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Analysis, background reports and updates from the PBS NewsHour putting today's news in context.

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    A short time ago, I spoke to Paul Sonne of The Wall Street Journal in Moscow.

    Paul, thanks for joining us.

    So, how much of a surprise was this in Moscow?

    PAUL SONNE, The Wall Street Journal: I think that it wasn't a particular surprise.

    I think there was a lot of writing on the wall here that the Kremlin was going to make this decision. And the real question is why was the Kremlin predisposed to granting Edward Snowden asylum? I think there's probably a number of factors at play there.

    One of those is that Russia is sort of -- it's very conscious of double standards here. It feels like the West and the U.S. wouldn't necessarily be predisposed to expel a Russian asylum seeker, so they shouldn't necessarily expel a U.S. asylum seeker. And I think there's an element that this would sort of play well among the more nationalist elements of Vladimir Putin's constituency.

    And then finally I think there's an element here of just who's boss. This is an ability of one of those moments where Vladimir Putin can show that he has the upper hand and that can play well among his constituency.

    JEFFREY BROWN: An aide to President Putin played down the potential for any impact on U.S./Russia relations. What do you make of that?

    PAUL SONNE: Yes, I think what you see is both the U.S. and Russia trying to do sort of two things at once here.

    One is to say, you know, we really want this guy or we're not handing this guy over, and then the thing that's underlining that is comments coming from both sides saying, we don't want this to affect our relations. So what Russia is sort of saying is, we can't give him back to you, we're going to keep him here. And the White House is saying, you have to hand him over. But on the other hand, we want to deal with things like Syria and disarmament in other -- North Korea, Iran. We don't want that to upset the diplomacy that we have been working on in the last couple of months.

    JEFFREY BROWN: Well, on the American side, how much anger are you picking up in Washington and also there in Moscow from the embassy or other Americans?

    PAUL SONNE: Yes. So I think what's actually interesting is that Jay Carney today, the White House spokesman, didn't say anything that much stronger than he's been saying throughout the entire Snowden affair since Snowden arrived here in late June.

    He said the White House is extremely disappointed but they don't want to cut off relations with Russia. He did say that this may call into question the summit that has been planned in Moscow in early September between Vladimir Putin and Barack Obama. But in terms of any other retribution or response, you know, we aren't seeing an escalated level of rhetoric from the White House, though we have seen some of that from Congress, especially from Republican senators.

    JEFFREY BROWN: But your sense from Russian officials is that they're not particularly worried about the summit or G20 meeting being impacted?

    PAUL SONNE: I think there is a real possibility that Barack Obama is not going to come to the summit in early September that he was planning on attending with Vladimir Putin, which is ahead of the G20 summit in St. Petersburg.

    And I think you have to look at two reasons for that. One is if he comes here and he appears to be shaking hands with President Putin and Edward Snowden is nearby somewhere else, that doesn't necessarily make him look good to the American public. But the other thing that I think a lot of people are missing here is that it's possible that there are just not going to be any results from that summit and it doesn't behoove President Obama to come here and then have yet another awkward meeting or an awkward press conference with President Putin like he had in Northern Ireland a month ago, where he doesn't have any results to show.

    It doesn't seem like the U.S. and Russia are making any progress on Syria. They don't really have anything to show for disarmament. The speech that Barack Obama made in Berlin a couple of weeks ago was met with a very tepid response here in Moscow. So I think part of this is also a calculation on the White House's part that not only is this going to look bad if Snowden is in Barack Obama's airspace while he's here. It's also that they just might not have anything to show for that summit.

    JEFFREY BROWN: And, finally, what happens next for Snowden? Is there an expectation there that this one-year grant of asylum really means something that could stretch on without limit?

    PAUL SONNE: Yes, I wouldn't necessarily take the one-year limit of this -- quote, unquote -- "temporary asylum" to be the amount of time that Snowden is going to spend in Russia. That is a renewable period.

    He could be here indefinitely. And from what his lawyer is saying, it certainly seems like he's going to be here for the foreseeable future. In terms of what he's doing here, where he is, all those questions remain unanswered. His lawyer has been very coy about where he's planning to live, where he actually went today after he got in the taxi outside of the airport.

    And, you know, he's saying that we don't want to give out that information because this is obviously a wanted alleged U.S. criminal, and he has serious safety concerns so we're going to not disclose where he is going to be staying here in Moscow.

    So it remains to be seen what he's going to end up doing here. The head of one of Russia's biggest social networks came out today and offered him a job as a programmer. But one of the main things that we know is that the requirement for giving him asylum, President Putin came out very clearly and said he needed to stop his political activities. He couldn't continue to sort of be a thorn in the side of the U.S. government while claiming asylum and staying here in Russia.

    So whatever he does, it's probably not necessarily going to be a public role.

    JEFFREY BROWN: Paul Sonne of The Wall Street Journal in Moscow, thanks so much.

    PAUL SONNE: Thanks.



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    PBS NewsHour's Judy Woodruff talks to two former National Security Agency analysts about what made them reveal information about the NSA's surveillance programs.

    William Binney and Russell Tice were working for the National Security Agency as analysts when they learned about its wiretapping program -- the controversial post-9/11 program in which the NSA collected phone and Internet activity without getting warrants first for the purpose of hunting down terrorists.

    They disagreed with the agency's tactics and the program's scope.

    Tice told PBS NewsHour senior correspondent Judy Woodruff that he's concerned about how the currently stored information will be used in the future. "What about the next administration and the next one after that? ... Remember this information is going to be archived indefinitely."

    You can watch their full interview above.

    But according to Joel Brenner, who was the NSA inspector general from 2002 to 2006, the agency "hasn't done anything, as I understand it and from all I know, that goes one inch beyond what it's been authorized to do by a court."

    Watch his interview below:

    Watch Video

    Brenner said the agency is collecting telephone metadata, but not emails or geographic locations. Congress has authorized the agency to collect the information and all three branches of government oversee it, he added.

    "The idea that NSA is compiling dossiers on people the way J Edgar Hoover did, or the way the East German police did, as some people suggest, that's just not true," he said.

    View all of our World coverage.

    Follow @NewsHourWorld

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    KWAME HOLMAN: Ariel Castro, who held three women captive and raped them repeatedly over a decade, was sentenced to life without parole today plus 1,000 years. One of his victims, Michelle Knight, addressed the hearing. She told Castro she spent eleven years in hell, but now has her life back.

    MICHELLE KNIGHT, kidnapping victim: From this moment on, I won't let you define me or affect who I am.

    You will live -- I will live on. You will die a little every day as you think about the 11 years and atrocities you inflicted on us.

    KWAME HOLMAN: Castro then delivered a rambling statement. He acknowledged that what he did was wrong, but insisted most of the sex he had with the three women was consensual.

    ARIEL CASTRO, defendant: I just wanted to clear the record that I am not a monster. I didn't prey on these women. I just acted on sexual instincts because of my sexual addiction. As God is my witness, I never beat these women, like they are trying to say that I did. I never tortured them

    KWAME HOLMAN: Last week, Castro pleaded guilty to more than 900 counts, including kidnapping, rape and murder, for beating and starving one of his captives until she miscarried.

    In Afghanistan, NATO opened an investigation after weapons fire from a U.S. helicopter mistakenly killed five Afghan police officers overnight. Two others were wounded during the operation in Nangarhar province, in the eastern part of the country. Afghan special forces called for air support during a clash with Taliban fighters at a police checkpoint. The U.S. helicopter engaged and apparently fired on the wrong target.

    The U.S. may end the use of drone attacks in Pakistan in the near future. Secretary of State John Kerry told Pakistani TV today that he hopes it's going to be very, very soon. He met with new prime minister, Nawaz Sharif, and announced the U.S. and Pakistan will resume a full partnership, including high-level talks on security.

    Kerry acknowledged U.S. drone strikes and other issues have roiled relations with Pakistan since 2011.

    SECRETARY OF STATE JOHN KERRY: I think we came here today, both the prime minister and myself, with a commitment that we cannot allow events that might divide us in a small way to distract from the common values and the common interests that unite us in big ways.

    KWAME HOLMAN: Kerry also addressed the political crisis in Egypt. The Obama administration has declined to say the military ouster of President Mohammed Morsi was a coup. Kerry said the military didn't take over, but in his words is restoring democracy. He said millions of Egyptians asked the armed forces to intervene.

    Egypt's interior minister offered safe passage today to thousands of Morsi supporters if they end two large sit-ins in Cairo. The offer came a day after the interim cabinet ordered police to break up the demonstrations, but gave no timetable. Even so, there was no sign today the protesters plan to move on, despite the risk of new bloodshed. Instead, the Muslim Brotherhood called for a mass march tomorrow.

    Charges of election fraud echoed across Zimbabwe today, as votes were counted in yesterday's presidential contest. The opposition charged the outcome has been fixed by Robert Mugabe, the 89-year-old president who's led the country for 33 years.

    We have a report from Neil Connery of Independent Television News.

    NEIL CONNERY: As the results from Zimbabwe's elections slowly emerged, the anger of what's been condemned as a monumental fraud soon became clear, the opposition leader attacking what he said was a rigged ballot.

    MORGAN TSVANGIRAI, Zimbabwe presidential candidate: This has been a huge fuss. The credibility of this election has been marred by administrative and legal violations which affect the legitimacy of its outcome. It is our view that this election is null and void.

    NEIL CONNERY: The suspected Mugabe supporters were bussed in to vote on election day to a constituency where they don't live to increase the ruling party's vote. They were challenged by an opposition M.P. who has now lost his seat.

    Robert Mugabe's Zanu-PF party says it's buried the opposition, but observers estimate as many as one million voters were denied their democratic right.

    IRENE PETERSON, Zimbabwe Election Support Network: The credibility of the 2013 harmonized elections were seriously compromised by a systematic effort to disenfranchise urban voters, up to a million voters.

    NEIL CONNERY: With the counting here nearly complete, there's a growing air of resignation that these official results will be anything but a true reflection of the voters' wishes.

    The opposition say they're incensed by the vote-rigging they claim has taken place. Outside the opposition's headquarters, we saw a police presence for much of the day. After 33 years in power, Robert Mugabe's rule goes on, and the hopes of those who dare to dream change was coming to Zimbabwe have been deflated.

    KWAME HOLMAN: A number of U.S. embassies and consulates worldwide will be closed Sunday in the face of a possible terror threat. The State Department said today it's being done out of an abundance of caution, and is based on unspecified information. The embassies may be closed for more than one day, depending on how serious the threat is judged to be.

    President Obama has chosen a new leader for the Internal Revenue Service. The nominee announced today is John Koskinen, a retired corporate and government official who's managed a number of organizations in crisis. The IRS has been under fire for singling out Tea Party groups and others for extra scrutiny when they sought tax-exempt status.

    On Wall Street, upbeat reports on manufacturing in China and the U.S. drove stocks to new highs. The S&P 500 closed above 1,700 for the first time. The Dow Jones industrial average gained 128 points to close at 15,628. The NASDAQ rose 49 points to close at 3,675.

    Those are some of the day's major stories.

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    JUDY WOODRUFF:   And we pick up on the continuing fallout from the revelations of former NSA contractor Edward Snowden. Last night, we debated the role of the Foreign Surveillance Intelligence court, which approves the government's requests to gather intelligence information on Americans.

    Tonight, we have a conversation with three former NSA officials, a former inspector general and two NSA veterans who blew the whistle on what they say were abuses and mismanagement at the secret government intelligence agency.

    William Binney worked at the NSA for over three decades as a mathematician, where he designed systems for collecting and analyzing large amounts of data. He retired in 2001. And Russell Tice had a two-decade career with the NSA where he focused on collection and analysis. He says he was fired in 2005 after calling on Congress to provide greater protection to whistle-blowers.

    He claims the NSA tapped the phone of high-level government officials and the news media 10 years ago.

    RUSSELL TICE, former National Security Agency analyst: The United States were, at that time, using satellites to spy on American citizens. At that time, it was news organizations, the State Department, including Colin Powell, and an awful lot of senior military people and industrial types.

    JUDY WOODRUFF:   So, this is the early 2000s.

    RUSSELL TICE: This was in 2002-2003 time frame. The NSA were targeting individuals. In that case, they were judges like the Supreme Court. I held in my hand Judge Alito's targeting information for his phones and his staff and his family.

    JUDY WOODRUFF:   Bill Binney, what was your sense of who was being targeted and why they were being targeted? And what was being collected, in other words?

    WILLIAM BINNEY, former National Security Agency technical leader: Well, I wasn't aware of specific targeting like Russ was. I just saw the inputs were including hundreds of millions of records of phone calls of U.S. citizens every day. So it was virtually -- there wasn't anybody who wasn't a part of this collection of information.

    So, virtually, you could target anybody in this country you wanted.

    JUDY WOODRUFF:   Both Binney and Tice suspect that today, the NSA is doing more than just collecting metadata on calls made in the U.S. They both point to this CNN interview by former FBI counterterrorism agent Tim Clemente days after the Boston Marathon bombing. Clemente was asked if the government had a way to get the recordings of the calls between Tamerlan Tsarnaev and his wife.

    TIM CLEMENTE, former FBI counterterrorism agent: On the national security side of the house, in the federal government, you know, we have assets. There are lots of assets at our disposal throughout the intelligence community and also not just domestically, but overseas. Those assets allow us to gain information, intelligence on things that we can't use ordinarily in a criminal investigation.

    All digital communications are -- there's a way to look at digital communications in the past. And I can't go into detail of how that's done or what's done. But I can tell you that no digital communication is secure.

    JUDY WOODRUFF:   Tice says after he saw this interview on television, he called some former workmates at the NSA.

    RUSSELL TICE: Well, two months ago, I contacted some colleagues at NSA. We had a little meeting, and the question came up, was NSA collecting everything now? Because we kind of figured that was the goal all along. And the answer came back. It was, yes, they are collecting everything, contents word for word, everything of every domestic communication in this country.

    JUDY WOODRUFF:   Both of you know what the government says is that we're collecting this -- we're collecting the number of phone calls that are made, the e-mails, but we're not listening to them.

    WILLIAM BINNEY: Well, I don't believe that for a minute. OK?

    I mean, that's why they had to build Bluffdale, that facility in Utah with that massive amount of storage that could store all these recordings and all the data being passed along the fiberoptic networks of the world. I mean, you could store 100 years of the world's communications here. That's for content storage. That's not for metadata.

    Metadata if you were doing it and putting it into the systems we built, you could do it in a 12-by-20-foot room for the world. That's all the space you need. You don't need 100,000 square feet of space that they have at Bluffdale to do that. You need that kind of storage for content.

    JUDY WOODRUFF:   So, what does that say, Russell Tice, about what the government -- you're saying -- your understanding is of what the government does once these conversations take place, is it your understanding they're recorded and kept?

    RUSSELL TICE: Yes, digitized and recorded and archived in a facility that is now online. And they're kind of fibbing about that as well, because Bluffdale is online right now.

    And that's where the information is going. Now, as far as being able to have an analyst look at all that, that's impossible, of course. And I think, semantically, they're trying to say that their definition of collection is having literally a physical analyst look or listen, which would be disingenuous.

    JUDY WOODRUFF:   But the government vehemently denies it is recording all telephone calls. Robert Litt is the general counsel in the Office of the Director of National Intelligence. He recently spoke at the Brookings Institution.

    ROBERT LITT, NSA general counsel: We do not indiscriminately sweep up and store the contents of the communications of Americans or of the citizenry of any country. We do collect metadata, information about communications, more broadly than we collect the actual content of communications, but that's because it is less intrusive than collecting content and in fact can provide us information that helps us more narrowly focus our collection of content on appropriate foreign intelligence targets.

    But it simply is not true that the United States government is listening to everything said by the citizens of any country.

    JUDY WOODRUFF:   Joel Brenner, who was the NSA's inspector general and then senior legal counsel, says the intelligence agency obeys the law and the directions of the Foreign Intelligence Surveillance court.

    JOEL BRENNER, former NSA inspector general: It's really important to understand that the NSA hasn't done anything, as I understand it and from all I know, that goes one inch beyond what it's been authorized to do by a court.

    JUDY WOODRUFF:   So, tell us, how extensive is the NSA's collection of data on American citizens, on their phone calls, on their e-mails, on their use of the Internet?

    JOEL BRENNER: This the program only involves telephony metadata, not e-mails, not geographic location information.

    The idea that NSA is keeping files on Americans, as a general rule, just isn't true. There's no basis for believing that. The idea that NSA is compiling dossiers on people the way J. Edgar Hoover did in the '40s and '50s or the way the East German police did, as some people allege, that's just not true.

    JUDY WOODRUFF:   Well, we have been talking to a couple of former NSA employees and one of the allegations they make is that it's not just collecting this metadata on telephone conversations; it's recording those conversations and it's storing them and keeping them for possible future use.

    JOEL BRENNER: I think you're talking about Mr. Tice and Mr. Binney.

    Mr. Binney hasn't been at the agency since 2001. Mr. Tice hasn't been at the agency since 2005. They don't know what's going on inside the agency.

    JUDY WOODRUFF:   Another allegation we heard from them, from Mr. Tice, is that back as of the time before he left the NSA in the early 2000s, that there was spying going on, on news organizations, on Supreme Court justices, on presidential candidates, then Senator Barack Obama, on military leaders, top generals in the army.

    JOEL BRENNER: Mr. Tice made the allegations you have just indicated having to do with the period before 2005, eight years ago. They're just coming out now. I wonder why.

    The farther he gets from the period when he could have known what he was talking about, the more fanciful his allegations have become.

    JUDY WOODRUFF:   Brenner claims that oversight of information gathering has actually improved.

    JOEL BRENNER: We have turned intelligence into a regulated industry in a way that none of our allies, even in Europe, have done.

    We have all three branches of government now involved in overseeing the activities of the NSA, the CIA, the DIA, and our other intelligence apparatus. This is an enormous achievement.

    MAN: Government has gone too far in the name of security, that the Fourth Amendment has been bruised.

    JUDY WOODRUFF:   Last week, one oversight proposal in Congress aimed at preventing the NSA from collecting date on phone calls was narrowly defeated, but some members are vowing to press for additional restrictions on the investigative agency.


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    JEFFREY BROWN: And we turn once again to Syria, where there was another bloody day and the country's president, Bashar al-Assad, called his country's civil war the fiercest barbaric war in modern history.

    Margaret Warner reports.

    MAN: Allahu akbar!

    MARGARET WARNER: That was a weapons depot, vaporized in a massive explosion today, as rebels rocketed an army-controlled district in the key crossroads city of Homs.

    Opposition activists and local residents said at least 40 people were killed and three times that many injured. The attack showed the rebels still going on offense in the face of recent gains by government forces. Those regime gains gave President Bashar al-Assad the confidence to issue a statement today, predicting his forces will win the civil war and to take his first public trip outside Damascus in more than a year.

    He addressed troops in Darayya, a suburb, in observance of Army Day.

    PRESIDENT BASHAR AL-ASSAD, Syria (through interpreter): The power of the army comes from its people. But at the same time, it comes from the support of the people for you, and the Syrian nation strongly stands with you. From when this conflict first started, I have said we will be victorious. Martyrdom is a fate. But our goal is one of victory, and all the nation is awaiting the victory of the Syrian army.

    MARGARET WARNER: Photos of destruction in Homs show those victories have come at an astonishing cost. What's left of the city's Khalidiya district is now back under Syrian army control.

    Homs, 100 miles north of Damascus, is the gateway to Assad's Alawite sect power base on the coast, and thus a crucial battleground. Farther north, parts of Idlib, Aleppo and Raqqa provinces are held by various rebel groups, but the city of Idlib is under regime control and brutal fighting rages in the commercial hub of Aleppo.

    Meanwhile, there are still questions about chemical weapons use in the Syrian civil war. The United Nations says it will soon deploy investigators to three sites. The U.N., U.S. and other countries have concluded chemical weapons have been used, but with mixed judgments as to who's responsible.

    Meanwhile, as the fighting grinds on, President Obama approved arms shipments to some rebels, but many of them say it may be too little, too late.


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    For more on what is going on in Syria, we are joined now by NPR's Deborah Amos. She has been covering the country's civil war since it began.And she's back in the United States for a brief visit.

    And, Deb Amos, thank you for joining us during one of these brief visits of yours.

    DEBORAH AMOS, National Public Radio:Great to be here. Thanks.

    MARGARET WARNER: What is your sense -- what is your sense of the strategic situation on the ground in Syria?

    DEBORAH AMOS: I think over the past couple of days, we have seen this continuing momentum for the regime, especially in the city of Homs. They have been able to take a particular neighborhood, Khalidiya.

    The rebels have had that neighborhood for more than a year, and this continues on from taking the town of Qusayr on the Lebanese border. So what we have seen is that the regime is able to use a not-so-secret weapon, foreign fighters. Hezbollah from Lebanon, the militant Shiite militia has come in to back up the army and they have been able to score two significant victories against the rebels in the center of the country.

    The rebels remain strong in the north and in the south.

    MARGARET WARNER: And so what's the state of the rebel forces and their state of mind? You talked to people involved in that camp. Are they demoralized?

    DEBORAH AMOS: I think Qusayr was demoralizing with the rebels and Khalidiya is as well. These are both symbolic, especially in the city of Homs, which was the heart of the revolution. And the regime has come down very hard, in fact, has destroyed Khalidiya to save it.

    We saw pictures today, dramatic pictures, yesterday and today, of unbelievable destruction in this neighborhood. The regime showed a lot of pictures in that neighborhood to prove that a historic mosque was still standing, but what you saw instead and what so many people focused on was this once-thriving neighborhood has been completely destroyed. We also saw that in Qusayr on the Lebanese border. As the regime routed the rebels, they destroyed the city.

    MARGARET WARNER: Now, have the weapons the administration promised and they had to get it through Congress, but have any really -- have any arrived? Are they making any difference?

    DEBORAH AMOS: I was there about three weeks ago in Jordan talking to rebels there, and nothing had arrived and they were complaining about it. There are weapons coming through. They are from Saudi Arabia. The Americans now are helping with vetting the rebels.

    It's the Americans, the French, the Turks and the Saudis who have an operation room in Amman. They are in constant touch with the rebel there is. As the situation stands now, the U.S. is still giving non-lethal aid.What that means is night-vision goggles. It means Kevlar vests.It means MREs. The United States so far has not started putting weapons into the hands of rebels, but they are taking a big role in vetting who does get the weapons that are coming through Jordan.

    MARGARET WARNER: Now, we saw today -- one, you mentioned the pictures from Khalidiya. Two, the Assad regime essentially released this video of him visiting troops in Darayya.Is there also an image war going on between two sides?

    DEBORAH AMOS: Oh, there's no doubt and that's been since the very beginning.

    The other thing that we saw this week is President Bashar al-Assad opened an Instagram account and this is another occasion for very calm leader-like photographs that were put out on the Web. On the rebel side, there are seven YouTube channels that are with the FSA. You can watch almost every battle that takes place, putting out more content than Al-Jazeera or PBS.

    It's a huge amount of video. I think both sides are speaking to their base, something that we understand in America politics, and it is to keep up the morale of each side to say, we are winning. And so all of that is done with this imagery.

    The truth of the matter is, we are still a stalemate in Syria. Neither side can deliver a knockout blow, although neither side appears to be willing to negotiate an end of this brutal, brutal conflict.

    MARGARET WARNER: And so we have heard so much about the refugees. More than a million Syrians have fled to neighboring countries, but what -- from your trips in there and the people you have talked to, how are people who have stayed, millions of them, in some of these battle-torn cities, how are they getting by? 

    DEBORAH AMOS: There's two kinds of people inside. There are millions of Syrians who are displaced, people who lived in the neighborhood of Khalidiya who have been driven out and find themselves in makeshift refugee -- they aren't refugee -- they are internally displaced camps within Syria.

    And those people are not doing well.International aid organizations don't often get to them. It's up to the rebels to care for them, to make sure they get enough to eat. But there are many villages in the north and in parts of Aleppo where people are going about their lives. It's now two-and-a-half years into this conflict and both in the rebel-held areas they know that every couple of days one of those villages may have a rocket or a mortar attack or a missile.

    It's part of life. People have gotten on with their lives. This is the same in the capital. People go out at night. There are restaurants open in the capital. Also, in the south, in Daraa, another contested city where you have a regime-controlled area in the middle of the city and the rebels control large swathes in the countryside, people, you know, get up in the morning. Some of them tend their farms. In Damascus, people go to work.

    It's really quite amazing, the resilience of Syrians in so much violence that as time has gone on people have learned to live with some of this violence. I'm not talking about the seriously contested areas. Of course, those are terrible for civilians, but there are parts of Syria where people have a relatively normal life.

    MARGARET WARNER: Well, Deb Amos of NPR, thank you and travel safely.

    DEBORAH AMOS: Thank you.



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    JUDY WOODRUFF: Longtime FBI Director Robert Mueller made his farewells to the law enforcement community today at a ceremony at the Justice Department.

    Ray Suarez looks at the outgoing director's tenure and how the FBI has evolved.

    RAY SUAREZ: Mueller led the agency for 12 years, starting just one week before the 9/11 attacks. Today, Attorney General Eric Holder said Mueller has transformed the bureau since then, and prevented a number of serious terror plots.

    The outgoing director, in turn, gave much of the credit to those he's worked with.

    ROBERT MUELLER, FBI Director: It has been my privilege to work with so many talented and dedicated public servants, men and women who give everything in their power to keep the American people safe, men and women for whom the rule of law is the guiding principle.

    RAY SUAREZ: For an examination of the Mueller era at the Bureau, we turn to former Homeland Security Secretary Michael Chertoff, who worked closely with Mueller during George W. Bush's administration, and Julian Zelizer. He's a Princeton University professor of history and public affairs, and is the author of a book on the politics of national security.

    Secretary Chertoff, it's been said that Director Mueller had to oversee the transformation of the FBI from a crime-fighting agency to a national security one. In practical terms, what did that mean? What had to change at the FBI?

    MICHAEL CHERTOFF, former U.S. Homeland Security Secretary: Well, of course, the FBI continues with a crime-fighting mission.

    But what he had to do was really elevate the issue of intelligence and prevention to be equal priorities with prosecuting and punishing crimes after that they occur. And that meant creating a career path that will foster the development of an intelligence capability. It meant to some degree centralizing some of the activities of what used to be a widely decentralized agency, so you could have a coordinated approach to dealing with counterterrorism.

    And perhaps most important it meant taking the FBI overseas, putting them into the field, getting them involved working side by side with our men in uniform and women in uniform to actually collect information, forensic information that has intelligence value.

    RAY SUAREZ: Professor, the director said: "I love doing bank robberies, drug cases, homicides. As a prosecutor, that's what I thought I was going to be overseeing when I got to the Bureau. But now Americans expect us to prevent the next terrorist attack."

    What did that mean about the FBI that he had to change?

    JULIAN ZELIZER, Princeton University: Well, 9/11 fundamentally changed the role of that agency from something that was really focused on domestic crime-fighting to something that was focused on terrorism, partially, and that included the expansion of analysis, the expansion of intelligence gathering, going across borders, and a redefinition of the mission of what the FBI was all about.

    And that included some internal struggles. And I think it will be ultimately a very significant change that we saw under President Bush that has continued and will remain a permanent part of our policy infrastructure.

    RAY SUAREZ: Professor, that wasn't just happening at the FBI, but many agencies involved in criminal and let's say intelligence activities, as part of a huge run-up in spending, in capability. In the case of the FBI, has it paid off? Did it work?

    JULIAN ZELIZER: Well, that's the question people will ask.

    Obviously, many supporters of the changes will argue that many important cases have been prevented. The subway bombing in New York City was one of the big landmark efforts where a really big terrorist threat was averted. There are many the public knows about, many which we don't know about, but overall that will go on the plus of what we have done since 9/11 to reestablish a sense of normalcy in this country and to prevent many attacks.

    On the negative side will be critics who say that there's been an erosion of civil liberties and there will also be questions about events such as the Boston bombing, where some of the holes in intelligence gathering have been exposed.

    RAY SUAREZ: Secretary Chertoff, same question. Has it all been worth it? Have some of the tradeoffs been larger than the benefits you derive from -- in an agency of the FBI?

    MICHAEL CHERTOFF: Well, from the standpoint of the FBI, there have been, as the professor said, a number of plots that were disrupted. Some are well-known. Some are not well-known.

    I can tell you during my time period -- and we met with the president pretty much once a week with the FBI director to talk about ongoing plots, and the Bureau was involved in disrupting or in some way preventing those plots from coming to fruition.They're not perfect. Obviously, the Boston Marathon bombing is an example of something they didn't succeed.

    But if you look at the total scorecard, it's quite remarkable what the transformation has done, and, frankly, without a significant sacrifice of civil liberties.The Bureau still operates within the traditional framework of the law, in many cases supervised by the courts.

    RAY SUAREZ: Secretary, you mentioned the Boston bombing.And I guess the Mueller era at the FBI is bracketed by 9/11 on one side and the Boston Marathon bombing on the other. And this was a case where the FBI already had Tsarnaev in the system, but didn't make the connections between what it had.

    Is that an illustration of a problem where now agencies are able to collect these huge databases, but can't necessarily connect all the crosshatchings that would get us to a suspect?

    MICHAEL CHERTOFF: Well, it does illustrate the fact that although we have now gotten a lot better about connecting the dots, it still requires you to understand the significance of the individual dots. And there are going to be times when either because of human error or some misalignment of priorities, something is going to get missed.

    So I wouldn't consider this to be in any way undercutting the overall success of the system, but it is a useful opportunity to take a look at what didn't work right. Did we not pay enough attention to the source of the information because it came from the Russians? Was there some failure to follow up on something because an individual didn't appreciate the urgency?

    In the hand, analysis, no matter how it is enhanced by technology, really depends upon human beings.

    RAY SUAREZ: Professor, when we look back at Robert Mueller's 12 years at the FBI, I guess the question comes up whether the emergency ever passes, whether there's ever a time when the threat is seen off, when you can stand down, or do places like the FBI only grow in the one direction, ever larger?

    JULIAN ZELIZER: Yes. I mean, the history of national security institutions is that they remain in place, they continue even after the crisis is over.

    That's certainly case with a lot of the Cold War institutions that we developed, although they were reformed and reorganized after 9/11. With this particular threat with terrorism, it's unlikely that the threat will go away any time soon.It will change in nature, it might diminish in some places, expand in others, but the FBI is not going to lose the new characteristics that it's gained since 9/11.

    I think this is a little bit like the Cold War in that respect and this institution and the changes that Mueller put into place will remain permanent. They will be reformed. Some might be scaled down, but the basic character of the FBI is what it is today, and it's not going to go back to the J. Edgar Hoover days.

    RAY SUAREZ: And, Secretary, are we ever going to have anybody, now that the job is so expanded, who's the director for 12 years again?

    MICHAEL CHERTOFF: Well, of course, you know Congress created a 10-year term. And I think that is going to be the norm. It was a little bit extraordinary to have Bob Mueller held over for another couple of years.

    But the theory here is you want to have continuity and you want to establish that the director is operating without the timeline that a particular administration has, but really stands a -- of administrations. There's got to be continuity. There's got to be nonpartisanship. Bob Mueller brought an incredible sense of professionalism and experience to the job. In many ways, he is the mold, I think, of directors to come, including Jim Comey, who just got confirmed.

    RAY SUAREZ: Well, Secretary Chertoff, Professor Zelizer, gentlemen, thanks for joining us.

    MICHAEL CHERTOFF: My pleasure.

    JULIAN ZELIZER: Thank you.


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    JEFFREY BROWN: And finally tonight: It's been called an epidemic, the ongoing problem of sexual crimes within the U.S. military.

    An estimated 26,000 troops were sexually assaulted last year.Just 3,400 of those attacks were reported.And, statistically, a female soldier is more likely to be raped by a fellow officer than she is to die in combat.

    Gwen Ifill picks up our look at the issue.

    GWEN IFILL: The debate continues on Capitol Hill over how to end rape and sexual assault in the military. We spoke recently with Democratic Sen. Kirsten Gillibrand of New York, who wants to take the power to launch prosecutions away from military commanders.

    But the Senate Armed Services Committee voted to keep the process in the chain of command, while stripping commanders of the authority to overturn verdicts.

    Democratic Sen. Claire McCaskill of Missouri and Republican Kelly Ayotte of New Hampshire support that approach.They join us now from Capitol Hill.

    Welcome to you both.

    You are both former prosecutors. You both agree that this is a major problem that has to be solved.How does your proposal, Sen. McCaskill, differ from what Sen. Gillibrand is proposing?

    SEN. CLAIRE MCCASKILL, D-Mo.: Well, I think proposal that we are supporting does a better job of protecting the victims and a better job of holding commanders accountable, and ultimately it will result in more prosecutions and putting more perpetrators behind bars.

    And I think, as former prosecutors, that's what motivated both -- I think I can speak for Kelly -- that this is about -- I mean, frankly we don't care whether the commanders are in it or not. The important issue is, how can we protect victims and get more successful prosecutions?

    GWEN IFILL: Sen. Ayotte, Sen. Gillibrand said when she talked to the NewsHour that this is what victims have asked for, her approach, which is to take it out of the chain of command for various reasons. How do you respond to that?What have victims told you?

    SEN. KELLY AYOTTE, R-N.H.: Well, certainly, victims have varying views on this issue.

    And what we want to do is make sure that we make sure that victims are protected. That's why we made retaliation a crime under the UCMJ, but also to make sure that the chain of command and the commanders take responsibility and aren't let off the hook for creating the best supportive environment for victims. And that's why I support this approach.

    And in fact, what we have found is that if you compared the amount of prosecutions brought by commanders, they have actually brought more prosecutions than if you just left it with the JAG lawyers. So I'm worried for victims that less cases will be prosecuted if we take it out of the chain of command. So, to me, as a former prosecutor, if we prosecute less cases, then it's going to put victims in a very difficult position.

    GWEN IFILL: UCMJ being the Uniform Code of Military Justice.

    SEN. KELLY AYOTTE: That's right.

    GWEN IFILL: I wanted to ask Sen. Gillibrand to follow up on that point about -- two points. Then I will come back to you, Sen. Ayotte, as well.

    But, Sen. McCaskill, that is, tell me what is it about accountability that makes your approach better? If all these years these problems have persisted, what about your approach would change the accountability?

    SEN. CLAIRE MCCASKILL: Well, here's the problem.

    Imagine you're a victim and you're going back into your unit and there are lawyers 200 miles away who have decided this case goes forward vs. the commander deciding whether the case goes forward. In which environment do you think the victim has more protection from retaliation? I think it's fairly obvious. She gets more protection from retaliation if the commander has signed off.

    And that has not been the problem. They have not been able to bring us any cases where the commanders have refused to bring prosecutions when the prosecutors have recommended it. Just the opposite is, in fact, true, as Kelly said, that many times, prosecutors, maybe because it's a hard case, maybe because they're worried about their won-loss record, say this case is not a winner.

    And the commanders have insisted, no, let's get to the bottom of it. So, yes, the commanders need to get out of the business of overturning juries. Yes, we need to change the rules so that victims get more protection, more counselors, legal help, they're in control of where they go, whether they come back to their unit or get shipped out or whether the perpetrator gets shipped out.

    And another important reform, Gwen, is that we're going to take out of the equation how good a soldier someone has been. That might be relevant to something. It's not relevant to whether or not they're guilty of a crime. So we have really done historic reforms here.

    And the countries that have changed their systems, there has not been an increase in reporting. So even that premise that they're basing this on that report willing increase, the other countries that have changed this, they have not seen an increase in reporting.

    SEN. KELLY AYOTTE: And, by the way, Gwen, the other count these have changed this, the changes were actually made as a result of -- to protect defendants, not to support victims.

    So it's important for people to understand that, when we have a difference with our allies, that was actually done because defendants were driving that, not further protection for victims, and what we're about is making sure that we have further protections for victims.

    GWEN IFILL: Sen. Ayotte, I want to start with you and then go back to Sen. McCaskill.

    But why will this be different? Why will commanders have more incentive to act to protect people if, indeed, in that chain of command -- someone in the chain of command may have been the one who raped or assaulted you?

    SEN. KELLY AYOTTE: Well, first of all, Gwen, you do not have to report at all within the chain of command.

    There are multiple avenues you can report to.Now we're also going to have special victims counsel, so victims have their own lawyer to represent them to bring a case forward. But, in addition to that, our proposal does have incredible accountability for the commanders, because if there's a disagreement between JAG attorney and the commander in terms of bringing a charge, that's going to go all the way up to the civilian secretary of the force, whether it's the secretary of the Air Force, the Army, to make the call.

    And even if both say that we're not going to bring a case, it still goes up for another level of review to make sure that victims know that there is accountability within the chain of command.

    GWEN IFILL: Sen. McCaskill, at your press conference on this matter not too long ago, you had a member of -- a retiree, a Navy retiree, who said part of the problem here is that the investigations just take too long, that their hands are tied, there's nothing they can do. What about your approach to this would resolve that problem?

    SEN. CLAIRE MCCASKILL: Well, the good news is that in our approach these victims when they report outside the chain of command, they're going to get their own legal advice.

    And that is going to be a pressure point in the system, because they're now going to have somebody advocating that this case be handled quickly.And if you take the commanders out, that removes even more pressure from these cases going as quickly as they should, because now the commanders are going to be accountable under ours.

    If they're not accountable anymore, then that's a problem for the JAGs.That's a problem for the JAGs.That's a problem for the criminal investigators.That's not our problem.That's an unintended consequence that would in the long run hurt victims, not help them.

    And it's important to know, Gwen, that, as Kelly said, the victim community is not monolithic on this. We have had victims call our office, victims that have been featured in some of the documentaries about this subject that have said, we think your approach is better. They're feeling, I think, marginalized because -- as sometimes we have felt marginalized, because the other side wanted to make this argument about victims vs. uniforms.

    That's a false premise. This argument is about how we can protect the victims the best.

    GWEN IFILL: And, Sen. Ayotte, finally -- finally, how do you get to zero tolerance on something like this, no matter what your approach is? It's one thing for commanders, it's one thing for presidents to say, we won't tolerate this or for members of the Senate, but how do you make that happen?

    SEN. KELLY AYOTTE: I think we make that happen, first of all, within the chain of command. If you condone this within your unit or you don't support victims, you should be fired and that piece of accountability coming from the top flowing through every level of the chain of command.

    And also I can tell you, Gwen, the reason we're going to push towards zero tolerance, in addition to training and the other provisions, the lawyers, the counsel that the victims will get in our bill, is that Claire and I are not going to let this go. We serve on the Armed Services Committee. And we will be asking people not every year, but every few months, what is happening and please report back to the committee to make sure that we hold people's feet to the fire on these important provisions.

    And you should know there is a lot of agreement between us and Sen. Gillibrand on so many of these provisions. And I know, whatever we report out, it will be strong and it's not the status quo.

    GWEN IFILL: Sen. Kelly Ayotte of New Hampshire and Sen. Claire McCaskill of Missouri, Republican and Democrat, good to see you working together. Thanks a lot.

    SEN. KELLY AYOTTE: Yes. Thank you.

    SEN. CLAIRE MCCASKILL: Thanks, Gwen.

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    It is true that when I want a little getaway reading, I normally download or pack a nice piece of fiction. But this year, I couldn't resist doing a deep dive into three really good books about Washington.

    It helps that each is written by journalists I respect and, as important, like a great deal. Even better, the books expanded my mind. Each read took me into different corners of the world I spend a lot of time thinking about -- politics, politicians and the people who inhabit the nation's capital.

    New York Times reporter Mark Leibovich's was the first one out of the gate. In "This Town," he exposes official Washington's least appealing traits -- self absorption, hypocrisy and conflicts of interest.

    It's a snackable book, full of boldfaced names behaving (often) badly in a city where power is the currency instead of Wall Street cash or Hollywood celebrity. Occasionally, at fetes like the annual White House Correspondents dinner, all three collide, and the result is not pretty.

    I rub elbows with enough of the people in the book to cringe when Leibovich lands a blow on someone I know, or to nod sagely when he exposes an often silly truth. But I also know Washington is like any other city where people worry about their parents, their kids, their pets and their heating bills. It's just that that is not nearly as much fun to read about.

    Dan Balz, chief correspondent for The Washington Post, writes the classic campaign book -- reacquainting us with the innards of an election year we thought we knew plenty about. I covered the thing from beginning to end, but only after reading "Collision 2012" did I finally get the Chris Christie frenzy, appreciate the sheer stubborn political natures of Rick Santorum and Newt Gingrich and grasp the myriad ways the "Obamanauts" beat the Romney forces to the punch on money, message and metadata.

    Moving from Leibovich to Balz is like shifting from popcorn to granola. The deep dive into the 2012 campaign sticks with you longer, and delivers a heftier crunch.

    But the weightiest tome of all is New York Times White House correspondent Peter Baker's take on the George W. Bush presidency, due out this fall. In "Days of Fire," Peter tells the stories of an administration laid low by war and terrorism through the lens of the president's relationship with his powerful vice president.

    There has been no shortage of memoirs and deconstructions of post-9/11 America, but this one peels back the onion on one of the most intriguing partnerships Washington has ever seen. Vice President Dick Cheney is indeed hard, inscrutable and tough as a bone. Bush is as we came to know him -- affable, emotional and possessed of rigid certitude.

    That combination of political gifts, faults and mission shaped America for decades to come -- if only because it is much tougher to pull out of wars than to declare them.

    If Mark's Washington insider story is popcorn, and Dan's tale of those scrambling to get to Washington is granola, Peter's deconstruction of the Bush years is a thick steak, full of the kind of context that will make it a permanent fixture on historians' bookshelves.

    Taken together, these three books actually enriched my summer. But now I'm on the hunt for a little cotton candy. Recommendations welcome.

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    By Paul Solman

    The simple story of the July unemployment numbers, released Friday, is that the population grew by about 200,000 people and new jobs absorbed just about all of them.

    Why did the unemployment rate go down -- from 7.6 percent to 7.4 percent? Because the official "workforce" actually declined -- by about 40,000 people. What could explain the drop, given the rise in population? "Ten thousand baby boomers turn 65 today" has become a demographic cliché (or meme, if you prefer). Barring a mass and age-selective plague, that means that 10,000 or so are also turning 66, their official Social Security retirement age. Many, if not most, baby boomers are retiring. And since 10,000 a day equals 300,000 a month, if two-thirds of them are hanging up their rock 'n' roll work shoes, Friday's numbers would make sense: 200,000 or so retirees offsetting the 200,000 or so new working-age Americans.

    I have long warned against making too much of any one month's unemployment numbers. But the story told above is plausible, if not provable.

    As for our own more inclusive measure of under- and unemployment, the Solman Scale "U-7," it nudged down from 16.3 percent to 16.15 percent. It adds to the part-timers and "discouraged" workers in the government's official accounting of the underemployed everyone who tells the Bureau of Labor Statistics that they want a full-time job but can't find one. Thus, it includes people who haven't looked for work in the past 12 months -- people the government drops from the workforce entirely. U-7 treats these people as super-discouraged.

    The drop in the U-7 would also make sense. On the negative side of the ledger, a slight shrinkage in the workforce was matched by the same number of people "not in [the] labor force" reporting they "currently want a job."

    A plain English interpretation: the 40,000 new discouraged Americans who passed the one-year mark in which they hadn't looked for work were no longer counted in the labor force, which consequently dropped by about 40,000. On the positive side, 200,000 or so fewer are unemployed.

    The headline-trumpeted gain of 162,000 new jobs -- mainly in retail, hotels and restaurants -- was characterized as "Continuing a Tepid Run" by the Wall Street Journal, "sluggish" by the New York Times, "below expectations" by the Financial Times, and "less than forecast" by Bloomberg News. Moreover, the total number of new jobs was offset by downward revisions of 26,000 for May and June.

    JUNE'S UNEMPLOYMENT NUMBERS: Boffo BLS Jobs Data! But -- the New Jobs Are Only Part-time

    Most discouraging of all perhaps is that average hourly earnings actually dropped in July or, as the Bureau of Labor Statistics press release put it, "edged down by 2 cents to $23.98, following a 10-cent increase in June." Nominal wages almost never drop, especially when there's inflation, as there is at the moment.

    So a story consistent with this month's data: new workers are entering the labor force at lower wages while higher-paid baby boomers retire. NewsHour producer Diane Lincoln Estes recently spoke with the Economic Policy Institute's Heidi Shierholz, who reflected on what this means for new workers entering the labor market for the first time:

    One group of people that immediately jumps out as being hit hard by this (persistent unemployment) are new entrants to the labor market -- new high school and college grads who are trying to start their careers. Entering a labor market, into a scene like this one, where job opportunities are very weak, the research suggests you're actually going to have lower lifetime earnings.

    If your employer knows that you don't have a lot of outside options for jobs, that you're not going anywhere, they have very little incentive to pay you very big wage increases. ... They don't have to pay big wage increases to keep the workers that they need, so that elevated unemployment year, after year, after year, just puts this downward pressure on wage growth for even those people with jobs. ...

    The kind of job growth that would make us feel that we were in a really strong jobs recovery would be on the order of 300,000 jobs a month. ... If we were getting 300,000 jobs a month, we would get back to health in the labor market in about 3 years. ... As it stands now, we're headed in the right direction, but it's going so slowly that we are still going to have years and years of elevated unemployment.

    Check out the Atlanta Fed's job calculator, from the Center for Human Capital Studies, to see when we could reach full employment.

    As for especially hard-hit sectors that we have focused on in the recent past: manufacturing showed no job gains and hasn't for a year. (See our "Man vs. Machine" segment on the plight of manufacturers). Interestingly, there were no jobs gain in health care or government.

    The joblessness rate for teens ages 16 to 19 actually went up ever so slightly, though their official unemployment rate edged down, suggesting that more teens, like their elders, simply stopped looking for work altogether.

    And for African-American teens, a demographic on which we've also been focusing on Making Sen$e? Their official unemployment rate is 41.6 percent. For more on the challenges youth -- and especially inner-city youth -- face finding employment, see our two segments below.

    Watch Video

    In our first Making Sen$e report on youth unemployment earlier this month, we examined obstacles inner-city youth face to finding jobs.

    Watch Video

    As reported in this week's Making Sen$e story on youth unemployment, the number of jobs available to 16- to 19-year-olds has decreased by half since the 1990s.

    This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @paulsolman

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    By Joel Slemrod

    Money and Taxes The correlation between states having no income tax and their economic growth is not as direct as Reagan White House economic adviser Arthur Laffer says it is, argues tax economist Joel Slemrod. Photo courtesy of Jon Boyes/Getty Images.

    Paul Solman: In February, I was pointed to a study by the Institute on Taxation and Economic Policy that began:

    "Lawmakers in about a dozen states are giving serious consideration to either cutting or eliminating their state personal income taxes. In each case, these proposals are being touted as a way to boost economic growth.

    "One claim often made during these debates is that the nine states without personal income taxes are outperforming the rest of the country, and that their growth can be easily replicated in any state that dares to abandon its income tax. Some have also claimed that the nine states with the highest top income tax rates are experiencing below-average growth. The governors of Indiana, Oklahoma, and South Carolina, as well as high-ranking officials pushing for income tax repeal in Louisiana and North Carolina, are just some of the more influential lawmakers that have attempted to frame the debate in this way.

    But these talking points, which have been widely disseminated by the American Legislative Exchange Council (ALEC), Americans for Prosperity, and The Wall Street Journal's editorial board, are based on an analysis by supply-side economist Arthur Laffer that is extremely flawed."

    Louisiana Republican Gov. Bobby Jindal shelved his plan to eliminate the state's income tax in April under pressure from state legislators. To the north, however, in Oklahoma, Republican Gov. Mary Fallin signed into law a quarter point reduction in the state's income tax, bringing it down to 5 percent with the hope of attracting business to the state.

    But the study seemed a persuasive piece of work, so I interviewed former Reagan White House economic adviser Arthur Laffer about the study and his work in general, including the inflection point of his famous "Laffer Curve," which we featured on the Business Desk Thursday.

    But since the research had been sent to me under the heading "Contra Laffer," I wanted a more impartial point of view. So I sent both the research and my interview with Laffer to the distinguished University of Michigan tax economist Joel Slemrod for a response. Here it is:

    Joel Slemrod: I've never had the chance to meet with Dr. Laffer, but his work has been a presence throughout my professional career. I was in graduate school at Harvard just when the Laffer Curve was at its hottest, and my adviser Martin Feldstein was at the front lines of the debate about the effect of taxation on the economy.

    ARTHUR LAFFER: How Low Can They Go? In Defense of Slashing State Income Taxes

    On some basic points, Laffer and I are in complete agreement: taxes can affect the decisions of individuals and firms on a wide variety of margins, and these potential behavioral responses should be considered in formulating policy. As Laffer says in his interview with Paul, the issue really is not whether taxes can affect behavior -- in 2013, this is indisputable. The issue is how big the effect is and what its policy consequences are.

    As of the late 1970s, though, there was much resistance to this idea. I distinctly recall Feldstein's reaction in the classroom to some of this evidence. He said, "When you ask business leaders to rank the top 10 factors in a business location decision, taxes often come out near the bottom of the list. But if you ask CEOs whether they make decisions based on pre-tax values or after-tax values, they look at you like you're crazy and say 'after-tax, of course.'"

    Paul's interview begins with Laffer offering himself and his family as a data point for the proposition that taxes, in this case, state income taxes, matter. He claims his family moved from California to Tennessee exclusively because of taxes; they would not have moved unless Tennessee had zero income tax. Of course, budgets being what they are, the lack of an income tax has other implications -- something has to give.

    In Tennessee's case, one thing that gives is that it has the highest combined state and local retail sales tax rate in the United States: 9.45 percent, according to the Tax Foundation. That the sales tax rate in Tennessee did not figure prominently in the Laffer residence's decision to move suggests something about the family's projected mix of income and consumption, and many others would undoubtedly weight the sales tax rate relatively more than he does. (He doesn't even mention it.)

    Another thing that might have to give is the level of public spending: other things equal, as we economists like to say, collecting no income tax revenue means the government has less to spend on services that most citizens value, such as education, health care and infrastructure. But in his interview, Laffer makes clear that this doesn't bother him because, he believes, more money does not provide better public services. This is a controversial statement that he backs with a few anecdotes, but it is not one that is widely held, the possibility of greater public-sector efficiency (getting better public services for less money) notwithstanding.

    Most of the Laffer interview concerns the effect of state income tax policy on economic performance. But having spent my entire career on the economics of taxation, I can say with some certainty that establishing the link between tax policy -- or, for that matter, any economic policy -- and economic performance is a difficult enterprise. The fundamental problem is that we observe tax policies that were enacted and we then observe indicators of states' economic performance under these policies, but we do not observe what economic performance would have been under other policies; we do not, because we cannot, observe what economists call the counterfactual. Economists have developed increasingly sophisticated statistical techniques to try to tease out the causal link between policies and performance but often still cannot establish causal effect conclusively.

    Laffer's analysis is not sophisticated, and instead aspires to be simple and straightforward. It focuses on the nine states that have no income tax and the nine states with the highest income tax rates, while ignoring the other 32 states. It then looks at three measures of economic performance in these 18 states, shows that they look a lot better in the no-income-tax state group, and seeks to conclude that the performance differences are likely caused by the income tax policy differences. Stated starkly, the key assumption of this exercise is that, were it not for the difference in income tax policy, the two sets of states would have performed about the same. But this is a very strong assumption and one that is really not verifiable. I don't mean that one cannot learn from such an exercise, but strong and clear conclusions cannot be drawn.

    What are the three metrics of economic performance Laffer uses? The first two are the percentage increase in state gross domestic product and non-farm payroll employment. The third metric is the absolute number of domestic net migration in and out of the state. This last one is a bit bizarre because it focuses on absolute rather than percentage changes. Thus, no matter how big the percentage migration to a small state, it will be a tiny number of people compared to even a small percentage migration into a big state. For example, over the last decade, Delaware had one of the largest percentage domestic migration rates, but it comes in the middle of the pack of the Laffer ranking because the net migration didn't amount to that many people.

    More importantly, none of the three metrics captures what's happened to the level of well-being of a typical resident, most commonly measured by per capita income or per capita gross domestic product. Instead, all of Laffer's metrics are aggregate measures; for any given per capita measure, if the state's population grows, the measure goes up.

    Thus, if the state's residents are getting poorer over time, but there are more of them for whatever reason, aggregate state gross domestic product might rise. Of course, Laffer is aware of this, and in the reports that discuss this analysis, he argues that population growth is a perfectly reasonable indicator of the attractiveness of a state's fiscal system: if the state's economic climate is good, it will attract more people and more businesses and reduce the emigration of individuals and firms from the state.

    What it comes down to is whether you believe that the large demographic shifts across states over the last decade (and before that) have been materially caused by the different income tax policies or whether you believe these two phenomena are largely coincidental. For a few reasons, I believe it's the latter.

    Is a Low Income Tax Rate Indeed the Elixir of Growth?

    First, there are other analyses of this issue, which you can read here and here, that make arguably better methodological choices that do not come to the same conclusions as Laffer's analysis.

    Second, it is simply not true that the states that have chosen not to levy income taxes have higher per capita incomes. The average rank of the no-income-tax states is lower than the average rank of the high-income-tax states. If a low-income tax rate was indeed the elixir of growth, then over time, this higher growth would result in higher well-being of the state residents, but no such correlation appears. The average rank of the no-income-tax states in terms of decadal growth in per capita income is a bit higher than in the high-income-tax states, but not much higher. What differentiates the two sets of states is population growth, and I don't think the income tax policy differences were instrumental in driving this.

    Just because it is difficult to find compelling evidence for a hypothesis does not mean the hypothesis is not true. So many economic crosscurrents have buffeted states over the last decade that it is not surprising it is difficult to tease out the impact of any one aspect of any single economic policy on state economic performance.

    Taxes do matter. States should watch carefully taxes on particularly mobile factors, firms or people. Consumption-based taxes score higher on an economic performance criterion than income-based taxes. But, of course, this is not the only criterion for judging tax policy -- equity matters, too.

    Where Are We on the Curve?

    Now a few words on the famous eponymous Laffer Curve. The brilliance of the curve is that it captures vividly the idea that pushing tax rates too high will eventually become counter-productive in terms of revenue. No one benefits if raising tax rates reduces revenue -- certainly not those who are taxed, and not those who would benefit from collecting additional revenue. But the question is at what tax rate a perverse revenue response would actually kick in. I think it is fair to say that the vast majority of the public finance community believes that the United States is far below that point. See Peter Diamond's response to Laffer in this Making Sen$e piece and his paper with Emmanuel Saez that makes the point in academic detail.

    The Laffer Curve shows a hypothetical relationship between taxes and government revenue.

    The belief that tax rates are currently well below their revenue-maximizing level is largely, though not entirely, based on an analysis of the Reagan-era tax cuts. That these tax changes affected behavior is indisputable -- lower taxes did induce some people to work more -- but the behavioral response was nowhere near large enough to increase aggregate revenue.

    Would a marginal tax rate of 70 percent or higher on every dollar earned above some top income threshold result in more or less total tax revenue due to a behavioral response? This is a more controversial question. But right now, the marginal rate is 39.6 percent, and a family must earn more than $400,000, after subtracting deductions and exemptions, before it kicks in. Every dollar above $400,000 is then taxed at 39.6 percent. For total revenue to decrease, high earners would have to cut back their taxable income substantially.

    Just as with the analysis of U.S. state data, the fact that we are on the benign side of the Laffer curve does not imply that we should ignore the economic costs of tax disincentives. Even if a tax increase raises revenue, it does so while imposing costs on the efficient operation of the economy. Although the starkest statements of the importance of behavioral response may not be true, policy makers should not ignore these responses.

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    In this 2012 Making Sen$e report, Arthur Laffer defends his famous curve, even drawing it on a napkin the way he did for the Ford administration, and Nobel Laureate Peter Diamond responds.

    This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @paulsolman

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    Samantha Power, senior director of multilateral affairs with the U.S. National Security Council waves to family members as she speaks during a nomination announcement with President Barack Obama, and Susan Rice, then-U.S. ambassador to the United Nations. Power was confirmed as the new UN ambassador Aug. 1. Photo by Andrew Harer/Bloomberg via Getty Images.

    WASHINGTON -- The Senate easily confirmed President Barack Obama's selection for ambassador to the United Nations on Thursday, capping a month in which senators used a bipartisan truce on once-mired nominations to fill a cluster of vacancies in the president's second-term administration.

    Senators approved Samantha Power for the post by 87-10. The vote put the former Obama foreign policy adviser and outspoken human rights advocate into the job formerly held by Susan Rice, whom the president has made his national security adviser.

    "As a long-time champion of human rights and dignity, she will be a fierce advocate for universal rights, fundamental freedoms and U.S. national interests," Obama said in a written statement after the vote.

    Power joined a stack of nominees that senators have approved since striking a bipartisan deal in mid-July. Late on Thursday, the Senate also confirmed:

    Army Gen. Martin Dempsey for another two-year term as chairman of the Joint Chiefs of Staff, and Adm. James Winnefeld, the vice chairman of the Joint Chiefs.

    Jason Furman, a veteran White House economic official, as chairman of the president's Council of Economic Advisers.

    Michael Sean Piwowar of Virginia, Kara Marlene Stein of Maryland and Mary Jo White of New York to the Securities and Exchange Commission.

    James Costos of California as U.S. ambassador to Spain.

    Republicans agreed to allow votes on seven of Obama's picks after Democrats agreed to drop plans to invoke the so-called nuclear option, forcing Senate rules changes that would have made it harder for the chamber's minority parties to block some nominations.

    Over the past three weeks, senators have approved Obama's choices to head the Environmental Protection Agency, the FBI, the Consumer Financial Protection Bureau and other agencies.

    With Congress about to start a summer recess, many leaders are hoping that the bipartisan cooperation will survive into the fall, when lawmakers face nasty fights over the budget, immigration and other issues.

    Underscoring the limits of the truce on nominations, all but one Republican banded together earlier Thursday to prevent the Senate from debating a $54 billion measure financing transportation and housing programs. That dispute evoked partisan passions on both sides, with Republicans accusing Democrats of busting budget limits and Democrats saying the GOP was bowing to extremists.

    The Irish-born Power, a one-time journalist who also has a Harvard Law School degree, has reported from many of the world's trouble spots and won a 2003 Pulitzer Prize for a book on the meek U.S. response to many 20th century atrocities, including those in Rwanda and Bosnia in the 1990s. She has long backed intervention -- including military force -- to halt human rights violations.

    Power has been "a tireless defender of human rights," said Senate Foreign Relations Committee Chairman Robert Menendez, D-N.J. "She has seen the tragedy of human suffering from the front lines, first hand."

    Speaking against her nomination was Sen. Marco Rubio, R-Fla.

    He said the next U.N. ambassador must focus on making sure the world organization is "more accountable, that it is more effective and that it is just not some multilateral ideal in which we invest all of our hopes." He said he doubted the administration's and Power's willingness to do that.

    Power's penchant for outspokenness has included her 2002 call for a "mammoth protection force" to prevent Middle East violence, from which she has distanced herself.

    Two weeks ago, Venezuela said it was calling off efforts to restore normal relations with the U.S. after Power said at her Senate confirmation hearing that the South American country was guilty of a "crackdown on civil society." She also called the U.N.'s inaction to end the large-scale killing in Syria's civil war "a disgrace that history will judge harshly."

    In 2008, she resigned as an adviser to Obama's presidential campaign after calling then-rival Hillary Clinton a "monster."

    "Certainly no one can question her willingness to speak her mind," said Menendez.

    On Wednesday, the Senate endured a nail-biting marathon vote on another nomination that frayed but kept intact the chamber's recent bipartisan spirit toward nominations. That involved B. Todd Jones, whom the chamber ultimately approved to become director of the Bureau of Alcohol, Tobacco, Firearms and Explosives.

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    Leon Panetta, left, then-director of the CIA, sits with National Intelligence director James Clapper, center, and FBI director Robert Mueller, to testify before the Senate Select Committee on Intelligence in February 2011.

    "To be in charge of the FBI during the heart of the war on terrorism was not only a challenge, but it involved a transformation as well," said Leon Panetta, former defense secretary under the Obama administration and director of the CIA from 2009 to 2011. Panetta offered reflections on outgoing FBI director Robert Mueller in a phone conversation with NewsHour senior correspondent Ray Suarez on Friday.

    Listen to their conversation:

    Robert Mueller took the helm of the FBI just a week before the attack on September 11, 2001, an event that "fundamentally changed the role of that agency," according to Julian Zelizer of Princeton University, who joined Michael Chertoff in a discussion with Ray Suarez on the PBS NewsHour on Thursday.

    Under Mueller, who led the agency for 12 years, the FBI made a major organizational transition from being concerned with catching bank robbers and drug dealers to remolding itself into an international intelligence and anti-terror agency.

    As the FBI's mission changed, Panetta says that Mueller's leadership helped develop and define the relationship between the FBI and CIA. He also helped bring the two agencies together.

    "We were confronting the same challenge, we were confronting the same enemy, we were confronting the same concerns about terrorism and it made sense for both of us to bring the best of our capabilities together to be able to protect the country."

    Panetta says that he and Mueller developed a close personal relationship, and that they had many discussions about the challenges of not going overboard in using increasing technological capabilities and capacity to snoop.

    "I developed a tremendous amount of respect for his integrity," Panetta said of Mueller.

    The former CIA director says he doesn't believe the intelligence and law enforcement community needs to choose between the need to protect the country and respecting the Constitution and Americans' right to privacy.

    "For all the laws you put in place, for all the standards you put in place, it really does come down to the integrity and statesmanship of those who have to enforce those laws."

    On Friday, the State Department issued a travel alert for Americans, warning for the possibility of terrorist attacks by al-Qaida. It also announced that it was closing some diplomatic missions abroad through the weekend.

    Panetta says that despite major gains in weakening the al-Qaida leadership, "they still are a threat."

    "It still is very important that agencies like the FBI ... do everything possible to make sure that we get ahead of this problem and ensure that we have the best information, the best intelligence possible, in order to protect the American people."

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    JEFFREY BROWN: Unemployment is down, but job growth still leaves a lot to be desired. That's the upshot of July's jobs data from the Labor Department.

    The NewsHour's economics correspondent, Paul Solman, has our story, part of his reporting on Making Sense of Financial News.

    PAUL SOLMAN: Today's report suggested that the economic recovery may be slowing down. Employers added only 162,000 new jobs last month, 23,000 less than economic forecasters' consensus predication.

    The new jobs total was the lowest since March. Moreover, the government revised job growth for May and June, down by 26,000. As for the new jobs, most were in lower-paying industries like retail, hotels, and restaurants. Even though inflation continues to rise, the average hourly wage actually dropped by two cents, the first decline in wages since last October and the most since late 2011.

    Overall, the economy has created nearly 200,000 jobs a month since the start of the year. And while those aren't exactly terrible numbers, they certainly don't represent robust growth after a deep recession, especially if the working age population grows by 200,000 a month, as it did in July.

    As Heidi Shierholz of the Economic Policy Institute points out, even at 200,000 a month, it will take much longer than many people realize to reduce unemployment decisively.

    HEIDI SHIERHOLZ, Economic Policy Institute: If we continue with that pace of job growth going forward, we get a little less than 200,000 jobs a month, every single month, indefinitely, we won't fill the jobs gap for another five years.

    PAUL SOLMAN: Today's announcement came on the heels of another lackluster report that showed the U.S. economy grew only slightly last quarter, gross domestic product up an indolent 1.7 percent.

    Today's best news was that the unemployment rate slid to 7.4 percent from 7.6 percent, marking a four-and-a-half year low. That's partly due to workers finding new opportunities in an improving labor market. But some of that decline can be attributed to the shrinking size of the work force, as more baby boomers, 10,000 of them a day reaching the full Social Security age of 66, and, says Shierholz, there's another reason the unemployment rate has been dropping.

    HEIDI SHIERHOLZ: The unemployment rate right now is vastly overstating the improvement in the labor market, in the recovery, because we have so many workers who have dropped out of the labor force, or never entered it because job opportunities are so weak.

    PAUL SOLMAN: Job opportunities as especially weak in manufacturing, which showed no job growth in July. Factory jobs have remained at a standstill for a year now. And the numbers for both long-term unemployment and part-time workers looking for full-time jobs remained unchanged last month.

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    KWAME HOLMAN: The jobs report sent Wall Street lower at first, but in the end, stocks managed small gains.The Dow Jones industrial average added 30 points to close at 15,658.The NASDAQ rose nearly 14 points to close at 3,689.For the week, the Dow gained just more than half-a-percent; the NASDAQ rose 2 percent.

    The defense rested today in Boston in the murder and racketeering trial of James "Whitey" Bulger.The reputed former underworld boss opted not to testify.Instead, he told the federal court judge, "As far as I'm concerned, this is a sham."

    Bulger is accused in the murders of 19 people, among other crimes.Closing arguments are set for Monday, and the jury is expected to get the case on Tuesday.

    The Italian coalition government initially struggled today to deal with fallout from Silvio Berlusconi's tax fraud conviction.The country's Supreme Court upheld the former prime minister's four-year prison sentence on Thursday.The 76-year-old media billionaire also is likely to lose his seat in parliament.

    Today, Prime Minister Enrico Letta played down prospects that Berlusconi's supporters might bolt from the governing coalition.

    ENRICO LETTA, Italian Prime Minister (through interpreter):I am fully aware that this is a delicate moment politically.I said yesterday -- and I repeat it now -- I am a person who puts Italy before anything else.If there is someone who wants to put other priorities first, then I think it is important at this time to have clarity on what those priorities are.First of all comes the country.First of all is Italy.

    KWAME HOLMAN: Berlusconi condemned the court ruling, but it is unlikely he will serve actual jail time.Instead, he's likely to do a year of community service or a year of house arrest.

    In Egypt, the Muslim Brotherhood organized new mass marches, despite government warnings such gatherings would be broken up.Supporters of deposed former President Mohammed Morsi marched to the military intelligence headquarters in Cairo.They also started a new sit-in at the airport.But amid the protests, state TV announced police will begin blockading existing sit-ins.The interim cabinet has warned the camp sites will be disbanded one way or the other.

    The U.S. Supreme Court refused today to stay an order that California release 10,000 state prison inmates.A lower federal court required the release by year's end to ease crowding.Gov. Jerry Brown argued the state needed more time to find alternatives and letting out more prisoners early will jeopardize public safety.The state's 33 prisons are reported to be at 150 percent of capacity.

    Those are some of the day's major stories.

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    JUDY WOODRUFF: And we return to the jobs story with a look at how difficult the labor market is for people with disabilities and what can be done about it.

    Estimates show that of the 54 million Americans with a disability, just 20 percent are employed or seeking a job. A new report out today has recommendations to improve those prospects. It comes from Delaware Governor Jack Markell, the current chairman of the National Governors Association.

    I spoke with him just a short time ago.

    Governor Jack Markell, thank you for talking with us.

    GOV. JACK MARKELL, D-Del.: Good to be with you. Thanks so much.

    JUDY WOODRUFF: So we know from today's unemployment report the jobs picture is improving, but it's slow. There are still something like 11 million or 12 million Americans out of work who would like to have a job. Why focus on people with disabilities?

    JACK MARKELL: There are so many companies around the country that are looking for people with particular skills. And the fact is we have got to focus on the ability and not on the disability.

    And we have seen so many companies around the country benefit when they give people with disabilities a shot at employment. And that's really what this is all about.

    JUDY WOODRUFF: You are saying in this report that you have issued today that it's not about a social service on the part of employers, but it's about the bottom line. Explain what you mean by that.

    JACK MARKELL: One of the most exciting things about the last year was talking to so many businesses who have told us that they employ people with disabilities not because it's charity, but because it's in the best interest of their shareholders.

    They found that people with disabilities have these skills that they're looking for, they're incredibly loyal, they show up on time, they're delighted to have the job, there's less turnover. And so when you hear the CEO of a company like Walgreens, Greg Wasson, tell his fellow CEOs that that's why he hires people with disabilities, it's very exciting.

    And what we're trying to do is make sure that governors have all the tools that they need to be supportive of businesses around the country who want to provide employment opportunities to people with disabilities.

    JUDY WOODRUFF: Governor, if that's the story, then why aren't more people businesses hiring people with disabilities?

    JACK MARKELL: We need to get the word out. That's number one.

    I think not enough businesses are hearing this message. They don't know that there are so many successful examples of companies that are providing these employment opportunities to people with disabilities and how well it's working out. That's number one.

    Number two, states have to do a much better job. I think for too long states have approached businesses asking businesses as a favor to provide employment opportunities for people with disabilities really as a charity. That's not what this is about. We have to change our mind-set. We have to recognize that we're business partners.

    A lot of these businesses are looking for people with skills. We bring those people. We bring people. It could be people with disabilities. It might be people who are traditionally abled. We have so many opportunities to bring people with the necessary skills. And I think the better we do as states and the more that businesses hear from other business, the more successful we will be.

    JUDY WOODRUFF: Governor, give us some examples of the kind of job, the kind of work people with disabilities, either physical disabilities or intellectual disabilities, are doing or can do that might surprise our audience?

    JACK MARKELL: There is such a wide range. Let me give you an example.

    We have a company. Actually, it's in Delaware, but it's a regional company, thousands of employees. They have committed over the next few years that 3 percent of their consultants will be people with autism because they found that many people with autism are great at data testing and software quality analysis and the like.

    We have met executives at Microsoft and at Highmark insurance company who are deaf. Walgreens is an incredible employer. Half of their employees at distribution centers in South Carolina and Connecticut have a range of disabilities. That's why the focus has to be on the ability and not the disability.

    People have so many different things to offer, but so often these folks have not been given a shot, and we're trying to change that.

    JUDY WOODRUFF: But you're not talking about a state government requiring employers to do something, is that right?


    And the beauty of this is if you talk to these businesses, once they give some of these folks a shot at employment, they find out it's actually in the best interest of their own shareholders. So this is not a requirement. We do believe that we as states have to do a better job of walking the walk and being a model employer of people with disabilities, but businesses will choose to do it.

    When they have all the facts, businesses will choose to do it for their own appropriate reasons, mainly what's in the interest of their shareholders. The other thing we have got to do is we have got to do a much better job of preparing our youth with disabilities for a lifetime of expectation of employment and not for a lifetime of expectation of being on public benefit.

    JUDY WOODRUFF: Well, that leads to a question I was thinking about. And that is, what do you think it is going to take for individuals with disabilities in this country -- and, as you said, there are millions of them who are not working -- to have something close to the opportunity that individuals who are able-bodied have to work?

    JACK MARKELL: Well, part of it is we states, governors have to do a better job of really making disability employment part of our overall work force development strategy.

    It's a change in a cultural mind-set away from charity and more toward what's in the best interest of the businesses. That's number one. Number two, we have got to do a better job of actually talking to businesses, recruiting businesses and hearing -- and having businesses hear from each other.

    I'm telling you that when a CEO of a company hears the CEO of Walgreens or the CEO of Lowe's or Office Max or UPS talk about why employing people with disabilities is right for their business, they hear that. And it's not just big businesses. It's medium-sized businesses as well. So we think there's several different strategies. We have issued this blueprint today that's very practical in nature, very concrete suggestions, but it does start as well with setting expectations for our young kids with disabilities, that they, in fact, can work. They will work.

    We believe in them. They will believe in themselves. And we have got to work hard to make sure those opportunities are there for them.

    JUDY WOODRUFF: Governor Jack Markell of Delaware, thank you very much.

    JACK MARKELL: Thanks, Judy.


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    JEFFREY BROWN: The U.S. State Department issued a global travel alert today, citing a threat from al-Qaida. The statement particularly warned American citizens in the Middle East and North Africa. It said al-Qaida "may focus efforts to conduct attacks in the period between now and the end of August."

    Twenty-one embassies and consulates will be closed this weekend in mostly Muslim nations, stretching from West Africa to Bangladesh, as a result of the increased threat.

    Margaret Warner has been reporting on this all day and joins me now.

    Welcome, Margaret.

    MARGARET WARNER: Thanks, Jeff.

    JEFFREY BROWN: What have do we know about the specifics -- how specific the threat is?

    MARGARET WARNER: Well, first, we have to start to say that those who really know aren't talking in detail, and a lot of those talking and speculating don't know.

    But we do know that there was a lot of credible -- an increase in credible what's called chatter over the last week to two weeks, perhaps bolstered by something very specific this week. We do know that it was fairly specific as to timing, that something big is in the works some time in this period covered, either -- especially from now until early next week where the embassies are closed and really through the rest of the month potentially.

    What is not known, apparently, is location or targets, not location geographic necessarily or targets, but the threat does come from or connected to the radical organization, the jihadi organization in -- headquartered in Yemen AQAP, or al-Qaida in the Arabian Peninsula, which, as you will recall, was behind the Christmas Day bomber of 2009, also the plot to try to send explosives through the air in 2010.

    JEFFREY BROWN: Well, so what does it mean for the embassies and for travelers right now?

    MARGARET WARNER: Well, Jeff, for embassies, they're not sending personnel home, but it means that Sunday, which would be the start of the workweek in the Muslim world, they will be closed. That means local staff will come in. No members of the public will come in, nobody needing a visa or wanting to see the consular section.

    And in many areas, many of the staff inside the compounds won't come out. But these compounds are heavily fortified and many people live on -- they're like a base. And those people may go to work.

    What it means for travelers -- and now, again, this is not a worldwide travel ban, but what's curious or interesting to me in this travel alert is the focus on public transportation systems, to avoid public transportation, to remember that terrorists are good at attacking subways and trains and airplanes. And that focus I think is worth travelers taking a -- taking note.

    JEFFREY BROWN: And, finally, I want to pull that map back up because it's really notable what a large area this is. How unusual is that, and why such a large stretch?

    MARGARET WARNER: Well, the State Department cannot think of a precedent for this. I can't say it's unprecedented, but they can't think of one.

    This reflects not only an abundance of caution, which is what the State Department says, but also the fact that in the last two years during this turmoil of the Arab spring, a lot of these different al-Qaida wannabes or linked affiliates -- that's al-Qaida in the Arabian Peninsula, but also al-Qaida in Northern Africa, or AQIM, and also a newly resurgent al-Qaida organization from Iraq which is now fighting in Syria -- that they are all resurgent.

    They have all taken more territory, the region's awash in weapons, and that there's a lot of interconnection, more than there used to be, among them. Furthermore, you had prison breaks in both Iraq and Libya which have released all these other hardened fighters. And you have got foreign fighters pouring into places like Syria and Iraq and also -- and also the Arabian Peninsula.

    So bottom line is, U.S. intelligence doesn't think they're all being directed by some master plotter al-Qaida core, but there is a belief that they're no longer the neat little separate franchises they were once thought to be.

    JEFFREY BROWN: All right, and watching a very wide area.

    Margaret Warner, thanks so much.

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    JUDY WOODRUFF: Next, a look at the debate over exporting coal through the Pacific Northwest.

    The latest figures from the International Energy Agency show a record-breaking global increase in carbon dioxide emissions last year. Coal accounted for 44 percent of the rise. But, in the United States, demand for coal is dropping. As a result, American companies are looking to send more abroad.

    Special correspondent Katie Campbell from of KCTS Seattle has the story. She reporters for the environmental public media project EarthFix.

    KATIE CAMPBELL: It's the heart of the crab fishing season in the Salish Sea. This network of coastal waterways extends beyond the border of Washington State into British Columbia.

    It's one of the largest and most biologically rich inland seas in the world. Jeremiah Julius is a fisherman from the Lummi tribal community.

    JEREMIAH JULIUS, fisherman: The whole landscape is sacred to us. There's not much contaminant-free lands left in the United States. This is one of them.

    KATIE CAMPBELL: For hundreds of generations, his tribe has relied on the halibut, salmon and crab that thrive in these waters.

    JEREMIAH JULIUS: Fishing is who we are. Fishing is our culture. And to us, culture is fish. It's just in our blood.

    KATIE CAMPBELL: But there's a storm brewing at Cherry Point, just north of Bellingham, Wash. This is where SSA Marine plans to build the largest coal export terminal in North America. Nearly 500 ships would travel these waters every year, carrying coal to the other side of the Pacific.

    Asia now consumes more coal than rest of the world combined. In the next three years, countries there are expected to double the amount of coal they import today. That soaring demand spells opportunity for U.S. companies, says Bob Watters, director of business development for SSA Marine.

    BOB WATTERS, SSA Marine: Our particular project, Gateway Pacific terminals, when built and fully operational at full capacity, would generate approximately $5.5 billion in foreign monies infused back into the U.S. economy.

    KATIE CAMPBELL: This possibility has placed the Northwest in the middle of a controversial debate: Should the region build export terminals that would open lucrative markets for the world's dirtiest fossil fuel? As the nation's economy continues to struggle, can the country afford not to?

    Gillette, Wyo. lies in the heart of the nation's largest coal mining region. One out of every six people here works for the coal industry, people like Phil Dillinger.

    Mining has provided a steady salary to support his family and send his four children to college.

    PHIL DILLINGER, coal miner: It's that stability of knowing that every two weeks, I'm going to get a paycheck. And that's -- that's a huge, huge thing.

    KATIE CAMPBELL: Dillinger's job is loading coal into trains.

    PHIL DILLINGER: So our job is from the time it's dumped into that coal hopper all the way to the time when we load it onto the trains. That's coal processing. So, that's what I do. On an average, it takes a minute to a less than a minute to fill up one car, one train car of coal.

    KATIE CAMPBELL: The United States relies on coal to provide about 40 percent of the nation's energy. But in recent years, U.S. utilities have been switching from burning coal to burning natural gas.

    That trend has pushed U.S. coal companies to search for customers in Asia. The most direct path would be to send coal trains through the river valleys of the Northwest to its deep-water ports, where ships can complete delivery to across the Pacific.

    The only obstacle is the lack of adequate coal export facilities. Cherry Point is one of a handful of places in Washington and Oregon considering building coal export terminals. These facilities would allow U.S. coal companies to ship up to 100 million tons of coal to Asia every year.

    If these terminals are built, communities along the railroad could see between 18 and 37 additional coal trains a day. And each coal train can stretch a mile-and-a-half long. Some scientists and physicians worry that these trains will have an adverse effect on the air quality around them.

    Professor Dan Jaffe is a leading expert in atmospheric pollution. He's begun to take a closer look.

    DAN JAFFE, University of Washington-Bothell: We stood on the bridge over the tracks at Richmond Beach and we measured particulate matter concentrations that were well above the health thresholds.

    The data we have collected on diesel and coal exhaust on trains is very preliminary. I'd be disappointed to see a policy decision go forward without more information on the air pollution impacts.

    KATIE CAMPBELL: In 2009, a BNSF Railway representative testified in a Department of Transportation committee meeting that as much as 645 pounds of coal dust is lost from each car during a 400-mile journey. And if a coal train usually has about 125 cars, the amount of dust could add up quickly.

    BNSF now requires companies that ship coal to apply what's called surfactant or a topper agent to coal trains before they leave the mines. They say this helps suppress dust by about 85 percent.

    Physicians like Martin Donohoe, a Portland-based public health advocate, also worry about the diesel exhaust coming from train locomotives.

    MARTIN DONOHOE, physician and public health advocate: We know from numerous peer reviewed population wide studies that there is an increase in asthma exacerbation when people are exposed to diesel particulate matter.

    It's important to realize that the particles from the coal trains are microscopic, ultra-fine particles that you can't see. But they're the ones that do the real damage because they make it to the deepest parts of the airways. So you may not be seeing it, but you're breathing it, and it's affecting you.

    KATIE CAMPBELL: There are currently three coal trains a day that travel through the Northwest carrying coal to ports in British Columbia. Canadian ports are already operating at near capacity. They too would need to expand in order to ship more coal abroad.

    Here at the Westshore terminal in British Columbia, about 1. 5 million tons of coal is waiting to be shipped to Asia.

    BOB WATTERS: Westshore was built in the 1970s. So the environmental laws and requirements and regulations are much different than they are today. Comparing what Westshore terminal is and what our terminals are going to be, on an environmental basis, it's looking at a 1970 GTO versus a Prius.

    KATIE CAMPBELL: Unlike the Westshore facility, the Gateway Pacific Terminal is designed so the coal would be covered during the loading process.

    BOB WATTERS: We've built in a great deal of design elements to protect the environment. We have all of our conveying systems on the terminal are covered. Any conveying systems that go out over the water are actually completely enclosed.

    We don't think it's an either/or proposition. We think that you can develop family wage jobs and be good stewards and protect the environment.

    KATIE CAMPBELL: For Jeremiah Julius, the environmental impacts outweigh the economic benefits.

    JEREMIAH JULIUS: And they say we are going to lose all these jobs and taxes if we don't go in, which to me is false because you can't lose something you don't have. We have our fish. We have our salmon. We have clean air. We'll lose that. That's losing to me.

    To me, these tankers are the trains that killed off the buffalo. These tankers are going to kill my way of life. So to me, this is -- it is a battle.

    KATIE CAMPBELL: Before any of the coal export terminals can be permitted to be built, the potential environmental impacts of these facilities must be studied. It's a process that can take months, possibly years.

    JUDY WOODRUFF: Federal and state regulators announced this week that they are extending the scope of the review process at Cherry Point to consider climate change, human health and the impacts of transporting coal by rail.

    For the record, BNSF Railway Company is a NewsHour underwriter.


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    JEFFREY BROWN: And we turn now to a new portrait of how Americans view themselves and their economic futures.

    Ray Suarez has our look.

    RAY SUAREZ: For decades, white, Hispanic and black Americans have felt similarly optimistic about their chances of improving their lives and economic prospects. But a study out this week shows that, since about 2006, whites have become more pessimistic. At the same time, blacks and Hispanics have grown more optimistic.

    Now we ask why.

    Joining me are Matt Barreto, a political science professor at the University of Washington and co-founder of the opinion research group Latino Decisions, and Ellis Cose, the author of "The End of Anger: A New Generation's Take on Race and Rage."

    Professor Barreto, by so many measures, white families are doing better. You know, simply taken in the aggregate, the socioeconomic measurements are just better. Why so much pessimism?

    MATT BARRETO, University of Washington: Well, I think it reflects what we call a ceiling effect, and that is that whites have been doing better for a very long time.

    You can go back to the post-World War II era, when whites really started moving into the suburbs and the upper middle class, and so they have occupied that top rung of doing better for a very long time. And now as they start to evaluate their position, I think a lot of white Americans are saying we don't see ourselves growing anymore. We have been at this top rung and we're not growing.

    And instead we see other groups are also growing. And that leads to a little bit more pessimism in their own reflection of their group, that perhaps they have already achieved the highest rung that they're going to achieve.

    RAY SUAREZ: Ellis Cose, conversely, black and brown Americans are more likely to be unemployed, less likely to have a college credential, by a lot of socioeconomic metrics, just doing worse. How do you explain the optimism?

    ELLIS COSE, author: Easy.

    I was speaking when I was doing research to a guy named Dave Thomas, who is a business school professor at Harvard, and he used the phrase “irrational exuberance” to explain what we were then picking up in the polls, because this poll finding is not new. It goes back several years.

    And in essence part of it that what African-Americans are looking at and Latinos as well is aspirational. They're looking at the future. We have gone, as Matt basically said, from being a country that was basically and totally dominated by whites to something very different now.

    And so for the first time you have African-Americans who are saying it's possible to break through some of these ceilings that it was impossible to break through a generation ago. And when you're talking about the future, the fact that unemployment for African-Americans has been roughly twice what it is for white Americans pretty much forever, that doesn't affect how you see the prospects for your child, because you say my child might be able to become a CEO of a corporation. My child may be able to become a big talk show host. My child may be able to become president of the United States.

    That's something you couldn't say a generation ago, and that's revolutionary.

    RAY SUAREZ: Professor, it's not a 4 percent, 5 percent, 6 percent difference. It's a huge bulge, 25 percent, 28 percent. Does that number, that big number demand to be looked at more closely? You're a guy who works with statistics and samples and polls all the time.

    MATT BARRETO: Yes, Ray, I think absolutely this is something that people should be paying attention to.

    And, as we just heard, this is something that those of us in the research community have been documenting for a number of years, that decline in white optimism and openness, which I think ultimately is also tied to the rise of the tea party in 2009 and 2010, and at the same time what you have had is you have had an increase in that aspirational opportunities for blacks and Hispanics.

    You have seen a black president-elected. You have seen a Latina appointed to the United States Supreme Court. You have seen all sorts of discussion of the black and the Latino vote after the 2012 election, and that makes minority communities feel a bit more empowered and optimistic.

    At the same time, we have seen a steady decline over the last few years of white Americans in terms of how they view their future in relationship, not just to themselves, but in relationship to this growing minority community in the United States, which is flexing its muscle. And I think that does need to be discussed.

    RAY SUAREZ: Families of all races experienced terrible losses during the worst of the recession, but Ellis Cose, the losses among black and brown families were brutal. Doesn't the view of today color how you see the future?

    ELLIS COSE: Well, if you look at people and you ask the question about how their own economic situation is, blacks are no more likely than whites to say that it's good. In fact, they're less likely.

    But if you ask the question is the country on the right path, if you ask the question are my children going to do better, if you ask the question, people like me and my family, are we going to do well, then you have a different story. And I would say a lot of that is about the future.

    And also part of what you're picking up is something generational. My book looked quite closely at the difference in different generations. And the younger generation, the under-40, under-30 generation, sees a different America than the over-40, over-50 generation sees.

    And that's being picked up in the polls as well. They see an America that's more open, that -- where success is more possible. So even if people are struggling now -- and they are -- and African-Americans if you look objectively have a bigger chance of falling out of the middle class now than white Americans do -- so it's brutal.

    But in terms of what's possible for their children and what's possible in the future, you get these responses where people say, you know, things aren't possibly that just weren't possible before. And that sort of trumps the particular situation many find themselves right in at this moment.

    RAY SUAREZ: And, Professor, quickly, before we go, what numbers will you be looking at in the near future to see how these questions will track over time? What will be significant?

    MATT BARRETO: Well, I think we not only want to look at how each individual group evaluates their own opportunities, but I think we should be looking at the cross-pressures here. We should be looking at how groups are more willing to work together and to address what you called the facts on the ground, the fact that blacks and Latinos still do lag behind whites.

    Despite the fact that they're more optimistic today, they're lagging behind. And we want to see all groups working together to make sure we can improve the economy and the situation for all Americans.

    RAY SUAREZ: Matt Barreto, Ellis Cose, gentlemen, thank you both.

    ELLIS COSE: Thank you. 

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    JUDY WOODRUFF: And to the analysis of Brooks and Marcus, New York Times columnist David Brooks and Washington Post columnist Ruth Marcus. Mark Shields is off today.

    Welcome to you both.

    So, let's go back to the lead story tonight, jobs report.

    David, 162,000 jobs created in July, that was added, but it's less than what was expected. What does it tell you about the economy?

    DAVID BROOKS: Yes, I think there's a consensus growing both on left and right that we -- the structural problems are becoming super obvious.

    So when the -- this recession started a number of years ago, you had 63, something like that, out of 100 Americans in the labor force. Now we're down, fewer than in -- than when the recession started. And so that suggests we have got some deep structural problems. It probably has a lot to do with technological change. People are not hiring -- companies are not hiring human beings. They're hire machines.

    It probably has to do with a skills shortage, that as technology increases, skills have got to keep up and skills are just not keeping up. It has to do with some sociological changes, men dropping out of the labor forces, women, and especially young women, never entering the labor force.

    And so these are deep structural changes. And I think there's a consensus growing that something really fundamental has shifted in the economy. And I wouldn't say anybody in the political arena has much of a set of solutions the way they did in the progressive era, the New Deal era, even the Reagan era, that are commensurate with the size of this problem.

    JUDY WOODRUFF: So how much reason for discouragement, Ruth?

    RUTH MARCUS: I'm not going to be Ms. Rosy to David's pessimistic scenario.

    RUTH MARCUS: Here -- this was another limping month in a limping recovery.

    And here are some numbers to just kind of underscore that. The Hamilton Project at the Brookings Institution looked at job growth and said if we added 208,000 jobs -- which, of course, is way better than we did this month -- if we added 208,000 jobs a month, it would take us until April 2020 to just get us back to the place that we were in December 2007, when the mess began.

    And so that just gives you a measure of the dauntingness. And you look not just at -- everybody looks at 7.2 percent, the new unemployment figure. It is down a little bit. But let's take a look at the total unemployment picture, the discouraged workers, the less -- or the people who have just stopped looking for work, the people who aren't working as hard as they would like to, as many hours as they'd like to.

    That's 14 percent of the labor force. I think David's totally right when he talks about how we need to sort of get to some really structural solutions. And the thing that's so disappointing is that we're looking at a political system that doesn't seem capable of achieving that.

    JUDY WOODRUFF: Well, how do you get to structural solutions? The president had a recommendation this week for changing the corporate tax rate. He said this could -- this was one way to create jobs for the middle class.

    Is that the kind of thing...

    DAVID BROOKS: Well, that's a good thing. I mean, changing the corporate tax rate -- our corporate taxes are too high. They're unrealistic. They're internationally uncompetitive. We should change them. And he wants to take some of the money that would be produced by cutting those taxes and shift it over to infrastructure, and that's also needed.

    And so there are small steps in the right direction, I suppose. But you wouldn't say they're commensurate with the size of the problem. Now, we have got decades-long problems of wage stagnation, of widening inequality, just gigantic problems. And when I look at it, what the president is proposing and what the Republicans are proposing, they're small.

    And I don't think they're as big. And I don't blame them, by the way. They're in office. They're busy. It's not their job to come up with a gigantic agenda.

    JUDY WOODRUFF: But isn't this a priority?

    RUTH MARCUS: And I think...

    JUDY WOODRUFF: Whose job is it to...

    RUTH MARCUS: Well, it is their job.

    And just -- there's no huge, mega silver bullet step. There are a whole set of small things can that can help, and so job retraining, money for community colleges. Let's start some infrastructure projects. The president proposed all of this. And I think you're being too even-handed in your, well, there aren't large ideas on the -- among the Democrats or the Republicans.

    The president put out this proposal, which -- you know, look, it wasn't a grand bargain. It was a mini-bargain. A lot of it was recycled from proposals he had previously done, but it offered something that Republicans in a rational world ought to have accepted, a lower corporate tax rate, which would be terrific for business and the economy and for job creation, and some short-term spending.

    Landed with a thud. No possibility.

    DAVID BROOKS: So I think I'm being not even-handed enough, as usual, as usual.

    JUDY WOODRUFF: Do we get credit for being even-handed around here?

    RUTH MARCUS: David does.


    The Republicans, to their credit, have done -- have suggested a bunch of big fundamental structural reforms, whether it's a big comprehensive tax thing that Dave Camp in the House is working on, whether it's a big entitlement reform that Paul Ryan is talking about.

    If you want to talk about one of the fundamental problems, it's that we have had entrenched institutions strangling policy-making increasingly for 30 or 40 years. And to clear that away, you need some pretty big structural reforms. And I think a big tax reform, a big entitlement reform would be at least gigantic things that would put us a little way in the right direction.

    I do think Republicans deserve some credit for some of that.

    RUTH MARCUS: Gigantic, but wrong, but we can continue this argument later.

    JUDY WOODRUFF: But is that -- is that dancing around the edges or do you agree those would make a difference if they could get the Democrats to go along?

    RUTH MARCUS: Nobody would be more excited than me to have a really serious national conversation about fundamental tax reform. If there's something to fault the president on in this corporate proposal, it's that we really need to address individual taxes as well.

    And I would love to have a serious conversation about entitlement reform. I'm not sure that I think Paul Ryan's approach -- it's big, but it may not be the best way or the most economically sound way to do it, morally sound.

    JUDY WOODRUFF: But all this is happening while Congress today has left town. They're gone for the next -- more than a month. They won't be back until September, David.

    RUTH MARCUS: Five weeks.

    JUDY WOODRUFF: What does this say about -- or where does this leave the big unanswered questions out there about government spending, about the debt limit? We could go on and on -- immigration.

    DAVID BROOKS: Well, just to continue a theme, the single biggest growth item in Washington right now is the immigration bill.

    The immigration bill, according to the Congressional Budget Office, according to Doug Holtz-Eakin, a prominent Republican economist, would produce gigantic, significant increases both in revenue, in growth, in job creation. And so that is the biggest thing we have out in front of us.

    And you have to say as they leave town the mood about immigration reform is not promising. And so that's -- that's both a problem, because we can't solve the problem, but it's also a result. And somebody mentioned in the piece the stagnation has created a political fracturing of the country and a polarization of the country, as people are upset about their stagnant prospects. And that's produced a political fragment -- polarization, which then makes it even harder to fix the problem that people are angry about.

    RUTH MARCUS: I'm very worried about the fall.

    We had some green shoots of hope, especially on the Senate side, passing comprehensive immigration bill, pulling back from the nuclear cliff and getting some...

    JUDY WOODRUFF: Over confirmation.

    RUTH MARCUS: ... agreements on confirmations.

    But then we got to the House. And the House won't do comprehensive immigration reform. The House -- this week, we saw the amazing spectacle that it won't -- it can't pass spending bills at the low level that it agreed to because it's not enough spending and it can't get a majority of Republicans to agree to cut spending that much.

    So it's the difference between the Ryan budget in theory and the Ryan budget in practice. So the -- so what we're facing when we come back in September is two things, really pretty quickly. First of all, we're going to need to pass a continuing resolution to keep the government functioning past September 30.

    If you can't get agreement on these spending bill, which oughtn't to be terribly controversial, how are you going to get agreement about what level to do that act? Nobody wants a shutdown -- well, a few people want it.

    RUTH MARCUS: But nobody sane wants a shutdown.

    And then, speaking of sanity, we have the debt ceiling coming up and the question of what is going to be held hostage to get an increase in the debt ceiling.

    JUDY WOODRUFF: In the middle of all this funding the president's health care.

    But what are the American people to think, David, as they look at Washington right now? I mean, is it just despair? Is there any ray of...

    DAVID BROOKS: So far, we have been pretty...

    JUDY WOODRUFF: OK. All right. We will...

    DAVID BROOKS: We have been pretty upbeat the last eight minutes or so.

    DAVID BROOKS: You know, it -- my basic view is, Washington reflects the country. I think the members are responding reasonably rationally to the incentive structure they're given, given their constituents.

    And so the country is both fractured and excessively distrustful, not willing to compromise. And so I always blame the country as much as I blame Washington.

    RUTH MARCUS: Now you're being unfair to the entire country. My goodness.

    RUTH MARCUS: I actually think -- well, I think Washington, the parts of Washington are better than its product. So there's a lot of people who are working really hard to try to solve these problems.

    But the -- yes, the country is fractured and it disagrees. Washington is reflecting its individual districts in the House. But the country wants Washington to fix these problems. It understands it's not an easy solution. It's tired of the bickering. And it wants it to stop. Whether it's willing to punish the people who are preventing it from stopping and unwilling to compromise is another story.

    But, boy...

    DAVID BROOKS: I'm being excessively kind to the country.

    RUTH MARCUS: Now you're mean to America.

    JUDY WOODRUFF: We have got to figure out how who's nicer to the American people.

    All right, complete change of subject.

    Pope Francis this week, David, made news on the plane back to Rome from his trip to South America, talking about sexuality, talking about gays and saying, who am I to judge if someone chooses or is -- happens to be gay?


    JUDY WOODRUFF: The church doctrine isn't changing. Does that change anything?

    DAVID BROOKS: I once saw a mass on TV, and Pope John Paul II and the TV reporter got up afterwards and said, nothing new here.

    DAVID BROOKS: The pope's job is not to be new. That's not his job.

    And so I think what you signal may be an emphasis, a little emphasis in how interested they are in some of these issues. But church doctrine is not going to change, and the pope's not in charge of that.

    RUTH MARCUS: Well, I am tempted to say, who are we to judge?


    RUTH MARCUS: But since that's our job...

    JUDY WOODRUFF: But go ahead.

    RUTH MARCUS: There was a significant and I think very welcome change in tone, a humility, an acceptance, an openness.

    The -- it's -- homosexuality is a sin in the eyes of the church, in the eyes of this pope and his predecessor, but I think a little bit of kindness and humility goes a long way, in columnists, as well as in popes.

    JUDY WOODRUFF: I was going to say it even works here at the NewsHour right here on Friday nights.

    JUDY WOODRUFF: David Brooks, Ruth Marcus, great to have you both.

    RUTH MARCUS: Thanks.

    JUDY WOODRUFF: Thank you.



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