Showing posts with label government. Show all posts
Showing posts with label government. Show all posts

Tuesday, June 17, 2014

What Makes the United States So Unequal?

By Robert J.S. Ross

If governments did nothing, Western Europe and the United States would have similar levels of inequality. But governments don’t sit on the sidelines. They collect taxes. They provide social programs. They take steps that can lessen the amount of market inequality. The difference: Governments in European and other high-income societies do much more to reduce inequality than the United States.

Comparisons among the high-income countries usually show the United States as the most unequal.

Comparisons of income inequality among the high income countries usually show the United States as the most unequal, as measured by a standard index called the Gini coefficient. A Gini value of 100 means that all the income is held by one household. A value of 0, on the other hand, means that all income is equally shared.

For the United States, the Gini coefficient runs about 38, according to the OECD, the economic policy tank for the rich countries, or about 48, according to the U.S. Census Bureau. The American Gini rating has risen sharply in the last generation, after falling gradually in the middle of the twentieth century.

By comparison, the Nordic countries– Sweden, Denmark, Norway – have among the lowest Gini coefficients, in the 25-27 range, while Germany has a Gini of 29 and France, 28.

Comparisons that show the United States as the most unequal of high-income societies typically take into account the income households have from market-based activity (work and investments) and government transfer programs (Social Security and unemployment compensation, for instance) and subtract away taxes. Researchers call the end result from these calculations “post tax and transfer” or “disposable” income.

Political decisions determine taxes and transfers. Public policies, everything from minimum wage to labor laws, also influence market-based income. So we should expect inequality levels to differ among developed nations. Even so, the actual differences among developed nations can be surprising.
Political decisions determine taxes and transfers.

On the yardstick of market-based income, the level of inequality in the United States does not come off as particularly extreme. The United States ranks eighth most unequal among the 26 countries that reported 2010 data to the OECD. The United States sports about 7 percent more market-based inequality than the average of all OECD nations.

The extreme inequality status of the United States only kicks in when we go beyond market-based income and look at tax and transfer policies.

In the United States, taxes and transfers are doing much less to reduce inequality than these policies are doing in other developed nations. On average, rich countries’ tax and transfer policies reduce inequality by about 36 percent. The figure in the United States: only about 24 percent.

In Sweden, market-based inequality shows a Gini of about 44, but the disposable income Gini sits at a much more equal 27, a reduction of 39 percent in inequality. In the United States, the market Gini comes in about 50. The disposable income Gini: just 38 in the OECD data, a reduction of only 24 percent.

Over the last generation, major changes in U.S. tax and transfer policies – mainly cuts in the tax rates on high incomes – have actually served to increase inequality.

Inequality, to be sure, is increasing in almost all high-income countries, the consequence of the triumph of global capitalism and its neoliberal policy package: market dominance, privatization, and deregulation. But even in this company, the United States stands out for the depth of its commitment to policies – particularly tax policies – that favor the rich.
The United States stands out for its policies that favor the rich.

Many Americans are, not surprisingly, concerned about excessive taxes. Ours, after all, has been a nation forged in a struggle against a grasping, remote, tax-hungry overlord. Yet when we compare ourselves to other countries about as rich and democratic as we are, it appears we are not highly taxed. Our total taxation level stands at about 24 percent of GDP (the total value of national production and income), a level significantly lower than the 34 percent average of the other high-ncome countries.

Why should we care about how little our tax system reduces inequality? Among the world’s high-income countries, the British epidemiologists Richard Wilkinson and Kate Pickett have powerfully pointed out in The Spirit Level, the more unequal societies – and regions within countries – have more violence, infant mortality, lower life expectancies, and more mental illness. Societies that are more equal, on the other hand, have more trust among people. Our levels of inequality produce fractured community and social resentment, and they drive sour and even violent politics.

Inequality has become like the weather: Everybody talks about it but no one does anything. Unlike the weather, we can fix this mess and heal these wounds. To do so, we may need a reminder from Supreme Court Justice Oliver Wendell Holmes, Jr.: “Taxes are what we pay for civilized society.”

Tuesday, February 22, 2011

Corporations Have Mastered not Paying Their Taxes

(Feb. 26 Target: Bank of America 


Despite ruining the economy with their reckless greed, Bank of America has consistently avoided any form of accountability to the American taxpayer. In fact, in 2009, Bank of America actually received a net tax benefit. Yes, last year, the federal government gave Bank of America $2.3 billion. That money alone could almost completely cover the proposed $2.5 billion cuts to the Low Income Home Energy Assistance Program (LIHEAP), which helps low-income families pay their heating and cooling bills and affects 34 million households. Bank of America is the largest bank and 9th largest corporation in the country, holding over $2.2 trillion in assets, and yet it pays less in taxes than the average American household, which made between $35,400 and $52,100 and had an effective tax rate of 14.2%.


We pay our taxes, why don't they?


On February 26th, citizens across the country will be targeting Bank of America branches and peaceably but forcefully showing them that they can't get away with such egregious tax-cheating.--US Uncut usuncut@gmail.com)

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If they paid taxes proportionate to the benefits they get from government, US citizens would finally get the tax break they so desperately seek. 
By Richard D. Wolff, Comment Is Free
Posted on February 21, 2011

Nothing better shows corporate control over the government than Washington's basic response to the current economic crisis. First, we had "the rescue", then "the recovery". Trillions in public money flowed to the biggest US banks, insurance companies, etc. That "bailed" them out (is it just me or is there a suggestion of criminality in that phrase?), while we waited for benefits to "trickle down" to the rest of us.

As usual, the "trickle-down" part has not happened. Large corporations and their investors kept the government's money for themselves; their profits and stock market "recovered" nicely. We get unemployment, home-foreclosures, job benefit cuts and growing job insecurity. As the crisis hits states and cities, politicians avoid raising corporate taxes in favour of cutting government services and jobs – witness Wisconsin, etc.

Might government bias favouring corporations be deserved, a reward for taxes they pay? No: corporations – especially the larger ones – have avoided taxes as effectively as they have controlled government expenditures to benefit them.

Compare income taxes received by the federal government from individuals and from corporations (their profits are treated as their income), based on statistics from the Office of Management and the Budget in the White House, and the trend is clear. During the Great Depression, federal income tax receipts from individuals and corporations were roughly equal. During the second world war, income tax receipts from corporations were 50% greater than from individuals. The national crises of depression and war produced successful popular demands for corporations to contribute significant portions of federal tax revenues.

US corporations resented that arrangement, and after the war, they changed it. Corporate profits financed politicians' campaigns and lobbies to make sure that income tax receipts from individuals rose faster than those from corporations and that tax cuts were larger for corporations than for individuals. By the 1980s, individual income taxes regularly yielded four times more than taxes on corporations' profits.

Since the second world war, corporations have shifted much of the federal tax burden from themselves to the public – and especially onto the middle-income members of the public. No wonder a tax "revolt" developed, yet it did not push to stop or reverse that shift. Corporations had focused public anger elsewhere, against government expenditures as "wasteful" and against public employees as inefficient.

Organisations such as Chambers of Commerce and corporations' academic and political allies together shaped the public debate. They did not want it to be about who does and does not pay the taxes. Instead, they steered the "tax revolt" against taxes in general (on businesses and individuals alike). The corporations' efforts saved them far more in reduced taxes than the costs of their political contributions, lobbyists' fees and public relations campaigns.

At the same time, corporations also lobbied successfully for many loopholes in the tax laws. The official federal tax rate on profits is now around 35% for large corporations, which theoretically have to pay additional state taxes on their profits and local taxes on their property (land, buildings, business inventories, etc). Those official and theoretical tax obligations have been used to support conservatives' claims that corporations pay half or more of their profits to federal, state and local levels of government combined. However, because of loopholes, the truth is very different. The actual tax payments of corporations, and especially large corporations, are far lower than their official, theoretical obligations.

The most comprehensive recent study of what larger corporations actually pay by three academic accountants – professors at Duke, MIT and the University of North Carolina – gets at that truth. It examined a large sample of corporations. Their average turned out to be a rate of total taxation (federal, state and local combined) below 30 %. The study concluded:
"We find a significant fraction of firms that appear to be able to successfully avoid large portions of the corporate income tax over sustained periods of time. Using a 10-year measure of tax avoidance, 546 firms, comprising 26.3% of our sample, are able to maintain a cash effective tax rate of 20% or less. The mean firm has a 10-year cash effective tax rate of approximately 29.6%."
General Electric (GE) deserves special mention. The New York Times reported that its total tax payment amounted to 14.3% over the last five years. Citizens for Tax Justice corrected that down to 3.4%, as the profits tax it paid in the US. Thus, GE paid a far lower tax rate on its income than most Americans paid on theirs. In 2009, GE received a huge $140bn bailout guarantee of its debt from Washington. By choosing GE's chief executive, Jeffrey R Immelt, to head his economic advisory panel, President Obama effectively rewarded the corporate programme: give us more and tax us less.

Corporations repeated at the state and local levels what they accomplished federally. According to the US Census Bureau, corporations paid taxes on their profits to states and localities totalling $24.7bn in 1988, while individuals then paid income taxes of $90bn. However, by 2009, while corporate tax payments had roughly doubled (to $49.1bn), individual income taxes had more than tripled (to $290bn).
 
If corporations paid taxes proportionate to the benefits they get from government and in fair proportion to what individuals pay, most US citizens would finally get the tax relief they so desperately seek.

Tuesday, January 18, 2011

Obama Launches Rule Review, Pledging to Spur Jobs, Growth

(OK, first, none of the legislation during Obama's administration even comes close to real regulation because the laws were written by corporate lobbyists, like 99% of our laws are. And now he's going to "take it easy" on big business so they'll hire more people? We DO need jobs, but this president caves into corporate interests quicker than they come--no one has ever folded with a better hand than Obama has had, and he does it routinely. He IS the corporate special interests "go to guy," after all. When I hear people complaining that Obama is 'anti-big business', I'm just like "What planet are you on?" After it's all said and done, when history looks back on this period in America, Obama will be viewed as one of the most corporate-friendly presidents there ever was, rivaling both Bush and Clinton at making it easier on the corporations while simultaneously making it more difficult on the lives of American families who are not wealthy.--jef)
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Obama Launches Rule Review, Pledging to Spur Jobs, Growth
By ELIZABETH WILLIAMSON - The Wall Street Journal

WASHINGTON—President Barack Obama plans a government-wide review of federal regulations, aiming to eliminate rules that stymie economic growth.

In an article published in the opinion pages of The Wall Street Journal, Mr. Obama said he intends to issue an executive order initiating a review to "make sure we avoid excessive, inconsistent and redundant regulation," focusing on rules that "stifle job creation and make our economy less competitive." He also suggested future regulations must do their job "while promoting economic growth."

The move is the latest effort by the White House to repair relations with corporate America, hoping to spur investment by the nation's largest multinationals and reduce unemployment.

Business leaders say an explosion in new regulations stemming from the president's health-care and financial regulatory overhauls has, along with the sluggish economy, made them reluctant to spend on expanding and hiring. Companies are sitting on nearly $2 trillion in cash and liquid assets, the most since World War II.

In recent weeks, the administration has made new efforts to push stalled free-trade agreements with Korea and others through Congress, and signaled its eagerness to consider an overhaul of the U.S. corporate tax code. The president invited chief executives to the White House last month, where they formed task forces to work on specific issues, including export growth and taxes.

On Feb. 7, Mr. Obama will visit the U.S. Chamber of Commerce—a chief opponent to his administration's regulatory approach—for a discussion on how the White House can work with the group to create jobs. The efforts are designed to give companies more confidence in the president's stewardship of the economy, and bolster his re-election prospects among a wealthy constituency not traditionally allied with Democrats.

In Tuesday's article, the president defended his administration's efforts to strike "the proper balance" between protecting the public and not interfering with economic growth.

The president said the government sometimes failed to meet its "basic responsibility to protect the public interest," citing the run-up to the financial crisis. He also acknowledged the cost of regulation and said that sometimes "rules have gotten out of balance, placing unreasonable burdens on business—burdens that have stifled innovation and have had a chilling effect on growth and jobs."

He also said: "Where necessary, we won't shy away from addressing obvious gaps: new safety rules for infant formula; procedures to stop preventable infections in hospitals; efforts to target chronic violators of workplace safety laws. But we are also making it our mission to root out regulations that conflict, that are not worth the cost, or that are just plain dumb."

For close to a year, the White House has been asking leading business groups in the capital to identify regulations they believe are obstacles to job-creating private investment. But these efforts are being dwarfed by complaints about the administration's unfriendly rhetoric toward the financial industry and large corporations, and regulations stemming from its legislative agenda.

Even some of the president's corporate allies have joined criticism of the White House's regulatory and tax policies. The Business Roundtable, an association of chief executives of many of the largest U.S. corporations, last year compiled a 54-page report that includes proposals to streamline rules proposed by the Environmental Protection Agency and the Federal Communications Commission, among scores of others. It was accompanied by public criticism from the Roundtable, whose members have frequently advised the White House on the economy.

At the same time, the administration faces pressure from the left not to appear to be too close to Wall Street and corporate interests. Liberals were irked most recently when Mr. Obama tapped political veteran and J. P. Morgan Chase & Co. executive William Daley as his chief of staff.

Tuesday, November 16, 2010

The Right to Ignore the State

by

1. Voluntary Outlawry

As a corollary to the proposition that all institutions must be subordinated to the law of equal freedom, we cannot choose but admit the right of the citizen to adopt a condition of voluntary outlawry. If every man has freedom to do all that he wills, provided he infringes not the equal freedom of any other man, then he is free to drop connection with the state — to relinquish its protection, and to refuse paying towards its support.

It is self-evident that in so behaving he in no way trenches upon the liberty of others; for his position is a passive one; and whilst passive he cannot become an aggressor. It is equally self-evident that he cannot be compelled to continue one of a political corporation, without a breach of the moral law, seeing that citizenship involves payment of taxes; and the taking away of a man's property against his will is an infringement of his rights.

Government being simply an agent employed in common by a number of individuals to secure to them certain advantages, the very nature of the connection implies that it is for each to say whether he will employ such an agent or not. If any one of them determines to ignore this mutual-safety confederation, nothing can be said except that he loses all claim to its good offices, and exposes himself to the danger of maltreatment — a thing he is quite at liberty to do if he likes. He cannot be coerced into political combination without a breach of the law of equal freedom; he can withdraw from it without committing any such breach; and he has therefore a right so to withdraw.

2. Legislative Authority Can Never Be Ethical
"No human laws are of any validity if contrary to the law of nature; and such of them as are valid derive all their force and all their authority mediately or immediately from this original."
Thus writes Blackstone, to whom let all honor be given for having so far outseen the ideas of his time, and, indeed, we may say of our time.[1]

A good antidote, this, for those political superstitions which so widely prevail. A good check upon that sentiment of power worship which still misleads us by magnifying the prerogatives of constitutional governments as it once did those of monarchs. Let men learn that a legislature is not "our God upon earth," though, by the authority they ascribe to it, and the things they expect from it, they would seem to think it is. Let them learn rather that it is an institution serving a purely temporary purpose, whose power, when not stolen, is at the best borrowed.

Nay, indeed, have we not seen that government is essentially immoral? Is it not the offspring of evil, bearing about it all the marks of its parentage? Does it not exist because crime exists? Is it not strong, or, as we say, despotic, when crime is great? Is there not more liberty, that is, less government, as crime diminishes? And must not government cease when crime ceases, for very lack of objects on which to perform its function?

Not only does magisterial power exist because of evil, but it exists by evil. Violence is employed to maintain it; and all violence involves criminality. Soldiers, policemen, and jailers, swords, batons, and fetters, are instruments for inflicting pain; and all infliction of pain is in the abstract wrong.

The state employs evil weapons to subjugate evil, and is alike contaminated by the objects with which it deals, and the means by which it works. Morality cannot recognize it; for morality, being simply a statement of the perfect law, can give no countenance to anything growing out of, and living by, breaches of that law. Wherefore, legislative authority can never be ethical — must always be conventional merely.

Hence, there is a certain inconsistency in the attempt to determine the right position, structure, and conduct of a government by appeal to the first principles of rectitude. For, as just pointed out, the acts of an institution which is in both nature and origin imperfect cannot be made to square with the perfect law. All that we can do is to ascertain, firstly, in what attitude a legislature must stand to the community to avoid being by its mere existence an embodied wrong; secondly, in what manner it must be constituted so as to exhibit the least incongruity with the moral law; and thirdly, to what sphere its actions must be limited to prevent it from multiplying those breaches of equity it is set up to prevent.

The first condition to be conformed to before a legislature can be established without violating the law of equal freedom is the acknowledgment of the right now under discussion — the right to ignore the state.[2]

3. The Only Legitimate Source of Power

Upholders of pure despotism may fitly believe state control to be unlimited and unconditional. They who assert that men are made for governments and not governments for men, may consistently hold that no one can remove himself beyond the pale of political organization.

But they who maintain that the people are the only legitimate source of power — that legislative authority is not original, but deputed — cannot deny the right to ignore the state without entangling themselves in an absurdity.

For, if legislative authority is deputed, it follows that those from whom it proceeds are the masters of those on whom it is conferred; it follows further, that as masters they confer the said authority voluntarily; and this implies that they may give or withhold it as they please.

To call that deputed which is wrenched from men whether they will or not, is nonsense. But what is here true of all collectively is equally true of each separately. As a government can rightly act for the people, only when empowered by them, so also can it rightly act for the individual, only when empowered by him.

If A, B, and C debate whether they shall employ an agent to perform for them a certain service, and if whilst A and B agree to do so, C dissents, C cannot equitably be made a party to the agreement in spite of himself. And this must be equally true of thirty as of three; and if of thirty, why not of three hundred, or three thousand, or three millions?

4. The Immorality of Majority Rule

Of the political superstitions lately alluded to, none is so universally diffused as the notion that majorities are omnipotent. Under the impression that the preservation of order will ever require power to be wielded by some party, the moral sense of our time feels that such power cannot rightly be conferred on any but the largest moiety of society. It interprets literally the saying that "the voice of the people is the voice of God," and transferring to the one the sacredness attached to the other, it concludes that from the will of the people, that is, of the majority, there can be no appeal. Yet is this belief entirely erroneous.

Suppose, for the sake of argument, that, struck by some Malthusian panic, a legislature duly representing public opinion were to enact that all children born during the next ten years should be drowned. Does any one think such an enactment would be warrantable? If not, there is evidently a limit to the power of a majority.

Suppose, again, that of two races living together — Celts and Saxons, for example — the most numerous determined to make the others their slaves. Would the authority of the greatest number be in such case valid? If not, there is something to which its authority must be subordinate.

Suppose, once more, that all men having incomes under £50 a year were to resolve upon reducing every income above that amount to their own standard, and appropriating the excess for public purposes. Could their resolution be justified? If not, it must be a third time confessed that there is a law to which the popular voice must defer.

What, then, is that law, if not the law of pure equity — the law of equal freedom?

These restraints, which all would put to the will of the majority, are exactly the restraints set up by that law. We deny the right of a majority to murder, to enslave, or to rob, simply because murder, enslaving, and robbery are violations of that law — violations too gross to be overlooked. But if great violations of it are wrong, so also are smaller ones. If the will of the many cannot supersede the first principle of morality in these cases, neither can it in any. So that, however insignificant the minority, and however trifling the proposed trespass against their rights, no such trespass is permissible.

When we have made our constitution purely democratic, thinks to himself the earnest reformer, we shall have brought government into harmony with absolute justice. Such a faith, though perhaps needful for the age, is a very erroneous one. By no process can coercion be made equitable.

The freest form of government is only the least objectionable form. The rule of the many by the few we call tyranny; the rule of the few by the many is tyranny also, only of a less intense kind. "You shall do as we will, and not as you will," is in either case the declaration; and if the hundred make it to the ninety-nine, instead of the ninety-nine to the hundred, it is only a fraction less immoral. Of two such parties, whichever fulfills this declaration necessarily breaks the law of equal freedom: the only difference being that by the one it is broken in the persons of ninety-nine, whilst by the other it is broken in the persons of a hundred. And the merit of the democratic form of government consists solely in this, that it trespasses against the smallest number.

The very existence of majorities and minorities is indicative of an immoral state. The man whose character harmonizes with the moral law, we found to be one who can obtain complete happiness without diminishing the happiness of his fellows. But the enactment of public arrangements by vote implies a society consisting of men otherwise constituted; implies that the desires of some cannot be satisfied without sacrificing the desires of others; implies that in the pursuit of their happiness the majority inflict a certain amount of unhappiness on the minority; implies, therefore, organic immorality.

Thus, from another point of view, we again perceive that even in its most equitable form it is impossible for government to dissociate itself from evil; and further, that unless the right to ignore the state is recognized, its acts must be essentially criminal.

5. Representation versus Consent

That a man is free to abandon the benefits and throw off the burdens of citizenship, may indeed be inferred from the admissions of existing authorities and of current opinion. Unprepared as they probably are for so extreme a doctrine as the one here maintained, the radicals of our day yet unwittingly profess their belief in a maxim which obviously embodies this doctrine.

Do we not continually hear them quote Blackstone's assertion that "no subject of England can be constrained to pay any aids or taxes even for the defense of the realm or the support of government, but such as are imposed by his own consent, or that of his representative in parliament?" And what does this mean? It means, say they, that every man should have a vote. True: but it means much more.

If there is any sense in words it is a distinct enunciation of the very right now contended for. In affirming that a man may not be taxed unless he has directly or indirectly given his consent, it affirms that he may refuse to be so taxed; and to refuse to be taxed is to cut all connection with the state.

Perhaps it will be said that this consent is not a specific, but a general one, and that the citizen is understood to have assented to everything his representative may do, when he voted for him. But suppose he did not vote for him, and on the contrary did all in his power to get elected someone holding opposite views. What then?

The reply will probably be that, by taking part in such an election, he tacitly agreed to abide by the decision of the majority. And how if he did not vote at all? Why then he cannot justly complain of any tax, seeing that he made no protest against its imposition.

So, curiously enough, it seems that he gave his consent in whatever way he acted — whether he said yes, whether he said no, or whether he remained neuter! A rather awkward doctrine this. Here stands an unfortunate citizen who is asked if he will pay money for a certain proffered advantage; and whether he employs the only means of expressing his refusal or does not employ it, we are told that he practically agrees, if only the number of others who agree is greater than the number of those who dissent.

And thus we are introduced to the novel principle that A's consent to a thing is not determined by what A says, but by what B may happen to say!

It is for those who quote Blackstone to choose between this absurdity and the doctrine above set forth. Either his maxim implies the right to ignore the state, or it is sheer nonsense.

6. Religious Liberty and Civil Liberty

There is a strange heterogeneity in our political faiths. Systems that have had their day, and are beginning here and there to let the daylight through, are patched with modern notions utterly unlike in quality and color; and men gravely display these systems, wear them, and walk about in them, quite unconscious of their grotesqueness.

This transition state of ours, partaking as it does equally of the past and the future, breeds hybrid theories exhibiting the oddest union of bygone despotism and coming freedom. Here are types of the old organization curiously disguised by germs of the new — peculiarities showing adaptation to a preceding state modified by rudiments that prophecy of something to come — making altogether so chaotic a mixture of relationships that there is no saying to what class these births of the age should be referred.

As ideas must of necessity bear the stamp of the time, it is useless to lament the contentment with which these incongruous beliefs are held. Otherwise it would seem unfortunate that men do not pursue to the end the trains of reasoning which have led to these partial modifications. In the present case, for example, consistency would force them to admit that, on other points besides the one just noticed, they hold opinions and use arguments in which the right to ignore the state is involved.

For what is the meaning of dissent? The time was when a man's faith and his mode of worship were as much determinable by law as his secular acts, and, according to provisions extant in our statute book, are so still. Thanks to the growth of a Protestant spirit, however, we have ignored the state in this matter — wholly in theory, and partly in practice. But how have we done so? By assuming an attitude which, if consistently maintained, implies a right to ignore the state entirely.
Observe the positions of the two parties:
"This is your creed," says the legislator; "you must believe and openly profess what is here set down for you."
"I shall not do anything of the kind," answers the nonconformist; "I will go to prison rather."
"Your religious ordinances," pursues the legislator, "shall be such as we have prescribed. You shall attend the churches we have endowed, and adopt the ceremonies used in them."
"Nothing shall induce me to do so," is the reply; "I altogether deny your power to dictate to me in such matters, and mean to resist to the uttermost."
"Lastly," adds the legislator, "we shall require you to pay such sums of money towards the support of these religious institutions, as we may see fit to ask."
"Not a farthing will you have from me," exclaims our sturdy Independent: "even did I believe in the doctrines of your church (which I do not), I should still rebel against your interference; and if you take my property, it shall be by force and under protest."
What now does this proceeding amount to when regarded in the abstract? It amounts to an assertion by the individual of the right to exercise one of his faculties — the religious sentiment — without let or hindrance, and with no limit save that set up by the equal claims of others.

And what is meant by ignoring the state? Simply an assertion of the right similarly to exercise all the faculties.

The one is just an expansion of the other, rests on the same footing with the other, must stand or fall with the other. Men do indeed speak of civil and religious liberty as different things, but the distinction is quite arbitrary. They are parts of the same whole and cannot philosophically be separated.

"Yes they can," interposes an objector; "assertion of the one is imperative as being a religious duty. The liberty to worship God in the way that seems to him right is a liberty without which a man cannot fulfill what he believes to be divine commands, and therefore conscience requires him to maintain it."

True enough; but how if the same can be asserted of all other liberty? How if maintenance of this also turns out to be a matter of conscience? Have we not seen that human happiness is the divine will, that only by exercising our faculties is this happiness obtainable, and that it is impossible to exercise them without freedom? And if this freedom for the exercise of faculties is a condition without which the divine will cannot be fulfilled, the preservation of it is, by our objector's own showing, a duty.

Or, in other words, it appears not only that the maintenance of liberty of action may be a point of conscience, but that it ought to be one. And thus we are clearly shown that the claims to ignore the state in religious and in secular matters are in essence identical.

The other reason commonly assigned for nonconformity admits of similar treatment. Besides resisting state dictation in the abstract, the dissenter resists it from disapprobation of the doctrines taught. No legislative injunction will make him adopt what he considers an erroneous belief; and, bearing in mind his duty towards his fellow men, he refuses to help through the medium of his purse in disseminating this erroneous belief.

The position is perfectly intelligible. But it is one which either commits its adherents to civil nonconformity also, or leaves them in a dilemma. For why do they refuse to be instrumental in spreading error? Because error is adverse to human happiness. And on what ground is any piece of secular legislation disapproved? For the same reason: because thought adverse to human happiness. How then can it be shown that the state ought to be resisted in the one case and not in the other?

Will any one deliberately assert that if a government demands money from us to aid in teaching what we think will produce evil, we ought to refuse it, but that if the money is for the purpose of doing what we think will produce evil, we ought not to refuse it?

Yet, such is the hopeful proposition which those have to maintain who recognize the right to ignore the state in religious matters, but deny it in civil matters.

7. Social Morality and Social Evolution

The substance of this chapter once more reminds us of the incongruity between a perfect law and an imperfect state. The practicability of the principle here laid down varies directly as social morality. In a thoroughly vicious community its admission would be productive of anarchy. In a completely virtuous one its admission will be both innocuous and inevitable. Progress towards a condition of social health — a condition, that is, in which the remedial measures of legislation will no longer be needed — is progress towards a condition in which those remedial measures will be cast aside, and the authority prescribing them disregarded.

The two changes are of necessity coordinate. That moral sense whose supremacy will make society harmonious and government unnecessary, is the same moral sense which will then make each man assert his freedom even to the extent of ignoring the state — is the same moral sense which, by deterring the majority from coercing the minority, will eventually render government impossible. And as what are merely different manifestations of the same sentiment must bear a constant ratio to each other, the tendency to repudiate governments will increase only at the same rate that governments become needless.

Let not any be alarmed, therefore, at the promulgation of the foregoing doctrine. There are many changes yet to be passed through before it can begin to exercise much influence. Probably a long time will elapse before the right to ignore the state will be generally admitted, even in theory. It will be still longer before it receives legislative recognition. And even then there will be plenty of checks upon the premature exercise of it. A sharp experience will sufficiently instruct those who may too soon abandon legal protection. Whilst, in the majority of men, there is such a love of tried arrangements, and so great a dread of experiments, that they will probably not act upon this right until long after it is safe to do so.



Herbert Spencer (1820–1903) was a laissez-faire radical at a time when academia was becoming ever more illiberal. He was an opponent of militarism, economic regulation, infringement on personal liberty, and government centralization. He played a huge role in the history of ideas, one that contemporary sociologists have sadly neglected other than to dismiss him as a "social Darwinist." In fact, his great contribution was precisely to untangle the study of society from all claims that it operated as a life form apart from the choices made by individuals.
This essay is taken from chapter 19 of Spencer's first major work of political philosophy, Social Statics (1851). Spelling and punctuation have been updated and titles have been added to the chapter subheadings.

Notes
[1] Sir William Blackstone (1723–1780) was the most renowned of English jurists. He produced the historical and analytic treatise on the common law called Commentaries on the Laws of England, first published in four volumes over 1765–1769.
[2] Hence may be drawn an argument for direct taxation; seeing that only when taxation is direct does repudiation of state burdens become possible.

Saturday, September 11, 2010

Disturbing Truths About Our Government

Dear Tea Partiers, Let's Get Mad Together
By PAUL BUCHHEIT

Not because the government does too much. But because it's done too little.

Consider a few disturbing truths:

  • We cry 'socialism!' at the mention of higher taxes, but we allow a businessman to make enough money to pay the salaries of every police officer, firefighter, and public school teacher in the city of Chicago.
  • The richest 1% had a big slice of the American income pie in 1980. Since that time, they've cut a second piece of the same size for themselves, and then a THIRD piece! Three times as much in 25 years. They got this extra pie not from being good hard-working little boys, but from tax cuts and deregulation.
  • As Howard Zinn argued, low-income people go to jail for thefts of a few hundred dollars. The people who take BILLIONS from society by calling their income "carried interest" instead of income are considered shrewd capitalists.
  • And how about corporations, the driving force of a 'revitalized' economy? Right now the 500 largest non-financial corporations are sitting on $1.8 trillion in cash instead of investing in people. And they're not paying much in taxes. The portion of federal revenue derived from corporate income tax decreased from 33% in the 1950s to 12% in 2005. Companies have saved billions by moving their headquarters to tax havens such as Bermuda or the Cayman Islands. Business-backers claim that the U.S. has one of the highest corporate tax rates among OECD countries, but the U.S. is actually the fourth lowest among OECD countries in the collection of corporate taxes as a percentage of GDP.
Tea Partiers, we should get mad together at government, because they've done too little to correct these injustices. It is not in their own best interests to raise taxes on the rich.

And we should get mad together at the mainstream media for not reporting on the abuses of the small percentage of very wealthy people who make it so hard on the rest of us.

Monday, August 16, 2010

Gulf Shrimpers Find Oil In Reopened Fishing Areas (2 stories)

Governnment Says "Shut Up"
Sierra Club Alleges Areas Were Solely Reopened to Limit BP's Liability
Published on 08-16-2010 | Washington's Blog

While the government says that the oil is gone, shrimpers say its still there.

The Press-Register reports:
Opening state offshore waters to fishing and winding down the cleanup effort on the coast is premature, said Louie Miller, state director of the Mississippi Sierra Club.
"We've got shrimpers out there saying there is oil out there," Miller said. "We had a meeting Wednesday night where we had over 150 shrimpers... who are saying there is oil out there and these underwater plumes are varying in size and shape. This stuff is obviously moving around out there."
***
[William Walker, executive director of the Mississippi Department of Marine Resources] "If you are not going to validate what you are saying through accepted scientific protocol and approaches, then quit talking about it without any evidence what you are saying is true," Walker said.
In other words, shut up.

Obviously, gulf shrimpers have a strong motivation to have everyone think that the shrimp is safe and the oil is all gone. They wouldn't be speaking out unless the problem was fairly bad.

Indeed, the Sierra Club accuses the government of reopening oiled fishing grounds to limit BP's liability:
The existence of oil is irrefutable, Miller said. Oil has reappeared on beaches in Alabama, Petit Bois and Horn islands and continues to wash ashore in Louisiana, he said.
Miller said there also is evidence of submerged oil.
"It is a weird thing. It is like strands, this black water, as they are calling it. It is like strands that are about three to four times the thickness of human hair. These things can be about foot-and-a-half, to five- to six-feet-long."
Miller said the assumption is oil that has been dispersed.
"To open up these waters, in my opinion, is nothing more than to limit the liability of BP to pay claims," he said.
"Because now they can deny any claims after the time at which these waters were opened back up," Miller said.
PBS Newshour also covered the shrimpers' distrust of the government's claims that all is well:
PBS: [Vice president of the Louisiana Shrimpers Association Acy] Cooper says despite government claims that most of the oil is gone, there’s plenty of it still on the bottom.
COOPER: I went out there and we made about four or five passes with the wheel, with the boat, stirred up the mud, and before you know it, oil was coming up. So these are the kind of areas that we need to distinguish where it's at, and these are the new places we need to keep closed. We don't need to open this. Keep them out of there.
(Video here). And see this.

Is the Sierra Club right? Are still-oiled fishing areas being reopened solely to limit BP's liability?

Are fishing areas instead being reopened to try to save the Gulf fishing industry (even though local fishermen and shrimpers would rather have dangerous areas remain closed so that Gulf seafood's reputation isn't permanently destroyed)?

Or is it just part of the same old attempt to cover up the severity of the crisis?

***

Louisiana Fishermen Slam Claims that Oil Almost Gone, Seafood Safe
Fishing grounds are full of oil-soaked marsh grass and tarballs, with shrimp season set to open next week, locals say
by Jacoba Charles - Aug 11th, 2010

HOPEDALE, LA.— In the small towns of coastal Louisiana, the widespread consensus is that the oil is far from gone.

Fishermen return from working on cleanup crews or from recreational angling trips with stories of crabs whose lungs are black with oil, or of oysters with shells covered in sludge. They take photos and carry tarballs home like talismans to show what they have seen. They talk about their fears with anyone who will listen, and often their voices are tinged with panic.

Yet a government report released last week by the National Oceanic and Atmospheric Administration (NOAA) said that 75 percent of the oil has been cleaned up, dispersed or otherwise contained. And the Food and Drug Administration (FDA) reports that of all the samples of seafood that have been tested since the oil spill, none have shown evidence of contamination.

While some in the coastal seafood industry agree with these assessments, a majority seem to view the news with a sense of betrayal.
"The cleanup isn't even close to being done," said Karen Hopkins of Dean Blanchard Seafood, which accounts for about 11 percent of the U.S. shrimp supply, on the barrier island of Grand Isle.
"The last thing I want to do is scare anyone away from the seafood down here," said Dawn Nunez, standing at the counter of the shrimp wholesale business and deli she owns in the tiny fishing town of Hopedale. "But if I’m not eating it or feeding it to my children, I can’t advise anyone else to eat it either."

On their dock across the street, Dawn's husband Marty Nunez pulls a clump of oil-ridden marsh grass out of a plastic bag.
"There's people fishing where this is at – or worse than this," he said. "I can't understand how they say things are getting back to normal."
Nunez surreptitiously picked the grass while working as part of BP's Vessels of Opportunity cleanup operation on Monday. For him the oil-soaked grass is a symbol of a lurking threat. Like many other people living along the coast, Nunez is confident that vast quantities of oil remain in the environment, despite highly publicized announcements to the contrary.
"Our fishermen bring home grass and tarballs and then we watch the news and they say there is no sign of oil," said Dawn Nunez. "Where did it go? Where did millions of gallons of oil go if it's not in the Gulf?"
A widely held theory is that the 1.8 million gallons of dispersants that were sprayed during the cleanup operation caused the oil to sink to the bottom.
"I've been working with oil all my life," said Brian Zito, a commercial fisherman on Grand Isle. "Dispersant is like a soap, and if you wash your hands in a bucket your water will be all white and soapy and fine. But let that bucket sit there for a few hours and see what happens – all that oil is going to come back together."
When they start trawling for shrimp or dredging for oysters, fishermen fear that the oil will get stirred up again.

For now that fear is largely untested. Although 5,144 square miles of federal waters affected by the oil spill had been deemed safe as of Tuesday, little of that good news applies to Louisiana. The state's three main fisheries are crab, oysters and shrimp – but the shrimp season doesn't open until next week. And crab and oyster fishing is almost entirely shut down because of the spill, as are most of the nearshore fishing grounds relied on by Louisiana's shrimpers.

But perhaps the biggest problem faced by the state's commercial fishermen is that they don't trust their own product. Even when the government decides they are allowed to fish in the marshes again, many say they are going to wait.
"I know what's out there and I'm not going to mess up my equipment with oil," Zito said in an often-repeated sentiment. "You can't even ride back there in a boat without stirring up tarballs, let alone put a net in the water."
Trawling for shrimp involves dragging a heavy chain, called a tickling chain, across the bottom of the marsh, lake or ocean. Shrimp that live in the muck swim up, and get scooped into the waiting net. And if oil is on the sea floor like the fishermen fear, that will get stirred up as well.

And if there is any contamination of the seafood, there is a very real chance that the individual fishermen could ultimately be held responsible. Past lawsuits filed by restaurant customers have made this possibility seem very real.
"We are going to have to buy product liability insurance on a product that we've never had to worry about before," Hopkins said.
Perhaps because of this, demand for Gulf Coast seafood is down. Marty Nunez said that the processor he has sold to for years called to warn him they wouldn’t be buying his product, should he get any in.
"They can't buy it because they can't sell it," he said. "They can’t even sell Gulf Coast shrimp that they have from last year."
But the fishermen facing this uncertain future stand to lose much more than a job. Many come from families that have hunted, fished and lived in Louisiana's swampy waterways for generations.
"This is a way of life," Nunez said. "It's what we eat, drink and breathe."

Thursday, July 29, 2010

Government Has Run Amok Since 9/11

Feeding Frenzy
By SHELDON RICHMAN

Those who understand the exploitative nature of big government suspected that the U.S. response to the 9/11 attacks had little to do with the security of the American people and much to do with power and money. Still, the magnitude of the scam, as revealed by the Washington Post last week, is astonishing.

Naturally, the politicians justify the growth in intelligence operations on national security grounds. To make sure such attacks never happen again, they said, new powers, agencies, personnel, and facilities were imperative.

Now the truth is out: the post–9/11 activity has been an obscene feeding frenzy at the public trough. Any resemblance to efforts at keeping Americans safe is strictly coincidental.

“The top-secret world the government created in response to the terrorist attacks of Sept. 11, 2001, has become so large, so unwieldy and so secretive that no one knows how much money it costs, how many people it employs, how many programs exist within it or exactly how many agencies do the same work” the Post’s Dana Priest and William Arkin write. “After nine years of unprecedented spending and growth, the result is that the system put in place to keep the United States safe is so massive that its effectiveness is impossible to determine.”

It would be a mistake to chalk up the government’s conduct to bureaucratic bumbling. This is not bumbling. It is highway robbery. Everyone who was well connected, either in government or the “private” sector, wanted a piece of the action, and chances are that he — and many others — got it. It doesn’t matter that multiple agencies do the same work and keep their findings secret from one another. It doesn’t matter that the volume of paperwork is beyond anyone’s capacity to absorb it. What matters is money, power, and prestige. This is the mother of all boondoggles.

Chew on some of the numbers from the Post investigation and see if it sounds as though protection of American society was a national-intelligence priority:
  • “Some 1,271 government organizations and 1,931 private companies work on programs related to counterterrorism, homeland security and intelligence in about 10,000 locations across the United States.” 
  • “An estimated 854,000 people, nearly 1.5 times as many people as live in Washington, D.C., hold top-secret security clearances.” 
  • “In Washington and the surrounding area, 33 building complexes for top-secret intelligence work are under construction or have been built since September 2001. Together they occupy the equivalent of almost three Pentagons or 22 U.S. Capitol buildings — about 17 million square feet of space.”
Moreover, the Post writes, “51 federal organizations and military commands, operating in 15 U.S. cities, track the flow of money to and from terrorist networks,” and “Analysts who make sense of documents and conversations obtained by foreign and domestic spying share their judgment by publishing 50,000 intelligence reports each year — a volume so large that many are routinely ignored” (emphasis added).

Since 9/11 no fewer than 263 intelligence and counterterrorism organizations have been “created or reorganized.”

And what about cost?

“The U.S. intelligence budget is vast, publicly announced last year as $75 billion, 2 1/2 times the size it was on Sept. 10, 2001. But the figure doesn’t include many military activities or domestic counterterrorism programs.” In other words, no one knows how much the whole thieving operation costs.

According to Priest and Arkin, “[Many] officials who work in the intelligence agencies say they remain unclear about what the [Office of the Director of National Intelligence] is in charge of.”

It comes as no surprise that the mega-bureaucracy isn’t even much help fighting wars: “When Maj. Gen. John M. Custer was the director of intelligence at U.S. Central Command, he grew angry at how little helpful information came out of the [National Counterterrorism Center]. In 2007, he visited its director at the time, retired Vice Adm. John Scott Redd, to tell him so. ‘I told him that after 4 1/2 years, this organization had never produced one shred of information that helped me prosecute three wars!’ he said loudly, leaning over the table during an interview” (emphasis added).

These revelations should have any professed opponent of big government screaming bloody murder. So far the silence from conservatives has been deafening.

Friday, July 23, 2010

The shrinking number of U.S. banks but growing assets

From 12,000+ in 1990 to roughly 7,000 today. The rise of the too big to fail banking system. Are bank hours conducive to the working and middle class?

    Some people have a hard time believing that prior to the Great Depression, there was a point in U.S. history where we had over 20,000 various and diverse banks in the country.  These banks would boom and bust and with no FDIC insurance, placing your money in a bank was a risky proposition.  The Federal Reserve initially was designed to serve as lender of last resort but as time has progressed, it has now been used as a tool to consolidatebanking power in the hands of a few.  They say that you should never let a good crisis go unused; the banking elite have decided to use propaganda, lobbyists, and coercion to thin out the number of competing banks in the system.  We are now facing the smallest number of commercial banks in many decades and the trend seems to be accelerating as every Friday a handful of banks are shut down and big banks continue to grow their market share.
The below chart shows this trend:


From 1990 when we had over 12,000 commercial banks to 2009 with approximately 7,000 commercial banks, the contraction over 20 years has been significant.  A 40 percent decrease is large but keep in mind that at the same time, the banking needs of our country have risen.

U.S. GDP in 1990 was $5.8 trillion compared to $14.26 trillion in 2009.  What you have occurring is the consolidation of banking power with the too big to fail.  It is no coincidence that during this time, we have faced two of the biggest bubbles in our history.  During the 1990s we lived through the technology bubble and in the 2000s, we had the legendary housing and credit bubble that has knocked our economy to the mat. 

It would be one thing if the financial quality of most Americans improved during this time but it hasn’t.  In fact, over the last decade wages have gone stagnant (negative if you lost your job like millions of others) and we are dealing with high unemployment that is persisting at levels that reflect a minor depression (with a softening name of the Great Recession).

If you think about banking hours, you really can see that banks don’t care much about the working or middle class:


Presumably most Americans work 8 to 5 or 9 to 6, right smack during banking hours.  You would think that banks would have hours that were a bit more flexible but in reality, banks make more money outside of the bank and also now through their investing units and gambling on Wall Street.  The storefront is merely to create an illusion.  Banks have done a good job in this crisis trying to propagate the idea that if no bailouts were given, then all banking in the U.S. would have come to a halt. 

This is not entirely true.  There is a solid amount of capital that would have found its way to people but why would anyone lend money when the government is backing up the biggest institutions and not rewarding prudence?  In fact, if we look at the mergers of JP Morgan with WaMu or BofA with Countrywide what we saw was two giant institutions (not necessarily good companies) becoming even bigger and having more access to government money.  Well run smaller banks had no chance.

The banking system has become one giant moral hazard.  If you stand on the outside looking in, you would think the number one criteria of favoritism is merely the size of a bank.  So the incentive isn’t to be prudent with making loans, it is to make as many loans as possible in the shortest amount of time to grow into a too big to fail institution.  This kind of system has created incredible risk in our system and we can see that after many decades, it has harmed our economy immensely.  Does anyone really think things are better because banks have gotten bigger?

And going back to the data we had regarding banking assets.  Let us look at asset growth over the same time that 5,000 commercial banks fell out of the system:
U.S. Banking assets (commercial banks)
1990:                     $2.5 trillion
2009:                     $9.3 trillion
At the time that we lost 40 percent of commercial banks, actual assets increased from $2.5 trillion to $9.3 trillion, nearly quadrupling in the same amount of time.  And yet, the actual overall financial well being for working and middle class Americans has actually fallen.  How is that?  Part of it has to do with the incredible amount of asset inflation caused by the banking sector.  More and more people went into massive debt while banks kept making money off a growing list of fees, charges, and also making large amounts of money on the margin from taking government funds and then lending it out or speculating on Wall Street.

Banks claim that the margin has to do with risk but as we have seen, as long as you reach a certain baking size, the government won’t let you fail so you are at liberty to do whatever you feel is in your best interest even if it hurts the overall economy.
The biggest line item comes from mortgage loans:

Source:  FDIC

64% of securitized assets at commercial banks come from mortgage loans including home equity.  The next big line item is credit cards (22%).  If you really look at it carefully, banks had a deep desire to inflate the housing bubble.  This allowed them to increase the overall size of their asset base while forcing Americans to go deeper and deeper into debt.  The value of a dollar has fallen at the same time and this is no accident:


Let us recap:
-From 1990 to 2009 commercial banks went from over 12,000 to 7,000
-Yet banking assets went from $2.5 trillion to over $9.3 trillion at commercial banks
-Banking has grown and fostered two of the largest asset bubbles in history
In the end, we really need to examine what we expect out of banking for our country and our economy.  It has grown too large and has harmed our economy.  The current incentive system rewards bad performance and not much has changed since the crisis started.  Time to reexamine the system and radically shake it up.

Wednesday, July 21, 2010

TOP SECRET America

A hidden world, growing beyond control
Monday, July 19, 2010

WATCH THE INTRO

EXPLORE CONNECTIONS

FIND COMPANIES 

SEARCH THE DATA


Click on the image for the interactive map.





The top-secret world the government created in response to the terrorist attacks of Sept. 11, 2001, has become so large, so unwieldy and so secretive that no one knows how much money it costs, how many people it employs, how many programs exist within it or exactly how many agencies do the same work.

These are some of the findings of a two-year investigation by The Washington Post that discovered what amounts to an alternative geography of the United States, a Top Secret America hidden from public view and lacking in thorough oversight. After nine years of unprecedented spending and growth, the result is that the system put in place to keep the United States safe is so massive that its effectiveness is impossible to determine.

The investigation's other findings include:

  • Some 1,271 government organizations and 1,931 private companies work on programs related to counterterrorism, homeland security and intelligence in about 10,000 locations across the United States.
  • An estimated 854,000 people, nearly 1.5 times as many people as live in Washington, D.C., hold top-secret security clearances.
  • In Washington and the surrounding area, 33 building complexes for top-secret intelligence work are under construction or have been built since September 2001. Together they occupy the equivalent of almost three Pentagons or 22 U.S. Capitol buildings - about 17 million square feet of space.
  • Many security and intelligence agencies do the same work, creating redundancy and waste. For example, 51 federal organizations and military commands, operating in 15 U.S. cities, track the flow of money to and from terrorist networks.
  • Analysts who make sense of documents and conversations obtained by foreign and domestic spying share their judgment by publishing 50,000 intelligence reports each year - a volume so large that many are routinely ignored.
These are not academic issues; lack of focus, not lack of resources, was at the heart of the Fort Hood shooting that left 13 dead, as well as the Christmas Day bomb attempt thwarted not by the thousands of analysts employed to find lone terrorists but by an alert airline passenger who saw smoke coming from his seatmate.

They are also issues that greatly concern some of the people in charge of the nation's security.

"There has been so much growth since 9/11 that getting your arms around that - not just for the CIA, for the secretary of defense - is a challenge," Defense Secretary Robert M. Gates said in an interview with The Post last week.

In the Department of Defense, where more than two-thirds of the intelligence programs reside, only a handful of senior officials - called Super Users - have the ability to even know about all the department's activities. But as two of the Super Users indicated in interviews, there is simply no way they can keep up with the nation's most sensitive work.

"I'm not going to live long enough to be briefed on everything" was how one Super User put it. The other recounted that for his initial briefing, he was escorted into a tiny, dark room, seated at a small table and told he couldn't take notes. Program after program began flashing on a screen, he said, until he yelled ''Stop!" in frustration.

"I wasn't remembering any of it," he said.

Underscoring the seriousness of these issues are the conclusions of retired Army Lt. Gen. John R. Vines, who was asked last year to review the method for tracking the Defense Department's most sensitive programs. Vines, who once commanded 145,000 troops in Iraq and is familiar with complex problems, was stunned by what he discovered.

"I'm not aware of any agency with the authority, responsibility or a process in place to coordinate all these interagency and commercial activities," he said in an interview. "The complexity of this system defies description."

The result, he added, is that it's impossible to tell whether the country is safer because of all this spending and all these activities. "Because it lacks a synchronizing process, it inevitably results in message dissonance, reduced effectiveness and waste," Vines said. "We consequently can't effectively assess whether it is making us more safe."

The Post's investigation is based on government documents and contracts, job descriptions, property records, corporate and social networking Web sites, additional records, and hundreds of interviews with intelligence, military and corporate officials and former officials. Most requested anonymity either because they are prohibited from speaking publicly or because, they said, they feared retaliation at work for describing their concerns.

The Post's online database of government organizations and private companies was built entirely on public records. The investigation focused on top-secret work because the amount classified at the secret level is too large to accurately track.

Today's article describes the government's role in this expanding enterprise. Tuesday's article describes the government's dependence on private contractors. Wednesday's is a portrait of one Top Secret America community. On the Web, an extensive, searchable database built by The Post about Top Secret America is available at washingtonpost.com/topsecretamerica.

Defense Secretary Gates, in his interview with The Post, said that he does not believe the system has become too big to manage but that getting precise data is sometimes difficult. Singling out the growth of intelligence units in the Defense Department, he said he intends to review those programs for waste. "Nine years after 9/11, it makes a lot of sense to sort of take a look at this and say, 'Okay, we've built tremendous capability, but do we have more than we need?' " he said.

CIA Director Leon Panetta, who was also interviewed by The Post last week, said he's begun mapping out a five-year plan for his agency because the levels of spending since 9/11 are not sustainable. "Particularly with these deficits, we're going to hit the wall. I want to be prepared for that," he said. "Frankly, I think everyone in intelligence ought to be doing that."

In an interview before he resigned as the director of national intelligence in May, retired Adm. Dennis C. Blair said he did not believe there was overlap and redundancy in the intelligence world. "Much of what appears to be redundancy is, in fact, providing tailored intelligence for many different customers," he said.

Blair also expressed confidence that subordinates told him what he needed to know. "I have visibility on all the important intelligence programs across the community, and there are processes in place to ensure the different intelligence capabilities are working together where they need to," he said.

Weeks later, as he sat in the corner of a ballroom at the Willard Hotel waiting to give a speech, he mused about The Post's findings. "After 9/11, when we decided to attack violent extremism, we did as we so often do in this country," he said. "The attitude was, if it's worth doing, it's probably worth overdoing."

----

Outside a gated subdivision of mansions in McLean, a line of cars idles every weekday morning as a new day in Top Secret America gets underway. The drivers wait patiently to turn left, then crawl up a hill and around a bend to a destination that is not on any public map and not announced by any street sign.

Liberty Crossing tries hard to hide from view. But in the winter, leafless trees can't conceal a mountain of cement and windows the size of five Wal-Mart stores stacked on top of one another rising behind a grassy berm. One step too close without the right badge, and men in black jump out of nowhere, guns at the ready.

Past the armed guards and the hydraulic steel barriers, at least 1,700 federal employees and 1,200 private contractors work at Liberty Crossing, the nickname for the two headquarters of the Office of the Director of National Intelligence and its National Counterterrorism Center. The two share a police force, a canine unit and thousands of parking spaces.

Liberty Crossing is at the center of the collection of U.S. government agencies and corporate contractors that mushroomed after the 2001 attacks. But it is not nearly the biggest, the most costly or even the most secretive part of the 9/11 enterprise.

In an Arlington County office building, the lobby directory doesn't include the Air Force's mysteriously named XOIWS unit, but there's a big "Welcome!" sign in the hallway greeting visitors who know to step off the elevator on the third floor. In Elkridge, Md., a clandestine program hides in a tall concrete structure fitted with false windows to look like a normal office building. In Arnold, Mo., the location is across the street from a Target and a Home Depot. In St. Petersburg, Fla., it's in a modest brick bungalow in a run-down business park.

Every day across the United States, 854,000 civil servants, military personnel and private contractors with top-secret security clearances are scanned into offices protected by electromagnetic locks, retinal cameras and fortified walls that eavesdropping equipment cannot penetrate.

This is not exactly President Dwight D. Eisenhower's "military-industrial complex," which emerged with the Cold War and centered on building nuclear weapons to deter the Soviet Union. This is a national security enterprise with a more amorphous mission: defeating transnational violent extremists.

Much of the information about this mission is classified. That is the reason it is so difficult to gauge the success and identify the problems of Top Secret America, including whether money is being spent wisely. The U.S. intelligence budget is vast, publicly announced last year as $75 billion, 21/2 times the size it was on Sept. 10, 2001. But the figure doesn't include many military activities or domestic counterterrorism programs.

At least 20 percent of the government organizations that exist to fend off terrorist threats were established or refashioned in the wake of 9/11. Many that existed before the attacks grew to historic proportions as the Bush administration and Congress gave agencies more money than they were capable of responsibly spending.

The Pentagon's Defense Intelligence Agency, for example, has gone from 7,500 employees in 2002 to 16,500 today. The budget of the National Security Agency, which conducts electronic eavesdropping, doubled. Thirty-five FBI Joint Terrorism Task Forces became 106. It was phenomenal growth that began almost as soon as the Sept. 11 attacks ended.

Nine days after the attacks, Congress committed $40 billion beyond what was in the federal budget to fortify domestic defenses and to launch a global offensive against al-Qaeda. It followed that up with an additional $36.5 billion in 2002 and $44 billion in 2003. That was only a beginning.

With the quick infusion of money, military and intelligence agencies multiplied. Twenty-four organizations were created by the end of 2001, including the Office of Homeland Security and the Foreign Terrorist Asset Tracking Task Force. In 2002, 37 more were created to track weapons of mass destruction, collect threat tips and coordinate the new focus on counterterrorism. That was followed the next year by 36 new organizations; and 26 after that; and 31 more; and 32 more; and 20 or more each in 2007, 2008 and 2009.

In all, at least 263 organizations have been created or reorganized as a response to 9/11. Each has required more people, and those people have required more administrative and logistic support: phone operators, secretaries, librarians, architects, carpenters, construction workers, air-conditioning mechanics and, because of where they work, even janitors with top-secret clearances.

With so many more employees, units and organizations, the lines of responsibility began to blur. To remedy this, at the recommendation of the bipartisan 9/11 Commission, the George W. Bush administration and Congress decided to create an agency in 2004 with overarching responsibilities called the Office of the Director of National Intelligence (ODNI) to bring the colossal effort under control.

----

While that was the idea, Washington has its own ways.

The first problem was that the law passed by Congress did not give the director clear legal or budgetary authority over intelligence matters, which meant he wouldn't have power over the individual agencies he was supposed to control.

The second problem: Even before the first director, Ambassador John D. Negroponte, was on the job, the turf battles began. The Defense Department shifted billions of dollars out of one budget and into another so that the ODNI could not touch it, according to two senior officials who watched the process. The CIA reclassified some of its most sensitive information at a higher level so the National Counterterrorism Center staff, part of the ODNI, would not be allowed to see it, said former intelligence officers involved.

And then came a problem that continues to this day, which has to do with the ODNI's rapid expansion.

When it opened in the spring of 2005, Negroponte's office was all of 11 people stuffed into a secure vault with closet-size rooms a block from the White House. A year later, the budding agency moved to two floors of another building. In April 2008, it moved into its huge permanent home, Liberty Crossing.

Today, many officials who work in the intelligence agencies say they remain unclear about what the ODNI is in charge of. To be sure, the ODNI has made some progress, especially in intelligence-sharing, information technology and budget reform. The DNI and his managers hold interagency meetings every day to promote collaboration. The last director, Blair, doggedly pursued such nitty-gritty issues as procurement reform, compatible computer networks, tradecraft standards and collegiality.

But improvements have been overtaken by volume at the ODNI, as the increased flow of intelligence data overwhelms the system's ability to analyze and use it. Every day, collection systems at the National Security Agency intercept and store 1.7 billion e-mails, phone calls and other types of communications. The NSA sorts a fraction of those into 70 separate databases. The same problem bedevils every other intelligence agency, none of which have enough analysts and translators for all this work.

The practical effect of this unwieldiness is visible, on a much smaller scale, in the office of Michael Leiter, the director of the National Counterterrorism Center. Leiter spends much of his day flipping among four computer monitors lined up on his desk. Six hard drives sit at his feet. The data flow is enormous, with dozens of databases feeding separate computer networks that cannot interact with one another.

There is a long explanation for why these databases are still not connected, and it amounts to this: It's too hard, and some agency heads don't really want to give up the systems they have. But there's some progress: "All my e-mail on one computer now," Leiter says. "That's a big deal."

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To get another view of how sprawling Top Secret America has become, just head west on the toll road toward Dulles International Airport.

As a Michaels craft store and a Books-A-Million give way to the military intelligence giants Northrop Grumman and Lockheed Martin, find the off-ramp and turn left. Those two shimmering-blue five-story ice cubes belong to the National Geospatial-Intelligence Agency, which analyzes images and mapping data of the Earth's geography. A small sign obscured by a boxwood hedge says so.

Across the street, in the chocolate-brown blocks, is Carahsoft, an intelligence agency contractor specializing in mapping, speech analysis and data harvesting. Nearby is the government's Underground Facility Analysis Center. It identifies overseas underground command centers associated with weapons of mass destruction and terrorist groups, and advises the military on how to destroy them.

Clusters of top-secret work exist throughout the country, but the Washington region is the capital of Top Secret America.

About half of the post-9/11 enterprise is anchored in an arc stretching from Leesburg south to Quantico, back north through Washington and curving northeast to Linthicum, just north of the Baltimore-Washington International Marshall Airport. Many buildings sit within off-limits government compounds or military bases.

Others occupy business parks or are intermingled with neighborhoods, schools and shopping centers and go unnoticed by most people who live or play nearby.

Many of the newest buildings are not just utilitarian offices but also edifices "on the order of the pyramids," in the words of one senior military intelligence officer.

Not far from the Dulles Toll Road, the CIA has expanded into two buildings that will increase the agency's office space by one-third. To the south, Springfield is becoming home to the new $1.8 billion National Geospatial-Intelligence Agency headquarters, which will be the fourth-largest federal building in the area and home to 8,500 employees. Economic stimulus money is paying hundreds of millions of dollars for this kind of federal construction across the region.

It's not only the number of buildings that suggests the size and cost of this expansion, it's also what is inside: banks of television monitors. "Escort-required" badges. X-ray machines and lockers to store cellphones and pagers. Keypad door locks that open special rooms encased in metal or permanent dry wall, impenetrable to eavesdropping tools and protected by alarms and a security force capable of responding within 15 minutes. Every one of these buildings has at least one of these rooms, known as a SCIF, for sensitive compartmented information facility. Some are as small as a closet; others are four times the size of a football field.

SCIF size has become a measure of status in Top Secret America, or at least in the Washington region of it. "In D.C., everyone talks SCIF, SCIF, SCIF," said Bruce Paquin, who moved to Florida from the Washington region several years ago to start a SCIF construction business. "They've got the penis envy thing going. You can't be a big boy unless you're a three-letter agency and you have a big SCIF."

SCIFs are not the only must-have items people pay attention to. Command centers, internal television networks, video walls, armored SUVs and personal security guards have also become the bling of national security.

"You can't find a four-star general without a security detail," said one three-star general now posted in Washington after years abroad. "Fear has caused everyone to have stuff. Then comes, 'If he has one, then I have to have one.' It's become a status symbol."

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Among the most important people inside the SCIFs are the low-paid employees carrying their lunches to work to save money. They are the analysts, the 20- and 30-year-olds making $41,000 to $65,000 a year, whose job is at the core of everything Top Secret America tries to do.

At its best, analysis melds cultural understanding with snippets of conversations, coded dialogue, anonymous tips, even scraps of trash, turning them into clues that lead to individuals and groups trying to harm the United States.

Their work is greatly enhanced by computers that sort through and categorize data. But in the end, analysis requires human judgment, and half the analysts are relatively inexperienced, having been hired in the past several years, said a senior ODNI official. Contract analysts are often straight out of college and trained at corporate headquarters.

When hired, a typical analyst knows very little about the priority countries - Iraq, Iran, Afghanistan and Pakistan - and is not fluent in their languages. Still, the number of intelligence reports they produce on these key countries is overwhelming, say current and former intelligence officials who try to cull them every day. The ODNI doesn't know exactly how many reports are issued each year, but in the process of trying to find out, the chief of analysis discovered 60 classified analytic Web sites still in operation that were supposed to have been closed down for lack of usefulness. "Like a zombie, it keeps on living" is how one official describes the sites.

The problem with many intelligence reports, say officers who read them, is that they simply re-slice the same facts already in circulation. "It's the soccer ball syndrome. Something happens, and they want to rush to cover it," said Richard H. Immerman, who was the ODNI's assistant deputy director of national intelligence for analytic integrity and standards until early 2009. "I saw tremendous overlap."

Even the analysts at the National Counterterrorism Center (NCTC), which is supposed to be where the most sensitive, most difficult-to-obtain nuggets of information are fused together, get low marks from intelligence officials for not producing reports that are original, or at least better than the reports already written by the CIA, FBI, National Security Agency or Defense Intelligence Agency.

When Maj. Gen. John M. Custer was the director of intelligence at U.S. Central Command, he grew angry at how little helpful information came out of the NCTC. In 2007, he visited its director at the time, retired Vice Adm. John Scott Redd, to tell him so. "I told him that after 41/2 years, this organization had never produced one shred of information that helped me prosecute three wars!" he said loudly, leaning over the table during an interview.

Two years later, Custer, now head of the Army's intelligence school at Fort Huachuca, Ariz., still gets red-faced recalling that day, which reminds him of his frustration with Washington's bureaucracy. "Who has the mission of reducing redundancy and ensuring everybody doesn't gravitate to the lowest-hanging fruit?" he said. "Who orchestrates what is produced so that everybody doesn't produce the same thing?"

He's hardly the only one irritated. In a secure office in Washington, a senior intelligence officer was dealing with his own frustration. Seated at his computer, he began scrolling through some of the classified information he is expected to read every day: CIA World Intelligence Review, WIRe-CIA, Spot Intelligence Report, Daily Intelligence Summary, Weekly Intelligence Forecast, Weekly Warning Forecast, IC Terrorist Threat Assessments, NCTC Terrorism Dispatch, NCTC Spotlight . . .

It's too much, he complained. The inbox on his desk was full, too. He threw up his arms, picked up a thick, glossy intelligence report and waved it around, yelling.

"Jesus! Why does it take so long to produce?"

"Why does it have to be so bulky?"

"Why isn't it online?"

The overload of hourly, daily, weekly, monthly and annual reports is actually counterproductive, say people who receive them. Some policymakers and senior officials don't dare delve into the backup clogging their computers. They rely instead on personal briefers, and those briefers usually rely on their own agency's analysis, re-creating the very problem identified as a main cause of the failure to thwart the attacks: a lack of information-sharing.

The ODNI's analysis office knows this is a problem. Yet its solution was another publication, this one a daily online newspaper, Intelligence Today. Every day, a staff of 22 culls more than two dozen agencies' reports and 63 Web sites, selects the best information and packages it by originality, topic and region.

Analysis is not the only area where serious overlap appears to be gumming up the national security machinery and blurring the lines of responsibility.

Within the Defense Department alone, 18 commands and agencies conduct information operations, which aspire to manage foreign audiences’ perceptions of U.S. policy and military activities overseas.

And all the major intelligence agencies and at least two major military commands claim a major role in cyber-warfare, the newest and least-defined frontier.

"Frankly, it hasn't been brought together in a unified approach," CIA Director Panetta said of the many agencies now involved in cyber-warfare.

"Cyber is tremendously difficult" to coordinate, said Benjamin A. Powell, who served as general counsel for three directors of national intelligence until he left the government last year. "Sometimes there was an unfortunate attitude of bring your knives, your guns, your fists and be fully prepared to defend your turf." Why? "Because it's funded, it's hot and it's sexy."

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Last fall, U.S. Army Maj. Nidal Malik Hasan allegedly opened fire at Fort Hood, Tex., killing 13 people and wounding 30. In the days after the shootings, information emerged about Hasan's increasingly strange behavior at Walter Reed Army Medical Center, where he had trained as a psychiatrist and warned commanders that they should allow Muslims to leave the Army or risk "adverse events." He had also exchanged e-mails with a well-known radical cleric in Yemen being monitored by U.S. intelligence.

But none of this reached the one organization charged with handling counterintelligence investigations within the Army. Just 25 miles up the road from Walter Reed, the Army's 902nd Military Intelligence Group had been doing little to search the ranks for potential threats. Instead, the 902's commander had decided to turn the unit's attention to assessing general terrorist affiliations in the United States, even though the Department of Homeland Security and the FBI's 106 Joint Terrorism Task Forces were already doing this work in great depth.

The 902nd, working on a program the commander named RITA, for Radical Islamic Threat to the Army, had quietly been gathering information on Hezbollah, Iranian Republican Guard and al-Qaeda student organizations in the United States. The assessment "didn't tell us anything we didn't know already," said the Army's senior counterintelligence officer at the Pentagon.

Secrecy and lack of coordination have allowed organizations, such as the 902nd in this case, to work on issues others were already tackling rather than take on the much more challenging job of trying to identify potential jihadist sympathizers within the Army itself.

Beyond redundancy, secrecy within the intelligence world hampers effectiveness in other ways, say defense and intelligence officers. For the Defense Department, the root of this problem goes back to an ultra-secret group of programs for which access is extremely limited and monitored by specially trained security officers.

These are called Special Access Programs - or SAPs - and the Pentagon's list of code names for them runs 300 pages. The intelligence community has hundreds more of its own, and those hundreds have thousands of sub-programs with their own limits on the number of people authorized to know anything about them. All this means that very few people have a complete sense of what's going on.

"There's only one entity in the entire universe that has visibility on all SAPs - that's God," said James R. Clapper, undersecretary of defense for intelligence and the Obama administration's nominee to be the next director of national intelligence.

Such secrecy can undermine the normal chain of command when senior officials use it to cut out rivals or when subordinates are ordered to keep secrets from their commanders.

One military officer involved in one such program said he was ordered to sign a document prohibiting him from disclosing it to his four-star commander, with whom he worked closely every day, because the commander was not authorized to know about it. Another senior defense official recalls the day he tried to find out about a program in his budget, only to be rebuffed by a peer. "What do you mean you can't tell me? I pay for the program," he recalled saying in a heated exchange.

Another senior intelligence official with wide access to many programs said that secrecy is sometimes used to protect ineffective projects. "I think the secretary of defense ought to direct a look at every single thing to see if it still has value," he said. "The DNI ought to do something similar."

The ODNI hasn't done that yet. The best it can do at the moment is maintain a database of the names of the most sensitive programs in the intelligence community. But the database does not include many important and relevant Pentagon projects.

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Because so much is classified, illustrations of what goes on every day in Top Secret America can be hard to ferret out. But every so often, examples emerge. A recent one shows the post-9/11 system at its best and its worst.

Last fall, after eight years of growth and hirings, the enterprise was at full throttle when word emerged that something was seriously amiss inside Yemen. In response, President Obama signed an order sending dozens of secret commandos to that country to target and kill the leaders of an al-Qaeda affiliate.

In Yemen, the commandos set up a joint operations center packed with hard drives, forensic kits and communications gear. They exchanged thousands of intercepts, agent reports, photographic evidence and real-time video surveillance with dozens of top-secret organizations in the United States.

That was the system as it was intended. But when the information reached the National Counterterrorism Center in Washington for analysis, it arrived buried within the 5,000 pieces of general terrorist-related data that are reviewed each day. Analysts had to switch from database to database, from hard drive to hard drive, from screen to screen, just to locate what might be interesting to study further.

As military operations in Yemen intensified and the chatter about a possible terrorist strike increased, the intelligence agencies ramped up their effort. The flood of information into the NCTC became a torrent.

Somewhere in that deluge was even more vital data. Partial names of someone in Yemen. A reference to a Nigerian radical who had gone to Yemen. A report of a father in Nigeria worried about a son who had become interested in radical teachings and had disappeared inside Yemen.

These were all clues to what would happen when a Nigerian named Umar Farouk Abdulmutallab left Yemen and eventually boarded a plane in Amsterdam bound for Detroit. But nobody put them together because, as officials would testify later, the system had gotten so big that the lines of responsibility had become hopelessly blurred.

"There are so many people involved here," NCTC Director Leiter told Congress.

"Everyone had the dots to connect," DNI Blair explained to the lawmakers. "But I hadn't made it clear exactly who had primary responsibility."

And so Abdulmutallab was able to step aboard Northwest Airlines Flight 253. As it descended toward Detroit, he allegedly tried to ignite explosives hidden in his underwear. It wasn't the very expensive, very large 9/11 enterprise that prevented disaster. It was a passenger who saw what he was doing and tackled him. "We didn't follow up and prioritize the stream of intelligence," White House counterterrorism adviser John O. Brennan explained afterward. "Because no one intelligence entity, or team or task force was assigned responsibility for doing that follow-up investigation."

Blair acknowledged the problem. His solution: Create yet another team to run down every important lead. But he also told Congress he needed more money and more analysts to prevent another mistake.

More is often the solution proposed by the leaders of the 9/11 enterprise. After the Christmas Day bombing attempt, Leiter also pleaded for more - more analysts to join the 300 or so he already had.

The Department of Homeland Security asked for more air marshals, more body scanners and more analysts, too, even though it can't find nearly enough qualified people to fill its intelligence unit now. Obama has said he will not freeze spending on national security, making it likely that those requests will be funded.

More building, more expansion of offices continues across the country. A $1.7 billion NSA data-processing center will be under construction soon near Salt Lake City. In Tampa, the U.S. Central Command’s new 270,000-square-foot intelligence office will be matched next year by an equally large headquarters building, and then, the year after that, by a 51,000-square-foot office just for its special operations section.

Just north of Charlottesville, the new Joint-Use Intelligence Analysis Facility will consolidate 1,000 defense intelligence analysts on a secure campus.

Meanwhile, five miles southeast of the White House, the DHS has broken ground for its new headquarters, to be shared with the Coast Guard. DHS, in existence for only seven years, already has its own Special Access Programs, its own research arm, its own command center, its own fleet of armored cars and its own 230,000-person workforce, the third-largest after the departments of Defense and Veterans Affairs.

Soon, on the grounds of the former St. Elizabeths mental hospital in Anacostia, a $3.4 billion showcase of security will rise from the crumbling brick wards. The new headquarters will be the largest government complex built since the Pentagon, a major landmark in the alternative geography of Top Secret America and four times as big as Liberty Crossing.

National Security Inc.
Tuesday, July 20, 2010

In June, a stone carver from Manassas chiseled another perfect star into a marble wall at CIA headquarters, one of 22 for agency workers killed in the global war initiated by the 2001 terrorist attacks.

The intent of the memorial is to publicly honor the courage of those who died in the line of duty, but it also conceals a deeper story about government in the post-9/11 era: Eight of the 22 were not CIA officers at all. They were private contractors.

To ensure that the country's most sensitive duties are carried out only by people loyal above all to the nation's interest, federal rules say contractors may not perform what are called "inherently government functions." But they do, all the time and in every intelligence and counterterrorism agency, according to a two-year investigation by The Washington Post.

What started as a temporary fix in response to the terrorist attacks has turned into a dependency that calls into question whether the federal workforce includes too many people obligated to shareholders rather than the public interest -- and whether the government is still in control of its most sensitive activities. In interviews last week, both Defense Secretary Robert M. Gates and CIA Director Leon Panetta said they agreed with such concerns.

The Post investigation uncovered what amounts to an alternative geography of the United States, a Top Secret America created since 9/11 that is hidden from public view, lacking in thorough oversight and so unwieldy that its effectiveness is impossible to determine.

It is also a system in which contractors are playing an ever more important role. The Post estimates that out of 854,000 people with top-secret clearances, 265,000 are contractors. There is no better example of the government's dependency on them than at the CIA, the one place in government that exists to do things overseas that no other U.S. agency is allowed to do.

Private contractors working for the CIA have recruited spies in Iraq, paid bribes for information in Afghanistan and protected CIA directors visiting world capitals. Contractors have helped snatch a suspected extremist off the streets of Italy, interrogated detainees once held at secret prisons abroad and watched over defectors holed up in the Washington suburbs. At Langley headquarters, they analyze terrorist networks. At the agency's training facility in Virginia, they are helping mold a new generation of American spies.

Through the federal budget process, the George W. Bush administration and Congress made it much easier for the CIA and other agencies involved in counterterrorism to hire more contractors than civil servants. They did this to limit the size of the permanent workforce, to hire employees more quickly than the sluggish federal process allows and because they thought - wrongly, it turned out - that contractors would be less expensive.

Nine years later, well into the Obama administration, the idea that contractors cost less has been repudiated, and the administration has made some progress toward its goal of reducing the number of hired hands by 7 percent over two years. Still, close to 30 percent of the workforce in the intelligence agencies is contractors.

"For too long, we've depended on contractors to do the operational work that ought to be done" by CIA employees, Panetta said. But replacing them "doesn't happen overnight. When you've been dependent on contractors for so long, you have to build that expertise over time."

A second concern of Panetta's: contracting with corporations, whose responsibility "is to their shareholders, and that does present an inherent conflict."

Or as Gates, who has been in and out of government his entire life, puts it: "You want somebody who's really in it for a career because they're passionate about it and because they care about the country and not just because of the money."

Contractors can offer more money - often twice as much - to experienced federal employees than the government is allowed to pay them. And because competition among firms for people with security clearances is so great, corporations offer such perks as BMWs and $15,000 signing bonuses, as Raytheon did in June for software developers with top-level clearances.

The idea that the government would save money on a contract workforce "is a false economy," said Mark M. Lowenthal, a former senior CIA official and now president of his own intelligence training academy.

As companies raid federal agencies of talent, the government has been left with the youngest intelligence staffs ever while more experienced employees move into the private sector. This is true at the CIA, where employees from 114 firms account for roughly a third of the workforce, or about 10,000 positions. Many of them are temporary hires, often former military or intelligence agency employees who left government service to work less and earn more while drawing a federal pension.

Across the government, such workers are used in every conceivable way.

Contractors kill enemy fighters. They spy on foreign governments and eavesdrop on terrorist networks. They help craft war plans. They gather information on local factions in war zones. They are the historians, the architects, the recruiters in the nation's most secretive agencies. They staff watch centers across the Washington area. They are among the most trusted advisers to the four-star generals leading the nation's wars.

So great is the government's appetite for private contractors with top-secret clearances that there are now more than 300 companies, often nicknamed "body shops," that specialize in finding candidates, often for a fee that approaches $50,000 a person, according to those in the business.

Making it more difficult to replace contractors with federal employees: The government doesn't know how many are on the federal payroll. Gates said he wants to reduce the number of defense contractors by about 13 percent, to pre-9/11 levels, but he's having a hard time even getting a basic head count.

"This is a terrible confession," he said. "I can't get a number on how many contractors work for the Office of the Secretary of Defense," referring to the department's civilian leadership.

The Post's estimate of 265,000 contractors doing top-secret work was vetted by several high-ranking intelligence officials who approved of The Post's methodology. The newspaper's Top Secret America database includes 1,931 companies that perform work at the top-secret level. More than a quarter of them - 533 - came into being after 2001, and others that already existed have expanded greatly. Most are thriving even as the rest of the United States struggles with bankruptcies, unemployment and foreclosures.

The privatization of national security work has been made possible by a nine-year "gusher" of money, as Gates recently described national security spending since the 9/11 attacks.

With so much money to spend, managers do not always worry about whether they are spending it effectively.

"Someone says, 'Let's do another study,' and because no one shares information, everyone does their own study," said Elena Mastors, who headed a team studying the al-Qaeda leadership for the Defense Department. "It's about how many studies you can orchestrate, how many people you can fly all over the place. Everybody's just on a spending spree. We don't need all these people doing all this stuff."

Most of these contractors do work that is fundamental to an agency's core mission. As a result, the government has become dependent on them in a way few could have foreseen: wartime temps who have become a permanent cadre.

Just last week, typing "top secret" into the search engine of a major jobs Web site showed 1,951 unfilled positions in the Washington area, and 19,759 nationwide: "Target analyst," Reston. "Critical infrastructure specialist," Washington, D.C. "Joint expeditionary team member," Arlington.

"We could not perform our mission without them. They serve as our 'reserves,' providing flexibility and expertise we can't acquire," said Ronald Sanders, who was chief of human capital for the Office of the Director of National Intelligence before retiring in February. "Once they are on board, we treat them as if they're a part of the total force."

The Post's investigation is based on government documents and contracts, job descriptions, property records, corporate and social networking Web sites, additional records, and hundreds of interviews with intelligence, military and corporate officials and former officials. Most requested anonymity either because they are prohibited from speaking publicly or because, they said, they feared retaliation at work for describing their concerns.

The investigation focused on top-secret work because the amount classified at the secret level is too large to accurately track. A searchable database of government organizations and private companies was built entirely on public records. [For an explanation of the newspaper's decision making behind this project, please see the Editor's Note.]

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The national security industry sells the military and intelligence agencies more than just airplanes, ships and tanks. It sells contractors' brain power. They advise, brief and work everywhere, including 25 feet under the Pentagon in a bunker where they can be found alongside military personnel in battle fatigues monitoring potential crises worldwide.

Late at night, when the wide corridors of the Pentagon are all but empty, the National Military Command Center hums with purpose. There's real-time access to the location of U.S. forces anywhere in the world, to granular satellite images or to the White House Situation Room.

The purpose of all this is to be able to answer any question the chairman of the Joint Chiefs of Staff might have. To be ready 24 hours a day, every day, takes five brigadier generals, a staff of colonels and senior noncommissioned officers - and a man wearing a pink contractor badge and a bright purple shirt and tie.

Erik Saar's job title is "knowledge engineer." In one of the most sensitive places in America, he is the only person in the room who knows how to bring data from far afield, fast. Saar and four teammates from a private company, SRA International, teach these top-ranked staff officers to think in Web 2.0. They are trying to push a tradition-bound culture to act differently, digitally.

That sometimes means asking for help in a public online chat room or exchanging ideas on shared Web pages outside the military computer networks dubbed .mil - things much resisted within the Pentagon's self-sufficient culture. "Our job is to change the perception of leaders who might drive change," Saar said.

Since 9/11, contractors have made extraordinary contributions - and extraordinary blunders - that have changed history and clouded the public's view of the distinction between the actions of officers sworn on behalf of the United States and corporate employees with little more than a security badge and a gun.

Contractor misdeeds in Iraq and Afghanistan have hurt U.S. credibility in those countries as well as in the Middle East. Abuse of prisoners at Abu Ghraib, some of it done by contractors, helped ignite a call for vengeance against the United States that continues today. Security guards working for Blackwater added fuel to the five-year violent chaos in Iraq and became the symbol of an America run amok.

Contractors in war zones, especially those who can fire weapons, blur "the line between the legitimate and illegitimate use of force, which is just what our enemies want," Allison Stanger, a professor of international politics and economics at Middlebury College and the author of "One Nation Under Contract," told the independent Commission on Wartime Contracting at a hearing in June.

Misconduct happens, too. A defense contractor formerly called MZM paid bribes for CIA contracts, sending Randy "Duke" Cunningham, who was a California congressman on the intelligence committee, to prison. Guards employed in Afghanistan by ArmorGroup North America, a private security company, were caught on camera in a lewd-partying scandal.

But contractors have also advanced the way the military fights. During the bloodiest months in Iraq, the founder of Berico Technologies, a former Army officer named Guy Filippelli, working with the National Security Agency, invented a technology that made finding the makers of roadside bombs easier and helped stanch the number of casualties from improvised explosives, according to NSA officials.

Contractors have produced blueprints and equipment for the unmanned aerial war fought by drones, which have killed the largest number of senior al-Qaeda leaders and produced a flood of surveillance videos. A dozen firms created the transnational digital highway that carries the drones' real-time data on terrorist hide-outs from overseas to command posts throughout the United States.

Private firms have become so thoroughly entwined with the government's most sensitive activities that without them important military and intelligence missions would have to cease or would be jeopardized. Some examples:

*At the Department of Homeland Security (DHS), the number of contractors equals the number of federal employees. The department depends on 318 companies for essential services and personnel, including 19 staffing firms that help DHS find and hire even more contractors. At the office that handles intelligence, six out of 10 employees are from private industry.

*The National Security Agency, which conducts worldwide electronic surveillance, hires private firms to come up with most of its technological innovations. The NSA used to work with a small stable of firms; now it works with at least 484 and is actively recruiting more.

*The National Reconnaissance Office cannot produce, launch or maintain its large satellite surveillance systems, which photograph countries such as China, North Korea and Iran, without the four major contractors it works with.

*Every intelligence and military organization depends on contract linguists to communicate overseas, translate documents and make sense of electronic voice intercepts. The demand for native speakers is so great, and the amount of money the government is willing to pay for them is so huge, that 56 firms compete for this business.

*Each of the 16 intelligence agencies depends on corporations to set up its computer networks, communicate with other agencies' networks, and fuse and mine disparate bits of information that might indicate a terrorist plot. More than 400 companies work exclusively in this area, building classified hardware and software systems.

Hiring contractors was supposed to save the government money. But that has not turned out to be the case. A 2008 study published by the Office of the Director of National Intelligence found that contractors made up 29 percent of the workforce in the intelligence agencies but cost the equivalent of 49 percent of their personnel budgets. Gates said that federal workers cost the government 25 percent less than contractors.

The process of reducing the number of contractors has been slow, if the giant Office of Naval Intelligence in Suitland is any example. There, 2,770 people work on the round-the-clock maritime watch floor tracking commercial vessels, or in science and engineering laboratories, or in one of four separate intelligence centers. But it is the employees of 70 information technology companies who keep the place operating.

They store, process and analyze communications and intelligence transmitted to and from the entire U.S. naval fleet and commercial vessels worldwide. "Could we keep this building running without contractors?" said the captain in charge of information technology. "No, I don't think we could keep up with it."

Vice Adm. David J. "Jack" Dorsett, director of naval intelligence, said he could save millions each year by converting 20 percent of the contractor jobs at the Suitland complex to civil servant positions. He has gotten the go-ahead, but it's been a slow start. This year, his staff has converted one contractor job and eliminated another - out of 589. "It's costing me an arm and a leg," Dorsett said.

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Washington's corridors of power stretch in a nearly straight geographical line from the Supreme Court to the Capitol to the White House. Keep going west, across the Potomac River, and the unofficial seats of power - the private, corporate ones - become visible, especially at night. There in the Virginia suburbs are the brightly illuminated company logos of Top Secret America: Northrop Grumman, SAIC, General Dynamics.

Of the 1,931 companies identified by The Post that work on top-secret contracts, about 110 of them do roughly 90 percent of the work on the corporate side of the defense-intelligence-corporate world.

To understand how these firms have come to dominate the post-9/11 era, there's no better place to start than the Herndon office of General Dynamics. One recent afternoon there, Ken Pohill was watching a series of unclassified images, the first of which showed a white truck moving across his computer monitor.

The truck was in Afghanistan, and a video camera bolted to the belly of a U.S. surveillance plane was following it. Pohill could access a dozen images that might help an intelligence analyst figure out whether the truck driver was just a truck driver or part of a network making roadside bombs to kill American soldiers.

To do this, he clicked his computer mouse. Up popped a picture of the truck driver's house, with notes about visitors. Another click. Up popped infrared video of the vehicle. Click: Analysis of an object thrown from the driver's side. Click: U-2 imagery. Click: A history of the truck's movement. Click. A Google Earth map of friendly forces. Click: A chat box with everyone else following the truck, too.

Ten years ago, if Pohill had worked for General Dynamics, he probably would have had a job bending steel. Then, the company's center of gravity was the industrial port city of Groton, Conn., where men and women in wet galoshes churned out submarines, the thoroughbreds of naval warfare. Today, the firm's commercial core is made up of data tools such as the digital imagery library in Herndon and the secure BlackBerry-like device used by President Obama, both developed at a carpeted suburban office by employees in loafers and heels.

The evolution of General Dynamics was based on one simple strategy: Follow the money.

The company embraced the emerging intelligence-driven style of warfare. It developed small-target identification systems and equipment that could intercept an insurgent's cellphone and laptop communications. It found ways to sort the billions of data points collected by intelligence agencies into piles of information that a single person could analyze.

It also began gobbling up smaller companies that could help it dominate the new intelligence landscape, just as its competitors were doing. Between 2001 and 2010, the company acquired 11 firms specializing in satellites, signals and geospatial intelligence, surveillance, reconnaissance, technology integration and imagery.

On Sept. 11, 2001, General Dynamics was working with nine intelligence organizations. Now it has contracts with all 16. Its employees fill the halls of the NSA and DHS. The corporation was paid hundreds of millions of dollars to set up and manage DHS's new offices in 2003, including its National Operations Center, Office of Intelligence and Analysis and Office of Security. Its employees do everything from deciding which threats to investigate to answering phones.

General Dynamics' bottom line reflects its successful transformation. It also reflects how much the U.S. government - the firm's largest customer by far - has paid the company beyond what it costs to do the work, which is, after all, the goal of every profit-making corporation.

The company reported $31.9 billion in revenue in 2009, up from $10.4 billion in 2000. Its workforce has more than doubled in that time, from 43,300 to 91,700 employees, according to the company.

Revenue from General Dynamics' intelligence- and information-related divisions, where the majority of its top-secret work is done, climbed to $10 billion in the second quarter of 2009, up from $2.4 billion in 2000, accounting for 34 percent of its overall revenue last year.

The company's profitability is on display in its Falls Church headquarters. There's a soaring, art-filled lobby, bistro meals served on china enameled with the General Dynamics logo and an auditorium with seven rows of white leather-upholstered seats, each with its own microphone and laptop docking station.

General Dynamics now has operations in every corner of the intelligence world. It helps counterintelligence operators and trains new analysts. It has a $600 million Air Force contract to intercept communications. It makes $1 billion a year keeping hackers out of U.S. computer networks and encrypting military communications. It even conducts information operations, the murky military art of trying to persuade foreigners to align their views with U.S. interests.

"The American intelligence community is an important market for our company," said General Dynamics spokesman Kendell Pease. "Over time, we have tailored our organization to deliver affordable, best-of-breed products and services to meet those agencies' unique requirements."

In September 2009, General Dynamics won a $10 million contract from the U.S. Special Operations Command's psychological operations unit to create Web sites to influence foreigners' views of U.S. policy. To do that, the company hired writers, editors and designers to produce a set of daily news sites tailored to five regions of the world. They appear as regular news Web sites, with names such as "SETimes.com: The News and Views of Southeast Europe." The first indication that they are run on behalf of the military comes at the bottom of the home page with the word "Disclaimer." Only by clicking on that do you learn that "the Southeast European Times (SET) is a Web site sponsored by the United States European Command."

What all of these contracts add up to: This year, General Dynamics' overall revenue was $7.8 billion in the first quarter, Jay L. Johnson, the company's chief executive and president, said at an earnings conference call in April. "We've hit the deck running in the first quarter," he said, "and we're on our way to another successful year."

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In the shadow of giants such as General Dynamics are 1,814 small to midsize companies that do top-secret work. About a third of them were established after Sept. 11, 2001, to take advantage of the huge flow of taxpayer money into the private sector. Many are led by former intelligence agency officials who know exactly whom to approach for work.

Abraxas of Herndon, headed by a former CIA spy, quickly became a major CIA contractor after 9/11. Its staff even recruited midlevel managers during work hours from the CIA's cafeteria, former agency officers recall.

Other small and medium-size firms sell niche technical expertise such as engineering for low-orbit satellites or long-dwell sensors. But the vast majority have not invented anything at all. Instead, they replicate what the government's workforce already does.

A company called SGIS, founded soon after the 2001 attacks, was one of these.

In June 2002, from the spare bedroom of his San Diego home, 30-year-old Hany Girgis put together an information technology team that won its first Defense Department contract four months later. By the end of the year, SGIS had opened a Tampa office close to the U.S. Central Command and Special Operations Command, had turned a profit and had 30 employees.

SGIS sold the government the services of people with specialized skills; expanding the types of teams it could put together was one key to its growth. Eventually it offered engineers, analysts and cyber-security specialists for military, space and intelligence agencies. By 2003, the company's revenue was $3.7 million. By then, SGIS had become a subcontractor for General Dynamics, working at the secret level. Satisfied with the partnership, General Dynamics helped SGIS receive a top-secret facility clearance, which opened the doors to more work.

By 2006, its revenue had multiplied tenfold, to $30.6 million, and the company had hired employees who specialized in government contracting just to help it win more contracts.

"We knew that's where we wanted to play," Girgis said in a phone interview. "There's always going to be a need to protect the homeland."

Eight years after it began, SGIS was up to revenue of $101 million, 14 offices and 675 employees. Those with top-secret clearances worked for 11 government agencies, according to The Post's database.

The company's marketing efforts had grown, too, both in size and sophistication. Its Web site, for example, showed an image of Navy sailors lined up on a battleship over the words "Proud to serve" and another image of a Navy helicopter flying near the Statue of Liberty over the words "Preserving freedom." And if it seemed hard to distinguish SGIS's work from the government's, it's because they were doing so many of the same things. SGIS employees replaced military personnel at the Pentagon's 24/7 telecommunications center. SGIS employees conducted terrorist threat analysis. SGIS employees provided help-desk support for federal computer systems.

Still, as alike as they seemed, there were crucial differences.

For one, unlike in government, if an SGIS employee did a good job, he might walk into the parking lot one day and be surprised by co-workers clapping at his latest bonus: a leased, dark-blue Mercedes convertible. And he might say, as a video camera recorded him sliding into the soft leather driver's seat, "Ahhhh . . . this is spectacular."

And then there was what happened to SGIS last month, when it did the one thing the federal government can never do.

It sold itself.

The new owner is a Fairfax-based company called Salient Federal Solutions, created just last year. It is a management company and a private-equity firm with lots of Washington connections that, with the purchase of SGIS, it intends to parlay into contracts.

"We have an objective," says chief executive and President Brad Antle, "to make $500 million in five years."

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Of all the different companies in Top Secret America, the most numerous by far are the information technology, or IT, firms. About 800 firms do nothing but IT.

Some IT companies integrate the mishmash of computer systems within one agency; others build digital links between agencies; still others have created software and hardware that can mine and analyze vast quantities of data.

The government is nearly totally dependent on these firms. Their close relationship was on display recently at the Defense Intelligence Agency's annual information technology conference in Phoenix. The agency expected the same IT firms angling for its business to pay for the entire five-day get-together, a DIA spokesman confirmed.

And they did.

General Dynamics spent $30,000 on the event. On a perfect spring night, it hosted a party at Chase Field, a 48,569-seat baseball stadium, reserved exclusively for the conference attendees. Government buyers and corporate sellers drank beer and ate hot dogs while the DIA director's morning keynote speech replayed on the gigantic scoreboard, digital baseballs bouncing along the bottom of the screen.

Carahsoft Technology, a DIA contractor, invited guests to a casino night where intelligence officials and vendors ate, drank and bet phony money at craps tables run by professional dealers.

The McAfee network security company, a Defense Department contractor, welcomed guests to a Margaritaville-themed social on the garden terrace of the hotel across the street from the convention site, where 250 firms paid thousands of dollars each to advertise their services and make their pitches to intelligence officials walking the exhibition hall.

Government officials and company executives say these networking events are critical to building a strong relationship between the public and private sectors.

"If I make one contact each day, it's worth it," said Tom Conway, director of federal business development for McAfee.

As for what a government agency gets out of it: "Our goal is to be open and learn stuff," said Grant M. Schneider, the DIA's chief information officer and one of the conference's main draws. By going outside Washington, where many of the firms are headquartered, "we get more synergy. . . . It's an interchange with industry."

These types of gatherings happen every week. Many of them are closed to anyone without a top-secret clearance.

At a U.S. Special Operations Command conference in Fayetteville, N.C., in April, vendors paid for access to some of the people who decide what services and gadgets to buy for troops. In mid-May, the national security industry held a black-tie evening funded by the same corporations seeking business from the defense, intelligence and congressional leaders seated at their tables.

Such coziness worries other officials who believe the post-9/11 defense-intelligence-corporate relationship has become, as one senior military intelligence officer described it, a "self-licking ice cream cone."

Another official, a longtime conservative staffer on the Senate Armed Services Committee, described it as "a living, breathing organism" impossible to control or curtail. "How much money has been involved is just mind-boggling," he said. "We've built such a vast instrument. What are you going to do with this thing? . . . It's turned into a jobs program."

Even some of those gathered in Phoenix criticized the size and disjointedness of the intelligence community and its contracting base. "Redundancy is the unacceptable norm," Lt. Gen. Richard P. Zahner, Army deputy chief of staff for intelligence, told the 2,000 attendees. "Are we spending our resources effectively? . . . If we have not gotten our houses in order, someone will do it for us."

On a day that also featured free back rubs, shoeshines, ice cream and fruit smoothies, another speaker, Kevin P. Meiners, a deputy undersecretary for intelligence, gave the audience what he called "the secret sauce," the key to thriving even when the Defense Department budget eventually stabilizes and stops rising so rapidly.

"Overhead," Meiners told them - that's what's going to get cut first. Overhead used to mean paper clips and toner. Now it's information technology, IT, the very products and services sold by the businesspeople in the audience.

"You should describe what you do as a weapons system, not overhead," Meiners instructed. "Overhead to them - I'm giving you the secret sauce here - is IT and people. . . . You have to foot-stomp hard that this is a war-fighting system that's helping save people's lives every day."

After he finished, many of the government officials listening headed to the exhibit hall, where company salespeople waited in display booths. Peter Coddington, chief executive of InTTENSITY, a small firm whose software teaches computers to "read" documents, was ready for them.

"You have to differentiate yourself," he said as they fanned out into the aisles. Coddington had glass beer mugs and pens twirling atop paperweight pyramids to help persuade officials of the nation's largest military intelligence agency that he had something they needed.

But first he needed them to stop walking so fast, to slow down long enough for him to start his pitch. His twirling pens seemed to do the job. "It's like moths to fire," Coddington whispered.

A DIA official with a tote bag approached. She spotted the pens, and her pace slowed. "Want a pen?" Coddington called.

She hesitated. "Ah . . . I have three children," she said.

"Want three pens?"

She stopped. In Top Secret America, every moment is an opportunity.

"We're a text extraction company. . . ," Coddington began, handing her the pens.


The secrets next door
Wednesday, July 21, 2010

In suburbs across the nation, the intelligence community goes about its anonymous business. Its work isn’t seen, but its impact is surely felt.

The brick warehouse is not just a warehouse. Drive through the gate and around back, and there, hidden away, is someone's personal security detail: a fleet of black SUVs that have been armored up to withstand explosions and gunfire.

Along the main street, the signs in the median aren't advertising homes for sale; they're inviting employees with top-secret security clearances to a job fair at Cafe Joe, which is anything but a typical lunch spot.

The new gunmetal-colored office building is really a kind of hotel where businesses can rent eavesdrop-proof rooms.

Even the manhole cover between two low-slung buildings is not just a manhole cover. Surrounded by concrete cylinders, it is an access point to a government cable. "TS/SCI," whispers an official, the abbreviations for "top secret" and "sensitive compartmented information" - and that means few people are allowed to know what information the cable transmits.

All of these places exist just outside Washington in what amounts to the capital of an alternative geography of the United States, one defined by the concentration of top-secret government organizations and the companies that do work for them. This Fort Meade cluster is the largest of a dozen such clusters across the United States that are the nerve centers of Top Secret America and its 854,000 workers.

Other locations include Dulles-Chantilly, Denver-Aurora and Tampa. All of them are under-the-radar versions of traditional military towns: economically dependent on the federal budget and culturally defined by their unique work.

The difference, of course, is that the military is not a secret culture. In the clusters of Top Secret America, a company lanyard attached to a digital smart card is often the only clue to a job location. Work is not discussed. Neither are deployments. Debate about the role of intelligence in protecting the country occurs only when something goes wrong and the government investigates, or when an unauthorized disclosure of classified information turns into news.

The existence of these clusters is so little known that most people don't realize when they're nearing the epicenter of Fort Meade's, even when the GPS on their car dashboard suddenly begins giving incorrect directions, trapping the driver in a series of U-turns, because the government is jamming all nearby signals.

Once this happens, it means that ground zero - the National Security Agency - is close by. But it's not easy to tell where. Trees, walls and a sloping landscape obscure the NSA's presence from most vantage points, and concrete barriers, fortified guard posts and warning signs stop those without authorization from entering the grounds of the largest intelligence agency in the United States.

Beyond all those obstacles loom huge buildings with row after row of opaque, blast-resistant windows, and behind those are an estimated 30,000 people, many of them reading, listening to and analyzing an endless flood of intercepted conversations 24 hours a day, seven days a week.

From the road, it's impossible to tell how large the NSA has become, even though its buildings occupy 6.3 million square feet - about the size of the Pentagon - and are surrounded by 112 acres of parking spaces. As massive as that might seem, documents indicate that the NSA is only going to get bigger: 10,000 more workers over the next 15 years; $2 billion to pay for just the first phase of expansion; an overall increase in size that will bring its building space throughout the Fort Meade cluster to nearly 14 million square feet.

The NSA headquarters sits on the Fort Meade Army base, which hosts 80 government tenants in all, including several large intelligence organizations.

Together, they inject $10 billion from paychecks and contracts into the region's economy every year - a figure that helps explain the rest of the Fort Meade cluster, which fans out about 10 miles in every direction.

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Just beyond the NSA perimeter, the companies that thrive off the agency and other nearby intelligence organizations begin. In some parts of the cluster, they occupy entire neighborhoods. In others, they make up mile-long business parks connected to the NSA campus by a private roadway guarded by forbidding yellow "Warning" signs.

The largest of these is the National Business Park - 285 tucked-away acres of wide, angular glass towers that go on for blocks. The occupants of these buildings are contractors, and in their more publicly known locations, they purposely understate their presence. But in the National Business Park, a place where only other contractors would have reason to go, their office signs are huge, glowing at night in bright red, yellow and blue: Booz Allen Hamilton, L-3 Communications, CSC, Northrop Grumman, General Dynamics, SAIC.

More than 250 companies - 13 percent of all the firms in Top Secret America - have a presence in the Fort Meade cluster. Some have multiple offices, such as Northrop Grumman, which has 19, and SAIC, which has 11. In all, there are 681 locations in the Fort Meade cluster where businesses conduct top-secret work.

Inside the locations are employees who must submit to strict, intrusive rules. They take lie-detector tests routinely, sign nondisclosure forms and file lengthy reports whenever they travel overseas. They are coached on how to deal with nosy neighbors and curious friends. Some are trained to assume false identities.

If they drink too much, borrow too much money or socialize with citizens from certain countries, they can lose their security clearances, and a clearance is the passport to a job for life at the NSA and its sister intelligence organizations.

Chances are they excel at math: To do what it does, the NSA relies on the largest number of mathematicians in the world. It needs linguists and technology experts, as well as cryptologists, known as "crippies." Many know themselves as ISTJ, which stands for "Introverted with Sensing, Thinking and Judging," a basket of personality traits identified on the Myers-Briggs personality test and prevalent in the Fort Meade cluster.

The old joke: "How can you tell the extrovert at NSA? He's the one looking at someone else's shoes."

"These are some of the most brilliant people in the world," said Ken Ulman, executive of Howard County, one of six counties in NSA's geographic sphere of influence. "They demand good schools and a high quality of life."

The schools, indeed, are among the best, and some are adopting a curriculum this fall that will teach students as young as 10 what kind of lifestyle it takes to get a security clearance and what kind of behavior would disqualify them.

Outside one school is the jarring sight of yellow school buses lined up across from a building where personnel from the "Five Eye" allies - the United States, Britain, Canada, Australia and New Zealand - share top-secret information about the entire world.

The buses deliver children to neighborhoods that are among the wealthiest in the country; affluence is another attribute of Top Secret America. Six of the 10 richest counties in the United States, according to Census Bureau data, are in these clusters.

Loudoun County, ranked as the wealthiest county in the country, helps supply the workforce of the nearby National Reconnaissance Office headquarters, which manages spy satellites. Fairfax County, the second-wealthiest, is home to the NRO, the CIA and the Office of the Director of National Intelligence. Arlington County, ranked ninth, hosts the Pentagon and major intelligence agencies. Montgomery County, ranked 10th, is home to the National Geospatial-Intelligence Agency. And Howard County, ranked third, is home to 8,000 NSA employees.

"If this were a Chrysler plant, we'd be talking Chrysler in the bowling alley, Chrysler in the council meetings, Chrysler, Chrysler, Chrysler," said Kent Menser, a Defense Department employee helping Howard County adjust to the growth of nearby Fort Meade. "People who are not in the workforce of NSA don't fully appreciate the impact of it on their lives."

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The impact of the NSA and other secretive organizations in this cluster is not just monetary. It shades even the flow of traffic one particular day as a white van pulls out of a parking lot and into midday traffic.

That white van is followed by five others just like it.

Inside each one, two government agents in training at the secretive Joint Counterintelligence Training Academy are trying not to get lost as they careen around local roads practicing "discreet surveillance" - in this case, following a teacher in the role of a spy. The real job of these agents from the Army, U.S. Customs and other government agencies is to identify foreign spies and terrorists targeting their organizations, to locate the spies within and to gather evidence to take action against them.

But on this day, they are trainees connected to one another by radios and specially labeled street maps. Some 4,000 federal and military agents attend counterintelligence classes in the Fort Meade cluster every year, moving, as these agents are, past unsuspecting residents going about their business.

The agent riding shotgun in one white van holds the maps on her lap as she frantically moves yellow stickies around, trying to keep tabs on the other vans and the suspect, or "rabbit," as he is called.

Other agents gun their engines and race 60 mph, trying to keep up with the rabbit while alerting one another to the presence of local police, who don't know that the vans weaving in and out of traffic are driven by federal agents.

Suddenly, the rabbit moves a full block ahead of the closest van, passes through a yellow light, then drives out of sight as the agents get stuck at a red light.

Green light.

"Go!" an agent yells in vain through the windshield as the light changes and the car in front of her pokes along. "Move! Move! Move!"

"We lost him," her partner groans as they do their best to catch up.

Finally, the agents end their surveillance on foot at a Borders bookstore in Columbia where the rabbit has reappeared. Six men in polo shirts and various shades of khaki pants scan the magazine racks and slowly walk the aisles.

Their instructor cringes. "The hardest part is the demeanor," he confides, watching as the agents follow the rabbit in the store, filled with women in shifts and children in flip-flops. "Some of them just can't relax enough to get the demeanor right. . . . They should be acting like they're browsing, but they are looking over the top of a book and never move."

Throughout the cluster are examples of how the hidden world and the public one intersect. A Quiznos sandwich shop in the cluster has the familiarity of any other restaurant in the national chain, except for the line that begins forming at 11 a.m. Those waiting wear the Oakley sunglasses favored by people who have worked in Afghanistan or Iraq. Their shoes are boots, the color of desert sand. Forty percent of the NSA's workforce is active-duty military, and this Quiznos is not far away from one of their work sites.

In another part of the cluster, Jerome Jones, one of its residents, is talking about the building that has sprung up just beyond his back yard. "It used to be all farmland, then they just started digging one day," he says. "I don't know what they do up there, but it doesn't bother me. I don't worry about it."

The building, sealed off behind fencing and Jersey barriers, is larger than a football field. It has no identifying sign. It does have an address, but Google Maps doesn't recognize it. Type it in, and another address is displayed, every time. "6700," it says.

No street name.

Just 6700.
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Inside such a building might be Justin Walsh, who spends hours each day on a ladder, peering into the false ceilings of the largest companies in Top Secret America. Walsh is a Defense Department industrial security specialist, and every cluster has a version of him, whether it's Fort Meade; or the underground maze of buildings at Crystal City in Arlington, near the Pentagon; or the high-tech business parks around the National Aerospace Intelligence Center in Dayton, Ohio.

When he's not on his ladder, Walsh is tinkering with a copy machine to make sure it cannot reproduce the secrets stored in its memory. He's testing the degausser, a giant magnet that erases data from classified hard drives. He's dissecting the alarm system, its fiber-optic cable and the encryption it uses to send signals to the control room.

The government regulates everything in Top Secret America: the gauge of steel in a fence, the grade of paper bag to haul away classified documents, the thickness of walls and the height of raised soundproof floors.

In the Washington area, there are 4,000 corporate offices that handle classified information, 25 percent more than last year, according to Walsh's supervisor, and on any given day Walsh's team has 220 buildings in its inspection pipeline. All existing buildings have things that need to be checked, and the new buildings have to be gone over from top to bottom before the NSA will allow their occupants to even connect to the agency via telephone.

Soon, there will be one more in the Fort Meade cluster: a new, four-story building, going up near a quiet gated community of upscale townhouses, that its builder boasts can withstand a car bomb. Dennis Lane says his engineers have drilled more bolts into each steel beam than is the norm to make the structure less likely to buckle were the unthinkable to happen.

Lane, senior vice president of Ryan Commercial real estate, has become something of a snoop himself when it comes to the NSA. At 55, he has lived and worked in its shadow all his life and has schooled himself on its growing presence in his community. He collects business intelligence using his own network of informants, executives like himself hoping to making a killing off an organization many of his neighbors don't know a thing about.

He notices when the NSA or a different secretive government organization leases another building, hires more contractors and expands its outreach to the local business community. He's been following construction projects, job migrations, corporate moves. He knows that local planners are estimating that 10,000 more jobs will come with an expanded NSA and an additional 52,000 from other intelligence units moving to the Fort Meade post.

Lane was up on all the gossip months before it was announced that the next giant military command, U.S. Cyber Command, would be run by the same four-star general who heads the NSA. "This whole cyber thing is going to be big," he says. "A cyber command could eat up all the building inventory out there."

Lane knows this because he has witnessed the post-9/11 growth of the NSA, which now ingests 1.7 billion pieces of intercepted communications every 24 hours: e-mails, bulletin board postings, instant messages, IP addresses, phone numbers, telephone calls and cellphone conversations.

In her own way, Jeani Burns has witnessed this, too.

Burns, a businesswoman in the Fort Meade cluster, is having a drink one night after work and gesturing toward some men standing in another part of the bar.

"I can spot them," she says. The suit. The haircut. The demeanor. "They have a haunted look, like they're afraid someone is going to ask them something about themselves."

Undercover agents come in here, too, she whispers, to watch the same people, "to make sure no one is saying too much."

Burns would know - she's been living with one of those secretive men for 20 years. He used to work at the NSA. Now he's one of its contractors. He's been to war. She doesn't know where. He does something important. She doesn't know what.

She says she fell for him two decades ago and has had a life of adjustments ever since. When they go out with other people, she says, she calls ahead with cautions: "Don't ask him stuff." Sometimes people get it, but when they don't, "it's a pain. We just didn't go out with them again."

She describes him as "an observer. I'm the interloper," she says. "It bothers me he never takes me traveling, never thinks of anything exciting to do. . . . I feel cheated."

But she also says: "I really respect him for what's he's done. He's spent his whole life so we can keep our way of living, and he doesn't get any public recognition."

Outside the bar, meanwhile, the cluster hums along. At night, in the confines of the National Business Park, office lights remain on here and there. The 140-room Marriott Courtyard is sold out, as usual, with guests such as the man checking in who says only that he's "with the military."

And inside the NSA, the mathematicians, the linguists, the techies and the crippies are flowing in and out. The ones leaving descend in elevators to the first floor. Each is carrying a plastic bar-coded box. Inside is a door key that rattles as they walk. To those who work here, it's the sound of a shift change.

As employees just starting their shifts push the turnstiles forward, those who are leaving push their identity badges into the mouth of the key machine. A door opens. They drop their key box in, then go out through the turnstiles. They drive out slowly through the barriers and gates protecting the NSA, passing a steady stream of cars headed in. It's almost midnight in the Fort Meade cluster, the capital of Top Secret America, a sleepless place growing larger every day.