The Center for Public Integrity

Tax avoidance is an old trick, but under the Bush administration, weak enforcement and a spate of new tax credits and loopholes have led to an extended tax holiday for big business. Though the basic corporate tax rate is 35 percent, according to the left-leaning Citizens for Tax Justice, the average tax rate paid among the 275 largest U.S. corporations is closer to 17 percent — lower than that of most individual citizens. Tax avoidance tactics abound, including funneling U.S. profits to tax-free subsidiaries overseas and using previous years’ losses (from up to 20 years ago) to write down a firm’s annual taxable profits. Lower levels of Internal Revenue Service (IRS) audits targeting large corporations have compounded the problem. While corporate tax payments accounted for 23 percent of all federal tax revenue in 1960, by 2007 that figure had dropped to just 14 percent. In fact, as the Government Accountability Office reported in a controversial 2008 study, nearly 60 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.

Revelations that Southwest Airlines flew thousands of flights in violation of Federal Aviation Administration (FAA) directives brought to light a “relaxed culture” of oversight that investigators later termed “symptomatic of much deeper problems.” When the airline industry and the FAA agreed in the 1990s to work together on safety, their new joint programs depended on “the integrity of the people using them,” the Department of Transportation’s (DOT) Office of Inspector General (OIG) told Congress in April 2008. But separate probes by the OIG, the U.S. Office of Special Counsel, and the House Transportation and Infrastructure Committee found alarming evidence that the necessary integrity was often missing, and that relationships between airlines and FAA inspectors were often far too cozy. In the case of Southwest Airlines, investigators eventually concluded that 46 of its aircraft flew more than 60,000 flights in violation of FAA directives before officially notifying the agency — and then even flew another 1,451 miles after notification. When Southwest voluntarily notified the FAA that its fleet had fuselage problems on March 15, 2007, the responsible FAA supervisor failed to ground the aircraft for the next eight days. Two FAA whistleblowers told congressional investigators of a close relationship between the supervisor and Southwest’s compliance manager. One whistleblower, FAA inspector Douglas E. Peters, alleged that the supervisor allowed Southwest to continue flying for two weeks after the agency discovered a problem with rudders on Southwest planes. An oversight committee report further asserted that FAA took no follow-up action to ensure that Southwest aircraft had been brought into compliance with federal law until the agency learned of the congressional investigations nearly eight months later.

When the No Child Left Behind Act (NCLB) was enacted in 2002, it was hailed as a bipartisan victory for education reform, promising student proficiency in math and science by 2014 — but funding issues and controversial measurement systems have hindered its success. According to the U.S. Department of Education’s National Center for Education Statistics, about 70 percent of schools are making adequate yearly progress, and national math achievement among tested students has improved since 2000. Certain areas, however, have not seen similar progress, such as reading achievement among 8th graders and graduation rates among minority students. The NCLB makes states accountable for holding their schools and students to exacting standards, and schools that fail to meet those standards for two consecutive years must undergo federally-mandated restructuring. While the basic premise of NCLB — to provide quality education to all children — is well accepted, it has suffered, in the view of many, from inadequate funding. In 2006, Democrats criticized the Bush administration for underfunding NCLB by more than $40 billion since 2001, and noted that the FY 2007 budget allocated only half the promised funding to assist disadvantaged students. The Department of Education’s inability to track and allocate funds, moreover, has made it difficult to provide necessary resources to schools most in need of assistance, according to the Government Accountability Office. Budgetary issues aside, stipulations in the law have made it difficult for some to implement the program. States are required to follow strict guidelines and success is measured by standardized tests, but critics say the law doesn’t allow for differing demographics or students’ varying abilities.

The Securities and Exchange Commission’s (SEC) laissez-faire attitude toward regulation of investment banks is widely believed to have contributed to the depth of the current economic crisis. That the SEC was asleep at the switch was on clear display in March, when its chairman, Christopher Cox, declared he felt “a good deal of comfort” about investment banks’ capital cushions. Just three days later, Bear Stearns collapsed and was bought by JP Morgan Chase in a hastily arranged deal backed by $29 billion in taxpayer funds. The sale of Bear Stearns, one of the first rumbles in the financial earthquake, was presaged by a 2004 SEC decision that loosened capital rules and allowed brokerage units to take on greater debt. Since then, investment firms’ debt-to-assets ratios have risen — in Bear Stearns’ case, to as high as 33 to 1. Simultaneously in 2004, the SEC began outsourcing risk monitoring responsibilities to the banks themselves, while assigning only seven staffers to oversee the five largest investment houses, which controlled more than $4 trillion in assets. Despite the companies’ vanishing cushion against investment losses, the SEC did nothing in the case of Bear Stearns to address the bank’s issues of heightened risk. As an SEC inspector general’s report put it in September, it is “undisputable” that the SEC “failed to carry out its mission” in that case. The public has ended up footing much of the bill.

In a busy Baghdad square, a disturbance between a group of Americans and Iraqis on September 16, 2007 resulted in the shooting death of 17 Iraqi civilians. The Americans involved were not military; they were private security contractors from a company called Blackwater. To date security contractors in Iraq number around 48,000 from various companies. Similarly, jobs such as cooking and cleaning on military bases — positions that in past wars were largely filled by military or government personnel — are increasingly outsourced to private companies. The number of private contractors, as well as the amount of money the government pays them, has risen considerably as the Iraq war has gone on, according to the Center for Public Integrity’s 2007 report, Windfalls of War II. The result has been less coordination in missions involving both military and private groups, such as U.K.-based Erinys, and U.S.-based Blackwater and KBR. The problem was highlighted in 2004, when insurgents ambushed a KBR truck convoy and drivers refused to work until security was improved. Without the deliveries, the military was left without adequate fuel, water, and ammunition. A complicating factor has been the ambiguous legal status of private contractors. In the 2007 Blackwater shooting, the security firm initially maintained that the guards fired in self-defense, but investigations by the Iraqi government and the Federal Bureau of Investigation both conclude that the only shots fired came from Blackwater employees. The Department of Defense holds its contractors liable under laws covering the military, but Blackwater works for the State Department, which does not. Critics say that such large-scale security contracting results in a lack of coordination and accountability which poses a risk to American troops as well as to Iraqis, and that mistakes made by U.S.

High-powered weapons smuggled into Mexico from the United States are arming drug cartels in a bloody war with Mexican authorities that has killed more than 4,000 in 2008 alone, including hundreds of police officers, soldiers, and prosecutors — all while Mexico’s calls for the United States to cut off the flow have had little effect. Mexico’s strict gun laws make buying the weapons difficult, but in the United States, they are sold legally at stores, gun shows, and flea markets — and then smuggled across the border. The Department of Justice’s Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) found that more than 90 percent of guns seized at the Mexican border were originally sold in the United States, two-thirds of which have been traced back to Texas, Arizona, and California. In a report issued in November, the Brookings Institution estimated that 2,000 guns cross the border into Mexico every day. Only 100 U.S. firearms agents and 35 inspectors are stationed along the border (compared to 16,000 Border Patrol agents).

Five years after the worst blackout in North American history, in which one Ohio utility’s mistakes darkened homes and businesses for 50 million people in eight states and Canada, the federal government acknowledges that much remains to be done to address the nation’s aging electric grid. The 200,000 miles of power lines that crisscross the country were not designed to bear the burden they now carry. In response to the 2003 blackout, Congress for the first time made the more than 500 owners and operators of the world’s largest power grid subject to mandatory reliability standards. But the program, run by the industry’s own self-regulatory organization, the North American Electric Reliability Corp. (NERC), is no cure-all. In February 2008, a million people lost power for an afternoon due to the errors of a Florida Power & Light engineer. NERC issued advisories to help prevent such problems in the future, but levied no penalties. More nettlesome problems, utilities argue, are the need to build additional long-distance, high-voltage power lines, and to bring up-to-date digital technology to the grid. Investment in electric transmission has roughly doubled in the last five years, thanks in part to Federal Energy Regulatory Commission incentives, but the agency says that much more investment is needed. Some projects are slowed because neighbors and environmentalists object to power lines, but that problem may not be as great a barrier to new transmission lines as the simple question of who should pay for them — when the customers who benefit the most are often hundreds of miles from the fields, farmland, and mountains that need to be cleared to make way for towering steel pylons.

Nine years after Osama bin Laden was placed on the Federal Bureau of Investigation’s “ten most wanted” list, seven years after President George W. Bush said the Al Qaeda leader was “Wanted, Dead or Alive,” the exact location of the six-foot, five-inch Saudi terrorist remains a mystery. Even before Al Qaeda operatives flew jumbo jets into the World Trade Center and the Pentagon, U.S. intelligence was tracking bin Laden’s whereabouts, but after September 11, the desire and the need to apprehend him surged. "It's not enough to get one individual, although we'll start with that one individual," then-Secretary of State Colin Powell told reporters in 2001. By December of that year, U.S. Special Forces and Afghan allies thought they had cornered the Al Qaeda leader at Tora Bora, a cave complex in the eastern mountains of Afghanistan. Army officials later asserted that they were not certain if bin Laden was present at Tora Bora, but in April 2002, The Washington Post reported that intelligence officials had “decisive evidence” that he was there and that he escaped the battle alive. Reporters and military experts say that American officials misjudged the commitment of the Afghan militias they relied on to seal off escape routes used by bin Laden, Al Qaeda leaders, and the Taliban. At a March 2002 press conference, President Bush appeared unruffled. “I truly am not that concerned about him. I know he is on the run,” he said. After that, the White House largely stopped talking about bin Laden. "I think we've lost him," a U.S. counterterrorism official told Time magazine in 2002. "That's why you're not hearing much talk about the hunt — because we're not succeeding." In 2003, the arrest of Khalid Sheikh Mohammed, bin Laden’s third-in-command, revitalized the hunt for bin Laden in remote areas of Pakistan, but the information gleaned from Mohammed’s arrest proved old.

While pouring billions of dollars into military actions in Iraq and Afghanistan, the Bush administration underplayed perhaps the most important battle against Islamic extremists: the struggle to win over hearts and minds. Building pro-Western political and cultural organizations and promoting U.S. values of openness, democracy, and human rights were key to winning the Cold War, but experts broadly agree that the “war of ideas” suffered under the Bush Administration. “If the United States does not act aggressively to define itself in the Islamic world, the extremists will gladly do the job for us,” the 9/11 Commission admonished.

In 2002, the EPA and the Army Corps of Engineers cleared the way for a resurgence of environmentally damaging mountaintop coal mining, using a rule change that legalized filling valleys with debris. The result: the drive for low-cost coal is blasting the peaks off the Appalachian Mountains and forever changing the lives of the people beneath them, who say that federal policy to boost energy production has forsaken the environment. In mountaintop removal, the coal industry uses explosives to blast away summits that expose seams of coal, and huge machines push the debris into the valley below. It puts fewer miners at risk than traditional underground mining. But across Kentucky, West Virginia, and Virginia, the Environmental Protection Agency (EPA) estimated — in a report produced as part of a lawsuit settlement — that mountaintop removal has filled in some 1,200 miles of streams and completely destroyed another 700 miles. With once-lush hillsides stripped of vegetation and the natural drainage patterns altered, communities below blame the mining for flooding and drinking-water pollution. Until the federal government’s 2002 rule change, mountaintop mining had ebbed in the late 1990s thanks in part to lawsuits. Now, the Department of the Interior’s Office of Surface Mining Reclamation and Enforcement (OSM) is proposing another rule change that critics say would further loosen the reins on industry, by easing requirements that mining not affect local water supplies. OSM maintains that Congress envisioned mountaintop mining and construction of valley fills in streams when it passed the federal surface mining law in 1977. An OSM spokesman told the Center that the agency’s job is to minimize the impacts and “to balance environmental protection and production of the nation’s coal supply.” The agency says its new proposal would not increase mountaintop mining, but would have a “positive effect” by clarifying what that law requires for operations near streams.