Behind the scenes, his campaign is searching for ways to pay for Sen. McCain's tax proposals. In addition to extending the Bush tax cuts, the 71-year-old candidate would slash the corporate income-tax rate from 35% to 25% at a cost to the Treasury of $100 billion a year, estimates Mr. Holtz-Eakin.

In all, his tax-cutting proposals could cost about $400 billion a year, according to estimates of the impact of different tax cuts by CBO and the McCain campaign. The cost will make it difficult for him to achieve his goal of balancing the budget by the end of his first term.

“I’m totally in favor of personal savings accounts,” he says. When reminded that his Web site says something different, he says he will change the Web site. “As part of Social Security reform, I believe that private savings accounts are a part of it — along the lines that President Bush proposed.”

In early 1987, at the beginning of his first Senate term, McCain attended two meetings with federal banking regulators to discuss an investigation into Lincoln Savings and Loan, an Irvine, Calif., thrift owned by Arizona developer Charles Keating. Federal auditors were investigating Keating's banking practices, and Keating, fearful that the government would seize his S&L, sought intervention from a number of U.S. senators.

Keating raised money for McCain's two congressional campaigns in 1982 and 1984, and for McCain's 1986 Senate bid. By 1987, McCain campaigns had received $112,000 from Keating, his relatives, and his employees--the most received by any of the Keating Five.

S. 1050—Buy American rules traditionally have required that most U.S. military equipment, defense systems and components be manufactured in the United States. An amendment to the FY 2004 U.S. Department of Defense authorization bill weakened the Buy American requirements. The amendment, offered by Sen. John McCain (R–Ariz.), exempted defense goods from six European countries from Buy American requirements. It passed May 21, 2003, 50–48.

The Air Force on Friday delivered a shock to storied American airplane builder The Boeing Co. by choosing a team of Northrop Grumman Corp. and Airbus parent EADS to build a new fleet of air-to-air refueling tankers -- a contract potentially worth $100 billion.

The U.S. has not only added 30,000 more troops in Iraq — it has essentially bribed the opposition, arming the very Sunni militants who only months ago were waging deadly assaults on American forces. To engineer a fragile peace, the U.S. military has created and backed dozens of new Sunni militias, which now operate beyond the control of Iraq's central government. The Americans call the units by a variety of euphemisms: Iraqi Security Volunteers (ISVs), neighborhood watch groups, Concerned Local Citizens, Critical Infrastructure Security. The militias prefer a simpler and more dramatic name: They call themselves Sahwa, or "the Awakening."

"The only reason anything works or anybody deals with us is because we give them money," says a young Army intelligence officer. The 2nd Squadron, 2nd Stryker Cavalry Regiment, which patrols Osama's territory, is handing out $32 million to Iraqis in the district, including $6 million to build the towering walls that, in the words of one U.S. officer, serve only to "make Iraqis more divided than they already are." In districts like Dora, the strategy of the surge seems simple: to buy off every Iraqi in sight. All told, the U.S. is now backing more than 600,000 Iraqi men in the security sector — more than half the number Saddam had at the height of his power.

Only months ago, members of the Awakening were planting IEDs and ambushing U.S. soldiers. They were snipers and assassins, singing songs in honor of Fallujah and fighting what they viewed as a war of national liberation against the foreign occupiers. These are men the Americans described as terrorists, Saddam loyalists, dead-enders, evildoers, Baathists, insurgents. There is little doubt what will happen when the massive influx of American money stops: Unless the new Iraqi state continues to operate as a vast bribing machine, the insurgent Sunnis who have joined the new militias will likely revert to fighting the ruling Shiites, who still refuse to share power.

"We are essentially supporting a quasi-feudal devolution of authority to armed enclaves, which exist at the expense of central government authority," says Chas Freeman, who served as ambassador to Saudi Arabia under the first President Bush. "Those we are arming and training are arming and training themselves not to facilitate our objectives but to pursue their own objectives vis-a-vis other Iraqis. It means that the sectarian and ethnic conflicts that are now suppressed are likely to burst out with even greater ferocity in the future."