Chapter 36: Years of Crisis, 2001–2008

TIMELINE

2001	George W. Bush signs $1.35 trillion tax cut  • Terrorists fly jetliners into the World Trade Center and Pentagon  • United States and Great Britain attack Taliban in Afghanistan  • Office of Homeland Security created
2002	Captured Al Qaeda and Taliban fighters jailed at Guantanamo Bay, Cuba  • Bush defines Iran, Iraq, and North Korea as “Axis of Evil”  • Bush addresses UN about Iraq’s weapons of mass destruction  • Congress authorizes Bush to use force against Iraq  • Sarbanes-Oxley Act passed  • McCain-Feingold Act passed
2003	United States invades Iraq  • Saddam Hussein captured
2004	Photos of abused Iraqi inmates at Abu Ghraib prison cause outrage  • Bush elected to second term as president
2005	John Roberts, Jr. appointed Chief Justice of the Supreme Court  •  Public learns Bush authorized warrantless surveillance on suspected terrorists  • Hurricane Katrina devastates Gulf Coast
2006	Samuel Alito appointed justice of the Supreme Court  • Bush signs Secure Fence Act  • Democrats win majority in Congress  • Nancy Pelosi becomes first woman Speaker of the House  • Patriot Act reauthorized
2007	Bush announces troop surge in Iraq  • Housing crisis begins
2008	Barack Obama elected president  • New York Stock Exchange loses trillions, triggering global financial crisis  • Congress passes Troubled Asset Relief Program

IMPORTANT PEOPLE, PLACES, EVENTS, AND CONCEPTS

2004 election

Samuel Alito

Department of Homeland Security

Hurricane Katrina

Hamid Karzai

mortgage-backed securities

Operation Iraqi Freedom

Sarbanes-Oxley Act

Taliban

war on terror

Abu Ghraib

“Axis of Evil”

Enron

Saddam Hussein

Osama bin Laden

No Child Left Behind

Patriot Act

Secure Fence Act

tax cut

waterboarding

Afghanistan

Bush Doctrine

Federal Emergency Management Agency (FEMA)

Iraq

Lehman Brothers

Barack Obama

Nancy Pelosi

September 11, 2001

Troubled Asset Relief Program (TARP)

weapons of mass destruction

Al Qaeda

Dick Cheney

Guantanamo Bay

Kyoto Protocol

McCain-Feingold Act

Operation Enduring Freedom

John Roberts, Jr.

subprime mortgages

unlawful combatants

WorldCom

“Our war on terror begins with Al Qaeda, but it does not end there. It will not end until every terrorist group of global reach has been found, stopped, and defeated…. Every nation, in every region, now has a decision to make. Either you are with us, or you are with the terrorists. From this day forward, any nation that continues to harbor or support terrorism will be regarded by the United States as a hostile regime.”

—George W. Bush, Address to Congress, September 20, 2001

INTRODUCTION

In 2000, George W. Bush campaigned on a program of “compassionate conservatism,” which advocated solving social issues through cooperation with private agencies rather than through government programs. It also stressed personal responsibility and accountability. One of Bush’s first successes in this vein was the No Child Left Behind Act, which required schools to prove through skills assessments that students are learning. If scores went down, funding was cut. He also advocated privatizing Social Security, encouraged health care reform, and throughout the summer of 2001 traveled across the country to promote his $1.35 trillion tax cut, arguing that it would stimulate the economy. Eight months into his presidency, however, everything changed.

THE “WAR ON TERROR”

On the morning of September 11, 2001, America was attacked by terrorists presumably under the direction of Muslim extremist Osama bin Laden and his Al Qaeda network. In a coordinated mission, 19 hijackers—15 from Saudi Arabia, two from the United Arab Emirates, one from Egypt, and one from Lebanon—hijacked four passenger jets using knives and small tools. One plane each flew into the north and south towers of the World Trade Center, one struck the Pentagon, and the last, intended to hit either the White House or the U.S. Capitol, crashed in a field near Shanksville, Pennsylvania, when passengers tried to take control of the plane. The hijacks took place simultaneously, causing chaos for air traffic controllers. For the first and only time, all civilian planes in the United States, Canada, and other countries were grounded, and all inbound flights to the United States from other countries were turned away. In all, 2,995 people from 70 countries were killed.

The young presidency of George W. Bush faced its greatest challenge. Declaring a “War on Terror” against terrorists and the nations that support them, while emphasizing respect for the religion of Islam and for Muslims, President Bush prepared the United States for a protracted battle against terrorism throughout the world.

Invasion of Afghanistan

Addressing a joint session of Congress on September 20, 2001, President Bush explained that the Islamic extremist Taliban regime in Afghanistan had supported Al Qaeda training camps and harbored bin Laden. He demanded the immediate closure of all the camps, the opening of camps to U.S. inspection, the release of all foreign prisoners, and the transfer of all terrorists to U.S. custody. After the Taliban refused to cooperate, on October 7, the United States, with help from British and Afghan Northern Alliance forces, launched Operation Enduring Freedom.

The Taliban crumbled quickly, and Kabul fell on November 13, 2001. However, pockets of insurgents in the mountainous area on the Afghanistan-Pakistan border sprang up the following year, leading to a protracted struggle. Nevertheless, the installation of Hamid Karzai as a transitional leader established a degree of stability, especially in Kabul. Karzai subsequently served as interim president from 2002–04 and was then elected president in 2004. After the United States invaded Iraq in 2003, the Taliban took advantage of limited U.S. resources and began to recapture large swaths of the countryside in southern Afghanistan.

Invasion of Iraq

In his 2002 State of the Union address, President Bush reiterated that the United States would prevent terror-sponsoring regimes from threatening America and its allies with weapons of mass destruction. In particular, he identified Iran, Iraq, and North Korea as an “axis of evil.” This solidified the Bush Doctrine, which advocated unilateral preemptive military strikes to fight terrorism.

Accusing Iraq of manufacturing chemical, biological, and nuclear weapons and thwarting United Nations weapons inspectors, Bush, in late 2002, appealed to the UN Security Council, which required Saddam Hussein to comply with inspections or face “serious consequences.” In the meantime, Congress passed a resolution for the president to “use any means necessary” to stop Iraq. In his 2003 State of the Union address, Bush stated that Hussein harbored terrorists, including members of Al Qaeda.

Despite opposition from Canada, France, Germany, and other American allies, the United States launched Operation Iraqi Freedom on March 20, 2003, with a missile attack on Baghdad. The coalition of forces included Australia, Poland, and Britain, whose prime minister, Tony Blair, strongly supported the invasion. Within weeks American troops entered Baghdad, and by December, Saddam Hussein was captured. In a widely criticized press briefing, President Bush, dressed in a flight suit, landed a plane on an aircraft carrier draped with a banner reading, “Mission Accomplished.”

Expansion of Executive Power

As part of the war on terror, the Bush administration, strongly influenced by Vice President Dick Cheney, sought to strengthen the power of the executive branch. Shortly after the 9/11 attacks, Bush signed the Patriot Act, which gave the government a slew of new powers to gather intelligence, including the ability to search personal records ranging from phone bills to medical records without the subject’s knowledge or consent. This curtailment of civil liberties alarmed many critics and led to lawsuits until a toned-down version was renewed in 2005.

In 2002 the Homeland Security Act established the Department of Homeland Security, which centralized many of the agencies needed to enforce the Patriot Act, including the Customs Service, Border Patrol, Coast Guard, Secret Service, and the Federal Emergency Management Agency (FEMA). It also created a new position in the presidential cabinet, Secretary of Homeland Security.

Also in 2002, the Bush administration opened the Guantanamo Bay detainment facility, or “Gitmo,” to house captives from the war on terror. Located on the Guantanamo Bay Naval Base in Cuba, the facility was considered to be outside U.S. legal jurisdiction. “Detainees” were categorized as unlawful combatants, a special type of enemy combatant. Because unlawful combatants represented no nation and didn’t adhere to accepted rules of war, they weren’t entitled to prisoner-of-war protections of the 1949 Geneva Convention, including civilian trials. Instead, they would be tried by military tribunals. Cheney worked with the Justice Department to secure legal authorization for waterboarding and other harsh interrogation techniques previously considered torture.

DOMESTIC AFFAIRS

A Weakening Economy

After the dot-com bust of 2000, the economy slid into a recession and unemployment grew. Nevertheless, early in 2001, the Bush administration introduced a sweeping 10-year tax cut that reduced individual tax rates and changed many other parts of the tax code. Congress passed the $1.35 trillion bill, which, in conjunction with the cost of the ongoing war on terror, increased annual deficits and swelled the federal debt to $8.4 trillion in 2006. The surpluses of the Clinton years had disappeared.

Adding to the economic instability were a number of corporate scandals, two of which resulted in the biggest bankruptcies in American history up to that time. In 2001, the Houston-based energy company Enron was discovered to have doctored its books, using accounting tricks to hide billions of dollars in debt. Its stock sank from $90 per share in mid-2000 to less than $1 in November 2001. Enron employees lost billions in stocks and pensions, and several executives, including Chairman and CEO Kenneth Lay, were sentenced to prison.

In June 2002, the telecommunications company WorldCom was also found to have misreported losses and inflated profits—by its own internal auditors. The Securities and Exchange Commission launched an investigation, and several executives were convicted of securities fraud.

These among other scandals prompted Congress to pass the 2002 Sarbanes-Oxley Act, which established a board to monitor accountants and banned accounting firms from providing consulting services to the companies they audit. It also required CEOs and CFOs to vouch for the accuracy of financial statements and imposed fines and imprisonment on anyone who is convicted of tampering with records.

The 2002 McCain-Feingold Bill sought to introduce campaign finance reform by focusing on two issues. First, it forbade political parties from raising or spending so-called “soft money”—that is, unlimited funds given to political parties or organizations rather than directly to candidates. Second, it required candidates to claim responsibility for their ads by appearing in them or including a message at the end (e.g., “I’m John Q. Public, and I approve this message.”) It also prohibited corporations from funding any issue advocacy ads, whether or not a politician was mentioned. Critics of the bill argued that it infringed on the First Amendment right to freedom of speech.

Growing Discontent

By 2004, the wars in Iraq and Afghanistan were plagued by insurgent forces skilled in guerilla warfare. In Iraq, insurgents in Fallujah attacked a convoy operated by Blackwater Security Consulting—a private paramilitary force hired by the United States—and killed four of its employees. In what seemed a symbol of an out-of-control war, photos of their corpses hanging from a bridge were seen worldwide, triggering a U.S. attack on the town. Days later, news broke about prisoner abuses at the U.S.-run Abu Ghraib prison near Baghdad, including instances of sodomy with a broomstick and beatings with a chair. Public outrage grew when no weapons of mass destruction were ever found in Iraq.

Despite the spiraling unpopularity of the war, George W. Bush won a second term in the election of 2004 when he defeated Massachusetts Senator John Kerry. Perhaps the most memorable part of Kerry’s badly run campaign was the keynote speech at the Democratic National Convention delivered by a little-known Illinois senator named Barack Obama.

Bush’s support hit new lows when Hurricane Katrina struck the Gulf Coast in August 2005. It was the most destructive natural disaster in U.S. history, displacing 800,000 people and killing 1,836. In New Orleans, breached levees caused water to flood 90 percent of the city. Per the country’s National Response Plan, federal rescue operations couldn’t begin until local and state authorities requested intervention, which didn’t happen until early September, when FEMA took over. City residents and the media charged all levels of government with mismanagement.

In the midterm elections of 2006, which was characterized as a referendum on the Iraq War, Democrats gained control of the House and Senate for the first time since 1994. California Representative Nancy Pelosi became the first woman Speaker of the House. In response to sectarian violence in Iraq, which many thought could explode into a full-blown civil war, Bush deployed 30,000 additional troops to Iraq in 2007. At the height of the “troop surge,” almost 170,000 soldiers were stationed in the country. By summer 2008, the Bush administration reported four-year lows in violence, but the war dragged on.

The Supreme Court

In 2005, after Justice Sandra Day O’Connor announced her retirement, Bush nominated John Roberts, Jr. to replace her. However, when Chief Justice William H. Rehnquist died during Roberts’s confirmation hearings, Bush renominated Roberts to become the new chief justice. Bush then nominated Samuel Alito to replace O’Connor. With the exit of O’Connor, a moderate who was often the swing vote in ideologically fraught cases, Roberts and Alito, both conservatives, tipped the court to the right.

Immigration Reform

In the 1980s and 1990s, the United States experienced tremendous growth in immigration, particularly from Asia and Latin America. As with the mostly European immigrants who arrived in the early 1900s, the reasons for coming still centered around the many opportunities that the country affords.

However, many wished to close the door on immigration. In 1986, Congress had passed the Immigration Reform and Control Act, which punished employers who hire undocumented workers. California then attempted to stem the tide of immigration from Mexico by voting to deprive illegal immigrants of benefits such as education and medical care.

In 2006, Congress passed the Secure Fence Act, authorizing construction of a 700-mile barrier along the U.S.-Mexico border. A year later, Bush proposed to Congress a comprehensive immigration reform bill that included giving millions of illegal immigrants already in the country a path to citizenship and encouraging them to assimilate, introducing a guest worker program, beefing up border security and penalizing employers who knowingly hired illegal workers. The legislation died in the Senate, as critics argued immigrants were stealing jobs from U.S. workers and that the bill amounted to amnesty for lawbreakers.

Ecological Challenges

The issues of energy and ecology became increasingly difficult to balance. The Bush administration repeatedly called for exploration in preserved lands in Alaska to find new sources of oil. Environmentalists feared that this exploration would destroy the pristine environment of this area.

The issue of global warming was another point of contention; the nations of the world discussed how to deal with this situation. Though Bush refused to participate in the Kyoto Protocol—a global pact initiated in 1997 and put into force in 2005 to reduce greenhouse emissions to nonthreatening levels—his administration supported the initiatives of the so-called Washington Declaration of 2007 in which the G8 (Group of Eight) countries, along with five other nations, agreed that global warming is scientific fact and efforts should be made toward a worldwide system of emissions caps and carbon emissions trading.

One thing is certain: An increased demand for energy will require new supplies to be tapped. Nuclear energy is efficient and clean, but people fear the possible problems of nuclear meltdown. Storage of nuclear waste is also a challenge. Coal is plentiful, but it pollutes the air, and while companies have the capabilities to clean it up, this would be at a great cost. The balance between nature and oil drilling is under debate—a debate that intensified after the BP oil spill of 2010—and the country must address this issue.

The Housing Crisis and Global Financial Crisis

Two related financial crises rocked American and world markets at the end of Bush’s second term, plummeting the world into the greatest economic recession since the Great Depression.

In 2007, the housing bubble of the previous decade finally burst. In the early 2000s, lenders began to entice homebuyers with weak credit histories to buy properties using subprime mortgages. These were mostly adjustable-rate mortgages that often required no down payment; the lending institution made money by steadily increasing interest rates. As long as home values went up, buyers and lenders were relatively safe, and buyers often secured second mortgages to pay for other things. Seeking to cash in on the housing market, developers secured easy credit to build new homes. However, when housing values declined in 2007, homeowners couldn’t pay their loans and they foreclosed. Banks, overwhelmed with bad debts, got into trouble.

This led to the global financial crash of 2008. During the housing boom, lenders bundled subprime mortgages into mortgage-backed securities, which were then traded like stocks by investment banks and hedge funds. Investors from around the world bought them. With the housing meltdown, mounting foreclosures meant financial institutions couldn’t afford to lend, so debtors had no credit to pay back loans. In September, Lehman Brothers, one of the world’s largest investment banks, declared bankruptcy, threatening the survival of other financial institutions. To prevent total catastrophe, Congress passed the $750 billion Troubled Asset Relief Program (TARP), which allowed the government to buy tainted assets from financial institutions and sell them back after the institutions stabilized.

THE ELECTION OF 2008

Just as the subprime mortgage crisis hit its peak, Barack Obama was elected the 44th president of the United States, soundly defeating Republican John McCain and his running mate, Alaska Governor Sarah Palin. Obama won 53 percent of the popular vote and 365 electoral votes while McCain captured 46 percent of the popular vote and 173 electoral votes.

After eight years of war, financial scandals, and a burgeoning financial crisis, both candidates campaigned on platforms of change. It was the first time two sitting senators ran against each other, the first time an African American won a major party nomination, and the first time the Republican Party nominated a woman for vice president. Obama’s campaign was notable for its innovative use of the Internet and social networking websites to reach younger voters and for its slogans: “Change We Can Believe In” and “Yes, We Can.”

SUMMARY

The administration of George W. Bush was challenged to protect the United States from the attempts of extremists who wish to destroy the American way of life through terrorism. Bush faced the problems of protecting the United States, exercising leadership in a world torn by political and ethnic strife, and restoring the economy to prosperity even as it veered toward depression at the end of his second term. As the 21st century moves into its second decade, the United States will continue to meet many challenges from the global economic crisis to the ongoing war on terrorism.

•  Bush Doctrine: George W. Bush’s belief in the propriety of using unilateral preemptive military strikes—essentially a preventive war—to fight terrorism

•  Compassionate Conservatism: This is a political philosophy that promotes solving social issues through cooperation with private agencies rather than through direct government programs. It also stresses personal responsibility and accountability as keys to success.

•  Kyoto Protocol: This is a global pact initiated in 1997 and put into force in 2005, designed to reduce greenhouse emissions to levels that would avoid climate change. The United States is not one of the 187 nations who have ratified the pact.

•  Mortgage-backed securities: Bundles of subprime mortgages that are traded like stocks

•  Subprime mortgage: This is a type of adjustable-rate mortgage, often requiring no down payment, offered to customers with risky credit ratings; the lending institution makes money by steadily increasing interest payments.

•  Unlawful combatants: These are persons who do not represent a state or nation who participate in military conflict and do not adhere to accepted rules of war. According to the Bush administration, unlawful combatants captured on the battlefield and detained off of U.S. soil are not entitled to the protections of the 1949 Geneva Convention and can be tried by military tribunals, not civilian courts.

•  War on Terror: The term denoting the ongoing military battle of the United States and its allies against terrorism, first used by George W. Bush when addressing a joint session of Congress following the terrorist attacks on September 11, 2001

•  Weapons of mass destruction: Umbrella term for biological, chemical, and nuclear weapons designed to kill large numbers of people

REVIEW QUESTIONS

1.   In his 2001 “War on Terror” speech to Congress, George W. Bush demanded the Taliban do all of the following EXCEPT

(A)    immediately close all terrorist camps.

(B)    release all foreign prisoners.

(C)    transfer all terrorists on Afghani soil to the United States.

(D)    hand over Saddam Hussein.

(E)    give U.S. troops access to terror camps to ensure compliance.

2.   Mortgage-backed securities are

(A)    bundles of subprime mortgages traded like stocks.

(B)    low-interest loans offered to people with troubled credit histories.

(C)    another name for adjustable-rate mortgages.

(D)    recession-proof investments.

(E)    stable assets.

3.   George W. Bush’s immigration reform policy can best be described as

(A)    amnesty for all people who immigrated to the U.S. illegally.

(B)    unrealistic, in that it refused to acknowledge illegal immigrants who were already working in the United States.

(C)    a policy to deport immediately all illegal immigrants.

(D)    a pathway to citizenship for illegal immigrants already working in the United States coupled with measures to restrict more from entering.

(E)    a way to safeguard American jobs for U.S. citizens.

4.   The Bush Doctrine refers to

(A)    a policy of unilateral, preemptive strikes against suspected terrorist threats against the United States and its allies.

(B)    a program of tax cuts to spark economic activity.

(C)    a policy of creating an international coalition of forces to crush terrorist threats.

(D)    rebuilding the Gulf Coast after Hurricane Katrina.

(E)    a systematic plan to encourage environmental initiatives to prevent global warming.

ANSWERS AND EXPLANATIONS

1.    D

While Bush was concerned about Saddam Hussein well before the Iraq War, Hussein ruled Iraq, not Afghanistan. At the time of the speech, Osama bin Laden, who orchestrated the 9/11 attacks, was thought to be living under the protection of the Taliban. All the other answers—(A), (B), (C), and (E)—were demands Bush made to the Taliban.

2.    A

During the housing boom of the mid-2000s, mortgage-backed securities, consisting of bundles of subprime mortgages, were traded around the world. They were not low-interest loans (B) but rather mortgages with adjustable interest rates that got higher after fixed amounts of time. Normal adjustable-rate mortgages (C) did not have the same ballooning interest rates as subprime mortgages. Because some customers who bought subprime mortgages had poor credit, mortgage-backed securities were neither recession-proof investments (D) nor stable assets (E).

3.    D

While Bush did not advocate a policy of amnesty for illegal immigrants (A), he recognized that many make valuable contributions to the economy, so he wanted to provide a pathway to citizenship. Therefore, the answer cannot be (B). While some ultraconservatives may have supported immediate deportation (D), Bush had no desire to attempt such an unrealistic and impractical goal. The policy sought to punish companies that knowingly hired illegal immigrants, but it did not directly safeguard American jobs (E).

4.    A

The Bush Doctrine refers to Bush’s determination to prevent terrorist strikes against the United States and its allies, regardless of whether other nations joined or even approved (C). It had nothing to do with tax cuts (B), Hurricane Katrina (D), or environmental initiatives (E).