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Volume 7, Issue 20: May 16, 2005

  1. Downing Street Memo Reveals Iraq War Deceptions
  2. "How -- and How Not -- to Fight Terrorism" -- Michael Scheuer transcript now available
  3. How U.S. "War Socialism" Diverted Resources Away from Wealth Creation

1) Downing Street Memo Reveals Iraq War Deceptions

On May 1st, the Sunday TIMES OF LONDON published a blockbuster story, based on a secret memo summarizing a July 2002 meeting between U.S. and U.K. officials, revealing that President George W. Bush had decided to wage war against Saddam Hussein at least eight months prior to the March 2003 invasion. At the time of the meeting, President Bush proclaimed his willingness to give peace -- or at least the United Nations' weapons-inspection process -- a chance.

More startling, however, is the memo's characterization of former British foreign-intelligence secretary Richard Dearlove's take on the meeting: "Bush wanted to remove Saddam, through military action, justified by the conjunction of terrorism and WMD. But the intelligence and facts were being fixed around the policy." (In response to the TIMES story about the memo, U.S. Representative John Conyers of Michigan has circulated an open letter to President Bush, signed by at least 88 members of Congress, asking for full disclosure of the details of the July 2002 meeting.)

"The British memo is only one of many pieces of evidence pointing to deliberate threat inflation by the Bush administration to justify the Iraq War," writes Ivan Eland, senior fellow and director of the Independent Institute's Center on Peace & Liberty, in his latest op-ed.

Not only does the "Downing Street memo" show that the White House deceived the American public during the run-up to the Iraq war, the fact that it took nearly two weeks for the TIMES story to hit the front page of an American newspaper shows that news outlets in the United States have been derelict in keeping readers informed about uncomfortable truths. Furthermore, Eland argues, the delayed interest in the contents of the memo reflects a misguided belief, held by the American public, that it was in the public's interest for an imperial president to deceive them about the need for the Iraq invasion.

"The U.S. presidency has become so powerful compared to what the nation's founders had intended that the public has come to expect that the chief executive and his entourage will lie to us for our own good -- even on issues as vital to the republic as war and peace," writes Eland. "In fact, the people, through their representatives in Congress, no longer have a real say through a declaration of war, whether the nation engages in violence or remains at peace. In recent conflicts, in contravention of the founders’ constitutional intent, the president has usurped such decisions and the docile Congress, if asked at all, usually rubber stamps them."

See "Media Coverage of Intelligence Manipulation Reflects Public Acceptance of Imperial Presidency," by Ivan Eland (5/16/05)
"La Cobertura de los Medios Sobre la Manipulación de la Información de Inteligencia Refleja la Aceptación Pública de una Presidencia Imperial"

To purchase THE EMPIRE HAS NO CLOTHES: U.S. Foreign Policy Exposed, by Ivan Eland, see

To purchase PUTTING "DEFENSE" BACK IN U.S. DEFENSE POLICY, by Ivan Eland, see

"The Way Out of Iraq: Decentralizing the Iraqi Government," by Ivan Eland

Center on Peace & Liberty


2) "How -- and How Not -- to Fight Terrorism" -- Michael Scheuer transcript now available

Although al Qaeda has not successfully launched an attack on U.S. soil since 9/11, Osama bin Laden's terrorist network represents an ongoing threat to the American homeland. Worse, U.S. policymakers still fail to grasp the gravity of the threat and have taken actions that have broadened support for anti-American terrorism from within the larger Muslim community, former CIA counterterrorism expert Michael Scheuer told a capacity crowd at the March 1st Independent Policy Forum, "How -- and How Not -- to Fight Terrorism."

"Bin Laden's gripe, if you will, has little to do with the vague but incendiary rhetorical attacks made against U.S. culture and society by [former Iranian theocrat Ayatollah] Khomeini," said Scheuer. "While bin Laden shares the grouchy old Iranian's distaste for our culture, bin Laden has taken the far more effective tack of focusing on specific U.S. policy toward the Islamic world in his effort to focus Muslim hated on America."

Bin Laden's grievances, Scheuer said, include the U.S. military and civilian presence in the Middle East, U.S. support for governments bin Laden believes suppress Muslims or are corrupt and apostate regimes within the Islamic world, and the U.S.’s ability to secure oil from the region at favorable prices.

Startlingly, policymakers have inadvertently weakened the ability of the U.S. intelligence community (IC) to combat terrorism, according to Scheuer. These actions include the government's failure to hold accountable any senior official whose negligence or dereliction led to 9/11; its ill-conceived expansion of the IC bureaucracy; and its dilution, "perhaps lethally, in terms of American lives," of the small pool of experienced intelligence officers who were working against al Qaeda prior to the 9/11 attacks.

Scheuer also lamented the Goss-Graham and Kean-Hamilton Commissions' failure to allow Americans to publicly hear from any intelligence officer who worked daily against al Qaeda before 9/11. Despite the critical acclaim his best-selling book, IMPERIAL HUBRIS: Why the West Is Losing the War on Terror, Scheuer said he had never been contacted to testify before any congressional or White House committee on intelligence failures or reform.

For a transcript of "How -- and How Not -- to Fight Terrorism," featuring Michael Scheuer (3/1/05), see

To hear the talk, go to


3) How U.S. "War Socialism" Diverted Resources Away from Wealth Creation

"U.S participation in the world wars gave rise to massive increases in the extent of government involvement in economic life and brought about many important, enduring changes in the government's relations with private economic actors," writes Robert Higgs in an important new Working Paper on the U.S. economy during the First and Second World Wars.

"In both wars, the federal government expanded enormously the amount of its expenditure, taxation, and regulation as well as its direct participation in productive activities, creating what contemporaries described during World War I as 'war socialism.'"

Even before the U.S. declaration of war on April 6, 1917, American policymakers laid the groundwork for a massive diversion of resources from private to governmental use, Higgs explains. The National Defense Act of 1916 authorized the president to place orders for munitions at below-market prices. The Army Appropriations Act of 1916 authorized the president to take control of transportation systems during wartime and to plan the militarization of the U.S. economy. In response to the war-related decline of commercial shipping, the Shipping Act of 1916 was enacted to regulate shipping rates and practices. It also authorized the creation of the Emergency Fleet Corporation, which between 1917 and 1922 "built more than 2,350 ships (hundreds of them nearly worthless wooden vessels) at a cost of $3 billion -- approximately one-tenth of the entire financial cost of the war," writes Higgs.

But this was merely the beginning of the U.S. government's unprecedented efforts to draft labor and capital from the private sector. Three weeks after passage of the enactment of conscription legislation, ten million young men had been registered for the draft; eventually 2,820,000 Americans were drafted. To divert capital goods away from private production, the federal government imposed a variety of new taxes and raised marginal tax rates on the highest income earners from 7 percent to 77 percent. It raised the lowest marginal tax rate from 1 percent to 6 percent, allowing federal revenues to swell "from well under a billion dollars in fiscal year 1916 to $6.6 billion in fiscal year 1920," Higgs writes.

But federal revenues could not keep pace with federal spending, and the national debt climbed steeply "from a little more than $1 billion before the war to more than $25 billion at the end," writes Higgs. The newly created Federal Reserve System bolstered the sale of government bonds, but the ensuing doubling of the monetary stock caused the purchasing power of money to fall to half of its previous value. Numerous government agencies, such as the War Industries Board, the War Finance Corporation, the War Labor Administrations, and many others, enabled the government to steer nominally private resources toward government-favored uses even more directly, and it laid the groundwork for further government interference in the economy during the Second World War.

See "Government and the Economy: The World Wars," by Robert Higgs (Independent Institute Working Paper No. 59)

Also see:

"Government and the Economy since World War II," by Robert Higgs (Independent Institute Working Paper #58)

AGAINST LEVIATHAN: Government Power and a Free Society, by Robert Higgs

ARMS, POLITICS, AND THE ECONOMY: Historical and Contemporary Perspectives, ed. by Robert Higgs


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