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Halfway through the 2011 fiscal year, our military is continuing to fight a ramped-up war in Afghanistan, preparing to redeploy 50,000 forces out of Iraq, conducting numerous humanitarian missions, and maintaining all other operations abroad. And it’s doing all this without a shred of fiscal security.

Were Congress to fund defense through a year-long Continuing Resolution, elected officials would be reducing the annual defense budget by at least $ 18 billion. The effects would wreak havoc on spending plans for the following fiscal year, setting the military further behind where it had planned to be. Such alarmingly reduced funding levels are well below what’s needed to meet current national security requirements.

Gates is more than skeptical about untimely spending cuts.

The implications of a spending freeze for defense go beyond losing the planned growth that $ 18 billion would purchase. This amount doesn’t include potential losses associated with contract and procurement delays that place the defense industrial base on indefinite standby. As Secretary Robert Gates has noted, today’s defense spending is “as low a percentage of federal outlays as it’s been since before World War II.” The harm Congress would impose on the military under a long-term CR is both unsustainable and unconscionable.

Gates is rightfully calling on Congress to stop playing games with military spending. Congress must take a longer view. Members would be wise to listen carefully to what the civilian in charge of the Defense Department recently told the press about a CR:

It’s the worst of all possible kinds of reductions, in significant measure because it comes halfway through the fiscal year. But beyond that, we can’t make up all of that through changes in contracts and programs and so on. And, in fact, most likely it would come out of operations and maintenance, even in war — operations and maintenance, through stretching out programs, which is what makes them very expensive; cuts in training and readiness.

And frankly, that’s how you hollow out a military even in wartime. It means lower flying — fewer flying hours, fewer steaming days, cuts in training for … home-stationed ground forces, cuts in maintenance and so on.

So, again, if we ended up with this yearlong continuing resolution, this new Congress would be responsible for a cut that’s nearly twice the size of our FY12 proposal and much, much more damaging.

So my question is about the seriousness of those who are worried about reductions to the defense budget, and I think they can demonstrate that seriousness by passing a defense appropriations bill, which still would be $ 10 billion less than the president has asked for.

So in short, talk about not cutting defense in FY12, as far as I’m concerned, is simply rhetoric without action on the FY11 defense budget that’s already in front of the Congress.

A yearlong CR would hamper the Navy’s ability to grow the fleet and affect more than 20 Air Force acquisition programs that require immediate funding. For example, the Navy and Congress have long sought to increase production of Virginia-class submarines from one to two per year: these plans would be further delayed by a continued freeze on defense spending. This would then increase the cost of these submarines in 2012 as a result of significant program and planning disruption.

Funding defense through a long-term CR could also cut the number of the Navy’s P-8A Poseidon maritime surveillance aircraft from seven to six and significantly slow the in-service date of these aircraft into an operational squadron. Further, Congress would essentially be increasing the cost of all major defense programs in 2012 if defense remains frozen at ’10 levels. Why? Because programs that are stalled or slowed due to inadequate funds in 2011 will then be too immature to execute next year. This then increases the cost of the program, which then virtually guarantees a cut in what the military can buy.

Congress should either separate FY 2011 defense spending from the CR and pass it as a stand-alone bill, or find an additional $ 18 billion within their reductions package to adequately fund defense this year. Doing any less could start the military down a familiar and dangerous path of possibly becoming a hollow force.

By adequately funding defense at the president’s requested and legitimately needed level, Congress would be saving itself from creating unnecessary longer-term costs. Forcing the military to postpone plans to buy needed items for those in uniform won’t really save money. When schedules slip, costs grow. When costs grow, the overall buy is cut. This destructive cycle costs more over time — and it will be ended only if Congress demands savings, efficiency, and the smart use of taxpayer dollars.

Big Peace

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(CNN) - Running for president can extract a heavy and personal financial toll on a candidate, especially if that candidate doesn’t have a so called “day job” at the time or millions in the bank.

And that’s why Mike Huckabee says he can’t afford to jump into the presidential race any sooner than he absolutely has to.

Speaking to reporters at an event organized by the Christian Science Monitor Wednesday, the former Arkansas governor and current Fox News host said it makes little financial sense for him to start a presidential campaign earlier than the summer, when voters in the early primary and caucus states really begin paying attention.

“If I run, I walk away from a pretty good income,” he said, according to Roll Call. “I don’t want to walk away any sooner than I have to because frankly, I don’t have a lot of reserve built up. Most of my life was in public service. Therefore I didn’t come away wealthy.”

The Arkansas Republican currently hosts a weekly program on Fox News, is a commentator for ABC Radio, and continues to make money on the speaking circuit - all gigs he’d have to give up if he became a presidential candidate.

But despite being on top of the pack in many recent polls, Huckabee has long appeared reluctant to mount a second presidential bid and said Wednesday he essentially went broke during his first campaign for the White House four years ago.

“In order to run for president last time, I cashed in my life insurance, my annuities, I pretty much went through everything that I ever had as an asset that I thought I might someday live on,” he said. “One thing I committed to myself, to my wife and God, was that if I do this I’m hopefully going to be in a position that I’m not so completely destitute at the end of it, that I have no idea what to do if I get sick.”

Huckabee also recently acquired an $ 800,000 property in the tony Blue Mountain Beach area of Florida and is in the process of building a $ 2.2 million home there. According to the Arkansas Times, the former governor took on a $ 2.8 million mortgage for the property and home, a figure that of course translates into a hefty mortgage payment.

Huckabee’s comments came a day after an interview with ABC, during which he bemoaned the rigors of a national campaign.

“It is a very grueling process,” Huckabee said of running. “I think the fact that I’ve done it before gives me both a sense of gravity toward the process, but it also gives me an understanding that it’s not always smart to be the first guy out of the corral and out there in the arena riding around on your pony by yourself.”

He also suggested that the odds will be heavily stacked against any Republican hoping to unseat President Obama.

“You don’t beat presidents easily,” he said. “And this idea that he’s just an absolute one-term and easy to beat - this race is going to be like climbing a ladder, pointing toward you, because Barack Obama is going to start this race with a billion dollars, he’s going to have no primary opponent.”


CNN Political Ticker

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Last week, the Congressional Budget Office released its report on H.R. 2, the House-passed legislation that would fully repeal Obamacare. The takeaway message was that American taxpayers simply cannot afford Obamacare.

CBO’s initial scoring of Obamacare analyzed its effects from 2010 to 2019, including only six years of full implementation, since main spending provisions do not go into effect until 2014. The new document reports on 2012 to 2021, including an additional two years of full implementation. This still fails to show the true 10-year cost of the law, but gets a little closer. Over eight years, the gross cost of Obamacare’s coverage provisions jumps from $ 938 billion to $ 1.39 trillion, which includes $ 677 billion to create a new health entitlement offering generous subsidies to the middle class to purchase health insurance.

It also includes an expansion of Medicaid, which will cost $ 674 billion. Initially, the federal government will almost entirely fund the expansion, but will pass costs on to the states starting in 2020. This will have serious consequences, as states already face tough choices to tackle mounting deficits. The combined increase in states’ Medicaid costs will be $ 60 billion. CBO’s initial score showed the Medicaid expansion costing states just $ 20 billion. The addition of just two extra years increased this number threefold, revealing the crippling effect the expansion will have on state budgets.

Obamacare proponents say the new law cuts the deficit. But the CBO report pulls the mask off the bill and reveals what it really is: a massive tax increase that, on paper at least, is slightly greater than the massive spending hike it also contains. Obamacare thus indisputably represents a massive new burden on current taxpayers and future generations.

Finally, several of Obamacare’s “pay-fors” are unlikely to ever become reality. One example is the excise tax on “Cadillac” health plans, an unpopular change that isn’t supposed to occur until 2018—after President Obama is safely out of office. If the Congress and White House responsible for creating this tax weren’t willing to put it into effect, it is unlikely that future lawmakers will do so. Without the Cadillac tax, Obamacare loses $ 111 billion of offsets for new spending.

Unsustainable cuts to the Medicare program are also expected to pay for new spending. Both the CBO director and Medicare’s Chief Actuary have warned that these cuts to Medicare provider payments could reduce access to care for seniors and reduce quality of care. Congress’s past behavior proves its hesitance to allow similar changes to the program, so savings within Medicare will likely not materialize.

The reality is that the offsets for Obamacare spending cannot occur without serious negative consequences, and without them, it adds significantly to deficit spending. CBO Director Douglas Elmendorf’s letter to Budget Committee Chairman Paul Ryan last week stated that repeal would reduce the deficit if these provisions don’t occur.

So the facts are in. Obamacare includes tremendous new levels of federal spending at a time when lawmakers are seeking ways to reduce the unaffordable size of government. It pays for new spending by increasing taxes on the American people, burdening individuals and businesses and putting further strain on the economy. And, as we explain further in recent research, a realistic scoring of Obamacare shows that it is certain to increase deficits.

The Foundry: Conservative Policy News.

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By Michael Conathan, CAPAF’s new Director of Oceans Policy

Weather predictions were once a frequent punchline but have improved dramatically in recent years. More often than not you’ll need an umbrella if your local television channel or website of choice tells you to take one when you leave the house. But we could take a huge step back to the days when your dartboard had a reasonable chance of outpredicting Al Roker if House Republicans have their way with the 2011 federal budget.

The House of Representatives is debating the Full Year Continuing Resolution Act (H.R. 1) to fund the federal government for the remainder of fiscal year 2011. The Republican leadership has proposed sweeping cuts to key programs across the climate change, clean energy, and environmental spectrum. They have also decided that accurate weather forecasting and hurricane tracking are luxuries America can no longer afford.

The GOP’s bill would tear $ 1.2 billion (21 percent) out of the president’s proposed budget for the National Oceanic and Atmospheric Administration, or NOAA. On the surface, cutting NOAA may seem like an obvious choice. The FY 2011 request for the agency included a 16 percent boost over 2010 levels that would have made this year’s funding level of $ 5.5 billion the largest in NOAA’s history.

Even this total funding level, however, is woefully insufficient for an agency tasked with managing such fundamental resources as the atmosphere that regulates our climate, the 4.3 million square miles of our oceanic exclusive economic zone, the ecological health of coastal regions that are home to more than 50 percent of all Americans, response to environmental catastrophes including the Deepwater Horizon oil spill, and fisheries that employ thousands of Americans and annually contribute tens of billions of dollars to the national economy.

More than $ 700 million of the president’s proposed 2011 increase in NOAA funding would be tagged for overhauling our nation’s aging environmental satellite infrastructure. Satellites gather key data about our oceans and atmosphere, including cloud cover and density, miniscule changes in ocean surface elevation and temperatures, and wind and current trajectories. Such monitoring is integral to our weather and climate forecasting and it plays a key role in projections of strength and tracking of major storms and hurricanes—things most Americans feel are worth keeping an eye on.

In fact, NOAA has been making great strides in hurricane tracking. The average margin of error for predicting landfall three days in advance was 125 miles in 2009—half what it was 10 years prior. This data translates into a higher degree of confidence among the public in NOAA’s forecasts, which means individuals will be more likely to obey an evacuation order. Further, since evacuating each mile of shoreline costs approximately up to $ 1 million, greater forecasting accuracy translates to substantial savings.

The United States needs these satellites if we’re to continue providing the best weather and climate forecasts in the world. The implications of the loss of these data far exceed the question of whether to pack the kids into snowsuits for the trip to school. The concern here is ensuring ongoing operational efficiency and national security on a global scale. In some cases it can literally become a question of life and death.

Consider the following numbers:

  • The $ 700 billion maritime commerce industry moves more than 90 percent of all global trade, with arrival and departure of quarter-mile long container ships timed to the minute to maximize revenue and efficiency. Shipping companies rely on accurate forecasts to set their manifests and itineraries.
  • Forecasting capabilities are particularly strained at high latitudes and shippers have estimated that the loss of satellite monitoring capabilities could cost them more than half a billion dollars per year in lost cargo and damage to vessels from unanticipated heavy weather.
  • When a hurricane makes landfall, evacuations cost as much as $ 1 million per mile. Over the past decade, NOAA has halved the average margin of error in its three-day forecasts from 250 miles to 125 miles, saving up to $ 125 million per storm.
  • Commercial fishing is the most dangerous profession in the country with 111.8 deaths per 100,000 workers. A fisherman’s most valuable piece of safety equipment is his weather radio.
  • When disaster strikes at sea, polar-orbiting satellites receive emergency distress beacons and relay positioning data to rescuers. This resulted in 295 lives saved in 2010 alone and the rescue of more than 6,500 fishermen, recreational boaters, and other maritime transportation workers since the program began in 1982.
  • Farmers rely on NOAA’s drought predictions to determine planting cycles. Drought forecasts informed directly by satellite data have been valued at $ 6 billion to 8 billion annually.
  • NOAA’s volcanic ash forecasting capabilities received international attention last spring during the eruption of the Icelandic volcano, Eyjafjallajökull. The service saves airlines upwards of $ 200 million per year.
  • NOAA’s polar-orbiting satellites are America’s only source of weather and climate data for vast areas of the globe, including areas key to overseas military operations. Their data are integral to planning deployments of troops and aircraft—certain high-atmosphere wind conditions, for example, can prohibit mid-air refueling operations.

All of these uses will be compromised if the Republicans succeed in defunding NOAA’s satellite program. At least an 18-month gap in coverage will be unavoidable without adequate funding for new polar-orbiting satellites this year. More troubling, taking an acquisition program offline and then restarting the process at a later date would lead to cost increases of as much as three to five times the amount the government would have to spend for the same product today.

So here’s the choice: Spend $ 700 million this year for continuous service or $ 2 billion to $ 3.5 billion at some point in the future for the same equipment and a guaranteed service interruption.

Environmental satellites are not optional equipment. This is not a debate about whether we should splurge on the sunroof or the premium sound system or the seat warmers for our new car. Today’s environmental satellites are at the end of their projected life cycles. They will fail. When they do, we must have replacements ready or risk billions of dollars in annual losses to major sectors of our economy and weakening our national security.

That’s an ugly forecast. Tragically, it’s also 100 percent accurate.

- Michael Conathan is Director of Oceans Policy at American Progress.

Related Posts on Extreme Weather:

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Let no one be confused, the stakes in Wisconsin are high and the Badger state could turn into the crucial battle ground between progressivism and the new Tea Party majority in the country.  Issues as important as public sector compensation, bulging state deficits, union power, federalism, education, federal entitlements as well as others are being fought over. That Wisconsin is the birthplace of American progressivism with a new conservative governor, new conservative majorities in both chambers, a new conservative U.S. senator and the bright new conservative chairman of the House Budget Committee, Paul Ryan, has made it ground zero for the left.

President Barack Obama has federalized the issue, throwing the full weight of the White House, the Democratic National Committee, and his own Organizing for America operation behind government unions, with the assistance of the SEIU and AFSCME unions. This is a major new test for the new governor, Scott Walker. If conservatives lose in Wisconsin, reform might be stifled elsewhere.  If they can win, progressivism is in real trouble. 

On the ground of course, it means that the Madison Metropolitan School District will not be educating any children today. For the third day in a row this week, the union members of Madison Teachers, Inc., will stage a “sick out” today to protest Governor Scott Walker’s (R) new budget, which would overcome a $ 137 million budget deficit this year and a projected $ 3.6 billion deficit over the next two years. Stacy Billings, a parent of two Madison students, told the Wisconsin State Journal that she supports unions and opposes Walker’s proposal but is against a teacher protest during school hours: “That’s not acceptable to me. My tax dollars pay for the teachers to teach and not to protest.”

What Billings does not understand, but is about to learn, is that like all government unions, Madison Teachers, Inc., does not care about teaching her children. Former American Federation of Teachers President Al Shanker put it bluntly: “When school children start paying union dues, that’s when I’ll start representing the interests of school children.” That is what this fight in Wisconsin, and across the country, is really about: money. And not money for government employees—money for government unions. The government unions themselves are admitting this every day the fight drags on.

Yesterday, Wisconsin state Senate Democrats brought the body to a halt when they fled the state to prevent the three-fifths quorum requirement needed for debate on legislation to continue. Governor Walker’s budget helps end Wisconsin’s budget deficit by requiring government workers to pay at least 12.6 percent of their health insurance premiums and contribute 5.8 percent to their pensions. Even with these modestly higher costs, Wisconsin government employees would still enjoy benefits far more generous than those offered in the private sector. But that’s actually irrelevant. Remember, this fight is not about government employee pay. It is about preserving the direct pipeline that government unions have to our tax dollars. Don’t believe it? Just ask Wisconsin Education Association Council President Mary Bell: “This is not about protecting our pay and our benefits. It is about protecting our right to collectively bargain.”

On Thursday, the President told a Wisconsin television station, “I haven’t followed exactly whats happening with the Wisconsin budget … some of what I’ve heard coming out of Wisconsin, where you’re just making it harder for public employees to collectively bargain generally seems like more of an assault on unions.”

President Obama is wrong: Denying government unions the power of collective bargaining is not an assault on all unions. Previous Democratic Presidents understood this fact. No less a progressive icon than President Franklin Delano Roosevelt wrote in 1937: “All government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. … The employer is the whole people, who speak by means of laws enacted by their representatives in Congress.”

This is why private-sector unions are regulated by the federal National Labor Relations Act but government unions are regulated by the states. Wisconsin is actually the birthplace of collective bargaining power for government unions, granting them the privilege in 1959, but many states have always operated, and still do, just fine without them. Virginia, for example, gives no collective bargaining power to government unions, but according to the Pew Center on the States, it still somehow manages to be one of the best managed states in the country.

What is really at stake in Wisconsin today (and Indiana, Ohio, New Jersey, and Pennsylvania tomorrow) is the future of American competitiveness. According to the latest Pew polling, the American people understand that unions make it harder for America to compete globally. Government unions are simply a parasite on the U.S. economy. When President Obama came into office, he shielded government unions from transparency by ending their reporting requirements to the Department of Labor. As a result it is impossible for the American people to know for sure how much of their taxpayer revenue is being diverted into union coffers. But if you assume that each union member pays between $ 500 and $ 750 annually, taken involuntarily directly from their paychecks, that means the government union industry in Wisconsin is worth at least $ 100 million a year.

If government employees want to voluntarily form associations and lobby the government for higher pay, better benefits, and working conditions, that is there constitutional right. But they have no right to force all employees to join their organization and take money from their paychecks every week. Governor Walker’s bill fixes these problems: It affords government workers the right to quit their union and keep their jobs; it requires unions to demonstrate their support through annual secret-ballot votes; and it stops state and local governments from collecting union dues through their payroll systems. These are common-sense measures that would increase worker freedom, restore power to taxpayers, and make America more competitive internationally. Keep fighting, Governor Walker! The American people can’t afford you to lose.

Quick Hits:

  • The House approved an amendment to the continuing resolution that would block funding for Obama Administration czars.
  • House Speaker John Boehner (R–OH) said he would not “move any kind of short-term [spending bill] at current levels” after the House passes the continuing resolution to keep the government running after March 4.
  • Foreign banks have already figured out how to restructure their U.S. operations to avoid Dodd–Frank regulations.
  • Rather than ask for a stay or a motion to reconsider, the Justice Department on Thursday oddly asked a federal trial judge to “clarify” the immediate impact of his ruling last month that declared Obamacare unconstitutional.
  • Cities throughout California are using redevelopment funds—intended to fight blight and promote economic development—as emergency ATMs.

The Foundry: Conservative Policy News.

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Choices.


He said it a few days ago but it’s best contemplated today, through the lens of the fiscal apocalypse that is Obama’s budget. All along, I’ve been thinking that the Romneyites want this guy to stay out of the race lest the moderate/managerial wing of the primary grow too crowded. But now? Mitt would inevitably [...]

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Hot Air » Top Picks

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From Sunlen Miller: Previewing his budget, set to be released on Monday President Obama promises a budget that will “help us live within our means while investing in our future.” “Families across this country understand what it takes to manage…



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Political Punch

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According to Zhang Guoqing of China’s state-controlled Xinjingbao [Beijing News], it seems that President Obama has finally woken up to the fact that America’s state of development is the most pressing issue for the nation. Unfortunately, the scholar from our largest creditor’s state-sanctioned media writes, Obama may be too late, and Americans and the U.S. media aren’t ‘buying it’.

For the Xinjingbao, Zhang Guoqing writes in part:

Obama has finally discovered what it means to be weary. Entering his third year in office, he has opportunistically turned his focus to next year’s general election, passionately evoking development in his State of the Union address, but unfortunately, people aren’t buying it.

No one likes being fooled. For Americans, whether or not they have work and money in their pockets, reality is more desirable than heart-warming words. As for the contents of Obama’s impassioned speech, it would make for a blockbuster of a movie, but there is no money to shoot it.

The statistics in the speech speak volumes - the president is powerless. … Even after the FED again turned on its cash printers, it has been unable to stimulate the U.S. economic wagon, and the people aboard remain at a loss.

Development is of paramount importance. U.S. President Obama has squandered two years, and even if he now grasps the truth, the price may be too great to pay. Included in this, his detour around his China policy was regrettable.

READ ON AT WORLDMEETS.US, your most trusted translator and aggregator of foreign news and views about our nation.


The Moderate Voice

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Arv at Street Carnage craps on Adbusters founder Kalle Lasn, the philosophy of the magazine, and its promotion of Buy Nothing Day: I don’t know if Kalle realizes it, but a lot of people spend most of the year not…





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The Daily Dish | By Andrew Sullivan

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Now here’s a rule I did not know:

“In my opinion, if you don’t have a bartender at your party, you’re a loser,” said Dustin Terry, who lives a floor below Ms. Argiro and said his job was to get models and Saudi royalty into hot clubs. “The bartender brings class and sophistication.”

“If you can’t afford to hire a bartender,” he added, “you shouldn’t be having a party.”

That seems to be the consensus of a growing crowd of 30-something New Yorkers who wish to signal they’ve graduated from post-collegiate squalor to young professional coming of age. No matter how small their abodes, they won’t invite friends over for cocktails without the assistance of a bartender — even if there’s barely room for the bartender to stand.

Now, I’m not sure what Procurer of Models and Saudi Royalty pays these days but this would have put the kibosh on most of the parties I’ve attended.   Indeed, I make a decent living and the only party I’ve hosted at which I’ve employed a non-me bartender was my wedding.

via Glenn Reynolds




Outside the Beltway

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President Barack Obama’s Debt Commission includes $ 100 billion in defense cuts a year by 2015. That represents over one-seventh of the defense budget. Since the military is already straining to meet all its missions now, these cuts would simply force the military to stop doing certain things. This is not just Heritage saying this. The force structure outlined by the Pentagon in its recent Quadrennial Defense Review as the minimum capabilities necessary could not be sustained this these cuts.

Since the White House has already shown that it plans to stay in Iraq and Afghanistan through 2014, that means spending on operations would cut directly into training and readiness. The U.S. would be incapable of responding to another major contingency without very grave risk of failure.

Furthermore, procurement that is already under-funded would have to make serious tradeoffs. Something wouldn’t get bought. Programs like a replacement air tanker would be on the chopping block. We could wind up with so few F-35s that the U.S. would never again start any major mission with assured air supremacy.

In the out years the “bow wave” of the new equipment that the U.S. needs to have versus the amounts available to purchase would mean that some capabilities (like long-range bombers) would vanish.

Defending U.S. interests in parts of the world would fall off the table. For starters, there is no way the U.S. could sustain in any credible way its commitments to NATO, the Middle East and Israel, and South Korea and Asia at the same time.

The military would likely have to shed 100,000 troops or more. Cutting ground forces would mean units on their fifth and sixth tours of combat duty in Afghanistan would get no relief.

Systems like missile defense would be imperiled not just because of the shortage of funds but because of our industrial defense. Since the U.S. is not buying anything, design engineers are retiring and not being replaced. U.S. design engineering capacity on satellites, large rockets, combat aircraft, large transport aircraft, and helicopters are already in peril. Pretty soon our equipment will not only not be “built in the USA”; it won’t even be designed in the USA.

Forget about defending the homeland. The Pentagon has already shaved the number of troops dedicated to respond to chemical, biological, or nuclear attacks. The U.S. capacity for air marshals, which we implemented after 9/11, will vanish.

Many of the capabilities the U.S. is building to address emerging threats like cyber security and training foreign militaries would fall by the wayside as the services struggle just to maintain basic forces.

Then there is the “wild card”: How would America’s adversaries move to take advantage of this deliberate self-weakening? What would Iran do if there is serious question if U.S. air power could even reach nuclear sites in Iran? What would Russia do the next time it wants to invade a neighbor? What would North Korea do when the U.S. struggles to find enough ships and planes to reinforce South Korea? What would China do if it finds it can control the South China Sea? What would Venezuela do if it sees that the U.S. lacks the capacity to meet existing commitments? What would happen if even a country with a small nuclear force and missiles has the capacity to checkmate the U.S.?

There is, and always will be, an upper limit to the effectiveness of diplomacy and soft power. The ability of our political leaders to practice effective diplomacy rests on the foundation of a powerful military. These cuts would decimate that foundation.

The Foundry: Conservative Policy News.

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Celebrating the company’s Wednesday initial public offering, President Barack Obama last night href="http://www.whitehouse.gov/the-press-office/2010/11/18/remarks-president-general-motors">called his government takeover of General Motors a “success story.” “American taxpayers are now positioned to recover more than my administration invested in GM,” he said. Left unsaid is the fact that if the Obama Administration keeps selling their GM stock at the IPO price, href="http://online.wsj.com/article/SB10001424052748704648604575621533011639228.html">the U.S. taxpayer will lose $ 10 billion on the deal, and that does not include href="../2010/05/03/video-gm-repaid-taxpayers-with-taxdollars/">the loans GM still owes, href="../2010/09/03/new-study-says-cash-for-clunkers-was-%E2%80%A6-a-clunker/">cash for clunkers, href="../2010/07/29/chevy-volt-cheap-at-half-the-price/">the Chevy Volt subsidies, or the millions of unseen costs the unprecedented intervention has inflicted on our economy.

No matter what you hear from the President’s defenders, always remember that it did not have to be this way. As late as href="http://dealbook.nytimes.com/2009/04/30/gm-bondholders-seek-majority-stake-in-counterproposal/">April 30, GM’s bondholders were willing to take a 58 percent equity stake in the company in exchange for canceling their $ 27 billion in unsecured GM bonds. But under their deal, the federal government would have had no control over this new company, while the United Auto Workers union would have received a minority share of the company and the taxpayers would have been protected as a secured creditor. An even better outcome would have been for the federal government not to have supplied taxpayer cash at all and href="http://www.heritage.org/Research/Reports/2008/12/Bankruptcy-Is-Best-Responding-to-Automakers-Arguments-against-Chapter-11-Restructuring">let all creditors take their lumps from an unbiased bankruptcy judge. But President Obama just couldn’t keep his government out of it.

So he href="http://www.washingtonpost.com/wp-dyn/content/article/2009/05/25/AR2009052502135.html">publicly bullied the GM bondholders into accepting a much worse deal. Under href="http://news.bbc.co.uk/2/hi/business/8077255.stm">the White House plan, the federal government was awarded a 60 percent stake of GM, the Canadian government got 12.5 percent, and GM’s unions got 17.5 percent while the bondholders walked away with just 10 percent. Defenders of the bailout say all this was worthwhile because the effects of a failure of GM would have been catastrophic. But that ignores both the deal the bondholders first offered the unions and the possibility of href="http://www.heritage.org/Research/Testimony/Bailouts-Abusive-Bankruptcies-And-the-Rule-of-Law">an expedited—but non-political—bankruptcy proceeding. id="more-46893">

Before this week, taxpayers href="http://online.wsj.com/article/SB10001424052748704104104575623061936893220.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsSecond">put $ 49.5 billion into GM and held a majority stake in the company. The IPO allowed the Treasury to sell about a quarter of this at $ 33 per share, href="http://online.wsj.com/article/SB10001424052748704104104575623061936893220.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsSecond">raising $ 13.6 billion. That leaves taxpayers, post-IPO, with $ 35.9 billion “invested” and href="http://online.wsj.com/article/SB10001424052748704648604575621533011639228.html">about a 37 percent stake in the company. At $ 33 per share, that leaves taxpayers still almost $ 10 billion in the hole. href="http://online.wsj.com/article/SB10001424052748704648604575621533011639228.html">The shares would have to jump to $ 51 for taxpayers to break even, a price level considered by most analysts to be unlikely.

But perhaps the biggest danger of all is the prospect of the GM “success” being used to justify future bailouts of other firms. That would be the true catastrophe. As George Mason University economist Don Boudreaux href="http://cafehayek.com/2010/08/successful-bailout.html">wrote:

The chief economic case against the bailout was not that huge infusions of taxpayer funds and special exemptions from bankruptcy rules could not make G.M. and Chrysler profitable. Of course they could. Instead, the heart of the case against the bailout is that it saps the life-blood of entrepreneurial capitalism. The bailout reinforces the debilitating precedent of protecting firms deemed “too big to fail.” Capital and other resources are thus kept glued by politics to familiar lines of production, thus impeding entrepreneurial initiative that would have otherwise redeployed these resources into newer, more-dynamic, and more productive industries. The “success” of the bailout is all too easy to engineer and to see. The cost of the bailout—the industries, the jobs, and the outputs that are never created—is impossible to see, but nevertheless real.

The legal and political chicanery used by the White House to produce the GM “success” story is also exactly why the United States fell from the ranks of the economically “free,” as measured by The Heritage Foundation’s href="http://www.heritage.org/index/">Index of Economic Freedom this year. From href="../2010/08/18/morning-bell-end-crony-capitalism/">Fannie Mae to Freddie Mac, from href="../2009/05/11/ceo-confirms-treasury-is-calling-shots-at-gm/">GM to href="http://www.cbsnews.com/stories/2009/05/07/politics/otherpeoplesmoney/main4997900.shtml">Chrysler, from href="../2009/05/15/paulson-and-the-banks-what-an-offer-you-can%E2%80%99t-refuse-looks-like/">AIG to Citibank, our government continues to subvert the established rule of law. This lawlessness creates uncertainty in the business environment, and it is a huge reason why our economy is not recovering as it should be.

Quick Hits:

  • New York Attorney General Andrew Cuomo href="http://online.wsj.com/article/SB10001424052748704104104575622500156880416.html?mod=WSJ_hp_LEFTWhatsNewsCollection">filed two suits against President Obama car czar Steven Rattner yesterday alleging that Rattner used special favors to win a $ 150 million investment from the New York pension fund.
  • California was href="http://www.latimes.com/business/la-fi-bonds-20101119,0,6528079.story">forced to boost interest rates on $ 10 billion in short-term debt it sold Thursday.
  • The Kaiser Family Foundation said there will be a href="http://online.wsj.com/article/SB10001424052748703374304575622480028578008.html?mod=WSJ_hp_LEFTWhatsNewsCollection">13 percent decline in the number of Medicare Advantage plans thanks to Obamacare.
  • According to the Labor Department, the href="http://online.wsj.com/article/SB10001424052748704648604575621061892216250.html?mod=WSJ_hp_LEFTWhatsNewsCollection">number of start-up companies fell by 2 percent last year.
  • href="../2010/11/18/soaking-the-rich-would-not-solve-the-long-term-deficit-crisis/">Soaking the rich would not solve the long-term deficit crisis.

The Foundry: Conservative Policy News.

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By David Boaz

Some 75 new Republican members of Congress got there by promising to stop the federal government’s massive overspending. And as Chris Edwards noted, there have been a number of lists of budget cuts proposed recently.

Saturday Night Live did a sketch back in 2007 that might be useful to Tea Partiers and new members of Congress. It’s about a self-help plan called “Don’t Buy Stuff You Cannot Afford.” Since the federal government is running deficits well over a trillion dollars a year, I’d say this plan would be good advice:

Hat tip to Jonathan Witt at the Acton Institute’s PowerBlog, who points out that if this were a perfect analogy, the book author would be more agitated because “the couple has been spending the author’s money using a credit card he had idiotically loaned them a few years before.”

A Budget Plan: Don’t Buy Stuff You Cannot Afford is a post from Cato @ Liberty - Cato Institute Blog


Cato @ Liberty

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il_430xN.72152299

Deck chairs on the Titanic.

What state ranks third in unemployment, second in foreclosures, has the nation’s worst credit rating, is running a $ 19 billion deficit – yet insists on spending billions on a greenhouse gas emissions reduction plan that can’t possibly impact global warming?

Yes, it’s California, land of the Governator, who signed a bill that may say “Hasta la vista, baby!” to perhaps a million jobs. Yet there’s hope the prosperity terminator can be stopped.

The state boasts that the California Global Warming Solutions Act of 2006, better known as AB 32, is “first-in-the-world.” It requires that by 2020 the state’s greenhouse gas emissions be reduced to 1990 levels, about 25-30 percent less than they’d otherwise be. It demands another 80 percent reduction by 2050. This even as the state’s population is projected to grow from 34 million to 59 million by then. Minor implementations have already begun and the law fully kicks in during January 2012.

The Golden State has prided itself for decades as a national leader in business and economic trends. Lately the focus seems to be on showing the rest of the United States the quickest path to financial ruin. Already poised at the edge of the cliff as far as jobs go, California is about to let AB32 push it over and finish the job.

As I pointed out in a previous post, the green jobs story spun by environmentalists and progressives has been nothing more than a leftist fairy tale to this point. The sales pitch for the artificially propped-up “industry” has become so sour that its most prominent champion-President Obama-has stopped trying to make it.

Noticeably absent from President Obama’s latest economic-stimulus package are any further attempts to create jobs through “green” energy projects, reflecting a year in which the administration’s original, loudly trumpeted efforts proved largely unfruitful.

The long delays typical with environmentally friendly projects - combined with reports of green stimulus funds being used to create jobs in China and other countries, rather than in the U.S. - appear to have killed the administration’s appetite for pushing green projects as an economic cure.

The plan to shackle and financially strangle profitable, proven energy sources and replace them with a renewable energy industry that has no real-world success stories (large scale) is losing steam on both ends of the political spectrum now.

Even some of the administration’s liberal allies have expressed skepticism over the original stimulus package’s use of green investments as a way to spur quick employment growth at home.

“Spending on renewables is slow to get out of the door. Leaks to foreign companies is an inadequate driver of jobs and growth and may not create a strong exporting industry,” said Samuel Sherraden, an economic analyst at the New America Foundation, a Washington-based progressive think tank.

AB32 was passed and signed into law at a time when California was still one of the largest economies in the world and had an unemployment rate almost eight points lower than it is now. There was money available to subsidize technologies that had yet proven themselves profit-makers on their own. Now the government here gives IOUs instead of state income tax refunds.

After decades of hyper-regulation poisoning the business climate in California, lawmakers here are still prepared to add more and do little more than cross their fingers, waiting for an almost fantastical outcome.

Originally the California Air Resources Board (CARB) forecast that by 2020 the law would expand economic production by $ 33 billion annually, increase overall personal income by $ 16 billion and per capita income by $ 200, while adding more than 100,000 jobs. But when that failed the laugh test, CARB rejiggered the numbers.

A new CARB report in March forecast continued economic growth for California, while also concluding that AB 32 would barely slow it. Indeed, under CARB’s best-case scenario, the law would actually add 10,000 jobs. Ah, but the study had four other scenarios. All of them indicate job losses – as high as 320,000.

The once-proud economic engine in California doesn’t have any wiggle room to absorb (as President Obama would say) the damage even more misguided energy regulation would cause. AB32 needs to, at the very least, be suspended until the state can provide some measure of solvency and return its citizens to work.


Big Government

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Steve Pearlstein’s column wondering whether business can afford a Senate dominated by Jim DeMint and his allies reminded me of a distinction that doesn’t get made often enough: Business don’t like policy uncertainty. But they don’t like policy inadequacy, either.

A GOP-dominated Senate where the aim is, as DeMint said, “total gridlock,” is not going to reduce policy uncertainty. As Pearlstein argues, it’ll just shift it to new realms. The possibility of the government getting shut down over a budget dispute will be bad for certainty. A rise in paralysis and acrimony is not going to comfort a bond market waiting to see whether we can make difficult decisions on spending cuts and tax hikes. A shift favoring regulatory action rather than legislative efforts might not be preferable for businesses. More foot-dragging for nominations and everyday bills is not going to help sectors that need the government agencies they deal with to be staffed and funded.

But then there’s the other problem: policy inadequacy. There are things the private sector needs. An energy bill that lays out our national priorities. Policies that will bring down the national debt. Improvements in our education system and our surface infrastructure. If action on those fronts grinds to a halt, doing business in America is going to get a lot worse.

What business should want, in theory, is a Republican Party that advocates for its interests. That is to say, a Republican Party willing to send 20 senators and 50 House members to the table when Democrats are writing a huge health-care bill that has the votes to pass. The Democrats would’ve given anything for some votes from across the aisle, and whatever it is that business wanted, it could’ve gotten. But since the Republican Party wasn’t interested in governing or negotiating, business didn’t have that leverage. Insofar as the GOP is the party of business, they failed their constituents: They neither stopped the bill nor — with the exception of Olympia Snowe — fully participated in the process behind it. Or take the stimulus bill, which major business groups like the Chamber of Commerce supported, but which the Republicans abandoned.

My hunch is that business doesn’t really care about this for two reasons. The first is that the Democrats aren’t anti-business and they in fact spent a lot of time talking to representatives from the affected industries and reshaping the bill to address their concerns. The second is that the people actually representing business interests in Washington are movement Republicans rather than disinterested CEOs, and they’re allied with the interests of the Republican Party in much the way that organized labor is allied with the interests of the Democratic Party. But what that means is that the GOP isn’t going to come in and do what business needs them to do, but instead what their base and electoral interests tell them to do. And so uncertainty and inadequacy will rule the day.









Republican - United States - Politics - Parties - GOP
Ezra Klein

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