Guns or Butter: The State and Local Budget Crunch, Inside the Tax Lobby & Rebuilding Iraq

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In March 2003, many were wondering if the US has miscalculated the response of the Iraqi citizens. Some were beginning to take up arms against coalition forces. With war in Iraq and plans for reconstruction well underway, Bill Moyers interviewed Arab scholar Shafeeq Ghabra via satellite from Kuwait.

While the nation’s attention was focused on Iraq, the House passed a spending plan for the upcoming fiscal year that paved the way for the Administration’s proposed deep tax cuts. Next, Bill examined who these tax cuts would benefit and their potential effect on an already fragile economy. Then, with city, state and county governments facing unprecedented budget shortfalls, Serena Cruz, Commissioner of Multnomah County, Oregon, considered how the cost of war in Iraq could worsen the crisis in our communities.

Finally, Bill Moyers interviewed Charles Lewis, founder and executive director of the Center for Public Integrity, about how some high-level government advisors were using their influence to profit from the war in Iraq. And an essay on the history of the great river Euphrates.

Watch the Essay


MOYERS: Welcome to NOW. Whether you are for or against the war, think for a moment of what it must be like in Baghdad right now.

The writer James Carroll did just that this week. He asked us to imagine ourselves living in Washington under similar shock-and-awe circumstances.

The U.S. Capitol would now be rubble, so would all the federal buildings astride Pennsylvania Avenue. The White House would be a smoldering ruin; the Pentagon a fetid sinkhole. The Vice President’s residence would be in ruins, and public services failing throughout the capitol, no one would yet know who and how many are dead and wounded.

Look at what it would be like, says James Carroll, to be on the receiving end, no matter the reason or goal.

If you have been following the world press, you’ve seen these and other pictures from the streets of Baghdad. These are the images shaping perceptions in the Middle East tonight.

For some thought on their impact, I’m joined now by Dr. Shafeeq Ghabra. Dr. Ghabra comes to us from Kuwait City, only a few miles south of the border with Iraq. He holds his Ph.D. from the University of Texas, my alma mater, and has degrees also from Purdue and Georgetown universities. He’s taught on several American campuses, and he’s served as head of Kuwait’s Information Ministry in Washington. He is now the president of an American University in Kuwait which plans to open its doors to students next fall.

Dr. Ghabra, welcome to NOW.

SHAFEEQ GHABRA: Thanks for having me.

MOYERS: How is the bombing of Baghdad being received among the people you know?

SHAFEEQ GHABRA: It’s a very complicated time, and for the Arab world it by and large magnifies its feeling of powerlessness, its feeling of weakness, division, regardless whose fault, who started this, how did it all happen. And therefore they see the kind of Iraqi ability to stand this attack as something much of the Arab world has looked up to as a heroic action.

MOYERS: Do you think the American troops are being perceived in Iraq as liberators?

SHAFEEQ GHABRA: So far it doesn’t look as liberators; so far there has been an under estimation of Iraqi nationalism. Also people have under estimated the element of fear that has been installed in the people of Iraq over the years. Let’s remember, in 1991 the people of Iraq rebelled. But in few weeks that rebellion was crushed. And it was crushed in front of American troops and forces and in front of the world. That mistrust has built itself into the phenomena that you see today.

MOYERS: You mean when the Iraqis rose against Saddam after the war the Americans and our allies just stood back and let it happen, and that’s created mistrust towards what we will do now?

SHAFEEQ GHABRA: You’ve had sanctions for a long time, you’ve had the Arab/Israeli conflict get worse and worse, the peace process collapse. That created also an image of mistrust.

MOYERS: It seems to many people back here that Saddam Hussein is being effective in his own propaganda, that he’s been showing, for example, displaying American prisoners to show that there is resistance. Is his propaganda working where you are?

SHAFEEQ GHABRA: In Kuwait it’s not, and we have to make it clear that there is a difference in the way we perceive this whole phenomena from Kuwait, in Kuwait, as we host American troops. And we are a part of this all together negatively or positively.

Yet, at the level of the region, there have been many statements coming in the beginning of the few first days of the war, and then the Iraqi media somehow came to express some sort of some credibility in saying that they’ve downed an American airplane before other media and the US has been able to confirm this, that they have prisoners of war, before others confirmed this.

But let me also add it’s not all the Iraqi media. It seems that the Arab media has gotten this satellite phenomena of Arab media to a point where it is competitive, it’s able to get the story, it airs more the Iraqi story, it gives more space to the Iraqi point of view. Believing as well that on the other side the space is not given to that point of view neither to other points of views in the region.

MOYERS: What is the language you’re hearing there from Washington, and how are you reacting to the President’s words?

SHAFEEQ GHABRA: You see, if you really go around in the Arab world and maybe have a poll and ask, so far the President of the United States is talking mostly to the American people, is talking mostly to the American Congress.

Yet America is fighting a war in the Middle East, among Arabs and Muslims. I don’t see the messages as being on target with compassion, with feelings, with genuine concern for the issues of the region, with genuine concern for the fate of the people of Iraq.

So far it’s been a message of a schoolteacher. There has to be a language that really targets the region and it has to be genuine and it has to be compassionate.

MOYERS: How do you think the United States should move after the war to prevent Iraq from breaking up? I mean, there’s talk about the appointment of an American general as a Proconsul in Baghdad until the infrastructure is rebuilt and the country can get back on its feet. What would be the reaction to that?

SHAFEEQ GHABRA: I would say talking about this, too much talking about this, this alienates sectors, important sectors of the Iraqi society and population. Talking about this and acting to some how, on it even prevented the Iraqi opposition from being part of this overall process, it’s very important not to talk a lot about a military rule.

It’s very important not to impose a military rule on the people of Iraq. It’s important to treat Iraq with dignity. It’s important to later on have a Marshall plan for Iraq, to be genuinely concerned for Iraq. Making sure that the Kurds do not end up taking a bigger piece than what is normally appropriate in the context of Iraq. Making sure that the outside powers do not really rush into the vacuum in Iraq. It’s a hell of a job between Shiite and Sunnis and Kurds, it’s a hell of a job dealing with Iraq, it’s a very tough population, it has a history, it’s rich with tradition. And it has been ruled with a very ruthless style coming from Saddam Hussein.

To make that transition into building for peace is going to be quite a job, and there has to be creativity in that approach as well.

MOYERS: Are you suggesting that there should be amnesty for Saddam Hussein’s Ba’ath party, for the members of the party who have supported him? And if there is amnesty for these people, wouldn’t that just leave in place the structures of repression and tyranny?

SHAFEEQ GHABRA: I would say there has to be amnesty for all Iraqis, for most Iraqis. Yes, there has to be an exception here for a group of Iraqis who have committed crimes against the people of Iraq. That definitely includes Saddam Hussein and those associated with him who have been responsible for crimes against the region and against the people of Iraq.

Beyond that, there has to be an amnesty, there has to be a way of reconciliation. And there has to be a role for the Iraqi army as well in the entire build up of the new Iraq.

MOYERS: Dr. Ghabra, here’s an issue that’s troubling a lot of Americans. Arab intellectuals have been saying for generations that the political leadership in your part of the world is corrupt and undemocratic.

Now, here comes the United States getting rid of one of the most brutal and corrupt dictators of all, and we’re wondering why aren’t the intellectuals in the Arab world speaking up in support of what the President and the United States are doing?

SHAFEEQ GHABRA: Again, this takes us to the lack of trust.

MOYERS: They don’t believe the President when he says the United States is there to get rid of an evil man, as he says, and bring democracy to the region? Aren’t they supportive of that?

SHAFEEQ GHABRA: Arab intellectuals by and large have not bought into this, have been alienated from this. Arab intellectuals by and large keep focusing on the issue on the other side of the aisle in Palestine, the Arab/Israeli conflict. They feel that if the humanity can be served it should be served in all places, equally.

It’s important to realize that there is a role for America to play. For instance, America goes to war, liberates, changes the regime of Saddam Hussein and then US companies end up taking much of the contract. That will not run very well. They have to involve others.

America goes in, talks about democracy, but it doesn’t deliver. Two, three, four years later we end up with another dictatorship in Iraq. That will not run well. So people are judging by historical record, but are also asking questions that come from history. This is why the responsibility for the US President and for the American government and institutions as they are embarking on this very difficult and complicated mission to be aware of all these complexities and to work them, to really work them very hard in such a way that will create a partnership between America and the US on the one hand and the Arab world on the other.

MOYERS: There isn’t a democracy in the Arab world including your own country. Can democracy take hold in the Middle East?

SHAFEEQ GHABRA: I believe democracy can take hold in the Middle East, and if you take my own country as such. There is a dynamic going on in Kuwait. I believe that we have to work for dynamics in the region, dynamics that are genuinely indigenous, that people work with, that somehow the process can move with and heal as well. And it’s in that context that one can see, there is a dynamic in Lebanon, there is a dynamic in Bahrain and in Qatar. There tends to be smaller Arab states, but yet I believe that the larger Arab states are under so much pressure as well to do reform and to move in the direction of reform.

And this seems to come from the young, from the professionals, from the middle class, the need for a modernizing coalition in every Arab country and society is a need, out there in government, by certain sectors of the leadership and other sectors of society, the intelligentsia, the business class, the business community. This is a region that is in need of international investment. This is a region that is in need of serious development at all levels, from education to private sector to… It is in need of many things.

MOYERS: What is your worst fear right now? You are by nature an optimistic and hopeful man, but what could go wrong right now?

SHAFEEQ GHABRA: My fear is that we end up with a worse situation in Iraq than we started with, and that once the Americans and allies are able to take Baghdad the price will be very high, and then once that has happened a continuity of violence in Iraq, a month after month by small groups and groups that oppose the American and British presence.

My fear is a continuity of the constant suffering that is going on at the level in Palestine, and the constant stage of insecurity by the Israelis’ rule also keep engaged in a conflict that is open ended with the Palestinians.

My fear is a stagnation in the Arab world, no reform, and later on instability and a region that cannot be part of the larger world and cannot be peaceful for its own people and with the world as well.

MOYERS: You talk about American humility, the need for American humility. Exactly what do you mean by that? We are now, for better or worse, a regional power, a power in your region. What do you mean by American humility?

SHAFEEQ GHABRA: When I say American humility I mean America is the sole remaining superpower. It is the power that no other power has existed like it. It is very easy. It is very easy to be tempted towards arrogance. It is very easy to be tempted toward full unilaterialism.

I do realize that there will be times when America will have to go its own unilateral direction. That’s the case with any superpower.

Yet there is also a time and lots of time for bringing everybody back on board, for…. So that humility is important in world politics, but yet it is also very important as America is engaging the region talking to the Arab people, talking to the world of Islam and dealing with the people of Iraq, like imposing or not imposing issues of imposing a military government or imposing a certain rule or imposing an Iraqi fraction against other fraction.

That’s where humility becomes important, to listen, to engage, and to be able to work with others as well in bringing better results.

MOYERS: And, how is the bombing of Baghdad being seen there tonight?

SHAFEEQ GHABRA: Overall the bombing of Baghdad has been seen with fear, with anxiety and with anger in much of the region. And the longer it goes, the worse psychologically and the worse the expressions of people in the region will be.

Yet, for the people of Kuwait, the hope is that this will end quickly and that the hope that one day we will have a friend in Iraq and we will be able to reconnect with the people of Iraq, the same people that we’ve really had a conflict with in 1991 when the Iraqi regime occupied Kuwait and destroyed it by and large.

MOYERS: Dr. Shafeeq Ghabra, thank you very much for joining us on NOW.

SHAFEEQ GHABRA: Thank you very much for having me.

MOYERS: The Pulitzer Prize-winning columnist David Broder was a troubled man this week. Usually mild of manner in both person and prose, he wrote with passion, and some anger, in the WASHINGTON POST about the refusal of the President and the Republican majorities in Congress to step up to the costs of the war against Iraq, of homeland defense, and of our social needs at home.

“Youngsters yet to be born,” said David Broder, “will see their choices limited and their prospects blighted by the decision of today’s politicians to press ahead with an unaffordable tax cut even while the costs of war and reconstruction make earlier spending estimates wildly unrealistic.”

That’s David Broder in the WASHINGTON POST. You can see what he was writing about in almost any American city.

NOW’s Keith Brown went to Portland, Oregon.

KEITH BROWN, NOW CORRESPONDENT: Recently, residents of Portland, Oregon took to the streets, not to protest the war in Iraq. But to try to save their public schools. Teachers, parents and students marched against budget cuts that closed several elementary schools, threatened to shorten the school year, and drastically cutback teachers pay.

Budget deficits in Portland have reached a boiling point. A city of about a half million people within Multnomah County, It’s confronting some of the most severe cuts in services in the nation. And it’s not just the school system that’s threatened. Public safety, healthcare, services to the poor, the elderly and the disabled have all been slashed 10 to 17 and 1/2 percent.

SERENA CRUZ, MULTNOMAH COUNTY COMMISSIONER: Multnomah County is facing an incredibly difficult time right now. We’re challenged with a local economy that’s in decay. We’re challenged with high unemployment. And we’re challenged with a local funding base that isn’t there.

KEITH BROWN: County Commissioner Serena Cruz and her colleagues are on the front line of this local struggle.

SERENA CRUZ: We’re turning to the voters in May and we’re going to ask them to pay 1.25 percent more personal income tax than any other county in the state.

KEITH BROWN: Is that asking a lot of a community that’s already suffering?

SERENA CRUZ: We really feel like we have no place to turn, but to ask ourselves how do we solve this for ourselves.

KEITH BROWN: But in a state reeling from changes in the local economy that have replaced good-paying jobs in traditional industries, like timber and fishing, with low paying, service economy work raising taxes is a hard sell.

And it’s not just in Oregon. Last month the National Governors Association met with President Bush and asked for urgent federal aid to help the states with education, health care and homeland security. But in his proposed federal budget, there’s no new money for states.

PRESIDENT BUSH (FROM TAPE): I understand we’ve got an issue with our own budget, and you’ve got issues with your budgets. We can talk about that. Our budget is in a deficit. It’s because we went through a recession. And we’re at war.

KEITH BROWN: Forty-three states are projecting deficits this year. One of the causes: the weak economy. Oregon is a prime example. It has the second highest unemployment rate in the country and the worst hunger rate. (See NOW’s State Budget Deficit Map and Life on the Edge: Oregon Hunger)

But states are also getting less from the federal government. And they share the pain down the line. For Portland’s Multnomah Country this fiscal year that means a shortfall of state and federal funds amounting to five million dollars a month.

Already, cuts in health care have left close to 8,000 people without prescription drug coverage. 100,000 more are expected to lose state coverage this summer.

And because of cuts in Medicaid nearly 150 senior citizens and people with disabilities are being forced out of their care facilities.

SERENA CRUZ: There are 90 year old men who are being kicked out of their assisted living facility because there’s no money to keep them there.

KEITH BROWN: It seems as if the most vulnerable here in the community are being affected most by these cuts in services.

SERENA CRUZ: Absolutely. I really think that kind of the way you judge how well you’re doing your job in government is whether or not you’re protecting those who are most vulnerable in your…in our… in your community. And right now I think we’re failing on that front.

KEITH BROWN: And that’s not all. Slashes in the sheriff’s budget have resulted in the release of 300 inmates from jail…including repeat burglars, and two sex offenders.

SHERIFF BERNIE GUISTO, MULTNOMAH COUNTY SHERIFF: And the worst part about it, we are not done. This is only, this is the best news we’ve got coming in the next six months. Things could get even worse, we could release another 300-500 people if we do not get help from the state legislature soon.

KEITH BROWN: Multnomah County Sheriff Bernie Giusto is a 30 year veteran of law enforcement. His department is now expected to cut 10% more from its budget that is already bare-bones.

SHERIFF BERNIE GIUSTO: The sheriff’s office started with a budget of about $101 million dollars probably three or four years ago. We’re now down to about $84 million, headed for $74 million dollars. That’s a huge cut in a county this big.

KEITH BROWN: And now there is an added burden. The local cost of the war on terror.

SHERIFF BERNIE GIUSTO: So the city of Portland police bureau has been on 12 hour shifts, a tremendous amount of overtime, canceling days– canceling days off and– and– vacations for their people. A very expensive proposition.

KEITH BROWN: The city of Portland has increased patrols in the downtown area and has opened an emergency operations center.

KEVIN PLATT, MULTNOMAH COUNTY DEPUTY SHERIFF: This is what I’m talking about right here, on that cement support, see right on the dead center there.

KEITH BROWN: On top of that the county has the job of protecting vulnerable waterways, bridges and dams.

KEVIN PLATT, MULTNOMAH COUNTY DEP. SHERIFF: With the heightened levels of security, we have to expand that to commercial vessels, ships out of the area, out of country, and other circumstances that might raise our level of suspicion.

SHERIFF GIUSTO: I had to double my patrols to guard what is the largest number of bridges in the state of Oregon. All the way from the five or six county bridges we have to the two state bridges that we have. And we have a large expanse of waterway.

KEITH BROWN: The city budgeted 500-thousand dollars for extra security measures. It turns out it’s costing the city between 100- and 200-thousand dollars per day.

There was something more they didn’t count on, the city has had to provide security for the swelling crowds gathering for and against the war.

SHERIFF BERNIE GIUSTO: Oh, it all costs money. And the reason for that is for the 95 percent of people who come to demonstration peacefully, we’d never have to do it. But we’re always guarding against that five and 10 percent that decide that civil disobedience, destruction of property is the way that they’re gonna express that.

KEITH BROWN: Just days before the first bombs dropped on Iraq, commissioner Serena Cruz was among 30-thousand anti-war protesters.

SERENA CRUZ: The resources that are being brought together, in order to fight this war, come at the cost of resources that could be going into our economy, and going into our community to address the needs of those most vulnerable.

KEITH BROWN: This fiscal year, Multnomah County has 61-million dollars less to spend this year than it did last year. No one here is saying the war is the direct cause of the county’s fiscal crisis. But what Commissioner Cruz and a growing number of public official are saying is that the billions of federal dollars needed to wage war in Iraq would be better spent and are desperately needed right here at home.

SERENA CRUZ: It is important for the federal government and for the President … at the same time that we’re trying to win this war with Iraq, that we don’t lose sight of the people in our cities, in our counties, in our states, across this country.

KEITH BROWN: For Commissioner Cruz, funding for essential services is a personal issue.

SERENA CRUZ: I grew up in public schools at a time when they gave kids like me access to a new world, and new opportunities. I mean if I hadn’t grown up in Oregon at a time when our schools were well funded, I don’t know that I’d be sitting across from you today.

KEITH BROWN: Cruz grew up in a working class family in Eugene, Oregon. She went on to study law at Berkeley and got a masters from the Kennedy School of Government at Harvard. In 1998, she was elected Multnomah County’s first Mexican American Commissioner.

Her county was among 150 towns, cities and counties across the country that passed a resolution that said no to war. They were a part of a national campaign — Cities for Peace. The resolution read in part:

“A war in Iraq would likely cost the U.S. government over $100 billion, an amount that could go a long way to meeting our health and educational needs.”

KEITH BROWN: But for some Portland business leaders and city council members — a resolution involving foreign policy simply took away from pressing local issues.

One of the arguments is that it’s just not appropriate for local politicians to get involved in foreign policy. Is there some truth to that?

SERENA CRUZ: I certainly think it doesn’t make sense for us to get involved in all foreign policy. You know, we’re at–

KEITH BROWN: So why this one?

SERENA CRUZ: We got involved here because, again, we see the compelling needs in our community that are going unmet. And yet, we don’t understand the compelling need for this war.

KEITH BROWN: Now that the war has begun Cities for Peace is rallying to pass new resolutions around the country calling for the withdrawal of troops and the reinstatment of United Nations weapons inspections.

PRESIDENT BUSH (FROM TAPE): “Every dollar we spend must serve the interests of our nation, and the interests of our nation in this supplemental is to win this war and to be able to keep the peace.”

KEITH BROWN: The 75 billion dollars President Bush has requested to fight the war and keep the “peace” will only cover the first six months. And the rebuilding of war torn Iraq will cost billions more.

SERENA CRUZ: Those are big dollars that are being discussed, and I guess from our perspective, the hard part is, not knowing what the costs are going to be. Not knowing when this will all end. And believing that we have the capacity to heal ourselves out here, but if the economy isn’t given a chance to return, how do we even get that chance?

MOYERS: That was Keith Brown from Portland, Oregon.

But as we said, it’s not just Portland. In Detroit, officials announced this week the closing of 16 public schools to help reduce $100 million budget deficit.

While local public officials everywhere struggle with the fallout of our slumping economy, the President and his allies in Washington remain determined to cut the taxes of the country’s richest people.

They got a slight comeuppance this week, but it may be only a temporary setback.

NOW’s senior Washington correspondent Roberta Baskin and Katie Pitra have our next report.

CONGRESSIONAL DEBATE MOMENTS: “This is a time when our budget should reflect our nation’s priorities…” “We need tax cuts to stimulate the economy…” “The Republican budget is intellectually dishonest…”

SENIOR WASHINGTON CORRESPONDENT ROBERTA BASKIN: It happened in the wee hours of last Friday morning. While American forces were launching a war that still hasn’t been paid for…the Republican controlled House of Representatives pushed through the President’s budget. Cutting money for, among other things, veterans’ benefits. But leaving room for more than 700 billion dollars in tax cuts. Democrats, like Chet Edwards of Texas, were furious.

REP. CHET EDWARDS (D-TX): Tax cuts for the wealthy paid for by benefit cuts to veterans. Is this the new Republican model for the long timed-honored American tradition of shared sacrifice in time of war?

ROBERTA BASKIN: It looked like the president’s budget would roll through the Republican-controlled Senate as well. Democrats, like Nevada’s Harry Reid could do little but watch.

SEN. HARRY REID (D-NV): And there isn’t a single penny in this budget that deals with this war. Not a penny. Do you think that might be one reason why they’re rushing through this budget.

ROBERTA BASKIN: It appeared nothing could slow the momentum behind the president’s tax cuts, until the president did it himself. He went to the Pentagon Tuesday morning and finally announced a price-tag for the war.

PRESIDENT BUSH (FROM TAPE): The war time supplemental is directly related to winning this war.

ROBERTA BASKIN: At least 75 billion dollars just for the next six months. The Senate looked at all the red ink and unexpectedly chopped the size of the president’s tax cut in half.

It’s far from over. The president is still calling for the full tax cut. And over the next few weeks, the Congressional Republican leaders will try to deliver it. In particular, the “jewel” in the president’s plan, what the president calls the double taxation of corporate dividends.

PRESIDENT BUSH’S STATE OF THE UNION, 1/28/03: It’s fair to tax a company’s profits. It is not fair to again tax the shareholder on the same profits (applause).

PETER ORSZAG, SENIOR FELLOW, THE BROOKINGS INSTITUTION: Well, the administration is very clever in its use of language. But the fact of the matter is a large chunk of corporate profits are not taxed at all currently because of tax shelters and other loopholes in the tax code.

ROBERTA BASKIN: Peter Orszag of Washington’s Brookings Institution says the real issue is “who” is really benefiting from the administration’s plan?

PETER ORSZAG, SENIOR FELLOW, THE BROOKINGS INSTITUTION: The winners are the very high income people who have a lot of money in dividend income. So CEOs, people earning hundreds of thousands or millions of dollars a year who have very very large amounts of dividends will get a very large tax break.

ROBERTA BASKIN: In other words, the top 1 percent of all taxfilers would get an average tax cut of 24-thousand dollars, while the bottom 80 percent would get an average tax cut of just 226 dollars.

And if your stocks are only in 401Ks, like half of Americans, you don’t get a tax break at all. And cutting taxes means adding to the federal deficit. If the president’s plan through, the federal deficit would grow by roughly 400 billion dollars over the next decade. And that could put a strain on basic federal programs like Medicaid, education and environmental protections.

ROBERT GREENSTEIN, EXECUTIVE DIRECTOR, THE CENTER FOR BUDGET AND POLICY PRIORITIES: I think the single biggest losers are probably today’s children who will inherit larger debts and be saddled with them if we pursue this course.

ROBERTA BASKIN: Robert Greenstein is Executive Director of The Center on Budget and Policy Priorities.

ROBERT GREENSTEIN: There has been a sense of shared sacrifice in order to protect the security of the nation. What I don’t believe has ever happened before in American history is to pass large tax cuts heavily tilted towards the wealthiest people in the country at the same time that we’re going to war.

ROBERTA BASKIN: And backers of the president’s tax cut are mounting an unprecedented campaign to push for its passage. Just look at the crowd at Americans for Tax Reform headquarters, at the helm, Grover Norquist with his regular Wednesday breakfast meeting. The strategy is to turn ordinary shareholders into an army of lobbyists to promote the tax cut.

GROVER NORQUIST: And the good news is a lot of our corporate friends…Fortune 500 companies are doing letters, and I know a lot of the Verizon people are passing out a note that they’ve sent to all of their shareholders.

ROBERTA BASKIN: The letters Norquist is referring to are recruiting messages for the campaign to eliminate the taxation on dividends. Millions of them have been sent to shareholders in recent weeks…right alongside quarterly dividend checks.

ROBERTA BASKIN: For instance, communications giant Verizon explains just how President Bush’s plan would “…eliminate the federal income tax on dividends.”

Automotive giant General Motors’ CEO says the president’s dividend tax cut will mean…”More money for you.”

And financial giant Morgan Stanley’s letter suggests…”If you support the elimination of the dividend tax, write or call your senators and congressman.”

And on the receiving end of letters like these people like Carol Rice.

CAROL RICE (READING LETTER): “…this proposal merits strong consideration and suggest that you may wish to express your views on this matter to your representative in Congress.”

ROBERTA BASKIN (ADDRESSING RICE): Are you going to do that?

CAROL RICE, CITIGROUP SHAREHOLDER: I am going to do that. But I’m going to tell Congress that I think this whole Bush tax cut is outrageous.

ROBERTA BASKIN: Carol Rice’s letter came with her dividend check from Citigroup. Semi-retired, Carol earns less than 50-thousand dollars a year.

ROBERTA BASKIN (ADDRESSING RICE): If this tax cut goes through, what would you get out of this?

CAROL RICE, CITIGROUP SHAREHOLDER: I suspect I would save a little bit on my taxes, I might get enough to go out for a really nice dinner, so…

ROBERTA BASKIN (ADDRESSING RICE): What’s wrong with that?

CAROL RICE, CITIGROUP SHAREHOLDER: It’s just a matter of priorities. When I was walking my dog I stopped at the library. The library’s closed on Fridays, the states around here, the city, they’re all in deficits, we’re in huge deficit. I would rather have the library open on Fridays. I would rather have prescription drug benefits for my mother.

ROBERTA BASKIN: Carol owns 266 shares of Citigroup stock and with the proposed tax cut she would earn an additional $32 in dividend income each year.

Contrast that with Citigroup’s CEO Sanford Weill. He owns nearly 23 million shares of Citigroup stock. If the tax cut passes, he would earn seven million, thirty three thousand dollars.

But it’s an army of people like carol rice that the letter writing campaign hopes to enlist. Which for Robert Greenstein, raises ethical questions.

ROBERT GREENSTEIN, EXECUTIVE DIRECTOR, THE CENTER FOR BUDGET AND POLICY PRIORITIES: I don’t ever recall seeing something like this done before and I do think there are ethical questions in that the corporations that are sending these notices with the dividend payments are not providing a more balanced assessment of the issues.

ROBERTA BASKIN: There’s a second front the president’s backers have opened up and it’s on K Street, famous for its rows of lobbying firms. It’s central command for the corporate effort to persuade Congress to get in line behind the president.

John Castellani is President of the Business Roundtable, made up of many of the country’s most powerful CEO’s. He’s chairing a committee formed to aggressively pursue the tax cuts. We met him on Capitol Hill where he was selling the president’s plan.

JOHN CASTELLANI, PRESIDENT, THE BUSINESS ROUNDTABLE: By gosh when the president embraces something, you can get something that’s been out there in the weeds up on the top of everybody’s agenda pretty quickly.

ROBERTA BASKIN: But Castellani denies that the president is exerting any political pressure on big business.

JOHN CASTELLANI, PRESIDENT, THE BUSINESS ROUNDTABLE: II have not talked to a single person and I think I know everybody who’s involved in this activity, that has in anyway felt as though they have been improperly encouraged to participate.

ROBERTA BASKIN: But others say the administration is using an arsenal of new weapons.

PETER ORSZAG, SENIOR FELLOW, THE BROOKINGS INSTITUTION: This administration plays hardball to a degree that I have not seen any other administration play. Its corporate groups are afraid to cross the administration because of retribution or veiled threats at retribution.

ROBERT GREENSTEIN, EXECUTIVE DIRECTOR, THE CENTER FOR BUDGET AND POLICY PRIORITIES: It’s no secret with a number of corporations privately aren’t that enthusiastic about the dividend tax cut but it’s been made very clear to the corporations by the White House “You’re either with us or you’re against us.”

If you don’t support us on this, you’re not our friend. And when you have something maybe on the regulatory side where you would like us to look favorably on your concerns, we’ll remember whether you were part of our effort on the dividend tax cut or not.

ROBERTA BASKIN: Grover Norquist in not shy about telling CEOs to get on board.

GROVER NORQUIST, PRESIDENT, AMERICANS FOR TAX REFORM: Don’t come and ask to see the President or the Secretary of Treasury and ask them for help if you as a business leader haven’t already written to your shareholders on the subject.

ROBERTA BASKIN: And the conservative Club for Growth, also on K Street, is doing its part, sending out warning letters to Republican members of Congress who don’t support the president’s tax cut.

The Club’s Web site boasts about its track record targetting Republicans who fall out of line like this one: “I knew I was in trouble when the Club for Growth endorsed my opponent.”

And the letters they just sent to Congressmen include what the president of the Club himself admits is a “veiled threat.” “We will be watching…”

And as the president’s tax cuts wind their way through a legislative maze of committee and floor action over the next several weeks… constituents like Carol Rice will be watching as well.

CAROL RICE, SHAREHOLDER: Oh we’re just moving to two societies. It’s going to lots of benefit to the people at the very top in income and very little and nothing to the people at the bottom and I think that’s wrong.

ANNOUNCER: Next week on NOW: This spring, big media may get even bigger.

FRANK BLETHEN, PUBLISHER, THE SEATTLE TIMES: If we go out 20 years from now with the same pace of concentration of media ownership we’ve had for the last 20, we will not have a democracy.

There’s simply no way.

ANNOUNCER: Can America say good-bye to the idea of a free press? Next week on NOW.

And connect to NOW with Bill Moyers online at

Who benefits from the dividend tax cut? Discover what the war against Iraq is costing your community.

Find out who is bidding to build postwar Iraq.

Connect to now at

MOYERS: With me now is a familiar figure on our program, Charles Lewis. He’s the head of the nonpartisan Center for Public Integrity in Washington, and a frequent collaborator with us and other investigative journalists. The Center is out this week with a new study of power, influence, and money in Washington. It’s called “Advisors of Influence” and it couldn’t be more timely.

The study takes a hard look at the conflicts of interest on something few Americans have heard of, the Defense Policy Board. This is a group of private citizens, academics, retired military officers and former government officials who serve as voluntary counselors to the Secretary of Defense.

Until yesterday, this man was the chairman of the Defense Policy Board. His name, Richard Perle, and he’s been in the news a lot recently. No one has been more vigorous or vocal in advocating a war against Iraq. Once an Assistant Secretary of Defense for Ronald Reagan, he left the administration in 1987.

In 1996, Perle helped write this study for an Israeli think tank calling for the removal of Saddam Hussein. Perle’s been at it ever since: a major architect of the war now taking place against Iraq. But that’s not all he’s been after.

Richard Perle has been a lobbyist for a foreign arms merchant and other governments. His venture capital firm invests in businesses related to national security. Recently, the investigative journalist Seymour Hirsch reported in the NEW YORKER that Perle has used his proximity to Donald Rumsfeld, the Secretary of Defense, to solicit investment for his firm. Perle has threatened to sue Hirsch for libel.

REPORTER, CNN SHOWDOWN WITH IRAQ (FROM TAPE): Let me read a quote from the NEW YORKER article, the March 17 issue just out now: “There is no question that Perle believes that removing Saddam from power is the right thing to do. At the same time, he has set up a company that may gain from a war.

RICHARD PERLE (FROM TAPE): I don’t believe that a company would gain from a war. On the contrary, I believe that the successful removal of Saddam Hussein– and I’ve said this over and over again– will diminish the threat of terrorism.

And what he’s talking about is investments in homeland defense, which I think are vital and necessary. But Sy Hersh is the closest thing American journalism has to a terrorist.

MOYERS: Then a few days ago, it was learned that the bankrupt telecommunications company Global Crossing has offered Richard Perle over half a million dollars to get Defense Department approval for its takeover by a foreign corporation.

The person who would make that decision, none other than Richard Perle’s close friend, the man he regularly advises, Secretary of Defense Donald Rumsfeld.

Yesterday Richard Perle resigned the chairmanship of the Defense Policy Board. Chuck Lewis, is the story over?

CHUCK LEWIS: I don’t think it’s changed anything. He’s still got access to the Secretary of Defense, and he’s still going to make money from that association.

MOYERS: resigned the chairmanship but…not his place on the board.

CHUCK LEWIS: Yes, so he hasn’t left. And you know, the ethics folks inside the Pentagon had no problem with any of this that we’re describing. All of their disclosures for these folks that serve on this board, all 30 of them, are classified. They’re not public information. So we won’t know what Perle does in the future. He has shown poor judgment on a number of occasions.

MOYERS: Perle says he’s told Global Crossing that he will not accept any compensation from them, but he didn’t say he would stop trying to persuade the government from doing what Global Crossing wants. In other words, he still is free to lobby his friend Donald Rumsfeld to do this favor for Global Crossing.

CHUCK LEWIS: That’s right, and he was going to make $725,000 for that, and it was a contingent contract, so that if the Defense Department did what this company wanted, he would get a fee, a finder’s fee, whatever you want to call it.

He still has associations with Goldman Sachs, investment advice about how to invest in wartime activities, giving seminars like that. He still has associations with other companies. And again, we do not have a disclosure form, we do not know what else he’s doing.

MOYERS: So he’s got the war he wanted.


MOYERS: He’s in a position to profit from the war. And he’s protected from the public knowing what influence he’s actually wielding and what inside information he’s getting.

CHUCK LEWIS: That’s right. He has the best of all worlds. He doesn’t have to officially give up any of his clients unless he does it voluntarily because of the heat publicly. But he doesn’t have to disclose his activities and he gets to have clout and access to the secretary.

This is a snapshot of the mercenary culture in action. This is how it works in Washington. You serve in government, you leave government, you make tons of money in the process. And the private sector and the public sector become the same. And they’re indistinguishable.

MOYERS: Doesn’t the press aid and abet this? I mean, I’ve seen Perle interviewed many times. He’s always supered, the little identification at the bottom of the screen, and it says, Richard Perle, Chairman, Defense Policy Board. It never says, manages investment firm, advises Global Crossing. He gets on television as if he had no interest but policy.

CHUCK LEWIS: Well, they do it all the time. They do it with a lot of these generals we see on TV, they do it with people like Perle.

And the problem is, these guys have so many investments, they’d fill up the whole screen with all their associations. And I mean, they should disclose it, but the fact is it’s usually the former title.

And so they’re living off of their title for celebrity and for media coverage, and of course, that drives up the interest in the private sector for their services.

MOYERS: In your study which is out today, and people can find it where?

CHUCK LEWIS: On our web site,

MOYERS: In this study you’ve been looking not only at Richard Perle but at all 30 members of the board. In summary what have you found.

CHUCK LEWIS: Nine out of 30 have ties to the defense industry and are either lobbyists, they’re executives in defense companies or they’re trustees, board of director type members of these companies. And so you know, there is an apparent potential conflict of interest situation.

MOYERS: Have you been able to identify how much money the companies represented by these nine members of the Defense Policy Board have been getting from the pentagon?

CHUCK LEWIS: The companies themselves have contracts in the neighborhood of $75 billion.

MOYERS: The companies on whose… represented by the members of this board have received how much money?

CHUCK LEWIS: $75 billion.

MOYERS: What does this tell you?

CHUCK LEWIS: Well, I think it tells us, a part of the story with all this war coverage, that maybe we don’t want to see, that there are a lot of people getting rich during war. Now, that’s not new; there have been war profiteering for centuries in different countries.

MOYERS: Now, you’re not talking about companies in Iowa providing shoes for the troops or building airplanes; you’re talking about something else.

CHUCK LEWIS: No, I’m talking about sort of beltway bandit firms that situation and wait for the solicitations for bids, and then they apply for them.

And with homeland security and the Department of Defense, they’re just cherry picking contracts, and they’re getting bloated.

A defense contractor class that was already well fed is getting bloated because we have so increased the defense budget in the last couple of years that we’re talking tens of billions of dollars higher than it was.

And so the way it has always worked, the military industrial complex that Eisenhower warned this country about 40 years ago, the former generals and the former defense security experts that served in government then go into the private sector, they go to work for these contractors, and people see their names, they’re impressed, it has credibility. And that’s how they get their contracts. And it just is a continuation of itself.

And then they tell us what weapon systems we need, and they tell us what wars we should be fighting, and it’s a self perpetuating situation.

And it’s been going on for years, but what we’re seeing in this instance is it’s absolutely unabashed. This is a case where the Secretary of Defense knows these people are getting rich because of their association with him. There’s one fellow who was an aide to Rumsfeld, was on Rumsfeld’s…

MOYERS: The Secretary of Defense.

CHUCK LEWIS: Secretary of Defense, and he goes out, becomes a lobbyist and picks up Northrop Grumman and T.R.W. As clients while he’s serving on the Defense Policy Board. Now… His name is Chris Williams.

MOYERS: Wait a minute. He leaves the Secretary of Defense’s office, Donald Rumsfeld’s office, goes out and becomes a lobbyist.


MOYERS: And then he gets appointed to the Defense Policy Board where he’s advising the Secretary of Defense?

CHUCK LEWIS: Right. That’s right.

MOYERS: Even though he’s a lobbyist?

CHUCK LEWIS: Right. And I don’t know if he was appointed… He may have been appointed to the board as soon as he left. I don’t know the exact sequence. All I know is, today he’s on the board and he’s got these clients, and that firm he went to was mostly an energy lobbying firm, and now they’re into defense and they’ve broadened their portfolio.

MOYERS: And there are people who’ve served Democratic presidents on this board.


MOYERS: People like Harold Brown.

CHUCK LEWIS: That’s right.

MOYERS: Who was Secretary of Defense under Jimmy Carter and James Woolsey who was C.I.A. Director under Bill Clinton. They’re now on the board advising…

CHUCK LEWIS: That’s right.

MOYERS: And they have conflicts of interest.

CHUCK LEWIS: Woolsey is a vice president of Booz Allen that had $600 million in contracts last year from the Pentagon, and he has other associations.

Harold Brown is on the board of Philip Morris, which got $150 million in defense contracts last year, which I’m fascinated by. I’ve got to look into that. And he’s also a trustee for Rand, which of course has been a long-standing recipient of defense money.

MOYERS: Couldn’t one make the case that given their experience in government and now in private business, they’re able, as private citizens to make the Defense Department more efficient?

CHUCK LEWIS: Look, I believe in the cross pollination between the private and public sector, and we believe that American government should benefit from the private sector and from the experience people have. And I’m all for that.

But if you’re going to have a system where you’re going to have advisors with those kinds of backgrounds, you’d better make sure you have ethical guidelines and transparency situations set up.

MOYERS: And your concern is that they advise the Secretary of Defense, as private citizens on this board, and then they go out and tell their clients, their businesses, “Well, I’m advising the Secretary of Defense.” I mean that creates a terribly attractive incentive, doesn’t it to get customers?

CHUCK LEWIS: Well it does. And you can’t tell me the companies they’re working for don’t know that they’re tight with Secretary of Defense Rumsfeld and that they’re on this board.

Now, the administration would say, “well, how can you say that? These are they’ve been in the field of these are well-known distinguished Americans. They’ve been in the field of defense for decades.”

But it’s different. There’s a perception that there’s a coziness and that they’re making profit from their association in government. And therein lies the problem.

Let’s get smart about ethics here and let’s watch these folks carefully. If they’re sending out solicitations pointing out that they’re on the Defense Policy Board, would you like to invest in my company those people should be tossed out on their ear in ten minutes. Nobody is tossing anybody out on the ear.

MOYERS: They must file financial disclosure forms, don’t they?

CHUCK LEWIS: Well, they do file financial disclosure forms, but they do it in a classified fashion. In other words, no one can see these forms. And more importantly– that bothers me immensely of course. I think he should be made public.

But the other problem is when they file them, no one apparently reads them because Richard Perle had all these associations that are were clearly over the top, clearly unacceptable, clear conflicts of interest and no one inside the Pentagon said Richard Perle, could you come here, please? There was no one watching.

Rumsfeld is not penalizing Perle. He’s letting him stay on the board. That means he doesn’t have a problem with any of this. And in fact he issued a statement saying, “he’s a fine American.”

MOYERS: This administration, they do not want to be judged by the rules the rest of us are judged by.

CHUCK LEWIS: Well, therein lies the problem. I mean, I think what offends me the most is the secrecy initiatives, because it’s just been reported in the last days that the vice president of the United States has now been given the authority to personally classify documents…

MOYERS: For the whole government?

CHUCK LEWIS: For the whole U.S. Government.

MOYERS: The former chairman of Haliburton?

CHUCK LEWIS: Right. And so we are now doing new secrecy initiatives. This is an administration that has already been bent on secrecy in a number of different ways, but we are increasing every day the amount of secrecy.

So when you have an ethical issue like the one we’ve had with Richard Perle, it’s only because of gritty tough reporting with sources, not documents, which is very hard to do. That’s how you find out a story about Richard Perle. It’s not from a disclosure form, which is… The public should have that information. It should be posted not only in some dusty file cabinet somewhere. It should be on the internet.

And of course, these guys don’t want to do any of that. There’s no disclosure. So we have the combination of the excess in terms of money, very little oversight on how the money is spent and secrecy about any ethical transactions or problems that have arisen. And you add all that up together that’s not a pretty picture.

MOYERS: In the interest of full disclosure, I shall say again as I’ve said before and we’ve worked together on many projects, including our relationship with the Shuman Foundation and the Center for Public Integrity on journalistic issues. Chuck Lewis, Center for Public Integrity, thank you very much.

CHUCK LEWIS: Thank you.

BILL MOYERS: This headline I saw on the web — MARINES CROSS EUPHRATES — got me to thinking.

Do they know? Do they know, these young Marines, this elite American fighting force. Do they know Alexander the Great crossed the Euphrates, too, on his way to battle — and empire… With his engineers, architects, scientists and scribes, and an army 40,000 strong, their l3-foot spears gleaming in the sun.

The mighty Darius also crossed the Euphrates, and on these plains met Alexander in battle. Xenophon … Xerxes and Sennacherib…they crossed the it, too. The Sumerians crossed this river…the Akkadians, Hittites, and Amorites. The Semites, as well.

The Euphrates is the largest and longest river of western Asia. And where it meets its sister the Tigris became the fertile womb of Mesopotamia, birthplace of civilization. A thousand gods sprang forth here — and cities like Persepolis, Seleucia, Nineva, and Babylon. Somewhere between these rivers lay the Garden of Genesis.

Adam and Eve, exiled, crossed the Euphrates fleeing East of Eden. Writing first appeared here — myths and legends took hold. Gilgamesh, the Flood, the prophet Jonah, the Tower of Babel. Sargon, beloved of Ishtar, won 34 battles here, ruled twice as many cities, and vanquished his foes. Inana, goddess of love and war, slaked her thirst and passion here. Hammurabi proclaimed his Code…

And on these stones is all that remain of conquests, rebellions and battles — the violent death of rulers — prisoners of war disposed of by execution. For five thousand years the story repeats itself, the victory of one, the defeat of the other. Tribes and gods turn on each other. Omens fill the literature: “A powerful man will ascend the throne in a foreign city,” it is written. “They will lock the city gates and there will be calamity in the city,” it is written.

Even Ghengis Khan met his match trying to get here. The last word has always been written in the sand. Cities and states lie buried beneath it. The great figures who once held sway here Ashunrasirpal II, Tilglath-pileser III, Shamish-Adad V, King Nino, Queen Semiramis, King Shar-Kali-sharr. Suleyman the Magnificant, the Ottomons, the British, have all been carried away.

Five thousand years from now, who will be crossing the Euphrates? What will remain from our time? And what will be remembered?

Next week we’ll take a special look at the press, and we’d like too know what stories you think are not being covered during the war.

Write us at

That’s it for NOW, I’m Bill Moyers.

Good night.

This transcript was entered on April 9, 2015.

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