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Friday, November 13, 2009 7:00 PM


Obama Wants Spending Cuts, He Should Start With Military


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After Democrats lost two Gubernatorial elections, Obama claims to have found fiscal religion. I will believe it when I see it.

Please consider Obama wants domestic spending cuts in next budget.

The Obama administration, mindful of public anxiety over the government's mushrooming debt, is shifting emphasis from big-spending policies to deficit reduction. Domestic agencies have been told to brace for a spending freeze or cuts of up to 5 percent as part of a midterm election-year push to rein in record budget shortfalls.

Yet with the economy still in distress and unemployment pushing past 10 percent, prospects for making a dent in a trillion-dollar-plus annual deficit seem slight. And since the Pentagon and Department of Veterans Affairs would likely be shielded from such cuts, overtures toward trimming the deficit may hold more symbolic value than substance.

President Barack Obama is expected to make post-recession spending restraint a key theme of his State of the Union address in January and an important element of the budget he submits to Congress a few weeks later. He is under increasing pressure, including from moderate and conservative members of his own party, to show he is serious about tackling a deficit that has become both an economic and political liability.

White House budget director Peter Orszag on Friday told The Associated Press it is imperative to start curbing the flow of red ink. But he called it a balancing act and said acting too fast could undercut what appears to be a fledgling economic recovery.

Democratic officials in the White House and on Capitol Hill say options for locking in budget savings include caps on the amount of money Congress gets to distribute each year for agency operating budgets. They spoke on condition of anonymity to frankly discuss internal deliberations.

The White House told agencies to submit spending plans that would, at the very least, freeze their budgets, and to prepare for cuts as high as 5 percent. That edict is but one round in internal administration deliberations on the budget. Cabinet heads are sure to seek exemptions, and Orszag warned that firm budget decisions haven't been made.

Congress will soon vote on legislation to raise the debt ceiling -- the limit on how much the government can borrow -- above the present $12.1 trillion. On Friday, the nation's overall debt stood at $11.99 trillion. Some fiscally conservative lawmakers have said they would not vote for further increases in the debt ceiling until the administration took deficit-cutting steps.

The national debt is the accumulation of annual budget deficits. The deficit for the 2009 budget year, which ended on Sept. 30, set an all-time record in dollar terms at $1.42 trillion.

The flow of red ink has been increased by war spending for Iraq and Afghanistan, recession-fighting stimulus and bank bailout spending and by reduced tax revenues from high unemployment and reduced personal and business income.

Polls show rising public concern over deficits. Exit polls from elections earlier this month showed clear majorities of Virginia and New Jersey voters said they were worried about the direction of the nation's economy. In both states, Republicans won gubernatorial seats that had been held by Democrats.

Republicans are seeking to capitalize on this month's Democratic election setbacks and rising voter concerns over the burst in federal spending. House Minority Leader John Boehner, R-Ohio, said the Democrats' "so-called `war on deficits' comes about a year late and more than a trillion dollars short."

"Spending in Washington has been out of control for years, and instead of changing it as they promised they would, Speaker Nancy Pelosi and President Obama have stepped on the accelerator," Boehner said in a statement.
Caps and Freezes No The Answer

Caps and freezes are not the answer. For Christ's sake, the deficit is $1.42 trillion. Raising taxes is not the answer either. Obama is on exactly the wrong path.

Small businesses are suffering and will suffer more if health care legislation passes as is. Instead of reducing military spending that does no one any good, he is increasing it. The list goes on and on.

U.S. defense bill would pay Taliban to switch sides

In one of the most insane proposals ever, U.S. defense bill would pay Taliban to switch sides.
The defence bill President Barack Obama will sign into law on Wednesday contains a new provision that would pay Taliban fighters who renounce the insurgency, Senate Armed Services Committee Chairman Carl Levin said on Tuesday.

Under the legislation, Afghan fighters who renounce the insurgency would be paid for "mainly protection of their towns and villages," Levin said.
Does anyone think paying people to switch sides can possibly work? What happens as soon as we stop paying them?

Hell bells, is there any accounting of where the money goes in the first place? This proposal is beyond idiotic.

Massive Defense Spending Leads to Job Loss

The Center For Economic And Policy Research says Massive Defense Spending Leads to Job Loss.
Defense spending means that the government is pulling away resources from the uses determined by the market and instead using them to buy weapons and supplies and to pay for soldiers and other military personnel. In standard economic models, defense spending is a direct drain on the economy, reducing efficiency, slowing growth and costing jobs.

Global Insight’s model projected that after 20 years the economy would be about 0.6 percentage points smaller as a result of the additional defense spending. Slower growth would imply a loss of almost 700,000 jobs compared to a situation in which defense spending had not been increased. Construction and manufacturing were especially big job losers in the projections, losing 210,000 and 90,000 jobs, respectively.

The scenario we asked Global Insight to model turned out to have vastly underestimated the increase in defense spending associated with current policy. In the most recent quarter, defense spending was equal to 5.6 percent of GDP. By comparison, before the September 11th attacks, the Congressional Budget Office projected that defense spending in 2009 would be equal to just 2.4 percent of GDP. Our post-September 11th build-up was equal to 3.2 percentage points of GDP compared to the pre-attack baseline. This means that the Global Insight projections of job loss are far too low.

The projected job loss from this increase in defense spending would be close to 2 million. In other words, the standard economic models that project job loss from efforts to stem global warming also project that the increase in defense spending since 2000 will cost the economy close to 2 million jobs in the long run.

For some reason, no one has chosen to highlight the job loss associated with higher defense spending. In fact, the job loss attributable to defense spending has probably never been mentioned in a single news story in the New York Times, Washington Post, National Public Radio, or any other major media outlet. It is difficult to find a good explanation for this omission.
"We just marched in we can just march home"

Please consider Ron Paul on Forbes: Be Prepared For The Worst; On Larry King Discussing Michael Moore
"We just marched in we can just march home. Besides, I will win this argument. We are bankrupt and cannot afford it."

"Let's quit this militarism around the world. We are in 130 countries and 700 bases around the world and we cannot sustain these. It's pumped out by the left and the right. There is conservative Keynesianism and liberal Keynesianism which always fails and gives us the financial crisis we are in."
Ron Paul has it correct.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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