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Mass Delusion – American Style

August 20th, 2010 Comments off

From The Burning Platform

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” – Charles Mackay – Extraordinary Popular Delusions and the Madness of Crowds

The American public thinks they are rugged individualists, who come to conclusions based upon sound reason and a rational thought process. The truth is that the vast majority of Americans act like a herd of cattle or a horde of lemmings. Throughout history there have been many instances of mass delusion. They include the South Sea Company bubble, Mississippi Company bubble, Dutch Tulip bubble, and Salem witch trials. It appears that mass delusion has replaced baseball as the national past-time in America. In the space of the last 15 years the American public have fallen for the three whopper delusions:

  1. Buy stocks for the long run
  2. Homes are always a great investment
  3. Globalization will benefit all Americans

Bill Bonner and Lila Rajiva ponder why people have always acted in a herd like manner in their outstanding book Mobs, Messiahs and Markets:

“Of course, we doubt if many public prescriptions are really intended to solve problems. People certainly believe they are when they propose them. But, like so much of what goes on in a public spectacle, its favorite slogans, too, are delusional – more in the nature of placebos than propositions. People repeat them like Hail Marys because it makes them feel better. Most of our beliefs about the economy – and everything else – are of this nature. They are forms of self medication, superstitious lip service we pay to the powers of the dark, like touching wood….or throwing salt over your shoulder. “Stocks for the long run,” “Globalization is good.” We repeat slogans to ourselves, because everyone else does. It is not so much bad luck we want to avoid as being on our own. Why it is that losing your life savings should be less painful if you have lost it in the company of one million other losers, we don’t know. But mankind is first of all a herd animal and fears nothing more than not being part of the herd.”

Stocks for the Long Run

The book Stocks for the Long Run was written by Jeremy Siegel in the mid-1990′s. The premise is that if you just buy and hold stocks over a 20 to 30 year period, you will always make money. This was exactly what the Wall Street witch doctors ordered. They pounded this message into the brains of every American incessantly in their advertising campaigns, literature and propaganda. It became an unquestioned truth. Just one problem. It isn’t the truth. Valuations matter. The Dow Jones was at the same level in 1982 as it was in 1966. On an inflation adjusted basis, the Dow did not get back to the 1966 level until 1990. That is 24 years of no return in the stock market. The American public ignored the true facts and piled into equities during the late 1990s. The result was one of the greatest examples of mass delusion in history. The internet bubble drove the NASDAQ market to a peak of 5,048 in March 2000. Today it sits at 2,180. Ten years after the bubble burst, the NASDAQ is still down 57% from its peak.

Delusional Americans all over the country believed in the new internet paradigm. Fools thought “bricks and mortar” retailers were dead. Morons quit their jobs so they could get rich day trading. Wall Street hucksters took advantage of this hysteria by attaching .COM to every ridiculous IPO they shilled to the American public. Wall Street knew these companies were pieces of crap, but they churned out the IPOs as quickly as possible while the getting was good. The Wall Street oligarchs made billions and the delusional American public got screwed. You would think that average Americans would have learned their lesson after this experience. They did not. They continued to buy into the Wall Street lies about stocks being a sure path to riches. The fact is that the S&P 500 is currently at the same level it was in March 1998. On an inflation adjusted basis, it is 25% below the level of 1998. You don’t hear this information on CNBC because the oligarchs that control the media need the delusion to continue in order to harvest more riches from the ignorant masses.

Chart forS&P 500 INDEX,RTH (^GSPC)

Home Sweet Home

“The continuing shortages of housing inventory are driving the price gains. There is no evidence of bubbles popping.”David Lereah – Chief Economist for National Association of Realtors – 2005

“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”Ben Bernanke – 2005

“House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.” - Ben Bernanke – 2005

Why was it that two supposedly brilliant, highly trained economists, with countless degrees and high paying positions could be so very wrong? Were they just mistaken or were they purposefully encouraging a national delusion? With the bursting of the internet bubble in 2000 – 2002, Americans immediately proceeded to the next bubble. Alan Greenspan was an almost God like figure in the early 2000s. He had “saved” the economy countless times during his 15 year reign of terror at the Federal Reserve. When he spoke, the American people listened. After the internet bubble and 9/11, he proceeded to reduce interest rates to 1% for an extended period of time. He then gave the all clear sign to Americans to take out adjustable rate mortgages. Lastly, Mr. Free Markets decided that banks and mortgage brokers could police themselves. The result was the greatest housing bubble in US history and a near collapse of the worldwide financial system.

Sane economists like Robert Shiller saw it for what it was. He calmly pointed out that home prices had pretty much tracked inflation for over 100 years. A 100% increase in home prices over the course of 3 years was irrationally exuberant. He was scorned and ridiculed by the delusion propagators at the NAR, the cheerleaders on CNBC, the Wall Street money changers, the Federal Reserve stuffed suits, and the corrupt politicians in Washington DC. The usual drivel about positive demographics, low interest rates, strong income growth, and limited land to develop were spewed out by the corporate media complex. The beneficiaries of this mass delusion were the Wall Street banks that created mortgage products and derivatives faster than Obama spreads our wealth around.

Mass delusion is always encouraged by those who benefit most from the mass delusion. David Lereah has admitted that he lied about the housing bubble because he was employed by realtors. Realtors made millions in commissions. Appraisers made millions in fees by inflating appraisals. Mortgage brokers made millions by encouraging people to lie on mortgage applications. Wall Street whores made billions by creating toxic packages of mortgages and selling them to Irish nuns, old ladies and clueless municipal administrators. The ratings agencies made hundreds of millions in fees for slapping  AAA ratings on toxic derivatives. Politicians got rich from political “contributions” from Fannie Mae, Freddie Mac, Wall Street, and the NAR. Any reasonable human being could look at the chart above and see that this would end badly, but Americans wanted to be deluded. They choose to believe. The housing market has now been falling for five years, with another five years to go. Ben Bernanke has reduced interest rates to zero. I wonder how that will work out.

Who Benefited from Globalization?

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” – Mark Twain

From the time that Bill Clinton signed the NAFTA agreement in 1994, globalization has been touted by those in power as beneficial to all Americans. How could free markets and free trade be a bad thing? Corporate America, Wall Street, and the mainstream corporate media have blared the propaganda of globalization benefits from their loudspeakers. In theory, globalization appears to be a positive concept. It describes a process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade. The truth is that globalization is not inherently good or inherently bad. The idea is that each country has its own strengths and weaknesses. Each country will take advantage of their strengths and rely on other countries to help mitigate their weaknesses. This will result in increased trade, a larger world market, and economic progress for all. One small problem. Trade is not really free. Every country on earth protects various industries. Every country on earth manipulates their currency in order to get an edge. Every country on earth invokes tariffs to protect their national interests.

Bill Bonner and Lila Rajiva address the difficulties of globalization and “free trade” in Mobs, Messiahs and Markets:

“Unfair trade is yet another of the dodgy slogans festooning the spectacle of globalization like tinsel slithering around a pole dancer. How can different regulations and practices in different countries constitute unfairness? Isn’t the essence of trade that different countries have different things to offer – whether cheap labor, or better technology, or more bountiful natural resources, or more welcoming business environments? If all countries had exactly the same things to offer each other, there would be no reason to trade at all. But what “fair” trade advocates are really advocating, of course, is unfair trade! They want to make sure their foreign competitors divest themselves of the very advantages that they bring to trading.”

“We notice, for instance, that when Americans in Detroit lose jobs to other Americans in California, they might grumble a bit. But, by and large, they accept it as part of the nature of things. They move, or retrain, or change jobs. But when they lose their jobs to Japanese in Osaka or Indians in Bangalore, then a cry goes up. Unfair trade, howl the trade unions; race to the bottom, scold the social activists; yellow – or brown – peril, shriek the xenophobes and racists.”

It seems the American middle class was sold a false bill of goods. They bought the Big Lie that globalization would benefit them. They bought into the delusion that even though their high paying manufacturing jobs sailed away to China and India, they could maintain their lifestyle through brain work, easy credit, cheap goods made in China by the people who took their jobs, and the ever increasing value of their homes. Noam Chomsky notes the fallacy of this delusion:

“The dominant propaganda systems have appropriated the term “globalization” to refer to the specific version of international economic integration that they favor, which privileges the rights of investors and lenders, those of people being incidental.”

Again, one must seek out who benefits from the delusion of globalization. The crony capitalists, Wall Street oligarchs, and corporate fascists who control the puppet strings in this country have benefited greatly from the Big Lie. Over 5 million manufacturing jobs have been off-shored since 2000. These good paying jobs are never coming back. Millions of service sector jobs continue to be shipped overseas. The global conglomerates like GE, HP, Oracle, IBM, and Boeing continue to rake in billions of profits, distributing millions to its high paid executives, while gutting middle class America. The ruling oligarchs convinced Americans to take advantage of cheap goods and easy credit, to buy electronics, cars, appliances, new kitchens, and take the vacations of their dreams. This Big Lie has left the American consumer with $2.5 trillion of non-mortgage debt and the lowest level of home equity in history. Retailers like Wal-Mart, Target, Home Depot, and Best Buy reaped billions in profits as Americans whipped out one of their 10 credit cards to buy HDTV’s, economy bags of tube socks, iPads, iPods, stainless steel refrigerators, and Dell computers. Small town America’s mom and pop economy was gutted by Big Box retailers selling the globalization delusion. The biggest beneficiaries of the globalization delusion were the Wall Street banks. They control 80% of credit card market and have reaped billions in interest at rates exceeding 20%, while sucking $20 billion per year in late fees from the clueless public. Wall Street bankers have rewarded themselves for their brilliance in destroying the middle class by reaping multi-million dollar bonus packages.

Vincible Ignorance

“Most ignorance is vincible ignorance. We don’t know because we don’t want to know.” - Aldous Huxley

Based on all available evidence, it seems the American public wants to be misled. They have chosen ignorance over knowledge and understanding. They want to believe their corrupt leaders. They want to believe that things always work out in the long run. They want to believe that the economy is about to get better. They don’t want to think about unsustainable debt, unfunded liabilities, saving for retirement, or Simon Cowell leaving American Idol. Americans desperately want to be deluded into another bubble, but there are no evident bubbles left to blow. The existing American delusion is that the current fiscal path will not lead to the utter destruction of our once great Republic.

America resembles a 40 year old aging baseball icon with two bad knees, a pot belly, receding hairline and delusions that he is still the ball player he was at 24. He doesn’t realize that his skills are shot, as he flails at curveballs in the dirt thrown by 21 year old kids. The rest of the league knows he is washed up, but he refuses to accept reality. America isn’t even running on fumes at this point. It is running on delusions. Politicians think they have saved the country from a Depression by adding $3 trillion to the National Debt and allowing  Wall Street banks to pretend they are solvent. Americans have been deluded by the ruling oligarchs that a $700 billion bank bailout, an $800 billion pork filled stimulus plan, the Federal Reserve buying $1.2 trillion of toxic mortgages, and the Treasury forcing taxpayers to pick up a $400 billion tab for Fannie Mae and Freddie Mac’s bad loans has actually solved a problem created by too much debt.

The American herd has gone mad. A few people have regained their senses, but the vast majority still exhibits the behavior of sheep being led to slaughter. The ruling oligarchs have utter contempt for the average American, but they fear the masses. In order to retain their power and wealth, they gladly hand out two years of unemployment payments, food stamps, and welfare payments to keep the masses sedated. The working middle class foots the bill. Corruption abounds and is sustained by the passage of more laws and regulations. The sociopathic powers that control the levers of power in this country need to be brought to justice if this country has any chance at survival. The den of vipers and thieves have trampled on the Constitution, speculated with the country’s funds, risked blowing up the financial system, committed fraud on a massive scale, and continue to rape and pillage the American citizens. Vincible ignorance by the American people is no longer a legitimate excuse. The criminals on Wall Street and Washington DC must be routed out and Americans must awaken from their delusional state before it is too late. I weep for the liberty of my country.

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Web Photos That Reveal Secrets, Like Where You Live

August 20th, 2010 Comments off

From Yahoo Finance

When Adam Savage, host of the popular science program “MythBusters,” posted a picture on Twitter of his automobile parked in front of his house, he let his fans know much more than that he drove a Toyota Land Cruiser.

Embedded in the image was a geotag, a bit of data providing the longitude and latitude of where the photo was taken. Hence, he revealed exactly where he lived. And since the accompanying text was “Now it’s off to work,” potential thieves knew he would not be at home.

Security experts and privacy advocates have recently begun warning about the potential dangers of geotags, which are embedded in photos and videos taken with GPS-equipped smartphones and digital cameras. Because the location data is not visible to the casual viewer, the concern is that many people may not realize it is there; and they could be compromising their privacy, if not their safety, when they post geotagged media online.

Mr. Savage said he knew about geotags. (He should, as host of a show popular with technology followers.) But he said he had neglected to disable the function on his iPhone before taking the picture and uploading it to Twitter.

“I guess it was a lack of concern because I’m not nearly famous enough to be stalked,” he said, “and if I am, I want a raise.”

Still, Mr. Savage has since turned off the geotag feature on his iPhone, and he isn’t worried about the archived photo on Twitter because he has moved to a new residence.

But others may not be so technologically informed or so blasé about their privacy.

“I’d say very few people know about geotag capabilities,” said Peter Eckersley, a staff technologist with the Electronic Frontier Foundation in San Francisco, “and consent is sort of a slippery slope when the only way you can turn off the function on your smartphone is through an invisible menu that no one really knows about.”

Indeed, disabling the geotag function generally involves going through several layers of menus until you find the “location” setting, then selecting “off” or “don’t allow.” But doing this can sometimes turn off all GPS capabilities, including mapping, so it can get complicated.

The Web site ICanStalkU.com provides step-by-step instructions for disabling the photo geotagging function on iPhone, BlackBerry, Android and Palm devices.

A person’s location is also revealed while using services like Foursquare and Gowalla as well as when posting to Twitter from a GPS-enabled mobile device, but the geographical data is not hidden as it is when posting photos.

A handful of academic researchers and independent Web security analysts, who call themselves “white hat hackers,” have been trying to raise awareness about geotags by releasing studies and giving presentations at technology get-togethers like the Hackers On Planet Earth, or Next HOPE, conference held last month in New York.

Their lectures and papers demonstrate the ubiquity of geotagged photos and videos on Web sites like Twitter, YouTube, Flickr and Craigslist, and how these photos can be used to identify a person’s home and haunts.

Many of the pictures show people’s children playing in or around their homes. Others reveal expensive cars, computers and flat-screen televisions. There are also pictures of people at their friends’ houses or at the Starbucks they visit each morning.

By downloading free browser plug-ins like the Exif Viewer for Firefox (addons.mozilla.org/en-US/firefox/addon/3905/) or Opanda IExif for Internet Explorer (opanda.com/en/iexif/), anyone can pinpoint the location where the photo was taken and create a Google map.

Moreover, since multimedia sites like Twitter and YouTube have user-friendly application programming interfaces, or A.P.I.’s, someone with a little knowledge about writing computer code can create a program to search for geotagged photos in a systematic way. For example, they can search for those accompanied with text like “on vacation” or those taken in a specified neighborhood.

“Any 16 year-old with basic programming skills can do this,” said Gerald Friedland, a researcher at the International Computer Science Institute at the University of California, Berkeley. He and a colleague, Robin Sommer, wrote a paper, “Cybercasing the Joint: On the Privacy Implications of Geotagging,” which they presented on Tuesday at a workshop in Washington during the Advanced Computing Systems Association’s annual conference on security.

The paper provides three examples of so-called cybercasing that use photos posted on Twitter and Craigslist and a homemade video on YouTube.

By looking at geotags and the text of posts, Mr. Sommer said, “you can easily find out where people live, what kind of things they have in their house and also when they are going to be away.”

“Our intent is not to show how it’s done,” he said, “but raise awareness so people can understand their devices and turn off those options if they want to.”

ICanStalkU.com, developed by the security consultants Larry Pesce of the NWN Corporation in Waltham, Mass., and Ben Jackson of Mayhemic Labs in Boston, uses a more direct approach to warning about the potential dangers of geotags. The site displays a real-time stream of geotagged photos posted on Twitter; the person who posted the photo also gets a notification via Twitter.

“The reaction from people is either anger, like ‘I’m going to punch you out,’ or ‘No duh, like I didn’t already know that’ or ‘Oh my God, I had no idea,’ ” Mr. Pesce said.

In the latter category was Cristina Parker of El Paso, who sells appliances part-time at Kmart and also manages social media for small companies. ICanStalkU.com notified her last week that a photo she had posted on Twitter of her Chihuahua, Zipp, also revealed where she lived.

“I immediately tweeted back to find out what I can do about it,” said Ms. Parker. The site sent her a Web link to instructions on how to turn off the geotag function on her LG Ally smartphone. “It’s definitely good to know for me personally and because of my social media work, too,” she said

Because of the way photographs are formatted by some sites like Facebook and Match.com, geotag information is not always retained when an image is uploaded, which provides some protection, albeit incidental. Other sites like Flickr have recently taken steps to block access to geotag data on images taken with smartphones unless a user explicitly allows it.

But experts say the problem goes far beyond social networking and photo sharing Web sites, regardless of whether they offer user privacy settings.

“There are so many places where people upload photos, like personal blogs and bulletin boards,” said Johannes B. Ullrich, chief technology officer of the SANS Technology Institute, which provides network security training and monitors the Internet for emerging security threats.

Protecting your privacy is not just a matter of being aware and personally responsible, said Mr. Sommer, the researcher. A friend may take a geotagged photo at your house and post it.

“You need to educate yourself and your friends but in the end, you really have no control,” he said, adding that he was considering writing a program to troll the Internet for photos with geotags corresponding to users’ home addresses.

“I’m beginning to think there may be a market for it.”

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The Myths of Reaganomics

August 19th, 2010 Comments off

From The Mises Institute


This memo to Mises Institute members was written in late 1987, and published in “The Free Market Reader,” LH Rockwell, Jr., ed., 1988, pp. 3342–362 and is posted on Mises.org in an edited edition.

I come to bury Reaganomics, not to praise it.

How well has Reaganomics achieved its own goals? Perhaps the best way of discovering those goals is to recall the heady days of Ronald Reagan’s first campaign for the presidency, especially before his triumph at the Republican National Convention in 1980. In general terms, Reagan pledged to return, or advance, to a free market and to “get government off our backs.”

Specifically, Reagan called for a massive cut in government spending, an even more drastic cut in taxation (particularly the income tax), a balanced budget by 1984 (that wild-spender, Jimmy Carter you see, had raised the budget deficit to $74 billion a year, and this had to be eliminated), and a return to the gold standard, where money is supplied by the market rather than by government. In addition to a call for free markets domestically, Reagan affirmed his deep commitment to freedom of international trade. Not only did the upper echelons of the administration sport Adam Smith ties, in honor of that moderate free-trader, but Reagan himself affirmed the depth of the influence upon him of the mid-19th century laissez-faire economist, Frederic Bastiat, whose devastating and satiric attacks on protectionism have been anthologized in economics readings ever since.

The gold standard was the easiest pledge to dispose of. President Reagan appointed an allegedly impartial gold commission to study the problem—a commission overwhelmingly packed with lifelong opponents of gold. The commission presented its predictable report, and gold was quickly interred.

Let’s run down the other important areas:

Government Spending. How well did Reagan succeed in cutting government spending, surely a critical ingredient in any plan to reduce the role of government in everyone’s life? In 1980, the last year of free-spending Jimmy Carter the federal government spent $591 billion. In 1986, the last recorded year of the Reagan administration, the federal government spent $990 billion, an increase of 68%. Whatever this is, it is emphatically not reducing government expenditures.

Sophisticated economists say that these absolute numbers are an unfair comparison, that we should compare federal spending in these two years as percentage of gross national product. But this strikes me as unfair in the opposite direction, because the greater the amount of inflation generated by the federal government, the higher will be the GNP. We might then be complimenting the government on a lower percentage of spending achieved by the government’s generating inflation by creating more money. But even taking these percentages of GNP figures, we get federal spending as percent of GNP in 1980 as 21.6%, and after six years of Reagan, 24.3%. A better comparison would be percentage of federal spending to net private product, that is, production of the private sector. That percentage was 31.1% in 1980, and a shocking 34.3% in 1986. So even using percentages, the Reagan administration has brought us a substantial increase in government spending.

Also, the excuse cannot be used that Congress massively increased Reagan’s budget proposals. On the contrary, there was never much difference between Reagan’s and Congress’s budgets, and despite propaganda to the contrary, Reagan never proposed a cut in the total budget.

Deficits. The next, and admittedly the most embarrassing, failure of Reaganomic goals is the deficit. Jimmy Carter habitually ran deficits of $40-50 billion and, by the end, up to $74 billion; but by 1984, when Reagan had promised to achieve a balanced budget, the deficit had settled down comfortably to about $200 billion, a level that seems to be permanent, despite desperate attempts to cook the figures in one-shot reductions.

This is by far the largest budget deficit in American history. It is true that the $50 billion deficits in World War II were a much higher percentage of the GNP; but the point is that that was a temporary, one-shot situation, the product of war finance. But the war was over in a few years; and the current federal deficits now seem to be a recent, but still permanent part of the American heritage.

One of the most curious, and least edifying, sights in the Reagan era was to see the Reaganites completely change their tune of a lifetime. At the very beginning of the Reagan administration, the conservative Republicans in the House of Representatives, convinced that deficits would disappear immediately, received a terrific shock when they were asked by the Reagan administration to vote for the usual annual increase in the statutory debt limit. These Republicans, some literally with tears in their eyes, protested that never in their lives had they voted for an increase in the national debt limit, but they were doing it just this one time because they “trusted Ronald Reagan” to balance the budget from then on. The rest, alas, is history, and the conservative Republicans never saw fit to cry again. Instead, they found themselves adjusting rather easily to the new era of huge permanent deficits. The Gramm-Rudman law, allegedly designed to eradicate deficits in a few years, has now unsurprisingly bogged down in enduring confusion.

Even less edifying is the spectre of Reaganomists who had inveighed against deficits—that legacy of Keynesianism—for decades. Soon Reaganite economists, especially those staffing economic posts in the executive and legislative branches, found that deficits really weren’t so bad after all. Ingenious models were devised claiming to prove that there really isn’t any deficit. Bill Niskanen, of the Reagan Council of Economic Advisors, came up with perhaps the most ingenious discovery: that there is no reason to worry about government deficits, since they are balanced by the growth in value of government assets. Well, hooray, but it is rather strange to see economists whose alleged goal is a drastic reduction in the role of government cheering for ever greater growth in government assets. Moreover, the size of government assets is really beside the point. It would only be of interest if the federal government were just another private business firm, about to go into liquidation, and whose debtors could then be satisfied by a parceling out of its hefty assets. The federal government is not about to be liquidated; there is no chance, for example, of an institution ever going into bankruptcy or liquidation that has the legal right to print whatever money it needs to get itself—and anyone else it favors—out of any financial hole.

There has also been a fervent revival of the old left-Keynesian idea that “deficits don’t matter, anyway.” Deficits are stimulating, we can “grow ourselves out of deficits,” etc. The most interesting, though predictable, twist was that of the supply-siders, who, led by Professor Arthur Laffer and his famous “curve,” had promised that if income tax rates were cut, investment and production would be so stimulated that a fall in tax rates would increase tax revenue and balance the budget. When the budget was most emphatically not balanced, and deficits instead got worse, the supply-siders threw Laffer overboard as the scapegoat, claiming that Laffer was an extremist, and the only propounder of his famous curve. The supply-siders then retreated to their current, fall-back position, which is quite frankly Keynesian; namely deficits don’t matter anyway, so let’s have cheap money and deficits; relax and enjoy them. About the only Keynesian phrase we have not heard yet from Reaganomists is that the national debt “doesn’t matter because we owe it to ourselves,” and I am waiting for some supply-sider to adopt this famous 1930s phrase of Abba Lerner without, of course, bothering about attribution.

One way in which Ronald Reagan has tried to seize the moral high road on the deficit question is to divorce his rhetoric from reality even more sharply than usual. Thus, the proposer of the biggest deficits in American history has been calling vehemently for a Constitutional amendment to require a balanced budget. In that way, Reagan can lead the way toward permanent $200 billion deficits, while basking in the virtue of proposing a balanced budget amendment, and trying to make Congress the fall guy for our deficit economy.

Even in the unlikely event that the balanced budget amendment should ever pass, it would be ludicrous in its lack of effect. In the first place, Congress can override the amendment at any time by three-fifths vote. Secondly, Congress is not required to actually balance any budget; that is, its actual expenditures in any given year are not limited to the revenues taken in. Instead, Congress is only required to prepare an estimate of a balanced budget for a future year; and of course, government estimates, even of its own income or spending, are notoriously unreliable. And third, there is no enforcement clause; suppose Congress did violate even the requirement for an estimated balanced budget: What is going to happen to the legislators? Is the Supreme Court going to summon marshals and put the entire U.S. Congress in jail? And yet, not only has Reagan been pushing for such an absurd amendment, but so too have many helpful Reaganomists.

Tax Cuts. One of the few areas where Reaganomists claim success without embarrassment is taxation. Didn’t the Reagan administration, after all, slash income taxes in 1981, and provide both tax cuts and “fairness” in its highly touted tax reform law of 1986? Hasn’t Ronald Reagan, in the teeth of opposition, heroically held the line against all tax increases?

The answer, unfortunately, is no. In the first place, the famous “tax cut” of 1981 did not cut taxes at all. It’s true that tax rates for higher-income brackets were cut; but for the average person, taxes rose, rather than declined. The reason is that, on the whole, the cut in income tax rates was more than offset by two forms of tax increase. One was “bracket creep,” a term for inflation quietly but effectively raising one into higher tax brackets, so that you pay more and proportionately higher taxes even though the tax rate schedule has officially remained the same. The second source of higher taxes was Social Security taxation, which kept increasing, and which helped taxes go up overall. Not only that, but soon thereafter; when the Social Security System was generally perceived as on the brink of bankruptcy, President Reagan brought in Alan Greenspan, a leading Reaganomist and now Chairman of the Federal Reserve, to save Social Security as head of a bipartisan commission. The “saving,” of course, meant still higher Social Security taxes then and forevermore.

Since the tax cut of 1981 that was not really a cut, furthermore, taxes have gone up every single year since, with the approval of the Reagan administration. But to save the president’s rhetorical sensibilities, they weren’t called tax increases. Instead, ingenious labels were attached to them; raising of “fees,” “plugging loopholes” (and surely everyone wants loopholes plugged), “tightening IRS enforcement,” and even revenue enhancements.” I am sure that all good Reaganomists slept soundly at night knowing that even though government revenue was being “enhanced,” the president had held the line against tax increases.

The highly ballyhooed Tax “Reform” Act of 1986 was supposed to be economically healthy as well as “fair”; supposedly “revenue neutral,” it was to bring us (a) simplicity, helping the public while making the lives of tax accountants and lawyers miserable; and (b) income tax cuts, especially in the higher income brackets and in everyone’s marginal tax rates (that is, income tax rates on additional money you may earn); and offset only by plugging those infamous loopholes. The reality, of course, was very different, In the first place, the administration has succeeded in making the tax laws so complicated that even the IRS admittedly doesn’t understand it, and tax accountants and lawyers will be kept puzzled and happy for years to come.

Secondly, while indeed income tax rates were cut in the higher brackets, many of the loophole plugs meant huge tax increases for people in the upper as well as middle income brackets. The point of the income tax, and particularly the marginal rate cuts, was the supply-sider objective of lowering taxes to stimulate savings and investment. But a National Bureau study by Hausman and Poterba on the Tax Reform Act shows that over 40% of the nation’s taxpayers suffered a marginal tax increase (or at best, the same rate as before) and, of the majority that did enjoy marginal tax cuts, only 11% got reductions of 10% or more. In short, most of the tax reductions were negligible. Not only that; the Tax Reform Act, these authors reckoned, would lower savings and investment overall because of the huge increases in taxes on business and on capital gains. Moreover savings were also hurt by the tax law’s removal of tax deductibility on contributions to IRAs.

Not only were taxes increased, but business costs were greatly raised by making business expense meals only 80% deductible, which means a great expenditure of business time and energy keeping and shuffling records. And not only were taxes raised by eliminating tax shelters in real estate, but the law’s claims to “fairness” were made grotesque by the retroactive nature of many of the tax increases. Thus, the abolition of tax shelter deductibility was made retroactive, imposing huge penalties after the fact. This is ex post facto legislation outlawed by the Constitution, which prohibits making actions retroactively criminal for a time period when they were perfectly legal. A friend of mine, for example, sold his business about eight years ago; to avoid capital gains taxes, he incorporated his business in the American Virgin Islands, which the federal government had made exempt from capital gains taxes in order to stimulate Virgin Islands development. Now, eight years later, this tax exemption for the Virgin Islands has been removed (a “loophole” plugged!) but the IRS now expects my friend to pay full retroactive capital gains taxes plus interest on this eight-year old sale. Let’s hear it for the “fairness” of the tax reform law!

But the bottom line on the tax question: is what happened in the Reagan era to government tax revenues overall? Did the amount of taxes extracted from the American people by the federal government go up or down during the Reagan years? The facts are that federal tax receipts were $517 billion in the last Carter year of 1980. In 1986, revenues totaled $769 billion, an increase of 49%. Whatever that is, that doesn’t look like a tax cut. But how about taxes as a percentage of the national product? There, we can concede that on a percentage criterion, overall taxes fell very slightly, remaining about even with the last year of Carter. Taxes fell from 18.9% of the GNP to 18.3%, or for a better gauge, taxes as percentage of net private product fell from 27.2% to 26.6%. A large absolute increase in taxes, coupled with keeping taxes as a percentage of national product about even, is scarcely cause for tossing one’s hat in the air about a whopping reduction in taxes during the Reagan years.

In recent months, moreover; the Reagan administration has been more receptive to loophole plugging, fees, and revenues than ever before. To quote from the Tax Watch column in the New York Times (October 13, 1987): “President Reagan has repeatedly warned Congress of his opposition to any new taxes, but some White House aides have been trying to figure out a way of endorsing a tax bill that could be called something else.”

In addition to closing loopholes, the White House is nudging Congress to expand the usual definition of a “user fee,” not a tax because it is supposed to be a fee for those who use a government service, say national parks or waterways. But apparently the Reagan administration is now expanding the definition of “user fee” to include excise taxes, on the assumption, apparently, that every time we purchase a product or service we must pay government for its permission. Thus, the Reagan administration has proposed not, of course, as a tax increase, but as an alleged “user fee,” a higher excise tax on every international airline or ship ticket, a tax on all coal producers, and a tax on gasoline and on highway charges for buses. The administration is also willing to support, as an alleged user fee rather than a tax, a requirement that employers, such as restaurants, start paying the Social Security tax on tips received by waiters and other service personnel.

In the wake of the stock market crash, President Reagan is now willing to give us a post-crash present of: higher taxes that will openly be called higher taxes. On Tuesday morning, the White House declared: “We’re going to hold to our guns. The president has given us marching orders: no tax increase.” By Tuesday afternoon, however, the marching orders had apparently evaporated, and the president said that he was “willing to look at” tax-increase proposals. To greet a looming recession with a tax increase is a wonderful way to bring that recession into reality. Once again, President Reagan is following the path blazed by Herbert Hoover in the Great Depression of raising taxes to try to combat a deficit.

Deregulation. Another crucial aspect of freeing the market and getting government off our backs is deregulation, and the administration and its Reaganomists have been very proud of its deregulation record. However, a look at the record reveals a very different picture. In the first place, the most conspicuous examples of deregulation; the ending of oil and gasoline price controls and rationing, the deregulation of trucks and airlines, were all launched by the Carter administration, and completed just in time for the Reagan administration to claim the credit. Meanwhile, there were other promised deregulations that never took place; for example, abolition of natural gas controls and of the Department of Energy.

Overall, in fact, there has probably been not deregulation, but an increase in regulation. Thus, Christopher De Muth, head of the American Enterprise Institute and a former top official of Reagan’s Office of Management and the Budget, concludes that “the President has not mounted a broad offensive against regulation. There hasn’t been much total change since 1981. There has been more balanced administration of regulatory agencies than we had become used to in the 1970s, but many regulatory rules have been strengthened.”

In particular, there has been a fervent drive, especially in the past year; to intensify regulation of Wall Street. A savage and almost hysterical attack was launched late last year by the Securities and Exchange Commission and by the Department of Justice on the high crime of “insider trading.” Distinguished investment bankers were literally hauled out of their offices in manacles, and the most conspicuous inside trader received as a punishment (1) a fine of $100 million; (2) a lifetime ban on any further security trading, and (3) a jail term of one year, suspended for community service. And this is the light sentence, in return for allowing himself to be wired and turn informer on his insider trading colleagues. [Editor's note: Ivan Boesky was sentenced to three years in prison.]

All this was part of a drive by the administration to protect inefficient corporate managers from the dread threat of takeover bids, by which means stockholders are able to dispose easily of ineffective management and turn to new managers. Can we really say that this frenzied assault on Wall Street by the Reagan administration had no impact on the stock market crash [October 1987]?

And yet the Reagan administration has reacted to the crash not by letting up, but by intensifying, regulation of the stock market. The head of the SEC strongly considered closing down the market on October 19, and some markets were temporarily shut down—a case, once again, of solving problems by shooting the market—the messenger of bad news. October 20, the Reagan administration collaborated in announcing early closing of the market for the next several days. The SEC has already moved, in conjunction with the New York Stock Exchange, to close down computer program trading on the market, a trade related to stock index futures. But blaming computer program trading for the crash is a Luddite reaction; trying to solve problems by taking a crowbar and wrecking machines. There were no computers, after all, in 1929. Once again, the instincts of the administration, particularly in relation to Wall Street, is to regulate. Regulate, and inflate, seem to be the Reaganite answers to our economic ills.

Agricultural policy, for its part, has been a total disaster. Instead of ending farm price supports and controls and returning to a free market in agriculture, the administration has greatly increased price supports, controls and subsidies. Furthermore, it has brought a calamitous innovation to the farm program; the PIK program ["Payments In Kind"] in which the government gets the farmers to agree to drastic cuts in acreage, in return for which the government pays back the wheat or cotton surpluses previously held off the market. The result of all this has been to push farm prices far higher than the world market, depress farm exports, and throw many farmers into bankruptcy. All the administration can offer, however, is more of the same disastrous policy.

Foreign Economic Policy. If the Reagan administration has botched the domestic economy, even in terms of its own goals, how has it done in foreign economic affairs? As we might expect, its foreign economic policy has been the exact opposite of its proclaimed devotion to free trade and free markets. In the first place, Adam Smith ties and Bastiat to the contrary notwithstanding, the Reagan administration has been the most belligerent and nationalistic since Herbert Hoover. Tariffs and import quotas have been repeatedly raised, and Japan has been treated as a leper and repeatedly denounced for the crime of selling high quality products at low prices to the delighted American consumer.

In all matters of complex and tangled international economics, the only way out of the thicket is to keep our eye on one overriding question: Is it good, or bad, for the American consumer? What the American consumer wants is good quality products at low prices, and so the Japanese should be welcomed and admired instead of condemned. As for the alleged crime of “dumping,” if the Japanese are really foolish enough to waste money and resources by dumping—that is selling goods to us below costs—then we should welcome such a policy with open arms; anytime the Japanese are willing to sell me Sony TV sets for a dollar, I am more than happy to take the sets off their hands.

Not only foreign producers are hurt by protectionism, but even more so are American consumers. Every time the administration slaps a tariff or quota on motorcycles or on textiles or semiconductors or clothespins—as it did to bail out one inefficient clothespin plant in Maine—every time it does that, it injures the American consumer.

It is no wonder, then, that even the Reaganomist Bill Niskanen recently admitted that “international trade is more regulated than it was 10 years ago.” Or, as Secretary of Treasury James Baker declared proudly last month: “President Reagan has granted more import relief to U.S. industry than any of his predecessors in more than half a century.” Pretty good for a Bastiat follower.

Another original aim of the Reagan administration, under the influence of the monetarists, or Friedmanites, was to keep the government’s hand completely off exchange rates, and to allow these rates to fluctuate freely on the market, without interference by the Federal Reserve or the Treasury. A leading monetarist, Dr. Beryl W. Sprinkel, was made Undersecretary of the Treasury for Monetary Policy in 1981 to carry out that policy. But this non-intervention is long gone, and Secretary Baker, aided by the Fed, has been busily engaged in trying to persuade other countries to intervene to help coordinate and fix exchange rates. After being removed from the Treasury after several years, Sprinkel was sent to Siberia and ordered to keep quiet, as head of the Council of Economic Advisors; and Sprinkel has recently announced that he will leave the government altogether. [Editor's note: Sprinkel was later rehabilitated, and given Cabinet status, in return for his agreement to take part in the disastrous Baker dollar policy.]

Moreover, the policy of foreign aid and foreign lending conducted or encouraged by the government has proceeded more intensely than even under previous administrations. Reagan has bailed out the despotic government of Poland with massive loans, so that Poland could repay its Western creditors. A similar policy has been conducted in relation to many shaky or bankrupt third world governments. The spectre of bank collapse from foreign loans has been averted by bailouts and promises of bailout from the Federal Reserve, the nation’s only manufacturer of dollars, which it can produce at will.

Wherever we look, then, on the budget, in the domestic economy, or in foreign trade or international monetary relations, we see government even more on our backs than ever. The burden and the scope of government intervention under Reagan has increased, not decreased. Reagan’s rhetoric has been calling for reductions of government; his actions have been precisely the reverse. Yet both sides of the political fence have bought the rhetoric and claim that it has been put into effect.

Reaganites and Reaganomists, for obvious reasons, are trying desperately to maintain that Reagan has indeed fulfilled his glorious promises; while his opponents, intent on attacking the bogey of Reaganomics, are also, and for opposite reasons, anxious to claim that Reagan has really put his free-market program into operation. So we have the curious, and surely not healthy, situation where a mass of politically interested people are totally misinterpreting and even misrepresenting the Reagan record; focusing, like Reagan himself, on his rhetoric instead of on the reality.

What of the Future? Is there life after Reaganomics? To assess coming events, we first have to realize that Reaganomics has never been a monolith. It has had several faces; Reaganomics has been an uneasy and shifting coalition of several clashing schools of economic thought. In particular, the leading schools have been the conservative Keynesians, the Milton Friedman monetarists, and the supply-siders. The monetarists, devoted to a money rule of a fixed percentage increase of money growth engineered by the Federal Reserve, have come a cropper. Fervently believing that science is nothing else but prediction, the monetarists have self-destructed by making a string of self-confident but disastrous predictions in the last several years. Their fate illustrates the fact that he who lives by prediction shall die by it. Apart from their views on money, the monetarists generally believe in free markets, and so their demise has left Reaganomics in the hands of the other two schools, neither of whom are particularly interested in free markets or cutting government.

The conservative Keynesians—the folks who brought us the economics of the Nixon and Ford administrations—saw Keynesianism lose its dominance among economists with the inflationary recession of 1973-74, an event which Keynesians stoutly believed could never possibly happen. But while Keynesians have lost their old eclat, they remain with two preoccupations: (1) a devotion to the New Deal-Fair Deal-Great Society-Nixon-Ford-Carter-status quo, and (2) a zeal for tax increases to moderate the current deficit. As for government spending, never has the thought of actually cutting expenditures crossed their minds. The supply-siders, who are weak in academia but strong in the press and in exerting enormous political leverage per capita, have also no interest in cutting government spending. To the contrary, both conservative Keynesians and supply-siders are prepared to call for an increasing stream of goodies from government.

Both groups have also long been keen on monetary inflation. The supply-siders have pretty much given up the idea of tax cuts; their stance is now to accept the deficit and oppose any tax increase. On foreign monetary matters, the conservative Keynesians and the supply-siders have formed a coalition; both groups embrace Secretary of Treasury Baker’s Keynesian program of fixed exchange rates and an internationally coordinated policy of cheap money.

Politically, the Republican presidential candidates can be assessed on their various preferred visions of Reaganomics. Vice-President Bush is, of course, a conservative Keynesian and a veteran arch-enemy of supply-side doctrine, which he famously denounced in 1980 as “voodoo economics.” Secretary of Treasury James Baker is a former Bush campaign aide. White House Chief of Staff Howard Baker is also in the conservative Keynesian camp, as was Paul Volcker, and is Alan Greenspan. Since former White House Chief of Staff Donald Regan was a fellow-traveller of the supply-siders, his replacement by Howard Baker as a result of Iranscam was a triumph of conservative Keynesians over the supply-siders. This year, in fact, our troika of Economic Rulers, Greenspan and the two Bakers, has all been squarely in the conservative Keynesian camp.

Senator Robert Dole, the other Republican front-runner for president, is also a conservative Keynesian. In fact, Bob Dole carried on the fight for higher taxes even when it was relatively unfashionable inside the administration. So devoted to higher taxes is Bob Dole, in fact, that he is reputed to be the favorite presidential candidate of the Internal Revenue Service. So if you like the IRS, you’ll love Bob Dole.

Congressman Jack Kemp, on the other hand, has been the political champion of the supply-siders ever since supply-side was invented in the late 1970s. Kemp’s call for higher government spending, and approval of deficits, monetary inflation, and fixed exchange rates, all attest to his supply-side devotion.

Jack Kemp, however, has for some reason not struck fire among the public, so Mrs. Jeanne Kirkpatrick stands ready in the wings to take up the cause if Kemp should fail to rally. I confess I have not been able to figure out the economic views of the Reverend Pat Robertson, although I have a hunch they do not loom very large in his world outlook.

Although there are a lot of Democratic candidates out there, it is hard at this point to distinguish one from another, on economic policy or indeed on anything else. As Joe Klein recently wrote in a perceptive article in New York magazine, the Republicans are engaged in an interesting clash of different ideas, while the Democrats are all muddily groping toward the center. To make the confusion still greater, Klein points out that Republicans are busily talking about “compassion,” while the Democrats are all stressing “efficiency.” One thing is fairly clear; Congressman Gephardt is an all-out protectionist, thoroughly jettisoning the old Democratic commitment to free trade, and is the most ardent statist in agricultural policy.

On monetary and fiscal policy, the Democrats are the classic party of liberal Keynesianism, in contrast to the Republican policy of conservative Keynesianism. The problem is that, in the last decade or two, it has become increasingly difficult to tell the difference. Apart from supply-sider Kemp, we can expect the president of either party to be a middle-of-the-road liberal/conservative Keynesian. And so we can expect the next administration’s economic policies to be roughly the same as they are now. Except that the rhetoric will be different. So we can, therefore, expect diverse perceptions and responses to a similar reality by the public and by the market. Thus, if Jack Kemp becomes president, the public will wrongly consider him a champion of hard money, budget cutting, and the free market. The public will therefore underestimate the wildly inflationist reality of a Kemp administration. On the other hand, the public probably perceives the Democrats to be wilder spenders relative to the Republicans than they really are. So should the Democrats win in 1988, we can expect the market to overestimate the inflationary measure of a Democratic administration.

All of this, along with the universal misperception of Reaganomics, illustrates once more the wisdom of those incisive political philosophers, Gilbert and Sullivan: “Things are not always what they seem; skim milk masquerades as cream.”

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Video: Thomas Sowell on Intellectuals and Society (2009)

August 18th, 2010 1 comment

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The War on Drugs Has Been a Whopper of a Failure

August 18th, 2010 Comments off

From Liberty For All

America’s futile effort to arrest its way out of our drug problems has cost taxpayers more than $1 trillion since 1970, and it drains $69 billion a year — every year — from our treasury. It funds terrorists and clogs the court system, yet our kids report that it can be easier for them to buy illegal drugs than beer or cigarettes.

As a child growing up in Wichita, I learned to spot a failure when I saw one. And this one’s a whopper.

Our government pours billions of dollars into poisoning crops in other counties, turning dirt-poor farmers into mortal enemies, and risking our soldiers against highly armed, ruthless drug gangs. And what did the CIA recently admit? After our latest $4 billion eradication effort in Afghanistan, the heroin-producing poppy trade is the largest ever recorded.

Another $4 billion wasted to eradicate coca plants in Colombia has resulted in an increase in coca, and that trade has now been joined by Colombian entrepreneurs who produce opium poppies.

What exactly are we getting for our trillion tax dollars? A good feeling?

But you know who really feels good about our war on drugs? The drug cartels. And the terrorists.

But just as happened to Al Capone and his smuggling buddies when Prohibition ended, the drug lords and terrorists would be out of business without this “war.”

How has our war on drugs affected traditional police work? We solve a much lower percentage of our nation’s homicide cases today than we did in the 1950s, despite more police per capita, better training and technical equipment. How many serious violent crimes go unresolved because police are busy chasing marijuana users?

The war on drugs doesn’t make us any safer. The war on drugs doesn’t prevent drug abuse. The war on drugs costs a fortune. And the war on drugs and its huge profits encourage corruption at all levels of law enforcement.

The good news is that there are workable alternatives. When the Swiss did a 10-year experiment, treating heroin addicts by giving them heroin up to three times a day, everything changed. There was a 60 percent drop in property and violent crime, overdose deaths disappeared, AIDS and hepatitis declined to the lowest rates in Europe, addiction rates went down as addicts stabilized their lives enough to kick their habit, and the rate of projected cases of new heroin users fell by a staggering 82 percent.

By treating heroin addiction as a medical problem, instead of a sign of bad moral character, officials were able to tame Switzerland’s drug problem and gut the drug dealers, as we had always dreamed — just like that.

I represent Law Enforcement Against Prohibition, an international group of law officers who are sworn opponents of drug abuse. We know a system of legalized regulation of drugs is more efficient and ethical than one of prohibition.

Originally published at the LEAP (Law Enforcement Against Prohibition) blog January 25, 2007.

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US Breast Cancer Drug Decision ‘Marks Start of Death Panels’

August 17th, 2010 Comments off

From The Telegraph (UK)

A decision to rescind endorsement of the drug would reignite the highly charged debate over US health care reform and how much the state should spend on new and expensive treatments.

Avastin, the world’s best selling cancer drug, is primarily used to treat colon cancer and was approved by the US Food and Drug Administration in 2008 for use on women with breast cancer that has spread.

It costs $8,000 (£5,000) a month and is given to about 17,500 women in the US a year. The drug was initially approved after a study found that, by preventing blood flow to tumours, it extended the amount of time until the disease worsened by more than five months. However, two new studies have shown that the drug may not even extend life by an extra month.

The FDA advisory panel has now voted 12-1 to drop the endorsement for breast cancer treatment. The panel unusually cited “effectiveness” grounds for the decision. But it has been claimed that “cost effectiveness” was the real reason ahead of reforms in which the government will extend health insurance to the poorest.

If the approval of the drug is revoked then US insurers would be likely to stop paying for Avastin.

The Avastin recommendation led to revived allegations that President Barack Obama’s overhaul of the US health care system would mean many would be denied treatments currently available.

During the debate, those opposed to the reforms cited Britain’s National Institute for Clinical Excellence, which decides whether new treatments should be made available on the NHS on the basis of cost effectiveness, as an example of the sort of drug rationing that amounted to a “death panel”.

David Vitter, the Republican Senator for Louisiana, said the FDA decision amounted to rationing health care.

“I shudder at the thought of a government panel assigning a value to a day of a person’s life,” he said. “It is sickening to think that care would be withheld from a patient simply because their life is not deemed valuable enough.

“I fear this is the beginning of a slippery slope leading to more and more rationing under the government takeover of health care that is being forced on the American people.”

Avastin has been described as “the poster child for expensive anti-cancer drugs”.

When reviewing drugs for approval the FDA is only charged with looking at their health risks and benefits, not cost effectiveness. It usually follows advisory panel recommendations. A final decision will be announced on Sept 17.

Avastin made $5.9 billion (£3.8 billion) in sales last year and is made by Genentech, a San Francisco-based unit of the Swiss drug maker Roche.

It is also approved for colon, lung, kidney and brain cancer, however, the FDA review and recommendation applies only to breast cancer.

An FDA spokeswoman said: “Avastin should be an option for patients with this incurable disease.”

Breast cancer is the second most common cause of cancer death among US women, with 40,000 last year.

In the UK the National Institute for Clinical Excellence is reviewing whether Avastin should be available on the NHS for woman with breast cancer that has spread.

A spokeswoman said: “We will continue to investigate the treatment regardless of the FDA decision.”

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The CIA and the Media

August 17th, 2010 Comments off

After leaving The Washington Post in 1977, Carl Bernstein spent six months looking at the relationship of the CIA and the press during the Cold War years. His 25,000-word cover story, published in Rolling Stone on October 20, 1977, is reprinted below.

THE CIA AND THE MEDIA

How Americas Most Powerful News Media Worked Hand in Glove with the Central Intelligence Agency and Why the Church Committee Covered It Up

BY CARL BERNSTEIN

In 1953, Joseph Alsop, then one of America’s leading syndicated columnists, went to the Philippines to cover an election. He did not go because he was asked to do so by his syndicate. He did not go because he was asked to do so by the newspapers that printed his column. He went at the request of the CIA.

Alsop is one of more than 400 American journalists who in the past twenty‑five years have secretly carried out assignments for the Central Intelligence Agency, according to documents on file at CIA headquarters. Some of these journalists’ relationships with the Agency were tacit; some were explicit. There was cooperation, accommodation and overlap. Journalists provided a full range of clandestine services—from simple intelligence gathering to serving as go‑betweens with spies in Communist countries. Reporters shared their notebooks with the CIA. Editors shared their staffs. Some of the journalists were Pulitzer Prize winners, distinguished reporters who considered themselves ambassadors without‑portfolio for their country. Most were less exalted: foreign correspondents who found that their association with the Agency helped their work; stringers and freelancers who were as interested in the derring‑do of the spy business as in filing articles; and, the smallest category, full‑time CIA employees masquerading as journalists abroad. In many instances, CIA documents show, journalists were engaged to perform tasks for the CIA with the consent of the managements of America’s leading news organizations.

WORKING PRESS — CIA STYLE

To understand the role of most journalist‑operatives, it is necessary to dismiss some myths about undercover work for American intelligence services. Few American agents are “spies” in the popularly accepted sense of the term. “Spying” — the acquisition of secrets from a foreign government—is almost always done by foreign nationals who have been recruited by the CIA and are under CIA control in their own countries. Thus the primary role of an American working undercover abroad is often to aid in the recruitment and “handling” of foreign nationals who are channels of secret information reaching American intelligence.

Many journalists were used by the CIA to assist in this process and they had the reputation of being among the best in the business. The peculiar nature of the job of the foreign correspondent is ideal for such work: he is accorded unusual access by his host country, permitted to travel in areas often off‑limits to other Americans, spends much of his time cultivating sources in governments, academic institutions, the military establishment and the scientific communities. He has the opportunity to form long‑term personal relationships with sources and—perhaps more than any other category of American operative—is in a position to make correct judgments about the susceptibility and availability of foreign nationals for recruitment as spies.

“After a foreigner is recruited, a case officer often has to stay in the background,” explained a CIA official. “So you use a journalist to carry messages to and from both parties”

Journalists in the field generally took their assignments in the same manner as any other undercover operative. If, for instance, a journalist was based in Austria, he ordinarily would be under the general direction of the Vienna station chief and report to a case officer. Some, particularly roving correspondents or U.S.‑based reporters who made frequent trips abroad, reported directly to CIA officials in Langley, Virginia.

The tasks they performed sometimes consisted of little more than serving as “eyes and ears” for the CIA; reporting on what they had seen or overheard in an Eastern European factory, at a diplomatic reception in Bonn, on the perimeter of a military base in Portugal. On other occasions, their assignments were more complex: planting subtly concocted pieces of misinformation; hosting parties or receptions designed to bring together American agents and foreign spies; serving up “black” propaganda to leading foreign journalists at lunch or dinner; providing their hotel rooms or bureau offices as “drops” for highly sensitive information moving to and from foreign agents; conveying instructions and dollars to CIA controlled members of foreign governments.

Often the CIA’s relationship with a journalist might begin informally with a lunch, a drink, a casual exchange of information. An Agency official might then offer a favor—for example, a trip to a country difficult to reach; in return, he would seek nothing more than the opportunity to debrief the reporter afterward. A few more lunches, a few more favors, and only then might there be a mention of a formal arrangement — “That came later,” said a CIA official, “after you had the journalist on a string.”

Another official described a typical example of the way accredited journalists (either paid or unpaid by the CIA) might be used by the Agency: “In return for our giving them information, we’d ask them to do things that fit their roles as journalists but that they wouldn’t have thought of unless we put it in their minds. For instance, a reporter in Vienna would say to our man, ‘I met an interesting second secretary at the Czech Embassy.’ We’d say, ‘Can you get to know him? And after you get to know him, can you assess him? And then, can you put him in touch with us—would you mind us using your apartment?”‘

Formal recruitment of reporters was generally handled at high levels—after the journalist had undergone a thorough background check. The actual approach might even be made by a deputy director or division chief. On some occasions, no discussion would he entered into until the journalist had signed a pledge of secrecy.

“The secrecy agreement was the sort of ritual that got you into the tabernacle,” said a former assistant to the Director of Central Intelligence. “After that you had to play by the rules.” David Attlee Phillips, former Western Hemisphere chief of clandestine services and a former journalist himself, estimated in an interview that at least 200 journalists signed secrecy agreements or employment contracts with the Agency in the past twenty‑five years. Phillips, who owned a small English‑language newspaper in Santiago, Chile, when he was recruited by the CIA in 1950, described the approach: “Somebody from the Agency says, ‘I want you to help me. 1 know you are a true‑blue American, but I want you to sign a piece of paper before I tell you what it’s about.’ I didn’t hesitate to sign, and a lot of newsmen didn’t hesitate over the next twenty years.”

“One of the things we always had going for us in terms of enticing reporters,” observed a CIA official who coordinated some of the arrangements with journalists, “was that we could make them look better with their home offices. A foreign correspondent with ties to the Company [the CIA] stood a much better chance than his competitors of getting the good stories.”

Within the CIA, journalist‑operatives were accorded elite status, a consequence of the common experience journalists shared with high‑level CIA officials. Many had gone to the same schools as their CIA handlers, moved in the same circles, shared fashionably liberal, anti‑Communist political values, and were part of the same “old boy” network that constituted something of an establishment elite in the media, politics and academia of postwar America. The most valued of these lent themselves for reasons of national service, not money.

The Agency’s use of journalists in undercover operations has been most extensive in Western Europe (“That was the big focus, where the threat was,” said one CIA official), Latin America and the Far East. In the 1950s and 1960s journalists were used as intermediaries—spotting, paying, passing instructions—to members of the Christian Democratic party in Italy and the Social Democrats in Germany, both of which covertly received millions of dollars from the CIA. During those years “we had journalists all over Berlin and Vienna just to keep track of who the hell was coming in from the East and what they were up to,” explained a CIA official.

In the Sixties, reporters were used extensively in the CIA offensive against Salvador Allende in Chile; they provided funds to Allende’s opponents and wrote anti‑Allende propaganda for CIA proprietary publications that were distributed in Chile. (CIA officials insist that they make no attempt to influence the content of American newspapers, but some fallout is inevitable: during the Chilean offensive, CIA‑generated black propaganda transmitted on the wire service out of Santiago often turned up in American publications.)

According to CIA officials, the Agency has been particularly sparing in its use of journalist agents in Eastern Europe on grounds that exposure might result in diplomatic sanctions against the United States or in permanent prohibitions against American correspondents serving in some countries. The same officials claim that their use of journalists in the Soviet Union has been even more limited, but they remain extremely guarded in discussing the subject. They are insistent, however, in maintaining that the Moscow correspondents of major news organizations have not been “tasked” or controlled by the Agency.

The Soviets, according to CIA officials, have consistently raised false charges of CIA affiliation against individual American reporters as part of a continuing diplomatic game that often follows the ups and downs of Soviet‑American relations. The latest such charge by the Russians—against Christopher Wren of the New York Times and Alfred Friendly Jr., formerly of Newsweek, has no basis in fact, they insist.

CIA officials acknowledge, however, that such charges will persist as long as the CIA continues to use journalistic cover and maintain covert affiliations with individuals in the profession. But even an absolute prohibition against Agency use of journalists would not free reporters from suspicion, according to many Agency officials. “Look at the Peace Corps,” said one source. “We have had no affiliation there and they [foreign governments] still throw them out”

The history of the CIA’s involvement with the American press continues to be shrouded by an official policy of obfuscation and deception for the following principal reasons:

■ The use of journalists has been among the most productive means of intelligence‑gathering employed by the CIA. Although the Agency has cut back sharply on the use of reporters since 1973 primarily as a result of pressure from the media), some journalist‑operatives are still posted abroad.

■ Further investigation into the matter, CIA officials say, would inevitably reveal a series of embarrassing relationships in the 1950s and 1960s with some of the most powerful organizations and individuals in American journalism.

Among the executives who lent their cooperation to the Agency were Williarn Paley of the Columbia Broadcasting System, Henry Luce of Tirne Inc., Arthur Hays Sulzberger of the New York Times, Barry Bingham Sr. of the LouisviIle Courier‑Journal, and James Copley of the Copley News Service. Other organizations which cooperated with the CIA include the American Broadcasting Company, the National Broadcasting Company, the Associated Press, United Press International, Reuters, Hearst Newspapers, Scripps‑Howard, Newsweek magazine, the Mutual Broadcasting System, the Miami Herald and the old Saturday Evening Post and New York Herald‑Tribune.

By far the most valuable of these associations, according to CIA officials, have been with the New York Times, CBS and Time Inc.

The CIA’s use of the American news media has been much more extensive than Agency officials have acknowledged publicly or in closed sessions with members of Congress. The general outlines of what happened are indisputable; the specifics are harder to come by. CIA sources hint that a particular journalist was trafficking all over Eastern Europe for the Agency; the journalist says no, he just had lunch with the station chief. CIA sources say flatly that a well‑known ABC correspondent worked for the Agency through 1973; they refuse to identify him. A high‑level CIA official with a prodigious memory says that the New York Times provided cover for about ten CIA operatives between 1950 and 1966; he does not know who they were, or who in the newspaper’s management made the arrangements.

The Agency’s special relationships with the so‑called “majors” in publishing and broadcasting enabled the CIA to post some of its most valuable operatives abroad without exposure for more than two decades. In most instances, Agency files show, officials at the highest levels of the CIA usually director or deputy director) dealt personally with a single designated individual in the top management of the cooperating news organization. The aid furnished often took two forms: providing jobs and credentials “journalistic cover” in Agency parlance) for CIA operatives about to be posted in foreign capitals; and lending the Agency the undercover services of reporters already on staff, including some of the best‑known correspondents in the business.

In the field, journalists were used to help recruit and handle foreigners as agents; to acquire and evaluate information, and to plant false information with officials of foreign governments. Many signed secrecy agreements, pledging never to divulge anything about their dealings with the Agency; some signed employment contracts., some were assigned case officers and treated with. unusual deference. Others had less structured relationships with the Agency, even though they performed similar tasks: they were briefed by CIA personnel before trips abroad, debriefed afterward, and used as intermediaries with foreign agents. Appropriately, the CIA uses the term “reporting” to describe much of what cooperating journalists did for the Agency. “We would ask them, ‘Will you do us a favor?’”.said a senior CIA official. “‘We understand you’re going to be in Yugoslavia. Have they paved all the streets? Where did you see planes? Were there any signs of military presence? How many Soviets did you see? If you happen to meet a Soviet, get his name and spell it right …. Can you set up a meeting for is? Or relay a message?’” Many CIA officials regarded these helpful journalists as operatives; the journalists tended to see themselves as trusted friends of the Agency who performed occasional favors—usually without pay—in the national interest.

“I’m proud they asked me and proud to have done it,” said Joseph Alsop who, like his late brother, columnist Stewart Alsop, undertook clandestine tasks for the Agency. “The notion that a newspaperman doesn’t have a duty to his country is perfect balls.”

From the Agency’s perspective, there is nothing untoward in such relationships, and any ethical questions are a matter for the journalistic profession to resolve, not the intelligence community. As Stuart Loory, former Los Angeles Times correspondent, has written in the Columbia Journalism Review: ‘If even one American overseas carrying a press card is a paid informer for the CIA, then all Americans with those credentials are suspect …. If the crisis of confidence faced by the news business—along with the government—is to be overcome, journalists must be willing to focus on themselves the same spotlight they so relentlessly train on others!’ But as Loory also noted: “When it was reported… that newsmen themselves were on the payroll of the CIA, the story caused a brief stir, and then was dropped.”

During the 1976 investigation of the CIA by the Senate Intelligence Committee, chaired by Senator Frank Church, the dimensions of the Agency’s involvement with the press became apparent to several members of the panel, as well as to two or three investigators on the staff. But top officials of the CIA, including former directors William Colby and George Bush, persuaded the committee to restrict its inquiry into the matter and to deliberately misrepresent the actual scope of the activities in its final report. The multivolurne report contains nine pages in which the use of journalists is discussed in deliberately vague and sometimes misleading terms. It makes no mention of the actual number of journalists who undertook covert tasks for the CIA. Nor does it adequately describe the role played by newspaper and broadcast executives in cooperating with the Agency.

THE AGENCY’S DEALINGS WITH THE PRESS BEGAN during the earliest stages of the Cold War. Allen Dulles, who became director of the CIA in 1953, sought to establish a recruiting‑and‑cover capability within America’s most prestigious journalistic institutions. By operating under the guise of accredited news correspondents, Dulles believed, CIA operatives abroad would be accorded a degree of access and freedom of movement unobtainable under almost any other type of cover.

American publishers, like so many other corporate and institutional leaders at the time, were willing to commit the resources of their companies to the struggle against “global Communism.” Accordingly, the traditional line separating the American press corps and government was often indistinguishable: rarely was a news agency used to provide cover for CIA operatives abroad without the knowledge and consent of either its principal owner, publisher or senior editor. Thus, contrary to the notion that the CIA insidiously infiltrated the journalistic community, there is ample evidence that America’s leading publishers and news executives allowed themselves and their organizations to become handmaidens to the intelligence services. “Let’s not pick on some poor reporters, for God’s sake,” William Colby exclaimed at one point to the Church committee’s investigators. “Let’s go to the managements. They were witting.”  In all, about twenty‑five news organizations including those listed at the beginning of this article) provided cover for the Agency.

In addition to cover capability, Dulles initiated a “debriefing” procedure under which American correspondents returning from abroad routinely emptied their notebooks and offered their impressions to Agency personnel. Such arrangements, continued by Dulles’ successors, to the present day, were made with literally dozens of news organizations. In the 1950s, it was not uncommon for returning reporters to be met at the ship by CIA officers. “There would be these guys from the CIA flashing ID cards and looking like they belonged at the Yale Club,” said Hugh Morrow, a former Saturday Evening Post correspondent who is now press secretary to former vice‑president Nelson Rockefeller. “It got to be so routine that you felt a little miffed if you weren’t asked.”

CIA officials almost always refuse to divulge the names of journalists who have cooperated with the Agency. They say it would be unfair to judge these individuals in a context different from the one that spawned the relationships in the first place. “There was a time when it wasn’t considered a crime to serve your government,” said one high‑level CIA official who makes no secret of his bitterness. “This all has to be considered in the context of the morality of the times, rather than against latter‑day standards—and hypocritical standards at that.”

Many journalists who covered World War II were close to people in the Office of Strategic Services, the wartime predecessor of the CIA; more important, they were all on the same side. When the war ended and many OSS officials went into the CIA, it was only natural that these relationships would continue. Meanwhile, the first postwar generation of journalists entered the profession; they shared the same political and professional values as their mentors. “You had a gang of people who worked together during World War II and never got over it,” said one Agency official. “They were genuinely motivated and highly susceptible to intrigue and being on the inside. Then in the Fifties and Sixties there was a national consensus about a national threat. The Vietnam War tore everything to pieces—shredded the consensus and threw it in the air.” Another Agency official observed: “Many journalists didn’t give a second thought to associating with the Agency. But there was a point when the ethical issues which most people had submerged finally surfaced. Today, a lot of these guys vehemently deny that they had any relationship with the Agency.”

From the outset, the use of journalists was among the CIA’s most sensitive undertakings, with full knowledge restricted to the Director of Central Intelligence and a few of his chosen deputies. Dulles and his successors were fearful of what would happen if a journalist‑operative’s cover was blown, or if details of the Agency’s dealings with the press otherwise became public. As a result, contacts with the heads of news  organizations were normally initiated by Dulles and succeeding Directors of Central Intelligence; by the deputy directors and division chiefs in charge of covert operations—Frank Wisner, Cord Meyer Jr., Richard Bissell, Desmond FitzGerald, Tracy Barnes, Thomas Karamessines and Richard Helms himself a former UPI correspondent); and, occasionally, by others in the CIA hierarchy known to have an unusually close social relationship with a particular publisher or broadcast executive.1

James Angleton, who was recently removed as the Agency’s head of counterintelligence operations, ran a completely independent group of journalist‑operatives who performed sensitive and frequently dangerous assignments; little is known about this group for the simple reason that Angleton deliberately kept only the vaguest of files.

The CIA even ran a formal training program in the 1950s to teach its agents to be journalists. Intelligence officers were “taught to make noises like reporters,” explained a high CIA official, and were then placed in major news organizations with help from management. “These were the guys who went through the ranks and were told ‘You’re going to he a journalist,’” the CIA official said. Relatively few of the 400‑some relationships described in Agency files followed that pattern, however; most involved persons who were already bona fide journalists when they began undertaking tasks for the Agency.

The Agency’s relationships with journalists, as described in CIA files, include the following general categories:

■ Legitimate, accredited staff members of news organizations—usually reporters. Some were paid; some worked for the Agency on a purely voluntary basis. This group includes many of the best‑known journalists who carried out tasks for the CIA. The files show that the salaries paid to reporters by newspaper and broadcast networks were sometimes supplemented by nominal payments from the CIA, either in the form of retainers, travel expenses or outlays for specific services performed.  Almost all the payments were made in cash. The accredited category also includes photographers, administrative personnel of foreign news bureaus and members of broadcast technical crews.)

Two of the Agency’s most valuable personal relationships in the 1960s, according to CIA officials, were with reporters who covered Latin America—Jerry O’Leary of the Washington Star and Hal Hendrix of the Miami News, a Pulitzer Prize winner who became a high official of the International Telephone and Telegraph Corporation. Hendrix was extremely helpful to the Agency in providing information about individuals in Miami’s Cuban exile community. O’Leary was considered a valued asset in Haiti and the Dominican Republic. Agency files contain lengthy reports of both men’s activities on behalf of the CIA.

O’Leary maintains that his dealings were limited to the normal give‑and‑take that goes on between reporters abroad and their sources. CIA officials dispute the contention: “There’s no question Jerry reported for us,” said one. “Jerry did assessing and spotting [of prospective agents] but he was better as a reporter for us.” Referring to O’Leary’s denials, the official added: “I don’t know what in the world he’s worried about unless he’s wearing that mantle of integrity the Senate put on you journalists.”

O’Leary attributes the difference of opinion to semantics. “I might call them up and say something like, ‘Papa Doc has the clap, did you know that?’ and they’d put it in the file. I don’t consider that reporting for them…. it’s useful to be friendly to them and, generally, I felt friendly to them. But I think they were more helpful to me than I was to them.” O’Leary took particular exception to being described in the same context as Hendrix. “Hal was really doing work for them,” said O’Leary. “I’m still with the Star. He ended up at ITT.” Hendrix could not be reached for comment. According to Agency officials, neither Hendrix nor O’Leary was paid by the CIA.

■ Stringers2 and freelancers. Most were payrolled by the Agency under standard contractual terms. Their journalistic credentials were often supplied by cooperating news organizations. some filed news stories; others reported only for the CIA. On some occasions, news organizations were not informed by the CIA that their stringers were also working for the Agency.

■ Employees of so‑called CIA “proprietaries.” During the past twenty‑five years, the Agency has secretly bankrolled numerous foreign press services, periodicals and newspapers—both English and foreign language—which provided excellent cover for CIA operatives. One such publication was the Rome Daily American, forty percent of which was owned by the CIA until the 1970s. The Daily American went out of business this year,

■ Editors, publishers and broadcast network executives. The CIAs relationship with most news executives differed fundamentally from those with working reporters and stringers, who were much more subject to direction from the Agency. A few executives—Arthur Hays Sulzberger of the New York Times among them—signed secrecy agreements. But such formal understandings were rare: relationships between Agency officials and media executives were usually social—”The P and Q Street axis in Georgetown,” said one source. “You don’t tell Wilharn Paley to sign a piece of paper saying he won’t fink.”

■ Columnists and commentators. There are perhaps a dozen well known columnists and broadcast commentators whose relationships with the CIA go far beyond those normally maintained between reporters and their sources. They are referred to at the Agency as “known assets” and can be counted on to perform a variety of undercover tasks; they are considered receptive to the Agency’s point of view on various subjects. Three of the most widely read columnists who maintained such ties with the Agency are C.L. Sulzberger of the New York Times, Joseph Alsop, and the late Stewart Alsop, whose column appeared in the New York Herald‑Tribune, the Saturday Evening Post and Newsweek. CIA files contain reports of specific tasks all three undertook. Sulzberger is still regarded as an active asset by the Agency. According to a senior CIA official, “Young Cy Sulzberger had some uses…. He signed a secrecy agreement because we gave him classified information…. There was sharing, give and take. We’d say, ‘Wed like to know this; if we tell you this will it help you get access to so‑and‑so?’ Because of his access in Europe he had an Open Sesame. We’d ask him to just report: ‘What did so‑and‑so say, what did he look like, is he healthy?’ He was very eager, he loved to cooperate.” On one occasion, according to several CIA officials, Sulzberger was given a briefing paper by the Agency which ran almost verbatim under the columnist’s byline in the Times. “Cycame out and said, ‘I’m thinking of doing a piece, can you give me some background?’” a CIA officer said. “We gave it to Cy as a background piece and Cy gave it to the printers and put his name on it.” Sulzberger denies that any incident occurred. “A lot of baloney,” he said.

Sulzberger claims that he was never formally “tasked” by the Agency and that he “would never get caught near the spook business. My relations were totally informal—I had a goodmany friends,” he said. “I’m sure they consider me an asset. They can ask me questions. They find out you’re going to Slobovia and they say, ‘Can we talk to you when you get back?’ … Or they’ll want to know if the head of the Ruritanian government is suffering from psoriasis. But I never took an assignment from one of those guys…. I’ve known Wisner well, and Helms and even McCone [former CIA director John McCone] I used to play golf with. But they’d have had to he awfully subtle to have used me.

Sulzberger says he was asked to sign the secrecy agreement in the 1950s. “A guy came around and said, ‘You are a responsible newsman and we need you to sign this if we are going to show you anything classified.’ I said I didn’t want to get entangled and told them, ‘Go to my uncle [Arthur Hays Sulzberger, then publisher of the New York Times] and if he says to sign it I will.’” His uncle subsequently signed such an agreement, Sulzberger said, and he thinks he did too, though he is unsure. “I don’t know, twenty‑some years is a long time.” He described the whole question as “a bubble in a bathtub.”

Stewart Alsop’s relationship with the Agency was much more extensive than Sulzberger’s. One official who served at the highest levels in the CIA said flatly: “Stew Alsop was a CIA agent.” An equally senior official refused to define Alsop’s relationship with the Agency except to say it was a formal one. Other sources said that Alsop was particularly helpful to the Agency in discussions with, officials of foreign governments—asking questions to which the CIA was seeking answers, planting misinformation advantageous to American policy, assessing opportunities for CIA recruitment of well‑placed foreigners.

“Absolute nonsense,” said Joseph Alsop of the notion that his brother was a CIA agent. “I was closer to the Agency than Stew was, though Stew was very close. I dare say he did perform some tasks—he just did the correct thing as an American…. The Founding Fathers [of the CIA] were close personal friends of ours. Dick Bissell [former CIA deputy director] was my oldest friend, from childhood. It was a social thing, my dear fellow. I never received a dollar, I never signed a secrecy agreement. I didn’t have to…. I’ve done things for them when I thought they were the right thing to do. I call it doing my duty as a citizen.

Alsop is willing to discuss on the record only two of the tasks he undertook: a visit to Laos in 1952 at the behest of Frank Wisner, who felt other American reporters were using anti‑American sources about uprisings there; and a visit to the Phillipines in 1953 when the CIA thought his presence there might affect the outcome of an election. “Des FitzGerald urged me to go,” Alsop recalled. “It would be less likely that the election could be stolen [by the opponents of Ramon Magsaysay] if the eyes of the world were on them. I stayed with the ambassador and wrote about what happened.”

Alsop maintains that he was never manipulated by the Agency. “You can’t get entangled so they have leverage on you,” he said. “But what I wrote was true. My view was to get the facts. If someone in the Agency was wrong, I stopped talking to them—they’d given me phony goods.” On one occasion, Alsop said, Richard Helms authorized the head of the Agency’s analytical branch to provide Alsop with information on Soviet military presence along the Chinese border. “The analytical side of the Agency had been dead wrong about the war in Vietnam—they thought it couldn’t be won,” said Alsop. “And they were wrong on the Soviet buildup. I stopped talking to them.” Today, he says, “People in our business would be outraged at the kinds of suggestions that were made to me. They shouldn’t be. The CIA did not open itself at all to people it did not trust. Stew and I were trusted, and I’m proud of it.”

MURKY DETAILS OF CIA RELATIONSHIPS WITH INDIVIDUALS and news organizations began trickling out in 1973 when it was first disclosed that the CIA had, on occasion, employed journalists. Those reports, combined with new information, serve as casebook studies of the Agency’s use of journalists for intelligence purposes. They include:

The New York Times. The Agency’s relationship with the Times was by far its most valuable among newspapers, according to CIA officials. From 1950 to 1966, about ten CIA employees were provided Times cover under arrangements approved by the newspaper’s late publisher, Arthur Hays Sulzberger. The cover arrangements were part of a general Times policy—set by Sulzberger—to provide assistance to the CIA whenever possible.

Sulzberger was especially close to Allen Dulles. “At that level of contact it was the mighty talking to the mighty,” said a high‑level CIA official who was present at some of the discussions. “There was an agreement in principle that, yes indeed, we would help each other. The question of cover came up on several occasions.  It was agreed that the actual arrangements would be handled by subordinates…. The mighty didn’t want to know the specifics; they wanted plausible deniability.

A senior CIA official who reviewed a portion of the Agency’s files on journalists for two hours onSeptember 15th, 1977, said he found documentation of five instances in which the Times had provided cover for CIA employees between 1954 and 1962. In each instance he said, the arrangements were handled by executives of the Times; the documents all contained standard Agency language “showing that this had been checked out at higher levels of the New York Times,” said the official. The documents did not mention Sulzberger’s name, however—only those of subordinates whom the official refused to identify.

The CIA employees who received Times credentials posed as stringers for the paper abroad and worked as members of clerical staffs in the Times’ foreign bureaus. Most were American; two or three were foreigners.

CIA officials cite two reasons why the Agency’s working relationship with the Times was closer and more extensive than with any other paper: the fact that the Times maintained the largest foreign news operation in American daily journalism; and the close personal ties between the men who ran both institutions.

Sulzberger informed a number of reporters and editors of his general policy of cooperation with the Agency. “We were in touch with them—they’d talk to us and some cooperated,” said a CIA official. The cooperation usually involved passing on information and “spotting” prospective agents among foreigners.

Arthur Hays Sulzberger signed a secrecy agreement with the CIA in the 1950s, according to CIA officials—a fact confirmed by his nephew, C.L. Sulzberger. However, there are varying interpretations of the purpose of the agreement: C.L. Sulzberger says it represented nothing more than a pledge not to disclose classified information made available to the publisher. That contention is supported by some Agency officials. Others in the Agency maintain that the agreement represented a pledge never to reveal any of the Times’ dealings with the CIA, especially those involving cover. And there are those who note that, because all cover arrangements are classified, a secrecy agreement would automatically apply to them.

Attempts to find out which individuals in the Times organization made the actual arrangements for providing credentials to CIA personnel have been unsuccessful. In a letter to reporter Stuart Loory in 1974, Turner Cadedge, managing editor of the Times from 1951 to 1964, wrote that approaches by the CIA had been rebuffed by the newspaper. “I knew nothing about any involvement with the CIA… of any of our foreign correspondents on the New York Times. I heard many times of overtures to our men by the CIA, seeking to use their privileges, contacts, immunities and, shall we say, superior intelligence in the sordid business of spying and informing. If any one of them succumbed to the blandishments or cash offers, I was not aware of it. Repeatedly, the CIA and other hush‑hush agencies sought to make arrangements for ‘cooperation’ even with Times management, especially during or soon after World War II, but we always resisted. Our motive was to protect our credibility.”

According to Wayne Phillips, a former Timesreporter, the CIA invoked Arthur Hays Sulzberger’s name when it tried to recruit him as an undercover operative in 1952 while he was studying at Columbia University’s Russian Institute. Phillips said an Agency official told him that the CIA had “a working arrangement” with the publisher in which other reporters abroad had been placed on the Agency’s payroll. Phillips, who remained at the Times until 1961, later obtained CIA documents under the Freedom of Information Act which show that the Agency intended to develop him as a clandestine “asset” for use abroad.

On January 31st, 1976, the Times carried a brief story describing the ClAs attempt to recruit Phillips. It quoted Arthur Ochs Sulzberger, the present publisher, as follows: “I never heard of the Times being approached, either in my capacity as publisher or as the son of the late Mr. Sulzberger.” The Times story, written by John M. Crewdson, also reported that Arthur Hays Sulzberger told an unnamed former correspondent that he might he approached by the CIA after arriving at a new post abroad. Sulzberger told him that he was not “under any obligation to agree,” the story said and that the publisher himself would be “happier” if he refused to cooperate. “But he left it sort of up to me,” the Times quoted its former reporter as saying. “The message was if I really wanted to do that, okay, but he didn’t think it appropriate for a Times correspondent”

C.L. Sulzberger, in a telephone interview, said he had no knowledge of any CIA personnel using Times cover or of reporters for the paper working actively for the Agency. He was the paper’s chief of foreign service from 1944 to 1954 and expressed doubt that his uncle would have approved such arrangements. More typical of the late publisher, said  Sulzberger, was a promise made to Allen Dulles’ brother, John Foster, then secretary of state, that no Times staff member would be permitted to accept an invitation to visit the People’s Republic of China without John Foster Dulles’ consent. Such an invitation was extended to the publisher’s nephew in the 1950s; Arthur Sulzberger forbade him to accept it. “It was seventeen years before another Times correspondent was invited,” C.L. Sulzberger recalled.

■ The Columbia Broadcasting System. CBS was unquestionably the CIAs most valuable broadcasting asset. CBS President William Paley and Allen Dulles enjoyed an easy working and social relationship. Over the years, the network provided cover for CIA employees, including at least one well‑known foreign correspondent and several stringers; it supplied outtakes of newsfilm to the CIA3; established a formal channel of communication between the Washington bureau chief and the Agency; gave the Agency access to the CBS newsfilm library; and allowed reports by CBS correspondents to the Washington and New York newsrooms to be routinely monitored by the CIA. Once a year during the 1950s and early 1960s, CBS correspondents joined the CIA hierarchy for private dinners and briefings.

The details of the CBS‑CIA arrangements were worked out by subordinates of both Dulles and Paley. “The head of the company doesn’t want to know the fine points, nor does the director,” said a CIA official. “Both designate aides to work that out. It keeps them above the battle.” Dr. Frank Stanton, for 25 years president of the network, was aware of the general arrangements Paley made with Dulles—including those for cover, according to CIA officials. Stanton, in an interview last year, said he could not recall any cover arrangements.) But Paley’s designated contact for the Agency was Sig Mickelson, president of CBS News between 1954 and 1961. On one occasion, Mickelson has said, he complained to Stanton about having to use a pay telephone to call the CIA, and Stanton suggested he install a private line, bypassing the CBS switchboard, for the purpose. According to Mickelson, he did so. Mickelson is now president of Radio Free Europe and Radio Liberty, both of which were associated with the CIA for many years.

In 1976, CBS News president Richard Salant ordered an in‑house investigation of the network’s dealings with the CIA. Some of its findings were first disclosed by Robert Scheer in the Los Angeles Times.) But Salant’s report makes no mention of some of his own dealings with the Agency, which continued into the 1970s.

Many details about the CBS‑CIA relationship were found in Mickelson’s files by two investigators for Salant. Among the documents they found was a September 13th, 1957, memo to Mickelson fromTed Koop, CBS News bureau chief  in Washington from 1948 to 1961. It describes a phone call to Koop from Colonel Stanley Grogan of the CIA: “Grogan phoned to say that Reeves [J. B. Love Reeves, another CIA official] is going to New York to be in charge of the CIA contact office there and will call to see you and some of your confreres. Grogan says normal activities will continue to channel through the Washington office of CBS News.” The report to Salant also states: “Further investigation of Mickelson’s files reveals some details of the relationship between the CIA and CBS News…. Two key administrators of this relationship were Mickelson and Koop…. The main activity appeared to be the delivery of CBS newsfilm to the CIA…. In addition there is evidence that, during 1964 to 1971, film material, including some outtakes, were supplied by the CBS Newsfilm Library to the CIA through and at the direction of Mr. Koop4…. Notes in Mr. Mickelson’s files indicate that the CIA used CBS films for training… All of the above Mickelson activities were handled on a confidential basis without mentioning the words Central Intelligence Agency. The films were sent to individuals at post‑office box numbers and were paid for by individual, nor government, checks. …” Mickelson also regularly sent the CIA an internal CBS newsletter, according to the report.

Salant’s investigation led him to conclude that Frank Kearns, a CBS‑TV reporter from 1958 to 1971, “was a CIA guy who got on the payroll somehow through a CIA contact with somebody at CBS.” Kearns and Austin Goodrich, a CBS stringer, were undercover CIA employees, hired under arrangements approved by Paley.

Last year a spokesman for Paley denied a report by former CBS correspondent Daniel Schorr that Mickelson and he had discussed Goodrich’s CIA status during a meeting with two Agency representatives in 1954. The spokesman claimed Paley had no knowledge that Goodrich had worked for the CIA. “When I moved into the job I was told by Paley that there was an ongoing relationship with the CIA,” Mickelson said in a recent interview. “He introduced me to two agents who he said would keep in touch. We all discussed the Goodrich situation and film arrangements. I assumed this was a normal relationship at the time. This was at the height of the Cold War and I assumed the communications media were cooperating—though the Goodrich matter was compromising.

At the headquarters of CBS News in New York, Paley’s cooperation with the CIA is taken for granted by many news executives and reporters, despite tile denials. Paley, 76, was not interviewed by Salant’s investigators. “It wouldn’t do any good,” said one CBS executive. “It is the single subject about which his memory has failed.”

Salant discussed his own contacts with the CIA, and the fact he continued many of his predecessor’s practices, in an interview with this reporter last year. The contacts, he said, began in February 1961, “when I got a phone call from a CIA man who said he had a working relationship with Sig Mickelson. The man said, ‘Your bosses know all about it.’”  According to Salant, the CIA representative asked that CBS continue to supply the Agency with unedited newstapes and make its correspondents available for debriefingby Agency officials. Said Salant: “I said no on talking to the reporters, and let them see broadcast tapes, but no outtakes.  This went on for a number of years—into the early Seventies.”

In 1964 and 1965, Salant served on a super-secret CIA task force which explored methods of beaming American propaganda broadcasts to the People’s Republic of China. The other members of the four‑man study team were Zbigniew Brzezinski, then a professor at Columbia University; William Griffith, then professor of political science at the Massachusetts Institute of Technology., and John Haves, then vice‑president of the Washington Post Company for radio‑TV5. The principal government officials associated with the project were Cord Meyer of the CIA; McGeorge Bundy, then special assistant to the president for national security; Leonard Marks, then director of the USIA; and Bill Moyers, then special assistant to President Lyndon Johnson and now a CBS correspondent.

Salant’s involvement in the project began with a call from Leonard Marks, “who told me the White House wanted to form a committee of four people to make a study of U.S. overseas broadcasts behind the Iron Curtain.” When Salant arrived in Washington for the first meeting he was told that the project was CIA sponsored. “Its purpose,” he said, “was to determine how best to set up shortwave broadcasts into Red China.” Accompanied by a CIA officer named Paul Henzie, the committee of four subsequently traveled around the world inspecting facilities run by Radio Free Europe and Radio Liberty both CIA‑run operations at the time), the Voice of America and Armed Forces Radio. After more than a year of study, they submitted a report to Moyers recommending that the government establish a broadcast service, run by the Voice of America, to be beamed at the People’s Republic of China. Salant has served two tours as head of CBS News, from 1961‑64 and 1966‑present. At the time of the China project he was a CBS corporate executive.)

Time and Newsweek magazines. According to CIA and Senate sources, Agency files contain written agreements with former foreign correspondents and stringers for both the weekly news magazines.  The same sources refused to say whether the CIA has ended all its associations with individuals who work for the two publications. Allen Dulles often interceded with his good friend, the late Henry Luce, founder of Time and Life magazines, who readily allowed certain members of his staff to work for the Agency and agreed to provide jobs and credentials for other CIA operatives who lacked journalistic experience.

For many years, Luce’s personal emissary to the CIA was C.D. Jackson, a Time Inc., vice‑president who was publisher of Life magazine from 1960 until his death in 1964.While a Time executive, Jackson coauthored a CIA‑sponsored study recommending the reorganization of the American intelligence services in the early 1950s. Jackson, whose Time‑Life service was interrupted by a one‑year White House tour as an assistant to President Dwight Eisenhower, approved specific arrangements for providing CIA employees with Time‑Life cover. Some of these arrangements were made with the knowledge of Luce’s wife, Clare Boothe. Other arrangements for Time cover, according to CIA officials including those who dealt with Luce), were made with the knowledge of Hedley Donovan, now editor‑in‑chief of Time Inc. Donovan, who took over editorial direction of all Time Inc. publications in 1959, denied in a telephone interview that he knew of any such arrangements. “I was never approached and I’d be amazed if Luce approved such arrangements,” Donovan said. “Luce had a very scrupulous regard for the difference between journalism and government.”

In the 1950s and early 1960s, Time magazine’s foreign correspondents attended CIA “briefing” dinners similar to those the CIA held for CBS. And Luce, according to CIA officials, made it a regular practice to brief Dulles or other high Agency officials when he returned from his frequent trips abroad. Luce and the men who ran his magazines in the 1950s and 1960s encouraged their foreign correspondents to provide help to the CIA, particularly information that might be useful to the Agency for intelligence purposes or recruiting foreigners.

At Newsweek, Agency sources reported, the CIA engaged the services of’ several foreign correspondents and stringers under arrangements approved by senior editors at the magazine. Newsweek’s stringer in Rome in the mid‑Fifties made little secret of the fact that he worked for the CIA. Malcolm Muir, Newsweek’s editor from its founding in 1937 until its sale to the Washington Post Company in 1961, said in a recent interview that his dealings with the CIA were limited to private briefings he gave Allen Dulles after trips abroad and arrangements he approved for regular debriefing of Newsweek correspondents by the Agency. He said that he had never provided cover for CIA operatives, but that others high in the Newsweek organization might have done so without his knowledge.

“I would have thought there might have been stringers who were agents, but I didn’t know who they were,” said Muir. “I do think in those days the CIA kept pretty close touch with all responsible reporters. Whenever I heard something that I thought might be of interest to Allen Dulles, I’d call him up…. At one point he appointed one of his CIA men to keep in regular contact with our reporters, a chap that I knew but whose name I can’t remember. I had a number of friends in Alien Dulles’ organization.” Muir said that Harry Kern, Newsweek’s foreign editor from 1945 until 1956, and Ernest K. Lindley, the magazine’s Washington bureau chief during the same period “regularly checked in with various fellows in the CIA.”

“To the best of my knowledge.” said Kern, “nobody at Newsweek worked for the CIA… The informal relationship was there. Why have anybody sign anything? What we knew we told them [the CIA] and the State Department…. When I went to Washington, I would talk to Foster or Allen Dulles about what was going on. … We thought it was admirable at the time. We were all on the same side.” CIA officials say that Kern’s dealings with the Agency were extensive. In 1956, he left Newsweek to run Foreign Reports, a Washington‑based newsletter whose subscribers Kern refuses to identify.

Ernest Lindley, who remained at Newsweek until 1961, said in a recent interview that he regularly consulted with Dulles and other high CIA officials before going abroad and briefed them upon his return. “Allen was very helpful to me and I tried to reciprocate when I could,” he said. “I’d give him my impressions of people I’d met overseas. Once or twice he asked me to brief a large group of intelligence people; when I came back from the Asian‑African conference in 1955, for example; they mainly wanted to know about various people.”

As Washington bureau chief, Lindley said he learned from Malcolm Muir that the magazine’s stringer in southeastern Europe was a CIA contract employee—given credentials under arrangements worked out with the management. “I remember it came up—whether it was a good idea to keep this person from the Agency; eventually it was decided to discontinue the association,” Lindley said.

When Newsweek waspurchased by the Washington Post Company, publisher Philip L. Graham was informed by Agency officials that the CIA occasionally used the magazine for cover purposes, according to CIA sources. “It was widely known that Phil Graham was somebody you could get help from,” said a former deputy director of the Agency. “Frank Wisner dealt with him.” Wisner, deputy director of the CIA from 1950 until shortly before his suicide in 1965, was the Agency’s premier orchestrator of “black” operations, including many in which journalists were involved. Wisner liked to boast of his “mighty Wurlitzer,” a wondrous propaganda instrument he built, and played, with help from the press.) Phil Graham was probably Wisner’s closest friend. But Graharn, who committed suicide in 1963, apparently knew little of the specifics of any cover arrangements with Newsweek, CIA sources said.

In 1965‑66, an accredited Newsweek stringer in the Far East was in fact a CIA contract employee earning an annual salary of $10,000 from the Agency, according to Robert T. Wood, then a CIA officer in the Hong Kong station. Some, Newsweek correspondents and stringers continued to maintain covert ties with the Agency into the 1970s, CIA sources said.

Information about Agency dealings with the Washington Post newspaper is extremely sketchy. According to CIA officials, some Post stringers have been CIA employees, but these officials say they do not know if anyone in the Post management was aware of the arrangements.

All editors‑in‑chief and managing editors of the Post since 1950 say they knew of no formal Agency relationship with either stringers or members of the Post staff. “If anything was done it was done by Phil without our knowledge,” said one. Agency officials, meanwhile, make no claim that Post staff members have had covert affiliations with the Agency while working for the paper.6

Katharine Graham, Philip Graham’s widow and the current publisher of the Post, says she has never been informed of any CIA relationships with either Post or Newsweek personnel. In November of 1973, Mrs. Graham called William Colby and asked if any Post stringers or staff members were associated with the CIA. Colby assured her that no staff members were employed by the Agency but refused to discuss the question of stringers.

■ The Louisville Courier‑Journal. From December 1964 until March 1965, a CIA undercover operative named Robert H. Campbell worked on the Courier‑Journal. According to high‑level CIA sources, Campbell was hired by the paper under arrangements the Agency made with Norman E. Isaacs, then executive editor of the Courier‑Journal. Barry Bingham Sr., then publisher of the paper, also had knowledge of the arrangements, the sources said. Both Isaacs and Bingham have denied knowing that Campbell was an intelligence agent when he was hired.

The complex saga of Campbell’s hiring was first revealed in a Courier‑Journal story written by James R Herzog on March 27th, 1976, during the Senate committee’s investigation, Herzog’s account began: “When 28‑year‑old Robert H. Campbell was hired as a Courier‑Journal reporter in December 1964, he couldn’t type and knew little about news writing.” The account then quoted the paper’s former managing editor as saying that Isaacs told him that Campbell was hired as a result of a CIA request: “Norman said, when he was in Washington [in 1964], he had been called to lunch with some friend of his who was with the CIA [and that] he wanted to send this young fellow down to get him a little knowledge of newspapering.” All aspects of Campbell’s hiring were highly unusual. No effort had been made to check his credentials, and his employment records contained the following two notations: “Isaacs has files of correspondence and investigation of this man”; and, “Hired for temporary work—no reference checks completed or needed.”

The level of Campbell’s journalistic abilities apparently remained consistent during his stint at the paper, “The stuff that Campbell turned in was almost unreadable,” said a former assistant city editor. One of Campbell’s major reportorial projects was a feature about wooden Indians. It was never published. During his tenure at the paper, Campbell frequented a bar a few steps from the office where, on occasion, he reportedly confided to fellow drinkers that he was a CIA employee.

According to CIA sources, Campbell’s tour at the Courier‑Journal was arranged to provide him with a record of journalistic experience that would enhance the plausibility of future reportorial cover and teach him something about the newspaper business. The Courier‑Journal’s investigation also turned up the fact that before coming to Louisville he had worked briefly for the Hornell, New York, Evening Tribune, published by Freedom News, Inc. CIA sources said the Agency had made arrangements with that paper’s management to employ Campbell.7

At the Courier‑Journal, Campbell was hired under arrangements made with Isaacs and approved by Bingham, said CIA and Senate sources. “We paid the Courier‑Journal so they could pay his salary,” said an Agency official who was involved in the transaction. Responding by letter to these assertions, Isaacs, who left Louisville to become president and publisher of the Wilmington Delaware) News & Journal, said: “All I can do is repeat the simple truth—that never, under any circumstances, or at any time, have I ever knowingly hired a government agent. I’ve also tried to dredge my memory, but Campbell’s hiring meant so little to me that nothing emerges…. None of this is to say that I couldn’t have been ‘had.’”.Barry Bingham Sr., said last year in a telephone interview that he had no specific memory of Campbell’s hiring and denied that he knew of any arrangements between the newspaper’s management and the CIA. However, CIA officials said that the Courier‑Journal, through contacts with Bingham, provided other unspecified assistance to the Agency in the 1950s and 1960s. The Courier‑Journal’s detailed, front‑page account of Campbell’s hiring was initiated by Barry Bingham Jr., who succeeded his father as editor and publisher of the paper in 1971. The article is the only major piece of self‑investigation by a newspaper that has appeared on this subject.8

■ The American Broadcasting Company and the National Broadcasting Company. According to CIA officials, ABC continued to provide cover for some CIA operatives through the 1960s. One was Sam Jaffe who CIA officials said performed clandestine tasks for the Agency. Jaffe has acknowledged only providing the CIA with information. In addition, another well‑known network correspondent performed covert tasks for the Agency, said CIA sources. At the time of the Senate bearings, Agency officials serving at the highest levels refused to say whether the CIA was still maintaining active relationships with members of the ABC‑News organization. All cover arrangements were made with the knowledge off ABC executives, the sources said.

These same sources professed to know few specifies about the Agency’s relationships with NBC, except that several foreign correspondents of the network undertook some assignments for the Agency in the 1950s and 1960s. “It was a thing people did then,” said Richard Wald, president of NBC News since 1973. “I wouldn’t be surprised if people here—including some of the correspondents in those days—had connections with the Agency.”

■ The Copley Press, and its subsidiary, the Copley News Service. This relationship, first disclosed publicly by reporters Joe Trento and Dave Roman in Penthouse magazine, is said by CIA officials to have been among the Agency’s most productive in terms of getting “outside” cover for its employees. Copley owns nine newspapers in California and Illinois—among them the San Diego Union and Evening Tribune. The Trento‑Roman account, which was financed by a grant from the Fund for Investigative Journalism, asserted that at least twenty‑three Copley News Service employees performed work for the CIA. “The Agency’s involvement with the Copley organization is so extensive that it’s almost impossible to sort out,” said a CIA official who was asked about the relationship late in 1976. Other Agency officials said then that James S. Copley, the chain’s owner until his death in 1973, personally made most of the cover arrangements with the CIA.

According to Trento and Roman, Copley personally volunteered his news service to then‑president Eisenhower to act as “the eyes and ears” against “the Communist threat in Latin and Central America” for “our intelligence services.”  James Copley was also the guiding hand behind the Inter‑American Press Association, a CIA‑funded organization with heavy membership among right‑wing Latin American newspaper editors.

■ Other major news organizations. According to Agency officials, CIA files document additional cover arrangements with the following news‑gathering organizations, among others: the New York Herald‑Tribune, the Saturday‑Evening Post, Scripps‑Howard Newspapers, Hearst Newspapers Seymour K. Freidin, Hearst’s current London bureau chief and a former Herald‑Tribune editor and correspondent, has been identified as a CIA operative by Agency sources), Associated Press,9 United Press International, the Mutual Broadcasting System, Reuters and the Miami Herald. Cover arrangements with the Herald, according to CIA officials, were unusual in that they were made “on the ground by the CIA station in Miami, not from CIA headquarters.

“And that’s just a small part of the list,” in the words of one official who served in the CIA hierarchy. Like many sources, this official said that the only way to end the uncertainties about aid furnished the Agency by journalists is to disclose the contents of the CIA files—a course opposed by almost all of the thirty‑five present and former CIA officials interviewed over the course of a year.

COLBY CUTS HIS LOSSES

THE CIA’S USE OF JOURNALISTS CONTINUED VIRTUALLY unabated until 1973 when, in response to public disclosure that the Agency had secretly employed American reporters, William Colby began scaling down the program. In his public statements, Colby conveyed the impression that the use of journalists had been minimal and of limited importance to the Agency.

He then initiated a series of moves intended to convince the press, Congress and the public that the CIA had gotten out of the news business. But according to Agency officials, Colby had in fact thrown a protective net around his valuable intelligence in the journalistic community. He ordered his deputies to maintain Agency ties with its best journalist contacts while severing formal relationships with many regarded as inactive, relatively unproductive or only marginally important. In reviewing Agency files to comply with Colby’s directive, officials found that many journalists had not performed useful functions for the CIA in years. Such relationships, perhaps as many as a hundred, were terminated between 1973 and 1976.

Meanwhile, important CIA operatives who had been placed on the staffs of some major newspaper and broadcast outlets were told to resign and become stringers or freelancers, thus enabling Colby to assure concerned editors that members of their staffs were not CIA employees. Colby also feared that some valuable stringer‑operatives might find their covers blown if scrutiny of the Agency’s ties with journalists continued. Some of these individuals were reassigned to jobs on so‑called proprietary publications—foreign periodicals and broadcast outlets secretly funded and staffed by the CIA. Other journalists who had signed formal contracts with the CIA—making them employees of the Agency—were released from their contracts, and asked to continue working under less formal arrangements.

In November 1973, after many such shifts had been made, Colby told reporters and editors from the New York Times and the Washington Star that the Agency had “some three dozen” American newsmen “on the CIA payroll,” including five who worked for “general‑circulation news organizations.” Yet even while the Senate Intelligence Committee was holding its hearings in 1976, according to high‑level CIA sources, the CIA continued to maintain ties with seventy‑five to ninety journalists of every description—executives, reporters, stringers, photographers, columnists, bureau clerks and members of broadcast technical crews. More than half of these had been moved off CIA contracts and payrolls but they were still bound by other secret agreements with the Agency. According to an unpublished report by the House Select Committee on Intelligence, chaired by Representative Otis Pike, at least fifteen news organizations were still providing cover for CIA operatives as of 1976.

Colby, who built a reputation as one of the most skilled undercover tacticians in the CIA’s history, had himself run journalists in clandestine operations before becoming director in 1973. But even he was said by his closest associates to have been disturbed at how extensively and, in his view, indiscriminately, the Agency continued to use journalists at the time he took over. “Too prominent,” the director frequently said of some of the individuals and news organizations then working with the CIA. Others in the Agency refer to their best‑known journalistic assets as “brand names.”)

“Colby’s concern was that he might lose the resource altogether unless we became a little more careful about who we used and how we got them,” explained one of the former director’s deputies. The thrust of Colby’s subsequent actions was to move the Agency’s affiliations away from the so‑called “majors” and to concentrate them instead in smaller newspaper chains, broadcasting groups and such specialized publications as trade journals and newsletters.

After Colby left the Agency on January 28th, 1976, and was succeeded by George Bush, the CIA announced a new policy: “Effective immediately, the CIA will not enter into any paid or contractual relationship with any full‑time or part‑time news correspondent accredited by any U.S. news service, newspaper, periodical, radio or television network or station” At the time of the announcement, the Agency acknowledged that the policy would result in termination of less than half of the relationships with the 50 U.S. journalists it said were still affiliated with the Agency. The text of the announcement noted that the CIA would continue to “welcome” the voluntary, unpaid cooperation of journalists. Thus, many relationships were permitted to remain intact.

The Agency’s unwillingness to end its use of journalists and its continued relationships with some news executives is largely the product of two basic facts of the intelligence game: journalistic cover is ideal because of the inquisitive nature of a reporter’s job; and many other sources of institutional cover have been denied the CIA in recent years by businesses, foundations and educational institutions that once cooperated with the Agency.

“It’s tough to run a secret agency in this country,” explained one high‑level CIA official. “We have a curious ambivalence about intelligence. In order to serve overseas we need cover. But we have been fighting a rear‑guard action to try and provide cover. The Peace Corps is off‑limit