Wednesday, November 12, 2014

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Pentagon Says "Stop Defense Cut Madness"; Mish Investigates Alleged "Cuts"

Posted: 12 Nov 2014 10:46 PM PST

Thanks to the sequester (long forgotten by most), alleged "cuts" in spending were scheduled to happen automatically.

But no one is Washington is happy with that prospect: Not McCain, not Obama, not defense hawks, not Republicans, not Democrats, not anyone that I can find.

Obama labeled the cuts "draconian". The Pentagon called them "mad".

Undoing the "Mad Defense Cuts"

The following headlines will tell you everything you need to know.

On November 12, Reuters reported Pentagon Number Two Urges End to U.S. Defense Cut 'Madness'

On October 8, The Hill reported Obama Warns of 'Draconian' Military Cuts

On September 10, the Daily Beast reported Obama Wants a Blank Check to Fight ISIS—and Congress Is Ready to Give It to Him.

On August 14, Reason.Com wrote Effects of Sequester Cuts Were Overstated, but GOP Hawks (and Obama) Want to Cancel It Anyway

On April 1, the National Journal wrote Ryan Budget Calls for Return to Pre-Sequester Defense Spending.

"House Budget Committee Chairman Paul Ryan laid out a budget vision Tuesday that goes beyond President Obama's request by ramping up defense spending beyond the caps in 2016 and restoring them by 2017."

Cuts? What Cuts? Where? When?

Before you can undo cuts, don't you first have to have cuts? Logically, one should think so. So let's investigate the cuts.

Impact of Sequester on Defense Budget



The Mercatus Center put the "cuts" in perspective on August 21, 2012 (see above chart) in its report Defense Spending Will Continue To Grow In Spite of Automatic Cuts Set By BCA.
As a result of Congress's failure to come up with a $1.2 trillion deficit-reduction plan, automatic spending cuts or "sequestration" set by the Budget Control Act of 2011 (BCA) is set to take place from 2013 to 2021. As the threat of sequestration looms, concerns about cutbacks in defense spending have become a significant issue surrounding debates tied to national security and American jobs.

To understand the effects of sequestration on future defense spending, it is important to understand how the BCA spending caps and sequestration apply to the base defense budget alone and when war spending is considered.

The expansion of the defense budget starts with the Department of Defense's base budget (green region), which is the legal amount of spending approved by Congress. The base budget does not include war costs – categorized as Overseas Contingency Operations (OCO) – for military operations in Afghanistan, Iraq, and other defense operations. Therefore, the additional costs for funding wars (blue region) are included in the chart to establish a full picture of defense spending.

As the chart shows, defense spending has almost doubled in the past decade in current dollar terms and will continue to grow in spite of automatic cuts set by the BCA. Clarifying these figures reveals that sequester cuts do not warrant the fears of policymakers who warn about "savage cuts" to the defense budget.
Washington Compromise

As I have pointed out before, the way compromise in Congress works is both sides get money for whatever ridiculous programs they want.

Recall that the sequester (automatic cuts) was supposed to force bipartisan compromise on tackling the deficit. It didn't. Both sides opted for the sequester instead.

The sequester called for a reduction in future budget increases (no actual cuts anywhere except a trivial amount in the first year). Now both parties complain about "draconian cuts" that never happened.

Reductions in the rate of future budget increases will now be restored.

What a bunch of hypocrites. It's sickening.

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

Tanks and Nukes: NATO Statements on Ukraine; McCain Will Go Ballistic

Posted: 12 Nov 2014 03:42 PM PST

In the wake of renewed fighting following the breakdown of the Ukraine ceasefire agreement, Nato Accuses Moscow of Helping Ukraine Rebels to Carve Out State.

That Russia is helping the rebels is certainly believable. Yet, some of the NATO statements are so preposterous that everything NATO says is suspect. Let's take a look.

NATO: "We have seen columns of Russian equipment, primarily Russian tanks, Russian artillery, Russian air defence systems and Russian combat troops entering into Ukraine," General Philip Breedlove said on a trip to Bulgaria as fears mounted that a tenuous ceasefire would collapse.

Mish: Where can you hide a tank? More importantly, where can you hide "columns of equipment, primarily tanks"? If columns of tanks were heading from Russia into Ukraine, both US and NATO would have satellite images. So where the hell are the images?

Other statements by NATO appear more reasonable.

NATO: A Nato military officer told the Financial Times that the alliance believed Russia now has around 8 battalions – equivalent to as many as 6,400 men – in a state of high readiness on the border with Ukraine. The number of Russian special forces soldiers operating already inside Ukrainian territory has increased from 300 to between 400-500 in recent days, the officer said. The deployment of sophisticated modern weapons systems has become a particular concern.

Mish: Is it believable Russia massed troops on Ukraine's border. Yes. 6,400 men? Who knows? I don't. But where are the images? Can you hide 6,400 men? The problem regarding men is that even if NATO does provides border images, those counts are not necessarily believable unless one can prove when they were taken.

Are there 400-500 Russian special forces in Ukraine? That's certainly possible, even believable. But are those "special forces" volunteers or were they ordered by Putin? And by the way, isn't that much smaller than previous Ukraine estimates that pegged the number of special forces at 2,000-5,000?

BBC Chimes In

The BBC reports Russian Troops Crossed Border, Nato Says

NATO: Nato's Supreme Commander in Europe General Philip Breedlove has confirmed that over the past two days, Nato has seen columns of Russian armour, artillery and crucially - combat troops - entering Ukraine.

Mish: What about nukes?

NATO: General Breedlove also confirmed that Nato believes Russia is deploying nuclear-capable weapons to Crimea - a reference to reports that Russia is deploying short-range Iskander ballistic missiles there that could potentially be equipped with nuclear warheads.

Mish: That report ought to make McCain's hair stand straight up in shades of orange. No doubt McCain will use General Breedwar's assessment to get the US to send nuclear missiles to the Czech Republic. Should the US make such an offer, hopefully the Czech Republic declines.

Russia: Russian defence official Maj-Gen Igor Konashenkov said "there was and is no evidence" to support Gen Breedlove's claims.

Mish: We have heard the accusations on tanks before, repeated nearly every month by Ukraine. If there is strong evidence, can we see it please? Is that too much to ask?

Ukraine, the US, and NATO have had more than enough time to produce some images of convoys of Russian tanks rolling in over the border.

That they have not is strong evidence that NATO and Ukraine talk on tanks is mostly-to-all hype and little-to-no reality.

McCain Will Go Ballistic

Would Russia place nukes in Crimea? The idea is silly.

Russia knows full well McCain would go ballistic. In turn, Obama would agree to send more US missiles to Eastern Europe at US taxpayer expense. That is not a set of events Putin would want.

Unfortunately, McCain is likely to go ballistic anyway, precisely the reason for Breedwar's statement of "belief".

More nukes by any side, any place, is not going to ensure peace. Instead, nukes increase the likelihood of a serious accident.

Related Discussion Roundup


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

Historic Hype Over Global Warming Agreement With China; CO2 vs. Death-by-Pollution

Posted: 12 Nov 2014 10:39 AM PST

On Tuesday, China and US Struck Deal on Carbon Cuts in Push for Global Climate Pact.

In a New York Times Op-Ed, Secretary of State John Kerry reflected on Our Historic Agreement With China on Climate Change.

Agreement Summation

  1. President Obama pledged to cut US carbon emissions by 26-28% of 2005 levels by 2025
  2. China agreed to cap its emissions by 2030 (earlier if possible, but no guarantees)
  3. China will expand zero-emission sources to 20% by 2030.

Is this a good deal? For whom?

Here is a little perspective on the agreement.

Carbon Emissions by Country



Under the agreement, the US needs to act now. China can delay for 5-10 years or more.

Questions of the Day

  1. What will China's emissions be in 2030 by the time China's cap kicks in? 
  2. Is this deal worth the accompanied hype?

Some of the comments on the Guardian Live Blog are ridiculous.

For example: "Today's deal puts intense pressure on Australia to announce a target for post-2020 greenhouse gas reductions, writes my colleague Lenore Taylor."

Please look at the above map. Would it matter one iota if Australia cut emissions 20% by overnight? Heck, would it matter if Australia cut emissions to zero?

From a carbon perspective the answer is no. However, the global loss in Australia's resource production would be quite significant, far more than any alleged gain from carbon reductions.

Pollution Perspective

Actually, I am all in favor of China reducing pollution. The sooner the better, but without so much hype over "global warming".

China is literally killing hundreds-of-thousands of people each year with air and water pollution.

Smog is so bad in China that discounting cultural issues and love of homeland, no one in their right mind would choose to live there if they had other options.

Interestingly, 47% of Chinese Billionaires Want to Leave China Within 5 Years, Only 6% of US Billionaires Seek to Leave US.

Death-by-Pollution Stories


Those headlines believable? You bet.

I have written about China's Pollution Problems over a dozen times.

Click on the preceding link and look at a couple articles for some truly nauseating pollution images. CO2 emissions are the least of China's pollution worries.

So please China, clean up your act, not because of global warming, but because you are poisoning the world right now.

China knows all that, and would have acted alone, with or without any persuasion from Obama or hype from Kerry.

Useless Feathers and More Questions

Did China commit to anything it would not have done in the first place, without an agreement?

If the answer is no (and it is), then what did Obama's "historic" deal accomplish other than put another useless "I did it feather" in Obama's cap, a feather that comes at relative expense to the US vs. China?

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

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