The Daily Operation

One hundred miles and runnin'

Monday, August 22, 2005

What is a Native American?












August 21, 2005

The Newest Indians

On a crisp morning in March at the Jaycee Fairgrounds near Jasper, Ala., the powwow was stirring. Amid pickups with bumper stickers reading ''Native Pride'' and ''The earth does not belong to us. We belong to the earth,'' small groups gathered to check out the booths selling Indian rugs, dancing sticks, homemade knives and genealogy books. On one side, under her camper's tarp, sat Wynona Morgan, a middle-aged woman wearing a modestly embroidered Indian smock and some jewelry. Morgan had only recently discovered her Indian heritage, but, she said, in some ways she had known who she was for years. ''My grandmother always told me that she came from Indians,'' Morgan told me. She is now a member of one of the groups meeting here in Jasper, the Cherokee Tribe of Northeast Alabama, which itself is new, having organized under that name in 1997. The tribe is committed to telling its story, in part through an R.V. campground named Cedar Winds that will eventually expand to include an ''authentic, working Cherokee Indian Village.''

''The only real proof we had that we were Indian was this stub,'' Morgan went on to say. She had brought along a copy of a century-old receipt entitling an ancestor to receive some money from the United States government for being an Indian. With the help of an amateur genealogist named Bryan Hickman, Morgan was able to connect her line to its Indian roots, and she began to raise her son, Jo-Jo, as a Native American. She was particularly proud of Jo-Jo; only a teenager, Jo-Jo had been chosen to serve as honorary headman and lead the grand entry just after the grass dancers performed later that afternoon.

''Sometimes Jo-Jo gets teased for being an Indian at school, but he doesn't care,'' Morgan said. What she didn't say was that the teasing is connected to the fact that neither she nor Jo-Jo look as much like Indians as they do regular Alabama white folks. In fact, every Indian at the powwow looked white. More than half my time with this tribe was spent dealing with their anxiety that I might make this observation.

This ethnic apprehension can be found even among the older tribes, where outmarriage, or exogamy, has created a contemporary population that doesn't look nearly as ''Indian'' as the characters of our movies and HBO westerns. What results from this can get funky. For example, among coastal Indian tribes, who depend upon tourism, it is not uncommon to see them dressed as Plains Indians with full feathered headdresses and other outfits that were never their custom. It is a practice known as ''chiefing,'' and in some tribes it is as regulated as jewelry sales. This is the market force, ethnic-wise: coastal Indians know that they have to look like an outsider's vision of an Indian in order to be accepted by tourists as Indian.

Among the newer tribes, this anxiety can get especially intense. All weekend at the Jaycee Fairgrounds, the Cherokees of Northeast Alabama whom I spoke to were quite nervous that I might pronounce them, as some put it, ''ethnic frauds.'' Hickman, the genealogist, insisted upon knowing if I was ''going to make fun of them.'' In the days leading up to the powwow, he called me repeatedly, his voice filled with panic. Hardly an hour went by over the weekend that the event's spokeswoman, Karen Cooper, didn't sidle up to ask me if there was anything she could do.

Morgan, though, was happy to talk about her relatively new status as an American Indian. She had been attending powwows for years as a white woman, but became official two years ago after her genealogical work was done. ''I hate to put it this way, but I'm a completely new Indian,'' she said. ''I have had to learn everything from the ground up, and I'm learning every day.''

Morgan's sincerity and her profound pleasure at all these discoveries in her ancestral line now influences every waking moment of her life, she said. She confided that she knows that there are fake Indians -- so-called wannabes -- and she says she feels sorry for them. ''I hear some people say that they have a 'Cherokee princess' up the line,'' Morgan said with a laugh. ''I just love that one, because of course the Cherokees didn't have a princess.'' This joke -- about the white person claiming a Cherokee princess -- is heard pretty often these days from any Indian, coast to coast. In the same way that blacks poke fun at white men who can't jump or Jews mock goyim mispronunciations of Yiddish words, it is not meant as much to put down others as to enunciate the authenticity and insider status of the person telling the joke. It is a way to assuage a new kind of ethnic unease that can be felt throughout Indian Country.

The Cherokee Tribe of Northeast Alabama is, according to the University of Oklahoma anthropologist Circe Sturm, one of more than 65 state-recognized tribes, most of which have emerged in the last few decades in the Southeast. State recognition is merely one of many legal mechanisms used to legitimate a Native American tribe. They range from the most difficult -- federal recognition, which is required for running a casino -- to state and local designations and on to unrecognized groups. (The Cherokees alone account for more than 200 of these recently formed unaffiliated tribes.) All of these tribes have emerged at a moment when Native Americans have experienced skyrocketing growth in population. I had traveled to Jasper, among other places, to find out what kind of growing pains this population surge is causing Native Americans.

Soon enough, the shed at the fairgrounds was all commotion as the grass dance began. Jo-Jo was dressed in full regalia, and like all the dancers here, he had made his bustle and other ornaments. The grass dancers were pouring their hearts into it. The crowd was mostly other tribal members, as well as what are called ''hobbyists,'' non-Indian enthusiasts who like to attend public powwows. All of them were thrilled with the performance, and it was hard not to be impressed by the difficult moves and the elaborate costumes. I meant to keep my eye on Jo-Jo, but I was distracted by another handsome teenage boy with light brown hair, the head grass dancer, who didn't seem to have made the full transition to Indian yet. His outfit was a painstaking interplay of beads and feathers and a series of striking variations of white and red shapes sewn onto his vest, which for some reason caught my eye and seduced me into leaving the bleacher seats in order to wander closer to the rail, elbowing my way out in front of even small children to peer more carefully and to make absolutely sure that the tiny red rectangles were -- yes, indeed, no doubt about it -- little Confederate battle flags.

A century ago, Native Americans were down to a few hundred thousand people, and the prevailing concern was not about overpopulation but about extinction. Some observers comfortably predicted that America would close the book on its ''vanishing race'' by 1935. But Native Americans didn't disappear, and after the birth of civil rights, when the Red Power movement asserted itself in the 1960's, something unexpected happened in the Indian population count. In four consecutive censuses, which showed other groups growing by 7 to 10 percent, Native American populations soared, growing by more than 50 percent in 1970, by more than 70 percent in 1980 and another third in 1990. The 2000 census reveals an overall doubling, to more than four million. Jack D. Forbes, an emeritus professor of Native American studies at the University of California at Davis, argues that undercounts and other census quirks may mean that the total number of Indians in the United States today is in fact closer to 15 or even 30 million. Using the 2000 census data, Indians can be called America's fastest-growing minority.

The assumption many people make when they hear these huge numbers is that the new Indians are just cashing in on casino money. But tribes with casinos or even casino potential have very restrictive enrollment policies. (If anything, when casinos are involved, the story usually goes heartbreakingly in the other direction. Take the case of Kathy Lewis, whose grandfather was the chief of the Chukchansi tribe, which now runs a casino with another tribe outside Fresno, Calif. Her father worked out a deal with the tribal council that placed him on the lucrative tribe's rolls but cut out his own children. He no longer speaks to his daughter. Impoverished, she lives in a two-room trailer just outside the reservation.)

Instead, the demographic spike in population is a symptom of what sociologists call ''ethnic shifting'' or ''ethnic shopping.'' This phenomenon reflects the way more and more Americans have come to feel comfortable changing out of the identities they were born into and donning new ethnicities in which they feel more at home. There is almost no group in this hemisphere immune to the dramas accompanying so much ethnic innovation. Last year in Montreal, for example, the selection of Tara Hecksher as Irish-Canadian parade queen seemed to many to be inspired. While the young woman's father is Irish, her mother is Nigerian. To look at her face and hair, most people would instinctively categorize her as ''black.'' Certainly the thug that interrupted the parade by tossing a white liquid at her seemed to think that way.

Such agonies of identity abound, but nowhere are they felt more keenly than among Native Americans. There, many of the markers of being Indian -- the personal adornments, the spiritual life, daily tribal culture -- are the subject of intense debate, in some cases even federal regulation. Much of what has defined Indianness has been appropriated by everyone from Hollywood to charlatan spiritual guides and ground into unappealing cliche. As a result, many Indians are trying to define the new modern Native American in terms that can't be so easily commodified. Some argue that this ethnic mobility in and out of Indian Country is connected to a separate phenomenon -- a rush to revitalize native languages. Many tribes have hired linguists or sent members to any of several institutes now devoted to helping Indians retain or recreate some form of their tribal languages.

In the past, ethnicity and race seemed like fixed categories, inherent qualities of self that were not only unchanging but could also be measured, quantified and reduced to small checkable boxes on bureaucratic forms. But American diversity and intermarriage (as well as the perfect match between the Internet and deep genealogical research) have changed this singular certainty into a multiple-choice question. For most of American history, identity was centrally controlled: the census taker decided your identity by quietly writing it down while asking questions at your door. But in 1960, the census was changed to permit Americans to declare their own race or ethnicity. The most significant shift, though, came as recently as the 2000 census. Americans were permitted to declare more than one race or identity. As a result, the old categories become even more fluid.

How much easier (though scarier) life might be if we all got ethnic identification cards so that when encountering a very light-skinned person claiming to be black, you could reply, ''O.K., show me your federal identification card guaranteeing the proper amount of African blood to qualify you as an African-American.'' Here's the thing: you could ask an Indian that question. Some Native Americans carry what is called, awkwardly, a white card, officially known as a C.D.I.B., a Certificate of Degree of Indian Blood. This card certifies a Native American's ''blood quantum'' and can be issued only after a tribe has been cleared by a federal subagency.

The practice of measuring Indian blood dates to the period just after the Civil War when the American government decided to shift its genocide policy against the Indians from elimination at gunpoint to the gentler idea of breeding them out of existence. It wasn't a new plan. Regarding Indians, Thomas Jefferson wrote that ''the ultimate point of rest and happiness for them is to let our settlements and theirs meet and blend together, to intermix, and become one people.'' When this idea was pursued bureaucratically under President Ulysses S. Grant, Americans were introduced to such phrases as ''half breed'' and ''full blood'' as scientific terms. In a diabolical stroke, the government granted more rewards and privileges the less Indian you were. For instance, when reservation lands were being broken up into individual land grants, full-blooded Indians were ruled ''incompetent'' because they didn't have enough civilized blood in them and their lands were administered for them by proxy agents. On the other hand, the land was given outright to Indians who were half white or three-quarters white. Here was the long-term catch: as Indians married among whites and gained more privileges, their blood fraction would get smaller, so that in time Indians would reproduce themselves out of existence.

Compounding this federal reward for intermarriage was the generally amicable tradition most tribes had of welcoming in outsiders. From the earliest days of European settlement, whites were amicably embraced by Indian tribes. For instance, the leader of the Cherokee Nation during the forced exile of 1838-39 -- the Trail of Tears -- was John Ross, often described as being seven-eighths Scottish.

A lot of Indians haven't looked ''Indian'' for quite a while, especially in the eastern half of the country, where there is a longer history of contact with Europeans. That fact might not have been the source of much anxiety in the past, but in the post-Civil Rights era, the connotations of the word ''white'' began to shift at the same time that the cultural conversation progressed from the plight of ''Negroes'' to the civil rights of ''blacks.'' Suddenly ''white'' acquired a whiff of racism. This association may well account for the rise of more respectable ethnic descriptions like ''Irish-American'' or ''Norwegian-American,'' terms that neatly leapfrog your identity from Old World to New without any hint of the Civil War in between. According to the work of Ruth Frankenberg and other scholars, some white people associate whiteness with ''mayonnaise'' and ''paleness'' and ''spiritual emptiness.'' So whatever is happening in Indian Country is being aggravated by an unexpected ethnic pressure next door: people who could be considered white but who can legitimately (or illegitimately) find an Indian ancestor now prefer to fashion their claim of identity around a different description of self. And in a nation defined by ethnic anxiety, what greater salve is there than to become a member of the one people who have been here all along?

The reaction from lifelong Indians runs the gamut. It is easy to find Native Americans who denounce many of these new Indians as members of the wannabe tribe. But it is also easy to find Indians like Clem Iron Wing, an elder among the Sioux, who sees this flood of new ethnic claims as magnificent, a surge of Indians ''trying to come home.'' Those Indians who ridicule Iron Wing's lax sense of tribal membership have retrofitted the old genocidal system of blood quantum -- measuring racial purity by blood -- into the new standard for real Indianness, a choice rich with paradox. The Native American scholar C. Matthew Snipp has written that the relationship between Native Americans and the agency that issues the C.D.I.B. card is ''not too different than the relationship that exists for championship collies and the American Kennel Club.''

Out on Chicaugon Lake on a warm afternoon in Michigan, dozens of families splashed around in the water, having good summer fun. Inside the nearby picnic shed, a few dozen folks assembled for an Ojibwe language camp. The camp was off to an awkward start. The adults stood at uncomfortable attention. The teenagers, off to one side, smoked and lobbed withering looks everywhere. The little ones raced about, crazed that they couldn't join the children in the lake.

The leader was Wendy Geniusz, a young blonde whose cute cheeky smile seemed to reflect her father's Polish background (as did that killer surname). She has been raised among the Ojibwe all her life. Her mother, Mary, is the granddaughter of a Canadian Indian who gave up her native claim after marrying a Presbyterian Scot. But Mary knew this grandmother, and about 25 years ago, when she started having her children, she decided that she could no longer indulge what she saw as the luxury of her multiple backgrounds. She needed to create a coherent environment for her children.

After finding a spiritual guide to lead her back to the world of her grandmother, Mary raised her children among the Ojibwe. Wendy Geniusz was born an Indian. She is known by her birth name, Makoons, and she has attended local powwows since she can remember. Geniusz's days begin, as they have for the past five years, with a tobacco offering and prayer. She is married to an Ojibwe man, Errol Geniusz (having taken her last name), and she intends to raise her children speaking Ojibwe in her home; she mastered the language at the University of Minnesota, where her Ph.D. topic is ''Decolonization of Ojibwe Plant Knowledge.'' She teaches the language to other members of the tribe.

One of the exercises this morning was to get people to ask one another basic questions in Ojibwe. About 10 kids, all around 11 or 12, were horsing around as Geniusz struggled to guide them through the paces. It was rough going. Two kids in particular were jumping on each other. One looked classically Indian; the other was a blond. The black-haired boy teasingly referred to the other as ''whitey.'' There were a few anxious looks among the adults, yet here on the Upper Peninsula, no one corrected the black-haired boy, in part because he is the great grandson of the tribal elder who was in attendance to lend the language camp a sense of history (and to resolve the occasional grammar stumper). Later that morning, when the teasing continued, the blond kid broke into a rap from ''Scary Movie 3'': ''I'm a white boy, but my neck is red/I put Miracle Whip on my Wonder Bread.'' The anxiety that was a constant at the Alabama powwow was present here, too, but it was acknowledged not with panic but with jokes and stories.

''People usually think I'm white,'' Geniusz explained. ''Like recently, my sister and I took a bunch of clothing to an Indian rummage sale, and they thought we were just some white kids bringing clothes down.'' On the other hand, she recalled attending a recent national Indian conference at which each tribe was asked to stand up and say hello. ''I was with the Chicaguan Chippewa, and they said I should get up and say hello because I spoke more Ojibwe. So I got up and said something very simple, like 'Boozhoo giinawaa,' or 'Hello, all of you.' And afterward, I had all these people coming up and hugging me and telling me that they had thought I was just some little white girl. When I speak, people get a little startled, and then they accept me.''

Circe Sturm, whose book on new Indian tribes, ''Claiming Redness,'' is due next year, suggests that ''one big difference between older recognized tribes and the newer tribes is that the newer groups are marked by a nervous disavowal of whiteness. You will often hear them talk about their 'Indian hair' or their 'Indian cheekbones.' They often solemnly conclude their conversations by saying, 'For all purposes, I consider myself Indian.' The older tribes acknowledge their whiteness. Oklahoma Cherokees talk about 'white Cherokees' and often make a joke about it.''


Ethnicity is a tricky thing because it is commonly understood as something fixed and essential rather than what it more likely is: an unarticulated negotiation between what you call yourself and what other people are willing to call you back. Geniusz has lived her life culturally among the Ojibwe and is recognized by them as an Indian. Her easy comfort at calling herself an Indian comes in part because everyone in her area recognizes the essential Indian life she has led. Her physically European features are, in this part of Michigan at least, understood as only marginally curious.

The way the ethnic negotiation works depends on what part of the country you are located in. Native Americans recognize that there exists a kind of spectrum. At one end there are Indians living on a well-established Western reservation in a tribe that is branded as seriously authentic -- Hopi, say -- where many in the tribe retain the classic Indian physical characteristics. Moving along, you encounter various tribes that have intermarried a lot -- like the Ojibwe -- yet whose members still feel a powerful sense of authenticity. But once you visit tribes of newcomers, where few members knew their Indian ancestors personally, you begin to sense a clawing anxiety of identity. At the far end are hobbyists, those Indian groupies who hang around powwows, hoping to find a native branch in their family tree. They enjoy wearing the traditional tribal garb and are, as the University of Michigan history professor Philip Deloria titled his book, ''Playing Indian.'' Most hobbyists do it for fun, although some are just criminals, like Ronald A. Roberts, who pleaded guilty to federal charges after trying to establish a casino with his forged genealogical documents, or David Smith, who was jailed for holding a ''healing ceremony'' for a 12-year-old girl that included fondling her.

Just where in that spectrum, between land-based tribes in the West and playful hobbyists, you might locate a bright dividing line of authenticity is an open question. It is territory that is currently being remapped. It is why the population of Indians is surging and why there is such fervent debate among Indians as to just who should be able to make the claim. It becomes a kind of nature-versus-nurture argument. Do genetics make you Indian or does culture? Or can either one?

It is in the context of such continued questions that the renewed interest in language takes on more urgent meaning. According to Laura Redish, the director of a resource clearinghouse for language revival called Native Languages of the Americas, there are roughly 150 native languages that are currently spoken in North America or that have disappeared recently enough that they could still be revived. She estimates that in the last 10 years, some 80 to 90 percent of the tribes associated with these languages have put together some kind of program of revival.

''Language has a different kind of importance now than it did only 20 or 30 years ago,'' says Ofelia Zepeda, the director of the American Indian Language Development Institute in Arizona, whose program in revitalizing languages works with about 20 tribes each year. ''Language is one of those things that you take for granted, but now it has a different dimension. It is a conscious act.''

As the sun angled down over Lake Chicaugon, Wendy Geniusz's language camp magically came together. The sullen teenagers were still smoking, but like the little kids were now tuned in. Everyone gathered around separate picnic tables set for a meal, and they were calling out the names of table utensils in Ojibwe. One of Geniusz's assistants, a very handsome native speaker with a long black ponytail named James Vukelich, stood up and announced: ''If you want to learn how to pick people up in Ojibwe, come over here. If you don't know what that means, stay where you are.'' Suddenly, the teenagers were all scrambling over to Vukelich's corner. Once the teenagers had decided that talking the ancestral language was as cool a thing as mastering smoke rings, the next three days of Ojibwe Language Camp were smooth sailing.

Geniusz is a proselytizer for language revival. She has interviewed tribal elders, put together CD-ROM's of language basics and created coloring books for kids. She attends Indian language revival conferences and exchanges tips with other tribal members, like Lone Wolf Jackson, an officer with one of the Mohegan tribes in Connecticut who is pushing his tribe to revive its language.

''I don't think we'll ever see the day when Mohegans are walking down the street speaking Mohegan to each other,'' Jackson told me when I met up with him at a conference on language revitalization. ''But I do think we can learn enough to conduct a religious service or a funeral in our own language. And that would be profoundly important.''

If you passed Jackson on the street, you would think he was black. And he is, on his father's side. But he was raised by the other side of his family, his mother and grandmother, who are Mohegan Indians.

''One of the motives behind the assimilation program was to get Indians to act like everyone else and not retain any cultural distinctiveness,'' Philip Deloria says. The revival of Indian language may be the new front in resisting total assimilation. ''For Indians to make a new argument of sovereignty, it will rely on a renewal of Indian distinctiveness.''

Laura Redish sees language revival at the heart of the new anxiety of identity: ''It also takes a commitment to learn a language. I've noticed that urban mixed bloods, especially, want to learn -- to not be wannabes. And language shows they are serious about connecting to who they are.''


From a small country lane in Connecticut, Stephanie Fielding rambled down a few dirt roads to a small clearing beside a rushing river. Her great-great-great-aunt Fidelia Fielding died in 1908, and a memorial stone dominates the sloping cemetery here. Fidelia was the last speaker of Mohegan. Today, Stephanie Fielding is devoted to reviving the language that Fidelia Fielding spoke. She travels from library to library scouring books and ancient missionary letters and documents. She is putting together her ancestral language, brick by brick, word by word.

You might mistake Stephanie Fielding for just another nice-looking lady with reddish hair and, judging from that name, British extraction. But she is a member of the wealthiest Indian tribe in America -- the Connecticut Mohegans, whose members divide the revenue from two lucrative casinos. Fielding is 59, and she has devoted the rest of her life to reviving her great-great-great-aunt's language. This June, she received her master's degree in linguistics from M.I.T. Like so many people devoted to language restoration, she admires the example of Hebrew, a language that essentially died more than two millennia ago, surviving only as a sacred text. It wasn't until the 19th century that a Zionist linguist took on the painstaking work of confecting a modern, slangy, day-to-day tongue out of the hallowed idiom of Moses. Fielding is trying to do the same, and then some. She doesn't begin with a body of Scripture, like the revivers of Hebrew had, but with not much more than some missionaries' notes and transcripts of long-dead speakers. Most of Fielding's work at M.I.T. has focused on creating a kind of linguistic algorithm that will permit her to take many of the accepted proto-Algonquian words and generate an authentic Mohegan vocabulary. Her tribe has commissioned her to put together a dictionary and a grammar to give the next generation a voice from the past.

Because it is time-consuming and difficult to learn any language, the commitment it takes to attend one of Wendy Geniusz's camps or to sign on with Fielding's work or to participate in any of the widespread Native American language revivals weeds out the easy hobbyists and leaves a cohort of Indians whose authenticity -- regardless of genealogy or blood quantum -- may one day be hard to question.

''Language is an important vehicle of transmission of culture,'' says Angela Gonzales, a Hopi Indian and an assistant professor of sociology at Cornell University. ''Some tribes resist letting any outsiders even speak their language. But that's why language is important. It's a great vehicle for the storage of important inaccessible cultural material.'' Since it is no longer enough for a man passing you on the street to look Indian, maybe the next generation will note in passing that that guy certainly sounded Indian. In 50 years, many of the tribes now being dissed as wannabes will have age, tradition and solemnity on their side. Who will be around to question their authenticity? Far more likely is the possibility that the reshaping of American identity, among Indians as well as other ethnicities, will simply be accepted as the way it always was and always was meant to be.

Kathleen Hinckley, the executive director of the Association of Professional Genealogists, explains that she constantly gets calls from people asking her to ''find an Indian'' in the family tree. But she also says that such requests were part of a much larger surge of genealogical interest. Her membership of professional genealogists has leapt from 1,000 to 1,700 in the last five years. Genealogists will tell you the phone always rings most on Monday, the day after a Sunday family reunion when some aging great-aunt finally confesses that her grandmother was a Chippewa or a Jew or from one of the noble clans of Scots, sending another anxious young American into the domains of ancestry.com or Hinckley's organization or into city-hall records to find the answer to the question What is my true past?

As an academic term, ethnic identity has long been associated with images of immigrant neighborhoods and ghettos -- dense collections of Jews or Italians, Irish or Germans who maintained the old ways, married among themselves and maybe even kept up the old language. But today's scattered, more mobile generations have less access to such stable reservoirs of ethnic identity, which may account for this rise in ethnic shopping and the need to lay claim through participation in ethnic festivals or religious conversion or powwows to an identity that better suits the itch of our increasingly intermarried, interracial, intertribal America.

Saturday, August 20, 2005

Our Trillion Dollar War



The Trillion-Dollar War

Cambridge, Mass.

THE human cost of the more than 2,000 American military personnel killed and 14,500 wounded so far in Iraq and Afghanistan is all too apparent. But the financial toll is still largely hidden from public view and, like the suffering of those who have lost loved ones, will persist long after the fighting is over.

The cost goes well beyond the more than $250 billion already spent on military operations and reconstruction. Basic running costs of the current conflicts are $6 billion a month - a figure that reflects the Pentagon's unprecedented reliance on expensive private contractors. Other factors keeping costs high include inducements for recruits and for military personnel serving second and third deployments, extra pay for reservists and members of the National Guard, as well as more than $2 billion a year in additional foreign aid to Jordan, Pakistan, Turkey and others to reward their cooperation in Iraq and Afghanistan. The bill for repairing and replacing military hardware is $20 billion a year, according to figures from the Congressional Budget Office.

But the biggest long-term costs are disability and health payments for returning troops, which will be incurred even if hostilities were to stop tomorrow. The United States currently pays more than $2 billion in disability claims per year for 159,000 veterans of the 1991 gulf war, even though that conflict lasted only five weeks, with 148 dead and 467 wounded. Even assuming that the 525,000 American troops who have so far served in Iraq and Afghanistan will require treatment only on the same scale as their predecessors from the gulf war, these payments are likely to run at $7 billion a year for the next 45 years.

All of this spending will need to be financed by adding to the federal debt. Extra interest payments will total $200 billion or more even if the borrowing is repaid quickly. Conflict in the Middle East has also played a part in doubling the price of oil from $30 a barrel just prior to the invasion of Iraq in March 2003 to $60 a barrel today. Each $5 increase in the price of oil reduces our national income by about $17 billion a year.

Even by this simple yardstick, if the American military presence in the region lasts another five years, the total outlay for the war could stretch to more than $1.3 trillion, or $11,300 for every household in the United States.

Linda Bilmes, an assistant secretary at the Department of Commerce from 1999 to 2001, teaches budgeting and public finance at the Kennedy School of Government at Harvard.

Tuesday, August 16, 2005

Great Wall Street



This is a fantastic article on China from last week's issue of the Economist. This article provides some great insight on how China's economic growth and internal fiscal/monetary policies impact the world economy generally (e.g. rise in prices of raw materials) and on specific countries (i.e. creating housing bubbles by supporting low interest rates in the US).

From T-shirts to T-bonds

Jul 28th 2005
From The Economist print edition





Beijing, not Washington, increasingly takes the decisions that affect workers, companies, financial markets and economies everywhere

Get article background

GLOBAL tremors in the currency, bond and commodity markets greeted China's announcement that the yuan will no longer be pegged to the dollar. No longer is it just Washington that has the power to cause shockwaves. For many people, the tremors reflected the view that China is the root cause of America's trade deficit, and that the revaluation is a partial cure.

In fact, that view is wrong on several counts. China is not the main cause of the American trade deficit. On the other hand, China is behind almost everything else going on in the world economy. For China is beginning to drive, in a new and pervasive way, economic trends that many countries assume to be domestically determined.

Americans like to slap the “made in China” label on their huge trade deficit. Yet not only is China's forecast current-account surplus of around $100 billion this year only a fraction of America's likely deficit of $800 billion, but, as chart 1 shows, most of the increase in America's trade deficit has come from outside China. The main cause of America's trade deficit is a lack of domestic saving, not unfair Chinese competition. The deficit is thus made in America, not made in China.



As for last week's revaluation, the announcement marked a significant break with the past. China has long been under pressure to revalue its currency from countries that claim the undervalued yuan gives Chinese exporters an unfair advantage. After pegging the yuan to the dollar for a decade, China has shifted to a managed float against a basket of currencies, with an initial revaluation against the dollar of 2.1%. Nobody is yet sure how this will work. It may be just a token move aimed at warding off American protectionism. Or it could be the first of several revaluations, marking the end of the so-called “revived Bretton Woods system”, under which China and other Asian countries have bought billions of dollars in foreign-exchange reserves to hold their currencies steady against the greenback.

Either way, the tiny revaluation by itself will have little impact on America's huge trade deficit. Indeed, even if the yuan is allowed to rise by another 5-10% over the next 12 months, as many economists expect, that would hardly make a dent in the deficit. Nevertheless, it is still an important change in China's exchange-rate regime, representing a step towards a market-based system. And, as such, it could have implications for the dollar, bond yields, and American consumer spending.

To view China's global impact mainly in terms of its exports and its trade surplus is to misunderstand, and to underestimate, the profound forces behind China's growing influence. Everyone knows that most TVs and T-shirts are made in China. But so, in some ways, are developed countries' inflation rates, interest rates, wages, profits, oil prices and even house prices—or at least they are strongly influenced by what happens in China.



Of course, China is not the only fast-growing emerging economy that is making waves around the world. But China really does loom much larger: its contribution to global GDP growth since 2000 has been almost twice as large as that of the next three biggest emerging economies, India, Brazil and Russia, combined. Moreover, there is another crucial reason why China's integration into the world economy is today having a bigger global impact than other emerging economies, or than Japan did during its period of rapid growth from the mid-1950s onwards. Uniquely, China combines a vast supply of cheap labour with an economy that is (for its size) unusually open to the rest of the world, in terms of trade and foreign direct investment. The sum of its total exports and imports of goods and services amounts to around 75% of China's GDP; in Japan, India and Brazil the figure is 25-30% (see chart 2). As a result, the dragon's awakening is more traumatic for the rest of the world.


Most analysis of China's growing importance focuses on its rising share of global output and exports. That, in turn, fuels fears that China is stealing production and jobs from the rest of the world. But this misses half the story. It is true that China's trade surplus has increased sharply this year—mainly because the government's efforts to cool fixed investment have cut back imports. But over the past decade, China's imports have risen at the same pace as its exports. So China is giving a big boost to both global supply and demand.

China's impact on the world economy can best be understood as what economists call a “positive supply-side shock”. Richard Freeman, an economist at Harvard University, reckons that the entry into the world economy of China, India and the former Soviet Union has, in effect, doubled the global labour force (China accounts for more than half of this increase). This has increased the world's potential growth rate, helped to hold down inflation and triggered changes in the relative prices of labour, capital, goods and assets.

The new entrants to the global economy brought with them little capital of economic value. So, with twice as many workers and little change in the size of the global capital stock, the ratio of global capital to labour has fallen by almost half in a matter of years: probably the biggest such shift in history. And, since this ratio determines the relative returns to labour and capital, it goes a long way to explain recent trends in wages and profits.



In America, Europe and Japan, the pace of growth in real wages has been unusually weak in recent years. Indeed, measured by the growth in income from employment, this is America's weakest recovery for decades. According to Stephen Roach, an economist at Morgan Stanley, American private-sector workers' total compensation (wages plus benefits) has risen by only 11% in real terms since November 2001, the trough of the recession, compared with an average gain of 17% over the equivalent period of the five previous recoveries (see chart 3). In most developed countries, average real wages have lagged well behind productivity gains.

The entry of China's vast army of cheap workers into the international system of production and trade has reduced the bargaining power of workers in developed economies. Although the absolute number of jobs outsourced from developed countries to China remains small, the threat that firms could produce offshore helps to keep a lid on wages. In most developed countries, wages as a proportion of total national income are currently close to their lowest level for decades.



The flip side is that profits are grabbing a bigger slice of the cake (see chart 4). Last year, America's after-tax profits rose to their highest as a proportion of GDP for 75 years; the shares of profit in the euro area and Japan are also close to their highest for at least 25 years. This is exactly what economic theory would predict. China's emergence into the world economy has made labour relatively abundant and capital relatively scarce, and so the relative return to capital has risen. It is ironic that western capitalists can thank the world's biggest communist country for their good fortune.

China's main impact on the world economy is to change relative prices and incomes. Not only are the prices of the goods that China exports falling; the prices of the goods that it imports are rising, notably oil and other raw materials. China is already the world's biggest consumer of many commodities, such as aluminium, steel, copper and coal, and the second-biggest consumer of oil, so changes in Chinese demand have a big impact on world prices.

China has accounted for one-third of the increase in global oil demand since 2000 and so must bear some of the blame for higher oil prices. Likewise, if China's economy stumbles, then so will oil prices. However, with China's oil consumption per person still only one-fifteenth of that in America, it is inevitable that China's energy demands will grow over the years in step with its income.

There is currently only one car for every 70 people in China, against one car for every two Americans. That implies a huge increase in oil demand, which could keep prices high for the foreseeable future, because of scarce global spare capacity. China's consumption per person of raw materials, such as copper and aluminium, is also still low, so rising demand will continue to support commodity prices.


Overall, the upward pressure that Chinese imports of raw materials have put on the prices of oil and other commodities has been more than offset by the downward pressure of Chinese manufactured exports. As a result, another important aspect of the China effect is low inflation.

Central bankers like to take all the credit for the defeat of inflation, but China has given them a big helping hand in recent years. China's ability to produce more cheaply has pushed down the prices of many goods worldwide, as well as restraining wage pressures in developed economies. For instance, the average prices of shoes and clothing in America have fallen by 10% over the past ten years—a drop of 35% in real terms.

A study by Dresdner Kleinwort Wasserstein reckons that China has knocked almost a full percentage-point off America's inflation rate in recent years. The recent 2% revaluation of the yuan will probably be absorbed by Chinese manufacturers trimming their profit margins and so will not be passed on into export prices. But Americans calling for a 25-30% revaluation may come to regret it: the result would almost certainly be faster inflation.

As it is, China's reduction of inflationary pressures has allowed central banks to hold interest rates lower than they otherwise would be. Three and a half years into its recovery, America's real short-term interest rates are only 0.7%, almost two percentage-points below their average at the equivalent stage in previous recoveries since 1960. This is good news for borrowers, but some economists worry that the entry of China and other emerging countries into the global economy may have affected monetary policy in ways that central banks do not fully understand.

In its latest annual report, the Bank for International Settlements (BIS) asks whether it is really desirable to maintain positive inflation rates when China is boosting the world's productive potential so dramatically and thus reducing the prices of so many goods. In other words, are central banks targeting too high a rate of inflation now that China has joined the global market economy?

During the late 19th-century era of rapid globalisation, falling average prices were quite common. This “good deflation”, which was accompanied by robust growth, is very different to the bad deflation experienced in the 1930s depression. Today, we would again have had “good deflation”—but central banks have instead held interest rates low in order to meet their inflation targets. The BIS frets that this has encouraged excessive credit growth.

This echoes a fierce debate in the 1920s. At that time, a similar jump in the world's productive potential (then caused by technology-driven productivity growth) was reducing manufacturing costs. Some economists suggested that, in such circumstances, overall price stability might be the wrong policy goal. Instead, they argued, average prices should be allowed to fall to pass the productivity gains on to workers and consumers as higher real incomes. But just like today, monetary policy prevented prices from falling. And an overly loose policy then inflated the late-1920s stockmarket bubble.

The Austrian school of economics offers perhaps the best framework to understand what is going on. The entry of China's army of cheap labour into the global economy has increased the worldwide return on capital. That, in turn, should imply an increase in the equilibrium level of real interest rates. But, instead, central banks are holding real rates at historically low levels. The result is a misallocation of capital, most obviously displayed at present in the shape of excessive mortgage borrowing and housing investment. If this analysis is correct, central banks, not China, are to blame for the excesses, but China's emergence is the root cause of the problem.

Not only has China's disinflationary impact caused low short-term interest rates, but China is also partly responsible for the low level of long-term bond yields. To keep its exchange rate pegged to the dollar, China was the biggest buyer of American Treasury bonds over the past year. In the first six months of 2005, its foreign-exchange reserves increased by more than $100 billion, to $711 billion, of which about three-quarters are in dollars. This has also kept capital costs artificially low.


For many decades, global monetary policy has been set in Washington. When the Fed raised interest rates, global monetary conditions would tighten. Today, however, thanks in part to China's purchases of T-bonds, low long-term bond yields have offset the rise in American short-term interest rates over the past year. The yield on ten-year bonds is currently lower than before the Fed started to lift interest rates in June 2004. America's sovereignty over its monetary policy has therefore been eroded, with a given rise in short-term rates producing much less monetary tightening than in the past. To that extent, global monetary policy is increasingly being set in Beijing as well as in Washington.

By helping to hold down interest rates in rich economies, China may have indirectly created a global liquidity bubble. Total global liquidity last year rose at its fastest pace in three decades after adjusting for inflation. This excess liquidity has not pushed up conventional inflation (thanks to cheap Chinese clothes and computers), but instead it has inflated a series of asset-price bubbles around the world. Thus, pushing this argument to its limit, it could be said that the global housing boom is indirectly “made in China”. Not only has China played a role in holding down short-term interest rates, but the People's Bank of China has also supported America's mortgage market by buying vast amounts of mortgage-backed securities.

What does the breaking of the yuan's peg to the dollar mean for bond yields? American Treasury yields rose by 12 basis points after Beijing made its announcement last week. Having played a hand in inflating America's housing bubble, could China now prick it by pushing up mortgage rates, which are closely tied to long-term bond yields?

If abandoning its dollar peg causes China to reduce its purchases of T-bonds, then yields will rise. But this depends on several uncertainties. For instance, will last week's revaluation reduce inflows of speculative capital into China, and hence its need to intervene in the foreign-exchange market by buying dollars? A large chunk of China's foreign-exchange intervention over the past year has been to offset not its current-account surplus but inflows of hot money. Some economists believe that, in the short term, the small revaluation will intensify speculation of further revaluations and so attract even more capital inflows, forcing the People's Bank of China to buy more Treasury bonds to stabilise its currency. If so, bond yields will remain low.

On the other hand, the switch from a dollar peg to a currency basket may cause China to diversify its reserves away from dollars. It is unlikely to dump its dollars, but it could well reduce its new purchases of Treasury bonds in favour of other currencies. And, if China really has broken the yuan's link with the dollar, then this could be the trigger for another general slide in the greenback against the euro, the yen and other currencies, prompting investors to demand higher yields. The fate of American house prices could thus be determined by unelected bureaucrats in Beijing rather than the unelected central bankers of the West.

This article has argued that global inflation, interest rates, bond yields, house prices, wages, profits and commodity prices are now being increasingly driven by decisions in China. This could be the most profound economic change in the world for at least half a century. And its effect could last for another couple of decades. By some estimates, China has almost 200m underemployed workers in rural areas, and it could take at least two decades for them to be absorbed by industry. As this process takes place, it will continue to subdue wage growth and global inflation. Profit margins could also remain historically high for a period (though not for ever, as stockmarket valuations in many countries seem to imply).

China creates immense opportunities, but it also brings new risks. If it stumbles, or if it decides to buy fewer American T-bonds, pushing up yields, then America might really have something to complain about: the first global downturn made in China.

Wedding Toasts

Wedding Toasts

Tips on giving a wedding toast::
Littlegirlpoetry
1. Be concise. Single people are pissed that they're not getting married and married people have heard enough crappy toasts. So hurry it up so folks can get to what they really came for: the booze.

2. You don't have to be an English major to know that like any good story, the opening should tie in with the closing. It's a sound structure and it'll make you sound like you actually put more than 2 minutes into the toast.

3. Balance the sappy love stuff with a few jokes. And remember, no one wants to wade through your 5 minute thesis on what love meant to Neruda.

4. Don't mention the bachelor/bachelorette party. And don't mention the old boy(girl)friends.

5. Anecdotes should make sense to the audience. Inside jokes that no one gets will not only lose points with the audience but leaves room for speculation that you're talking about some kinky sexual experience.

6. Speak clearly and firmly. Being a little tipsy off of Hen or So Co is no excuse for f^^^^^ up the toast.

7. Get into 8 Mile mode and get the crowd involved.

8. Close strong with a reaffirming statement about the couples love. Remember, the divorce rate is 50% and everyone is secretly taking bets on how long it's all going to last. Make the parents feel good about the $50K they dropped on the ceremony and reception by talking about how the couple will last forever.

What is Greenlining?


My organization was recently profiled in the American Banker.



Greenlining's Secret Ingredient: Cooperation

American Banker Tuesday, August 16, 2005

In the world of community advocates, the Greenlining Institute stands out. Its success in cajoling financial companies to invest in low-income communities, treat minorities fairly, and be good corporate citizens reflects its approach: informed, tough, but cooperative.

"They're crystal clear about what they want, what they need, and what their position is. They do their research. They do their homework," said Tim Hanlon, a senior vice president at Wells Fargo & Co., who heads community development in the western United States. "It's a very solid and respectful relationship."

If not for Bank of America Corp., Greenlining (the name is a twist on the discriminatory practice of redlining) might never have come about. In 1992, B of A lent $100,000 to founders John Gamboa and Robert Gnaizda, who put up their homes as collateral.

Mr. Gnaizda, 69, said he first realized his passion for social and economic justice in February 1965 when he visited Mississippi to gather testimony for Congress that would eventually lead to the Civil Rights Act. His first job was director of litigation of the California Rural Legal Assistance.

Meanwhile, Mr. Gamboa, 63, was organizing 2,000 Hispanic managers at Pacific Bell to promote Spanish-language services at a time when phone companies opposed the move as un-American.

Back then, what would later become Greenlining based in Berkeley, Calif., was an ad hoc group that came together to address specific issues. It was incorporated in 1993 and today 40 groups as diverse as the First AME Church, the Asian Business Association, and the Mexican American Grocers Association work together under Greenlining's umbrella.

Its staff of 18 pursues a wide-ranging agenda that includes health care, education, and campaign finance. But its roots are firmly planted in financial services, and over the years it has figured out how to get what it wants from bankers.

"Greenlining doesn't approach it in terms of 'These are the bad guys and we're the good guys,' " said Mr. Gnaizda, the group's policy director and general counsel. He describes their style as "nonjudgmental and friendly."

Reza Aghamirzadeh, the senior vice president of community and external affairs at Washington Mutual Inc., calls Greenlining "forward-looking, thoughtful, and challenging." Wamu, he said, has a "trustful relationship" with the organization.

Mr. Hanlon of Wells added that Greenlining can come off as confrontational, "but once you get beyond that and realize that you're just really dealing with professionals who have figured out what issue they want to talk about and what their take on it is, then I think it becomes a much more professional meeting of the minds."

Greenlining board member Jorge Corralejo, a senior board member of the Latin Business Association, said Greenlining has earned bankers' respect through diligence and tenacity.

"Some would say we're tough, and we are," he said. "We're tough because we know what we're saying, what we're talking about. We're hard to brush off."

Greenlining insists on cooperation among members, too.

"If anyone violates it, we kick them out," Mr. Gamboa said. "We've done it many times."

Nor is it easy to join the coalition.

"A group has to be nominated by a member and voted on by all the other members," Mr. Gamboa said. "And the vote has to be unanimous." After their first year new members are voted on again, and again approval must be unanimous.

The founders met when Mr. Gamboa was a law student at the University of California, Berkeley, and Mr. Gnaizda was a guest lecturer. "We got in a fight in the classroom," Mr. Gamboa recalled in an interview last week. The two men are quite different, yet a 35-year collaboration was born.

Mr. Gamboa said the idea behind Greenlining was to teach competing groups to be partners rather than wrestle with one another over available resources.

"All we were doing was moving the resources around," he said. "We weren't making the pie any larger.

"Everything we are taught is 'get yours.' It's still our weakest point."

When Mr. Gamboa assesses Greenlining's record, he does not point to any single victory. Instead, to him, the biggest achievement has been a shift in the way companies view minorities.

"At first we had to sue companies and fight," he said. "Government has taught the whole county to look at minorities as a social problem, rather than as a viable market.

"That has changed. Now banks and others have come to the realization that this is an untapped, viable market. Businesses see they can produce goods, products, and services that we need in our communities, and they in turn will get a fair profit."

Greenlining knows it needs banks as partners.

"We'd much rather go with profit-oriented suggestions that benefit the community that are rooted in the company's own history or movement," Mr. Gnaizda said. "We are just a stimulus for them to put on their creative hats."

Greenlining uses the potential profitability of investing in lower-income communities as an argument for banks to sign community reinvestment deals. To date the group has negotiated commitments of more than $2.4 trillion under the Community Reinvestment Act of 1977.

"It makes economic sense," considering the enormous growth of the minority community, especially in California, Mr. Corralejo said. "The companies that are making the commitments are realizing greater potential," and "the ones who aren't, are cutting themselves short."

Though the dollar figures are staggering - JPMorgan Chase & Co. set a record last year with an $800 billion pledge over 10 years - Mr. Gnaizda said the CRA deals are not just about the money.

"It's that it forces financial institutions to develop long-term strategic plans for underserved or untapped markets," he said. "It forces them to go after the unbanked."

Greenlining has played a role in CRA deals with Bank of America, Wells Fargo, Bank of Tokyo, Home Savings of America, and Washington Mutual.

The group also realizes a large CRA deal with one bank often paves the way to the next. After Bank of America committed to $750 billion in community reinvestment in 2003, Mr. Gnaizda said, JPMorgan Chase realized that being larger than B of A, "anything less would be hard to explain and would be very hard to trumpet as a leading commitment."

One of Greenlining's priorities is fair lending.

A strong national anti-predatory-lending law would protect borrowers and free lenders from dealing with dozens of different jurisdictions, Mr. Gnaizda said.

Greenlining recently filed a brief supporting New York Attorney General Eliot Spitzer's battle for access to Home Mortgage Disclosure Act data. The Office of the Comptroller of the Currency sued in June to block Mr. Spitzer's office.

Though banks may not be intentionally discriminating against minority borrowers, Greenlining considers the inflexible tools lenders use to assess borrowers- namely credit scores - can lead to bias.

"We're going to try to work with all the banks to change their credit-scoring instruments and evaluation so that by 2007 there will be no disparities," Mr. Gnaizda said. "We're looking for prospective, positive relief."

Part of Greenlining's clout with financial institutions stems from its access to the industry's regulators. Greenlining makes two trips to Washington a year, bringing a number of its members to meet with the comptroller of the currency, the head of the Federal Deposit Insurance Corp., and various lawmakers, among others.

The group is proud of its track record with perhaps the most powerful regulator - its members have met with Federal Reserve Board Chairman Alan Greenspan twice a year every year since the early 1990s.

At times Greenlining is harder on federal regulators than on the banking industry.

"I'm not finding fault with the banks as much as with the government," Mr. Gnaizda said. "What we don't have is regulators who have put themselves in the shoes of both the community and the banks."

In particular, Greenlining is frustrated with Mr. Greenspan. Mr. Gnaizda said the Fed chief should "use his very considerable intelligence, wisdom, and political astuteness to move CRA from the backburner because if he did, groups like Greenlining would not be necessary."

The last time Greenlining officials met with Mr. Greenspan, Reg B came up for the umpteenth time. That Equal Credit Opportunity proposal, if the Fed ever approved it, would permit banks to collect race and gender data on all types of loans - not just mortgages.

The issue has come up again and again - without resolution. Mr. Greenspan's 18-year run is slated to end in January. Mr. Gnaizda jokes, "He told us to wait until he leaves before we try again."