This level of $325 billion happens to be the level of funding for the US military in 1992, when Bill Clinton succeeded George Bush (senior) as the first Gulf War came to a close, and we were engaged as an Middle East MP force over Saddam.
According to US government inflation statistics this would be equivalent in today's terms to about $500 billion.
Reducing our costs by $400 billion would enable us to almost pay the interest costs of our current debt for the year.
Some would say this money keeps troops employed. Great. What a job. If the reduction in debt by $400 billion was proportionally applied to troop levels from our current total force of 1.4 million actives, this would be equivalent to 800,000 personnel. $400 billion over 800,000 FTEs is $500,000 per head.
Ask your local soldier: would they prefer their current annual salary or $500,000 per year (roughly the same as average Goldman Sachs bonuses)?
The math is astounding. We could send every downsized troop to a 4-year university for 25% of the savings. We could use another 25% to hire hundreds of thousands of teachers. Fix infrastructure. Invest in renewable energy. Modernize our grid. Invest in public rail transit. Or pay down the debt.
The opportunity cost scenarios are many, political willpower though, much less evident. While I hope it could happen, I prefer to invest time and energy hedging for the alternate scenario.
Friday, January 7, 2011
Sunday, January 2, 2011
How to reduce the Federal Deficit by $4 Trillion Dollars by 2020
Our current defense posture includes substantial offensive costs, under the dictum that the American way of life is partially dependent upon projecting our influence throughout the world. Manifest Destiny in every time zone. A big stick for every knucklehead that asserts sovereignty over their natural resources, resources that we might want to take in the name of the Red White and Blue.
A successful use of military power lies in its inherent latency. Slipshod use of that power weakens you. When you put your military in motion with poorly defined campaigns you are playing with loaded dice. The moral, human, and financial costs of poorly planned campaigns are many times that of smartly executed actions.
President Teddy Roosevelt understood how to project power and use it in metered doses to obtain objectives, the Big Stock policy. After all he fomented a Columbian revolution and Panamanian Independence, to dig a canal where the master French engineers of Suez failed... however neither Bush II nor Obama show the same mastery of Big Stick execution. Their approach reminds me of the village idiot who whacks the beehive simply because they *have* a stick in their hand. Inelegant. Yoda wept.
We are now in a de facto NeverEnding War, and badly planned, that. As of June 2010 we have been in Afghanistan longer than Vietnam, and as of Thanksgiving 2010 longer than the Soviets. End dates are tossed around like so much water cooler talk before the TV podiums in Washington, with no tangible action taken by either the President or the Congress to end the conflict.
The financial costs are calculable, but almost inconceivable. The website Cost of War allows you to go down to specific states, cities and counties to see what each owes in terms of our actions in Iraq and Afghanistan. As of the new year in 2011, my adopted home town of San Francisco is on the hook for $3.8 billion dollars. My rural home county's share is $131 million dolars.
What's yours?
The cumulative tab for our wars is well over a trillion dollars and mounting.
Our cumulative economic output each year is around $15 trillion dollars. Our national debt is approaching our total national output. A battle is now looming in Washington over raising our debt ceiling from $14.3 trillion to a higher level to allow increased spending on programs and war to continue without commensurate cuts or tax increases. Every time Congress votes to raise the ceiling, but not before much ululating occurs before media celebrities about the woes of higher debt. This pandering ignores the real danger.
If our national debt continues to accelerate we stand to lose control of our economic system, and thereafter our way of life as we know it. This is because increasing the debt to live beyond our means runs the risk of fanning inflation (or more accurately, currency debasement) and thereby displace the US dollar as the primary world reserve currency. When other central banks and other countries see that their reserve dollars are worth less and less, they will bail and switch to other fiat currencies or bullion. This is already happening now in a somewhat controlled fashion, but it is dangerous and fragile decoupling. If this process trips for any reason and unwinds in a disorderly or unexpected way, this would make our recent Great Recession seem Minor by comparison.
The need to reduce our spending is imperative. Most of the DC apparatchik would have everyone brawling in the streets over social programs. There is another way to save $400 billion dollars every year (that's more than US corporations pay in income taxes) and that lies in cutting military expenditures.
The United States is projected to spend around $725 billion dollars in 2011 on our military. I would suggest that we look at what other countries spend on their military operations. The following is a list of the major countries where we don't always see eye-to-eye and/or who have resources we covet and/or are in areas of the world that we or at least the Christian right consider important.
If we reduce our spending by $400 billion dollars that would then leave the United States with $325 billion for defense and offense, or still more than all of the above, combined, plus an extra $36 billion to deal with upstarts... or the bottom 100 countries of the world, combined.
Applying that $400 billion a year to deficit reduction could reduce our total obligations by $4 trillion dollars in the next 10 years, with no impact on social programs. This savings would help bolster world confidence in the US dollar, and enable us to leverage the extraordinary and incalculable privilege of remaining the world reserve currency.
We could never approach that kind of savings by ripping out social programs.
Consider one often thrown out by pundits: Food Stamps.
According to the Cato Institute Food Stamps (or the Supplemental Nutrition Assistance Program) are going to cost a projected $75 billion in 2011. This is nearly double that spent prior to the Great Recession so is out of the ordinary. But let's take this as the new normal for the sake of argument.
This amount supports 40 million people. Many of these have very marginal existence and elimination of food support could cause severe food distress. But who cares if 40 million people in America starve, right? I mean, revolutions in human history have never been provoked by mass starvation, right? So what have we got to fear except the cake-eating masses itself?
By the way, 40 million people is more than the populations of the following states, combined:
Other social programs can be put to the same analysis. Consider Section 8 Housing assistance vouchers. I personally have a big problem with how Section 8 is defrauded, by both recipients and landlords who distort the purpose of the program. It is not all fraudulently used and without it many families would be on the streets... just a damn poorly administered program with little oversight. But from a deficit perspective it is just not that big of a number relative to defense spending: around $30 billion total.
And consider this, a lot of our soldiers serving overseas have families here in these United States who rely upon food stamps and Section 8 to make ends meet.
But I'm not holding my breath waiting for our folks in DC to figure out basic economics or find some common sense. They would be well served to hear the opinions of the Austrian School of thought, but the Keynesian/Monetarist Chicago eCons that currently advise them are not going anywhere anytime soon.
So our deficits will likely continue to rise and inflation, follow.
Add some commodities/bullion to your portfolio, plant a backyard garden, and stock up the wine cellar! It's going to be an interesting ride.
A successful use of military power lies in its inherent latency. Slipshod use of that power weakens you. When you put your military in motion with poorly defined campaigns you are playing with loaded dice. The moral, human, and financial costs of poorly planned campaigns are many times that of smartly executed actions.
President Teddy Roosevelt understood how to project power and use it in metered doses to obtain objectives, the Big Stock policy. After all he fomented a Columbian revolution and Panamanian Independence, to dig a canal where the master French engineers of Suez failed... however neither Bush II nor Obama show the same mastery of Big Stick execution. Their approach reminds me of the village idiot who whacks the beehive simply because they *have* a stick in their hand. Inelegant. Yoda wept.
We are now in a de facto NeverEnding War, and badly planned, that. As of June 2010 we have been in Afghanistan longer than Vietnam, and as of Thanksgiving 2010 longer than the Soviets. End dates are tossed around like so much water cooler talk before the TV podiums in Washington, with no tangible action taken by either the President or the Congress to end the conflict.
The financial costs are calculable, but almost inconceivable. The website Cost of War allows you to go down to specific states, cities and counties to see what each owes in terms of our actions in Iraq and Afghanistan. As of the new year in 2011, my adopted home town of San Francisco is on the hook for $3.8 billion dollars. My rural home county's share is $131 million dolars.
What's yours?
The cumulative tab for our wars is well over a trillion dollars and mounting.
Our cumulative economic output each year is around $15 trillion dollars. Our national debt is approaching our total national output. A battle is now looming in Washington over raising our debt ceiling from $14.3 trillion to a higher level to allow increased spending on programs and war to continue without commensurate cuts or tax increases. Every time Congress votes to raise the ceiling, but not before much ululating occurs before media celebrities about the woes of higher debt. This pandering ignores the real danger.
If our national debt continues to accelerate we stand to lose control of our economic system, and thereafter our way of life as we know it. This is because increasing the debt to live beyond our means runs the risk of fanning inflation (or more accurately, currency debasement) and thereby displace the US dollar as the primary world reserve currency. When other central banks and other countries see that their reserve dollars are worth less and less, they will bail and switch to other fiat currencies or bullion. This is already happening now in a somewhat controlled fashion, but it is dangerous and fragile decoupling. If this process trips for any reason and unwinds in a disorderly or unexpected way, this would make our recent Great Recession seem Minor by comparison.
The need to reduce our spending is imperative. Most of the DC apparatchik would have everyone brawling in the streets over social programs. There is another way to save $400 billion dollars every year (that's more than US corporations pay in income taxes) and that lies in cutting military expenditures.
The United States is projected to spend around $725 billion dollars in 2011 on our military. I would suggest that we look at what other countries spend on their military operations. The following is a list of the major countries where we don't always see eye-to-eye and/or who have resources we covet and/or are in areas of the world that we or at least the Christian right consider important.
- The People's Republic of China (inc Taiwan): $110 billion
- Russia: $61 billion
- Saudi Arabia: $39 billion
- Brazil: $27 billion
- United Arab Emirates: $13 billion
- Iran: $9 billion
- Kuwait: $4.5 billion
- Oman: $4 billion
- Iraq: $3.8 billion
- Venezuela: $3.2 billion
- Angola: $2.9 billion
- Sudan, Syria, Nigeria, Kazakhstan, Lebanon, Jordan, Libya, Georgia (combined): $12.8 billion.
If we reduce our spending by $400 billion dollars that would then leave the United States with $325 billion for defense and offense, or still more than all of the above, combined, plus an extra $36 billion to deal with upstarts... or the bottom 100 countries of the world, combined.
Applying that $400 billion a year to deficit reduction could reduce our total obligations by $4 trillion dollars in the next 10 years, with no impact on social programs. This savings would help bolster world confidence in the US dollar, and enable us to leverage the extraordinary and incalculable privilege of remaining the world reserve currency.
We could never approach that kind of savings by ripping out social programs.
Consider one often thrown out by pundits: Food Stamps.
According to the Cato Institute Food Stamps (or the Supplemental Nutrition Assistance Program) are going to cost a projected $75 billion in 2011. This is nearly double that spent prior to the Great Recession so is out of the ordinary. But let's take this as the new normal for the sake of argument.
This amount supports 40 million people. Many of these have very marginal existence and elimination of food support could cause severe food distress. But who cares if 40 million people in America starve, right? I mean, revolutions in human history have never been provoked by mass starvation, right? So what have we got to fear except the cake-eating masses itself?
By the way, 40 million people is more than the populations of the following states, combined:
- Connecticut
- Iowa
- Mississippi
- Arkansas
- Kansas
- Utah
- Nevada
- New Mexico
- West Virginia
- Nebraska
- Idaho
- Hawaii
- Maine
- New Hampshire
- Rhode Island
- Montana
- Delaware
- South Dakota
- Alaska
- North Dakota
- Vermont
- Wyoming
- and for good measure, Washington DC
Other social programs can be put to the same analysis. Consider Section 8 Housing assistance vouchers. I personally have a big problem with how Section 8 is defrauded, by both recipients and landlords who distort the purpose of the program. It is not all fraudulently used and without it many families would be on the streets... just a damn poorly administered program with little oversight. But from a deficit perspective it is just not that big of a number relative to defense spending: around $30 billion total.
And consider this, a lot of our soldiers serving overseas have families here in these United States who rely upon food stamps and Section 8 to make ends meet.
But I'm not holding my breath waiting for our folks in DC to figure out basic economics or find some common sense. They would be well served to hear the opinions of the Austrian School of thought, but the Keynesian/Monetarist Chicago eCons that currently advise them are not going anywhere anytime soon.
So our deficits will likely continue to rise and inflation, follow.
Add some commodities/bullion to your portfolio, plant a backyard garden, and stock up the wine cellar! It's going to be an interesting ride.
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