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After the meeting, Hadley wrote up a brief memo that came to be known as Hadley's Rules:

If a state like Syria or Iran offers specific assistance, we will take it without offering anything in return. We will accept it without strings or promises. We won't try to build on it.

"States like these, and their terrorist allies, constitute an axis of evil, arming to threaten the peace of the world."

The Iranians had been engaging in high-level diplomacy with the American government for more than a year, so the phrase was shocking and profound.

After that, the Iranian diplomats skipped the monthly meeting in Geneva. But they came again in March. And so did Mann. "They said they had put their necks out to talk to us and they were taking big risks with their careers and their families and their lives," Mann says.

The secret negotiations with Iran continued, every month for another year.

Leverett plunged right into a dramatic new peace proposal floated by Crown Prince Abdullah of Saudi Arabia. Calling for "full normalization" in exchange for "full withdrawal" from the occupied territories, Abdullah promised to rally all the Arab nations to a final settlement with Israel. In his brand-new third-floor office at the Old Executive Office Building, a tiny room with a very high ceiling, Leverett began hammering out the details with Abdullah's foreign-policy advisor, Adel Al-Jubeir. When Ariel Sharon said that a return to the '67 borders was unacceptable, Al-Jubeir said the Saudis didn't want to be in the "real estate business" -- if the Palestinians agreed to border modifications, the Saudis could hardly refuse them. Al-Jubeir believed he had something that might actually work.

But the White House wasn't interested. Sharon already rejected it, Rice told Leverett.

At the Arab League meeting, Abdullah got every Arab state to sign his proposal in a unanimous vote.

The White House still wasn't interested.

Powell was furious, Leverett remembers. "What is it they're afraid of?" he demanded. "Who the hell are they afraid of?"

"I don't know sir," Leverett said.

Abdullah stood up. "That's it. This meeting is over."

No Arab leader had ever spoken to Bush like that before, Leverett says. But Saudi Arabia was a key ally in the war on terror, vital to the continued U.S. oil supply, so Bush and Rice and Powell excused themselves into another room for a quick huddle.

"Because one Israeli politician told you it's going to make things politically difficult for him, you don't put it out? Do you realize how hard that makes things for all our Arab partners?"

Rice sat impassively behind her broad desk. "If we put the road map out," she said, "it will interfere with Israeli elections."

"You are interfering with Israeli elections, just in another way."

There was also an awkward scene with the secretary of defense. They were in the Situation Room and Leverett was sitting behind Rice taking notes when suddenly Rumsfeld addressed him directly. "Why are you laughing? Did I say something funny?"

The room went silent, and Rumsfeld asked it again.

"Why are you laughing? Did I say something funny?"

"I'm sorry Mr. Secretary, I don't think I know what you're talking about."

"It looks to me like you were laughing," Rumsfeld said.

"No sir. I'm sorry if I gave that impression. I was just listening to the meeting and taking notes. Didn't mean to disturb you."

The fax was from the Swiss ambassador to Iran, which wasn't unusual -- since the U.S. had no formal relationship with Iran, the Swiss ambassador represented American interests there and often faxed over updates on what he was doing. This time he'd met with Sadeq Kharrazi, a well-connected Iranian who was the nephew of the foreign minister and son-in-law to the supreme leader. Amazingly, Kharrazi had presented the ambassador with a detailed proposal for peace in the Middle East, approved at the highest levels in Tehran.

A two-page summary was attached. Scanning it, Mann was startled by one dramatic concession after another -- "decisive action" against all terrorists in Iran, an end of support for Hamas and the Islamic Jihad, a promise to cease its nuclear program, and also an agreement to recognize Israel.

A few days after that, a terrorist attack in Saudi Arabia killed thirty-four people, including eight Americans, and an intelligence report said the bombers had been in phone contact with Al Qaeda members in Iran. Although it was unknown whether Tehran had anything to do with the bombing or if the terrorists were hiding out in the lawless areas near the border, Rumsfeld set the tone for the administration's response at his next press conference. "There's no question but that there have been and are today senior Al Qaeda leaders in Iran, and they are busy."

Colin Powell saw Mann's memo. A couple weeks later he approached her at a State Department reception and said, "It was a very good memo. I couldn't sell it at the White House."

In response to questions from Esquire, Colin Powell called Leverett "very able" and confirms much of what he says. Leverett's account of the clash between Bush and Crown Prince Abdullah was accurate, he said. "It was a very serious moment and no one wanted to see if the Saudis were bluffing." The same goes for the story about his speech in Israel in 2002. "I had major problems with the White House on what I wanted to say."

They called on Wednesday and told him that there was nothing classified in the piece as far as the agency was concerned, but someone in the West Wing wasn't happy with it and would be redacting large sections.

"You're the clearing agency," Leverett said. "You're the people named in my agreement."

They said their hands were tied.

After consulting a lawyer, Leverett and Mann and a researcher worked through the night to assemble a list of public sources where the blacked-out material had already been published. They also took out one line that might have been based on a classified document.

But the White House wouldn't budge. It was a First Amendment showdown.

Bush accused Iran of "providing material support" for attacks on U.S. forces, a formulation that suggested a legal justification for a preemptive attack.

Senator Jim Webb of Virginia pushed through an amendment requiring Bush to get congressional authorization for an attack.

Colin Powell broke his long silence with a pointed warning. "You can't negotiate when you tell the other side, 'Give us what a negotiation would produce before the negotiations start.' "

Even Henry Kissinger started giving interviews on the need to "exhaust every possibility to come to an understanding with Iran."

We'll start with the Civil War. Congress enacted various income and excise taxes to meet the rising cost of the war, most of which were repealed in the years after the war.

During World War I, the 1916 Revenue Act and the War Revenue Act of 1917 increased tax revenue from $761 million in 1916 to $3.6 billion in 1918. After the war, in the 1920s, Congress cut taxes five times.

The same was true during World War II. Tax increases over several years raised revenues from $8.7 billion in 1941 to $45.2 billion in 1945. Again, tax cuts followed the war.

"Traditionally countries raise taxes to pay for wars, then cut taxes by a portion of the amount raised once peace descends," agreed J.D. Foster, senior fellow in the economics of fiscal policy at the conservative Heritage Foundation.

But Foster noted two caveats. One, the Bush tax cuts of 2001 and 2003 came during a jobless recovery period after a recession. And the economic stimulus package championed by Obama includes $282 billion in tax cuts over two years -- also in the midst of the wars in Iraq and Afghanistan.

The date is July 24th, 1940. The place, the New York City Field Office of the FBI. The memo, from Director Hoover, is short and cryptic:

CLEARANCE AUTHORIZED FOR FOLLOWING MESSAGE: “DUNN SAYS FOUR BATTLESHIPS AND TEN DESTROYERS OF TEXAS CLASS GOING TO CARIBBEAN TO SCOUT FOR ENGLISH WITH SIX HUNDRED RESERVE OFFICERS AND SIX HUNDRED ENLISTED MEN.”

HOOVER