Carolina Journal Weekly Report

November 04, 2002

In This Issue:
Feature 1 - Plucking of Golden LEAF

Feature 2 - No Ozone-Asthma Link

Feature 3 - A Fourth World War

Feature 1
Plucking of Golden LEAF
Easley, Basnight apparently influenced investments

The Golden LEAF Foundation, which administers half of North Carolina’s share of the national tobacco settlement, claims to operate independent of political persuasion. But documents obtained by Carolina Journal suggest that Gov. Mike Easley and N.C. Senate President Pro Tem Marc Basnight wield significant influence over the nonprofit foundation.

The centerpiece of their involvement — a recent $85.4 million Golden LEAF proposal to invest in biotechnology initiatives in North Carolina — was part of a larger plan by state Democrats seeking to campaign on a platform of creating jobs in the midst of the state’s troubled economy.

The Winston-Salem Journal reported that Basnight listed “the recruiting incentives and biotechnology proposals as Democratic initiatives.”

Basnight appears to have achieved part of his goal by pressuring Golden LEAF’s leaders, threatening to intercept its tobacco settlement payments this year unless the foundation immediately devised a $150 million biotechnology investment plan.

Minutes from a Golden LEAF emergency board meeting May 23 show that foundation Chairman S. Lawrence Davenport and other LEAF officials met with the chairmen of the Senate Appropriations Committee. Davenport said the chairmen “informed the foundation representatives that they would like to see the foundation assist the State during the current financial crisis.” Also in an e-mail to board members June 12, LEAF President Valeria Lee said Basnight and the appropriations chairmen told her and Davenport that “we should be investing up to $150 million in ventures to stimulate the biotech sector of North Carolina's economy.” Lee said that “we were strongly encouraged to act ‘sooner’ rather than later.”

Once a Golden LEAF special committee made its investment decisions, other board members were concerned the plan might not be enough to satisfy Basnight. Board member Michael Almond e-mailed Lee telling her of discussions he had with Davenport. “Lawrence and I have been discussing how he might present our package…,” Almond wrote to Lee, “…while also appearing to accommodate the desire of Basnight’s people…”

Davenport welcomed dozens of state officials and economic development leaders from across the state to Raleigh on Aug. 14, and introduced Golden LEAF’s plan to the public. He said Golden LEAF would immediately provide $85.4 million for biotechnology training, facilities, business incentives, and loans. Long term, he said, the foundation would commit an additional $108 million, if needed.

For the complete story, look at Carolina Journal Online on the Internet at

Ahead of the Curve

• Rep. Art Pope, R-Wake, said this week he suspects that Golden LEAF (see accompanying story, this page) could be concealing political wrongdoing because foundation leaders won’t provide documents about an investment deal.

Pope’s concern centers on Golden LEAF’s $85.4 million economic stimulus program, which was announced in August. Of the $42 million portion that the foundation is investing in biotechnology-based venture capital funds, $30 million will be invested in a new fund called BioVista, created by Durham-based Catalysta Partners. John Crumpler, a general partner for Catalysta, has contributed large amounts of money to Gov. Mike Easley’s campaigns. Crumpler also was named to the state Economic Development Board by Easley last year.

Pope said he thinks that John Merritt, a senior advisor on Easley’s staff and also a board member of Golden LEAF, had some influence in getting the money invested with Catalysta. Merritt also shares political ties with Crumpler; they both worked on the staff of former U.S. Rep. Charlie Rose. Pope’s suspicions were raised because Catalysta has limited investing experience in the field compared to other investment companies, who received limited consideration by Golden LEAF. Pope said that he had requested from LEAF President Valeria Lee all documents related to the Catalysta deal, but that she refused until the agreement was finalized. Golden LEAF is subject to the state’s public records law.

Feature 2
No Ozone-Asthma Link
Activists, journalists disregard the facts, scholar says

There is no foundation for claims that there is a link between smog and asthma among children, according to a new study by the John Locke Foundation that cautions policymakers and the news media to “check the facts” before coming to conclusions about scientific issues.

In the study, Dr. Roy Cordato, vice president of research and resident scholar at the Raleigh-based think tank, examined ozone and childhood-asthma data from North Carolina counties. One of his conclusions was that increasing rates of childhood hospitalizations for asthma were hard to connect to levels of ozone pollution, since there was no evidence that the latter (measured as ozone-alert days per monitor) had been increasing at all.

More importantly, Cordato wrote in a new Spotlight briefing paper, a careful look at county-by-county statistics found no basis for the alleged asthma-ozone link. For all four years studied, he said, the only detectable correlation was negative.

“The greater the number of ozone exceedences, the lower the rate of asthma hospital admissions,” Cordato said. Previous reports that suggested a link between smog and asthma in North Carolina, he said, had apparently made no effort to examine the available data.

Another result that refutes conventional wisdom pertains to the North Carolina mountains and the Asheville area in particular. It has often been suggested that high rates of asthma hospitalizations in the region are caused by high levels of ozone pollution.

Again, the data suggest that this is unlikely. For the 1995-1997 period, Swain County, which has the highest rate of childhood asthma hospitalizations (1,261 per 100,000) registered no high-ozone days, while Caswell County, which had the highest number of high-ozone days, had the lowest rate of hospitalizations.

Buncombe County and the Asheville area, also having no high-ozone days, ranked fourth in hospitalizations (649 per 100,000). Lenoir County reported the highest number of asthma hospitalizations with only two high-ozone days for the year.

“The idea that high asthma rates among children in North Carolina have been the result of ozone pollution has been a consistent and unquestioned given in debates surrounding air quality regulations, such as the recently enacted ‘clean smokestacks bill,’” he said. “Next time, lawmakers and the media should check the facts before repeating unfounded and politically motivated allegations.”

Cordato, an economist, has authored numerous studies on North Carolina air quality, environmental regulation, and related issues for the John Locke Foundation and for national research institutes. He argued in the new report that the attempt — by groups such as the American Lung Association, the Public Interest Research Group, and the “Energy Working Group” at Appalachian State University — to sell new regulations as having a potentially beneficial affect on children could prove counterproductive.

“Unfortunately, such phantom-chasing in the media and elsewhere does a great disservice to those who are suffering from asthma-related problems, as it distracts our attention and our resources from more likely causes,” Cordato wrote.

For more information about the report, read it online at:

Capital Quotes

“We really need to start from the beginning and make sure we have accurate figures and that something like this doesn’t happen again.”

— Wilmington Mayor Harper Peterson, talking to the Wilmington Star News about the status of his area’s transportation planning process. A local priority is the construction of an interchange between South College Road and Oleander Drive. A 2001 planning document estimated its cost at $1.67 billion, likely making it unaffordable. State engineers, however, have recently re-examined the project and put the cost at about $109 million. The cost listed for several other projects in the 2001 plan also seem to be unreliable.

“We have all paid the same (transit) tax since 1998 and now they are proposing an investment in communities that is inequitable… It is an affront to be treated as second-class citizens.”

—Teddi Daniels, westside Charlotte activist, commenting to The Charlotte Observer on the Charlotte Area Transit System’s plan to provide rail service along only three of five corridors in his city. Residents of areas, like the westside, that will not get rail service are asking that the decision be reconsidered. A group has filed a discrimination complaint with the Federal Transit Administration.

“Sales tax is the city’s major flexible tax. For them to deny that one option to us is absolutely untenable.”

— Tom Phillips, Havelock city manager, discussing with the New Bern Sun Journal the impact on Havelock of Craven County’s decision not to raise the local-option sales tax. Unlike most communities, Havelock has a limited ability to use property tax increases to generate additional tax revenue because a large percentage of land within the city limits is owned by the federal government. The Craven County Commission failed to approve the tax increase on a 3-3 vote along party lines. A seventh commissioner was out sick.

Feature 3
A Fourth World War
Former CIA Director James Woolsey speaks in Raleigh

The United States hung a big “kick me” sign on its backside in the Middle East, and the Arab world has obliged, former CIA Director R. James Woolsey says.

Woolsey, who spoke at a John Locke Foundation dinner Wednesday in Raleigh, said America’s method of confrontation in response to terrorist acts is to send “litigators” most of the time, not soldiers. Woolsey was CIA director for two years under President Bill Clinton.

“We have hung a ‘kick me’ sign in the Middle East for the last 25 years,” Woolsey said, citing the country’s feeble responses to terrorist attacks, such as that on the U.S. Embassy in Beirut. He said that despite the Gulf War in 1991, which allowed Saddam Hussein and his Republican Guard to stay in power, the United States continued its penchant for limited response to attacks in 1993. He cited the plan to assassinate former President George H. W. Bush and the ambush of U.S. soldiers in Mogadishu, Somalia, as examples.

“And what did we do (after Mogadishu)?” Woolsey asked rhetorically. “Leave. We continue to dispatch the lawyers,” and once in a while the legal system catches one or two individuals who plot attacks against the United States, Woolsey said. Al Qaeda and Hussein have been given evidence over the years that America is a lazy nation and won’t fight, he said.

Now that the country has experienced the Sept. 11 terror attacks and responded in Afghanistan, the United States must look ahead to fighting a “fourth world war” against enemies in the Middle East in order to survive.
Woolsey believes there is no solution to the problems in Iraq other than removing Hussein’s regime by force. “We won’t have a chance for peace in the Middle East unless we do,” Woolsey said.

Woolsey said that he doesn’t think there is a direct link between Hussein and al Qaeda, but that he is sure they have shared intelligence. The two factions hate each other, but they both hate the United States a lot more, he said.

Woolsey said he thinks eventually, that if Hussein stays in power, the dictator will give al Qaeda chemical weapons. He also said that if Hussein possesses ballistic missiles and nuclear weapons, “he can control the Middle East.”

Woolsey also discussed the situation in Iran, which he said has been ruled by theocracy for more than 25 years. Its people are repressed by mullahs, and as a result, he said the United States is popular with the nation’s common people. “It would be stupid for us to use military force against [Iran],” Woolsey said, because it would damage the limited goodwill we have there.

As for getting rid of al Qaeda, Woolsey said, “I don’t think we’ll be free of them until we change the Middle East.” Calling such a change a “tall order,” Woolsey said he remains hopeful because of transformations in other nations after world wars over the last 85 years. He said that at the onset of World War I there were only about 10 democratic nations in the world. Today, he said, there are about 120 democracies. “We have done an amazing thing in the last 85 years,” he said.

Woolsey said it will have to be done again, being prepared to stay with it for the “long haul,” in order to “change the face of the Middle East.” It can be done, he said, if America has the will.

On The Cutting Edge

World Poverty

• The fierce debates over economic globalization have focused recently on global poverty and income inequality. Many academics, journalists, and multilateral organizations have declared poverty and inequality are on the rise.

However, research shows global poverty and income inequality declined significantly from 1970 to 1998.

In 1970, about 40 percent of the global population subsisted under the $2 per-day poverty line, while about one-sixth lived under the $1 extreme poverty line.

The picture was much the same in 1980, but things changed dramatically in the 1990s when China, India and Indonesia began growing rapidly.

By 1998, less than 20 percent of the world population was beneath the $2 level, while, less than 7 percent was below the $1 level.

Even in absolute terms, from 1976 to 1998, the number of people living under $1 per day declined by 235 million between 1976 and 1998, while the number of people living on less than $2 per day declined by 450 million. The number of people living in extreme poverty declined dramatically, from 430 million people in 1970 to 52 million in 1998.

Though inequality remained more or less constant, or possibly increased, during the 1970s, it declined substantially in the 1980s and 1990.

As a result, the shape of the income distribution has changed, from a bimodal distribution with a peak of poor people and a peak of rich in 1970, to a smoother distribution in 1998, suggesting the emergence of a “world middle class.”

Despite these improvements, some 350 million people still lived on less that $1 per day in 1998, while nearly one billion subsisted on under $2 per day.

Reported in NBER Digest, October 2002, based on Xavier Sala-i-Martin, “The World Distribution of Income (Estimated from Individual Country Distributions)”, Working Paper No. 8933, May 2002, National Bureau of Economic Research.

Water Rights

• Water shortages are common in arid areas. The usual solution is for the government to institute some sort of rationing and engage in production of fresh water.

Some experts believe this is impractical. They contend that government is the primary cause of water misallocation, arguing that governments worsen the water situation by engaging in Soviet style centralized water control. The best solution is for governments to create an initial allocation of water and a legal framework that allows individuals to trade their quotas.

Chile offers a telling lesson for water-deprived states. In 1966, Chile nationalized its water supplies. But 15 years later allocated rights to individual farmers, businesses and municipalities, and allowed each group to trade its quotas. The results were impressive.

In 1970 only 27 percent of rural and 63 percent of urban dwellers received drinkable water. By the mid-1990s, the respective percentages were 94 percent and 99 percent. These figures are better than any other mid-income developing country in the world.

Experts believe that other arid areas should implement similar reforms. This would divert water away from entrenched agricultural interests, direct water toward more efficient ventures and allow more efficient uses of the land.

Researched by Roger Bate, “How Markets Help Provide Water For The Poor,” Journal of the Institute of Economic Affairs, Volume 22, No. 2, June 2002.

Age and Voting

• Older Americans who plan to take part in the Nov. 5 elections outnumber people younger than 30 likely to vote by a margin of more than 2 to 1.

If current trends continue, the number of people 65 and older who vote in mid-term elections is likely to exceed that of young adults by a 4-1 ratio by 2022.

These projections are part of a study conducted by the Washington Post, the Henry J. Kaiser Family Foundation and Harvard University.

Other highlights of the report include:

• Young adults hold beliefs quite distinct from those of their parents and grandparents — more conservative in many of their views of government, more tolerant in many of their social values — and yet are not expressing them at the polls.

• The disconnect of the young from politics is prompting candidates to concentrate on issues such as Social Security of interest to the older electorate.

• As opposed to majorities of older voters, most younger people support Social Security privatization and school vouchers.

• More young voters see Republicans as the party best able to cope with the nation’s main problems, while their parents and grandparents tend to favor Democrats.

Many younger people say they aren’t interested in politics because it is corrupt, and don’t vote because they think their one vote doesn’t count.

Reported in the Washington Post, 10-20-2002; based upon “A Generational Look at the Public: Politics and Policy,” October 2002, Washington Post/Henry J. Kaiser Family Foundation/Harvard University.

Coming Up

• The John Locke Foundation will sponsor a Post-Election Wrap Up luncheon at noon Nov.11 at the Brownstone Hotel in Raleigh.

What do the election results mean? Join John Locke Foundation Chairman and President John Hood; Locke Senior Fellow Marc Rotterman; American Conservative Union President David Keene; News & Observer chief political reporter Rob Christensen; WRAL anchor David Crabtree; and veteran pollster Bill Lee, president of Tele Opinion Research Inc., for a unique and penetrating look into the 2002 election.

Lee has been professionally involved in political efforts and campaigns for more than 25 years in the United States, Central America, and Africa. An expert in campaign planning and strategy, he was also involved in several of the Reagan presidential campaigns. Lee has been the general consultant for several successful congressional campaigns and involved with successful efforts for gubernatorial and senatorial seats as well.

For more information or to pre-register, contact Kory Swanson or Thomas Croom at (919) 828-3876 or [email protected].



Material published here may be reprinted provided the
Locke Foundation receives prior notice and appropriate credit is given.


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