Historic Documents of 2007


Edited by: CQ Press

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    Overview of 2007

    A meltdown of the international financial system and a temporary improvement in the security situation in Iraq were among the most important developments of 2007. Both came late in the year and suggested that 2008—an election year in the United States—could be especially stressful, possibly featuring a recession in the United States as part of a broader economic slowdown in much of the world.

    The U.S. economy began to overtake the ongoing conflict in Iraq as the top concern of the many Americans who were struggling to cope with a collapsing housing market, tightening credit conditions, and rising prices for gasoline, food, and health care. The U.S. housing boom that began in 1995 finally went bust in 2007. A rash of delinquencies on subprime mortgages—those given to the riskiest borrowers—exacerbated a natural correction in the housing market, displacing many families from their homes in the process. By some estimates, as many as half a million families were expected to face foreclosure in 2008. Slowing home sales also cost many construction workers their jobs.

    The White House and Congress were slow to respond to the housing crisis. In December, President George W. Bush announced a voluntary plan that would provide some relief to some distressed homeowners. Congress considered various options for helping stranded homeowners but did not take final action on any major plan by the end of the year.

    The U.S. housing crisis, which was distressing on its own merits, also touched off an unanticipated crisis in worldwide financial markets. For several years, banks and investment houses had been bundling subprime mortgage payments into complicated securities packages that were then sold to investors on Wall Street and elsewhere. When large numbers of homeowners began to default on their mortgage payments in late 2006 and early 2007, the value of mortgage-backed securities began to plummet. By early August, some of the world's largest banks had been forced to write down billions of dollars in losses, and the availability of credit not only for mortgages but also for other types of loans had contracted. Central banks around the world injected cash into the system to reassure jittery investors. In the United States, the Federal Reserve took additional steps to loosen credit by lowering key interest rates. Although markets seemed to stabilize toward the end of the year, dismal earnings reports from major banks, concerns that the subprime problem might have even wider repercussions in coming months, and suggestions that the “real” economy was slowing heightened concerns that the United States could be heading into a recession.

    The slowing economy and high gasoline prices (which hovered around three dollars per gallon for much of the year) continued to take a toll on the American automobile industry. Successful labor negotiations with the United Auto Workers helped the “Big Three” U.S. automakers pare back wages and benefits, making them more competitive with their nonunion foreign rivals. But the three companies’ continued reliance on sales of light trucks and sports utility vehicles offset some of those gains as customers increasingly turned to small cars with better gas mileage.

    Rising gas prices and widespread concern over climate change helped persuade automakers to drop their long-standing opposition to any increase in federal fuel economy standards. That eased the way for Congress to clear legislation in December that raised the standard to an average of 35 miles per gallon across a manufacturer's entire fleet by the 2020 model year. In a move that many environmental advocates criticized as a political payoff to the auto industry, however, the Environmental Protection Agency (EPA) denied California and several other states permission to set greenhouse gas emission standards that would have forced automakers to meet the higher fuel economy standard by 2016.

    Seeking to give lower-income Americans some relief from soaring health care costs, Democrats—who had won control of both chambers of Congress in the November 2006 elections—tried to expand a popular federal program providing health insurance to low- and middle-income children. President Bush opposed the legislation and vetoed it twice, saying it went in “the wrong direction” because it would encourage millions of families to give up their private health insurance and sign up for the government program instead. Democrats were unable to override the vetoes and settled for a short-term extension of the existing program.

    Democrats vs. Republicans

    The fight over children's health insurance was emblematic of the year in Congress. Again and again, the slim Democratic majorities tried to push an ambitious legislative program through Congress, sometimes with the help of some powerful Republican allies. But time after time, they were blocked by determined Republican minorities in both chambers who used procedural rules to defeat or force changes in Democratic measures and by a president who made effective use of vetoes and veto threats. Nowhere was this more evident than in the Democrats’ plans to hasten the withdrawal of U.S. troops from Iraq. The pattern was set in May, when Bush vetoed the first piece of Iraq-related legislation Congress sent him, which set a deadline for starting to bring the troops home, and the House failed to override. Subsequent efforts by Democrats to legislate change in U.S. policy in Iraq never cleared Congress. Democrats were also stymied in their initial efforts to place meaningful limits on the president's intelligence-gathering authority, including a surveillance program that eavesdropped on U.S. citizens. Legislation seeking to limit that authority was pending at the end of the year.

    The Democrats did carry the day on a few of their top priorities, including legislation lowering interest rates on federal student loans and a measure raising the minimum wage for the first time in a decade. Democrats also worked with President Bush to enact comprehensive immigration reform. As in 2006, however, their efforts were blocked by Republicans and some Democrats; opponents argued that provisions in the bill that would allow some illegal aliens to earn citizenship were tantamount to amnesty for people who had broken the law.

    Democrats also exercised congressional oversight of executive branch actions to a degree not seen in some years. One target was the Food and Drug Administration, which had come under increasing criticism after some imported pet food, seafood, and drugs were found to carry dangerous contaminants. Other targets were the Pentagon and Veterans Affairs Department for the way they treated disabled soldiers and veterans. Investigations by a broad range of commissions found widespread evidence of mismanagement, personnel shortages, and other problems that were preventing disabled soldiers and veterans from receiving adequate medical attention and disability payments. By the end of the year, several steps had been taken to improve the process, but much more work still needed to be done.

    A congressional investigation into whether the Justice Department had fired several of the government's top prosecutors for political, partisan reasons contributed to the resignation of Attorney General Alberto R. Gonzales in August. Gonzales, who had served as White House counsel during Bush's first term, was a central figure in ongoing controversies over the legal definition of torture and the limits of secret surveillance of U.S. citizens. His changing and sometimes conflicting explanations of his personal role in and the Justice Department's position on the firings and the secret surveillance programs undermined his credibility among congressional Republicans as well as Democrats. In the conclusion of another embarrassment for the administration, I. Lewis “Scooter” Libby, the former top aide to Vice President Dick Cheney, in March was found guilty of lying about his role in revealing the name of a covert CIA operative to the media. In July, Bush commuted Libby's prison sentence but did not formally pardon him.

    Supreme Court Opinions

    The Supreme Court issued several notable decisions in 2007. In its first ruling on any issue related to global warming, the Court on April 2 ruled that the Environmental Protection Agency had authority under the Clean Air Act to regulate carbon dioxide and other heat-trapping gases in vehicle tailpipe emissions—the greenhouse gases that many scientists said contributed to global warming. The Bush administration had refused to regulate the emissions, arguing that they were not air pollutants within the meaning of the Clean Air law.

    The Bush administration maintained its opposition to mandatory cuts in greenhouse gas emissions at an international conference in Bali, Indonesia, in December, where delegates were debating what should replace the Kyoto Protocol on climate change when that treaty expired. The administration did agree, however, to participate in United Nations negotiations aimed at developing a new climate control treaty by 2009, which meant that many of the important decisions about a new treaty would be made after the election of a new president in November 2008. All leading Democratic candidates and a leading Republican candidate, Sen. John McCain, had taken positions on climate change that were sharply different from those of the Bush administration.

    In a 5–4 decision that heartened abortion opponents, the Supreme Court upheld a federal ban on so-called partial-birth abortions, a procedure sometimes used to terminate pregnancy after the third month. The decision represented the first time since the Court recognized a women's constitutional right to abortion in 1973 that it had upheld a ban on a specific procedure. It also was the first time the Court had approved a restriction on abortion that did not include an exemption to protect the health of the mother. In another 5–4 ruling, the Court overturned key provisions of the Bipartisan Campaign Reform Act of 2002, which were aimed at curbing controversial issue ads. These ads often praised or scorned a candidate's position on a specific issue without directly instructing the viewer to vote for or against a candidate. The Court majority held that the curbs as applied in the specific case before it were an unconstitutional restriction on the advertiser's free speech rights.

    The Court, also by a 5–4 vote, ruled that race could not be the determining factor in assigning students to public schools. Four of the justices in the majority would have gone even further to state that schools could never consider race. The four dissenting justices said the ruling was a “cruel distortion” of the meaning of the historic decision in Brown v. Board of Education (1954), in which a unanimous Court called for an end to segregated schools.

    The Supreme Court also agreed to hear arguments on two other controversial matters in its 2007–2008 term. One case challenged the constitutionality of lethal injection, the most common method used to execute death row inmates. The question in the second case was whether the Second Amendment confers the right to keep and bear arms on individuals under certain conditions as well as on organized militias such as the National Guard; the case involved a District of Columbia gun control law considered to be one of the toughest in the nation.

    Whether gun control laws were an effective tool in controlling crime had long been a matter of some controversy. The question arose again in April after a deeply disturbed student shot and killed thirty-two students at Virginia Tech University in Blacksburg, Virginia, before taking his own life. It was the deadliest campus shooting in U.S. history. The shooter used two handguns he had purchased even though his mental illness should have placed his name on a federal background check list that would have prohibited the sales.

    The Troop “Surge” in Iraq

    The conflict in Iraq entered its fifth year in the spring of 2007, making it one of the longest conflicts fought by the U.S. military. President Bush decided at the beginning of the year to try something new, or at least to take a somewhat bolder approach to combating the insurgents who had launched a campaign against the U.S. occupation of Iraq in mid-2003. The most visible component of this new approach was a “surge” of approximately 30,000 additional troops into Iraq, putting the U.S. presence there at about 160,000 soldiers and marines. The additional troops, along with Iraqi military units that were still unable to operate entirely on their own, were deployed in a new counterinsurgency strategy. Rather than operating from big, protected military bases, thousands of soldiers were stationed in dozens of small outposts in Baghdad and other areas, enabling them to interact with the locals and, presumably, to be more effective in fighting the insurgents hiding among the civilian population.

    Another central component of the new U.S. approach to Iraq involved extensive cooperation with, and encouragement of, a rebellion by Iraq's Sunni Muslim minority against the insurgency, which was based in the Sunni community. This “Sunni awakening” stemmed from ordinary citizens’ frustration with the violence that had disrupted their communities and killed or maimed thousands of Iraqis. By the middle of 2007, the United States was supporting tens of thousands of Sunni fighters who pledged to battle the insurgents; some of these fighters almost certainly had been insurgents themselves before they switched sides. The United States also benefited from a cease-fire called by Moqtada al-Sadr, the leader of one of Iraq's biggest Shiite Muslim militias. Sadr halted fighting by his Mahdi Army in August for tactical reasons—not as a favor to Washington—but U.S. policy benefited nonetheless.

    The combination of the troop surge, the Sunni awakening, Sadr's cease-fire, and several other developments led to a sharp reduction in violence in Iraq during the last four months of the year. By nearly every measure, Iraq was a safer place in December than it had been in January or even August. Iraq was still one of the world's most violent countries, but the relative calm created an opening for Iraq's political leaders to attempt to resolve their differences that had contributed to the violence. Some politicians made some efforts to reach out to competing factions, and the parliament began responding to U.S. pressure to enact legislation intended to reassure the Sunni and Kurdish minorities of their rights. The overall result, however, was that the political reconciliation that U.S. officials hoped to promote, through the surge, was still more a dream than a reality.

    Elsewhere in the Middle East

    The Bush administration's other dreams for the Middle East also were frustrated during the year. This was particularly the case in the seemingly endless conflict between the Israelis and the Palestinians. In 2006, Hamas, the radical Islamist faction, had shocked the world and embarrassed Washington by winning Palestinian elections that the United States had promoted as part of President Bush's vision for democracy in the Middle East. In 2007, Hamas and the more moderate, U.S.-favored Fatah faction tried to settle their differences but failed, leading to an intense period of violence in June that gave Hamas full control over the impoverished Gaza Strip. The result was that the two Palestinian territories were controlled by two separate factions: Hamas in Gaza and Fatah in the West Bank, posing new dangers to Israel and to hopes of negotiating a peaceful settlement to the Israeli- Palestinian conflict.

    President Bush chose this unpromising circumstance to launch a new effort to negotiate such a settlement. He began with an international conference in Annapolis, Maryland, in November. There, in front of world leaders, Israeli prime minister Ehud Olmert and Palestinian president Mahmoud Abbas pledged to try to reach a major peace agreement before President Bush left office in January 2009. The odds against them were long at the outset and grew longer still during their first follow-up negotiating sessions in December, which stalled on procedural matters and underlying policy disputes.

    Looming over nearly all of the year's developments in the Middle East was the Iranian government's continuing drive for greater influence in the region. The Bush administration accused Tehran of fomenting violence in Iraq by supplying weapons and training to anti-U.S. factions there; Washington's concerns were so great, in fact, that President Bush authorized the first direct diplomacy between the United States and Iran in a generation. A series of meetings between the U.S. and Iranian ambassadors in Baghdad produced only limited results but did establish a precedent for more diplomacy in the future. Another subject of dispute was Iran's work to develop the technology to enrich uranium—work that Israelis and many experts in the West believed was intended to build nuclear weapons but that Iranian officials insisted was for peaceful purposes only. Unexpected affirmation of the Iranian position came from U.S. intelligence agencies, which issued a National Intelligence Estimate in December suggesting that Tehran wanted to build nuclear weapons but had stopped work on its weapons program in 2003. This estimate, which was harshly criticized by many conservatives and by Israelis, undercut the administration's push at the United Nations for tough new sanctions against Iran and appeared to end, at least for the moment, any prospect for a preemptive U.S. military strike to destroy Iran's nuclear facilities.

    Pakistan: On the Brink?

    Very few places in the world worried U.S. foreign policy makers more than Pakistan. With its nuclear weapons, an unstable political system, a long history of antagonism with neighboring India (also a nuclear power), the likely presence of Osama bin Laden and other leaders of the al Qaeda network in the mountainous border area adjacent to Afghanistan, and a vocal minority of radical Islamists, Pakistan had all the hallmarks of a strategically located country that could descend into anarchy and take much of South Asia with it. Additionally, Pakistan's president, Gen. Pervez Musharraf, who had supported Washington in its “war on terror” against al Qaeda, had become increasingly unpopular and faced elections in 2007.

    Pakistan underwent a series of political crises during the year, including dissension over Musharraf's reelection by the parliament in October—something that was accomplished only after the president promised to resign from his other post as head of the army once he won the vote. The drama over Musharraf's election paled in comparison to what happened next. Later in October, throngs of Pakistanis welcomed home former prime minister Benazir Bhutto, who had been living in exile and had tried to negotiate a deal with Musharraf to allow her to return. Hours after she arrived in Karachi on October 18, a bomb exploded next to her motorcade, killing an estimated 140 people and wounding some 400 others. Bhutto was unhurt, and she blamed the government for failing to act against those who sought to kill her.

    Two months later, on December 27, as she was campaigning in Rawalpindi for parliamentary elections scheduled for the following month, Bhutto was assassinated in another attack. It was unclear, by year's end, whether she was killed by gunfire or by a bomb that exploded near her car. In either case, the results were the same: thousands of angry supporters blamed the government, which in turn blamed Islamist extremists. The assassination deprived Bhutto's Pakistan People's Party of her charismatic leadership just before crucial elections, which were postponed to mid-February 2008. The one outcome that appeared certain was that the year's events had sapped much of Musharraf's political clout; whether the country's long-bickering civilian politicians could step in to fill the void was far from certain.

    North Korea's Promise on Nuclear Weapons

    Potentially significant progress was achieved during the year in negotiations concerning North Korea's nuclear weapons program. Since 2003, China had led “Six-Party Talks” intended to convince North Korea to give up its nuclear weapons program in return for economic aid and assurances that it would not be attacked by the United States. In addition to China and North Korea, the other parties participating were Japan, Russia, South Korea, and the United States.

    North Korea agreed, in principle, in 2005 to abandon “all nuclear weapons and existing nuclear weapons programs,” but one year later tested a nuclear weapon. The test appeared to be a failure, but it unnerved Asian neighbors and brought a swift denunciation from the UN Security Council.

    The Bush administration, which had been reluctant to negotiate directly with North Korea, finally took that approach early in 2007. The result was another significant agreement by North Korea, announced on February 13: an action plan to implement the promises Pyongyang had made in 2005. Under the agreement, North Korea agreed to “shut down and seal” a plutonium-producing nuclear plant in Yongbyon; in return, other countries in the Six-Party Talks agreed to supply North Korea with large quantities of fuel oil to keep its fragile economy running. More negotiations were necessary before North Korea would agree to additional steps to implement these agreements, resulting in yet another accord on October 3. A key part of that agreement was a pledge by North Korea to give the five other countries a “complete and correct declaration” of all of its nuclear facilities, something U.S. officials said was necessary to determine whether Pyongyang had conducted a program separate from the Yongbyon reactor—using enriched uranium—to develop nuclear weapons. By year's end, North Korea had dismantled much of the Yongbyon reactor but appeared to be stalling on its pledge to reveal details of its other nuclear activities, thus raising new suspicions about its true intentions.

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