Unexpected Loss of Jobs Raises Risk of Recession

The New York Times
Unexpected Loss of Jobs Raises Risk of Recession
By DAVID LEONHARDT and JEREMY W. PETERS

The job market took a serious and unexpected turn for the worse last month, raising the risk of a recession and putting added pressure on the Federal Reserve to move more aggressively to keep the ailing housing industry from infecting the rest of the economy.

The Labor Department reported yesterday that 4,000 jobs were lost from July to August, and the deepest cuts were in industries that are connected to the housing market, like construction and manufacturing. It was the first employment decline since 2003, when the job market was still struggling to emerge from the slump after the 2001 recession.

The jobs report all but guarantees that the Fed will cut its benchmark short-term interest rate when its policy-making committee meets on Sept. 18. A quarter-point reduction, to 5 percent, remains the most likely move, although a half-point cut now cannot be ruled out, economists said.

The unexpected weakness in employment changed the terms of the debate over the health of the economy. Before the report was released, most economists were predicting that the economy had added about 100,000 jobs in August and that growth had slowed but continued.

But now, the odds of a recession in the next year have risen, to 25 to 50 percent, economists interviewed yesterday said. A recession is typically defined as an extended period in which the economy shrinks, leading to a rise in unemployment and a drop in consumer spending and business investment.

“People need to start thinking about the housing market not just as some ring-fence problem which is off on its own,” said Nigel Gault, chief United States economist at Global Insight, an economic research firm in Lexington, Mass. “They need to start worrying about the health of the broader economy.”

Stocks fell broadly and sharply, as investors digested the idea that the economy had been weakening significantly even before the mortgage crisis hit financial markets last month. The Standard & Poor’s 500-stock index was down more than 1.5 percent. The Dow Jones industrial average dropped almost 250 points.

The unemployment rate held steady at 4.6 percent in August, but economists said that was at least in part a fluke of the survey as more people stopped looking for work and were therefore not counted by the government as unemployed.

“If the economy is not headed toward recession, it is very close to one,” said Mark Zandi, chief economist at Moody’s Economy.com.

The Bush administration tried to defuse concerns that the weak jobs numbers hinted at a wider economic slowdown. In an interview with Bloomberg Television yesterday, Treasury Secretary Henry M. Paulson Jr. said the report was “not totally surprising.”

“There will be news that is not always good news,” he said. “But I feel quite strongly that we have a resilient economy.”

For months, Fed officials and Wall Street forecasters have been predicting that the housing slump would slow the economy and that other factors, like corporate earnings, growth in other countries and strong wage advances, would keep the slowdown from being severe.

That could still happen; in the economic expansions of both the 1980s and the 1990s, employment fell at least once before quickly reversing course.

“The financial turmoil and extended problems in housing put the risks for the economy clearly to the downside, no question,” said Mickey D. Levy, chief economist at Bank of America. “But there are also factors that suggest a longer period of slower growth, but not recession.”

One of the most worrisome signs in the jobs report released yesterday was the government’s revision to its employment data for June and July. The new numbers show just under 70,000 jobs being created in each of the two months. Initial estimates had been an average of almost 110,000 a month.

In 2005 and 2006, the average monthly job growth was slightly above 200,000.

The sharp slowdown this year suggests that some employers have already begun to see a downturn in their business and that others think one is on the way. With house prices falling in most of the country and oil prices having risen, consumer spending has slowed modestly in recent months.

State and local government agencies, many of them dealing with budget shortfalls connected to the housing slump, have also cut an average of 27,000 jobs a month over the last three months. But economists said the declines in government employment, especially in schools, may have reflected seasonal quirks that made the job market look worse last month than it was.

Hospitals, doctors’ offices, restaurants and retail stores added jobs in August.

But the bright spots were few. Employment in the finance sector, which includes real estate agencies and accounts for about 8.5 million of the country’s 138 million jobs, was flat in August, which could be a sign that the government numbers have not yet captured some of the mortgage-related job cuts now occurring.

The surveys that made up the Labor Department report measured employment from Aug. 12 to Aug. 18, when the credit squeeze and subsequent stock market turmoil were under way but not yet fully felt. Since then, some large lenders like Lehman Brothers have continued to lay off workers.

And just yesterday, two mortgage lenders, Countrywide Financial and IndyMac Bancorp, said they would shrink their work forces. Countrywide said it would cut as many as 12,000 jobs over the next three months, and IndyMac Bancorp said it would trim 1,000.

“There probably was not that much influence in the data from the credit shock,” said Richard Berner, chief United States economist at Morgan Stanley. “So I think more weakness in the economy is likely. The economy is clearly losing momentum.”

The extent to which that continues will determine the Fed’s course of action. The price of a futures contract tied to Fed policy indicates that the central bank will probably cut the benchmark rate, now 5.25 percent, to 4.5 percent by the end of the year. But a growing number of economists are saying that may not be soon enough.

Mr. Gault of Global Insight, who is forecasting a cut of half a point on Sept. 18, said it would send “an important message that the Fed sees there are real problems here, there’s a real threat, and it needs to have a response that’s commensurate to that threat.”

Although the unemployment rate held steady at 4.6 percent, the percentage of adults with jobs fell to 62.8, from 63 percent in July and a peak of 63.4 percent in December. The number of people who were neither working nor looking for work, and therefore were not classified as employed or unemployed, rose by almost 600,000 in August.

“That’s a sign of economic weakness,” said Scott Anderson, a senior economist at Wells Fargo. “Perhaps people just gave up trying to find jobs.”

The number of people with part-time jobs who said they would prefer to work full time has also been rising in recent months. In August, the Labor Department classified 4.5 million workers as “part time for economic reasons,” up from 4.3 million in July.

Wage growth, which often lags behind job growth, continued at roughly its recent pace. Average hourly earnings for rank-and-file workers, who make up about four-fifths of the work force, have increased 3.9 percent over the last year, to $17.50. Inflation has been running at about 2.5 percent a year.

Wall Street had awaited the jobs report because it was the most significant economic data released since financial markets began to tumble in early August. If the jobs report had shown merely lackluster growth, investors might have welcomed it as a sign that a Fed rate cut was all but certain and that the economy was still growing at a healthy pace.

The reversal in employment, however, was far different from the gain of roughly 100,000 jobs that Wall Street had been expecting, raising worries that corporate profits and wage gains could weaken as the market upheaval moves beyond the housing and financial sectors.

“The big question on all of our minds is whether the financial market contagion would reach the labor market,” said Jared Bernstein, an economist with the liberal Economic Policy Institute. “And it appears it has with a vengeance.”

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A Tale of Two Parties

A Tale of Two Parties
Two gatherings in the nation's capital help point up the difference between theorizing about war--and fighting one.
By Eleanor Clift
Newsweek

Sept. 7, 2007 - Washington was out in force--right, left and center--this week for a party to toast the publication of a new book by Mark Penn, the pollster credited with re-electing Bill Clinton in 1996 who is now the principle strategist for Hillary Clinton’s presidential campaign. “Isn’t he dangerously DLC?” asked antitax conservative Grover Norquist, referring to the centrist group that launched Bill Clinton’s candidacy. As fellow editors at the Harvard Crimson a couple and a half decades ago, Penn was Norquist’s soul mate, a right-wing radical in the eyes of the “Harvard socialists,” says Norquist with a laugh, implying that Penn is suspiciously centrist.

Wherever Penn is on the ideological spectrum, he’s positioning Hillary for a general election, bucking up her centrist credentials while moving her to the left enough on the war to quiet critics. His book is avowedly nonpolitical, a breezy look at societal ripples entitled “Microtrends: The Small Forces Behind Big Changes.” It’s the latest blending of marketing and politics, a way to identify social changes and tap into them for a big payoff on Election Day.

Chatting with partygoers over the salmon and cucumber canapés, the mention of one trend in Penn’s book, “red-shirting,” triggered a burst of conversation. The phrase refers to the growing phenomenon of mostly upscale parents holding their children back a year from entering kindergarten.

At Georgetown Day School, a top-flight private school in Washington, there are kids 13 months apart in age in his child’s class, one father exclaimed. The practice originated in college sports with student athletes postponing enrollment to spread their eligibility to play over five years, when they’re bigger and stronger. High-achieving parents who struggled up the greasy pole of meritocracy to reach the finest institutions consider it a defeat if their children don’t make it to the Ivies, and they want to give them any edge they can. The extra year is supposed to give them a better chance to excel. It’s a crazy elitist trend that has little to do with the world most people live in.

Four blocks away from the Corcoran Museum of Art, where the Penn party was held, a very different event was unfolding at the Reagan Building. Actor James Gandolfini, best known as Tony Soprano, mingled with another cross-section of Washington for the premiere of a new HBO documentary, “Alive Day Memories,” about the wounded of Iraq, and the challenges they face. I slipped in late, right behind Paul Wolfowitz, one of the major promoters of the Iraq War and arguably its intellectual godfather. Seated to my left was a young woman, Robin Cleveland, whose husband, Tai, is in a wheelchair owing to spinal-cord and brain injuries he received in Iraq. “You have no idea how many people are suffering from this war,” she said. On my right was a young man in a wheelchair who had lost a leg and who knows what else. As I looked around before the lights dimmed for the film, I saw many more young men and some women with metal limbs and prostheses.

When John Edwards talks about the “two Americas,” he means the growing gulf caused by poverty, but the phrase could just as well refer to the divide between the people who do the theorizing about war and the America that does the fighting, the people who have the luxury of red-shirting their kids and the kids trying to reclaim their lives in hospital wards. The wounded from Iraq, now numbering more than 20,000, all have two birthdays--the day they were born and their “Alive Day,” the term of art given to the day they were wounded. Gandolfini interviews 10 returning soldiers, posing simple questions, keeping his back mostly to the camera as he lets them talk. Their stories carry the film. It’s hard to separate the character of Tony Soprano from the real-life Gandolfini. But the role he plays here is more like Dr. Melfi, Tony’s therapist, eliciting what happened, saying little and serving as a sympathetic sounding board.

The result is as compelling as it is graphic and hard to watch.

The therapists at Walter Reed make a big deal out of your “Alive Day,” says Sgt. Bryan Anderson, 25. “But from my point of view, we’re celebrating the worst day of my life. Great! Let’s just remind me of that every year.” Anderson recounts how he was smoking a cigarette right before the bomb went off. He knew he was hurt, and when he went to wipe the blood and the flies off his face, he noticed a fingertip was gone. He thought, that’s not so bad, as he continued assessing himself. A chunk of his other hand was gone. I can live with that, he thought. Then he saw that both his legs were gone. “What did you think then?” Gandolfini asked gently. “I thought, ‘Oh, Shit’.”

In any other war, Anderson would be dead. The number of wounded relative to casualties was 3 to 1 in Vietnam; it is 7 to 1 in Iraq, according to the film. Once a star gymnast, Anderson endured 40 surgeries and found the will to live in the hand surgeons saved. “I can still pick up a fork and feed myself,” he said. “Alive Day” brings the wounded home to America with unblinking realism. “Now the rest of the world can see,” said the woman next to me. And Wolfowitz? Give him credit for attending. “Fantastic,” he told reporters as he hurried out. “Very realistic, unfortunately.” If the sheer number of these wounded warriors among us don’t bring the “two Americas” together, shame on us all.

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Employers Cut Payrolls by 4,000 in August; economists were were forecasting payrolls to grow by 110,000

AP
Employers Cut Jobs in August
By Jeannine Aversa, AP Economics Writer
Employers Cut Payrolls by 4,000 in August, the First Drop in US Jobs in 4 Years

WASHINGTON (AP) -- Employers sliced payrolls by 4,000 in August, the first drop in four years, a stark sign that a painful credit crunch that has unnerved Wall Street is putting a strain on the national economy.

The latest snapshot of the employment climate, released by the Labor Department on Friday, also showed that the unemployment rate held steady at 4.6 percent, mainly because hundreds of thousands of people left the work force for any number of reasons.

Job losses in construction, manufacturing, transportation and government swamped gains in education and health care, leisure and hospitality, and retail. Employment in financial services was flat. The weakness in payrolls reflected fallout from a deepening housing slump, a credit crisis and financial turbulence that has made businesses more cautious in their hiring.

"I think a lot of businesses are moving to the sidelines to wait and see how things shake out," said Ken Mayland, president of ClearView Economics.

The report was much weaker than economists were expecting. They were forecasting payrolls to grow by 110,000.

The drop of 4,000 jobs in August was the first decline since August 2003.

The surprisingly weak report provides the Federal Reserve with a reason to lower interest rates when it meets next on Sept. 18.

Federal Reserve Chairman Ben Bernanke, in a speech last week, said the Fed stands ready to do all that is needed to keep the credit crunch that has rocked Wall Street from damaging the economy.

Economists increasingly believe the Fed will lower a key interest rate, now at 5.25 percent, by at least one-quarter percentage point on Sept. 18, its next meeting. The Fed has not lowered this rate in four years.

"Clearly the economy is struggling, and this is the kind of evidence that really makes a strong case for a Fed easing move," Mayland said.

Those with jobs, however, did see modest wage gains.

Average hourly earnings rose to $17.50 in August, a 0.3 percent increase from July. That matched economists' forecasts. Over the past 12 months, wages are up 3.9 percent. Wage growth supports consumer spending, a major ingredient for a healthy economy. If the job markets continues to lose steam, however, wage growth will eventually slow, too, economists said.

The modest wage growth could ease inflation fears, giving the Fed more leeway to cut interest rates.

On the payrolls front, job gains in June and July turned out to be smaller. The economy added 68,000 new jobs in July compared with 92,000 reported a month ago. For June, 69,000 new jobs were created, less than the 126,000 previously reported.

The 4,000 jobs cut in August are from both private and government employers. The government actually cut 28,000 jobs, while all private employers added 24,000.

Credit problems began with "subprime" mortgages held by people with spotty credit histories or low incomes. The problems have spread to some more creditworthy borrowers and intensified in August, unnerving Wall Street. In reaction, the Fed has pumped tens of billions of dollars into the financial system and lowered an interest rate that it charges banks for loans.

Credit is the economy's life blood. If it becomes more difficult to obtain, people might tighten their belts and companies might spend and invest less, including cutting back on hiring. That would crimp overall economic activity.

The economy, which grew at a brisk 4 percent pace in the April-to-June period, is expected to slow to half that pace in the three months from July through September. Against this backdrop, the unemployment rate is expected to creep higher, reaching close to 5 percent by the end of the year.

The unemployment rate, which is derived from a different statistical survey than the payroll figures, held steady as 340,000 people left the work force. Fewer people in that survey reported finding employment in August compared with July.

President Bush's handling of the economy has gotten lukewarm ratings from the public. Only 41 percent approved of the president's economic stewardship in early August, according to an AP-Ipsos poll.

Mindful of political backlash heading into the 2008 elections, the administration and Democrats on Capitol Hill have been scrambling to help millions of homeowners in danger of losing their homes and looking for other ways to limit the fallout.

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Judge strikes down part of Patriot Act

Yahoo! News
Judge strikes down part of Patriot Act
By LARRY NEUMEISTER, Associated Press Writer

A federal judge struck down a key part of the USA Patriot Act on Thursday in a ruling that defended the need for judicial oversight of laws and bashed Congress for passing a law that makes possible "far-reaching invasions of liberty."

U.S. District Judge Victor Marrero immediately stayed the effect of his ruling, allowing the government time to appeal. Justice Department spokesman Dean Boyd said: "We are reviewing the decision and considering our options at this time."

The ruling handed the American Civil Liberties Union a major victory in its challenge of the post-Sept. 11 law that gave broader investigative powers to law enforcement.

The ACLU had challenged the law on behalf of an Internet service provider, complaining that the law allowed the FBI to demand records without the kind of court supervision required for other government searches. Under the law, investigators can issue so-called national security letters to entities like Internet service providers and phone companies and demand customers' phone and Internet records.

In his ruling, Marrero said much more was at stake than questions about the national security letters.

He said Congress, in the original USA Patriot Act and less so in a 2005 revision, had essentially tried to legislate how the judiciary must review challenges to the law. If done to other bills, they ultimately could all "be styled to make the validation of the law foolproof."

Noting that the courthouse where he resides is several blocks from the fallen World Trade Center, the judge said the Constitution was designed so that the dangers of any given moment could never justify discarding fundamental individual liberties.

He said when "the judiciary lowers its guard on the Constitution, it opens the door to far-reaching invasions of liberty."

Regarding the national security letters, he said, Congress crossed its boundaries so dramatically that to let the law stand might turn an innocent legislative step into "the legislative equivalent of breaking and entering, with an ominous free pass to the hijacking of constitutional values."

He said the ruling does not mean the FBI must obtain the approval of a court prior to ordering records be turned over, but rather must justify to a court the need for secrecy if the orders will last longer than a reasonable and brief period of time.

A March government report showed that the FBI issued about 8,500 national security letter, or NSL, requests in 2000, the year prior to passage of the USA Patriot Act. By 2003, the number of requests had risen to 39,000 and to 56,000 in 2004 before falling to 47,000 in 2005. The overwhelming majority of the requests sought telephone billing records information, telephone or e-mail subscriber information or electronic communication transactional records.

The judge said that through the NSLs, the government can unmask the identity of Internet users engaged in anonymous speech in online discussions, can obtain an itemized list of all e-mails sent and received by someone and can then seek information on those communicating with the individual.

"It may even be able to discover the web sites an individual has visited and queries submitted to search engines," the judge said.

Marrero's lengthy judicial opinion, akin to an eighth-grade civics lesson, described why the framers of the Constitution created three separate but equal branches of government and delegated to the judiciary to say what the law is and to protect the Constitution and the rights it gives citizens.

Marrero said the constitutional barriers against governmental abuse "may eventually collapse, with consequential diminution of the judiciary's function, and hence potential dire effects to individual freedoms."

In that event, he said, the judiciary could become "a mere mouthpiece of the legislature."

Marrero had ruled in 2004, on the initial version of the Patriot Act, that the letters violate the Constitution because they amounted to unreasonable search and seizure. He found free-speech violations in the nondisclosure requirement, which for example, disallowed an Internet service provider from telling customers their records were being turned over to the government.

After he ruled, Congress revised the Patriot Act in 2005, and the 2nd U.S. Circuit Court of Appeals directed that Marrero review the law's constitutionality a second time.

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August private sector job growth lowest in 4 yrs

Reuters
Aug private sector job growth lowest in 4 yrs

NEW YORK (Reuters) - Private employers likely added 38,000 jobs in August, far fewer than analysts had expected and the slowest rate of growth in four years, a report by a private employment service said on Wednesday.

The report also revised July's private sector job growth downward to 41,000 from the originally reported 48,000 jobs. The employment report was developed jointly by ADP and Macroeconomic Advisers LLC.

Economists polled by Reuters had forecast 83,000 new jobs for August. The 38,000 result was the smallest increase since June 2003 and could reinforce market expectations for an interest rate cut by the Federal Reserve.

U.S. stock index futures extended their losses on the report. U.S. government bonds, which are usually boosted by soft economic data, extended their gains.

The ADP result followed a separate survey by Challenger, Gray & Christmas Inc. that showed planned U.S. lay-offs rocketed in August. The housing slowdown and subprime mortgage debacle led to record job cuts in the financial sector, the independent group said. Markets were awaiting the government's monthly employment report for August scheduled on Friday.

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Giuliani calls for more disaster prep

Yahoo! News
Giuliani calls for more disaster prep
By EMILY WAGSTER PETTUS, Associated Press Writer

Republican presidential hopeful Rudy Giuliani on Tuesday called for less federal control and more regional training to prepare U.S. communities for terrorist attacks and other disasters.

Visiting Mississippi, portions of which were devastated in 2005 by Hurricane Katrina, Giuliani pledged to prepare every community in the United States for such a disaster. And for those caused by man, as well.

"When you're preparing for a natural disaster, you're preparing for a terrorist attack," Giuliani said as he stood before a backdrop of firefighters' helmets and coats.

To be ready, states and cities need more regional training and coordination and less federal meddling, Giuliani said.

The former New York mayor proposes to make the federal Department of Homeland Security — created in response to the Sept. 11 attacks — more regional. He also said the Federal Emergency Management Agency, which is now part of the Homeland Security department, should have a regional structure instead of a central one.

"We are vulnerable in our smallest community (and) in our largest city," Giuliani said.

He praised Mississippi Gov. Haley Barbour for the state's response to Hurricane Katrina. Barbour was Republican National Committee chairman during the 1990s when Giuliani was elected mayor of New York.

After touring the Mississippi Emergency Management Agency headquarters in Pearl, Giuliani attended a $1,000-per-ticket fundraising luncheon at the home of a supporter in Jackson.

He then spoke to about 200, including two dozen trainers from the Mississippi Fire Academy, at the Rankin County branch of Hinds Community College. Giuliani was to attend another fundraiser Tuesday night in Jackson.

Among Giuliani's proposals are:

• Boosting local and state training and creating regional response teams like FEMA's Urban Search and Rescue Teams.

• Giving FEMA updated technology to track relief supplies and aid.

• Cutting off federal money for congressional pet projects, and instead mapping out long-term infrastructure needs such as bridge improvements.

Along with his plan, Giuliani also released a list of his high-profile homeland security advisers.

Some names, such as the group's leader, former FBI director Louis Freeh, and New York Rep. Peter King, have already been announced.

Advisers also include Robert Bonner, former commissioner of U.S. Customs and Border Protection, and others connected mostly to the Department of Homeland Security and city of New York.

Also on the list is Daniel Johnson, former homeland security director for Minnesota, site of last month's interstate bridge collapse.

Democrats criticized Giuliani's advisers, saying the list includes officials on the job during the bungled response to Hurricane Katrina as well as officials faulted by the Sept. 11 commission for being ill-prepared for the terrorist attacks.

"As mayor, Rudy failed to prepare New York City for 9/11," said Karen Finney, spokeswoman for the Democratic National Committee. "Now as a presidential candidate, he's proposing to create a homeland security team that includes many of the same folks who did a `heckuva job' on the Katrina response?"

In response, Giuliani spokeswoman Katie Levinson said: "More ridiculous comments from the DNC come as no surprise."

____

Associated Press writer Libby Quaid in Washington contributed to this report.

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Calif. ballot proposal's GOP ties

Yahoo! News
Calif. ballot proposal's GOP ties
By MICHAEL R. BLOOD, Associated Press Writer

Lawyers behind a California ballot proposal that could benefit the 2008 Republican presidential nominee have ties to a Texas homebuilder who financed attacks on Democrat John Kerry's Vietnam War record in the 2004 presidential campaign.

Charles H. Bell and Thomas Hiltachk's law firm banked nearly $65,000 in fees from a California-based political committee funded almost solely by Bob J. Perry that targeted Democrats in 2006. Perry, a major Republican donor, contributed nearly $4.5 million to the group Swift Boat Veterans for Truth that made unsubstantiated but damaging attacks on Kerry three years ago.

Hiltachk has been pushing a proposal to revamp the way California awards its electoral votes, a change Democrats claim would rig the 2008 race. He and Bell are the sole officers of a new political committee, Californians for Equal Representation, that is raising money to place the plan on the ballot in June.

Their success could hinge on whether they get the financial backing to collect more than 400,000 petition signatures needed to qualify the proposal for the ballot. And while Perry has not donated to their cause, his wealth and connections make him a potential financier for a drive that could cost more than $1 million. Running a statewide campaign would cost millions more.

Democrats are working to defeat the effort and already have lined up supporters such as Hollywood producer Stephen Bing.

Supporters say the vote-change plan could open a new era of fairness in presidential contests. But the law firm's link to Perry and other Republican candidates and causes will make it difficult to separate the proposal from partisan politics.

Bell, McAndrews & Hiltachk is one of the most politically involved law firms in the state. According to a news story on its Web site, Bell keeps a life-sized cardboard image of President Bush in his office.

The push to alter the division of electoral votes in California — a change with national implications — "is nothing more than an attempt by right-wing Republicans to change the rules in ways that benefits them," said the spokesman, Roger Salazar.

The fight over California's electoral votes is shaping up as an important subplot in the national campaign.

Like most states, California awards all 55 of its electoral votes to the statewide winner in presidential elections — the largest single prize in the nation.

Under the ballot proposal, the statewide winner would get only two electoral votes. The rest would be distributed to the winning candidate in each of the state's congressional districts.

In effect that would create 53 races, each with one electoral vote up for grabs. President Bush carried 22 of those districts in 2004, while losing the statewide vote by double digits.

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Advisers tell Bush to stand pat on Iraq

Yahoo! News
Advisers tell Bush to stand pat on Iraq
By MATTHEW LEE and ANNE GEARAN, Associated Press Writers

President Bush's senior advisers on Iraq have recommended he stand by his current war strategy, and he is unlikely to order more than a symbolic cut in troops before the end of the year, administration officials told The Associated Press on Tuesday.

The recommendations from the military commander in Iraq, Gen. David Petraeus, and U.S. Ambassador Ryan Crocker come despite independent government findings Tuesday that Baghdad has not met most of the political, military and economic markers set by Congress.

Bush appears set on maintaining the central elements of the policy he announced in January, one senior administration official said after discussions with participants in Bush's briefings during his surprise visit to an air base in Iraq on Monday.

Although the addition of 30,000 troops and the focus on increasing security in Baghdad would not be permanent, Bush is inclined to give it more time in hopes of extending military gains in Baghdad and the formerly restive Anbar province, officials said. They spoke on condition of anonymity to describe decisions coming as part of the White House report on Iraq due to Congress next week.

The plan they described is fraught with political risk. While Republican leaders on Tuesday suggested the GOP may be willing to support keeping troops in the region through spring, it is unclear whether rank-and-file party members who face tough elections next year will be willing to follow their lead.

Senate Republican leader Mitch McConnell told reporters he would like to ensure a long-term U.S. presence in the Middle East to fight al-Qaida and deter aggression from Iran.

"And I hope that this reaction to Iraq and the highly politicized nature of dealing with Iraq this year doesn't end up in a situation where we just bring all the troops back home and thereby expose us, once again, to the kind of attacks we've had here in the homeland or on American facilities," said McConnell, R-Ky.

With Monday's back-to-back review sessions in Iraq, Bush has now heard from all the military chiefs, diplomats and other advisers he planned to consult before making a widely anticipated report to Congress by Sept. 15. Petraeus and Crocker are to testify before Congress on their recommendations next week.

The United States would be hard-pressed to maintain the current level of 160,000 troops in Iraq indefinitely, but Bush is not expected to order more than a slight cut before the end of the year, officials said.

Bush himself suggested that modest troop cuts may be possible if military successes continue, but he gave no timeline or specific numbers. Options beyond a symbolic cut this year include cutting the tour of duty for troops in Iraq from 15 months back to the traditional 12 months, one official said. If adopted, that change would not come before the spring.

Speaking to reporters Wednesday during a trip to Australia, Bush restated his view that decisions about troop levels should be based on recommendations from military commanders and noted that Petraeus and Crocker would be delivering reports soon enough.

"Whether or not that's part of the policy I announce to the nation ... why don't we see what they say and then I'll let you know," Bush said.

Adm. William Fallon, the head of U.S. Central Command, which oversees American forces in the Middle East and Central Asia, said Tuesday he saw signs of broad progress in Iraq.

"In the less than six months I've been in this job, I have seen a substantial change and it gives me some significant optimism that this place may just work out the way we had envisioned, or some had envisioned, when the tasks were undertaken," Fallon said in remarks to the Commonwealth Club of California, a public affairs forum.

A Pentagon official said Petraeus has not specifically recommended trimming tours by three months. Bush's troop increase will end by default in April or May, when one of the added brigades is slated to leave, unless Bush makes other changes to hold the number steady.

In an interview with ABC News, Petraeus suggested a drawdown next spring would be needed to avoid further strain on the military. Asked if March would be that time, he said, "Your calculations are about right."

Republican support could hinge on Petraeus' testimony next week. If he can convince lawmakers that the security gains won in recent months are substantial and point toward a bigger trend, GOP members might be more likely to hold out until next spring. They also might be more easily persuaded if Bush promises some small troop drawdowns by the end of the year, as was suggested to the White House by Sen. John Warner of Virginia, an influential Republican on security matters.

Sen. Norm Coleman, R-Minn., returning from a weekend trip to Iraq, said Tuesday a small round of troop withdrawals might be the ticket to forcing political progress in Iraq. The position was a new one for the senator, who faces a tough election next year.

"I think the unmistakable message has to be sent to the Shiite leadership that there is no blank check for Iraq," Coleman told reporters on a conference call.

Also Tuesday, the Government Accountability Office, Congress' investigative and auditing arm, reported that Iraq has failed to meet 11 of its 18 political and security goals.

The study was slightly more upbeat than initially planned. After receiving substantial resistance from the White House, the GAO determined that four benchmarks — instead of two — had been partially met.

But the GAO stuck with its original contention that only three goals out of the 18 had been fully achieved. The goals met include establishing joint security stations in Baghdad, ensuring minority rights in the Iraqi legislature and creating support committees for the Baghdad security plan.

U.S. Comptroller David Walker said the GAO did not soften its report due to pressure from the administration and reached its conclusions on its own. Walker said Congress should ask itself what it wants to achieve in Iraq and can do so realistically.

"After we answer that, we can reassess what the appropriate goal is of U.S. forces," he said in an interview Tuesday.

Democrats said the GAO report showed that Bush's decision to send more troops to Iraq was failing because Baghdad was not making the political progress needed to tamp down sectarian violence.

"No matter what spin we may hear in the coming days, this independent assessment is a failing grade for a policy that simply isn't working," said Sen. John Kerry, D-Mass.

The report does not make any substantial policy recommendations, but says future administration reports "would be more useful to the Congress" if they provided more detailed information.

___

Associated Press writers Anne Flaherty and Lolita C. Baldor contributed to this report.

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Who's profiting from the Iraq war?

MSN Money
Who's profiting from the Iraq war?
By Michael Brush

Military contractors that set up utilities, prepare food or make bulletproof vests are getting a big boost from the conflict. Here's who's getting the most money.

In a few weeks, Gen. David Petraeus and the Bush administration will report to Congress on the progress of the U.S. military's troop surge in Iraq.

But some of the war's winners are already clear: military contractors who supply everything from bodyguards to bombs, clean socks to ready-to-eat meals. "For the companies involved, this has been a real gravy train," says William Hartung, who tracks defense spending for the New America Foundation.

The White House has proposed military spending of $647 billion in 2008. Adjusted for inflation, that would be the highest level since World War II -- topping even expenditures during Vietnam and the Reagan years, calculates Hartung. The current request for Iraq-related spending for 2008 is $116 billion, which would raise total Iraq war spending to $567 billion.

Who's getting all that money? Sometimes it can be difficult to tell. "There isn't good visibility on where the money goes," says Steven Kosiak of the Center for Strategic and Budgetary Assessments. But you can get a snapshot of who's been getting a good chunk of the Iraq-related spending in two ways.

The first step is to scour a vast database of more than $400 billion in annual government contracts, more than 70% of which are from the Department of Defense. It's called the Federal Procurement Data System. I turned to a private contractor of my own, Eagle Eye, for some (free) expert assistance in navigating the database.

Eagle Eye mined the database for all Iraq-related contracts from 2003 through 2006 (the most recent year for which numbers are available). That catches everything from spending on base maintenance and bulletproof vests to ammo and combat boots. We tallied the numbers to find the top 10 companies out of thousands of contractors.

The second step is to look at the Pentagon's own budget to see which companies are building the major weapons systems that support the war in Iraq.

The Top 10

It's no surprise that KBR Inc. (KBR, news, msgs), a division of Halliburton (HAL, news, msgs) during the years we examined, tops the first list, compiled by Eagle Eye, with $17.2 billion in Iraq-related war revenue for 2003-2006. KBR is one of the largest construction and energy field-service companies in the world. It has a long history of collaborating with the U.S. government on war-related construction.

• Videos: Recent news on Halliburton

In Iraq, KBR has been working on base construction and maintenance, oil-field repairs, infrastructure projects and logistics support. KBR got about a fifth of its revenue from the Iraq war in 2006, according to our calculations.

"We are proud to serve the troops," says a KBR spokeswoman. "We are providing the troops with essential services and the comforts of home that allow them to stay focused on the dangerous and important missions they face daily."

Continued: The No. 2 slot

But why does a private-equity shop called Veritas Capital Fund take the No. 2 slot? That's easy. It specializes in investing in defense and aerospace companies. So Veritas owns a portfolio of companies -- and has a stake in others -- that pull down big Iraq-related contracts.

DynCorp International (DCP, news, msgs), which Veritas bought in 2005 and spun out last year, offers security services and police training, as well as logistical services. Veritas' McNeil Technologies provides interpreter and translation services to the military and U.S. government agencies in Iraq. Another of its companies, Wornick, supplies military rations.

It's also no big surprise that U.S.-based companies like Washington Group International (WNG, news, msgs), Fluor (FLR, news, msgs), Perini (PCR, news, msgs) and Parsons are on our top 10 list. They've landed many of the contracts to restore, repair and maintain oil fields, power plants, schools, public water systems and military bases. But the award of contracts to build the U.S. Embassy in Baghdad to First Kuwaiti General Trading & Contracting left many analysts scratching their heads.

Environmental Chemical does munitions disposal, while International American Products sets up systems that deliver electricity to military camps. L3 Communications (LLL, news, msgs) offers security screening services, linguists, training and law-enforcement services, and some equipment replacement.

10 companies making the most in Iraq* (millions of dollars)

Rank	Company		Amount
		2003	2004	2005	2006	Total
1.	KBR Inc. (KBR, news, msgs) and Halliburton (HAL, news, msgs)	$2,550	$5,809	$4,505	$4,362	$17,226
2.	Veritas Capital Fund	0.7	208	850	386	1,444
3.	Washington Group International (WNG, news, msgs)	111	205	533	82	931
4.	Environmental Chemical	0	192	360	326	878
5.	International American Products	58	283	310	108	759
6.	Fluor (FLR, news, msgs)	116	413	123	105	757
7.	Perini (PCR, news, msgs)	72	312	185	81	650
8.	Parsons	0	248	120	172	540
9.	First Kuwaiti General Trading & Contracting	0	7	469	24	500
10.	L-3 Communications (LLL, news, msgs)	1	9	148	201	359

*Goods and services contracted specifically for Iraq. Source: Eagle Eye

Two companies that have seen their revenue shoot up the most in the ongoing military buildup -- largely because of Iraq-related spending -- are Armor Holdings and Renco, according to Hartung's calculations. They don't make our list because their overall defense-related revenue is too small. But they have done phenomenally well.

Armor Holdings, which sells vehicle and personnel armor, saw defense-related revenue shoot up 2,747% between 2001 and 2006, to $634.9 million. Armor is now a division of BAE Systems (BAESY, news, msgs).

Renco, which makes the extra-wide all-terrain vehicle known as the Humvee, saw Defense Department revenue rise 1,260% over the same period, to $1.9 billion.

Misspent funds

Not all of the Iraq-war money is well spent. "Because of the urgency of the war, a lot of these contracts have been subject to less scrutiny," says Hartung. Another problem is that the war has been funded outside of the regular defense budget process. Instead, it gets funded through "emergency" spending bills called supplementals, which offer much less detail and get less scrutiny on Capitol Hill.

Hartung believes we've only seen the tip of the iceberg in allegations of fraud and corruption related to Iraq war spending. "Congress is starting to look into it, but it has not yet gotten down to specific questions," says Hartung.

Details of wrongdoing are being uncovered by the Office of the Special Inspector General for Iraq Reconstruction, and you can also find summaries of misconduct here.

Hidden winners

Of course, there's a vast collection of military hardware and technology from fighter jets and naval vessels to spy satellites that are used in the Iraq war effort. But they're paid for by the broader Pentagon budget, so they won't show up in a scan of the federal procurement database for Iraq-related spending.

To see who has benefited from the underlying buildup in defense spending under the Bush administration for the Iraq war and other anti-terror and defense efforts, I calculated who got the most in Department of Defense contracts from 2002 through 2006. You can see the top seven in my second chart.

U.S. Department of Defense contracts* (billions of dollars)

		2002	2003	2004	2005	2006	Total
1	Lockheed Martin (LMT, news, msgs)	$17	$22	$20.7	$19.4	$26.6	$105.7
2	Boeing (BA, news, msgs)	16.5	17.3	17	18.3	20.3	89.4
3	Northrop Grumman (NOC, news, msgs)	8.7	11.1	11.9	13.5	16.6	61.8
4	General Dynamics (GD, news, msgs)	6.9	8.2	9.6	10.6	10.5	45.8
5	Raytheon (RTN, news, msgs)	7	7.9	8.5	9.1	10	42.5
6	KBR Inc. (KBR, news, msgs)	0.5	3.9	8	5.8	6	24.2
7	United Technologies (UTX, news, msgs)	3.6	4.5	5	5	4.4	22.5
	Total defense contracts	171	209	230.7	269	295	1,174.70

*More than $25,000 for any field of operation. Source: Department of Defense

While all of these companies have benefited from the Bush administration's defense spending ramp-up since the terror attacks of Sept. 11, 2001, not all are equally exposed to the Iraq war effort, says defense sector analyst Paul Nisbet of JSA Research.

In addition to ships and Gulfstream planes, General Dynamics (GD, news, msgs) makes ground vehicles and ammunition, so it generates a fair amount of revenue directly from Iraq war spending. But Lockheed Martin (LMT, news, msgs), which is working on next-generation military aircraft and also makes military electronics and satellites, has little direct exposure to the war, says Nisbet. Neither does Northrop Grumman (NOC, news, msgs), which makes ships designed to last three decades or more.

• Videos: Recent news on Lockheed Martin

Of all the companies on my second list, KBR saw some of the biggest revenue gains from the Iraq war. It was No. 37 on the Defense Department's top-100 list of military contractors in 2002. By 2006, KBR had climbed to No. 6.

At the time of publication, Michael Brush did not own or control shares of companies mentioned in this column.

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British troops leave Basra base in Iraq

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British troops leave Basra base in Iraq
By DAVID STRINGER, Associated Press Writer

British soldiers began withdrawing Sunday from their last base in the southern Iraqi city of Basra, paving the way for fresh troop cuts and fueling worries about the security of the country's second-largest city and the surrounding region.

U.S. and Iraqi authorities have expressed concern that a broader British drawdown could jeopardize the region's rich oil resources and the land supply line from Kuwait to Baghdad and beyond. Some analysts also fear that British withdrawal could exacerbate a violent power struggle between rival Shiite groups in the sect's southern heartland.

Around 550 soldiers were leaving the downtown Basra Palace, one of deposed President Saddam Hussein's former compounds, to join 5,000 other personnel at an air base 7 miles away on the fringes of the city. Defense officials said the withdrawal was going well but could take days to complete.

The Iraqi military sent hundreds of reinforcements to the city to prevent Shiite militias and criminal gangs from expanding their influence once the British have gone.

Former Prime Minister Tony Blair reduced the number of British troops in Iraq from 7,000 to 5,500 in February and left open the option of pulling out around 500 more personnel once Basra Palace was handed back to Iraqis.

Prime Minister Gordon Brown is due to set out future strategy for British operations in Iraq in a speech to parliament next month.

The British defense ministry said forces operating from Basra Air Station will "retain security responsibility for Basra until we hand over to provincial Iraqi control, which we anticipate in the autumn."

Basra Palace was to house British soldiers and diplomatic staff after the 2003 U.S.-led invasion and has come under daily mortar and rocket attack in recent months.

"This is a thoroughly sensible military decision," said opposition Conservative lawmaker Patrick Mercer. "It will allow more troops to be withdrawn from Iraq in the autumn, just as Britain increases its numbers of troops in Afghanistan."

In Basra, Major Mike Shearer, Britain's military spokesman, told reporters: "I can confirm that an operation is ongoing, but we will not give any further details."

U.S. officials have raised concerns about the prospect of British troops leaving the city, which fell under the influence of Shiite religious parties and militias, some with ties to Iran, after the January 2005 election that brought Prime Minister Nouri al-Maliki to power.

The police force is heavily infiltrated by militias. Political rivals, liquor dealers, DVD shop owners and anyone who violated different groups' interpretations of Islam was subject to assassination by death squads.

Retired U.S. Army Gen. Jack Keane, who was vice chief of staff at the time the Iraq war was launched, said in an interview last week that Britain had never deployed enough troops to properly stabilize the region and allowed a bad security situation deteriorate.

"It has always been our intention to draw down troops in Basra" as Iraqi army and police become ready to handle security duties, said a spokesman for Brown's Downing Street office, speaking on condition of anonymity.

The International Crisis Group, a Brussels based think-tank, said in a June report that unconstrained militias were destabilizing Basra and that locals believed British forces had been driven out.

"Relentless attacks against British forces in effect had driven them off the streets into increasingly secluded compounds," the report said. "Basra's residents and militiamen view this not as an orderly withdrawal but rather as an ignominious defeat."

With additional Iraqi soldiers in the streets, residents say things have quieted in recent weeks.

But last week, the head of the security committee on the Basra city council, Hakim al-Miyahi, predicted "some disorder" after the British pullout from the city because he feared that Iraqi forces were incapable of maintaining order.

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More than 1,800 Iraqis killed in August

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More than 1,800 Iraqis killed in August
By DAVID RISING, Associated Press Writer

Civilian deaths rose slightly in August as a huge suicide attack in the north two weeks ago offset security gains elsewhere, making it the second deadliest month for Iraqis since the U.S. troop buildup began, according to figures compiled Saturday by The Associated Press.

U.S. deaths remained well below figures from last winter when the U.S began dispatching 30,000 additional troops to Iraq.

At least 1,809 civilians were killed in the month, compared to 1,760 in July, based on figures compiled by the AP from official Iraqi reports. That brings to 27,564 the number of Iraqi civilians killed since AP began collecting data on April 28, 2005.

The August total included 520 people killed in quadruple suicide bombings on Yazidi communities near the Syrian border. The horrific attacks made Aug. 14 the single deadliest day since the war began in March 2003.

Eighty-five coalition troops — 81 American and four British — died in August, down from 88 the month before, including 79 Americans. The average rate of 2.74 coalition deaths per day was the second lowest since the surge began, and down from a peak of 4.23 per day in May.

May also saw the highest number of civilian deaths since the start of the year, with 1,901.

U.S. officials have maintained that violence is declining in Iraq in the run-up to a series of reports to Congress this month that will decide the course of the U.S. military presence here.

The top U.S. commander, Gen. David Petraeus, was quoted Friday as saying the troop increase has sharply reduced sectarian killings in Baghdad. Petraeus is expected to make the same point when he reports to Congress in about two weeks.

"If you look at Baghdad, which is hugely important because it is the center of everything in Iraq, you can see the density plot on ethno-sectarian deaths," the Australian newspaper quoted him as saying during an interview in the Iraqi capital.

"It's a bit macabre but some areas were literally on fire with hundreds of bodies every week and a total of 2,100 in the month of December '06, Iraq-wide. It is still much too high but we think in August in Baghdad it will be as little as one quarter of what it was," the newspaper quoted Petraeus, who gave no specific figures.

American hopes brightened this week when the most powerful Shiite militia leader, Muqtada al-Sadr, ordered a halt to attacks by his Mahdi Army for up to six months to reorganize and purge it of unruly factions that the U.S. maintains are armed and trained by Iran.

"If implemented, Sadr's order holds the prospect of allowing coalition and Iraqi security forces to intensify their focus on al-Qaida-Iraq and on protecting the Iraqi population," the U.S. military said in a statement Saturday.

The statement said an end to Mahdi Army violence "would also be an important step in helping Iraqi authorities focus greater attention on achieving the political and economic solutions necessary for progress and less on dealing with criminal activity, sectarian violence, kidnappings, assassinations, and attacks on Iraqi and coalition forces."

The government-run newspaper Sabah published a front-page editorial Saturday praising al-Sadr's declaration as "a correct decision" and urged other militia leaders to follow suit.

Despite those comments, U.S. and Iraqi forces have not let up on raids against extremists in Shiite areas.

Before daybreak Saturday, Iraqi and American forces raided Sadr City, the Baghdad stronghold of the Mahdi Army. Several cars were demolished during the operation by U.S. tanks, according to a police officer speaking on condition of anonymity and Associated Press Television News video from the scene showed several crushed cars on the street.

The U.S. military said American troops and Iraqi police were involved in the raid and searched two houses, detaining three suspects. On the way back to base the group was attacked with a roadside bomb but suffered no injuries, Spc. Emily Greene said in an e-mailed statement. There was no mention of the crushed cars or other collateral damage.

Leaflets scattered around Sadr City urged people to report on Shiite militants who are cooperating with the Iranians, providing a cell phone number and an e-mail address.

"The criminal Iraqis who work with the Iranian Revolutionary Guards are toys under Persian control," read one of the leaflets, which pictured a puppet dancing on strings. "Iranian Revolutionary Guards are interfering in Iraq's affairs while Iraqis are dying."

Armed Shiite groups are locked in a struggle for power in Shiite areas of the capital and in the Shiite heartland of the south, which includes major religious shrines and vast oil wealth. Control of the shrines offers not only prestige but access to huge sums of money donated by Shiites from around the world.

As part of that power struggle, gunmen on a motorcycle assassinated Muslim al-Batat, an aide to the country's top Shiite cleric, Grand Ayatollah Ali al-Sistani, police said. The attack occurred in Basra, where numerous militias are competing for power.

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U.S.: Military alone can't beat Taliban

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U.S.: Military alone can't beat Taliban
By CHRIS BRUMMITT, Associated Press Writer

Military force alone is unlikely to defeat the Taliban in Afghanistan, a top U.S. commander said Thursday, noting that most insurgencies end with a political solution.

Maj. Gen. Robert Cone, who is in charge of equipping and training Afghan security forces to take over from international troops, said the local units were making good progress, but declined to say when they would be strong enough to allow foreign forces to go home.

Meanwhile, a senior Taliban leader was killed in a clash with Afghan and foreign troops in southern Afghanistan, an Afghan army officer said.

Violence is soaring in Afghanistan despite years of counterinsurgency operations by international troops and millions of dollars spent in equipping the country's army and police units.

Cone cautioned that military force alone would likely not be enough to beat the Taliban and other militants battling foreign and Afghan government troops.

"You can say you defeated them in a single campaign ... but again given the complex nature of this environment, they might be back again the very next year," he told a media conference in the capital Kabul. "I think the real issue is probably not a military solution in the long term."

President Hamid Karzai earlier this year said he had met with unspecified Taliban militants to try to reach a political settlement, but he did not elaborate on the extent of the contacts.

Cone, who arrived in Afghanistan in July, said the "military will have a significant impact on the overall solution, but in reality most insurgencies are dealt with by political solution in the end."

Hundreds of former members of the hard-line Taliban regime, including a sprinkling of former senior commanders and officials, have reconciled with the government since they were ousted from power in the U.S.-led invasion in 2001.

But current rebel leaders have apparently refused to hold talks, and in the past year, thousands more fighters have joined the insurgency, which this year alone has left more than 3,900 people dead, especially in southern and much of eastern Afghanistan. The exact number of insurgents is unclear.

There are more than 42,000 Afghan Army soldiers, and some 75,000 police members, with plans to create a 70,000-man army and 82,000-strong police force by the end of 2008. There also are more than 50,000 foreign troops in the country, including U.S.-led coalition and NATO-led forces.

Formal talks with the Taliban would be politically very sensitive because of the close relationship top commanders are believed to have with al-Qaida leaders, including Osama bin Laden.

In the southern Helmand province, meanwhile, senior Taliban leader Mullah Abdul Ghani, known as Mullah Brother, was reported killed during clashes with Afghan and foreign troops, said Maj. Gen. Ghulam Muhiddin Ghori, an Afghan army officer.

The report could not be independently verified, and a NATO official in southern Afghanistan said that they were not aware of the clash.

Ghani was one of the top leaders of all Taliban forces in the country, when the hard-line Islamist movement ruled Afghanistan, and a close associate of Taliban's reclusive leader Mullah Omar. His current role in within the reconstituted Taliban movement was not clear.

If confirmed, his death would deal a serious blow to the militants, who have made a comeback since their ouster.

In neighboring Uruzgan province, the U.S.-led coalition called in airstrikes to repeal an attack on their base by a large group of insurgents, leaving up to 11 suspected insurgents dead Thursday, a coalition statement said.

Also Thursday, unidentified assailants Thursday killed a British soldier and wounded two others in a routine patrol in the southern province of Kandahar, the British Ministry of Defense said. An Afghan interpreter working with the troops also was killed, it said.

On Wednesday, Afghan soldiers and coalition forces found and destroyed an insurgent-run drug lab after a brief fight in Helmand province, according to a statement. The opium lab was the second of its kind found in the past four days in the province.

A significant portion of the profits from Afghanistan's booming drug trade are thought to flow to Taliban fighters who tax and protect poppy farmers and drug runners.

___

Associated Press Writer Noor Khan in Kandahar contributed to this report.

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Jobless claims show unexpected increase

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Jobless claims show unexpected increase

The number of newly laid off workers filing for unemployment benefits unexpectedly rose last week.

The Labor Department reported Thursday that applications for unemployment benefits totaled 334,000, an increase of 9,000 from the previous week.

That gain caught analysts by surprise. They had been forecasting that jobless claims would fall by around 2,000.

Analysts are closely watching to see whether recent financial market turmoil will have an impact on business hiring decisions.

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Arsenic in drinking water seen as threat

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Arsenic in drinking water seen as threat

Arsenic in drinking water is a global threat to health, affecting more than 70 countries and 137 million people, according to new research.

Large numbers of people are unknowingly exposed to unsafe levels of arsenic in their drinking water, said Peter Ravenscroft, of the Department of Geography at the University of Cambridge. He made his remarks at an annual conference of the Royal Geographical Society in London on Wednesday.

The country worst affected is Bangladesh, where hundreds of thousands of people are likely to die from cancers of the lung, bladder and skin caused by arsenic, the research said.

Arsenic, which is odorless and tasteless, enters water supplies from natural deposits in the Earth or from agricultural and industrial practices.

World Health Organization guidelines set a safe limit of 10 parts per billion of arsenic in water supplies, but 137 million people drink water with levels higher than that — and 57 million drink water with a level of more than 50 ppb, according to the research.

Arsenic poses long-term health risks "exceeding every other potential water contaminant," according to research presented by Allan Smith of the University of California, Berkeley, an adviser to the WHO on arsenic.

"Most countries have some water sources with dangerous levels of arsenic, but only now are we beginning to recognize the magnitude of the problem," Smith said. "It is the most dangerous contaminant of drinking water in terms of long-term health risks, and we must test all water sources worldwide as soon as possible."

Speakers at the conference predicted that new arsenic pollution would occur in parts of southeast and southwest Asia, the western parts of South and Central America, and some areas in Africa.

Arsenic has been found in water in the north of England, the Midlands and mid-Wales. But Ravenscroft said there was no major health risk in Britain and that tests carried out by water companies meant that public water supplies in this country were still safe to drink.

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U.S. gives consumers day to sound off on bad imports

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U.S. gives consumers day to sound off on bad imports

The Bush administration will conduct a meeting this fall to hear Americans' advice on how to stem a wave of unsafe imports from China and other countries, officials said on Thursday.

The all-day meeting on October 1 at the Agriculture Department in Washington is designed to gather suggestions about how the government and companies can better ensure the safety of imported food and other products.

U.S. consumers have been jarred in recent months by a spate of recalls of unsafe children's toys, chemical-laced toothpaste, and dangerous additives in pet food and seafood.

Most of the goods under scrutiny come from China. Beijing is taking steps to crack down on unscrupulous exporters, but it also is seeking to fend off some of the blame.

Bush's panel, headed by Health and Human Services Secretary Michael Leavitt and including officials from the Department of Homeland Security, the Food and Drug Administration, the Agriculture Department and other agencies, will present two reports this fall.

An Agriculture Department official said comments from October's meeting, made in person or teleconference, will contribute to the second report which will set out specific actions the government can take to safeguard against perilous products.

Comments can be submitted at http://www.fda.gov/dockets/ecomments or http://www.regulations.gov

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Iraq war chemicals found stored in U.N. office

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Iraq war chemicals found stored in U.N. office
By Evelyn Leopold

The United Nations found small amounts of a potentially lethal chemical warfare agent, removed from Iraq a decade ago, in offices near its New York headquarters but officials said on Thursday there was no danger.

The FBI and New York police were called and they had removed the substances by late afternoon on Thursday, said Marie Okabe, a U.N. spokeswoman.

The material was identified as phosgene, an older generation chemical warfare agent, which could have been lethal if it had evaporated, the officials said.

Phosgene was used extensively during World War One as a choking agent that attacks the lungs.

The phosgene was recovered in 1996 from a former Iraqi chemical weapons facility, al-Muthanna, north of Baghdad.

"It should not have come here," said Ewen Buchanan, spokesman for the U.N. Monitoring, Verification and Inspection Commission, known as UNMOVIC, in whose offices the substance was found. Normally, such materials would be taken to a secure laboratory.

R.P. Eddy, executive director of the Manhattan Institute's Center for Policing Terrorism and a former U.N. adviser, agreed. "Did someone there make a stupid mistake that could have actually been catastrophic? Yes. Does that mean the U.N. is a flawed organization? No. This is one goofball error," he said.

In Washington, White House spokesman Tony Snow said, "I'm sure that there are going to be a lot of red-faced people over at the U.N. trying to just figure out how they got there."

The inspectors, searching for weapons of mass destruction, were thrown out of Iraq by Saddam Hussein in 1998 and came back in early 2002. The United States ordered them to leave shortly before the March 2003 invasion.

The Security Council on June 29 disbanded UNMOVIC. The inspectors were cleaning out their offices.

They discovered two small plastic packages with metal and glass containers, ranging in size from small vials to tubes the length of a pen with liquid substances, Buchanan said.

The vials were in a small sealed metal box, thought to contain papers. The container was discovered last Friday but only on Wednesday did the inspectors find a list of what the items were.

NO NERVE GAS

The chemicals are being taken to the U.S. Army laboratory in Edgewood, Maryland. They were brought to New York in 1996 by inspectors, Okabe said.

On the New York Stock Exchange, the Dow Jones industrial average and the Standard and Poor's 500 dropped after midday on an erroneous report the substance found was nerve gas and that U.N. headquarters had been evacuated. The market recovered after the world body said there was no danger.

Okabe, who announced the news at her regular U.N. briefing. said Secretary-General Ban Ki-moon had been informed and "there will be an investigation."

No office was evacuated until the FBI came to collect the materials and ordered the staff to leave temporarily.

The experts believe "the packages are properly secured and pose no immediate risk or danger to the immediate public," Buchanan said, adding the materials were isolated in a secured room and no toxic vapors had escaped.

"We made a determination based on what it was ... that it was safe for us to come back to work, so we're working in the premises," Brian Mullady, an UNMOVIC expert said. "We feel perfectly safe."

(Additional reporting by Patrick Worsnip and Michele Nichols)

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White House pushes back on Iraq report

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White House pushes back on Iraq report
By ANNE FLAHERTY and ANNE GEARAN, Associated Press Writers

An independent assessment concluding that Iraq has made little political progress in recent months despite an influx of U.S. troops drew fierce objections from the White House on Thursday and provided fresh ammunition for Democrats who want to bring troops home.

The political wrangling came days before the report was to be officially released and while most lawmakers were still out of town for the August recess, reflecting the high stakes involved for both sides in the Iraq war debate. President Bush, who planned to meet Friday at the Pentagon with the Joint Chiefs of Staff, is nearing a decision on a way forward in Iraq while Congress planned another round of votes this fall to end the war.

A draft report by the Government Accountability Office concluded Iraq has satisfied three of 18 benchmarks set by Congress and partially met two others, a senior administration official said Thursday. None of those are the high-profile political issues such as passage of a national oil revenue sharing law that the Bush administration has said are critical to Iraq's future.

The State Department, Pentagon and White House dispute some GAO findings, including the conclusion that Iraq has only partially met tests involving its budget process and legislation dealing with semiautonomous regions in the large, multiethnic country, two officials said.

Administration officials also disputed that Iraq has failed to provide three trained and ready Iraqi brigades to support Baghdad operations or to ensure that the security plan will not provide a safe haven for outlaws.

The officials spoke on condition of anonymity to describe internal deliberations that included lengthy meetings Thursday at the White House. The GAO may alter some of its findings in response to administration arguments, one official said.

Administration officials also said the draft report is unrealistically harsh because it assigned pass-or-fail grades to each benchmark.

The GAO found that Iraq had fully met requirements to:

_Establish political, media, economic, and services committees in support of the Baghdad security plan. That plan involves many of the 30,000 U.S. troops Bush sent to Iraq this year.

• Establish joint security stations in neighborhoods across Baghdad.

• Ensure the rights of minority political parties in the Iraqi legislature are protected.

Bush has suggested he intends to stick to his Iraq strategy, but in his meeting Friday at the Pentagon he's expected to hear some of the Joint Chiefs express deep concern at the long-term impact on the military of maintaining a heavy troop presence in Iraq in 2008 and beyond. Now, there are more than 160,000 troops in Iraq, the most since the war began in 2003.

The Army and the Marine Corps have shouldered most of the burden, creating strains that service leaders fear could hurt their recruiting as well as their preparedness for other military emergencies. The Joint Chiefs are not, however, expected to urge Bush to withdraw from Iraq entirely as many Democrats want.

"It is clear that every objective expert keeps providing the American public with the same facts: that the president's flawed Iraq strategy is failing to deliver what it needs to — a political solution for Iraq," said Senate Majority Leader Harry Reid, D-Nev.

GAO officials briefed congressional staff behind closed doors, promising an unvarnished assessment when an unclassified version of the report is publicly released on Sept. 4.

"The real question that people have is: What's going on in Iraq? Are we making progress? Militarily, is the surge having an impact?" said White House spokesman Tony Snow. "The answer is yes. There's no question about it."

But Democrats and even some Republicans say military progress made in recent weeks is not the issue. If Baghdad politicians refuse to reach a lasting political settlement that can influence the sectarian-fueled violence, the increase in troops is useless, they said.

The Pentagon and State Department provided detailed and lengthy objections to the findings by the congressional auditors.

Pentagon press secretary Geoff Morrell said Thursday that after reviewing a draft of the GAO report, policy officials "made some factual corrections" and "offered some suggestions on a few of the actual grades" assigned by the GAO.

"We have provided the GAO with information which we believe will lead them to conclude that a few of the benchmark grades should be upgraded from 'not met' to 'met,'" Morrell said.

State Department deputy spokesman Tom Casey said the GAO should at least note progress made when ruling that Iraq has failed to meet a specific benchmark.

Democrats are expected to try to use money needed to support the war as leverage to bring troops home. The Pentagon has requested $147 billion for Iraq and Afghanistan for the 2007 budget year, which begins Oct. 1. House Speaker Nancy Pelosi on Thursday suggested Bush should not be asking Congress to approve "tens of billions more dollars" when independent voices like GAO find the Iraqis are failing to reach a political accord.

"With the president continuing to stay the course in Iraq, Republicans will have to decide whether they will continue to vote with him or join Democrats and the vast majority of Americans who are demanding a new direction in Iraq and refocusing America's efforts on fighting the real threats of terrorism around the world," said Pelosi, D-Calif.

The GAO report is one of several assessments called for in May legislation that funded the war: Retired Gen. James Jones briefs Congress next week on his assessment of the Iraqi security forces; Gen. David Petraeus, the top commander in Iraq, and Ryan Crocker, the U.S. ambassador to Iraq, testify the week of Sept. 10. Bush will deliver his own progress report by Sept. 15.

Bush is meeting Friday with the Joint Chiefs of Staff and Defense Secretary Robert Gates in a secure conference room at the Pentagon known as "the Tank."

Maj. Gen. Richard Sherlock, director of operational planning for the Joint Chiefs, told reporters this would be the Joint Chiefs' opportunity to "provide the president with their unvarnished recommendations and their assessments of current operations."

It did not appear that the session was intended to work out a consensus military view on how long Bush should maintain the U.S. troop buildup in Iraq or how soon to transition to Iraqi control of security.

Bush will be hearing from Gen. Peter Pace, chairman of the Joint Chiefs; Adm. William Fallon, the senior commander of U.S. forces in the Middle East; and top commanders in Baghdad.

___

Associated Press writers Robert Burns, Matthew Lee, Kimberly Hefling, Terence Hunt and Deb Riechmann contributed to this report.

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A Sobering Census Report: Americans’ Meager Income Gains

NY Times
A Sobering Census Report: Americans’ Meager Income Gains

The economic party is winding down and most working Americans never even got near the punch bowl.

The Census Bureau reported yesterday that median household income rose 0.7 percent last year — it’s second annual increase in a row— to $48,201. The share of households living in poverty fell to 12.3 percent from 12.6 percent in 2005. This seems like welcome news, but a deeper look at the belated improvement in these numbers — more than five years after the end of the last recession — underscores how the gains from economic growth have failed to benefit most of the population.

The median household income last year was still about $1,000 less than in 2000, before the onset of the last recession. In 2006, 36.5 million Americans were living in poverty — 5 million more than six years before, when the poverty rate fell to 11.3 percent.

And what is perhaps most disturbing is that it appears this is as good as it’s going to get.

Sputtering under the weight of the credit crisis and the associated drop in the housing market, the economic expansion that started in 2001 looks like it might enter history books with the dubious distinction of being the only sustained expansion on record in which the incomes of typical American households never reached the peak of the previous cycle. It seems that ordinary working families are going to have to wait — at the very minimum — until the next cycle to make up the losses they suffered in this one. There’s no guarantee they will.

The gains against poverty last year were remarkably narrow. The poverty rate declined among the elderly, but it remained unchanged for people under 65. Analyzed by race, only Hispanics saw poverty decline on average while other groups experienced no gains.

The fortunes of middle-class, working Americans also appear less upbeat on closer consideration of the data. Indeed, earnings of men and women working full time actually fell more than 1 percent last year.

This suggests that when household incomes rose, it was because more members of the household went to work, not because anybody got a bigger paycheck. The median income of working-age households, those headed by somebody younger than 65, remained more than 2 percent lower than in 2001, the year of the recession.

Over all, the new data on incomes and poverty mesh consistently with the pattern of the last five years, in which the spoils of the nation’s economic growth have flowed almost exclusively to the wealthy and the extremely wealthy, leaving little for everybody else.

Standard measures of inequality did not increase last year, according to the new census data. But over a longer period, the trend becomes crystal clear: the only group for which earnings in 2006 exceeded those of 2000 were the households in the top five percent of the earnings distribution. For everybody else, they were lower.

This stilted distribution of rewards underscores how economic growth alone has been insufficient to provide better living standards for most American families. What are needed are policies to help spread benefits broadly — be it more progressive taxation, or policies to strengthen public education and increase access to affordable health care.

Unfortunately, these policies are unlikely to come from the current White House. This administration prefers tax cuts for the lucky ones in the top five percent.

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New Orleans marks Katrina anniversary

Yahoo! News
New Orleans marks Katrina anniversary
By MARY FOSTER, Associated Press Writer

Prayers, protests and a lingering disgust with the government's response to Hurricane Katrina marked the disaster's second anniversary Wednesday, with a presidential visit doing little to mollify those still displaced by the storm.

Clarence Russ, 64, took a dim view of politicians' promises as he tried to put the finishing touches on his repaired home in the city's devastated Lower 9th Ward.

"There was supposed to be all this money, but where'd it go? None of us got any," said Russ, whose house was the only restored home on an otherwise desolate block.

Not far away, President Bush visited a school. "We're still paying attention. We understand," he said before heading to the Mississippi Gulf Coast, also devastated by Katrina.

But Gina Martin, who is still living in Houston after Katrina destroyed her New Orleans home, was unconvinced. "Bush was down here again making more promises he isn't going to keep. The government has failed all of us. It's got to stop," she said.

Martin was among an estimated 1,000 people taking part in a protest march that started in the Lower 9th Ward. It was a uniquely New Orleans-style protest: There were signs accusing the Bush administration of murder and angry chants about the failure of government. But marchers also danced in the street accompanied by two brass bands.

Katrina was a powerful Category 3 hurricane when it hit the Gulf Coast the morning of Aug. 29, 2005, broke through levees in New Orleans and flooded 80 percent of the city.

By the time the water dried up weeks later, more than 1,600 people across Louisiana and Mississippi were dead, and a shocked nation saw miles of wrecked homes, mud and debris from one of the worst natural disasters in its history.

In New Orleans, recovery has been spotty at best. The historic French Quarter and neighborhoods close to the Mississippi River did not flood and have bounced back fairly well. The city's population has reached an estimated 277,000, about 60 percent its pre-storm level of 455,000. Sales tax revenues are approaching normal, and tourism and the port industry are recovering.

But vast stretches of the city show little or no recovery. A housing shortage and high rents have hampered business growth. The homeless population has almost doubled since the storm, and many of those squat in an estimated 80,000 vacant dwellings. Violent crime is also on the rise, and the National Guard and state troopers still supplement a diminished local police force.

Bells pealed amid prayers, song and tears at the groundbreaking for a planned Katrina memorial at a New Orleans cemetery.

"We ring the bells for a city that is in recovery, that is struggling, that is performing miracles on a daily basis," said Mayor Ray Nagin, who famously cursed the federal response in a radio interview days after the storm.

The memorial will be the final resting place for more than two dozen unclaimed bodies.

"The saddest thing I've seen here is that there are 30 human beings who will be buried here one day that nobody ever called about," David Kopra, a volunteer from Olympia, Wash., said, holding back tears. "It says something to my heart. This city needs so much care, and that's why I'm here."

Churches throughout the region, including historic St. Louis Cathedral in the French Quarter, held services. At the Claiborne Avenue bridge over the Industrial Canal, mourners tossed a wreath into the water near the spot where a levee breach led to the inundation of the Lower 9th Ward.

In Mississippi, about 100 people prayed and sang in the shadow of a Katrina monument on the neatly manicured town green of Biloxi.

"God has been good to Biloxi and its people of the Mississippi Gulf Coast," Mayor A.J. Holloway said. "We have a new outlook on life and a new appreciation for what's really important in life. It's not your car or your clothes or your possessions. It's being alive and knowing the importance of family and friends and knowing that we all have a higher power."

In Gulfport, Miss., Gov. Haley Barbour urged people to see the positive. About 13,000 of his state's families are still living in FEMA trailers, but that's down from a peak of 48,000, and he expects they could all be out of the temporary housing in a year.

Some let the day pass without fanfare. James Chaney, working on his sister's washed-out house in New Orleans, had no use for the protesters.

"They've done that stuff and done that stuff. It doesn't help us. It doesn't get us anything. It doesn't get anyone to help us."

___

Associated Press writers Cain Burdeau, Alan Sayre and Stacey Plaisance in New Orleans and Becky Bohrer in Biloxi, Miss., contributed to this story.

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Number of Americans without health insurance hits new high

Number of Americans without health insurance hits new high
By Tony Pugh | McClatchy Newspapers



WASHINGTON — The continued loss of job-based coverage helped push the number of Americans without health insurance to 47 million last year, the highest total on record and the sixth straight year that the ranks of the uninsured have grown.

New annual Census Bureau survey data released Tuesday showed that the number of uninsured Americans jumped by 2.2 million in 2006, from 15.3 percent of Americans in 2005 to a record-tying 15.8 percent last year. The number of uninsured children increased for the second straight year as well, spiking by more than 611,000 last year to nearly 8.7 million.

Tuesday's annual census report also had some upbeat news. The nation's median household income - half of households earn more than the median and half earn less - increased by $356 to $48,200 last year. The amount increased more than inflation for the second straight year.

The significant increases in the number of Americans without health insurance are unprecedented because they occurred in a fairly strong economy and at a time when health-care premium increases have been moderating, said Diane Rowland, executive vice president of the Kaiser Family Foundation, which studies health-care issues.

"I think the bad news from the statistics today is that when the economy is doing fairly well, we're still seeing a continued erosion in the ability of working families to get health coverage through the workplace, which places more and more people at risk of being uninsured," Rowland said.

With health care a top concern going into the 2008 elections, America's health-care system and the growing numbers of uninsured also have become political issues.

Each Democratic presidential candidate has offered a plan to address both concerns and Republican candidates have begun tackling the problem too. Congress, the nation's governors and state officials from both political parties want to reauthorize and greatly expand the State Children's Health Insurance Program, which has reduced the number of low-income uninsured children dramatically since its inception in 1998.

About 6.6 million children are covered through SCHIP. Of the 8.7 million uninsured youngsters in the United States, 5 million to 6 million are eligible for coverage through Medicaid or SCHIP.

The Bush administration opposes the efforts to cover more children under SCHIP. In addition to President Bush's vows to veto funding increases for the program that both houses of Congress have approved, the administration recently adopted tough new requirements that make it nearly impossible for states to expand eligibility for children from higher-earning families.

Tuesday's census numbers sparked a torrent of calls for Bush to drop his veto threat and support expanding SCHIP.

In a letter to the president this week, Democratic presidential candidate Barack Obama urged Bush to rescind the new requirements and commit to supporting the bills in the House of Representatives and the Senate.

Apparently unmoved, Bush issued a statement Tuesday criticizing the House and Senate proposals because they'd be funded by stiff increases in taxes on cigarettes and other tobacco products. He said the taxes would undermine the economy. The president also has said that both bills would lead people who can afford private coverage to opt for cheaper government coverage through SCHIP.

"What American workers do not need right now are tax increases to fuel excess spending by the Congress. I encourage Democratic leaders in Congress to resist their urge to increase taxes on Americans and to live within the budget limits I've proposed," Bush said in a statement.

The Senate's bipartisan bill increases SCHIP funding by $35 billion over five years and would cover another 3 million youngsters. The House approved a Democratic bill that boosts funding by nearly $50 billion and would cover an additional 6 million children.

The president supports a $5 billion funding increase, which isn't enough to maintain current levels and could force hundreds of thousands of children out of the program over five years.

Congressional negotiators will merge both bills and send the final product to the president for his signature. The amount of the spending increase is to be determined. A presidential veto probably would face an override vote in the Democratic-controlled Congress.

Bush has said that allowing states to cover more affluent children in the program, which both bills do, would be the first step toward government-funded universal health coverage. He supports tax incentives to help people buy health insurance in the private market.

The growing number of uninsured Americans during Bush's two terms in office reflects the administration's limited attention to the problem and its misguided policy proposals to address it, charged Cindy Mann, executive director of the Georgetown University Center for Children and Families.

While the president has pushed for health savings accounts and tax incentives to help people buy private coverage, those measures haven't taken off in the marketplace or won approval in Congress, Mann said.

While the problem of the uninsured predates Bush's time in the White House, the fact that the president hasn't mustered a major initiative to address it "may well be part of his legacy," Kaiser's Rowland said.

Although the census report found that median household income grew last year, the concentration of America's wealth remained at the top of the earnings totem pole. The top 20 percent of earners accounted for slightly more than half of aggregate income, while the lowest 40 percent of earners accounted for only 12 percent of aggregate income.

The median income for men who work full time declined for the third straight year, from $42,743 in 2005 to $42,261 last year. Full-time working women saw their average incomes fall for the fourth straight year, from $32,903 to $32,515.

The nation's poverty rate declined from 12.6 percent in 2005 to 12.3 percent in 2006. However, the number of people in poverty held steady at about 36.5 million.

To see a copy of the new census report on health insurance, income and poverty in 2006, go to Census report on insurance.

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