@cheesehead, Ernst.

I don't see what the problem is here.

1. The US spends half of the world's military expenditure. This comes to over 500 billion dollars.
2. Despite this they need extra money to fight the two wars. To the tune of 159 billion dollars.
3. Is it too much to ask the military and the administration to cut back a bit in these times of austerity and make do with the 500+ billion dollars and not ask for the extra 159 billion?
4. The 159 billion saved this way could make the first 35k for everyone tax free.
5. Point 4 may not be the most efficient use of this money but it sure as hell is better than what it is being currently spent on. And it will have a stimulant effect on the economy. Now it may be that paying down the deficit is better but the point being lost here is that almost anything is better than what the money is currently being spent on.
6. And no, salaries do not come from the extra. Salaries are provisioned for in the "standard" 500 billion plus.

[QUOTE=ewmayer;216115]Now, for a *slightly* more bearish view, let`s check out James Howard "prophet of doom" Kunstler`s latest:

[url=http://kunstler.com/blog/2010/05/something-happened.html]Clusterfuck Nation: Something Happened[/url]
[/QUOTE]

Ah, so you've descended to actually quoting Kunstler. Your disclaimer about his left-field-ness notwithstanding, I'm worried that by referencing him you've finally jumped the shark, Ernst.

I read his book "The Geography of Nowhere" quite some time ago and found it to be excellent. So a few years ago I came across Clusterfuck Nation and started to read it. My take: Come for the Freak, Stay for the Fury. I stuck around for a while just for the sheer entertainment value. There's just something amazingly fun about watching a lunatic whip himself into apoplectic fury until you're sure he's going to break something. Mind you, he has some interesting things to say here and there, but it's all so couched in fiery doom-mongering that the good points are rather lost.

They say economists have predicted 8 of the last 3 recessions. Well Kunstler has managed to predict the End of the World As We Know It pretty much every day for 10 years. I finally stopped reading after he proclaimed that a day on which the DJIA finished up over 275 points was proof that he was correct in predicting a crash for that day: you see, it was just the speed wobble before the actual crash. This was in 2002, with the Dow at around 8200 (by the end of that year it was at almost 9000).

Anyway, this wasn't particularly intended as a comment on your posts; I just enjoyed the quick trip down memory lane. La la la...

[QUOTE=garo;216124]5. Point 4 may not be the most efficient use of this money but it sure as hell is better than what it is being currently spent on. And it will have a stimulant effect on the economy.[/QUOTE]

This ignores the fact that some of the extra $159 billion spent on wars is stimulative. Hazardous duty pay is spent at home, plus buying bombs, ammo, jeeps create jobs for Americans. Even money spent on Iranian/Afghanistan public works projects hires Americans which is also stimulative. Of course, bribe money, gasoline, etc. is completely non-stimulative.

Also, if you give the $159 billion to the poor, nearly all of the money they then spend on Korean TVs, Japanese cars, and Chinese trinkets is non-stimulative.

Which is more stimulative? Who cares? The U.S. doesn't have the money for a tax break for anyone. Reduce the deficit. Then start the debate on raising taxes on the middle class and the poor. You cannot balance the humongous budget deficit without it.

BTW, the looney Alan Grayson is my representative. I did vote for him -- and he has proven quite entertaining. I had the great choice of a left-wing looney or a right-wing nut-job. I'll probably get a similar choice next time too - sigh.

[QUOTE=Prime95;216135]BTW, the looney Alan Grayson is my representative. I did vote for him -- and he has proven quite entertaining. I had the great choice of a left-wing looney or a right-wing nut-job. I'll probably get a similar choice next time too - sigh.[/QUOTE]

I sometimes wonder if it makes sense to speak of a "productive lunatic", e.g. one whose rants do occasionally cause more-sober-minded heads to deal with a genuine problem. In Grayson's case, I figure if his rantings can help keep the spotlight on the truly dangerous loonies - the monetarist nuts driving our nation in the fast lane toward insolvency - then that is a net good. And even when he's too way out to accomplish such, like you said, he's entertaining. Who needs phoneys like Simon Cowell of [i]American Idol[/i] when you have non-network-scripted, not-sponsored-by-Big-Faceless-Corp genuine stark raving mad hatters like Grayson (and Kunstler in my post above)?

--------------------------

Today`s interesting statistic is taken from a NYT article [url=http://www.nytimes.com/2010/05/23/world/europe/23europe.html?src=me&ref=world]Payback Time: Europeans Fear Crisis Threatens Liberal Benefits[/url]:

[i]"According to the European Commission, by 2050 the percentage of Europeans older than 65 will nearly double. In the 1950s there were seven workers for every retiree in advanced economies. By 2050, the ratio in the European Union will drop to 1.3 to 1 ... In Sweden and Switzerland, 7 of 10 people work past 50. In France, only half do."[/i]

The above article is worth reading in its entirety ... in particular the disparity in viewpoints of the young and old folks quoted is very striking.

And staying on the European continent, in a piece which could have come straight from the satirical pages of [i]The Onion[/i];

[url=http://www.nytimes.com/reuters/2010/05/25/world/international-uk-greece-tax.html]Greek Ministry Cracks Down on Tax Evasion By Staff[/url]:[i]Greece's Finance Ministry launched a tax evasion crackdown on itself on Tuesday to investigate hundreds of staff in response to a public outcry over corruption in the crisis-hit country.[/i]
[quote]Greeks, at the epicenter of fears over European debt, have been hit hard by austerity measures meant to pull the economy out of recession and opinion polls show they demand retribution in a country where corruption is widespread.

"Restoring transparency in tax collection, as well as the reputation of the tax administration in general, is essential not only for improving public revenues but also in order to instil a sense of social justice and establish a trustworthy relationship between citizens and the state," the ministry said.

The internal inquiry will investigate 50 complaints, mostly against tax offices and customs agencies, in cases including accusations of bribery, illegal economic activity, smuggling and corruption, the ministry said in a statement.

It will also investigate 234 employees who have not filed tax declarations for 2007-2008, as well as others at random, and examine the property holdings of 70 employees.

"The average real estate holdings for these employees is valued at 1,228,337 euros (1,052,000 pounds), while their average declared income is 50,834 euros," the ministry said.[/quote]
[i]My Comment:[/i] In related news, the Greek military has been put on a state of alert due to news of Greece`s military having been put on a state of high readiness.

You are right. Who cares which is more stimulative. Just stop spending the money you don't have right now. Stopping the unnecessary killing would be a bonus.

PS: Only in the US would Alan Grayson be called a left-wing looney. Everywhere else he would be called a moderate.

Those with an interest in monetary policy and business-cycle theory may be interested in this piece:

[url=http://www.themoneyillusion.com/?p=203]Anna Schwartz Changes Her Tune[/url]

----------------------

[i]Blacklistednews[/i] has [url=http://www.blacklistednews.com/?news_id=8878]25 Questions To Ask Anyone Who Is Delusional Enough To Believe That This Economic Recovery Is Real[/url] - instead of quoting the 25 questions, let me simply list my answers:

1. Going on food stamps = more cash-in-pocket to spend on stimulating the Chinese economy
2. More foreclosure filings means more newly-affordable housing, thus more home sales
3. Missed mortgage payments = more cash-in-pocket to spend on stimulating the Chinese economy
4. Bank-owned real estate represents a huge pool of as-yet-unrealized profits for banks
5. Higher gas prices will stimulate the green-tech sector, thus creating lots of high-wage jobs
6. Arnie always talks tough, but CA assembly speaker Perez [url=http://globaleconomicanalysis.blogspot.com/2010/05/borrowing-billions-from-pop-bottle.html]has a nifty budget solution[/url]
7. More states in trouble means a better chance of Economic Stimulus 2: Just think of it, millions of unemployed Americans getting high-paid government jobs collecting hair to help mop up the Gulf oil spill. It`s a win-win! And this year`s census is gonna be the best *ever*.
8. Trade deficits is just us parking our money with the Chinese ... it's a form of savings!
9. So if I instead spent $31,000 every second I could spend a trillion in one year - think of all the jobs that will create! I`m a one-man econo-stimulus band, baby!
10. Here you go with the deficit gloom & doom aqain ... like I said, it`s just a kind of savings account. Nice to see we are saving a lot these days.
11. In other words, by 2015 our GDP will finally be fully-backed by government bonds ... solid.
12. People misunderstand the whole Gulf of Mexico oil thing ... it`s really a brilliant strategy to produce oil more cheaply. Why spend time and money drilling hundreds of wells when you can drill just one and use it to fill the gulf with oil, where it`s really easy to retrieve? Just line up those tankers at the Gulf self-serve. The Arabs must be so jealous that they didn't think of it first.
13. Lots of small banks failing means they get merged which means lots of cost savings and greater efficiency.
14. There you go with "small banks are failing" thing again ... I prefer "there has never been a better time to buy distressed small banks".
15. Expiration of the homebuyer tax credit means home prices will fall, which will stimulate home sales.
16. "there has never been a better time to buy distressed GSEs"
17. Life on the edge provides a great incentive to not get sick, which will help slash healthcare costs
18. "there has never been a better time to buy distressed Detroit residents"
19. Clearly, the Gallup numbers show a steady uptrend ... upper is better, right?
20. I vote "the vast majority of Americans is just stupid". (Was that a trick question?)
21. That`s not Obama`s mantra ... "favorite aphorism" perhaps, but "mantra" is too ethnic.
22. Richard Russell sounds like he`s been "getting liquid" a little too often himself lately, if you catch my drift.
23. Another solid uptrend there.
24. "there has never been a better time to buy distressed fresh and dried vegetables"
25. Filing for personal bankruptcy = more cash-in-pocket to spend on stimulating the Chinese economy (or buying a distressed Detroit resident).

[quote=garo;216124]6. And no, salaries do not come from the extra. Salaries are provisioned for in the "standard" 500 billion plus.[/quote]... and as the need for combat troops in Iraq/Afghanistan drops (in case of a funding cut), so too will military recruitment and retention after a while, thus dropping the salary total in the standard military budget, even though they aren't paid from the extra.

Are the salaries of called-up-and-sent-to-Iraq/Afghanistan National Guard troops paid from the standard budget, or the supplemental? They're a substantial fraction.

George's favorite nutty congressman, Alan Grayson, is sponsoring a bill to [url=http://globaleconomicanalysis.blogspot.com/2010/05/war-is-making-you-poor-sign-petition.html]eliminate the supplemental-war-funding accounting games[/url]:
[quote]Next year's budget allocates $159,000,000,000 to "contingency operations," to perpetuate the occupations of Afghanistan and Iraq. That’s enough money to eliminate federal income taxes for the first $35,000 of every American's income each year, and beyond that, leave over $15 billion that would cut the deficit.

Grayson says ...

Support the [i]'War is Making You Poor'[/i] Act. This bill would eliminate the separate funding for the occupations of Iraq and Afghanistan, and eliminate federal income taxes for everyone's first $35,000 of income (or $70,000 for couples) each year. And it would help pay down our national debt.[/quote]

-----------------------

David Einhorn, well-known housing-bubble skeptic and head of Greenlight Capital Management, has an excellent op-ed in the NYT today:

[url=http://www.nytimes.com/2010/05/27/opinion/27einhorn.html?ref=opinion]Easy Money, Hard Truths[/url]:[i]Is the U.S. doing enough to keep debt from spiraling out of control? The signs are not encouraging.[/i]
[quote]According to the Bank for International Settlements, the United States’ structural deficit — the amount of our deficit adjusted for the economic cycle — has increased from 3.1 percent of gross domestic product in 2007 to 9.2 percent in 2010. This does not take into account the very large liabilities the government has taken on by socializing losses in the housing market. We have not seen the bills for bailing out Fannie Mae and Freddie Mac and even more so the Federal Housing Administration, which is issuing government-guaranteed loans to non-creditworthy borrowers on terms easier than anything offered during the housing bubble. Government accounting is done on a cash basis, so promises to pay in the future — whether Social Security benefits or loan guarantees — do not count in the budget until the money goes out the door.

A good percentage of the structural increase in the deficit is because last year’s “stimulus” was not stimulus in the traditional sense. Rather than a one-time injection of spending to replace a cyclical reduction in private demand, the vast majority of the stimulus has been a permanent increase in the base level of government spending — including spending on federal jobs. How different is the government today from what General Motors was a decade ago? Government employees are expensive and difficult to fire. Bloomberg News reported that from the last peak businesses have let go 8.5 million people, or 7.4 percent of the work force, while local governments have cut only 141,000 workers, or less than 1 percent.

Public sector jobs used to offer greater job security but lower pay. Not anymore. In 2008, according to the Cato Institute, the average federal civilian salary with benefits was $119,982, compared with $59,909 for the average private sector worker; the disparity has grown enormously over the last decade.

The question we need to ask is this: If we don’t change direction, how long can we travel down this path without having a crisis? The answer lies in two critical issues. First, how long will the capital markets continue to finance government borrowings that may be refinanced but never repaid on reasonable terms? And second, to what extent can obligations that are not financed through traditional fiscal means be satisfied through central bank monetization of debts — that is, by the printing of money?

•

The recent United States credit crisis was attributable in large measure to capital requirements and risk models that incorrectly assumed AAA-rated securities were exempt from default risk. We learned the hard way that when the market ignores credit risk, the behavior of borrowers and lenders becomes distorted.

It was once unthinkable that “risk-free” institutions could fail — so unthinkable that the chief executives of the companies that recently did fail probably didn’t realize when they crossed the line from highly creditworthy to eventually insolvent. Surely, had they seen the line, they would, to a man, have stopped on the solvent side.

Our government leaders are faced with the same risk today. At what level of government debt and future commitments does government default go from being unthinkable to inevitable, and how does our government think about that risk?

I recently posed this question to one of the president’s senior economic advisers. He answered that the government is different from financial institutions because it can print money, and statistically the United States is not as bad off as some other countries. For an investor, these responses do not inspire confidence. [/quote]
[i]My Comment:[/i] It`s a multi-page editorial which is worth reading in its entirety ... I note that Einhorn concludes with a brief rundown of the bailout-bubble-mentality which has beset our government since Paul Volcker departed as head of the Fed in August 1987, just a few months before the October 1987 computer-aided market crash which set the ball rolling on Bailout-Bubbles-R-Us. He also opines that in a sense it's a good thing that economic crisis has led to a debt explosion, because it will force the day of reckoning much closer, meaning that we won't simply be able to let our children clean up our mess - this echoes what I told a friend in late 2004 about W. Bush getting re-elected - namely that in a way it was good, because Bush would be forced to deal with the consequences of his ill-thought-out adventure in Iraq:
[quote]In recent years, we have gone from one bubble and bailout to the next. Each bailout has rewarded those who acted imprudently. This has encouraged additional risky behavior, feeding the creation of new, larger bubbles.

The Fed bailed out the equity markets after the crash of 1987, which fed a boom ending with the Mexican crisis and bailout. That Treasury-financed bailout started a bubble in emerging market debt, which ended with the Asian currency crisis and Russian default. The resulting organized rescue of Long-Term Capital Management’s counterparties spurred the Internet bubble. After that popped, the rescue led to the housing and credit bubble. The deflationary aspects of that bubble popping created a bubble in sovereign debt, despite the fiscal strains created by the bailouts. The Greek crisis may be the first sign of the sovereign debt bubble bursting.

Though we don’t know what’s going to happen next, the good news for our grandchildren is that we will have to face our own debts. If we realize that our own future is at risk, we might be more serious about changing course. If we don’t, Mr. Geithner and others might regret having never said never about America’s rating. [/quote]

[QUOTE=ewmayer;215962]Karl Denninger - while admitting to being entertained by this latest delicious Graysonian rant - has a somewhat [url=http://market-ticker.denninger.net/archives/2345-Has-Alan-Grayson-Lost-His-Mind.html]different take[/url] on the practicability of the idea. It`s an interesting question: Say we were able to magically end our involvement in Iraq and Afghanistan (and started no new "replacement" wars) in the next few years ... without any appreciable driver for significant private-sector jobs creation, what is the resulting significant fraction of service personnel who retire from active duty going to do?[/QUOTE]

If Denninger is just asking a significant question for our future economy in case we decide to walk away from these ill-conceived wars, I applaud him. If he is advocating that we continue these wars for the sake of driving our economy, then he has lost any sense of moral compass. I read his article as simply saying that Grayson's idea is good, except that we should do other things with the money rather than tax breaks for those at the lower income levels.

Pay down the debt, or stimulate the economy? Is it even possible to have it both ways? Probably not, given our current level of military spending, but maybe there is some middle ground.

[QUOTE=Prime95;216135]This ignores the fact that some of the extra $159 billion spent on wars is stimulative. Hazardous duty pay is spent at home, plus buying bombs, ammo, jeeps create jobs for Americans. Even money spent on Iranian/Afghanistan public works projects hires Americans which is also stimulative. Of course, bribe money, gasoline, etc. is completely non-stimulative.[/QUOTE]

I certainly hope that you are not advocating that we continue these wars because they stimulate the economy! I have heard of studies that claim that money spent on infrastructure (transportation, public works, etc.) does far more to stimulate the economy than military spending. I can't claim for the accuracy of these studies, but considering the amount of military spending that is non-productive, I can believe that these claims might be true.

[QUOTE=Prime95;216135]Also, if you give the $159 billion to the poor, nearly all of the money they then spend on Korean TVs, Japanese cars, and Chinese trinkets is non-stimulative.[/QUOTE]

Most of the poor I know (and I teach at a community college, so I know quite a few) are more concerned about food, rent, and medicine than consumer electronics. (Many do not even have home internet access, which would be helpful when pursuing higher education.) If you give the money to these people, I can guarantee that their increased spending will be stimulative.

Long rebuttal to the Einhorn piece by billyblog.

[url]http://bilbo.economicoutlook.net/blog/?p=9956[/url]