Where did the money go?

ClubOrlov/

[A timely guest post from Gary, with all the anti-Iranian sabre-rattling going on. Spurred on by its political parasitic twin Israel, Washington seems poised to shoot itself right in the wallet. I believe that's called a "beauty shot."]

The lesson that the United States desperately needs to learn is that their trillion-dollar-a-year military is nothing more than a gigantic public money sponge that provokes outrage among friends and enemies alike and puts the country in ill repute. It is useless against its enemies, because they know better than to engage it directly. It can never be used to defeat any of the major nuclear powers, because sufficient deterrence against it can be maintained for relatively little money. It can never defuse a popular insurgency, because that takes political and diplomatic finesse, not a compulsion to bomb faraway places. Political and diplomatic finesse cannot be procured, even for a trillion dollars, even in a country that believes in extreme makeovers. As Vladimir Putin put it, “If grandmother had testicles, she’d be a grandfather.”

Reinventing Collapse, 2nd ed., p. 41

Military Keynesianism and America’s Declining Infrastructure

In August 2007, the nation was stunned by the collapse of a major Minneapolis bridge, killing thirteen. The bridge had been rated structurally deficient by the U.S. government as far back as 1990, and it was only one of 72,868 bridges (12.1%) across the country with that rating.  They also rated 89.024 bridges (14.8%) as functionally obsolete. Here closer to my home the eighty year old Champlain Bridge, also known as the Crown Point Bridge, was closed in October 2009 due to extensive corrosion of two structural piers. At least it was condemned before it fell down.  Two years later a replacement bridge has been completed, but not without substantial inconvenience and economic loss to business and workers on both sides of the bridge.  People were forced to take a ferry during reconstruction.  The DOT states the average design life of US bridges is 50 years with an average current age of 43.  The American Society of Civil Engineers estimates that it would take nearly $930 billion to fix the country's failing bridges and roads over the next five years.  With estimated spending of $380.5 billion, they predict a shortfall of $549.5 billion. 

Where did all the money go?  The recently deceased Chalmers Johnson called it "Military Keynesianism".  For those who don't follow arcane economics lingo, Keynes was a British economist who said that in a period of slow or declining economic growth (recession or depression), that government spending was needed to "prime the pump" of the economy.  The US recovery from the Great Depression with help from WWII military spending gave credence to this analysis.  Except now we have permanent Military Keynesianism.

Johnson cites an incredible statistic from the late Seymour Melman, the Columbia University advocate of military conversion, and the "peace dividend".  "By 1990, the value of the weapons, equipment, and factories devoted to the military was 83% of the value of all plants and equipment in American Manufacturing.  From 1947-1990 the combined US military budget amounted to $8.7 trillion...Military industries crowd out the civilian economy (ed-and other government spending like bridges) and lead to severe economic weakness.” Consider that the US military is now spending over $1 trillion per year including all black and related expenses, which is more than the entire rest of the world combined.  The next biggest spender is China at $91.5 billion according to Chinese figures.  Johnson summarizes, “Devotion to military Keynesianism is, in fact, a form of slow economic suicide."  More >>

Athens waits on its money

Greece is wrapping up talks with officials from the European Union, International Monetary Fund and European Central Bank -- the so-called Troika -- on the next instalment of the bailout Athens needs to prevent it going bankrupt next month.

China tells U.S. "good old days" of borrowing are over

NEW YORK/SHANGHAI (Reuters) - China bluntly criticized the United States on Saturday one day after the superpower's credit rating was downgraded, saying the "good old days" of borrowing were over.
Standard & Poor's cut the U.S. long-term credit rating from top-tier AAA by a notch to AA-plus on Friday over concerns about the nation's budget deficits and climbing debt burden.
China -- the United States' biggest creditor -- said Washington only had itself to blame for its plight and called for a new stable global reserve currency.
"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China's official Xinhua news agency said in a commentary.
After a week which saw $2.5 trillion wiped off global markets, the move deepened investors' concerns of an impending recession in the United States and over the euro zone crisis.
Read more >

Debt deal: Winners and losers

White House, Senate leaders reach deal

Debt deal: Winners and losers

Ron Paul "Nobody Wants To Admit The Real Problem & That Is We're Bankrupt!"

The Debt Ceiling Debacle Is Only The Beginning Of A Major Fiscal Crisis

Grace Wyler
If you think the current debt ceiling circus is bad, just wait for the real debt crisis.
Peter Coy at Businessweek writes today that the debate over raising the debt limit ignores just how ailing the nation's fiscal health really is.
Here are the highlights from his piece:

• The national debt is only a small part of U.S. liabilities. Failure to raise the debt ceiling would hurt the global financial system, but the threat is minimal compared to the real danger: Sharply rising healthcare costs combined with the aging baby-boomer generation.

• The U.S. is in danger of reaching a generational tipping point at which older Americans have the clout to vote themselves benefits that sap the strength of the younger generation—benefits that can never be repeated. We may already be there, if the vitriolic opposition to entitlement cuts is any indication.

• Even the $4 trillion "grand bargain" would not fix the nation's real fiscal problems. A June analysis by the Congressional Budget Office found that keeping the U.S. debt to GDP ratio consistent until 2085 would require cutting spending and/or raising revenue by 8.3% of GDP annually for the next 75 years. That's $15 trillion over the next decade.

• The fiscal gap—the net present value of all future expenses minus all future revenue—is $211 trillion, according to CBO calculations.

• The size of a deal is far more important than its composition i.e. spending vs. taxes. The reason so many plans aim for $4 trillion is because that's the amount that would, temporarily, stabilize the debt-to-GDP ratio.

• The nation's long-term budget problems are so big that some mixture of spending cuts and revenue increases will inevitably be necessary.

• In periods of slow demand, tax hikes are probably less "job-killing" than spending cuts. Cutting spending—by firing federal employees or canceling procurement, for example—removes demand from the economy dollar-for-dollar. A dollar tax hike, on the other hand, especially one aimed at upper incomes, cuts demand by less than a dollar.

There are ways to escape the impending crisis, Coy writes, if Washington can agree to use them. Ending tax breaks and eliminating incentives that are driving up healthcare costs would go far. Cutting Medicare and Social Security benefit formulas is also necessary.

Read more: http://www.businessinsider.com/the-debt-ceiling-debacle-is-only-the-beginning-of-a-major-fiscal-crisis-2011-7?utm_source=Triggermail&utm_medium=email&utm_term=Business%20Insider%20Select&utm_campaign=BI_Select_072811#ixzz1TRHa8fmu

The big mistake of House's Speaker [Boehner]

Boehner: "Let's Pass This Bill And End The Crisis," Reid: "But It Will Be Defeated"
 Read »

Also  Before going off half-cocked about how Paul Ryan a...

Bill Bill Clinton: Obama Should Ignore Congress on Debt, Invoke 14th Amendment

• Posted on July 19, 2011 at 9:07am by Billy Hallowell

Former Democratic President Bill Clinton has come out swinging at Congress, telling The National Memo’s Joe Conason that he would take decisive action if no debt deal is reached by the August 2 deadline. Clinton says that if he were in Obama’s situation, he’d invoke the Fourteenth Amendment to raise America’s debt ceiling “without hesitation, and force the courts to stop me.”
Clinton, who came out strongly against Republicans in an exclusive interview with The National Memo on Monday, said:

“I think the Constitution is clear and I think this idea that the Congress gets to vote twice on whether to pay for [expenditures] it has appropriated is crazy.
[Raising the ceiling] is necessary to pay for appropriations already made…so you can’t say, ‘Well, we won the last election and we didn’t vote for some of that stuff, so we’re going to throw the whole country’s credit into arrears.”

Clinton faced his own debt battles as president during two government shut downs. Back then, though, he didn’t consider utilizing the Fourteenth Amendment, because the debt ceiling was not brought in as part of the overall debate. The National Memo has more:
According to Clinton, the Gingrich Republicans thought about that tactic [using the debt ceiling] before rejecting it — and Treasury officials who served under Clinton commissioned legal research on the president’s power to raise the debt ceiling without congressional approval. While some legal scholars believe the Fourteenth Amendment requires Congress to fund the debt that results from its appropriations, and therefore empowers the president to raise the debt ceiling, others vehemently disagree.

Read more...

D-Day on the Debt Ceiling (Update: The president speaks)

by Bryan Preston
The GOP House caucus leaders gave a brief press conference a few minutes ago as I write this, showing a very unified front on the debt ceiling talks. Their message was two-fold: No tax increases, and the president needs to step up and lead already. They noted that the president doesn’t seem to have a plan, which isn’t exactly news, and that it’s time to act — also, not exactly news.
They delivered the press remarks to get out ahead of the president’s own speech, planned for later in the morning. He is likely to pin the blame for the impasse on the Republicans. But it’s worth remembering just how we got to this point in the first place. Take it away, WSJ:
On spending, it is important to recall how extraordinary the blowout of the last three years has been. We’ve seen nothing like it since World War II. Nothing close. The nearby chart tracks federal outlays as a share of GDP since 1960. The early peaks coincide with the rise of the Great Society, the recession of 1974-75, and then a high of 23.5% with the recession of 1982 and the Reagan defense buildup.
From there, spending declines, most rapidly during the 1990s as defense outlays fell to 3% of GDP in 2000 from its Reagan peak of 6.2% in 1986. The early George W. Bush years saw spending bounce up to a plateau of roughly 20% of GDP, but no more than 20.7% as recently as 2008.

Read more...

Playing the Man: Defeating Obama With the Debt Ceiling

By Adam Yoshida

 

If President Obama's decidedly un-presidential explosion at House Majority Leader Eric Cantor during a White House meeting on Wednesday suggests anything, it's that the stress is getting to the man.  Everything that we've ever seen suggests that the president is fairly thin-skinned.  As someone who had virtually everything in his life handed to him -- and who made it nearly to the age of fifty living in isolated realms (Hawaii prep schools, Ivy League universities, Chicago Democratic politics) where he'd never have to even speak to, let alone deal seriously with, a genuine conservative -- he's not someone used to dealing with those who disagree with his premises.  This gives the GOP an opening.

Politically, the Democrats still hold more power.  Control of the White House and the Senate ensures that Republicans will not be able to get the sort of genuine reforms -- serious changes to entitlements, pro-growth tax reform, broad spending cuts, government reorganization -- that will genuinely end the debt crisis.  Even assuming that the president is reelected in 2012, the contours of the 2012 political battlefield make it at least a 50/50 proposition that the Republicans will control the Senate as well come January 3, 2013.  Therefore, there is little political incentive for Republicans to strike a "Grand Bargain" at the present time -- especially in light of the fact that one can be certain that, whatever its details, the media will credit such a deal to Obama and use it to kick-start the sort of "shift-to-the-center" narrative that he'll need in order to win another term.  With these considerations in mind, the correct Republican strategy for the debt ceiling is to play the man, not the ball.

Read more...

The Debt Limit

By Richard Baehr

I am pretty certain that in the current debate over the debt ceiling and the attempt to reduce the deficit, the President will come out on top. The reason for this is simple- he is the leader of his Party and his side in the debate. What Nancy Pelosi and Harry Reid think is irrelevant.  Other than demagoguery about Eric Cantor, they have largely kept their mouths shut.  Obama has the big megaphone, and gets all the networks to break away for his speeches and press conferences. So he can shade every substantive debate his way, and get a large audience for his attempt to frame his side as one that wants to compromise,  behave responsibly,  achieve balance between tax increases on those who can afford to pay more and cutting programs for the needy (in reality, mostly the middle class). 

On the GOP side, you have a fight for the nomination going on, so the leaders of the Party are those in the Senate and House.  Here real ideological battles are playing out publicly. 
I just watched a bit of the Obama press conference, and as usual, he lied.  Obama argued that America is not Greece or Portugal and our deficit problems only need a little tweaking. That is patently false.  The Obama budget for the next ten years, relies on optimistic growth forecasts for the economy, optimistic forecasts for interest rates on federal debt (very low), and absurd estimates of the cost of the health care reform act -- now scored as a deficit reducer, when in reality, once many companies drop coverage , pay the small penalties, and allow their employees to enter the subsidized exchanges, the cost will skyrocket. The federal deficit of $14 trillion could easily double in the next ten years.  Greece is taking some medicine. We have not.  As usual, we will defer the problem. 
We have a gridlock in Washington because one party, the Democrats, does not trust  the results of the private economy, and wants to insure the results it desires. They need larger government to achieve more redistribution.  For that they need more tax money.  The GOP is more sensible about the size of government and the excess of regulation (and its job killing impact).  They understand that almost all "cuts"  in government spending are really not cuts at all,  but merely cuts in the rate of growth of government.  The debate over changing the inflation adjustment for Social Security  by a few tenths of one percent per year going forward, brought out all the predictable "granny will freeze, starve and fall over a cliff" baloney.

 Read more...

Dems: GOP Ideologues Deseperate to make a Debt Deal

Treasury Secretary Tim Geithner and Democrat leaders are urging Republicans to compromise on a debt deal before the country defaults on August 2. Senate Majority Leader Harry Reid says GOP ideologues are hindering negotiations. (July 14)

Cool Obama Starting to Sweat

 

AP

House Majority Leader Eric Cantor told Fox News that President Obama became agitated and abruptly walked out of today’s debt talks at the White House – allegations that Democratic sources strongly deny.
“He (the president) became very agitated,” Cantor told Fox News. “He said ‘Ronald Reagan wouldn’t sit here. You either have to compromise on the dollar figure or the grand bargain’…He said ‘Don’t call my bluff. I’m going to the American people on this.’”
Cantor said Obama shoved back and said, ‘We’ll see you tomorrow’ – noting the meeting “ended with (the) President abruptly walking out of the meeting.”
However, a senior Democratic aide told Fox News that Cantor’s version of the meeting is not accurate.
“Congressman Cantor is the last guy who should complain about people abruptly walking out of meetings,” the unidentified aide told Fox.
Another House Democratic source, familiar with the meeting, called this Cantor’s “Gingrich back-of-the-plane” moment.
“Obama was concluding the meeting, giving the closing remarks and talking about meeting tomorrow,” the source told Fox. “Cantor interrupted him and raised for the third time doing a short-term (so after it had already been addressed twice), and Obama shut him down. Cantor was playing the role he’s played throughout this whole thing – being not productive.”
Yet another, congressional aide said that President Obama “dressed down” Cantor.
“The President spoke for several minutes uninterrupted about how he would not be deterred in doing what is best for the country,” the aide said. “The meeting ended with Cantor being dressed down while sitting in silence.”
Cantor told Fox News today’s meeting “was the most tense meeting of the week.”
President Obama was quoted as saying, "This may bring down my presidency, but I will not yield on this."

Read more: http://nation.foxnews.com/debt-meetings/2011/07/13/agitated-obama-storms-out-debt-meeting?cmpid=NL_FiredUpFoxNation_20110714#ixzz1S6fmmRZ0

#Bernanke: Federal Reserve is ‘prepared to respond’ if economic recovery falters

By Neil Irwin, Published: July 13

The Federal Reserve is prepared to take new action if the recovery falters, Chairman Ben S. Bernanke said Wednesday, raising the possibility of resuming un­or­tho­dox methods of trying to pump money into the economy.
Bernanke expects that the economy will strengthen over the remainder of the year as temporary drags such as higher fuel prices dissipate, according to his testimony before the House Financial Services Committee. But he also acknowledged that there is no way to be certain, and he said that the Fed would act if its outlook proves overly optimistic. His list of possible responses included a new round of Treasury bond purchases by the Fed. Only two weeks ago, the central bank completed a $600 billion effort to support the economy along those lines.

“The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risk might reemerge, implying a need for additional policy support,” Bernanke said in his twice-yearly report to Congress on monetary policy. He added that the Fed is “prepared to respond” if economic conditions make it appropriate.
Those comments stopped short of an indication that the Fed will take new action, and according to minutes of its last policy meeting, released Tuesday, only “some” members of the policy committee are in favor of action. And unlike in a speech last August in which Bernanke raised the possibility of bond purchases because of a weakening economy, this time he also outlined a competing scenario: how the Fed would remove its support struts from the economy should inflation become a problem.
Nonetheless, the Fed chairman was more receptive to new steps to easing monetary policy than he was in a news conference just three weeks ago. In that span, economic data has generally been soft, particularly a report Friday that showed weak job creation in June and a rising unemployment rate. The Fed is charged by Congress with maintaining stable prices and maximum employment.

JON STEWART: Congress Fighting About Light Bulbs Instead Of Preventing China From Repossessing America

Noah Davis

As the debt-ceiling limit debate rages on, Jon Stewart is not a happy man. The reason: Congress, of course.

"The people in charge of putting together this country-saving plan are the same ones who, as of today, currently on the floor of the House of Representatives doing this," Stewart said, as clips of Congressmen discussing incandescent light bulbs played.

But it gets worse.

"Just so we're clear. They aren't fighting about light bulb standards. They are re-fighting a light bulb standards fight that we settled in 2007," the "Daily Show" host said. "We're three weeks away from having to park our country down the street so China can't find it, and these yuhtzes are re-litigating incandescent v. florescent. We are like children. That is why yesterday dad, much to his chagrin, had to come home early from work and give us a talking to about not cleaning our budget."

Obama speech, followed by a clip of John Boehner. He is not helping at all.

"The President and I do not agree on his view that government needs more revenue from higher taxes on job creators," the Speaker said.

Say it ain't so, Jon: "It's like a doctor consulting with a patient who believes strictly in magic. 'Broken leg? That's nothing a frog, wing, fire dance, and some rhinoceros tusk boner powder can't cure.'"

Well, when you put it that way...

Rome fears spread of 'Athens Syndrome'

The size of Greece's debt

The Truth About Who's Responsible For The Explosion In Government Spending

Henry Blodget

Mention anything about the US's huge debt, deficit, and debt-ceiling problem, and fans of both political teams will immediately begin shouting at each other.
Republicans howl that the whole problem is the fault of President Obama, who exploded federal government spending the moment he took office.
Democrats, meanwhile, blame massive increase in federal government spending during the Bush years and the triumphant assertions by Republicans during those years that "deficits don't matter."
So, what's the truth?
They're both right. (And wrong. And, on the Republican side, hypocritical.)
Federal government spending has risen under President Obama, mostly because of the $800 billion stimulus designed to offset the massive recession he inherited from President Bush. But the increase in federal spending under Obama is dwarfed by the colossal increase under President Bush.
Don't believe it?
Let's go to the chart.
Here's Federal Expenditures from 2000-2011 (quarterly figures, annualized), from the St. Louis Fed:

Image: St. Louis Fed

As you can see, from 2000 to 2008, under President Bush, Federal spending rose by $1.3 trillion, from $1.9 trillion a year to $3.2 trillion a year.
From 2009 to 2011, meanwhile, under President Obama, federal spending has risen by $600 billion, from $3.2 trillion a year to $3.8 trillion a year.  It has also now begun to decline.
In other words, federal government spending under President Bush increased 2X as much as it has under President Obama.
So, who's responsible for the explosion in federal spending?

Read more: http://www.businessinsider.com/government-spending-2011-7?utm_source=Triggermail&utm_medium=email&utm_term=Business%20Insider%20Select&utm_campaign=BI_Select_071111#ixzz1RpjgAtK0

Breaking news: Boehner abandons efforts to reach comprehensive debt-reduction deal

By Paul Kane and Lori Montgomery, Updated: Saturday, July 9, 8:41 PM

House Speaker John A. Boehner (R-Ohio) abandoned efforts Saturday night to reach a comprehesive debt-reduction deal worth more than $4 trillion in savings, telling President Obama that a mid-size package was the only politically possible alternative to avoid a first-ever default on the nation’s mounting national debt.
After speaking with Obama -- who is hosting a key meeting Sunday evening on steps forward on the debt issue -- Boehner issued the following statement:

“Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes. I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.”
The impasse on the massive plan leaves Obama and congressional negotiators back at the smaller package of cuts to federal agency budgets and more modest reforms to entitlement programs. That package, which had been negotiated by Vice President Biden and key GOP leaders including House Majority Leader Eric I. Cantor (R-Va.), would come to somewhere between $2 trillion and $2.4 trillion in savings, allowing for Congress to approve an extension of the federal debt ceiling into the spring of 2013.

Prof. Terry Lovell Analyzes the Federal Budget Crisis

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