Kerry's Clever Tax Cut
Politically, not bad. Economically, it hardly offsets his tax hikes.

Sen. John Kerry moved to the right of Walter Mondale by proposing a small cut in the corporate tax rate, which he would lower to 33 ? percent from 35 percent. In political terms, it's a clever ploy. In economic terms, it merely provides a small offset to the significant tax hikes Kerry proposes on capital formation, where he would slap small businesses, top-bracket taxpayers, dividends, and capital gains.
The Kerry proposal to rollback the Bush tax cuts would raise the after-tax cost and reduce the post-tax investment return on capital by more than 54 ? percent. Taking out the upper-bracket labor-income component -- which is still investment capital -- the Kerry tax hike would reduce investment incentives by nearly 47 percent and work-effort returns by more that 7 ? percent. A big hit.
Offsetting that, Kerry's corporate tax cut would raise after-tax returns on corporate income by almost 2 ? percent. But that's only a tiny amount compared to the overall tax-hike proposal.
Kerry would also terminate the extra-territorial tax credit for multinational companies with offshore operations. In doing so, he's both giving and taking away. More, he's pandering to the current political hysteria over so-called jobs outsourcing, a misinformation campaign that Kerry compounds with his threats to terminate a number of free-trade agreements.
As the profits of U.S. firms are taxed overseas as well as at home (when the income is transferred back to the U.S.), companies are unfairly double-taxed on their earnings. This is the big issue regarding the current corporate tax debate in Congress. Why should American companies be double-taxed on a worldwide basis when nearly all other foreign companies, including those in Europe, are only single taxed? (Europeans provide a rebate to their companies in the amount of the extra-territorial tax burden.)
U.S. multinational companies operate abroad, largely through foreign sales corporations, because that's where the market customers are. A little-known factoid shows that roughly 90 percent of all worldwide markets (in population terms) are located outside the U.S. When asked why he robbed banks, Willie Sutton responded, "That's where the money is." If you asked GE, Gillette, Intel, or Microsoft why they go offshore, they'd each say, "That's where the customers are."
Narrow-minded members of Congress who are obsessed with the phony outsourcing argument are trying to punish international companies, arguing that the "loophole" that lets corporations defer foreign-earned profits with a special tax credit is merely a reward for creating offshore jobs. This is Sen. Kerry's argument.
But the truth is, the territorial tax break is only a small part of the corporate rationale to locate part of an operation overseas. The greater justification is to be closer to foreign customers. And yes: Why should companies be double-taxed at home and abroad?
As for the outsourcing argument, that's old-fashioned fear-mongering. Recent trade data show that there's far more insourcing of service jobs from foreigners who invest directly in the U.S. than outsourcing of jobs from U.S. foreign investment. In manufacturing there is a net outsourcing, but that number hasn't changed in 20 years, a period during which the U.S. created 38 million new domestic jobs. "Outsourcing" today is a phony war against American business and open international trade.
Surprisingly, the Bush administration has not weighed in on the corporate tax-cut issue necessary to accommodate a WTO ruling that the extra-territorial tax-credit is illegal. The most sensible solution would be a reduction in the marginal tax rate on corporate income from 35 percent to somewhere around 30 percent.
House Ways and Means chair William Thomas is trying to get a 3 percent cut in the corporate rate. So Sen. John Kerry has weighed in with a smaller 1 ? percent drop. Again, he's clever. Democrats don't usually propose cutting tax rates.
But Kerry's rollback of dividends, cap-gains, and the top-bracket tax cuts instituted by President Bush would do great harm to the economic recovery and the stock market boom. Higher after-tax returns that reduce the risk of owning stock have attracted investors back to equities. After a three-year bear market, these higher post-tax returns were exactly what the doctor ordered.
The choice come November is clear. Bush is the pro-investor candidate, which should provide him with a comfortable reelection majority. (Two of every three voters were stock market investors in the 2002 and 2000 election cycles.) But a recent poll by Scott Rasmussen shows that only 36 percent of likely voters (down from 44 percent in January) believe that Bush is doing a good or excellent job with the economy.
Bush has work to do. Both the economy and the markets are recovering strong, but the president can't be bashful in making his case with clarity and vision.
-- Larry Kudlow, NRO's Economics Editor, is CEO of Kudlow & Co. and host with Jim Cramer of CNBC's Kudlow & Cramer.
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The Myth of a Jobless Recovery
by Tim Kane, Ph.D.
Executive Memorandum #917

March 25, 2004 | |
The alleged failure of the economy to create jobs is an illusion that stems from a survey of employment conducted each month by the U.S. Bureau of Labor Statistics (BLS), commonly known as the payroll survey. The payroll survey has problems measuring the modern workforce and contains a unique methodological problem: It systematically overcounts the jobs of many workers when they change employers. But worker turnover has declined significantly since the 1990s, artificially deflating payrolls.
Since the recession ended in November 2001, payroll jobs are down by over 700,000, in contrast to the additional 1.9 million Americans who say they are working, according to the latest Labor Department household survey. A close examination of the two surveys suggests that payrolls are missing something. Congress should not move to protect jobs or meddle in labor markets if, as the facts show, those markets are functioning well.
The payroll survey double-counts many workers who change jobs and is now artificially deflated because job turnover is down. Decelerating turnover in 2002-2003 explains up to 1 million jobs "lost" in the payroll survey since 2001.
The payroll survey does not count the surge in self-employment. The household survey has recorded a surge of 650,000 self-employed workers. This number may be even higher if modern workers in limited liability companies or in consulting positions with traditional firms are not identifying themselves as self-employed.
Revisions of the payroll survey have frequently been in the millions. Overestimates of 1 million payroll jobs were common in the early 1990s and also in 2002. Underestimates of 1 million jobs were common during the 1993-1996 period.
The disparity between the two BLS employment surveys is cyclical. The disparity widens during recessions and narrows during periods of rapid growth in gross domestic product (GDP). Such variation strongly suggests a statistical bias in one of the surveys.
The BLS household survey indicates record high employment. The disparity of 3 million jobs (in employment growth) between the household and payroll surveys since the recovery began is unprecedented.
Pessimists have tried to defend the payroll survey because it is bigger and less volatile than household survey data. The danger in the "bigger is better" rationale is mistaking quantity for quality. The big sample in the payroll survey is filled with double-counts and miscounts. The supposedly high monthly variability in the household survey is no worse than the large revisions in payroll data, except that revised payroll variability is historically invisible.
The Modern Workforce
One could think of the payroll survey as counting all the "brown-eyed" workers at traditional firms and "blue-eyed" workers at start-ups. It does not count "green-eyed" individuals who are self-employed, consult 20 hours a week, or simply home-school their children.
Further, workers who leave the IBM payroll for full-time consulting roles with IBM are still likely to consider themselves IBM employees. Likewise, partners at a limited liability company (LLC, a new company form) often consider themselves traditional employees, while the government classifies them as self-employed. The number of LLCs has swelled from near zero in 1993 to over 700,000. Clearly, a "hazel-eyed" workforce--self-employees who consider themselves payroll "brown-eyes"--is emerging. Yet these consultants and partners, like every farmer and sole proprietor in America, are considered jobless by the payroll survey.
Decelerating Turnover Since 2001
The payroll survey double-counts any individual who changes jobs during the pay period in which the worker is on two payrolls. "If a person leaves one job and starts another during a relatively short time span, they could appear on both employers' payrolls," said Labor Department economists in late 2003. Constant turnover means that the payroll survey systematically overestimates the level of jobs.
Because worker turnover has declined since 1999, the measure of payroll jobs has been deflated by up to 1.77 million jobs. In the two years since the recession ended, gross job flows are down by 1.2 percent, deflating the payroll survey by 1 million jobs. Thus, a net growth in payroll jobs in the real economy looks like a job loss in currently published data.
The bottom line is that either the current payroll data will be revised significantly or they will not. If they are revised, the household survey will be essentially vindicated. The more intriguing possibility is that there are structural problems within the payroll survey that have only just now surfaced in the wake of the odd recovery of the "new" economy. The loss of payroll jobs may be permanent as the workforce shifts to new forms.
Conclusion
Policymakers and analysts should treat payroll data with caution when making comparisons to employment levels in 2001 and earlier years. A better measure of employment is the household survey, and analysts can now point with confidence to the employment of an additional 1.9 million workers since the recession ended.
Tim Kane, Ph.D., is Research Fellow in Macroeconomics in the Center for Data Analysis at The Heritage Foundation.

? 1995 - 2004 The Heritage Foundation
All Rights Reserved.


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Will the Real Unemployment Rate Please Stand Up?
by Timothy Kane
WebMemo #456

March 24, 2004
Big government types assert that the economy cannot recover without the government's help. The anemic, sluggish labor market is their main piece of evidence when arguing for more benefits for the poor, more taxes on the rich, higher minimum wages, and protection from international trade with impoverished Third World countries. The unwelcome sunshine on their gloomy parade for big government is the low rate of unemployment, currently at 5.6 percent.
Even pessimists know that 5.6 percent unemployment is close to what economists consider the "natural" rate or the non-accelerating inflation rate of unemployment. As a metric, the rate of unemployment is comparable to body temperature in that a sudden spike upwards is a powerful signal of ill health. But after a fever breaks, coming back to the normal level is healthy, and going much lower has risks of its own.
What is the Unemployment Rate?
Instead of arguing that the unemployment rate could or should be lower, critics are questioning the integrity of the way the rate is calculated. The basic idea is that the economy is so bad that workers are not even in the labor force, and so the unemployment rate today is not comparable to the rate five or ten years ago. For example, on March 19th, a Washington Post editorial claims that the unemployment rate is "above 7 percent" if "you add in discouraged workers."
The Post has been misinformed. The authoritative data on unemployment come from the Bureau of Labor Statistics (BLS), specifically table A-12 of the household survey, which calculates several different unemployment rates. Each is based on a nuanced definition of who is actually unemployed. http://www.bls.gov/webapps/legacy/cpsatab12.htm. Unemployment peaked in June 2003, and that peak is lower than the level of unemployment in the early 1990s for all measures of unemployment.
The rate of unemployment that includes discouraged workers is known as "U-4." It is currently 5.9 percent, which is 0.3 percent higher than the official rate, not the 1.4 percent gap imagined by the Post. Actually, the present gap between U-4 and the official unemployment rate is quite close to the historical average of 0.23 percent.
[Click CHART to enlarge]
As a refresher, the rate of unemployment in February 2004 is calculated by dividing the 8.17 million unemployed Americans by the 146.47 million people in the labor force. Paul Krugman's March 12 column in the New York Times is typical of attempts to explain away the low rate of 5.6 percent, saying it is "entirely the result of people dropping out of the labor force."
A fine argument, if only it were true. Chart 2 shows what is really happening. The household survey reports a surge in the size of the labor force (2.03m) and total employment (1.90m) since the end of the recession in November 2001. (http://www.bls.gov/cps/cpspopsm.pdf).
[Click CHART to enlarge]
Discouraged Workers?
So, what is the difference between discouraged workers and other marginally attached workers? As technically defined by the BLS, discouraged workers think that no work is available, and so they quit looking. In sharp contrast, other "marginally attached" workers think work is available but are not able to actively seek work for reasons such as child-care and transportation problems. They are specifically not discouraged, and it is inaccurate to describe them as such. It is even more inaccurate to describe every home-schooling parent and sole proprietor as jobless, but that is another story (http://www.heritage.org/Research/Labor/CDA04-03.cfm).
Those are the facts. But this is a political season, and often facts can't find their way into the headlines. Even so, anyone who is genuinely concerned about the U.S. economy should know that its temperature is fine. There are fewer discouraged workers as a percentage of the labor force today than in 2003, but also in comparison to 1994, 1995, and even 1996. Despite the fondest hopes of pessimists, today's low unemployment rate is the real deal.
? 1995 - 2004 The Heritage Foundation
All Rights Reserved.


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Mediscam?
The drug bill cost more than the Bushies let on.
In previous columns, I have warned that George W. Bush is in danger of appearing Nixonian -- that is, using Richard Nixon's political methods, such as a willingness to subordinate everything to a re-election effort, including abrogation of one's own principles; punishing staffers with genuine policy disagreements for being disloyal; and keeping secret information that might undermine decisions one has already made.
The clearest evidence yet of Bush as Nixon has arisen over the question of what the White House knew about the cost of the recently passed Medicare drug bill, when it knew it, and whether it actively suppressed information that might have caused the measure to fail in Congress. It is becoming harder and harder to believe that the administration was not knowingly engaged in deception in this matter. Increasingly, it appears that it knew perfectly well that the legislation would cost far more than $400 billion over 10 years -- the most Congress was allowed to spend under its rules -- and that it took extraordinary measures to suppress this fact.
The center of this situation is an obscure bureaucrat named Richard Foster, chief actuary for Medicare. It is his job to estimate spending for that program over long periods. Annually, he produces a report for Medicare's board of trustees, based on many complex mathematical calculations, that lays out the program's financial condition in excruciating detail. Foster's latest report was delivered Tuesday, March 23. It showed serious financial deterioration, largely due to the addition of a large unfunded drug benefit.
According to the New York Times, Wall Street Journal, and Knight Ridder news service, Foster knew last summer that the drug bill being debated in Congress would cost somewhere between $500 billion and $600 billion. In its latest budget, the administration conceded that the figure is $534 billion.
The problem is that everyone knew that a bill with a price tag that large would never get through Congress. The version that did pass only made it through with two votes to spare in the House of Representatives (and only after the vote was held open for an unprecedented 3 hours, while arms were twisted to get the necessary votes). Most of the pressure was brought to bear on conservative Republicans reluctant to vote for so much new spending when the budget was already in deficit.
Reportedly, the last couple of votes were secured after legislators were warned that an even bigger Democratic bill would be enacted unless they agreed to the White House plan. This was utterly dishonest. In the event that the administration bill went down to defeat, the House leadership would simply have pulled it off the floor while something new was cooked up. There was zero chance that something like the $1 trillion Democratic alternative would ever have become law.
Another argument being made by the drug bill's supporters is that only the Congressional Budget Office's estimate of $395 billion was binding. The administration's estimate would not have been official for legislative purposes. While this is technically true, it ignores the closeness of the vote and the fact that misgivings about the drug bill's cost were the final sticking point. There is no serious political observer who does not think that disclosure of the administration's $534 billion estimate would have killed the bill, at least temporarily.
This is why the apparent effort to squelch Foster is so scandalous. Reportedly, his boss, Medicare administrator Tom Scully, threatened Foster with dismissal if he communicated any information about his estimates to anyone on Capitol Hill without Scully's authorization. Needless to say, such authorization was not forthcoming, because Scully knew perfectly well that it doomed the legislation -- a high-priority White House initiative.
The administration has tried to portray this whole thing as a simple management issue. Generally speaking, career bureaucrats are not allowed to communicate with Congress officially unless through channels. However, the actuaries for Social Security and Medicare have long had a measure of independence, allowing them to give technical advice directly. Consequently, the effort to withhold estimates of the drug bill appear unusual and politically motivated to an extraordinary degree.
It looks as though Scully will be the fall guy for this scandal -- which is convenient, since he has already left government. But the larger question of White House honesty still needs to be answered.

-- Bruce Bartlett is senior fellow for the National Center for Policy Analysis. Write to him here.

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Medicare's Deepening Financial Crisis: The High Price of Fiscal Irresponsibility (Draft)
by Robert E. Moffit, Ph.D., and Brian Riedl
Backgrounder #1740

March 23, 2004

Medicare, the huge government insurance program that covers 41 million seniors and disabled citizens, is facing a major financial crisis. None of this is surprising.
Rising Costs
Title I of the Medicare Prescription Drug Improvement and Modernization Act of 2003 creates a new and complex universal prescription drug entitlement. According to the latest Medicare trustees report, the Medicare hospital insurance program will be exhausted in 2019, seven years earlier than the past year's estimate.[1] But that is just the tip of the iceberg. The hospital insurance trust fund does not include the new drug entitlement, and that alone will add $8.1 trillion to the program's long-term unfunded liabilities over the next 75 years.[2]
Medicare's massive costs will result in huge tax increases. According to Medicare Trustee Thomas R. Saving, a professor of economics at Texas A&M University and senior fellow at the National Center for Policy Analysis, the Medicare program is now projected to consume:
24 percent of all federal income taxes by 2019 and
51 percent of all federal income taxes by 2042.[3]
The true cost of the drug entitlement expansion is unknown, and the trustees could be understating the real cost. When the new Medicare law was enacted in 2003, the Congressional Budget Office (CBO) estimated the 10-year cost at $395 billion. Less than three months later, the White House Office of Management and Budget (OMB) revealed that it estimated the 10-year cost at $534 billion.[4]
More recently, Richard S. Foster, Medicare's chief actuary, said, "All our estimates showed that the cost of the drug benefit, through 2013, would be in the range of $500 billion to $600 billion."[5] This is just for the next 10 years, before the baby-boom generation hits the program. All of the various government actuaries have concluded that taxpayers will likely pay far more than the initial official estimates for the first 10 years and trillions of dollars after that.
Ironically, the entire financial situation could be far worse. During the debate on the new drug entitlement, Democrats offered proposals that would have cost nearly $1 trillion in the first 10 years,[6] far in excess of anything proposed by the Administration or the congressional leadership. Many critics of the new drug program actually want a more expensive program.
Bad Drug Policy
When the new drug entitlement takes effect in 2006, seniors will pay an estimated $420 in additional drug-related premiums in the first year, plus a $250 deductible. The government would then pay 75 percent of drug costs up to $2,250. Above that amount, seniors would pay $3,600 out of pocket--the "doughnut hole"--before becoming eligible for catastrophic coverage, with the government paying 95 percent of catastrophic costs and seniors paying 5 percent. Unlike the hospitalization payments, which are drawn from dedicated taxes deposited in a trust fund, the government will pay for the drug benefit from general revenues.
In the meantime, the new Medicare law creates a prescription discount drug card, effective this year, that includes a $600 subsidy for low-income seniors. Unlike the subsidies provided for seniors under the drug entitlement, the drug card subsidies do not require an asset test for eligibility. The discount card is projected to save between 10 percent and 25 percent. For many seniors, especially poor seniors without coverage, this is an attractive program; it is also market-friendly and builds on existing private-sector entities. Remarkably, Congress has decided to kill this promising program after just two years of operation.
Thus, the drug discount card is temporary and expires in 2006, but the new drug entitlement is permanent and would take effect in 2006, accelerating the displacement of the existing drug coverage for millions of retirees, including the coverage that many seniors have today through former employers. Thus, Congress has enacted a universal government drug entitlement, setting in motion dynamics that will crowd out other alternatives.
A Better Medicare Drug Policy
Congress made a huge mistake in enacting the universal drug entitlement and should deal with the emerging financial problems of Medicare, including the prescription drug problem, as quickly as possible. Specifically, Congress should:
Delay the implementation of the universal drug entitlement scheduled for 2006. Even without a prescription drug entitlement, Medicare is facing formidable financial challenges. A range of public and private-sector health policy analysts have repeatedly warned Congress of the gravity of these challenges and have recommended serious structural changes to Medicare, such as a premium support financing system, to enable the program to deliver high-quality health care to future retirees.
In the meantime, Congress has not yet adopted a strong mechanism to cope with future entitlement costs and the unfunded liabilities that face current and future generations of taxpayers. This needs to be done before any new entitlement begins in 2006. In the face of these unmet challenges, there is no good reason for Congress to expand the Medicare entitlement, displace existing drug coverage, and accelerate the loss of drug coverage offered to retirees through former employers.
Make the drug discount card program a permanent feature of Medicare. The Centers for Medicare and Medicaid Services staff is already processing applications from over 100 companies that want to offer the drug discount cards on a regional or national basis. The infrastructure for a potentially successful program is already being established. There is no good reason to shut down the entire operation and deprive seniors of a personal choice. Indeed, the drug discount card program, combined with catastrophic coverage and even richer subsidies to low-income seniors, could be the foundation of a superior drug option for Medicare beneficiaries.
Federal subsidies to low-income seniors, or those without drug coverage, could be delivered through debit cards issued by private health plans. Any qualified health plan that provides for catastrophic coverage and meets current federal or state insurance regulations should be able to participate. Income-related subsidies could be channeled through qualified health plans. This would give Medicare beneficiaries a strong incentive to sign up for drug coverage and minimize adverse selection.
Like the entities offering the drug discount cards, the plans could be national or regional and could be required to disclose information that would allow for consumer comparisons. Consumer comparisons are routine under the Federal Employees Health Benefits Program (FEHBP), the popular and successful program used by federal employees and retirees.
Integrate the drug discount card program into the new Medicare Advantage program. Medicare beneficiaries should be allowed to continue to use the drug discount card, and the subsidies for low-income seniors should be retained or even increased. In 2006, the Medicare Advantage health plans, including new regionally based preferred provider organizations, will be available to seniors. These health plans should have the opportunity to integrate the drug discount card and low-income drug assistance programs into their health plan offerings. Unspent funds for those who are subsidized through the discount card could be rolled over tax-free from year to year, much like a health savings account.
CONCLUSION
Taxpayers face a serious financial problem in the Medicare program. As Professor Tom Saving, a Medicare public trustee, has reported, the program is projected to consume over half of all federal income taxes by 2042.[7]
Taxpayers can expect the real costs of the drug entitlement to be much greater than the initial published estimates. Worse, some Members of Congress are claiming that the current drug entitlement subsidy is not enough and want to fill the entitlement's unpopular "doughnut hole" and double the initial expenditures on the new entitlement. Such prescriptions would not only worsen Medicare's already difficult financial problems, but also pave the way for government restrictions on prescription drugs for seniors. To control costs of the drug entitlement program, the government would somehow have to limit the supply of drugs, probably through tighter drug formularies or some form of government price fixing or purchasing mechanism. Yet, with demand for prescription drugs rising rapidly, the government cannot and should not provide more by paying less.
There is a better alternative. Members of Congress should get a handle on the exploding costs of the Medicare program before implementing a universal entitlement expansion. To that end, they should at least delay implementation of the drug entitlement while making the prescription drug discount a permanent feature of Medicare, including the new Medicare Advantage system that will take effect in 2006. Such a policy could establish the foundation for a more rational and responsible Medicare drug program: one that accommodates, rather than displaces, a wide variety of private-sector drug options.
Of course, Congress can also choose to do nothing.
But nothing will be very expensive.

Robert E. Moffit, Ph.D., is Director of the Center for Health Policy Studies, and Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies, at The Heritage Foundation.

[1]Centers for Medicare and Medicaid Services, 2004 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Insurance Trust Funds, March 23, 2004, p. 2, at www.cms.hhs.gov/publications/trusteesreport.
[2]Ibid., p. 109. The unfunded obligation over the 2003-2078 period is $8.1 trillion. The unfunded obligation over an infinite time horizon is $16.6 trillion. This year, the Medicare trustees have introduced an additional way to calculate the program's future costs and liabilities. This method, known as "infinite horizon," includes all current and future participants. Under this category, the unfunded obligation of the drug entitlement amounts to $16.6 trillion.
[3]Thomas R. Saving, "Examining the 2004 Social Security and Medicare Trustees Reports," congressional briefing on behalf of the National Center for Policy Analysis, Washington, D.C., 2004.
[4]The different cost estimates are the results of significant differences between CBO and OMB assumptions.
[5]Robert Pear, "Democrats Demand Inquiry into Charge by Medicare Officer," The New York Times, March 14, 2004.
[6]Sheryl Gay Stolberg and Robert Pear, "Mysterious Fax Adds to Intrigue over the Medicare Bill's Cost," The New York Times, March 18, 2004.
[7]Saving, "Examining the 2004 Social Security and Medicare Trustees Reports."

? 1995 - 2004 The Heritage Foundation
All Rights Reserved.

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>> CLINTON MP3 LINK
http://www.newsmax.com/archives/ic/2004/3/25/00841.shtml

White House, Giuliani React to Sudan's OBL Offer
The Bush White House and former New York City Mayor Rudy Giuliani reacted on Wednesday to news that President Clinton turned down an offer to arrest Osama bin Laden five years before the Sept. 11 attacks.
During an interview with White House Chief of Staff Andy Card, radio host Sean Hannity played NewsMax.com's recording of Clinton explaining that after Sudan released bin Laden in 1996, "I did not bring him here because we had no basis on which to hold him, though we knew he wanted to commit crimes against America."
Hannity asked Card, "Doesn't that statement clearly indicate that Osama bin Laden was offered to the United States?"
The top Bush aide sounded stunned by the Clinton audio.
"You ask a very important rhetorical question and I can't answer it," said Card. "I have no knowledge [of the Sudanese offer]. When I say I have no knowledge, I don't even have knowledge that I can't tell you about."
When pressed on whether Clinton's comments indicated that the Sudanese offer was indeed real, Card told Hannity, "It would certainly be a credible reason to have that expectation."
Later during the same broadcast, Hannity shared the Clinton audio with former New York City Mayor Rudy Giuliani, who said it confirmed reports of the Sudanese offer.
"From President Clinton's answer it sounds like he was offered [bin Laden]," he told Hannity.
"It sounds like the president and the administration came to the conclusion that there was no legal basis - if we had him - to hold him, which would make him just a free person here. That seems like the former president is probably correct about that."
Giuliani continued:
"But I don't know how you'd be having those discussions if [bin Laden] wasn't offered. ... I don't know why he'd be making those decisions if there wasn't some kind of viable offer being made."
On Tuesday the 9/11 Commission said it could find no "reliable evidence" indicating that Sudan had indeed offered bin Laden to the Clinton administration.

To listen to Bill Clinton explain how he let Osama bin Laden get away, Click here.

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9/11 Commission: Clinton Refused to Let CIA Kill Bin Laden
Announcing some of its preliminary findings on Wednesday, the 9/11 Commission has confirmed that President Clinton ordered the CIA to take Osama bin Laden alive or not at all - a directive that made the task of neutralizing the terrorist kingpin infinitely more difficult.
In a statement read at the beginning of Wednesday's session, 9/11 staffer Michael Hurley revealed:
"CIA senior managers, operators and lawyers uniformly said that they read the relevant authorities signed by President Clinton as instructing them to try to capture bin Laden.
"They believed that the only acceptable context for killing bin Laden was a credible capture operation. 'We always talked about how much easier it would have been to try to kill him,'" a former chief of the bin Laden station told the Commission.
"Working level CIA officers were frustrated by what they saw as the policy restraints of having to instruct their assets to mount a capture operation," the Commission statement said.
Commission staffer Hurley detailed one attempt to recruit indigenous Afghan forces in a bin Laden capture operation, explaining, "When Northern Alliance leader Massoud was briefed on the carefully worded instructions for him, the briefer recalled that Massoud laughed and said, 'You Americans are crazy. You guys never change.'"
The Commission found that at least two senior CIA officers would have objected to killing bin Laden even if Clinton had authorized the hit. "One of them, a former counterrorism center chief, said that he would have refused an order to directly kill bin Laden," the Commission statement said.
Last week NBC News quoted former CIA official Gary Schroen as saying that White House orders to spare bin Laden's life cut the chances of getting him in half, from 50 to 25 percent.
Schroen's revelation - now confirmed by the 9/11 Commission - was ignored by the mainstream press beyond its initial coverage by NBC.
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China Puts Gun to Head to of U.S. Tech Companies
Dave Eberhart, NewsMax.com
Saturday, Mar. 27, 2004
As the Wi-Fi boom takes hold around the globe, China is putting a gun to the head of U.S. chip makers -
Either turn over your patented technology - and accept our standards - or we won't allow U.S. companies to enter Chinese markets.
Wi-Fi refers to "wireless fidelity" - the ability to transmit internet and other broadband connections though wireless transmitters to computers and other wireless devices. With Wi-Fi, plugging your computer into a telephone line will be a thing of the past. And already, there's talk of Wi-Fi telephones, radio and more.
The Wi-Fi craze is taking root here in the U.S. - with "hot spots" or "Wi-Fi nodes" sprouting up in airport lounges, hotels, public parks, and even Starbucks.
Now, Chinese IT companies are poised in the wings, salivating to create computer "hotspots" at trendy Chinese airports, restaurants and the ubiquitous Starbucks -- anxious to serve a huge computer savvy populace breathless for wireless Internet connectivity (WLAN).
The bogeyman in this frenetic scene: China's Wired Authentication and Privacy Infrastructure (WAPI) security specification.
The rub: China's newly developed WAPI security spec isn't compatible with the U.S. and World 802.11 standard. A 802.11 network refers to a family of specifications developed by the IEEE for wireless LAN technology. The numeric specifies an over-the-air interface between a wireless client and a base station or between two wireless clients. The IEEE accepted the specification in 1997.
IEEE is the Institute of Electrical and Electronics Engineers, an organization composed of engineers, scientists, and students -- best known for developing standards for the computer and electronics industry. In particular, the IEEE 802 standards for local-area networks are widely followed.
Worst of all: China doesn't seem to care.
In fact, China has pulled out a .357 magnum and pointed it at the head of U.S. tech companies: China is now demanding that non-Chinese vendors must partner with one of 24 Chinese-sanctioned vendors to make any Wi-Fi products used in the People's Republic - incorporating, of course the nettlesome WAPI.
At stake: the slamming of the door on the huge Chinese IT market.
China's surprise game of hardball has much of the IT world and its cadre of pundits in a dither:
Some think that forcing the foreign companies to work with the Chinese vendors is just a WTO-dissing ruse to pump up the country's flagging economy.
Others suggest that the forced partnerships put foreign Intellectual Property rights in jeopardy. China, after all, has a bad rep in this department. While working with the foreigners to muscle in the new Chinese WAPI, the Chinese vendors will get the inside scoop on a bunch of trade secrets held by their guests' gear and spirit it away -- reprising the nation's stunt with cell phone technology in the last decade.
Conspiracy addicts suspicion that WAPI just might include a "back door" that would allow the Chinese government access to encrypted data.
Some opine that the Chinese checkers move is just the salient in a long-term move to make the Chinese WAPI the world standard, dissing long-standing entities such as IEEE and the Wi-Fi Alliance.
The Wi-Fi Alliance is an organization made up of leading wireless equipment and software providers with the missions of certifying all 802.11-based products for interoperability and promoting the term Wi-Fi as the global brand name across all markets for any 802.11-based wireless LAN products.
And the biggest fear: Chinese companies will use Western Wi-Fi technology to build the expertise needed to grab a big share of the growing market for chips in China. So far, the budding Chinese IT industry is benignly churning out low-end semiconductors, including commodity memory chips, for relatively simple goods. No one, save for the Chinese, is anxious to see that happy situation change.
Not so to all-of-the-above, argue the Chinese, who suggest that they are only interested in security. The present World standards are at best second-rate, they say, and need to be abridged (particularly to quell the national paranoia in all things relating to security).
Between a Rock and a Hard Place
In any event, all this brouhaha has put the leading foreign manufacturers between a rock and a hard place.
Everyone would like to humor the hugely profitable customer. The customer, after all, is always right. However, the rock at one end is that tech companies don't want to give away trade secrets that will eventually grow low-cost rivals. And the hard place is that if they spurn China's demands, they risk being frozen out of a fast-growing market.
Dilemma or no, Intel Corp. has tossed down the gauntlet, announcing that it won't ship any Wi-Fi chips to China after May of this year. It seems that Intel's Centrino integrates a Wi-Fi transmitter with a microprocessor. That unhappy fact -- for reasons at best vague to the technically-disadvantaged -- makes it a cinch that the U.S. giant would have to cough-up key know-how to finagle the Chinese standard WAPI thingamajig to work in its own gear.
No one to dis a big client, Intel has eschewed any reference to the shopping list of colorful charges above, revealing only that the use of the WAPI gadget would undermine the quality standards of its products and that the technical challenges of converting to WAPI were too great to meet the deadline of June 1.
Chip maker Broadcom has also come out as against the WAPI mandate. They will also stop selling Wi-Fi chips to China - also starting in May.
But there is hardly a united front. Competitors Atheros and Texas Instruments are going to go ahead full bore with full support for WAPI.
Enter the Mysterious `ARM core'
Jason Tsai, senior manager for the Connectivity Products Division at Taiwan-based Silicon Integrated Systems, has signaled his company's malleability to the mandate:
"In our design, we can move in two directions -- modify the hardware architecture as soon as possible" or "try to implement an ARM core into the chip to have the flexibility to modify the firmware to fit the WAPI spec."
"Firmware" or not, some out there in IT-land are still hoping for some kind of compromise to break the logjam. After all, some argue, chipmakers have already agreed upon improved international standards to address many of the Wi-Fi security issues China raises.
Perhaps China, a relatively new member of the World Trade Organization, will buckle under the pressure coming from those who maintain that Beijing's policy violates WTO rules. Some of the fine print in those rules, for instance, says that governments are not allowed to treat foreign companies differently from domestic ones.
Ann Rollins, director of technology and trade policy at industry lobby group ITI sees it this way:
"China is a new member of the WTO. And the people that developed the standard don't quite understand that there are principles and obligations to uphold."