could be one of a few things, maybe thats your background layer? maybe you need to do it on a blank layer? add a new layer and try it. and instead of selecting everything with the marquee tool, ues ctrl+A
Control+A didn't work. And I don't think it was because it was the bg layer and making a new one didn't help.
you have tomake a new layer, and make sure you have the new layer selected when you select, then contract.