. 14, 2011, http://energy.national journal.com/2011/02/can-obama-budget-a-clean-energ.php. Policy experts and energy company leaders debate whether President Obamas proposed investments will help create a green economy. Klare, Michael T., The Relentless Pursuit of Extreme Energy, The Nation, May 18, 2010, www.thenation.com/ article/relentless-pursuit-extreme-energy. A professor of peace and world security studies at Hampshire College argues that more major accidents like the 2010 BP oil spill can be expected. Room for Debate: Can the U.S. Compete with China on Green Tech? The New York Times, Jan. 19, 2011, www.ny times.com/roomfordebate/2011/01/18/can-the-us-competewoth-china-on-green-tech. Lawyers, economists and other policy experts give their perspectives on American companies efforts to win global market shares in clean-energy industries. Rotman, David, Praying for an Energy Miracle, Technology Review, March/April 2011, www.technologyreview. com/energy/32383/. Many companies are developing new clean-energy sources, but deploying new technologies into the market is harder than inventing them and requires government support.

Articles
Clayton, Mark, Is EPA Greenhouse-Gas Plan a Job Killer? History Might Offer Clues, The Christian Science Monitor, March 2, 2011, www.csmonitor.com/USA/Politics/ 2011/0302/Is-EPA-greenhouse-gas-plan-a-job-killer-Historymight-offer-clues. Carbon-intensive industries say regulating greenhouse gases as pollutants would wreck the U.S. economy, but many economists say the impact would be insignificant or positive. De Gorter, Harry, and Jerry Taylor, Ethanol: Let Protectionism Expire,National Review (online), Dec. 8, 2010, www. cato.org/pub_display.php?pub_id=12623. Two libertarian scholars argue against continuing federal tax credits and trade protections for ethanol. Goldberg, Jonah, Obamas Sputnik Analogy Doesnt Fly, USA Today, Jan. 31, 2011, www.usatoday.com/news/opinion/ forum/2011-02-01-column01_ST_N.htm. A conservative argues that the United States should not spend billions of dollars to emulate Chinas energy policy.

Reports and Studies


Estimating U.S. Government Subsidies to Energy Sources: 2002-2008, Environmental Law Institute, 2009, www. elistore.org/reports_detail.asp?ID=11358. The United States provided $72 billion in subsidies for fossil fuels and $29 billion for renewable-energy sources. Hendricks, Bracken, and Lisbeth Kaufman, Cutting the Cost of Clean Energy 1.0, Center for American Progress, November 2010, www.americanprogress.org/issues/ 2010/ 11/cleanenergycosts.html. A liberal think tank lays out a strategy for clean-energy investments led by the private sector but spurred by government policies, including regulatory reforms. MIT Energy Initiative, The Future of Natural Gas: Interim Report, Massachusetts Institute of Technology, 2010, web.mit.edu/mitei/research/studies/report-natural-gas.pdf. An interdisciplinary study finds that abundant natural gas could serve as a bridge fuel to a low-carbon future, especially as a substitute for coal to generate electricity, but that it should not be allowed to crowd out cleaner fuels.

478

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Clean Energy
Dennison, Mike, Legislation Would Mandate More Renewable Energy, Missoulian (Missoula, Mont.), July 31, 2010, p. A1. A panel of Montana lawmakers has endorsed a bill that would require state electric utilities to generate 25 percent of their energy from renewable sources by 2025. Olivera, Armando J., Without Right Regulations, Future Cloudy for Solar, Sun-Sentinel (Ft. Lauderdale, Fla.), Aug. 1, 2010, p. F1. A lack of favorable regulations impedes solar energys potential in Florida, according to an energy company CEO. Reheis-Boyd, Catherine, Taxes on Oil Help Expand, Diversify Our Energy Supply, Sacramento (Calif.) Bee, Jan. 9, 2011, p. E3. Clean-energy sources should not be pursued at the expense of fossil fuels, an oil executive argues. Marcum, Ed, Groups Target Fracking, News Sentinel (Knoxville, Tenn.), Feb. 22, 2011, p. B1, www.knoxnews. com/news/2011/feb/22/groups-target-fracking-environ mentalists-want-on/. Tennessee environmentalists are calling for new state regulations on fracking.

Subsidies
Broder, John M., Obamas Proposal to End Oil Subsidies Revives a Long Debate, The New York Times, Feb. 1, 2011, p. A14, www.nytimes.com/2011/02/01/science/earth/01 subsidy.html. The oil industry contends that it subsidizes the government through billions of dollars in taxes and royalties, not the other way around. Voorhis, Dan, Ethanol Industry to Congress: Shift Subsidies,Wichita (Kan.) Eagle, July 16, 2010, p. B5, www.down streamtoday.com/news/article.aspx?a_id=23392&Aspx AutoDetectCookieSupport=1. Executives from the ethanol industry have asked Congress to redirect government subsidies for ethanol to pipeline builders, gas station owners and farmers. Wolff, Eric, Solar Industry Running Out of Subsidies, North County Times (Escondido, Calif.), Jan. 18, 2011, www. nctimes.com/business/article_68999a60-477a-5adb-95c8bc9e82b456f4.html. The success of Californias solar industry has caused many state subsidies to be retracted, shaking up the entire industry and causing many smaller solar companies to fold.

Fossil Fuels
Hamilton, Lee, Moving Away From Oil Dependency Will Help Hoosiers, Fort Wayne (Ind.) Journal Gazette, July 20, 2010, p. A9, www.journalgazette.net/article/20100720/EDIT 05/307209948/1147/EDIT07. Dependence on fossil fuels has led to billions of dollars being sent to countries that arent always friendly to the United States, according to a former U.S. representative from Indiana. Tankersley, Jim, A Call to End Oil Dependence, Los Angeles Times, June 16, 2010, p. A14, articles.latimes.com/ 2010/jun/16/nation/la-na-obama-oil-facts-20100616. Analysts say that reducing dependence on fossil fuels may lead to job losses and higher costs for consumers.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

Fracking
Brill, Richard, Extracting Natural Gas Is Not a Clean Process,Honolulu Star-Advertiser, May 6, 2011, www.star advertiser.com/news/20110506__Extracting_natural_gas_ is_not_a_clean_process.html. The economic and environmental components of natural gas policies are too powerful for fracking to disappear, according to a science professor at Honolulu Community College. Clayton, Mark, Fracking for Natural Gas: EPA Hearings Bring Protests, The Christian Science Monitor, Sept. 13, 2010, www.csmonitor.com/Environment/2010/0913/ Fracking-for-natural-gas-EPA-hearings-bring-protests. Critics of fracking question the health and environmental effects of pumping thousands of gallons of water and chemicals beneath the Earths surface.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

May 20, 2011

479

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Government Secrecy, 2/11 Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10

Education
School Reform, 4/11 Crime on Campus, 2/11 Career Colleges, 1/11 Value of a College Education, 11/09

Health/Safety
Organ Donations, 4/11 Downsizing Prisons, 3/11 Genes and Health, 1/11 Food Safety, 12/10 Preventing Bullying, 12/10 Preventing Obesity, 10/10

Crime/Law
Class Action Lawsuits, 5/11 Cameras in the Courtroom, 1/11 Death Penalty Debates, 11/10 Drone Warfare, 8/10 Prosecuting Terrorists, 3/10 Legalizing Marijuana, 6/09

Environment/Society
Business Ethics, 5/11 Artificial Intelligence, 4/11 Wind Power, 4/11 Women and Sports, 3/11 Managing Nuclear Waste, 1/11 Animal Intelligence, 10/10

Politics/Economy
Public-Employee Unions, 4/11 Redistricting Debates, 2/11 Lies and Politics, 2/11 Income Inequality, 12/10

Upcoming Reports
Teen Drug Use, 6/3/11 Nuclear Energy, 6/10/11 Aging, 6/17/11

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Aging Population

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

Can the U.S. support its growing ranks of elderly?

T
savings.

he oldest of the 78 million Americans born during the post-World War II baby boom generation are turning 65 this year, while the share of the population older than 85 is growing even faster. The flood

of elderly Americans is putting severe financial stress on programs that benefit older citizens. The number of people covered under Medicare will increase by more than 30 million over the next 20 years. So far, congressional proposals for constraining Medicare spending have encountered stiff resistance. But economists say the countrys deficits will become unmanageable if entitlement programs arent scaled back. The United States is not aging as rapidly as other developed countries and will continue to have a growing population of working-age people. But as longevity and spending on health care increase, many seniors will outlive their retirement
A hospice patient in Lakewood, Colo., releases a dove as part of an animal therapy program designed to increase happiness for terminally ill residents. The growing number of aging and elderly Americans is putting programs for the elderly under financial stress.

I N S I D E

THIS REPORT
THE ISSUES ....................579 BACKGROUND ................586 CHRONOLOGY ................587 CURRENT SITUATION ........591 AT ISSUE........................593 OUTLOOK ......................594 BIBLIOGRAPHY ................597 THE NEXT STEP ..............598

CQ Researcher July 15, 2011 www.cqresearcher.com Volume 21, Number 25 Pages 577-600
RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

AGING POPULATION
THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
July 15, 2011 Volume 21, Number 25

579

Should Americans work longer? Will health care for the elderly bankrupt the U.S.? Will the young and old fight over resources?

580 581 582 584 585

More Americans Expect to Delay Retirement One-fifth of workers expect to retire later than planned. Workers Gloomy About Retirement Prospects One-fourth lack confidence in a secure retirement. Cities Struggle to Meet Growing Needs of Elderly Lack of jobs is biggest obstacle. U.S. Population Growing Grayer A record 40 million Americans are age 65 or older. Elderly a Growing Share of Electorate The proportion of the electorate 65 and older may top 30 percent by 2050. Chronology Key events since 1946. Minority Youths Are Rising Demographic Force Some fear disconnect between young blacks, Hispanics and older whites. At Issue Should the retirement age be raised?

MANAGING EDITOR: Thomas J. Billitteri

tjb@cqpress.com

BACKGROUND

586 586 589 590

Living Longer One-fourth of Americans may be over 65 by 2030. Fertility Splurge About 78 million children were born from 1946-1964. The Baby Bust Americans had fewer children after the baby boom. Sandwich Generation Ten million adults over 50 care for their parents.

kkoch@cqpress.com CONTRIBUTING EDITOR: Thomas J. Colin tcolin@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Sarah Glazer, Alan Greenblatt, Barbara Mantel, Tom Price, Jennifer Weeks
DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT CHECKER: Michelle Harris INTERNS: Daniel Bauer, Benjamin Woody

ASSISTANT MANAGING EDITOR: Kathy Koch

A Division of SAGE

CURRENT SITUATION

587 588

PRESIDENT AND PUBLISHER:

John A. Jenkins
DIRECTOR, REFERENCE SOLUTIONS:

591 591 591 592

Financial Insecurity Most people will rely on Social Security. Automatic Enrollment The administration favors automatic savings plans. Government Cutbacks A dozen states have altered workers pension plans. Math and Politics Union leaders blame legislatures for not adequately funding retirement plans.

Todd Baldwin
Copyright 2011 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except: (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

593

FOR FURTHER RESEARCH

596 597 598 599

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

OUTLOOK

594

Political Prospects The two parties are kind of locked in cement.

Cover: Getty Images/John Moore

578

CQ Researcher

Aging Population
BY ALAN GREENBLATT
niors which will be much higher than population growth among young and workingames Kempthorne is runage Americans will lead to ning out of money. He changes across society, insaved, or thought he was cluding pressures on the worksaving, for retirement, force and federal budget. 4 says his son, Dirk, a former Thats despite the fact that Republican governor of the United States is aging less Idaho. He thought he rapidly than other developed would be okay, even if he nations, such as Germany, lived to be 90. Italy, Spain and Japan. By But on the 4th of July, the 2015, the population of senior Kempthorne turned 96. working-age people typiHis savings are gone, and cally defined as those behis only source of income is tween ages 15 and 64 will Social Security Social Sebegin to decline throughout curity and a couple of sons, the developed world, with the Dirk Kempthorne says. United States as the sole major As the proud patriarch of a exception. successful family, James The demographics are Kempthorne isnt happy about obviously more favorable having to rely on his children than just about anywhere else for help. But hes not alone. in the rich world, says Nearly 10 million adult children Richard Jackson, who directs over age 50 in the United States the Global Aging Initiative at provide care or financial help the Center for Strategic and to their aging parents. 1 International Studies, a think Such numbers are only tank in Washington. We have going to grow. The oldest an aging population, but at members of the baby boom the end of the day, when Activists on Capitol Hill urge lawmakers on April 15 not generation 78 million the last of the boomers have to cut Medicare, the federal governments health Americans born between passed on to that great Woodinsurance program for the elderly and disabled. The same 1946 and 1964 are turnstock in the sky, well be day, however, the majority-Republican House approved a ing 65 this year. The sheer about as old as Japan and budget plan that would rein in Medicare costs. Democrats oppose the plan and intend to use it as a campaign issue number of them means that Italy are today. And well in 2012. Economists say entitlement programs must be one will turn 65 every 8 sechave a growing population scaled back to control the countrys deficit. onds until 2030. 2 and not a stagnant or a deBut the population of the clining one. I assume that most people would old old those over age 85 is But the United States has a major growing, proportionately, faster. Ameri- like to live a long, full life, and thats problem those other countries dont ca has the largest number of centenar- increasingly possible, says John Rother, have. Spending on health care is far ians in the world, at 72,000 a total policy director at AARP, the major ad- greater here than in other developed that has doubled over the past 20 years vocacy group for seniors, formerly countries and will only rise with the and will at least double again by 2020, known as the American Association of aging of the population. 5 Retired Persons. Advances in health care according to the Census Bureau. 3 We look as though our problem Thats the result of good news: in- make that more likely for people. is very affordable, relative to other Still, Rother acknowledges that a good countries, says Neil Howe, president creased life expectancy that stems deal of concern exists about the chal- of LifeCourse Associates, a demofrom improved medicine and nutrition and a drastic decline over recent lenges posed by the aging population. graphics consulting firm in Great Falls, The rapid growth in the number of se- Va., and author of several books about decades in infant mortality.

THE ISSUES

www.cqresearcher.com

Getty Images/Alex Wong

July 15, 2011

579

AGING POPULATION
More Americans Expect to Delay Retirement
One-fth of American workers say they expect to retire later than planned a lower percentage than in 2009 and 2010, but higher than when the economy was stronger in 2002. Workers Expecting to Retire Later Than Planned, 2002-2011
(percentage)

25% 20 15 10 2002 2005 2008 2009 2010 2011


Digital Stock

Source: Ruth Helman, et al., The 2011 Retirement Condence Survey: Condence Drops to Record Lows, Reecting the New Normal, Employee Benet Research Institute, March 2011, www.ebri.org/pdf/surveys/rcs/2011/ebri_03-2011_no355_ rcs-11.pdf.

demographics. The big factor that pushes hugely in the other direction is health care. We are anomalous in that we have a system in which health care costs are growing uncontrollably even before the age wave. Total enrollment in Medicare, the federal governments health insurance program for the elderly, is expected to rise from 47 million today to just over 80 million by 2030. 6 Richard Foster, Medicares chief actuary, predicts the programs trust fund could be depleted by 2024. 7 The growing number of aging Americans also will put enormous strains on Social Security and Medicaid, the state-federal health insurance program for the poor and disabled, which pays for more than 40 percent of nursing home care in the United States. What were long-term problems are now at our doorstep, says Maya MacGuineas, director of the Fiscal Policy Program at the New America Foundation and president of the nonpartisan Committee for a Responsible Federal Budget, which advocates greater fiscal discipline.

On April 15, the U.S. House of Representatives approved a budget plan that would attempt to rein in Medicare costs by converting it from an insurance program to a limited subsidy for seniors buying private insurance. The plan is unpopular with the public, according to polls, and Democrats not only oppose it but plan to use it as a campaign issue in 2012. 8 We will never allow any effort to dismantle the program and force benefit cuts upon seniors under the guise of deficit reduction, five Democratic senators wrote June 6 to Vice President Joseph Biden, who had been leading negotiations with members of Congress on debt reduction. Our nations seniors are not responsible for the fiscal challenges we face, and they should not be responsible for shouldering the burden of reducing our deficits. But many policy analysts insist some changes to entitlements benefiting seniors, particularly Medicare, will be necessary to bring down the federal deficit. On average, says Richard W. Johnson, director of the retirement policy program at the Urban Institute, a cen-

trist think tank in Washington, Americans are healthier than 30 years ago. But theres been an increase since the late 1990s in the number of Americans in their late 40s or 50s who are disabled or suffer ailments that make it harder for them to work. Were seeing increases in the number of handicapped people in late middle age, mostly because of obesity and sedentary lifestyles, says demographer Phillip Longman of the New America Foundation, a liberal think tank in Washington. Here we have this generation thats physically unfit and has no savings and whose health care we cant afford at current prices. Such health challenges are going to make it difficult for many Americans to work longer, which economists argue will be necessary to shore up not only Social Security but also personal retirement savings. Rother, the AARP policy director, stirred up a great deal of controversy with remarks quoted in The Wall Street Journal that suggested the seniors lobbying group, which had helped torpedo a plan to partially privatize Social Security in 2005, might be willing to accept benefit cuts in the program. 9 The group immediately sought to downplay Rothers comments. Still, the open debate about cutting entitlement programs, combined with losses in the stock market and the collapse of the housing bubble, have left elder Americans nervous about their financial futures. 10 A retirement confidence survey by the Employee Benefit Research Institute found that the percentage of workers not at all confident they will be able to afford a comfortable retirement rose from 22 percent last year to 27 percent this year, the highest level in the 21 years the group has conducted the survey. (See graph, p. 581.) 11 And its going to be harder for younger Americans to support the swelling population of seniors. Dowell Myers, a demographer at the University of

580

CQ Researcher

Southern California, says the ratio of those over 65 to those between 25 and 64 has been constant for 40 years, with 24 seniors for every 100 working-age Americans. But that dependency ratio will spike by two-thirds over the next 20 years, to 38 seniors per 100 workingage adults, he says. When we come out of this recession, were going to have fewer new workers and more boomers retiring, Myers says. Thats when well feel the changes. As Americans contemplate the consequences of an aging population, here are some of the questions theyre debating: Should Americans work longer? In March, the Centers for Disease Control and Prevention announced that the U.S. death rate had hit a new low while life expectancy had once again ticked up. A male born in 2009 could expect to live 75.7 years, while a female could expect to live to 80.6. 12 Those numbers are a vast improvement over life expectancy in 1935, when Social Security was created. Life expectancy at birth then was just 58 for men and 62 for women. 13 Those averages were held down by much higher rates of infant mortality. Most people who lived to adulthood could expect to live past 65, even then. Still, people are living longer and spending more years in retirement. Those two facts are putting additional strain on both Social Security and Medicare finances. The typical beneficiary is expecting to receive benefits for almost nine years longer than when the Social Security program started, says Charles Blahous, a trustee of the Social Security program and research fellow at the conservative Hoover Institution at Stanford University. Not only are people living longer, but they are retiring earlier. Most men worked, on average, just past 65 during the 1950s. Now, the average retirement age is 62, says Blahous, who

Workers Gloomy About Retirement Prospects


More than one-fourth of American workers are not at all condent that they will have enough money to last through retirement. Thats nearly a three-fold increase from nine years earlier. Fewer than one in eight workers is very condent about a comfortable retirement.
50% 40 30 20 10 0

Worker Condence in Having Enough Money to Live Comfortably Throughout Retirement, 2002-2011

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Very confident Somewhat confident Not too confident Not at all confident Dont know/ refused to answer

Source: Ruth Helman, et al., The 2011 Retirement Condence Survey: Condence Drops to Record Lows, Reecting the New Normal, Employee Benet Research Institute, March 2011, www.ebri.org/pdf/ surveys/rcs/2011/ebri_03-2011_no355_rcs-11.pdf.

was an economic aide to former President George W. Bush. The age for retiring with full Social Security benefits is slowly rising to 67. Some politicians and economists believe it needs to be raised further. That was the recommendation of President Barack Obamas debt commission last year and is a policy direction lately followed in several European countries. What we really need to do is raise the early-entitlement age, which has always been 62 since it was introduced, in 1956 for women and in 1962 for men, says the Urban Institutes Johnson. The problem with having the early retirement age relatively young is that it does send a signal that 62 is an appropriate time to retire. Its not good for society as a whole, and its also not good for individuals. Many people may not be able to retire early, regardless of the official retirement ages set by Social Security. Americans do a bad job of saving in

general, and retirement accounts, in particular, are not as full as they should be. Many people have yet to make up recent stock market losses, and a weak housing market has largely dashed hopes of turning homes into assets that can offer support in retirement. Fewer private employers are offering guaranteed pension benefits, and pensions and other retirement benefits for government workers are under political pressure as well. 14 The result is that about half of U.S. households are at risk of not being able to maintain their living standards in retirement, according to the Center for Retirement Research at Boston College. 15 More Americans might need to keep working, and market demand for them to do so may also rise, suggests MacGuineas, of the New America Foundation. Were actually going to be having labor-market shortages as baby boomers move out of the workforce, she says. A number of social scientists have speculated about whether boomers will

www.cqresearcher.com

July 15, 2011

581

AGING POPULATION

Cities Struggle to Meet Growing Needs of Elderly


We have a country thats aging everywhere.
ockfords not doing well. The Illinois city, about 90 miles northwest of Chicago, was once a leading furniture-making center, but those jobs are mostly gone. As a result, Rockfords unemployment rate was among the highest among U.S. cities during the recent recession. Most jobs that remain are snatched up by workers 55 and older about all thats left of Rockfords working-age population. Rockford Mayor Larry Morrissey, who is in his 40s, was elected on a platform of promising economic revitalization that would help bring young people including natives whove left back to town. Without strong cultural amenities or a major university, its been a tough sell. Lack of jobs presents the biggest obstacle. Even entry-level jobs paying just above minimum wage that once would have gone to teenagers or people in their 20s are now largely held by workers in their 50s. We have an aging population, and its getting poorer, said James Ryan, Rockfords city administrator. 1 Rockford may be an extreme case, but its not unique. Many former industrial cities in the Northeast and Midwest are growing both older and less affluent. Among the nations 100 largest metropolitan areas, the ones that have had the highest percentage growth of seniors are struggling places such as Scranton, Pa., Buffalo, N.Y., and Youngstown, Ohio. 2 They have higher concentrations of seniors, says William Frey, a demographer at the Brookings Institution think tank who has analyzed 2010 census data on the location of seniors. The younger people have left. There are metropolitan areas in Florida that have a high density of people over age 65. But the number of seniors and aging baby boomers who pick up and move to warmer climes

in Florida and Arizona is relatively small. Most people retire in their own homes, or at least their own counties. You can certainly find lots of upper-middle-class baby boomers who are coping quite well, moving into college towns where there are good social services available and good medical services, says demographer Phillip Longman, a senior research fellow at the New America Foundation. The vast majority of baby boomers, however, are often stuck underwater in postwar tract housing and more recent exurban construction. They cant get out if they wanted to. Frey says its important for communities, particularly in the suburbs that were planned with younger populations in mind, to learn to adapt to aging ones. Every metropolitan area, he says, is seeing marked growth in its senior population and will see more as boomers age. The baby boom python keeps rolling along, he says. In recent years, many local governments and nonprofit groups have tried to come up with programs, such as increased transit, that will help address the needs of populations that are aging in place. About 40 localities, including Atlanta, Iowa City, Iowa, and Pima County, Ariz., have passed ordinances mapping out voluntary or mandatory design requirements for new-home construction that would accommodate the needs of seniors and the disabled, sparing more of them from moving to nursing homes. We could save a lot of money if individuals could continue to live in their own homes and receive in-home nursing if they need it, says Rep. Jan Schakowsky, D-Ill., who has introduced inclusive home design legislation at the federal level. Helping seniors cope with chronic disease is another way to keep them out of nursing homes. Thats why Elder Ser-

keep working longer for that reason or perhaps out of a desire to keep mentally and socially active. Many have speculated that the next generation of older Americans will want to volunteer or work part time, if not stay in their same job past the normal retirement age. Theres not going to be a shrinking entry-level workforce, but its not going to be growing either, says Jackson of the Center for Strategic and International Studies. There may be demand for older workers. But not everyone is convinced that many more people will be able to keep working well into their 60s or

even 70s. Robert H. Binstock, a professor of aging and public policy at Case Western Reserve University, notes that although people are living longer, theyre also afflicted with chronic diseases for longer periods of time. A lot of them cant do their jobs anymore, he says. The whole notion that everybody is going to be able to keep doing their job until 70, its silly. Blahous, the former Bush administration official, dismisses such arguments. Social Security already makes provisions for disabilities, and people worked, on average, longer a half-

century ago, he says. People take early retirement more often, Blahous says, not because more people are physically breaking down. Its because its financially beneficial. But putting aside arguments about whether people are physically capable of working longer, theres also the question of whether they can find work. Alicia Munnell, director of the Boston College Center for Retirement Research, says employers will never say they wouldnt hire older people thats against the law but they are very ho hum about the prospect. Her center has conducted surveys that show

582

CQ Researcher

Its not just the lack of provices of Merrimack Valley gramming help offered by govin Lawrence, Mass., has ernments that is a problem for been working with seniors aging communities, but also a and physicians to help codecline in basic services and ordinate management of amenities, Binstock says. prescription drug regimens Youve got lots of places that and other treatments. Were are aging, and the young people not a medical facility, but are moving out, particularly in what we have is the abilirural areas, he says. Youre going ty to draw elders in and to have communities that arent educate them on their even going to have grocery stores. health care, says Rosanne Eighty-year-old Ada Noda, of St. Augustine, Fla., developed Some states have a youth DiStefano, the facilitys exhealth problems and couldnt work, forcing her to declare bankruptcy. Aging trends are seen by many experts as a population that is growing more ecutive director. significant reason for the climb in health care costs. But rapidly than the older populaDiStefanos program has health economists say medical costs are rising largely because tion, notably in the Southwest, been widely imitated in of the increasing availability of expensive treatments. says Frey. But aging populaMassachusetts, as have a tions are growing in many number of other innovations designed to help residents adjust to old age. But such parts of the country not accustomed to accommodating them. The localities where older residents are starting to predomprograms are having trouble attracting funding in the present inate, such as Rockford, are the ones that are going to be budget environment. Many local governments are providing exercise classes and most severely hit, says Frey. We have a country thats aging nutrition assistance for seniors, but a survey by the National everywhere, but its only young in certain spots. Association of Area Agencies on Aging found that finance and Alan Greenblatt funding problems are the biggest challenge localities face in adjusting to an aging population. Thirty percent of local gov1 Ted C. Fishman, Shock of Gray (2010), p. 235. ernments say that their overall revenues are in decline. 3 If you go community by community, sure, some have de- 2 For background, see Thomas J. Billitteri, Blighted Cities, CQ Researcher, veloped programs that are better than others, says Robert H. Nov. 12, 2010, pp. 941-964. 3 The Maturing of America: Communities Moving Forward for an Aging Binstock, a professor of aging and public policy at Case West- Population, National Association of Area Agencies on Aging, June 2011, ern Reserve University. Overall, its a tremendous problem. www.n4a.org/files/MOA_FINAL_Rpt.pdf, p. iii.
AP Photo/Jake Roth

employers are worried about issues such as older workers stamina, ability to learn new skills and adaptability to changing technology. Thus, although the economics of both entitlement programs and household finances would seem to dictate that more Americans will have to work longer, their chances of doing so might not be as good as they would wish. We see employers willing to keep older workers, but they are reluctant to hire [older] people who are new to the payroll, says the Urban Institutes Johnson. We know that when older people lose their jobs, getting a new

job is harder, and the periods of unemployment are longer. Will spending on health care for the elderly bankrupt the United States? Health care costs already consume more than double the share of the economy that they did 30 years ago. They are expected to consume $2.8 trillion this year, or 17.9 percent of gross domestic product (GDP), according to the federal Centers on Medicare and Medicaid Services (CMS). Thats up from 8.1 percent of the economy in 1975. 16

Medicare and Medicaid spending have grown at a similar pace. The two programs, which provide coverage for seniors and the poor and disabled, respectively, are on course to grow from about 4 percent of GDP in 2008 to nearly 7 percent by 2035. 17 The 2010 federal health-care law, known as the Affordable Care Act, was designed to cut Medicare costs by nearly $120 billion over the next five years. 18 But Medicares actuaries worry that savings from the 2010 law cant all be relied upon. Thats because Congress has frequently canceled plans to lower Medicare fees

www.cqresearcher.com

July 15, 2011

583

AGING POPULATION
U.S. Population Growing Grayer
A record 40 million Americans are age 65 or older, nearly double the total four decades ago. The number of seniors has risen every decade since 1880.
(in millions)

50 40 30 20 10 0

Number of Americans Age 65 or Older, 1880-2010

1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Sources: Life Expectancy for Social Security, Social Security Administration, www.ssa.gov/history/lifeexpect.html; Prole of General Population and Housing Characteristics: 2010, U.S. Census Bureau, 2010, factnder2.census.gov/faces/ tableservices/jsf/pages/productview.xhtml?pid=DEC_10_DP_DPDP1&prodType=table.

for hospitals and physicians. 19 As a result, the Medicare trust fund is on course to run out of money in 2024 five years earlier than previously predicted according to Richard Foster, the chief actuary at CMS. Rising health care costs are a burden not just for the government but for individuals as well. Were spending about $8,000 more annually for insurance for a family of four than we did in 2000, says Paul Hewitt, vice president of research at the Coalition for Affordable Health Coverage, an advocacy group in Washington. Experts say aging trends are a significant reason for the climb in health care costs and an important source of pressure on the federal budget. Its worth keeping in mind that a significant share of health care growth is demographically based, says Jackson of the Center for Strategic and International Studies. Youre looking at a steep rise in cost just because of the rise in the average age of the beneficiaries the aging of the aged. But health economists say aging trends are far from the whole story. Medical costs are rising largely because of the ever-increasing availabil-

ity of expensive treatments in the health care system a system that treats young and old alike. The real problem is not the aging of the population, but the rise of health care costs, says Case Westerns Binstock, a former president of the Gerontological Society of America. We dont look at the elephant in the room here, which is the enormous profits of the medicalindustrial complex. Most experts agree that major alterations are in order. Some are discouraged that the two major parties seem worlds apart on health care issues. Both parties have to recognize the need to compromise, says the Urban Institutes Johnson. That does not appear imminent. Republicans have pledged to repeal the 2010 health care law, considered one of Obamas signature achievements, while Democrats intend to use the GOPs controversial plan to turn Medicare into something resembling a voucher program against them in the 2012 elections. Even as congressional Republicans seek to slash Medicare and other entitlements, they oppose the Independent Payment Advisory Board, estab-

lished by the 2010 health care law, which is meant to make recommendations for Medicare spending cuts when its growth exceeds GDP growth by more than 1 percent. Cutting providers eventually cuts benefits because they are less available, said Sen. Jon Kyl, R-Ariz., the minority whip. You dont have as many physicians, for example, to take care of Medicare patients, so either people have to wait a lot longer or they never get to see the physician theyd like to. 20 But if a political deal is not reached, the consequences could be dire, experts warn. The Congressional Budget Office (CBO) says health care costs, on their current course, could swallow all of GDP by 2082. 21 The risk of bankruptcy from health costs in particular, says Hewitt, are exactly what bond rating agencies have warned about when they have threatened recently to downgrade U.S. debt meaning the federal government may not be able to borrow money as cheaply because theres more risk that it wont be able to cover its interest payments. Three-quarters of the projected deficits over the next 10 years are new health care spending, according to CBO, Hewitt says. If you could hold health costs at 2011 levels, you wouldnt have any deficit of note in 2021. Theres no question that were on course for health care costs to bankrupt the country, says the New America Foundations MacGuineas. You cant have anything growing faster than GDP forever, because it consumes more and more of the economy. That may be the greatest danger. MacGuineas, like other budget experts, predicts that some sort of change will be made in health care spending, because present trends are not sustainable. But the changes wont come without pain and political difficulty. In the meantime, rising health costs may continue to squeeze spending on other programs.

584

CQ Researcher

Will the young and old fight over resources? When he unveiled his budget in February, New York City Mayor Michael Bloomberg warned that the city faced tough choices because of a budget shortfall of nearly $5 billion. Everybody expects you to do everything, the mayor said. Thats not the world we live in. 22 Bloomberg felt he had no choice but to threaten layoffs of more than 4,000 school teachers. At the same time, however, his budget contained a new initiative: the construction of 10 megacenters for senior citizens. Both ideas were ultimately rejected by the city council. Still, says the Urban Institutes Johnson, That was striking. It seems to be the essence of the potential for intergenerational combat. The idea that aging boomers will drain the nations resources through entitlements such as Social Security and Medicare and that younger generations are not just going to resent but protest it has seeped into popular culture. It forms the premise, for example, of satirical novels such as Christopher Buckleys Boomsday and Albert Brooks 2030. While older voters demand full funding for Social Security and Medicare, younger voters may worry that the growth of those expensive programs is crowding out spending on areas that benefit them more directly, such as education and transportation. Or the young might want to see entitlements cut in order to chop deficits that theyll eventually have to repay. I think its amazing weve gotten this far without younger generations getting more agitated about constantly investing in seniors, with no similar promises made for productive investments for young people, says MacGuineas. Voting schisms along generational lines have become apparent in some recent elections. You had this overwhelming tilt of millennials to the

Elderly a Growing Share of Electorate


The proportion of the American electorate age 65 and older has risen modestly over the past 20 years, from 17 percent in 1990 to 19 percent in 2010. But it is expected to grow sharply over the next 40 years, topping 30 percent by 2050.
(percentage)

35% 30 25 20 15 1990 * projected

Voting-age Population Age 65 and Older, 1990-2050

2000

2010

2020*

2030*

2040*

2050*

Sources: United States 1990 Census of Population, U.S. Census Bureau, www.census.gov/prod/cen1990/cp1/cp-1-1.pdf; United States 2000 Census of Population and Housing, U.S. Census Bureau, November 2010, www.census. gov/prod/cen2000/phc-1-1-pt1.pdf; Projections of the Population by Selected Age Groups and Sex for the United States: 2010 to 2050, U.S. Census Bureau, 2008, www.census.gov/population/www/projections/les/nation/summary/np2008-t2.xls.

Democrats and Obama in 2008, says Howe, co-author of Millennials Rising, about the generation born between 1982 and 2002. Obama and McCain Sen. John McCain, Obamas GOP opponent were dead even among those 30 and over. Older Americans voted disproportionately for GOP candidates in 2010. But Democrats won a special election in May in a traditionally Republican congressional district in upstate New York. The election was widely interpreted as a referendum on the House GOPs plan to turn Medicare into a form of voucher program, with seniors turning out in force to reject the idea and the Republican candidate. Over the years, until very recently, theres been very little evidence that older people vote on the basis of old-age benefits as a bloc, says Binstock at Case Western Reserve. Its only in 2010 and the 26th District in New York that you begin to see some signs of this, particularly in relation to Medicare.

Howe and others say boomers, throughout their adult lives, have not voted as a predictable bloc. If they start to in old age, however, they would be formidable. As the population ages, the electorate the group of people actually voting is growing older at a disproportionate rate. The percentage of the voting-age population that is over 65 is expected to climb by more than 10 percent over the next 25 years. 23 (See graph, above.) And, because older voters tend to go to the polls more regularly, their share of the electorate will climb even more, Binstock predicts. Some political scientists are skeptical that there will be a young persons revolt, or even noticeable friction between the generations. I dont buy the generational-conflict theory, says Alan Abramowitz, a political scientist at Emory University. Programs that benefit the elderly, such as Social Security and Medicare, also benefit their children and grandchildren. If you cut benefits for the elderly, one conse-

www.cqresearcher.com

July 15, 2011

585

Getty Images/Joe Raedle

AGING POPULATION
quence will be to largely synonymous shift costs onto their with death. Older peochildren and reduce ple were both rarer and income available to more vulnerable to sudpay for, among other den death due to such things, education for things as infectious distheir children. eases and poor sanitaOthers echo this tion. But even as modpoint, noting that oldern medicine has age entitlements keep conquered diseases that seniors from being a afflict the old, it has done financial burden on even more to address their children, while infant mortality. older voters will want With fewer people to see young people dying young, life exsucceed through edpectancy has increased. ucation in part, to And healthier babies help pay the taxes have coincided with Walter Breuning celebrates his 113th birthday at a retirement home in that fund their entiother societal and ecoGreat Falls, Mont., on Sept. 21, 2009. At his death in April 2011 at age tlements. nomic factors to bring 114, he was the last American man born in the 19th century and one of the worlds oldest people. The oldest of the 78 million Americans born Older people birthrates down. As during the post-World War II baby boom are turning 65 this year, while really do care about prosperity grows, death the share of the population over 85 is growing even faster. their grandchildren rates fall. And the adand obviously have vent of pensions and a financial stake in having a proother social-insurance programs has ductive workforce, says Rother, the meant that parents no longer have as AARP vice president. Younger peogreat a need for large families to supple need to look forward to a seport them as they age. cure retirement, and they obviously Meanwhile, womens roles have cant vote to limit Medicare without changed. Many now balance reproduchaving repercussions for them later. tion with concerns and responsibilities Still, some observers say resentment or most of human history, jour- outside the home. Contraceptives are among the young is only likely to nalist Ted C. Fishman points out more widely available, while abortion grow as entitlements take up an in- in his book about global aging, Shock has become legal and available. creasingly large share of a strained fed- of Gray, people who lived past 45 had Finally, as American society has eral budget. And some worry that the beaten the odds. Life expectancy bare- urbanized, fewer families need to intergenerational compact may be ly budged from 25 years during the have multiple children to help work frayed by the fact that the older Amer- Roman Empire to 30 years at the dawn in the fields. icans who receive entitlements are of the 20th century. 24 predominantly white, while the school Until the Industrial Revolution, peoand working-age populations will be ple 65 or older never comprised more increasingly made up of minorities, in- than 3 or 4 percent of the population. n the 1930s, demographers predictcluding Hispanics and Asians. (See side- Today, they average 16 percent in the ed that after a long period of debar, p. 588.) developed world and their share Despite the rumblings, I think the is expected to rise to nearly 25 per- cline in birthrates dating back to the population may come to appreciate that cent by 2030. 25 (The share of Amer- Industrial Revolution, the U.S. populaold-age benefits are actually things that icans over 65 will be nearly 20 per- tion would stagnate and was unlikely benefit all generations, Binstock says. cent by then.) Demographers call such to rise above 150 million by centurys However, I do think that the growing shifts from historic norms the demo- end. But birthrates shot up immediately after World War II, quickly rising to Latino population may very well come graphic transition. to resent paying taxes to support an A confluence of factors has led to more than 4 million births per year. Continued on p. 588 older white generation. the current transition. Aging was once

BACKGROUND
Living Longer

Fertility Splurge

586

CQ Researcher

Getty Images/John Moore

Chronology
1940s-1960s High postwar birth rates fuel
suburban growth. 1946 First of the 78 million American baby boomers are born. 1956 Women are allowed to collect early benefits under Social Security at age 62. The same deal is offered to men in 1962. 1959 More than 50 million Americans are under age 14, representing 30 percent of the population. 1960 Sun City opens in Arizona, pioneering the retirement community idea. 1960 Seventy percent of women ages 20-24 are married. 1965 Forty-one percent of Americans are under age 20. . . . Medicare and Medicaid, the main government health programs for the elderly, poor and disabled, are created.

1990 Proportion of married women ages 20-24 drops to 32 percent. 1992 Bill Clinton elected as the first boomer president.

the retirement age for pilots from 60 to 65. . . . The nations earliestborn boomer, Kathleen CaseyKirschling, applies for Social Security benefits.

2000s

2010s

Oldest boomers, enter their 60s, raising concerns about the cost of their retirements. 2000 For every American 65 or older, there are 3.4 workers contributing payroll taxes to Social Security a ratio that will shrink to 2.0 by 2030. 2003 Congress passes an expansion of Medicare that offers a prescription drug benefit to seniors. . . . Pima County, Ariz., becomes the first local government to require all new homes to be designed to accommodate seniors and the disabled. 2005 The pregnancy rate of 103.2 per 1,000 women aged 15 to 44 years old is 11 percent below the 1990 peak of 115.8. 2006 President George W. Bush, one of the oldest boomers, turns 60. . . . The Pension Protection Act allows workers to dip into their pensions while working past 62. 2007 Federal Reserve Chairman Ben S. Bernanke predicts Social Security and Medicare will swallow 15 percent of annual economic output by 2030. . . . The Federal Aviation Administration proposes increasing

The number of older Americans continues to rise, but the U.S. enjoys more growth among school and working-age populations than other rich nations. 2010 The number of workers 55 and over hits 26 million, which is a 46 percent increase since 2000. Congress enacts the Affordable Care Act, designed to expand health coverage, including a doubling of the eligible population under Medicaid. 2011 March 16: The Centers for Disease Control and Prevention announces that life expectancy for Americans at birth increased in 2009 to 78.2 years. . . . April 15: The House passes a budget that would convert Medicare into a voucher program for those now under 55. . . . May 24: Democrats win a special election in a traditionally Republican district in upstate New York; the race is seen as a referendum on the House GOP Medicare proposal. 2015 Working-age populations are projected to start declining in the developed world, with the United States as the major exception. 2025 Population growth is expected to stall in every developed country except the United States, which is also expected to be the only developed nation with more children under age 20 than elderly over age 65.
July 15, 2011

1980s-1990s Boomers set aside youthful rebellion to take a leading role in wealth creation and politics. 1983 Congress approves a gradual increase in the age at which Americans can collect full Social Security benefits, from 65 to 67. 1986 The Age Discrimination Employment Act is amended to eliminate mandatory retirement ages.
www.cqresearcher.com

587

AGING POPULATION

Minority Youths Are Rising Demographic Force


Trend has major implications for aging whites.
hite America is aging, while its young people are increasingly dominated by members of ethnic and racial minorities. As a result, the days when the United States will no longer be a white-majority nation are coming sooner than demographers had long expected. That could lead to a political struggle over resources, some social scientists contend. There could be a generational battle over governmental priorities one with racial or ethnic overtones. Younger members of minority groups may not want to fund entitlement programs that chiefly benefit a mostly white cohort of older Americans. Conversely, the elderly who hold disproportionate political power thanks to higher rates of voter turnout may seek to protect such programs at the expense of investments in government programs that chiefly benefit the young. Over time, the major focus in this struggle is likely to be between an aging white population that appears increasingly resistant to taxes and dubious of public spending, and a minority population that overwhelmingly views government education, health and social-welfare programs as the best ladder of opportunity for its children, political journalist Ronald Brownstein wrote in the National Journal last year. 1 In a number of places, minorities already outnumber whites at least among schoolchildren. The population of white children declined by 4.3 million from 2000 to 2010, while that of Hispanic children rose by 5.5 million, according to the 2010 decennial census. Indeed, the number of white children decreased in 46 states between 2000 and 2010. Whites now make up a minority among

those younger than 18 in 10 states and 35 large metropolitan areas, including Atlanta, Dallas and Orlando. In Texas, 95 percent of the growth of the youth population occurred among Hispanics. What a lot of older people dont understand is that, to the extent we have a growing youth population, its entirely due to minorities, says William Frey, a demographer at the Brookings Institution who has analyzed the 2010 census data on children. Twenty-three states have seen a decline in the total number of children. In the baby boom generation, about 20 percent never had children, which is about double the rate of the previous generation of elders, says Phillip Longman, a policy researcher at the New America Foundation think tank in Washington. Now, youre talking about this aging population that doesnt have any family support and doesnt have any biological relations, he says. Its not so much that theyre white as they forgot to have children. This opens one of the big questions regarding the differences between an older, white population and a younger population made up more from minorities. In his 2007 book Immigrants and Boomers, demographer Dowell Myers worried that there is little kinship or sense of shared identification between the groups. But Longman says such concerns may be overstated. Thirty years ago, I predicted that would be a big thing, the conflict between generations made even worse by the fact that it has an ethnic and racial component to it as well, he says. Longman argues now, however, that racial lines are getting blurrier. Just as the definition of who was white expanded in

Continued from p. 586

All told, about 76 million children were born in the United States between 1946 and 1964, generally considered the period of the baby boom. (Several million have died, but immigrants have more than made up for those numbers, bringing the baby boom total to 78 million.) Simply put, the baby boom was a disturbance which emanated from a decade-and-a-half-long fertility splurge on the part of American couples, concluded the Population Reference Bureau in 1980. 26 Childbearing long delayed first by the Great Depression of the 1930s and then by war was put off no longer.

Women married younger and had their first babies at an earlier age than at any time in modern history. 27 The fertility rate, which refers to the average number of children born to women of childbearing years, had averaged 2.1 children per woman during the 1930s but peaked at 3.7 in the late 1950s. 28 The number of babies being born certainly surprised the General Electric Co. in January 1953. It promised five shares of stock to any employee who had a baby on Oct. 15, the companys 75th anniversary. GE expected maybe eight employees would qualify. Instead they had to hand over stock to 189 workers. 29

The time was ripe, economically, for many more people to have children than had done so during the Depression. GDP expanded rapidly, from $227 billion in 1940 to $488 billion in 1960. Median family income and wages climbed steadily because of tight labor markets, while inflation remained low. The Servicemembers Readjustment Act of 1944, commonly known as the GI Bill of Rights, helped more people in the middle class buy their first homes and get college educations, significantly increasing their lifetime earnings. Never had so many people, anywhere, been so well off, observed U.S. News & World Report in 1957. 30

588

CQ Researcher

White parents with chilthe first half of the 20th cendren may be more likely to lotury to include groups such cate in select neighborhoods as the Irish and Italians, Hisand communities, perhaps those panics will increasingly be with better schools, or superiseen as white, Longman or public amenities related to says. I just think the meltchildrearing, he writes. 3 ing pot continues, he says. Polls indicate that younger It will be in the interest Americans are readier to emof the aging white populabrace racial diversity than tion to see that young peotheir elders, while more deple, including Hispanics and Minorities are fueling the nations growing youth scribe themselves as mulother minorities, fulfill their population. Above, black and Hispanic students at the Harlem Success Academy, a New York charter school. tiracial. Still, racial animosieducational potential, says ties and differences persist, Myers. Otherwise, they will and they may become exacerbated as the white population ages be caught short as the working-age population, which pays and the minority population grows larger. the bulk of the taxes that support programs that benefit The public-school system is one place where tensions could seniors, is made up largely of minorities. The person you rise. Gaps on average reading and math test scores posted by educated 20 years ago, thats who is going to buy your Hispanics and non-Hispanic whites have been narrowing, but house, he says. remain wide. Despite the closing white-Hispanic gaps on civics Alan Greenblatt performance, the fact is were still seeing gaps in the double digits, said Leticia Van de Putte, a Texas state senator who sits on the board that oversees National Assessment of Edu- 1 Ronald Brownstein, The Gray and The Brown: The Generational Mismatch, National Journal, July 24, 2010, www.nationaljournal.com/magazine/ cational Progress testing. 2 the-gray-and-the-brown-the-generational-mismatch-20100724. Because school funding relies partly on property tax as- 2 State Senators React to Hispanic Achievement Gains, Hispanic Tips, May 5, sessments in most places, such disparities may be perpetuated 2011, www.hispanictips.com/2011/05/05/state-senators-react-to-hispanicby racial segregation. Although the 2010 census showed a de- achievement-gains-on-latest-naep-civics-report-card-that-showed-substantialgains-in-the-performance-of-hispanic-students-at-grades-four-eight-and-12/ cline in residential segregation, black and Hispanic children are 3 William Frey, Americas Diverse Future, The Brookings Institution, April 2011, more likely to live in a segregated neighborhood than black p. 10, www.brookings.edu/~/media/Files/rc/papers/2011/0406_census_diversity_ frey/0406_census_diversity_frey.pdf. and Hispanic adults, according to Frey.
Getty Images/Chris Hondros

The Baby Bust


erhaps because of the advent of the birth control pill in 1960 and the fact that more women had careers, boomers were slower to become parents than their parents had been. Between 1965 and 1976 the era of the so-called baby bust fertility among whites dropped below replacement levels. 31 After just two decades of a fertility splurge, Americans went back to marrying later and producing fewer children. In 1990, only 32 percent of women 20-24 were married, com-

pared to 70 percent in 1960. Social scientists began to posit that it was the baby boom that was exceptional in American history, not the subsequent bust. 32 But the baby bust was followed by the uptick known as the echo boom, when many boomers became parents, racking up 64 million live births between 1977 and 1993. 33 Meanwhile, boomers continued to dominate many aspects of American life and culture. Some criticized them as frivolous, blaming their personal habits and quests for self-fulfillment for every social ill from divorce rates to teen drug use. Others defended

them for fighting for greater rights for women and gays, among others. The debate about boomers values became a recurring motif in politics especially after Bill Clinton, who would become the first boomer president, emerged on the national stage in 1992. Political scientists have noted that boomers failed to coalesce behind a single political party, with many growing more fiscally conservative during the 1980s but remaining socially liberal, with views on race, AIDS, drugs and womens rights distinctly different from their parents generation. But the mere fact of their massive numbers made them hard to ig-

www.cqresearcher.com

July 15, 2011

589

AGING POPULATION
nore and created policy challenges buy private insurance is an example. A The percentage of adults who are as they aged. This year, the first of survey conducted in May by the Pew providing personal or financial care about 78 million baby boomers turn Research Center for the People & the to a parent has tripled since 1994, 60, including two of my dads fa- Press found opposition to the plan was according to the MetLife Mature Marvorite people, me and President especially high among people who say ket Institute. Nearly 10 million adult Clinton, President George W. Bush they have heard a lot about this pro- children over the age of 50 care for said during his 2006 State of the posal fully 56 percent are opposed, their aging parents, said Sandra Union address. This milestone is while 33 percent are in favor. 36 Timmermann, the institutes director. more than a personal crisis. It is a The politics of this is, the baby Assessing the long-term financial imnational challenge. The retirement of boom is a generation thats always pact of caregiving for aging parents the baby boom on caregivers themgeneration will selves, especially those put unprecedented who must curtail their strains on the fedworking careers to do eral government. 34 so, is especially important, since it can Combined spendjeopardize their future ing for Social Secufinancial security. 37 rity, Medicare and Boomers are quite Medicaid will condifferent from earlier sume 60 percent of generations as theyre the federal budget approaching this age, by 2030, Bush said, says William H. Frey, presenting future a demographer at the Congresses with Brookings Institution, a impossible choices centrist think tank in staggering tax Washington. For exincreases, immense ample, boomer women deficits or deep cuts are much more likein every category of A nurse examines stroke victim Elvira Tesarek at her home in Warren, ly to have lived indespending. R.I., in May 2011. Nearly 1,300 elderly and disabled adults in the state have been able to return home under a pilot program pendent lives, been Bush had spent designed to cut spending on Medicare. head of households a good chunk of and worked. 2005 touting a plan But theres a great to revamp Social Security, meant to be the signature been pretty willing to vote themselves deal of economic inequality within the domestic achievement of his second good fiscal deals, says MacGuineas of baby boom generation, he notes, which means many retirees will have a hard term. But the plan which would the New America Foundation. time making ends meet. 38 In addihave allowed workers born after 1950 tion, Frey says, boomers didnt have to put part of their payroll taxes into as many children as their parents genprivate investment accounts in exeration, so they cant rely on them change for cuts in traditional benefits oomers will add to the rising num- for support. went nowhere. A Washington ber of seniors but their parents, Not everyone views the aging of Post/ABC News Poll found that 58 percent of those surveyed said the more in many cases, will still be around. America as bad news. An aging popthey heard about Bushs plan, the less Those 85 and over now make up the ulation, says Eric Kingson, a professor fastest-growing segment of the U.S. pop- of social work at Syracuse University, they liked it. 35 More recent attempts to overhaul the ulation, according to the National Insti- is a sign that society has successfully major entitlement plans benefiting se- tute on Aging. That means that even as fostered an economy that helps peoniors have proved no more popular. A boomers enter what has traditionally ple lead long, prosperous lives. PopHouse Republican plan to convert been considered old age, they are sand- ulation aging is not just about the old, Medicare from an insurance program wiched between still-living parents and he says. Its about how all of our ininto a credit that would help seniors their own children and grandchildren. stitutions are going to change.

Sandwich Generation

590

CQ Researcher

McClatchy-Tribune via Getty Images/Jay Reiter

CURRENT SITUATION
Financial Insecurity
ven as federal officials debate the affordability of Social Security and Medicare as the population ages, individual Americans are increasingly concerned about their own ability to support themselves during retirement. Even before the financial crisis of 2008, income and wealth inequality was growing among seniors. Back in 2004, the top 5 percent of the baby boomers controlled more than half of the assets, says Diane Oakley, executive director of the National Institute on Retirement Security in Washington. The bottom half had less than 3 percent of the assets. She hopes lower-income Americans have been able to save more for retirement since then, but stock market losses and the collapse of the housing bubble make that unlikely. In a recent poll, 78 percent say they cant save enough on their own to be secure in retirement, says Brian Perlman, president and CEO of Mathew Greenwald & Associates, a market research firm in Washington. Peoples beliefs are that its harder and harder to do that. The risk for retirement has shifted more onto individuals, Oakley says. From 1980 to 2008, she says, the percentage of private-sector workers covered by defined-benefit pension plans which offer a guaranteed income throughout retirement dropped from 38 percent to 20 percent. Meanwhile, defined-contribution plans, such as 401(k) plans, have grown. These plans, which shift the burden for retirement savings onto individuals, have certain tax advantages, but

like any personal savings account, they can be drained dry. Unlike definedbenefit plans, the money is gone once 401(k) assets are depleted. Americans are not contributing enough to 401(k)s to build up sufficient retirement nest eggs. According to Towers Watson, a human-resources consulting firm, only 57.3 percent of Americans have enough in their retirement accounts to replace one years worth of working salary. Only 10.9 percent had more than four times their current salary saved up. 39 Because most people are going to be retired more than a few years, that presents a problem. For most, Social Security will represent the bulk of their retirement income, but benefits average only about $14,000 per year. Only about half of workers are in any kind of retirement plan through their employers, says the Urban Institutes Johnson. People dont make the most of their 401(k) plans they dont contribute the maximum, or at all.

Automatic Enrollment
ost workers have to sign up for 401(k) plans, but Johnson favors automatic enrollment. Automatic enrollment plans would allow employers to deduct part of each paycheck and put the money toward employees retirement, unless a worker made the express decision to opt out. Weve run some simulations, Johnson says. If most people behave as we expect they would, based on past experience, automatic enrollment would increase retirement incomes for low- and moderate-income people by about 20 percent. The Obama administration supports the idea of automatic enrollment. The administration would like employers, even if they dont offer 401(k) accounts of their own, to enroll their workers in some kind of retirement account.

The basic idea is that an employer would simply do payroll deduction, says J. Mark Iwry, senior adviser to Treasury Secretary Timothy Geithner. When we do automatic enrollment in 401(k)s, the [participation] rate goes up from two-thirds or threequarters to more than 90 percent. But the idea of enrolling workers automatically into retirement savings accounts may run into opposition in Congress because of budget concerns. Obamas deficit commission last year recommended lowering the cap on annual contributions allowed to such retirement savings accounts. 40 Aside from putting more money aside for retirement, individuals will also come to rely more on income earned later in life whether by staying in their old job longer or finding a new one after retiring, many economists believe. If people want to have a secure retirement, they really should work longer, says Alicia Munnell, director of the Center for Retirement Research at Boston College. Theres an enormous benefit in terms of what your Social Security benefits and 401(k) accounts will be. And then, you have [fewer] years over which to spread your savings. All were talking about, basically, is three to four more years. Were not talking about into your 90s.

Government Cutbacks
ost government workers can count on a relatively comfortable retirement. In contrast to privatesector employees, about 90 percent of state and local government workers are enrolled in defined-benefit programs. But the disparity between the plans offered to government workers and those at private companies, along with severe budget problems confronting state and local government workers,

www.cqresearcher.com

July 15, 2011

591

AGING POPULATION
is increasing pressure on retirement benefits in the public sector, too. The gap between what states had promised to pay out in pensions and retirement health benefits and the assets they have to pay them had grown to more than $1.26 trillion by the end of the 2009 budget year, according to the Pew Center on the States. 41 Some economists say the gap is even larger. State and local retirement accounts might be more than $1 trillion in the red, but union leaders say its unfair to blame government workers because legislatures failed to make scheduled payments to pension funds over the years. Better to blame Wall Street, they say, for racking up record profits even as large-scale investment losses have blown a hole through pension accounts. Theyve blamed public empowers that would allow him to change retirement-benefit formulas. 42 Reed warns that he will have to lay off two-thirds of the citys work force if he cant achieve significant savings in retirement-benefit costs. What consumed $65 million of the citys budget a decade ago already accounts for $250 million and half the citys current budget shortfall. Retirement costs could rise to as much as $650 million annually over the next few years, Reed says. In Reeds mind, its simply a math problem. We are draining money out of services and pouring them into retirement benefits, Reed says. However you define unsustainable, its unsustainable. Public-employee unions concede that Reeds complaints are borne out of real problems with San Joses finances. They dont agree that his approach is the best way to address those problems, however. And union leaders in San Jose, like their colleagues elsewhere, think stripping public employees of promised benefits will undermine one of the few pockets of retirement security. Its perfectly understandable that workers in the private sector are worried about their retirement security, says John Liu, New York Citys comptroller. But to scapegoat public employees will fuel a race to the bottom in our country. Yet, further cutbacks appear inevitable, even for government workers who have long counted on benefits that would allow them to retire free of financial anxiety. State officials appear to have lost some of their initial enthusiasm for moving to 401(k)style plans, however, because of the enormous upfront costs in switching from traditional pensions. In Kentucky, increased costs are estimated at $8 billion over 15 years. Nevada would run through $1.2 billion in just two years. 43
Continued on p. 594

We are draining money out of services and pouring them into retirement benefits. However you define unsustainable, its unsustainable.
Mayor Chuck Reed San Jose, Calif.

About a dozen states have altered their pension systems over the past couple of years, according to the National Conference of State Legislatures. Most have made moves such as putting new employees into 401(k)style accounts, rather than enrolling them in defined-benefit plans.

Math and Politics


ut some governors and lawmakers have sought changes in retirement coverage for current workers as well. The battle over retirement benefits has turned political, most notably in Wisconsin, where legislation to strip most public employees of collective bargaining rights led to weeks of large-scale protests at the capital.

ployees for problems theyve never caused in the first place, says Randi Weingarten, president of the American Federation of Teachers. Patrick OConnor, an alderman in Chicago, agrees that unions have a point when they accuse government officials of not properly funding promised benefits. Still, he argues, cities and states have no choice but to cut back on benefits that are no longer affordable. Government cant blame the unions in total, OConnor says. Government is what put the benefits in place. But I dont think anybody who looks at pension plans thinks they can be funded at the levels theyre at. In San Jose, Calif., Mayor Chuck Reed declared a state of fiscal emergency in May, hoping he can persuade voters to give him additional

592

CQ Researcher

At Issue:
Should the retirement age be raised?
yes

ANDREW G. BIGGS
RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE
WRITTEN FOR CQ RESEARCHER, JULY 2011

NANCY ALTMAN AND ERIC KINGSON


CO-CHAIRS, STRENGTHEN SOCIAL SECURITY CAMPAIGN
WRITTEN FOR CQ RESEARCHER, JULY 2011

ocial Securitys retirement age should not be increased for anyone on the verge of retirement, but theres a good case for doing so over coming decades, as the Baby Boomers retire and the population ages. In 1950, the average retiree claimed Social Security benefits at age 68.5 and lived to around 76. Today, a typical retiree claims benefits at 63 and will live an additional two decades. Americans today live almost one-third of their adult lives in retirement, supported by an increasing tax burden on their kids and grandkids. This isnt simply unfair to future generations. It is also a waste of human talent. Are there some people who cant work longer? Of course. And for them, early retirement or disability benefits remain an option. But it would be strange in todays service economy if Americans, who work mostly in offices, could not work as long as prior generations who toiled in mines, mills and farms. Indeed, our longer lives are also healthier lives. According to the National Center for Health Statistics, among individuals ages 65-74 the share describing themselves as in fair or poor health dropped from 25.1 percent in 1983 to 18.5 percent in 2007. Overall, 75 percent of individuals over 65 report being in good, very good or excellent health. Its easy to scare people for instance, President Obamas Commission on Fiscal Responsibility and Reform would increase the retirement age to 69. But this would apply only to people who havent even been born yet and at retirement would live on average to age 88 almost 10 years longer than they did when Social Security started in the 1930s. It is true that life expectancies have risen faster for highearners than for low-income Americans. This is why almost every reform plan that raises the retirement age also makes Social Security more progressive, by boosting benefits for lowearners while trimming them for the rich. One option is to let the retirement age rise to 67 as scheduled, then increase it in future years as life spans rise. If life expectancies increase quickly, then the retirement age will follow; if life spans stay constant, the retirement age wont need to increase further. By itself, this would fix nearly one-quarter of Social Securitys deficit. Mathematically, we cant fix the entire entitlement deficit by raising taxes. And Medicare is far more likely to require tax increases than Social Security. So it only makes sense to reduce costs where we can. Increasing the retirement age is a reasonable response to longer lives.
no

yes no
July 15, 2011

o reduce unemployment during the 1961 recession, and in recognition that many Americans were unable to work until age 65, Congress allowed men to claim reduced Social Security benefits at age 62, just as it had for women in 1956. Speaking in support, Democratic Ohio Rep. Charles Vanik said that if 2 million male workers eventually retire under this program, 2 million job opportunities will be created. Ironically, with unemployment topping 9 percent, many in Congress today favor increasing Social Securitys full retirement age. This is the wrong policy today, would have been wrong in 1961 and will be wrong in the future. A retirement age increase is mathematically indistinguishable from a benefit cut, and ill-advised because benefits are too low. Congress has already increased the retirement age from 65 to 67, a 13 percent cut for people born after 1960. A further increase, from 67 to 69, would be another 13 percent cut for retired workers, no matter whether they claim benefits at age 62, age 70, or any age in between, and translates into lower benefits for many spouses and widow(er)s. Benefits are modest, averaging about $14,000, and the retirement prospects for persons in their 40s and early 50s are already dimmed by diminishing pension protections, shrinking 401(k) and IRA retirement savings, unemployment and declining home values. Retirement-age increases especially burden lower-wage and minority workers, who often have no choice but to retire early. It is well-known that many workers must stop work because of serious health and physical challenges; still others face age discrimination and job loss. Sixty-two percent of Latino males and 53 percent of older black male workers are in physically demanding or difficult jobs, compared with 42 percent of their white male counterparts. By retiring early, they claim permanently reduced benefits. A hardship exemption for these categories of workers has never been found to be politically feasible or workable. Lower-wage workers, on average, have seen little or no increase in life expectancy. Over the past quarter-century, the life expectancy of upper-income men increased by five years while life expectancy among lower-income men increased by only one year and that of lower-income women actually declined. For all these reasons, Congress should follow the will of the American people, who reject increasing the retirement age. Congress should consider eliminating Social Securitys projected shortfall by scrapping the cap on earnings subject to Social Securitys FICA contributions, as the American people strongly favor.

www.cqresearcher.com

593

AGING POPULATION
Continued from p. 592

Even the well-funded Pentagon is worried about whether it can afford to fund retirement benefits, including health care, at the levels soldiers and sailors have come to expect. Retiree pay will cost the Department of Defense about $50 billion next year, according to the Obama administrations proposed fiscal 2012 budget. Military health costs, which have doubled over the past decade, will run even more, with a fair share going to coverage of military retirees. We in the Department of Defense are on the same path that General Motors found itself on, retired Marine Maj. Gen. Arnold Punaro, who advises the Pentagon on financial operations, told NPR. General Motors did not start out to be a health care company that occasionally built an automobile. Today, were on the path in the Department of Defense to turn it into a benefits company that may occasionally kill a terrorist. 44 Robert Gates, who stepped down as Defense Secretary June 30, said the military may have to consider moving to a 401(k)-style plan. Financial problems make some sort of change to the Pentagons pension and retirement health formulas inevitable, he told Defense News. We are way behind the private sector in this. 45

OUTLOOK
Political Prospects
iven the costs associated with aging particularly those involving medical care some economists are growing pessimistic about the countrys long-term budget health. By the time the last of the boomers have turned 65, in 2029, there will be nearly twice as many people enrolled

in Medicare as there are today, according to AARP. Social Security has pretty much anticipated the aging population and built up a very large trust fund, says Rother, AARPs policy director. Medicare is the place where the stress shows. Health care costs are bound to be driven higher by an older population. Some worry Congress wont be able to agree on ways to significantly reduce growth in entitlement programs and thereby reduce the federal deficit. I just think the two parties are kind of locked in cement on this stuff, says Hewitt of the Coalition for Affordable Health Care. The question of whether Congress will change entitlements really depends on the attitudes of the voting public, he says. I frankly dont think that fiscal conservatives are going to be able to hold the line, because baby boomers in the end are going to decide they dont want to defund their retirement, Hewitt says. Myers, the USC demographer, says politicians will need to appeal to older voters to make big policy changes. Older Americans may love their entitlements, but theyll have to be convinced that younger, workingage people need money left over for productive investments in areas such as education and infrastructure and shouldnt be saddled with crippling debt, Myers says. The only winning political strategy is not to fight [older voters] but persuade them its in their interest, Myers says. I believe they control the electorate for the next 20 years, and we dont have 20 years to wait. Budget realities will force changes to entitlement programs in the next decade, says MacGuineas of the New American Foundation. And, she says, waiting until financial markets force fiscal changes, as has been happening in European countries such as Greece, wont be pleasant.

Theres no question that by 2020, changes will have been made, she says. What Im worried about is that changes may have been forced upon us changes made because of markets will be much more painful. Not everyone thinks some kind of fiscal crisis is inevitable. Blahous, the Hoover Institution fellow and Social Security trustee, says hes pessimistic, but not because he worries the country will face economic Armageddon. Instead, Blahous worries that continuing unbridled growth in major entitlement programs will mean well have more expensive government than weve ever had before, he says. Peoples after-tax income will not have the growth weve seen in the past. There are some positive predictions. The Urban Institutes Johnson says widowhood is becoming less common. Men are living longer, and the differences between men and womens mortality is lessening. Widowhood is still associated with poverty. Still, Johnson expects income inequality among the aged to continue to grow and more older Americans will need to work longer. Others say policy changes to health coverage are inevitable, despite the political opposition engendered both by President Obamas 2010 health care-expansion law and the House GOPs current effort to limit Medicare growth. Were going to be moving more and more toward managed care, says Binstock, the Case Western Reserve health policy professor, in the sense that therell be a fixed budget in terms of care for older people. Older people will be hurt as a result, Binstock contends. But the New America Foundations Longman isnt convinced. A move toward some form of managed care will lead to better health outcomes than the current U.S. health system, which

594

CQ Researcher

is prone to ill-informed treatment and mistakes, he says. I would hope in 10 years, we have turned the corner on the health care thing, Longman says. The idea that were going to let people go get any care they want from anybody they want, thats not going to work. Longman says the outlook is gloomy but that it wont be impossible to turn things around. As long as health care is restructured and as long as todays young people dont forget to have children, the U.S. should be able to care for its growing senior population, he says. But fewer people are having children and certainly fewer are having multiple children, notes Fishman, the author of Shock of Gray. Were about a generation away from children having no brothers and sisters, no aunts and uncles, no cousins, he says. People may be looking continuously for more family supports, but the family just wont be there. The prospect of fewer children and longer life expectancy means the median age will continue to rise. No matter the difficulties posed by the aging of the baby boom generation, they wont be solved by that generations passing. The boomers may seem like a large cohort of older people, Fishman says, but the median age is increasing and that wont turn around.

For background, see Marcia Clemmitt, National Debt, CQ Researcher, March 18, 2011, pp. 241-264. 5 For background, see the following CQ Researcher reports: Marcia Clemmitt, HealthCare Reform, June 11, 2010, pp. 505-528, updated May 24, 2011; Beth Baker, Treating Alzheimers, March 4, 2011, pp. 193-216; Alan Greenblatt, Aging Baby Boomers, Oct. 19, 2007, pp. 865-888; and Marcia Clemmitt, Caring for the Elderly, Oct. 13, 2006, pp. 841-864. 6 Richard Wolf, Medicare to Swell With Boomer Onslaught, USA Today, Jan 1. 2011, http:// abcnews.go.com/Politics/medicare-swell-babyboomer-onslaught/story?id=12504388. 7 From remarks at The 2011 Medicare Trustees Report: The Baby Boomer Tsunami, American Enterprise Institute, May 16, 2011. 8 See, for instance, CNN Poll: Majority Gives Thumbs Down to Ryan Medicare Plan, CNN.org, June 1, 2011, http://politicalticker.blogs.cnn. com/2011/06/01/cnn-poll-majority-gives-thumbsdown-to-ryan-plan/. 9 Laura Meckler, Key Seniors Association Pivots on Benefit Cut, The Wall Street Journal, June 17, 2011, http://online.wsj.com/article/ SB10001424052702304186404576389760955403 414.html. 10 For background, see Thomas J. Billitteri, Middle-Class Squeeze, CQ Researcher, March 6, 2009, pp. 201-224. 11 Employee Benefit Research Institute, The 2011 Retirement Confidence Survey: Confidence Drops to Record Lows, Reflecting the New Normal, March 2011, www.ebri.org/pdf/ surveys/rcs/2011/EBRI_03-2011_No355_RCS11.pdf. 12 U.S. Death Rate Falls for 10th Straight Year, Centers for Disease Control, March 16, 2011, www.cdc.gov/media/releases/2011/p03 16_deathrate.html.

13 Life Expectancy for Social Security, Social Security Administration, www.ssa.gov/history/ lifeexpect.html. 14 For background, see Kenneth Jost, PublicEmployee Unions, CQ Researcher, April 8, 2011, pp. 313-336; and Alan Greenblatt, Pension Crisis, CQ Researcher, Feb. 17, 2006, pp. 145-168. 15 For background, see the centers Web page on its National Retirement Risk Index publications at http://crr.bc.edu/special_projects/ national_retirement_risk_index.html. 16 See Annual Report of the Medicare Trustees, Center for Medicare and Medicaid Services, May 13, 2011, www.cms.gov/ReportsTrustFunds/ downloads/tr2011.pdf. 17 Choosing The Nations Fiscal Future, National Academies Press (2010), p. 79, available at www.ourfiscalfuture.org/wp-content/uploads/ fiscalfuture_full_report.pdf. 18 Strengthening Medicare: Better Health, Better Care, Lower Costs, Centers for Medicare and Medicaid Services, www.cms.gov/apps/ files/medicare-savings-report.pdf. 19 Matthew DoBias, Medicares Actuary Paints a Darker Picture Than Trustees, National Journal.com, May 23, 2011, www.nationaljournal.com/healthcare/medicare-s-actuarypaints-a-darker-picture-than-trustees-20110523. 20 Emily Ethridge, Republicans Decry Medicare Cost-Control Panel While Seeking Broad Cuts, CQ HealthBeat, June 8, 2011. 21 CBOS 2011 Long-Term Budget Outlook, Congressional Budget Office, www.cbo.gov/doc. cfm?index=12212. 22 Jonathan Lemire and Erin Einhorn, Mayor Bloomberg Unveils $65.6 Billion Budget, New York Daily News, Feb. 17, 2011, http:// articles.nydailynews.com/2011-02-17/local/286 28742_1_president-michael-mulgrew-mayorbloomberg-teacher-layoffs.

Notes
1 Double Jeopardy For Baby Boomers Proving Care For Their Parents, MetLife Mature Market Institute, June 2001, p. 2, www.metlife. com/assets/cao/mmi/publications/studies/2011/ mmi-caregiving-costs-working-caregivers.pdf. 2 For background, see Thomas J. Billitteri, Rethinking Retirement, CQ Researcher, June 19, 2009, pp. 549-572. 3 Matt Sedensky, Number of 100-Year-Olds is Booming in U.S., The Associated Press, April 26, 2011, http://news.yahoo.com/s/ap/ 20110426/ap_on_re_us/us_centenarian_boom.

About the Author


Alan Greenblatt covers foreign affairs for National Public Radio. He was previously a staff writer at Governing magazine and CQ Weekly, where he won the National Press Clubs Sandy Hume Award for political journalism. He graduated from San Francisco State University in 1986 and received a masters degree in English literature from the University of Virginia in 1988. For the CQ Researcher, he wrote Confronting Warming, Future of the GOP and Immigration Debate. His most recent CQ Global Researcher reports were Attacking Piracy and Rewriting History.

www.cqresearcher.com

July 15, 2011

595

AGING POPULATION
23 As Boomers Wrinkle, The Economist, Dec. 29, 2010, www.economist.com/node/17800237? story_id=17800237. 24 Ted C. Fishman, Shock of Gray (2011), p. 13. 25 Richard Jackson and Neil Howe, The Graying of the Great Powers (2008), p. 7. 26 Paul C. Light, Baby Boomers (1988), p. 10. 27 Herbert S. Klein, The U.S. Baby Bust in Historical Perspective, in Fred R. Harris., ed., The Baby Bust: Who Will Do the Work? Who Will Pay the Taxes? (2006), p. 115. 28 Light, op. cit., p. 23. 29 Steve Gillon, Boomer Nation: The Largest and Richest Generation Ever and How It Changed America (2004), p. 1. 30 Ibid., p. 6. 31 Klein., op. cit., p. 173. 32 Jeremy Greenwood, Ananth Seshadri and Guillaume Vandenbroucke, The Baby Boom and Baby Bust. American Economic Review, 2005, p. 183. 33 William Sterling and Stephen Waite, Boomernomics: The Future of Money in the Upcoming Generational Warfare (1998), p. 3. 34 President George W. Bush, State of the Union address, Jan. 31, 2006, www.washing tonpost.com/wp-dyn/content/article/2006/01/ 31/AR2006013101468.html. 35 Jonathan Weisman, Skepticism of Bushs Social Security Plan Is Growing, The Washington Post, March 15, 2005, p. A1, www.wash ingtonpost.com/wp-dyn/articles/A35231-2005 Mar14.html. 36 Opposition to Ryan Plan Among Older, Attentive Americans, Pew Research Center, June 6, 2011, http://people-press.org/2011/ 06/06/opposition-to-ryan-medicare-plan-fromolder-attentive-americans/. 37 Sheryl Nance-Nash, Caring for Aging Parents Will Cost Boomers $3 Trillion, AOL Daily Finance, June 15, 2011, www.dailyfinance.com/ 2011/06/15/caring-for-aging-parents-will-costboomers-3-trillion/. 38 For background, see Marcia Clemmitt, Income Inequality, CQ Researcher, Dec. 3, 2010, pp. 989-1012. 39 See, Retirement Attitudes, Towers Watson, September 2010, www.towerswatson.com/assets/ pdf/2717/TowersWatson-Retirement-Attitudes_ NA-2010-17683.pdf. 40 Will Congress Slash Your 401(k) Tax Break, Reuters Wealth, June 16, 2011, http://blogs. reuters.com/reuters-wealth/2011/06/16/willcongress-slash-your-401k-tax-break/. 41 William Selway, U.S. States Pension Fund Deficits Widen by 26%, Pew Center

FOR MORE INFORMATION


AARP, 601 E St., N.W., Washington, DC 20049; (888) 687-2277; www.aarp.org. The largest advocacy organization for older Americans. American Society on Aging, 71 Stevenson St., Suite 1450, San Francisco, CA 94105; (415) 974-9600; www.asaging.org. Founded as the Western Gerontological Society; offers programs and online learning for professionals in health care, social services, government and other fields who seek to improve the quality of life for older adults. Boston College, Center for Retirement Research, Hovey House, 140 Commonwealth Ave., Chestnut Hill, MA 02467; (617) 552-1762; crr.bc.edu. Conducts research on issues related to retirement, particularly finance and health. Center for Strategic and International Studies, Global Aging Initiative, 1800 K St., N.W., Washington, DC 20006; (202) 887-0200; csis.org/program/global-aging-initiative. Conducts research and education programs on long-term economic, social and geopolitical implications of demographic change in the United States and abroad. Employee Benefit Research Institute, 1100 13th St., N.W., Suite 878, Washington, DC 20005; (202) 659-0670; www.ebri.org. Conducts research on employee benefits, including pensions and defined-contribution plans such as 401(k)s. National Association of Area Agencies on Aging, 1730 Rhode Island Ave., N.W., 4th Floor, Washington, DC 20036; (202) 872-0888; www.n4a.org. Umbrella organization for local area aging agencies. National Institute on Aging, Building 31, Room 5C27, 31 Center Dr., MSC 2292, Bethesda, MD 20892; (301) 496-1752; www.nia.nih.gov. Leads the federal governments scientific effort to study the nature of aging. National Institute on Retirement Security, 1730 Rhode Island Ave., N.W., Suite 207, Washington, DC 20036; (202) 457-8190; www.nirsonline.org. Studies retirement-income issues such as pensions. Urban Institute, Program on Retirement Policy, 2100 M St., N.W., Washington, DC 20037; (202) 833-7200; www.retirementpolicy.org. Conducts research on issues relevant to retirement, such as Social Security, long-term care and unemployment rates among older Americans. UCLA, Center for Policy Research on Aging, 3250 Public Policy Building, Box 951656, Los Angeles, CA 90095; (310) 794-5908; www.spa.ucla.edu. Studies major policy and political issues surrounding aging; devotes particular attention to issues relating to ethnic populations.
Study Says, Bloomberg, April 25, 2011, www.bloomberg.com/news/2011-04-26/u-sstates-pension-fund-deficits-widen-by-26-pewcenter-study-says.html. 42 Elizabeth Lesly Stevens, San Jose Mayor Declares State of Fiscal Emergency, The Bay Citizen, May 21, 2011, www.nytimes.com/2011/ 05/22/us/22bcstevens.html. 43 Stephen C. Fehn, States Overhaul Pensions But Pass On 401(k)-Style Plans, Stateline, June 21, 2011, www.stateline.org/live/details/story? contentId=582585. 44 Tamara Keith, Health Care Costs New Threat to U.S. Military, NPR, June 7, 2011, www. npr.org/2011/06/07/137009416/u-s-military-hasnew-threat-health-care-costs. 45 Vago Muradian, Q&A: Robert Gates, U.S. Defense Secretary, Defense News, June 13, 2011, p. 32, www.defensenews.com/story.php? i=6792060&c=FEA&s=INT.

596

CQ Researcher

July 15, 2011

596

Bibliography
Selected Sources
Books
Fishman, Ted C., Shock of Gray, Scribner, 2010. The author, a former financial trader, uses statistics and sketches of representative individuals to portray how aging is presenting fiscal, health and economic challenges to countries including Japan, China and the United States. Gillon, Steve, Boomer Nation: The Largest and Richest Generation Ever and How It Changed America, Free Press, 2004. The History Channels Gillon writes a sympathetic history of the boomers, whose birth, he says, is the single greatest demographic event in American history. Pearce, Fred, The Coming Population Crash and Our Planets Surprising Future, Beacon Press, 2010. A former New Scientist news editor traces the history of population changes, looking at past state-sponsored efforts at population control and the implications for possible population decline in decades to come. Is there such a thing as a Medicare voting bloc? Some political scientists suggest there increasingly could be pitched political battles between generations over government resources. Ludden, Jennifer, Boomers Take the Retire Out of Retirement, NPR.org, Jan. 1, 2011, www.npr.org/2011/01/01/13 2490242/boomers-take-the-retire-out-of-retirement. As baby boomers reach age 65, many are optimistic, but a bit more than half may not be able to maintain current living standards in retirement. Rucker, Philip, NY Race Is Referendum on GOP Medicare Plan, The Washington Post, May 15, 2011, www.washing tonpost.com/politics/ny-special-election-becomes-refer endum-on-gop-medicare-plan/2011/05/15/AFnoVR4G_ story.html?hpid=z3. Democrats successfully test a strategy they intend to use in 2012, castigating Republicans for looking to overhaul Medicare.

Studies and Reports


Arno, Peter S., and Deborah Viola, Double Jeopardy for Baby Boomers Caring for Their Parents, MetLife Mature Market Institute, June 2011, www.metlife.com/assets/cao/mmi/pub lications/studies/2011/mmi-caregiving-costs-working-care givers.pdf. Nearly 10 million adult children over age 50 care for their aging parents. Cohn, DVera, and Paul Taylor, Baby Boomers Approach 65 Glumly,Pew Research Center, December 2010, http:// pewsocialtrends.org/files/2010/12/Boomer-Summary-Re port-FINAL.pdf. As they approach 65, boomers continue to be accepting of changes in social trends and arent ready to concede they have reached old age. Frey, William, Americas Diverse Future, Brookings Institution, April 2011, p. 10, www.brookings.edu/~/media/ Files/rc/papers/2011/0406_census_diversity_frey/0406_ census_diversity_frey.pdf. The 2010 census showed that the number of white and black children shrank, while there was significant growth among Hispanics and Asians younger than 18. Jackson, Richard, and Neil Howe with Rebecca Strauss and Keisuke Nakashima, The Graying of the Great Powers: Demography and Geopolitics in the 21st Century, Center for Strategic and International Studies, 2008, www.aging society.org/agingsociety/publications/public_policy/CSIS major_findings.pdf. The report offers a comprehensive survey of aging trends in the developed and developing world.

Articles
As Boomers Wrinkle, The Economist, Dec. 29, 2010, www.economist.com/node/17800237?story_id=17800237. Aging baby boomers will resist any cuts to their entitlements. Brownstein, Ronald, The Gray and the Brown: The Generational Mismatch, National Journal, July 24, 2010; www. nationaljournal.com/magazine/the-gray-and-the-brownthe-generational-mismatch-20100724. The United States is seeing a divergence in attitudes and priorities between a heavily nonwhite population of younger people and an overwhelmingly white cohort of older people. Fehr, Stephen C., States Overhaul Pensions But Pass on 401(k)-Style Plans, Stateline, June 21, 2011, www.state line.org/live/details/story?contentId=582585. Pensions for state government workers are badly underfunded, but officials are still wary of switching employees to retirement savings accounts. Hare, Kristin, Older Americans Are Working Longer, St. Louis Beacon, April 24, 2011, www.stlbeacon.org/issuespolitics/172-Economy/109733-retiring-retirement-americansare-working-longer-. Ten years ago, 4 million people age 65 and older were working or looking for jobs. By March, that number had increased to 7 million. Johnson, Kirk, Between Young and Old, A Political Collision, The New York Times, June 3, 2011, www.nytimes. com/2011/06/04/us/politics/04elders.html.

www.cqresearcher.com

July 15, 2011

597

The Next Step:


Additional Articles from Current Periodicals
Community
Carreras, Jessica, Golden Gays, Between the Lines (New York), July 8, 2010. As America ages, gays and lesbians have started to concentrate more and more on aging issues affecting their community. Meyers, Jessica, Aging Boomers Heading to the Burbs, Dallas Morning News, July 25, 2010, p. A1, www.dallas news.com/news/community-news/prosper/headlines/2010 0725-as-aging-baby-boomers-head-to-suburbs-collin-countyto-feel-impact.ece. Many retirees are moving to the suburbs only to find that their new communities are as unaccommodating for aging seniors as the cities they left. Pyros, Andrea, As Seniors Age, Families Face Myriad Challenges, Poughkeepsie (N.Y.) Journal, Nov. 25, 2010. Americans are taking in their aging parents in greater numbers, spurring a rise in multigenerational homes. Wolfe, Warren, et al., Where Will Seniors Live? Star-Tribune (Minneapolis), Dec. 2, 2010, p.A1, www.startribune.com/life style/111163024.html. Communities built for the elderly are sprouting up all over the nation, but seniors are reluctant to inhabit them. totally disabled, while the reality is often somewhere in between.

Employment
Collins, Margaret, Survey Suggests Benefits Keep Older Workers from Leaving,Sun-Sentinel (Fort Lauderdale, Fla.), June 19, 2011, p. D1, www.sun-sentinel.com/business/flretaining-older-workers-20110617,0,6111086.story. As fewer seniors maintain the savings they need to retire, employers are offering incentives to prolong aging workers time in the labor force. Gibson, Caitlin, Agings Evolving Puzzle: How Washingtons Communities, and Their Seniors, Must Adapt to a Changing Game, The Washington Post, June 16, 2011, p. T19, www.washingtonpost.com/local/agings-evolvingpuzzle-how-communities-and-their-seniors-must-adapt-to-achanging-game/2011/05/23/AGJ9FmWH_story.html. Unemployment and large elderly populations are driving Washington, D.C., residents to develop programs aimed at keeping seniors active and healthy as they age in their own homes. Johnson, Kirk, Between Young and Old, a Political Collision, The New York Times, June 4, 2011, p. A10, www. nytimes.com/2011/06/04/us/politics/04elders.html. Unemployment and bankruptcy are growing among Americans age 65 and over, contributing to a growing generational divide.

Culture
El Nasser, Haya,Boomer Divide: Generation Spans 19 Years, USA Today, Dec. 3, 2010, p. A1, www.usatoday.com/news/ nation/2010-12-03-1Atwoboomers03_CV_N.htm. Boomers are generally viewed as a massive, homogenous portion of the population, but not every member of the generation feels connected. Horovitz, Bruce, Big-Spending Boomers Bend Rules of Marketing, USA Today, Nov. 16, 2010, p. A1, www.usa today.com/printedition/news/20101116/1aboomerbuyers 16_cv.art.htm. Marketing firms are increasingly switching their focus from the young to the old as seniors wield more influence. Jayson, Sharon, Tired of the Baby Boomers; Other Generations are Weary of Their Place in the Culture, USA Today, Nov. 18, 2010, p. D1, www.usatoday.com/yourlife/ parenting-family/2010-11-18-boomerloathing18_CV_N.htm. The boomer generations time in the spotlight may be exhausting the rest of Americas patience. Tugend, Alina, Fears, and Opportunities, on the Road to Retirement, The New York Times, June 4, 2011, p. B5, www. nytimes.com/2011/06/04/your-money/04shortcuts.html. Stereotypes of seniors range from adventure-seeking to

Health Care
Fitzgerald, Jay, Retiring Boomers, Rising Health Costs Are a Frightening Combination, The Boston Globe, June 12, 2011, p. 1, articles.boston.com/2011-06-12/business/29650 598_1_medicare-spending-medicare-today-medicare-modern ization-act. No consensus has emerged on how to reform a Medicare system that most experts agree is unsustainable in its current form. Rivkin, Jacqueline, Not There to Care; With Ailing Parents, Children Living Elsewhere Struggle to Balance Competing Needs, Newsday (New York), June 4, 2011, p. B4. Many working adults are struggling financially and emotionally to care for aging parents while maintaining a career. Sullivan, Julie, Baby Boomers Set to Become Generation Alzheimers With 1 in 8 Predicted to Get the Disease, Oregonian (Portland), Jan. 28, 2011, www.oregonlive.com/ health/index.ssf/2011/01/baby_boomers_set_to_become_ gen.html. According to the Alzheimers Association, the diseases is on track to become the defining disease of aging baby boomers, yet research and treatment options are limited compared to other serious ailments, such as cancer.

598

CQ Researcher

Innovations
Hamilton, Walter, Elder Care Goes High Tech, Los Angeles Times, June 17, 2011, p. A1, articles.latimes.com/ 2011/jun/17/business/la-fi-boomer-homes-20110617. Companies are investing in technologies that allow seniors to live safely in their own homes for as long as possible. Hawkins, Robert J., Seniors Facing Transit Trap, San Diego Union-Tribune, June 16, 2011, p. B1, www.sign onsandiego.com/news/2011/jun/15/lack-public-transpor tation-could-trap-aging-boomer. Under criticism that retiring boomers may end up isolated because of a lack of public transportation options, major metropolitan areas such as San Diego are searching for solutions. Otts, Chris, Booming Future in Aging Care, CourierJournal (Louisville, Ky.), Feb., 27, 2011, p. A1. As baby boomers retire, the burgeoning aging-care industry sees a golden opportunity for growth.

Gaps in educational attainment for minority students may present a challenge as the growing youth minority population takes over in the labor force for retiring baby boomers. Tavernise, Sabrina, In Census, Young Americans Increasingly Diverse, The New York Times, Feb. 4, 2011, p. A10, www.nytimes.com/2011/02/05/us/05census.html. The growth of an aging white population and a diverse youth population has some analysts warning of the emergence of a cultural generational gap.

Political Implications
Now is the Time to Prepare for Oklahomas Aging Population, The Oklahoman (Oklahoma City), June 5, 2011, p. A18, newsok.com/now-is-the-time-to-prepare-for-okla homas-aging-population/article/3573884. Solidarity with seniors is increasingly becoming a political necessity in Oklahoma. Tsai, Michael, Largest-Ever Generation Slips Toward the Gray, Honolulu Star-Advertiser (Hawaii), Nov. 15, 2011, www.staradvertiser.com/news/20101115_Graying_of_ Hawaii.html. It may be too early to speculate on the political leanings of boomers, who have traditionally been a generation defined by change. Turner, Grace-Marie, and John Conyers Jr., Pro & Con: Should Congress, President Overhaul Medicare? Atlanta Journal-Constitution, June 2, 2011, p. A9, www.ajc.com/ opinion/pro-con-should-congress-964399.html. Supporters of Medicare reform say the program is not sustainable in its current form; detractors say cost controls make drastic changes unnecessary.

Life Expectancy
Lloyd, Janis, Americans Arent Hitting Their Prime Until After 65, USA Today, June 29, 2011, p. D1, www.usatoday. com/LIFE/usaedition/2011-06-29-Wellnesscov_CV_U.htm. Americas elderly are healthier than other age groups, in part thanks to healthy habits and active lifestyles. Mercado, Darla, Lucky Genes Seen as Key to Long Life, Investment News (New York), Dec. 13, 2010. Though healthy habits play a role, researchers say good genes are the key to a long life. Yen, Hope, Men Narrow Womens Population Advantage, Census Shows; Society Likely Will Adapt as Men Live Longer, The Associated Press, May 6, 2010. While women still outlive men in America, the gender gap in life expectancy is narrowing as the population ages.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

Minorities
Morello, Carol, and Dan Keating, Census Offers New Proof that Hispanic, Asian Growth Skyrocketed in Past Decade, The Washington Post, March 24, 2011, www. washingtonpost.com/local/new-census-portrait-hispanicsand-asians-skyrocketed-over-past-decade/2011/03/23/AB pKDQOB_story.html. The 2010 Census revealed tremendous growth in Hispanic and Asian populations while an aging white population stagnated. Shawgo, Ron, Minorities Drive Population Growth; Education Top Challenge, Fort Wayne (Ind.) Journal Gazette, May 1, 2011, p. A1, www.journalgazette.net/article/2011 0501/LOCAL10/305019920.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

July 15, 2011

599

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Government Secrecy, 2/11 Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10

Education
School Reform, 4/11 Crime on Campus, 2/11 Career Colleges, 1/11 Value of a College Education, 11/09

Health/Safety
Teen Drug Use, 6/11 Organ Donations, 4/11 Genes and Health, 1/11 Food Safety, 12/10 Preventing Bullying, 12/10 Preventing Obesity, 10/10

Crime/Law
Class Action Lawsuits, 5/11 Cameras in the Courtroom, 1/11 Death Penalty Debates, 11/10 Drone Warfare, 8/10 Prosecuting Terrorists, 3/10 Legalizing Marijuana, 6/09

Environment/Society
Nuclear Power, 6/11 Business Ethics, 5/11 Artificial Intelligence, 4/11 Wind Power, 4/11 Women and Sports, 3/11 Animal Intelligence, 10/10

Politics/Economy
Foreign Aid and National Security, 6/11 Public-Employee Unions, 4/11 Lies and Politics, 2/11 Income Inequality, 12/10

Upcoming Reports
Manufacturing, 7/22/11 Future of Libraries, 7/29/11 U.S.-Pakistan Relations, 8/5/11

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Is the landmark new plan a good idea?

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

Health-Care Reform

he health-care reform legislation signed into law by President Obama on March 23 marked the biggest attempt to expand access to health care since Medicare and Medicaid were launched in the 1960s.

The massive legislation will help 32 million Americans get health insurance coverage and bans insurers from denying coverage to those with preexisting illnesses. It also expands Medicaid to all poor people except illegal immigrants and gives subsidies to low- and low-middle-income people to buy insurance. But opponents, including every Republican member of Congress, say the coverage expansion is simply too expensive, at a price tag of about $1 trillion over 10 years. They also say new fees and taxes to help pay for the coverage place too big a burden on currently insured people. Meanwhile, a group of state attorneys general is challenging the constitutionality of the laws requirement that everyone buy health insurance.
Beginning this year, for the first time, young adults up to age 26 like Charleston, W. Va., student Erin Huntley, here with her mother, can get coverage under their parents health insurance.

I N S I D E

THIS REPORT
THE ISSUES ....................507 BACKGROUND ................514 CHRONOLOGY ................515 CURRENT SITUATION ........519 AT ISSUE........................521 OUTLOOK ......................523 BIBLIOGRAPHY ................526 THE NEXT STEP ..............527

CQ Researcher June 11, 2010 www.cqresearcher.com Volume 20, Number 22 Pages 505-528
RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

HEALTH-CARE REFORM
THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
June 11, 2010 Volume 20, Number 22

507

Is the new health-care reform law a good idea? Will people with insurance lose out under the new law? Will health-care reform make care more affordable?

508 509 510 511 512 515 516 518 521

Reforms Opposed in Majority of States Legislation in 39 states challenges plan. Wealthy to Pay Higher Medicare Tax Middle-income families wont pay more. Health Reforms That Begin This Year Some expand coverage for the neediest. Reforms That Begin in 2011 and Beyond Changes will spread costs, reduce spending. Half of Unemployed Workers Are Uninsured Plan will provide tax-subsidized coverage. Chronology Key events since 1883. States Will Be Ground Zero for Many Changes A lot is resting on the shoulders of the states. Reforms Face Many Hurdles The war . . . has just begun. At Issue Will the health care reform law harm the federal budget?

MANAGING EDITOR: Thomas J. Colin

tcolin@cqpress.com

BACKGROUND

514 516 517 517

Exceptional America Unlike most industrialized countries, Congress has never seriously debated a universal right to care. Hybrid Solutions Congress launched Medicare and Medicaid in 1965. The Clinton Plan Critics defeated the complex health overhaul plan. Massachusetts Plan The state enacted its universal coverage plan in 2006.

kkoch@cqpress.com Thomas J. Billitteri, tjb@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Rachel Cox, Sarah Glazer, Alan Greenblatt, Reed Karaim Barbara Mantel, Patrick Marshall, Tom Price, Jennifer Weeks DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT-CHECKING: Eugene J. Gabler, Michelle Harris

ASSISTANT MANAGING EDITORS: Kathy Koch

A Division of SAGE

PRESIDENT AND PUBLISHER:

John A. Jenkins
Copyright 2010 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except; (Jan. wk. 1) (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE Publications. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-4277737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

CURRENT SITUATION

519 522 523

Democrats in Power A parliamentary maneuver helped pass health reform with no Republican votes. Implementing the Law Most provisions take effect in 2014. Fighting the Law A lawsuit filed by 20 states is challenging health reform.

FOR FURTHER RESEARCH

525 526 527 527

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

OUTLOOK

523

Dealing With Rationing Health care ultimately must be rationed.

Cover: AP Photo/Jeff Gentner

506

CQ Researcher

Health-Care Reform
BY MARCIA CLEMMITT
care as a national responsibility, with the great bulk of the dollars coming from taxnactment of the most payers to fund the coverage far-reaching health-care expansion, says Feder. The law in at least four cost-cutting sections contain decades pumped emotions to provisions designed to esa fever pitch among opposentially reengineer health nents and supporters alike. care to favor efficient, effecToday, after almost a tive treatments and prevencentury of trying; today, after tive medicine over expensive over a year of debate; today, but relatively ineffective serafter all the votes have been vices, she says. This is urtallied health insurance gent for a variety of reasons, reform becomes law in the including the fact that the high United States of America. cost of health care is the Today, President Barack main reason people are uninObama proclaimed at the sured, says Feder. March 23 White House signThe law launches a variing ceremony. 1 ety of institutions and exWith equal passion, Reperiments that policymakers publicans unanimously rehope can eventually slow the jected the landmark Patient huge annual increases in Protection and Affordable h e a l t h - c a r e c o s t s , s ay s Health Care Act, refusing to Michael E. Chernew, a proaward it even a single vote. fessor of health policy at HarHouse Speaker Nancy Pelosi, D-Calif., greets 11-year-old The law is an historic vard Medical School. Some Brian McCann during a news conference on health care betrayal of the clear will of the are simple payment cuts to in September 2009, months before she helped engineer American people, scolded health-care players like private passage of the landmark health reform law. The sweeping new law enables people with preexisting medical Republican National ComMedicare Advantage plans conditions, like Brian, to get affordable insurance. mittee Chairman Michael that most health-care econoSteele. Referring to the new mists agree have long been requirement that all Americans overpaid, he says. carry health-insurance coverBut the law also will launch age, he said the law represented an lems, conservatives argue the federal numerous demonstration projects aimed government has no right to require in- at developing ways to pay doctors, hoshistoric loss of liberty. 2 The landmark law will extend cov- dividuals to purchase insurance or states pitals and other providers for delivererage to about 32 million of the na- to participate in coverage-expansion ing good health outcomes efficiently tions 45 million uninsured people by: programs. At least 20 state attorneys rather than continuing the current sysgeneral and several private groups are tem, which mostly pays for services Expanding Medicaid; Providing subsidies to help low- suing to stop the law. whether they are successful and necThe law has two main facets ex- essary or not, Chernew explains. and middle-income families buy inpanding health coverage and developing surance; We cant be sure the [cost-cutting] Creating regulated insurance mar- cost-control measures, says Judith Feder, things in the law will work, and critkets where people without employer- a professor of public policy at George- ics can argue that they are not pursponsored insurance can buy subsi- town University and former staff director sued aggressively enough or quickly of the 1990 U.S. Bipartisan Commission enough, says Chernew. Nevertheless, dized coverage; and Using Medicares economic clout on Comprehensive Health Care, which we have to do them, and from a pure called for universal health coverage. to cut health care costs. cost-curve standpoint, [the laws framers] For the first time in history, the law did whatever they could possibly do, While supporters tout the laws multifaceted approach to access and cost prob- establishes access to affordable health what is politically possible.

THE ISSUES

www.cqresearcher.com

AP Photo/Matt Slocum

June 11, 2010

507

HEALTH-CARE REFORM
Health Reforms Opposed in Majority of States
State lawmakers in at least 39 states have introduced legislation to limit, alter or oppose aspects of the health-reform plan. The measures largely seek to make or keep health insurance optional and allow people to purchase any type of coverage they choose. Such legislation passed and is in effect in three states Idaho, Utah and Virginia and legislation passed in Oklahoma and Georgia is ready for approval by the governors. The bills did not pass in 21 states.
State Legislation Opposing Certain Health Reforms, 2009-2010
Wash.* Mont. N.D.* S.D.** Wyo.* Neb.* Nev. Calif. Ariz. Okla. N.M.* Texas Ark.*
Miss.

Minn.* Wis. Iowa*


Mich.** Ill. Ind.* Ohio

N.H. Vt.
Maine

Ore.

Idaho

N.Y. Pa.

Utah

Colo.*

Kan.*

Mo.

Ky.*
Tenn.

W.Va. Va.

Mass. R.I. Conn. N.J. Del. Md.

N.C.

La.

S.C.** Ala.* Ga.

D.C.

Alaska* Hawaii

Fla.

Legislation signed, 2010

Legislation filed, 2009 or 2010

*Did not pass **Non-binding resolution adopted

Legislation passed; requires statewide vote in 2010 Legislation passed, on governors desk

Source: Richard Cauchi, State Legislation Challenging Certain Health Reforms, 2010, National Conference of State Legislatures, May 2010

The law also has some procompetitive elements to encourage private insurers to emphasize cost and quality control as well, Chernew says. The insurance exchanges that will be set up in states to help people without employer coverage buy insurance are very pro-competition since they get insurers to compete against each other for individuals business, Chernew says. Its very easy for those not in power to argue that those in power havent done enough, Chernew says, but those in power can only do what is politically possible in a system where health-care providers and insurers hold enormous influence. Ultimately, Chernew acknowledges, the law could turn out to be a dis-

aster because, when the results are in from cost-cutting experiments, the solution [to rising costs] may require tough choices to impose cost-trimming measures that doctors and patients wont like. If that happens and we end up not having the political will to impose the changes, the federal budget deficit will soar because, under the law, the nation has committed itself to a new entitlement program subsidizing health coverage for most low- and middle-income Americans, Chernew says. The law takes some good steps but also leaves a few important things undone, says Mark McClellan, a former chief of Medicare and Medicaid under President George W. Bush and now di-

rector of the Engelberg Center for Health Care Reform at the centrist Brookings Institution think tank. For example, McClellan says the laws tax on highcost employer-provided health insurance with rich benefit packages is a good way to raise money for coverage, but the tax should kick in sooner. It got pushed back to 2018, after complaints about unfairness, he says. But he argues that it is fair to end the tax-favored status of the most benefitrich coverage, in favor of spending those dollars to help lower-income people gain coverage. Currently, we pay about $250 billion a year for those employer subsidies, and most of that goes to higher-income people, he says. One set of conservative-backed costtrimming provisions that didnt make it into the law are so-called consumerside incentives for people to take steps on their own to reduce health spending, McClellan says. For example, private insurers are implementing wellness plans to give consumers financial incentives to take common-sense steps like stopping smoking or losing weight, which should save health-system dollars down the line, he says. Limits on lawsuits against healthcare providers also should have been included, says McClellan. Such reforms can trim 2-3 percent annually from medical spending, and while that amount may seem minimal, it could add to the other reforms and increase the laws cumulative cost-cutting effect, he says. The new law also has its critics among proponents of guaranteed, universal access to health care. The law does not solve the problem, says Steffie Woolhandler, an associate professor of medicine at Harvard and longtime advocate of national, single-payer health care. If the bill works as planned, there will still be 23 million uninsured people in 2019, of whom about a quarter will be illegal immigrants, she says. Furthermore, many who get insurance under the bill will end up underinsured, she

508

CQ Researcher

added, partly because about 16 million of the newly insured will be enrolled in Medicaid, which most doctors dont accept because of its lower payments. They can go to the emergency room (ER), but theyll have trouble getting primary care for conditions like high blood pressure and the like, where early treatment could keep ER-type health emergencies from happening, she says. Many who buy insurance in the laws new exchanges also will get woefully inadequate coverage, since the insurance available there will cover only 60 percent of medical costs, says Woolhandler. Because the law was sold largely on the basis of cost containment, the critics are able to fire at it by saying, It wont save as much money as you say, says Arthur L. Caplan, a professor of bioethics at the University of Pennsylvania. If, instead, you had had the discussion of whether there is a right to health care, critics would have to explicitly make their arguments for why health care is not a right, bringing out into the open the real issue, which the country must face sooner or later, he says. Only critics looking for some way to derail reform give a hoot about details like individual mandates or tax provisions, Caplan said. No nation on Earth has ever reformed its health care system by asking the public to wallow around in the details of health reform. Instead, nations including Canada, Britain, Singapore, Taiwan, Germany and Australia secured agreement that health care is a right and then, and only then, moved on to figure out how to guarantee that right to all citizens, he said. 3 As health reform is implemented amid protests in Washington and the states, here are some of the questions being debated: Is the new health-care reform law a good idea? The new laws supporters say it puts in place most of the mechanisms for coverage expansion and cost control

Wealthy to Pay Higher Medicare Tax


Before passage of the healthcare plan, middle-income families paid a higher Medicare tax than wealthy families. Under the plan, middle-income families will continue to pay a 2.9 percent tax but the tax on couples making $10 million annually would nearly triple. Medicare Tax Under Health Reform
3.5% 3.0 2.5 2.0 1.5 1.0 0.5 0.0

2.9% 1.1%

2.9% 3.2%

Current President Obamas Medicare tax proposal


Middle-income family Couple making $10 million annually

Source: Chuck Marr, Changes in Medicare Tax on High-Income People Represent Sound Additions to Health Reform, Center on Budget and Policy Priorities, March 2010

that are politically possible in the complex, private-sector-dominated American health system, but many conservative critics have called for the laws partial rollback or repeal. They argue that increased government involvement in health care can only damage the job market, interfere with individual freedom and worsen cost problems. Critics on the left, meanwhile, say there was little point in enacting provisions that will only temporarily lower the number of uninsured Americans without creating a permanent solution. The bills so-called individual mandate, requiring everyone to purchase insurance, is unconstitutional, said Sen. Orrin Hatch, R-Utah.

The purpose of insurance is to spread costs across the population with people paying in even in years when they dont use much health care. Those payments serve as a buffer against times when they are sick and use services and if people wait until they become ill to sign up for insurance, insurers are unable to spread costs in this way. For this reason, an individual mandate has been part of some Republican coverage-expansion proposals over the years, as well as the 1993 proposal by President Bill Clinton. Hatch raised no objection to the individual mandates in the Clinton plan, but . . . 17 years later . . . I looked at it and, constitutionally, I came to the conclusion . . . that this would be the first time in history that the federal government requires you to buy something you dont want, he said. If we allow the federal government to tell us what we can or cant buy, then our liberties are gone. 4 Forcing employers to offer health insurance . . . will cost America jobs and revenue, and inhibit small businesses from growing, according to the small-business lobbying group National Federation of Independent Businesses. Its a bad idea any time but is particularly destructive in the current economic environment. 5 By requiring employers to pay a penalty if they dont offer workers substantial health-insurance coverage, the law creates an incentive for employers to avoid hiring workers from lowincome families, hurting those who need jobs the most, said Kathryn Nix, a research assistant at the conservative Heritage Foundation. (Low-income workers are the least likely to receive employer-based health insurance because its cost is more than most employers are willing to shoulder as an added cost of employing a worker.) 6 Tax increases to pay for expanding coverage will damage the economy, Nix continued. For example, the law raises some taxes on investment income, a

www.cqresearcher.com

June 11, 2010

509

HEALTH-CARE REFORM

Health Reforms That Begin This Year


A few programs expand coverage for the neediest.
ost Americans wont see many effects of the healthcare reform law this year. However, the law does launch a few programs that start expanding coverage for some of the neediest people and some who are easier to cover. 1 High-risk pool Many people with preexisting medical conditions cant get affordable insurance under current laws. To help close that gap, this year a temporary high-risk pool will begin offering price-capped coverage to people with preexisting illnesses. In 2014 the new law will require insurers to take all comers. Young adult coverage Young adults are one of the largest uninsured groups. Beginning this year, for the first time, young adults up to age 26 can get coverage under their parents health insurance. Benefit limits In the past, patients with serious illnesses were likely to lose their insurance coverage when they ran into a lifetime limit on the dollar value of their coverage. Beginning this year, the law bans lifetime dollar limits on coverage and also bans insurers from canceling a patients insurance policy

for any reason except fraud by the patient. Also beginning this year, children may not be refused health insurance because of preexisting medical conditions. Medicaid expansion For the first time, states may offer Medicaid coverage to all poor people, not just to mothers and their young children or the disabled. Business tax credit Small businesses whose workers annual wage is under $50,000 get tax credits if they provide health insurance. Regulating insurance premiums Insurers must report the proportion of premium dollars they spend on actual medical services, and the federal government will establish a process for judging whether annual premium increases are justified. Marcia Clemmitt
1 See Focus on Health Reform: Summary of New Health Reform Law, The Henry J. Kaiser Family Foundation, March 26, 2010, and Timeline for Health Care Reform Implementation: System and Delivery Reform Provisions, The Commonwealth Fund, April 1, 2010.

move that will discourage investment in the U.S. economy . . . reducing the potential for economic growth. Families with incomes greater than $250,000 will pay a higher Medicare payroll tax up to 2.35 percent, plus a new 3.8 percent tax on interest and dividend income. With this stroke, Democrats have managed to punish both work and the savings of American families, wrote Sally C. Pipes, chief executive officer of the free-market-oriented Pacific Research Institute in San Francisco. 7 Increasing government involvement in health care will likely drive some doctors out of Medicare and perhaps out of practice altogether, said Robert E. Moffit, director of health policy studies at Heritage. Having public and private insurers pay for health care rather than allowing individuals to pay directly out of their own pockets for it already [compromises] the independence and integrity of the medical profession, and the new law will reinforce the worst of these features, because physicians will be subject to

more government regulation and oversight, said Moffit. 8 Some critics on the left also see more harm than good in the reforms. The law hurts many more people than it helps, wrote blogger Jane Hamsher of the liberal website Firedoglake. A middle-class family of four making $66,370 will be forced to pay $5,243 per year for insurance, an amount that will leave many without enough discretionary income to cover other bills, she said. 9 But reform supporters counter that expanding coverage is worth the laws cost and that its provisions are not unconstitutional. There is a long line of [Supreme Court] cases holding that Congress has broad power to enact laws that substantially affect prices, marketplaces and commercial transactions, including cases decided by the current conservative-dominated court, wrote Ian Millhiser, a policy analyst at the liberal Center for American Progress. A law requiring all Americans to hold

health insurance does all of these things, so its constitutionality is not in question, he said. The 2005 case Gonzales v. Raich, for example, establishes that Congress can regulate even tiny insurance providers who serve only a handful of local residents because such local activity substantially affects a multistate market, said Millhiser. 10 The Supreme Court decades ago held that the business of insurance fell within Congress regulatory authority under the Commerce Clause, wrote Simon Lazarus, public policy counsel to the National Senior Citizens Law Center. 11 The court noted that perhaps no modern commercial enterprise directly affects so many persons in all walks of life as does the insurance business, said Lazarus. Consequently, the 1944 finding could hardly be more consonant with Congress identical case for expanding federal regulation of health insurance in 2009, including the individual mandate to buy coverage, since many independent experts, studies and analyses concur that without such a require-

510

CQ Researcher

Health Reforms That Begin in 2011 and Beyond


Changes spread costs, reduce spending increases.
he health-reform law contains hundreds of provisions designed to expand insurance coverage, spread the tax burden of paying for the new coverage fairly and eventually tame steep annual increases in spending while improving care. Most of the provisions will be phased in over the next eight years. 1

2011 Long-term care People may enroll in an insurance plan to fund future long-term care needs, including services that can help them stay in their own homes. Drug company fees Annual fees paid by large pharmaceutical manufacturers will help pay for expanding health coverage. Hospital-acquired illnesses Medicare wont pay hospitals to care for infections caused by a patients hospital stay. OTC drugs To raise money, the law bans paying for over-the-counter drugs from tax-favored accounts like flexible spending accounts unless a doctor has prescribed the drugs. 2012 Paying health-care providers To hold down rising medical costs and improve care, Medicare will begin paying doctors and hospitals less when patients develop preventable illnesses and study other potential incentives to get medical providers to work together to deliver care more efficiently. 2013 Standardize insurance operations To save money and set the stage for the new health-insurance exchanges that launch in 2014, health-insurance eligibility, enrollment and claims procedures will be standardized nationwide. Higher Medicare taxes To raise money to expand insurance coverage, individuals with adjusted gross incomes over $200,000 ($250,000 for couples who file jointly) will pay higher Medicare taxes.

2014 Individual mandate U.S. citizens and legal residents must carry health coverage or pay a tax penalty. Employer contributions To help pay for coverage expansion, employers with more than 50 workers must either offer health coverage or pay a per-worker fee. Insurance exchanges State-based regulated markets will help individuals and small businesses buy health coverage that is tax-subsidized on a sliding scale for people earning up to 400 percent of the federal poverty level. The federal government will establish a minimum benefit package for health coverage. Medicaid expansion The federal government will pay to expand Medicaid to all non-elderly Americans earning up to 133 percent of the federal poverty level. Insurance rules Insurance companies will no longer be able to refuse new coverage or coverage renewal to anyone, regardless of preexisting conditions or other factors. To keep insurance affordable for all, older and sicker people cant be charged more than three times what the average person in the community pays for coverage. Annual dollar limits on benefits are banned. Insurer fees Insurance companies will pay fees based on their size. 2018 Benefit tax To raise funds, tax breaks will end for health plans with annual premiums exceeding $10,000 for an individual (or $27,500 for a family). Such so-called Cadillac plans benefit only richer Americans and are believed to be inefficient. Marcia Clemmitt
1 See Focus on Health Reform: Summary of New Health Reform Law, The Henry J. Kaiser Family Foundation, March 26, 2010, and Timeline for Health Care Reform Implementation: System and Delivery Reform Provisions, The Commonwealth Fund, April 1, 2010.

ment overall health reform will be unsustainable, he said. 12 The law is an enormously positive step to expand access and put in tools to begin driving down costs, says Jacob Hacker, a Yale University professor of political science who was the chief architect of a proposal eventually dumped from the legislation to include a public, government-run health insurance plan to compete against private insurers. I was a very strong advocate of the bill even after the public-

plan option was off the table, he says. Supporters argue that by making it easier for people to get non-job-based health coverage and beginning to trim costs, the law will actual improve businesses ability to create jobs. Inability to find affordable health coverage under current law is one of the major reasons why small businesses close their doors and corporations ship jobs overseas, said Obama. 13 By establishing a system in which fewer people experience breaks in in-

surance coverage, the law will improve health and trim some costs, according to Mathematica Policy Research, a consulting firm in Princeton, N.J. Studies show that adults with continuous insurance coverage are healthier and at lower risk for premature death than those who are uninsured or whose coverage is intermittent, the firm reported in April. 14 Continuous coverage also can reduce administrative costs, Mathematica said. For example, guaranteed eligibility for Medicaid and the Childrens Health

www.cqresearcher.com

June 11, 2010

511

HEALTH-CARE REFORM
Half of Unemployed Workers Are Uninsured
Out of nearly 6 million unemployed workers with incomes below 200 percent of the poverty level, more than 50 percent are uninsured. The new law will allow unemployed people and others without job-sponsored coverage to buy tax-subsidized insurance.
Private or military coverage

Health coverage status of non-elderly unemployed workers with incomes below 200% of poverty level, December 2008

1,214,324

20.8%
Uninsured

3,149,847 1,467,874

54.0% 25.2%

Public coverage

Source: Claire McAndrew, Unemployed and Uninsured in America, Families USA, February 2009

Insurance Program for six or 12 months can lower states administrative costs by reducing the frequent movement (called churning) of people in and out of the programs, drastically cutting paperwork and staff time. 15 Will people with insurance lose out under the new law? Critics say the new law will change things for the worse for people who have either public or private insurance today. Reform supporters argue, however, that while the law will change how many people get coverage and care, it will ultimately provide better options for everyone. Many provisions that raise revenue to pay for coverage expansion will leave insured Americans worse off, said John Berlau, director of the Center for Investors and Entrepreneurs at the freemarket think tank Competitive Enterprise Institute. For example, a provision to raise tax money to fund the laws coverage expansion will ban using pretax dollars from a flexible-spending account or health-savings account to buy over-the-counter drugs unless a doctor has prescribed them, creating an effective tax increase of up to 40 percent on these items, said Berlau. 16

About 7 million Medicare enrollees will lose the more generous benefits they now receive from Medicare Advantage private health insurers that serve the Medicare program, said GraceMarie Turner, president of the Galen Institute, a free-market think tank in Alexandria, Va. Payments to those insurers will be cut under the law, based on recommendations by many economists that Medicare has long overpaid the plans. But the resulting pullout of the plans from Medicare will be a significant hardship for the Medicare enrollees whove come to rely on the richer benefits Medicare Advantage plans provide, compared to traditional Medicare, Turner said. 17 Before the law was enacted, the United States already faced a shortage of primary-care doctors and, with an estimated 32 million newly insured people by 2019 under the law, primary-care physicians will be stretched even thinner, according to Kaiser Health News. 18 If Congress actually implements Medicare payment cuts named in the law, 15 percent of hospitals and other care facilities that rely on Medicare reimbursements would become unprofitable, meaning that they might drop Medicare patients, limiting the availability of care

for millions of seniors, the Columbus [Ohio] Dispatch editorialized. 19 But health-reform supporters say that, contrary to critics warnings, the law, on balance, will make it easier for virtually everyone to maintain continuous access to health insurance and care. Rather than losing money, hospitals actually come out winners under the law, so access wont become a greater problem, said Maggie Mahar, a fellow at the liberal Century Foundation. 20 Hospitals got in on early negotiations for the law and negotiated some payment rate cuts that they found acceptable, said Urban Institute senior fellow Robert Berenson. Now hospitals are off-limits until 2020 from pay cuts proposed by the new board established by the law to make sure that Medicare hits its spending targets, Berenson said. 21 Moreover, hospital payment cuts will be offset by the fact that hospitals will be seeing an influx of paying patients as more people gain insurance, Mahar said. 22 And Medicare cuts will actually benefit enrollees, some analysts argue. Cutting payments for ineffective care such as hospital readmissions, for example, will not only make Medicare more economically sustainable over the long haul but help eliminate hospital stays that amount to unnecessary hardship for the patient, said a report published by the liberal-leaning Commonwealth Fund in Manhattan. 23 The law will help insured people avoid unwarranted insurance-premium rate increases by requiring annual review of premium increases in a public process that will, for the first time, require public input, not just explanations of their charges by the insurance company, according to the liberal consumer group Families USA. Before the law went into effect, many states had no process for obtaining consumer input in the rate-review process, so state officials heard only the insurers side of the story and

512

CQ Researcher

often were unaware that the proposed advocacy group in Washington. For ex- the former Medicare and Medicaid chief rates were unaffordable. 24 ample, the current system . . . lets doc- under George W. Bush. Changes brought about by the law tors who cause infections through imThe history of previous legislation is do not pose a risk to the public, proper hand-washing send [insurers] more auspicious, because earlier laws that cut says Georgetown Universitys Feder. bills to treat infections that patients may health-care provider payments have alWhat insured people are currently at get as a result, Kendall explained. The most always had a bigger cost-cutting efrisk of is higher costs that will force new law institutes cost-saving provisions fect than analysts first predicted, said Peter them out of their coverage, either be- such as requiring hospitals to effectively Orszag, director of the White House Ofcause they lose a job, become self- put a warranty on their care by limit- fice of Management and Budget. 27 employed or an employer stops of- ing the payments they get from In academic analyses of health-system fering it, she says. Under the new law, Medicare if a patient is readmitted too reorganization plans that stamp out inif theres an employment change, soon or in circumstances that suggest efficient care as the law aims to do now for the first time the estimates of postheyll have a real sible efficiency savings option, she says. range up to 30 percent In another boon or more of medical spendfor patients, begining, said Harvard Unining this year, if you versity professor of ecobecome seriously ill, nomics David M. Cutler. insurers wont be able Because previous analyto drop your coverses have underestimated age on the grounds the cost-saving effects of that you forgot some such measures, theres a detail of your medgood chance that costs ical history when you will fall more rapidly than applied for insurexpected, Cutler said. 28 ance, as they could Nevertheless, even in the past, said some analysts who see Mahar. From now on, significant good in the insurers will be able law have doubts about to rescind your polits ability to make health Supporters of the Tea Party movement demonstrate against the health care bill at the Capitol on March 20, 2010, just before a cliffhanger vote icy only if they can care affordable. on the sweeping legislation the next day. Critics say the plan will cost prove fraud, or that I suspect that the legtoo much and give the government too much control over you intentionally set islation is going to be Americans health decisions. out to deceive them. more successful at covThis wont be easy. 25 his or her earlier care was ineffective erage goals than at cost-containment goals, says Katherine Baicker, a profesor harmful. 26 Will health care reform make If such an outcomes-based payment sor of health economics at the Harvard care more affordable? system often referred to as a bun- School of Public Health. You can throw Supporters of the new law say its tax- dled payment system can be de- money at patients and providers and funded subsidies will help low-income veloped that providers can live with, increase individuals access to health people afford health coverage and that well be in a much better place than care, but we simply dont yet know health-provider payment initiatives will we are today when it comes to hold- how to slow health-care cost growth, slow out-of-control health spending. But ing down costs, says Harvard Medical even though scholars do have ideas about skeptics say that the laws affordability Schools Chernew. Whether the law is what may work, she says. Also unknown is whether Congress provisions are all unproven. making inroads should begin to become will have the political will to enforce Using incentives and accountability, evident in about five years, he says. the new law tries to nudge doctors, hosOther proposed provider-payment cost-cutting measures that the laws pitals and other health-care providers measures include just about everything demonstration projects find to be effectoward eliminating unnecessary illness we know about cost control, making it tive, says Baicker. Health-care providers and treatment, said David Kendall, a se- a best effort at implementing cost savings always fight such changes because they nior fellow at Third Way, a center-left on the provider side, says McClellan, affect income, and that means all these
AFP/Getty Images/Nicholas Kamm

www.cqresearcher.com

June 11, 2010

513

HEALTH-CARE REFORM
things could easily be left to wither on the vine, she says. While the demos may be promising, there is no built-in mechanism in the law to give them teeth. For example, the law sets up a program for testing the comparative effectiveness of health treatments with the goal of spending health-care dollars only for what works best, notes a report by Medicares actuary. Requiring Medicare to base payments on comparative-effectiveness findings would reap substantial savings, says the actuarys office. However, the law does not authorize establishment of a federal board with authority over payment and coverage policies to force Medicare and other programs to stop paying for less effective treatments, said the actuary. Instead, the legislation only requires dissemination of the research as a recommendation for payment changes. Because of lawmakers reluctance to impose tough changes, therefore, a program that could save a lot of money will result only in small savings, and even those will take many years to develop, the report predicts. 29 If there were an FDA [Food and Drug Administration] of cost containment, none of these measures would be considered safe and effective, quipped Mark Pauly, a professor of health-care systems, business and public policy at the University of Pennsylvanias Wharton School. Nevertheless, a few provisions, such as reducing rates of hospital readmission by letting nurses counsel patients about staying healthy and requiring hospitals to take stringent steps to ward off hospitalacquired infections, likely will save money, Pauly conceded. 30 But some conservative critics say the laws cost-cutting initiatives simply cannot work. You cannot control costs unless someone does the controlling. And there is nothing in the legislation that would free either patients or doctors to do that job, said John Goodman, president of the National Center for Policy Analysis, a freemarket think tank in Dallas. Goodman is among conservatives who argue that the entire system of third-party insurance not just public programs like Medicare shields patients too much from the high cost of health care. Therefore, he argues that since the new law preserves an insurance system, it cannot succeed at cost control. Goodman argues that health costs will only be controlled when patients must fully confront the cost of the care they seek, so that they will bargain hard to force their medical providers to use their intelligence, creativity and innovative ability to seek efficiencies the way people do in other markets. 31 Furthermore, several provisions in the law are sure to increase health-insurance premiums in the short term, says the Galen Institutes Turner. A ban on health insurers placing a lifetime or annual limit on the benefits an individual receives will raise premiums for all policyholders, she said. 32 Meanwhile, liberal opponents say the law lacks the most powerful known means of holding down costs. For example, allowing Americans to buy prescription drugs from Canada could have saved American consumers roughly $100 billion, but that didnt make it into the bill because drug manufacturers strenuously object to the practice, wrote liberal blogger Jon Walker. Creating a centralized federal government authority to negotiate payments with health-care providers would also lower payment rates, and requiring insurance-benefit packages to be standardized would reduce administrative costs and allow for better comparison shopping. But neither of those common-sense measures is in the new law either, Walker said. 33 health care is a right that nations owe their people and have created taxpayerfunded public or combination publicprivate systems to provide it. By contrast, the U.S. Congress has never seriously debated establishing a universal right to care. 34 We had a little of this conversation after the Civil War, resulting in a basic guarantee of health care as a right for veterans, says University of Pennsylvania ethicist Caplan. Other nations have gone much farther, however. For example, after World War II, Britain explicitly discussed whether health care should be guaranteed as a right and decided that it was part of what the nation owed to a people who had lived through the blitz Nazi Germanys sustained seven-month bombing of Britain during the early years of World War II, he says. Canada had the conversation and concluded that a guaranteed right to health care is part of what would bind [the geographically vast country] together as a nation, says Caplan. Were the only county that finds it quite this difficult to discuss whether health care should be a right, in part because of historical struggles to harmonize a racially and ethnically diverse society, Caplan says. Its easier for a smaller, homogeneous nation to discuss using taxpayer dollars to offer health care to all, he says. As a result, health insurance in America developed as a purely private enterprise in the first half of the 20th century. At first, there was limited concern about paying for coverage. Gradually, however, as care grew more expensive, employers began offering hospitalization insurance as a benefit for workers. By the 1940s, large unionized companies dominated the American economy, and many used health-insurance benefits as a bargaining chip in labor negotiations. Employer-sponsored health plans successfully spread out health-care costs among large pools of workers and,
Continued on p. 516

BACKGROUND
Exceptional America

irtually all other industrialized countries have concluded that

514

CQ Researcher

Chronology
1880s-1930s As the cost and effectiveness of
health care increase, industrialized countries mull universal access, and Americans worry about affording health care. 1883 Germany creates first universal health-care system. 1929 School system in Dallas, Texas, launches first prepaid hospital insurance plan for employees. 1932 Committee on the Cost of Medical Care details Americans growing difficulties in paying for care. 1935 Attempts fail to include health coverage in the Social Security Act.

1960 U.S. health spending totals $28 billion, or 5.2 percent of gross domestic product (GDP). 1965 President Lyndon B. Johnson signs Medicare and Medicaid into law. 1971 President Richard M. Nixon places wage and price controls on medical services. 1980 Health spending tops $255 billion, or 9.1 percent of GDP.

2006 Massachusetts enacts mandatory, universal health-coverage program. 2009 Massachusetts officials consider implementing payment bundling paying doctors and hospitals a flat fee upfront to cover patients to control cost growth in their universalcoverage plan. . . . Congress votes to expand SCHIP program. . . . President Obama and congressional Democrats slowly push coverageexpansion plans through Congress in the face of heated opposition; bill passes Senate on Dec. 24.

1990s-2009 2010s
Rising health costs force some Americans to drop coverage, prompting Congress to enact a public insurance program for children in working families. 1993 President Bill Clinton and first lady Hillary Clinton propose sweeping health-system reforms. Insurance industry launches opposition campaign. 1994 Senate abandons the Clinton health plan without debate. 1997 President Clinton signs State Childrens Health Insurance Program (SCHIP) to provide coverage for children in working families. 2000 Health spending totals $1.4 trillion, or 13.8 percent of GDP. 2002 Congress enacts Health Care Tax Credit for those who lose their jobs to foreign competition.

Implementation begins of the most wide-ranging health-reform legislation in U.S. history. 2010 Health reform clears Congress on March 21; President Obama signs legislation intended to cover about 32 million uninsured people and reengineer the health-care payment system to trim costs; the laws main provisions take effect in 2014. . . . The 2009 federal SCHIP expansion falters as state budgets suffer from recession. . . . Connecticut becomes first state to sign up for the 2010 reform laws option to immediately extend Medicaid coverage to poor adults outside the traditional Medicaid categories of disabled people and mothers and their young children. . . . At least 20 state attorneys general sue the federal government to stop the health-care law. 2014 Main provisions of the 2010 health law are slated to begin, including a requirement for all Americans to buy health insurance.

1940s-1980s Employer-sponsored insurance


becomes the dominant form of U.S. health coverage. Congress enacts Medicare and Medicaid to fill coverage gaps for the elderly, the disabled and poor mothers with children. 1943 Wagner-Murray-Dingell bill for compulsory national health insurance is introduced in Congress. . . . National War Labor Board declares employer contributions to insurance are income-tax free, opening the way for companies to use health insurance packages to attract workers. 1946 United Kingdom launches fully nationalized universal coverage system National Health Service.

www.cqresearcher.com

June 11, 2010

515

HEALTH-CARE REFORM

States Will Be Ground Zero for Many Changes


A lot is resting on the shoulders of the states.

ublic-policy experts agree that the states will play a crucial role in implementing the new health-care reforms, but they arent all sure the states are up to the task. A lot is resting on the shoulders of the states for the success of health-care reform, says Stan Dorn, a senior research associate at the Washington-based Urban Institute, a centrist think tank. This federalism aspect of the law is one of the biggest worries in some respects because reliance on states leads to enormous variation in a program, which likely will leave some residents of the country with low benefits and little protection under the new law, says Georgetown University professor of public policy Judith Feder. Some analysts tout states as laboratories of democracy, where innovative ideas are often pioneered and tested, but Feder argues that studies show that most states rarely innovate. Federalism is overrated, she says. Yale University professor of political science Jacob Hacker says ultimate success will heavily depend on the states and federal government working together. To me, one of the biggest challenges of implementation is that the law creates dual authority in many areas, he says. Hopefully, good partnerships will develop. Specifically, Hacker explains, the federal government will be funding subsidies for people without employer-based coverage to buy insurance in new markets, called exchanges, but the states are charged with setting up and running the exchanges. Most of the money to fund actual new insurance coverage under Medicaid and in the new exchanges will come from the federal government, which should prove a boon to states in some respects, since its state and local authorities who often see the consequences as uninsured people develop severe medical problems. States will end up bearing a large share of administrative expenses for the programs, however. The states that do the least now to provide Medicaid coverage will get the most money from the expansion of Medicaid to a new group of eligible people everyone with incomes under 133 percent of the federal poverty level, says Judith Solomon, a senior fellow at the left-leaning Center on Budget and Policy Priorities. States generally will benefit from the Medicaid expansion because currently very, very large numbers of the low-income people who will become eligible for the mostly federally funded

Medicaid expansion are currently in some state-funded programs, such as mental-health programs, Solomon says. State officials who are fretting about the cost of the new programs tend to assume that 100 percent of eligible people will participate, but weve never seen any such number in previous programs, so its unlikely to happen this time either, says Solomon. Thats not to say that there wont be some expenses for states, Solomon says. Just as in the current Medicaid program, states will pick up half the administrative costs for the new, much larger Medicaid population beginning in 2014 while the federal government will pay for the other 50 percent of the administration. Im worried about the administration side, where theres only a 50 percent federal match, says Dorn. No state person will want to brag about hiring more state employees since all state governments are constrained by legal requirements to balance their budgets annually, he says. Nevertheless, when it comes to getting high numbers of eligible people enrolled, intensive outreach is crucial, plus having as many as possible automatically enrolled based on information government agencies already possess, rather than requiring them to fill out application forms, Dorn says. That makes administrative resources the greatest implementation question. Unless they opt out of the responsibility, states also are supposed to set up and manage the health-insurance exchanges that in 2014 are slated to begin selling coverage to people without employer-sponsored health insurance. But if I were a state legislator or governor, the last thing I would want to do would be to run an exchange, says Dorn. The federal money [to administer the exchanges] runs from 2014 to Jan. 1, 2015, and after that each exchange must raise its own money by charging fees to insurers or health-care providers, Dorn explains. All of these players will want services the exchanges provide but wont want to pay. That will give states a difficult balancing act: raising money while also tightly regulating the health-care market, Dorn says. If many states are leery, the feds might end up doing it all, which might not be a bad outcome, he says, although its not what the law anticipates. Marcia Clemmitt

Continued from p. 514

by doing so, allowed each individual to pay relatively low and consistent premiums, even in years when they had accidents or illnesses. Furthermore, since the sickest people are unlikely to be employed, private insurance companies prospered in an insurance market al-

most entirely made up of employersponsored coverage.

Hybrid Solutions

eginning as early as the 1940s, however, some lawmakers grew

troubled by the realization that vulnerable populations such as the elderly and the disabled did not have workplace-based coverage. Many of these people couldnt afford individual policies, which in most states insurers could price according to the individuals own health risk.

516

CQ Researcher

Members of Congress made unsuccessful attempts to launch discussion of health coverage for all in 1943, 1945, 1947, 1949 and 1957, and Presidents Franklin D. Roosevelt, Harry S. Truman, Richard M. Nixon and Clinton all proposed guaranteed universal coverage. Ultimately, however, Congress backed off even debating such proposals because of strong opposition from big employers, insurers and healthcare providers who feared that increased government involvement in health care would mean less autonomy in practice and lower pay. Even organized labor opposed the discussions, largely because it liked bargaining for good health-care benefits. But the growing size of the population without coverage eventually forced Congress to act. To supplement the private health-insurance system, which left many people behind, Congress launched two large public insurance programs in 1965, effectively creating a right or entitlement to health care for two specific groups of Americans. The Medicare program covers the elderly, while Medicaid covers poor mothers with young children and some poor and seriously disabled people. Congress expanded public coverage one more time to reach another population that was increasingly priced out of employer-sponsored coverage. The State Childrens Health Insurance Program (SCHIP), launched in 1997, covers children in low- and middle-income working families. History, then, leaves the United States with a hybrid system about half public and half private. While the arrangement matches the policy preferences of many Americans, who tend to be political centrists, it poses a complex challenge for lawmakers faced with high rates of uninsurance and fast-rising costs. When Nixon and Democratic Presidents Jimmy Carter, in the 1970s, and Clinton, in the 1990s, proposed healthcare overhauls intended to help provide affordable care for all Americans, all three

plans were complicated by their attempts to leave both public and private coverage intact. Further, because of their hybrid nature, all invited harsh criticism both from conservative Republicans, who oppose taxpayer-financed, governmentregulated health care, and from liberal Democrats, who often argue that private health-insurance markets simply dont work and ought to be replaced by all-public coverage.

The Clinton Plan

n 1993 and 1994, when Bill and Hillary Clinton, now Secretary of State, proposed their health-care overhaul plan, Congress came as close as it ever has to debating a full-fledged health overhaul. The times seemed to favor action. When the Clintons Health Security Act was proposed, up to two-thirds of Americans told pollsters they favored tax-financed national health insurance. The Clinton proposal attempted to thread the needle of the hybrid U.S. system by maintaining large publiccoverage programs while creating new, tightly regulated private-insurance markets where people could buy coverage that was tax subsidized for lowincome people. In an attempt to hold onto the private business dollars that had long financed health care in the United States for workers, the plan would have required all employers to contribute to the cost. But the proposals complexity helped make the plan an easy target for political opponents and businesses and health-care insurers and providers who feared its complicated rules and high costs. Less than a year after the proposal was announced, Congress informed the White House that it had no plans to move the plan forward. The failure of the Clinton health plan . . . vividly demonstrates . . . that most Americans even the underinsured and the soon-to-be-uninsured, the po-

tentially uninsurable and the one-illnessfrom-bankruptcy can be scared into fearing that changing Americas inadequate public-private patchwork means higher costs and lower quality, Yales Hacker wrote. This is the legacy of an insurance structure that lulls many into believing they are secure when they are not, that hides vast costs in quiet deductions from workers pay, [and] that leaves government paying the tab for the most vulnerable and the least well, he said. It is the very failings of our insurance system that make dealing with those failings so devilishly hard. 35 But many conservatives continue to argue that too-strict government regulation of health care along with insurance and public programs like Medicare are the culprits that have hopelessly damaged the health-care market and made effective overhaul difficult. The problems in American health care have not been caused by a failure in the health care market, but mainly by distortions imposed on the market, such as federal tax subsidies and programs that have created a thirdparty payment system, said Rep. Paul Ryan, R-Wis. The key to a successful overhaul is to convert to an all-private system, by means such as creating a standard Medicare [cash] payment to be used for the purchase of private health coverage, he said. 36

Massachusetts Plan
ver the years, many states have attempted to enact systemwide reforms on their own, frustrated by the federal governments reluctance even to discuss universal health care. The pioneers of sweeping reform included Tennessee, Oregon, Washington, Vermont and Minnesota. Those states generally attempted to expand public coverage for the poorest residents and provide some form of tax-funded subsidies to help other low- to middle-income and sick people

www.cqresearcher.com

June 11, 2010

517

HEALTH-CARE REFORM

Reforms Face Many Hurdles


The war to make health-care reform an enduring success has just begun.
s the health-reform law is implemented, the number of things that can go wrong is as big as the health-care system is complicated. Besides the fact that not only states but also doctors and hospitals may balk at the new provisions, future Congresses must ante up continued funding to administer the law, never a certain outcome. The laws coverage-expansion portions are so state-based that the states can stymie a lot, says Judith Solomon, a senior fellow at the left-leaning Center on Budget and Policy Priorities. There can be a great deal of stalling on getting some initiatives like a large Medicaid expansion up and running. The law also will largely rely on increased state regulation of health insurers, which could lead to large variations around the country in how tightly insurers are held to consumer-friendly standards. Furthermore, Medicaid rolls in some states will expand by 50 percent or more beginning in 2014, and it is unclear whether these states will be able to find enough providers who are willing to accept the anticipated payment rates, wrote Henry J. Aaron, a senior fellow at the centrist Brookings Institution think tank, and Robert D. Reischauer, president of the centrist Urban Institute. Will states raise provider payment rates, curtail Medicaid benefits (as states are legally authorized to do), or simply let patients fail to find doctors who are willing to provide them with care? they ask. 1 One of the balancing acts that face lawmakers seeking to ex-

pand coverage in the employer-based U.S. system is keeping enough employer money in the game to avoid overwhelming taxpayers with new costs. Accordingly, the law was developed in hopes of limiting incentives for employers to drop workers coverage. But already there are some troubling signs that employers will back off coverage because of the existence of the exchanges, where workers can buy insurance using tax-funded subsidies if their employers dont offer it, says Yale University professor of political science Jacob Hacker. If that happens on a large scale, for society as a whole it might be a better thing and more fair, because having employers as the basis for coverage distorts labor markets because the fear of losing health insurance often traps people in jobs or careers they dont want, Hacker says. Nevertheless, its not a direction that most people want to go in. Federal agencies must transform the laws rather general language into specific rules, and some observers say that might produce rules that are unworkable. Moreover, theres evidence that the agencies are already falling behind in the process. Theyre not going to meet their deadlines, so they should push the whole thing back, says Joseph Antos, a scholar at the free-market American Enterprise Institute think tank and a former assistant director of the Congressional Budget Office. Its going to take more than the three years the law has set aside to get the massive coverage-expansion program up and running.

purchase coverage in more tightly regulated private insurance markets. But while the programs have increased coverage, at least temporarily, all have eventually foundered as costs continued rising while taxpayer willingness to fund coverage for sick or lowerincome people waned. Massachusetts first began expanding coverage to all its citizens in 1988 and enacted its latest plan in 2006. The law shifted Medicaid funding to provide more subsidies to individuals to get insurance; placed requirements to buy or help pay for coverage on both employers and individuals; and set up a statewide regulated insurance market known as an insurance Connector which state officials hoped would force insurers to compete for enrollees based on quality and price of benefits. 37

Reactions to Massachusetts latest initiative are mixed. Costs are the big challenge, and its not yet clear how state attempts to change the medical culture to favor efficiency over excess services and high price tags are working, says Chernew, of Harvard Medical School. Some say that the culture in the state is changing, but others say were on the verge of collapse. People using the Connector to buy insurance have had lots of different choices of health plans, and theres been good consumer service and information, says the Urban Institutes Dorn. Furthermore, theyve been good at negotiating for low premiums with insurers, he says. For example, Massachusetts has several extremely expensive hospital systems, which have had enormous clout in winning high payment from insurers over the years be-

cause patients want access to them, Dorn explains. But the Connector set up price competition by establishing a low-cost coverage option that didnt include the big-name systems, and consumers concerned with price, such as young people earning lower wages, have signed up for it, he says. The state also has rewarded health insurers who keep premiums low by enrolling the most default enrollees people who dont seek out the health coverage on their own with the insurer who quotes the lowest premium. Default enrollees are often the healthiest, cheapest-to-cover people, thus helping that insurer hold down costs by having an extra helping of healthy people in their pool, Dorn says. Advocates of single-payer systems, however, say Massachusetts attempt at health-care expansion is doomed, just

518

CQ Researcher

Already theres evidence that agencies like the Centers for Medicare and Medicaid Services (CMS) are overwhelmed, Antos says. Neither CMS nor the Department of Health and Human Services (HHS) is an insurance company or has much experience in insurance, a serious lack since a massive insurance expansion is a central portion of the law, and Congress has relied on the agencies to flesh out virtually all the details, Antos says. HHS Secretary Kathleen Sebelius is a former Kansas insurance commissioner, but she admitted that she doesnt have any particular influence in health-care reform. Drafters of the law made little use of the expertise of the insurance industry and insurance analysts and regulators, so there will be mistakes in implementation, charges Antos. It was done without consultation with the many, many experts, and HHS looks as if its not going to ask experts now. But Hacker says its too soon to be that critical of the implementation. The critical judgments will be made in the next year or so, when it will be possible to begin judging whether implementation will be smooth, he says. And while rules for how much premium revenue must fund health care are inevitably going to be contentious, I dont believe itll preclude insurers from participating, says Hacker. The fact is that insurers were supportive of these things because they want the revenue that will accompany expanded, subsidized coverage. Nevertheless, theres such a long time before the law goes fully into effect that critics can paint it any way they want, making it very

easy for opponents to turn the public against the law, says Hacker. The best thing advocates could do for themselves is not to trumpet their achievements but to make clear that the law is a first step. In another setback to implementation, Senate Republicans are blocking the nomination of physician Donald Berwick, a professor of health policy and management at the Harvard School of Public Health, to head CMS. Conservatives say that Berwicks work with Britains National Health Service is a sign he would use government to destroy American physicians independence. Supporters argue that, to advance the health-reform laws costcutting initiatives, CMS must have a leader dedicated to emphasizing effectiveness and efficiency in U.S. medical practice. 2 The war to make health-care reform an enduring success has just begun and will require administrative determination and imagination and as much political resolve as was needed to pass the legislation, Aaron and Reischauer warn. 3 Marcia Clemmitt
1 Henry J. Aaron and Robert D. Reischauer, The War Isnt Over, The New England Journal of Medicine online, March 24, 2010, www.nejm.org. 2 For background, see Linda Bergthold, Who Is Don Berwick and Why Do the Republicans Want to Kill His Nomination, Huffington Post blog, June 1, 2010, www.huffingtonpost.com/linda-bergthold/who-is-don-berwickand-wh_b_596859.html. 3 Aaron and Reischauer, op. cit.

like earlier attempts. Unfortunately, competition in health insurance involves a race to the bottom, said Harvard Medical Schools Woolhandler. Insurers compete by not paying for care: by denying payment and shifting costs onto patients or other payers. 38

CURRENT SITUATION
Democrats in Power
ith Democrats holding not only the White House but also substantial majorities in both the House and the Senate for the first time in three

decades, advocates of health-care reform hoped that the 111th Congress whose term runs from 2009 through 2010 would finally be the one to debate a health-care overhaul for the entire population. In his first address to a joint session of Congress, on Feb. 24, 2009, newly inaugurated President Barack Obama declared that we must . . . address the crushing cost of health care and thus can no longer afford to put healthcare reform on hold. High-cost health care now causes a bankruptcy in America every thirty seconds. . . . In the last eight years, [health-insurance] premiums have grown four times faster than wages. And in each of these years, 1 million more Americans have lost their health insurance. 39 Furthermore, he said, already, we have done more to advance the cause

of health-care reform in the last 30 days than we have in the last decade. For example, when it was days old, this Congress passed a law to provide and protect health insurance for 11 million American children whose parents work full time by using a cigarette tax to expand funding for the public-sector SCHIP program that covers children in working families, he said. 40 I suffer no illusions that this will be an easy process, said Obama. But I . . . know that nearly a century after Teddy Roosevelt first called for reform, the cost of our health care has weighed down our economy and the conscience of our nation long enough. . . . Health-care reform cannot wait, it must not wait, and it will not wait another year. 41 In the House, the legislation waited nearly 10 months, passing on a 220-215

www.cqresearcher.com

June 11, 2010

519

HEALTH-CARE REFORM

Does Health Reform Create Winners and Losers?


More affordable coverage for sicker people will boost costs for healthier people.
ritics charge that the health-care reform plan makes some Americans winners and others losers. Some liberal critics charge that, by relying on private insurance for much of the tax-subsidized coverage expansion, Congress will essentially just direct more taxpayer dollars into the already bloated coffers of the insurance industry. Other analysts arent so sure, however. Many of the people who will enroll in tax-subsidized coverage will not have had consistent insurance coverage for several years, and as a result often have developed significant health needs that will drive their spending up, said Maggie Mahar, a fellow at the liberal, New York City-based Century Foundation. 1 According to recent analyses, around 11 percent of uninsured people are in fair or poor health, compared to only 5 percent of privately insured people who report poor health. Unlike in the past, under the new reform law, insurance companies will not be able to charge these new customers more than they charge others in their community, said Mahar. This means that insurers are unlikely to reap a big windfall from the tax-funded subsidies, she argued. 2 The same legislative provision that Mahar cites as making coverage more affordable for sicker people will cause health premiums to rise for younger, healthier people, however an example of the way the law creates some winners and losers in the attempt to get more people covered, noted Trudy Lieberman, a longtime health-care journalist who is a contributing editor to the Columbia Journalism Review. 3 This is not national health insurance were talking about, where everyone, no matter how old or young, is treated equally, Lieberman wrote. We are talking about a private insurance market where companies have to make money to stay in business and where one key way of making money in the past has been for companies to simply avoid insuring the sickest people so that healthier people can pay lower premiums. Under the new law, however, insurance companies will be required to take sick people who will file large claims and also will be banned from charging them the extremely high premiums that they are liable for in the individual insurance market today, she said. Instead, older or sicker people will be on the

hook for premiums that are no more than three times what [insurers] charge a younger person, and as a result premiums for younger, healthier people will rise by an estimated 15 to 17 percent. Insurers have to make up the revenue shortfall somehow, and theyll do it by increasing the premiums for younger people. Its a balancing act Congress has permitted, she wrote. However, for young adults earning $43,000 per year or less, some of the premium increase will be offset by a federal tax credit. In another financial balancing act, lawmakers had to determine whether to offer larger taxpayer-funded subsidies to a smaller population of people with lower incomes or spread out the subsidies to a larger population. More subsidies might make the law more politically popular but also would require making subsidies for the lowest-income people smaller than they might have been otherwise. Some analysts fear that lawmakers came down on the wrong side of that question. One big worry that I have is affordability, says Stan Dorn, a senior research associate at the Urban Institute think tank. In the 2006 coverage expansion launched in Massachusetts, the state provided much bigger subsidies and much more extensive coverage to people with incomes up to 300 percent of the federal poverty level the group most in danger of being priced out of coverage, says Dorn. (In 2009, for example, a family of four earning about $66,000 had an income 300 percent of the poverty level.) But the federal law took a different tack, offering smaller subsidies for every income group including the lowest in order to provide some level of subsidy for people with incomes up to 400 percent of the poverty level, he says. It would have been better to concentrate more on the people up to 300 percent of the poverty level rather than spread the subsidies so far. Marcia Clemmitt
Maggie Mahar, Myths & Facts About HealthCare Reform: Who Wins & Who Loses? Healthbeat blog, April 6, 2010, www.healthbeatblog.com. Ibid. 3 Trudy Lieberman, The White House vs. the Associated Press, Columbia Journalism Review online, April 7, 2010, www.cjr.org.
2 1

vote on Saturday evening, Nov. 7, 2009, with one Republican voting in favor and 39 Democrats opposed. 42 In the Senate, however, where the minority party wields much more power, debate dragged on into spring 2010, with the measure all but given up for dead on several occasions. Republican senators repeatedly threatened to fili-

buster hold the floor without allowing the health-care legislation to come to a vote forcing Senate leaders to muster 60-vote majorities five times to move the bill forward. On Dec. 24, 2009, by a 60-39 margin, Senate Democrats finally passed their version of the legislation with no Republican votes. The Senate and

House bills varied considerably, however, and, in such a case, both houses of Congress must one way or another pass identical bills before they can become law. Thus, the cliffhanger continued for an additional three months as Democrats struggled to piece together a reform
Continued on p. 522

520

CQ Researcher

At Issue:
Will the health-care reform law harm the federal budget?
yes

GRACE-MARIE TURNER
PRESIDENT, GALEN INSTITUTE
WRITTEN FOR CQ RESEARCHER, MAY 2010

PAUL N. VAN DE WATER


SENIOR FELLOW, CENTER ON BUDGET AND POLICY PRIORITIES
WRITTEN FOR CQ RESEARCHER, MAY 2010

resident Obamas health overhaul law will have a devastating impact on the federal budget, both because of what it does and what it fails to do. It does increase federal health spending, creates expensive open-ended entitlements and uses budget gimmicks to hide the true costs of the massive expansion of federal spending. And it fails to lower health costs, bend the cost curve down or provide real solutions to the trillions of dollars in red ink facing existing entitlement programs, especially Medicare and Medicaid. Nonetheless, to win passage of the health law, supporters insisted the law would be fiscally responsible and would reduce the deficit. Not a chance. The Congressional Budget Office (CBO) recently said the law will cost $115 billion more than originally estimated, pushing the total cost above $1 trillion. But this underestimates the true costs by hundreds of billions if not trillions of dollars due to the laws deception and budget gimmicks. Part of the true cost was concealed by delaying expensive subsidies until 2014 while starting many of the tax hikes and Medicare cuts much earlier. Further, the law is purportedly paid for with $569 billion in tax increases and $528 billion in cuts to Medicare. But these Medicare cuts are highly suspect given Congress history of pushing them off to keep doctor payments level and keep physicians in the Medicare program. Keeping payments just at current rates will cost $276 billion over 10 years, according to the CBO. When these and other costs are included, the more accurate price tag for ObamaCare is $2.5 trillion over a decade. Rather than helping contain escalating health spending, as promised, ObamaCare pushes it higher. Medicares chief actuary, Rick Foster, says federal health spending will rise by $311 billion by 2019 thanks to the law. And this estimate doesnt include tens of millions more people who could lose their health insurance at work. The law threatens employers with big fines and subjects them to unpredictable health insurance cost increases; many are considering dropping coverage. If they do, millions more workers would be dumped onto health exchanges where theyll be subsidized by taxpayers. If this happens, federal spending will explode. Gimmicks, new entitlements and unrealistic assumptions are just some of the many ingredients in ObamaCare that will have a crippling impact on the federal budget. We simply cant afford this law.
no

yes no
June 11, 2010

he Congressional Budget Office (CBO) estimates that the new health reform law will reduce deficits by $143 billion over the first decade (2010-2019) and by about one-half of 1 percent of gross domestic product, or about $1.3 trillion, over the second decade (2020-2029). The law will extend coverage to over 30 million uninsured Americans and provide important consumer protections to tens of millions of insured Americans whose coverage may have critical gaps. It will more than pay for these improvements by making specific reductions in Medicare, Medicaid and other programs and by increasing tax revenues (such as by raising the Medicare tax on high-income people). Despite CBOs finding that the law will reduce deficits, some people have argued that it will actually increase deficits, claiming that CBOs cost estimate includes savings that wont occur, omits costs that should be included, or both. Those claims dont withstand scrutiny (see Health Reform Will Reduce the Deficit, www.cbpp.org/files/3-25-10health.pdf). For example, some claim that the laws Medicare savings are unrealistic because Congress never lets Medicare reductions take effect. History shows this is untrue. Over the past 20 years Congress has enacted four pieces of legislation that include significant Medicare savings; virtually all of the savings in three of them (the 1990, 1993 and 2005 budget reconciliation bills) took effect, as did nearly four-fifths of the savings in the fourth piece of legislation (the Balanced Budget Act of 1997). Some contend that the health-reform law should include the cost of permanently fixing Medicares sustainable growth rate (SGR) formula for setting physician payments. The poorly designed formula turned out to require much larger cuts in physician payments than Congress intended when it enacted SGR, so Congress has regularly acted in recent years to prevent the full SGR cuts from taking effect. But the SGR cost is in no way a result of health reform the government will incur this cost regardless of health reform, not because of it. Because rising health-care costs represent the single largest cause of the federal governments long-term budget problems, fundamental health reform is key to their solution. Experts agree that slowing the growth of health-care costs will require an ongoing process of testing, experimentation and rapid implementation of what is found to work. The health-reform law begins that process. It starts to transform a system that delivers ever more services into one that provides effective, high-value health care.

www.cqresearcher.com

521

HEALTH-CARE REFORM
Continued from p. 520 servative policy than was considered to participate in health-coverage expanpackage that could win all the needed in the past, says the Urban Institutes sions, nor the taxes the law will raise to conservative Democratic votes in the Sen- Dorn. For example, in the Clinton plan, pay for coverage, said Romney. 45 ate while retaining liberal support in the we were going to leave behind our House. In addition, by 2010, Democrats employer-based coverage, and there previous 60-vote, filibuster-stymieing would have been a uniform benefit Senate majority was reduced to 59 votes, standard for all health insurance. The as Sen. Scott Brown, R-Mass., was seated Clinton proposal also included exerhaps the biggest difference the law as the elected replacement of the late plicit regulation of insurance premiwill make for most people is that, Sen. Edward M. Kennedy, D-Mass. ums to prevent them from rising too beginning in 2014, it will provide a new, longtime ardent champion of health-care high and largely dictated what in- regulated insurance marketplace. People reform who died of brain cancer on surance benefit packages could con- who cannot get employer-sponsored Aug. 26, 2009. coverage can shop for Ultimately, using health insurance at the several parliamenso-called state exchanges. tary maneuvers, SenThe law also will provide ate Majority Leader many people with subsiHarry Reid, D-Nev., dies to help pay for that and Speaker of the coverage. 46 House Nancy Pelosi, Also in 2014, people D-Calif., engineered with incomes up to 133 passage of a bill acpercent of the federal ceptable to Democpoverty level can get rats in both houses. Medicaid coverage, paid On March 21, the for mostly by the fedHouse passed the eral government. CurSenates version of rently, only certain the bill. Then, under groups of people, a process called recmainly poor mothers onciliation, first the and their young chilNurse practitioner Kathryn Quinn administers a flu shot at a clinic in Senate and then the a CVS store in Wyckoff, N.J. Proponents of the health-reform law say dren and some severeusing nurse practitioners for more tasks often performed by physicians House passed a ly disabled poor peowill help keep health-care costs down. package of changes ple, are eligible for to the Senate legisMedicaid. lation to make it acceptable to the gen- tain, says Dorn. This bill doesnt have Health insurers will face a very diferally more liberal House Democratic any of that. ferent set of rules and expectations in majority. Reconciliation bills which In fact, many Democrats liken the bill the new system, says Georgetown Uniare permitted to include only provi- to the 2006 Massachusetts plan, passed versitys Feder. Today U.S. health insursions that relate to the federal budget by a Democrat-dominated legislature and ers compete for profits largely based on may not be filibustered and thus signed into law by then-Gov. Mitt Rom- risk selection trying to be the inrequire only a 51-vote majority in the ney, a Republican. surer whose benefit packages attract the Senate to pass. 43 A lot of commentators have said . . . healthiest people, because money that Part of Obamas frustration over this is sort of similar to the bill that Mitt doesnt go to medical care can go to health care is that he thought that in Romney . . . passed in Massachusetts, profits. While the law doesnt stamp out the end some Republicans would ap- said Obama. 44 risk selection, it sure as hell treads on prove the legislation, which is not Many conservatives, including Rom- it, she continues, mainly because, ultias radical as the overhaul that Nixon ney, heatedly deny that the Massa- mately, it will require insurers to take all proposed in the early 1970s, says chusetts plan has much in common comers and will also require that a cerBryan D. Jones, a professor of con- with the 2010 federal law, however. tain minimum percentage of premiums gressional studies at the University of We dont like . . . the intrusion of the go towards medical care, she explains. Texas, in Austin. federal government on the rights of states Many of the laws provisions aimed The new law is a much more con- in the federal law, which requires states at cost containment involve putting

Implementing the Law

522

CQ Researcher

Bloomberg via Getty Images/Steve Hockstein

new [health-care-delivery and payment] arrangements in place and getting providers into them, says Feder. Under the new arrangements, providers like doctors and hospitals would retain earnings if theyre efficient and deliver high-quality care rather than delivering a high volume of care, as occurs under current systems, she says. Its going to take a lot of money and new resources for Medicare to implement and implement quickly the laws many new programs, says former Medicare and Medicaid chief McClellan. It normally takes seven to 10 years for a good idea to actually become part of the Medicare program. But we dont have that kind of time. Furthermore, theres the fear that, as in the past when Medicare has proven that certain techniques for saving money worked, Congress may block nationwide rollout of the methods, because of providers who worry theyll lose money, McClellan says. The risk is not that the bill is repealed but that pieces of it wont be supported by future Congresses, says Robert Blendon, a professor of health policy at the Harvard School of Public Health. For example, a Republican Congress that opposes taxes may cut funding for federal subsidies that are required to help people afford insurance, he says. Meanwhile, congressional Democrats are mulling additional changes they say may be needed to improve the healthcare system for patients, such as tightening government oversight of healthinsurance premium price increases. 47

Fighting the Law

onservatives continue to argue that the law involves government too much in health care. The new law requires all Americans to purchase health insurance or pay a penalty . . . an unprecedented extension of congressional power,

wrote the Heritage Foundations Nix. Furthermore, she said, the health-care overhaul . . . diminishes the federalist system upon which the U.S. was founded, which grants certain powers to the states in order to limit those of the federal government. The law requires that states expand their Medicaid programs, whether or not they want to, and also includes new federal regulations on health insurers, which have been largely state regulated, Nix said. 48 One of the most prominent initiatives to halt the law is a lawsuit now backed by 20 states and the National Federation of Independent Business. After all the political deals were made, small businesses were left with a law that does little to address costs and instead is filled with new mandates, taxes and paperwork requirements that increase the cost of doing business, said Karen Harned, head of the federations legal office. 49 The Obama administration has already filed a brief in federal district court in Detroit in one of the earliest lawsuits against the law. The suit was filed by the Thomas More Law Center, a conservative legal group in Ann Arbor, which argues that the laws individual mandate to buy health insurance violates constitutionally protected freedoms. The administration argues that decisions to opt out of health insurance are more than personal choices but have consequences for the entire country thus making them suitable targets of federal lawmaking. The administrations brief argues that when uninsured people get sick, people who have been paying insurance, as well as taxpayers, pick up the bill for their care. Thus, individual decisions to forgo insurance coverage, in the aggregate, substantially affect interstate commerce by shifting costs to health-care providers and the public, making them a fair target for federal legislation under the Commerce Clause. 50

Ironically, former Gov. Romney who signed Massachusetts health-reform law is among opponents whove called most loudly for stopping the new federal law. Rather than seeking judicial repeal, however, Romney this spring urged voters to support Republican candidates to win back a congressional majority in November. Then we can clamp down on this bill . . . by not funding it, he said. 51

OUTLOOK
Dealing with Rationing

upporters argue that as people learn more about the new law, most will back it. However, expanding taxpayers responsibility to help provide health coverage for most Americans will ultimately require wrestling with the toughest question: As costs rise, how should taxpayersupported health benefits be limited or rationed? As people come to understand the basic approach of the new law, theyll like most of it, says the Urban Institutes Dorn. Many already support providing more help for people who cant afford insurance, requiring employers to help and setting up new rules that help people buy insurance in a more transparent, regulated marketplace, he says. Once the law is implemented, people wont have to worry that, Oh, if I get laid off, Ill lose coverage for my asthmatic daughter because they will be able to buy subsidized coverage elsewhere, he says. But single-payer advocate Woolhandler of Harvard says the new law will only temporarily slow momentum for much larger reform because we didnt really solve anything. The cost curve was absolutely not fixed by the legislation,

www.cqresearcher.com

June 11, 2010

523

HEALTH-CARE REFORM
so a lot of middle-class people will eventually find their coverage threatened again. Very quickly people are going to see that nothing is solved. With a program in place to ensure basic health coverage to most Americans, the next debate will be about rationing care, says Baicker of the Harvard School of Public Health. As the number of available health services and their price tags increases, public programs, at least, almost certainly wont be able to pay for anything that has any benefit at all, but, eventually, will need to have a higher threshold paying only for things that have a certain level of benefit to avoid having health costs squeeze out all other government spending, she says. Merely broaching the conversation let alone reaching conclusions about what care to fund will be extremely difficult, Baicker says. Currently, our system rations care by pricing some people out of care altogether, except for emergencies treated in the emergency room, says University of Pennsylvania ethicist Caplan. Because lawmakers avoided any discussion of rationing in the recent debate, the public is running around with the delusion that we dont ration now, Caplan says. But the discussion we need to have should start now, because the public will need many years to accept the notion of health spending limits, he says.

Notes
1 Quoted in Scott Wilson, With a Signature, Obama Seals His Health-care Victory, The Washington Post, March 24, 2010, p. A1. 2 Steven Thomma and David Lightman, Obama Signs Health-care Bill, but GOP Protests Continue, McClatchy Newspapers/Miami Herald, March 23, 2010, www.miamiherald.com/2010/ 03/23/1543254/obama-signs-health-care-legisla tion.html. 3 Arthur L. Caplan, Right to Reform, The Journal of Clinical Investigation, October 2009, p. 2862, www.jci.org. 4 Quoted in Michael Sweeney, Hatch Attacks Individual Mandate He Previously Supported, TPM LiveWire, Talking Points Memo blog, March 26, 2010, http://tpmlivewire.talking pointsmemo.com. 5 Quoted in Health Care Reform: Not Ready to Be Discharged Yet, Knowledge at Wharton newsletter, March 31, 2010, http://knowledge. wharton.upenn.edu/article.cfm?articleid=2457. 6 Kathryn Nix, Top 10 Disasters of Obamacare, Web Memo, The Heritage Foundation, March 30, 2010, www.heritage.org. 7 Sally C. Pipes, Obamacare Wins: Now the Pain Begins, New York Post, March 22, 2010, www.nypost.com. 8 Robert E. Moffit, Obamacare: Impact on Doctors, WebMemo No. 2895, The Heritage Foundation, May 11, 2010, www.heritage.org. 9 Jane Hamsher, Fact Sheet: The Truth About the Health Care Bill, Firedoglake blog, March 19, 2010, http://fdlaction.firedoglake.com. 10 Ian Millhiser, If at First You Dont Succeed, Hope for Activist Judges, Center for American Progress website, March 23, 2010, www.ameri canprogress.org; for background, see Gonzales v. Raich, 545 U.S. 1 (2005), www.law.cornell. edu/supct/html/03-1454.ZS.html.

About the Author


Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include Preventing Cancer and Reproductive Ethics.

Simon Lazarus, Mandatory Health Insurance: Is It Constitutional? Issue Brief, American Constitution Society, December 2009, www.acslaw. org/node/15654; for background, see United States v. Southeastern Underwriters Association, 322 U.S. 533 (1944), http://supreme.justia.com/us/322/533/. 12 Ibid. 13 President Barack Obama State of the Union Address, Feb. 24, 2009, About.com: US Politics website, http://uspolitics.about.com/ od/speeches/l/bl_feb2009_obama_SOTU.htm. 14 Jill Bernstein, Deborah Chollet and Stephanie Peterson, How Does Insurance Coverage Improve Health Outcomes? Issue Brief, Mathematica Policy Research, April 2010, www.mathe matica-mpr.com. 15 Ibid. 16 John Berlau, Health Care: Fix Middle-Class Medicine Cabinet Tax in Reconciliation, Competitive Enterprise Institute, March 23, 2010, www.cei.org. 17 Grace-Marie Turner, Fosters Report Validates Fears, National Journal Expert Blogs, May 3, 2010, http://healthcare.nationaljournal. com. 18 Quoted in True or False? Top Seven Health Care Fears, msnbc.com/Kaiser Health News, April 2, 2010, www.msnbc.com. 19 Flaws of Health-care Overhaul Grow More Apparent Every Day, Columbus [Ohio] Dispatch, April 29, 2010. 20 Maggie Mahar, Myths & Facts About HealthCare Reform: The Impact on Hospitals, and Patients Who Need Hospital Care Part 3, Healthbeat blog, April 21, 2010, www.health beatblog.com. 21 Quoted in ibid. 22 Mahar, op. cit. 23 Stuart Guterman, Karen Davis, and Kristof Stremikis, How Health Reform Legislation Will Affect Medicare Beneficiaries, The Commonwealth Fund, March 2010, www.cmwf.org. 24 Rate Review: Holding Health Plans Accountable for Your Premium Dollars, Families USA Issue Brief, April 2010, www.familiesusa.org. 25 Maggie Mahar, Myths & Facts About HealthCare Reform: Who Wins and Who Loses? Healthbeat blog, April 6, 2010, www.healthbeat blog.com. 26 David B. Kendall, A Foundation for Cost Control, National Journal blogs, March 22, 2010, http://healthcare.nationaljournal.com. 27 In Search of a Fiscal Cure, Newsweek, May 10, 2010, p. 12. 28 David M. Cutler, Time to Prove the Skeptics Wrong on Health Reform, Center for

11

524

CQ Researcher

American Progress, April 23 ,2010, www.ameri canprogress.org. 29 Richard S. Foster, Estimated Financial Effects of the Patient Protection and Affordable Care Act as Amended, Office of the Actuary, Centers for Medicare and Medicaid Services, April 22, 2010. 30 Quoted in Health Care Reform: Not Ready to Be Discharged Yet, op. cit. 31 John Goodman, The Most Important Feature of ObamaCare Is Something No One Is Talking About, John Goodmans blog, March 29, 2010, www.john-goodman-blog.com. 32 Testimony before Senate Committee on Health, Education, Labor and Pensions, April 20, 2010. 33 Jon Walker, Former Obama Aide David Cutler Ignores Proven Cost Control ideas to Inflate Grade on Presidents Health Care Plan, Firedoglake blog, March 10, 2010, http://fdlac tion.firedoglake.com. 34 For background, see the following CQ Researcher reports by Marcia Clemmitt, Rising Health Costs, April 7, 2006, pp. 289-312; Universal Coverage, March 30, 2007, pp. 265288; and Health Care Reform, Aug. 28, 2009, pp. 693-716. 35 Jacob S. Hacker, Yes We Can? The New Push for American Health Security, Politics & Society, March 2009, p. 14. 36 Paul Ryan, A Roadmap for Americas Future: Description of the Legislation, House Budget Committee Republican website, www. roadmap.republicans.budget.house.gov. 37 For background, see John E. McDonough, Brian Rosman, Fawn Phelps and Melissa Shannon, The Third Wave of Massachusetts Health Care Access Reform, Health Affairs online, Sept. 14, 2006, http://content.healthaffairs.org/ cgi/content/full/25/6/w420. 38 Testimony before House Energy and Commerce Subcommittee on Health, June 24, 2009, www.pnhp.org/news/2009/june/testimony_of_ steffie.php. 39 President Barack Obama State of the Union Address, Feb. 24, 2009, About.com: US Politics website, http://uspolitics.about.com/od/speeches/ l/bl_feb2009_obama_SOTU.htm. 40 For background see Ceci Connolly, Senate Passes Health Insurance Bill for Children, The Washington Post, Jan. 30, 2009, p. A1, www. washingtonpost.com/wp-dyn/content/article/ 2009/01/29/AR2009012900325.html. 41 President Barack Obama State of the Union Address, Feb. 24, 2009, op. cit. 42 For background see House Passes Health Care Reform Bill, CNN.com, Nov. 8, 2009,

FOR MORE INFORMATION


Alliance for Health Reform, 1444 I St., N.W., Suite 910, Washington, DC 20005-6573; (202) 789-2300; www.allhealth.org. Nonpartisan group providing information on all facets of health coverage and access, including transcripts and videos of Capitol Hill briefings from experts with a wide spectrum of views on reform. The Commonwealth Fund, One East 75th St., NY, NY 10021; (212) 606-3800; www.commonwealthfund.org. Private foundation that supports research on and advocates for universal access to affordable, high-quality health care. The Heritage Foundation, 214 Massachusetts Ave., N.E., Washington, DC 200024999; (202) 546-4400; www.heritage.org. Public-policy think tank provides analysis of health reform and health care from a conservative viewpoint. John Goodmans Health Policy Blog, National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, TX 75251-1339; (972) 386-6272; www.johngoodman-blog.com. Conservative analyst who advocates for free-market policies provides daily commentary on health care and health reform. Kaiser Health News, www.kaiserhealthnews.org. Foundation-funded, editorially independent nonprofit news group provides information on current events affecting health care. National Conferences of State Legislatures, 444 North Capitol St., N.W., Suite 515, Washington, DC 20001; (202) 624-5400; www.ncsl.org. Nongovernmental group that tracks proposed state legislation related to health-care reform. National Journal Expert Blogs: Health Care, http://healthcare.nationaljournal.com. Reporters from the political magazine and a wide variety of health-care experts and analysts provide commentary. The White House Blog: Health Care, www.whitehouse.gov/blog/issues/HealthCare. Obama administration officials comment on implementation of the new law.
www.cnn.com/2009/POLITICS/11/07/health.care. For background see Timothy Noah, Health Reform: An Online Guide, Slate, April 12, 2010, www.slate.com. 44 Quoted in Eric Kleefeld, Romney Spokesman: Romney Plan Is Not Like Obamas Health Care Reform, Despite What Obama Says, Talking Points Memo blog, March 31, 2010, http://tpmdc.talkingpointsmemo.com. 45 Quoted in Andrew Romano, Mitt Romney on RomneyCare, Newsweek online, April 19, 2010, www.newsweek.com. 46 For background see Side-by-Side Comparisons of Major Health Care Reform Proposals, Focus on Health Reform website, Kaiser Family Foundation, April 8, 2010, www.kff.org/health reform/sidebyside.cfm.
43

For background see Senate Democrats Seek Legislation to Regulate Insurer Rate Hikes, Kaiser Health News website, April 21, 2010, www.kaiser healthnews.org/daily-reports/2010/april/21/ insurers.aspx?referrer=search. 48 Nix, op. cit. 49 Quoted in Tom Brown, States Joined in Suit Against Healthcare Reform, Reuters, May 14, 2010, www.reuters.com. 50 Quoted in Ricardo Alonso-Zaldivar, U.S. Files First Defense of Health Care Law in Court, The Associated Press, May 12, 2010, http://news.yahoo.com/s/ap/20100512/ap_on_ bi_ge/us_health_care_challenge. 51 Quoted in Jonathan Chait, Could Republicans Repeal Health Care Reform? The New Republic online, March 19, 2010, www.tnr.com.

47

www.cqresearcher.com

June 11, 2010

525

Bibliography
Selected Sources
Books
Grater, David, The Cure: How Capitalism Can Save American Health Care, Encounter Books, 2008. A psychiatrist who has practiced in the United States and Canada makes the conservative case for reforming the health care system by ending government regulation and third-party payment through insurance and instead having consumers pay directly for care. Hacker, Jacob S., ed., Health at Risk: Americas Ailing System and How to Heal It, Columbia University Press, 2008. A Yale University professor of political science who was chief architect of the proposal eventually abandoned by Congress to include a public, government-run insurance plan to compete with private insurers, assembles essays by health-policy scholars on topics including the state of healthcare quality. Reid, T. R., The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care, Penguin Press, 2009. A former foreign affairs correspondent for The Washington Post reports his impressions of a round-the-world tour to explore health care systems. Ostrom, Carol M., Health-care Law Will Alter High-Risk Pool, but Just How Hasnt Been Worked Out, Seattle Times, April 18, 2010, p. A1. Under the new health-care reform law, states and the federal government starting this summer will set up temporary programs to help people with serious illnesses obtain affordable coverage. In 2014, private insurers will be required to enroll people regardless of health status. Currently, 35 states already have such programs, and enrollees in those programs worry that Congress legislative language may lock them out of the federal plan even though they might get more affordable coverage there. Reichard, John, After the Win, No Time to Lose, CQ Weekly, April 5, 2010, p. 814. Federal health agencies face unprecedented challenges in developing rules for the huge, multifaceted health-reform law and making its multiple, complex programs work.

Reports and Studies


Butler, Stuart M., Evolving Beyond Traditional EmployerSponsored Health Insurance, The Hamilton Project, Brookings Institution, May 2007, www.brookings.edu/ papers/2007/05healthcare_butler.aspx. A health-policy scholar from the conservative Heritage Foundation, a Washington think tank, explains the legal, regulatory and business changes he believes would be required to create a stable health-insurance system based on conservative principles, as the current employer-based system crumbles. Cauchy, Richard, State Legislation Challenging Certain Health Reforms, 2010, National Conference of State Legislatures, May 2010, www.ncsl.org. States and the federal government share a complex set of responsibilities for regulating health insurance and health care in the United States, which has often set some states at odds with the federal government. As federal healthreform legislation slowly moved through Congress over the past year, at least 39 state legislatures have proposed bills to limit, change or oppose certain federal actions on health care. Lazarus, Simon, Mandatory Health Insurance: Is It Constitutional?American Constitution Society, December 2009, www.acslaw.org/node/15654. A lawyer for the National Senior Citizens Law Center argues that contested provisions in the recently passed healthreform law, including the individual requirement to buy health insurance, are constitutional, based on longtime legal precedent.

Articles
Cohn, Jonathan, How They Did It, The New Republic, June 10, 2010, www.tnr.com, p. 14. In the early days of his administration, President Obama switched from opposition to support of an individual mandate to buy insurance. Meyer, Harris, Group Healths Move to the Medical Home: For Doctors, Its Often a Hard Journey, Health Affairs, May 2010, p. 844. At a private health plan thats trying to reengineer medical practice to favor primary and preventive care, as the new health-reform law seeks to do nationally, many physicians balk at the change. Milligan, Susan, GOP Targets Nominee to Run Health Agency,The Boston Globe, May 13, 2010, www.boston.com, p. 1. In a move that could hamper implementation of the healthreform law, congressional Republicans have been blocking President Obamas nomination of Donald Berwick, a Massachusetts pediatrician, to head the Centers for Medicare and Medicaid Services, on the grounds that Berwick believes that cost controls and pay-for-performance are required.

526

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Costs
Cowles, Robert, Transparency Helps Keep Health-Care Costs Down, Green Bay Press-Gazette, Jan. 7, 2010, p. A7. Patients often do not know the costs of certain procedures before they are performed, which doesnt allow them to make informed consumer decisions, says a Wisconsin state senator. Ferry, Michael, How Much Will Health Care Cost Us? Mobile Register, Jan. 3, 2010, p. A17. Americans are shielded from the true costs of health care because of employer-sponsored insurance. Guy, Sandra, Savings You Can Believe In, Chicago Sun Times, June 5, 2010, p. B15. The Obama administrations health-care reform plan is structured to find novel, efficient and cost-effective treatments with fewer side effects. Samuelson, Robert J., Get Real on Health Costs, Newsweek, Dec. 21, 2009, p. 36. The Obama administration says it can curb excessive health spending by tackling the waste in todays health-care system. islation that would prohibit health insurance coverage for abortions if subsidized with tax money. Rogers, Christina, State Braces for Health Changes, Detroit News, March 27, 2010, p. B7. Michigan insurers and health providers are readying themselves for an onslaught of changes amid the passage of federal health reform. Sluss, Michael, Cuccinelli to Sue Over Federal Health Care Bill, Roanoke Times, March 22, 2010. Virginias attorney general says Obamas health reform legislation is an unconstitutional overreach against his states rights.

The Uninsured
Freyer, Felice J., Number of Uninsured in R.I. Soars to Record 140,000, Providence Journal-Bulletin, March 16, 2010, p. 1. The number of people in Rhode Island without health insurance has reached its highest level ever 16 percent of the population largely due to a soaring jobless rate. Halladay, Doug, Its Life or Death for States Uninsured, Detroit Free Press, March 18, 2010, p. A20. Access remains a challenge for the newly uninsured, especially those from smaller communities that lack community health centers and adequate facilities. Templeton, David, Middle Class Struggling With Health Care Costs, Report Finds, Pittsburgh Post-Gazette, March 18, 2010, p. A8. More and more uninsured Americans are from the middle class, not just from poverty.

Medicaid
Herszenhorn, David M., Spreading the Golden Corn, The New York Times, Jan. 8, 2010, p. A15. Sen. Ben Nelson, D-Neb., is demanding that the federal government pay for a proposed Medicaid expansion in his state. MacGillis, Alec, Medicaid Growth Wont Cost States Much, The Washington Post, May 27, 2010, p. A25. The federal government will bear virtually the entire cost of expanding Medicaid under the new health care law, according to the Kaiser Family Foundation. Richert, Catharine, Health Care Reform Bill Will Expand Medicaid, Increasing Demands on Doctors, St. Petersburg Times, March 1, 2010. Medicaid expansion has proven controversial among state officials, who say local budgets are too tight to handle additional enrollees.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

The States
Bisbee, Julie, State GOP May Go to Court to Fight Health Care Measure, The Oklahoman, March 23, 2010, p. 3A. Oklahoma Republicans have promised to fight the recent national health care reform bill in court. Craig, Jon, Legislation Would Bar Tax-Funded Abortion Coverage in Ohio, Cincinnati Enquirer, May 18, 2010. Three Cincinnati-area lawmakers have introduced state leg-

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

June 11, 2010

527

Updated May 24, 2011

www.cqresearcher.com

Health-Care Reform
Here are key events, legislation and court rulings since publication of the CQ Researcher report by Marcia Clemmitt, Health-Care Reform, June 11, 2010.
lmost as soon as President Obama signed the Patient Protection and Affordable Care Act into law on March 23, 2010, federal officials and many state governments frantically began implementation efforts for the complex health-care-reform legislation. At the same time, however, Republicans in Congress, conservative groups and officials in more than half the states began exploring legal and legislative means to stop the law. Scheduled to go into effect over the next eight years, the law is intended to reshape the health-insurance market and expand coverage to millions of uninsured Americans while holding down medical costs. The federal governments implementation of the earlystage changes appears to be basically on track. All 26 legislative provisions scheduled to take effect in 2010 have been implemented, along with 18 of 21 provisions scheduled for 2011 rollout. 52 Provisions that have already gone into effect include: 53 Grants to improve the process by which states review and approve proposed rate hikes by healthinsurance companies;
Getty Images/Joe Raedle

Rebates of $250 to Medicare enrollees who paid for some of their own prescriptions because of a so-called doughnut hole in Medicare prescription-drug coverage enacted in 2003; Tax credits to very small businesses with low-paid workforces Olveen Carrasquillo, chief of general internal for providing health insurance medicine at the University of Miami, above, opposes to their employees; efforts by congressional Republicans and conservative groups to block the health-care reform law passed Requirements that health insurlast year. Spend a morning in a public hospital, ers spend at least 85 percent of he says, and it becomes clear that premium revenue on healthrolling back the reforms is a bad idea. care-related items and provide rebates to consumers if they spend less; most recent date for which enrollment Approval for young adults up to has been reported. age 26 to remain covered by their Hundreds of thousands of people parents health plans. around the country remain unable to The laws effectiveness in expand- afford coverage because insurers charge ing coverage to some 30 million ad- high premiums for people with preditional Americans has yet to be fully existing conditions such as cancer, high tested, but early results include both blood pressure and high cholesterol. promising and worrisome data. Nevertheless, federal officials have an For example, the creation of high- aggressive strategy to encourage enrisk pools to help people with pre- rollment of eligible individuals, meetexisting medical conditions find af- ing with local doctors, hospitals, confordable coverage got off to a much sumer groups and chapters of advocacy slower start than lawmakers had hoped. groups like the American Cancer SoOnly about 12,500 people were en- ciety and American Diabetes Associarolled nationwide by Feb. 1, 2011, the tion, Steven B. Larsen, deputy ad-

PUBLISHED BY CQ PRESS, A DIVISION OF SAGE

WWW.CQPRESS.COM

HEALTH-CARE REFORM
ministrator of the federal Center for Medicare and Medicaid Services, told a House subcommittee in April. As a result, he said, officials expect to see enrollment grow significantly between now and 2014, when insurers will no longer be allowed to refuse coverage or charge extremely disparate rates to people with preexisting conditions. 54 to the legislation have been mounted. In Congress first major legislative action of 2011, a newly elected House Republican majority joined by three Democrats voted 245 to 189 to repeal the entire law. 56 The vote was mainly a symbolic gesture, however, because Democrats maintain control of the Senate and would not vote for gressional Republicans aims to stop the law by blocking funds for federal agencies implementation efforts. In April, for example, four House Democrats joined Republicans to approve legislation defunding the laws so-called prevention and public health fund, which would award grants to states and localities for preventivehealth services. 58 In May, House Republicans voted to defund a federal grant program intended to help states set up insurance exchanges regulated markets in which individuals and small businesses could find information about and purchase insurance under the law. 59 Also in May, the House GOP voted to block a funding provision in the law for building school-based health centers. 60 Action by the States Much of the laws implementation, including funding, is left up to the states, some of which are actively executing the laws requirements while others are approving legislation to block the measure. In Illinois, for example, Gov. Pat Quinn, a Democrat, declared this spring that a health-reform panel hed appointed struck the unifying theme that the Affordable Care Act must be implemented quickly, efficiently and fairly to expand health coverage to more than a million currently uninsured state residents by 2014 and that state agencies would work together to deliver on the laws promise. 61 In March 2010, however, Virginia lawmakers became the first in the nation to approve legislation declaring it illegal for the government to require individuals to buy health insurance. Republican Gov. Robert F. McDonnell signed the bill the next day. Later in 2010, Idaho, Utah, Georgia, Louisiana and Arizona legislators passed laws designed to block state implementation of the federal reform law by various means, and other states, including Indiana, Missouri, Montana, North Dakota, Tennessee

Former House Speaker Newt Gingrich, R-Ga., speaking on Capitol Hill on March 31, 2011, wants to repeal the health-care reform law, which he calls Obamacare. National and state Republican leaders argue that expanding coverage to 30 million uninsured Americans would cost too much and lead to unwelcome government interference in the health-care system.

Other parts of the law are off to a faster start. For example, at least 600,000 young adults under 26 are estimated to have insurance coverage now under the laws dependent-coverage provision, which debuted in September 2010. 55 Legislative and Legal Opposition Even before the Affordable Care Act became law, national and state Republican leaders vociferously opposed it, arguing that the coverage expansion would cost too much and lead to unwelcome government interference in the U.S. health-care system. State and federal GOP lawmakers have proposed legislation to repeal or defund the law, and several legal challenges

repeal, and President Obama would veto repeal legislation should it reach his desk. By spring, congressional Republicans widely acknowledged that attempts to repeal the entire program were dead, as House Ways and Means Committee Chairman Dave Camp, RMich., put it. However, most Republicans still strongly oppose the law, especially the legal requirement for individuals to carry health insurance, which is set to take effect in 2014. I do think we may have a vote to repeal that provision some time in this Congress, said Camp. 57 Meanwhile, a series of 2011 spending bills and budget proposals by con-

Getty Images/Brendan Hoffman

Chronology
2010
March President Obama signs the Patient Protection and Affordable Care Act and its companion legislation, the Health Care and Education Reconciliation Act of 2010. . . . First lawsuits challenging the laws constitutionality are filed, including one brought by the state of Virginia. . . . Virginia is first state to enact a law barring the government from requiring individuals to buy health insurance. April Thirteen states file a court challenge to the healthcare reform law. . . . States may expand Medicaid to cover childless adults with incomes up to 133 percent of poverty level. July Federal government opens high-risk health plan where people with preexisting health conditions can get more affordable coverage. September Young adults up to age 26 become eligible for coverage by their parents health plans.

Very small businesses become eligible for tax credits for providing health insurance to workers. . . . Newly elected House Republican majority votes to repeal health-reform law; Senate does not take up the bill. May House Republicans vote to defund several health-reform provisions; Senate does not take up the bills, and President Obama says he would veto them. May-June Federal appeals courts take up four legal challenges to the Affordable Care Act; in initial rulings, judges strike down two of the challenges and uphold two others; Supreme Court declines to expedite hearing on challenges to the law.

2011
January Some Medicare enrollees get rebates for their prescription-drug spending. . . .

and Wyoming, enacted similarly intentioned statutes in 2011. 62 Legal Challenges Meanwhile, conservative groups and state attorneys general have filed about 20 lawsuits challenging the health-care reform law, beginning soon after its enactment in spring 2010. The suits raise various arguments against the laws constitutionality, but virtually all focus on its requirement that individuals buy health insurance. Supporters of the law say the Constitution permits Congress to regulate business that crosses state lines a point that many of the measures opponents challenge. In addition, supporters argue that the mandate requiring insurance coverage for all Americans is needed because, without it, too many people would purchase

coverage only when they were ill. That, the laws supporters say, would subvert the purpose of insurance, which is to spread the costs of those who are ill at any given time across the whole, mostly healthy, population. 63 Twenty-six states are now party to a lawsuit filed against the law in Florida on March 23, 2010. On Jan. 23, 2011, U.S. District Judge Roger Vinson sided with those states, ruling the entire law is unconstitutional based on the individual requirement to buy insurance. In December 2010, U.S. District Judge Henry Hudson also ruled against the mandate, in a lawsuit filed on March 23, 2010, by Virginias attorney general, Kenneth Cuccinelli, a Republican. Unlike Vinson, Hudson struck down the individual mandate but left the rest of the law intact. In two other cases, filed in Detroit and Lynchburg, Va., however, judges have upheld

the individual mandate and the healthcare reform law as constitutional. 64 The rulings in all four cases have been appealed. In April, Cuccinelli asked the U.S. Supreme Court to fast-track the appeals and place the health-care reform challenges onto its docket before the four appeals courts rule on the cases. The high court denied the request to expedite the matter, however. 65
Marcia Clemmitt

Notes
52

Implementation Timeline, Health Reform Source, Henry J. Kaiser Family Foundation website, http://healthreform.kff.org/Timeline.aspx. 53 Ibid. 54 Testimony before House Energy and Commerce Subcommittee on Oversight and In-

HEALTH-CARE REFORM
vestigations, April 1, 2011, http://republicans. energycommerce.house.gov/Media/file/Hear ings/Oversight/040111/Larsen.pdf. 55 Phil Galewitz, At Least 600,000 Young Adults Join Parents Health Plans Under New Law, Kaiser Health News website, May 3, 2011, www.kaiserhealthnews.org/Stories/2011/May/01/ young-adult-health-insurance-coverage.aspx. 56 Amy Goldstein and N. S. Aizenman, House Votes to Repeal Health-Care Law, The Washington Post, Jan. 20, 2011, www.washington post.com/wp-dyn/content/article/2011/01/19/ AR2011011903344.html. 57 Sam Stein, Health Care Repeal Is Dead, Says Top Republican, Sights Turn to Repealing Individual Mandate, Huffington Post, May 5, 2011, www.huffingtonpost.com/2011/05/05/healthcare-repeal-dead-republican_n_858015.html. 58 Felicia Sonmez, House Passes Repeal of Health Care Law Provision; Obama Issues Veto Threat, The Washington Post blogs, April 13, 2011, www.washingtonpost.com/blogs/2cham bers/post/house-passes-repeal-of-health-carelaw-provision-obama-issues-veto-threat/2011/ 04/13/AF52PSYD_blog.html. 59 Catherine Dodge, House Votes to Bar U.S. Funding for Insurance Exchanges, Bloomberg, May 4, 2011, www.bloomberg.com/news/201105-04/house-votes-to-bar-u-s-funding-for-insur ance-exchanges-1-.html. 60 Jessica Zigmond, House Approves Bill to Defund School-based Health Centers, Modern Healthcare, May 4, 2011, www.modernhealth care.com/article/20110504/NEWS/305049963. 61 Illinois Health Care Reform Implementation Panel Releases Initial Recommendations, press release, Illinois Government News Network, March 2, 2011, www.illinois.gov/Press Releases/ShowPressRelease.cfm?SubjectID=1& RecNum=9252. 62 Stephen Groves, Gov. McDonnell Keeps Up Fight to Strike Down Health Insurance Mandate, Virginia Statehouse News, July 27, 2010; State Legislation and Actions Challenging Certain Health Reforms, 2011, National Conference of State Legislatures website, May 6, 2011, www.ncsl.org/?tabid=18906. 63 For background, see Melissa Maleske, Health Reform Lawsuits Likely Headed to Supreme Court, Inside Counsel, Feb. 1, 2011, www.insidecounsel.com/Issues/2011/February2011/Pages/Health-Care-Reform-Lawsuits-LikelyHeaded-to-Supreme-Court.aspx?page=1. 64 Robert Lowes, Federal Judge Strikes Down Entire Healthcare Reform Law, Medscape News Today, Jan. 31, 2011, www.medscape.com/view article/736539. 65 Warren Richey, Supreme Court Says No to Expedited Hearing on Health-Care Reform Law, The Christian Science Monitor, April 25, 2011, www.csmonitor.com/USA/Justice/2011/ 0425/Supreme-Court-says-no-to-expeditedhearing-on-health-care-reform-law. Update

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10 Closing Guantnamo, 2/09 Affirmative Action, 10/08

Education
Housing the Homeless, 12/09 Bilingual Education, 12/09 Value of a College Education, 11/09 Financial Literacy, 9/09

Health/Safety
Caring for Veterans, 4/10 Earthquake Threat, 4/10 Breast Cancer, 4/10 Modernizing the Grid, 2/10 Sleep Deprivation, 2/10

Environment/Society
Teen Pregnancy, 3/10 Youth Violence, 3/10 Sex Scandals, 1/10 Animal Rights, 1/10 Women in the Military, 11/09 Conspiracy Theories, 10/09

Crime/Law
Prosecuting Terrorists, 3/10 Prisoner Reentry, 12/09 Interrogating the CIA, 9/09 Examining Forensics, 7/09 Legalizing Marijuana, 6/09

Politics/Economy
Jobs Outlook, 6/10 Campaign Finance Debates. 5/10 Census Controversy, 5/10 Gridlock in Washington, 4/10 Tea Party Movement, 3/10

Upcoming Reports
Water Crisis, 6/18/10 Offshore Drilling, 6/25/10 Gangs in the U.S., 7/16/10

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Should undocumented immigrants be counted?

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

Census Controversy

ow under way, the 2010 census has sparked bitter partisanship. Some conservative Republicans, for example, have criticized the census as an unconstitutional intrusion on privacy; others warn that

census participation is important for maintaining GOP power, since the count is used to apportion congressional seats and allocate federal money to cities and states. Liberal Democrats have been more supportive of census procedures, which for the first time will count same-sex couples. To raise response rates, the Census Bureau sent every household the same brief 10-question form and dropped use of the long form a lengthy questionnaire seeking data on housing, transportation, education and income. The long form has been replaced by a separate, ongoing monthly survey that will provide timelier data, but from a smaller sample of households. Researchers generally hail the change but say it will cause some problems, at least initially.
Despite controversy over this years count, U.S. households returned census forms at the same 72 percent rate as in 2000. Census data determine the number of seats in congressional districts and how nearly $5 trillion in federal funds will be distributed to states and localities over the coming decade.

I N S I D E

THIS REPORT
THE ISSUES ....................435 BACKGROUND ................442 CHRONOLOGY ................443 CURRENT SITUATION ........448 AT ISSUE........................449 OUTLOOK ......................451

CQ Researcher May 14, 2010 www.cqresearcher.com Volume 20, Number 19 Pages 433-456
RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

BIBLIOGRAPHY ................454 THE NEXT STEP ..............455

CENSUS CONTROVERSY
THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
May 14, 2010 Volume 20, Number 19

435

Will the 2010 census be accurate? Should the census include undocumented immigrants? Should the long form be replaced by the American Community Survey?

436 437 439 440 443 444 447

Most Americans Support 2010 Census Less than 10 percent say it isnt important. Hispanics Support for Census Varies Native-born Hispanics are least supportive. Midwest Returned Most Census Forms Livonia, Mich., leads the way. States Receive Most CensusBased Federal Funds Health programs received 60 percent of the funds. Chronology Key events since 1790. Gay Couples to Be Counted for First Time But census wont provide complete count of gays. Census Leads to Power Shift in Congress Population migration transfers House seats to Sun Belt states. At Issue Should the census ask questions about race?

BACKGROUND

442 442 445 446

The First Census The U.S. began with nearly 4 million residents. Rural-Urban Fight Urban population shifts led to disputes over congressional districts. Litigation Over Sampling Statistical shortcuts led to undercounting of minorities. Political Debate Undercounting remains a key issue.

tcolin@cqpress.com ASSISTANT MANAGING EDITOR: Kathy Koch kkoch@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Thomas J. Billitteri, Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Rachel Cox, Sarah Glazer, Alan Greenblatt, Reed Karaim Barbara Mantel, Patrick Marshall, Tom Price, Jennifer Weeks
DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa EDITORIAL INTERNS: Dagny Leonard,

MANAGING EDITOR: Thomas J. Colin

Julia Russell
FACT-CHECKING: Eugene J. Gabler,

Michelle Harris

A Division of SAGE

PRESIDENT AND PUBLISHER:

John A. Jenkins
Copyright 2010 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except; (Jan. wk. 1) (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE Publications. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-4277737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

CURRENT SITUATION

448 450 450

Redistricting About three-quarters of 2010 forms have been mailed back. Counting Prisoners Critics call the system unfair. Doling Out Funds Population accuracy matters to low-income communities.

449

FOR FURTHER RESEARCH

453 454 455 455

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

OUTLOOK

451

Changing Times? Social and cultural shifts will make future counts more challenging.

Cover: AFP/Getty Images/Paul J. Richards

434

CQ Researcher

Census Controversy
BY THOMAS J. BILLITTERI
decade (not adjusting for inflation or other changes). 4 Yet the census has faced irst, the good news: myriad logistical and ideoWhen the Pew Relogical challenges. search Center asked Last year a government Americans in March for their report said uncertainties surviews about the 2010 U.S. rounded the Census Bucensus, most respondents reaus readiness for the 2010 said they were ready to parcensus. 5 One problem conticipate in the once-everycerned a planned technical decade portrait of the nainnovation: the use of spetional population. 1 cial hand-held computers to Now the not-so-good verify addresses and conduct news: The positive public refollow-up interviews with nonsponse masked an angry deresponding households. The bate over this years census, devices didnt work as hoped, including concerns about its however, and are being used accuracy. This is probably only for address verification, the most polarized, political forcing the bureau to do census Ive seen, says Jacquepencil-and-paper follow-up line Byers, director of research interviews. And congressionand outreach at the National squabbling over the Obama al Association of Counties and administrations appointment a veteran of four censuses. of a new secretary at the As the census moved into Commerce Depar tment, Census workers kick off the 2010 census at a rally in full swing this spring, the dewhich oversees the Census New York Citys Times Square on Jan. 4. Censuses have cennial ritual became a lens Bureau, and confirmation of been controversial since the first one in 1790, and this through which partisans on a new bureau director disyears is no exception. Partisans on the right and left both the right and left filtered rupted planning. raised questions about a range of issues, including their views on a range of polStill, census officials are opaccuracy, invasion of privacy, counting of same-sex couples and U.S. immigration policy. icy issues. Ultraconservative timistic about the 2010 count Republicans, for example, critand in late April were citing icized the census as an unan encouraging sign: 72 perconstitutional intrusion on privacy. congressional, state and local legisla- cent of census forms had been returned Evangelical Latino pastors urged un- tive districts, and, according to a new by households that received them, matchdocumented immigrants to boycott the study, allocate $447 billion in federal ing the rate in the 2000 census. 6 count to protest congressional inaction assistance to states and localities. 3 Response rates in surveys have deThe 2010 census is the most ex- clined each year throughout the Weston immigration reform. Liberals hailed a new census policy allowing same- pensive ever at an estimated cost of ern world, bureau director Robert M. sex couples to be counted as married; $14.5 billion, but its impact on gov- Groves wrote in his blog. I fully exsome conservatives called it political ernment outlays will be vast. The out- pected the census to achieve lower parpandering. 2 Even the census forms sized influence of census statistics on ticipation rates this decade than it did question on racial background has federal funding indicates the enormous in 2000. It basically didnt happen. Even sparked debate. (See At Issue, p. 449.) return on taxpayer investment in fed- so, he added, there is much hard work In fact, every census going back eral statistics, Brooking Institution fel- ahead to follow up on the approxito the first one in 1790 has been low Andrew Reamer wrote. One way mately 48 million households that did controversial. Thats no surprise, given to think about this is that the $14 bil- not mail back a form, or didnt receive the political power and money at lion life-cycle cost of the 2010 census one, and risks remain. 7 stake: Census counts are used to ap- will enable the fair allocation of nearThe bureau made several significant portion congressional seats, redraw ly $5 trillion in funds over the coming changes this year, in part to encourage

THE ISSUES

www.cqresearcher.com

Getty Images/Mario Tama

May 14, 2010

435

CENSUS CONTROVERSY
Most Americans Support 2010 Census
Most people think the census will benet their communities and are willing to ll out their forms. Nearly 90 percent of Americans consider the census important. How important is the census for the U.S.?
Somewhat or very important: Not too or not at all important: Dont know: 0%

89% 7% 4%
20 40 60 80 100

How will lling out census forms affect your community?


Benefit community: Harm community: Neither benefit nor harm: Dont know/other:

62% 3% 29% 6%
10 20 30 40 50 60 70 80

0%

People who denitely will participate in the census. . . .


Total: People ages 18-29: 30-49 50-64 65+ White, non-Hispanic: Black, non-Hispanic: Hispanic: 0%

70% 45% 70% 85% 81% 73% 67% 65%


20 40 60 80 100

Source: With Growing Awareness of Census, Most Ready to Fill Out Forms, Pew Research Center for the People & the Press, March 2010

a stronger response. For example, after employing a paid advertising campaign for the first time in the 2000 census, the bureau increased its advertising and promotion efforts for the 2010 count to a total of $340 million inviting criticism from budget hawks. As of May, a census official said the bureau spent $171 million for TV, radio, digital, print and outdoor advertising in 28 languages including television ads before and during the Super Bowl. The bureau also sponsored a NASCAR race car and a 13-vehicle nationwide promotional road tour. The bureau also has used the Internet to boost response rates,

offering, among other things, an interactive map that tracks community participation rates. 8 Certain areas of the country are receiving questionnaires in both English and Spanish. 9 But perhaps the most far-reaching change has to do with the questionnaire itself. In another effort to encourage response, the bureau eliminated the traditional detailed long form survey on demographic, housing and economic factors sent to about a sixth of households since 1960. Instead, a brief 10-question form is being sent to every household. To replace the data collected by the old long form, the

Census Bureau is using a separate questionnaire, the American Community Survey (ACS), which is sent to about 250,000 households each month, providing researchers with a steady flow of rolling socioeconomic data throughout the decade rather than a once-perdecade snapshot. For demographers, statisticians and scholars, the change is huge and not without some anxiety. In the short term, researchers say the switch will force them to learn how to use the rolling data and reconcile it with decennial statistics gathered by the old long form. Some worry the new ACS survey sample size may curtail the amount of useful data. But ultimately, many say, the change will be beneficial. The switch will be extremely positive, even transforming, because it will provide more timely data, asserts Kenneth Prewitt, Census Bureau director in the Clinton administration and now a professor of public affairs at Columbia University. Against the backdrop of operational challenges and technical change, the 2010 census has sparked bitter partisanship, raising concern that some Americans might not participate in the count even though federal law makes it mandatory to do so. Non-cooperation costs the taxpayers heavily. The government saves $85 million for each percentage-point increase in the mail-back response rate for this years census, Groves noted. When households dont complete a form in a timely way, the bureau must send out paid enumerators some 635,000 temporary workers this year to knock on doors and collect the information firsthand. On average, it costs 42 cents when people mail back their form, but $57 for a census takers visit. 10 Heightening public wariness of the census has been a tide of conservative rhetoric raising the specter of unwarranted government intrusion. U.S. Rep. Michele Bachman, R-Minn., vowed not to provide any information except

436

CQ Researcher

the number of people in her household, claiming last year that census questions had become very intricate, very personal. 11 Rep. Ron Paul, R-Texas, the only House member to oppose a resolution urging census participation, opined that the census was never intended to serve as a vehicle for gathering personal information on citizens. 12 And Republican blogger Erick Erickson, founder of the conservative website RedState.com, said he would pull out a shotgun to scare away a census worker who showed up at his house. We are becoming enslaved by the government, he declared. 13 But Rep. Patrick McHenry, R-N.C., warned against such anti-census rhetoric. Boycotting the census offends me as an American patriot, he said, warning of potential negative consequences for the GOP. Writing on RedState.com, he said he worried about blatant misinformation coming from otherwise well-meaning conservatives who are helping big-government liberals by discouraging fellow conservatives from filling out their census forms. Not responding to the census would reduce conservatives power in elections, allow Democrats to draw more favorable congressional boundaries and help put more tax-hiking politicians in office, he wrote. 14 Of course, Americans of every political persuasion sometimes balk at filling out census forms. Steven Jost, associate director of communications for the Census Bureau, said the challenges in conducting the census go across the whole demography of our country. In researching public attitudes toward the census, he found that about 19 percent of the people we interviewed . . . are just cynical about government. And when we looked at the makeup of that cynical fifth, it was identical to the makeup of the population as a whole age, race, gender, education, income levels. Were in a tough environment in our coun-

Hispanics Support for Census Varies


Four-fths of foreign-born Hispanics in the United States think the census is good for their communities, compared with less than 60 percent of native-born Hispanics. What Hispanics Say About the Census Impact on Their Community
80% 70% 57% 33% 23% 2% 4% Native-born 17% N/A Foreign-born
Bad

80% 70 60 50 40 30 20 10 0

All Hispanics
Good

Doesnt make much difference

Source: Latinos and the 2010 Census: The Foreign Born Are More Positive, Pew Hispanic Center, April 1, 2010

try now with mistrust of government, and we happen to be the face of the government right now. 15 As this years census controversy heats up, here are some of the questions being asked: Will the census be accurate? A key goal of this years census marketing blitz has been to persuade as many people as possible to participate. But getting an accurate count isnt easy. Undercounting is a recurring challenge for the Census Bureau, especially among minorities, low-income households, renters and immigrants. 16 The political implications of that are high, because people in those categories tend to vote Democratic. Double-counting people can be a problem, too. The 1990 census produced a net undercount the difference between incorrect omissions and incorrect inclusions of about 4 million people, or 1.6 percent of the population, but the rate was far higher for blacks (4.6 percent), Hispanics (5.0 percent) and children (3.2 percent). The rate for whites was 0.7 percent. 17

The 2000 census did a better job, with the undercount rate for blacks falling to 1.8 percent and for Hispanics to 0.7 percent. 18 But for the first time in history, the census had a net overcount. It double-counted nearly 5.8 million people, helping create a net overcount of 1.3 million. 19 Overcounts can happen when, for instance, a college student is tallied at a dorm and counted again by parents back home. This years form warns households not to count college students, soldiers or others who are living separately but may come home later. Many census experts are optimistic about this years count. I think it will be very accurate, says Brown University demographer John Logan, who directs a program on the 2010 census for the Russell Sage Foundation, a New York research center. Theyve done a very professional job and are rolling with the punches, he says of the Census Bureau. Still, the bureau faces several challenges in arriving at a reliable count. One is the nations growing immigrant population legal and illegal both of which the census tallies.

www.cqresearcher.com

May 14, 2010

437

CENSUS CONTROVERSY
To be sure, many immigrants are ing there arent any further problems The fragile national economy also highly supportive of the census in terms of an anti-immigrant senti- can upset population counts in sevforeign-born immigrants all the more ment or the Department of Homeland eral ways. With unemployment in the so. The Pew Hispanic Center found in Security doesnt have any major high- 10 percent range, some people have a March poll that 85 percent of His- profile raids during the census count. left home in search of work and are panics said they had already sent in Those types of things can affect hard to pin down. Others may be their census form or definitely would whether people want to cooperate or homeless or living in temporary group do so. The return rate for foreign-born not. And as the Census Bureau sends quarters. Hispanics was 91 percent and for workers to neighborhoods to contact Whats more, many states and lonative-born Hispanics 78 percent. non-responding households, Falcn calities have been short on funds for Whats more, 69 percensus outreach. In Calcent of foreign-born ifornia, which is facing Hispanics correctly a $20 billion budget said the census cant shortfall, money for cenbe used to determine sus outreach was slashed legal status, comto $2 million, compared pared with 57 perwith nearly $25 million cent of native-born in 2000. The state could Hispanics. 20 lose nearly $3,000 a Even so, experts year in federal assistance are concerned that for each resident not many immigrants counted. We need to may be wary of parmake a push to make ticipating. Theres a sure we at least stay huge fear factor, even, said Louis Stewsays Prewitt, the forart, deputy director of mer Census Bureau Californias census outdirector. Contributreach. There is a lot Actress Rosario Dawson announces in Los Angeles on March 10 a ing to that fear, he riding on this count. 23 multimedia plan by the Mexican American Legal Defense and Educational Fund (MALDEF) and Voto Latino to encourage says, are such acCharities and comyoung California Latinos to fill out their census forms. At right is tions as Arizonas munity-based groups Nancy Agosto, national census director for MALDEF. passage last month have taken up some of of a strict new law the slack left by depletaimed at identifying and deporting il- says, it will be a test to see if the ed state budgets. The philanthropic comlegal immigrants. 21 bureau did a good job in hiring peo- munity poured some $15 million into You can say over and over that the ple from those same neighborhoods census-promotion efforts, much of it census is confidential, but in parts of so residents will be willing to let the directed to difficult-to-count areas and community groups serving them, acthe country that message is very hard census workers into their homes. to communicate, says Prewitt. He exAnother roadblock to census accu- cording to Terri Ann Lowenthal, a cenpects it to be much, much harder to racy is the difficulty of locating peo- sus consultant and former staff direccount the undocumented this year be- ple in certain locales. For example, in tor of the House census oversight cause of a serious change in the envi- hurricane-ravaged New Orleans, de- subcommittee. She said the collaboronment surrounding immigration. termining how many people live [there] ration has helped push response rates Angelo Falcn, president of the Na- will not be an easy task, given the above the national average in some tional Institute for Latino Policy, a New thousands who are still homeless or hard-to-count areas. 24 Deep-seated mistrust of governYork City-based think tank, says he is living with relatives as they await persure there will be an undercount of manent housing, The New York Times ment also can influence how people Latinos due both to the fear fac- noted. The newspaper added that the respond to the census. A new Pew tor and the difficulty of counting some Census Bureau was allowing some Research Center survey found that demographic groups. People are try- unconventional counting practices, only 22 percent of respondents said ing to get the word out locally about such as distributing forms to people they could trust the government in the census, Falcn says. Were hop- who are not at verified addresses. 22 Washington almost always or most of
AP Photo/Chris Pizzello

438

CQ Researcher

the time, the lowest by far since at least the Kennedy administration. 25 Asked why he thought Republican opposition existed toward this years census, Reamer, the Brookings Institution fellow, said some people are using the census as a symbol of big, intrusive government, seeking to stoke fear and paranoia about government in general and the Democrats in particular. In addition, he said, straightup political reality is that Republicans benefit from an undercount of nonwhites, who tend to vote Democratic. Democrats are the beneficiaries of a low undercount. 26 Should the census include undocumented immigrants? Last fall, Republican Sens. Bob Bennett of Utah and David Vitter of Louisiana proposed an amendment requiring that the census include a question on citizenship, a move aimed at removing undocumented immigrants from the count. The Senate rejected their amendment, but Bennett vowed to keep pushing for it in future censuses so we can fairly determine congressional representation and ensure that legal residents are equally represented. 27 * But many say such a move runs counter to the historical roots of the census. The 1790 Census Act said the decennial census should count everyone living in the country where they usually reside, bureau director Groves told a press briefing last fall. That applied to every census since 1790. 28 Groves said he had no idea how people would react to a census question asking if a person is in the country legally or not, saying it was really hard to say. But experts say asking
* Bennett, a three-term, 76-year-old Senate veteran, was denied his partys nomination for a fourth term on May 8 by the Utah GOP convention, making him one of the first congressional victims of the growing power of the conservative Tea Party movement.

Midwest Returned Most Census Forms


The 10 areas with the best records for returning 2010 census forms are in the Midwest; Livonia, Mich., held the record, at 87 percent. Nationwide, 72 percent of American households returned forms before the May 1 deadline.
Top 10 areas to return census forms
1. 2. 3. 5. 6. 7. 9. 10. Livonia, Mich. Green Township, Ohio Maple Grove, Minn. Carmel, Ind. Clay Township, Ind. Eau Claire, Wis. Lakeville, Minn. 87% 86% 86% 85% 85% 85% 85% 85% 85%

4. Appleton, Wis.

8. Frankfort Township, Ill.

Macomb Township, Mich. 85%

Top five states to return census forms


1. 2. 3. 4. 5. Wisconsin Minnesota Indiana Iowa Michigan 81% 80% 78% 78% 77%

Source: Take 10 Map: 2010 Census Participation Rates, U.S. Census Bureau, April 27, 2010

people whether theyre citizens would lead many immigrants not to participate for fear of harassment or deportation. I just want to know how you get somebody to respond to say theyre citizens or not, says Byers of the National Association of Counties. Beyond that practical consideration, many argue that given the census key uses to apportion congressional seats and allocate federal money a count of all inhabitants is crucial.

Everyone is protected by the law, so everyone should be counted in determining how many seats a state gets to write those laws, wrote Robert J. Shapiro, a former Commerce Department official who oversaw the 2000 census. And whether or not someone has citizenship or residency papers, they still put claims on public services, which the funding for those services should reflect. Shapiro said the implications of using the census to identify undocumented immigrants are enormous. California may have as many as 4 or 5 million undocumented inhabitants, he wrote. Exclude them and the state could lose perhaps a half-dozen seats in Congress and tens of billions of dollars in federal funds. Texas and other states with large Hispanic populations would lose seats and funding as well. 29 The controversy over citizenship goes beyond the census and flows into the countrys fractious debate over immigration reform. The Rev. Miguel Rivera, leader of the National Coalition of Latino Clergy and Christian Leaders, which represents 20,000 churches in 34 states, has urged undocumented immigrants to boycott the census to protest Congress failure to overhaul immigration laws. As explained by National Public Radio last year, Rivera realized members of Congress have a big stake in the census because their seats and federal funding for their districts depend on the count. So if they dont want lacking of funding for their constituents, [and] maybe losing seats at the congressional level, then what they have to do is roll [up] their sleeves and move forward with comprehensive immigration reform, Rivera said. 30 But other Hispanic leaders who back immigration reform see it differently. Its sad. Its unfortunate. Ultimately, it means more political power for the people who dont like immigrants, said the Rev. Luis Cortes, president of Esperanza, a faith-based network that claims more than 12,000 Hispanic congregations and other organizations. 31

www.cqresearcher.com

May 14, 2010

439

CENSUS CONTROVERSY
States Receive Most Census-Based Federal Funds
State governments received most of the federal funds distributed on the basis of census data (top). Four major program areas health, housing, transportation and education received more than 90 percent of census-based funds (bottom). Geographic Distribution of Federal Funds Based on Census Data, FY 2008
Geographic Level State Local area County Metropolitan Statistical Area School district Census tract Programs 116 75 49 45 7 7 Expenditures (in $ billions) $386.0 $78.4 $50.3 $49.4 $10.3 $76.2 % of Total* 86.4% 17.6% 11.3% 11.1% 2.3% 0.0%

Census-Guided Programs by Budget Function, FY 2008


Budget Function Health Section 8 Housing Subsidies Transportation Education, Training, Employment and Social Services Community and Regional Development Commerce and Housing Credit Energy Other Programs 24 31 11 54 34 13 4 44 Expenditures (in $ billions) $272.2 $55.3 $48.3 $40.0 $10.5 $9.8 $2.3 $8.0 % of Total 60.9% 12.4% 10.8% 9.0% 2.4% 2.2% 0.5% 1.8%

ican society. By counting them you basically include them in the process. But Mark Krikorian, executive director of the Center for Immigration Studies, a conservative think tank in Washington, is ambivalent on whether undocumented immigrants should be counted. He would much rather enforce the immigration laws so it is a less salient issue in the first place, he says. A second-best approach would be to count everybody and use that number for dispensing federal funds, but use only a count of U.S. citizens for determining House and state legislative seats. But that would require asking about citizenship status a step that many say would make the census count unreliable. Should the census long form be replaced by the American Community Survey? For decades, while most Americans filled out a regular census form, about one in six households received a more in-depth long-form questionnaire that asked about everything from education levels and commuting patterns to homeheating fuel and family income. The data served many purposes. Government officials used it, for example, to plan new roads, measure poverty and allocate federal funds. Demographers used it to spot social trends. Businesses used it to decide where to build everything from stores to power plants. The Census Bureau is still asking such questions, but starting this year it is using the ongoing American Community Survey (ACS) to do so in place of the old decennial census long form. Each month the ACS is mailed to about 250,000 households 3 million a year and, as with the census, recipients are legally bound to fill it out. The ACS has both pluses and minuses compared to the old long form, demographers, researchers and census scholars say. On the plus side, the flow of data will be continual and far time-

* Totals add to more than 100 percent because one program can use data for more than one geographic level. Source: Counting for Dollars: The Role of the Decennial Census in the Distribution of Federal Funds, Brookings Institution, March 9, 2010

In this years Pew Hispanic Center poll, 70 percent of Hispanics said the census is good for the Hispanic community. Whats more, foreign-born Hispanics were more positive and knowledgeable about this years census than were native-born Hispanics, Pew found. 32 We should be counting everybody, says Falcn of the National Institute for Latino Policy. Thats what the Constitution said. . . . Its a question of people who live here, who use the services here, who contribute here.

Whether theyre here legally or not, legally at a certain point becomes irrelevant. Even for reapportionment you can make the argument that these are people who require the political system to be responsive to them. They do contribute, and they are part of the body politic. Maybe they cant vote, but they might be able to contribute money or participate in campaigns. . . . Im part of that group that would like to get a lot of these people legalized and become part of Amer-

440

CQ Researcher

lier than information gleaned from the once-a-decade long form. With the [ACS], its no longer necessary to rely on a single snapshot of an area that becomes increasingly dated throughout the decade, the Census Bureau says. Instead, the survey provides a moving picture of community characteristics a more efficient use of taxpayer dollars. 33 Five-year data will be published on areas with fewer than 20,000 residents. Three- and five-year data will be available on areas with populations between 20,000 and 65,000. And annual data, plus three- and five-year data, will be published on areas with 65,000 or more people. The Census Bureau began developing the ACS in the early 2000s and rolled it out in 2005. Three-year data are out now, and later this year the bureau will produce its first set of five-year ACS data, covering 2005 through 2009. On the downside, say census experts, the ACS samples fewer households than the old long form did, though the Obama administration is seeking additional funding to increase the sample size. Whats more, data on small communities wont be available as quickly as for larger cities and regions. And while multiyear data are often more useful than a 10-year snapshot, they can blur sharp economic ups and downs, presenting an unreliable picture of prevailing conditions. There are lots of rationales for what the Census Bureau is doing, says Byers of the National Association of Counties. Areas with 65,000 or more residents make up 82 percent of the U.S. population, she notes. But they dont do as frequent an update of the smaller counties. And were a nation of smaller counties. CQ Weekly noted in December that the ACS has been surveying a smaller and smaller portion of the population every year because its budget has remained essentially flat. In fiscal 2009, about $200 million was spent on the survey, which paid for interviews of

about 3 million households, roughly the same number as in prior years, the magazine said. That used to amount to about 2.5 percent of all the households in the United States, it said, but with population growth the same survey reaches just over 2 percent of households. Some experts say the sampling of small geographic areas or population groups, such as teen mothers or people older than 85, is becoming too small to be statistically reliable, noted the Weekly. 34 Cynthia Taeuber, a retired Census Bureau statistician who runs a consulting firm on census issues, said this is a very big loss to businesses and to state, local and federal governments. It means that federal programs are distributing funds say, for poverty within cities or population within rural areas on shaky data. 35 Reamer, the Brookings Institution scholar, says while the ACS data will be more timely, the tradeoff is that its not an estimate of a point in time like the traditional long-form data. That can matter in periods when the economy is in flux, such as the one the nation has been experiencing, Reamer says. Late in 2010, well get 2005-2009 data for areas under 20,000 population, which was the end of a boom period and the beginning and middle of recession. Were going to get somewhat of a muddled picture of economic conditions at the neighborhood level. For transportation planners, among the heaviest users of census data, the switch to the ACS is especially challenging. Alan Pisarski, author of a series of reports on commuting patterns published by the National Academy of Sciences, warned that the number of households surveyed in any given year will be too small to provide the kind of granular data needed to plan bus routes, traffic intersections and other needs. The old long form gave you not only county-level detail but census tract detail it even gave you blockgroup-level data, he says. With the

ACSs very small sample, Pisarski says, its enough to give you good national stuff, but nowhere near as close as blocks. That means that a lot of the stuff [wont] be useful. The ACS is a very big change, one with a short-term cost, says Logan, the Brown University demographer. Noting its smaller sample size, he says, When we get Census 2010 data, were not going to know as much, with as much accuracy and detail, about the population in neighborhoods of big cities or about small towns or smaller counties, even areas of 40,000 or 50,000 people. Were going to be dependent on the ACS, which is not a substitute for that one-time, very detailed and pretty accurate picture. Still, Logan says, researchers will get used to the ACS. It will be a very big contribution to see trends as they are appearing. Its something we could not do with the 10-year snapshot provided by the long form. Indeed, many say the switch to the ACS will be a plus in the long run. Census scholar Margo J. Anderson, a professor of history and urban studies at the University of Wisconsin-Milwaukee, points out that the long form had been spurring increasing questions about privacy and its onerous length, dragging down response rates. Because the ACS will provide a steady flow of timely data on local population characteristics, Anderson says it will be very nice for local-government planning, allocation of federal money and so forth. On the downside, she notes, itll be a different kind of data. Users are going to have to get used to it. But in the long term its an improvement. Joseph Salvo, New York Citys chief demographer, says the advantages of the switch outweigh the disadvantages, which include educating data users to learn to work with multiyear averages rather than data based on a fixed point in time. But overall, the switch is clearly positive, Salvo says. If you go back

www.cqresearcher.com

May 14, 2010

441

CENSUS CONTROVERSY
to 2000 and look at data from the long form, a lot of it is bad, he says. For example, the economic data in the Bronx was compromised because a whole bunch of people did not respond. The degree to which the Census Bureau had to substitute values for the missing data was very high in a whole bunch of items in a whole bunch of communities. Salvo also expects response rates on the ACS to be better because professional interviewers are following up with non-responders. The major plus is that we get data more than once a decade, Salvo says. We get data new estimates every year. not an idle irritation on Washingtons part, Prewitt added. Washington worried that a small population would tempt Americas European enemies to military action. 38 That first census was controversial for another reason, too: politics. Washington exercised the first of his two presidential vetoes on a bill to apportion House seats. Opposing sides had formed around two competing formulas, one proposed by Alexander Hamilton of New York and the other supported by Jefferson of Virginia. Washingtons veto led Congress to adopt Jeffersons method. 39 This battle between North and South, between political parties, between geographic areas with large populations and those with small populations, or between urban and rural areas, is central to nearly all controversy over apportionment and districting from 1790 to the present, wrote census expert David McMillen. 40 In the 1800s, the North-South battle was fought not only with Civil War cannons but also with census counts, and the slavery issue was at the heart of it. Under an infamous compromise made during the Constitutional Convention in 1787, only three-fifths of the slave population was to be counted when apportioning seats in the House. The result was growing political power among Republican-dominated Northern states compared with the Democrat-controlled South, where most slaves lived. But in 1865, slavery was abolished through the 13th Amendment, effectively ending the three-fifths compromise. On paper, at least, that shifted more political power to the South. Even so, slaverys legacy and its relationship to the census remained an issue and became a factor in the push for civil rights in the postCivil War South. Northern Republicans realized that the census and reapportionment would work to their political disadvantage after the Civil War and Reconstruction, wrote Anderson, the University of Wisconsin historian. With the demise of the three-fifths compromise, the Southern states would gain a windfall of increased representation in Congress. However, since few policymakers expected the freed slaves to be able to vote initially, they realized that a disfranchised free black population would strengthen the white-led Southern states and permit the Democrats to come dangerously close to gaining control of the presidency as early as 1868. The logic of population counting and apportionment, therefore, was one of the major forces driving Congress to extend further political and civil rights to the freedmen. 41

BACKGROUND
The First Census
his spring, a first edition of the first U.S. census, signed in 1791 by then-Secretary of State Thomas Jefferson, sold at auction for more than $122,000. 36 Jeffersons signature helped make the 56-page document a historical prize, but that first census is notable for another reason, too: Like every U.S. census that followed, the 1790 count spurred discord and doubt. The first census, which broke out the 1790 population into free people and slaves, concluded that the new nation contained 3.9 million people. Jefferson and President George Washington both expected the count to be higher at least 4 million if not, in Jeffersons mind, 4 to 5 million. 37 Washington had expected a population about 5 percent higher and blamed the inaccuracy on avoidance by some residents as well as on negligence by those responsible for taking the census, former Census Bureau director Prewitt wrote. This was

Rural-Urban Fight

ust as the census and reapportionment factored in Civil War-era racial tensions, they also formed a backdrop for another major battle this one between cities and rural regions. As a result of the 1920 census, the government announced that most Americans now lived in urban areas, a monumental shift that, as Anderson wrote, threatened to undermine the rural states domination of national politics and the rural towns domination of state politics. 42 Rural legislators challenged the 1920 census count and refused to give up power, and for the only time in U.S. history Congress did not pass a reapportionment bill after a census. The rural-urban squabble had lasting effects. As part of a reapportionment bill based on the 1930 census, Congress set aside a requirement that congressional districts be roughly equal in size. In short, Congress redistributed political power among the states but quietly permitted malapportioned districts within states in order to preserve rural and small-town dominance of Congress, Anderson wrote. She added that malapportionment remained the norm until the 1960s. 43
Continued on p. 444

442

CQ Researcher

Chronology
1790-1800s
Constitutions mandate for a decennial census sparks political conflict over how the American population is counted. 1790 First census puts population at 3.9 million, lower than the figure President George Washington and thenSecretary of State Thomas Jefferson hoped for; slaves counted as threefifths of a person; Washington vetoes apportionment bill he saw as unfair. 1865 Thirteenth Amendment abolishes slavery, ending three-fifths count for African-Americans and effectively shifting more political power to the South.

1957 Census Act allows sampling to be used in the 1960 census.

1960s-1980s Concern about undercounting


grows among civil rights groups, cities and states. 1969 Ebony magazine pushes for accurate Black count, telling readers that census counts are important to government and industry for apportionment, program planning and analysis. 1976 In effort to address undercount, Congress amends the Census Act to require the Commerce secretary to use sampling if he considers it feasible. 1980 Undercount reduced again, but some cities and states seek to force Census Bureau to adjust figures.

1996 U.S. Supreme Court, in Wisconsin v. City of New York, rejects cities effort to force adjustment of 1990 census. . . . Census Bureau announces re-engineered census plan aimed at reducing undercount and avoiding lawsuits; congressional Republicans say the plan violates the Constitution. 1999 Supreme Court rules that the Census Act bars use of statistical sampling for reapportionment but leaves door open for using it to allocate federal funds and draw state legislative districts. 2000 Census Bureau buys ads for the first time to encourage responses. 2009 Robert M. Groves chosen to head Census Bureau, says wont use sampling to adjust the 2010 count. . . . Census Bureau cuts ties with Association of Community Organizations for Reform Now (ACORN) after employees of the antipoverty group are filmed appearing to give advice encouraging tax fraud and prostitution. 2010 Census Bureau replaces long-form questionnaire with American Community Survey while sending all households a short 10-question form. . . . Total cost of 2010 census estimated at $14.5 billion, including $340 million promotional campaign that includes $171 million in advertising; conservative Republicans criticize census as intrusive, and some Latino advocates try to boycott it to protest lack of immigration reform; mail-back response rate of 72 percent matches 2000 rate; bureau begins effort to contact non-responders.

1900-1950s
1902 Congress creates Census Office.

Farm-to-city population shifts and undercounting of minorities cast new attention on census data.

1920 Census finds that most Americans live in cities; rural legislators challenge census count, and Congress fails to pass a reapportionment bill. 1940 First hard evidence of undercounting emerges as demographic analysis shows that 3 percent more draft-age men, including 13 percent more blacks, registered for the draft pool than were counted in the 1940 census. 1951 Newly invented Univac computer used in final stages of 1950 census.

1990-Present Conflict arises over use of statistical adjustment of census data to reduce undercounting. 1990 For first time since 1940 Census Bureau fails to reduce undercount; population reaches 249 million. 1991 Commerce Secretary Robert A. Mosbacher declines Census Bureau recommendation to adjust the 1990 census to deal with undercount; critics say the decision is politically driven, and several states and cities sue to force adjustment.

www.cqresearcher.com

May 14, 2010

443

CENSUS CONTROVERSY

Gay Couples to Be Counted for First Time


But census wont provide complete count of gays in America.
ith eight states and Washington, D.C., recognizing same-sex marriages, the U.S. Census for the first time this year will include data about same-sex marriages nationwide, regardless of whether they are legal. In previous censuses, the Census Bureau considered samesex couples who checked the married box as unmarried partners. 1 But since the last census in 2000, five states and the district have legalized same-sex marriages, and three more recognize out-of-state same-sex marriages. The Census Bureau is even encouraging same-sex couples who arent legally married but identify themselves as such to check the married box. And since the census is confidential, there will be no legal repercussions for same-sex married couples who live in states in which same-sex marriages arent legal. The census is a portrait of America, Che Ruddell-Tabisola, the manager of the lesbian, gay, bisexual and transgender program at the Census Bureau, told The Kansas City Star. Our job is to get an accurate count. . . . One of the most important things is for same-sex couples to know that it is 100 percent safe to participate in the census. 2 The decision to count same-sex married couples is hailed by some gay rights advocates as an important first step in getting a complete count of the lesbian, gay, bisexual and transgender (LGBT) community in the United States. Even in the absence of federal recognition of our relationships, we have an opportunity to say on an official form that, Yes, we are married, Yes, our relationships are every bit as equal to every-

one elses, said Josh Friedes, executive director of the LGBT advocacy group Equal Rights Washington. 3 Some gay rights advocates, however, say more needs to be done to recognize the U.S. LGBT community in terms of data and gathering more statistics. [At] the moment, its not that easy for us to answer a simple question, like How many LGBT people are there, Gary Gates, a member of Our Families Count, a census campaign to count the LGBT community, told National Public Radios Tell Me More program. In data-gathering, When a group is essentially invisible, its hard to make an argument that they have needs or that they are treated differently. 4 Because the census will count only same-sex couples who live together, many say a large proportion of the community will not be counted, and the only remedy for this is to include a question on the census about sexual orientation. But the only way to add questions to the census is to get approval by Congress, so that does not appear likely anytime soon. Some conservative same-sex-marriage opponents worry that these new statistics will aid gay rights advocates in the fight for legal same-sex marriage in more states. Some have even said that counting same-sex couples violates the federal Defense of Marriage Act (DOMA), which defines marriage as a legal union between a man and a woman. Marriage is only for a man and woman. Thats the law they need to follow. Somebody needs to sue the federal government to enforce the Defense of Marriage Act, said Randy Thomasson, president of SaveCalifornia.com, a pro-family advocacy group. The Family Research Council (FRC), which promotes family,

Continued from p. 442

In 1962, in the landmark ruling Baker v. Carr, the Supreme Court held that voters could bring a constitutional challenge to a states legislative apportionment. The decision opened the door to a series of rulings that local and state legislative bodies as well as congressional districts must be apportioned according to what became known as the one-person, one-vote rule in other words, districts had to contain a roughly equal number of people as tallied in the decennial census. Other methods of drawing legislative districts, which might use political or geographic boundaries, were invalid if those districts were not equal in population, Anderson noted. 44

Meanwhile, the growing focus on antidiscrimination laws was helping to spotlight the issue of census accuracy and the problem of undercounting minorities. Undercounting had been a concern ever since the first census in 1790, but for 150 years demographers and census officials had little in the way of hard proof that undercounting particularly of African-Americans existed to any significant degree. That changed in 1940 at the advent of World War II. As noted by the Census Bureau, demographic analysis showed that 3 percent more draft-age men, including 13 percent more blacks, registered for the World War II draft pool than were counted in the 1940 census, proving

that censuses were missing part of the population. 45 Concerns about undercounting especially of minorities led to major changes in modern census methods. Over the past six decades those changes have led to controversies and charges of politicization of the census charges that persisted through the planning for Census 2010. At the heart of the controversy has been the practice of sampling using data on part of the population to make broader conclusions about the whole. The 1950 census produced a net undercount of 4.4 percent of the population, but the undercount rate for blacks was 9.6 percent. 46 In 1957 Congress passed a new Census Act, which

444

CQ Researcher

LGBT community and encourage it to marriage and human life in national be honest on its survey responses. The policy, agrees the Census Bureaus acbureau also broadcast public service tions may violate DOMA. ads on the gay-oriented channel Logo For the Census Bureau to actuabout counting same-sex marriages ally encourage same-sex couples to and posted them on the Census Bumark themselves as married is a clear reau Web site. violation of the Defense of Marriage We have to reach out and engage Act, says Peter Sprigg, a senior felthis part of the population, a Census low for policy studies at FRC. Sprigg Bureau official said. Anything less than says the data being collected could that is a failure. 5 have been interesting because some states that have legalized same-sex Julia Russell marriages dont record data on how many marriages are performed. But, This years census will include data about 1 Census Form Question Stirs Controversy, U.S. because the census will count all same-sex marriages for the first time. Census Bureau to Acknowledge Couples Differsame-sex couples who consider themRocky Galloway and Reggie Stanley, above, ently, KCRA (Sacramento), April 1, 2010, selves married legally or not celebrate after applying for their marriage www.kcra.com/news/23024784/detail.html. 2 Eric Adler, Bureau wants same-sex couples to the data really isnt very useful. license in Washington, D.C., last March. check the married box on census form, The Because Congress mandated that Kansas City Star (Missouri), April 6, 2010, www. a marriage can be only between a man and a woman, the kansascity.com/2010/04/06/1861880/census-bureau-seeking-count-of.html. FRC believes the idea of same-sex marriage is an oxymoron, 3 Lornet Turnbull, Census will count gay couples who check husband or wife, The Seattle Times, March 30, 2010, http://seattletimes.nwsource.com/html/ according to Sprigg. localnews/2011483128_lgbtcensus31m.html. And while it might be one thing for the census to simply 4 2010 Census Will Count Same-Sex Couples, Tell Me More, National count same-sex married couples, he said its another thing for Public Radio, Nov. 25, 2009, www.npr.org/templates/story/story.php? the Census Bureau to distribute messages encouraging same- storyId=120816467. 5 Census Bureau urges same-sex couples to be counted, USA Today, April 6, sex couples to check the married box. To promote its new way of counting same-sex couples, 2010, www.usatoday.com/news/nation/census/2010-04-05-census-gays_N.htm. the Census Bureau sent a task force to reach out to the

allowed sampling to be used in the 1960 census in such form and content as the secretary of Commerce may determine, but the law said sampling could not be used for reapportioning House seats. 47 By 1970, the stakes in census accuracy had grown significantly, in large part because of the passage of civil rights legislation that demanded reliable counts to monitor the application of antidiscrimination laws. In addition, big U.S. cities were under increasing financial pressure, raising the importance of census counts in the allocation of federal assistance. Judicial rulings requiring legislative districts to be equal in population also demanded accurate census counts.

In January 1969 an Ebony magazine editorial pushed for an accurate Black count and told readers that census counts were important to government and industry for apportionment, program planning and analysis. And, the magazine claimed, the figures they use are a lie because about 10 percent of non-Whites (primarily Blacks) were missed. The magazine noted that most census workers were white, and it advocated for black interviewers to take the census to ghetto areas. 48 The following year the Urban League organized a Coalition for a Black Count to monitor the 1970 census and urge participation to assure a full and accurate minority count. 49

AFP/Getty Images/Mandel Ngan

Undercounts persisted, though. The 1970 census produced a net undercount of 2.9 percent of the population, but 8 percent of blacks. 50 In 1957 Congress amended the Census Act to allow sampling, but not for apportionment. In 1976 the law was strengthened to allow the Commerce secretary to use sampling if he considers it feasible, though again not for apportionment. The change was technical in nature and not aimed at improving the undercount. 51

Litigation Over Sampling

ut over the next quarter-century, the idea of using sampling to

www.cqresearcher.com

May 14, 2010

445

CENSUS CONTROVERSY
statistically adjust for the undercount arose repeatedly, resulting in court fights, a landmark Supreme Court ruling and charges of politicizing the census to gain a partisan edge in the apportionment of congressional seats, drawing of legislative districts and allocation of federal money to the states. After the 1980 census, the Census Bureau stepped up its research on methods for statistically adjusting the 1990 census to correct for undercounting, but the Commerce Department subsequently decided against the idea. That led to litigation. In late 1988 New York City and a coalition of other state and local entities, joined by the NAACP and other advocacy groups, sued the Census Bureau in an effort to stop chronic under-counting of urban blacks and Latinos. 52 From a civil rights point of view, it has to do with equal voting rights, Neil Corwin, New York Citys assistant corporation counsel, explained at the time. From the federal-funding point, there are a number of programs based on population figures. If New York has more people than the Census Bureau gives it credit for, they are going to suffer in the amount of federal funds they get. 53 In 1990 the Census Bureau failed to reduce the undercount for the first time since 1940. The overall rate was 1.6 percent, but 4.6 percent for blacks and 5 percent for Hispanics. Renters were undercounted by 4.5 percent, and many children were missed. 54 The bureau recommended that the 1990 results be adjusted, but Commerce Secretary Robert Mosbacher, a Republican serving in the George H. W. Bush administration, declined. While conceding that minorities and some jurisdictions had been undercounted, he argued that the proposed adjustment methods, employing sampling, werent accurate enough to improve the overall census results. 55 Critics promptly tagged his decision as without merit and politically driven. New York City Mayor David Dinkins called it nothing less than statistical grand larceny. 56 More litigation followed. New York City and others challenged Mosbachers decision, but a federal district court judge ruled that it was constitutional and did not violate the Census Act. A federal appellate court overturned that decision, ruling that because a disproportionate undercount of minorities raised concerns about equal representation, the government was required to prove that its refusal to adjust the census figures was necessary to achieve some legitimate goal. 57 But in 1996, the Supreme Court upheld Mosbachers decision not to adjust the 1990 count. Using statistical means to deal with undercounting wasnt dead, however. After the string of lawsuits over the 1990 count, the Census Bureau came up with a new plan for a reengineered census in 2000 that it thought would correct the miscounting and avoid litigation. It was the culmination of a four-year process of discussion and review of census plans by a broad spectrum of experts, advisors and stakeholders, according to the bureau. 58 The plan, which became public in early 1996, called again for the use of statistical sampling. As described by The New York Times, the technique was loosely similar to that of public opinion polls in that it would extrapolate information about the population from partial data. But the bureaus plans are more sophisticated. They involve using traditional methods to count everyone in 90 percent of the households in a census tract a neighborhood of about 1,700 dwellings. Data from the 90 percent would be used to determine the number and characteristics of the remaining 10 percent, and the population would be further adjusted on the basis of a survey of 750,000 households. 59 Congressional Republicans, who had gained control of both houses of Congress in the 1994 midterm elections, objected, saying the technique violated federal law and the Constitution. As The Times noted, with House Republicans holding a razor-thin majority, both parties [were] acutely conscious of any question that might give one side an advantage. 60 In 1998 a federal court ruled against the sampling plan, and the ruling was appealed to the Supreme Court. In 1999, in a landmark 5-4 decision, the justices barred the use of statistical sampling to arrive at population totals for the purpose of reapportionment. But the court left the door open to using sampling for other purposes, such as allocating federal funds and state districting. 61

Political Debate
ew controversies arose as the 2010 census approached. One involved last years White House nomination of Sen. Judd Gregg, a Republican from New Hampshire, to head the Commerce Department. Obamas pick . . . raised alarm among some minority advocates, who noted that Gregg had opposed increases to census funding and could not be trusted to do everything necessary to reduce undercounts, Boston Globe correspondent James Burnett wrote. To mollify those critics, White House spokesman Ben LaBolt indicated that for 2010 the census director would now work closely with White House senior management. To some census observers especially those observing from GOP congressional seats this looked like a power grab. 62 Gregg withdrew, citing the census as key among irresolvable conflicts with the Obama administration. 63 In picking a replacement Washington Gov. Gary Locke, a Democrat the White House sought to reassure critics that the census wouldnt be politicized. But yet another controversy erupted after the Association of Community Organizations for Reform Now a grassroots antipoverty group com-

446

CQ Researcher

Census Leads to Power Shift in Congress


Population migration transfers House seats to Sun Belt states.
hen William Howard Taft occupied the White House in 1911, Congress set the number of seats in the U.S. House of Representatives at 435, the same as today. But every 10 years, when the census is conducted, an element of suspense surrounds that set-in-stone figure. House seats are distributed among the states based on population figures gathered in the census, with apportionment occurring the year following the census. With every new census, some states gain seats (and the political power that goes with them) and others lose seats. Following the 2000 census, for instance, 12 seats shifted; after the 1990 count, 19 seats transferred. 1 Political analysts often can reliably forecast winners and losers ahead of time, but some states are cliff-hangers until the Census Bureau releases its official post-census results. This year that will happen by Dec. 31. For years, House seats and political power have been shifting toward the Sun Belt the Southern and Western states and away from the Midwest and Northeast, a trend expected to continue in next years reapportionment. That trend began in earnest after World War II, spurred by the baby boom and air conditioning, says Kimball W. Brace, president of Election Data Services (EDS), a Manassas, Va., consulting firm specializing in redistricting, election administration and census analysis. Returning veterans started families, the U.S. population grew and people moved seeking jobs not just to the suburbs but also to warm-weather states, such as California, Texas and Florida. With the advent of air conditioning, they ended up not feeling bad going to hot places, Brace notes. The migratory trend continues, but with some recent twists that could have a strong impact on reapportionment, he says. If you look at the Census Bureaus yearly studies of movement . . . since World War II, you generally find that about 17 or 18 percent of the population moves every year whether across town or cross-country. But in the last two years, that 17 percent has dropped to 11 percent, mainly because of the housing crisis and economic upheaval, he says. With migration slow, some states may not gain as many House seats as expected before the recent recession. According to estimates by EDS, seven states Arizona, Florida, Georgia, Nevada, South Carolina, Utah and Washington would each gain a seat, and Texas would gain three, based on 2009 Census Bureau population estimates, the latest available until the 2010 census is counted. 2 Before the economy soured, Brace says, Florida was on track to gain two seats but will now be lucky to gain one.

Texas, on the other hand, has held steady, and in fact could gain a fourth seat, depending on the 2010 census, Brace says. The migration of people to Texas from Louisiana in the wake of Hurricane Katrina in 2005 may have boosted Texas population enough to give the state another seat, Brace says. The issue is, have any of those people gone back? Were not sure yet. A separate study by Polidata, a Virginia group that analyzes political data, projected that Texas could gain four seats, though the strength of that projection has decreased, it said late last year. 3 The EDS study noted that Arizona and Nevada have both seen their population growth decline over the past decade. Arizonas lower growth rate has impacted whether it will gain a second seat in 2010, it said. Nevada, on the other hand, has enough population to keep its additional seat. Eight states Illinois, Iowa, Louisiana, Massachusetts, Michigan, New Jersey, New York and Pennsylvania will probably each lose a seat, according to EDS estimates, and Ohio stands to lose two. Minnesota is an uncertainty. Based on the 2009 population data, it would not lose a seat, but if 2009 population trends continue into 2010, it will, according to EDS. California is also a cliff-hanger and perhaps the most consequential because of its size. Depending on the 2010 census, the state could lose a congressional seat for the first time since it achieved statehood in 1850, EDS said. That marks a dramatic turn of events for California. Brace says when 2005 Census Bureau data were projected out to 2010, California looked to be in line to gain a seat. But then came the recession, which hit California earlier than the rest of the country, and the states population growth rate fell behind that of some other states, he says. If the census counted only U.S. citizens and did not include undocumented immigrants an idea embraced by some conservatives California could wind up losing five congressional seats, Brace says. Immigration does have an impact. Thomas J. Billitteri
Greg Giroux, Before Redistricting, That Other R Word, CQ Weekly, Nov. 20, 2009, p. 2768. 2 New Population Estimates Show Additional Changes for 2009 Congressional Apportionment, With Many States Sitting Close to the Edge for 2010, Election Data Services, Dec. 23, 2009, www.electiondataservices.com/images/ File/NR_Appor09wTables.pdf. 3 Congressional Apportionment: 2010 Projections Based Upon State Estimates as of July 1, 2009, Polidata, Dec. 23, 2009, www.polidata.org/news.htm#20091223.
1

monly known as ACORN signed on as an unpaid census-promotion partner for the 2010 census. Long a

target of conservative critics, ACORN had been accused by Republicans of voter-registration fraud during the

2008 presidential campaign, and its involvement in the census touched off strong GOP objections. 64

www.cqresearcher.com

May 14, 2010

447

CENSUS CONTROVERSY
Its a concern, especially when you publican on the House Committee on tell the full story. [T]he measure is limlook at all the different charges of Oversight and Government Reform, said ited to the universe of homes to which voter fraud, Rep. Lynn A. Westmore- Groves selection was incredibly troubling the Census Bureau mailed . . . or handland, R-Ga., vice ranking member of and contradicts the administrations as- delivered . . . questionnaires and asked the House Oversight Subcommittee on surances that the census process would residents to mail them back, wrote Information Policy, Census and Na- not be used to advance an ulterior polit- Lowenthal, the census consultant and former House staffer. tional Archives, told FoxNews.com. We ical agenda. 67 Not in the equation, she noted, are want an enumeration. We dont want But at his confirmation hearing in to have any false numbers. 65 May, Groves told a Senate panel he people counted separately everyone What came next all but sealed ACORNs wouldnt use sampling to adjust the from American Indians living on reserfate. After conservative activists secretly 2010 census. And, he said, there are vations and college students living in dorms to people living in migrant farmfilmed ACORN employees appearing to no plans to do that for 2020. 68 worker camps and RV offer advice encour(recreational vehicle) aging tax fraud to acparks. And those additivists posing as a tional counting operations prostitute and her are just part of the parpimp, the Census tial story, she said. ConBureau cut ties with cluded Lowenthal, We the group. It is dont really know how clear, wrote bureau many Americans have director Groves, that joined our decennial naACORNs affiliation tional portrait so far. But with the 2010 census one conclusion is beyond promotion has caused doubt: The hardest part sufficient concern in is yet to come. 70 the general public, In fact, in various has indeed become ways, Census 2010 is only a distraction from our To encourage Americans to return their census questionnaires, at the midpoint. mission, and may the Census Bureau this year sponsored a NASCAR race car, above, a From May through even become a dis13-vehicle nationwide promotional road tour and television ads July census takers will couragement to pubbefore and during the Super Bowl. be knocking on roughlic cooperation, negly 48 million doors of atively impacting 2010 households that didnt mail back their census efforts. 66 Groves himself had also stirred parcensus form or didnt receive one. From tisan controversy when he was nomiAugust through December the bureau nated to the post a little over five months will conduct a separate Coverage Meabefore the ACORN flap exploded. As a surement Survey to evaluate the acCensus Bureau official in the early curacy of the census count. 1990s, he had advocated statistical adDecember 31 is the deadline for justment to the 1990 census to deal with the bureau to provide the White the undercount. After Obama nominatHouse and Congress with the official ed him to run the Census Bureau, Ren late April the Census Bureau an- population count by state. The indipublicans expressed alarm. nounced that 72 percent of 2010 vidual states then use the data to apConducting the census is a vital con- census forms had been mailed back portion House seats to various constitutional obligation, House minority leader by households that received them. On gressional districts. Rep. John A. Boehner, R-Ohio, said after his Census Web site blog, Groves exIn March 2011 the bureau will begin Groves nomination. It should be as solid, pressed satisfaction with the response, providing redistricting data to the reliable and accurate as possible in every calling it a remarkable display of civic states. 71 And in 2012 the results of the respect. That is why I am concerned about participation. 69 Coverage Measurement Survey will bethe White House decision to select Groves. But census experts cautioned that come available. Census experts say that Rep. Darrell Issa, R-Calif., the ranking Re- the so-called participation rate doesnt Continued on p. 450

CURRENT SITUATION
Redistricting

448

CQ Researcher

U.S. Census Bureau/Public Information Office

At Issue:
Should the census ask questions about race?
yes

MELISSA NOBLES
ASSOCIATE PROFESSOR OF POLITICAL SCIENCE, MASSACHUSETTS INSTITUTE OF TECHNOLOGY
WRITTEN FOR CQ RESEARCHER, MAY 2010

HANS A. VON SPAKOVSKY


SENIOR LEGAL FELLOW, THE HERITAGE FOUNDATION; FORMER COUNSEL TO THE
ASSISTANT ATTORNEY GENERAL FOR CIVIL RIGHTS, U.S. JUSTICE DEPARTMENT WRITTEN FOR CQ RESEARCHER, MAY 2010

or nearly 170 years, the Census Bureaus mission in asking about race was clear: define and then distinguish who was white from who was non-white, and especially from who was black. Today, the dismantling of formal racial segregation, the enforcement of civil rights legislation and significant increases in immigration to the United States have all introduced new purposes for racial categorization in census taking. Asking people to categorize themselves by race provides important data about our countrys growing diversity and serves to support the nations civil rights laws especially the Voting Rights Act. Indeed, census data on race are used in a range of public policies, many of which are designed to counteract entrenched material disadvantage among minorities. In my view, these are purposes worthy of the continued inclusion of the race question in U.S. census taking. The issue has been contentious mostly because it is impossible to disassociate the history of racial thought and politics that have fundamentally shaped census-taking from the start. For most of its history, censustaking supported a politics of racial segregation and subordination. For example, the 1840 and 1850 censuses were directly intertwined with debates about slavery. Data from the largely discredited 1840 census purportedly disclosed higher rates of insanity among free blacks, thereby proving that freedom drove free black people crazy. The 1850 census first introduced the category mulatto, at the behest of a Southern physician, in order to gather data about the presumed deleterious effects of racial mixture. Post-Civil War censuses continued to include the mulatto category, reflecting the enduring preoccupation with racial mixing. Twentieth-century racial and ethnic census categorization remained intertwined with the centurys core political and social issues: racial segregation and immigration. In regard to segregation, categories and instructions for the censuses from 1930 to 1950 largely mirrored the racial status quo in politics and law. Southern laws defined persons with any trace of Negro blood as legally Negro and subject to all of the political, economic and social disabilities such designation conferred. Southern law treated other non-white persons similarly. Census categories and definitions followed suit, essentially bringing the logic of racial segregation into national census taking itself. Thus, for most of American history the census wasnt used for edifying reasons. But today it supports the political and social policies that seek to guarantee civil rights and equality.
no

yes no
May 14, 2010

mericans are uncomfortable with the Census Bureau demand that everyone identify their race on the 2010 Census. Despite the bureaus insidious commercials urging Americans to return the form so their communities can get their fair share of government largesse (earmarks writ large), the constitutional reason for the census is to reapportion congressional representation. The race question invades our privacy and is part of a continuing effort to divide Americans by race and enable official discrimination. Some justify this because the census has historically asked for racial information. That information was required prior to the Civil War because black Americans who were slaves were counted as only three-fifths of a person in reapportionment. So why must we check the race box in this day and age? Two reasons: 1) to facilitate racially gerrymandered congressional districts, a pernicious practice that segregates voters by race; and 2) to discriminate in the provision of government benefits based on race. For Americans who chafed at the race question and either left it blank or wrote in American, a census worker may visit their homes to get them to change their answer. If they dont, the census will impute the persons race based on what he looks like or where he lives an offensive example of stereotyping and racial profiling in a society where so many of us are of mixed race and ancestry. Small wonder the U.S. Commission on Civil Rights recommended that this question be made voluntary a recommendation the Census Bureau ignored. The options given for answering the race question also reflect political correctness and half-baked, liberal social-policy theories that have nothing to do with biology and genetics. Although the question asks for your race, it gives you choices like Japanese that are nationalities, not racial categories. Race is a very imprecise term that scientists disagree about. Moreover, many people have no idea what their apparent racial background is for more than a few generations. Classifying and subdividing Americans on the basis of race is repugnant. E pluribus unum out of many, one is both our motto and our objective. It is one we should strive for every day, and the census continued preoccupation with race is detrimental to the great progress weve made as a nation toward achieving that goal.

www.cqresearcher.com

449

CENSUS CONTROVERSY
Continued from p. 448

if it shows significant undercounts, states could wind up suing to press the bureau to adjust the figures because of the importance of census results to federal funding allocations and the drawing of legislative boundaries.

Counting Prisoners
s the 2010 census moves forward, advocacy groups are continuing to spotlight how certain population groups are counted, especially prison inmates. Currently, the Census Bureau counts prison inmates where they are incarcerated. Critics argue that areas where prisons are located benefit in the allotment of political representation to the detriment of prisoners home communities. Most people in prison in America are urban and African-American or Latino, Rep. William Lacy Clay, D-Mo., chairman of the House census subcommittee, wrote to the Census Bureau. But, he added, the 2010 census will again be counting incarcerated people as residents of the rural, predominantly white communities that contain prisons. 72 Some change on the issue is coming. In May 2011, a few months earlier than in the past and in time for redistricting in most states, the Census Bureau will identify the location and population counts of prisons and other group quarters, according to Aleks Kajstura, legal director at Prison Policy Initiative, a Massachusetts-based group pushing for change in the way prisoners are counted. States can choose whether they want to collect the home addresses of prisoners and adjust the census counts before redistricting, she says. Ultimately, advocates want the Census Bureau to change the way prisoners are counted in time for the 2020 census. But some states are acting on their own. In April, Maryland became the first state to pass legislation requiring inmates to be counted in the jurisdiction of their last permanent address

rather than where they are incarcerated. 73 Similar legislation is pending or under consideration in eight other states, including New York, Florida, Illinois and Pennsylvania, Kajstura said. In a lot of states the trend has been to build new prisons at locations far removed from the home community of incarcerated persons, which means a shift in political and representation power and representation away from these home communities to generally more rural areas where prisons are located, says Brenda Wright, director of the Democracy Program at Dmos, a liberal research and advocacy group in New York that also is pushing for a change in how prisoners are counted. At the same time, we emphasize its not just a rural versus urban problem at heart, because the issue of how prisoners are counted affects local county and city redistricting as well. 74 How the Census Bureau counts prisoners also inflates the weight of the vote of any district where a prison happens to be located at the expense of all other districts that do not have a prison, Wright says.

Doling Out Funds


risoner counts are just one part of the larger census picture, of course, and the stakes for states and localities in the ability of the Census Bureau to produce an accurate count are huge not only for legislative districting and congressional seats but also for allocations of federal money. A new study by the Brookings Institutions Reamer found that in fiscal 2008, 215 federal domestic-assistance programs used census-related data to guide $447 billion in distributions to the states, local governments and other recipients, mostly for Medicaid and other aid for low-income households and highway programs. 75 Census accuracy is especially important to low-income recipients of

federal help, the study notes. Based on 2000 census data, it said, each additional person included in [that census] resulted in an annual additional Medicaid reimbursement to most states of between several hundred and several thousand dollars. In an interview, Reamer notes the census widespread importance to apportionment and redistricting, enforcement of antidiscrimination laws, distribution of federal funds and the information needs of business, for example. To the extent the census is inaccurate, we have a less efficient economy if businesses are making decisions based on faulty data, he says. His study notes that the decennial census is the basis for 10 other data sets that help shape federal-assistance funding, including a Bureau of Economic Analysis series on per capita income. The effectiveness of the decennial census depends, of course, in no small part on how seamlessly it is planned and executed. In Congress a bipartisan group of legislators want to see that future censuses run more smoothly than many past ones have, including the 2010 census. A bill called the Census Oversight, Efficiency and Management Reform Act would, among other things, make the Census Bureau directorship a five-year appointment so census planning isnt disrupted by a presidential election. 76 The 10-year decennial cycle would be split into two five-year phases the first for planning and the second for operations, fostering consistency across administrations. Under the current system, every president appoints a new director. In addition, the bill would give bureau directors more independence by having them report directly to the Commerce secretary and letting them give recommendations or testimony to Congress that represents their views and not necessarily those of the administration. It also would keep directors from having to testify on census issues they didnt agree with. 77

450

CQ Researcher

Seven former Census Bureau directors endorsed the bill in March, stating that the time has come for the Census Bureau to be much more independent and transparent. 78 They said that after 30 years in which the press and Congress frequently discussed the Decennial Census in explicitly partisan terms, it is vitally important that the American public have confidence that the census results have been produced by a nonpartisan, apolitical and scientific Census Bureau. In addition, they said the importance of the Census Bureau waxes and wanes, peaking as the decennial approaches but then drifting down the [Commerce] Departments priority list, but that the bureau needs to more efficiently focus on [its] continuous responsibilities, which include not only the decennial census but other measurement projects. And third, the former directors noted, each of us experienced times when we could have made much more timely and thorough responses to congressional requests and oversight if we had dealt directly with the Congress.

OUTLOOK
Changing Times
s census experts look beyond the completion of the 2010 count, they see prospects for important changes in the way the government creates its every10-year national portrait. Social and cultural shifts are likely to make census taking more challenging in 2020 and beyond, yet technology could also make it cheaper, easier and more effective. In 1970, 78 percent of households receiving a census form mailed it back. That rate fell to 65 percent in 1990, rose modestly in 2000 thanks in part to heavy spending on advertising and remained largely flat in 2010.

Some of the long-term decline in response no doubt reflects growing concerns about privacy and a wariness of how information collected by the census might be used, experts say. That wariness may grow, particularly in the nations expanding immigrant communities especially if Congress fails to pass comprehensive immigration reform before the next census. Lifestyle changes also have made it more challenging and costly for the Census Bureau to do its work. The growth of same-sex unions and interracial marriages, increases in joint custody of children, the expansion of secondhome purchases among the nations aging baby-boom population and other trends may make it more difficult for the Census Bureau to get a firm fix on population and demographic trends. But other developments may work in the Census Bureaus favor. One is the growth of communications technology, which could make census taking cheaper for the government and more convenient for households. An online data-collection option is a probable evolution in 2020. The bureau said an Internet option was deemed feasible from a technical standpoint. But without time to fully test the entire system, security concerns led the Census Bureau to decide to not offer the 2010 census questionnaire online, it said. The bureau said it plans to introduce an Internet option in the next census. 79 One thing seems likely: Criticism of the census will be around in future decades much as it has been in the past. After the bureau announced the 72 percent mail response to this years census, Rep. Jason Chaffetz, R-Utah, phoned The Washington Post to point out that while this years mail-back rate matched the 2000 figure, the cost of the 2010 count was more than double that of the 2000 census. And, he criticized the amount the bureau spent on advertising, saying theyre getting poor results in the places we know we have problems.

However, Jost, the bureau communications official, told The Post the 2010 advertising budget was the same as for 2000 on an inflation-adjusted basis. We spent just 5 percent more in equivalent dollars this year on a population that was 10 percent bigger. 80

Notes
1 With Growing Awareness of Census, Most Ready to Fill Out Forms, Pew Research Center, March 16, 2010, http://people-press.org/report/596/ census-forms. 2 See Michelle Malkin, True Confessions from Americas Census Workers, April 7, 2010, http:// news.yahoo.com/s/uc/20100407/cm_uc_crm max/op_1913518. 3 Andrew D. Reamer, Counting for Dollars: The Role of the Decennial Census in the Geographic Distribution of Federal Funds, Brookings Institution, March 2010, www.brookings.edu/reports/ 2010/0309_Census_dollars.aspx. 4 Andrew Reamer, Census Brings Money Home, April 6, 2010, www.brookings.edu/opinions/2010/ 0315_census_reamer.aspx?p=1. 5 2010 Census: Fundamental Building Block of a Successful Enumeration Faces Challenges, U.S. Government Accountability Office (GAO), March 5, 2009, www.gao.gov/new.items/d094 30t.pdf. 6 Rate achieved by April 27. 7 Robert M. Groves, A Surprise Reaction, The Directors Blog, U.S. Bureau of the Census, April 23, 2010, http://blogs.census.gov/2010 census/. 8 Take 10 Map, http://2010.census.gov/2010 census/take10map/. 9 See How the 2010 Census is Different, Population Reference Bureau, www.prb.org/ Articles/2009/changesin2010.aspx. 10 Robert M. Groves, The Directors Blog, U.S. Bureau of the Census, entries for April 14, 15 and 16, 2010, http://blogs.census.gov/2010 census/. 11 Stephen Dinan, Exclusive: Minn. Lawmaker vows not to complete Census, The Washington Times, June 17, 2009. 12 Naftali Bendavid, Republicans Fear Undercounting in Census, The Wall Street Journal, April 5, 2010, p. 4A. Pauls comment appeared in a weekly column in April 2010. 13 Andy Barr, Ericksons census shotgun threat, Politico, April 2, 2010, www.politico.com/news/ stories/0410/35338.html.

www.cqresearcher.com

May 14, 2010

451

CENSUS CONTROVERSY
Patrick McHenry, Returning the Census is Our Constitutional Duty, RedState.com, April 1, 2010, www.redstate.com/rep_patrick_mchenry/ 2010/04/01/returning-the-census-is-our-constitu tional-duty/. 15 Transcript, The 2010 Census, The Diane Rehm Show, National Public Radio, March 3, 2010. 16 For background, see the following CQ Researcher reports: David Masci, Latinos Future, Oct. 7, 2003, pp. 869-892; Kenneth Jost, Census 2000, May 1, 1998, pp. 385-408, and R. K. Landers, 1990 Census: Undercounting Minorities, Editorial Research Reports, March 10, 1989, pp. 117-132. 17 What is the 1990 Undercount? U.S. Census Bureau, www.census.gov/dmd/www/techdoc1. html. 18 Technical Assessment of A.C.E. Revision II, U.S. Census Bureau, March 12, 2003, www.cen sus.gov/dmd/www/pdf/ACETechAssess.pdf. 19 Ibid. 20 Mark Hugo Lopez and Paul Taylor, Latinos and the 2010 Census: The Foreign Born Are More Positive, Pew Hispanic Center, April 1, 2010, http://pewhispanic.org/files/reports/121.pdf. 21 Randal C. Archibold, Arizona Enacts Stringent Law on Immigration, The New York Times, April 23, 2010, www.nytimes.com/2010/ 04/24/us/politics/24immig.html?scp=5&sq= arizona%20and%20immigrants&st=cse. 22 Campbell Robertson, Suspense Builds Over Census for New Orleans, The New York Times, April 7, 2010, www.nytimes.com/2010/04/08/ us/08orleans.html?ref=us. 23 The Associated Press, State, local government budgets hamper census outreach, The Washington Post, April 12, 2010, www. washingtonpost.com/wp-dyn/content/article/ 2010/04/11/AR2010041103832.html. 24 Ibid. 25 Distrust, Discontent, Anger and Partisan Rancor, Pew Research Center, April 18, 2010, http:// pewresearch.org/pubs/1569/trust-in-governmentdistrust-discontent-anger-partisan-rancor.
14

Reamer, The Scouting Report Web Chat: 2010 Census, op. cit. 27 Matt Canham, Bennetts census-immigration amendment rejected, Salt Lake Tribune, Nov. 5, 2009, www.sltrib.com/news/ci_13721132. 28 2010 Census Operational Briefing Transcript, U.S. Census Bureau, Sept. 23, 2009, www.cen sus.gov/Press-Release/www/releases/pdf/2010 CensusBriefing_Transcript.pdf. 29 Rob Shapiro, The Latest Attack on the Census is an Attack on All of Us, New Policy Institute, Oct. 1, 2009, www.newpolicyinstitute. org/2009/10/the-latest-attack-on-the-census-isan-attack-on-all-of-us/. 30 Jennifer Ludden, Hispanics Divided Over Census Boycott, National Public Radio, July 13, 2009, www.npr.org/templates/story/story.php? storyId=106555313. 31 Ibid. 32 Lopez and Taylor, op. cit. 33 An Introduction to the American Community Survey, U.S. Census Bureau, summer 2009, www.census.gov/Press-Release/www/2009/pdf/ 09ACS_intro.pdf. 34 Clea Benson, The Data Catch: Not Enough Information, CQ Weekly, Dec. 7, 2009, p. 2810. 35 Quoted in ibid. 36 The Associated Press, Thomas Jefferson Signed Census Sells for $122,500, The Huffington Post, April 15, 2010, www.huffingtonpost. com/2010/04/15/thomas-jefferson-signed-c_n_ 538634.html. 37 A Century of Population Growth: From the First Census of the United States to the Twelfth, 1790-1900, 1909, Bureau of the Census, Department of Commerce and Labor, p. 48, www.archive.org/details/centuryofpopulat00unit. On Jan. 23, 1791, Jefferson wrote: The census has made considerable progress, but will not be completed till midsummer. It is judged at present that our numbers will be between four and five millions. 38 Kenneth Prewitt, The American People: Politics and Science in Census Taking, Russell Sage Foundation and Population Reference

26

About the Author


Thomas J. Billitteri is a CQ Researcher staff writer based in Fairfield, Pa., who has more than 30 years experience covering business, nonprofit institutions and public policy for newspapers and other publications. His recent CQ Researcher reports include Youth Violence, Afghanistans Future and Financial Literacy. He holds a BA in English and an MA in journalism from Indiana University.

Bureau, 2003, p. 6, accessed at www.thecensus project.org/factsheets/PrewittSAGE-PRBCensus 2000Report.pdf. 39 David McMillen, Apportionment and districting, in Margo J. Anderson, ed., Encyclopedia of the U.S. Census (2000), pp. 34-35. 40 Ibid., p. 34. 41 Ibid., p. xiii. 42 Ibid. 43 Ibid., p. xiv. 44 Ibid. The case is Baker v. Carr, 369 U.S. 186 (1962). 45 United States Census 2000: Press Briefing Background Documents, U.S. Census Bureau, June 14, 2000, p. 6, www.census.gov/PressRelease/www/background.pdf. 46 Margo J. Anderson and Stephen E. Fienberg, Who Counts? The Politics of Census-Taking in Contemporary America (1999), p. 60. Figures are estimated net census undercounts as measured by a technique called Demographic Analysis, in which the best estimate of the previous census count is updated with various kinds of administrative statistics on births, deaths and net immigration, along with Medicare data, to produce an estimate of the population separately from the current census count. The authors cite Robert E. Fay, et al., The Coverage of the Population in the 1980 Census, Bureau of the Census, 1988. 47 United States Census 2000, U.S. Census Bureau, op. cit. 48 Anderson and Fienberg, op. cit., p. 38. 49 Ibid., p. 39. 50 Ibid., p. 60. Figures are estimated net census undercounts as measured by demographic analysis. 51 United States Census 2000, U.S. Census Bureau, op cit. 52 Sam Burchell, Big Cities Sue for Changes in 90 Census, United Press International, Nov. 3, 1988, Los Angeles Times, http://articles.latimes. com/1988-11-03/news/mn-1041_1_census-bureau. See also U.S. Bureau of the Census, 1990 Overview, www.census.gov/history/www/ through_the_decades/overview/1990.html. 53 Quoted in Burchell, op. cit. 54 United States Census 2000, U.S. Census Bureau, op. cit. 55 Anderson, Litigation and the census, in Anderson, ed., Encyclopedia of the Census, op. cit., p. 270. 56 Anderson and Fienberg, op. cit., p. 128. The authors attribute the Dinkins quote to The New York Times, July 16, 1991. 57 Linda Greenhouse, High Court Hears Arguments For Census Alteration by Race, The

452

CQ Researcher

New York Times, Jan. 11, 1996, www.nytimes. com/1996/01/11/us/high-court-hears-argumentsfor-census-alteration-by-race.html?pagewanted=1. 58 2000 Overview, U.S. Census Bureau, www.census.gov/history/www/through_the_ decades/overview/2000.html. 59 Steven A. Holmes, Court Voids Plan to Use Sampling for 2000 Census, The New York Times, Aug. 25, 1998, www.nytimes.com/1998/ 08/25/us/court-voids-plan-to-use-sampling-for2000-census.html?scp=1&sq=2000%20census%20 and%20sampling&st=cse. 60 Ibid. 61 Linda Greenhouse, Jarring Democrats, Court Rules Census Must Be by Actual Count, The New York Times, Jan. 26, 1999, www. nytimes.com/1999/01/26/us/jarring-democratscourt-rules-census-must-be-by-actual-count. html?scp=1&sq=census%20and%20sampling %20and%20supreme%20court&st=cse. 62 James Burnett, Night of the census taker, The Boston Globe, Oct. 18, 2009, www.boston. com/bostonglobe/ideas/articles/2009/10/18/look_ out_obama_is_sending_his_minions_to_your_ house_the_deep_history_of_a_conspiracy_theory/. 63 Joseph Curl and Kara Rowland, Census battle intensifies; GOP leader threatens lawsuit, The Washington Times, Feb. 13, 2009, www.washingtontimes.com/news/2009/feb/13/ gregg-withdrawal-foreshadows-census-debate/. 64 Times Topics: Acorn, The New York Times, http://topics.nytimes.com/top/reference/times topics/organizations/a/acorn/index.html. 65 Cristina Corbin, ACORN to Play Role in 2010 Census, FOXNews.com, March 18, 2009, www.foxnews.com/politics/2009/03/18/acornplay-role-census/. 66 The Associated Press, Census Bureau Drops Acorn from 2010 Effort, The New York Times, Sept. 12, 2009, www.nytimes.com/2009/09/12/ us/politics/12acorn.html. 67 Quoted in David Stout, Obamas Census Choice Unsettles Republicans, The New York Times, April 3, 2009, www.nytimes.com/2009/04/ 03/washington/03census.html?scp=6&sq=gary% 20locke%20and%20judd%20gregg%20and%20 census&st=cse. 68 Timothy J. Alberta, Census Nominee Rules Out Statistical Sampling in 2010, The Wall Street Journal, May 15, 2009, http://online.wsj.com/ article/SB124241977657124963.html. 69 A Surprise Reaction, op. cit. 70 Terri Ann Lowenthal, Taking Stock: A MidCensus Reality Check, The Census Project Blog, April 20, 2010, http://censusprojectblog.org/. 71 For background see Jennifer Gavin, Redistricting, CQ Researcher, Feb. 16, 2001, pp.

FOR MORE INFORMATION


Brookings Institution, 1775 Massachusetts Ave., N.W., Washington, DC 20036; (202) 797-6000; www.brookings.edu. Centrist think tank that studies a wide range of policy issues. Center for Immigration Studies, 1522 K St., N.W., Suite 820, Washington, DC 20005-1202; (202) 466-8185; www.cis.org. Conservative nonprofit research organization that provides information on immigration. Dmos, 220 5th Ave., 5th Floor, New York, NY 10001; (212) 633-1405; www.demos.org. Liberal research and advocacy group that follows economic, voter-participation and other policy issues. Election Data Services, 6171 Emerywood Ct., Manassas, VA 20112; (202) 789-2004; www.electiondataservices.com. Political consulting firm specializing in redistricting, election administration and analysis and presentation of census and political data. Heritage Foundation, 214 Massachusetts Ave., N.E., Washington, DC 20002-4999; (202) 546-4400; www.heritage.org. Conservative think tank that studies wide range of policy issues, including the census. National Association of Counties, 25 Massachusetts Ave., N.W., Washington, DC 20001; (202) 393-6226; www.naco.org. National organization representing county governments. National Institute for Latino Policy, 101 Avenue of the Americas, Suite 313, New York, NY 10013; (800) 590-2516; www.latinopolicy.org. Nonprofit think tank that focuses on policies affecting the Latino community. Pew Research Center, 1615 L St., N.W., Suite 700, Washington, DC 20036; (202) 419-4300; www.pewresearch.org. Nonpartisan group that provides information on issues, attitudes and trends shaping the United States and world. Prison Policy Initiative, P.O. Box 127, Northampton, MA 01061; www.prisonpolicy.org. Nonprofit group that researches impact of Census Bureau policy that counts people where they are incarcerated rather than in their home communities. Russell Sage Foundation, 112 East 64th St., New York, NY 10065; (212) 750-6000; www.russellsage.org. A research center on the social sciences that performs scholarly analysis of census results. U.S. Census Bureau, 4600 Silver Hill Rd., Washington, DC 20233; (301) 763-4636; www.census.gov. Federal agency that conducts the decennial census.
113-128. Sam Roberts, New Option for the States on Inmates in the Census, The New York Times, Feb. 11, 2010, www.nytimes.com/2010/02/11/us/ politics/11census.html. 73 Erica L. Green, Baltimore will gain residents in prison count shift, The Baltimore Sun, April 24, 2010, http://articles.baltimoresun. com/2010-04-24/news/bs-md-inmate-census20100425_1_prison-towns-state-and-federalinmates-census-bureau. 74 See also Dmos, A Dilution of Democracy: Prison-Based Gerrymandering, www.demos.org/ pubs/prison_gerrymand_factsheet.pdf. 75 Reamer, Counting for Dollars, op. cit. 76 Count Us in Favor, The New York Times, March 29, 2010, www.nytimes.com/2010/03/
72

29/opinion/29mon2.html?scp=1&sq=count%20 us%20in%20favor&st=cse. The bill is HR 4945 and S 3167. 77 Statement in Support of The Census Oversight, Efficiency and Management Reform Act, The Census Project, March 25, 2010, www.the censusproject.org/letters/cp-fmrdirs-bill-25march 2010.pdf. 78 Ibid. 79 Census on Campus: Students Frequently Asked Questions, U.S. Bureau of the Census, http://2010.census.gov/campus/pdf/FAQ_Census OnCampus.pdf. 80 Ed OKeefe, Was 2010 Census a Success? Federal Eye blog, The Washington Post, April 26, 2010, http://voices.washingtonpost.com/federaleye/2010/04/was_2010_census_a_success.html.

www.cqresearcher.com

May 14, 2010

453

Bibliography
Selected Sources
Books
Anderson, Margo J., ed., Encyclopedia of the U.S. Census, CQ Press, 2000. An expert on the census who is a professor of history and urban studies at the University of Wisconsin, Milwaukee, offers dozens of articles on topics ranging from redistricting to government use of census data, plus an appendix with historical data. Anderson, Margo J., and Stephen E. Fienberg, Who Counts? The Politics of Census-Taking in Contemporary America, Russell Sage Foundation, 1999. Census expert Anderson and a professor of statistics and social science at Carnegie Mellon University examine how well the census counts the U.S. population. Nobles, Melissa, Shades of Citizenship: Race and the Census in Modern Politics, Stanford University Press, 2000. An MIT political scientist examines issues surrounding race during U.S. and Brazilian censuses and argues that censustaking is one of the institutional mechanisms by which racial boundaries are set. Santos, Fernanda, Door to Door, City Volunteers Try to Break Down Resistance to the Census, The New York Times, March 31, 2010, www.nytimes.com/2010/04/01/ us/01count.html?scp=1&sq=Door%20to%20Door,%20city %20volunteers%20try%20to%20break%20down&st=cse. The work of volunteers in helping to encourage participation is crucial, as demonstrated by their efforts in New York City, a reporter finds. Williams, Juan, Marketing the 2010 census with a conservative-friendly face, The Washington Post, March 1, 2010, www.washingtonpost.com/wp-dyn/content/article/ 2010/02/28/AR2010022803364.html. The Census Bureau has responded to challenges from conservatives with unprecedented outreach, including putting the bureaus name on a NASCAR auto.

Reports and Studies


Preparing for the 2010 Census: How Philadelphia and Other Cities Are Struggling and Why It Matters, Pew Charitable Trusts, Oct. 12, 2009, www.pewtrusts.org/uploaded Files/wwwpewtrustsorg/Reports/Philadelphia-area_grantmak ing/Census%20Report%20101209_FINAL.pdf?n=8566. Most of the 11 cities studied had less money and smaller staffs for local census preparation than they did a decade ago, raising concerns about undercounting in urban areas. Prewitt, Kenneth, The American People, Census 2000: Politics and Science in Census Taking, Russell Sage Foundation and Population Reference Bureau, 2003, www.thecensusproject.org/factsheets/PrewittSAGE-PRBCensus2000Report.pdf. A former Census Bureau director writes in this lengthy and useful analysis that while the census may sound dull and technical, it is a drama at the very center of our political life. Williams, Jennifer D., The 2010 Decennial Census: Background and Issues, Congressional Research Service, April 27, 2009, http://assets.opencrs.com/rpts/R40551_ 20090427.pdf. Far from being simple . . . , the attempt to find and correctly enumerate 100 percent of U.S. residents is increasingly complicated and expensive, declares this overview.

Articles
Farley, Rob, Census takers contend with suspicion and spin over the 2010 count, St. Petersburg Times, April 11, 2010, www.tampabay.com/incoming/census-takers-contendwith-suspicion-and-spin-over-the-2010-count/1086739. The newspaper examines three assertions about the census designed to quell Republican fears that the census is intrusive and cumbersome. Roberts, Sam, New Option for the States on Inmates in the Census, The New York Times, Feb. 11, 2010, www.ny times.com/2010/02/11/us/politics/11census.html?scp=1&sq =new%20option%20for%20the%20states%20on%20inmates %20in%20the%20census&st=cse. In time for congressional and legislative reapportionment, the Census Bureau in May 2011 will give states more flexibility on how to count prison inmates. Robertson, Campbell, Suspense Builds Over Census for New Orleans, The New York Times, April 7, 2010, www. nytimes.com/2010/04/08/us/08orleans.html?scp=1&sq= suspense%20builds%20over%20census%20for%20new%20 orleans&st=cse. The final census count for hurricane-battered New Orleans will go far in determining how [the city] thinks about itself, whether it is continuing to mount a steady comeback or whether it has sputtered and stalled, says The Times.

On the Web
The Census Bureau (www.census.gov) offers extensive data and other information on the U.S. population, households, business, congressional districts and more. A separate Web site for Census 2010 (www.2010.census.gov) includes details, in multiple languages, about this years decennial census, plus a blog by Census Bureau Director Robert M. Groves.

454

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Census Outreach
State, Local Government Budgets Hamper Census Outreach, The Washington Post, April 12, 2010. The recession has caused state and local governments to cut spending on census outreach, which could cause hard-toreach neighborhoods to turn in fewer census forms. Luo, Michael, Economists See a Lift in 2010 Census, The New York Times, Dec. 19, 2009, p. 12A. About 1.2 million temporary census-taking jobs will put $2.3 billion into the economy and act as a stimulus. Saker, Anne, Send in Survey or Expect Knock on the Door, The Oregonian, Jan. 4, 2010. The Census Bureau has launched a campaign to encourage people to mail back their census forms. Stelter, Brian, U.S. Census Uses Telenovela to Reach Hispanics, The New York Times, Sept. 23, 2009, p. 1B. The Census Bureau has helped write a story line for a popular Spanish-language soap opera in order to encourage Hispanics to fill out their census forms.

Non-Citizens
Barbassa, Juliana, and Manuel Valdes, Indigenous Immigrants to Be Counted in 2010 Census, The Seattle Times, Jan. 4, 2010. The Census Bureau will count Native Americans of Mexico and Central America for the first time. Chardy, Alfonso, Survey: Undocumented Migrants Willing to Take Part in Census, The Miami Herald, April 24, 2010, p. 4B. A survey conducted in six urban areas within the United States shows that undocumented immigrants are willing to fill out census forms. Roberts, Sam, California Would Lose Seats Under Census Change, The New York Times, Oct. 28, 2009, p. 21A. A census proposal by Sen. David Vitter, R-La., would count only citizen residents when determining how many seats states get in the House of Representatives.

Prisoners
Morello, Carol, Md. to Count Prisoners in Home Towns, The Washington Post, April 15, 2010, p. 5B. Maryland will become the first state to count prisoners in their hometowns rather than in their prison cells, thereby redrawing some districts. Yen, Hope, States Get New Leeway to Tally Prisoners in Census, The Associated Press, Feb. 11, 2010. Census officials will now make inmate population data available to states earlier, allowing them to decide whether to count inmates for redistricting purposes.

Form Returns
MacQuarrie, Brian, Tired of Indignities, Town Makes Itself Heard, The Boston Globe, May 6, 2010. The 1,500 residents of Erving, Mass., recorded a 100-percent response to the 2010 census in an attempt to bring attention to mail problems caused by ZIP code confusion. Yen, Hope, Census Mail Results Could Be Trouble for 5 States, The Washington Post, April 28, 2010. Five big states may lose congressional seats because they were below average in census form returns. Yen, Hope, Census Returns Hit 72 Percent, Match Rate in 2000, The Miami Herald, April 23, 2010. Seventy-two percent of Americans have returned their census forms thus far, matching the response rate from the 2000 census.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

Gays
Chin, Richard, 2010 Census Changes Reflect Gay Marriage, St. Paul (Minnesota) Pioneer Press, July 4, 2009. The Obama administration says the Defense of Marriage Act does not prohibit collecting same-sex marriage data. Wise, Lindsay, Changing the Count, The Houston Chronicle, March 18, 2010, p. 1B. The census will publish data on same-sex spouses who identify themselves as married on the form, whether or not they can legally marry in their state.

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

May 14, 2010

455

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10 Closing Guantnamo, 2/09 Affirmative Action, 10/08

Education
Housing the Homeless, 12/09 Bilingual Education, 12/09 Value of a College Education, 11/09 Financial Literacy, 9/09

Health/Safety
Caring for Veterans, 4/10 Earthquake Threat, 4/10 Breast Cancer, 4/10 Modernizing the Grid, 2/10 Sleep Deprivation, 2/10 Professional Football, 1/10 Medication Abuse, 10/09

Environment/Society
Teen Pregnancy, 3/10 Youth Violence, 3/10 Sex Scandals, 1/10 Animal Rights, 1/10 Women in the Military, 11/09 Conspiracy Theories, 10/09

Crime/Law
Prosecuting Terrorists, 3/10 Prisoner Reentry, 12/09 Interrogating the CIA, 9/09 Examining Forensics, 7/09 Legalizing Marijuana, 6/09

Politics/Economy
Gridlock in Washington, 4/10 Tea Party Movement, 3/10 State Budget Crisis, 9/09

Upcoming Reports
Campaign Finance Debates, 5/28/10 Jobs of the Future, 6/4/10 Health-Care Reform, 6/11/10

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Foreign Aid and National Security
Will cuts in assistance undermine U.S. safety?

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

he Sept. 11, 2001, attacks and subsequent wars in Iraq and Afghanistan prompted U.S. leaders to increase U.S. aid in the belief that improved global stability ultimately undergirds U.S. security. Secretary

of State Hillary Clinton and Defense Secretary Robert Gates are now among those calling for elevating international development assistance and diplomacy to the same status as defense. But budget debates on Capitol Hill could block aid-reform efforts. The Republican-led House calls for drastically reducing international affairs funding, but the Democratic-led Senate and the Obama administration are resisting. Complicating the arguments are questions about the efficiency of Americas aid bureaucracy and, ultimately, the effectiveness of the aid itself. While aid supporters point to improved accountability, its unclear whether future aid requests can withstand the pressure of budget cutters.
CQ Researcher June 17, 2011 www.cqresearcher.com Volume 21, Number 23 Pages 529-552
RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD
An Afghan child holds cooking oil provided by the USAID program. Afghanistan received $4.1 billion in U.S. aid in 2010, more than any other nation.

I N S I D E

THIS REPORT
THE ISSUES ....................531 BACKGROUND ................538 CHRONOLOGY ................539 AT ISSUE........................545 CURRENT SITUATION ........546 OUTLOOK ......................547 BIBLIOGRAPHY ................550 THE NEXT STEP ..............551

FOREIGN AID AND NATIONAL SECURITY


THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
June 17, 2011 Volume 21, Number 23

531

Is foreign aid necessary for national security? Does the United States benefit from foreign aid spending? Does the United States give too much aid to authoritarian regimes?

532 533 535 536 539 540 542

Afghanistan Now Receives Most U.S. Aid Israel is No. 2 and gets half as much. Foreign Aid Is Tiny Part of U.S. Budget Annual outlays average about 1 percent. The ABCs of Foreign Assistance Military funding is one of five major categories. U.S. Contributes Most Aid But other nations give more as a percentage of gross national income. Chronology Key events since 1947. Chinas Growing Aid to Africa Does it undermine American influence? More Aid Sought for Women and Girls Secretary Clinton: They represent potential that goes unfulfilled. At Issue Does foreign aid help governments and their societies?

MANAGING EDITOR: Thomas J. Billitteri

tjb@cqpress.com

BACKGROUND

538 541 542 544

Rise of Modern Aid World War II led to major U.S. aid efforts in Europe. New Approach Concern about terrorism led to a focus on aiding fragile states. Bushs Initiatives Millennium Challenge grants aided non-strategic nations. Obamas Initiatives The president stressed global health and economic development.

kkoch@cqpress.com CONTRIBUTING EDITOR: Thomas J. Colin tcolin@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Sarah Glazer, Alan Greenblatt, Barbara Mantel, Tom Price, Jennifer Weeks
DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT CHECKER: Michelle Harris

ASSISTANT MANAGING EDITOR: Kathy Koch

A Division of SAGE

PRESIDENT AND PUBLISHER:

John A. Jenkins
DIRECTOR, REFERENCE SOLUTIONS:

Todd Baldwin
Copyright 2011 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except: (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

CURRENT SITUATION

546

Modest Reforms Administration goals include reforms at USAID and increased support for sustainable agriculture in developing nations.

545

FOR FURTHER RESEARCH

OUTLOOK

549 550 551 551

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

547

Budget Battle Republicans proposed aid cuts worry Democrats and other economicdevelopment advocates.

Cover: U.S. Agency for International Development

530

CQ Researcher

Foreign Aid and National Security


BY NELLIE BRISTOL
situation has deteriorated. Poverty and poor governance can spur violence and instaormer Marine Capt. bility anywhere in the world, Rye Barcott is no the argument goes, spawning stranger to suffering. terrorism, desperation and disWhen he was a University of ease that may come to haunt North Carolina undergraduate, the United States or need to even before he joined the be addressed through a larger Marines, he and two Kenyans military investment. founded a leadership-building After the terrorist attacks on youth center and health clinthe United States on Sept. 11, ic in the infamous Kibera 2001, the George W. Bush adslum in Nairobi. ministration pushed the conBut it was while he was nection between long-term serving in Iraq, as he watched economic and social develkids playing soccer on a dusty opment assistance and national field at Abu Ghraib prison, security, a link the Obama adthat he fully grasped the poministration has continued. tential of economic and social We need an integrated development assistance in civilian-military national sestruggling countries. curity budget, said Secretary As Barcott watched an 11of State Hillary Rodham Clinyear-old accused killer kick ton. [I]ts now so important to a goal, he realized the conhave diplomats and develWorkers in Rwanda learn to install solar panels at health clinics under a project funded by the U.S. Agency nection between the boy and opment experts working side for International Development. Defense Secretary Robert his 15-year-old accomplice by side [with the military]. Gates has endorsed efforts by President Obama to and many of the youths he Clinton said civilian efforts increase U.S. foreign assistance, but congressional knew in Kenya. As troubled led by the State Department Republicans are calling for reductions. as I was by the [Iraqi] boys and the U.S. Agency for Insituation, I had still viewed them as the ing to give a larger role to U.S. for- ternational Development (USAID) were enemy, he wrote in his just-published eign aid, for both humanitarian and especially crucial in the front-line memoir, It Happened on the Way to national security reasons. The boys in states of Pakistan, Iraq and Afghanistan War: A Marines Path to Peace. Now, Iraq, Barcott learned, had been co- as the U.S. military reduces its forces. they had confessed and were playing erced into murdering an Iraqi leader, U.S. foreign aid is designed to help soccer, and I was seeing them again caught up in forces far beyond their increase government stability and defor who they were. Kids. They were control. And that, he says today, velop reliable services, including water shows me there are just clearly dra- and schools, making citizens less disjust boys. It dawned on him with particular matic limitations to what the military satisfied with their government and less clarity that separating his two callings can do, and at that particular moment apt to seek or be susceptible to al soldier and humanitarian worker it wasnt going to be any type of pos- ternatives. Too many people on Capi wasnt possible. They were differ- itive force in these kids lives. tol Hill and throughout the country Barcott is not alone in his belief that say, Okay, so the militarys gone, we ent means toward the same goal: peace and stability in a violent world, he U.S. foreign policy would be more ef- dont need to spend any money, wrote. Surely we would always need fective by putting greater emphasis on which would be a terrible mistake, a strong military, though there had to the civilian tools of diplomacy and de- Clinton said. It would make Iraq even be a better way toward peace than velopment, rather than military force. more vulnerable to outside interference this: our detention at Abu Ghraib of It is far preferable, he says, to work from Iran. 1 proactively with faltering countries to two kids almost half my age. But House Republicans are pushBarcott is now out of the military improve living conditions, rather than ing for sharp cuts in foreign aid as and working with U.S. groups push- deal with the consequences after the they seek to slash federal spending

THE ISSUES

www.cqresearcher.com

U.S. Agency for International Development

June 17, 2011

531

FOREIGN AID AND NATIONAL SECURITY


Afghanistan Now Receives Most U.S. Aid
Afghanistan received more U.S. aid in 2010 than any other country, and nearly twice as much as Israel. A decade ago, Israel by far was the biggest aid recipient, and Afghanistan was not even on the list.
and the support and resources that our military uses are directly related to the health of our economy over time. 3 The defense spending reauthorization bill in the House this year calls for a study of the security risks associated with the U.S. debt held by China. 4 Complicating the argument is aids uneven past. Advocates of international assistance point to numerous successes over the years increased agricultural yields for millions of hungry people, reduced disease worldwide and improved childbirth safety for vulnerable women. But even advocates of aid acknowledge its shortcomings. The United States devoted more than $50 billion to projects in Iraq, for example, including construction of police stations, government buildings and health facilities. 5 Yet poor management, corruption and security problems resulted in billions in cost overruns, and many projects may never be finished. 6 Afghanistan is another example. While remarkable aid-driven improvements have been made in the country in the last several years, the Senate Foreign Relations Committee released a report on June 8 showing that efforts to push money toward short-term development projects in volatile areas have been counterproductive and may result in an economic crisis in the country when the United States withdraws. It suggests the Obama administration overhaul its approach to ensure projects are necessary, achievable and sustainable before funding is allocated. The report is sure to play into continuing debates both on the value of foreign aid and the U.S. role in Afghanistan. 7 In addition, foreign aid may be the most misunderstood piece of the federal budget. According to a 2010 poll, Americans think 25 percent of the federal budget goes to foreign aid and that a more appropriate percentage would be 10 percent. 8 In reality, foreign aid constitutes only around 1.1 percent of the budget. (See graph, p. 533.)

Top Recipients of U.S. Foreign Assistance


Israel Egypt Colombia $899 West Bank/Gaza $485 Jordan $429 Russia $195 Bolivia $194 Ukraine $183 Kosovo $165 Peru $120 Georgia $112 Armenia $104 Bosnia $101 Indonesia $94 Nigeria $68 $0 1,000

$4,069 $2,053

Fiscal 2000

2,000

3,000

4,000

5,000

(U.S. aid in $ billions, in constant 2011 dollars)

Afghanistan Israel Pakistan Egypt Haiti Iraq Jordan Kenya Nigeria South Africa Ethiopia Colombia West Bank/Gaza Tanzania Uganda $0

$4,102 $2,220 $1,807 $1,296 $1,271 $1,117 $693 $688 $614 $578 $533 $507 $496 $464 $457
1,000 2,000

Fiscal 2010

3,000

4,000

5,000

(U.S. aid in $ billions, in constant 2011 dollars)

Source: Curt Tarnoff and Marian Leonardo Lawson, Foreign Aid: An Introduction to U.S. Programs and Policy, Congressional Research Service, February 2011, assets.opencrs.com/rpts/R40213_20110210.pdf

and reduce the size of the government. To many of them, and others, the bigger threat to national security is out-of-control government spending and the massive federal debt. The projected $9.7 trillion national debt over the next decade not only will make the United States more dependent on foreign creditors and international financial markets but also could force

cuts to the defense budget that could weaken the military. 2 Although he also supports a greater role for development aid and diplomacy, Joint Chiefs of Staff Chairman Adm. Mike Mullen said, The more significant threat to our national security is our debt. He added, Thats why its so important the economy move in the right direction, because the strength

532

CQ Researcher

Another complicating factor is the confusing nature of aid, which is used for a variety of purposes. Slightly more than half of the 2010 foreign aid budget was directed at humanitarian and development projects. 9 The remainder was intended for strategic purposes or to bolster civilian law enforcement or militaries and never intended to improve economic growth in a country. Still, in the eyes of the public, the accounts often are lumped together. If we give money to a friendly dictator, 10 years later not much development comes of it, and people say Oh, well foreign aid doesnt work, says David Beckmann, president of the anti-hunger group Bread for the World. But the point was to buy an air force base, it wasnt to help people, so we shouldnt be surprised later that it doesnt help people. As lawmakers on Capitol Hill debate the size of the federal budget. USAID Administrator Rajiv Shah, widely viewed as a dynamic, progressive leader, is trying to convince members of Congress of the value of aid in an era of tight budgets. Shah is making the agency and its aid recipients more accountable, working more closely with developing countries and better tracking effectiveness. Like an enterprise, were focused on delivering the highest possible value for our shareholders in this case, the American people and the congressional leaders who represent them, Shah said. We will deliver that value by scaling back our footprint to shift resources to critical regions, rationalizing our operations and vigilantly fighting fraud, waste and abuse. 10 As the debate over foreign aid and the federal deficit heats up, here are some of the questions being asked: Is foreign aid necessary for national security? The importance of the connection between non-military foreign aid and national security is being supported

Foreign Aid Is Tiny Part of U.S. Budget


Foreign assistance accounted for 1.1 percent of U.S. federal budget outlays in scal 2010. Foreign aid spending has represented, on average, just over 1 percent of total budget authority annually since 1977.
Transportation

3%
Education/Training

Other Defense

2%
Health

21%

4%
Income Security

10%
Medicare

18%
Social Security

13%
Foreign assistance

1%
Net Interest on Debt * Figures do not total 100 due to rounding.

5%
Justice Sector

19%
Veterans

1%

3%

Source: Curt Tarnoff and Marian Leonardo Lawson, Foreign Aid: An Introduction to U.S. Programs and Policy, Congressional Research Service, February 2011, assets.opencrs.com/rpts/R40213_20110210.pdf

strongly by what may be a surprising group: former and active members of the U.S. military. And the message is coming from the top: Secretary of Defense Robert Gates. It has become clear that Americas civilian institutions of diplomacy and development have been chronically undermanned and underfunded for far too long relative to what we spend on the military, and more important, relative to the responsibilities and challenges our nation has around the world, Gates said in 2008. 11 Gates sees civilian tools of persuasion and inspiration as indispensable to a stable world. We cannot kill or capture our way to victory, he said. What the Pentagon calls kinetic operations should be subordinate to measures to promote participation in government, economic programs to spur development and efforts to address grievances that often lie at the heart of in-

surgencies and among the discontented from which the terrorists recruit. Retired Adm. James M. Loy, former deputy secretary of Homeland Security and Coast Guard commandant, traces the shift in approach to September 11. Since the attacks, he says, the very definition of national security is much broader in scope. While pre-9/11 security operations might have involved the White House, the National Security Council and the State and Defense departments, they now include participants ranging from the Treasury and Justice departments to the Agriculture Department and Environmental Protection Agency. Who would have thought wed ever pine for the good old days of the Cold War, with the simplistic notion of a couple of superpowers keeping client states under their wing and in order, all fostered by the notion of mutually assured destruction? says Loy, now

www.cqresearcher.com

June 17, 2011

533

FOREIGN AID AND NATIONAL SECURITY


co-chair of the National Security Advisory Council at the U.S. Global Leadership Coalition, a network of business and nongovernmental leaders that advocates increased use of civilian power. In todays more complicated world, he adds, Were still trying to understand it. Investment in civilian operations is considered a best buy by J. Stephen Morrison, senior vice president at the Center for Strategic and International Studies (CSIS). It is much cheaper to send specialists in health or elections to a country than to fund a military intervention, not to mention saving the lives and limbs of soldiers, he notes. Supporters of development as a national security tool acknowledge that definitive results for the approach are hard to find, mostly because its difficult to measure what would have happened absent the aid. But, Morrison argues, theres the kind of presumptive, wise, forward investment in creating a form of human security, accountability and transparency that will make for a better-functioning world. Afghanistan is frequently cited as an example of how aid would have protected the United States. When the Russians left in 1989, after nearly 10 years of war and occupation, the United States didnt follow through in rebuilding. Such actions can have serious consequences, comments Adm. Loy, who says, Often when weve watched [foreign aid] fall, weve paid the price shortly thereafter. But not everyone agrees. James Roberts, a research fellow for economic freedom and growth at the Heritage Foundation, a conservative think tank, warned that out of control federal spending leads to a national security threat and that traditional development assistance does not work, at least not if the goal is to foster sustainable development in poor countries. 12 He said development is better accomplished through private organizations. He did, however, laud humanitarian aid delivered under U.S. global HIV/AIDS programs. Justin Logan, associate director of foreign policy studies at the Cato Institute, a libertarian think tank, says strategic aid is unnecessary and counterproductive. I think were secure, independent of these efforts to try to tinker with the balance of power in other regions, he says. He calls a lot of aid, especially to problematic allies such as Egypt and Pakistan, bribery. I dont buy the Rube Goldberg theory that regional instability everywhere will always come back to bite us, [a view] I think is quite prevalent in Washington, he adds. U.S. willingness to engage throughout the world has made other countries less motivated to provide services for their citizens or even shore up their own defenses, Logan says. The U.S. tendency to pick and choose when and how to get involved in conflicts internationally taints the image of America as a beacon of liberalism and democracy to the rest of the world and in some cases causes actual animosity and terrorism against the United States, he adds. Significantly, among those not fully convinced by the development aid-asnational security argument are lawmakers influential in budget matters. House Budget Committee Chairman Paul Ryan, R-Wis., developed a 2012 budget plan that would have cut international affairs funding, which includes foreign aid, by as much as 28 percent. 13 And Rep. Kay Granger, R-Texas, chair of the House Appropriations Committees State, Foreign Operations and Related Programs Subcommittee, said that given the countrys constrained economic circumstances, foreign aid needs to be focused on direct national security. 14 While she acknowledged the connection between foreign aid and national security in long-term U.S. commitments to Israel, Iraq, Afghanistan, Pakistan and Mexico, she suggested other, less pressing development investments would be a lower priority in the current climate. We have to look at our national security, particularly in foreign aid, and say, What is in our national security interest? she said. Sen. Rand Paul, R-Ky., makes the most extreme case against foreign aid, saying all aid should be cut, even to longtime ally Israel. Citing a Reuters poll, Paul said, 71 percent of the American people agree with me that when were short of money, when we cant do the things we need to do in our country, we certainly shouldnt be shipping the money overseas. In making his case, Paul said that while hes sympathetic to challenges faced by developing countries, aid money too often goes to unscrupulous leaders. You dont want to just keep throwing money to corrupt leaders who steal it from their people, he argued. Moreover, Paul said, U.S. aid to Israel is matched by aid to Islamic countries, possibly contributing to an arms race in the region. I dont think that funding both sides of an arms race, particularly when we have to borrow the money from China to send it to someone else we just cant do it anymore. The debt is all-consuming, and it threatens our well-being as a country. 15 Does the U.S. benefit from foreign aid spending? Foreign aid has always been a hard sell, but in the current political and economic climate, its harder still. While much of official Washington considers aid vital, the value is often lost on everyday Americans, many of whom are struggling to hold on to their houses, find new jobs and educate their kids. Its really important that you all know this committee is extremely supportive of programs that really will save the lives and positively impact the developing world, Rep. Jerry Lewis, R-Calif., a member of the Foreign Operations Subcommittee, told USAID and State Department officials March 31. In turn, our public just plain doesnt believe it, and they wonder why, for Gods sake,

534

CQ Researcher

were spending this money when we dont actually sense theres any positive result for the American taxpayer. 16 Calculating the ultimate value of aid to the donor is difficult to begin with. Further, examples of misspent, ineffective and even harmful aid are plentiful. Several prominent economists, including William Easterly of New York University, author of The White Mans Burden: Why The Wests Efforts to Aid the Rest Have Done So Much Ill and So Little Good, and Dambisa Moyo, author of Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa, have harshly criticized Western attempts at poverty alleviation. Some experts urge a move toward expanded trade opportunities with developing countries rather than continued direct assistance. To counter theories that aid is akin to pouring money down a rat hole, development professionals have worked steadily, particularly in the last decade, to document program effectiveness. 17 For example, the Oportunidades program in Mexico was proven to successfully alleviate poverty and ill health by providing payments to families to keep their kids in school and take them to health clinics. 18 Similar programs have been established in Brazil and Nicaragua. 19 Other successful interventions include deworming, immunization, vitamin supplements and oral rehydration solutions to treat diarrhea in areas in the developing world with high child mortality rates. But when it comes to specific programs, determining value is a little bit tricky, says Christopher J. L. Murray, director of the Institute for Health Metrics and Evaluation at the University of Washington in Seattle. The health arena boasts several obvious winners, Murray says, including programs providing insecticide-treated bed nets to prevent mosquito-borne malaria in Africa and HIV/AIDS treatments to millions of sufferers, also particularly in Africa. Pretty much anyone would say theres been a real benefit, and the

The ABCs of Foreign Assistance


U.S. foreign assistance totaled $39.4 billion, or 1.1% of the federal budget in scal 2010, the highest amount since 1985. Aid has three primary rationales: enhancing national security, bolstering commercial interests and addressing humanitarian concerns. U.S. aid falls into several categories based on the goal and form of the aid: Bilateral Development Assistance totaled $12.3 billion in 2010, or 34 percent of foreign aid appropriations, and is largely administered by USAID. It is used for long-term projects supporting economic reform, private-sector development, democracy promotion, environmental protection and human health. Multilateral Development Assistance made up 7 percent of the 2010 budget, totaling $2.6 billion. It is combined with contributions from other donor nations and implemented by international organizations such as the United Nations. Humanitarian assistance was allotted $5.1 billion in 2010, or 13.5 percent of the assistance budget. Funding is used to help victims of earthquakes, oods and other crises. A large portion addresses issues related to refugees and internally displaced persons. Assistance serving both development and special political/strategic purposes includes the Economic Support Fund, which now largely goes to countries key to the war on terrorism. Several other programs in this category are aimed at Europe and Asia. These funds totaled $9.6 billion in 2010, or 25 percent of total assistance. Civilian Security Assistance focuses on terrorism, illicit narcotics, crimes and weapons proliferation and totaled 9 percent of the foreign aid budget in 2010. Military Assistance is provided to U.S. friends and allies to help them purchase U.S. military equipment and training. In 2010, Congress appropriated $4.7 billion for this account, or 12.5% of total foreign aid.
Note: Totals do not add to 100 due to rounding. Source: Curt Tarnoff and Marian Leonardo Lawson, Foreign Aid: An Introduction to US Programs and Policy, Congressional Research Service, Feb. 10, 2011, www. fas.org/sgp/crs/row/R40213.pdf.

U.S. has played an important role in both, Murray says. But with other programs, he says, evaluating value for money is much harder. Its not that aid isnt having an effect, Murray adds, but that its harder

to pinpoint exactly what is creating the positive result. For example, while there has been marked progress recently in reducing child morality in the poorest countries, its hard to prove with certainty which factors are

www.cqresearcher.com

June 17, 2011

535

FOREIGN AID AND NATIONAL SECURITY


U.S. Contributes Most Aid
The United States contributed nearly $29 billion in ofcial development assistance (ODA) in 2009, the most in the world and more than twice the amount of France, which ranked second (top graph). As a percentage of gross national income (GNI), however, the U.S. contributed only 0.2 percent to such assistance, ranking far behind Nordic countries such as Sweden and Norway, each of which gave more than 1 percent (bottom graph).
here is teasing out the effect of, lets say, vaccination programs versus these broader development trends, Murray notes. I think its likely that development assistance has contributed to that. Can I prove that in a rigorous, scientific way like we can for bed nets or [HIV/AIDS therapies]? Much harder to do, he says. Dean Karlan, a professor of economics at Yale University and president and founder of Innovations for Poverty Action, a consulting firm that evaluates poverty programs, thinks at least partial evaluation of programs is possible. When asked if the U.S. gets value for its foreign aid dollars, Karlan says, The answer is, sort of. Some things work, and some things dont. Both Karlan and Murray see the development sector as much more motivated and able now to examine specific programs, largely because more tools have become available to collect and analyze data, and more development organizations, including governments, the U.N. and private donors, are demanding transparency and accountability of both funding and data. But objectivity has its limitations. Karlan favors randomized evaluations to rigorously examine intervention effectiveness. The method works for discrete programs, including health services, and is being adopted vigorously by USAID and other U.S. government programs. However, Karlan says, the method doesnt work for everything. Efforts such as judicial reform, democracy building or even road construction are more difficult to evaluate for their impact on local citizens. Whether projects result in goodwill and enhanced security for Americans is even more difficult to measure. There are some areas of aid that still elude us in terms of establishing good, clear, rigorous evaluation, Karlan says. Without clear evidence, all we can do is fire rhetoric and bad data at each other, but no ones ever going to convince the other side on it.

Ofcial Development Assistance, 2009


(in $ billions)

$30 25 20 15 10 5

Total Aid to Selected Countries

(as a percentage of GNI)

1.2% 1.0 0.8 0.6 0.4 0.2

Source: Net Ofcial Development Assistance in 2009, Organisation for Economic Co-operation and Development, April 2010, www.oecd.org/dataoecd/17/9/44981 892.pdf

most responsible. So many things contribute to reductions in child mortality . . . rising incomes contribute at the household and community level, bet-

536

ed Lu N o e n xe rw m ay b De our Ne nm g th er ark la Be nd lg s Fi ium nl Un a ite Ire nd d la K n Sw ingd d itz om er la Fr nd an c S e Ge pai rm n Ca any na Au da s Ne Aus tria w tra Ze lia a Po land Un ite rtu d ga St l a Gr tes ee c Ja e pa n So ut Ita h ly Ko re a

0.0

Sw

St at Fr es Un an ite Ge ce d rm Ki an ng y do Ja m p Ne S an th pa er in la Sw nds e No den rw Ca ay na da De Ital n y Au mar st k B ra Sw elg lia itz ium er la Fi nd nl a Au nd st So Ire ria ut la h nd Ko Gr rea ee Lu Por ce tu xe Ne mb gal w ou Ze rg al an d

Un

ite

Aid as a Percentage of Gross National Income

ter housing, better water, etc. Probably half of the decline in child mortality is related to improvements in educating young girls. So the challenge

CQ Researcher

zens, he says. So baDoes the United sically we end up emStates give too powering and enriching much aid to authose corrupt powers in thoritarian govthe government and ernments? perhaps contributing to America has long the longevity of non-debestowed aid to win mocratic regimes. The friends and influmoney we paid hasnt ence people paid off for the United and not always to States, he says. the most savory inAn even more comdividuals. Despots plicated situation is ocwho have received curring in Pakistan, acU.S. aid include Fercording to Molly Kinder, dinand Marcos in a senior policy analyst at the Philippines, the Center for Global Baby Doc DuvaA U.S. military helicopter delivers cement to Pakistans flooded Swat Development, a devellier in Haiti, and Valley last October. Slightly more than half of the U.S. foreign aid budget opment think tank in even Saddam Husfor 2010 supported humanitarian and development projects. The remainder was allocated for strategic purposes, including military aid. Washington. The United sein in Iraq. During States has aided the counthe Cold War, the try for many years, but practice of supporting harsh, non-democratic gov- America really backs the demands of it stepped up funding after 9/11 to ernments, while roundly criticized, the Egyptian people, or just wants to enlist Pakistans anti-terrorism help. was viewed as a necessary evil in en- return to stability with a faade of The assistance started out heavily weightsuring regional stability and keeping change, Rep. Gary Ackerman, D-N.Y., ed toward military aid, but Congress forced a more balanced approach in countries from turning to communism. said in February. 22 The Obama administrations experi- 2009, tripling the amount designated for But the doctrine has come under renewed scrutiny during the recent ences with the Egyptian upheaval and economic development. 24 Arab Spring unrest, when the Unit- others in the Middle East may prompt Overall, U.S. aid for Pakistan has ed States was criticized for being on a re-evaluation of its strategies toward been largely based on U.S. strategic the wrong side of several democratic countries with autocratic leaders, such as needs rather than the needs of the Yemen and Bahrain. 23 uprisings, most notably in Egypt. people of Pakistan, says Kinder. The Anthony Kim, a policy analyst at the ebbs and flows of foreign aid are conEgypt is a top recipient of U.S. aid more than $70 billion since 1948 Heritage Foundation, says its about time. tingent on whats going on in the world, mostly for weapons. 20 The Egyptian- In the name of stability the United she says. So when Pakistan is needIsraeli Peace Treaty of 1979 cement- States has been giving out a lot of tax- ed as an ally in the war on terror or ed U.S. backing. 21 From Americas payers money to a lot of authoritari- the Cold War, our aid to Pakistan spikes, perspective, the aid increases Egypts an regimes, and as we know now bet- often corresponding with military stability, raises regional support for the ter than before, in countries like Egypt regimes [there]. So I think its a very United States and helps Egypt stay at and Pakistan political freedom is very fair criticism to say Pakistanis view the peace with Israel. But the recent protests limited, Kim says. We blindly, with- United States as putting money disin Cairos Tahrir Square against the out thinking through the true effect of proportionally to non-democratic now-ended regime of Hosni Mubarak foreign aid, have been wasting our regimes in Pakistan, Kinder says. While such a policy may endear put the United States in the difficult money on those countries. Referring largely to the billions of the United States to ruling authoriposition of having to denounce a government it had financially helped for dollars of non-military aid to Egypt tarian powers and give it at least the many years, and the administrations over the years, Kim said the funding illusion of an ally, the U.S. ends up lukewarm initial reaction to the upris- did little for economic development. looking bad to the citizenry, Kinder Year after year, the data show eco- says. Theres a real ethical conunings generated widespread criticism. The Obama administration now nomic development has been at best drum and a real foreign policy chalappears to be wavering on whether cosmetic and has not reached citi- lenge because it certainly can breed
AFP/Getty Images/Carl de Souza

www.cqresearcher.com

June 17, 2011

537

FOREIGN AID AND NATIONAL SECURITY


U.S. Aid Tracks Events, Presidential Initiatives
Foreign aid funding in recent decades can be attributed to specic foreign policy events and presidential initiatives. Since the Sept. 11, 2001, terrorist attacks, funding has been closely tied to U.S. strategy in Iraq and Afghanistan. Global health initiatives by the Bush and Obama administrations, including the Global Health Initiative, the Millennium Challenge Corp., and the PEPFAR HIV/AIDS program, also drove increases. Aid to the Middle East also rose, especially in nations viewed as vital partners in Americas War on Terror.
(in $ billions)

the long view, rather than in the flush of public passion and the urgency to save a buck, he added. 28

BACKGROUND
Rise of Modern Aid
oreign assistance became a key component of U.S. foreign policy during and after World War II. The United States began providing support for war-devastated European countries in 1945. Those diffuse efforts were centralized when Secretary of State George C. Marshall and other officials called for a massive, coordinated effort to rebuild Europes infrastructure. The European Recovery Program, known as the Marshall Plan, pumped $12.5 billion into Western Europe over a three-year period beginning in 1948. The aid was designed to advance U.S. interests as well as help Europe. A primary driver of the efforts was concern that a Europe on its knees would allow westward expansion of the Soviet Union and the spread of communism. The plan also advanced U.S. economic interests by requiring the purchase of U.S. goods. The Marshall Plan was considered by most to be a success, although some would argue other factors contributed to the recovery, notably a 32 percent increase in Western Europes gross national product, spurred by an 11 percent rise in agricultural production and a 40 percent increase in industrial output over pre-war levels. 29 Inspired by the success in Europe, President Harry S Truman proposed aid to developing countries. Nonetheless, foreign aid spending was stagnant during the costly Korean War (1950-53) and the Eisenhower administration (1953-61).

Source: Curt Tarnoff and Marian Leonardo Lawson, Foreign Aid: An Introduction to U.S. Programs and Policy, Congressional Research Service, Feb. 10, 2011

resentment toward the United States, which were seeing now in Pakistan, she says. A recent poll by the Pew Research Center showed that only 11 percent of Pakistanis have favorable views of the United States, one of the lowest levels in Muslim countries surveyed. 25 My big question about aid to countries were not quite comfortable with is whether we are just keeping a lid on things and hoping that the governments stay in power to do the things we want them to do? Kinder asks. Is the aid just blunting pressure for reform or pressure for change, giving the government resources to just kind of survive against the will of the people? Thats something that I think requires a lot of soul-searching from the U.S. perspective. But Roberts of the Heritage Foundation said that while development aid is ineffective in Egypt and many other

places, military aid paid big dividends for the United States during the Egyptian revolt. He cited the U.S.-supported Egyptian military as having succeeded in holding the line against virulently anti-U.S. elements. 26 That view is echoed by Secretary of State Hillary Rodham Clinton, who said U.S. support of the Egyptian military was one of the best investments America made because the relationship facilitated communication between the United States and the Egyptian military during the protests. 27 Joint Chiefs Chairman Mullen made a similar argument, noting military aid to Egypt has been of incalculable value in transforming the countrys army into a capable force. Changes to those relationships in either aid or assistance ought to be considered only with an abundance of caution and a thorough appreciation for

Continued on p. 540

538

CQ Researcher

Chronology
1940s-1960s United States begins a tradition
of foreign assistance. June 5, 1947 Economic assistance for postwar Europe proposed by Secretary of State George C. Marshall. Marshall Plan plays key role in stimulating Western Europes economic revival. Jan. 30, 1961 Citing concerns about the spread of communism, President John F. Kennedy announces plans for a new aid program: Our role is essential and unavoidable in the construction of a sound and expanding economy for the entire noncommunist world, helping other nations build the strength to meet their own problems, to satisfy their own aspirations to surmount their own dangers. Sept. 4, 1961 Congress passes Foreign Assistance Act, separating military and nonmilitary aid. Nov. 3, 1961 Kennedy establishes U.S. Agency for International Development as the first foreign-assistance organization focused primarily on longrange economic and social development.

1971 Senate rejects foreign-assistance funding for fiscal 1972 and 1973. 1973 Congress passes amendments to the Foreign Assistance Act that break aid into targeted sectors including food and nutrition, population planning and health and education and human resources. 1979 Camp David Accords boost U.S. aid to Israel and Egypt to encourage the peace process. Most of the aid is military assistance to buy U.S. weapons.

March 14, 2002 President George W. Bush creates a new aid mechanism, the Millennium Challenge Account, which offers assistance only to countries that adopt reforms and effective policies. He pledges $5 billion a year for the effort. Jan. 28, 2003 President Bush announces the $15 billion, five-year Presidents Emergency Plan for AIDS Relief (PEPFAR), which becomes the largest international commitment by any country dedicated to a single disease. Jan. 18, 2006 Secretary of State Condoleezza Rice announces move toward transformational diplomacy, or elevating the role of diplomacy and development in U.S. foreign policy. 2008 Democratic presidential candidate Barack Obama pledges to double U.S. foreign assistance to $50 billion by 2012, a promise that runs headfirst into the global economic collapse. Dec. 8, 2010 Incoming House Foreign Affairs Committee Chairwoman Ileana RosLehtinen, R-Fla., pledges to restore fiscal discipline to foreign affairs. Dec. 16, 2010 Secretary of State Hillary Rodham Clinton releases long-awaited Quadrennial Diplomacy and Development Review, a blueprint for making U.S. foreign policy more coherent and calling for greater engagement of civilian power in advancing national interests. April 15, 2011 House passes budget resolution that would cut international affairs budgets by as much as 28 percent in 2012.

1990s

U.S. foreign aid continues to decline. 1990 U.S. spending on foreign aid peaks at $65.5 billion and begins a 20 percent decline to $53.1 billion by 2000. 1997 Sen. Jesse Helms, R-N.C., makes unsuccessful attempt to downsize USAID and place it fully in the State Department.

1970s

2000s

U.S. foreign aid focuses on Middle East, begins to decline. 1970 U.N. calls for economically advanced countries to progressively increase their development assistance to 0.7 percent of gross national product.

Terrorist attacks on Sept. 11, 2001, renew U.S. interest in stabilizing failing states; U.S. becomes a leader in global health funding. Sept. 8, 2000 Worlds nations adopt U.N. Millennium Declaration vowing to reduce extreme poverty by half and address other inequities by 2015.

www.cqresearcher.com

June 17, 2011

539

FOREIGN AID AND NATIONAL SECURITY

Chinas Growing Aid to Africa


Does it undermine U.S. influence?
ith U.S. foreign aid budgets threatened on Capitol Hill, the Obama administration is warning that decreasing American influence abroad could lead to greater influence for China. Lets put aside the moral, humanitarian, do-good side of what we believe in, and lets just talk, you know, straight realpolitik, Secretary of State Hillary Rodham Clinton told the Senate Foreign Relations Committee on March 2. We are in competition with China. 1 China has increased its foreign aid significantly over the past few years, particularly in Africa, where it grew from $300 million in 2001 to $2.1 billion in 2009. 2 Most of the aid is in the form of loans. The rise has caused alarm from some who say China is baldly seeking influence in developing countries by, among other things, constructing high-profile buildings such as hotels, conference centers and soccer stadiums. 3 These highly visible investments, seemingly unavoidable across Africa, are designed to buy influence with governments, writes Washington Post columnist Michael Gerson. 4 The move seems to be working, at least among the public. In a recent poll, developing nations had more positive than negative views of China, especially Nigeria (82 percent) and Kenya (77 percent). 5 China has been active in both countries for several years. 6 Chinas growing aid budget raises concerns about: The general threat of another power seeking influence in the developing world; A lack of transparency associated with Chinese aid;

Extraction of natural resources without much return for the host country, and Aid without regard to a countrys governance record that will weaken attempts to encourage countries to reform. But China expert Deborah Brautigam, a professor of international relations at American University in Washington, sees the situation differently. There are a lot of myths out there about Chinas aid program, she says, pointing out that China focuses more on export credits, which foster exports and business, while the United States emphasizes outright aid. Chinas focus on exports stems from the affordability of its goods in Africa, unlike those from the United States, she explains. As for China locking up all Africas natural resources, thats really unrealistic, she says. She acknowledges Chinese aid programs lack transparency but says thats not unusual for countries relatively new to the foreign-assistance arena. Nonetheless, she notes, China recently released a white paper outlining some of its activities. 7 While it was not the detailed, country-bycountry data that would have been expected from a more experienced donor country, Brautigam says, I thought for them this was a very big step. Expecting this kind of transparency to happen immediately, people are bound to be disappointed. Meanwhile, critics complain that despite Chinas deep pockets, reflected in both its growing aid efforts and ability to put on costly events like the 2008 Olympics, it continues to receive aid from the Global Fund to Fight AIDS, Tuberculosis and Malaria

Continued from p. 538

Much of the modern architecture of foreign aid was developed during the foreshortened presidency of John F. Kennedy (1961-1963). On Nov. 3, 1961 Kennedy consolidated assistance programs into the United States Agency for International Development (USAID). Its creation was mandated by the Foreign Assistance Act of 1961, which for the first time separated military and non-military aid. It was the first U.S. assistance organization to focus on long-range economic and social development and to offer direct support to developing countries. Even then, the threat of global economic disparity weighed heavily in arguments for foreign aid. [W]idespread poverty and chaos lead to a collapse of existing political

and social structures which would inevitably invite the advance of totalitarianism into every weak and unstable area, Kennedy said in 1961. Thus our own security would be endangered and our prosperity imperiled. A program of assistance to the underdeveloped nations must continue because the nations interest and the cause of political freedom require it. 30 Although the stated goal of foreign aid was development, during the Vietnam War era, concerns arose that it was too focused on short-term military goals. In 1971, as the conflict was nearing its end, the Senate defeated foreign assistance funding for 1972 and 1973; it was the first time since the start of the Marshall Plan that either chamber of Congress had rejected aid funding. In 1973, Congress

amended the Foreign Assistance Act to steer funds into specific, functional categories including education, agriculture and family planning. The aid structure developed by the amendments remains largely intact today. Controversies have cropped up since the United States began handing out foreign assistance. One of the most contentious occurred during Ronald Reagans presidency (1981-1989), when antiabortion groups complained that taxpayer money was supporting abortion in foreign countries, particularly in China. That prompted Reagan, through a 1984 executive order, to bar government funding for family planning to any foreign, non-governmental organizations that perform or actively promote abortions or conduct research to improve abortion methods. 31

540

CQ Researcher

2 Benedicte Vibe Christensen, China in $539 million since 2003. Africa: A Macroeconomic Perspective, Chinas aggregate award The Center for Global Development, from the fund is nearly three Dec. 22, 2010. 3 Michael Gerson, Chinas African Intimes larger than that of vestments: Who Benefits? The WashSouth Africa, one of the most ington Post, March 28, 2011, www.wash affected countries from these ingtonpost.com/opinions/chinas-africanthree diseases, wrote Jack investments-who-benefits/2011/03/28/ AF8G7mqB_story.html. Chow, a former assistant di4 Ibid. rector general of the World 5 Andrew Walker, Chinas New EcoMasai tribesmen perform a traditional dance as a Health Organization, now a nomic Power Fans Fear, BBC Poll Finds, Chinese hospital ship departs Mombasa, Kenya, professor at Carnegie MelBBC, March 27, 2011, www.bbc.co.uk/ after providing residents with free medical help. news/business-12867892. lon University. 8 A fund 6 Chinas Hu boosts Kenyan Business, spokesman said China isnt BBC, April 28, 2006, http://news.bbc. usurping money from other needy countries because the fund co.uk/2/hi/africa/4953588.stm, and Chinese Engagement in Nigeria Would Aid so far has been able to approve all applications of quality. 9 the Industrialization of the Country, Pan-African News Wire, May 30, 2009. 7 Sven Grimm, Chinas Aid Policy White Paper: Transparency Now? Devex, The question may soon be moot. The fund recently froze its May 20, 2011, www.devex.com/en/blogs/full-disclosure/china-s-aid-policy-whitegrants to China over a dispute about management of the money paper-transparency-now. and funding of community organizations, a move likely to intensify 8 Jack C. Chow, Chinas Billion-Dollar Aid Appetite: Why is Beijing Winning the debate over whether China should be receiving grants at all. 10 Health Grants at the Expense of African Countries, Foreign Policy, July 2010,

Nellie Bristol
1

Transcript of Senate Foreign Relations Committee hearing on the Proposed Fiscal 2012 Budget for the State Department, March 2, 2011, http://micevhill. com/attachments/immigration_documents/hosted_documents/112th_congress/ TranscriptOfSenateForeignRelationsCommitteeHearingOnTheProposedFiscal 2012ForeignAffairsBudget.pdf.

www.foreignpolicy.com/articles/2010/07/19/chinas_billion_dollar_aid_appetite. Gillian Wong, China Rises and Rises, Yet Still Gets Foreign Aid, The Daily Journal, Oct. 1, 2010, www.smdailyjournal.com/article_preview.php?id=142573& title=China%20rises%20and%20rises,%20yet%20still%20gets%20foreign%20aid. 10 Sharon LaFraniere, AIDS Funds Frozen for China in Grant Dispute, The New York Times, May 20, 2011, www.nytimes.com/2011/05/21/world/asia/21 china.html.
9

Known by opponents as the global gag rule, it targeted groups providing abortion as a method of family planning. The ban applied to groups even using their own funds for abortion-related activities. Reaction to the rule reflected the politics of the abortion debate: Democratic President Bill Clinton rescinded the policy, Republican George W. Bush reinstated it and Democrat Obama again rescinded it. Organizational dysfunction and lack of clear successes also plagued foreign aid. Programs were criticized as being too dispersed and U.S. bureaucracies too hidebound to be effective. The intermingling of aid used to curry friends mostly in the form of military and strategic accounts and aid aimed at long-term develop-

ment made it difficult to determine whether the aid was achieving the goal of poverty alleviation. Congressional requirements for the use of U.S. commodities, goods and services also kept aid administrators from pursuing the most effective interventions. Dissatisfaction with the program both among the public and in Congress led to a decline in USAID funding. Foreign Service permanent staffing declined from a high of about 4,500 in 1970 to a low of 1,000 in 2000. The level is projected to be around 2,000 in 2012. 32 Moreover, several unsuccessful efforts were made to reform the Foreign Assistance Act, including a move to abolish USAID. In 1991, President George H. W. Bush proposed a comprehensive rewriting of the act, but

Congress did not seriously consider it. President Clinton also tried his hand at reform through the 1994 Peace, Prosperity and Democracy Act, but it too failed to gain traction in Congress.

New Approach
he 9/11 terrorist attacks put foreign aid back in the spotlight. While little evidence suggested that poverty in the Arab world had motivated the terrorists, U.S. officials noted that al-Qaida, the group behind the attacks, was based in Afghanistan, one of the worlds poorest countries. Concern about the link between poverty and terrorism led to a focus on stabilizing other fragile and failing states to minimize the number of places

www.cqresearcher.com

AFP/Getty Images/Jean Curran

June 17, 2011

541

FOREIGN AID AND NATIONAL SECURITY

More Aid Sought for Women and Girls


Secretary Clinton: They represent potential that goes unfulfilled.
majority of the planets poor, jobless, illiterate, hungry and uneducated people are females. 1 They are subject to domestic violence, child marriage and poor reproductive health services that result in unwanted pregnancies and pregnancy-related death and disability. Yet, women and girls receive only 2 cents of every development dollar, according to some estimates, despite evidence that investing in females creates broad social gains. 2 For example, an extra year of secondary school increases wages by 15-25 percent; girls who stay in school longer than seven years marry later and have fewer children, and women are more likely than men to reinvest their incomes in their families. 3 Special attention to the needs of women and their connection to broader development progress was underscored at a 1994 United Nations Conference on Population and Development in Cairo, Egypt. 4 Then-first lady Hillary Rodham Clinton was a prominent leader of the U.S. delegation. While goals for achieving better health care for women became mired in antiabortion politics during the Bush years, the issue has become popular again now that Clinton is secretary of State. When a girl becomes a mother before she becomes literate, when a women gives birth alone and is left with a permanent disability, when a mother toils daily to feed her large family but cannot convince her husband to agree to contra-

ception, these struggles represent suffering that can and should be avoided, Clinton said on the 15th anniversary of the Cairo conference. They represent potential that goes unfulfilled. And they also represent an opportunity to send critical help to women worldwide and the children who depend on them. 5 Opportunities and health care for woman and girls are centerpieces of several Obama administration assistance programs, including the secretarys International Fund for Women and Girls and the Global Health Initiative (GHI). The fund, a public-private effort started by Clinton, invests in organizations with innovative ideas to combat violence and create economic and political opportunities for women and girls. A focus on women, girls and gender equality is one of the first principles of the GHI, which proposes a $63-billion, six-year expansion of U.S. programs addressing infectious disease, nutrition, maternal and child health, neglected tropical disease and other issues. In addition, as HIV/AIDS began to affect more women than men in high prevalence regions, the United States global HIV/AIDS program PEPFAR began to shift resources to address mother-tochild transmission of the disease and develop female-controlled prevention strategies. Obama is pushing combining HIV treatment with family planning and other health services. The shift responds to recent research showing that supporting the development of women and girls has a multiplier effect. Ensuring a basic education for girls, for example, helps

where terrorist groups could flourish as well as to attract allies in the war against Islamic extremists. A reshuffling of U.S. foreign aid followed. While Israel and Egypt had been the top aid recipients in fiscal 2000, Afghanistan was in the No. 1 spot in 2010, and Pakistan, Haiti, Iraq and Kenya had become major recipients as well. 33 The attacks also fostered a new approach to foreign policy, which Secretary of State Condoleezza Rice termed transformational diplomacy. The goal, Rice said in 2006, was to work with our many partners around the world to build and sustain democratic, wellgoverned states that will respond to the needs of their people and conduct themselves responsibly in the international system. 34 The effort included a new post: director of foreign assistance, who served

concurrently as USAID administrator. The goal was to better coordinate foreign assistance programs, which spanned more than 20 government agencies, and better align foreign assistance with national security goals. The effort also was aimed at increasing Americas civilian capability to address instability and crisis abroad. Over time, responsibility for foreign operations increasingly had fallen to the military, and it began to ask for help. Secretary of Defense Gates in 2007 called for a dramatic increase in spending on the civilian instruments of national security diplomacy, strategic communications, foreign assistance, civic action and economic reconstruction and development. 35 While the development and humanitarian communities applauded the increased focus on civilian efforts, they also had a fundamental concern. Many

worried that folding USAID more tightly into the State Department linked foreign assistance too closely with shortterm policy goals, leaving little room for sustainable development and poverty alleviation. The USAID administrator post was appointed as a separate position in the Obama administration.

Bushs Initiatives
ut Bush also instituted programs to benefit countries that were not key to U.S. political strategy. Calling the fight against poverty a moral imperative, Bush in a speech to the Inter-American Development Bank in Monterrey, Mexico, in 2002 pledged increases in core development assistance by 50 percent over three years. 36 The funds would be administered through a newly de-

542

CQ Researcher

them control their fertility better, allows them more opportunities in the workplace and gives them the knowledge they need to keep their families healthier, according to Nandini Oomman, a senior program associate at the Center for Global Development in Washington. If development and foreign assistance thats supposed to support development doesnt address gender differentials, then youre not going to make a lot of progress in human development no matter how much economic development you have, she says. Reaching women with aid is difficult in many places, especially rural areas. Women tend to be mostly at home, out of the public sphere, and bear a disproportionate share of the family burden. Girls, for example, are more likely than boys to carry out household chores rather than go to school. When you dont think specifically about how you can bring services to women, then they cant avail themselves of those services, said Oomman. In other words, she says, aid for women can only be effective when it focuses on their circumstances. If you start with a man as a norm, you leave off women, agrees Serra Sippel, president of the Center for Health and Gender Equity in Washington. But raising the issue of gender is difficult in countries where discrimination is firmly entrenched. USAID recently stripped several gender-equity provisions from large projects in Afghanistan. 6 When asked at a congressional hearing about the change, Clin-

ton acknowledged that promoting opportunities for women in the country is really hard. And there are deep cultural challenges to doing this work. Nonetheless, Clinton reaffirmed Americas commitment to gender equality. We believe strongly that supporting women and girls is essential to building democracy and security, she told the panel. 7 Nellie Bristol
Ritu Sharma, Written Testimony: House Subcommittee on State Foreign Operations, and Related Programs, April 14, 2011, http://appropriations. house.gov/_files/041411WomenThriveWorldwideTestimony.pdf. 2 Nancy Gibbs, To Fight Poverty, Invest in Girls, Time, Feb. 14, 2011, www. time.com/time/magazine/article/0,9171,2046045,00.html. 3 Ibid. 4 Lori S. Ashford, What Was Cairo? The Promise and Reality of ICPD, Population Reference Bureau, September 2004, www.prb.org/Articles/2004/WhatWas CairoThePromiseandRealityofICPD.aspx. 5 Hillary Rodham Clinton, Remarks on the 15th Anniversary of the International Conference on Population and Development, Jan. 8, 2010, www.state.gov/ secretary/rm/2010/01/135001.htm. 6 Rajiv Chandrasekaran, In Afghanistan, US Shifts Strategy on Womens Rights as it Eyes Wider Priorities, The Washington Post, March 14, 2011, www. washingtonpost.com/wp-dyn/content/article/2011/03/05/AR2011030503668. html?nav=emailpage. 7 Rajiv Chandrasekaran, Clinton: US Will Keep Helping Afghan Women, The Washington Post, March 11, 2011, www.washingtonpost.com/wp-dyn/content/ article/2011/03/10/AR2011031005181.html.
1

veloped Millennium Challenge Account, separate from USAID. The approach was approved by Congress in 2004 and is administered by a State Department arm, the Millennium Challenge Corporation (MCC). Before doling out funds, the MCC requires countries to prove they are well-governed and have the administrative capacity to effectively use them. In addition, countries have to show progress in fighting corruption, educating girls, building democracy and other actions. Instead of deciding in Washington which projects would be funded, MCC sponsors programs suggested by the countries themselves. But sluggish appropriations from Congress and difficulties in getting projects off the ground have slowed MCCs progress. Bush originally envisioned the agency receiving $5 billion

per year, but MCC has approved only $7.4 billion in development programs in the seven years since its inception. 37 Some aid experts worried that the MCCs strict approach would result in further suffering by poor people in countries with ineffective or corrupt leaders. Meanwhile, some U.S. beneficiaries, including Afghanistan and Pakistan, were not meeting many of the MCC criteria. The biggest aid effort of the George W. Bush administration was the Presidents Emergency Plan for AIDS Relief (PEPFAR). After an initially slow response to the burgeoning global HIV/AIDS epidemic, Bush proposed the plan in his 2003 State of the Union address, promising $15 billion over five years. Congress enthusiastically approved the U.S. Leadership Against HIV/AIDS, Tuberculosis and Malaria Act with the goal of providing HIV/AIDS

care, treatment and prevention to specific hard-hit countries. PEPFAR is the largest single disease program ever supported by one nation. It has provided antiretroviral drugs to millions of HIV sufferers in poor countries, helped develop key prevention programs and prevent the transmission of the disease from mothers to newborns. 38 The U.S Office of the Global AIDS coordinator, housed at the State Department, oversees the program. The act was reauthorized in 2008, allowing funding of up to $39 billion for the program over five years. Bush also developed the freestanding Presidents Malaria Initiative. In addition, Bush authorized major U.S. contributions to multilateral efforts to improve global health. In 2001, the U.S. appropriated $100 million for the fledging Global Fund to Fight AIDS,

www.cqresearcher.com

June 17, 2011

543

FOREIGN AID AND NATIONAL SECURITY


tuberculosis and for global health and Malaria, which helps development was the low- and middle-inBill & Melinda Gates come countries. As of Foundation. Since 1994, late last year, donors the foundation has dohave pledged $30 bilnated $3.3 billion to lion to the fund, global development and which has approved another $14.5 billion to nearly $20 billion in global health activities. 44 grants to more than InterAction, an umbrella 140 countries. 39 The group for non-government United States has organizations, estimates pledged $9.7 billion that aid provided by founand had contributed dations, corporations, 28 percent of the NGOs, universities and funds total contribureligious organizations tions as of October totaled $49 billion world2010. But the fund is wide in 2007, almost half An Israeli tank guards the border with the Gaza Strip. U.S. military aid facing criticism and the amount of aid proto Israel dropped to $2.2 billion last year from $4 billion in 2000. potential budget cuts vided by governments According to a 2010 poll, most Americans think 25 percent of the in Congress as it works that year. In the United federal budget goes to foreign aid. In reality, foreign aid constitutes only about 1.1 percent of the budget. through a fraud inStates, InterAction says, vestigation of some of private aid to developing Also during this heady time for in- countries exceeded U.S. government its grants. 40 Through PEPFAR and other efforts, ternational assistance, the developed assistance that year, totaling $33.4 billion Bush established the United States as country members of the Organisation compared with $21.8 billion. 45 a leader in foreign assistance through for Economic Co-operation and Develglobal health programs, a tradition that opment (OECD) began increasing their President Obama continued but may funding for foreign aid. While amounts now be threatened by concerns over for development, known as Official Development Assistance (ODA), rose the budget deficit. lobal health and development As foreign aid increased in the Unit- steadily from 1960 to 1992, they falwere key features of the presied States in the last decade, other coun- tered through the mid-1990s. Then dential campaigns of both Obama and tries were embracing it as well. In 2001, they started to climb again and rose Hillary Clinton. Both followed the Bush the United Nations adopted the Millen- from $67.9 billion in 1997 to $127 bil- administration in advocating developnium Development Goals (MDGs), eight lion by 2010. 42 The United States is ment as one of the three pillars of Unitmeasures for reducing poverty in the by far the largest donor in dollar terms, ed States foreign policy along with dedeveloping world by 2015. The MDGs contributing $28 billion in 2009, fol- fense and diplomacy. Obama, whose offered concrete targets in areas including lowed by France, Germany, the United father was Kenyan, was considered to poverty and hunger reduction, univer- Kingdom and Japan. Nonetheless, the have a personal interest in the welfare sal education, gender equality and im- United States contributes only 0.2 per- of developing countries, especially those proved health. The purpose was to gal- cent of its gross national income to de- in Africa. In August 2006, Obama and vanize nations and development experts velopment assistance while Denmark, his wife Michelle were both publicly toward meeting specific goals with a set Luxembourg, the Netherlands, Norway tested for HIV/AIDS in an attempt to timeline. While solid progress is being and Sweden each exceeded the United reduce stigmas associated with the promade on some of the goals, others are Nations target of 0.7 percent in 2009. 43 cedure. Obama called for increased proving more difficult. Many regions (See graphs, p. 536.) Many are concerned funding for PEPFAR, creation of stronger have improved access to primary school that the global economic downturn will health systems globally to help comfor girls, for example, while there is less diminish foreign assistance. bat AIDS and other diseases and inWhile governmental foreign aid creased funding for multilateral orgaprogress in the areas of womens paid employment and reductions in deaths boomed in the 2000s, private aid nizations involved with global health. rose as well. The leader in funding related to childbirth. 41 Continued on p. 546

Obamas Initiatives

544

CQ Researcher

AFP/Getty Images/Jack Guez

At Issue:
Does foreign aid help governments and their societies?
yes

SAMUEL A. WORTHINGTON
PRESIDENT AND CEO, INTERACTION
WRITTEN FOR CQ RESEARCHER, JUNE 13, 2011

ANTHONY B. KIM
POLICY ANALYST, CENTER FOR INTERNATIONAL TRADE AND ECONOMICS, THE HERITAGE FOUNDATION
WRITTEN FOR CQ RESEARCHER, JUNE 13, 2011

obust foreign assistance helps governments in developing nations build more stable, prosperous societies and can be a catalyst in pulling a country out of poverty. Such an investment by the United States, in turn, makes our nation more secure and may create new economic partners, as was the case with former aid recipient South Korea. Cash-strapped governments in developing nations often leverage foreign assistance to supplement their own health, education, infrastructure and other programs that enable a society to grow and prosper. This assistance which for the United States amounts to less than 1 percent of the federal budget saves lives. Programs like USAIDs Feed the Future initiative, for example, help boost agricultural capacity and enable a family to get nutritious food. The Presidents Emergency Plan for AIDS Relief (PEPFAR) has provided help to tens of millions of people suffering from HIV and AIDS, via the delivery of retroviral drugs and counseling. In many countries, disaster risk-reduction programs funded by USAID build on existing preparedness efforts. Experts estimate that for every dollar invested in such programs, $7 is saved in disaster-response costs later on. Often implemented in partnership with nongovernmental organizations (NGOs), this assistance strengthens local and national governments and better prepares them to deal with future disasters. The best U.S. foreign-assistance programs involve a range of stakeholders, including civil society groups and the private sector, who should work together to achieve measurable goals. Some Millennium Challenge Corporation (MCC) programs reward good governance and encourage civil society involvement as well as that of the private sector. The debate over U.S. foreign aid and how it helps developing governments and their people takes place amid efforts to make this assistance more effective and better aligned with the priorities of the societies we are trying to help. Aid given to governments without active citizen engagement serves only to create dependency, particularly if a government views aid solely as a way to develop the state instead of improving the lives of its people. That is why assistance should be aligned with a countrys broader development strategies that have been developed in consultation with citizens and their communities. There will always be those who argue that foreign assistance is a luxury, particularly as we are trying to balance our own budget. But for economic, moral and security reasons, the opposite is true. We cant afford not to do it.
no

yes no
June 17, 2011

resident Obama recently unveiled a new foreign aid package for the Middle East and North Africa. The announcement has conveyed a feel-good public diplomacy message that the United States is willing to help the region. But can foreign aid, in general, effectively deliver much-needed economic vitality and development? Real-world cases strongly indicate that development assistance has a dismal record in catalyzing economic growth. Indeed, recipients of large amounts of aid tend to become dependent on it and more likely to founder than to prosper. All too often over the decades, U.S. foreign aid has wound up enriching corrupt and anti-democratic governments that have severely undermined economic development for ordinary people in their countries. Perhaps its not surprising, then, that U.S. foreign aid has come under more intensive scrutiny in recent months. Instead of following an approach that has repeatedly failed, the United States, as well as aid-recipient nations, would benefit from a re-evaluation of their foreign assistance agendas, which should be focused on real reforms and advancing economic freedom. Numerous studies indicate that policy changes that create a more conducive environment for economic transactions are far more important to development than the amount of aid a country receives. Such changes, in turn, bolster a free and fair legal system while strengthening government accountability and responsiveness. In other words, entrepreneurship encouraged by greater economic freedom leads to innovation, economic expansion and overall human development. A fresh case in point is Rwanda, now undergoing an entrepreneurial revolution. According to The Heritage Foundations 2011 Index of Economic Freedom, Rwanda had notable improvements in half of the 10 indicators of economic freedom, achieving the largest score gain among 179 economies examined. Its no coincidence that Rwandas gross domestic product per capita increased to more than $1,000 in 2009, from less than $350 in 1994. Along with solid economic growth backed by sound economic policies, social indicators are rising fast, too. For example, primary-school enrollment has risen 50 percent. As the index noted, in pursuing sustainable prosperity, both the direction of policy and commitment to economic freedom are important. Indeed, over the last decade, the countries with greater improvements in economic freedom have achieved much higher reductions in poverty. To successfully revamp foreign aid programs to provide more effective development assistance, we need to employ the principles of economic freedom.

www.cqresearcher.com

545

FOREIGN AID AND NATIONAL SECURITY


Continued from p. 544

Obama came into office determined to double yearly foreign aid funding to $50 billion by 2012. But the global economic crisis, followed by a battle in Congress over health care reform, and foreign assistance fell down the priority list. Development experts and supporters in Congress saw their best opportunity for reform in decades fade away as the United States grappled with enormous debt and a sluggish economy. While many thought a foreign assistance reform bill could pass the Democratic-controlled House and Senate and be signed by Obama, the November 2010 elections brought in a large class of conservatives to the House and turned control of the chamber to the Republicans. The shift not only put reform efforts suddenly out of reach, but also resulted in foreign assistance coming under attack in a way it hadnt been for many years. Nonetheless, Obama thrilled global development advocates when he brought the issue front and center in a speech at the United Nations in September 2010. He announced a Presidential Policy Directive that officially made global development a part of national security and realigned its goals. My national security strategy recognizes development as not only a moral imperative, but a strategic and economic imperative, Obama said. 46 He proposed revitalizing USAID, and after years of having its mission outsourced to other parts of the government, ensured the agency was the lead development focus for the United States. Obama followed the directive in December 2010 with release of the first ever Quadrennial Diplomacy and Development Review (QDDR), a State Department document aimed at giving civilian leadership a greater role in advancing national interests and working with the military. The QDDR is a blueprint for how we can make the State Department and USAID more nimble, more effective

and more accountable, Secretary of State Clinton said in announcing the plan. 47 A key goal of the effort is to bolster the use of soft power, encompassing a non-military approach to improve global stability. Leading through civilian power means directing and coordinating the resources of all Americas civilian agencies to prevent and resolve conflicts; help countries lift themselves out of poverty into prosperous, stable and democratic states; and build global coalitions to address global problems, State Department documents explain. 48

CURRENT SITUATION
Modest Reforms
hile wholesale reform of Americas foreign assistance apparatus is seen as unlikely in the foreseeable future, development nonetheless remains a key goal of the Obama administration, which is pushing modest changes on several fronts. First and foremost, USAID is transforming itself to become more businesslike and efficient, largely to improve its functional status, but also in an effort to stave off conservative efforts to trim it. Administrator Shah has embarked on a number of efforts to transform the agency it into what he called a modern development enterprise. 49 The effort includes the USAID Forward initiative, which Shah hopes will allow countries to eventually graduate from needing U.S. aid. The reforms include changing the way USAID works with contractors, increasing and improving the technical capability of local staff and recreating USAID policy and budget bureaus. In

addition, technology and innovation will be emphasized, and monitoring and evaluation of aids effectiveness will be made more rigorous. The Obama administration is also championing two global development programs in particular, one promoting sustainable agriculture in the developing world and the other addressing health issues. Obama is seeking $3.5 billion from Congress to be spent over three years for Feed the Future, a new program aimed at increasing agricultural productivity, expanding markets and trade and bolstering economic resilience in poor, rural areas. 50 He also proposed $63 billion over six years for the Global Health Initiative (GHI), which broadens and builds on President George W. Bushs PEPFAR program. While continuing its primary focus on combating AIDS, tuberculosis and malaria, the initiative also targets neglected tropical diseases; maternal, newborn and child health; and nutrition and health systems improvement. 51 The program is led by USAID, the Centers for Disease Control and Prevention and the U.S. Global AIDS coordinator and seeks to ensure fairness and effectiveness by focusing on: Gender equality; Allowing countries to choose which projects the United States will invest in; Increased integration and coordination in providing aid; and Improved monitoring and evaluation. Even with efforts to improve efficiency and accountability, foreign aid faces a tough battle for funding in the new Congress. Several key House Republicans began indicating as early as last year that foreign assistance would be a prime target in future deficitreduction talks. I have identified and will propose a number of cuts to the State Department and foreign aid budgets, House Foreign Affairs Committee Chairwoman Ileana Ros-Lehtinen, R-Fla., said last December. There is

546

CQ Researcher

much fat in these budgets, which makes some cuts obvious. Others will be more difficult, but necessary, to improve the efficiency of U.S. efforts and accomplish more with less. 52 In January, the conservative Republican Study Committee, a group of more than 175 House Republicans, proposed a spending reduction act that gutted USAID funding. 53 In a continuing resolution proposed by Republicans in February, foreign aid received the thirdlargest percentage of cuts out of the 12 appropriations subcommittees, according to State and Foreign Operations Subcommittee Chairwoman Kay Granger, R-Texas. 54 Cuts proposed by the House mainly target international development, not assistance to conflict zones. Ros-Lehtinen is also using her leadership post to blast another traditional target of conservatives: the United Nations. Some in Congress are dismayed with the international organization over allegations of sexual abuse committed by U.N. peacekeepers in Africa and reports of abuse of the oil for food program in Iraq in 2004. The U.N.s Human Rights Council regularly has been accused of anti-Semitism and being comprised of member countries with spotty human rights records. 55 However, initial efforts to cut funding to the organization failed in February to gain the two-thirds House majority needed to pass under an expedited consideration process. 56 Senators, particularly Democrats, are more supportive of foreign assistance funding. The Senate Appropriations Committee, chaired by Hawaii Democrat Daniel K. Inouye, preserved funding for foreign aid, echoing the Obama administration position that aid is vital in supporting national security. Still, Senate Democrats proposed a $6.5 billion reduction to the State Department and foreign operations budget compared to the amount requested by the Obama administration. This compares to an $11.7 billion reduction outlined by the House.

OUTLOOK
Budget Battle
he inevitable all-out war on the federal budget means lawmakers on Capitol Hill and administration officials can expect an especially long and hot summer this year in Washington. House Republicans have shown willingness to take on even the most popular programs, including Medicare, in the name of government and deficit reduction. While the international-affairs funding cuts outlined by the House Appropriations Committee are not as drastic as those suggested in the Republicans budget resolution, they are worrisome to economic development advocates. The core programs (non-war-related funding) are certainly being reduced with serious long-term funding implications, said the U.S. Global Leadership Coalition, a broadbased group of business leaders and NGOs that advocates increased foreign aid. 57 The group estimates the allocations would cut some programs by 12-16 percent. The House Appropriations Committee also is considering cuts to international agriculture programs. 58 The Senate appears to be taking a different course, having rejected the Housepassed budget proposal as well as the presidents fiscal 2012 budget request. It also overwhelmingly rejected, 90-7, the budget cuts proposed by Sen. Paul. 59 Indeed, foreign assistance as a means of enhancing national security has strong bipartisan support in the Senate, notably from South Carolinas Lindsey Graham, the ranking Republican on the State, Foreign Operations and Related Programs Subcommittee. If you dont want to use military force any more than you have to, count me in, said Graham. State Department, USAID, all of these programs, in their own way, help win this struggle against

radical Islam. The unsung heroes of this war are the State Department officials, the [Department of Justice] officials and the agricultural people who are going out there. Graham added: To those members [of Congress] who do not see the value of the civilian partnership in the war on terror, I think they are making a very dangerous decision. 60 Aid supporters are lining up to make their case. Seventy top military leaders signed a recent letter to Congress stressing the importance of foreign assistance. 61 Global health advocates are particularly concerned about future funding for flagship programs like PEPFAR and other global health initiatives and are hitting the Hill with their support. While acknowledging that the current budget environment is very, very tough, Nora OConnell, senior director of policy development and advocacy for the international welfareadvocacy group Save the Children, says she sees important support for foreign assistance. If you talk to congressional leaders and particularly those that are charged with oversight of foreign affairs, the Foreign Relations Committee and the Appropriations Committee, theres actually very strong bipartisan support for foreign affairs, and it comes from this fundamental belief that this is critical for our national security, she says. What were hoping for is that members of Congress can sort of stay strong to what the facts show . . . that this is a tiny percent of our budget, that the U.S. gets a lot out of this money and that some of these programs are serving some of the poorest and most vulnerable people in the world. But the pressure from Republicans is fierce, especially for other Republicans who stray from the party line. Newly elected Florida Republican Sen. Marco Rubio got a taste of that intensity when he made some positive comments about foreign aid: Foreign

www.cqresearcher.com

June 17, 2011

547

FOREIGN AID AND NATIONAL SECURITY


aid serves our national interests, and by the way, foreign aid is not the reason why were running trillions of dollars of debt. 62 He was soon attacked for the comment on a political website. This man ran under the Tea Party bandwagon just to get elected. He puts other countries [sic] interest before our own. Why would a supposed Tea Party candidate do this? 63
Majority Staff Report, Evaluating U.S. Foreign Assistance to Afghanistan, Prepared for the Committee on Foreign Relations, United States Senate, June 8, 2011. 8 American Public Opinion on Foreign Aid, WorldPublicOpinion.org, Nov. 30, 2010, www. worldpublicopinion.org/pipa/pdf/nov10/Foreign Aid_Nov10_quaire.pdf. 9 Curt Tarnoff and Marian Leonardo Lawson, Foreign Aid: An Introduction to US Programs and Policy, Congressional Research Service, Feb. 10, 2011, www.fas.org/sgp/crs/row/R40 213.pdf. 10 Dr. Rajiv Shah, The Modern Development Enterprise, Center for Global Development, Jan. 19, 2011, www.usaid.gov/press/speeches/ 2011/sp110119.html. 11 Robert Gates, speech to the U.S. Global Leadership Campaign, July 15, 2008, Washington, D.C., www.defense.gov/speeches/speech. aspx?speechid=1262. 12 James Roberts, Not All Foreign Aid is Equal, Backgrounder, The Heritage Foundation, March 1, 2011. 13 The Path to Prosperity: Restoring Americas Promise, Fiscal Year 2012 Budget Resolution, House Committee on Budget, http://budget. house.gov/UploadedFiles/PathToProsperityFY2012.pdf. 14 Kay Granger, PBS NewsHour, March 10, 2011, www.pbs.org/newshour/bb/world/jan-june 11/foreignaid_03-10.html. 15 Matt Schneider, Sen. Paul Rand: We Should End all Foreign Aid to Countries, Including Israel, Medialite, Jan. 30, 2011, www.mediaite. com/tv/rand-paul-we-should-end-all-foreignaid-to-countries-including-israel/. 16 House Appropriations Subcommittee on State, Foreign Operations and Related Programs Holds Hearing on Proposed Fiscal Year 2012 Appropriations for Global Health and HIV/AIDS Programs, March 31, 2001. 17 Steven Radelet, Bush and Foreign Aid, Foreign Affairs, September/October 2003, www.
7

Notes
Hillary Clinton on Foreign Aid, Secretary of State insists on a link between foreign assistance and national security, ABC News Extra, Feb. 2, 2011, http://abcnews.go.com/ThisWeek/ video/web-extra-hillary-clinton-foreign-aid-129 59689. 2 Gerald F. Seib, Deficit Balloons into National Security Threat, The Wall Street Journal, Feb. 2, 2010, http://online.wsj.com/article/SB100014240 52748703422904575039173633482894.html. 3 Mullen: Debt is Top National Security Threat, CNN, Aug. 27, 2010, http://articles.cnn. com/2010-08-27/us/debt.security.mullen_1_ pentagon-budget-national-debt-michael-mullen?_ s=PM:US. 4 Pete Kasperowicz, GOP Bill Would Study Security Threat Posed by Chinese-Held Debt, The Hill, May 10, 2011, http://thehill.com/blogs/ floor-action/house/160163-house-defense-billtreats-us-debt-held-by-china-as-possible-securityrisk. 5 Kim Gamel, US wasted billions in rebuilding Iraq: Hundreds of Infrastructure projects are incomplete or abandoned, The Associated Press, Aug. 8, 2010, www.msnbc.msn. com/id/38903955/ns/world_news-mideastn_ africa/. 6 Ibid.
1

About the Author


Nellie Bristol is a veteran Capitol Hill reporter who has covered health policy in Washington for more than 20 years. She now writes for The Lancet, Health Affairs and Global Health magazine. She graduated in American studies from The George Washington University, where she recently earned a masters degree in public health/global health.

cgdev.org/doc/commentary/Bush_and_Foreign_ Aid.pdf. 18 Theresa Braine, Reaching Mexicos Poorest, Bulletin of the World Health Organization, 2002, www.scielosp.org/scielo.php?script=sci_arttext &pid=S0042-96862006000800004&lng=pt&nrm =iso&tlng=en. 19 Hyun H. Son, Conditional Cash Transfer Programs: An Effective Tool for Poverty Alleviation? Asian Development Bank, July 2008, www.adb.org/Documents/EDRC/Policy_Briefs/ PB051.pdf. 20 Jeremy M. Sharp, Egypt in Transition, Congressional Research Service, March 29, 2011, www.fas.org/sgp/crs/mideast/RL33003.pdf. 21 Background Note: Egypt, Department of State, Nov. 10, 2010, www.state.gov/r/pa/ei/bgn/ 5309.htm. 22 Ashish Kumar, Sen., Lawmakers Criticize Obamas Response to Egypt Crisis, The Washington Times, Feb. 9, 2011, www.washington times.com/news/2011/feb/9/republican-anddemocratic-lawmakers-criticized-the/. 23 David Francis, Foreign Aid Dilemma: Dictators on Our Dole, The Fiscal Times, March 16, 2011, www.thefiscaltimes.com/Articles/2011/ 03/16/Foreign-Aid-Dilemma-Dictators-on-our-Dole. aspx?p=1. 24 Aid to Pakistan by the Numbers, Center for Global Development, www.cgdev.org/sec tion/initiatives/_active/pakistan/numbers. 25 Obamas Challenge in the Muslim World: Arab Spring Fails to Improve US Image Pew Research Center, May 17, 2011, http://pew global.org/files/2011/05/Pew-Global-AttitudesArab-Spring-FINAL-May-17-2011.pdf. 26 James Roberts, Not all Foreign Aid is Equal, Backgrounder, The Heritage Foundation, March 1, 2011, www.heritage.org/Research/ Reports/2011/03/Not-All-Foreign-Aid-Is-Equal. 27 ABC News Extra, op. cit. 28 US Military: Aid to Egypt has Incalculable Value, Reuters, Feb. 16, 2011, www.reuters. com/article/2011/02/16/us-usa-budget-egyptidUSTRE71F4CO20110216. 29 Diane B. Kunz, The Marshall Plan Reconsidered, A Complex of Motives, Foreign Affairs, May/June 1997. 30 About USAID, USAID History, USAID, www. usaid.gov/about_usaid/usaidhist.html. 31 Richard P. Cincotta and Barbara B. Crane, The Mexico City Policy and US Family Planning Assistance, Science, Oct. 19, 2002. 32 USAID Foreign Service Permanent Workforce & USAID Managed Program Dollars, USAID, www.usaid.gov/press/speeches/2011/ ty110330b.pdf.

548

CQ Researcher

Tarnoff and Lawson, op. cit. Condoleezza Rice, remarks at Georgetown School of Foreign Service, Jan. 18, 2006, www. unc.edu/depts/diplomat/item/2006/0103/rice/ rice_georgetown.html. 35 Thom Shanker, Defense Secretary Urges More Spending for US Diplomacy, The New York Times, Nov. 27, 2007, www.nytimes.com/ 2007/11/27/washington/27gates.html?_r=1. 36 Radelet, op. cit. 37 About MCC, Millennium Challenge Corporation, www.mcc.gov/pages/about. 38 The Presidents Emergency Plan for AIDS Relief, Latest Results, www.pepfar.gov/results/ index.htm. 39 The US & The Global Fund to Fight AIDS, Tuberculosis and Malaria, Kaiser Family Foundation, November 2010, www.kff.org/global health/upload/8003-02.pdf. 40 John Heilprin, AP Enterprise: Fraud Plagues Global Health Fund, The Associated Press, Jan. 23, 2011, http://news.yahoo.com/s/ap/ 20110123/ap_on_re_eu/eu_aids_fund_corruption. 41 Ibid. 42 Net ODA Disbursements, Total DAC Countries, Organisation for Economic Co-operation and Development, http://webnet.oecd.org/dcd graphs/ODAhistory/. 43 Ibid. 44 Foundation Fact Sheet, Bill & Melinda Gates Foundation, www.gatesfoundation.org/ about/Pages/foundation-fact-sheet.aspx. 45 Private Aid Flows, InterAction, www.inter action.org/private-aid-flows. 46 Barack Obama, Statement by the President at the Millennium Development Goal Summit in New York, New York, Sept. 22, 2010, www. whitehouse.gov/the-press-office/2010/09/22/ remarks-president-millennium-developmentgoals-summit-new-york-new-york. 47 Leading Through Civilian Power: Quadrennial Diplomacy and Development Review, DipNote, Dec. 15, 2010, http://blogs.state.gov/ index.php/site/entry/civilian_power_qddr. 48 Ibid. 49 Shah, op. cit. 50 Angela Rucker, $3.5B US Hunger Plan to Feed 40 Million People, Frontlines, USAID June 2010, www.usaid.gov/press/frontlines/ fl_jun10/p01_hunger100601.html. 51 The US Global Health Initiative, www.ghi. gov/. 52 Nicole Gaouette, Ros-Lehtinen To Seek Cuts in Diplomatic, Foreign Aid Funding, Bloomberg, Dec. 9, 2010, www.bloomberg.com/ news/2010-12-09/ros-lehtinen-to-seek-cuts-indiplomatic-foreign-aid-funding.html.
34

33

FOR MORE INFORMATION


Bread for the World, 425 Third St., S.W., Suite 1200, Washington, DC 20024; (800) 822-7323; www.bread.org. Christian citizens movement dedicated to ending hunger domestically and abroad. Cato Institute, 1000 Massachusetts Ave., N.W., Washington, DC 20001; (202) 842-0200; www.cato.org. Libertarian think tank opposing strategic foreign aid and promoting economic freedom as a solution to problems overseas. Center for Global Development, 1800 Massachusetts Ave., N.W., Third Floor, Washington, DC 20036; (202) 416-4000; www.cgdev.org. Independent and nonpartisan research institute working to reduce global poverty. Heritage Foundation, 214 Massachusetts Ave., N.E., Washington, DC 20002; (202) 546-4400; www.heritage.org. Conservative think tank advocating for policies that oppose traditional development assistance. InterAction, 1400 16th St., N.W., Suite 210, Washington, DC 20036; (202) 667-8227; www.interaction.org. Alliance of U.S.-based nongovernmental organizations focusing on disaster relief and sustainable development. Millennium Challenge Corporation, 875 15th St., N.W., Washington, DC 20005; (202) 521-3850; www.mcc.gov. Bilateral U.S. foreign aid agency distributing funds through a process of competitive selection. Modernizing Foreign Assistance Network, 425 Third St., S.W., Suite 1200, Washington, DC 20024; (202) 688-1087; www.modernizeaid.net. Coalition of foreign policy practitioners advocating for a larger U.S. leadership role in reducing poverty and suffering around the world. U.S. Agency for International Development, 1300 Pennsylvania Ave., N.W., Washington, DC 20523; (202) 712-0000; www.usaid.gov. U.S. federal agency primarily responsible for administering civilian foreign aid. U.S. Global Leadership Coalition, 1129 20th St., N.W., Suite 600, Washington, DC 20036; (202) 833-5555; www.usglc.org. Coalition of American businesses and NGOs promoting greater U.S. diplomatic and development efforts.
53 Emily Cadei, Proposed Cuts Thrust Foreign Aid Into Center of Spending Debate, CQ Today, Jan. 21, 2011. 54 Emily Cadei, In Fiscal 2011 Bill, Senate Democrats Take a Broader view of Security Spending, CQ Today, March 4, 2011. 55 Emily Cadei, Key Post Gives Ros-Lehtinen a Platform to Hammer U.N. CQ Today, Jan. 7, 2011. 56 Frances Symes, Effort to Cut U.N. Funding Over Tax Payments Falls Short on House Floor, CQ Today, Feb. 9, 2011. 57 Stuart B. Baimel, International Affairs Budget Update, 5-12-11, US Global Leadership Coalition, May 24, 2011, www.usglc.org/2011/ 05/24/international-affairs-budget-update-5-122011-2/. 58 Stuart B. Baimel, International Affairs Budget Update, 5-27-11, US Global Leadership Coalition, May 27, 2010, www.usglc.org/2011/ 05/27/international-affairs-budget-update-5-27-11/. 59 Senate Rejects Rand Paul Budget Plan, Kentucky Politics, May 25, 2011, http://cincin nati.com/blogs/nkypolitics/2011/05/25/senaterejects-rand-paul-budget-plan/. 60 Josh Rogin, Lindsey Graham to the Rescue for State and USAID, The Cable, Feb. 1, 2011, http://thecable.foreignpolicy.com/posts/ 2011/02/01/lindsey_graham_to_the_rescue_for _state_and_usaid. 61 Military Leaders Letter to Congress, US Global Leadership Coalition, March 30, 2011, www.usglc.org/wp-content/uploads/2011/03/ NSAC-letter-2011.pdf. 62 Sen. Marco Rubio: Foreign Aid Serves Our National Interest, YouTube, Your World with Neil Cavuto, March 30, 2011, www.you tube.com/watch?v=KAcfaXEDem8. 63 Tea Party Has Been Swindled by Marco Rubio, The Truth Stings, April 8, 2011, http:// truthstings.com/tea-party-has-been-swindledby-marco-rubio/.

www.cqresearcher.com

June 17, 2011

549

Bibliography
Selected Sources
Books
Brautigam, Deborah, The Dragons Gift: The Real Story of China in Africa, Oxford, 2009. A noted China expert at American University in Washington explains Chinas African aid strategy. Easterly, William, The White Mans Burden: Why the Wests Efforts to Aid the Rest Have Done So Much Ill and So Little Good, Penguin Books, 2006. A New York University economics professor argues that Western attempts to alleviate poverty have been futile. Moyo, Dambisa, Dead Aid: Why Aid is Not working and How There is a Better Way for Africa, Farrar, Straus and Giroux, 2009. An African economist argues that African countries are worse off as a result of foreign aid. Sachs, Jeffrey, The End of Poverty: Economic Possibilities for Our Time, Penguin, 2005. A Columbia University economist contends that extreme global poverty can be eliminated through development aid by 2025. Karlan, Dean, More than Good Intentions: How a New Economics is Helping to Solve Global Poverty, Penguin, 2011. A Yale University economics professor discusses behavioral economics and worldwide field research to explore what works in development aid. Calderisi, Robert, The Trouble with Africa: Why Foreign Aid Isnt Working, Palgrave, Macmillan, 2006. A former World Bank international spokesman on Africa discusses the shortcomings of foreign aid. McKenzie, A. D., Parliamentarian ask G8 to focus on Women, Guardian Development Network, May 19, 2011. Countries at the G8 conference in France call for an increased focus on the role of women and girls in development. Norris, John, Five Myths about Foreign Aid, The Washington Post, April 28, 2011. The executive director of the sustainable security program at the Center for American Progress discusses foreign aid budget cuts proposed by Republicans and misconceptions about economic development. Pennington, Matthew, Clinton Says US in Direct Competition With China,The Associated Press, March 2, 2011. Pennington recounts Secretary of State Hillary Rodham Clintons comments to the Senate Foreign Relations Committee.

Reports and Studies


A Woman-Centered Approach to the US Global Health Initiative, Center for Health and Gender Equity, February 2010. Explains and supports woman-centered approach in the US global health policy. Epstein, Susan, Foreign Aid Reform, National Strategy, and the Quadrennial Review, Congressional Research Service, Feb. 15, 2011. An analyst for the nonpartisan agency details congressional and administration efforts to reform foreign-assistance programs. Levine, Ruth, Cynthia B. Lloyd, Margaret Greene and Caren Grown, Girls Count: A Global Investment and Action Agenda, Center for Global Development, December 2009. The authors detail the disadvantages faced by girls in developing countries and make a case for gender equality. Sharp, Jeremy M., Egypt in Transition, Congressional Research Service, March 29, 2011. Sharp gives an overview of the transition occurring in Egypt and outlines U.S. foreign aid to the country. Tarnoff, Curt, and Marian Leonardo Lawson, Foreign Aid: an Introductory Overview of US Programs and Policy, Congressional Research Service, Feb. 10, 2011. CRS analysts present an overview of the types and goals of U.S. foreign assistance. Williams-Bridgers, Jacquelyn, Foreign Operations, Key Issues or Congressional Oversight, Government Accountability Office, March 3, 2011. The author reviews a GAO study of weaknesses in U.S. foreign assistance programs.

Articles
Ali, Ambreen, Tea Party: Unimpressed and Angry as Ever, CQ Weekly, March 7, 2011. Ali examines the Tea Partys insistence on smaller government. Cadei, Emily, Proposed Cuts Thrust Foreign Aid Agency into Center of Spending Debate, CQ Today Online News, Jan. 21, 2011. Cadei outlines House Republican criticism of the U.S. Agency for International Development. Kunz, Diane B., The Marshall Plan Reconsidered: A Complex of Motives, Foreign Affairs, May/June 1997. Kunz argues that the posts-World War II aid effort paid huge dividends for the United States and that similar efforts can be justified today.

550

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Authoritarian Governments
Carafano, James Jay, Whats the Big Idea: U.S. Aid Needs Freedom First Conditions, The Washington Times, May 19, 2011, p. A4, www.washingtontimes.com/news/2011/may/ 18/us-aid-needs-freedom-first-conditions/. The United States should stop providing aid to countries that do little to help themselves, according to a director at the right-leaning Heritage Foundation. Harsanyi, David, Bribery Done Right, Denver Post, Feb. 4, 2011, p. B9, www.denverpost.com/opinion/ci_172 86956. Authoritarian governments qualify for U.S. foreign aid simply by asking and without adhering to certain criteria. Wingfield, Kyle, What Foreign Aid Buys in Pakistan, Atlanta Journal-Constitution, May 5, 2011, p. A16, blogs. ajc.com/kyle-wingfield/2011/05/04/bin-laden-now-whatabout-pakistan/. Foreign aid to Pakistan has not translated into increased counterterrorism efforts, a columnist writes. Schatz, Ken, Foreign Aids Peaceful Purpose, Tampa (Fla.) Tribune, July 24, 2010, p. 2, beta2.tbo.com/news/opinion/ 2010/jul/24/co-foreign-aids-peaceful-purpose-ar-45239/. Foreign aid programs focusing on microfinance, global health and education can help augment the militarys goals of peace and national security, according to a poverty advocate. Smith, Adam, and Jim McDermott, Cuts to Foreign Aid Undermine Investment in Global Security, Seattle Times, April 18, 2011, p. A11, o.seattletimes.nwsource.com/html/ opinion/2014788015_guest18smith.html. The U.S. cannot reduce foreign aid without considering the greater costs in global poverty and instability that will affect future generations, two Democratic representatives say.

Women and Girls


U.S. Gives Liberia $15M to Educate Girls, Jacksonville (Fla.) Free Press, July 15, 2010, p. 2. The U.S. Millennium Challenge Corporation has provided Liberia with $15 million to finance the primary education of girls, a cause close to President Ellen Johnson Sirleaf. Baird, Joel Banner, Afghan Womens Activist Urges U.S. Withdrawal, Burlington (Vt.) Free Press, March 27, 2011. An Afghan human rights activist says that the influx of U.S. foreign aid into the country should be halted because the U.S.financed conflict has only solidified oppression against women. Nordland, Rod, Womens Shelters Waste Funds, Afghan Says, The New York Times, Feb. 16, 2011, p. A8, www. nytimes.com/2011/02/16/world/asia/16afghanistan.html. Womens shelters in Afghanistan that are partially funded by the United States have been accused of corruption.

China
Gerson, Michael, In Africa, Chinas Aid Invasion, The Washington Post, March 30, 2011, p. A21, www.washing tonpost.com/opinions/chinas-african-investments-whobenefits/2011/03/28/AF8G7mqB_story.html. If better governance and economic reform are vital, then Chinese aid is not the best solution for Africa, according to a former policy adviser to President George W. Bush. Pomfret, John, Western Nations Match Chinas Game, The Washington Post, Jan. 12, 2011, p. A11, www.washing tonpost.com/wp-dyn/content/article/2011/01/11/AR2011 011107899.html. U.S. foreign aid is intended to serve U.S. diplomatic goals, whereas Chinese aid is intended to make money. Wong, Gillian, China Gives First Report on Role in Foreign Aid, The Boston Globe, April 22, 2011, p. A12, articles. boston.com/2011-04-22/news/29463800_1_foreign-aid-aidprogram-aid-donor. China says that its aid to developing nations provides an alternative to heavily conditioned aid from Western donors.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

National Security
Richter, Paul, Obama Seeks Emergency Aid Package for Egypt, Chicago Tribune, Feb. 15, 2011, p. A12. Secretary of State Clinton says the Obama administrations aid package for Egypt is crucial to the U.S. national security.

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

June 17, 2011

551

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Government Secrecy, 2/11 Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10

Education
School Reform, 4/11 Crime on Campus, 2/11 Career Colleges, 1/11 Value of a College Education, 11/09

Health/Safety
Organ Donations, 4/11 Downsizing Prisons, 3/11 Genes and Health, 1/11 Food Safety, 12/10 Preventing Bullying, 12/10 Preventing Obesity, 10/10

Crime/Law
Class Action Lawsuits, 5/11 Cameras in the Courtroom, 1/11 Death Penalty Debates, 11/10 Drone Warfare, 8/10 Prosecuting Terrorists, 3/10 Legalizing Marijuana, 6/09

Environment/Society
Business Ethics, 5/11 Artificial Intelligence, 4/11 Wind Power, 4/11 Women and Sports, 3/11 Managing Nuclear Waste, 1/11 Animal Intelligence, 10/10

Politics/Economy
Public-Employee Unions, 4/11 Redistricting Debates, 2/11 Lies and Politics, 2/11 Income Inequality, 12/10

Upcoming Reports
Mining Safety, 6/24/11 Manufacturing, 7/15/11 Aging Population, 7/22/11

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Is the rocky alliance worth saving?

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

U.S.-Pakistan Relations

n May 2, U.S. Navy Seals raided a house in Abbottabad, Pakistan, and killed Osama bin Laden, mastermind of the September 2001 terror attacks. While Americans hailed the Al Qaeda leaders

death, some Pakistanis and Americans, including members of Congress, saw it as yet another betrayal in the rocky alliance between the two nations. Pakistanis considered the U.S. raid as a clear violation of their countrys sovereignty; Americans say that bin Ladens ability to take refuge in a major Pakistani city perhaps for as long as five years reflected the countrys duplicity. Some in Congress have called for ending aid to Pakistan nearly $5 billion in fiscal 2010 on the grounds that Pakistan has undermined the U.S. fight against terrorism. But others warn that halting aid could push nuclear-armed Pakistan further into chaos, thus opening a power vacuum that militants could fill.
Pakistanis protest Secretary of State Hillary Rodham Clintons visit to Lahore on May 27, less than a month after U.S. Navy Seals killed Al Qaeda leader Osama bin Laden in Abbottabad.

I N S I D E

THIS REPORT
THE ISSUES ....................655 BACKGROUND ................661 CHRONOLOGY ................663 CURRENT SITUATION ........668 AT ISSUE........................669 OUTLOOK ......................671 BIBLIOGRAPHY ................674 THE NEXT STEP ..............675

CQ Researcher Aug. 5, 2011 www.cqresearcher.com Volume 21, Number 28 Pages 653-676


RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

U.S.-PAKISTAN RELATIONS
THE ISSUES

CQ Researcher
657 659
Key Facts on Pakistan Almost two-thirds of its 187 million people are rural. Terror Groups Have Varied Goals Some are banned by the Pakistani government, others tolerated. Pakistan Aid Tied to Anti-Terror Fight U.S. aid totaled $4.5 billion in 2010. Chronology Key events since 1947. Pakistanis Hold Mixed Views of Terror Groups Government supports some militants for political reasons. Bloody Regional Conflicts Color Pakistans History Ethnic factionalism has been the biggest obstacle to peace and stability. At Issue Should the United States cut off aid to Pakistan?
Aug. 5, 2011 Volume 21, Number 28

655

Are Pakistan and the United States allies? Is Pakistan on the verge of collapse? Should the United States cut off aid to Pakistan?

MANAGING EDITOR: Thomas J. Billitteri

tjb@cqpress.com

BACKGROUND

661 661 662 665

Birth of a Nation
Britain eventually lost control of India.

660 663 664 666

kkoch@cqpress.com CONTRIBUTING EDITOR: Thomas J. Colin tcolin@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Sarah Glazer, Alan Greenblatt, Barbara Mantel, Tom Price, Jennifer Weeks
DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT CHECKER: Michelle Harris

ASSISTANT MANAGING EDITOR: Kathy Koch

River of Blood
Independence in 1947 sparked widespread rioting.

India and the Bomb


Pakistan has a larger nuclear arsenal.

Troubled Alliances
U.S.-Pakistan relations have long been rocky.

A Division of SAGE

PRESIDENT AND PUBLISHER:

CURRENT SITUATION

John A. Jenkins
DIRECTOR, REFERENCE SOLUTIONS:

668 670

Trouble at Home
Attacks by militants are increasing.

669

Todd Baldwin
Copyright 2011 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except: (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

U.S. Aid
Non-military aid was not well received.

FOR FURTHER RESEARCH

673 674 675 675

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

OUTLOOK

671

Accord with India


Improved relations with Pakistan seem unlikely.

SIDEBARS AND GRAPHICS

656

Global Hotspot Pakistans neighbors include India, China and Afghanistan.

Cover: AFP/Getty Images/Banaras Khan

654

CQ Researcher

U.S.-Pakistan Relations
BY MARCIA CLEMMITT
self with extremist regimes and grow as a terrorist haven. Heightening concern over hen U.S. Navy Pakistans stability are its posSeals killed Osama session of nuclear weapons bin Laden May 2 and a bitter, decades-long in a raid on his house in Abstruggle it has carried on with bottabad, Pakistan, the death its cross-border nemesis, India, sparked a mixture of glee, also nuclear-armed. relief and satisfaction in the With such high stakes, West. After a decade-long many analysts say the Unitmanhunt, the mastermind of ed States must maintain a the September 2001 terror strategic alliance with the naattacks was no longer a threat, tion. In recent years, that aland the murders of nearly liance has paid big dividends, 3,000 innocent people had experts note: Pakistani milibeen avenged. tary authorities have tacitly B i n L a d e n s d e m i s e approved U.S. drone strikes marked the most significant in western tribal regions adachievement to date in our jacent to Afghanistan and alnations effort to defeat Al lowed CIA operatives to Qaeda, President Barack search for terrorists inside Obama declared. 1 Pakistani cities all despite But the U.S. assault on bin bitter recriminations from Ladens lair also inflamed some who claim such operlongstanding tensions beations violate the countrys tween the United States and sovereignty. Pakistan, sparking charges To underscore the imporand counter-charges of detance of the alliance, C. ChrisA poster from the Muslim Pakistani political party ceit and betrayal and further tine Fair, an assistant profesJamaat-e-Islami protests against the release of Raymond shaking the long, rocky alsor at Georgetown Universitys Davis, an American CIA contractor who last January liance between the two counCenter for Peace and Security shot and killed two civilians in Lahore who he said had tries in the fight against IsStudies, points to an incident tried to rob him. Davis, who was in Pakistan to monitor international terror groups, was allowed by Pakistan to lamic extremism. last January in which CIA leave the country without standing trial. After the raid, reports contractor Raymond Davis quickly surfaced that bin shot dead two Pakistani naLaden may have hidden in tionals in Lahore who he said the Abbottabad house a conspicu- istans sovereignty, army and intelli- had tried to rob him, then was alously upscale compound a stones gence, declared Pervez Musharraf, the lowed by the Pakistani government throw from Pakistans top military acad- former army chief who ruled Pakistan to leave the country without standemy for as long as five years, in- as a dictator from 1999 until 2008, ing trial. Davis was in Pakistan to creasing suspicion that Pakistani au- when he stepped down amid calls for keep tabs on international terror thorities knew of his whereabouts and his impeachment. 3 groups such as Lashkar-e-Taiba (LeT), While bin Ladens presence on Pak- suspected of numerous attacks, inkept silent. 2 Many Pakistanis, meanwhile, charged that the raid swift, istani soil stoked American anger, many cluding one in Mumbai, India, in Noviolent and stealthy was tantamount experts say that because the United vember 2008, that killed 174 people. States needs Pakistan to fight terrorto an illegal invasion. To keep its agents protected and All peace-loving people should be ism, it must encourage the countrys intelligence flowing, Fair says, the happy that bin Laden is dead, but no development into a stable, civilian-led United States must even maintain a recountry will accept such a violation state. Otherwise, they say, Pakistan lationship with Pakistans ruthless Interby the U.S., which undermines Pak- could skid further into chaos, ally it- Services Intelligence (ISI) agency,

THE ISSUES

www.cqresearcher.com

AFP/Getty Images/Asif Hassan

Aug. 5, 2011

655

U.S.-PAKISTAN RELATIONS
Global Hotspot
Sandwiched between Afghanistan and India and bordering China to the north Pakistan exists in one of the worlds most tumultuous regions. Hindu-dominated India has had a longrunning territorial dispute with Muslim Pakistan over Kashmir, and both countries maintain robust nuclear arsenals. Afghan insurgents and terrorist groups take refuge in Pakistans lawless northwestern territories. The United States has maintained close ties with Pakistan when the U.S. needed help elsewhere in the region, such as in the early 1970s in establishing relations with China, in the 1980s in driving the Soviets from Afghanistan and today in ghting the war against terrorism.
knowledge of bin Ladens whereabouts. We need to re-evaluate the foreign aid that we send to countries that do not have Americas best interest in mind, said Poe. 4 Concerns over Pakistans stability and trustworthiness extend beyond the anti-terrorism realm and include questions about Pakistans internal governance and economic structure. Pakistans federal and provincial governments appear helpless in the face of strong economic mafias that manipulate supplies to markets and increase prices of essential commodities, wrote Hasan-Askari Rizvi, an independent political and defense analyst in Pakistan. The resulting poverty and injustice increases the threat of anarchy, if not total collapse, in many parts of Pakistan. 5 In recent years, Pakistan has consistently ranked near the top of an annual Failed States Index compiled by the Fund for Peace, an independent, Washington-based research and advocacy group. This year, Pakistan ranks as the 12th most risky nation; last year it ranked 10th. 6 But some foreign-policy experts caution that U.S. concerns over Pakistan may be somewhat overstated. Americans get into despair easily about Pakistan, says Stephen P. Cohen, a senior fellow at the Brookings Institution, a centrist think tank in Washington. But, while the current situation is grim, Pakistan has a huge number of competent people and has navigated rough shoals in the past, he says, pointing, for example, to the fact that the nation has returned from military dictatorship to democratic rule several times during its history and moved on intact after the assassinations and untimely deaths of several of its top leaders. As Congress and the Obama administration wonder how and whether to salvage the Pakistan alliance, here are some questions that are being asked:

Sources: Political Handbook of the World 2008, CQ Press, 2008; The World Factbook, Central Intelligence Agency

without whose cooperation U.S. agents couldnt operate in the country. Sometimes you have to deal with the fireman even if the fireman is an arsonist, Fair says. Other analysts, however, question whether the alliance between Pakistan and the United States already is beyond repair. They point to increasing anti-Americanism inside Pakistan, the proliferation of militant groups whose aims are increasingly unclear and suspicion that Pakistan continues to provide cover for terrorists like bin Laden. Indeed, some in Congress are call-

ing for a sharp reduction or complete end to U.S. economic and military aid to Pakistan, arguing it has been exploiting its ties with the United States. The United States provided nearly $4.5 billion in aid to Pakistan in fiscal 2010 about $2.7 billion for military and anti-drug uses and $1.7 billion in economic and food aid. (See graph, p. 660.) Pakistan has a lot of explaining to do, said Rep. Ted Poe, R-Texas, who introduced the Pakistan Foreign Aid Accountability Act, aimed at halting all aid to Pakistan unless its proven that Pakistani leaders had no

656

CQ Researcher

Are Pakistan and the United States allies? After the Abbottabad raid, some Pakistanis complained that the United States routinely violates Pakistans sovereignty, while some in Congress argued the incident proves Pakistan cant be trusted. However, many South Asia analysts argue that, despite conflicts, the countries do often support each others interests. It is undeniable that our relationship with Pakistan has helped us pursue our security goals, said Senate Foreign Relations Committee Chairman John Kerry, D-Mass. 7 Pakistan has been a critical partner in capturing Al Qaeda leadership in Pakistan, wrote Georgetowns Fair. Without Pakistans prior cooperation, the United States would not have even been in a position to kill bin Laden. 8 Since the 2001 terrorist attacks on the United States, Pakistan has given us bases and over-flight rights, and we, in turn gave them aid and debt relief, notes Dennis Kux, a senior policy scholar at the nonpartisan Washingtonbased Woodrow Wilson International Center for Scholars and a retired State Department South Asia expert. Furthermore, despite the Pakistani militarys continued conviction that India, to Pakistans east, is its primary enemy, the army has moved a number of divisions to the western front, bordering Afghanistan, at the behest of the United States, says William Milam, a senior policy scholar at the Wilson center and a former U.S. ambassador to Pakistan. The help of the Pakistani intelligence services to Britain, which has a large Pakistani population, has been absolutely vital to identifying the links of potential Pakistani militants now living in the United Kingdom to militant groups in Pakistan, and to preventing more attacks on Britain, the USA and Europe, wrote Anatol Lieven, a professor of war studies at Kings College, in London, and a senior

Key Facts on Pakistan


Area: 307,374 sq. mi. Population: 187.3 million; worlds sixth-largest nation (36 percent urban, 64 percent rural) Median age: 21.6 years Literacy rate: 49.9 percent (63 percent males, 36 percent females) Infant mortality rate: 63.26 deaths per 1,000 births Annual per capita GDP: $2,500 No access to modern sewage systems: 28 percent of urban dwellers; 71 percent of rural population
Source: The World Factbook, U.S. Central Intelligence Agency, https://www.cia.gov/ library/publications/the-world-factbook/geos/pk.html

research fellow at the New America Foundation, a centrist think tank in Washington. 9 The United States has greatly increased aid to Pakistan in the past decade, from $36.76 million in 2001 to $4.46 billion 2010, a 2,273 percent increase, according to the nonpartisan Congressional Research Service. 10 Nevertheless, the alliance has long been troubled. For example, the United States has provided and withdrawn economic aid to Pakistan repeatedly over the decades, depending on Pakistans cooperation with U.S. strategic aims and the level of interest in South Asian affairs shown by various congressional leaders and presidents. In fiscal 2000, Pakistan didnt even rank in the top 15 nations in the amount of U.S. economic aid received (No. 15 Nigeria received $68 million.) But in fiscal 2010, Pakistan leapfrogged to third as the United States sought its cooperation with drone strikes and other targeting of Islamic militants in the region. 11 The ups and downs of U.S. aid have exacerbated Pakistans difficulties in developing economically and greatly contributed to Pakistanis distrust of the United States, many scholars say.

In 1965, the United States walked away from the alliance altogether, says Kux. Pakistan was one of the first countries to recognize the communist government of the Peoples Republic of China, on its northeast border, and President Lyndon Johnson was mad over that as well as generally sick of South Asia, where Pakistan and India had squabbled for years, Kux says. Johnson cut off both military and civilian aid, although he regretted it later, I was told, Kux says. To me, that was the turning point for Pakistan. The relationship was all downhill from there. Until recently our South Asia policy has been made because of our anti-Soviet policy, says Brookings Cohen. As a result, the U.S. policy has been, Lets let them solve their own problems, unless theres a crisis or specific U.S interests are at stake, says Cohen. Because the United States has viewed the alliance as a way to achieve defense goals, it has allied itself primarily with Pakistans military and reinforced a message that were only interested in working with dictators, not in supporting Pakistans development into a democracy, says Marvin Weinbaum, a scholar in residence at the Middle East Institute, a nonpartisan research center in Wash-

www.cqresearcher.com

Aug. 5, 2011

657

U.S.-PAKISTAN RELATIONS
ington. Both countries gloss over the fact that their interests are often inconsistent. In recent years, the United States has stoked Pakistani resentment by building Americas relationship with rival India with acts that, many Pakistanis charge, symbolize neglect of the longstanding U.S.-Pakistan alliance. In 2000, on a South Asia visit, President Bill Clinton spent five glorious days in India and five cold hours in Pakistan, observes Kux. Throughout the Cold War, India was a Soviet ally and Pakistan a friend of the United States, but when the Soviet Union collapsed in 1991, the United States said, Oh, look, Indias the bigger country! Lets get involved with them, says Barry Blechman, cofounder of the Stimson Center, a nonpartisan think tank in Washington that researches security issues. In 2008, for example, President George W. Bush made that terrible nuclear deal allowing India to engage in nuclear-technology trade although it hadnt signed the Nuclear Nonproliferation Treaty which was a slap in the face to everyone we had hectored over the years about nuclear nonproliferation, including Pakistan, he says. 12 We care about a geographical location, not about a country, says Paula Newberg, director of Georgetown Universitys Institute for the Study of Diplomacy. Talk in the United States of helping Pakistan reform is worse than useless, since its accompanied by actions that do the opposite, such as channeling aid to people who shouldnt be in power in the first place. Partly because the countries exaggerate the extent to which their interests align, theres this long story line of desertion on both sides, says Adil Najam, vice chancellor at Pakistans Lahore University of Management Sciences. This is exacerbated in Pakistan by tribal notions of what it means to be a friend that a friend stands by you even when youre wrong. Anti-Americanism is increasing throughout Pakistan, says Aqil Shah, a post-doctoral fellow at Harvard University. Many people feel the United States has let them down, talking about how they support democracy but not protecting them against dictators, and periodically washing their hands of us and walking away. Now, with the United States winding down the Afghan war, Shah says, it looks to people as if the United States is planning another exit from its alliance with Pakistan, as it did when the Soviet Union withdrew in defeat from Afghanistan around 1990. Just as occurred then, Shah says, Pakistanis fear that Washington will leave them with another bad situation on their doorstep, this time in the form of an Afghanistan permanently aligned with Pakistans nemesis, India. Complicating matters is the fact that Pakistans military and intelligence agency continue to tell the public that India is the countrys chief enemy and that they will defend Pakistans borders against all foreign encroachments, including U.S. strikes on terrorist targets, says Milam. In fact, they have played a double game with the public, acting in complicity with the United States in the drone program since 2004, but not telling that truth to Pakistanis, who remain largely unaware that the government has been in favor of many of the drone attacks, he says. The alliance is like a marriage disintegrating, says Najam. When things start falling apart, you start promising more than you can deliver as a misguided way to patch things up, he observes. Thats what Pakistan has done by telling the United States that we will be with you completely in the fight against terror. Public opinion inside Pakistan makes that politically impossible, but when Pakistan doesnt fully deliver, the United States sees betrayal. Both countries need to be smarter about what they really want and more honest about what they can give, says Najam. I wish Pakistan told the United States No more often, because it would be better to promise less but deliver better. Is Pakistan on the verge of collapse? Pakistan faces many challenges, from growing political violence to looming water shortages. Furthermore, a weak Pakistan now could mean a radicalized Pakistan, increasingly dominated by extremist groups, says the Middle East Institutes Weinbaum. Nevertheless, Pakistanis have persisted through many troubles and may do so again, some South Asia experts say. Pakistans top internal threats include: a huge population of refugees, displaced by war in Afghanistan, violence at home and natural disasters; escalating ethnic, regional and religious violence; highly uneven economic development; government corruption; military and security agencies divided against themselves and infiltrated by terrorist sympathizers; and government institutions that cant deliver services. 13 Pakistan is a state in perpetual crisis, says retired Brig. Gen. Feroz Khan, a 32-year veteran of Pakistans army and a lecturer at the U.S. Naval Postgraduate School in Monterey, Calif. Pakistans political system is corrupt, with only 400 families largely monopolizing the voter support needed to win elections or govern once in office, says Blechman of the Stimson Center. Furthermore, the central government has only limited say in large parts of the country and is currently losing control completely in many areas. The terrorism that increasingly threatens Pakistanis is fueled partly by public discontent and thus cant be controlled without introducing a system based on justice, said Shahbaz Sharif, chief minister of Pakistans Punjab

658

CQ Researcher

province. But justice eludes the nation because the elites continue to hold the lions share of wealth, he said. 14 Pakistans government can be accused of not doing enough to stop violence; however, their ability to do so is very limited, given the central governments traditionally limited role in many regions, wrote the New America Foundations Lieven. The overwhelming majority of human rights abuses . . . stem from a mixture of freelance brutality and exploitation by policemen, working either for themselves or for local elites; actions by local landlords and bosses; and punishments by local communities of real or perceived infringements of their moral code. 15 Worse problems loom, says Bruce Riedel, a senior fellow at the Brookings Institution and former CIA officer who oversaw a 2009 review of U.S. Pakistan and Afghanistan policy for the Obama administration. 16 Their demographics are terrible, with a terrific youth bulge and not enough water for them all to drink, he says. Massive floods that occurred in 2010 were a severe climate-change disruption that will eventually lead to long-term drought, and no drought-amelioration measures are in place. However, Pakistan is home to many capable people and has demonstrated the ability to rebound from difficulties in the past, some analysts say. In the 1950s, the U.S. Agency for International Development actually used to send Koreans to Pakistan to see an example of American aid well used, observes Kux of the Woodrow Wilson Center. Furthermore, almost all the [Pakistani] military governments have ended with uprisings of citizens, including tradesmen, lawyers and students, who sought democracy, says Shah of Harvard. Contrary to much instinctive belief in the West, Pakistan has actually worked according to its own imperfect but functional patterns, wrote

Terror Groups Have Varied Goals


The United States has designated the Pakistan-based groups below as foreign terrorist organizations. But Pakistan takes a more pragmatic view of militancy. Groups with domestic targets are hunted down; those with international goals are sometimes tolerated; and groups with some strategic value, especially those active in the disputed region of Kashmir, may even enjoy the covert support of Pakistans powerful Inter-Services Intelligence (ISI) agency. Even ofcially banned groups may operate with some impunity throughout Pakistan, exacerbating Pakistans already troubled relationship with the United States.
Jaish-e-Mohammed (Army of the Prophet, JeM) Objectives: Free Jammu & Kashmir from India Pakistani designation: Banned Linked to 2001 attack on Indian Parliament Linked to the 2002 death of American journalist Daniel Pearl Linked to Al Qaeda, Afghan Taliban, Inter-Services Intelligence (ISI) Lashkar-e-Taiba (Army of the Pure, LeT) Objectives: Free Jammu & Kashmir from India, establish Islamic rule in South Asia Pakistani designation: Banned Implicated in 2001 attack on Indian Parliament Implicated in 2008 attack on Mumbai Tied to charity organization Jamaat-ud-Dawa Linked to Al Qaeda, ISI Lashkar-e-Jhangvi (Army of Jhangvi, LeJ) Objectives: Establish a Sunni state in Pakistan Pakistani designation: Banned Has funding ties to Al Qaeda, Afghan Taliban Sipah-e-Muhammed Pakistan (SMP) Objectives: Protect and promote Shiites in Pakistan Pakistani designation: Banned Shiite group devoted to countering anti-Shiite violence May have ties to Iranian government Tehrik-e-Taliban Pakistan (Pakistani Taliban, TTP) Objectives: Establish a global Islamic state Pakistani designation: Banned, military target Biggest domestic terrorist organization in Pakistan Not a part of Afghan Taliban Extremely close to Al Qaeda Target of large Pakistani military operations, but still active
Sources: Institute for Conict Management; National Counterterrorism Center, Belfer Center for Science and International Affairs, Harverd University; Federation of American Scientists

www.cqresearcher.com

Aug. 5, 2011

659

U.S.-PAKISTAN RELATIONS
Pakistan Aid Tied to Anti-Terror Fight
U.S. military and economic aid to Pakistan rose sharply after the Sept. 11, 2001, terror attacks as the United States sought Pakistans help in ghting Al Qaeda in neighboring Afghanistan. Aid totaled about $4.5 billion in scal 2010, about 50 percent more than the previous scal year alone as the newly elected Obama administration successfully sought increased economic and military aid.
(in $ billions)

5 4 3 2 1 0

Direct Overt U.S. Aid and Military Reimbursements to Pakistan, FY2001-FY2010

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010

Source: Susan B. Epstein and K. Alan Kronstadt, Pakistan: U.S. Foreign Assistance, Congressional Research Service, June 2011, fpc.state.gov/documents/organization/ 166839.pdf

Aid Components
Security-related Economic-related Total

Lieven. All South Asian countries face regional unrest, he notes. Sri Lanka and Burma have experienced worse insurrections, and even India has faced repeated rebellions in various regions, some lasting for generations. 17 Pakistans proliferating broadcast media, especially, spread lies and pernicious conspiracy theories, which could show a system falling apart, says Lahore Universitys Najam. But it could also be a symptom of a system improving, demonstrating that people are paying attention and ultimately giving a corrupt elite less room to misuse the system. Similarly, the fact that President Asif Ali Zardari is totally embattled might also be a blessing in disguise, he says. For the first time in my memory people seem to be demanding accountability. In a 2010 poll, less than a fifth of Pakistanis viewed the Taliban favorably, and the masses do not want Islamist revolution, wrote Lieven. Furthermore, while extremists have infiltrated the military, the Taliban could gain a

meaningful political foothold . . . only after a large-scale military mutiny that is unlikely to occur, he argues. 18 I would like to believe that at the end of the day logic will keep the military from throwing in its lot with terrorist groups rather than the United States, says Shah. They need their F-16s, they dont want to be [a state in chaos such as] Sudan. Should the United States cut off aid to Pakistan? Since the Abbottabad raid on bin Ladens hideout, debate has raged over whether U.S. aid should be discontinued. Weve been providing billions of dollars . . . while theyve been committing hostile acts behind our back, said Rep. Dana Rohrabacher, R-Calif., who introduced legislation (H.R. 1790) to cut off aid entirely, without giving Pakistan a chance to prove it merits such help, as some other lawmakers recommend. 19 Recent U.S. moves to redirect aid to civilian rather than military purposes is use-

less, wrote Nitin Pai, editor of Pragati The Indian National Interest Review. As long as the military establishment is in effective control of the administrative spigots, it can divert cash, he said. Cutting off aid altogether, on the other hand, could induce Pakistanis to force the army to change course. 20 But cutting off aid, military or civilian, means youve lost all your leverage, says the Stimson Centers Blechman. Economic sanctions are not really a credible threat, because the economic collapse of Pakistan would play straight into the hands of terrorist groups the United States opposes, said Lieven. 21 Unless the U.S. military presence in Afghanistan is meant to be permanent . . . Pakistans support for a peaceful and viable settlement in Afghanistan is a must, making the alliance necessary, wrote Hassan Abbas, a senior adviser at Harvard Universitys Belfer Center for Science and International Affairs. And, in fact, Pakistan has paid a heavy price for supporting the U.S.-led war on terror . . . [,] facing a brutal backlash from . . . militant and terrorist groups as well as a negative impact on its economy, he said. 22 Many analysts argue for reshaping aid policies to focus on long-term economic development. Military assistance should be dramatically reduced, wrote Parag Khanna, a senior research fellow at the New American Foundation. 23 Congress should make it clear that it will continue aid only if Pakistan makes changes the United States has sought, such as ditching propagandizing school textbooks that stoke antipathy toward Hindus, says Danielle Pletka, vice president for foreign and defense policy studies at the conservative American Enterprise Institute think tank. 24 The Obama administration has recently indicated that were going to try to do a few big things that are important with currently authorized aid,

660

CQ Researcher

a welcome change, says the Middle East Institutes Weinbaum. In the past Weve disrupted the effectiveness of our aid by spreading money across too many projects, thus diluting its visibility and effectiveness, he says. A single big project, such as building more electric-power capacity, would provide bang for the buck, says Najam. Pakistans inadequate electricity system leaves residents to cope with five to 10 hours daily of load shedding, or rolling blackouts intentional localized power shutoffs undertaken to keep the system running. A new power plant would provide ordinary citizens tangible daily proof that the United States is an ally, he says. Today, people say, What U.S. aid? because they dont see its results, says Harvards Shah. Solid economic development that would reach down to local communities would pay dividends, he says. Others suggest looking beyond aid to improve the alliance. The biggest failure of the U.S. is the lack of public diplomacy to counter false anti-American claims spread by the media, argues Pakistani army veteran Khan. Trade, not aid, should be the rallying cry, says Brookings Riedel. Pakistan faces a higher U.S. tariff on its products than India or China do, largely because there is no effective Pakistan lobby in Congress, he says. If tariffs for Pakistani goods mostly textiles were lowered, it could do a lot to help the economy and the entrepreneurial class over time, which would strengthen the push for democracy, he says. Substituting favorable trade policies for aid would also limit the extent to which mostly U.S.-based contractors, rather than Pakistanis, end up with much of the aid cash, Riedel says. It would also help if the United States said clearly that we will deal with the military when it comes to

Al Qaeda, but well regularly talk with the civilian government, too, on all topics, says Shah.

BACKGROUND
Birth of a Nation
hen the United States and Pakistan first declared themselves allies in the 1950s, the United States was a superpower, locked in competition with the other reigning superpower, the Soviet Union. Pakistan, meanwhile, was emerging from an independence struggle that left India as a bitter rival on its doorstep and regional disputes within. 25 From the early 1800s through the mid-20th century, the dominant power in the Indian subcontinent was Great Britain. Despite its imperial reach, Britain held only loose sway over much of its empire, including territories in the north and west that, in 1947, became Pakistan. Today, the northwestern frontier areas, which border Afghanistan, are among the worlds most prominent safe havens for terrorist groups. British colonial rulers egged on religious communities, especially Hindus and Muslims, to view each other, rather than Britain, as their chief enemies, in an example of divide and rule thinking, wrote Hussain Haqqani, Pakistans current ambassador to the United States. That legacy persists in the grudge match between Pakistan, formed as a Muslim nation, and India, a primarily Hindu one, he argued. 26 Revolts against Britain erupted periodically in the 19th century, and, in 1885 the Indian National Congress Party was established, initially seeking more clout for locals in the colonial government but soon switching to a quest for independence. Hindus in the region outnumbered Muslims

two to one, however, and in 1906, some Muslim politicians founded the All-India Muslim League to look after Muslim interests on the road to independence. In 1936 and 1937, under Britains aegis, provincial elections took place as a preparation for local rule. The Indian National Congress led by Mohandas Gandhi racked up big victories, but the Muslim League won few seats, even in Muslim-majority areas. Following the losses, Muslim League President Muhammud Ali Jinnah focused on religious differences as a way to draw voters support for the party, despite being a quintessentially secular, rather than a religious, man himself, says Sumit Ganguly, a professor of political science at Indiana University in Bloomington. The strategy consolidated many Muslims into a voting bloc and ultimately led to formation of two separate nations, one Muslim, one mainly Hindu. Historians dont agree about whether this was Jinnahs intent, Ganguly says.

River of Blood
n 1946, hoping to keep the region a single state, the British suggested establishing a decentralized government that would allow localities substantial power. Both Jinnah and Congress Party chief Jawaharlal Nehru rejected the plan, and in July 1947 the area was partitioned into two nations: India occupied a large central area and Pakistan had two areas, West Pakistan, in the northwest, and the province of East Bengal later East Pakistan and now Bangladesh nearly 1,000 miles away, across India, to the east. (See sidebar, p. 666.) As a result, when independence came, 12 million panicking Muslims and Hindus rushed to relocate. The border . . . became a river of blood, as the exodus erupted into rioting, said the BBC. 27 As many as a million people may have died.

www.cqresearcher.com

Aug. 5, 2011

661

U.S.-PAKISTAN RELATIONS
In 1948, Jinnah This is still a coundied, leaving no try run by a feudal elite, blueprint for how where wealth exists side the new state should by side with grinding develop. poverty and powerlessPartly as a result, ness, says the Brookings the state got into a Institutions Cohen. crisis within the first Bhuttos father, Zultwo years of its exfikar Ali Bhutto, served istence, says retired as president and, later, Brig. Gen. Khan. prime minister in the Confusion about 1970s, and her widower, religions role and traAsif Ali Zardari, is Pakditions of tribal rather istans current president. than central rule comBut while Bhutto famiplicated Pakistans dely members have been velopment. relatively progressive Pakistan was crenational leaders, they ated as a modern owned a massive Muslim nation rather spread in Sindh than a theological province that exhibits state, intended to Pakistans underlying be neutral in defeudalism, says Milam. fending the rights of Youll find no school all residents to practhere. Theyve done tice religion as they nothing to improve or saw fit, as Jinnah develop the region Minutes before she was assassinated, former Pakistani Prime Minister stated in unambiguinto a modern econoBenazir Bhutto addresses supporters in Rawalpindi on Dec. 27, 2007. ous terms, says my, he says. Bhutto and her family were relatively progressive national leaders with Khan. Pakistans Pakistans founders close ties to the United States. U.S. intelligence officials suspect she was ideal should be that had little or no idea killed by Islamist military who viewed her as too friendly with the West. status as a citizen how to accommodate does not depend on difference, with the belonging to any consequence that they religion or caste or creed, Jinnah de- merit-based, democratic government, hardly have an iota of democracy, even he says. Military leadership is also today says Ganguly. This sets the stage clared in a 1947 address. 28 Nevertheless, Pakistanis views about clan-based, when you look at who for the civil service and military to run religious tolerance varied, says Milam, they recruit from. the country, he says. The clan systems strength is demonof the Wilson Center. Pakistans Constitution, for example which aroused strated by the phenomenon of a so much contention that it took nine woman such as Benazir Bhutto years to complete even defines one twice elected prime minister rising to the top of the political sysMuslim sect, the Ahmadis, as nony contrast, neighboring India had tem in an extremely conservative Muslim, he notes. 29 a quite methodical beginning, The new nation inherited a tradi- male-dominated society, wrote the New agreeing on a constitution by 1950 and tionally clannish society in which America Foundations Lieven. This was holding its first elections in 1952, says established elites hold power by pass- power by inheritance, and no more the Wilson centers Kux. ing out patronage spoils to a network a sign of advancing womens rights India was also luckier in the partiof friends and relatives who then sup- than was Queen Elizabeth Is inheri- tion, holding more territory that Britain port them, says the Middle East In- tance of her throne from her father, had brought under centralized rule, stitutes Weinbaum. This tradition re- Henry VIII, in 16th-century England, says Ganguly. Many parts of Pakistan Continued on p. 664 peatedly dooms attempts to establish he said. 30

India and the Bomb

662

CQ Researcher

AFP/Getty Images/Aamir Qureshi

Chronology
1940s
British rule ends in India; partition creates Pakistan. 1947 Pakistan is created by combining regions in India widely separated geographically and culturally. 1948 Pakistans legendary first governor general, Muhammad Ali Jinnah, dies. . . . First war with India over disputed territory of Kashmir.

1990s

Soviets depart Afghanistan in defeat. 1990 United States suspends aid, declaring that Pakistan has secretly advanced its nuclear weapons program. 1999 United States reduces aid after Gen. Pervez Musharraf overthrows democratically elected Nawaz Sharif.

istans Frontier Corps. . . . After terrorist attacks kill 174 people in Mumbai, India says attackers have Pakistani ties. 2009 President Barack Obama vows United States will take long-term view of the U.S.-Pakistan alliance, focusing on economic and political development rather than short-term military goals. . . . Militants kill 40 in attack on Pakistani police academy in Lahore. . . . U.S. drone attack in South Waziristan kills powerful Pakistan Taliban leader Baitullah Mehsud. 2010 Joint raid by U.S. and Pakistani intelligence forces captures Afghan Talibans second in command, Abdul Ghani Baradar. . . . Worst floods in 80 years inundate onefifth of Pakistan, with economic damages exceeding $40 billion; government assistance fails to reach many; United States provides about $600 million in aid. 2011 CIA contractor Raymond Davis kills two Pakistani men he said tried to rob him; Pakistani officials allow Davis to leave without a trial. . . . Pakistan Taliban claims responsibility for the apparently religiously motivated assassination of Minorities Minister Shahbaz Bhatti, the only Christian in Pakistans cabinet. . . . U.S. Navy Seals raid a house in Abbottabad, Pakistan, and kill Al Qaeda leader Osama bin Laden; some U.S. lawmakers vow to cut off aid, charging Pakistan protected bin Laden. . . . Obama administration withholds more than a third of military aid ($800 million) to pressure Pakistan to cooperate on anti-terrorism; U.S. civilian aid continues. . . . Indian Prime Minister Manmohan Singh opens talks with Pakistan on improving relations.

1950s-1970s United States enlists Pakistan


as ally in Cold War. 1956 Constitution adopted, establishing Pakistan as Islamic republic. 1965 Second war with India over Kashmir; Pakistan outraged over absence of U.S. assistance. 1971 East Pakistan secedes, becoming new nation of Bangladesh. 1979 Pakistani student group burns U.S. Embassy in Islamabad, killing two Americans. . . . United States suspends all aid except flood assistance over human-rights violations. . . . Soviet Union invades Afghanistan.

2000s

United States seeks Pakistans help fighting Islamic terror groups. 2001 Musharraf promises support for anti-terror fight. 2003 United States forgives $1 billion of Pakistan debt as reward for antiterror assistance. 2004 Pakistani nuclear scientist Abdul Qadeer Khan admits leaking nuclearweapons information, possibly to Libya, North Korea and Iran. . . . Pakistan attacks Al Qaeda militants near Afghan border. 2007 Public outcry follows Musharrafs suspension of Supreme Court Chief Justice Iftikhar Chaudry. . . . Musharraf secretly discusses sharing power with ex-prime minister Benazir Bhutto. . . . Pakistani army fights militants in North Waziristan, a stronghold of proAl Qaeda groups. . . . Bhutto, recently returned from exile, assassinated. 2008 U.S. airstrike on Afghan-Pakistan border kills 10 members of Pak-

1980s

United States increases aid to Pakistan as it becomes staging ground for militant groups fighting the Soviets.

www.cqresearcher.com

Aug. 5, 2011

663

U.S.-PAKISTAN RELATIONS

Pakistanis Hold Mixed Views of Terror Groups


Government supports some militants for political reasons.
ver since the Al Qaeda attacks on New York City and the Pentagon in 2001, the United States has sought Pakistans help in eliminating militant Islamic groups, many of which operate in Pakistans outlying northern and western areas. But Pakistan has its own way of viewing the militants. It feverishly fights some extremist groups while turning a blind eye to others for political reasons. Since the United States went to war in Afghanistan after the 9/11 attacks, pledging to stop Al Qaeda, Pakistan has become a haven for an ever more lethal stew of Al Qaeda operatives, Uzbek militants, Afghani and Pakistani Taliban and local tribal militants, wrote Zahid Hussain, senior editor of the Karachi-based online newsmagazine Newsline and a scholar at the Woodrow Wilson International Center in Washington. An estimated 10,000 to 15,000 militants now operate from within Pakistan, mostly in its loosely governed, far-western territories, said Hussain. 1 The militants, a growing number of whom are now migrating into Pakistani cities, fall into five general categories, according to C. Christine Fair, an assistant professor of security studies at Georgetown University. Pakistan actively opposes the first two groups, which it views as enemies of the state: Al Qaeda operatives based in Pakistan but generally not native Pakistanis. They work with and through networks of supportive Pakistani militant groups, planning international attacks and, increasingly, carrying out attacks in Pakistan along-

side other groups that oppose the Pakistani government, Fair told the Senate Foreign Relations Committee in May. 2 The Pakistan Taliban, also called the Tehreek-e-Taliban-ePakistan (TTP), which emerged around 2004 inside Pakistan and has since conducted an increasingly violent insurgency against the government. The three other categories of militant groups cited by Fair are viewed by Pakistan as much less likely to oppose the government, which in some cases has seen them as supporters of Pakistans geopolitical goals. As a result, Pakistan generally has not fought these groups, although recently some have attacked targets in Pakistan itself, according to Fair. The three categories are: The Afghan Taliban, conservative Islamists who fight mainly to control Afghanistans government after the United States departs. These extremists frequently take sanctuary in Pakistan. But Pakistan doesnt fight them because it sees them as potential allies in its struggle to keep India from seizing power in Afghanistan. Groups representing either Islams Sunni or Shia sect. Members of one sect attack those in the other in a rivalry carried on for decades throughout the Muslim world. Islamist groups such as the Jamaat-e-Islami and Lashkar-eTaiba (LeT) that declare that their goal is to force India to leave Kashmir, which Pakistan and India have fought over since they

Continued from p. 662

had never been properly administered and were difficult to govern, he says. Because of its location, India also inherited Britains infrastructure, including government buildings, while Pakistan built from scratch. The Indians were rather niggardly when it came to handing over the spoils from the departure of colonial governors, including money and supplies owed to Pakistan, Ganguly says. There are stories about bureaucrats sitting on crates because Indians refused to hand over office furniture. Disputes over borders were not fully settled when independence came. They involved, for example, water rights to the Indus River that flows into Pakistan through India, as well as territories, mainly Kashmir, at Pakistans and Indias northern edges.

Before independence, Kashmir was a majority-Muslim region, ruled by a small Hindu elite. Both countries expected to receive it in the partition, but its Hindu maharajah signed a treaty granting it to India. Pakistan launched attacks, but India retaliated, winning control of more than half the territory. Called to mediate, the United Nations ordered a popular vote that India blocked. A ceasefire in 1948 ended the initial fighting, and treaties officially divided Kashmir. But conflict simmered, breaking into full-fledged wars in 1965 and 1999. As part of the dispute, India and Pakistan have, since 1984, maintained military outposts on the worlds highest battlefield, the vast Siachen Glacier in disputed territory three miles above sea level in the Himalayan Mountains. Thousands have died there, where avalanches, altitude sickness and frostbite are sol-

diers ruthless enemies. Its totally insane to be fighting a war at these altitudes, said Rifaat Hussain, a professor of strategic studies at Quaid-i-Azam University in Islamabad. 31 Each country blames the other for the continued hostilities. Pakistan has existed under the threat of invasion throughout its existence, and since the mid-1980s six major military crises of varying degrees of intensity have forced Pakistan to consider physical invasion from India an existential threat in perpetuity, wrote Khan, in an expression of the Pakistani militarys long-held view. 32 India, meanwhile, does not want to acknowledge that it has played any negative role, denying any abuse of Kashmir, for instance, says Georgetowns Fair. The Pakistani state has evolved as a garrison, under threat, an idea thats

664

CQ Researcher

became independent nations in 1947. Fair calls the LeT the most lethal terrorist group operating in and from South Asia. Some groups in this last category sprang up on their own, but most came into being as surrogates of Pakistans intelligence agency and thus are not treated as enemies by the Pakistani military, said Fair. While the groups claim to focus on Kashmir, however, their operations are expanding, with some carrying out terror attacks in India and fighting U.S. forces in Afghanistan. Fair said some of the Kashmir-focused groups also now work against Pakistan itself, in apparent retaliation against its participation in the U.S.-led global war on terrorism. 3 That does not include the dangerous LeT, however, which Fair says has tight linkages with Pakistans own security forces. Like their government, the Pakistani public has a far more complicated attitude toward militant groups than Americans generally realize. Few support militancy generally, as some in the United States fear. However, many do support small militant organizations when those organizations use violence to achieve political goals the individual cares about, wrote Fair and Jacob N. Shapiro, an assistant professor of politics at Princeton University. 4 The nuanced views arent surprising, Shapiro and Fair wrote. Someone who supports a group operating in Kashmir because they believe that Kashmiris living under Indian control are grievously abused . . . need not have any strong feelings toward the Afghan Taliban, for example, they argued. 5

That being the case, theres no simple way to dissuade average Pakistanis from supporting some militant groups, as U.S. lawmakers, among others, might hope, Shapiro and Fair said. Much can be done, however, to address political factors that drive support for militancy, such as corruption, human rights abuses, lack of security, limited access to the rule of law and longstanding geopolitical disputes, such as the standoff between India and Pakistan over Kashmir, they argued. 6 Marcia Clemmitt
Zahid Hussain, The Scorpions Tail: The Relentless Rise of Islamic Militants in Pakistan and How it Threatens America (2010), p. 3. 2 C. Christine Fair, testimony before U.S. Senate Foreign Relations Committee, May 24, 2011, www.humansecuritygateway.com/documents/US-SenateForeign-Relations-Fair-Testimony-Lashkar-e-Taiba-Region-International-Com munity.pdf. 3 Ibid. 4 Jacob N. Shapiro and C. Christine Fair, Why Pakistanis Support Islamist Militancy, Harvard University Belfer Center Website, Feb. 10, 2010, http://belfer center.ksg.harvard.edu/publication/19922/why_pakistanis_support_islamist_ militancy.html. 5 Jacob N. Shapiro and C. Christine Fair, Why Support Islamist Militancy? Evidence from Pakistan, May 18, 2009, www.princeton.edu/~jns/papers/ Shapiro_Fair_2009_Why_Support_Islamist_Militancy.pdf. 6 Shapiro and Fair, op. cit., Feb. 10, 2010.
1

permeated textbooks that speak to the glory of the Islamic nation and the insidiousness of the Hindu state, says Harvards Shah. Pakistanis are conditioned by a lifetime of such rhetoric, although theres a growing recognition that this demonization has held Pakistan back, while [Indias economy] has grown by nearly 10 percent a year, he says. Widespread belief in an implacable Indian military threat has allowed Pakistans military to force elected officials to do its bidding, says Shah. Thats true even though the Pakistan Peoples Party, the countrys largest, has a radically different view, favoring establishing India as a trading partner, he says. Nuclear arsenals back the longstanding enmity. Neither India nor Pakistan has signed the 1968 Nuclear Nonproliferation

Treaty to limit the spread of nuclear weapons, and both have substantial nuclear arsenals, with Pakistans the larger. At least one Pakistani nuclear expert, A. Q. Khan, helped spread nuclear-arms technology to countries including Libya, Iran and North Korea in the 1990s. 33 If were lucky the nukes will cancel each other out, says the Middle East Institutes Weinbaum. When the U.S. pulls out of Afghanistan in 2014 or 2015, well have a Pakistan with 115 [nuclear] weapons, more than England or France, says Zia Mian, director of Princeton Universitys Program on Science and Global Security. In the case of a relatively weak country with nuclear arms, the old principle that such weapons deter conventional warfare doesnt hold, and more conventional fighting takes place

than there would be otherwise, contends S. Paul Kapur, an associate professor of national security at the Naval Postgraduate School. A weak power like Pakistan uses the nuke as a backstop that allows it to behave more aggressively toward its stronger enemy, Kapur argues. Because India realizes that full-blown war could expose it to a nuclear blast, it holds back its firepower when Pakistan attacks, he says. That dynamic has helped lead to nearly constant low-level conflict over the decades, Kapur says.

Troubled Alliances
akistans on-again, off-again alliance with the United States began in the early 1950s, when the United

www.cqresearcher.com

Aug. 5, 2011

665

U.S.-PAKISTAN RELATIONS

Bloody Regional Conflicts Color Pakistans History


Ethnic factionalism has been biggest obstacle to peace and stability.

ver since Pakistans 1947 independence, its status as a functioning nation has been threatened less by foreign enemies or militant Islamists than by internal strife. Cobbled together from territories in India with Muslim-majority populations that were differently managed by the British colonial government and that harbored a range of ethnic and tribal grievances, Pakistan has struggled to make a functioning whole out of a geographic and ethnic hodgepodge. 1 At independence, the new nation consisted of two areas widely separated by not only geography but also ethnic prejudice. West Pakistan was located in the northwest Indian subcontinent, while the densely populated province of East Bengal later East Pakistan and now Bangladesh lay far to the east, separated from the rest of the country by nearly 1,000 miles of territory belonging to Pakistans chief rival, India. Ostensibly bound by a shared Muslim tradition, East and West Pakistan in fact were light years apart culturally. West Pakistan consisted of many ethnic groups, of which Punjabis and Pathans were the most numerous, with Kashmiris and Sindhis also in the mix. Most Punjabis and Pathans never really thought of the East Bengalis as fellow countrymen or even true Muslims, wrote Anatol Lieven, a professor of war studies at Kings College, in London, and a senior research fellow at the New America Foundation, a centrist think tank in Washington. The Punjabis and Pathans also shared much British racial contempt for the Bengalis and contrasted their alleged passivity with the supposedly virile qualities of the ethnicities dubbed by the British as martial, the Punjabis and Pathans, Lieven wrote. 2 From the bifurcated nations inception, contempt for Bengalis led to mistreatment by the central government, located in West Pakistan. East Pakistan pays most of Pakistans taxes, provides most of the sterling and dollar earnings, but gets the short end of revenues, Time magazine reported in 1954. Even in his own area, the East Pakistani feels like a second-class citizen, exploited by carpetbagger West Pakistanis, who hold most of the top government posts and most of the top police jobs. 3 Last week the news seeped through tight censorship that

East Pakistans hatred had flared into appalling bloodshed, when the owners of the worlds newest, biggest jute mill at Narayanganj, East Pakistan, pampered their imported West Pakistan workers, gave them better jobs and a higher wage scale than the East Pakistan Bengalis, Time continued. When frustrated Bengalis responded with violence, the West Pakistanis in charge answered with greater violence. Soon two Bengali villages were in ashes, the water in two hyacinth-covered ponds was red from the blood of floating bodies, as many as 1,000 Bengalis were dead, and newspapers in West Pakistan thundered for punitive martial law in the east. 4 The conflict between the young countrys two halves seethed for another 17 years, with occasional violent outbreaks and ongoing economic exploitation of East Pakistan by the central government in the West. In December 1971, the situation flamed into war in the east after India intervened in favor of rebelling Bengalis. West Pakistans army, far from its base and surrounded by enemies, soon lost the fight, and West Pakistan lost the province, which became the independent nation of Bangladesh. West Pakistans harsh treatment of Bengal casts doubt on the whole effort to unify the nation around Islam, argues Sumit Ganguly, a professor of political science at Indiana University in Bloomington. If youre so concerned about Muslims, Ganguly asks, why did the Bengalis leave you in 1971 amid international cries of a Bengali genocide? The Bengali east is not the only region where Pakistans fractures are exposed. Before the British extended colonial rule throughout the Indian subcontinent in the 18th and 19th centuries, the sparsely populated tribal areas along the northern and western border of what is now Pakistan had jirgas councils that met to make decisions with input from the local clans, says Kimberly Marten, a professor of political science at Barnard College, Columbia University, in New York. Nobody was set up as a particularly permanent leader or was able to completely consolidate power in most of the region now known as the FATA, or Federally Administered Tribal Areas, Marten says. But the British colonial gov-

States sought support to fight communisms spread, says Kux of the Wilson center. Located just south of the Soviet Union, Pakistan was a handy U.S. listening post and air base for U-2 spy planes. Pakistan, meanwhile, hoped the alliance could strengthen its hand against India. While Pakistan initially sought the alliance, the Democrats kept putting them off and wouldnt commit to a

military relationship, says Kux. But when President Dwight D. Eisenhower took office in 1953, Republicans saw it differently. Secretary of State John Foster Dulles thought neutrality [in the Cold War, which India maintained] was immoral and, partly on those grounds, entered a military alliance with Indias chief rival, he says. Dulles never committed the United States to come to Pakistans military

aid against India, but only agreed to protect Pakistan against communist attack, in keeping with overall U.S. Cold War strategy, says Kux. Pakistan, however, didnt really register the caveat and felt betrayed on several occasions when the United States failed to send help, Kux says. That fact has contributed to the long, downward spiral of the alliance over the decades, he says. The relationship has repeatedly

666

CQ Researcher

Meanwhile, another western ernment essentially replaced border region, the vast province the more deliberative, jirgaof Balochistan, has waged an inbased governance system dependence battle that dates back and consolidated power to Pakistans own independence under hereditary tribal leadand has recently grown bloodier, ers, Marten says. according to the human rights orThe British sought to govganization Amnesty International. ern remote regions while Every month between October dealing with as few locals A Bengali woman performs a traditional dance during the 2010 and February 2011, there was as possible, she says. To that spring festival in Dhaka, capital of Bangladesh, on Feb. 13, an increase in the cases of alleged end, they analyzed each lo2010. Hostility between the Punjabis and Pathans of disappearances and unlawful cality to determine which West Pakistan and the Bengalis of East Pakistan killings of Baloch residents, whose family most often came out (now Bangladesh) led to war in 1971. bodies often turn up later showon top in disputes. They then established a system of inherited power in which colonial ing signs of torture, said Sam Zarifi, Amnestys Asia-Pacific director. 5 officials would deal only with these handpicked leaders and reBaloch groups blame the killings on Pakistani security forces, ward them and their descendants with arms and other which deny the allegations. Nevertheless, many of the victims resources to help them hold power securely. Thus was the sys- were abducted by [the] uniformed Frontier Corps a paratem of all-powerful local tribal warlords born, Marten says. military group from Pakistans outlying territories that was foundIf somebody created a problem for the British, the local ed by the British colonial government in 1907 and is currentBritish-approved malik or chieftain would impose a ly supported by both the Pakistani and U.S. governments remedy for which the accused had no appeal, she says. The in front of multiple witnesses, Amnesty reports. Meanwhile, central colonial government didnt penetrate there. It was the armed Baloch groups have also been implicated in a surge in official maliks who alone decided what the law said. targeted killings of non-Baloch civilians and government emAt Pakistans independence, the tradition continued, at least ployees, including teachers. . . . bringing the education system partly because it proved effective for Pakistan when they want- to [a] breaking point, says the group. 6 ed to fight off foreign powers, says Marten. For example, in Marcia Clemmitt 1948 Pakistan got the maliks to send troops to fight in the disputed territory of Kashmir (see p. 664). 1 For background, see Iftikhar Malik, The History of Pakistan (2008). But theres a price to pay, says Marten. With power in the 2 hands of wealthy, hereditary mini-monarchies, there has been 3 Anatol Lieven, Pakistan: A Hard Country (2011), Kindle Edition, Location 275. Pakistan: Butchery in Bengal, Time, May 31, 1954, www.time.com/time/maga no penetration of state institutions such as schools or courts zine/article/0,9171,819913,00.html. into many areas and thus little chance for those areas to de- 4 Ibid. velop into modern societies. The system creates extreme re- 5 Pakistan Must Provide Accountability for Rising Atrocities in Balochistan, sentment, says Marten. People know what the rest of the press statement, Amnesty International, Feb. 23, 2011, www.amnesty.org/en/ news-and-updates/pakistan-must-provide-accountability-rising-atrocities-balo world is like and know they havent gained any benefits of chistan-2011-02-23. 6 Ibid. modernity, she says.

waxed and waned. In the early 1970s, President Richard Nixon strengthened the tie to gain Pakistans help in opening relations with communist China, on Pakistans northeast border. The relationship soured in 1977 when President Jimmy Carters foreign policy stressed democratic institutions, human rights and nonproliferation of nuclear weapons. Pakistan struck out on all three, Kux says.

Beginning in 1979, the Soviet Union deployed troops in Afghanistan, Pakistans western neighbor, to help a fledgling socialist government squelch rebellion. In response, the CIA secretly began to fund and train Muslim groups the so-called Afghan mujahedeen for guerrilla warfare against the Soviets. Much of the training took place in Pakistan, where many Afghan refugees had fled.

Soon the United States was giving Pakistan $600 million in aid annually, half to the military and half designated as economic, says Kux. In 1989, a battered Soviet army retreated, and the United States once again lost interest in South Asia. Meanwhile, a decade of guerrilla warfare, with Pakistan as the staging area, had seen numerous militant groups spring up in Pakistans northwestern territories.

www.cqresearcher.com

AFP/Getty Images/Munir uz Zaman

Aug. 5, 2011

667

U.S.-PAKISTAN RELATIONS
Some groups conMany of the groups sidered friendly to Pakwere jihadists, enistan now mount attacks gaged in a struggle against national instituto defend Islam, tions. And some declare while some focused their intent to push ultraon regional or ethnic conservative Islamic rule grievances. into the Pakistani mainPakistans military stream, attacking girls and the ISI have schools, for example. covertly used such Meanwhile, many see groups to pursue the U.S.-Pakistan algeopolitical goals as liance crumbling as far back as 1947, many Americans conwhen the new govdemn Pakistan for harernment inherited boring bin Laden. 36 from Britain vast areas that were home to On May 23, three warring clans. 34 Over weeks after the AbbotU.S. Navy Seal commandos killed Al Qaeda leader Osama bin Laden in the years, many such tabad raid that killed a raid on this house in Abbottabad, Pakistan, on May 2. Conducted groups have been bin Laden, militants atwithout the Pakistani Armys knowledge, the raid inflamed useful to Pakistan in tacked Pakistans heavlongstanding tensions between the United States and Pakistan and weakened the shaky alliance between the pursuing border disily guarded Mehran two countries in the fight against Islamic extremism. putes with India and naval air base near Afghanistan and Karachi, destroying two squelching uprisings in the territories, the stated mission of forcing India to aircraft and killing several members leading the government to aim at cede Kashmir to Pakistans control. The of the armed forces. containing rather than destroying group is suspected of having connecThe attackers belonged to the Talthem, says the Middle East Institutes tions to numerous violent acts, includ- ibans Pakistan wing, an Al Qaedaing the devastating November 2008 at- affiliated group that Pakistan has Weinbaum. (See sidebar, p. 664.) 35 In 2001, the United States declared tacks on Indias largest city, Mumbai. fought, not to the Afghan Taliban, All this creates a problem with us, which Pakistan has tolerated if not a war on terror and sought Pakistans cooperation in eliminating all militant because were against terrorism, says encouraged. Both Taliban groups groups in the region. But, while promis- the Wilson centers Kux. Nevertheless, draw their members from the same ing and providing cooperation, its also partly our fault. When we ethnic tribe, the Pashtuns, whose traPakistan fought some groups while were leaning on the Pakistanis to ditional lands span the Pakistantolerating and supporting others that push the Soviets from Afghanistan, they Afghan border. The attack by the it believed would act in, not against, were leaning on the Taliban to actu- Pakistan Taliban was the revenge of ally do the job. Pakistans interest. martyrdom of Osama bin Laden and Pakistan has not fought the Afghan proof that we are still united and Taliban, for example, which arose in powerful, a spokesman for the group the 1990s to oppose a socialist-leaning told Reuters. 37 The naval-base attack alarmed PakAfghan government left by the Soviets. istanis. Early press reports suggested Because the other major Afghan rebel that India was involved, while subsegroup, the Northern Alliance, is allied quent reports raised the likelihood that with India, Pakistan has regarded the the attackers had help from military Afghan Taliban as its sole hedge against insiders. Did the Taliban raiders have Afghanistan becoming a permanent Ininformation inside the naval base? dian ally after the United States departs. Such a possibility cannot be ruled out, Some members of Pakistans military and intelligence services apparently have akistans attempt to handle vari- because the involvement of serving allied themselves with the Lashkar-eous militant groups in different personnel in several previous attacks Taiba, which formed around 1990 with ways has led to complications. Continued on p. 670

CURRENT SITUATION

Trouble at Home

668

CQ Researcher

AFP/Getty Images/Aamir Qureshi

At Issue:
Should the United States cut off aid to Pakistan?
yes

REP. DANA ROHRABACHER, R-CALIF.


CHAIRMAN, HOUSE FOREIGN RELATIONS OVERSIGHT AND INVESTIGATIONS SUBCOMMITTEE
WRITTEN FOR CQ RESEARCHER, JULY 2011

LISA CURTIS
SENIOR RESEARCH FELLOW FOR SOUTH ASIA, HERITAGE FOUNDATION
WRITTEN FOR CQ RESEARCHER, JULY 2011

akistan is not a friend of the United States. It has very different strategic interests. Over the past decade we have given Pakistan $18 billion to buy their help in the War on Terrorism, and it has become increasingly clear that strategy has failed. In the aftermath of the Navy Seal raid on Osama bin Ladens hideout, Islamabad demanded the U.S. reduce the number of our personnel in Pakistan. They arrested informants who helped us locate Bin Laden, after Pakistan gave him safe harbor for years. Mike Rodgers, R-Mich., chairman of the House Permanent Select Committee on Intelligence, said he believes there are elements of both the [Pakistani] military and intelligence service who in some way, both before and maybe even currently, provided some assistance to bin Laden. That is putting it mildly; the Pakistans intelligence service is the Taliban. Joint Chiefs of Staff Chairman Adm. Michael Mullen said in a newspaper interview, Its fairly well known that the ISI [Directorate of Inter-Services Intelligence] has a longstanding relationship with the Haqqani network. . . . Haqqani is supporting, funding and training fighters that are killing Americans and . . . coalition partners. It is suspected that Pakistan tips off insurgent groups about raids U.S., Afghan and coalition forces are planning. The Wall Street Journal reported the Pakistani prime minister traveled to Kabul and told Afghan President Hamid Karzai not to cooperate with America and to move towards their friends the Chinese. Another example of Pakistans divergent interests is its alignment with Communist China, against their common enemy India. Recently the Pakistani ambassador in Beijing said the relationship with China is higher than the mountains, deeper than the oceans, stronger than steel, dearer than eyesight, sweeter than honey and so on. In contrast, the Pakistani prime minister has reportedly denounced Americas imperial designs. The China-Pakistan alliance has included intelligence sharing, nuclear weapons development, infrastructure expansion, military training, arms sales and defense industrial cooperation. Their imperial design is to control Afghanistan (the reason Pakistan created the Taliban), drive out Western influence and contain India. Building the Gwadar naval base is part of Chinas String of Pearls strategy that includes bases in Burma, Sri Lanka, Bangladesh and elsewhere to contain India. American aid has not pulled Pakistan away from this alliance; it has only served to subsidize it and Chinas hegemonic designs. Recognizing that our strategic interests are no longer in Pakistan is long overdue, which is why I have introduced House Resolution 1790 to cut off all financial aid.
no

yes no
Aug. 5, 2011

utting off all U.S. aid to Pakistan would spell disaster for U.S. interests in the region. But sticking with the status quo providing generous assistance to a country with an increasingly defiant posture toward the United States also makes little sense. The Obama administrations announcement earlier this month that it planned to withhold $800 million in military aid to Pakistan sends a signal that the current state of affairs between the two countries is no longer sustainable. U.S. security assistance to Pakistan is legally conditioned on it meeting counterterrorism benchmarks, and we ought to hold firmly to the letter of the law. The recent reduction in security assistance makes sense, especially in light of Pakistans expulsion of 150 U.S. and British military trainers from the country and reports about Pakistani officials alerting terrorists to U.S. information on bomb-making facilities in the tribal border areas. But the United States must balance the need to demonstrate dissatisfaction with Pakistani actions with the goal of encouraging Pakistan to develop into a stable, moderate and economically vibrant country at peace with its neighbors. Strengthening Pakistans democratic institutions and civilian authorities offers the best chance to create a functional, mutually beneficial relationship. And the U.S. diminishes the chances of pushing the relationship in this direction if it only pursues punitive measures. Abruptly stopping all aid would also come at a steep price. Pakistan could react by cutting off NATO supply lines that run through Pakistan to coalition troops in Afghanistan. In addition, it may expel U.S. intelligence officials, thus denying the United States access to valuable information that helps the CIA track terrorists. The U.S. has a broader interest in maintaining steady relations with Pakistan and encouraging stability in the nucleararmed nation of 180 million. If the U.S. were to cut all aid to Pakistan and prevail on the International Monetary Fund and World Bank to do the same, the Pakistani economy would teeter on the brink of collapse. The chances of Pakistans nuclear arsenal falling into terrorist hands, while currently remote, would increase. The United States must carefully calibrate its large-scale aid programs to Pakistan in a way that helps shape their policies toward terrorism and at the same time assures them of U.S. goodwill and interest in maintaining close ties over the long term. The strategy may not succeed, but it is worth a try.

www.cqresearcher.com

669

U.S.-PAKISTAN RELATIONS
Continued from p. 668

has been well established, wrote the English-language paper Dawn. 38 Eight days after the attack, Syed Saleem Shahzad, Pakistan bureau chief for the newspaper Asia Times Online, turned up dead and tortured in a canal 90 miles from Pakistans capital, Islamabad. Shahzad had reported on alleged links between terrorists and the military and told friends that intelligence agents had threatened him. 39 The deeper underlying motive behind the attack on the naval air base was a reaction to massive internal crackdowns by the navy on Al Qaeda sympathizers in its ranks, Shahzad had written on May 27, two days before he disappeared. Navy insiders affiliated with terror groups provided information that helped militants enter and seize the base, he wrote. 40 Some groups in Pakistan also signal their intention to institute conservative Islamic law and squelch religious tolerance. In January, Salman Taseer, liberal governor of Pakistans most economically developed and populous province, Punjab, was assassinated by his bodyguard, apparently as retribution for his having supported a Christian woman whom clerics accused of heresy, which is punishable by death. 41 The bodyguard had gone through the same security program that the people guarding Pakistans nuclear weapons have gone through, evidence of the dire possibilities inherent in the rising Pakistani-on-Pakistani violence, observes the Stimson Centers Blechman. Acts of violence and religious intolerance once confined to remote border regions are creeping closer to urban areas, says Weinbaum, of the Middle East Institute. In the past, he says, Pakistanis could more easily dismiss these things, saying, Well, everybodys crazy out there. But in 2009, when video surfaced of Taliban men publicly flogging a 17-year-old girl ac-

cused of sexual immorality a mere 60 miles from Islamabad, the video turned many people against them for the first time, he says. Increasingly, it becomes clear that if you let these people continue to share influence, eventually youll have to share power with them, says Weinbaum. At least one militant group has declared that were coming to Islamabad to change the constitution, he says. Pakistans leaders have likely created a monster that eventually will turn on them. Its unclear how the public will respond to militant groups changing goals and strategies. Nearly two-thirds of Pakistans population is under age 25, and many are unemployed. Theyre very angry. Many dont have the education they need to succeed in a technological world, says retired Brig. Gen. Khan. Such conditions can fuel anti-establishment views, including sympathy for militant groups, he says. While some Pakistanis blame India or the United States for rising troubles, most of Pakistans problems are homegrown, including the long tradition of cronyism that stints public investment and rewards a favored few, says the Brookings Institutions Riedel. Because of whats essentially mass tax evasion on the part of Pakistans elite, only 2 percent of the population pays taxes, a dangerous situation that is one of the largest threats to stability, he says.

U.S. Aid
n the wake of bin Ladens death, some members of Congress called for ending aid to Pakistan. In July the Obama administration suspended, at least temporarily, $800 million in military aid. 42 I dont think our military assistance is serving the interests we are intending it to serve, said Rep. Howard Berman, D-Calif. What Im asking the adminis-

tration to do is focus on getting Pakistan to . . . go after extremist groups. If theyre not successful, we should reconsider giving this money. 43 Ironically, the calls to cut off aid come just as many South Asia experts say U.S. policy is improving, after many past blunders. Previous U.S. policy encouraged the dysfunctional civilian-military relationship, but the Obama administration is making efforts, though it hasnt made a breakthrough, to change the pattern, says Riedel. [Secretary of State] Hillary Clinton has said some spectacular things and means them, such as reiterating that while there is a war on terror, we also want to make Pakistans governance better and seek a long-term relationship, says Najam of Lahore University of Management Sciences. Theres a growing realization in D.C. that Washingtons method of engagement has boosted the militarys credibility in Pakistan, giving it leeway to do whatever it wants to do domestically, says Harvards Shah. That approach, he says, has curtailed development of Pakistans democracy and its economy. The Enhanced Partnership with Pakistan Act, which authorizes $1.5 billion in annual nonmilitary aid from 2010 through 2014, is a step in the right direction, some analysts say. 44 The legislation took all the things that people like me had been saying should be done, such as focusing on civilian development aid, says Najam. The legislation attempts to set up mechanisms to ensure that aid goes where its supposed to, a step that many say theyll welcome, if it works. When you look at the other post2001 aid, there was $750 million a year in nonmilitary aid, and nobody ever saw it, says Weinbaum. How much even got into the country, since so much was siphoned off into contractors? Maybe a third?

670

CQ Researcher

The aid laws reception in Pakistan has been anything but warm, however, especially from the Pakistani military and some political parties, which have complained that the accountability provisions smack of colonialism. This is less an assistance program than a treaty of surrender, wrote Ayaz Amir, a journalist and member of Pakistans Parliament. 45 The negative reaction surprised everyone, says Najam. Instead of sending a thank you note, there were new critics. He blames the skepticism partly on the countrys weak democracy. When people dont believe that anyone will give them a fair deal, it lowers trust in everything, such as by causing people to assume that the United States is always doing the worst things they can possibly do to Pakistanis, he says. In response to critics, two of the laws chief architects, Sen. Kerry, DMass., and Rep. Berman, issued a statement declaring that the legislation does not seek in any way to compromise Pakistans sovereignty . . . or micromanage any aspect of Pakistani military or civilian operations. 46 Harvards Shah calls the backpedaling a huge mistake, reinforcing the idea that the military can get away with murder simply by raising a ruckus about U.S. policies it doesnt like. It will take time for Pakistanis to adjust to the troubling notion that the growing violence they face comes from Muslim groups, not from the United States or Hindu India, says Shah. The media play a nasty, jingoistic theme, blaring conspiracy theories such as that the U.S. is coming after our nukes, and those messages reinforce what people were taught to believe since they were children that Muslims dont kill Muslims, while non-Muslims do, he says. The Iraq War, the things that have happened to Palestinians have bolstered such thinking as well, says Shah. Its simply easier to believe that somebody else is

doing it easier to believe that it cannot be our guys.

OUTLOOK
Accord with India

nless relations between Pakistan and India improve, Pakistans future, and peace in the region, will continue to be at risk. How India and Pakistan negotiate water rights for the Indus River will have a huge effect on both nations, especially Pakistan, which faces devastating water shortages as its population swells, says Brookings Cohen. The two countries operate one of the largest irrigation systems in the world, but there is no cooperation currently on a management plan to sustain it, he says. Pakistans military is likely to continue to cooperate with some violent groups as long as the military remains fixated on India as the nations chief enemy, many analysts say. The army has brainwashed themselves on India, says the Wilson centers Kux. Persuading the public that India is a frightening, close-by enemy has solidified the militarys hold on power, many analysts say. The military is the largest property holder and the largest highway builder, and the officer corps has the only health insurance in the country. So its no wonder they like the status quo, says Brookings Riedel. Meanwhile, India is very concerned that Pakistan will continue to wage asymmetric warfare on it by surreptitiously supporting militant groups, says Kapur, of the U.S. Naval Postgraduate School. Leaders of the 2008 Mumbai attacks, for example, are believed to have significant Pakistani

connections, although Pakistani military and intelligence officials largely deny the links. 47 Opinions vary on what role the United States should play in resolving the Pakistan-India conflict. Leaving India and Pakistan alone to do it on their own, as has been done, is counterproductive to the U.S., says the Postgraduate Schools Khan. The United States should become more active in discussion but should not take an official mediating role, says Riedel. The U.S. should focus on coming up with creative ideas for dealing with Kashmir and being a cheerleader for bilateral actions by Pakistan and India to overcome differences, he says. We have a window of opportunity because Indian Prime Minister Manmohan Singh, a Sikh who is the first nonHindu to hold the office, re-engaged Pakistan this spring, says Riedel. We have to encourage Singh and [Pakistan President] Zardari to reach deals that they can present to the Indian and Pakistani people, starting with easy stuff like transportation creating more crossing routes over the border, for example and trade, he says. Facilitating development of more commercial air routes would be a small step that would improve the reputation of both governments, says Riedel. Its easier to fly from the United States to any country in Europe or Latin American than it is to fly between India and Pakistan, he says. You have to fly to Doha in Qatar or elsewhere in the Middle East or Asia, then double back. Others dismiss the possibility of peace. The enmity has gotten worse in recent years, says Ganguly, of Indiana University. Singh is on a fools errand, thinking he can bring about rapprochement. I dont think thats going to happen. Pakistanis growing mistrust of the United States, exacerbated by a warming U.S.-India relationship, also presents problems.

www.cqresearcher.com

Aug. 5, 2011

671

U.S.-PAKISTAN RELATIONS
American policymakers are largely unaware that, because of our new wonderful relationship with India, Pakistan perceives us as having sided with them, says Brookings Cohen. We must talk with both. Im not optimistic that the trust issue can be overcome, given how policy is made, particularly at the congressional level, says Georgetowns Fair. India has a large lobbying presence, recently tutored by the [highly effective] Israeli lobby, while Pakistan has little Washington clout, so the policy process is skewed toward India. Furthermore, we have pretty much signaled that we have no problem with India being a regional hegemon the dominant South Asian state but we get annoyed when Pakistan makes childlike overtures to China. India, meanwhile, believes that its a global power with Pakistan as an albatross around its neck. So, rather than looking at the outstanding issues, it hopes theyll simply go away and puts off negotiating with Pakistan because tomorrow Pakistan will be weaker, Fair says.
Guardian [United Kingdom], May 6, 2011, www. guardian.co.uk/world/2011/may/06/osama-binladen-lived-two-rooms. 3 Musharraf Slams U.S. Over bin Laden Raid, Dawn.com, May 7, 2011, www.dawn.com/ 2011/05/07/musharraf-slams-us-over-bin-ladenraid.html; for background, see Kamran Haider, Pakistan Coalition to Move for Musharraf Impeachment, Reuters, Aug. 7, 2008, www.reuters. com/article/2008/08/07/us-pakistan-politics-id USISL15267920080807. 4 Congressman Poe to Introduce Pakistan Foreign Aid Accountability Act, press release, office of Rep. Ted Poe, May 3, 2011, http://poe. house.gov/News/DocumentSingle.aspx?Docu mentID=239188. 5 Hasan-Askari Rizvi, Analysis: Uncertain Future? Daily Times [Pakistan], Feb. 14, 2010, www.dailytimes.com.pk/default.asp?page=2010\ 02\14\story_14-2-2010_pg3_2. 6 The Failed States Index 2011, The Fund for Peace, www.foreignpolicy.com/articles/2011/ 06/17/2011_failed_states_index_interactive_map_ and_rankings. 7 Quoted in Aqil Shah, Time to Get Serious With Pakistan, Foreign Affairs, May 6, 2011, www.foreignaffairs.com/articles/67836/aqil-shah/ time-to-get-serious-with-pakistan. 8 C. Christine Fair, The Road from Abbottabad Leads to Lame Analysis, Huffington Post, June 21, 2011, www.huffingtonpost.com/ c-christine-fair/the-road-from-abbottabad-_b_ 881256.html. 9 Anatol Lieven, Pakistan: A Hard Country (2011), Kindle Edition, Location 275. 10 Susan B. Epstein and K. Alan Kronstadt, Pakistan: U.S. Foreign Assistance, Congressional Research Services, June 7, 2011, p. 5, www.fas.org/sgp/crs/row/R41856.pdf. 11 Curt Tarnoff and Marian Leonardo Lawson, Foreign Aid: An Introduction to U.S. Programs and Policy, Congressional Research Service, Feb. 10, 2011, www.fas.org/sgp/crs/ row/R40213.pdf, p. 14. For background, see Jayshree Bajoria, The U.S.-India Nuclear Deal, Council on Foreign Relations website, Nov. 5, 2010, www.cfr.org/ india/us-india-nuclear-deal/p9663. 13 The Failed States Index 2011, op. cit., www.foreignpolicy.com/articles/2011/06/17/ 2011_failed_states_index_interactive_map_and_ rankings. 14 Quoted in System Based on Justice Needed to Stem Terror: Shahbaz, PakTribune, June 13, 2011, www.paktribune.com/news/index.shtml? 240307. 15 Lieven, op. cit., Kindle Location 610. 16 For background, see Thomas J. Billitteri, Afghanistan Dilemma, CQ Researcher, Aug. 7, 2009, updated May 25, 2011. 17 Lieven, op. cit., Kindle Location 503. 18 Anatol Lieven, 5 Myths About Pakistan, The Washington Post, June 5, 2011, p. B2, www. washingtonpost.com/opinions/five-myths-aboutpakistan/2011/05/24/AGkPs4HH_story.html. 19 Quoted in Pete Kasperowicz, Rohrabacher Dismisses GOP Leadership Position on Aid to Pakistan, The Hill Floor Action Blog, May 6, 2011, http://thehill.com/blogs/floor-action/ house/159733-rohrabacher-dismisses-gop-leader ship-position-on-aid-to-pakistan. 20 Nitin Pai, Cut Pakistan Loose, The Wall Street Journal online, June 9, 2011, http://on line.wsj.com/article/SB10001424052702304259 304576373073934473728.html. 21 Lieven, op. cit., Pakistan: A Hard Country, Kindle Location 282. 22 Quoted in Should U.S. Continue Aid to Pakistan, Council on Foreign Relations website, May 17, 2011, www.cfr.org/pakistan/ should-us-continue-aid-pakistan/p25015. 23 Parag Khanna, Cut Military Aid Now, The New York Times Room for Debate Blog, May 10, 2011, www.nytimes.com/roomfordebate/2011/ 05/09/should-the-us-cut-off-aid-to-pakistan/cutmilitary-aid-now. 24 For background, see U.S. Report Ties Militancy to Pakistan School Woes, Reuters, Inform Education website, http://informeducationnet work.com/education/report-ties-militancy-pakis tan-school-woes-969901a. 25 For background, see Robert Kiener, Crisis in Pakistan, CQ Global Researcher, December 2008; Iftikhar Malik, The History of Pakistan (2008). 26 Hussain Haqqani, Pakistan: Between Mosque and Military (2005), p. 20. 27 In Pictures: Indias Partition, BBC News, http://news.bbc.co.uk/2/shared/spl/hi/pop_ups/
12

Notes
1 Remarks by the President on Osama Bin Laden, The White House Blog, May 2, 2011, www.whitehouse.gov/blog/2011/05/02/osamabin-laden-dead. 2 Peter Walker, Osama bin Laden Lived in Two Rooms for Five Years, Wife Says, The

About the Author


Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include Gridlock in Washington and Lies and Politics.

672

CQ Researcher

06/south_asia_india0s_partition/html/1.stm. 28 Mr. Jinnahs Address to the Constituent Assembly of Pakistan, Aug. 11, 1947, www.pakis tani.org/pakistan/legislation/constituent_address_ 11aug1947.html. 29 The Constitution of Pakistan, Part XII, Section 260, www.pakistani.org/pakistan/ constitution/part12.ch5.html. 30 Lieven, op. cit., Pakistan: A Hard Country, Kindle Location 420. 31 Quoted in Tim McGirk and Aravind Adiva, War at the Top of the World, TimeAsia, May 4, 2005, www.time.com/time/asia/covers/ 501050711/story.html. 32 Feroz Hassan Khan, Nuclear Security in Pakistan: Separating Myth from Reality, Arms Control Today, July/August 2009, www.arms control.org/act/2009_07-08/khan. 33 For background, see Douglas Frantz and Catherine Collins, The Nuclear Jihadist: The True Story of the Man Who Sold the Worlds Most Dangerous Secrets . . . and How We Could Have Stopped Him (2007). 34 For background, see C. Christine Fair, The Militant Challenge in Pakistan, Asia Policy, National Bureau of Asian Research, January 2011, pp. 105-137, www.nbr.org/publications/ asia_policy/AP11/AP11_F_MilitantPakistan.pdf, and C. Christine Fair, The U.S. Strategy in Afghanistan: Impacts Upon U.S. Interests in Pakistan, testimony before the House Armed Services Subcommittee on Oversight and Investigations, Nov. 5, 2009, http://home.com cast.net/~christine_fair/pubs/Fair_Pakistan_ Afghanistan_11_5_09.pdf. 35 For background, see Mark Magnier and Subhash Sharma, Terror Attacks Ravage Mumbai, Los Angeles Times, Nov. 27, 2008, http:// articles.latimes.com/print/2008/nov/27/world/ fg-mumbai27. 36 For background, see Thomas J. Billitteri, Drone Warfare, CQ Researcher, Aug. 6, 2010, pp. 653-676. 37 Faisal Aziz and Michael Georgy, Pakistan Retakes Naval Base After Attack, Reuters, May 23, 2011, www.reuters.com/article/2011/0 5/23/us-pakistan-blast-idUSTRE74L2I320110523. 38 PNS Mehran Attack, Dawn online, May 24, 2011, www.dawn.com/2011/05/24/pns-mehranattack.html. 39 For background, see Saleem Shahzad, Committee to Protect Journalists website, http://cpj. org/killed/2011/saleem-shahzad.php, and Amir Mir, Who Killed Syed Saleem Shahzad, Asia Times Online, June 4, 2011, www.atimes.com/ atimes/South_Asia/MF04Df03.html.

FOR MORE INFORMATION


All Things Pakistan, http://pakistaniat.com. Five-year archive (2006-2011) of the now-closed blog of Adil Najam, vice chancellor at Pakistans Lahore University of Management Sciences; posts news, essays and a lively comment section. Belfer Center for Science and International Affairs, John F. Kennedy School of Government, Harvard University, 79 JFK St., Cambridge, MA 02138; (617) 4951400; www.belfercenter.org. Research group of international-security scholars, including nuclear-arms experts. Center for Strategic and International Studies, 1800 K St., N.W., # 400, Washington, DC 20006-2230; (202) 887-0200; http://csis.org. Nonpartisan think tank pursuing research and policy recommendations in international affairs. Council on Foreign Relations, 1777 F St., N.W., Washington, DC 20006; (202) 509-8400; www.cfr.org. Washington- and New York City-based membership organization of international-relations experts providing research and commentary. Dawn.com, www.dawn.com. Pakistan-based English-language newspaper. Middle East Institute, 1761 N St., N.W., Washington, DC 20036-2882; (202) 785-1141; www.mei.edu. Research group providing analysis and information on Middle Eastern and South Asian affairs. New America Foundation, 1899 L St., N.W., Suite 400, Washington, DC 20036; (202) 986-2700; www.newamerica.net. Centrist think tank providing analysis of international issues, including terrorism. South Asia Hand, http://southasiahand.com. The blog of two retired State Department South Asia experts who post reports and commentary. Woodrow Wilson International Center for Scholars, Ronald Reagan Building and International Trade Center, One Woodrow Wilson Plaza, 1300 Pennsylvania Ave., N.W., Washington, DC 20004-3027; (202) 691-4000; www.wilsoncenter.org. International group of scholars providing commentary on world issues.
Syed Saleem Shahzad, Al-Qaeda Had Warned of Pakistan Strike, Asia Times Online, May 27, 2011, www.atimes.com/atimes/South_ Asia/ME27Df06.html. 41 For background, see Ed Husain, Explaining the Salman Taseer Murder, Council on Foreign Relations website, Jan. 7, 2011, www.cfr.org/pakis tan/explaining-salman-taseer-murder/p23755. 42 Jawayria Malik, Suspension of U.S. Aid to Pakistan, The News International [Pakistan], July 29, 2011, www.thenews.com.pk/Todays PrintDetail.aspx?ID=60067&Cat=6&dt=7/29/2011. 43 Quoted in Josh Rogin, The Cable blog, Foreign Policy, May 5, 2011, http://thecable. foreignpolicy.com/posts/2011/05/05/congress_ preparing_options_to_cut_pakistani_aid. 44 For background, see Mahanth Joishy, The Enhanced Partnership With Pakistan Act of 2009:
40

Challenges Along the Money Trail, Foreign Policy Digest, May 1, 2010, www.foreignpolicy digest.org/2010/05/01/the-enhanced-partnershipwith-pakistan-act-of-2009-challenges-along-themoney-trail. 45 Quoted in ibid. 46 Chairman Kerry and Chairman Berman Release Joint Explanatory Statement to Accompany Enhanced Partnership With Pakistan Act of 2009, press release, Office of Sen. John Kerry, Oct. 14, 2009, http://kerry. senate.gov/press/release/?id=34cf9b3a-27914dec-bc23-8611417466ed. 47 For background, see Sebastian Rotella, Pakistan and the Mumbai Attacks: The Untold Story, ProPublica, Jan. 26, 2011, www.propublica. org/article/pakistan-and-the-mumbai-attacksthe-untold-story/single.

www.cqresearcher.com

Aug. 5, 2011

673

Bibliography
Selected Sources
Books
Ali, Tariq, The Duel: Pakistan on the Flight Path of American Power, Scribner, 2009. A veteran Pakistani journalist describes his encounters with many key figures in Pakistans political past and argues that both longstanding Pakistani government corruption and faulty U.S. policy have played pernicious roles in creating the unstable state that exists today. Lieven, Anatol, Pakistan: A Hard Country, PublicAffairs, 2011. A professor of war studies at Kings College, London, describes how Pakistans complex society and difficult history have led to a militarized state with ineffective civilian institutions. Century Foundation, 2010, http://tcf.org/publications/ 2010/10/militancy-in-pakistan2019s-borderlands-impli cations-for-the-nation-and-for-afghan-policy/pdf. A senior advisor at Harvard Universitys Belfer Center on Science and International Affairs chronicles the rise of many militant leaders and groups in Pakistans remotest regions, beginning in the 19th century under British colonial rule. He argues that Pakistan must institute long-term political reforms in those regions or risk increasing violence and chaos. Cohen, Stephen P., The Future of Pakistan, Brookings Institution, January 2011, www.humansecuritygateway. com/documents/BROOKINGS_TheFutureofPakistan.pdf. A senior foreign policy fellow at the center-left think tank argues that a future for Pakistan as a moderate, mainly secular, economically strong country may be slipping out of reach, which could leave the countrys large nuclear arsenal up for grabs in a splintered state. If the United States and India, together with other nations, can work with Pakistans elite and its democracy-hungry middle class to strengthen civilian institutions and convince the military to loosen its grip on power, the country may pull itself back from the brink, Cohen argues. Fair, C. Christine, The Militant Challenge in Pakistan, Asia Policy, January 2011, pp. 105-137, www.isn.ethz. ch/isn/Digital-Library/Publications/Detail/?ots591=0c54e 3b3-1e9c-be1e-2c24-a6a8c7060233&lng=en&id=126157. An assistant professor in Georgetown Universitys School of Foreign Service recounts the long history of Pakistans use of small militant groups to pursue both foreign and domestic objectives. Fair, C. Christine, et al., Pakistan: Can the United States Secure an Insecure State? RAND Corporation, 2010, www. rand.org/pubs/monographs/MG910.html. Political instability and anti-Americanism in Pakistan have both increased since the country committed itself a decade ago to helping the United States fight Islamic terrorism. If Pakistani elites worked together to create a stronger civilian government to control the military and respond to public needs, the country might yet pull out of its downward spiral, RAND analysts write. The United States could help by providing assistance for development of civilian institutions and avoiding the temptation to support a strong man to pursue U.S. interests, they advise. Kronstadt, K. Alan, Pakistan-U.S. Relations, Congressional Research Service, Feb. 6, 2009, www.fas.org/sgp/crs/row/ RL33498.pdf. An analyst at Congress nonpartisan research arm chronicles U.S.-Pakistan relations since the late 1990s, when the United States first became focused on Islamic terrorism in the Middle East and South Asia.

Articles
Brown, Vahid, The Faade of Allegiance: Bin Ladins Dubious Pledge to Mullah Omar, CTC Sentinel, Jan. 13, 2010, www.ctc.usma.edu/posts/the-facade-of-allegiance-binladin%E2%80%99s-dubious-pledge-to-mullah-omar. A research fellow at West Points Combating Terrorism Center describes the complicated relationship between Al Qaeda and the Afghan Taliban, arguing that, contrary to claims that they are strongly allied, the two groups currently pursue conflicting objectives. Schaffer, Teresita C., The U.S. and Pakistan: The Third Divorce? South Asia Hand blog, May 17, 2011, http:// southasiahand.com/pakistan/the-u-s-and-pakistan-the-thirddivorce. A Brookings Institution senior fellow and retired State Department South Asia expert argues the United States and Pakistan must openly discuss how their objectives and constraints differ and then rebuild more limited but more achievable agreements about intelligence sharing and drone strikes.

Reports and Studies


Beyond Bullets and Bombs: Fixing the U.S. Approach to Development in Pakistan, Study Group on a U.S. Development Strategy in Pakistan, Center for Global Development, June 2011, www.cgdev.org/content/publications/ detail/1425136. Analysts for a Washington-based think tank concerned with inequality and poverty argue that U.S. Pakistan policy should be refocused on economy-building measures such as removing U.S. trade barriers to Pakistani goods and providing incentives such as risk insurance for investment in the countrys economy. Abbas, Hassan, Militancy in Pakistans Borderlands: Implications for the Nation and for Afghan Policy, The

674

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Aid
Arnoldy, Ben, Should the U.S. Cut Aid to Pakistan?, The Christian Science Monitor, May 26, 2011, www.csmoni tor.com/World/Asia-South-Central/2011/0526/Follow-themoney-Should-the-US-cut-aid-to-Pakistan. The World Bank is likely to follow U.S. footsteps on whether to cut aid to Pakistan. Rodriguez, Alex, Withholding Pakistan Aid May Cost U.S., Los Angeles Times, July 12, 2011, p. A4, articles.latimes. com/2011/jul/12/world/la-fg-pakistan-aid-20110712. Washingtons decision to withhold $800 million in military aid to Pakistan is unlikely to encourage the country to clamp down on militancy, according to experts. Subrahmanian, V. S., et al., Black Hole for Foreign Aid, The Washington Times, Sept. 27, 2010, p. B4, www.wash ingtontimes.com/news/2010/sep/24/black-hole-for-foreignaid/print/. As violence and terrorism emanating from Pakistan continue to increase, donors must ask themselves whether aid to Pakistan is improving international security. Khan, Raza, Pakistan Denies Militant Group Is Global Terror Threat, The Washington Times, Aug. 26, 2010, p. A1, www.washingtontimes.com/news/2010/aug/25/pakistandenies-militant-group-is-terror-threat/. Pakistanis lack of understanding and popular support of Lashkar-e-Taiba an Islamist militant group with ties to Al Qaeda have prevented Pakistans government from taking concrete action against the group. Khan, Zarar, Mullen Links Pakistans Spy Agency to Militant Group, The Boston Globe, April 21, 2011, p. A6, articles.boston.com/2011-04-21/news/29460051_1_haqqaninetwork-drone-strikes-american-missile-strike. Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, has accused Pakistans spy agency of links to a powerful militant faction fighting in Afghanistan.

Nuclear Arsenal
DeYoung, Karen, Pakistan Doubles Its Nuclear Arsenal, The Washington Post, Jan. 31, 2011, p. A1, www.washing tonpost.com/wp-dyn/content/article/2011/01/30/AR20110 13004136.html. Pakistans nuclear arsenal now totals about 100 deployed weapons, a doubling of its stockpile over the past several years, according to analysts estimates. Sanger, David E., and Eric Schmitt, Pakistani Arms Pose Challenge to U.S. Policy, The New York Times, Feb. 1, 2011, p. A1, www.nytimes.com/2011/02/01/world/asia/ 01policy.html?pagewanted=all. Pakistans determination to increase its nuclear arsenal poses a direct challenge to President Obamas goal of reducing nuclear stockpiles around the world.

Allies
Brulliard, Karin, Within Pakistani Military Ranks, Anger at U.S., The Washington Post, May 20, 2011, p. A8. The killing of Osama bin Laden in Pakistan has raised U.S. concerns that the Pakistani government is not committed to fighting terrorism. Cooper, Helene, Allies in War, But the Goals Clash, The New York Times, Oct. 10, 2010, p. WK1, www.nytimes.com/ 2010/10/10/weekinreview/10cooper.html. The United States and Pakistan may remain committed to fighting the Taliban, but their overall goals in Afghanistan are not symmetrical. Riedel, Bruce, Our Difficult, Invaluable Ally, Los Angeles Times, Aug. 1, 2010, p. A30, articles.latimes.com/2010/aug/ 01/opinion/la-oe-riedel-pakistan-20100801. Pakistan is a crucial ally in winning the Afghan war, but in the absence of firm commitments from the United States the Pakistani government will continue to hedge its bets.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

Militant Groups
Gall, Carlotta, Pakistani Military Still Cultivates Militant Groups, a Former Fighter Says, The New York Times, July 4, 2011, p. A4, www.nytimes.com/2011/07/04/world/ asia/04pakistan.html?pagewanted=all. The Pakistani military continues to nurture a broad range of militant groups.

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

Aug. 5, 2011

675

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Government Secrecy, 2/11 Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10

Education
School Reform, 4/11 Crime on Campus, 2/11 Career Colleges, 1/11 Value of a College Education, 11/09

Health/Safety
Teen Drug Use, 6/11 Organ Donations, 4/11 Genes and Health, 1/11 Food Safety, 12/10 Preventing Bullying, 12/10

Crime/Law
Class Action Lawsuits, 5/11 Cameras in the Courtroom, 1/11 Death Penalty Debates, 11/10 Drone Warfare, 8/10 Prosecuting Terrorists, 3/10 Legalizing Marijuana, 6/09

Environment/Society
Aging Population, 7/11 Nuclear Power, 6/11 Business Ethics, 5/11 Artificial Intelligence, 4/11 Wind Power, 4/11 Women and Sports, 3/11

Politics/Economy
Reviving Manufacturing, 7/11 Foreign Aid and National Security, 6/11 Public-Employee Unions, 4/11 Lies and Politics, 2/11 Income Inequality, 12/10

Upcoming Reports
Restoring the Gulf Coast, 8/26/11 Remembering 9/11, 9/2/11 Violent Weather, 9/9/11

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

CQ
Is President Obama pursuing the right course?

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

Afghanistan Dilemma

early eight years ago, U.S. forces first entered Afghanistan to pursue the al Qaeda terrorists who plotted the Sept. 11 terror attacks. American troops are still there today, along with thousands

of NATO forces. Under a new strategy crafted by the Obama administration, military leaders are trying to deny terrorists a permanent foothold in the impoverished Central Asian country and in neighboring, nuclear-armed Pakistan, whose western border region has become a sanctuary for Taliban and al Qaeda forces. The Afghanistan-Pakistan conflict Af-Pak in diplomatic parlance poses huge challenges ranging from rampant corruption within Afghanistans police forces to a multibillion-dollar opium economy that funds the insurgency. But those problems pale in comparison with the ultimate nightmare scenario: Pakistans nuclear weapons falling into the hands of terrorists, which foreign-policy experts say has become a real possibility.
A U.S. Marine frisks an Afghan man in southern Helmand Province on July 5. Marines began a massive assault in the area in July to quash insurgent violence and strengthen Afghanistans legal and security institutions.

I N S I D E

THIS REPORT
THE ISSUES ......................671 CHRONOLOGY ..................679 BACKGROUND ..................680 CURRENT SITUATION ..........684 AT ISSUE ........................685 OUTLOOK........................687 BIBLIOGRAPHY..................690 THE NEXT STEP ................691

CQ Researcher Aug. 7, 2009 www.cqresearcher.com Volume 19, Number 28 Pages 669-692


RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

AFGHANISTAN DILEMMA
THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
Aug. 7, 2009 Volume 19, Number 28

671

Is the Obama administration pursuing the right course in Afghanistan? Are troop levels in Afghanistan adequate? Should the United States negotiate with the Taliban?

672 673 674 676 677 679 680 682 685

An Unstable Nation in a Volatile Neighborhood Afghanistan is beset by desperate poverty and an unstable central government. Civilian Toll Worries Gates Defense secretary calls casualties a strategic problem. Opium Trade Funds Taliban, Official Corruption Its clear that drug money is paying for the Talibans operational costs. Social Conditions Worsened in Many Areas Afghan citizens cite decline from 2007 to 2008. Afghanistan Ranks Low in Developing World It was second-weakest state in developing world in 2008. Chronology Key events since 1838. The Many Faces of the Taliban Adherents include violent warlords and Islamist extremists U.S. Troop Deaths Rose Steadily Improvised explosive devices caused half the deaths in 2008. At Issue Should the president announce an exit strategy?

BACKGROUND

680 681 682 683

Graveyard of Empires Afghanistans remote terrain thwarted many conquerors. Chaos and War In the 1970s, leftists and Islamists wracked Afghanistan. Soviet Invasion The 1979 occupation lasted a decade. A Weakening Government The collapse of the Taliban after the U.S.-led invasion led to political instability.

tcolin@cqpress.com ASSISTANT MANAGING EDITOR: Kathy Koch kkoch@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Thomas J. Billitteri, Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Rachel Cox, Sarah Glazer, Alan Greenblatt, Reed Karaim Barbara Mantel, Patrick Marshall, Tom Price, Jennifer Weeks DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT-CHECKING: Eugene J. Gabler, Michelle Harris

MANAGING EDITOR: Thomas J. Colin

A Division of SAGE

PRESIDENT AND PUBLISHER:

John A. Jenkins
EXECUTIVE DIRECTOR, REFERENCE INFORMATION GROUP:

CURRENT SITUATION

Alix B. Vance
Copyright 2009 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except; (Jan. wk. 1) (May wk. 4) (July wks. 1, 2) (Aug. wks. 3, 4) (Nov. wk. 4) and (Dec. wk. 4), by CQ Press, a division of SAGE Publications. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020, ext. 1906. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

684 686 687

Measurable Metrics President Obama says the Afghanistan war will be carefully assessed. NATOs Cold Shoulder Europe has rebuffed calls for more troops. Americanizing the War Obama says Europes contributions to the war are critical.

FOR FURTHER RESEARCH

689 690 691 691

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

OUTLOOK

687

More Violence

Strategists fear the Taliban will disrupt this months presidential election.

Cover: Getty Images/Joe Raedle

670

CQ Researcher

Afghanistan Dilemma
BY THOMAS J. BILLITTERI
poses a witchs brew of challenges: fanatical Taliban and al Qaeda fighters, rampant n the outskirts of corruption within Afghanistans Now Zad, a Taliban homegrown police force and stronghold in southother institutions, not enough ern Afghanistans violent Afghan National Army forces Helmand Province, the past, to help with the fighting and present and future of the war a multibillion-dollar opium in Afghanistan came together economy that supplies revthis summer. enue to the insurgents. The past: After the U.S.-led But those problems pale invasion of Afghanistan in in comparison with what 2001, Now Zad and its surforeign-policy experts call rounding poppy fields and the ultimate nightmare: stout compounds were largely Pakistans nuclear weapons tranquil, thanks in part to the falling into the hands of jiclinics and wells that Western hadists and terrorists, a scemoney helped to build in the nario that has become more area. But three years ago, credible this summer as suiwhen the war in Iraq intensicide bombers and Taliban fied and the Bush administrafighters have stepped up attion shifted attention from tacks in Pakistani cities and An Afghan security officer guards two tons of burning Afghanistan to Iraq, insurgents rural areas, using Pakistans heroin, opium and hashish near Kabul, Afghanistans moved in, driving out most of lawless western border recapital, on March 18, 2009. Nearly eight years after U.S.Now Zads 35,000 residents gion as a sanctuary. 3 led forces first entered Afghanistan, many challenges still and foreign aid workers. The fact that Pakistan has confront the U.S., Afghan and coalition forces seeking to stabilize the country: fanatical Taliban and al Qaeda The present: This summer nuclear weapons and the fighters, rampant police corruption, shortages of U.S. Marines engaged in question of the security of Afghan troops and a multibillion-dollar opium withering firefights with those weapons presses very economy that supports the insurgents. Taliban militants dug in on hard on the minds of Amerthe northern fringes of the town and faces what many consider his biggest ican defense planners and on the mind foreign-policy challenge: bringing sta- of the president, says Bruce Riedel, who in nearby fields and orchards. The future: The situation in Now bility and security to Afghanistan and led a 60-day strategic policy review of Zad and the surrounding war-torn re- denying Islamist militants a permanent Afghanistan and Pakistan for the gion of southern Afghanistan is a mi- foothold there and in neighboring Obama administration. If you didnt crocosm of what confronts the Obama nuclear-armed Pakistan. have that angle, adds Riedel, who has The challenge is heightened by the since returned to his post as a Brookadministration as it tries to smash the Taliban, defang al Qaeda and stabilize wars growing casualty figures. July was ings Institution senior fellow, I think governance in Afghanistan. In many the deadliest month in Afghanistan for this would all be notched down one ways, wrote an Associated Press re- U.S. soldiers since the 2001 invasion level of concern. porter following the fighting, Now Zad began, with 43 killed. 2 Twenty-two Pakistan is important to the Afghan symbolizes what went wrong in British troops also died last month, in- conflict for reasons that go beyond its Afghanistan and the enormous chal- cluding eight in a 24-hour period. In nuclear arsenal. Pakistan has been a nearly eight years of war in Afghanistan, breeding ground for much of the radlenges facing the United States. 1 Nearly eight years after U.S.-led 767 U.S. troops have died there, along ical ideology that has taken root in forces first entered Afghanistan to pur- with 520 coalition forces, according to Afghanistan. A failure of governance sue al Qaeda and its Taliban allies in the Web site iCasualties.org. Thousands in Afghanistan would leave a void that the wake of the Sept. 11, 2001, ter- of Afghan civilians also have died. Islamist militants on either side of the The Afghanistan-Pakistan conflict border could wind up filling, further rorist attacks, the country remains in chaos, and President Barack Obama Af-Pak in diplomatic parlance destabilizing the entire region.

THE ISSUES

www.cqresearcher.com

AP Photo/Fraidoon Pooyaa

Aug. 7, 2009

671

AFGHANISTAN DILEMMA
An Unstable Nation in a Volatile Neighborhood
Almost as large as Texas, Afghanistan faces Texas-size problems, including desperate poverty, an economy dominated by illicit drugs and an unstable central government beset by Taliban militants. Afghanistans instability is compounded by longstanding tensions between neighboring Pakistan and India, both armed with nuclear weapons. Many Western experts also say Pakistan has failed, despite promises, to rein in Taliban and other Islamist extremists.
TURKMENISTAN IRAN
Mazar-e-Sharif

UZBEKISTAN

TAJIKISTAN

CHINA

U ND HI
Herat Farah

KUSH

A F G H A N I S T A N

Kabul
Jalalabad

Tora Bora

Khyber Pass

Islamabad Kandahar

INDIA

PA K I S TA N

Quetta

Lahore

In March Obama announced what he called a comprehensive, new strategy for Afghanistan and Pakistan that rests on a clear and focused goal for the region: to disrupt, dismantle and defeat al Qaeda in Pakistan and Afghanistan, and to prevent their return to either country in the future. 4 Key to the strategy is winning over the local Afghan population by protecting it from insurgent violence and improving governance, security and economic development. 5 The effort includes new troop deployments a total of 21,000 additional U.S. soldiers to fight the insurgency in Afghanistan and train Afghan security forces, plus other strategic resources. By years end, U.S. troop levels are expected to reach about 68,000. NATO countries and other allies currently are supplying another 32,000 or so, though many are engaged in development and relief work but not offensive combat operations. 6

An immediate goal is to heighten security in Afghanistan in the run-up to a high-profile presidential election on Aug. 20. None of Afghan President Hamid Karzais main challengers are expected to beat him flat out, The Washington Post noted, but some observers said other candidates could do well enough as a group to force a second round of polling, partly because of recent blunders by Karzai and partly because many Afghans are looking for alternative leadership at a time of sustained insurgent violence, economic stagnation and political drift. 7 Observers say Obamas approach to the Af-Pak conflict represents a middle path between counterterrorism and counterinsurgency protecting civilians, relying on them for information on the enemy and providing aid to build up a countrys social and physical infrastructure and democratic institutions. 8

Among the most notable features of the new approach is a vow among military officials beginning with Gen. Stanley A. McChrystal, the newly appointed commander of U.S. and NATO forces in Afghanistan to avoid civilian casualties. McChrystal pledged to follow a holistic approach in which protecting civilians takes precedence over killing militants. 9 I expect stiff fighting ahead, McChrystal told the Senate Armed Services Committee at his confirmation hearing. But the measure of effectiveness will not be the number of enemy killed, he added, it will be the number of Afghans shielded from violence. 10 The United Nations said that 1,013 civilians died in the first six months of 2009, up from 818 during the same period last year. The U.N. said 310 deaths were attributed to pro-government forces, with about two-thirds caused by U.S. air strikes. 11 As part of his strategy, Obama called for a dramatic increase in the number of agricultural specialists, educators, engineers and lawyers dispatched to help the Afghan government serve its people and develop an economy that isnt dominated by illicit drugs. He also supports economic-development aid to Pakistan, including legislation to provide $1.5 billion annually over the next five years. But Obamas approach on Pakistan also reflects long-held Western concerns that the Pakistani government has been at best negligent and perhaps downright obstructionist in bringing Taliban and other Islamist extremists to heel. Pakistan, whose situation is complicated by longstanding tensions with nearby India, will get no free pass in exchange for the aid, Obama vowed. We will not, and cannot, provide a blank check, he said, because Pakistan had shown years of mixed results in rooting out terrorism. 12 As Obama goes after the insurgency, his Af-Pak policy is under the microscope here at home.

672

CQ Researcher

Some have demanded that the administration describe its plans for ending military operations in Afghanistan. A measure proposed by Rep. Jim McGovern, D-Mass., requiring a report from the Obama administration by the end of the year on its exit strategy, drew significant support from Democrats but was defeated in the House this summer amid heavy Republican opposition. And some critics question the validity of Obamas rationale for the fighting in Afghanistan, particularly the assumption that if the Taliban were victorious they would invite al Qaeda to return to Afghanistan and use it as a base for its global jihad. John Mueller, a political science professor at Ohio State University and author of Overblown: How Politicians and the Terrorism Industry Inflate National Security Threats, and Why We Believe Them, contends that al Qaeda does not need Afghanistan as a base. The 2001 terrorist attacks were orchestrated mostly from Hamburg, Germany, he points out. Whats more, he argues, distinct tensions exist between al Qaeda and the Taliban. Even if the Taliban were to prevail in Afghanistan, he says, they would not particularly want al Qaeda back. Nor, he says, is it clear that al Qaeda would again view Afghanistan as a safe haven. 13 But administration officials disagree. The Taliban are the frontrunners for al Qaeda, said Richard Holbrooke, Obamas special envoy to Pakistan and Afghanistan. If they succeed in Afghanistan, without any shadow of a doubt al Qaeda would move back into Afghanistan, set up a larger presence, recruit more people and pursue its objectives against the United States even more aggressively. 14 As the war in Afghanistan continues, here are some of the questions people are asking:

Gates Warns About Civilian Deaths


The number of civilians killed in Afghanistan more than doubled from 2006 to 2008, but based on the toll for the rst six months of 2009, the rate may be somewhat lower in 2009 (graph at left). In 2008 nearly half of the civilian deaths were caused by executions or suicide and IED (improvised explosive device) attacks by the Taliban and other anti-government groups (graph at right). Concern over civilian deaths prompted Defense Secretary Robert Gates to call such casualties one of our greatest strategic vulnerabilities. Estimated Afghan Civilian Fatalities, 2006-2009*
(from ghting between pro-government forces and opposition groups)
2,500 2,000 1,500 1,000 500 0 2006 2007 2008 2009* 929 1,523 893 2,118 Suicide/ IED attacks by antigovernment entities**

Causes of Afghan Civilian Fatalities, 2008


Executions by antigovernment entities

13%

Other incidents

25%
Air strikes, pro-govt forces

34%

26%

Non-attributable Armed opposition groups Government and pro-government forces

Escalation of force by pro-govt forces

2%

* Through June; the total is 1,013, according to the U.N. ** Includes Taliban and other insurgents Source: Afghan Index: Tracking Variables of Reconstruction and Security in Post-9/11 Afghanistan, Brookings Institution, July 15, 2009

Is the Obama administration pursuing the right course in Afghanistan? Early in July, thousands of U.S. Marines began a massive assault in Afghanistans Helmand River valley, the biggest American offensive of the Obama presidency and a key test of his new strategy in the region. The operation included 4,000 troops from the 2nd Marine Expeditionary Brigade, who poured into the area in helicopters and armored vehicles. The Marines have run into stiff opposition, but the ultimate goal remains intact: protect local Afghans from insurgent violence and strengthen Afghanistans legal, judicial and security institutions.

Our focus must be on getting this [Afghan] government back up on its feet, Brig. Gen. Lawrence D. Nicholson, commander of the brigade, told his officers. 15 But the mission is fraught with huge risks and challenges, and skepticism about it runs deep, even among some of Obamas fellow Democrats. In May, House Appropriations Chairman David Obey, D-Wis., suggested that if the White House doesnt demonstrate progress by next year, funding for the war could slow. Asked if he could see Congress halting funding completely, Obey said, If it becomes a fools errand, I would hope so, according to The Hill newspaper. The

www.cqresearcher.com

Aug. 7, 2009

673

AFGHANISTAN DILEMMA

Opium Trade Funds Taliban, Official Corruption


Its clear that drug money is paying for the Talibans operational costs.
n the crowded Afghan capital of Kabul, opulent marble homes sit behind guard houses and razor wire. Most are owned by Afghan officials or people connected to them, men who make a few hundred dollars a month as government employees but are driven around in small convoys of armored SUVs that cost tens of thousands of dollars, reporter Tom Lasseter noted recently. [M]any of the houses were built with profits harvested from opium poppy fields in the southern provinces of Helmand and Kandahar. 1 The so-called poppy palaces are outward signs of a cancer eating Afghanistan to its core: illicit drugs and narcoterrorism, aided by official corruption. According to the United Nations Office on Drugs and Crime, Afghanistan grows more than 90 percent of the worlds opium, which is used to produce heroin and morphine. 2 Total opium production for 2008 was estimated at 7,700 metric tons, more than double the 2002 level. 3 In her new book, Seeds of Terror: How Heroin Is Bankrolling the Taliban and Al Qaeda, journalist Gretchen Peters says militant groups are raising hundreds of millions of dollars a year from the opium trade. Its clear that drug money is paying for the Talibans operational costs within Afghanistan, she told Time magazine. That means that every time a U.S. soldier is killed in an IED attack or a shootout with militants, drug money helped pay for that bomb or paid the militants who placed it. . . . The Taliban have now thrown off their old masters and are a full-fledged criminal force on both sides of the [Afghan-Pakistan] border. 4 The biggest challenge to curbing the drug trade, Peters said,

is corruption. As much money as the insurgents are earning off the drug trade, corrupt officials in Afghanistan and Pakistan are earning even more, she said. Its going to be very complex for the U.S. and for the international community, for NATO, to find reliable and trustworthy partners to work with. I dont think that it is widely understood how high up the corruption goes within the Pakistani government, particularly within their military and intelligence forces. In recent weeks, the Obama administration has shifted U.S. drug policy in Afghanistan from trying to eradicate poppy fields to seizing drugs and related supplies and helping farmers grow alternative crops. 5 The Western policies against the opium crop, the poppy crop, have been a failure, Richard C. Holbrooke, the administrations special representative for Afghanistan and Pakistan, said. They did not result in any damage to the Taliban, but they put farmers out of work and they alienated people and drove people into the arms of the Taliban. 6 The Bush administration had advocated intense efforts to eradicate poppy fields, but some experts have said the approach is counterproductive. The United States should de-emphasize opium eradication efforts, Air Force Lt. Col. John A. Glaze wrote in a 2007 report for the U.S. Army War College. It recommended a multipronged strategy including higher troop levels, more economic aid for Afghanistan, pursuit of drug lords and corrupt officials and development of alternative livelihoods for Afghans, plus exploration of the possibility of participating in the market for legal opiates used for morphine and other medicines.

success or failure of the Afghan policy is not in the hands of the president or Congress, Obey said, but in the hands of the practicing politicians in Pakistan and Afghanistan. And Im dubious about those hands. 16 Much of the American public is similarly dubious. A June New York TimesCBS News poll found that 55 percent of respondents believed the war in Afghanistan was going somewhat or very badly for the United States, an increase of two points since April. Only 2 percent said the war was going very well. 17 Critics question the prospect of success in a country long divided by ethnic rivalries, a resistance to central gov-

ernance and rampant graft that ranges from demands for petty bribes to drug corruption in high levels of government. 18 To pacify the place in the absence of reconciliation of the main tribes, * youd need a very large national army one that would have to be financially subsidized by outside powers, says Stephen Walt, a professor of international affairs at Harvard Universitys Kennedy School of Government. Such an army would have to be drawn from all these groups and imbued with cen* The main ethnic groups are the Pashtun (42%); Tajik (27%), Hazara (9%), Uzbek (9%), Aimak (4%), Turkmen (3%) and Baloch (2%).

tral loyalty to the state. And theres never been a strong central state. Politics [in Afghanistan is defined by] factional alignments. And, he adds, the challenge is compounded by levels of corruption and lack of institutions. Were sort of trying to impart a Western model of how the Afghan state should be created with a central government, ministries, defense and so on. Thats not the way Afghanistan has been run for centuries. The idea that we know how to do that, especially in the short term, Walt says, is far-fetched. Malou Innocent, a foreign-policy analyst at the conservative Cato Institute think tank, says America faces the

674

CQ Researcher

U.S.-backed eradication efforts have been ineffective and have resulted in turning Afghans against U.S. and NATO forces . . . , Glaze wrote. While the process of eradication lends itself well to the use of flashy metrics such as acres eradicated, eradication without provision for long-term alternative livelihoods is devastating Afghans poor farmers without addressing root causes. 7 Brookings Institution scholar Vanda Felbab-Brown, an expert on Afghanistans opium-poppy economy, says rural development, not poppy eradication, is the best way to attack the drug economy. Any massive eradication right now . . . , we would lose Afghanistan, she says. In the absence of resources available to farmers, any eradication would just prompt massive destabilization and invite the Taliban in. Felbab-Brown says the development of new crops is key, but that such crops must be high-labor-intensive, high-value crops that offer more than subsistence income. People dont have to become rich, but they cannot continue existing in excruciating poverty. Many people will be willing and motivated to switch to a legal crop, she says, but it needs to offer some chance of advancement. Vegetable, fruit and horticultural crops are better options, Felbab-Brown says. Wheat, on the other hand, has no traction because the prices are low, people in vast parts of the country dont have enough land to make the crop pay, and wheat is much less labor-intensive than poppy growing, affording fewer opportunities for employment, she says. For rural development to offer an alternative to illicit poppy production, it must include not only access to land, legal mi-

crocredit and other features, but security for Afghan farmers, Felbab-Brown stresses. The lack of security in many ways is the key structural driver of illicit crop cultivation, because the risks of cultivating legal crops in insecure settings are just tremendous, she says. Rural development, for example, needs to involve roads, and not just their physical presence but also security on the roads, Felbab-Brown says. Roads are now insecure due to both the insurgents and the Afghan National Police. In much of the south, travel on the road is three times as expensive as travel in the north because of the number of bribes that one needs to pay at check stops. For many people, simply to take crops from Laskar Gah to Kandahar, by the time they pay the bribes that they need to pay, they will have lost all profit.
1 Tom Lasseter, Western Military Looked Other Way as the Afghan Drug Trade Boomed, Charlotte Observer, May 10, 2009, p. 13A. 2 World Drug Report 2009 Highlights Links Between Drugs and Crime, United Nations Office on Drugs and Crime, June 2009, www.unodc.org/unodc/ en/press/releases/2009/june/world-drug-report-2009-highlights-links-betweendrugs-and-crime.html. 3 World Drug Report 2009, United Nations Office on Drugs and Crime, www.unodc.org/documents/wdr/WDR_2009/WDR2009_eng_web.pdf. 4 Bobby Ghosh, Q&A: Fighting the New Narcoterrorism Syndicates, Time, July 17, 2009, www.time.com/time/nation/article/0,8599,1910935,00.html. 5 Rachel Donadio, New Course for Antidrug Efforts in Afghanistan, The New York Times, June 28, 2009, www.nytimes.com/2009/06/28/world/asia/28holbrooke.html?scp=1&sq=holbrooke+drug%20policy+afghanistan+rome&st=cse. 6 Quoted in ibid. 7 John A. Glaze, Opium and Afghanistan: Reassessing U.S. Counternarcotics Strategy, U.S. Army War College, www.strategicstudiesinstitute.army.mil/Pubs/Dis play.Cfm?pubID=804.

prospect of an ambiguous victory because it is caught amid long-simmering tensions between Pakistan and India, a dynamic, she argues, that the Obama administration has failed to adequately take into account. Pakistan has long feared an alliance between Afghanistan and India. To hedge its bets, Pakistan aids the insurgency in Afghanistan by providing shelter to the Taliban and other militants, Innocent says. At the same time, she says, Pakistan has accused India of funneling weapons through Afghanistan to separatists in Pakistans unstable Balochistan province. 19 The ongoing India-Pakistan dispute over Kashmir also remains a cause of friction in the region.

The regional dynamics are too intractable, Innocent says. The countries in the region have an incentive to foment and maintain Afghanistans instability. So we should be looking to get out of Afghanistan within a reasonable time frame say at least in the next five years. Innocent sees a U.S. role in training Afghanistans own security forces and says covert operations against specific insurgent targets could make sense. But the Taliban threat centered along the Afghanistan-Pakistan border cannot be definitively eradicated, she argues. We can contain the militancy and weaken it, she says, but we cant believe we can have a victory with a capital V.

But Peter Bergen, a counterterrorism analyst and senior fellow at the New America Foundation, is more sanguine about the wars prospects in Afghanistan. In a Washington Monthly article, he challenged those who say Afghanistan is an unconquerable and ungovernable graveyard of empires where foreign armies have come to ignominious ends. One telling fact, in Bergens view, is that the Afghan people themselves, the center of gravity in a counterinsurgency, are rooting for us to win. He cited BBC/ABC polling data indicating that 58 percent of Afghans named the Taliban viewed favorably by only 7 percent of Afghans

www.cqresearcher.com

Aug. 7, 2009

675

AFGHANISTAN DILEMMA
Social Conditions Worsened in Many Areas
Living conditions deteriorated between 2007 and 2008 in areas such as education, water quality and availability of electricity, according to surveys of Afghan citizens. Condition of Infrastructure in Localities, 2007 and 2008
Very/Quite Good (%) 2007 2008 Quite/Very Bad (%) 2007 2008

act quickly and decisively in a number of ways, including giving the Afghan government the necessary legitimacy and capacity at national, regional and local levels, reducing official corruption and creating a level of actual governance that can ensure security and stability. 22 Are troop levels in Afghanistan adequate? When the Marine assault in Helmand Province got under way this summer, only about 400 effective Afghan fighters had joined the American force of nearly 4,000, according to The New York Times, citing information from Gen. Nicholson. 23 Commanders expressed concern that not enough homegrown forces were available to fight the insurgency and build ties with the local population. Gen. Nicholson said, Im not going to sugarcoat it. The fact of the matter is, we dont have enough Afghan forces. And Id like more. 24 Capt. Brian Huysman, a Marine company commander, said the lack of Afghan forces is absolutely our Achilles heel. 25 Weve seen a shift over the past few years to put a lot more resources, including money and attention, toward building Afghan national security forces, army and police forces, Seth Jones, a political scientist at the RAND Corporation, told the NewsHour on PBS. I think the problem that were running into on the ground in Afghanistan, though: There are not enough Afghan national security forces and coalition forces to do what Gen. McChrystal and others want, and that is to protect the local population. 26 Worries about the size of the Afghan force have been accompanied by concerns over whether U.S. forces are adequate to overcome the Taliban threat and secure local areas long enough to ensure security and build governance capabilities. According to a report this summer by veteran Washington Post reporter Bob

Availability of clean drinking water Availability of water for irrigation Availability of jobs Supply of electricity Security situation Availability of medical care Availability of education for children Freedom of movement

63% 59 30 31 66 56 72 72

62% 47 21 25 No data 49 70 No data

36% 40 69 68 33 44 28 28

38% 49 78 74 No data 50 29 No data

Source: Afghan Index: Tracking Variables of Reconstruction and Security in Post-9/11 Afghanistan, Brookings Institution, July 15, 2009

as the biggest threat to their country, while only 8 percent named the United States. [T]he growing skepticism about Obamas chances for success in Afghanistan is largely based on deep misreadings of both the countrys history and the views of its people, which are often compounded by facile comparisons to the United States misadventures of past decades in Southeast Asia and the Middle East, wrote Bergen. Afghanistan will not be Obamas Vietnam, nor will it be his Iraq. Rather, the renewed and better-resourced American effort in Afghanistan will, in time, produce a relatively stable and prosperous Central Asian state. 20 Stephen Biddle, a senior fellow at the Council on Foreign Relations, a think tank in New York City, said victory in Afghanistan is possible but only if steps are taken to strengthen Afghanistans governance. I do think its possible to succeed, Biddle said in late July after spending a month as part of a group helping McChrystal formulate a strategic assessment report on the war, due this month. But, he added,

there are two very different requirements for success. One is providing security, [and] the other is providing enough of an improvement in Afghan governance to enable the country to function without us. We can keep the patient on life support by providing security assistance indefinitely, but if you dont get an improvement in governance, youll never be able to take the patient off the ventilator. Of those two challenges, providing security we know how to do. Its expensive, its hard, it takes a long time, but if we invest the resources theres a substantial probability that we can provide security through our assistance. Governance improvement is a more uncertain undertaking. There are a lot of things we can do that we have not yet done to improve governance, but ultimately the more uncertain of the two requirements is the governance part. 21 Another member of McChrystals strategic assessment group, Anthony Cordesman, a scholar with the Center for Strategic and International Studies, also believes the war is winnable, but that the United States and its allies must

676

CQ Researcher

Woodward, National Security Adviser James L. Jones told U.S. commanders in Afghanistan the Obama administration wants to keep troop levels steady for now. Gen. Nicholson, though, told Jones that he was a little light, suggesting he could use more troops, and that we dont have enough force to go everywhere, Woodward reported. 27 The question of the force level for Afghanistan . . . is not settled and will probably be hotly debated over the next year, Woodward wrote. One senior military officer said privately that the United States would have to deploy a force of more than 100,000 to execute the counterinsurgency strategy of holding areas and towns after clearing out the Taliban insurgents. That is at least 32,000 more than the 68,000 currently authorized. 28 Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, said on CBS News Face the Nation on July 5 that in southern Afghanistan, where the toughest fighting is expected, we have enough forces now not just to clear an area but to hold it so we can build after. And thats really the strategy. He noted that Gen. McChrystal was due to produce his 60-day assessment of the war this summer, adding were all committed to getting this right and resourcing it properly. 29 But senior military officials told The Washington Post later that week that McChrystal had concluded Afghan security forces must be greatly expanded if the war is to be won. According to officials, the Post said, such an expansion would require spending billions more than the $7.5 billion the administration has budgeted annually to build up the Afghan army and police over the next several years, and the likely deployment of thousands more U.S. troops as trainers and advisers. 30 As combat has intensified this spring and summer and more troops entered the war zone, commanders focused on one of the most pernicious threats to the U.S.-led counterinsurgency strategy:

Afghanistan Ranks Low in Developing World


Afghanistan ranked as the second-weakest state in the developing world, after Somalia, in 2008, according to the Brookings Institution* (left). It consistently ranks near the bottom among countries rated for corruption by Transparency International (right).

Afghanistans Rank
Index of State Weakness in Developing World, 2008
Rank 1 2 3 4 5 Country Somalia Afghanistan Dem. Rep. Congo Iraq Burundi Overall Score 0.52 1.65 1.67 3.11 3.21

Corruption Perceptions Index


Year 2008 2007 2006 2005 Rank 176 172 No data 117 No. of Countries Surveyed 180 180 163 159

* Brookings surveyed 141 nations, allocating a score of 0-10 points for each of four categories: economic, political, security and social welfare. Benin had the median score, 6.36; the Slovak Republic was the least weak, with a score of 9.41. Source: Afghan Index: Tracking Variables of Reconstruction and Security in Post-9/11 Afghanistan, Brookings Institution, July 15, 2009

the potential for civilian casualties, which can undermine efforts to build trust and cooperation with the local population. Concern over civilian deaths rose sharply in May, when a high-profile U.S. air strike in western Farah province killed at least 26 civilians, according to American investigators. 31 This spring commanders instituted strict new combat rules aimed at minimizing civilian deaths, and Defense Secretary Robert M. Gates has called such casualties one of our greatest strategic vulnerabilities. 32 While some fear that the deployment of more troops to Afghanistan could heighten civilian casualties, others say the opposite is true. In fact, the presence of more boots on the ground is likely to reduce civilian casualties, because historically it has been the over-reliance on American air strikes as a result of too few ground forces which has been the key cause of civilian deaths, wrote Bergen of the New America Foundation. 33

Should the United States negotiate with the Taliban? In early March, shortly before announcing his new strategy for Afghanistan and Pakistan, The New York Times reported that Obama, in an interview aboard Air Force One, opened the door to a reconciliation process in which the American military would reach out to moderate elements of the Taliban. 34 In broaching the idea of negotiating with the Taliban, the president cited successes in Iraq in separating moderate insurgents from the more extreme factions of al Qaeda. Still, he was cautious about reconciliation prospects in Afghanistan. The situation in Afghanistan is, if anything, more complex than the one in Iraq, he said. You have a less governed region, a history of fierce independence among tribes. Those tribes are multiple and sometimes operate at cross-purposes, and so figuring

www.cqresearcher.com

Aug. 7, 2009

677

AFGHANISTAN DILEMMA
all that out is going to be much more of a challenge. 35 Nevertheless, the notion of seeking some sort of reconciliation with elements of the Afghan Taliban has received fresh attention recently. Opponents of the idea argue that it could project an image of weakness and embolden the insurgency and that Taliban leaders cannot be trusted to uphold any deals they may make. But proponents argue the Taliban is not a unified bloc, but rather an amalgam that includes those who joined the insurgency out of frustration at the lack of security in their villages or because they were forcibly drafted, among other reasons. (See sidebar, p. 680.) If you look at a security map of Afghanistan between, say, 2003 and today, you have this creep of the insurgency sort of moving up from the south and east into other parts of the country, J. Alexander Thier, senior rule of law adviser with the United States Institute of Peace. That trend, he says, suggests many local communities and commanders that may have once supported the Afghan government have turned neutral or are actively supporting the Taliban. Theres real room in there to deal with their grievances and concerns about security and justice and the rule of law so as to change that tide. Thier says hes not talking about seeking a grand bargain with the Taliban leadership now ensconced in Pakistan. If what youre envisioning is [Afghan President] Karzai and [Taliban leader] Mullah Omar sitting on the deck of an aircraft carrier signing an armistice, I dont think thats feasible or realistic, he says. What is feasible are micro level negotiations. There is an enormous opportunity to work on what I would call mid- and low-level insurgents who, for a variety of reasons, were likely not engaged in the insurgency just a few years ago and were either pro-government or at least neutral. And I think they can and should be brought back to that position. In an article this summer in Foreign Affairs, Fotini Christia, an assistant professor of political science at MIT, and Michael Semple, former deputy to the European Union special representative to Afghanistan, wrote that while sending more troops is necessary to tip the balance of power against the insurgents, the move will have a lasting impact only if it is accompanied by a political surge, a committed effort to persuade large groups of Taliban fighters to put down their arms and give up the fight. 36 For reconciliation to work, say Fotini and Semple, Afghans first must feel secure. The situation on the ground will need to be stabilized, and the Taliban must be reminded that they have no prospect of winning their current military campaign, they wrote. If the Afghan government offers reconciliation as its carrot, it must also present force as its stick hence the importance of sending more U.S. troops to Afghanistan, but also, in the long term, the importance of building up Afghanistans own security forces. Reconciliation needs to be viewed as part of a larger military-political strategy to defeat the insurgency. Some favor waiting to begin negotiation efforts, while others say they should occur simultaneously with the military campaign. Riedel of Brookings says he sees reason to believe that a fair number of Taliban foot soldiers and local commanders are not deeply dedicated to the core extremist cause as espoused by leaders such as Omar. Many rank and file Taliban may be in this for one reason or another perhaps because their tribe is aligned with the Taliban for local reasons, theyre getting paid by the Taliban to do this better than they could be paid by anyone else, or simply because if youre a 17-year-old Pashtun male in Kandahar, fighting is kind of how you get your right of passage, Riedel says. If the momentum changes on the battlefield and its a lot more dangerous to support the Taliban, Riedel continues, my sense . . . is that these people will either defect or simply go home they just wont fight. Still, he says, its not yet time to begin negotiations. First must come intelligence networks and greater political savvy in each district and province to capitalize on any Taliban inclinations to bend, he argues. That is primarily an Afghan job, because theyre the only people who are going to know the ins and outs of this. Thats one of the things the new [U.S.] command arrangement needs to focus on the most. I dont think were there. This requires really intense local information. Yet, while the hour for negotiating may not be ripe, the time is now to do the homework to do that, Riedel says, in order to develop fine-grained knowledge of whats going on. But Rajan Menon, a professor of international relations at Lehigh University, says not coupling the military campaign against the Taliban with an olive branch is probably not effective. Because huge challenges face the military operation from the threat of civilian casualties to the weakness of the countrys central government the prospect of a long and costly war looms, he says. To avoid that, Menon says, the military effort should be occurring simultaneously with one aimed at encouraging pragmatic elements of the Taliban to buy into a process in which they have to sell [their] ideas in the political marketplace. The Taliban pragmatists, he says, would be offered a choice: either a long, open-ended war with heavy insurgent casualties or the opportunity to enter the political process as a group seeking victory through the ballot box. The question is, can you fracture the [insurgency] movement by laying down terms that are pretty stringent and test their will, Menon says. Nobody knows if the arms-and-olive branch approach would work, he says, but you lose nothing by trying.
Continued on p. 680

678

CQ Researcher

Chronology
1838-1930s 1990-2001
Afghanistan gains independence, but ethnic and religious conflicts persist. 1838-42; 1878 Afghan forces defeat Britain in two wars, but Britain retains control of Afghanistans foreign affairs under 1879 treaty. 1893 British draw Afghan-Pakistan border, split Pashtun ethnic group. 1919 Afghanistan gains independence after Third Anglo-Afghan War. 1934 Diplomatic relations between United States and Afghanistan established.

Taliban emerges amid postwar chaos; al Qaeda forges ties with Afghan militants. 1992 Burhanuddin Rabbani, an ethnic Tajik, rises to power, declares Afghanistan an Islamic state. 1994 Taliban emerges; the militant Islamist group is mainly Pashtun. 1996 Taliban gains control of Kabul. 1996 Taliban leader Mullah Omar invites al Qaeda leader Osama bin Laden to live with him in Kandahar. 1997 Osama bin Laden declares war on U.S. in interview with CNN. 2001 U.S. and coalition forces invade Afghanistan on Oct. 7 after Sept. 11 terrorist attacks; Taliban retreats.

2004 Draft constitution approved; Karzai elected president; Pakistani nuclear scientist A. Q. Khan admits international nuclear-weapons trading; President Pervez Musharraf pardons him. 2005 Afghanistan holds its first parliamentary elections in some three decades. 2006 NATO takes over Afghan security; donors pledge $10.5 billion more. 2007 Musharraf and Karzai agree to coordinate efforts to fight Taliban, al Qaeda; allied troops kill Taliban leader Mullah Dadullah. 2008 More than 50 die in suicide bombing of Indian Embassy in Kabul in July. . . . More than 160 die in November terror attacks in Mumbai, India; India accuses Pakistani militants of carrying out the attacks; in July 2009 a young Pakistani admits to taking part in the attacks as a soldier for Lashkar-e-Taiba, a Pakistan-based Islamic group. 2009 Obama announces new strategy to disrupt, dismantle and defeat al Qaeda in Pakistan and Afghanistan; Gen. Stanley McChrystal replaces Gen. David McKiernan as top U.S. commander in Afghanistan; Marines attack Taliban in southern Helmand Province; July is bloodiest month for U.S. and foreign troops in Afghanistan, with 43 Americans killed. . . . Concern grows over security surrounding Aug. 20 presidential election.

1950s-1980s
Political chaos wracks Afghanistan during Cold War. 1950s-1960s Soviets and Americans funnel aid to Afghanistan. 1953 Gen. Mohammed Daoud becomes prime minister, seeks aid from Soviets, institutes reforms. 1964 New constitution establishes constitutional monarchy. 1973 Daoud overthrows king, is killed in Marxist coup in 1978. 1979-1989 Civil war rages between communistbacked government and U.S.-backed Mujahedeen. Soviets withdraw in 1989, 10 years after they invaded.
www.cqresearcher.com

2002-Present U.S.-led invasion of Iraq shifts


focus off Afghanistan; Taliban resurges. 2002 Hamid Karzai elected head of Afghan Transitional Authority; International Security Assistance Force deployed in Kabul; international donors pledge $4.5 billion for reconstruction. 2003 U.S.-led invasion of Iraq begins, leading to charges Bush administration shifted focus and resources away from Afghanistan; commission drafts new Afghan constitution.

Aug. 7, 2009

679

AFGHANISTAN DILEMMA

The Many Faces of the Taliban


Adherents include violent warlords and Islamist extremists.
hen President Barack Obama announced his administrations new Afghanistan strategy in March, he declared that if the Afghan government were to fall to the Taliban, the country would again be a base for terrorists who want to kill as many of our people as they possibly can. 1 But defining the Taliban is tricky. Far from a monolithic organization, the Taliban is a many-headed hydra, and a shadowy one at that. It is a mlange of insurgents and militants, ranging from high-profile Islamist extremists and violent warlords to local villagers fighting for cash or glory. Western military strategists hope to kill or capture the most fanatical elements of the Taliban while persuading others to abandon their arms and work within Afghanistans political system. You have a whole spectrum of bad guys that sort of get lumped into this catch-all term of Taliban . . . because theyre launching bullets at us, a senior Defense official told The Boston Globe. There are many of the groups that can probably be peeled off. The Defense official quoted by The Globe was among hundreds of intelligence operatives and analysts in the United States and abroad involved in a broad study of tribes tied to the Taliban, the newspaper said. The aim is to figure out whether diplomatic or economic efforts can persuade some to break away, according to the paper. The examination is expected to culminate later this year in a detailed, highly classified analysis of the different factions of the Taliban and other groups, The Globe said. 2 Many experts break down the Taliban into four main groups: The Early Taliban Insurgents emerged under Mullah Omar and other leaders during the civil war that wracked Afghanistan in the mid-1990s, following the end of the Soviet

occupation of the country. Early members were a mix of fighters who battled the Soviets in the 1980s and Pashtuns who attended religious schools in Pakistan, where they were aided by the Pakistani Inter-Services Intelligence agency. 3 The Pakistani Taliban emerged under a separate organizational structure in 2002, when Pakistani forces entered the countrys tribal region in the northwest to pursue Islamist militants. 4 At the time of the U.S.-led military campaign in Afghanistan in late 2001, allies and sympathizers of the Taliban in Pakistan were not identified as Taliban themselves, wrote Hassan Abbas, a research fellow at Harvards Belfer Center for Science and International Affairs. That reality is now a distant memory. Today, Pakistans indigenous Taliban are an effective fighting force and are engaging the Pakistani military on one side and NATO forces on the other. 5 Hizb-e-Islami Formed by the brutal warlord Gulbuddin Hekmatyar, the group is a prominent ally under the Taliban umbrella, says Christian Science Monitor journalist Anand Gopal. 6 Hizb-e-Islami (Islamic Party) was allied with the United States and Pakistan during the decade-long Soviet war, Gopal wrote, but after the 2001 U.S. invasion of Afghanistan a segment led by Hekmatyar joined the insurgency. The New York Times has described Hekmatyar as having a record of extreme brutality. 7 Hizb-e-Islami fighters have for years had a reputation for being more educated and worldly than their Taliban counterparts, who are often illiterate farmers, Gopal wrote last year. In the 1970s, Hekmatyar studied engineering at Kabul University, where he made a name for himself by hurling acid in the faces of unveiled women. 8

Continued from p. 678

BACKGROUND
Graveyard of Empires
fghanistan has long been known as the crossroads of Central Asia, an apt name given the long list of outsiders who have ventured across its borders. It also is known as the graveyard of empires, reflecting the difficulty faced by would-be conquerors of its remote terrain and disparate peoples.

The list is long. It includes the Persian king Darius I in the 6th century B.C. and the Macedonian conqueror Alexander the Great in 328 B.C., followed by the Scythians, White Huns, Turks, Arabs (who brought Islam in the 7th century A.D.), and the Mongol warrior Genghis Khan in 1219 A.D. 37 Afghanistans more recent history is a story of struggle against foreign domination, internal wrangling between reformists and traditionalists, coups, assassinations and war. Modern Afghanistan began to take shape in the late 19th century, after a bitter fight for influence in Central Asia between the burgeoning British Empire and czarist Russia in what is known as

the Great Game. The contest led to Anglo-Afghan wars in 1839 and 1878. In the first, Afghan warriors forced the British into a deadly retreat from Kabul. The Afghans also had the upper hand over the British in the second war, which resulted in a treaty guaranteeing internal autonomy to Afghanistan while the British had control of its foreign affairs. In 1880 Amir Abdur Rahman rose to the throne, reigning until 1901. Known as the Iron Amir, he sought to institute reforms and weaken Pashtun resistance to centralized power but used methods, later emulated by the Taliban, to bring Uzbeks, Hazaras and Tajiks under Kabuls authority. 38 During his reign, Britain drew the so-called Durand Line separating

680

CQ Researcher

Today the group has a strong presence in the provinces near Kabul and in Pashtun pockets in the countrys north and northeast, Gopal wrote. In 2008 Hizb-e-Islami participated in an assassination attempt on President Hamid Karzai and was behind a 2008 ambush that killed 10 NATO soldiers, according to Gopal. Its guerrillas fight under the Taliban banner, although independently and with a separate command structure, Gopal wrote. Like the Taliban, its leaders see their task as restoring Afghan sovereignty as well as establishing an Islamic state in Afghanistan. The Haqqani network Some of the most notorious terrorist actions in recent months have been linked to the network, including the kidnapping of a New York Times reporter and the abduction of a U.S. soldier. Haqqani is not traditional Taliban, theyre more strongly associated with al Qaeda, said Haroun Mir, director of Afghanistans Center for Research and Policy Studies in Kabul. 9 Thought to control major parts of eastern Afghanistan, the network in recent years has emerged . . . as a powerful antagonist to U.S. efforts to stabilize that country and root out insurgent havens in the lawless tribal areas of Pakistan, according to The Washington Post. 10 The network is controlled by Jalaluddin Haqqani and his son, Sirajuddin, the Post said. Analysts call the son a terrorist mastermind, according to The Christian Science Monitor. 11 New York Times reporter David Rohde, who was abducted in Logar Province in Afghanistan and taken across the Pakistani border to North Waziristan, was held by the Haqqani network until he escaped in June after seven months in captivity. 12 The network also is suspected of the suicide bombing of

the Indian Embassy in Kabul in July 2008 that left more than 50 dead, The Post said. 13 According to Gopal, The Haqqanis command the lions share of foreign fighters operating in [Afghanistan] and tend to be even more extreme than their Taliban counterparts. Unlike most of the Taliban and Hizb-e-Islami, elements of the Haqqani network cooperate closely with al Qaeda. 14
1 Remarks by the President on a New Strategy for Afghanistan and Pakistan, The White House, March 27, 2009, www/whitehouse.gov. 2 Bryan Bender, U.S. probes divisions within Taliban, The Boston Globe, May 24, 2009, p. 1. 3 See Eben Kaplan and Greg Bruno, The Taliban in Afghanistan, Council on Foreign Relations, July 2, 2008, www.cfr.org/publication/10551/taliban_in_ afghanistan.html. 4 Ibid. 5 Hassan Abbas, A Profile of Tehrik-i-Taliban Pakistan, CTC Sentinel, Vol. 1, Issue 2, pp. 1-4, www.ctc.usma.edu/sentinel/CTCSentinel-Vol1Iss2.pdf. 6 Anand Gopal, Briefing: Who Are the Taliban? The Christian Science Monitor, April 16, 2009, http://anandgopal.com/briefing-who-are-the-taliban/. 7 Dexter Filkins, Taliban said to be in talks with intermediaries about peace; U.S. withdrawal is called a focus, The New York Times, May 21, 2009, p. 4. 8 Anand Gopal, Who Are the Taliban? The Nation, Dec. 22, 2008, www.the nation.com/doc/20081222/gopal. 9 Quoted in Issam Ahmed, Captured U.S. soldier in Taliban video: Held by Haqqani network? The Christian Science Monitor, Global News blog, July 19, 2009, http://features.csmonitor.com/globalnews/2009/07/19/cap tured-us-soldier-in-taliban-video-held-by-haqqani-network/. 10 Keith B. Richburg, Reporters Escape Taliban Captors, The Washington Post, June 21, 2009, p. A1. 11 Ahmed, op. cit. 12 Ibid. 13 Richburg, op. cit. 14 Gopal, The Nation, op. cit.

Afghanistan from what was then India and later became Pakistan. Rahmans son succeeded him but was assassinated in 1919. Under his successor, Amanullah Rahmans grandson Afghanistan gained full independence as a result of the Third Anglo War. Amanullah brought reforms that included ties with other countries and coeducational schools. But the moves alienated traditionalists, and Amanullah was forced to abdicate in 1929. His successor and cousin, Nadir Shah, was assassinated in 1933. His death led to the 40-year reign of Crown Prince Mohammad Zahir Shah, Nadir Shahs son, who assumed power at 19.

Chaos and War


nder Zahir, Afghanistan sought to liberalize its political system. But the effort collapsed in the 1970s, and the country became a battleground between communist-backed leftists and a U.S.-backed Islamist resistance movement. Afghanistan had tilted toward the Soviets in the Cold War era of the 1950s, partly because of U.S. ties to Pakistan, a country created by the partition of India in 1947. Afghan leaders wanted independence or at least autonomy for the Pashtun-dominated areas beyond the Durand Line.

Border tensions led Kabul to seek help from the Soviets, who responded with development loans and other aid in 1950. The United States sought to counter the Soviet Unions influence, and in the 1960s both countries were helping to build up Afghanistans infrastructure. Between 1956 and 1978, according to Pakistani journalist Ahmed Rashid, Afghanistan received some $533 million in economic aid from the United States and $2.5 billion in both economic and military aid from the Soviets. 39 In the 1960s Zahir introduced a constitutional monarchy and pressed for political freedoms that included new rights for women in voting, schooling and

www.cqresearcher.com

Aug. 7, 2009

681

AFGHANISTAN DILEMMA
U.S. Troop Deaths Rose Steadily
U.S. troop fatalities have risen steadily since the United States entered Afghanistan in 2001 (graph at left). So far this year, IEDs (improvised explosive devices) caused slightly more than half the deaths (right). U.S. Troop Deaths in Afghanistan, 2008
200 150 100 50 0

Causes of U.S. Troop Deaths, 2009


(through July 14, 2009)
Non-hostile causes

IEDs

16
Other hostile re
2001 2002 2003 2004 2005 2006 2007 2008

58

24
Helicopter losses Mortars RPGs Rockets

Suicide bombs

Source: Afghan Index: Tracking 2 Variables of Reconstruction and Security in Post-9/11 Afghanistan, Brookings Institution, July 15, 2009

employment. These changes, in a deeply traditional Islamic society, were not popular with everyone, the Times noted in a 2007 obituary of Zahir. But his years were characterized by a rare long period of peace. This tranquility is recalled now with immense nostalgia. On the other hand, peace was not accompanied by prosperity, and the king was faulted for not developing the economy. 40 Zahirs experiment in democracy did not lead to many lasting reforms, but it permitted the growth of unofficial extremist parties on both the left and the right, including the communist Peoples Democratic Party of Afghanistan that was ideologically aligned with the Soviets, the U.S. State Department noted. The party split into rival groups in 1967 in a rift that reflected ethnic, class and ideological divisions within Afghan society. 41 In 1973 Zahir was ousted while in Europe for medical treatment. His cousin, former Prime Minister Sardar Mohammad Daoud Khan, whom Zahir had forced out in the 1960s, seized power in a bloodless coup. Daoud tried to institute reforms,

but political unrest persisted. He aligned closely with the Soviets, but his efforts to build his own political party and forge some links with the United States alienated communist radicals. In 1978, the Peoples Democratic Party overthrew Daoud, killing him and most of his family.

Soviet Invasion
ore upheaval followed. The new leader, Nur Mohammad Taraki, imposed Marxist reforms that angered Islamic traditionalists and ethnic leaders, sparking revolts. Taraki was ousted and killed, and his successor, Hafizullah Amin, who resisted Soviet pressure to moderate his policies, was himself executed in 1979 by the Soviets. Shortly before Amins killing, the Soviets mounted a massive invasion of Afghanistan, starting a decade-long war t h a t wo u l d p e r m a n e n t l y a l t e r Afghanistans profile in world affairs. In Amins place, the Soviets installed Babrak Karmal. With Soviet military aid,

he tried to impose authority throughout Afghanistan but ran into stiff opposition, especially in rural regions. An Islamist resistance movement called the Mujahedeen began receiving weapons and training from the United States and other countries in 1984, and soon the Soviet invasion was on the ropes. In 1986 Karmal was replaced by Muhammad Najibullah, former head of the Afghan secret police, but the war continued to sour for the Soviets, who also were dealing with powerful political opposition at home. In 1988 Moscow signed agreements, along with the United States, Pakistan and Afghanistan, calling for an end to foreign intervention in Afghanistan. The Soviets withdrew early the following year, and in 1991 the USSR collapsed. The Soviet invasion affirmed the idea of Afghanistan as a graveyard for invaders. Between 1979 and the Soviet withdrawal in 1989, some 14,500 Soviets died. 42 For the Afghan people, however, the war was a bloodbath that all but destroyed the economy and educational system and uprooted much of the population. The U.S. State Department estimates a million died. 43 Some estimates are higher. Yet the end of the Soviet invasion brought no peace, but rather more chaos. After the Soviets departed, President George H. W. Bush withdrew support from Afghanistan, setting the stage for the conflict engulfing Afghanistan today. Having won the Cold War, journalist Rashid wrote, Washington had no further interest in Afghanistan or the region. This left a critical power vacuum for which the United States would pay an enormously high price a decade later. 44 When the Soviet Union collapsed and the United States disengaged from Afghanistan, they left a country that had become a cockpit for regional competition, a shattered state with no functioning security forces or civilian political process, a highly mobilized and armed population increasingly dependent on international organizations and cash for

682

CQ Researcher

livelihood (including global terrorist infrathrough the drug structure. 49 trade), and a multiThe al Qaeda threat plicity of armed reached full force with groups linked transnathe Sept. 11, 2001, attacks tionally to both state on the United States. In and non-state paOctober President George trons, wrote Barnett W. Bush responded with Rubin, director of a military assault called studies at the Center Operation Enduring Freeon International Codom. The Taliban promptoperation at New ly collapsed, and its leadYo r k U n i ve r s i t y, ership, along with that of where he directs a al Qaeda, fled, in the program on Afghan view of many analysts, to Afghan President Hamid Karzai may face a runoff after the reconstruction. 45 Pakistan. presidential election on Aug. 20, partly because many Afghans are Yet still more trouble The Mujahedeen looking for alternative leadership in the face of sustained insurgent was to follow. were not a party to violence, economic stagnation and political drift. the accord leading to Soviet withdrawal, and through the against the Soviets and then returned early 1990s they continued fighting the to madrassas in Pakistan to resume their Najibullah regime. In 1992 his govern- religious studies or to their villages in ment fell, and Burhanuddin Rabbani, Afghanistan gathered around their elders he collapse of the Taliban govan ethnic Tajik, became president. He demanding action. 47 ernment . . . created a condiThe Taliban took over Kabul in 1996, tion of emerging anarchy, Jones wrote. declared Afghanistan an Islamic state and by the early 2000s Rabbanis anti- In late 2001 a United Nations-sponsored but failed to ensure order. By 1994 Afghanistan was fast disin- Taliban Northern Alliance was limited conference in Bonn, Germany, laid tegrating, Rashid wrote. Warlord fief- to a slice of northern territory. The down a process to rebuild Afghanistans doms ruled vast swathes of countryside. Taliban instituted a repressive version political system. With the Bonn agreePresident Rabbani . . . governed only of sharia law that outlawed music, ment, on paper, Afghanistan looked Kabul and the northeast of the country, banned women from working or going like it had a central government, Jones while the west, centered on Herat, was to school and prohibited freedom of the wrote. But in practice . . ., Afghanistan under the control of warlord Ismael press, wrote Jones, the RAND political had a fragile government that became Khan. Six provinces in the north were scientist. While it was a detestable weaker over time. 50 ruled by the Uzbek general Rashid Dos- regime that committed gross human The new government couldnt protum, and central Afghanistan was in the rights violations, the Taliban succeeded vide essential services, especially in hands of the Hazaras. In the Pashtun in establishing law and order through- rural areas, and a 2005 World Bank south and east there was even greater out most of the country. 48 study found that the urban elite were At the same time, the Taliban was the main beneficiaries of help, Jones fragmentation. . . . Warlords seized peoples homes and farms for no reason, forging links to al Qaeda. In 1996 Tal- wrote. 51 Meanwhile, the Afghan govraped their daughters, abused and iban leader Mullah Omar invited Osama ernment had various problems, includrobbed the population and taxed trav- bin Laden to stay with him in Kanda- ing the inability to provide security outelers at will. Instead of refugees return- har, and even though the CIA already side of Kabul, in large measure due to ing to Afghanistan, more began to leave considered bin Laden a threat . . ., he the inability of the U.S. government to was left alone to ingratiate himself with build competent Afghan security forces, the south for Pakistan. 46 In 1994 a militant Islamist group Omar by providing money, fighters and especially the police. 52 known as the Taliban and made up ideological advice to the Taliban, American force levels were low, too, mainly of Pashtuns sprang up in the Rashid wrote. Bin Laden gathered the with the number of U.S. troops per south to oppose Rabbani. Their rise Arabs left behind in Afghanistan and capita in Afghanistan . . . significantly stemmed directly from the chaos wrack- Pakistan from the war against the So- less than in almost every state-building ing Afghanistan, Rashid wrote. Frus- viets, enlisted more militants from effort since World War II, Jones trated young men who had fought Arab countries, and established a new wrote. 53 Moreover, the United States

A Weakening Government

www.cqresearcher.com

AFP/Getty Images/Massoud Hossaini

Aug. 7, 2009

683

AFGHANISTAN DILEMMA
gave significant assistance to local warlords, further undermining governance and weakening the ability of the Afghan state to establish law and order. 54 The Taliban rebounded, aided by what critics have called a lack of focus by the Bush administration after its decision to invade Iraq in 2003. In Afghanistan, reconstruction and security issues were left unattended, critics say, leaving an opening for the Taliban along with criminals, warlords, drug traffickers and others to assert brutal control. Afghan opium production soared, al Qaeda sanctuaries in the border region of Pakistan festered and once again the region threatened to unleash a new wave of global terrorism. The threat came not only from Afghanistan, but Pakistan, too. In an article last year on the emboldened Taliban and al Qaeda forces in the Pakistani border region, celebrated New York Times war correspondent Dexter Filkins noted that Islamist militants continued to be backed by Pakistani military and intelligence services. Then, in 1994, came Pakistans most fateful move, he wrote. Concerned about the mayhem that swept through Afghanistan after the Soviet withdrawal, Pakistani Prime Minister Benazir Bhutto and her administration intervened on behalf of the Taliban, Filkins wrote. We created the Taliban, Bhuttos interior minister, Nasrullah Babar, told Filkins. Mrs. Bhutto had a vision: that through a peaceful Afghanistan, Pakistan could extend its influence into the resource-rich territories of Central Asia. Her dream didnt materialize the Talibans conquest of Afghanistan fell short, and Bhutto was assassinated in late 2007. But as Filkins noted, the Taliban training camps, sometimes supported by Pakistani intelligence officials, were beacons to Islamic militants from around the world. 55 Concerns persist about Pakistans intentions and security capabilities. In recent weeks, as militants threatened Islamabad and other Pakistani cities, Pakistan has gone after insurgents in the Swat Valley and elsewhere. But Pakistani officials also have criticized U.S. attacks on insurgent strongholds using unmanned drone planes. The big question, as posed by Filkins and others, is whether Pakistan is willing or able to control the radical forces within its border region. This was not supposed to be a major worry, Filkins wrote, noting that after the Sept. 11 attacks Pakistani President Pervez Musharraf backed the United States, helped find al Qaeda suspects, attacked militants in Pakistans remote tribal areas and vowed to fight terrorism all in return for $10 billion in U.S. aid since 2001. But Pakistani military and civilian leaders have survived by playing a double game, Filkins wrote, promising the United States they were cracking down on militants, and sometimes doing so, while also allowing, and even helping, the same militants. One reason for the double game is Pakistans longstanding tension with India, especially over the disputed border region of Kashmir. You cant address Pakistan without dealing with India, says Riedel, the Brookings scholar. Some experts say Pakistan views its support of the Taliban as a hedge against an India-friendly government coming to power in Afghanistan. The Pakistanis have convinced themselves that Indias objective is a friendly Afghanistan that can pose a second front against Pakistan, says Riedel. They see the Afghan Taliban, in particular, as a very useful asset. It keeps Afghanistan from becoming an Indian client state, and their conviction is that . . . its only a matter of time until the United States leaves Afghanistan. The Pakistanis believe that if they wait it out, their client will be the dominant power at least in southern and eastern Afghanistan. The Cato Institutes Innocent says the Obama administration has made a profound strategic miscalculation by not recognizing how much Pakistani leaders fear a non-Pashtun, India-leaning government assuming power in Kabul. India has used its influence in Afghanistan, she says, to funnel weapons to a separatist movement in southwest Pakistans sprawling Baluchistan region a movement that some say could pose an existential threat to Pakistan. That, in turn, has given Pakistan an incentive to keep Afghanistan from growing closer to India. Says Innocent, This rivalry between [Pakistan and India] is the biggest impediment to stabilizing Afghanistan.

CURRENT SITUATION
Measurable Metrics
n the weeks leading up to this summers Helmand River operation, Defense Secretary Gates expressed optimism about the war in Afghanistan, but acknowledged that the American publics patience with its progress could be limited. I think what the people in the United States want to see is the momentum shifting to see that the strategies that were following are working, he said on CBS 60 Minutes. And thats why Ive said in nine months to a year, we need to evaluate how were doing. 56 Part of that evaluation will be done through metrics, statistical measurements on everything from civilian casualties to the strength of the Afghan National Army. The approach is part of the Obama strategy. Going forward, we will not blindly stay the course, Obama said, but rather we will set clear metrics to measure progress and hold ourselves accountable. Well consistently assess our efforts to train Afghan security forces

Continued on p. 686

684

CQ Researcher

At Issue:
Should the president announce an Afghanistan exit strategy?
yes

MALOU INNOCENT
FOREIGN POLICY ANALYST CATO INSTITUTE
WRITTEN FOR CQ RESEARCHER, JULY 2009

ILAN BERMAN
VICE PRESIDENT FOR POLICY AMERICAN FOREIGN POLICY COUNCIL
WRITTEN FOR CQ RESEARCHER, JULY 2009

o strategic, political or economic gains could outweigh the costs of America maintaining an indefinite military presence in Afghanistan. Washington can continue to disrupt terrorist havens by monitoring the region with unmanned aerial vehicles, retaining advisers for training Afghan forces and using covert operatives against specific targets. Many policy makers and prominent opinion leaders are pushing for a large-scale, long-term military presence in Afghanistan. But none of their rationales for such a heavy presence withstands close scrutiny. Al Qaeda poses a manageable security problem, not an existential threat to America. Washingtons response, with an open-ended mission in Afghanistan, is both unnecessary and unsustainable. Policy makers also tend to conflate al Qaeda with indigenous Pashtun-dominated militias, such as the Taliban. Americas security, however, will not necessarily be at risk even if an oppressive regime takes over a contiguous fraction of Afghan territory. Additionally, the argument that America has a moral obligation to prevent the reemergence of reprehensible groups like the Taliban seems instead a justification for the perpetuation of American empire. After all, America never made a substantive policy shift toward or against the Talibans misogynistic, oppressive and militant Islamic regime when it controlled Afghanistan in the 1990s. Thus, the present moral outrage against the group can be interpreted as opportunistic. Some policy makers claim the war is worth waging because terrorists flourish in failed states. But that cannot account for terrorists who thrive in states with the sovereignty to reject external interference. That is one reason why militants find sanctuary in Pakistan. In fact, attempts to stabilize Afghanistan destabilize Pakistan. Amassing troops in Afghanistan feeds the perception of a foreign occupation, spawning more terrorist recruits for Pakistani militias and thus placing undue stress on an already-weakened, nuclear-armed nation. Its also important to recognize that Afghanistans landlocked position in Central Asia will forever render it vulnerable to meddling from surrounding states. This factor will make sealing the countrys borders from terrorists impossible. Finally, Americans should not fear appearing weak after withdrawal. The United States accounts for almost half of the worlds military spending, wields one of the planets largest nuclear arsenals and can project its power around the globe. Remaining in Afghanistan is more likely to weaken the United States militarily and economically than would withdrawal.
no

yes no
Aug. 7, 2009

t has been called the graveyard of empires, a place that for thousands of years has stymied invading armies. Today, Afghanistan remains one of the Wests most vexing international security conundrums and a pressing foreign policy challenge for the Obama administration. Indeed, for almost as long as Obama has been in office, critics have counseled the new U.S. president to set a date certain for an American exit from Afghanistan. To his credit, Mr. Obama has done no such thing. To the contrary, through the Af-Pak strategy unveiled in March, the White House has effectively doubled down on the American investment in Afghanistans security. It has done so for two principal reasons. The first has to do with Afghanistans importance to the overall struggle against radical Islam. In the years before Sept. 11, Afghanistan became an incubator of international terrorism. And the sinister synergy created there between al Qaeda and the ruling Taliban movement was directly responsible for the most devastating terrorist attack in American history. Preventing a repeat occurrence remains an overriding priority, which is why Washington has committed to propping up the fragile government of Afghan President Hamid Karzai with the troops and training necessary to hold its ground. The second is an understanding that Afghanistan is essentially a derivative problem. Much of the instability that exists there today is a function of radicalism nurtured next door, in Pakistan. The Taliban, after all, was an invention of Pakistans Inter-Services Intelligence back in the mid-1990s, and Islamabads intelligence czars (as well as their military counterparts) remain heavily invested in its future. Today, the Taliban poses perhaps a greater threat to Pakistans own stability than to that of Afghanistan. But a retraction of U.S. and allied forces from the latter is sure to create a political vacuum that Islamic radicals will be all too eager to exploit. These realities have defined the Obama administrations approach. Unlike previous foreign powers that have gotten involved in Afghanistan, the United States today is interested simply in what the military calls area denial. The goal is not to conquer and claim, but to deny the Taliban the necessary breathing room to regroup and re-entrench. Setting a firm date for an American withdrawal would fundamentally undermine that objective. It would also serve to provide regional radicals with far greater certainty that the U.S. investment in Afghanistans stability is both limited and reversible.

www.cqresearcher.com

685

AFGHANISTAN DILEMMA
Continued from p. 684

and our progress in combating insurgents. We will measure the growth of Afghanistans economy and its illicit narcotics production. And we will review whether we are using the right tools and tactics to make progress towards accomplishing our goals. 57 One measure attracting rising attention in recent weeks is that of troop levels. Michael E. OHanlon, a senior fellow at Brookings, wrote this summer in the Washington Examiner that for all its virtues, the Obama administrations Afghan strategy may still lowball requirements for the Afghanistan mission to succeed. The administrations decisions in March to increase U.S. troop numbers to 68,000 (making for about 100,000 foreign troops in all), and Afghan army and police to about 215,000 will leave combined coalition forces at only half the levels in Iraq during the surge, OHanlon wrote, and Afghanistan is slightly larger and more populous. OHanlon cautioned against closing the door on adding more troops and pointed to troubling signs that the Obama administration may be digging in against any future troop requirements. While we may or may not have enough forces in Afghanistan to accomplish the missions full range of goals, he concluded, lets not close off the conversation until we learn a little bit more. 58

NATOs Cold Shoulder


mong the thorniest of the trooplevel issues is the role of NATO forces in Afghanistan. As of June, countries participating in the NATO-led International Security Assistance Forces (ISAF), a mission mandated by the U.N. under the 2001 Bonn agreement, have committed about 32,000 troops to Afghanistan, not counting those from the United States, according to the Brookings Institution. The top three were the United Kingdom, which had committed 8,300 troops, Ger-

many (3,380) and Canada (2,830). Several countries, including the U.K. and Germany, were expected to send a small number of additional troops to provide security for the Aug. 20 election. The Obama administration has been largely unsuccessful in prodding European nations to send more troops to Afghanistan. In April, in what the online edition of the Times of London billed as a charm offensive by Obama on his debut international tour, leaders on the European continent turned their backs on the president, with British Prime Minister Gordon Brown the only one to offer substantial help. Brown offered to send several hundred extra troops to provide election security, the Times noted, but even that fell short of the thousands of combat troops that the U.S. was hoping to [gain] from the prime minister. 59 Nonetheless, Obama has mustered some recent support for his Afghan policy. In late July Spains prime minister, Jos Lus Rodriguez Zapatero, said his country was willing to increase its force on long-term deployment to Afghanistan, The New York Times reported. 60 Early this month, NATO approved a reorganized command structure for Afghanistan, agreeing to set up a New Intermediate Joint Headquarters in Kabul under U.S. Lt. General David M. Rodriquez, who will manage the war on a day-to-day basis and report to McChrystal. NATO made the move at the first meeting of its governing body, the North Atlantic Council, under new NATO Secretary General Anders Fogh Rasmussen, former Danish prime minister. 61 Rasmussen, in his first comments as secretary general, called on the United Nations and European Union to help defeat the Taliban. NATO will do its part, but it cannot do it alone, he said. This needs to be an international effort, both military and civilian. 62 The effectiveness of having more NATO troops in Afghanistan has been a matter of debate. At a forum in June, Brookings scholar Jeremy Shapiro, re-

cently back from a visit to southern Afghanistan, suggested U.S. commanders have had little faith in the NATO command structure. Each of the main countries there is really running its own provincial war, Shapiro said. The overall problem is that there really is no unity of command in Afghanistan so were unable . . . to prioritize and to shift resources to deal with the most important problems. . . . Its related to the fact that for every NATO force in Afghanistan including the Americans, there are two chains of command, one up through the NATO commander who is an American, and one to the national capital, and in case of conflict, the national capital command always takes priority. The result is that each of the lead countries in the south, the Canadians in Kandahar, the British in Helmand, the Dutch in Uruzgan, are focused on their own priorities, on improving specific indicators in their piece of the war in their own province or district without a great deal of attention to the impact of that measure on the overall fight. In impoverished Uruzgan Province, for example, the Dutch are doing impressive things with development efforts, but Uruzgan is to a large degree serving as a sanctuary for insurgents to rest and refit and plan and to engage in the struggle in Kandahar and Helmand province, Shapiro said. The Canadians and British would argue . . . that the priority for Afghanistan is not Uruzgan, it is Kandahar and Helmand and [if] the development of Uruzgan comes at the cost of strengthening the insurgency in other provinces, its perhaps not the best use of resources. Shapiro said he believes that as the number of U.S. troops has increased, especially in southern Afghanistan, the focus for the U.S. military command is on . . . assigning roles to coalition partners that dont require intense coordination. . . . What that presages is an Americanization of the war, including in the south. By next year, Shapiro said, NATO

686

CQ Researcher

will remain in command, but I would be very dubious that well be truly fighting a NATO war at that point. 63

Americanizing the War


uch predictions of an Americanized war are at odds with the administrations perception of the Afghan mission. Obama told Sky News, a British news outlet, that British contributions to the war effort are critical and that this is not an American mission. The mission in Afghanistan is one that the Europeans have as much if not more of a stake in what we do. . . . The likelihood of a terrorist attack in London is at least as high, if not higher, than it is in the United States. 64 Any further Americanization of the war will doubtlessly fuel scrutiny of the Afghan strategy in Congress and bolster demands for the Obama administration to set forth an exit strategy. This summer, the U.S. House of Representatives strongly rejected an amendment calling on the defense secretary to submit a report no later than Dec. 31 outlining an exit strategy for U.S. forces in Afghanistan. Every military mission has a beginning, a middle, a time of transition and an end, said Rep. McGovern, the Massachusetts Democrat who sponsored the measure. But I have yet to see that vision articulated in any document, speech or briefing. Were not asking for an immediate withdrawal. Were sure not talking about cutting or running or retreating, just a plan. If there is no military solution for Afghanistan, then please just tell us how we will know when our military contribution to the political solution has ended. 65 But focusing on an exit versus a strategy is irresponsible and fails to recognize that our efforts in Afghanistan are vital to preventing future terrorist attacks on the American people and our allies, argued Rep. Howard McKeon, R-Calif. 66

The amendments defeat did nothing to allay scrutiny of the war. Sen. John F. Kerry, D-Mass., chairman of the Senate Foreign Relations Committee, told GlobalPost, an online international-news site, that he planned to hold oversight hearings on U.S. involvement in Afghanistan. 67 End of summer, early fall, Kerry said, we are going to take a hard look at Afghanistan.

OUTLOOK
More Violence
ilitary strategists say the Afghan war is likely to get more violent in coming months as U.S. and NATO forces battle the insurgency. One immediate concern is whether the Taliban will make good on threats to disrupt this months presidential election. While additional troops are being deployed to guard against attacks, officials have said ensuring the security of all 28,000 polling places is impossible. 68 Meanwhile, tensions are likely to remain between those calling for a strict timetable for de-escalating the war and those arguing in favor of staying the course. I certainly do not think it would be a wise idea to impose a timeline on ourselves, says Riedel of Brookings, although he points to political realities that include the idea that some measure of improvement in the security situation on the ground needs to be apparent over the course of the next 18 to 24 months. Riedel expresses confidence that will occur. Once all scheduled troop deployments are in place, he says, its reasonable to expect that you can see some impact from [those deployments] in 18 to 24 months. Not victory, not

the surrender of [Taliban leader] Mullah Omar, but some measurable decline in the pace of Taliban activity, some increase in the number of districts and provinces which are regarded as safe enough for [non-governmental organizations] to work in. Beyond demands for on-the-ground progress in Afghanistan, the Obama administration faces other pressures as it struggles to get a grip on the Afghanistan and Pakistan region. One is helping U.S. allies maintain support for the war. In Britain, Prime Minister Brown has faced an uproar over growing British casualties that critics say stem from an underfunded defense budget that led to inadequate troop levels and equipment. 69 At home, as the financial crisis, health-care reform and other issues put pressure on the federal budget, Obama is likely to face opposition in Congress over additional war funding. And Obama also is under pressure to address incendiary issues left over from the Bush administration. In July, a New York Times report detailed how the Bush administration repeatedly sought to discourage an investigation of charges that forces under U.S.-backed warlord Gen. Abdul Rashid Dostum massacred hundreds or even thousands of Taliban prisoners of war during the 2001 invasion of Afghanistan. 70 In an editorial, the Times said Obama has directed aides to study the issue and that the administration is pressing Afghan President Karzai not to return Dostum to power. But, it added, Obama needs to order a full investigation into the massacre. 71 In the long run, one of the biggest challenges facing the Obama administration is its effort to instill sound governance in a country saturated with graft. Afghanistans corruption reveals the magnitude of the task, says Walt, the Harvard international affairs professor. Fixing corrupt public institutions is really hard once a pattern of

www.cqresearcher.com

Aug. 7, 2009

687

AFGHANISTAN DILEMMA
behavior has been established, where money is flowing in non-regular ways. Its very difficult for outsiders to reengineer those social and political practices, even if we were committed to staying five or 10 years. Walt says he hopes hes wrong that the injection of the right kind of American power will create space for some kind of political reconciliation. But hes not optimistic. I believe several years from now, [Afghanistan] will look like a sinkhole.
July 13, 2009, www.washingtonpost.com/wpdyn/content/article/2009/07/12/AR2009071202 426.html. 8 See, for example, Fred Kaplan, Counterinsurgenterrorism, Slate, March 27, 2009, www.slate.com/id/2214726/. 9 Ann Scott Tyson, New Approach to Afghanistan Likely, The Washington Post, June 3, 2009, www.washingtonpost.com/wpdyn/content/article/2009/06/02/AR2009060203 828.html. 10 Ibid. 11 Sharon Otterman, Civilian death toll rises in Afghanistan, The New York Times, Aug. 1, 2009, www.nytimes.com/2009/08/01/world/ asia/01afghan.html?scp=1&sq=civilian%20death %20toll%20rises&st=cse. 12 White House, op. cit. 13 See also John Mueller, How Dangerous Are the Taliban? foreignaffairs.com, April 15, 2009, www.foreignaffairs.com/articles/64932/johnmueller/how-dangerous-are-the-taliban. 14 Matthew Kaminski, Holbrooke of South Asia, The Wall Street Journal, April 11, 2009. 15 Quoted in Rajiv Chandrasekaran, Marines Deploy on Major Mission, The Washington Post, July 2, 2009, www.washingtonpost.com/wpdyn/content/article/2009/07/01/AR200907010320 2.html. 16 Jared Allen and Roxana Tiron, Obey warns Afghanistan funding may slow unless significant progress made, The Hill, May 4, 2009, http://thehill.com/leading-the-news/obey-warnsafghanistan-funding-may-slow-unless-signifi cant-progress-made-2009-05-04.html. 17 The New York Times/CBS News Poll, June 12-16, 2009, http://graphics8.nytimes.com/packages/images/nytint/docs/latest-new-york-timescbs-news-poll/original.pdf. 18 See Dexter Filkins, Afghan corruption: Everything for Sale, The New York Times, Jan. 2, 2009, www.nytimes.com/2009/01/02/world/asia/02ihtcorrupt.1.19050534.html?scp=2&sq=everything% 20for%20sale&st=cse.
19 See Malou Innocent, Obamas Mumbai problem, The Guardian, Jan. 27, 2009, www. guardian.co.uk/commentisfree/cifamerica/2009/ jan/27/obama-india-pakistan-relations. 20 Peter Bergen, Winning the Good War, Washington Monthly, July/August 2009, www. washingtonmonthly.com/features/2009/0907.ber gen.html#Byline. 21 Greg Bruno, U.S. Needs a Stronger Commitment to Improving Afghan Governance, Council on Foreign Relations, July 30, 2009, www.cfr.org/publication/19936/us_needs_a_ stronger_commitment_to_improving_afghan_ governance.html?breadcrumb=%2Fpublication %2Fpublication_list%3Ftype%3Dinterview. 22 Anthony H. Cordesman, The Afghanistan Campaign: Can We Win? Center for Strategic and International Studies, July 22, 2009. Cordesman expands on his ideas in a paper available at http://csis.org/files/publication/090722_CanWe AchieveMission.pdf. 23 Richard A. Oppel Jr., Allied Officers Concerned by Lack of Afghan Forces, The New York Times, July 8, 2009, www.nytimes.com/ 2009/07/08/world/asia/08afghan.html?ref=world. 24 Quoted in Associated Press, Marines: More Afghan Soldiers Needed in Helmand, CBS News, July 8, 2009, www.cbsnews.com/stories/ 2009/07/08/ap/politics/main5145174.shtml. 25 Quoted in Oppel, op. cit. 26 Transcript, Death Toll Mounts as Coalition Forces Confront Taliban, The NewsHour with Jim Lehrer, PBS, July 15, 2009, www.pbs.org/news hour/bb/military/july-dec09/afghancas_07-15.html. 27 Bob Woodward, Key in Afghanistan: Economy, Not Military, The Washington Post, July 1, 2009, www.washingtonpost.com/wp-dyn/con tent/article/2009/06/30/AR2009063002811.html. 28 Ibid. 29 Face the Nation, CBS News, July 5, 2009. 30 Greg Jaffe and Karen De Young, U.S. General Sees Afghan Army, Police Insufficient, The Washington Post, July 11, 2009, www.washingtonpost.com/wp-dyn/content/article/2009/07/ 10/AR2009071002975.html. 31 Greg Jaffe, U.S. Troops Erred in Airstrikes on Civilians, The Washington Post, June 20, 2009, www.washingtonpost.com/wp-dyn/con tent/article/2009/06/19/AR2009061903359.html. 32 Quoted in Robert Burns, Analysis: reducing Afghan civilian deaths key goal, The Associated Press, June 13, 2009, www.google.com/host ednews/ap/article/ALeqM5hyNJNBigtMGe2M12B 2s3w6OCoAbQD98Q2VP80. 33 Bergen, op. cit. 34 Helene Cooper and Sheryl Gay Stolberg,

Notes
Chris Brummitt, Afghan firefight shows challenge for U.S. troops, The Associated Press, June 21, 2009, http://news.yahoo.com/s/ap/ 20090621/ap_on_re_as/as_afghan_taking_on_the_ taliban. 2 Laura King, 6 U.S. troops killed in Afghanistan, Los Angeles Times, Aug. 3, 2009, www.latimes.com/news/nationworld/world/ la-fg-afghan-deaths3-2009aug03,0,3594308.story. 3 For background, see Robert Kiener, Crisis in Pakistan, CQ Global Researcher, December 2008, pp. 321-348, and Roland Flamini, Afghanistan on the Brink, CQ Global Researcher, June 2007, pp. 125-150. 4 Remarks by the President on a New Strategy for Afghanistan and Pakistan, White House, March 27, 2009, www.whitehouse.gov. 5 See www.boston.com/news/nation/washing ton/articles/2009/07/23/obama_victory_not_right_ word_for_afghanistan/. 6 For background, see Roland Flamini, Future of NATO, CQ Global Researcher, January 2009, pp. 1-26. 7 Pamela Constable, For Karzai, Stumbles On Road To Election, The Washington Post,
1

About the Author


Thomas J. Billitteri is a CQ Researcher staff writer based in Fairfield, Pa., who has more than 30 years experience covering business, nonprofit institutions and public policy for newspapers and other publications. His recent CQ Researcher reports include Auto Industrys Future, MiddleClass Squeeze and Financial Bailout. He holds a BA in English and an MA in journalism from Indiana University.

688

CQ Researcher

Obama Ponders Outreach to Elements of Taliban, The New York Times, March 8, 2009, www.nytimes.com/2009/03/08/us/politics/08obama .html?scp=1&sq=obama%20ponders%20outreach %20to%20elements%20of%20taliban&st=cse. 35 Quoted in ibid. 36 Fotini Christia and Michael Semple, Flipping the Taliban: How to Win in Afghanistan, Foreign Affairs, July/August 2009, p. 34, www.foreignaffairs.com/articles/65151/fotinichristia-and-michael-semple/flipping-the-taliban. Co-author Semple, who has significant background in holding dialogues with the Taliban, was expelled from Afghanistan in 2007 by the Karzai government amid accusations he and another diplomat held unauthorized talks with the Taliban. 37 See, Background Note: Afghanistan, U.S. Department of State November 2008, www.state.gov/r/pa/ei/bgn/5380.htm; also, Grolier Encyclopedia of Knowledge, Vol. 1, 1991. See also Kenneth Jost, Rebuilding Afghanistan, CQ Researcher, Dec. 21, 2001, pp. 1041-1064. 38 Ahmed Rashid, Descent into Chaos (2008), p. 8. 39 Ibid. 40 Barry Bearak, Mohammad Zahir Shah, Last Afghan King, Dies at 92, The New York Times, July 24, 2007, www.nytimes.com/2007/07/24/ world/asia/24shah.html. 41 U.S. State Department, op. cit. 42 Ibid. 43 Ibid. 44 Rashid, op. cit., p. 11. 45 Barnett R. Rubin, The Transformation of the Afghan State, in J. Alexander Thier, ed., The Future of Afghanistan (2009), p. 15. 46 Rashid, op. cit., pp. 12-13. 47 Ibid., p. 13. 48 Seth G. Jones, The Rise of Afghanistans Insurgency, International Security, Vol. 32, No. 4, spring 2008, p. 19. 49 Rashid, op. cit., p. 15. 50 Jones, op. cit., p. 20. 51 Ibid. The reference to the urban elite comes from Afghanistan: State Building, Sustaining Growth, and Reducing Poverty, World Bank Report No. 29551-AF, 2005, p. xxvi. 52 Ibid., pp. 20, 22. 53 Ibid., p. 24. 54 Ibid., p. 25. 55 Dexter Filkins, Right at the Edge, The New York Times, Sept. 7, 2008, www.nytimes.com/ 2008/09/07/magazine/07pakistan-t.html. 56 Bob Gates, Americas Secretary of War, 60 Minutes, May 17, 2009, www.cbsnews.com/sto

FOR MORE INFORMATION


American Foreign Policy Council, 509 C St., N.E., Washington, DC 20002; (202) 543-1006; www.afpc.org. Provides analysis on foreign-policy issues. Brookings Institution, 1775 Massachusetts Ave., N.W., Washington, DC 20036; (202) 797-6000; www.brookings.edu. Liberal-oriented think tank that provides research, data and other resources on security and political conditions in Afghanistan and Pakistan and global counterterrorism. Cato Institute, 1000 Massachusetts Ave., N.W., Washington, DC 20001; (202) 842-0200; www.cato.org. Libertarian-oriented think tank that provides analysis on U.S. policy toward Afghanistan and Pakistan. RAND Corp., 1776 Main St., Santa Monica, CA 90401; (310) 393-0411; www.rand.org. Research organization that studies domestic and international policy issues. United Nations Office on Drugs and Crime, U.N. Headquarters, DC1 Building, Room 613, One United Nations Plaza, New York, NY 10017; (212) 963-5698; www.unodc.org. Helps member states fight illicit drugs, crime and terrorism; compiles data on opium poppy production. United States Institute of Peace, 1200 17th St., N.W., Washington, DC 20036; (202) 457-1700; www.usip.org. Provides analysis, training and other resources to prevent and end conflicts.
ries/2009/05/14/60minutes/main5014588.shtml. White House, op. cit. 58 Michael OHanlon, We Might still Need More Troops In Afghanistan, Washington Examiner, July 7, 2009, www.washingtonexaminer.com/pol itics/50044002.html. 59 Michael Evans and David Charter, Barack Obama fails to win NATO troops he wants for Afghanistan, Timesonline, April 4, 2009, www. timesonline.co.uk/tol/news/world/us_and_ americas/article6032342.ece. 60 Victoria Burnett and Rachel Donadio, Spain Is Open to Bolstering Forces in Afghanistan, The New York Times, July 30, 2009, www.ny times.com/2009/07/30/world/europe/30zapatero. html?ref=world. 61 Steven Erlanger, NATO Reorganizes Afghan Command Structure, The New York Times, Aug. 4, 2009, www.nytimes.com/2009/08/05/ world/05nato.html. 62 Thomas Harding, New NATO head calls for international effort in Afghanistan, Telegraph, Aug. 3, 2009, www.telegraph.co.uk/news/world news/asia/afghanistan/5967377/New-Nato-headcalls-for-international-effort-in-Afghanistan.html. 63 Afghanistan and Pakistan: A Status Report, Brookings Institution, June 8, 2009, www.brook ings.edu/~/media/Files/events/2009/0608_afghani stan_pakistan/20090608_afghanistan_pakistan.pdf. 64 Taliban pushed back, long way to go:
57

Obama, Reuters, July 12, 2009, www.reuters. com/article/topNews/idUSTRE56A2Q42009071 2?feedType=RSS&feedName=topNews&rpc=22 &sp=true. 65 Quoted in Dan Robinson, U.S. Lawmakers Reject Amendment Calling for an Exit Strategy from Afghanistan, VOA News, June 26, 2009, www.voanews.com/english/2009-06-26-voa1.cfm. 66 Quoted in ibid. 67 John Aloysius Farrell, Kerry: We are going to take a hard look at Afghanistan, GlobalPost, updated July 10, 2009, www.globalpost.com. 68 Pamela Constable, Karzais Challengers Face Daunting Odds, The Washington Post, July 6, 2009, p. 7A. 69 John F. Burns, Criticism of Afghan War Is on the Rise in Britain, The New York Times, July 12, 2009, www.nytimes.com/2009/07/12/ world/europe/12britain.html?scp=1&sq=criticism %20of%20afghan%20war%20is%20on%20the%20 rise&st=cse. 70 James Risen, U.S. Inaction Seen After Taliban P.O.W.s Died, The New York Times, July 11, 2009, www.nytimes.com/2009/07/11/world/asia/11af ghan.html?scp=1&sq=U.S.%20Inaction%20Seen% 20After%20Taliban&st=cse. 71 The Truth About Dasht-i-Leili, The New York Times, July 14, 2009, www.nytimes.com/ 2009/07/14/opinion/14tue2.html?scp=5&sq=U.S.% 20Inaction%20Seen%20After%20Taliban&st=cse.

www.cqresearcher.com

Aug. 7, 2009

689

Bibliography
Selected Sources
Books
Coll, Steve, Ghost Wars, Penguin Press, 2004. The former Washington Post managing editor, now president of the New America Foundation think tank, traces the CIAs involvement in Afghanistan since the Soviet invasion in the 1970s. Kilcullen, David, The Accidental Guerrilla, Oxford University Press, 2009. A former Australian Army officer and counterterrorism adviser argues that strategists have tended to conflate small insurgencies and broader terror movements. Peters, Gretchen, Seeds of Terror, Thomas Dunne Books, 2009. A journalist examines the role of Afghanistans illegal narcotics industry in fueling the activities of the Taliban and al Qaeda. Rashid, Ahmed, Descent into Chaos, Viking, 2008. A Pakistani journalist argues that the U.S.-led war on terrorism has left in its wake a far more unstable world than existed on Sept. 11, 2001. Wright, Lawrence, The Looming Tower, Knopf, 2006. In a Pulitzer Prize-winning volume that remains a must-read for students of the wars in Afghanistan and Iraq, a New Yorker staff writer charts the spread of Islamic fundamentalism and emergence of al Qaeda that gave rise to the Sept. 11 attacks. Q&A that the only thing that is absolutely certain about this war is that its going to be Obamas war, just as Iraq will be Bushs war. Jones, Seth G., The Rise of Afghanistans Insurgency, International Security, Vol. 32, No. 4, spring 2008, http:// belfercenter.ksg.harvard.edu/files/IS3204_pp007-040_ Jones.pdf. A RAND Corporation political scientist analyzes the reasons a violent insurgency began to develop in Afghanistan earlier this decade. Mueller, John, How Dangerous Are the Taliban? Foreign affairs.com, April 15, 2009, www.foreignaffairs.com/ articles/64932/john-mueller/how-dangerous-are-the-taliban. An Ohio State University political science professor questions whether the Taliban and al Qaeda are a big enough menace to the United States to make a long war in Afghanistan worth the cost. Riedel, Bruce, Comparing the U.S. and Soviet Experiences in Afghanistan, CTC Sentinel, Combating Terrorism Center, May 2009, www.brookings.edu/~/media/Files/rc/articles/ 2009/05_afghanistan_riedel/05_afghanistan_riedel.pdf. A Brookings Institution scholar and former senior adviser to President Barack Obama examines the fundamental differences between the Soviet and U.S. experiences in the region. Rosenberg, Matthew, and Zahid Hussain, Pakistan Taps Tribes Anger with Taliban, The Wall Street Journal, June 6-7, 2009, p. A14. Pakistani anger at the Taliban in tribal regions bordering Afghanistan is growing, and Pakistans military leaders hope to capitalize on that anger as they mount a grueling campaign against insurgents in North and South Waziristan.

Articles
Bergen, Peter, Winning the Good War, Washington Monthly, July/August 2009, www.washingtonmonthly.com/ features/2009/0907.bergen.html. A senior fellow at the New America Foundation argues that skepticism about the Obama administrations chances of victory in Afghanistan are based on a misreading of that nations history and people. Christia, Fotini, and Michael Semple, Flipping the Taliban, Foreign Affairs, July/August 2009. A political scientist (Christia) and a specialist on Afghanistan and Pakistan who has talked with the Taliban argue that while more troops are necessary, the move will have a lasting impact only if it is accompanied by a political surge aimed at persuading large groups of Taliban fighters to lay down arms. Hogan, Michael, Milt Bearden: Afghanistan Is Obamas War, Vanityfair.com, Feb. 5, 2009, www.vanityfair.com/ online/politics/2009/02/milt-bearden-afghanistan-is-obamaswar.html. Bearden, the former CIA field officer in Afghanistan when U.S. covert action helped expel the Soviet Union, says in this

Reports and Studies


Campbell, Jason, Michael OHanlon and Jeremy Shapiro, Assessing Counterinsurgency and Stabilization Missions, Brookings Institution, Policy Paper No. 14, May 2009, www.brookings.edu/~/media/Files/rc/papers/2009/05_coun terinsurgency_ohanlon/05_counterinsurgency_ohanlon.pdf. Brookings scholars examine the status of change in Afghanistan and Iraq and explain why 2009 is expected by many to be a pivotal year in Afghanistan. Tellis, Ashley J., Reconciling With the Taliban? Carnegie Endowment for International Peace, 2009, www.carnegie endowment.org/files/reconciling_with_taliban.pdf. Efforts at reconciliation today would undermine American credibility and jeopardize the success of the U.S.-led mission in Afghanistan, argues a senior associate at the endowment.

690

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Drug Trade
Barker, Kim, NATO-led Force Engages in Poppy Eradication in Afghanistan, Chicago Tribune, Feb. 8, 2009, p. A1. NATOs International Security Assistance Force is working to destroy Afghan poppy fields that fund the Taliban. Dilanian, Ken, Poppy Farms Pose Dilemma, USA Today, March 31, 2009, p. 6A. Profits from poppy farming fields have fueled the insurgency in Afghanistan, but destroying the fields is likely to be just as helpful to the insurgents. Gearan, Anne, U.S. Eradication of Afghan Poppy Wanes, Newsday (New York), July 11, 2009, p. A20. U.S. authorities are abandoning Bush-era policies of destroying Afghan cash crops as a waste of money. Lasseter, Tom, Drug Trade Permeates Afghanistan, Wichita [Kansas] Eagle, May 10, 2009, p. A1. Afghanistan produces about 90 percent of the worlds opium worth $3.4 billion in 2008 which has led Afghan officials to open highways to opium and heroin trafficking. but Pakistanis dont see the group as much of a threat. Qazi, Raza, and Sara A. Carter, 3 Taliban Leaders Unite Against U.S. in Pakistan, The Washington Times, Feb. 24, 2009, p. A1. An alliance among three Taliban leaders in Pakistan could hamper U.S. efforts to flush out al Qaeda in the countrys lawless borderlands. Rashid, Ahmed, Pakistan Seems Ready to Crack Down on Taliban, The Miami Herald, July 2, 2009, p. A1. Pakistan has begun a military offensive to drive the Taliban out of South Waziristan.

Taliban
Barnes, Julian E., and Greg Miller, U.S. Strategy Aims to Stop Taliban Push, Los Angeles Times, March 27, 2009, p. A1. Senior defense officials have called for more training of Afghan forces in order to thwart an attempt by the countrys former Taliban leader from reclaiming power. Cooper, Helene, Dreaming of Splitting the Taliban, The New York Times, March 8, 2009, p. WK1. European governments have pressed the United States for some time over negotiating with the Taliban. Filkins, Dexter, Taliban Said to Be in Talks With Intermediaries About Peace, The Boston Globe, May 21, 2009, p. A4. Taliban leaders are said to be considering peace agreements, with initial demands focused on U.S. troop withdrawal.

Obama Administration
DeYoung, Karen, Obama Outlines Afghan Strategy, The Washington Post, March 28, 2009, p. A1. President Obamas strategy assumes the terrorists who planned the Sept. 11 attacks are devising more plots. Landler, Mark, U.S. to Pledge $40 Million for Afghanistan Elections, The New York Times, March 31, 2009, p. A13. The United States has committed $40 million to underwrite the cost of elections in Afghanistan. Lubold, Gordon, US Troop Buildup in Afghanistan Could Be a Defining Moment, The Christian Science Monitor, Feb. 19, 2009, p. 1. President Obamas decision to deploy an additional 17,000 troops to Afghanistan will either reverse the deteriorating situation or burden the administration with a war with no foreseeable end. Tyson, Ann Scott, Top Forced Out, The Boston The top American general has been replaced amid calls General in Afghan Conflict Globe, May 12, 2009, p. A5. in Afghanistan, David McKiernan, for more counterinsurgency tactics.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

Pakistan
Magnier, Mark, Taliban in Pakistan Is Not Easily Defined, Chicago Tribune, May 11, 2009, p. A11. Turmoil in Pakistan has made it seem as though a unified Taliban is gathering in the northwest areas of the country,

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

Aug. 7, 2009

691

Updated May 25, 2011

www.cqresearcher.com

Afghanistan Dilemma
Here are key events, legislation and court rulings since publication of the CQ Researcher report by Thomas J. Billitteri, Afghanistan Dilemma, Aug. 7, 2009.
he dramatic Navy Seal commando raid that killed al-Qaida leader Osama bin Laden on May 1 undoubtedly will affect U.S. anti-terrorism efforts, including the war in Afghanistan. How much remains to be seen. But even before members of elite Seal Team 6 swooped into Abbottabad, Pakistan, the Obama administration planned to shrink the number of U.S. and NATO soldiers in Afghanistan. Reportedly the reduction would amount to about 5,000 troops out of more than 100,000 currently deployed, not to mention an even larger force of private security contractors. 72 The conflict is now in its 10th year, and analysts predict that 2011 will be its most violent. Many see the conflict as one in which neither side can defeat the other. Nic Lee, director of the Afghanistan NGO Safety Office, a group that advises nongovernmental organizations about security in Afghanistan, describes it as a perpetually escalating stalemate. 73 Moreover, in the decade since the terrorist attacks of Sept. 11, 2001, critics of the conflict, including Richard Haass, president of the Council on Foreign Relations, and former Republican National Committee Chairman Michael Steele say
AFP/Getty Images/Amir Qureshia

it has gone from a war of necessity to one of choice. 74 Many argue that Afghanistan is no longer a significant global terrorist threat, a view underscored in May, when bin Laden the raison detre behind the conflict was discovered living in Pakistan, a scant hours drive from the capital, Islamabad. It appears that he had sheltered there for many years, even as U.S. forces blasted away with bombs and missiles at suspected terrorists and other militants U.S. Navy Seals killed al-Qaida leader Osama bin Laden believed to be living in the remote in this high-walled compound in Abbottabad, Pakistan, on May 1, 2011. Many military and terrorism experts tribal regions between Afghanistan say his death in Pakistan after 10 years on the run supports their argument that Afghanistan and Pakistan. no longer poses a significant terrorist threat. U.S intelligence officials with the aid of materials captured in the bin Laden raid are now racing to just yards from the top Pakistani milirewrite the history of al-Qaida, in light tary academy, and his walled compound of bin Ladens decade on the lam. The yielded a vast trove of al-Qaida inforresults will clearly have major implica- mation stored on computer hard drives tions for the larger conflict between the and thumb drives, including plans to atWest and the radical Islamist terrorist tack the United States on the 10th anorganization and others. niversary of 9/11. It had long been thought that bin Meanwhile, the scheduled drawdown Laden was living in a cave, in limited of U.S. forces in Afghanistan, slated to contact with the outside world and not begin in July, will be an important incoordinating terrorist attacks worldwide. dicator of Washingtons long-term plans Those assumptions are now being re- for the war. The size and nature of the considered after his lair was discovered drawdown have yet to be announced.

PUBLISHED BY CQ PRESS, A DIVISION OF SAGE

WWW.CQPRESS.COM

AFGHANISTAN DILEMMA
Even the authorization of military force against perpetrators of the 9/11 attacks and those who harbored them, passed three days after the attacks, is up for consideration. The authorization legally underpins the war effort in Afghanistan and detention of terror There were only 200 sworn members of the group when key operatives met in the German city of Hamburg to plan the 2001 attacks on the World Trade Center and Pentagon. Most troubling for Washington is the weak, U.S.-backed government of licans, too, are questioning the continued importance of the war. Rep. Jason Chaffetz, a freshman Republican from Utah, bucked his party and twice voted in the House to force the Obama administration to detail a withdrawal plan. I believe that it is time to bring our troops home, Chaffetz proclaimed on his website. 79 Sen. Richard Lugar, R-Ind., the senior Republican on the influential Foreign Relations Committee, is even blunter in his criticism of the war effort. Nearly a decade later, with al-Qaida largely displaced from the country but franchised in other locations, Afghanistan does not carry a strategic value that justifies 100,000 American troops and a $100 billion a year cost, especially given current fiscal restraints in the United States, Lugar said in May. 80 Just days after the raid on bin Ladens compound, a bipartisan group of House members wrote a letter to Obama urging that the Afghan mission be recalibrated. We believe it is no longer the best way to defend America against terror attacks, and we urge you to withdraw all troops from Afghanistan that are not crucial to the immediate national security objective of combating al-Qaida, the lawmakers said. 81 But other members of Congress have said it would be reasonable to stay the course well into 2014. A precipitous withdrawal from Afghanistan would be a mistake, and I, for one, would take that option off the table, Democratic Sen. John Kerry, chairman of the Foreign Relations Committee, said in mid-May. 82 End Game Many Americans outside Washington are calling for a new direction in Afghanistan. In a Washington Post/ABC News poll conducted in March, 64 percent of respondents said the war was no longer worth the cost, though there was nearly an even split on the question of how well things were going. 83

Defense Secretary Robert Gates and Afghan President Hamid Karzai arrive at a joint press conference in Kabul on March 7, 2011. Karzais weak, U.S.-backed government is widely viewed as corrupt and dysfunctional, and many Afghans see it as illegitimate.

suspects at Guantnamo Bay, Cuba. But with the death of bin Laden and capture of others responsible for the 9/11 attacks, experts say the war resolution will need congressional updating. That process will allow lawmakers to craft a long-term framework for any continued military and counterterrorism actions. 75 Changes on the Ground There are only a few dozen al-Qaida operatives, at most, in Afghanistan, according to the CIA. 76 But numbers are only one measure of al-Qaidas strength:

President Hamid Karzai in Kabul. It is widely viewed as corrupt and dysfunctional, and many Afghans see it as illegitimate. 77 The Vietnam War showed us that we shouldnt prop up corrupt governments, and thats what weve got in Afghanistan, said former Democratic National Committee Chairman. Howard Dean. 78 Dean, who rallied Democratic support as an anti-war presidential candidate in 2004, initially had supported the Obama administrations surge last year of 30,000 additional troops in Afghanistan, but no longer. Repub-

Getty Images/Mandel Ngan

Chronology
2009
July U.S. and NATO forces launch major offensive against the Taliban in Afghanistans southern Helmand province; more than 4,000 Marines take part, along with a smaller contingent of Afghan forces. August Numerous Taliban attacks mark presidential and provincial elections, which are largely seen as fraudulent by outside observers. November Hamid Karzai is sworn in as Afghan president, despite concerns about election fraud. December After months of consideration, President Obama
For a decade, this country has expended an inordinate amount of its resources, not to mention the more than 1,500 soldiers killed, to fight a war in Afghanistan that never promised to yield comparable strategic results, argued an editorial in the Philadelphia Inquirer days after the Navy Seals raid. With bin Ladens death, this nation has an opportunity to take emotionalism and politics out of the equation and make some rational decisions about U.S. strategic interests in South Asia, and how best to achieve them. 84 For the U.S. military, which bears the brunt of the burden in the Afghan War, 10 years of combat in the region have taken an emotional toll as well. The latest survey of military morale found it to be the lowest in five years, even as the intensity of the fighting

opts to send 30,000 additional troops to Afghanistan; at the same time, he announces that U.S. forces will begin a partial withdrawal in 2011. . . . In one of the deadliest days for the CIA in decades, a CIA base in Khost, Afghanistan, is attacked by a double agent turned suicide bomber, killing seven CIA officers.

McChrystal resigns over comments published in Rolling Stone. August Dutch troops end Afghan mission.

2011
May 1 Al-Qaida leader Osama bin Laden is killed in a U.S. raid; he apparently had been hiding in the same house in Abbottabad, Pakistan, for more than five years, according to U.S. intelligence officials. The raid also netted dozens of computer drives and other materials that the CIA hopes will reveal terrorist planning strategies and show who helped bin Laden remain hidden over the past decade.
vere shortage of officers. Whats more, 86 percent of enlisted men are illiterate, and drug abuse is rampant. 87 Combat Continues Since the surge in U.S. forces into Afghanistan last year, the strategy has involved both repositioning soldiers to better protect population centers and drastically boosting aerial bombardment, often using the CIAs unmanned aerial drones to target enemy fighters. The two-pronged approach was developed by Gen. David Petraeus, the commander of U.S. Forces in Afghanistan, who is expected to take over as CIA chief in September. 88 The drone campaign has been crucial in taking the fight to the enemy, as military officials like to say. Bill Roggio, a military analyst and editor of

2010
July WikiLeaks begins publishing thousands of formerly classified documents detailing the Pakistani security services backing of the Taliban. . . . Gen. David Petraeus takes command of U.S. forces in Afghanistan after Gen. Stanley
has spiked to levels comparable to combat in Iraq in 2006-07. Many soldiers have served three or more deployments, and half of the respondents said they had killed enemy fighters, a crucial psychological event for a combat veteran. 85 And the costs are not limited to members of the military and their families: The $110 billion price for the war consumes $1 of every $7 the nation spends on defense. 86 One of NATOs primary goals in Afghanistan has been to bolster the Afghan national army, seen as crucial for lasting stability and a prerequisite for U.S. troop withdrawal. The Afghan army is on track to meet its growth target of 171,000 troops by October 2011. Its currently short of that goal by about 10,000 soldiers. But desertion rates are high, and there is a se-

AFGHANISTAN DILEMMA
The Long War Journal who has studied the secretive campaign, has kept a running tally of drone strikes, which rose to 117 in 2010, compared with 35 in 2008. There have been 22 reported strikes during the first four months of 2011. In May, on the eve of the summer battle season, NATO announced that the Taliban and other insurgents in Kabul had been weakened by both the increase in the number of troops on the ground and an uptick in airstrikes. But because the drone campaign is classified, no full public accounting has been provided of the targets and success rates for the strikes, including how many civilians have been killed and the number and nature of militants deaths. Roggio argues that international fighters and terrorist leaders are targeted, but Gilles Dorronsoro, a visiting scholar at the Carnegie Endowment for International Peace, says the drone campaign is problematic. Now, were seeing drone airstrikes against low-level foot soldiers and more civilian casualties, he says. Is it working to use drones to break the back of the Taliban? No. Airstrikes in the tribal regions alone have not forced the Taliban to the negotiating table, nor have they broken their will to fight on. Moreover, the high number of civilian causalities has made the U.S. war against terrorist groups wildly unpopular in Pakistan. But the death of Osama bin Laden might be the break that many people have been hoping for. Afghanistans ambassador to Washington said that the demise of the worlds most wanted terrorist created the hope for leadership of the Taliban to join the reconciliation and reintegration process. 89 In addition, Pakistani security officials announced a new operation to sweep through Quetta, long thought to be the home of the Talibans government in exile, to make sure that oneeyed Taliban chief Mullah Mohammed Omar and Ayman al-Zawahiri, formerly bin Ladens second in command, arent also hiding in Pakistan.
Alex Kingsbury
Eurasia Review, April 26, 2011. 78 McKay Coppins, Howard Dean to Obama: Get Out of Afghanistan! The Daily Beast, May 18, 2011, www.thedailybeast.com/blogsand-stories/2011-04-18/howard-dean-to-presi dent-obama-get-our-troops-out-of-afghanistan/? cid=hp:beastoriginalsC1. 79 http://chaffetz.house.gov/legislation/strongnational-defense.shtml. 80 Indiana Senator calling for troop withdrawal from Afghanistan, FOX News, May 3, 2011, www.fox59.com/news/wxin-richard-lugarindiana-senator-calling-for-troop-withdrawalfrom-afghanistan-20110503,0,3670876.story. 81 Letter to President Obama, http://welch. house.gov/index.php?option=com_content& view=article&id=1466:welch-and-chaffetzlead-bipartisan-house-group-urging-obama-topull-out-of-afghanistan-and-recalibrate-antiterrorism-strategy&catid=39:2011-pressreleases&Itemid=32. 82 Key US senators warn against hasty Afghan pullout, Agence France-Press, May 10, 2011. 83 Washington Post-ABC News Poll, March 13, 2011, www.washingtonpost.com/wp-srv/politics/ polls/postpoll_03142011.html. 84 Rethink Afghanistan, Philadelphia Inquirer, May 9, 2011, www.philly.com/philly/opinion/ 121482579.html. 85 Gregg Zoroya, Strain on forces in the field at a five-year high, USA Today, May 8, 2011. 86 Prepared Statement of Richard Haass, op. cit. 87 C. J. Radin, Afghan National Army Update May 2011, The Long War Journal, May 9, 2011, www.longwarjournal.org/archives/2011/05/afghan_ national_army_4.php. 88 Yochi Dreazen, National Security Reshuffle has Implications for Afghan War, National Journal, April 27, 2011. 89 Ashish Kumar Sen, Without bin Laden, Taliban may talk peace, The Washington Times, May 8, 2011. Update

Notes
Julian Barnes and Adam Entous, Military Draws Up Afghan Exit Plan, The Wall Street Journal, May 10, 2011. 73 Glimmers of hope; its been a long slog, but Afghanistan may at last be able to contemplate more stable government, The Economist, May 12, 2011. 74 Statement of Richard Haass before the Senate Committee on Foreign Relations, May 3, 2011, http://i.cfr.org/content/publications/ attachments/Testimony.Haass.SFRC.5.3.2011.pdf. 75 Josh Gerstein, GOP seeks to redefine the war on terror, Politico, May 10, 2011. 76 Felicia Sonmez, Panetta: Maybe 50 to 100 al Qaeda left in Afghanistan, The Washington Post, June 27, 2010. 77 Larry Goodson and Thomas H. Johnson, Parallels With Past: How Soviets Lost In Afghanistan, How US Is Losing Analysis,
72

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Closing Guantnamo, 2/09 Affirmative Action, 10/08 Gay Marriage Showdowns, 9/08 Americas Border Fence, 9/08 Immigration Debate, 2/08

Education
Reading Crisis? 2/08 Discipline in Schools, 2/08 Student Aid, 1/08 Racial Diversity in Public Schools, 9/07

Health/Safety
Straining the Safety Net, 7/09 Treating Depression, 6/09 Reproductive Ethics, 5/09 Extreme Sports, 4/09 Regulating Toxic Chemicals, 1/09 Preventing Cancer, 1/09 Heart Health, 9/08

Environment/Society
Energy and Climate, 7/09 Future of Books, 5/09 Hate Groups, 5/09 Future of Journalism, 3/09 Confronting Warming, 1/09 Reducing Carbon Footprint, 12/08

Crime/Law
Examining Forensics, 7/09 Legalizing Marijuana, 6/09 Mexicos Drug War, 12/08 Prostitution Debate, 5/08 Public Defenders, 4/08

Politics/Economy
Business Bankruptcy, 4/09 Future of the GOP, 3/09 Middle-Class Squeeze, 3/09

Upcoming Reports
Health Reforms, 8/28/09 Financial Literacy, 9/4/09 U.S. Nuclear Arsenal, 9/11/09

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
To receive notice of upcoming CQ Researcher reports, or learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, ext. 1906, or e-mail librarysales@cqpress.com.

CQ
T
fense, needs to be updated.

Researcher
Published by CQ Press, a Division of SAGE

www.cqresearcher.com

Government Secrecy
Does greater openness threaten national security?
he online disclosure of thousands of classified diplomatic, military and intelligence documents by the shadowy Internet site WikiLeaks has dramatically intensified the debate over government secrecy.

Open-government advocates argue that federal agencies, including the CIA, keep too much information from the public, undermining the ability of citizens to keep a check on official wrongdoing. Secrecy supporters argue that modern technology gives far too many people access to sensitive information that could threaten the nations welfare if released. The Obama administration is taking steps to open more of the governments business to public scrutiny, but disclosure advocates say President Obama needs to do even more. Meanwhile, lawmakers, intelligence officials and secrecy experts are debating whether the Espionage Act of 1917, which prohibits the willful disclosure of information relating to the national deWikiLeaks founder Julian Assange, here at a conference in Geneva last November, is fighting extradition to Sweden to face sexual misconduct charges. Meanwhile, the U.S. government is investigating his controversial website, which continues to disclose classified information.

I N S I D E

THIS REPORT
THE ISSUES ....................123 BACKGROUND ................129 CHRONOLOGY ................131 CURRENT SITUATION ........136 AT ISSUE........................137 OUTLOOK ......................139 BIBLIOGRAPHY ................142 THE NEXT STEP ..............143

CQ Researcher Feb. 11, 2011 www.cqresearcher.com Volume 21, Number 6 Pages 121-144
RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

GOVERNMENT SECRECY
THE ISSUES SIDEBARS AND GRAPHICS

CQ Researcher
Feb. 11, 2011 Volume 21, Number 6

123

Has WikiLeaks threatened national security? Should the government prosecute Julian Assange? Is too much government information classified?

124

Government Secrecy Increased Dramatically Efforts to classify information doubled in 2009 over the previous year. More Than Half of Pages Reviewed Were Declassified Federal agencies opened 28 million pages of data in 2009. Freedom of Information Requests Dropped Requests fell 8 percent from 2008 to 2009. Chronology Key events since 1966. Secrets of the Man Behind WikiLeaks By age 16, Julian Assange had become the master hacker known as Mendax. Many Recent Leakers Ended Up Behind Bars Obama administration takes hard line against unauthorized disclosures. At Issue Should the Espionage Act of 1917 be updated?

MANAGING EDITOR: Thomas J. Billitteri

tjb@cqpress.com

BACKGROUND

125

129 132 134

Growth of Secrecy The 1917 Espionage Act criminalized disclosure of information related to national defense. Secrecy Blowback In the 1970s, the Pentagon Papers case spurred calls for more openness. War on Transparency The state secrets privilege and later USA Patriot Act helped the government keep secrets.

kkoch@cqpress.com CONTRIBUTING EDITOR: Thomas J. Colin tcolin@cqpress.com ASSOCIATE EDITOR: Kenneth Jost STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Roland Flamini, Sarah Glazer, Alan Greenblatt, Reed Karaim, Barbara Mantel, Tom Price, Jennifer Weeks
DESIGN/PRODUCTION EDITOR: Olu B. Davis ASSISTANT EDITOR: Darrell Dela Rosa FACT CHECKER: Michelle Harris

ASSISTANT MANAGING EDITOR: Kathy Koch

128 131 132

A Division of SAGE

PRESIDENT AND PUBLISHER:

134

John A. Jenkins
DIRECTOR, REFERENCE SOLUTIONS:

CURRENT SITUATION

Todd Baldwin
Copyright 2011 CQ Press, a Division of SAGE. SAGE reserves all copyright and other rights herein, unless previously specified in writing. No part of this publication may be reproduced electronically or otherwise, without prior written permission. Unauthorized reproduction or transmission of SAGE copyrighted material is a violation of federal law carrying civil fines of up to $100,000. CQ Press is a registered trademark of Congressional Quarterly Inc. CQ Researcher (ISSN 1056-2036) is printed on acidfree paper. Published weekly, except: (May wk. 4) (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and (Dec. wks. 4, 5), by CQ Press, a division of SAGE. Annual full-service subscriptions start at $803. For pricing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. Periodicals postage paid at Washington, D.C., and additional mailing offices. POSTMASTER: Send address changes to CQ Researcher, 2300 N St., N.W., Suite 800, Washington, DC 20037.

136

Opening Up The Obama administration is pressing for more transparency, even as it pursues WikiLeaks founder Assange. Report Card Open-government advocates say Obama is heading in the right direction.

137

FOR FURTHER RESEARCH

138

141 142 143 143

For More Information Organizations to contact. Bibliography Selected sources used. The Next Step Additional articles. Citing CQ Researcher Sample bibliography formats.

OUTLOOK

139

Flood of Leaks Internet sites that disclose information are springing up, even in Russia.

Cover: AFP/Getty Images/Fabrice Coffrini

122

CQ Researcher

Government Secrecy
BY ALEX KINGSBURY
Indeed, a Norwegian lawmaker this month nominated WikiLeaks for a Nobel Prize, ast summer, the biggest saying the site and its work security breach ever to promote world peace by dishit the U.S. government closing government docuexploded on the international ments. 4 (See sidebar, p. 132.) scene, but the leaker wasnt The conflicting views over a renegade CIA operative or a WikiLeaks point to a much National Security Agency mole. broader ideological rift beIt was a tousled 39-yeartween advocates of greater old former computer hacker government transparency from Australia named Julian conducting government busiAssange, founder of the conness in full view of the pubtroversial whistle-blowing lic and those who fear that website WikiLeaks. Aided by loosening the secrecy reins a shadowy band of associcould put the nation at risk. ates in several countries, AsPresident Barack Obama has sange has posted hundreds satisfied neither side in the deof thousands of classified U.S. bate. On his first full day in military and State Department office, Obama signed an exdocuments. His source may ecutive order aimed at reduchave been Bradley Manning, ing government secrecy and a U.S. Army private with acincreasing the flow of inforcess to one of the governmation across federal agenments classified databases. cies. He also created the NaA small portion of the trove tional Declassification Center Pvt. Bradley Manning, the 23-year-old Army intelligence of hundreds of thousands of to speed and coordinate the analyst suspected of providing WikiLeaks with thousands of classified documents, reportedly is being held in documents obtained by Asrelease of government inforsolitary confinement at the Quantico Marine Corps Base sange, including sensitive mation that no longer needed in Virginia. WikiLeaks disclosure of classified diplomatic cables and comto be kept from public view. diplomatic, military and intelligence documents has bat field reports from Iraq Both actions were designed to intensified the battle of words between open-government and Afghanistan, has apfulfill campaign pledges. advocates and those who say too much transparency threatens national security. peared in newspapers around But critics say Obama has the world, including The New fallen short in fulfilling all the York Times, and new leaks continue efforts to disseminate these stolen promises he made on the stump. For materials. 2 to emerge online. 1 example, they note, the White House But not everyone agrees that groups has invoked the state secrets privilege Last December, however, lawmakers condemned Assange and pressured like WikiLeaks are illegal or ought to to thwart lawsuits challenging the jailthe online shopping behemoth Ama- be stifled. ing of people who leak sensitive inWhat is really going on here is a formation to the press.* Candidate zon.com to stop hosting the controwar over control of the Internet, and Obama decried such legal maneuvers versial site on its powerful servers. WikiLeaks illegal, outrageous and whether or not the Internet can actu- when his predecessor, George W. Bush, reckless acts have compromised our ally serve its ultimate purpose which was in office. national security and put lives at risk is to allow citizens to band together around the world, declared Sen. Joseph and democratize the checks on the * The state secrets privilege is a controversial Lieberman, I-Conn., chairman of the worlds most powerful factions, rule of evidence whereby the government tells Senate Homeland Security and Govern- Salon.coms Glenn Greenwald, a lawyer a court that its proceedings might disclose semental Affairs Committee. No responsi- and prominent civil liberties blogger, cret information and thereby endanger nable company whether American or proclaimed soon after the Amazon af- tional security. Courts rarely deny or challenge foreign should assist WikiLeaks in its fair unfolded. 3 a state secrets claim.

THE ISSUES

www.cqresearcher.com

www.dailymail.co.uk

Feb. 11, 2011

123

GOVERNMENT SECRECY
Government Secrecy Efforts Increased
Government efforts to classify information* more than doubled in 2009 over 2008 and were nearly 10 times greater than in 1996 (line graph). The number of classication decisions increased largely because classifying agencies used new guidelines to provide more accurate data. However, the number of original decisions dropped from more than 500,000 in 1989 to fewer than 200,000 in 2009 (inset). The drop reected a declining number of people and agencies with classication authority and a change in the way the number of classication decisions was tabulated by federal agencies. Combined Original and Derivative Classication Activity, FY 1996-FY 2009
No. of Classification Decisions (in millions)

60 50 40 30 20 10 0

Original Classification Activity, FY 1991 and FY 2009


No. of Classification Decisions (in thousands) 600 500 400 300 200 100 0

21%/condential 77%/secret 4%/top secret

1991

2009

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

* Government information is classied in one of two ways: The initial determination that certain information must be protected in other words a new secret created is known as original classication; derivative classication involves the reuse of already classied information in a new form. There are three basic levels of classication: Top Secret, Secret, and Condential. Note: In 2009 67 percent of the information protected was designated for declassication in 10 years or less, the highest percentage to date. Source:Report to the President, 2009, Information Security Oversight Ofce, March 31, 2010

The administrations record on transparency is mixed, says Hina Shamsi, director of the National Security Project at the liberal American Civil Liberties Union. The longer he is in office, the less importance secrecy reform appears to have. [Obama] should recommit to the ideals about openness and transparency that he invoked when he first took office. Obama is hardly the first president to struggle with the secrecy issue. But

the rise of the Internet as a tool to disseminate sensitive information, coupled with international tensions wrought by the Sept. 11, 2001, terror attacks and the wars in Iraq and Afghanistan, have brought the issue to a boil. And nothing has raised the temperature of the debate as much as the WikiLeaks controversy. To fully understand it, one must first know about a little-known Defense Department com-

puter network that sounds like it was conjured up by a Hollywood sci-fi screenwriter. Known as SIPRNet Secret Internet Protocol Router Network the system allows the U.S. military, the State Department and other agencies around the globe to share classified information. Although the information is supposed to be protected from prying eyes, nearly 500,000 people have access to it from senior military and law-enforcement officials to low-level military analysts and government contractors. 5 That accessibility apparently contributed to the WikiLeaks affair. Pvt. Manning, a 23-year-old intelligence analyst with SIPRNet access, is suspected of downloading the classified military communiqus and diplomatic cables from the Defense Department computer system while he was deployed in Iraq. 6 According to friends, Manning was despondent after being demoted for fighting with a fellow soldier and felt that his military career was headed nowhere. 7 He was arrested on suspicion of unauthorized disclosure of classified information and reportedly is being held under harsh conditions at the Marine Corps Base in Quantico, Va. Last summer Assange gave the documents to selected media outlets, including The Times. Recently, the papers executive editor, Bill Keller, described a prickly relationship with Assange. Julian Assange has been heard to boast that he served as a kind of puppet master, recruiting several news organizations, forcing them to work in concert and choreographing their work. This is characteristic braggadocio, Keller wrote in a long article last month detailing the papers WikiLeaks dealings. 8 In the end, several international newspapers besides The Times Britains The Guardian, Frances Le Monde and Madrids El Pais plus the German newsmagazine Der Spiegel published some of the documents, along with articles explaining the significance

124

CQ Researcher

of the material. Some names and other information in the WikiLeaks files were redacted, or blacked out. 9 The documents did not expose the governments most sensitive secrets, many of which are kept off SIPRNet because of its wide accessibility. 10 Still, the disclosures were explosive. They marked the first time in history that such a large collection of candid communiqus among diplomats and military officials was exposed to public view. (See box, p. 129.) Whats more, publication spurred concern that human-rights workers, government informants and collaborators mentioned in the dispatches could be identified and put at personal risk. Defense Secretary Robert Gates condemned the leaks but suggested that fears of their effects on American foreign policy have been exaggerated. Yet politicians in both parties have expressed deep outrage over what they view as WikiLeaks compromise of national security. Democrats objected even though they previously supported leaks exposing controversial national security practices such as warrantless wiretapping during the Bush administration. Republicans are upset even though they earlier praised the publication of stolen e-mails suggesting that some climatologists tried to hide evidence that undermined their global warming research. Lieberman, an Independent who has sided with Republicans on many foreign-policy issues, said, The recent dissemination by WikiLeaks . . . is just the latest example of how our national security interests, the interests of our allies, and the safety of government employees and countless other individuals are jeopardized by the illegal release of classified and sensitive information. Liebermans statement came as he introduced legislation making it a federal crime to publish the name of a U.S. intelligence source. 11 The WikiLeaks disclosures have already had a far-reaching impact on

Half of Pages Reviewed Were Declassied


Federal agencies declassied more than 28 million pages of government data in 2009, or about 55 percent of the 52 million pages it reviewed. The number of pages declassied dropped 8 percent from the previous year. The percentage of pages declassied has remained constant at 55 percent of total pages reviewed since 2004. Pages Reviewed and Declassied, FY2004-FY 2009
No. of pages

80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 0

Pages reviewed Pages declassified

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

Source: Report to the President 2009, Information Security Oversight Ofce, March 31, 2010

government operations. The State Department suspended its use of SIPRNet, forcing the military and diplomatic corps to share less information with each other than in the past. The government also has warned humanrights activists, foreign officials and others who have been identified in leaked diplomatic cables that they could be in jeopardy; some have been moved to more secure sites. 12 In addition, foreign leaders reportedly have become more reluctant to candidly discuss issues with U.S. diplomats. 13 Efforts to discourage informationsharing are viewed as troubling in light of a government panels conclusion that the failure of federal agencies to share intelligence information aided the 9/11 terrorists. 14 Meanwhile, Congress and some government agencies have told employees not to download classified material from the WikiLeaks site. The leaks may also affect broader transparency efforts far into the future, including fulfilling Freedom of Information Act (FOIA) requests made by

government watchdog groups and the news media, some analysts say. Media representatives have been wary in their dealings with Assange. 15 Keller wrote that The Times was confident that reporting on the secret documents could be done within the law. But, he said, the papers editors felt an enormous moral and ethical obligation to use the material responsibly. . . . From the beginning, we agreed that in our articles and in any documents we published from the secret archive, we would excise material that could put lives at risk. 16 Reporters Without Borders, an international organization that promotes press freedom, was more equivocal. In a scathing letter to Assange, general secretary Jean-Franois Julliard charged, The precedent you have set leaves all those people throughout the world who risk their freedom and sometimes their lives for the sake of online information even more exposed to reprisals. 17 Yet Reporters Without Borders also has lashed out at attempts to stifle WikiLeaks. It is up to the courts, not politicians, to

www.cqresearcher.com

Feb. 11, 2011

125

GOVERNMENT SECRECY
decide whether or not a website should be closed, it declared in December. 18 WikiLeaks staunchest defenders have cast it as a modern-day whistleblowers clearinghouse, saying that its disclosures show evidence of government malfeasance on the scale of the top-secret Pentagon Papers, which were leaked to The Times and The Washington Post in 1971 and revealed official misgivings and deception about the Vietnam War. 19 But critics have another view of WikiLeaks. I think a lot of their talk about fighting injustice is pretty woolly and a little hard to take seriously, said Steven Aftergood, editor of Secrecy News, a Web publication of the Federation of American Scientists. * [T]here are lots of potential consequences of just this latest release that may turn out to be really positive and constructive, including a change of course in the war, perhaps, and there are potential consequences that are disastrous, including the potential loss of life and future difficulties in assembling new intelligence networks, because sources will lack confidence that the U.S. can keep the secrets it commits to keeping. 20 As the government tries to manage vast amounts of sensitive information in the age of WikiLeaks, here are some questions being asked: Has WikiLeaks threatened national security? To be sure, the WikiLeaks documents embarrassed the U.S. government. They document the deaths of civilians in war zones, the close relations that the United States has with some despotic regimes and countless
* Aftergood directs the federations Project on Government Secrecy, which promotes the reform of official secrecy practices. In 1997 his Freedom of Information Act lawsuit against the CIA led to the declassification and publication of a prior years intelligence budget, for the first time in 50 years.

other details, both explosive and mundane, that were never meant for public consumption. In some instances, the documents also show that the U.S. government has lied. A case in point: For years the Pentagon insisted publicly that it was not keeping a tally of Iraqi civilians and soldiers killed during the war and that counts provided by private aid groups and journalists were wildly inflated. In reality, the Pentagon did keep count, and its numbers were, if anything, slightly higher than the most widely cited press tallies. 21 But does embarrassment and scandal rise to the level of a national security threat? Defense Secretary Gates denounced the release of thousands of once secret battlefield reports from troops in Iraq and Afghanistan, but sounded a word of caution. Ive heard the impact of these releases on our foreign policy described as a meltdown, as a game-changer and so on. I think those descriptions are fairly significantly overwrought, Gates said. The fact is, governments deal with the United States because its in their interest, not because they like us, not because they trust us and not because they believe we can keep secrets. Many governments some governments deal with us because they fear us, some because they respect us, most because they need us. We are still essentially, as has been said before, the indispensable nation. 22 Concerns over the disclosures have centered on two issues. First, that those who had provided information to, or cooperated with, the U.S. government on the battlefield in Afghanistan, for instance would face immediate reprisal. Second, that the release sowed mistrust that would make governments and individuals unwilling to cooperate candidly with the government in the future, for fear they would later be identified in leaked documents.

The first concern has been the more immediate and serious. In the wake of the first release of Afghan documents last July, Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, put it bluntly: Mr. Assange can say whatever he likes about the greater good he thinks he and his source are doing, but the truth is they might already have on their hands the blood of some young soldier or that of an Afghan family. 23 Highlighting what it sees as the seriousness of the issue, the State Department released a letter to WikiLeaks from its legal adviser, Harold Koh, warning that the site was jeopardizing the lives of countless innocent individuals from journalists to humanrights activists and bloggers to soldiers to individuals providing information to further peace and security. John Bellinger III, a State Department legal adviser in the Bush administration from 2005-2009, says WikiLeaks undoubtedly caused damage, especially regarding the willingness of people to cooperate with the U.S. government in the future. What if WikiLeaks had published the internal source list for Human Rights Watch, which relies on confidential sources to write its reports? he asks. Not many people would agree that transparency in that case was a good idea. Foreign Service officers routinely meet with dissidents, human-rights workers [and] environmental activists, and they do good work that may be compromised. But months after the leaks were published, nearly 100 government intelligence analysts reported to Congress that the disclosures had done little actual damage to U.S. national interests. We were told [by intelligence analysts that the impact of WikiLeaks revelations] was embarrassing but not damaging, a government official familiar with the report told the Reuters news agency. 24 The State Department did note, however, that it helped relocate a small number of people who had been compromised through the release of the documents. 25

126

CQ Researcher

Some intelligence experts say the release of sensitive information may actually have had benefits. The documents showed frequent duplicity on the part of foreign governments. The Yemeni president, for instance, allowed U.S. forces to operate in his country and lied about it to the countrys parliament. 26 On the other hand, the State Department comes across as rather honest, experts say. As Blake Hounshell, managing editor of Foreign Policy magazine noted, WikiLeaks actually showed that the U.S. is remarkably consistent in what it says publicly and privately. 27 But others contend that analysis misses the point. Undermining the confidentiality of diplomatic communication harms our national security all by itself, says Stephen Sestanovich, a former U.S. diplomat and current fellow at the Council on Foreign Relations. Yes, the leaks may show that American diplomats are good, honest, capable people, but that isnt reason enough to think that the affair helps us. Others have mixed views. Professor Peter Feaver, who heads the Triangle Institute for Security Studies at Duke University, says the WikiLeaks disclosures have imposed costs on friends and allies in other countries who trusted us, making diplomacy and cooperation harder, feeding noxious conspiracy theories and contributing to an image of a weak administration incapable of protecting items it has claimed must be kept secret to protect our national security. Then again, he says, for fair-minded and careful observers, many of the files disprove certain critiques of the United States and so, in this limited sense, there are some silver linings. Should the government prosecute Julian Assange? Attorney General Eric Holder announced in December that the Justice Department was considering prosecuting Assange. Meanwhile, a Washington

Post/ABC News poll found that some 60 percent of Americans want the WikiLeaks founder arrested and charged with something. 28 (Assange faces unrelated sex-crime accusations in Sweden.) But legal experts say it will be difficult to prosecute Assange for the disclosure of the classified government documents, primarily because it is unclear whether he broke any U.S. laws when he received and posted them online. The government doesnt normally have the right to stop publication of stolen classified material, the Supreme Court ruled in the Pentagon Papers case. 29 In another important case, Barnicki v. Vopper, the court said the press has the right to publish truthful information that is leaked, even if the leaker gained the information illegally. 30 In fact, the government has never successfully prosecuted a media organization for a leak. Nor is there a law criminalizing the simple disclosure of classified information. In 2000, President Bill Clinton vetoed a bill that would have explicitly criminalized all leaking. 31 The most likely approach to prosecuting Assange would be under the Espionage Act, which prohibits the willful disclosure of information relating to the national defense. Courts have interpreted that to mean that the defendant must know the information will hurt national security and that disclosure violates the law. But what constitutes harm to national security can be a highly contentious issue. Here, Assange can make the departments case especially difficult, contends Baruch Weiss, a lawyer who has defended clients against charges of violating the Espionage Act. Well before publishing the cables, he wrote a letter to the U.S. government, delivered to our ambassador in London, inviting suggestions for redactions. 32 The government declined that offer and demanded that the documents be returned. Adding to the confusion is the fact that the Espionage Act refers to national security, not national defense.

Experts say it is unclear how the two concepts may differ. Indeed, lawyers reviewing the WikiLeaks situation have noted that the first witness called in Assanges defense could theoretically be Defense Secretary Gates, who said the leaks were likely to cause the nation minimal long-term damage. But the limitations of existing law shouldnt dissuade the government from pursuing prosecution, others argue. The Obama administration should, within the limits of the law, of course, seek to indict and prosecute those who have stolen classified documents, particularly when they have done so with the express purpose of hurting the United States, as Assange has done, says Duke Universitys Feaver. If anything, prosecution should be considered for its deterrent value, Kenneth Wainstein, former assistant attorney general for national security, told a congressional committee in December. If Assange and WikiLeaks pay no penalty for their recent audacious releases, that sense of security will become one of invulnerability, they will redouble their efforts to match or exceed their recent exploits, and copycat operations will start to appear throughout the Internet, he said. 33 Wainstein thinks the government stands a fighting chance of successfully prosecuting the case. But the problem with prosecuting Assange under the Espionage Act, media and civil liberties groups say, is that such a judicial remedy could just as easily be turned against traditional news outlets that publish stories based on the leaks of classified information. 34 The ACLUs Shamsi says any effort to prosecute Assange would be catastrophic for the news media. From what we know in the public record, theres no difference between what Julian Assange has done that is any different than whats done by The New York Times. Criminalizing the publication of classified information is not the step that the government should

www.cqresearcher.com

Feb. 11, 2011

127

GOVERNMENT SECRECY
Freedom of Information Requests Dropped
The number of public requests for government records under the Freedom of Information Act (FOIA) dropped 8 percent from 2008 to 2009. Meanwhile, the cost of processing FOIA requests rose to nearly $400 million in the past decade. Freedom of Information Act Requests and Costs, 1999-2009*
Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 FOIA requests received 1,908,083 2,174,570 2,188,799 2,429,980 3,266,394 4,080,737 19,950,547 21,412,736 21,758,628 605,471 557,825 Total cost of FOIA $286,546,488 $253,049,516 $287,792,041 $300,105,324 $323,050,337 $336,763,628 $334,853,222 $304,280,766 $352,935,673 $338,677,544 $382,244,225

* Year-to-year gures are not comparable because some agencies included Privacy Act numbers in their annual totals. Source: Secrecy Report Card 2010, OpentheGovernment.org

take. It would have a chilling effect on the First Amendment. But that chilling effect would be a good thing, argues historian Gabriel Schoenfeld, author of Necessary Secrets: National Security, the Media, and the Rule of Law. In publishing leaked materials, journalists indefatigably demand openness in government and claim to defend the peoples right to know, he told a congressional panel in December. But along with the publics right to know, constantly invoked by the press, there is also something rarely spoken about, let alone defended: namely the publics right not to know. 35 Is too much government information classified? Over the past 50 years, a half-dozen commissions have examined classification, and all came to essentially the

same conclusion: Too much information is kept from the public, and the practice runs contrary to the national interest. One advocacy group estimated that in 2009 the government spent at least $196 maintaining secrets already on the books for every dollar it spent declassifying documents. 36 Obama talked frequently on the campaign trail about a culture of transparency. And on his first day in office he relaxed Bush administration restrictions on photographing the return of service members killed in combat, posted more government documents online and ordered his agencies to be more transparent with the public. But advocates of open government argue that isnt enough. Too much government information is being classified, says Lucy Dalglish, who heads the Reporters Committee for Freedom of the Press.

Yet, even trying to understand how much information is classified, and why, is difficult. For instance, in 2005 the federal government had 50 different designations for secret information. Many of those categories, such as sensitive but unclassified, were improvised meaning that there was neither clear legal precedent for their creation nor clear avenues for declassification. 37 Congress has taken steps in recent years to standardize those designations and reduce the number of people authorized to classify information. The Reducing Over-Classification Act, signed into law by Obama in October 2010, directs the Department of Homeland Security and the intelligence community to standardize classification and declassification procedures and improve information sharing across the government. The importance of sharing information has been an important motivator for reform. After the 9/11 attacks, numerous reviews cited a failure to share information among different agencies often for fear of disclosure as a critical failing of the government in the run-up to the disaster. Yet the government does need to do some things in private, experts say. Bellinger, the former State Department legal adviser, says that while the government may overclassify some information, the problem is perhaps exaggerated by transparency advocates. Theres probably no one who has served in government who hasnt seen something that was classified that probably shouldnt have been, he says. But I think that its more of a peripheral problem. So, how much secrecy is too much? Rodney McDaniel, National Security Council secretary in the Reagan administration, estimated 20 years ago that only 10 percent of what the government classified was for the legitimate protection of secrets, implying that the government should reveal 90 percent of its protected data. 38 Former New Jersey Gov. Thomas Kean, co-chair of the 9/11 Commission,

128

CQ Researcher

said after reviewing thousands of documents related to the terror attacks that maybe 60 to 70 percent of the materials that I went over that are classified shouldnt have been. 39 Meanwhile, over the past 15 years, the Interagency Security Classification Appeals Panel, where denied FOIA requests are appealed, has overruled agency secrecy claims in whole or in part in about twothirds of its cases. 40 Tom Blanton, head of the National Security Archive, a nonprofit research organization that collects and publishes declassified government documents, says his group has found dozens of examples of identical documents that are both classified and unclassified at the same time, sometimes with different versions from different agencies or different reviewers, all because the secrecy is so subjective and overdone. And while there are many examples of information redacted in one document and released in another, what may get lost in the debate is the corrosive effect the sometimes arbitrary secrecy decisions have on the public debate. Jack Goldsmith, who headed the Office of Legal Counsel in the Bush administration, said, A root cause of the perception of illegitimacy inside the government that led to leaking (and then to occasional irresponsible reporting) is, ironically, excessive government secrecy. 41

WikiLeaks Sheds Light on U.S. Diplomatic Actions


Thousands of cables posted by the controversial website WikiLeaks have put the U.S. State Department and its allies under the spotlight. Notable disclosures include payment to other nations in exchange for accepting Guantnamo detainees, suspected corruption in the Afghan government and potential Korean unication.

Yemen takes responsibility for attacks. The Yemeni


government covered up American drone attacks against al-Qaida in the country by saying the attacks were its own. Well continue saying the bombs are ours, not yours, President Ali Abdullah Saleh told Gen. David Petraeus in January 2010.

China hacks Google. The Chinese government initiated a


cyberattack on Googles computer network in January 2010, according to what a contact told the U.S. Embassy in Beijing. Attacks were also targeted against the computers and e-mail accounts of adversaries such as the Dalai Lama.

Saudi King pushes for U.S. strike against Iran. King


Abdullah of Saudi Arabia has repeatedly pleaded for the United States to attack Iran. Cut off the head of the snake, he said in 2008, referring to a military strike against Irans nuclear program.

U.S. pays others to take in Guantnamo detainees.


U.S. authorities, in an effort to resettle Guantnamo detainees, offered the island nation of Kiribati millions of dollars to accept Chinese Muslim prisoners. Slovenian ofcials were offered a meeting with President Obama in exchange for accepting a former prisoner.

Korean unication discussed. American and South Korean ofcials have presented plans to unite North and South Korea after a collapse of the North. They oated the idea of persuading China to accept unication in exchange for economic incentives. Corruption suspected in Afghan government. During a
visit by Afghan Vice President Ahmed Zia Massoud to the United Arab Emirates in 2009, ofcials from the U.S. Drug Enforcement Administration discovered that he was carrying $52 million in cash, which they ultimately allowed him to keep without revealing its source.

BACKGROUND
Growth of Secrecy

he countrys oldest official secret is a recipe for invisible ink that predates World War I. The information remains classified, not because the recipe is still in use (though it may be), but because it is evidence of the

Sources: The 9 Most Shocking WikiLeaks Secrets, The Daily Beast, Nov. 28, 2010, www.thedailybeast.com/blogs-and-stories/2010-11-28/wikileaks-documents-chinasgoogle-hack-un-spying-more-secrets/full/; Scott Shane and Andrew W. Lehren, Leaked Cables Offer Raw Look at U.S. Diplomacy, The New York Times, Nov. 28, 2010, www.nytimes.com/2010/11/29/world/29cables.html?pagewanted=all; The Telegraph, www.telegraph.co.uk.

www.cqresearcher.com

Feb. 11, 2011

129

GOVERNMENT SECRECY
intelligence communitys sources and methods, which are exempt from declassification laws. 42 In 1916, as the United States edged closer to entering the war, German saboteurs destroyed a munitions dump in New Jersey with an explosive blast so powerful that it was heard as far away as Maryland, and shrapnel hit the Statue of Liberty. The next year, the country joined the war, and Congress passed the Espionage Act, which made disclosure of information related to the national defense a crime. Soon after, Congress passed laws that criminalized treasonable utterances, while President Woodrow Wilson pushed to expand the scope of the Espionage Act to include profane, scurrilous, or abusive language about the form of government . . . the Constitution . . . or the flag of the United States, or the uniform of the Army and Navy. 43 Former President Theodore Roosevelt aptly captured the zeitgeist when he said that the men who oppose the war; who fail to support the government in every measure which really tends to the efficient prosecution of the war; and above all who in any shape or way champion the cause and the actions of Germany, show themselves to be the Huns within our own gates and the allies of men whom our sons and brothers are crossing the ocean to fight. 44 The emergence of the United States as a global military power during and after World War II led to what critics say is a system that keeps too much government information secret. By the early years of the Cold War, overclassification was already identified as a problem in need of remedy. The 1956 Coolidge Committee, led by Assistant Defense Secretary Charles Coolidge, identified widespread overclassification and traced it to a chaotic and largely unaccountable classification system. 45 Subsequently, the Wright and Moss commissions, in 1957 and 1958, respectively, came to nearly identical conclusions. 46 Even as the Defense Department and other agencies kept more and more information secret, there was competing pressure for citizens, businesses, and others to make more government business transparent. The growth in government regulation, in particular, created a need to publish more information and increased demand for that information from businesses, journalists and others. The 1935 Federal Register Act mandated the daily publication of agency regulations, executive orders, and presidential orders. A decade later, the Administrative Procedure Act of 1946 directed federal agencies to allow the public to participate in the rulemaking process. 47 In 1966, a reluctant Lyndon B. Johnson signed the Freedom of Information Act (FOIA), which allowed public access to government records. (He did so, however, in a ceremony closed to the public, and he attached a statement that limited the laws reach.) As first written, the law set no minimum times for agencies to respond to requests, no penalties for noncompliance and no minimum fees that agencies could charge. Amendments to the law addressed some of those issues, such as requiring a 20-day response time and capping fees and in some cases waiving them altogether. Though FOIA receives much attention in discussions about government transparency, critics note that it only provides the public with a way to try to access government records and only some of those records. It doesnt address the issue of overclassification, nor does it change the procedures government officials use to make documents secret in the first place. 48 During the 1960s, conflicts arose with the FBI and the CIA over secret practices and classified documents. Investigations detailing the CIAs overthrow of foreign governments and a host of other controversial actions led to calls for stricter congressional oversight and greater transparency. The FBI, meanwhile, was forced to answer questions about infiltrating and subverting the civil rights and anti-war movements. Later investigations by the 1975 Church Committee, chaired by Sen. Frank Church, D-Idaho, found that the CIA had, among other things, spied on Americans, assassinated some foreign leaders and overthrown others, and administered the drug LSD (acid) to unwitting human test subjects, all in secret. At the same time, the classification of other government information was growing. In 1970, the Defense Science Boards Task Force on Secrecy concluded that the amount of scientific and technical information that was being classified could profitably be decreased perhaps as much as 90 percent by limiting the amount of information classified and the duration of its classification. 49 The board recommended limiting the classification of most technical and scientific information to five years, but the recommendation was ignored. It also noted the costs of keeping secrets, both in terms of dollars and also the harm to an informed public and the suppression of innovation. In addition, the board said that secrecy has limited effectiveness. . . . Classification may sometimes be more effective in withholding information from our friends than from potential enemies. 50 In 1971, open-government advocates won their most significant victory when the Supreme Court denied an effort by the Nixon administration to halt publication of the Pentagon Papers, a classified study of U.S. involvement in Vietnam. Daniel Ellsberg, a defense analyst turned anti-war activist, leaked the study to The Times and The Washington Post, which began to publish the study before the Justice Department contended the government had the right to block publication.
Continued on p. 132

130

CQ Researcher

Chronology
1960s-1970s Open-government and consumerrights groups push for more public access to information. 1966 President Lyndon B. Johnson signs Freedom of Information Act (FOIA). 1971 Supreme Court refuses Nixon administrations plea to stop publication of Pentagon Papers. 1974 Congress strengthens FOIA by setting deadlines for agencies to release information and providing for judicial review. . . . Privacy Act allows individuals to see information the government has compiled about them. 1978 Presidential Records Act mandates release of presidential papers 12 years after an administration ends.

unless the information would harm national security. 1996 Electronic Freedom of Information Act requires agencies to make requested records available in electronic format whenever possible. 1997 Commission on Protecting and Reducing Government Secrecy headed by Sen. Daniel Patrick Moynihan, DN.Y., criticizes excessive secrecy and calls for various reforms; proposed legislation fails.

2000-Present President George W. Bush


expands scope of government secrecy. 2000 President Bill Clinton vetoes bill criminalizing leaking of classified information. 2001 January: Energy task force headed by Vice President Dick Cheney meets secretly. . . . September: After 9/11 terrorist attacks, government secrecy expands exponentially. . . . USA Patriot Act further limits the release of information related to national security and terrorism investigations. . . . November: Bush signs executive order allowing White House or former presidents to veto the release of presidential papers. 2005 American Civil Liberties Union wins court ruling for release of additional photos of detainee abuse at Abu Ghraib prison in Baghdad. 2007 WikiLeaks is launched with mandate to expose oppressive regimes.

2009 Jan. 21: On his first full day in office, President Obama signs executive order directing agencies to make more information public; establishes National Declassification Center at the National Archives; and orders study of classification system reforms. . . . May: Obama administration reneges on an earlier promise and withholds publication of additional Abu Ghraib photos, calling their release a danger to combat troops. . . . September: In a victory for open-government advocates, the director of national intelligence for the first time reveals the current U.S. intelligence budget. . . . By the end of fiscal 2009, the number of original classification decisions (new secrets) has decreased 10 percent from the previous year. . . . November: WikiLeaks publishes e-mails suggesting British climate scientists had fudged research data; a later investigation disproves those claims. 2010 July: In coordination with several media partners, including The Guardian (London) and The New York Times, WikiLeaks publishes thousands of classified military reports from Iraq and Afghanistan, as well as State Department cables dating back decades. . . . Oct. 7: Obama signs Reducing OverClassification Act mandating evaluations by agency inspector generals offices and other oversight bodies. . . . Nov. 30: Amazon.com stops hosting WikiLeaks. . . . Dec. 1: Interpol places Assange on its most-wanted list in connection with sexual misconduct accusations in Sweden. . . . Dec. 10: Former WikiLeaks employees announce plans to launch a rival site, OpenLeaks. . . . Dec. 16: Assange is released on bail in London as he prepares to fight extradition to Sweden.
Feb. 11, 2011

1980s

Reagan administration resists transparency. 1982 President Ronald Reagan eliminates requirement that government documents eventually be declassified. 1986 Congress broadens FOIA exemption for law enforcement materials.

1990s

Clinton administration allows greater access to government information. 1995 President Bill Clinton orders a 25year limit on secrecy classification
www.cqresearcher.com

131

GOVERNMENT SECRECY

Secrets of the Man Behind WikiLeaks


By age 16, Julian Assange had become the master hacker known as Mendax.
ong before Julian Assange launched WikiLeaks and became a crusader both celebrated and vilified against government secrecy worldwide, he was no ordinary hacker. Calling himself Mendax, he prided himself on his uncanny ability to hack into secure computer networks including those belonging to the Department of Defense and the national nuclear laboratory in Los Alamos, N.M. That was back in 1987, before most households had personal computers, when Assange was 16 years old. 1 Since then, Assange has turned networked computers worldwide into a giant farm, of sorts, from which he harvests the secrets that have made him and his website notorious. For his efforts, Assange has won a medal from Amnesty International for publishing material about extrajudicial killings in Kenya. 2 Politicians in the United States, meanwhile, have called for Assange an Australian citizen to be tried for treason; others have called for his assassination. 3 Though Assange has never claimed to be a journalist, many see him as a 21st-century, wired-world version of one, albeit with some ethical caveats. Daniel Ellsberg, the one-time defense analyst who leaked the Pentagon Papers during the Vietnam War, called Assange a hero in December, shortly before chaining himself to a fence at the White House in protest of

the wars in Iraq and Afghanistan. Ellsberg sees fundamental similarities between the Pentagon Papers and the WikiLeaks document dumps related to the Iraq and Afghanistan wars. 4 Indeed, some credit Assange with one of the greatest journalistic scoops of the last 30 years. 5 Assange launched WikiLeaks in 2006 specifically to end government secrecy through the leaking and publication of information. The more secretive or unjust an organization is, the more leaks induce fear and paranoia in its leadership, Assange wrote. He said that, faced with sufficient threats to its ability to keep secrets, sclerotic organizations are forced to either adapt and improve or face collapse. Keeping secrets inside an organization, he added, results in a secrecy tax as a result of inefficiency. 6 Since WikiLeaks went online three years ago, it has published military manuals on detainee treatment at Guantnamo Bay, Cuba; the so-called climate-gate e-mails from scientists at the University of East Anglia; the contents of Sarah Palins personal e-mail account; and thousands of stolen and formerly classified military and diplomatic reports from the U.S. government. In the past few months, Assange has claimed to have other, equally explosive troves of documents, including Swiss banking records, 7 the contents of a U.S. bank executives hard drive 8 and documentation of corruption in Russia. 9

Continued from p. 130

In a 6-3 ruling against the Nixon administration, the Supreme Court held that the government had failed to meet the high constitutional burden required to justify press censorship. Justice Potter Stewart, who voted with the majority, wrote that the only effective restraint upon executive policy and power in the areas of national defense and international affairs may lie in an enlightened citizenry in an informed and critical public opinion which alone can here protect the values of democratic government. 51 History proved that the Pentagon Papers didnt damage national security. In 1989, Erwin Griswold, who as Nixons solicitor general argued the governments position but was barred from seeing the documents at issue, called the case an instance of massive overclassification. He said he saw

no trace of a threat to the national security in what was eventually published in the press. 52

Secrecy Blowback
he Pentagon Papers case, coupled with growing consumer-rights and open-government movements in the 1970s, spurred even greater public calls for transparency. In 1974, Congress overhauled FOIA and overturned a veto by President Gerald Ford aimed at nullifying the changes. The amendments provided for judicial review of contested declassification decisions and narrowed exemptions enjoyed by law enforcement agencies. They also mandated a 10-day response time for FOIA requests. Presidents in the past few decades have pushed the margins of FOIA in

various directions. In the late 1970s and early 80s the Carter administration generally expanded government transparency and liberalized classification policy. For instance, the administration specified that those with classification authority must use the lowest necessary level of classification as their default position. In the 1980s, the Reagan administration tightened government control of information, directing officials to use the highest level of classification as their default and broadening exemptions that agencies could claim to deny FOIA requests. 53 In 1984, Congress passed the Central Intelligence Agency Information Act, putting most CIA records essentially off-limits to FOIA requests. Nevertheless, overclassification was still seen as a problem. In 1985, a Pentagon review, the Stilwell Commission, concluded once again that too much information appears

132

CQ Researcher

But Assanges personal behavior has been as controversial as his projects. Bill Keller, executive editor of The New York Times, which published redacted versions of military documents and State Department cables provided by WikiLeaks, called him elusive, manipulative and volatile. Last year, when a disgruntled WikiLeaks employee provided journalists with copies of some unpublished WikiLeaks material, Assange threatened to sue, claiming that he had a financial interest in keeping his stolen secrets secret. 10 And last year, Assange turned himself in to authorities in England in connection with sex-crime allegations against him in Sweden at the same time that WikiLeaks began releasing the stolen State Department cables. In what many commentators called a delicious irony, the police report on the incident in question was leaked to a British newspaper, which one of Assanges close supporters called a selective smear through the disclosure of material. 11 A full hearing on Swedens request for Assanges extradition began Feb. 7. Alex Kingsbury
1 Raffi Khatchadourian, No Secrets: Julian Assanges mission for total transparency, The New Yorker, June 7, 2010, www.wired.com/threatlevel/2010/06/ assange-newyorker/.

2 Amnesty announces Media Awards, Amnesty International, June 2, 2009, www.amnesty.org.uk/news_details.asp?NewsID=18227. 3 Alex Newman, WikiLeaks Assange Accuses Some Critics of Terror, Calls for Prosecution, New American, Jan. 4, 2010, www.thenewamerican.com/ index.php/world-mainmenu-26/north-america-mainmenu-36/5752-wikileaksassange-accuses-some-critics-of-terror-calls-for-prosecution. 4 Cameron Joseph, Ellsberg Calls Assange a Hero, The National Journal, Dec. 16, 2010, http://nationaljournal.com/nationalsecurity/from-the-pentagonpapers-to-wikileaks-daniel-ellsberg-calls-julian-assange-a-hero-20101216. 5 Sarah Ellison, The Man Who Spilled the Secrets, Vanity Fair, February 2011, www.vanityfair.com/politics/features/2011/02/the-guardian-201102. 6 Julian Assange, Selected Correspondence, http://web.archive.org/web/2007 1020051936/http://iq.org/. 7 Ed Vulliamy, Swiss whistleblower Rudolf Elmer plans to hand over offshore banking secrets of the rich and famous to WikiLeaks, The Guardian, Jan. 16, 2011, www.guardian.co.uk/media/2011/jan/16/swiss-whistleblowerrudolf-elmer-banks. 8 Sarah Halzack, Bank of American braces for WikiLeaks, The Washington Post, Jan. 3, 2011, http://voices.washingtonpost.com/political-economy/2011/01/ bank_of_america_prepares_for_p.html. 9 Fred Weir, WikiLeaks ready to drop a bombshell on Russia. But will Russians get to read about it? The Christian Science Monitor, Oct. 26, 2010, www. csmonitor.com/World/Europe/2010/1026/WikiLeaks-ready-to-drop-a-bombshell-on-Russia.-But-will-Russians-get-to-read-about-it. 10 Sarah Ellison, The Man Who Spilled the Secrets, Vanity Fair, February 2011, www.vanityfair.com/politics/features/2011/02/the-guardian-201102. 11 David Leppard, Lawyers cry foul over leak of Julian Assange sex-case papers, The Australian, Dec. 20, 2010, www.theaustralian.com.au/news/world/ lawyers-cry-foul-over-leak-of-julian-assange-sex-case-papers/story-e6frg6so1225973548657.

to be classified and at much higher levels than is warranted. 54 The panels recommendations, including the simplification of the classification system, were ignored. Some Reagan-era restrictions to FOIA were rolled back during Clintons presidency. In 1995, he signed an executive order allowing the public to request access to classified documents that are at least 25 years old, provided that their disclosure doesnt demonstrably damage national security. The order also established the Interagency Security Classification Appeals Panel to hear appeals to denied disclosure requests. A year later, another Clinton order required agencies responding to FOIA requests to make their records available electronically. It also lengthened the maximum response time from 10 to 20 days, as the shorter deadlines had proved largely unworkable. By

1997, Clinton had authorized 20 federal officials to classify materials as top secret, a cadre that a few years later expanded to include more than 1,300 original classifiers. Today, some 4,407 people have that authority, not to mention the 140,000 plus people who have the authority to stamp less important materials secret. 55 But even as FOIA was allowing the public greater access to government documents, the classification system continued to raise concerns. In 1994, a commission reported to the secretary of Defense that [d]espite the best of intentions, the classification system, largely unchanged since the Eisenhower administration, has grown out of control. 56 Three years after that, the Commission on Protecting and Reducing Government Secrecy, headed by Sen. Daniel Patrick Moynihan, D-N.Y., con-

cluded that [t]he classification system, for example, is used too often to deny the public an understanding of the policymaking process, rather than for the necessary protection of intelligence activities and other highly sensitive matters. Accompanying that condemnation of the status quo was a series of modest recommendations on how to fix the system. Congress ignored them. A bill enacting the changes expired without coming to a vote. From the outset of his presidency, George W. Bush ramped up government secrecy. The Bush administration was so diligent in its effort to remove government information from public view that it classified information on the vulnerabilities of drinking-water supplies, data on airline safety and the exposure of communities to dangerous chemicals. The administration even limited the disclosure of car tire safety data

www.cqresearcher.com

Feb. 11, 2011

133

GOVERNMENT SECRECY

Many Recent Leakers Ended Up Behind Bars


Obama administration takes hard line against unauthorized disclosures.
he Obama administration has jailed more leakers during its first two years than any other administration in modern times. In August 2010, a month after WikiLeaks began releasing classified U.S. military documents about the Afghan war, Samuel Shamai Leibowitz, a former Hebrew linguist for the FBI, took up temporary residence at the low-security federal prison in Petersburg, Va. He is the first person incarcerated during the Obama administration for leaking classified material. 1 Leibowitz was sentenced to 20 months after pleading guilty to providing information to a blogger, who was not identified in open court. In a strange twist, the sentencing judge confessed to being in the dark as to the kind of documents that had been leaked. I dont know what was divulged, other than some documents, and I dont know how its compromised things, District Court Judge Alexander Williams Jr. said. Leibowitz and the prosecutors, however, had stipulated that the disclosed information related to the communications intelligence activities of the United States. 2 Leibowitzs importance pales in comparison to that of U.S. Army Pvt. Bradley Manning, who is believed to have given hundreds of thousands of documents to WikiLeaks. Hes currently being held at the Quantico Marine Corps Base in Virginia. Mannings supporters have objected to his treatment; he reportedly is being held in solitary confinement for 23 hours per day, without a pillow, sheets or personal possessions. 3 Amnesty International sent a letter to the Pentagon decrying the treatment of Manning, who has yet to be convicted of a crime. 4 So far, government officials apparently have been unable to link Manning to WikiLeaks, perhaps because of the websites highly complex and largely untraceable method of pub-

lishing information. Donations of information to WikiLeaks are frequently made through an anonymous, encrypted e-mail system that doesnt record the identity of the leaker. Consequently, WikiLeaks founder Julian Assange and others at the controversial site have long said they are unsure if Manning is the source of the material. Nonetheless, in July the website promised to foot half the cost of Mannings legal defense. Mannings lawyers have set that figure at $100,000. In January, WikiLeaks donated $15,100 to Mannings legal defense fund and now contends it has fulfilled its obligations to the 23-year-old intelligence analyst. 5 Other leakers also are behind bars. In April, a grand jury indicted Thomas Drake, a former senior official at the supersecret National Security Agency (NSA), on charges that he provided classified information to a reporter likely from the Baltimore Sun between 2006 and 2007. 6 Reports in that newspaper around the same time detailed wasteful and mismanaged electronic intelligence collection programs at the NSA that cost billions of dollars. In yet another case, a trial is pending for Jeffrey Sterling, a former senior CIA officer accused of leaking information on Iran to a reporter. With the exception of Manning, these cases were little noticed outside the intelligence community. They were unusual because they resulted in jail time. Media reports based on classified information are common in major newspapers, television and, increasingly, on blogs and in so-called niche publications. Cases often have been referred to prosecutors, experts say, but only rarely do they actually lead to charges, trials or imprisonment. Indeed, between 2005 and 2010, the federal government made 183 complaints about leaks to the FBI. Only 26 cases actually were opened by the bureau, and only 14 leakers were ever identified. 7

submitted to the government by tire manufacturers in the wake of hundreds of tire-related crashes and deaths. Bush also reversed the Clinton order to classify information at the lowest possible level. In the wake of the 9/11 attacks, government secrecy expanded greatly. Despite the fact that the 9/11 Commission later concluded that secrecy within the government was a contributing factor in the failure to disrupt al-Qaidas plans to attack the United States, the government went on a classification binge.

In 2002, Bush issued an order making it easier to reclassify information that previously had been declassified. Some reclassifications occurred as early as 1999 but greatly accelerated after the 2001 attacks. More than 55,000 documents were taken off the public shelves of the National Archives and marked classified. The details of what was reclassified and why were also classified. The effort even reclassified some documents that had been widely published in the State Departments own publicly available series, The Foreign Relations of the United States. 57

The War on Transparency


n the early 1950s, the widows of three crewmen killed in a military plane crash filed a wrongful death suit against the government. They wanted officials to release the crash report, but the government argued that it couldnt do so without compromising national security because the plane carried secret radio gear. 58 It was the first invocation of what came to be known as the state secrets privilege. At the time, fearing future abuse, the court

134

CQ Researcher

may be the beneficiary of the unauIn U.S. history, one of the most thorized disclosure of classified inforprominent cases involving leaked clasmation, this defendant elected to dissified material was that of defense close the classified information publicly analyst Daniel Ellsberg, who leaked through the mass media. Thus, every a secret study of U.S. involvement foreign adversary stood to benefit from in the Vietnam War to The New York the defendants unauthorized disclosure Times in 1971. The White House atof classified information, thus posing an tempted to prevent The Times from even greater threat to society. 11 publishing the documents in a groundbreaking legal case that went Alex Kingsbury to the Supreme Court, which ruled 8 The inin favor of the newspaper. 1 Josh Gerstein, Obama sends first leaker to cident became known as the Pentaprison, Politico, Aug. 4, 2010. gon Papers case. Ellsberg was pros2 Maria Glod, Former FBI employee sentenced ecuted, though the charges were for leaking classified papers, The Washington Post, later dropped because of government May 25, 2010. Thomas Drake, a former senior official at 3 Raphael Satter, Amnesty urges UK to intervene in misconduct. the super-secret National Security Agency Manning case, The Associated Press, Feb. 1, 2011. There have been other, less promi(NSA), was indicted on charges that he 4 Amnesty International letter to Robert Gates, nent cases in recent decades, includgave classified information to a Jan. 11, 2011, www.amnesty.org/en/library/asset/AM ing that of Samuel Morison, a naval R51/006/2011/en/df463159-5ba2-416a-8b98-d52df0 newspaper reporter. dc817a/amr510062011en.pdf. intelligence analyst convicted of pro5 Joshua Norman, WikiLeaks finally gives funds viding three satellite photographs to to Bradley Manning, CBS News, Jan. 13, 2011. 9 and Lawrence Franklin, a dea British trade journal in 1985, 6 Scott Shane, Former N.S.A. official is charged in leak case, The New York fense official who pleaded guilty to providing classified infor- Times, April 15, 2010. 7 Pete Yost, FBI uncovered 14 suspected leakers in five years, The Associated mation to a pro-Israeli lobbying group in 2005. 10 Some question why the government has made such a con- Press, June 22, 2010. 8 certed effort to punish leakers, but government attorneys hint- 9 New York Times Co. v. United States, 403 U.S. 713 (1971). Ex-analyst for Navy convicted of spying, The Associated Press, Oct. 18, ed at a cause in a recent court filing during the Sterling case. 1985. Leaking, the government contended in the brief, is more 10 Mark Sherman, More charges in leak of Pentagon material, The Assopernicious than the typical espionage case where a spy sells ciated Press, Aug. 5, 2005. classified information for money. Unlike the typical espionage 11 Motion for Pretrial detention; case 1:10-cr-00485-LMB Document 9; Jan. 11, 2011, www.politico.com/static/PPM176_110114_detention.html. case where a single foreign country or intelligence agency
http://downwithtyranny.blogspot.com

admonished the government that the privilege was not to be lightly invoked. From 1953 through 1976, the government asserted the privilege just six times, but from 1977 through 2000, it invoked it 59 times a nearly tenfold increase. Bush asserted the state secrets privilege at an even faster clip. From 2001 through 2008, the White House asserted it 48 times. 59 The government used the privilege not only to block parts of documents from public view but also to dismiss requests for information in their entirety. The two most promi-

nent cases in which the administration used the privilege were in challenges to the National Security Agencys warrantless eavesdropping program and the CIAs use of extraordinary renditions, in which suspected terrorists in U.S. custody were sent to nations where they were allegedly tortured by intelligence services. The Bush administration also won court victories allowing it to keep secret the records of Vice President Dick Cheneys energy task force. The task force aided in the formulation of national energy policy, but critics

charged it was unduly influenced by industry groups. The Bush White House also beat back legal challenges to immigration policies it initiated after the 9/11 attacks. Following the attacks, hundreds of Muslim foreigners in the United States were detained for suspected immigration violations, and in some cases deported after closed hearings. Congress allowed the government to keep more information secret when it passed the USA Patriot Act in October 2001. The law gave the FBI broad authority to investigate terror-

www.cqresearcher.com

Feb. 11, 2011

135

GOVERNMENT SECRECY
ism cases and issue national security Bill Clinton called the order unnec- sound legal basis or present an unletters, allowing certain government essary. A legal challenge to the Bush warranted risk of adverse impact on the ability of other agencies to proagencies to request records and data order was rejected in 2004. 61 pertaining to individuals without probThroughout his term as Bushs at- tect other important records. able cause or judicial oversight. The torney general, John Ashcroft staunchletters also imposed a gag order on ly defended the administrations apthose named, preventing recipients proach to government secrecy. Testifying from disclosing that the letters were before a Senate panel, he said, to even issued. While initially limited, the those who scare peace-loving people use of the letters skyrocketed. From with phantoms of lost liberty, my mes2003 through 2006 the FBI issued sage is this: Your tactics only aid termore than 192,500 letters an aver- rorists for they erode our national age of almost 50,000 a year. 60 unity and diminish our resolve. They The Bush administration increased give ammunition to Americas enemies, the number of government officials and pause to Americas friends. They with classification authority to in- encourage people of good will to res WikiLeaks continues to publish clude the secretary of Health and main silent in the face of evil. 62 new documents from the trove Human Services, of State Department Agriculture secretary cables, releasing a few and head of the every week, Assange is Environmental Profocusing his attention on tection Agency. Traanother matter: accusaditionally, that autions that he sexually thority had been assaulted two women limited to officials in last year in Sweden. the national securiAssange has been ty and intelligence confined to a mansion communities. The owned by one of his change put vast supporters outside Lonamounts of previdon, as he awaits posously unclassified sible extradition in the information in these case. He is required to departments out of check in daily with the the public view. police and wear an elecWhen it came to tronic tag to monitor historical records, his location. He also the Bush adminishas launched a fundraistration was equally ing campaign for his resistant to disclolegal defense fund. sure. In November Still, despite the conSecretary of Defense Robert Gates has denounced WikiLeaks release of 2001, Bush alditions of his bail, Asbattlefield reports from the Iraq and Afghan wars while sounding a sange has managed to lowed the White word of caution. Ive heard the impact of these releases on our foreign policy described as a meltdown, as a game-changer, and so on, he said. do dozens of interHouse and living I think those descriptions are fairly significantly overwrought. former presidents views with journalists to block the reand sign a $1.5 million In October 2001, Ashcroft directed book deal for his memoirs. 63 lease of presidential papers indefiAssange says WikiLeaks has more nitely. Bush issued his order shortly federal agencies in a memo: When before the scheduled release of the you carefully consider FOIA requests secrets to disclose, including the conpapers of President Ronald Reagan, and decide to withhold records, in tents of a hard drive from a senior offor whom his father, George H.W. whole or in part, you can be assured ficial at a major U.S. bank (Assange Bush, served as vice president. His- that the Department of Justice will de- wouldnt say which one), along with torians were outraged, and President fend your decisions unless they lack Continued on p. 138

CURRENT SITUATION
Opening Up

136

CQ Researcher

Getty Images/Mark Wilson

At Issue:
Should the Espionage Act of 1917 be updated?
yes

ABBE LOWELL
CHIEF, WHITE-COLLAR CRIMINAL DEFENSE GROUP, MCDERMOTT WILL & EMERY
TESTIMONY BEFORE HOUSE JUDICIARY COMMITTEE, DEC. 16, 2010

GABRIEL SCHOENFELD
SENIOR FELLOW, HUDSON INSTITUTE
TESTIMONY BEFORE HOUSE JUDICIARY COMMITTEE, DEC. 16, 2010

hat is primarily missing in the act right now is clarity. The statute has been attacked often as vague and overbroad. Because of its breadth and language, it can be applied in a manner that infringes on proper First Amendment activity: discussions of foreign policy between government officials and private parties or proper newsgathering to expose government wrongdoing. If the Espionage Act were used to bring charges against WikiLeaks or its founder, Julian Assange, this too would be unprecedented because it would be applying the law to a (a) nongovernment official, (b) who had no confidentiality agreement, (c) who did not steal the information, (d) who did not sell or pay for the information involved, (e) who was quite out front and not secretive about what he was doing, (f) who gave the U.S. notice and asked if the government wanted to make redactions to protect any information, and (g) in a context that can be argued to be newsgathering and dissemination protected by the First Amendment. If the act applies to this disclosure, then why does it not apply as well to the articles written by The New York Times and other traditional media with the same disclosures? On its face, the Espionage Act does not distinguish between these two disclosures and would apply equally to both and to any even further dissemination of the same information. Of course, the First Amendment would not and should not provide blanket immunity, for example, to a newspaper that tips off enemy forces by publishing a story that describes, in advance, a planned assault by the U.S. military on an al-Qaida or Taliban stronghold. While such a news report might arguably provide some benefit to public understanding of our government, the imminent and likely risk of harm to American troops would far outweigh any such benefit, and there would be no First Amendment protection for such a publication. The acts breadth and vagueness can, intentionally or not, result in a powerful chill on the kinds of open government, freedom of the press and transparency in proper foreign policy formulation that make this country stronger. It does not serve proper national security or law enforcement interests to have this possibility of improper application of the act to conduct that was not targeted in 1917 and has even less reason to be targeted today. Accordingly, Congress should revise the act. It is almost 100 years old and was passed at a time and in an era that has little resemblance to the type of threats the county faces now or for the way information is disseminated today.
no

yes no
Feb. 11, 2011

n the one hand, were a wide-open society. On the other hand, we have too much secrecy. On the one hand, we have authorized, innocuous leaks of government secrets. On the other hand, we have unauthorized, highly dangerous leaks. And this is a very unsatisfactory state of affairs, and we have begun to pay a high price for it. There are five things we need to do: First, we need to devote more attention and resources to declassification and to combating overclassification. Fewer secrets and a more rational secrecy policy will help us to preserve truly necessary secrets. Second, we need to make sure that legitimate whistle-blowers have viable avenues other than the media to which they can turn. Third, we need to reestablish deterrents and prosecute those in government who violate their confidentiality agreements and pass secrets to the press or to an outfit like WikiLeaks. The Obama administration has been doing this with unprecedented energy. The last 24 months have witnessed four prosecutions of leakers, more than all previous presidencies combined. Fourth, we need at the very least to bring down the weight of public opprobrium on those in the media who disseminate vital secrets. And, finally, we sometimes need to take legal action. We have never had a prosecution of a media outlet in our history, although we came close during World War II, when The Chicago Tribune revealed that we had broken Japanese naval codes. While I believe that the First Amendment would not protect a news outlet that endangered the nation as The Chicago Tribune did in 1942, reasons of prudence suggest that such a prosecution should be a last resort, used against the media outlet only in the face of reckless disregard for the publics safety. WikiLeaks whether it is or is not a news organization has certainly exhibited such reckless disregard. Thanks in part to the march of technology, it has been able to launch what might be called LMDs, leaks of mass disclosure. Leaks so massive in volume and so indiscriminate in what they convey that it becomes very difficult to assess the overall harm, precisely because there are so many different ways in which that harm is occurring. The purpose of these leaks is to cripple our government, which Mr. Assange believes is a, quote, authoritarian conspiracy, close quote. But the United States is not such a conspiracy; it is a democracy. And as a democracy it has every right to create its own laws concerning secrecy, and to see to it that those laws are respected. And, as a democracy, it has every right to protect itself against those who would do it harm.

www.cqresearcher.com

137

GOVERNMENT SECRECY
Obamas new openness is a de- inflame anti-American opinion and to records from some Swiss bank ac- parture from the secrecy of the past put our troops in greater danger, counts. 64 At the same time, the group administration, which famously Obama said. 67 has released only about 1 percent of blurred satellite imagery of the vice the estimated State Department trove. presidential residence on MassachuMeanwhile, even as the Obama ad- setts Avenue on public websites such ministrations Justice Department tries as GoogleMaps. 65 Indeed, when he annual Government Secrecy to build a case against Assange, it is Obama took office, one of his first Report Card, compiled by a coalistill publicly committed to reducing acts was to create the National Declassification Center. In 2010, the cen- tion of open-government advocates, has secrecy within the government. William J. Bosanko, director of the ter reviewed some 83 million pages given the Obama administration qualiInformation Security Oversight Office, of classified historical records, but only fied praise for its transparency record. The elections of who is wrapping up 2008 were viewed by work on his offices many as a referendum annual report on on the secrecy and ungovernment secrecy, accountability of the says the Obama adBush administration, ministration may be and the country electpushing for change ed a president who has but that change promised the most promises to be a open, transparent, and lengthy process. accountable federal ExObamas executive ecutive Branch in hisorder [signed on his tory, it said. The record first full day in ofto date is mixed, but fice] drives us tosome indicators are wards the standardtrending in the right diization of secrecy rection. policy across agenAmong the issues cies and does prothat the report card mote greater openRuLeaks.net a copycat site calling itself the Russian WikiLeaks recently published photographs of a palace constructed near the Black raised: Fewer pages ness, but it will take Sea, reportedly for Prime Minister Vladimir Putin at a cost of $1 billion. were declassified govyears to change the ernmentwide during classification and secrecy system even a little bit, he says. 12 million of those pages have been the reporting period, and the backEven after WikiLeaks began pub- declassified and released to the open log of declassification requests continues to grow. On the other side of lishing its classified documents, the shelves at the National Archives. 66 In Obamas first year in office, his ad- the ledger, the number of original Obama administration signed an executive order that standardizes and ministration also released once-classified classification decisions decreased by limits the use of Controlled Unclassi- Justice Department memos detailing 10 percent, there was a 40 percent fied Information, one of the numer- coercive interrogation techniques decrease in the backlog of FOIA reous secrecy classifications that has including waterboarding that were quests, and the head of the U.S. inemerged in recent years. In October, authorized by the Bush administration telligence community for the first time the administration also published the in terrorism cases and that many in- revealed the total size of the current total intelligence budget for 2010 (it ternational law experts said constitut- intelligence budget, a key statistic that was $80.1 billion) the first time a ed torture. But Obama reneged on an has long been considered a vital nacurrent intelligence budget was offi- earlier promise to release a complete tional secret. 68 A few months ago, an investigation cially released by an administration. archive of photographs depicting the While it might not seem like a large abuse of detained Iraqis by U.S. sol- by The Associated Press found that concession, open government advo- diers at the Abu Ghraib prison. [T]he political appointees at the Department cates have sought the declassification most direct consequence of releasing of Homeland Security may have delayed them, I believe, would be to further release of some 500 FOIA requests to of the intelligence budget for years.
Continued from p. 136

Report Card

138

CQ Researcher

examine what was being sought, and by whom. A memo from the departments chief FOIA officer asked for weekly updates on requesting activities. 69 Once the practice had been publicized, however, the department quickly stopped it, though Congress and the departments inspector general say they are investigating the incident. The House of Representatives may hold hearings on the matter in coming months. 70 Government secrecy issues aside, the WikiLeaks episode is hitting the open government movement like an atomic bomb. Indeed, WikiLeaks itself has spawned a rival, OpenLeaks, created by former WikiLeaks staffer Daniel Domscheit-Berg with the aim of avoiding the aura of celebrity that has surrounded Assange and his outfit. In January, a copycat site billing itself as a Russian WikiLeaks published numerous photos of a palace reportedly constructed for Russian Prime Minister Vladimir Putin near the Black Sea. RuLeaks.net apparently acquired the photos from workers at the site of the gargantuan estate. 71 Another prominent anti-secrecy website, cryptome.org, frequently publishes national security-related documents after they have inadvertently been placed online by the government, such as a Transportation Safety Administration security manual detailing how airport screeners operate. Its long been said in certain corners of Washington that all officials in the CIA or State Department need to do is speak their minds during a meeting for it to be printed on the front pages the next day. In the wake of the WikiLeaks scandal, the cynicism doesnt seem so far-fetched. One of the most candid U.S. diplomats, Gene Cretz, whose cables on Libya were published by the site, has already been recalled to Washington. 72 The veteran diplomat famously wrote that Libyan leader Moammar Gadhafi relied on a voluptuous Ukrainian nurse. The

cables release may have been embarrassing, but now the government could have to worry about less candor from its diplomats.

OUTLOOK
Tsunami of Information
itting in his paper-filled office a few blocks north of the White House, Aftergood, the Secrecy News editor, says he worries about the long-term impact that WikiLeaks may have on the governments ability to reform itself. Will things be better on the secrecy front in 20 years? I cant say, but I do know that the WikiLeaks disclosures have probably made it less likely that the government will become more transparent. Bellinger, the former State Department legal adviser, concurs. Well see the pendulum swing back the other way, towards greater government control in the wake of the WikiLeaks, he says. I think a lot of senior people in government are asking at a practical level why the system allowed someone so junior [Manning] to access so much information, and theyll try to limit that type of need-to-know access in the future. While some foresee the flow of government information slowing, declassification nonetheless is continuing at a rapid clip. Were declassifying maybe 30 million pages per year, which is three times what was being released in 1995, says Bosanko of the Information Security Oversight Office. Theres a tsunami of information that is being released and it is growing. What I also see happening already, which will continue in the future, is that the wave of newly released information has outstripped both the governments and the publics ability to assimilate it.

As more information whether officially released or purloined becomes available, WikiLeaks or groups similar to it may represent an emerging third category of stakeholders in the secrecy debate, alongside citizens and government. It is likely that there will be other sites besides WikiLeaks that try to disclose classified information in the future, which is why the Congress should update the laws on the books so that they wont be forced to do so when tensions over the issue are high, says the ACLUs Shamsi. Meanwhile, regardless of what happens to Assange in the courtroom, all eyes will be on a single computer file posted on the WikiLeaks site designated insurance.aes256. 73 Some 100,000 people around the world have downloaded the file, believed to be encrypted with a 256character password. The file is large enough to contain countless documents or other materials, but little is known about its contents, though speculation has been rampant on the Internet. Several people familiar with the WikiLeaks case suspect that it is designed to be unlocked in the event that Assange faces prison or perhaps meets an even worse fate at the hand of enemies who oppose his work. The files encryption is reputedly so powerful that not even the governments supercomputers could crack it without a key. Bruce Schneier, a cryptographer and one of the countrys top computer security experts, writes that the mystery file, like any secret, could be important or not. Its either 1.4 gig of embarrassing secret documents, or 1.4 gig of random data bluffing. Theres no way to know. 74

Notes
1

Bill Keller, The Boy Who Kicked the Hornets Nest, The New York Times Magazine, Jan. 30, 2011, p. 32; see also, Ellen Nakashima,

www.cqresearcher.com

Feb. 11, 2011

139

GOVERNMENT SECRECY
Amazon.com stops hosting WikiLeaks on its servers, The Washington Post, Dec. 1, 2010. 2 Anahad OConnor, Amazon Removes WikiLeaks From Servers, The New York Times, Dec. 2, 2010, www.nytimes.com/2010/12/02/ world/02amazon.html?_r=1&scp=9&sq=lieber man+wikileaks+amaz&st=cse. 3 Amy Goodman, Democracy Now!, Dec. 7, 2010, http://mwcnews.net/focus/analysis/7119glenn-greenwald-on-assange-arrest.html. 4 Selah Hennessy, WikiLeaks receives 2011 Nobel Peace Prize nomination, Voice of America, Feb. 3, 2011. 5 Sharon Weinberger, What is SIPRNet? Popular Mechanics, Dec. 1, 2010. 6 Nancy Youssef, Probe: Army was warned not to deploy WikiLeaks suspect, The Miami Herald, Jan. 27, 2011, www.miamiherald.com/ 2011/01/27/2037978/probe-army-was-warnednot-to-deploy.html. 7 Ellen Nakashima, Messages from alleged leaker Bradley Manning portray him as despondent soldier, The Washington Post, June 10, 2010, www.washingtonpost.com/wp-dyn/content/ article/2010/06/09/AR2010060906170.html. 8 Keller, op. cit. 9 Mike Barber, A WikiLeaks Timeline, The National Post, Nov. 28, 2010. 10 The Central Intelligence Agency is so sensitive about potential breaches of SIPRNet that it doesnt generally use it to distribute information. See Bruce Berkowitz, Failing to keep up with the information revolution: the DI and IT, Studies in Intelligence, Vol. 47, No. 1, 2003. After the WikiLeaks scandal broke open, some CIA officials felt vindicated in their reluctance to share information on the system. See Alex Kingsbury, CIA seen as the winner in WikiLeaks scandal, U.S. News & World Report, Dec. 15, 2010. 11 Kevin Poulsen, Lieberman Introduced AntiWikiLeaks Legislation, Wired, Dec. 2, 2010, www.wired.com/threatlevel/2010/12/shield. Mark Landler and Scott Shane, U.S. Sends Warning to People Named in Cable Leaks, The New York Times, Jan. 6, 2011, www.nytimes. com/2011/01/07/world/07wiki.html. 13 Mark Hosenball, Officials privately say WikiLeaks damage limited, Reuters, Jan. 18, 2011. 14 National Commission on Terrorist Attacks Upon the United States, p. 19, www.9-11 commission.gov/report/911Report_Exec.pdf. 15 Nancy Youssef, In WikiLeaks fight, journalists take a pass, McClatchy Newspapers, Jan. 9, 2010. 16 Bill Keller, Dealing With Assange and the WikiLeaks Secrets, The New York Times, Jan. 26, 2010. 17 http://en.rsf.org/united-states-open-letter-towikileaks-founder-12-08-2010,38130.html. 18 Wikileaks hounded?, Reporters Without Borders, Dec. 4, 2010, http://en.rsf.org/wiki leaks-hounded-04-12-2010,38958.html. 19 Pentagon Papers, Encyclopedia Britannica, www.britannica.com/EBchecked/topic/450326/ Pentagon-Papers. 20 From One Transparency Advocate to Another, On The Media, NPR (transcript), July 30, 2010, www.onthemedia.org/transcripts/ 2010/07/30/02. 21 Iraq death toll higher: WikiLeaks, CBC News, Oct. 23, 2010, www.cbc.ca/world/story/ 2010/10/23/wikileaks-iraqi-death-toll.html. 22 Robert Gates, Pentagon briefing, Nov. 30, 2010. 23 Mike Mullen, Pentagon briefing, July 29, 2010, www.jcs.mil/speech.aspx?id=1432. 24 Quoted in Hosenball, op. cit. 25 Ibid. 26 Nick Allen, WikiLeaks: Yemen covered up US drone strikes, The Telegraph, Nov. 28, 2010. 27 Daniel Drezner, The Utopianism of Julian Assange, Foreign Policy, Nov. 29, 2010. 28 Meredith Chaiken, Poll: Americans say WikiLeaks harmed public interest; most want
12

About the Author


Alex Kingsbury writes about national security and the intelligence community for U.S. News & World Report. He made several trips to Iraq in 2007 and 2008 to cover the Iraq War and also has written about steroids in baseball, campaign finance reform and education reform. He holds a B.A. in history from George Washington University and an M.S. in journalism from Columbia University.

Assange arrested, The Washington Post, Dec. 14, 2010. 29 New York Times Co. v. United States, 403 U.S. 713 (1971). For an account of the case, see Paul Finkelman and Melvin I. Urofsky, Landmark Decisions of the United States Supreme Court (2d ed.), 2008, pp. 413-414. 30 Bartnicki v. Vopper, 532 U.S. 514 (2001), www. law.cornell.edu/supct/html/99-1687.ZS.html. 31 Deb Riechmann, Clinton vetoes leakers bill, ABC News, Nov. 4, 2000. 32 Baruch Weiss, Why prosecuting WikiLeaks Julian Assange wont be easy, The Washington Post, Dec. 5, 2010. 33 Testimony of Kenneth Wainstein, House Judiciary Committee, Concerning the espionage act and the legal and constitutional issues raised by WikiLeaks, Dec. 16, 2010. 34 American University law professor Stephen Vladeck notes further that the potentially sweeping nature of the Espionage Act may inadvertently interfere with federal whistleblower laws. 35 House Judiciary Committee, op. cit. 36 Secrecy Report Card 2010, OpenTheGov ernment.org, p. 4. 37 Secrecy Report Card 2005, OpenTheGov ernment.org. 38 Daniel Patrick Moynihan, Secrecy: Report of the Commission on Protecting and Reducing Government Secrecy, 1997, p. 36. 39 Thomas Kean, Frontline, www.pbs.org/ wgbh/pages/frontline/enemywithin/interviews/ kean.html. 40 Tom Blanton, congressional testimony, Dec. 16, 2010, www.gwu.edu/~nsarchiv/news/ 20101216/Blanton101216.pdf. 41 Jack Goldsmith, Secrecy and Safety, The New Republic, Aug. 13, 2008. 42 Bill Miller, The very visible battle over invisible ink, The Washington Post, June 13, 2001. 43 Daniel Patrick Moynihan, Secrecy: the American Experience (1998), p. 106. 44 John Podesta and Judd Legum, A secret history of secrecy: the closing of the American government, Salon.com, March 22, 2004. 45 Steven Aftergood, Reducing Government secrecy: finding what works, Yale Law & Policy Review, Vol. 27, No. 2, 2009, p. 404. 46 Appendix G: Major Reviews of the U.S. Secrecy System, www.gpo.gov/congress/ commissions/secrecy/pdf/18form1.pdf. 47 Kenneth Jost, Government Secrecy, CQ Researcher, Dec. 2, 2005, p. 1014. 48 Aftergood, op. cit., p. 406.

140

CQ Researcher

of the Defense Science Board Taskforce on Secrecy, July 1, 1970, p. 1, www.fas. org/sgp/othergov/dsbrep.pdf. 50 Ibid., p. 3. 51 New York Times Co. v. United States, 403 U.S. 713 (1971). 52 John Correll, The Pentagon Papers, Air Force Magazine, Vol. 90, No. 2, 2007. 53 Jost, op. cit., p. 1016. 54 www.gpo.gov/congress/commissions/ secrecy/pdf/18form1.pdf. 55 Report to the President for FY 2009, Information Security Oversight Office, p. 2, www.archives.gov/isoo/reports/2009-annualreport.pdf. 56 Redefining Security. A Report by the Joint Security Commission, Feb. 24, 1994, p. 6. 57 Scott Shane, U.S. reclassifies many documents in secret review, The New York Times, Feb. 21, 2006. 58 When the crash report was finally declassified in 2004, historians found that it contained no details that would have compromised national security, leading many to conclude that the government invoked the privilege simply to shield itself from liability. 59 Secrecy Report Card, 2010, op. cit., p. 10. 60 Ellen Nakashima, Plaintiff who challenged FBIs national security letters reveals concerns, The Washington Post, Aug. 10, 2010. 61 Jost, op. cit., p. 1019. 62 Testimony before Senate Judiciary Committee, Dec. 6, 2001. 63 Jill Lawless, Julian Assange extradition hearing begins Monday as WikiLeaks founder faces legal battle, The Associated Press, Feb. 2, 2011. 64 Theunis Bates, WikiLeaks handed data on secret Swiss bank accounts, AOL News, Jan. 17, 2011. 65 Sharon Weinberger, Why is Google Earth hiding Dick Cheneys House? Wired, July 23, 2008. 66 Bi-annual Report on Operations of the National Declassification Center, Jan. 1, 2010Dec. 31, 2010, www.fas.org/sgp/othergov/ndc123110.pdf. 67 Statement of the President, May 13, 2009, www.whitehouse.gov/the_press_office/Statement-by-the-President-on-the-Situation-in-SriLanka-and-Detainee-Photographs/. 68 Secrecy Report Card, 2010, op. cit., p. 4. 69 Mary Ellen Callahan, Memorandum for all DHS FOIA officers, July 7, 2009, http://papers

49 Report

FOR MORE INFORMATION


American Civil Liberties Union, 125 Broad St., 18th Floor, New York, NY 10004-2400; (212) 549-2500; 122 Maryland Ave., N.E., Washington, DC 20002; (202) 544-1681; www.aclu.org. Frequently uses the Freedom of Information Act in litigation against the government for infringements on civil liberties, particularly in cases involving national security and technology. Brechner Center for Freedom of Information, P.O. Box 118400, 3208 Weimer Hall, University of Florida, Gainesville, FL 32611-840; (352) 392-2273; http://brechner. org. Focuses on media law and the Freedom of Information Act. Federation of American Scientists, Project on Government Secrecy, 1725 DeSales St., N.W., Washington, DC 20036; (202) 546-3300, fas@fas.org; www.fas.org. Publishes the Secrecy News blog and newsletter focusing on declassification and secrecy issues. Freedom of Information Advocates Network, www.foiadvocates.net/. An international information-sharing network of organizations and individuals who promote the right of access to information. Freedominfo.org, www.freedominfo.org. An online portal describing best practices, lessons learned and future strategies for freedom of information advocates worldwide. Information Security Oversight Office, National Archives and Records Administration, 700 Pennsylvania Ave., N.W., Room 500, Washington, DC 20408; (202) 219-5250; www.archives.gov/isoo/. Compiles and publishes statistical reports on government classification and secrecy. James Madison Project, 1380 Monroe St., N.W., Unit 269, Washington, DC 20010; (202) 498-0011, www.jamesmadisonproject.org. Advocates for less government secrecy and more education on intelligence and national security issues. National Security Archive, The George Washington University, Gelman Library, Suite 701, 2130 H St., N.W., Washington, DC 20037; (202) 994-7000; www.gwu. edu/~nsarchive. A private research center that files FOIA requests and publishes the results, often with scholarly commentary. OpenTheGovernment.org, 1742 Connecticut Ave., N.W., Washington, DC 20009; (202) 234-8494; www.openthegovernment.org. A coalition of journalism, consumer watchdog and related organizations that promotes open and accountable government. Reporters Committee for Freedom of the Press, 1101 Wilson Blvd. Suite 1100, Arlington, VA 22209; (703) 807-2100; www.rcfp.org. Works with journalists and media companies on issues involving journalism and the government. Its website offers help for reporters and citizens seeking access to government documents and records.
please.org/wp/wp-content/uploads/2010/10/ foia-blocking-policy.pdf. 70 Alan Fram, House panel wants Homeland Security documents, The Associated Press, Jan. 16, 2010. 71 Putin Palace Pics: its good to the PM, Radio Free Europe Radio Liberty, Jan. 21, 2011.
72 Warren Strobel, WikiLeaks: Voluptuous nurse cable costs diplomat his job, McClatchy Newspapers, Jan. 4, 2011. 73 For more on the file, see www.wired.com/ threatlevel/2010/07/wikileaks-insurance-file/. 74 Bruce Schneier, Schneier on Security, www.schneier.com/blog/archives/2010/08/wiki leaks_insur.html.

www.cqresearcher.com

Feb. 11, 2011

141

Bibliography
Selected Sources
Books
Goldman, Jan, and Susan Maret, Government Secrecy: Classic and Contemporary Readings, Libraries Unlimited, 2008. This collection of 45 readings on government secrecy in the United States dates back to a piece by Thomas Jefferson from 1787. The readings detail and critique the history, philosophy, theory, practice and justification for secrecy. They also explain how the CIA, NSA and other intelligence agencies operate and how they affect the governments overall approach to secrecy. Moynihan, Daniel, Secrecy: The American Experience, Yale University Press, 1998. The late senator from New York served for eight years on the Senate Select Committee on Intelligence and came to abhor the culture of secrecy that he felt impeded enlightened public discourse and the proper functioning of government. His book traces the growth of the modern secrecy system from the early 20th century to the post-Cold War years. Schneier, Bruce, Secrets and Lies: Digital Security in a Networked World, John Wiley & Sons, 2000. A cryptographer, mathematician and security expert says that in the digital age even the most elegant security systems can be breached and exploited because of human weakness by users. People break the rules, he concludes, no matter how well-designed those rules may be. Schneier traces the history of computer security in witty prose that has made him one of the more engaging and popular voices on a rather dense topic. Schoenfeld, Gabriel, Necessary Secrets: National Security, the Media, and the Rule of Law, W.W. Norton, 2010. Conservative thinker Schoenfeld has said The New York Times and others could be prosecuted under the countrys espionage laws for exposing secret intelligence operations. He expands that argument here within the context of a broader discussion of the history of American government secrecy. He argues that secrecy is important and that the government should be more forthright in its prosecution of those who undermine it. of settlements. Anderson contends that keeping court proceedings secret undermines public confidence in the legal system. Feldman, Noah, The Way We Live Now: In Defense of Secrecy, The New York Times, Feb. 10, 2009. There are many circumstances in which secrets are critical, argues Feldman, a fellow at the Council on Foreign Relations. He traces how secrecy can impact not just the national security realm but also transparency in the financial markets and other areas. Schmitt, Christopher, and Edward Pound, Keeping Secrets, U.S. News & World Report, Dec. 22, 2003, p. 18. Investigative reporters trace the Bush administrations penchant for secrecy. They conclude that from day one, the administration quietly but efficiently dropped a shroud of secrecy across many critical operations of the federal government cloaking its own affairs from scrutiny and removing from the public domain important information on health, safety and environmental matters. Stone, Geoffrey, Government Secrecy vs. Freedom of the Press, Harvard Law and Policy Review, No. 185, 2007. The author explores whether the measures taken and suggested by the executive branch to prevent and punish disclosure of classified materials are consistent with the First Amendment. Sunstein, Cass, Government Control of Information, California Law Review, Vol. 74, No. 3, Symposium: New Perspectives in the Law of Defamation, May 1986, pp. 889-921. The noted legal scholar critically examines the governments history and incentives to manage information secret and otherwise.

Reports and Studies


Report of the Commission on Protecting and Reducing Government Secrecy, Commission on Protecting and Reducing Government Secrecy, 1997. The late Sen. Moynihan chaired this landmark, 12-member panel, which aimed to reduce secrecy within the federal government as a means of increasing its transparency and efficiency. The commissions work caused a stir when it was released, but the commission was unable to mobilize the political will to enact legislation in line with its recommendations. Secrecy Report Card 2010, OpenTheGovernment.org, September 2010. This yearly update is issued by a coalition of more than 70 groups advocating for open government and a reduction in the number and nature of classified materials. It concludes that secrecy as reflected by several indicators has declined during the first years of the Obama administration and that backlogs in the declassification system are easing as well. Yet in other areas, the system continues to fall further behind.

Articles
Aftergood, Steven, Reducing Government secrecy: finding what works, Yale Law & Policy Review, Vol. 27, No. 2, 2009. A leading security expert traces a history of government secrecy, charting the effectiveness of various policy approaches to reducing it. Anderson, Joseph, Hidden from the Public by Order of the Court:The Case Against Government-Enforced Secrecy,South Carolina Law Review, Vol. 55, No. 4, 2004, pp. 711-760. The author examines the use of secrecy inside the courtroom and how it affects the publics right to know about the proceedings of a trial, including its procedural history and details

142

CQ Researcher

The Next Step:


Additional Articles from Current Periodicals
Assange
Apps, Peter, Hacker-Turned-Gadfly Assange As Divisive As Site, Chicago Tribune, Dec. 10, 2010, p. A4. WikiLeaks founder Julian Assange has been viewed as both a hero who challenges censorship and a dangerous radical who threatens the foundations of diplomacy. Goodman, Amy, From Character Assassination to Calls for the Real Thing, The Oregonian, Dec. 17, 2010, www. truthdig.com/report/item/assangination_from_character_ assassination_to_the_real_thing_20101214/. Assange says his arrest has strengthened his view that his ideals of democracy and free information are true and correct. Kurczy, Stephen, WikiLeaks Julian Assange Is Merely Fighting Baddies, Says His Mom, The Christian Science Monitor, Dec. 1, 2010, www.csmonitor.com/World/GlobalIssues/2010/1201/WikiLeaks-Julian-Assange-is-merelyfighting-baddies-says-his-mom. The mother of Julian Assange says that his strong grounding in ethics has led him to publish government secrets. Somaiya, Ravi, and Alan Cowell, WikiLeaks Founder Said to Fear Illegal Rendition to U.S., The New York Times, Jan. 12, 2011, p. A6, www.nytimes.com/2011/01/12/world/ europe/12assange.html?ref=extradition. Lawyers for Julian Assange say they would oppose his extradition to Sweden for fear of subsequent illegal rendition to the United States, which could eventually lead to the death penalty. as the WikiLeaks controversy, government lawyers could ask judges to remove shield laws that protect journalists from revealing confidential sources. LaFranchi, Howard, WikiLeaks Documents Explosive, But No Pentagon Papers Yet, The Christian Science Monitor, July 26, 2010, www.csmonitor.com/USA/Military/ 2010/0726/WikiLeaks-documents-explosive-but-no-Penta gon-Papers-yet. The WikiLeaks documents may harm national security, but it is premature to suggest that they are as explosive as the 1971 Pentagon Papers. Oliphant, James, U.S. Scrambles to Head Off WikiLeaks Damage, Chicago Tribune, Nov. 26, 2010, p. A27. The State Department believes the WikiLeaks documents could harm relations with other nations.

Revealed Secrets
Apuzzo, Matt, Obvious Kept Secret in Classified US Data, The Boston Globe, Dec. 12, 2010, p. A23, www.boston. com/news/nation/washington/articles/2010/12/12/ obvious_kept_secret_in_classified_us_data/. The United States and Canada have very good diplomatic relations and are likely to remain allies, according to several pieces of information released through WikiLeaks. Theimer, Sharon, WikiLeaks Reveals Sites Critical to US Security, The Associated Press, Dec. 6, 2010, www. salon.com/wires/politics/2010/12/06/D9JUI5JO0_us_wiki leaks_secret_sites/index.html. WikiLeaks has released a cable listing websites that the United States considers critical to its national security.

Classified Information
Chemerinsky, Erwin, Too Many Secrets, Los Angeles Times, July 28, 2010, p. A15, www.concordmonitor.com/ article/too-many-secrets. Far too much information is classified, often because it is simply embarrassing to the government, according to the dean of the University of California, Irvine, School of Law. Goldsmith, Jack, A Broken System for Our Nations Secrets, The Washington Post, Oct. 22, 2010, p. A25, www. washingtonpost.com/wp-dyn/content/article/2010/10/ 21/AR2010102104848.html. The revelations in Bob Woodwards Obamas Wars calls into question the legitimacy of the presidential secrecy system.

CITING CQ RESEARCHER
Sample formats for citing these reports in a bibliography include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor.

MLA STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher 16 Nov. 2001: 945-68.

APA STYLE
Jost, K. (2001, November 16). Rethinking the death penalty. CQ Researcher, 11, 945-968.

National Security
Farhi, Paul, Wikileaks is Barrier to Shield Arguments, The Washington Post, Aug. 21, 2010, p. C1, www.wash ingtonpost.com/wp-dyn/content/article/2010/08/20/AR 2010082005402.html. In matters involving terrorism and national security such

CHICAGO STYLE
Jost, Kenneth. Rethinking the Death Penalty. CQ Researcher, November 16, 2001, 945-968.

www.cqresearcher.com

Feb. 11, 2011

143

In-depth Reports on Issues in the News


Are you writing a paper? Need backup for a debate? Want to become an expert on an issue?
For more than 80 years, students have turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:
Civil Liberties
Cybersecurity, 2/10 Press Freedom, 2/10 Government and Religion, 1/10 Closing Guantnamo, 2/09 Affirmative Action, 10/08

Education
Crime on Campus, 2/11 Career Colleges, 1/11 Bilingual Education, 12/09 Value of a College Education, 11/09

Health/Safety
Genes and Health, 1/11 Food Safety, 12/10 Preventing Bullying, 12/10 Preventing Obesity, 10/10 Health-Care Reform, 6/10 Caring for Veterans, 4/10

Environment/Society

Crime/Law
Cameras in the Courtroom, 1/11 Death Penalty Debates, 11/10 Drone Warfare, 8/10 Prosecuting Terrorists, 3/10 Legalizing Marijuana, 6/09

Managing Nuclear Waste, 1/11 Politics/Economy Animal Intelligence, 10/10 Impact of the Internet on Thinking, 9/10 Income Inequality, 12/10 Social Networking, 9/10 Blighted Cities, 11/10 Abortion Debates, 9/10 U.S.-British Relations, 11/10 Reality TV, 8/10 Jobs Outlook, 6/10

Upcoming Reports
Lies and Politics, 2/18/11 Redistricting, 2/25/11 Alzheimers and Dementia, 3/4/11

ACCESS
CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com.

STAY CURRENT
For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Researcher Alert! and CQ Researcher News: http://cqpress.com/newsletters.

PURCHASE
To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available.

SUBSCRIBE
Annual full-service CQ Researcher subscriptionsincluding 44 reports a year, monthly index updates, and a bound volumestart at $803. Add $25 for domestic postage. CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail librarymarketing@cqpress.com.

You might also like