During his recent trip to Europe to drum up support from the allies, Deputy Defense Secretary Paul D. Wolfowitz was asked by NATO ambassadors what it would take to prove that Iraq has failed to give up its weapons of mass destruction. His reply illustrated the subjective nature of the evidence against Iraqi President Saddam Hussein, which depends on the eye of the beholder.

"It's like the judge said about pornography," Wolfowitz told the closed-door audience, according to a participant. "I can't define it, but I will know it when I see it."

As Baghdad complies with the deadline set by the U.N. Security Council and hands over a detailed report on Iraqi weapons programs, few experts in or out of government are expecting to find a smoking gun buried in the mound of documentation.

A far more likely result, they say, is further ambiguity about Hussein's arsenal and widely differing opinions about the need for war with Iraq.

While the Bush administration may need little convincing that Iraq is in material breach of U.N. resolutions demanding its disarmament, a much higher standard of evidence will be required to convince key U.S. allies, including Turkey and Saudi Arabia, of the case for war. Even Britain, America's most dependable ally, has signaled differences with Washington over how long the inspection process should be permitted to continue before declaring that Hussein is cheating.

Now that Iraq has completed its report, pressure will mount on the United States to produce solid evidence to bolster its contention that Hussein still has an extensive program to produce nuclear, chemical and biological weapons in violation of the cease-fire that ended the 1991 Persian Gulf War. U.S. officials have refrained from providing such evidence until now on the grounds that it would enable Baghdad to fill in gaps in its "full and final" accounting of its arsenal.

In briefings last week, senior administration officials went out of their way to play down expectations of dramatic new evidence showing that Iraq has been caught red-handed. As one White House official put it, this will not be like the Cuban missile crisis in 1962, when the U.S. ambassador to the United Nations, Adlai Stevenson, shocked the Security Council with spy-plane photos of Soviet missile emplacements in Cuba.

"The intelligence process is an art, not a science, requiring synthesis of a lot of information from a wide variety of sources," said a top administration expert on Iraqi weapons of mass destruction. He added that over the last four decades, Iraq and other countries have invested huge resources in covering up their tracks, including moving key facilities underground, making them difficult to detect by overhead surveillance.

Rather than a smoking gun, U.S. officials say, the rest of the world should expect a pattern of telltale signs that lead to "only one logical conclusion": that Hussein still has weapons of mass destruction and "values these weapons very dearly."

In the absence of dramatic, unambiguous evidence proving that Hussein is lying, European officials say much will depend on the conclusions of the U.N. inspection teams allowed back into Iraq last month after four years.

"We must give the inspections a serious chance," a West European diplomat said. "If the Americans want to bring the sensible majority of Security Council members with them, it will have to be on the basis of the inspectors' analysis."

Giving the inspectors a chance raises problems of timing, however. Many experts believe it will take the inspectors many months, if not years, to come up with convincing evidence of large-scale cheating by Baghdad. This will push the timetable for an invasion of Iraq past February, the optimum period for fighting a war, before desert temperatures begin to rise and chemical protection suits become too hot to tolerate.

This explains why some Washington hawks would like to orchestrate a showdown with Iraq over the next few weeks, rather than get involved in a protracted cat-and-mouse game with Baghdad.

"If you think the result of the inspections process will be ambiguous, then the best time to strike is now," said Kenneth Pollack, a former CIA expert on Iraq now with the Brookings Institution. "You should make a crisis now because you are not going to have any better cause for a crisis in six months. It is a fantasy to think the inspectors will come up with a smoking gun."

The drawback to engineering a crisis with Iraq based on something less than a smoking gun is that it becomes much more difficult -- although not necessarily impossible -- to assemble an international coalition to overthrow Hussein. Officials from Turkey and Saudi Arabia, which are home to large U.S. military bases bordering Iraq, have said they will require a second Security Council resolution authorizing the use of force before allowing their countries to be used as the springboard for an invasion.

In the case of Saudi Arabia, alternative bases are available in Kuwait and Qatar, where the U.S. military has just inaugurated a new command and control center duplicating many of the facilities available at the Prince Sultan air base outside Riyadh.

Turkey's cooperation, however, is crucial for access to northern Iraq, given that neither Iran nor Syria is friendly with the United States.

Bush administration officials have put a good deal of effort into wooing the new Turkish government after the election victory of a moderate Islamic party, many of whose supporters are strongly oppose to a U.S. attack on a neighboring Muslim state. When Wolfowitz visited Ankara last week, he brought a big bag of incentives for Turkey, including economic assistance, a role in deciding the future of northern Iraq and full integration with Europe.

"The United States has become the champion of Turkey joining the European Union," said a European diplomat, noting that Wolfowitz spent one-third of a major foreign policy address in London supporting Turkish political aspirations. "These things are all linked."

U.S. experts on Turkey believe that Ankara will eventually go along with the Bush administration's wishes on Iraq, and provide Washington the facilities it needs, if only because Turkey cannot afford to stand aside, given the geopolitical stakes involved.

Successive Turkish governments have been determined to prevent the emergence of an autonomous Kurdish state in northern Iraq, fearing that this would encourage secessionist pressures from Turkey's own Kurdish minority.

A former Turkish prime minister, Turgut Ozal, summed up the Turkish dilemma on Iraq when he noted that during the run-up to the Gulf War, Turkey wanted to be "at the table as a guest, not as a menu item."

In order to secure a minimum level of international endorsement of an attack on Iraq, the Bush administration will need the support of Britain and France, who have veto rights on the Security Council. While London has loyally supported Washington throughout the current crisis with Iraq, the two governments' positions are not identical. British Foreign Secretary Jack Straw last week made clear that London wants the inspectors to be given time to "nail" Hussein's "lies."

France, meanwhile, has the taken the lead in insisting on a second U.N. resolution to clear the way for a U.S. attack on Iraq. In the end, however, most observers expect the French to fall into line. "The French will be persnickety in demanding respect for international law," said a European diplomat, "but when the chips are down, they will be there."

Commentary:
Excellent!

BAGHDAD, Iraq – Iraq challenged the United States today to produce any evidence it has that Baghdad possesses weapons of mass destruction.

"Why play a game?" a top adviser to President Saddam Hussein asked.

As the huge collection of documents on Iraq's nuclear, chemical and biological programs was being flown to the U.N. headquarters, Lt. Gen. Amer Al-Saadi said the declaration demanded by the United Nations is accurate and complete.

Al-Saadi told reporters that the report contains no new Iraqi evidence to answer lingering questions inspectors have about crucial part of Baghdad's chemical and biological weapons programs. Baghdad has previously presented "first-class evidence" that was ignored for political reasons, he said.

A U.N. inspector brought a copy of the part of the report dealing with Iraq's nuclear program to Vienna today and handed it over to the International Atomic Energy Agency, the U.N. agency overseeing nuclear inspections in Iraq. IAEA experts were to begin examining the documents Sunday night, a spokeswoman said.

Two more copies of the report – which in its complete form totals more than 12,000 pages – were on their way to New York, one for the Security Council and the other for the U.N. Monitoring, Verification and Inspection Commission.

The U.N. resolution requiring the declaration be filed by today also called on Iraq to declare any stocks or programs in chemical, biological or nuclear weapons. The Baghdad government says it has none.

Bush administration officials reject such Iraqi denials and threaten war if, in their view, Baghdad does not meet U.N. arms control demands. They say they have "solid evidence" Iraq retains weapons of mass destruction, but U.N. inspectors indicate they have seen no conclusive evidence thus far from U.S. or other sources.

Al-Saadi, a British-educated, former chief of military production for Iraq, told reporters the Iraqi declaration was "accurate" and "truthful." Then he added:

"If they have anything to the contrary, let them forthwith come up with it, give it to (the U.N. inspectors). They are here. Why play a game?"

Al-Saadi said the report "will embarrass some nations and companies" cited as having assisted in Iraq's pre-1991 efforts to build weapons of mass destruction, which Baghdad insists it no longer holds.

Al-Saadi said the document was so complete that if the council makes it all public, "this means that the Security Council is participating in the proliferation of materials" relating to prohibited weapons. He said the council already is discussing how to handle the report during a meeting in New York on Tuesday.

He complained that the U.S. administration, even before reading the dossiers filed Saturday, had ridiculed the mass of Iraqi documents as a "telephone directory."

"We don't understand this rush to judgment," he said. "A superpower should study and take its time in judging, especially since everyone is looking on as it prepares for a huge military campaign, for an aggression against Iraq. It should behave wisely."

Asked whether Iraq itself has included new evidence in its declaration to address major unanswered questions posed by the U.N. inspectors, al-Saadi focused on two issues: reported discrepancies in the disposition of large amounts of lethal VX nerve agent produced by Iraq in the 1980s, and large gaps in documentation linked to Iraq's biological weapons program.

On VX, he said, "some first-class evidence" was given in the 1990s, but did not satisfy the inspectors then "because they were mainly led by personnel from the United States and Britain." As for biological weapons, he said further evidence doesn't exist because "the program didn't exist after 1991."

The U.N. plane carried the Iraqi declaration out of Baghdad to Cyprus for onward flights. On its return, the plane brought reinforcements for the U.N. weapons inspectors in the Iraqi capital, 25 new investigators who will double the staff and allow quick expansion of the inspection schedule.

The inspectors' first helicopter was being assembled today at Baghdad's Saddam International Airport. They expect eight in all, enabling them to range farther afield with their daily surprise inspections.

The U.N. teams continued those missions today, visiting a government mining and survey company in Baghdad with past association with uranium processing, which could help make fuel for nuclear bombs, and a pesticide plant west of Baghdad. Pesticide production can be converted to chemical weapons making.

The long-awaited Iraqi declaration comprised at least a dozen bound volumes accompanied by computer disks, covering such subjects as the 1990s U.N. weapons inspection regime in Iraq, when many arms and much production equipment were destroyed, and "dual-use" industries that can alternate between civilian and military production.

The arms declaration will draw weeks of scrutiny from nuclear engineers, chemists, microbiologists, missile technicians and other specialists as the United Nations searches for clues, among the dry accounts, of hidden arms programs or remaining caches of weapons of mass destruction.

"I hope the international community will bear with us and give us time to do a proper job," said Mohamed ElBaradei, the IAEA director-general.

The U.N. experts are expected to "sanitize" the documents for distribution to representatives of 15 Security Council member nations, by removing sensitive information on producing chemical, biological or nuclear weapons. Translating from Arabic may also cause delays.

The U.N. agencies will compare the new Iraqi information with past Iraqi reports and with their own databases of past inspections and other information. What they learn "will be integrated in our overall strategy" as they plan targets for surprise visits in the coming weeks, said Jacques Baute, leader of the nuclear inspection team here.

"The information provided in this declaration will have to be verified, and the onus of that will fall on us," said Demetrius Perricos, operational chief for the U.N. Monitoring, Verification and Inspection Commission, responsible for chemical and biological weapons and missiles.

If Iraq is eventually found to have cooperated fully with the inspectors, U.N. resolutions call for the Security Council to consider lifting economic sanctions imposed on Iraq after it invaded Kuwait in 1990.

Although Washington was dismissive of the Iraqi document submitted this weekend, the Russian Foreign Ministry, by contrast, issued a statement saying the declaration shows Iraq is committed "to act in compliance" with U.N. requirements.

In the Persian Gulf emirate of Qatar, meanwhile, the U.S. Central Command prepared to inaugurate a seven-day, computer-assisted war game Monday that some observers speculate could be a rehearsal for a war against Iraq. The exercise will not involve troops in the field, but rather "tabletop" scenarios played out by staff officers.

Commentary:
There's an old saying, "put up or shut up." For almost a year Bush has claimed he has proof Iraq has weapons of mass destruction. Where is it? Why didn't he give the evidence UN inspectors on day one? Why didn't the inspectors find evidence on day one? Is Bush the one who is lying? Bush needs war. Without it his presidency ceases to have purpose or meaning and his war-mongering lies will be exposed to the world press. If on the otherhand, Iraq does have WMD and Bush didn't prove in on day one, that means he was prepared to go to war and kill perhaps tens of thousand based on a guess. No matter how you cut Bush is evil.

WASHINGTON (Reuters) - Pushing for a major hike in the U.S. Securities and Exchange Commission's budget, Commissioner Harvey Goldschmid said on Friday any successor to SEC chairman Harvey Pitt should demand the White House agree to Congress's authorized SEC budget. As Democrats in Congress criticized President Bush over his stance on the SEC budget, Goldschmid said the SEC needs close to the $776-million authorized for it this summer by Congress after a flood of corporate scandals.

"The new chairman of the SEC should not accept nomination without a pledge from the administration to support something in the order of the $776 million authorized" in the Sarbanes-Oxley Act passed in July, said Goldschmid.

The Bush administration is recommending less money for the SEC than Congress has called for, reviving questions about White House commitment to fighting corporate fraud.

Congressional Democrats on Thursday blasted Bush for resisting the 77-percent SEC budget hike in Sarbanes-Oxley, the biggest securities law overhaul since the 1930s.

"To make securities regulation effective, the SEC must have a budget along the lines of the $776 million that was authorized in Sarbanes-Oxley," Goldschmid, a Democrat, said after speaking to a consumer group conference here.

Officials on Thursday said the White House is backing a more modest fiscal 2003 SEC expenditure of about $568 million, compared to the commission's 2002 budget of $438 million.

Pitt resigned on Nov. 5 amid controversy about his handling of appointments to a new national accounting oversight board, whose chairman William Webster also resigned a week later. Replacements for the two men still have not been found.

Sarbanes-Oxley -- co-authored by Sen. Paul Sarbanes and Rep. Michael Oxley -- enacted dozens of new laws on accounting, corporate governance, financial disclosure and the SEC, which has been seen widely for years as woefully underfunded.

Over the past year, Bush has already provided $30 million to the SEC to pay for hiring 100 new employees, plus $100 million more in emergency funding.

The SEC -- with 2,900 employees and a budget that is puny by federal standards -- polices 17,000 publicly traded corporations, 34,000 investment company portfolios, 8,000 brokerage firms and 7,500 financial advisers.

Commentary:
Bush promised to clean up corporate fraud, but then opposed spending the money to do it. When the scandal was head-line news every day, Bush was forced to agree to the democrat plan (the press keeps telling us the democrat party is dead--what party do they live on?). Finally Bush was forced to accept the Sarbanes Bill and he signed it into law. Then came funding and Bush demanded that the funding be stripped out for the new accounting board (an impeachable offense), then he also demanded hundreds of millions more cut out. Where is Bush on the Corporate Scandals? On the side of the criminals that took your money.

TORONTO (Reuters) - Well over a third of Canadians think President Bush poses a bigger threat to peace than Iraq's Saddam Hussein, although far more worry about Saddam, according to an opinion poll published on Saturday.

The poll of 1,205 adult Canadians showed that 38 percent of Canadians thought Bush was a greater threat to world peace than Saddam, and 56 percent thought Saddam was the bigger risk.

The survey, by the EKOS polling group, was published in the Toronto Star newspaper and in La Presse in Montreal.

More than half those surveyed thought that relations between Canada and the United States had soured in the last year and 65 percent thought Washington had no business telling Canada to boost defense spending.

"There is a good deal of ambiguity in Canadians' minds," the Toronto Star quoted EKOS President Frank Graves as saying. "It appears having something less than the most idyllic relations with the United States is not necessarily seen as a bad thing."

Ties between Canada and the United States have been frosty for a while, if only because Bush's conservative politics are so different from those of Canada's Liberal prime minister, Jean Chretien.

A Chretien aide caused a storm last month when she referred to Bush as a "a moron" in what she thought was a private conversation. She quit in embarrassment after the media picked up the tale, and Chretien, who had initially sought to defend her, insisted that he did not think Bush was "a moron" at all.

Other irritants between the two vast neighbors center on trade disputes on softwood lumber and perhaps on wheat, and on U.S. pressure on Canada to increase defense spending.

According to Canadian media reports, White House officials privately refer to the 68-year-old Chretien as "dino," short for dinosaur.

US-CANADIAN TIES WORSE

Saturday's poll, conducted between Monday and Wednesday, showed that 52 percent of Canadians thought ties between Canada and the United States were worse now than they were a year ago and only 7 percent felt they had improved.

Almost two-thirds of those questioned, or 65 percent, believed the United States had no business telling Canadians to boost defense spending, although 31 percent thought it was a reasonable request.

The survey, which had an error margin of 2.8 percentage points, also revealed deep divisions about what Canadians viewed as the root cause of conflicts and tensions between the Muslim world and the West.

Twenty-seven percent of those questioned thought the tensions stemmed from "basic differences in the values of Islam and the West" and 21 percent blamed the Islamic world's hatred of the West.

But 20 percent thought the problems stemmed from economic disparities between the West and the Islamic world and 25 percent blamed U.S. foreign policy, especially Washington's policy in the Middle East.

Earlier this year, Chretien was strongly criticized by conservative U.S. commentators for linking the Sept. 11 suicide attacks on the United States to the perceived arrogance of the United States and the West.

Graves said the survey did not show that Canadians felt Bush was "evil," but it did reflect concern about the power of the world's only superpower.

"A good portion of Canadians wouldn't agree with the characterization that he (Bush) is a moron, but they do think he is dangerous," he said.

"His missteps or miscalculations can have far more catastrophic calculations than nutty or evil Saddam Hussein."

Commentary:

WASHINGTON (Reuters) - President Bush launched the biggest shakeup of his two-year-old administration on Friday, pushing out gaffe-prone Treasury Secretary Paul O'Neill and top White House economic adviser Lawrence Lindsey.

O'Neill's resignation, announced in a curt letter at Treasury, ended a two-year tenure marked by ill-timed comments and criticism of the former industrialist's ability to be the chief spokesman for the world's biggest economy.

An administration official said O'Neill quit "at the request of the White House," making him the first Bush Cabinet official to leave. Less than an hour later, Lindsey, who is director of the National Economic Council, also tendered his resignation, which was more widely expected.

PREPARING FOR 2004

The actions seemed aimed at helping inoculate the White House against what could be a key vulnerability during the approaching run-up to the 2004 election presidential election season -- a public view that the shaky economy was not in skilled hands.

Republican sources said Vice-President Dick Cheney, who helped recruit O'Neill for the Treasury job, also played a key role in the shakeup. Cheney has been meeting economists for the past several weeks but was characteristically close-lipped about the nature of the discussions, so the resignations came as a surprise.

O'Neill, who turned 67 on Wednesday, was considered to be on relatively solid ground since he was leading the administration's effort to reform the nation's tax code.

He had a one-on-one meeting with Bush last week, immediately upon returning from a grueling 12-day trip to Southwest Asia. The session was allegedly to talk about tax reform, though administration officials afterward declined to comment on the topics discussed.

O'Neill had always smarted at comparison between himself and market-savvy former Treasury Secretary Robert Rubin, with whom he was frequently and unfavorably compared. But in the wake of his and Lindsey's resignation, financial market participants sounded more relieved than shocked.

CONFIDENCE LACKING

"It does not come as a surprise that the administration would make significant changes in its economic team given that the group had not been able to inspire the kind of confidence among investors and consumers that is required to set effective economic policy," said Carl Tannenbaum, chief economist for LaSalle Bank in Chicago.

In his letter to Bush, O'Neill simply offered thanks and gave no hint that he was quitting at the White House's request, as officials later confirmed was the case.

"It has been a privilege to serve the Nation during these challenging times. I thank you for that opportunity," O'Neill said in a brief letter to President Bush.

Treasury spokeswoman Michele Davis told reporters the resignation would become effective "in the next few weeks," adding that O'Neill had informed senior Treasury staff of his decision on Friday morning.

"As he told senior staff this morning, there are lots of other important things to do in life. Back in December of 2000, he was planning to retire and devote himself to improving health care and education in Pittsburgh. I'm sure he will return to those important projects," she said.

O'Neill was sworn in as the 72nd U.S. treasury secretary on Jan. 20, 2001. While his often direct style of speaking raised eyebrows in Washington, he was also often seen as refreshingly candid. But this style sometimes roiled financial markets and upset foreign governments.

Commentary:
With Lindsey and O'Neill gone who will Bush blame? Damn those damn democrats, where are they when you need them? Bush, like Reagan will blame democrats for his failings. That's how the game is played. The economy and markets are already in turmoil, confidence is shot, unemployment is at a nine year high and the Constitution lay in shreds. Bush makes a lousy Santa Claus huh?

The nation's governors are increasingly fingering the federal government as a major culprit in their widening fiscal crises, pointing to billions of dollars in tax cuts and new spending mandates that Congress and the Bush administration have foisted on the states.

Last month, the National Governors Association (NGA) declared that the states are facing their worst fiscal crisis since World War II, as governors and legislatures struggle to close budget shortfalls totaling $67 billion. Standard & Poor's, a credit rating agency, has warned of a possible downgrade for bonds issued by nine states, including California, Indiana and Arizona.

Governors of both political parties are ratcheting up their demands and emphasizing Washington's responsibilities. As the Council of State Governments convenes in Richmond today, Virginia Gov. Mark R. Warner (D) plans to appear with state lawmakers and other governors, including Parris N. Glendening (D) of Maryland, to demand federal help to cover mandated expenditures for Medicaid, road construction and emergency response.

Warner's speech follows a meeting Monday in North Carolina, where a group of governors met with Education Secretary Roderick R. Paige to insist that the administration provide adequate funds to cover demands imposed by President Bush's new education law.

Administration officials faced a barrage of complaints last month at the NGA meeting in Austin.

"In every one of those meetings the topic has been exactly the same," said Glendening, "the state of the economy, the federal government's role in causing much of the problems the states are facing and deep concern over the federal government's lack of a response in any way."

Among governors, that sentiment is bipartisan.

"I realize the federal government can't go in and rescue everyone. It's not all their fault," said Arkansas Gov. Mike Huckabee (R). "But when we hear that the government is going to bail out the airlines, to heck with the airlines. We're providing the services that you're supposed to be providing. Help us out."

But Bush administration officials are resisting the governors' entreaties for direct federal aid. "As to the question of whether federal taxpayers should be on the hook for states' budget problems, I'm skeptical," R. Glenn Hubbard, chairman of the president's Council of Economic Advisers, told the Financial Times this week.

Just who is responsible for that crisis is the subject of an increasingly heated debate.

White House budget office spokeswoman Amy Call said it was unfair for the governors to blame Washington for their troubles. The states are grappling with the same forces that have pushed the federal government into deficit: rising health care costs and a sluggish economy that has sharply eroded tax revenue.

And the administration has been trying to help, crafting waivers designed to rein in Medicaid costs and pushing proposals to expand private health coverage and provide prescription drug benefits to seniors. One Republican congressional aide suggested the governors' clamor for federal aid is nothing new and entirely predictable.

A report last month by the Center on Budget and Policy Priorities pointed to a different culprit of the states' own making. The report noted that between 1994 and 2001, 43 states enacted major tax cuts. Those tax cuts are costing the states $40 billion in lost revenue each year, three-fifths of the current shortfall. States also made the choice to expand social programs and the reach of Medicaid, the costs of which are now exploding.

But the report's author, Nicholas Johnson, said the governors are also correct when they say the states' problems have been exacerbated greatly by the actions of Congress and the White House. "There's plenty of responsibility to go around," Johnson said.

The governors' litany of complaints is lengthy.

On the tax side, last year's 10-year, $1.35 trillion tax cut included a little-noticed provision aimed directly at state coffers. Under the tax law, the federal estate tax diminishes at glacial speed over the next decade. But the law makes swift work of a provision that allows states to claim a credit from the federal government for estate taxes paid. The "state death tax credit" has already been cut by 25 percent, and will be gone by 2005, at a cost to the states of $4 billion a year, according to Harley Duncan, executive director of the Federation of Tax Administrators.

This year's stimulus bill, which granted an additional tax break to businesses that invest in plant and equipment, also hit the states, because almost all of them have tied their own corporate income tax systems to the federal government's. Thirty states scrambled to "decouple" their corporate tax rates from Washington's to save as much as $15 billion over the next three years, but 15 other states have absorbed the revenue blow.

"Utah at this point is, if not grinning, at least bearing it," said Gov. Mike Leavitt (R). Making matters worse, Leavitt said, Washington has so far blocked efforts by the governors to impose new sales taxes on the Internet, a medium that governors believe is costing their states billions of dollars in lost revenue. "We are progressively losing control of our tax policies," he said.

On the spending side, governors say they are struggling to fund new burdens imposed by the federal election reform law, homeland defense requests, and education testing requirements, all of which were supposed to be financed in whole or in part by the federal government.

State and local fire, police and medical rescue units were supposed to receive $3.5 billion this October to finance homeland security programs that Washington wants. So far, they have seen virtually none of it. The president's "No Child Left Behind" education law envisioned spending nearly $28 billion on new educational testing and teacher training. But the Bush budget requested $22 billion, and so far, Congress has approved nothing. Congress also hoped to give the states $2.1 billion to finance the election reforms requested, but, so far, lawmakers haven't approved a cent.

"To pass these mandates without dollars attached when the states are so fiscally stressed is just not responsible," Warner said.

Most importantly, the governors say they are simply losing control of their Medicaid budgets. For that, they largely blame Washington. When Medicaid and Medicare were created, Congress envisioned Medicare as the health insurance program for the elderly, while Medicaid would cover the poor through combined state and federal contributions. But the burden on Medicaid has grown steadily. The program now covers the long-term care costs of the elderly, and, in many states, their prescription drug costs.

Congress's failure to pass a promised prescription drug benefit for the elderly has landed squarely on the states' shoulders, Huckabee said. And despite efforts by the Bush administration to grant state governments more flexibility to manage Medicaid, the states still lack the authority to control costs that grew by 13.2 percent this year, the fastest rate since 1992.

"It violates the basic principle of good management to give us the responsibility to manage but no authority to manage with," Leavitt said.

This summer, the Senate approved bipartisan legislation that would have temporarily placed more of the cost-sharing burden for Medicaid on the federal government. But in the face of strong White House opposition, the bill died. Now the governors are seeking a longer term solution that would force the federal government to assume responsibility for the long-term health care costs of seniors, and that too is facing White House opposition.

Call noted that the federal government is facing budget problems of its own. Any new responsibility for Medicaid is bound to become a long-term burden. "We feel that if you change the [Medicaid] formula, it's a change in law, a permanent change," she said. "You're never going to get anyone to change it back."

Commentary:
The law requires all new federal programs be funded by the federal government. This was a core component of the "Contract With America." Forcing states to do testing etc. are not part of Bush's so-called "national emergency." Bush is therefore in violation of Title 2, Chapter 25 of US Code and should be removed from office.

Why do we have laws in this country again? I forget?

Sen. John McCain accused President Bush yesterday of breaking a written promise to speedily appoint a Democrat to the Federal Election Commission, reigniting their roiling feud just as McCain is about to regain the post of chairman of the Senate commerce committee.

McCain (R-Ariz.) said he will "assume all future assurances and promises by this administration to be quite possibly insincere." In an interview, he said the White House had delayed the appointment as part of an "orchestrated and systematic undermining" of the campaign finance legislation that he long championed and Bush belatedly and grudgingly supported.

The FEC is writing regulations to implement the McCain-Feingold campaign finance law and the current commissioners have approved several loopholes. Supporters of McCain's proposed appointee, ethics lawyer Ellen L. Weintraub, say she would vote for stricter limitations.

A White House official said last night that Bush plans to appoint Weintraub this morning -- less than 24 hours after the FEC finished the bulk of its work on the law. McCain called the timing cynical.

"The Bush administration has broken their word on an issue that has been of transcendent importance to me, and that's hard to get over," said McCain, who ran against Bush in the Republican primaries of 2000. "It will be harder for them to do business with the Senate, since a lot of it is done by handshake."

McCain -- who was not invited to the ceremony when Bush signed the measure into law -- could launch investigations of the administration when the GOP takes over the Senate in January and he regains the chairmanship of the Committee on Commerce, Science and Transportation.

The White House made a deal with McCain in July to appoint Weintraub to the FEC. Weintraub, a former Democratic counsel to the House ethics committee, was the choice of Senate Majority Leader Thomas A. Daschle (D-S.D.). Until the deal was struck, McCain was holding up nearly 100 of Bush's judicial and administrative nominations.

Even as the senator was voicing his anger, the FEC yesterday adopted a disputed regulation that McCain and his allies say epitomizes the kind of loophole that Weintraub might have prevented. McCain and groups such as Common Cause and the Center for Responsive Politics say the new regulation will let federal candidates control the spending of unlimited amounts of corporate, union and special interest "soft money" in the early stages of federal campaigns. A key goal of the McCain-Feingold law is to bar the national parties and federal candidates from raising and spending soft money.

Under the regulation, federal candidates and national parties could write commercials, decide when and where they would air, and have a trade association, lobby, union, corporation or individual pay the cost -- but only if the ads run at least 120 days before the primary or general election and stop short of expressly advocating a candidate's election or defeat.

"This will create a new 'anything goes' zone where soft money donors can literally pay for a candidate's TV ads and other expenses, and still be totally outside the reach of the new law," said Don Simon, acting president of Common Cause.

FEC Chairman David M. Mason and three other commission members defended the new rule. They said the 120-day cutoff period will set a tougher standard than those governing previous elections.

Terms of the July deal regarding Weintraub were spelled out in a White House e-mail, which McCain divulged and Bush aides confirmed. The e-mail said that if no disqualifying issues turned up during Weintraub's background check, Bush would seat her using his recess appointment power.

Since then, the FEC has written most of the regulations needed to implement the campaign finance law, which took effect Nov. 6. The Democrat to be replaced by Weintraub, Karl J. Sandstrom, has joined three Republican commissioners on several controversial 4-2 rulings that weakened the law in the view of McCain and other sponsors.

White House Chief of Staff Andrew H. Card Jr. told McCain in a phone call Wednesday that Weintraub would not be seated in time for yesterday's important FEC meeting.

McCain said the appointment is coming too late. "While the administration wanted to share in widespread public approval of campaign finance reform by having the president sign the legislation into law,'' he said, "they are cooperating behind the scenes with opponents of the law in Congress and on the commission to weaken it as much as possible."

Weintraub said she is looking forward to serving but feels "a little frustration that I'm going to be faced with implementing regulations I had no part in drafting."

White House press secretary Ari Fleischer said Bush had kept his word. "Ms. Weintraub has brought to the attention of the White House several questions that require being looked into," Fleischer said. "Due diligence is being done in reviewing those questions, and we look forward to completing this task."

A White House official said last night the process was completed. "When it comes to good-government legislation, the last thing you want to do is short-cut the good-government process," the official said.

McCain said Card told him Weintraub might have a conflict of interest because her firm, Perkins Coie, had filed comments about the campaign finance rulemaking. But McCain said Weintraub "has scrupulously refrained from any participation in her firm's involvement in the litigation."

McCain sources said the only other issue that Clay Johnson, the presidential personnel director, raised with Weintraub during a phone conversation Wednesday was whether she was prepared to rule on the regulations on short notice -- she said she was -- and whether she needed time to wrap up her law practice. She said she did not.

Several authorities on campaign finance agreed that Weintraub's absence from the FEC has resulted in softer regulations. Michael J. Malbin, executive director of the Campaign Finance Institute, said the latest rules "could be creating large avenues for activities that certainly would not be favored by people who voted for the law."

Commentary:
The Law forbids soft money, Bush's appointee's undid the law and now allow soft money. Why do we have a congress and why do they waste time writing legislation. Bush either ignores the law or rewrites it without their consent. An impeachable offense if ever there was one.

Paul O'Neill, whose outspokenness won him praise as a captain of industry but often landed him in hot water as President Bush's treasury secretary, announced his resignation Friday.

Sworn in Jan. 20, 2001, O'Neill is expected to leave office within the next few weeks. During his time as treasury secretary, O'Neill's blunt-speaking style served as a lightning rod for detractors and sometimes could even make his supporters wince.

He is the first member of Bush's Cabinet to leave.

"It has been a privilege to serve the nation during these challenging times," O'Neill said in a letter to the president. "I thank you for that opportunity."

His two years at Treasury were peppered with controversy.

O'Neill, who left his job as chairman of Alcoa, the world's biggest aluminum maker, to take the Cabinet post, touched off a furor when he said he would keep nearly $100 million worth of stock in the company. Under fire by critics about potential conflicts of interest, he eventually reversed course and sold the stock.

As the president's chief economic spokesman, he was frequently criticized as being either too enthusiastic about the economy's prospects and the stock market or too ho-hum.

When Wall Street reopened after the Sept. 11, 2001, terrorist attacks, O'Neill turned into an economic cheerleader, predicting on Sept. 17 that the Dow Jones industrial average could be approaching all-time highs within 12 to 18 months.

As the stock market melted down that day, O'Neill declared that "the people who sold will be sorry that they did it." He also pooh-poohed the notion that the economy could be headed into a recession. It was.

Just months after he took office, O'Neill had taken the opposite approach. Following the first trading day after the Dow Jones index in the spring of 2001 suffered its worst week of declines in 11 years, O'Neill offered this comment to millions of investors: "Markets go up and markets go down."

From the beginning, he suffered in comparison to one of his predecessors, Robert Rubin, who held the post under President Clinton and was highly thought of on Wall Street.

Early in his term, O'Neill's mixed comments on the U.S. dollar rattled currency markets and perplexed currency traders. He described traders as people who "sit in front of a flickering green screen" all day and were "not the sort of people you would want to help you think about complex questions.

Commentary:
O'Neill's problem was simple. He couldn't defend Bush's policies anymore. O'Neill is very much like Reagan's budget director in that both knew what their bosses were doing was wrong but had to defend it anyway. David Stockman lasted a few years longer than O'Neill though.

This is just the beginning of course. Most of Bush's economic team has to go. Wall Street lost confidence in them a long time ago.

WASHINGTON –– The nation's unemployment rate unexpectedly shot up to 6.0 percent in November, the highest level since a peak almost nine years ago when the country was struggling to emerge from the last recession.

The report, released Friday by the Labor Department, portrayed a bleak snapshot of the U.S. economy at a time when many analysts had thought that rock bottom days for job seekers were behind them. Analysts were expecting a slight increase from the 5.7 percent posted in October.

U.S. companies also slashed 40,000 jobs in November, the most since nine months ago, when 165,000 jobs were cut. Economists had forecast modest job growth for last month.

November's jobless rate was matched back in April, and it was the highest since July 1994, when the rate topped 6.1 percent.

Friday's report surprised analysts, who thought the unemployment rate might tick up to 5.8 percent for November with stabilizing layoffs and fewer workers seeking unemployment benefits in recent weeks.

That had created optimism for the holiday shopping season - a hope that workers were lining up at cash registers rather than at unemployment offices. Consumer spending accounts for two-thirds of all economic activity in the United States and has been the main force keeping the economy going all year.

Low mortgage rates, tax cuts, and extra cash coming from a refinancing boom have helped to support consumer spending, offsetting some negative factors, including the roller-coaster stock market, a possible war and a string of corporate scandals.

Still, economists did not expect companies to go on a hiring spree. In the face of the struggling recovery and economic uncertainties, companies are keeping their work forces lean.

The report showed that employment in the nation's factories continued to decline, with a loss of 45,000 jobs last month. Hiring also was down in retail, mostly because of weak hiring during a time that stores typically build up work forces for the holiday shopping rush.

Countering those job losses was an overall hiring increase in services. Health-related companies made up more than half of the November increase, with notable gains in hospitals and nursing facilities. But employment in temporary employment firms - an industry where hiring had been on the upswing for much of the year - fell for the second month in a row. Such employment is closely watched by economists because companies often seek temporary help as their businesses start growing again instead of taking on full-time workers.

Other major industries showed little change last month, including construction and government, which had a large gain in October.

Commentary:
The fact that the month before Christmas had a drop in employment is a very bad oman. Christmas is the make or bust time of the year for retail and since they're not hiring things are far worse than most had expected.

I'd suggest Bush stop terrorizing the economy for a few months and see if we can pull out of this mess. He won't of course. Without war, he has nothing to do except explain his spending spree and deficit spending. Gotta keep the press pre-occupied with non-stories like Iraq.