One thing he said really caught my attention. “You elected me to do what is right,” he
said.

I think if President Obama would “do what is right” for small businesses, it would create
more jobs than anything he or anyone in Congress has proposed to date. Of course, I’m
talking about ending the diversion of over $100 billion a year in federal small business
contracts to corporate giants around the world.

Since 2003, over a dozen federal investigations have found billions of dollars a month
in federal small business contracts actually wind up in the hands of many of the largest
businesses in the world. Some of the firms that have received federal small business
contracts include: Lockheed Martin, Boeing, Raytheon, L-3 Communications, British
Aerospace (BAE), Northrop Grumman, General Electric and Dell Computer.

The diversion of federal small business contracts to large businesses is such a severe
problem, that the Small Business Administration Office of Inspector General (SBA
IG) referred to it as “One of the most important challenges facing the Small Business
Administration and the entire Federal government today…”

President Obama recognized the magnitude of the problem during his campaign when he released the statement, “It is time to end the diversion of federal small
business contracts to corporate giants.”

We don’t have to spend another $50 billion on infrastructure projects, and another $200
billion in tax cuts to create jobs. Why don’t we just quit giving billions of dollars a month
in federal small business contracts to some of the largest corporations in the world?

You don’t have to be a Nobel Prize winning economist to figure this out. According to
the U.S. Census Bureau, small businesses create over 90 percent of all net new jobs.
Federal law requires a minimum of 23 percent of all federal contracts to be awarded to
small businesses. With an actual federal acquisition budget of over $1 trillion, American
small businesses should be receiving at least $230 billion a year in federal contracts.

The Obama Administration is only claiming to have awarded $96 billion to small
business during fiscal year (FY) 2009, and most of that money actually went to large
corporations. An analysis by the American Small Business League (ASBL) found that
of the top 100 recipients of federal small businesses contracts reported by the Obama
Administration, 60 were actually large businesses, and those firms received 65 percent of
the dollars awarded to the top 100.

It looks like small businesses are actually receiving roughly $35 billion a year. That’s

approximately $195 billion less than the law requires.

If President Obama would simply insure that the federal law, which requires that small
businesses receive a minimum of 23 percent of all federal contracts, was fully enforced,
it would create more new jobs than anything he has ever proposed. Ask any economist
what the impact of redirecting $195 billion a year in existing federal infrastructure
spending into the middle class will have on job creation. The Senate Small Business
Committee found that every 1 percent increase in federal contracts to small businesses
would create 100,000 new jobs. Increasing federal contracts for small businesses from
$35 billion to $230 billion would create over 2 million new jobs.

The best part of redirecting federal small business contracts away from large businesses
and back to legitimate small businesses is… it’s free. No new taxes, no new spending.
You can’t beat a deficit neutral stimulus program that will actually create millions of
net new jobs. All of the programs the Obama Administration has proposed are one-time
programs. Redirecting existing federal infrastructure spending to America’s 27 million
small businesses, which create over 90 percent of net new jobs will work year-after-year
for years to come.

Now here’s the best part, this can be accomplished without any new legislation.
President Obama can issue an executive order simply directing that no federal small
business contracts will be awarded to large businesses. He could also direct the SBA to
immediately abolish federal policies that have allowed corporate giants from around the
world to hijack federal small business contracts.

In closing, what’s not to love here? An economic stimulus program that will shift billions
of dollars in existing federal infrastructure spending directly into the hands of the small
businesses where most Americans work; the very firms that create over 50 percent of
the gross domestic product (GDP), over 90 percent of all U.S. exports and create over
90 percent of all net new jobs. A program that is deficit neutral that can be implemented
immediately with out any new legislation.

Now the sad truth… President Obama is not going to “do the right thing” here. This
perfect stimulus plan has no hope of ever being implemented. Why? Because it
won’t help the unions, and it won’t help any of President Obama’s biggest campaign
contributors. The Fortune 500 firms that currently receive billions of dollars in federal
small business contracts will also spend as much as it takes kill it.

Too bad… double-dip here we come.

This will be the first in a series of articles entitled “Let’s Be Honest.” Each article will deal with an important issue which our news media and political leaders are framing in a way that is so dishonest and misguided that it makes rational discussion impossible.

For example, reasonable people can disagree about whether Barack Obama is doing a good job as president. But they can’t disagree about whether he is a Muslim (more than 30 percent of Republicans believe he is) or was born outside the U.S (more than 40 percent of Republicans believe he was). Those are simply lies.

The same would seem to apply to any reasonable assessment of where our economy and job situation stand right now and whether our president’s policies have helped or hurt. Reasonable people can disagree about the wisdom and long-term impact of Obama’s policies but, as with so much else these days, the news media and politicians have chosen to make rational conversation almost impossible by filling the airwaves and print with so many lies and distortions that useful give-and-take can’t even get started.

We are constantly hearing about the horrible condition of the U.S. economy and how Obama’s socialist preoccupation with redistributing wealth and taxing us to death is killing business.

But let’s be honest. When Obama became president the economies of the world were in an American-induced death spiral. We were drowning in debt that could not be repaid. Stock markets and commodities prices were in free-fall, our economy was shedding 800,000 net jobs a month, credit was not available to most companies at any price. General Electric and Goldman Sachs had to pay Warren Buffett 10 percent interest and provide an equity kicker just to get a loan which should give you an idea how impossible it was for mere mortals to borrow. There was a very real risk that hundreds of major companies and financial institutions would disappear. Many actually did.

We still face enormous economic challenges, but let’s be honest. It is now 18 months later and the stock markets in the U.S. and around the world are 50 to100 percent higher. With federal help, General Motors and many other companies staved off bankruptcy and are now able to sell stock to new investors. Millions of jobs that were thought to be at risk were saved. Commodities prices have recovered broadly and credit is widely available to a broad range of credible borrowers.

We have enormous debts to repay once we get the economy on better footing and we face lots of other challenges. But the sequencing of the “experts” is backwards. We already had the economic crisis they are predicting for the future and it had nothing to do with Obama, taxes, or socialism. It was due to good old American greed and free-market capitalism run amok.

We are also told that making the richest Americans pay the same level of income tax as they did during the boom times in the ’90s would kill the recovery in its tracks. But let’s be honest. How many millionaires do you know who are putting off purchases and denying themselves stuff that they would run out and buy if they only had an extra few grand?

Most people are buying less because they are worth less than they used to be, their homes have gone down in and value, they are earning nothing on their savings, and/or they are heavily in debt. And most others are just nervous about the future–in part because they are told all day in the media and by politicians that they should be outraged and afraid. It has nothing to do with uncertainty about a proposed small increase in taxes for a handful of the wealthiest Americans.

The one problem that remains very real for far too many people is jobs. Most companies downsized their work forces during the economic meltdown but now that business has come back–in many cases stronger than ever–they are not hiring new workers. In most cases, they haven’t even hired back the ones they laid off during the crisis.

The U.S. unemployment rate is hovering just below 10 percent and the number of people who are holding jobs that pay and require skills far below their qualifications is at least as high. We are told by financial “experts” and politicians that Obama is to blame for reasons that make no sense.

They claim that corporate CEOs are not hiring more workers, even though many of their companies are doing great business and are flush with cash, because they are “uncertain” about the impact of health care reform and tax increases they fear may be coming in the near future. These paralyzing uncertainties are simply the icing on the Obama anti-business, anti-America socialist cake which is yet another reason why the Republicans will take over both houses of Congress in a couple months. Or so the story goes.

But let’s be honest. Back during the Clinton years when taxes were much higher and when health care costs were going through the roof each and every year, companies were hiring like crazy. Many, like my employer, offered big bonuses to any employee who referred a prospect who ended up being hired by our firm. It had nothing to do with certainty about the future or tax rates or socialism or health care costs.

It was all about our CEO’s belief that we were missing out on a lot of business because we didn’t have enough people. So our company hired more people.

Today many companies that survived the financial crisis are flush with cash and very profitable. But instead of hiring back the workers they laid off, they are investing in new equipment and productivity technology that will enable them to do more business with even fewer employees in the future. They are also using their huge cash hordes to buy other companies so they can lay off even more workers in the future and become even more profitable–at least in the short run.

And when companies make more money, their CEOs (the same ones who decide whether to hire or fire more workers) make lots of money. A recent report issued by the Institute for Policy Studies shows that the 50 companies that laid off the most workers last year saw their profits go up an average of 44 percent. And (surprise surprise) the CEOs of those companies made an average of $12 million last year–almost 50 percent more than average CEO pay at America’s 500 largest companies.

So let’s be honest. There’s not a thing that Obama or any other politician can do to lower unemployment in the private sector as long as CEOs and shareholders of our largest companies are getting richer and richer because of mergers, productivity gains, and layoffs. And our free market capitalist system–which I heartily support and have earned my living managing for more than 30 years–guarantees them the right to do that.

So, if we’re going to be honest there is a lot to talk about and figure out. It will be tough and it will be complicated. It is so much easier to create villains and phony issues to keep people busy being outraged and afraid. Maybe that’s why so many of our politicians and media celebrities are going that route instead of giving us the facts and trying to help America.

Across America, economic stress fell month to month in July in about 54 percent of the nation’s 3,141 counties, and in 24 of the 50 states, the AP’s Economic Stress Index shows.

But the average county’s “stress score” in July remains unchanged from the previous month. About 42 percent of counties were found to be economically distressed, which was also unchanged from June.

“Stress eased in counties whose work forces lean toward areas like agriculture, mining, wholesale trade and finance. By contrast, counties with many employees in the retail and real estate industries suffered higher distress in July,” according to analysis by AP.

Among the most stressed counties, concentrated in states like Nevada, California and Florida, county unemployment rates have soared as high as 30.3 percent, and foreclosure rates can exceed four times the national average.

The AP’s index calculates a stress score for each county from 1 to 100 based on unemployment, foreclosure and bankruptcy rates. A county is considered stressed if its score exceeds 11 (the current national average is 10.5.)

Below are the top five most economically stressed counties, and the five least economically stressed counties in America. (For the 20 most stressed and 20 least stressed counties click here for an interactive map that shows statistics for all U.S. counties and states .)

Do we really need to focus on 150,000 miles of roads? They must be popping champagne bottles in the corner offices of the oil industry and at OPEC headquarters. Focusing on getting off the gasoline habit would have been a far wiser commitment.

More landing strips, encouraging us to fly, fly, fly, gulping ever greater quantities of fossil fuels? Maybe that’s not such a good idea.

Then whatever is left over goes into rail infrastructure. And in this domain, a technology wherein we once led the world, we are now eons behind. There is little else in the President’s proposal that would do as much for our economy, our way of life and keep us on a competitive footing with nations whose governments are not beholden to oil lobbies. There is nothing that would so clearly address the blunders of past administrations that permitted the ripping up of rail lines and tramways throughout the land at the instigation of oil interests, and the once considerable sway of the automobile industry.

But a $50 billion program to deal with all these objectives? Assuming that half, or $25 is being set aside for rail, how does that compare to other nations who are already far ahead of us in providing modern up to date mass transportation for their citizenry, or at least far more farseeing in planning ahead.

France for one, with perhaps the most comprehensive national high speed rail network in the world will be adding another 2000 additional kilometers of track to accommodate high-speed rail by 2020 at a cost of 98 billion dollars. In comparison, proportionate to size and population, that would the equivalent of the U.S. committing at least $490 billion to a similar project.

China, in the time frame of one generation has built an infrastructure of high speed trains that leaves us in the dust. Major hubs are interconnected by trains speeding at some 300 miles per hour, while the rail travel time between many of our major cities is now slower than it was in the 1930’s and ’40s. According to Arianna Huffington’s “Third World America” it now takes eighteen hours to travel by rail between Chicago and Denver, while back then the travel time was thirteen hours. According to an article in the China Daily in August of last year, China was planning to invest at least 700 billion yuan ($102 billion) annually from 2010 through 2012 on railway construction alone.

By comparison we are way behind and falling further behind every year. From the very outset our reticence, or perhaps lack of vision, of how a national program to rebuild our railways might impact our society was missing. The stimulus program initiated last year set aside but $8 billion for important rail service improvement, a sum perhaps more appropriate to Andorra or Grenada than the United States. (Please see “The Stimulus Package: Why Is Intercity Rail Service At The End Of The Line?” 02.04.09)

What is it that our government doesn’t get? Where is the vision that at another time in an equally stressful economic environment rendered unto the nation such massive capital investments and infrastructural icons as the Hoover Dam (at the time of its building in the 1930’s, the largest dam in the world), the Tennessee Valley Authority and the W.P.A.

A massive rebuilding and expanding of our railroad infrastructure would not just be a disbursement of stimulus dollars but a far sighted and needed capital investment that would pay off in spades through greater efficiencies, reduced dependence on fossil fuels, greater self reliance and an altogether massive improvement in the way we live and travel.

Instead of frittering away billons here and there in make work or politically driven earmark projects, rebuilding our rail system and bringing it into the 21st Century would engage the entire nation. And all of us would benefit.

Starting Tuesday, the Federal Housing Administration will permit lenders to give these borrowers refinanced loans backed by the government. The lenders will be required to forgive at least 10 percent of the original mortgage amount. Investors who have control over the mortgages as part of their large portfolios will select which borrowers are invited to participate.

The plan was first announced in March. Its rollout represents the latest of numerous efforts by the administration to address the housing bust. So far, the government has only nibbled around the edges of the crisis, as its programs have run into numerous problems.

The lending industry was ill-prepared for a crush of distressed homeowners, the economy worsened and millions of homeowners had taken on so much debt that their financial woes have been nearly impossible to resolve.

Nearly half of the 1.3 million homeowners who have enrolled in the Obama administration’s main mortgage-relief program – overseen by the Treasury Department – have already fallen out over the past year.

Many borrowers say the government program is a bureaucratic nightmare, with banks often losing their documents and then claiming borrowers did not send back the necessary paperwork. Banks say borrowers often didn’t return the required documents.

The new refinancing program takes a different approach. It allows investors in mortgage-backed securities to evaluate their holdings and select borrowers that will be offered refinanced mortgages guaranteed by the FHA.

The theory is that there are some loans that investors simply want to unload because they have a high risk of default.

However, when faced with the choice between slashing the amount borrowers owe on their home loans and foreclosing, lenders have generally chosen to foreclose on borrowers. Many experts doubt the new program will persuade investors to change their minds.

Government officials acknowledge that getting the plan going will be complicated. FHA Commissioner David Stevens said in a statement that it “requires significant coordination and operational execution by several parties to be successful.”

The government estimates that between 500,000 and 1.5 million homeowners could be helped. But Stevens said the number of borrowers who actually benefit will likely be toward the low end of that range.

Even so, Keefe, Bruyette & Woods Inc. analyst Bose George called the government’s estimates “extremely optimistic.” George said investors are likely to only offer refinances to borrowers who have seen their home values plunge to the point where they owe 40 percent more than their home’s current value. Those homeowners, he said, are in danger of walking away from their mortgages.

“We’re assuming that the impact is minimal,” he said.

The program is funded with $14 billion from the Obama administration’s existing $75 billion mortgage assistance program. That money will be used to cover incentive payments to lenders and losses from borrowers who fall back into foreclosure.

To qualify, borrowers must be up-to-date on their mortgages, though many people who have already received loan modifications through other programs are still eligible. The plan is limited to loans in which homeowners owe at least 15 percent more than their home’s current value.

Analysts at Barclays Capital estimated last month that the refinancing program would only aid between 200,000 and 300,000 homeowners. If it reaches that many, it would be a small share of the number of Americans with so-called underwater mortgages.

As of the end of June, about 11 million U.S. homes, or 23 percent of those with a mortgage, were in this position, according to real estate data provider CoreLogic.

Long before the greed of speculators and bankers went wild and long before there were sub-prime housing loans, there was the US Government involvement in the form government of subsidies as reflected in (i) the existing tax-deductibility of home-mortgage interest payments; (ii) Federal Housing Administration programs which provide credit to first-time home buyers and permit up to 97 percent leverage at origination and also permit cash-out refinancing that resulted in 95percent leveraging (take-out of $520 billion each year by households through re-financing); and (iii) government financial subsidies through federal home loan bank lending for owning ‘an American dream’ and directing credit to low-income communities in line with the spirit of Community Reinvestment Act of 1977 and establishment of quasi-government agencies such as Frannie Mae and Freddie Mac.

In addition, there is the ever increasing moral hazard in the financial sector over the past century in the form of deposit insurance, reduction in capital adequacy ratios, and implicit and explicit guarantees for bank bailouts to all types of financial institutions, including the too big to fail institutions. These policies combined with Fed policy of cheap money by keeping interest rates low to help economic recovery from the dot-com bubble burst of early 2000s only fueled credit growth and exacerbated the speculative bubble in housing market. From Iceland to Ireland to other European countries and USA, housing bubbles were spawned in this fashion.

Prior to the global financial crisis of 2008-09, there were rapid price hikes in food grains and fuel during 2007 and early 2008. Again, financialization of commodity markets and role of speculators was blamed for those bubbles. Without healthy behavior of speculators and traders, markets would not function efficiently. It is only when speculation is out of control that everything goes hay wire. But behind the wild speculation, there is always cheap money in the form of easy fiscal and monetary policies.

Within the financial reforms under way in a number of countries, hardly any mention is made about government policy blunders nor does it deal with continued government involvement in housing. Instead they are exclusively focused on re-regulating financial firms, strengthening watch dog institutions, and restricting speculators. Such reforms will hardly prevent future crises because of the ‘capture’ of all institutions (parliaments, regulators, credit rating agencies, policy making agencies).

Spurred by state directives, banks in China have been providing cheap money since late 2008 which has now led to a housing and construction bubble in China. Similarly, the recent jump in stock prices in both emerging and developed economies is likely to be a manifestation of public policies of 2008-10 in the form of large fiscal stimulus packages and ‘quantitative easing’ of the central banks. Similarly, the recent jump in wheat prices is partially due to severe drought in Russia but also a precursor of search for higher yields by the excess liquidity now in place in the world. A bubble is created by the news of ‘artificial scarcity’ and here is where regulators and government agencies have to step in.

No one can deny that prudential (and not strangulating) regulations and their effective enforcement strengthen market efficiency. Rather than wait for bubbles to develop, regulators and government agencies should prevent the bubbles by raising margin requirements to reduce leverage, raising interest rates to mop up excess liquidity, and with use of ‘moral persuasion.’ But, governments should also not be involved in housing, land sales, take over of banks, industries, and running commodity marketing boards; for this role signals a scarcity which exacerbates moral hazard.

How can ‘captured’ governments implement sound policies? Only if the citizens and media are vigilant, and seek full transparency, while holding government agencies accountable all the time.

Arianna Huffington’s brilliance is in her realization that there is one simple answer to both of these questions. Like most third world countries, American democracy and our elected representatives have been bought and sold to the highest bidder. Corporate money in politics and lobbyists in Washington have created a government that is more concerned with the economic health of our biggest banks and corporations than with the well-being of our citizens. Huffington explains that the problem is not that our government is not working, it just isn’t working on your behalf.

I say, like most third world countries, because analysis of what prevents most poor countries from developing is a panoply of oligarchs that so control their governments that the governments cannot stop high level corruption and create a level playing field for all economic participants. Economies cannot grow and develop broadly unless economic opportunity is open to all.

The sad truth about the third world is that once these oligarchs take control of a country’s legislature, it is very difficult for the countries to pass legislation necessary to accomplish real reform to clean up the corruption. Once your legislature is corrupted, real reform depends on the people rising up, organizing, protesting and demanding real change to their government. That is why poor countries in Africa and Latin America have such difficulty transitioning to growth economies and end up remaining poor for centuries.

Huffington’s book, Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream, is very strong on statistics that make it perfectly clear that America’s middle-class is under threat. She personalizes the hard data by incorporating individual Americans’ family stories at the end of each chapter.

Huffington’s greatest strength is her courage and conviction to not only name names, but to raise issues which others feel uncomfortable talking about. Huffington shines a bright light on our nation’s debt problems, but unlike others, she is slower to blame the increasing costs of Social Security and Medicare. Just as in this financial crisis, where the middle class is burdened with the job losses and wage cuts from problems actually caused by executives on Wall Street, she notes that it would be unfair to solve our deficit problems by cutting retirement and health care benefits to working Americans if the deficits have been caused by enormous increases in military spending and corporate welfare and bank bailouts. Military spending is now over $1 trillion a year when you include all defense expenditures, intelligence agency spending and the homeland security budget. This is more than enough in potential savings to ensure that Americans do not have to work into their seventies to afford reasonable health care and retirement.

I have been writing for 12 years now about the economic problems caused by lobbyists and corporate money in politics. I know firsthand how unpopular these ideas are on Wall Street, in Washington, amongst our corporate owned media and in the plush meeting rooms and think tanks of our country’s elite. It takes a brave person to confront these issues, and I applaud Huffington’s effort in this regard.

The last chapter of Huffington’s exposé deals with how we get out of this mess. It is not easy. Huffington tells us that 80% of Americans now believe that special-interests in Washington are damaging America’s democracy. But, until very recently, 98.6% of incumbents were reelected. Money still buys elections, even ill-gotten money. As Huffington says, the problem is not that there is too much discord in our nation’s capital, the problem is that both the Democratic and Republican parties are controlled by big business and ignoring the real problems faced by ordinary Americans — joblessness, declining wages, poor health care coverage, reduced pensions and a declining public education system. The Tea Partiers are right, our government is broken, but their libertarian approach is wrong. Less government is not the answer, big business would love that. No, the answer is better government more concerned about its citizens than its executives.

And this is where Huffington can be most helpful, in finding a solution. The Huffington Post must remain outside the control of corporate interests and broaden its base to include all Americans who have been disenfranchised or disenchanted by the system, regardless of their political party. Only through working together will Americans overcome the damaging influence of corporate special interests and lobbyists and return our country back to the people to whom it belongs.

John R. Talbott is the bestselling author of eight books on economics and politics that have accurately detailed and predicted the causes and devastating effects of this entire financial crisis including, in 2003, “The Coming Crash in the Housing Market”, in January 2006, “Sell Now! The End of the Housing Bubble” and in 2008, “Contagion: The Financial Epidemic that is Sweeping the Global Economy”. His newest book will be available on September 30, 2010.

Chung Sung-eun, vice chairman and CEO of South Korea’s No. 2 automaker, stepped down on Friday, according to company spokesman Michael Choo.

“His resignation comes in the light of the recent global recall issued by Kia Motors,” Choo said, without elaborating. He said no successor has been named. Chung was one of two Kia CEOs.

Kia Motors Corp. is an affiliate of South Korea’s top automaker Hyundai Motor Co. Together they form the world’s fifth-largest automotive group.

Chung’s resignation comes amid a wave of recalls that have shaken the global auto industry since Japan’s Toyota Motor Corp. began calling in vehicles in October last year. The world’s top automaker has recalled more than 10 million vehicles for problems including faulty gas pedals and floor mats.

South Korea’s Yonhap news agency reported that Hyundai Motor Chairman Chung Mong-koo asked Chung to step down to take responsibility for the recalls as they suggested possible quality problems.

Neither Choo nor Hyundai Motor spokeswoman Song Meeyoung could confirm the report.

Chung, the former Kia executive, is no relation to the Hyundai chairman, Choo said.

Early this month Kia issued a global recall totaling 104,047 vehicles for a defect in electric wiring that controls mood lighting inside the car and could cause heat-related damage, according to Choo. Of that total, 35,185 vehicles were recalled in the United States, he said.

Seoul-based Kia has a complex management system. Though Chung held the top rank, day-to-day operations come under the control of two presidents: Hank Lee for overseas operations and Seo Young-jong for domestic operations, according to Choo. Seo also holds the title of CEO, said Pamela Munoz, a Kia spokeswoman.

Kia, which posted a 61 percent surge in second-quarter net profit, manufactures vehicles in South Korea as well as at overseas plants in China, Slovakia and the U.S.

The company’s stock price fell 0.2 percent to close Tuesday at 33,400 won ($28.38). Kia shares tripled in value in 2009.

For example, what if someone had stood up to Dick Cheney and prevented him from browbeating the U.S. intelligence community into giving the Bush administration the intelligence analyses that suited its preconceptions. What if the U.S. military had planned for a prolonged insurgency? What if Paul Bremer hadn’t disbanded the Iraqi army?

And on the subject of private security contractors, what if the U.S. military had done something different after four Blackwater contractors were killed in Fallujah in 2004?

Recall that on March 31, 2004 Iraqi insurgents in Fallujah ambushed a convoy containing four Blackwater contractors who were guarding a convoy carrying kitchen supplies to a military base, for the catering company Eurest Support Services

The four contractors, Scott Helvenston, Jerko Zovko, Wesley Batalona and Michael Teague, were dragged from their cars, beaten, and set ablaze. Their burned corpses were then dragged through the streets before two of them were hung over a bridge crossing the Euphrates.

Photos of the event were released to news agencies worldwide, causing a great deal of indignation and moral outrage in the United States, and prompting the announcement of an upcoming “pacification” of the city.

Fallujah was already a hotbed of discontent, thanks to past U.S. screw-ups. In April 2003, just a month after the initial U.S. invasion, US forces opened fire on a group of unarmed demonstrators, claiming they were fired at. Fallujah’s mayor, Taha Bedaiwi al-Alwani, said that two people were killed and 14 wounded. Although the majority of the residents was Sunni and had supported Saddam Hussein’s rule, Fallujah was one of the most peaceful areas of the country just after his fall. There was very little looting and the new mayor was pro-United States.

Although people knew at the time and have said many times since, it still deserves mentioning that sending U.S. troops into Fallujah after the killing of the Blackwater contractors was the wrong thing to do. It led to a failed siege of Fallujah in April 2004 (Operation Vigilant Resolve, also known as the First Battle of Fallujah, done by US Marines)

Thus, the intended Marine Corps strategy of foot patrols, less aggressive raids, humanitarian aid, and close cooperation with local leaders was suspended on orders to mount a military operation to clear guerrillas from Fallujah. 27 American servicemen were killed in and around Fallujah during the battle, as well as hundreds of Iraqis, both civilians and insurgents.

After months of counter-insurgency activity this was followed by a joint U.S.-Iraqi-British offensive of November 7, 2004 named Operation Phantom Fury, also known as the Second Battle of Fallujah.

In retrospect these battled were not fated to happen. The might has been avoided if the Bush administration had actually listed to the voices of its commanders on the ground, which, by the way, is something it always claimed it did. But it appears that was more rhetoric than reality.

Nowhere is this better detailed than in the book New Dawn: The Battles for Fallujah by Richard S. Lowry, published this past May.

Let me quote from the foreword:

Violence was down during the first three months of 2004 because of Saddam’s capture, but that changed on March 31 when insurgents in Fallujah dragged four Blackwater contractors from their SUVs, beat them savagely, and set them on fire. The brutal desecration of their bodies–pictures of which were infamously broadcast around the world–prompted some leaders to advocate immediate retaliation. Although a response was justified, hindsight tells us a more carefully considered reaction would have better served our short- and long-term goals.

And from the first chapter:

Within hours of the Blackwater ambush on the last day of March 2004, the Marines moved to cordon off the entire city. Inside, the enemy prepared for the inevitable assault. Major General James Mattis and Lieutenant General James Conway, however, recommended restraint. The Assistant Division Commander, Brigadier General John Kelley, sought to temper America’s response in the Division’s daily report.

As we review the actions in Fallujah yesterday, the murder of four private security personnel in the most brutal way, we are convinced that this act was spontaneous mob action. Under the wrong circumstances this could have taken place in any city in Iraq. We must avoid the temptation to strike out in retribution. In the only 10 days we have been here we have engaged the “good” and the bad in Fallujah everyday, and have casualties to show for our efforts. We must remember that the citizens and officials of Fallujah were already gathering up and delivering what was left of three victims before asked to do so, and continue in their efforts to collect up what they can of the dismembered remnants of the fourth.

We have a well thought out campaign plan that considers the Fallujah problem across its very complicated spectrum. This plan most certainly includes kinetic action, but going overly kinetic at this juncture plays into the hands of the opposition in exactly the way they assume we will. This is why they shoot and throw hand grenades out of crowds, to bait us into overreaction. The insurgents did not plan this crime, it dropped into their lap. We should not fall victim to their hopes for a vengeful response. To react to this provocation, as heinous as it is, will likely negate the efforts of the 82nd Airborne Division paid for in blood, and complicate our campaign plan, which we have not yet been given the opportunity to implement. Counterinsurgency forces have learned many times in the past that the desire to demonstrate force and resolve has long term and generally negative implications, and destabilize rather than stabilize the environment.

The Marine commanders did not want to further disenfranchise the people of Fallujah. They told their corps commander, U.S. Army Lieutenant General Ricardo Sanchez that they could find the perpetrators of the ambush and bring them to justice within two weeks. Sanchez passed on the Marines’ recommendation. Secretary of Defense Donald Rumsfeld, however, was not impressed with the suggestion for a tempered response and ordered the Marines to attack Conway and Mattis had delivered their recommendation as to how they thought they should respond, but when they received their orders, they–like any good Marines–unflinchingly obeyed them.

At least up to a point.

People’s emotional well-being – happiness – increases along with their income up to about $75,000, researchers report in Tuesday’s edition of Proceedings of the National Academy of Sciences.

For folks making less than that, said Angus Deaton, an economist at the Center for Health and Wellbeing at Princeton University, “Stuff is so in your face it’s hard to be happy. It interferes with your enjoyment.”

Deaton and Daniel Kahneman reviewed surveys of 450,000 Americans conducted in 2008 and 2009 for the Gallup-Healthways Well-Being Index that included questions on people’s day-to-day happiness and their overall life satisfaction.

Happiness got better as income rose but the effect leveled out at $75,000, Deaton said. On the other hand, their overall sense of success or well-being continued to rise as their earnings grew beyond that point.

“Giving people more income beyond 75K is not going to do much for their daily mood … but it is going to make them feel they have a better life,” Deaton said in an interview.

Not surprisingly, someone who moves from a $100,000-a-year job to one paying $200,000 realizes an improved sense of success. That doesn’t necessarily mean they are happier day to day, Deaton said.

The results were similar for other measures, Deaton said. For example, people were really happier on weekends, but their deeper sense of well-being didn’t change.

Kahneman, a Nobel Prize winning psychologist, and Deaton undertook the study to learn more about economic growth and policy.

Some have questioned the value of growth to individuals, and Deaton said they were far from definitively resolving that question.

But he added, “Working on this paper has brought me a lot of emotional well-being. As an economist I tend to think money is good for you, and am pleased to find some evidence for that.”

Overall, the researchers said, “as in other studies of well-being, we found that most people were quite happy and satisfied with their lives.”

Comparing their life-satisfaction results with those of other countries, the researchers said the United States ranked ninth after the Scandinavian countries, Canada, the Netherlands, Switzerland and New Zealand.

The research was supported by the Gallup Organization and the National Institute on Aging.

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Online:

Proceedings of the National Academy of Sciences: http://www.pnas.org

Princeton Center for Health and Wellbeing: http://www.princeton.edu/chw/

Gallup-Healthways Well-Being Index: http://www.well-beingindex.com/