According to MSNBC, U.N. Secretary General Kofi Annan says that he has received a letter from Iraq's Foreign Minister which says that Iraq accepts the unconditional return of weapons inspectors.

I doubt that there truly are no conditions on the return of weapons inspectors to Iraq. In any case, many questions remain unanswered, including these:

1) Will troops accompany the inspectors in case Iraq denies entry to the sites that the inspectors wish to visit?
2) The composition of the inspector groups is different than in the early 90s. Back then, the inspectors were composed of delegates from the US and coalition forces. Now, they are expected to be UN employees, subject to its silly politics and policies. Back then, the inspectors had access to confidential intelligence information to tip them off to activity around the sites in question. Now, the allies probably will not share sensitive information for fear that it will educate the Iraqis about the methods used to gather the data. Given these and other issues with the quality of the inspectors and the inspections, will the results be satisfactory to the US and its allies? I doubt they will, and rightly so.
3) What about the other resolutions that Iraq continues to violate?

Saddam is proving adept at negotiation through the media. I doubt that he can deflect the President from his course to see that Iraq disarms, stops supporting terror, and adheres to the UN resolutions in force. The pressure on Iraq to prove itself through deeds, not words, will continue.

Well Dilfer wasn't bad, his injured knee seemed sound, but the Seahawk defense, especially against the run, was anything but. Add to that, the Hawk special teams play was poor.

The new stadium is glorious. I'd forgotten what a treat the "real" half-time show at a football game could be. The Washington State Cougar and Washington Husky bands joined for the first time ever to perform patriotic songs along with a singing group from McCord Air Force Base. They also unfurled one of the largest flags I've ever seen in person.

As for fan support, they did their best; the metal bleachers resounded as the fans stomped and yelled when Arizona had the ball near the end zones. They cheered and booed lustily as the situation dictated; everyone wanted to see the Hawks win. Alas.

Still, a record of 0-2 does not a season make (yet). The Steelers and the Rams were picked to return to the Super Bowl, and both are also 0-2.

We will see what Coach Holmgren asks General Manager Holmgren to do. Without a big bodied run stopper in the middle, we may have to make a trade if the Hawks cannot stop teams from running on them. We won't give up yet!

We had a nice family barbeque last night over at Kathy's daughter's house. Lots of laughs, no talk of terrorism--as long as you leave out their Rottweiler, who is only a minor terror. Actually, she (Thora, the Rottweiler) is a good dog with some funny traits. Human howls encourage her to join in. She loves tug of war, petting, food treats, disobeying orders to stay "out of the kitchen", and eating cat food.

Our three Labrador dogs--I have dubbed them "Logs"--are much the same, minus the cat food habit, as we have no cat. The Logs love to sleep, eat, rassle, and play with their toys. The Black Log, Abby, loves the "Wooly Chew "Bone" (SI03PB)" I bought for them from Orvis.com. Abby, who gets no respect from the two other Logs, has claimed it for her own. She looks so funny carrying it around--a big body crowned with a smallish head clutching a big wooly toy tenderly in her jaws

Fun stuff to see.

Today we go to our first real football game at the new SeaHawk Stadium. Hope springs eternal once again as Trent Dilfer returns as the starting Quarterback, with knee brace. The Hawks were at their best in the preseason with Dilfer at the controls. Hopefully that wasn't a fluke, and that Dilfer's knee injury is truly ready to test game conditions.

The President has made his case to the UN. It was a direct, forceful statement. The President took Iraq to task for its failure to comply with every UN resolution that was passed by the Security Council following its defeat in the Gulf War. His speech detailed the suffering of the Iraqi people, its support for terror, and the waste of Iraq's treasure and productivity on weaponry and on enrichment for Saddam. The President detailed the US' long standing support for the UN. However, he cautioned the body that inaction on Iraq was not an option.

Prior to the President's speech, President Chirac of France proposed a time limit for compliance with UN inspection resolutions. His proposal outlined a three week period during which Iraq must begin to admit inspectors. I agree; Iraq should comply in short order, without further delay. However, the original resolutions--and their full terms--in all of the aforementioned UN Security Council resolutions must be complied with in that time. Failure to do so will only give the Butcher of Baghdad more time to pursue and acquire weapons of mass destruction, including nuclear weapons. As the President said, once Saddam has such weapons, the world's options to deal with him will be limited indeed.

Today was a very tough day for most Americans. Like that fateful day a year ago, I sat riveted to the TV. I watched the ceremony at the Pentagon, the reading of names at Ground Zero, and the wreath ceremony at Shankesville. I tried to avoid the voices of the commentators; most of what can be said has been said. The best coverage was simply the images. Thankfully, CNBC World showed President and Mrs. Bush's interaction with the families at Shankesville without any announcers at all. The only sounds that were heard were the sounds of the wind, and faint, unintelligible speech. I shed tears more than once today. I said a prayer for those who lost a loved one that day and for those whose loss occurred in service to our country since then.

I hope that today has brought some solace and peace to those in pain of loss. For the rest of us, buck up. We have a call to action to heed. Let us listen carefully to the President's words tomorrow. I trust that they will shake the foundations of the butcher of Babylon to the core.

Then, let's roll.

Susan Sontag and Paul Krugman have forgotten much of what the President has said about the war on terror. The terrorists are not a group of thugs who act independently of any nation, like some set of characters from a Bond movie. They live somewhere; they receive economic support and aid from a government, or from a group of people within a nation, or both. While the war on terror may force us to live with ambiguity, it will have its D-Day and Vx-Day equivalents. It may not fit into the neat categories that the New York Times editorial board would like it to have--but it is no Vietnam.

If Saddam obtains nuclear weapons, he can place terrorists and his fellow "Axis" members under his protection. All of the Middle East, and Turkey, would be under constant threat, as we were during the First Cold War. This situation cannot be tolerated. We must deny terrorists their hidey-holes, and madmen their nightmare weapons, while we still can.

Many will link to Dave Barry's tribute to the passenger's on United Flight 93. I was very moved by it.

It will take some time, but I recommend reading this. Francis Fukuyama is the author of the famous article entitled "The End of History?". I don't agree with everything he says, but I agree with quite a bit, and respect his point of view on the rest.

I also enjoyed this. Remembrances and mourning have their place, and are important. However, let us get on with the job that we have been forced to undertake.

Many, many things have been written about the impact of 9/11 on America, and the world since that tragic day. Now a debate rages about Iraq: is it a sponsor of terrorists, or not? Should we give Saddam a chance through negotiation for more inspections, or assume that he would make a mockery of the process? Should we attack now in order to force a “regime change”, or wait?

Wait for what? For Saddam to strike? Or for Saddam to present incontrovertible evidence that he has nuclear weapons and the means to deliver them, if not to the US or Europe, then to Israel or other friends in the region?

It occurs to me that we were given a brief respite between the original Cold War and a new, more malicious version. The New Cold War pits America against a type of enemy who we call “evil doers” and terrorists. However, these enemies are not in one country, not sponsored by one state. They cannot be defeated on a battlefield; they do not seek that kind of war as a rule.

There are many parallels between this Cold War and the last:
• The enemy includes a number of states and a number of terrorist groups funded by them.
• Destruction of a group, or toppling a regime, will not end the threat. The threat will take years to contain, years longer to defeat.
• We will achieve victories in visible, and invisible, battles.
• Ideas, ideals, and economics are among the chief weapons to be used in this battle.
• Our convictions will be tested from within as well as by our enemy directly. There are many free people who fear war, who fear the loss of young lives, who fear—fear.

Are we more secure a year after 9/11? In some ways we are. Passengers have already shown both the willingness and the ability to protect themselves on aircraft. Citizens are volunteering for duty in police, fire, and military service in increasing numbers. We honor those willing to make the sacrifice in defense of our liberty more now than on 9/10.

However, the Homeland Security Department is a politicized mess, bogged down over turf and Civil Service rules. The Transportation Security Agency is at best a work in progress.

We have no choice but to slog through these messes. Our borders must be better protected than before. We have a right to know who is in this country, whether that requires a form of “profiling” or not. Public gathering places, mass transit, seats of government, and critical infrastructure must be protected. Sadly, we cannot count on the oceans to protect us from attack. We cannot hope for the best, and fail to prepare for the worst.

We have been called to act in our own defense. This is not like a failure to prepare for a natural disaster—something that may or may not happen. Something that can be compensated for by a neighbor’s generosity, or parcels from a relief agency. Now lives, and the future of our way of life, are at stake. To fail to act would be to fail ourselves and our children, and to embolden an implacable enemy who seeks signs of our weakness, and draws strength from them.

There is plenty of evidence that Saddam is a psychopath in the mold of Hitler and Stalin. Let us not give him the opportunity to prove that he is a killer on the same scale.

I have been thinking about investment quite a bit lately. After losing $30,000 in three weeks around a month ago, I decided to pull out of the market for a while. I will remain out until the hysteria over corporate responsibility shakes out and the prospects for the economy improve in an unequivocal sense.

Of course, there is a way to change investor psychology that would help offset these factors almost overnight.

Government loves to collect taxes. Here is a section of a report from the Congressional Budget Office that speaks to likely causes for the decline in income tax receipts; the full report is here :

The Usual Suspects

The first likely factor is capital gains income. Realizations of capital gains are not part of national income or GDP. But they are taxable income to individuals and corporations. Consequently, they can grow more rapidly or fall more precipitously than national income, resulting in changes in revenue proportionately greater or smaller than changes in overall economic activity. CBO's analysis indicates that rapid growth of capital gains realizations explains about 30 percent of the growth in individual income tax receipts relative to GDP from 1995 to 1999, so they may be playing a major role in the decline in FY 2002 receipts.

When projecting gains receipts in its January 2002 and March 2002 baselines, CBO already had good estimates of the calendar year 2001 level of the stock market and GDP--big influences on the level of gains realizations that would help determine final tax liability payments in April 2002. As a result, the March baseline, in comparison to the baseline of January 2001, projected a 23 percent decline in realizations and a $27 billion decrease in gains receipts. But because realizations are so volatile, the decline may be greater than econometric analyses of past behavior would suggest. Distributions of capital gains from mutual funds were down in calendar year 2001--reportedly by about 80 percent. Total gains realizations differ from those in mutual funds: stocks are the principal component of mutual funds, but only about half of total taxable gains come from stocks, with the rest coming from other capital assets, such as real estate. As a consequence, total gains would likely have fallen less than gains in mutual funds. Thus, while realizations almost certainly explain some of the FY 2002 shortfall, they very likely do not account for all of it.

A second likely factor is the slower growth of very high incomes in comparison to that of overall income. Those incomes are taxed at the highest rates and produce a disproportionate amount of income tax revenues. From 1995 to 1999, very rapid growth in very high incomes accounted for about 16 percent of the growth in the revenues in excess of GDP. A reversal could very well reduce receipts by a significant amount.
In addition, enough changes occurred this year--including the tax cut, the recession, and the drop in the stock market--to have altered the usual division of tax liability between withholding and estimated payments on the one hand and final payments and refunds on the other. In the 2001 tax year, the ratio of refunds to withholding departed from its previous, relatively stable, pattern. The larger-than-usual role played by final payments and refunds may mean that taxpayers were surprised by economic developments in 2001 and continued to withhold higher-than-necessary amounts. That overwithholding could have been simply the consequence of lower capital gains realizations; but it could also have been because earnings weakened over the course of calendar year 2001, and taxpayers paid withholding at a higher marginal rate than would have been the case had their earnings been steady throughout. In either case, the overwithholding suggests that shortfalls in receipts from two different years could have been bunched into a single year's collections, making the reduction look more ominous than it really was.

Noticeably absent from this list of likely causes are stock options and bonuses, because bonuses are a form of wage income, and most options are included in wage income measures when exercised. They also reduce taxable corporate profits at the same time that they increase taxable wage income. Nevertheless, options and bonuses may play a role in the distributional effect just described. To the extent that they accrue primarily to people with very high income, their rise and fall can affect the receipts-to-GDP ratio. The lower the proportion of income coming from bonuses and options of high-income individuals, the lower the receipts from a given level of wages and salaries. And because options income is typically withheld below the top marginal tax rate, it can disproportionately affect April payments when taxpayers settle up on their liability. Some early evidence suggests that options income may have fallen by 50 percent in calendar year 2001, in contrast to the 30 percent decline built into CBO's projections.

I believe that the drop in capital gains income is due to factors that include 1) lower receipts from the sales of stock, mutual funds, businesses, etc. and 2) a decline in dollars invested in these instruments.

One factor that could help increase investor interest in putting more capital to work is equal treatment of capital gains and capital losses in income tax law. If your investment earns a dollar today, that dollar is fully taxable less applicable deductions. However, under current law, if your investment loses money, you cannot fully deduct those losses on a dollar for dollar basis. The government allows you to write off a maximum of $3,000 per year until your loss is deducted completely. If you lost a little, this may only take a year or so. In my case, and I believe in the case of many people nearing retirement age, the losses cannot be deducted in the investor’s remaining lifetime.

This is unfair, and stacks the deck against those willing to put capital at risk.

Please take the time to read this and this. There may be better indictments of some of the most stupid behavior and ideas in America, but these will do for today.

This story does an even better job of exposing Terry McAuliffe. I wonder if he'll crawl under a rock for a few months until the dust settles on all the "corporate responsibility" and insider trading scandals.

This analysis of the PC economy and the Microsoft anti-trust ruling is the best I have read--I wish I had written it.

This should be especially interesting for all those Democrats who try to claim that the government had a role in the growth of the stock market in the 1990s; maybe this will enlighten you as to the government's power to damage the true engine of growth--hard working businessmen and women. Usually, the government's role is similar to that of the amazed mother-in-law who stares incredulously at the success her no-account son-in-law became--despite her warnings to her daughter.

From FoxViews at the Fox News site:

Sam Donaldson interviewed Terry McAuliffe on This Week. Appearing to be enjoying an adrenaline rush, the Democratic party leader stood by his criticism of Bush and the upcoming economic forum.
He also defended his Global Crossing investment by saying he was a "venture capitalist."

A jovial Donaldson appeared to enjoy McAuliffe’s energy level and failed to press him on the issues.

Now that's funny. Terry McAuliffe, the venture capitalist? As this story in Business 2.0 points out, McAuliffe was simply offered a chance to buy pre-IPO shares that were frequently flipped--sold for a quick profit after the IPO date--in the 1990s. McAuliffe was smart enough--or lucky enough--to hold onto his shares until 1999 and sell them for $18 million.

If McAuliffe were a "venture capitalist", he'd have done due diligence, reviewing start up business plans. He would have stayed awake at night worrying about the money he had at risk, about tough personnel decisions he might have to make. Nope, Terry is just a friend of a contributor to the Democratic party who got in on one of the most lucrative opportunities of the past century. Whether McAuliffe did anything wrong or not, he is certainly stretching the truth by calling himself anything but a crony of a fat cat.

Will there be a baseball strike? Reports out of the player representative meetings in Chicago today seem to indicate that the answer is yes. That is sad news indeed for all of us baseball fans.

My wife was offered a chance to buy Mariner’s playoff tickets for this season. I would jump at the chance, despite the slender lead the team is clinging to, if not for the threat of a strike.

We bought SeaHawk season tickets earlier in the month. Although Seattle’s star quarterback, Trent Dilfer, sprained his knee in an exhibition game Saturday, I’m still cautiously optimistic about the season.

Football—college and pro—is the number one sport in America. NASCAR appears to be well on its way to breaking into the top three, if not the top two. A baseball strike will only hasten the change. NASCAR drivers do not strike. Neither do professional golfers.

In an era of declining discretionary income, baseball cannot afford to take fan loyalty for granted. My wife and I had a great time on a tour with the BMW club on Saturday. We may decide that our spare time—and dollars—are all accounted for with SeaHawks and driving adventures.

Baseball, be careful. Will the networks pay for rights to games no one watches?

Now we read that Saddam plans to draw US forces into Iraq’s cities rather than deploy his armies in the desert. Apparently, he thinks that he can bog us down in house to house fighting, popping up to shoot at us from a rabbit warren of tunnels and bunkers underground.

Hmmm.

As I recall, a favorite tactic in modern mobile warfare is to bypass enemy strongholds in order to capture and hold strategic chokepoints. If Saddam hides his army, we could set up an interdiction plan to control his borders, destroy his media outlets (and replace them with ours), secure his oilfields, and generally starve him out in the open. This would take more than a few weeks of bombing followed by a few days of combat, as in Bush vs. Saddam I, but would be even more effective. We could create an UN-administered zone containing the captured territory and leave him the ruler of a land-locked, resource poor slum.

As for using his Scuds to launch terror weapons from Baghdad at Israel or Kuwait, does anyone think that we have not improved our ability to shoot down his largely ineffective missiles since the Gulf War?

$6 per barrel oil, anyone?

Things move more slowly in summer. The pace of the war against terrorism seems to be moving slowly in Afghanistan, but moves all too quickly if Israel’s battlefront is included. Moreover, it should be--the PLO and Arafat’s "government" are no less bent on genocide now than at any time in its sad history. The Israeli government must feel profoundly bitter and torn as they transfer funds to the Palestinian "government" in the aftermath of the recent university bombing.

Russia is assisting Iran with the construction of nuclear plants. That bears repeating. Russia is assisting Iran with the construction of nuclear plants. Fortunately, the Russian government is reconsidering its plans after pressure from the Bush administration.

Iraq now says that it may readmit UN weapons inspectors. Of course, Saddam Hussein has had years to perfect his camouflage techniques for his weapons stores and death factories.

Jordan’s King Abdullah says that talk of deposing Saddam is "somewhat ludicrous". Of course, Jordan depends heavily on support from Iraq, making the King’s motives subject to question.

The Saudi royal family is lead by a man near death in a hospital in Switzerland. Will his successor be friendly to the West? Or will his successor do anything to retain power, continuing to tolerate and even finance religious extremists up to the minute of his execution?

Indonesia, the largest predominately Muslim nation in the world, has its share of terrorists and revolutionaries who threaten its stability. The same is true of the Philippines. The US is trying to shore up these governments with aid, including anti-terrorism training for their armed forces.

The Russians are trying to exact heavy tolls and establish virtual control over oil shipped across the Caspian Sea from land-locked countries in the region. It recently held a series of naval exercises there that are clearly efforts to intimidate its oil-producing neighbors.

The list of truly serious problems goes on and on almost without end. Our nation, which seemed to want to turn inward after the 1992 election, cannot shirk its role in the world. However, we must accept that simple solutions are not to be found in any of these cases. Europe is long on criticism of US policy, but short on action--except in support of Arafat and Saddam. When and where we act, and act we should in many of these cases, we must accept that long-term US commitment to each of these regions is required to help foster stability and peace.

A slow summer indeed.

I wonder if bin Laden is still alive. We have read conflicting statements from those supposedly in the know in and out of government. What a blow it would be to the al-Qaida and their cronies if his body could be positively identified! What a boost it would be domestically!

As for the economy, who does the average investor trust to tell them that it is safe to invest again? Rather than the death of a hated enemy, who could return--alive--to save us? I doubt that a politician could have that kind of impact. Would a positive ruling in favor of Microsoft have the opposite effect of the guilty verdict back in early 2000 on the market? Would tech stocks bounce?

Probably not. But if you are going to own tech, own Microsoft.

While the run of stories on corporate responsibility is bad, let us not forget that this is America. Only in America can there be such widespread discussion of issues like this, whether the discussion takes place in the mass media, on talk radio and TV, or on the Web.

I enjoyed a comment I heard on the radio today very much. A caller challenged Congress to sign the federal budget with the same responsibilities for accountability that CEOs are expected to follow. Will Congressmen (and women) ever stop pointing fingers at "evil executives", or other scapegoats of the moment? The Democrats are returning to their roots as the "anti-business" party. Class warfare gets us--all of us--exactly nowhere!

I hope that some sort of reason takes hold and that the baby is not thrown out with the bath water; that is, that the stampede to "do something" about executive power run amok does not itself run amok. Many, many people in America have large personal stakes in the capital markets. Winning the 2002 elections through the long-term destruction of the investment class would be a pyrrhic victory indeed for the Democrats. What would the Social Security system--not to mention society at large--look like if every person entering retirement age truly depended upon it for 100% of his or her retirement income? I don't believe any Democrat wants that, not even those hypocrites who flew on corporate jets to get to fund raisers this weekend.

Give the SEC the headcount and budget it needs to vigorously uphold the laws that are on the books today. Change the law to make stock options an expense, if that is the right thing to do--after an informed debate. For God’s sake, stop demagoging the economy!

Do you remember the early days of the Bush administration? Back when the Democrats accused Republicans of talking down the economy? It turned out that we really were in a recession, and that a stimulus was required to help bring us out of it.

Now, it seems, Democrats are talking down the economy and the stock market. Investors are taking major hits. People who were looking forward to retiring are now looking at working for several years longer.
What are the motivations for this behavior?

I believe that the President, back in 2001, wanted to avoid a deep recession becoming the hallmark of his presidency, and acted quickly (with the support of both houses of Congress) to do what could be done by the government. The Fed acted in concert, perhaps concerned that the interest rate increases of 2000 were too much, too quickly, for the economy to take.

Now, the Fed is standing pat, having shot most of its bolts. Interest rates are more than low enough, if only businesspeople would borrow to make investments.

However, we are caught in the quarterly numbers trap. For many years, businesspeople have warned that business is becoming too beholden to next quarter’s profit and forecast data. Even mighty Microsoft has to beat the whisper numbers and year to year comparisons, no matter how much it invests in new initiatives that will, eventually, bring in more revenue and profit.

With this sort of scrutiny, coupled with terrorist jitters, corporate scandals that affect the most admired of companies (Enron, Fortune magazine’s poster child), and perhaps most nefariously, lack of pricing power, it is no wonder that the stock market averages are dropping like stones.

The Democrats, concerned only with winning, are not helping. They appear to have Republicans running away from good ideas like Social Security privatization. They appear to have a super majority forming in Congress that will pass any new corporate reporting/accounting regulatory bill that can be cobbled together--no matter the unintended consequences. Even John McCain now opposes stock options. How many political contributions were paid with those options in the "roaring '90s"?

Investor psychology is shot. I really wish my broker would have put me in Ginnie Mae issues back in March of 2001 when I asked him to. I’d be sleeping like a baby, earning about 7%.

As for what is next, I predict plenty of demagoguery, seasoned with overlarge helpings of attacks on President Bush’s Harken energy record. As to that, if you file the form saying you are going to sell stock, is it so critical to file the form saying that you sold the stock? I think the disclosure for most investors who pay attention has taken place. There's no there there--sorry Washington Post and New York Times.