-Caveat Lector-
Posted at 4:32 p.m. PST Tuesday, February 23, 1999
Senate report: Y2K disruptions almost certain
Knight Ridder News Service
WASHINGTON -- After almost a year of systematic investigation, a
special Senate committee warns in a report to be released within days
that all segments of the U.S. economy -- from hospitals to electric
power plants -- remain ``at risk'' from the year 2000 computer problem
that looms less than one year away.
The sober study -- a draft was obtained by Knight Ridder Newspapers --
concludes that while both government and business have worked hard to
correct the Y2K problem, their efforts began late, remain insufficient
and consequently some incalculable level of economic disruption is
inevitable.
``Make no mistake,'' the Senate panel's co-chairmen warn in a letter
to their colleagues at the report's front, ``this problem will affect
us all individually and collectively in very profound ways. ... It
will indeed impact individual businesses and the global economy. In
some cases, lives could even be at stake.''
The authors of the carefully low-key report take care to avoid either
undue alarm or unfounded optimism. For example, they conclude that
while local electricity blackouts are likely, a national power
breakdown is not.
The study notes that most small to midsize businesses have yet to make
Y2K repairs. And many of America's trade partners are far behind in
taking corrective steps, posing risks of worldwide ripple effects.
Banks and other financial-service firms are well-prepared, the Senate
panel finds. Social Security checks should not face interruption. And
air-traffic control should be able to avoid major disruptions to air
travel, although some ``flight rationing'' may be necessary.
``The committee has no data to suggest that the United States will
experience nation-wide social or economic collapse,'' the Senate
co-chairmen wrote, ``but we believe that disruptions will occur that
in some cases will be significant. The international situation will be
more disturbing. Those who suggest that it will be nothing more than a
'bump in the road' are simply misinformed.''
Chairman Robert F. Bennett, R-Utah, and Vice Chairman Christopher J.
Dodd, D-Conn., led their special Senate select committee through nine
hearings since last April examining the state of Y2K preparedness in
seven critical U.S. industries.
They intend to trumpet their findings in Senate floor speeches,
possibly as soon as Thursday, in an effort to rouse awareness to what
they call ``one of the most serious and potentially devastating events
this nation has ever encountered -- the Year 2000 computer program.
... It deserves our top priority.''
The Y2K problem, also known as ``the Millennium Bug,'' stems from a
defect in millions of computer programs used worldwide. To save space,
early programmers recorded annual dates by using only two digits;
1999, for example, is programmed only as ``99.'' The first two digits
are assumed to be ``19.''
Unless those programs are fixed, when the century changes next Jan. 1,
computers may misread their codes as referring to the year 1900 rather
than 2000. This could cause them to produce erroneous information,
corrupt linking systems or even shut down.
President Clinton's Council of Economic Advisers put this into
perspective in its annual report, released earlier this month:
``Although it sounds to many at first like a trivial matter, of
interest only to computer engineers and programmers, in fact the Y2K
problem is potentially extremely serious, given the central role that
computer technology has taken in our lives.''
Edward Yardeni, chief economist of Deutsche Bank, leads several Wall
Street economists in warning that Y2K disruptions are likely to cause
a global recession next year, but Clinton's CEA report said ``such
forecasts seem excessively dire.
``Even if disruptions turn out to be more serious than most analysts
expect, they will most likely show up primarily as inconveniences and
losses in certain sectors. It is less likely that they will ... lead
to a recession. ... However, it would be unwise to state categorically
that a Y2K recession is not in the cards,'' the CEA report said.
The Senate panel's study aims to fill a gap in public knowledge left
by what it terms inadequate news-media discussion to date.
``Reports in even the most reputable news sources fall prey to
polarization -- either over-emphasizing the handful of Y2K
survivalists or downplaying the event as a hoax designed to sell
information technology equipment,'' notes the first paragraph of the
executive summary.
The public is hungry for solid information about the Y2K threat,
according to a recent survey by the Media Studies Center, a New
York-based research institute. While 82 percent said they expect
problems to be minor, 64 percent said it is ``very important'' to them
for news media to publicize how it might affect medical facilities,
emergency services, banks and the military, for example.
Americans should be prepared, the Senate report says.
``Consumers are urged to keep copies of financial statements. ...
Stockpiling a small amount of extra food and water in the event of
temporary shortages may also be advisable,'' although extremes should
be avoided, the report says.
Here is how the Senate panel sees Y2K affecting various sectors of the
U.S. economy:
UTILITIES. Only about 50 percent of electric utilities had repaired
Y2K systems as of December. ``Of greatest concern are about 1,000
small, rural electric utilities.'' Local and regional blackouts are
``likely,'' but a ``prolonged, nationwide blackout'' is not.
HEALTH CARE. Some 64 percent of hospitals have no plans to test their
Y2K fixes before the crunch date. Some 90 percent of doctors' offices
are unaware of how exposed they are to Y2K problems. Federal payment
systems for Medicare and other health-insurance programs are behind
schedule for repair. ``The health care industry is one of the
worst-prepared for Y2K and carries a significant potential for harm.''
TELECOMMUNICATIONS. Some 95 percent of telephone systems are expected
to be ready. No reliable data exists on readiness to test data
networks, cellular or satellite communications systems, or 1,400
regional carriers.
TRANSPORTATION. ``On average, the nation's 670 domestic airports
started Y2K compliance too late,'' the report states. The Federal
Aviation Administration has ``made great strides'' but ``it still has
a way to go. ... Planes will not fall out of the sky, but flight
rationing to some areas and countries is possible.'' Aviation problems
will be ``much worse'' abroad.
FINANCE. Banks and automated tellers are expected to function and to
have enough cash. The Federal Reserve intends to expand available
currency by one-third, to about $200 billion, to cover withdrawals
``and has other contingency arrangements available if needed,'' Fed
Chairman Alan Greenspan told the Senate Banking Committee on Tuesday.
GOVERNMENT. Federal agencies vary widely in preparedness; among the
least prepared is the Department of Defense. (A House panel monitoring
federal Y2K efforts issued an overall grade of C+ on Tuesday. Defense
reported that only 72 percent of its ``mission-critical systems'' are
ready; Transportation, only 53 percent.
John Koskinen, chairman of President Clinton's Y2K Council, told a
computer-industry forum last week that he is confident federal
agencies will be ready in time. The Senate report concludes that not
all ``mission-critical'' federal systems will be ready, ``but
wholesale failures'' of federal services ``will not occur.''
However, state and local governments vary widely in preparations, the
Senate panel said, noting its ``greatest concern is the ability of
local communities to provide 911 emergency services.''
BUSINESS. Heavily regulated fields such as banking, insurance and
finance ``are furthest ahead,'' but ``health care, oil, education,
agriculture, farming, food processing and the construction industry
are lagging behind,'' the report said. Any failure of a critical
system is likely to cost up to $3.5 million to repair and to take
three to 15 days.
INTERNATIONAL. Venezuela and Saudi Arabia, which together supply 30
percent of U.S. oil imports, are both 12 to 18 months behind U.S. Y2K
repair efforts, exemplifying how problems abroad might have an impact
here. Infection of repaired U.S. computer systems from links to
unfixed foreign ones is also worrisome.
Perhaps equally worrisome is how impossible it is to measure the
problem in advance. ``It is unfortunate how little we still know about
the scope and the severity of the Y2K problem for the U.S. and for the
world,'' the Senate report observes.
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