March 2003 Selected News Clips

(Especially noteworthy articles’ headings highlighted in gold.)

LATEST TWIST ON THE NIGERIAN SCAM : PHONY CASHIER’S CHECKS

Counterfeit cashier’s checks are used to buy merchandise sold on the Internet. The checks are so skillfully counterfeited that they have fooled many banks in the United States. The amount of the check is greater than the asking price, and you are asked to wire the difference back to the alleged purchaser. (If you send them the goods too that is a bonus.)

RICH AMERICANS FEAR FREE MARKET COMPETITION

The world used to be divided starkly into right and left. On the right were people who believed in the protection of property rights, in the virtues of free markets and in the dangers of government interference. On the left were those who believed markets did not work and that governments had to step in to substitute for them, as well as to redress the wrongs of the past by redistributing wealth.

The rich, fearing expropriation, mostly sided with the right. The poor, hoping to gain some of the crumbs from redistribution, mostly sided with the left. Hence, throughout the world, pro-market parties became the parties of the rich and anti-market parties the parties of the poor. The fall of communism has allowed us to make finer distinctions. People are recognizing that there is a difference between being for free markets and being for the elite that has benefited from them. This distinction seems to escape today’s US administration.

The elite that derives its positions from its abilities is spurred by competition to try harder, to the benefit of all. But those whose positions derive only from past accomplishments or inheritance have a reason to oppose truly competitive markets, the single most important tool of capitalism. Once these distinctions are recognised, old mantras of the right need to be questioned.

U.S. WANTS LISTS OF ALL U.S. AIR PASSENGER INFO

Flight information from all airline passengers, including financial data, can be collected and analyzed under a little-seen regulation proposed by the Transportation Security Administration (TSA) to track potential terrorists. The federal government wants to keep information for 50 years on passengers it believes pose threats to national security, while information on other passengers would be stored in a database for the duration of their travel and eliminated after their return trips.

Privacy advocates criticize the TSA proposal as a national database open to abuse, similar to concerns about the Pentagon’s Total Information Awareness project, which Congress has put on indefinite hold. “This is something that ought to be particularly worrisome to the public” said former Rep. Bob Barr, Georgia Republican. “The public focus has been on TIA, while the TSA has been quietly putting together a program that is as potentially just as intrusive.”

“We may be creating a massive surveillance system without public discussion,” said Barry Steinhardt, an American Civil Liberties Union director. Transportation officials say CAPPS II - Computer Assisted Passenger Prescreening System - will use databases that already operate in line with privacy laws and won’t profile based on race, religion or ethnicity.

Paul Hudson, executive director of the Aviation Consumer Action Project, which advocates airline safety and security, is skeptical the system will work. “The whole track record of profiling is a very poor to mixed one,” Hudson said, noting incorrect profiles of the Unabomber and the Washington-area snipers. Nine to 11 of the 19 hijackers on September 11 were flagged by the original CAPPS, but weren’t searched because the system gave a pass to passengers who didn’t check their bags, Hudson said. People without checked bags are now included.

A CAUTIONARY TALE FROM COLONIAL BAGHDAD

Contrary to the conventional wisdom that prevails in Washington, history did not begin on September 11 2001 - certainly not the history of western attempts to put Iraq right. Wherever US forces will tread, the British have already been there. Whatever reforms American and other well-meaning advisers will endeavour to implement in a post-Saddam Iraq have already been tried by an earlier generation of British colonial administrators. Iraq’s calamitous and brutal political history does not foretell the future - but it should offer a cautionary tale for those who believe that whoever is installed in Saddam Hussein’s bloody wake must improve upon his legacy, or that it is in Washington’s power or interest to make certain that he does so.

GOVERNMENT BUDGETS DEEP IN THE RED

With America’s budget deficits set to soar, and European governments getting cold feet about budget discpline, fiscal prudence is slipping down the economic agenda. Do deficits no longer matter?

President Bush’s relaxed attitude to large fiscal deficits is matched by a similar lack of concern about America’s giant current-account deficit. At around 5% of GDP, this is now, in the opinion of many economists, unsustainably large. The issue for them is not whether it comes down but whether it does so gradually or suddenly. A sudden fall in the value of the dollar, the usual way such deficits are reduced or eliminated, could rattle economies around the world.

The Bush administration has tended to argue that the current-account deficit is not so important as long as foreign investors are willing to provide the large capital inflows that fund the shortfall. Many economists believe that America is still the best haven for investors. That could change over time, though - and so large are the capital inflows needed that even a slowdown rather than a reversal would push the dollar’s value down.

PATRIOT ACT’S BIG BROTHER: THE DOMESTIC SECURITY ENHANCEMENT ACT

In early February, the Center for Public Integrity disclosed a leaked draft of the Bush Administration’s next round in the war on terrorism - the Domestic Security Enhancement Act (DSEA). The draft legislation, stamped “Confidential” and dated January 9, 2003, appears to be in final form but has not yet been introduced in Congress. Presumably the Administration had determined that the timing would be more propitious for passage - meaning less propitious for reasoned debate - after we go to war with Iraq. But it is one thing to play politics with the timing of a farm bill; it is another matter to do so with a bill that would radically alter our rights and freedoms.

The bill would authorize secret arrests, a practice common in totalitarian regimes but never before authorized in the United States. It would terminate court orders barring illegal police spying entered before September 11, 2001, without regard to the need for judicial supervision. It would allow secret government wiretaps and searches without even a warrant from the supersecret Foreign Intelligence Surveillance Court when Congress has authorized the use of force.

But the trajectory of the war on terrorism is probably best illustrated by an obscure provision that would eliminate the distinction between domestic terrorism and international terrorism for a host of investigatory purposes. With the DSEA the Administration seeks to transgress both the alien-citizen line, by turning citizens into aliens for their political ties, and the domestic-international line, extending to wholly domestic criminal-law-enforcement tools that were previously reserved for international terrorism investigations.

The tactic of protecting citizens’ rights while ignoring those of foreign nationals is untenable, not only on moral grounds but because if the Administration gets its way, we are all potentially “aliens”.

JUSTICE DEPARTMENT’S WAR ON IMMIGRANTS: FIRST THEY CAME FOR THE MUSLIMS ...

In the wake of September 11, current Attorney General John Ashcroft carried out the most sweeping roundup of aliens since the Palmer Raids carried out during the Woodrow Wilson administration. Between 1,100 and 2,000 people were arrested and detained. The exact number is unknown because the Department of Justice, after criticism grew, stopped announcing a running total. The last published figure, in November 2001, was 1,147. As of September 2002, only four detainees had been charged with crimes related to terrorism.

In the atmosphere of fear after 9-11 and Ashcroft’s orders to use sweeping measures against possible terrorists, INS and FBI agents inevitably made mistakes - at a high human price. Muslims, citizens as well as aliens, were picked out for treatment that was often harsh and humiliating. But because of the pervasive secrecy, only occasionally did these episodes come to public attention.

Given the identity of the 9-11 attackers, it was not surprising that U.S. authorities have kept a more careful watch on visitors from Arab and Muslim countries. But the peremptory handling of foreigners by the Justice Department, their extended detention in many cases and the sweeping together of the plainly innocent with legitimate suspects were not only offensive to American values but likely to intensify anti-American feelings.

WHY WAR WITH IRAQ? FOLLOW THE MONEY!

There is an old adage in political and economic analysis. If you want to understand why people do many of the things they do, then you should “follow the money.” That is, who benefits from a particular policy often tells you a lot about who is advocating it and why.

For all of the post–World War II period the U.S. dollar has served as the reserve currency for international trade. It is estimated that about $3 trillion is in circulation around the world. Almost all oil transactions and numerous other globally traded commodities are bought and sold with dollars. In some cases, dollars are hoarded by the citizens of other countries because of a lack of confidence or trust in their own governments. In Russia, for example, as much as $30 billion is held as cash money by thousands of people instead of rubles.

The world demand for dollars and the worldwide use of the dollar have served as an important cushion to maintain the value of the dollar on foreign-exchange markets, which has enabled the U.S. government to print money and run trade deficits that might otherwise have put downward pressure on the international exchange rate of the greenback. The demand for dollars has also enabled Washington to fund the federal budget deficits of the past because foreigners have used the dollars they own to purchase U.S. Treasury securities.

But a number of European newspapers have pointed out that the world has been slowly shifting into an alternative currency to use for international transactions: the euro. Not long ago, the Iraqi government made it official policy that Iraqi oil, two-thirds of which is purchased by American oil companies, had to be paid for in euros. With the American military serving as the keeper of the oil fields in an occupied Iraq, the first policy change undoubtedly would be that all Iraqi oil sales will be once again exclusively in dollars.

REP. RON PAUL ON THE MYTH OF WAR PROSPERITY

There is a longstanding myth that war benefits the economy. The argument goes that when a country is at war, jobs are created and the economy grows. This is a myth. Many argue that World War II ended the Great Depression, which is another myth. Unemployment went down because many men were drafted, but national economic output went down during WWII. Inflation and taxes go up, trade is much more difficult. During wartime government expands in size and scope. And after war, the government rarely shrinks to its original size.

“War should always be fought as the very, very last resort. It should never be done casually, but only when absolutely necessary. And when it is, I believe it should be fought to be won. It should be declared. It should not be fought under U.N. resolutions or for U.N. resolutions, but for the sovereignty and the safety and the security of this country. It is explicit in our Constitution that necessary wars be declared by the Congress. And that is something that concerns me a great deal because we have not declared war outright since 1945, and if you look carefully, we have not won very many since then.

“We are lingering in Korea. What a mess! We have been there for 58 years, have spent hundreds of billions of dollars, and we still have achieved nothing – because we went there under U.N. resolutions and we did not fight to victory. The same was true with the first Persian Gulf War. We went into Iraq without a declaration of war. We went there under the U.N., we are still there, and nobody knows how long we will be there. So there are many costs, some hidden and some overt. But the greatest threat, the greatest cost of war is the threat to individual liberty. So I caution my colleagues that we should move much more cautiously and hope and pray for peace.”

HANS SENNHOLZ ADDRESSES THE QUESTION “WHY GOLD?”

The supply of gold is plentiful. For thousands of years it has been mined and accumulated; very little is consumed or lost. Existing supplies in the form of coins, jewelry, decoration, and plated coating are greater by far than current production. No matter how much gold is produced in South Africa or Russia, current output is rather negligible when compared to the quantities in individual possession throughout the world. This characteristic, in which it differs from all other metals, reduces the risk of sudden changes in quantity and, therefore, sudden changes in its value.

No other currency, national or international, can conceivably take the place of the American dollar. They all suffer seriously from the same ideological malady: they are the creation of political concern and authority. Whatever we may think of gold, it always looms in the background, beckoning to be used as money, as it has been since the dawn of civilization.

US JUSTICE DEPARTMENT SEIZING WEB DOMAINS ACCUSED OF CRIME INVOLVEMENT

Federal agents routinely seize property allegedly used in the commission of a crime, anything from a drug dealer’s car or speedboat to a hacker’s computer. In a series of raids in recent weeks, the Justice Department has extended such grabs to property that might seem esoteric but worry civil libertarians - Internet domain names. In one case, the government took over websites that it said peddled bongs, roach clips, rolling papers and other paraphernalia used in the consumption of illegal drugs.

The trend is alarming online civil liberties groups and legal scholars, who say the government’s new tactic risks depriving people of valuable property - their Internet storefronts and thus their livelihoods - as electronic commerce becomes more common. “If you want to take down a website but simply confiscate the servers, operators can always buy other servers,” said Michael Overly, an attorney specializing in computer law at Foley & Lardner. “But if they take the domain name away, then they’ve put the person out of business.” Critics of the Justice Department’s recent moves also say they fear the government could use the new method to spy on Web surfers who visit confiscated sites.

PANAMA THE SAFEST OFFSHORE HAVEN NATION NOW?

British controlled Caribbean havens, and other UK colonies, are being stripped of financial privacy on orders from London. Soon they will be ordered to end offshore tax breaks. Panama consistently has refused to commit to OECD demands for an end to “harmful tax competition” - meaning the imposition of taxes on foreigners where none now exist - as well as demands for automatic exchange of tax information about foreign nationals with accounts or investments there. Yet it has strong anti-money laundering laws and is fully cooperative in fighting drug and other international crimes. Last year, Panama’s minister of foreign relations denounced OECD “imperialistic agenda” and said flatly his nation will not bow to outside pressures (links here and here).

Panama legal entities discussed here.

Note: Wealth International, Ltd. can help you set up Panamanian IBCs and Foundations.

WARREN BUFFET WORRIES ABOUT DERIVATIVES, SEES FEW VALUES IN STOCKS

In his [justly] famous annual report to Berkshire Hathaway shareholders, he warns against derivatives, saying “We view them as time bombs, both for the parties that deal in them and the economic system”. He also notes that “Despite three years of falling prices, which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us.” And that includes not adding to the positions of companies he already owns.

Alan Greenspan, on the other hand, says derivatives have accelerated globalization, raised living standards, and helped keep the United States from sinking into a deep recession. The use of derivatives - obligations derived from debt and equity securities, commodities and currencies - has “significantly improved the flexibility of economies” he said. That has helped keep the nation’s economy afloat as it struggles against the “extraordinary shocks”, of a “dramatic” decline in stock prices, a drop in capital investment, the terrorist attacks of Sept. 11, corporate governance scandals and now “geopolitical risks and a fairly sharp rise in energy prices”, he added.

RED ALERT FOR BILL OF RIGHTS! BUT PRESS LARGELY IGNORING PATRIOT ACT II

We may never know the name of the patriot who leaked John Ashcroft’s draft of a sequel to the USA Patriot Act to Charles Lewis, head of the Center for Public Integrity. Lewis put the 86 pages on his web site on February 7, and that night Bill Moyers interviewed Lewis on his PBS television program, Now. This broke the story of the most radical government plan in our history to remove from Americans their liberties under the Bill of Rights. Called the Domestic Security Enhancement Act of 2003, the legislation was most likely intended to be sprung on Congress and the rest of us once the war on Iraq began.

In addition to the judiciary and Congress, the other check the Framers relied on to stop uncontrolled government power was what used to be called the “Fourth Estate”. That is why the First Amendment specifies that “Congress shall make no law ... abridging the ... freedom ... of the press.” But most of the media treated this unprecedented revision of the Constitution as a one- or two-day story, and there was scant mention of it on television. An ACLU analysis notes that this bill, if signed into law by the eager president, would, among other consequences, “threaten public health by severely restricting access to crucial information about environmental health risks posed by facilities that use dangerous chemicals.” Have you seen that anywhere in the media?

For those who remember the stunningly illegal orders given to government officials by Richard Nixon, USA Patriot Act II will “shelter federal agents engaged in illegal surveillance - without a court order - from criminal prosecution if they are following orders of High Executive Branch officials.” Trust the White House!

Index of the Village Voice’s coverage of the attack on civil liberties in post-September 11 America here.

TOWARDS A GLOBAL TAX CARTEL

The true agenda of many advocates of greater financial information exchange has more to do with tax competition than criminal law enforcement or national security. The needs of law enforcement officials to combat serious crimes, prevent terrorism and protect national security are of the highest concern, but many OECD governments appear to be exploiting the political climate post-September 11 to promote information exchange policies that have more to do with limiting tax competition than enhancing international efforts to apprehend terrorists and criminals.

Well before the September 11 attacks, the OECD and the UN had launched major initiatives designed to abolish financial privacy and limit tax competition by blacklisting low-tax jurisdictions or so-called tax havens (the OECD Harmful Tax Competition project) and enabling the UN to share financial information among UN members through the proposed United Nations International Tax Organisation (UNITO). The OECD is worried that low tax countries attract too much capital from high tax countries, primarily the welfare states of the European Union.

The Heritage Foundation’s Dan Mitchell testifies on taxes and economic growth, inveighing against tax harmonization. Global information sharing - which really only flows one way: from the low-tax to high-tax nation - would create a tax cartel. This would be tragic since the last 20 years have demonstrated that tax competition is a liberalizing force in the world economy.

SCHOLARLY TOME “THE FUTURE OF AMERICAN TAXATION”

Essays commemorating the 30th anniversary of Tax Analysts’ Tax Notes.

MEASURING LOST FREEDOM vs. SECURITY COSTS

In an unusual twist on cost-benefit analysis, an economic tool that conservatives have often used to attack environmental regulation, top advisers to President Bush want to weigh the benefits of tighter domestic security against the “costs” of lost privacy and freedom. In a notice published last month, the White House Office of Management and Budget asked experts from around the country for ideas on how to measure “indirect costs” like lost time, lost privacy and even lost liberty that might stem from tougher security regulations.

Jarring as it may seem to assign a price on privacy or liberty, the idea has attracted an unusual array of supporters, including Ralph Nader, the consumer advocate and former presidential candidate, who said the approach might expose wrong-headed security regulations. “As long as they”re going to deal with monetary evaluations, I told them they should start asking about the cost of destroying democracy,” said Mr. Nader. “If the value assigned to civil rights and privacy is zero, the natural thing to do is just wipe them out.”

Supporters and critics alike say the effort could open up a new battlefront on domestic security. The budget office has the power to challenge and sometimes to block regulations if they appear to fail the cost-benefit test.

CATO ON “PRESERVING OUR LIBERTIES WHILE FIGHTING TERRORISM”

Government officials typically respond to terrorist attacks by proposing and enacting “antiterrorism” legislation. To assuage the wide-spread anxiety of the populace, policymakers make the dubious claim that they can prevent terrorism by curtailing the privacy and civil liberties of the people. The plain truth, however, is that it is only a matter of time before the next attack.

This cycle of terrorist attack followed by government curtailment of civil liberties must be broken - or our society will eventually lose the key attribute that has made it great: freedom. The American people can accept the reality that the president and Congress are simply not capable of preventing terrorist attacks from occurring. Policymakers should stop pretending otherwise and focus their attention on combating terrorism within the framework of a free society.

Full text of policy analysis here (PDF file).

TOURING THE DOMINICAN REPUBLIC WITH AN EYE ON INVESTING

Large numbers of Europeans are profiting from a destination that has largely been a secret for Americans. Naturally beautiful with a perfect balance of stunning beaches and towering forested mountains, steeped in history, boasting the first European city founded in the Americas, the island is breathtaking. And the real estate is reasonably priced.

TAX HAVENS: A REFUGE FOR OPPRESSED TAXPAYERS

Congress and the IRS have expended considerable effort in recent months in targeting overseas tax havens. Too many Americans are evading their fair share of the national tax burden, D.C. insiders say, by hiding money in offshore bank accounts and transferring their businesses to low-tax Bermuda. “There’s tremendous unity in the House that dodging American taxes is un-American,” huffed Rep. Nancy L. Johnson of Connecticut.

The European Union shares American concerns about tax havens. Oddly, though, one of the offending tax havens targeted by the EU is the U.S. How’s that? Isn’t the U.S. government dedicated to battling outlaw nations which ally themselves with tax evaders? Well, it turns out that “tax havens” are in the eye of the beholder.

Were American politicians to give in to European demands and snitch about money invested in the relatively low-tax environment offered by the U.S., they’d be surrendering the country’s “tax haven” status - and the significant flow of investment capital that accompanies that outlaw appellation. The Cato Institute’s Veronique de Rugy estimates that the EU’s financial information scheme would drive at least $1 trillion out of the U.S., were it to be adopted.

Tax havens | Going, going, gone? As the long arms of the IRS, the OECD and other organizations cast shadows on many sunny places (and some chilly but hitherto welcoming ones), some accountants and lawyers maintain that offshore accounts are becoming more trouble than they are worth to most law-abiding citizens - and even to those who had hoped to stretch the rules. Either offshore banks will fall into line with international standards - while remaining more expensive and less convenient than domestic banks - or they will risk being cut off, and their account holders with them.

IRS GOES AFTER IRWIN SCHIFF, OTHERS

Irwin Schiff, who for years dared the government to come after him for teaching people how to stop paying income taxes has had his wish fulfilled. The Justice Department asked a Federal District Court judge in Las Vegas to prohibit interference with the tax laws by Irwin Schiff, author of The Federal Mafia and other books that argue that income taxes are voluntary.

Mr. Schiff, 75, who has twice gone to prison for tax violations, said yesterday that the government had no authority to enforce the payment of taxes. He said the request for an injunction against him, his girlfriend, Cindy Nuen, and one of his employees showed that the federal government is “a criminal organization” in which “all the judges are corrupt.” “The income tax was repealed in 1954,” he said, and paying it “is voluntary.”

The IRS has identified 3,100 people who filed returns in 1999 through 2001 showing zero income and seeking the return of taxes withheld by their employers, court papers in Las Vegas showed. These same papers hint at a wider effect, as many clients simply stopped filing once they had turned in a few years of such “zero returns”.

INTRUSIVE IRS CASH REPORTING FORM COULD IMPACT MINORITIES, LOW-INCOME FAMILIES

A new form for reporting suspicious financial activities to the IRS could unfairly target minorities and low-income families who need cash advances or other money services they cannot get from banks, argues the chief of a local tax clinic. Zullie Franco, coordinator of the Low Income Taxpayer Clinic of Nevada Legal Services, said illegal immigrants, regardless of their nationality, often work to send money to their native countries and probably have no idea information they supply for the exchange could be reported to the government.

The new form, known as the 90-22.56 or Suspicious Activity Report by Money Services Business, is a product of the Patriot Act. The act went into effect shortly after the terrorist attacks of September 11, 2001. Money service businesses other than banks are required to provide the IRS detailed reports about money exchanges of $2,000 or more. The forms also offer businesses guidelines in case they wish to report suspicious transactions that might not reach the $2,000 threshold. Banks report suspicious activity as well but have their own forms for doing so.

The reports ask for serial numbers of money orders and travelers checks as well as other customer information, including occupations, Social Security numbers, bank account numbers and vehicle license plate numbers. The form also instructs the business to submit descriptions of the conduct that raised suspicion and to try to obtain an explanation of the transaction from the customer. Businesses are asked to indicate whether the customer is a foreign national and to provide any available information from the person’s passport, visa or other identification document.

Allen Lichtenstein, a lawyer for the American Civil Liberties Union of Nevada, said the form is “so unfocused, vague and open-ended that it won’t be particularly effective in dealing with terrorists or others who might be conducting illegal business. It’s one more step in an ever-growing trend to have government scrutinize everyday activities of our everyday lives.”

ASHCROFT EFFECTIVE AT EXPANDING HIS OFFICE’S REACH

In the bureaucratic reshuffling over domestic security, Attorney General John Ashcroft came out a winner. Mr. Ashcroft grabbed control of the Bureau of Alcohol, Tobacco and Firearms and with it an issue dear to his conservative agenda, guns. And he shucked responsibility for two areas of law enforcement that had brought ridicule to the Justice Department, the color-coded threat alert system and immigration.

In recent months, Mr. Ashcroft, once regarded as a peripheral, even clumsy, player in the Bush administration, has not only honed his skills as a bureaucratic infighter, he has also patched his tenuous relations with President Bush, who told Mr. Ashcroft last month that he was doing “a fabulous job”.

With the addition of nearly 5,000 law enforcement officials from the firearms bureau, Mr. Ashcroft has again expanded the policing authority of the Justice Department, a hallmark of his tenure as attorney general. And with the fight against terrorism as his soapbox, he has pushed the powers of federal law enforcement in directions few thought possible before the September 11 attacks. Despite a years-long effort as a senator from Missouri to shrink government, Mr. Ashcroft has significantly broadened the reach of the attorney general, legal scholars and law enforcement officials agree.

Nancy Baker, a professor at New Mexico State University who wrote a history of the attorney general’s office: “The current attorney general sees himself and the Justice Department as engaged in a systemwide struggle between good and evil, and that therefore requires very aggressive and comprehensive countermeasures.”

“He is certainly the first attorney general in the United States in the last half-century with any kind of enthusiasm for executions,” said Franklin E. Zimring, a law professor at the University of California in Berkeley who specializes in law enforcement issues. “He has an affirmative belief in them.”

AIRLINE SECURITY SYSTEM SPURS BIG BACKLASH

Criticism of an electronic airline passenger-screening network took on a new edge yesterday as the Senate Commerce Committee endorsed a plan to require the Transportation Security Administration to disclose how the system will work, including its impact on personal privacy. A growing number of critics believe the system will be overly intrusive and used by other law enforcement agencies.

“This is really the beginning of a debate of how our country can fight [terrorism] ferociously, without gutting civil liberties,” Sen. Ron Wyden (D-Ore.) said after the committee accepted his amendment yesterday. It also would require the TSA to report how it will mitigate errors and enable appeals from passengers who believe they were incorrectly identified as potential threats.

When Palo Alto resident Bill Scannell learned that Delta Airlines was the first in the nation to demonstrate a government system to screen passengers by checking their credit and criminal histories, he was horrified. Called CAPPS II, the system is undergoing a 90-day trial at Delta checkpoints at San Jose International and two undisclosed airports. A computer double-checks the information against a terrorist watch list, automatically ranks the riskiness of passengers and labels them red, yellow or green. Federal screeners then stop “red” passengers from boarding planes and require “yellow” passengers to go through extra screening.

“It is an invasion of people’s privacy that appalls me to the core,” said Scannell, who works at a Silicon Valley company. “I’m a U.S. Army veteran. I did not sign up for this. It is wrong. This is the beginning of (George Orwell’s) 1984. This is evil.”

He created a Web site and posted a Massachusetts Institute of Technology study that mathematically showed that terrorists had a better chance of beating CAPPS II than random searches alone. Scannell called for a boycott of Delta and an end to CAPPS II before it got off the ground. The response was electronic wildfire.

CONSERVATIVE BACKLASH - PROVISIONS OF ‘PATRIOT II’ DRAFT WORRY THOSE ON RIGHT

Some conservative groups are finding common ground with organizations such as the American Civil Liberties Union and the Bill of Rights Defense Committee, expressing concerns about the effect that the USA Patriot Act and a possible follow-up law, the Domestic Security Enhancement Act, could have on civil liberties.

More than 60 towns, cities and counties around the country have passed resolutions criticizing the act, some going so far as to instruct municipal employees - including police - not to assist federal agents in investigations that they believe violate the Constitution. Now, right-leaning groups such as the American Conservative Union, the Eagle Forum and Gun Owners of America say they are concerned that American citizens could also be victimized by what they say are unconstitutional law enforcement powers allowed by the Patriot and the potential enhancement act.

The heart of the issue, according to conservatives, liberals and constitutional scholars, is the effect that USA Patriot has already had on issues of probable cause and due process, and that both of those concepts would be further eroded if the so-called Patriot II were adopted as it appears in the draft form.

EMERGENCY PREPAREDNESS GUIDE: CREATING A COMFORT ZONE

Coming up with a reasonable and livable stance against the threat of terrorism. Start with information: facts about the kind of threats the government says may be out there; the damage each can wreak; relevant policies and guidelines; and the myriad things people can do, buy, learn or talk about, should they choose to plan for a terrorist event.

As for the threat of any of these things actually coming to pass, well, nobody really knows. An extensive set of articles on the subject.

SHRINKING COMPUTER TECHNOLOGY CREATING “SMART MOBS”

Since 1968, the Whole Earth Catalog has been a valuable sourcebook for freethinkers, do-it-yourselfers, and back-to-the-landers. Its most recent full-fledged catalog, published in 1994, opened by noting that the price of computing “has dropped so far since the first Whole Earth Catalog that we have entered the era of desktop everything: desktop publishing, desktop audio, desktop video. Book publishing, radio and television production, and music distribution used to require buildings full of heavy machinery. Communications capabilities once reserved for government or corporate elites now reside in tens of millions of citizens’ desktops.”

It is a sign of how quickly technology can evolve that those desktops, once the sign of individual liberation, now seem somewhat clunky themselves. Less than a decade after the catalog’s then-editor wrote those words, the equivalent computing power can be found not just on desks but in people’s pockets. The social implications of that revolution are discussed in Smart Mobs: The Next Social Revolution (Perseus, 2002), the most recent book by the man who described the desktop revolution in 1994: Howard Rheingold.

In Smart Mobs, Rheingold observes people communicating via cell phones, pagers, and hand-held computers, explores the new forms of social interaction he sees emerging, and asks what will happen when those technologies become ubiquitous. The book also describes the ongoing effort to add computing power to our environment - the buildings we occupy, the objects we buy, even the clothes we wear - and speculates about what will happen as electronically equipped people interact with this electronically equipped terrain.

TAX SECRETS OF THE WEALTHY: SECOND OPINION ALMOST DOUBLES FAMILY WEALTH

Can you answer “yes” to the following two questions: 1.) Does my estate plan transfer all - every dollar - of my wealth to my heirs, all taxes, if any, paid in full? and 2.) Can I control all of my assets - including my business - for as long as I live? If you do not get a clear “yes” to both questions, get a second opinion.

One of the column’s readers is sure glad he did.

TIME FOR THE US TO RENOUNCE THE UNITED NATIONS, SAYS RON PAUL

Most Americans rightfully resent the arrogant attitude toward our national sovereignty that an invasion of Iraq magically becomes legitimate only when UN bureaucrats grant their blessing, and do not care what the UN thinks about our war plans. Only the most ardent war hawks connected with the administration have begun to discuss complete withdrawal from the UN. Rep. Paul has advocated this position for twenty years, and has introduced legislation to that effect.

Our current situation in Iraq shows that we cannot allow U.S. national security to become a matter of international consensus. We do not need UN permission to go to war; only Congress can declare war under the Constitution. The Constitution does not permit the delegation of congressional duties to international bodies. It is bad enough when Congress relinquishes its warmaking authority to the President, but disastrous if we relinquish it to international bureaucrats who don’t care about America.

Those bureaucrats are not satisfied by meddling only in international disputes, however. The UN increasingly wants to influence our domestic environmental, trade, labor, tax, and gun laws. Its global planners fully intend to expand the UN into a true world government, complete with taxes, courts, and a standing army. This is not an alarmist statement; these facts are readily promoted on the UN’s own website. UN planners do not care about national sovereignty; in fact they are actively hostile to it. They correctly view it as an obstacle to their plans. They simply aren’t interested in our Constitution and republican form of government.

PROTECTING YOU FROM YOURSELF: ANTI-GAMBLING ZEALOTS ON THE MARCH

We all want our government to protect us - from criminals and foreign invaders. However, far too often the government oversteps its basic responsibilities by a mile. It seeks to protect us not just from outsiders, but “from ourselves” as well. Backed by a dangerous constituency of moral crusaders our government has instituted laws and legal restrictions against drinking, recreational drug use, smoking, and even some forms of sex.

Now, in the name of national security, the government is actively targeting gambling. Anti-gambling zealots now fill the halls of Congress like fruit flies swirling around a rotten apple. They are entrenched in governors’ mansions from coast to coast. They dominate nearly every state legislature in America (Nevada being the notable exception). Contrary to public opinion showing that the overwhelmingly majority of people support most forms of gambling in many areas, elected officials at virtually every level of government, from lowly city council member up to the President, pride themselves in being opposed to gambling. Right now, under your nose and behind your back these forces are going after gambling with a vengeance under the guise of “protecting” citizens.

MIT REPORT: SURVEILLANCE NATION

According to a January report by J.P. Freeman, a security market-research firm, 26 million surveillance cameras have already been installed worldwide, with more than 11 million of them in the United States. In heavily monitored London, England, Hull University criminologist Clive Norris has estimated, the average person is filmed by more than 300 cameras each day.

The $150 million-a-year remote digital-surveillance-camera market will grow, according to Freeman, at an annual clip of 40 to 50% for the next 10 years. But astonishingly, other, nonvideo forms of monitoring will increase even faster. In a process that mirrors the unplanned growth of the Internet itself, thousands of personal, commercial, medical, police, and government databases and monitoring systems will intersect and entwine. Ultimately, surveillance will become so ubiquitous, networked, and searchable that unmonitored public space will effectively cease to exist.

ASHCROFT EXPANDS USE OF SEARCH POWERS

Since the 9/11 attacks, the Justice Department and FBI have dramatically increased the use of two little-known powers that allow authorities to tap telephones, seize bank and telephone records and obtain other information in counterterrorism investigations with no immediate court oversight. The FBI, for example, has issued scores of “national security letters” that require businesses to turn over electronic records about finances, telephone calls, e-mail and other personal information, according to the officials and documents. The letters, a type of administrative subpoena, may be issued independently by FBI field offices and are not subject to judicial review unless a case comes to court, officials said. Attorney General John Ashcroft also personally signed more than 170 “emergency foreign intelligence warrants”, three times the number authorized in the preceding 23 years, according to recent congressional testimony.

Government officials describe both measures as crucial tools in the war on terrorism that allow authorities to act rapidly in the pursuit of potential threats without the delays that can result from seeking a judge's signature. Authorities also stress that the tactics are perfectly legal.

INSTEAD OF AIRPORT SECURITY, WE HAVE A BLACKLIST

A second generation Lebanese-American found herself being searched every time she entered an airport. Shes called the Transportation Security Administration close to a dozen times, contacted her local FBI office, Continental Airlines and her congressman. None of these contacts yielded any information on how she got on a suspicious-persons list or how to get off. All they have given her is a royal runaround.

The reason her story should concern the traveling public is that the TSA is about to markedly expand the number of people who land in this netherworld of suspicion. A new data-mining system is being rolled out this month at three major but unidentified airports. Privacy issues aside, there is simply no evidence that this kind of data mining effectively identifies true threats. What is certain, however, is an extraordinary potential for making inaccurate assumptions about innocent activities.

RUSSIA’S FLAT-TAX MIRACLE

President Vladimir Putin implemented a flat tax in 2001. Not only a flat tax, but a flat tax with a 13% rate, four percentage points lower than the supposedly “radical” plan espoused by Steve Forbes and former House Majority Leader Dick Armey. And it is been a big success. The U.S. won the Cold War, but Russia gets a flat tax while America is stuck with a Byzantine tax system based on class-warfare ideology.

The Russian flat tax has been so successful that even American politicians might learn the right lessons. Let’s look at the evidence: Russia’s economy has expanded by about 10% since it adopted a flat tax - decidedly better than occurred in the U.S. or Europe. It also appears, conventional wisdom aside, that a low tax rate does not mean less money for government. Over the last two years, inflation-adjusted income tax revenue in Russia has grown 50%. Why? Because people are willing to produce more and pay their taxes when the system if fair and tax rates are low.

The success of Russia’s flat tax should not surprise anyone. Hong Kong has had a flat tax for a long time, and it has been the world’s fastest-growing economy over some 50 years. Indeed, there are growing signs that China may implement a flat tax in the near future. Talk about a man-bites-dog story!

THE PHILOSOPHER OF ISLAMIC TERROR

Police in many countries, applying themselves at last, have raided a number of Muslim charities and Islamic banks, which stand accused of subsidizing the terrorists. The raids have shown that Al Qaeda is not only popular; it is also institutionally solid, with a worldwide network of clandestine resources. This is not the Symbionese Liberation Army. This is an organization with ties to the ruling elites in a number of countries; an organization that, were it given the chance to strike up an alliance with Saddam Hussein’s Baath movement, would be doubly terrifying; an organization that, in any case, will surely survive the outcome in Iraq.

Al Qaeda and its sister organizations are not merely popular, wealthy, global, well connected and institutionally sophisticated. These groups stand on a set of ideas too, and some of those ideas may be pathological, which is an old story in modern politics; yet even so, the ideas are powerful. We should have known that, of course. But we should have known many things.

THE TERRORIST ADVANTAGE

By just existing, the terrorist is causing Americans to spend billions of dollars - and is making Americans fearful and anxious. That is the terrorist advantage. He can strike anywhere at any time. His target, however, has to try to be on guard all the time everywhere. New York City’s heightened state of alert is costing it several million dollars a week it cannot afford.

The fact is, terrorists could take a year, two years or even three or more years before they strike us again. In the meantime, given the government’s desire to politicize its war on terror and the media’s perpetual hysteria, we will spend and spend on security and, given the present administration’s fear of liberty, nibble away at individual rights.

The proper way to deal with terrorists is to ignore them. That means reasonable security at airports and ports of entry, but all of this show of uniforms and guns and stupid color schemes is not going to do any good. Like the old baseball player who used to “hit ‘em where they ain’t”, the terrorists, when they are ready, will simply choose a target that is unguarded.

The Israelis have been a miserable failure at preventing terrorism (their policies generate it perpetually), but they do know how to deal with the attacks. They clean up the mess, bury the victims and go right on with their lives. They don’t talk about it for weeks on end or shut down their country. They have learned to accept it as a fact of life. There are accidents, there are storms and there are terrorist incidents. Clean up, bury the dead and go on with life.

IMF ADMITS ITS POLICIES SELDOM WORK

The International Monetary Fund, the Washington-based bank set up to police the financial globe and assist the Third World, yesterday made the startling admission that the policies it has been pursuing for the last 60 years do not often work. In a paper that will be seized on by IMF critics across the political spectrum, leading officials reveal they can find little evidence of their own success.

Countries that follow IMF suggestions often suffer a “collapse in growth rates and significant financial crises”, with open currency markets merely serving to “amplify the effects of various shocks”.

A recent study by the United Nations reported that the 47 poorest countries in the world - the biggest recipients of loans from the IMF and the World Bank - are poorer now than they were when the IMF was founded in 1944.

BRACING FOR BUSH’S WAR AT HOME

A new, comprehensive review of Bush’s growing presidential power hardly reveals any “holes”. Rather - using court positions, internal policy changes, and secret decisions as bricks - the administration has built the executive branch into a fortress, nearly invulnerable to the checks of the judiciary and Congress. Most alarming, according to the watchdog authors of the 96-page report, “Imbalance of Powers”, the complexity of this historic expansion continues to mask its true proportions.

“You have to connect the dots,” said Elisa Massimino, Washington, D.C., director of the Lawyers Committee for Human Rights (LCHR), a 25-year nonprofit defender of civil liberties and humane policy. LCHR analyzed hundreds of pages of legislation, policy directives, and congressional records, plus a spate of major court cases such as the suit challenging the indefinite detention, without representation, of accused American “dirty bomber” Jose Padilla. The big picture shows an “executive branch amassing so much more power,” said Massimino, even in the past six months alone. But since many developments have occurred “under the radar,” she said, few members of Congress, let alone of the public, could easily map out such a blueprint on their own.

Even with the existing behemoth, Massimino said, a “quantum leap” in executive branch authority is possible. She referred to the recently leaked Justice Department draft bill, the Domestic Security Enhancement Act of 2003, commonly known as Patriot Act II. “It would make over 100 changes to existing law,” she said. But as recently as March 4, Attorney General John Ashcroft was being coy about it, refusing to discuss any of the 86-page draft at a Senate hearing.

A RUSSIAN VIEW OF THE WAR IN IRAQ

Testimony to the tactical excellence of the U.S. armed forces in Iraq - and a shrewd assessment of the unexpectedly formidable enemy they are striving to overcome - is emerging from a remarkable source: Russian military intelligence, or GRU. Daily assessments of developments in the war from Russian journalists and military analysts are being posted on the Internet daily at the iraqwar.ru Web site, or analytical center. The reports are described as being based on “Russian military intelligence reports” and contain alleged Russian intelligence intercepts of radio communications between U.S. and other coalition forces in Iraq.

While the factual reports based on these claimed intercepts cannot be independently verified, and may possibly contain deliberate disinformation, the analytical assessments the performance of U.S. forces and the opposition facing them is based on much material also clearly reported by U.S. and other sources and verified by the Pentagon. And it is shrewd and of a high - and thought-provoking - order.

IRAQ: THE WASHINGTON EMPIRE’S AFGHANISTAN?

In December 1979, the Soviet Union invaded Afghanistan and most experts in the Soviet Union and the West suggested the invasion and occupation would end in a quick Soviet victory. You know the history. The people of Afghanistan resisted bravely and the United States as well as other Arab nations began to support thousands of “Moslem Freedom Fighters” including Bin Laden. Over time the Soviet Forces were defeated and this public defeat, led to questions around the world of the much-vaunted Soviet military and its ability to project Soviet power. This Soviet military defeat eventually led to the total collapse of communism and the Soviet Union.

Unless Bush wins the war quickly, the Washington Empire risks a shattering of the “invincible American military image” which will translate into higher morale and increased resistance by Iraqi forces. Second, the trickle of Moslem extremist fighters into Iraq will turn into a flood of popular support. Third, the limited government support and remaining public support at home and abroad for our invasion will vanish. Forth, the likelihood of Arab states wanting to improve their public opinion at home may well begin to offer military assistance to Iraq. Fifth, other nations like China, Korea, and Iran might take advantage of the growing quagmire of American forces to quickly move to achieve their military objectives that the U.S. will not be able to counter. Finally, the Bush War will have transformed Saddam Hussein, the most unpopular, despotic, hated leader in the Arab world into a hero and the leading Arab statesman in the world.

US EYES PERSONAL COMMERCIAL DATA IN TERROR SEARCH

Government investigators are turning to commercial databases to track down and isolate possible hijackers and suicide bombers before they strike, raising fear among privacy advocates that long-standing protections against government snooping may be eroded. The Transportation Security Administration is developing an airline passenger-screening program that would check private records such as credit reports to assess risk, prompting a fierce debate about the merits of such “pattern recognition” systems.

The practice of relying on commercial data allows investigators to skirt existing privacy laws and gain access to a realm of personal details they would not see otherwise.

IRS ENFORCEMENT PROBLEMS

Five years ago, Charles Rossotti, President Clinton’s nominee to head the IRS, told a Senate committee how he would rein in IRS abuses of taxpayers. That was followed by GOP-sponsored legislation strengthening taxpayers’ rights and modernizing the tax agency to provide better service.

Times have changed. With April 15 fast approaching, President Bush’s nominee, Mark Everson, recently told a Senate committee that he would step up enforcement. The challenge: The IRS is unable to pursue 60% of overdue tax payments, 75% of taxpayers who do not file, and 79% of those illegally hiding money in offshore bank accounts.

The problem is twofold: First, when organizations shift emphasis, they often overcompensate. Second, the IRS has some of the government’s most tangled computer problems.

SAVE TAXES WITH AN INSURANCE COMPANY

Ffty years ago Congress, trying to help farmers and others having a hard time getting insurance, exempted insurance companies from taxes if they collected less than $350,000 in premiums. But Congress did not limit how much in assets these insurance companies could own and invest free of taxes. So the companies simply collect a small amount in premiums for a small amount of insurance. But they set aside as reserves far more money than would ever be needed to pay claims, and invest that money tax-free.

“These are perfectly legal under the letter of the law,” said J. J. MacNab, an insurance industry analyst who tracks tax dodges. She said the I.R.S. could deny the tax benefits because these companies are not principally in the business of insurance. “But the I.R.S. is not willing to fight it. Legislation is needed to stop this.”

BOOK REVIEW: FREDERIC BASTIAT’S THE LAW

Not every good idea is a new one. Many good ideas are old ideas that have simply been forgotten - or are intentionally overlooked. One wonderful source of good and important ideas is a very old but prescient book by Frederic Bastiat. In his slim volume which is succinctly entitled The Law, we find an impassioned, sustained, and persuasive reminder of the purpose of law and the legitimate use of government. It may have been written back in the early 19th century, but its truths speak to us today in the 21st century.

We would all - elected officials included - benefit from this man’s ideas. Bastiat believed that the greatest single threat to liberty is government. And he calls all to recognize that might does not make right. That is to say, simply legalizing a particular undertaking does not change that undertaking’s morally problematic nature. An legalized taking from another may still be wrong, whatever ink on paper may say.

He decries the government’s penchant for “plunder”: “See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”

MINING DATA TO FIGHT TERROR STIRS PRIVACY FEARS

NEW YORK: They met just a few miles from the scene of the worst terrorist act in US history. But what really worried the technologists and civil libertarians at this year’s Conference on Computers, Freedom & Privacy were the antiterrorism policies of the Bush administration. The conference, cosponsored by the American Civil Liberties Union and the Association for Computing Machinery, has debated everything from digital music to Internet pornography over the past dozen years. But yesterday there was only one question up for discussion: In its efforts to fend off the next Sept. 11, has the federal government gone too far?

Most speakers said the government wants to use technology in ways that take away too much privacy, and provide little additional safety.

Some at the conference say the concept of data mining as a law enforcement tool should be abandoned. “I think there are serious scientific questions to be raised about whether it’s even feasible,” said Patrick Ball, deputy director of the Science and Human Rights Program of the American Association for the Advancement of Science. Ball, a statistician, said a system like TIA would inevitably identify tens of thousands of innocent people as terrorism suspects. Attempting to follow up on all the leads would lead to useless harassment of many law-abiding citizens.

RETIRE LIKE ROYALTY IN A LOW-COST PARADISE

A growing number of Americans are making the leap into early retirement by moving to a country with a lower cost of living. The U.S. State Department estimates some 4 million Americans live abroad, not counting military and embassy folks. About a quarter of those are estimated to be retirees.

From a financial perspective, spending your golden years overseas is certainly tantalizing. Consider how far your Social Security checks might go:

• In Quito, Ecuador, where a full restaurant meal costs about $1 - double that if you add wine or beer to your meal, which typically includes soup or salad, an entrée and dessert.
• In Ajijic, Mexico, a community near Guadalajara that is home to more than 3,000 expatriate Americans, where you can rent a sprawling three-bedroom, two-bath hacienda for about $700 a month.
• In English-speaking Belize, where retirees do not have to pay taxes on the first $75,000 of income and where property taxes on a $500,000 home run about $90 a year.
• In Spain, where the weather is good, health care is affordable and Europe is at your doorstep.

If you are the kind of person who considers only the financial aspects, however, then retiring abroad could be an absolute disaster. At a minimum, people who consider retirement abroad should be adventuresome, flexible, tolerant and patient.