Mar 01

Today’s News 1st March 2018

  • The Mystery Of The Russian Planes That Never Were

    Authored by Paul Rogers via OpenDemocracy.net,

    Most analysts blame Vladimir Putin’s aggressive political stance for the renewed hostility between Russia and the western states of the North Atlantic Treaty Organisation (NATO). The deteriorating relationship has been evident for a decade and more. The fallout from Moscow’s interventions in Georgia / South Ossetia (2008), Ukraine / Crimea (2014), and Syria (2015), as well as its reported disruption in the United States presidential election (2016), are but the main episodes. Lesser ones include displays of military strength that attract wide coverage in the western media.  

    Before looking in more detail at the latter, it is worth offering a touch of historical perspective on great-power interference. In particular, at a time when Moscow’s role in the US election is hotly disputed, a certain degree of hollow laughter is appropriate given Washington’s (and London’s) own dedicated efforts to influence elections and other political processes in many countries over many decades.

    One person involved in a Congressional investigation into CIA activities is Loch K Johnson, an experienced intelligence analyst at the University of Georgia. He characterizes Russia’s recent election endeavor as simply a cyber-age version of past US activities:

    “We’ve been doing this kind of thing since the C.I.A. was created in 1947.  We’ve used posters, pamphlets, mailers, banners – you name it. We’ve planted false information in foreign newspapers. We’ve used what the British call ‘King George’s cavalry’: suitcases of cash” (see Scott Shane, “Russia Isn’t the Only One Meddling in Elections. We Do It, Too.“, New York Times, 17 February 2018).

    US actions have gone much further than merely trying to undermine elections – as indeed have Britain’s in the Middle East, including the overthrow of Iran’s prime minister in 1953. These actions were memorably described by the much-decorated marine corps major-general, Smedley D Butler, in his memoirs:

    “I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.”

    The bigger picture

    All this puts Russia’s own numerous machinations, past and present (including in its incarnation as the Soviet Union), in the larger frame of routine great-power politics. In this light too, another view is possible on Russia’s recent media-heightened projection of military force.

    A case in point is the deployment of the aircraft-carrier Admiral Kuznetsov to the Mediterranean in January 2017, which provoked a great ruction in Britain’s media. The vessel is in reality an ageing warship more than thirty years old, prone to repeated propulsion mishaps and apt to have much of its plumbing freeze up, including toilets. Since its home port was on Russia’s Arctic coast, this alone was a bit of a drawback (see “Britain’s military: costs of failure, symbols of vanity“, 26 January 2018).   

    On the rare occasions when the carrier actually went to sea, it would be accompanied by an ocean-going tug in case it broke down. Indeed, when it finally got to the eastern Mediterranean in its recent deployment it lost two of its twelve strike-aircraft due to malfunctions. Most of the rest were eventually flown off to conduct their bombing raids from a Russian airbase within Syria, thus not from the Kuznetsov itself. In spite of all this, the ship’s advance near to the UK’s territory was still heralded in the British press as proof of a Russian threat and of the consequent need to increase military spending. 

    The frequency of Russian probes towards British airspace is further cited by Britain’s defense lobby as an even scarier indication of that threat. Regular reports of near incursions by those Tu-95 bombers, complete with accompanying videos, were offered as additional proof of Russia’s steady rise to global power (see “Russia and the west: risks of hype“, 6 October 2016).

    Russia may present many dangers, it may have plenty of nuclear weapons, and may have a leader determined to take risks to make Russia great again – but such reports of its frequent air incursions are anything but true.

    A recent freedom-of-information request to the UK defence ministry, reported by Jane’s Defence Weekly, shows a rather different state of affairs. In each of the years 2013, 2014 and 2015, the RAF scrambled fighters on seventeen, twenty, and twelve days respectively: but many were not in response to Russian sorties, which stood at just eight for each of the years.

    Moreover, in 2016 only five of the twelve days of “QRA” launches involved Russian aircraft, and in 2018 the incidence was only three out of six days (see Gareth Jennings, “UK notes marked decrease in number of days QRA intercepts flown against Russian aircraft“, Jane’s Defence Weekly, 12 February 2018).

    Such results are starkly different from public perceptions, as cultivated by the media. They remain one of the sustained planks in the narrative of a new threat from Russia. Even the data on the Russia flights only came to light through dedicated inquiry to unravel the information. Meanwhile, alarmist defense sources say next to nothing about the huge cost overruns on Britain’s own new aircraft-carriers, its nuclear-attack submarines and Trident replacements. The imbalance of attention is extreme.

    Perhaps the best way to look at the big picture is with another of Smedley D Butler’s choice quotes, dating from 1935:

    “A few profit – and the many pay. But there is a way to stop it. You can’t end it by disarmament conferences. You can’t eliminate it by peace parleys at Geneva. Well-meaning but impractical groups can’t wipe it out by resolutions. It can be smashed effectively only by taking the profit out of war.”

  • State Department Committs $40 Million For "Information Wars"

    The Pentagon will allocate $40 million into an inter-agency unit housed at the State Department to counter online propaganda and disinformation campaigns conducted by foreign nations, in an effort to respond “aggressively” to attacks. 

    The program was announced by the State Department this week in conjunction with the US Department of Defense, which will allocate the funds to the Global Engagement Center (GEC) – created in spring 2016 to replace the Center for Strategic Counterterrorism Communications (CSCC). 

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    “One of those initiatives is the creation of an Information Access Fund to support public and private partners working to expose and counter propaganda and disinformation from foreign nations.“

    This funding is critical to ensuring that we continue an aggressive response to malign influence and disinformation and that we can leverage deeper partnerships with our allies, Silicon Valley, and other partners in this fight, said Under Secretary Goldstein. It is not merely a defensive posture that we should take, we also need to be on the offensive.

    Last year Secretary of State Rex Tillerson requested that $40 million be transferred from the Department of Defense, with an overall allocation of up to $60 million from the US Defense budget. The funding was authorized in a December 2016 defense bill signed by President Obama – which widened the scope of the center’s activities.

    Previously, the GEC had focused exclusively on terrorist propaganda, however it was Tillerson’s request for the funds that got the ball rolling on the expanded operation. 

    Almost $20 million of the $60 million was already in the State Departments coffers and will be released to the center’s officials to fight propaganda by terrorist groups such as the Islamic State. Tillerson also approved a request for a transfer of $40 million from the Pentagon to the center so it can fight state-sponsored propaganda. –Politico

    The GEC will counter disinformation campaigns primarily from China, North Korea and Russia.

    Tillerson’s delay in implementing funding authorized for the GEC had frustrated U.S. officials – who called it an example of “severe slowdown” within the State Department’s decision making process. Sources, however, cited another factor at play; angering Russia.

    At one point during the discussions, Tillerson aide R.C. Hammond suggested the money is unwelcome because any extra funding for programs to counter Russian media influence would anger Moscow, according to a former senior State Department official. –Politico

    Hopefully the good folks at the GEC will be able to match forces with the “90 people with a shaky grasp of English and a rudimentary understanding of U.S. politics shitposting on Facebook.” at that Russian troll farm whose trash CNN went rooting through a few weeks ago. The one which Deputy Attorney General Rod Rosenstein said had zero effect on the outcome of the election. 

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    Maybe the GEC can consult with Facebook’s VP of advertising, Rob Goldman, who noted that the majority of the Russian ad spend happened “AFTER the election,” and wasn’t intended to impact the election. Apparently dividing America by stoking political activism was their thing.

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    Just remember, it wasn’t Hillary’s fault that she lost – and the GEC will keep feeble-minded Americans safe and un-propagandized by foreign masterminds.

  • Gun Rights And Mental Health Restrictions: A Slippery Slope

    Authored by Brandon Smith via Alt-Market.com,

    In the wake of the Parkland shooting, as in the wake of any mass shooting, there has been a scramble by various political groups to place blame for the violence. Everyone is looking for the source of the evil that causes these events, to little avail. In most cases, at least when it comes to the extreme Left, the blame is placed squarely on guns themselves. This is obviously an absurd notion. Placing blame on the particular tool used in the crime does not solve the problem of the criminal and what led him to the deed. Whether or not the tool made his crime “easier” is irrelevant to the greater disturbance at hand.

    After years of debate and failed legislation, leftists have discovered that resistance to the incremental destruction of the 2nd Amendment is insurmountable, and a change in narrative has occurred.

    Finally, we are talking more about mental health issues and a little less about guns. This is a win for gun rights, however, there is a danger that needs to be addressed.

    First, while mental health is being presented in the mainstream media more and more as a central issue in mass shootings, I find it interesting that the problem of psychotropic pharmaceuticals has been conveniently ignored. In a large number of non-terrorist related shooting incidents, assailants have been subjected to long term psychotropic drug use. Why has this factor not been addressed?

    Well, consider the fact that Big Pharma has spent at least $2.5 billion over the past ten years lobbying in Washington D.C. Compare this to the NRA lobbying budget, which in comparison was a paltry $20 million over the past 10 years according to OpenSecret.

    This should put into perspective the idiocy of anti-gun advocates and their obsession with the “nefarious” NRA. The influence of the pharmaceutical industry is almost universally ignored when it comes to the debate on gun violence, yet their lobbying efforts dwarf all others. All this despite the fact that psychotropic drugs are proven to influence violent and even homicidal behavior in people.

    Second, the focus on mental health in terms of the Parkland shooting seems to be glossing over the vast failings of the FBI and local law enforcement in following up and investigating the dozens of warnings they received about Nikolas Cruz.  As I outlined in my recent article ‘“Mass shootings will never negate the need for gun rights,” gun grabbers love to trot out legislation on increased background check restrictions and closing the “gun show loophole,” yet none of their suggested solutions would have stopped the Parkland tragedy from taking place.

    The success of Nikolas Cruz’s attack was due to the abject failure of the FBI and law enforcement, NOT the failure of background checks. Had they done their jobs, Cruz never would have been able to purchase a firearm to begin with. I find it rather ironic that gun grabbers constantly argue that average citizens do not need guns for self defense because they have law enforcement to rely on, yet it was exactly the stupidity or inaction of law enforcement that opened the door wide for Cruz to (allegedly) kill.

    Clearly, the so-called “authorities” are not trustworthy enough to carry out the job of protecting us all from active shooters. The only people capable of stopping an active shooter in a fast and practical manner are armed citizens on the scene at the moment the attack begins.

    Third, and most important, is the issue of mental health parameters and how they will be used to restrict gun rights. The ATF already has rules regarding people “adjudicated as mentally defective,” which includes people ruled a danger to themselves and others by a “court, board or commission or other lawful authority.” Now, these guidelines themselves can be rather broad, but abuse by government so far has been limited (though some instances have been egregious). If the Trump administration seeks to broaden the guidelines even further, then we may have a problem.

    Take for example the unacceptable abuse of military veterans and their 2nd Amendment rights by the Bureau of Veterans Affairs. The VA has in recent years placed restrictions on thousands of veterans, negating their gun rights without due process and without oversight. And all of this has been predicated on the claim that some veterans are “mentally defective” based on dubious parameters, including whether or not they let their spouse handle household finances.

    This is what I am talking about when I bring up the dangers behind “mental illness” and gun rights. WHO gets to decide who is mentally ill and why they are mentally ill? Will this be done by a jury of our peers? Or, by an unaccountable and faceless bureaucracy? Will the guidelines for mental illness be strict and specific, or will they be broad and wide open to interpretation? Once a person has been labeled mentally defective, will they have the ability to appeal the decision, or will the label haunt them for the rest of their lives?

    Gun rights activists should not put blind faith in the Trump administration to ensure that new mental health legislation will remain fair to the 2nd Amendment. Unfortunately, Trump is on record as supporting the “No Fly List” gun control bill. This type of bill is something liberty activists opposed vehemently under the Obama administration because it allows the government to erase the gun rights of almost anyone without due process merely by placing them on an arbitrary watch list. A list, I will remind readers, that is a matter of national security and not subject to public overview.

    Would a list of “mentally defective people” fall under the same Orwellian standards?

    What about the new and disturbing designation by the psychiatric community of oppositional defiance disorder? This absurd “illness” is being applied to people as young as pre-school age and suggests that adults with the illness often display resistance to authority figures and government.

    What if your opposition is not to “authority” in general, but to CORRUPT authority specifically? Is this mental illness, or the very epitome of sanity?

    In the Soviet Union, it was all too common for the government to abuse “mental illness” designations as a means to silence and imprison political dissent. Anti-government agitation and propaganda were criminalized under Soviet legal codes, and these codes were frequently applied in conjunction with the psychiatric system. This was sometimes referred to as “punitive medicine.”

    The problem with government and psychiatric institutions joining forces to determine constitutional rights for individuals should be obvious. Government should be as separate from the medical establishment as possible yet they are often intertwined to terrible effect. If mental illness is not adjudicated by a jury of ones peers and with extreme oversight by gun rights groups, then abuse of such laws by government is almost guaranteed. The temptation to use backdoor bureaucracy in a totalitarian manner to underhandedly confiscate guns and sabotage the 2nd Amendment will be high.

    It is also important to remember that even if you have placed full and blind faith in the Trump administration, there are no guarantees that the constitutional rules we allow him to bend today will not be completely broken by the next president in line. Gun rights are paramount to a free society. Without them, governments almost always revert to increased socialism and “tyranny creep” while violent crime continues or increases as the citizenry is left defenseless. Mental illness AND psychotropic drugs need to be taken seriously in terms of gun violence, but it is also vital that we do not allow the issue of mental health to be exploited as a subversive means to undermine our freedoms.

  • Economists' Latest Leading Recessionary Indicator: Sex

    When it comes to unorthodox indicators of the business cycle – especially when the business cycle is the second longest in history such as this one – economists have always had creative ways of “calculating” where in the cycle we are at any given moment.

    Starting in the 1926s, economist George Taylor came up with the “hemline index” which suggested that the length of women’s skirts tracked stock market performance — rising and falling in tandem. In good economies, we get such results as miniskirts while in poor economic times, as shown by the 1929 Wall Street Crash, hems can drop almost overnight.

    Several decades later, former Fed chair Alan Greenspan used to track sales of men’s underwear, which he said fell at the onset of recessions as men delayed buying new underwear during tough economic times.

    Then there was the lipstick index proposed by Estée Lauder chairman Leonard Lauder in 2001: he claimed that purchases of cosmetics were inversely correlated with the health of the economy (the idea was later discredited). The 2008 recession gave rise to the tie index, sales of which, it was claimed, rise as employees fear for their jobs.

    Now, according to new research there is a new indicator that can warn of a coming recession: sex, or rather the 9 month consequences thereof: the rise and fall of pregnancies.

    According to a paper paper published on Monday by the National Bureau of Economic Research, ahead of the past three US recessions, the number of conceptions began to fall at least six months before the economy started to contract. As the FT notes, while previous research has shown how birth rates track economic cycles, the scientific study is the first to show that fertility declines are a leading indicator for recessions.

    Speaking to the FT, Daniel Hungerman, economics professor at the University of Notre Dame and one of the report’s authors, said it was “striking” that the drop in pregnancies was evident before the recession that came after the 2007 financial crisis, since it has traditionally been argued that this slump had been hard to predict.

    It may be difficult for “experts” but apparently not for a couple deciding what to do next in the bedroom.

    The analysis used data on the 109 million births in the US between 1989-2016 to examine how fertility rates changed through the last three economic cycles — in the early 1990s, the early 2000s and the late 2000s. A similar pattern emerged in all three cases.

    The researchers focused on birth data from the National Center for Health Statistics, looking at clinical estimates for the month of conception. They compared that to the dates of the recessions, as calculated by the NBER, and to changes in the GDP. The change in birth rates was driven by a drop in conceptions, not an increase in abortion or miscarriage, the researchers found. In other words, less sex with the intent to procreate. 

    “One way to think about this is that the decision to have a child often reflects one’s level of optimism about the future,” says Kasey Buckles, another Notre-Dame professor and co-author of the study. Research published through the NBER is often conducted by academics at their own universities.

    To the researchers’ surprise, they found that falls in conceptions were a far better leading indicator of recessions than many commonly used indicators such as consumer confidence, measures of uncertainty, and purchases of big-ticket items such as washing machines and cars.

    “None of the experts saw it coming and in its first few months many business leaders were convinced the economy was doing OK,” he says. The fertility statistics told a different story.

    Take the Great Recession. The U.S. birth rate, rising before the recession, fell in 2008, as one might expect. But back up before that — to the middle of 2007. The subprime mortgage crisis was hurting the housing market, but the broader effect on the economy was not yet apparent. As the NPR notes, stock prices kept hitting all-time highs. Unemployment was below 5 percent. Analysts were confident, optimistic. In July, the chief economist of Standard & Poor’s told NPR listeners that “the rest of the economy so far has been ignoring the housing crisis very nicely.”

    It was months before the recession began, as NBER later calculated it, and more than a year before the collapse of Lehman Brothers triggered a global panic.

    But, the researchers found, the U.S. conception rate had already started to drop.

    “That’s what makes our results surprising,” Buckle says. “While the best of the experts didn’t see the Great Recession coming, it seems that families and households were feeling those tremors and responding to it.”

    The researchers suggest several possible explanations, including the natural time lag with attempting to conceive, the increasing age of first-time mothers and the growing popularity of long-acting birth control.

    * * *

    To be sure, this may be just another case of spurious correlation, especially now that the Fed has killed the business cycle. Indeed, researchers admitted that the correlation between conceptions and recessions is not perfect, and there have been periods when conceptions have fallen but the economy has not.

    Professor Buckles said: “It might be difficult in practice to determine whether a one-quarter drop in conceptions is really signalling a future downturn. However, this is also an issue with many commonly used economic indicators.”

    So what does the latest data indicate? Well, as the chart below shows, after peaking in some time in 2013, the US is now deep in its latest recession, at least based on pregnancy rates. Ironically, it is now up to the NBER – the author of the paper – to determine if that is indeed the case.

  • Browbeaten Sessions Dines With Rosenstein After Spat With Trump

    After a day of taking heat from the President over a “disgraceful” investigation into FISA abuse, Attorney General Jeff Sessions grabbed dinner Wednesday night with his deputy AG Rod Rosenstein and the Solicitor General, Noel Francisco.

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    While it’s anyone’s guess what the trio discussed, the image of Sessions, dining with Rosenstein – who signed off on one or more “Steele dossier” FISA applications – is unmistakable: Sessions enjoys the culinary delights of the swamp. 

    From refusing to appoint a Special Counsel to investigate the suspected Awan family spy ring, to seemingly covering for the FBI’s mishandling of evidence in the Uranium One case – which Robert Mueller and Rod Rosenstein were directly involved in, to now relegating the FISA abuse investigation to the Office of the Inspector General (OIG) instead of appointing a second Special Counsel – many believe Sessions has been stonewalling for the establishment. 

    But wait… could this be 4D chess? Perhaps Sessions simply doesn’t trust anyone “from the swamp” to lead Special Counsel investigations – and Inspector General Michael Horowitz – who Trump referred to as an “Obama guy,” is about to set D.C. on fire with his upcoming OIG report. He also fought the Obama administration for several years to restore OIG powers which the previous administration stripped. You can read more about Horowitz here, and will likely conclude that he’s no “Obama guy.”

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    Earlier in the day, President Trump fired off an angry tweet rebuking Sessions for asking the OIG – an “Obama guy,” to “investigate potentially massive FISA abuse.” 

    Trump said the investigation will “take forever, has no prosecutorial power and already late with reports on Comey etc. Isn’t the IG an Obama guy? Why not use Justice Department lawyers? DISGRACEFUL!”

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    Sessions fired back in a stiffly-worded statement to Trump, defending his handling of the FISA investigation by saying he followed the “appropriate process” by ordering the IG to investigate and that, as long as he remains attorney general, he will “continue to discharge my duties with integrity and honor.”

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    On its face, Sessions publicly “swimming with the swamp creatures” while appearing to stonewall several legitimate investigations into potential espionage, election interference, and pay-for-play has infuriated those who expected Hillary to be in jail by now, along with the Awans and corrupt FBI and DOJ officials (some of whom are still collecting paychecks). 

    On the other hand, perhaps Sessions knows that Inspector General Michael Horowitz is simply the best man for the job, and today’s entire exchange between Trump and Sessions was nothing more than theater while ongoing investigations mature. 

    One has to wonder; in a swampy town like D.C., who would lead a second Special Counsel into anything anyway?

  • All Guns, No Butter: Military Contractors As The New Welfare Queens

    What company gets the most money from the U.S. government?

    The answer, via Tom Engelhardt’s TomDispatch.com: the weapons maker Lockheed Martin. As the Washington Post recently reported, of its $51 billion in sales in 2017, Lockheed took in $35.2 billion from the government, or close to what the Trump administration is proposing for the 2019 State Department budget.

    And which company is in second place when it comes to raking in the taxpayer dollars?

    The answer: Boeing with a mere $26.5 billion.

    And, as Engelhardt notes, that’s before the good times even truly begin to roll, as TomDispatch regular and weapons industry expert William Hartung makes clear today in a deep dive into the (ir)realities of the Pentagon budget. 

    When it comes to the Department of Defense, though, perhaps we should retire the term “budget” altogether, given its connotation of restraint. Can’t we find another word entirely? Like the Pentagon cornucopia?

    How the Pentagon Devours the Budget: Normalizing Budgetary Bloat

    By William D. Hartung

    Imagine for a moment a scheme in which American taxpayers were taken to the cleaners to the tune of hundreds of billions of dollars and there was barely a hint of criticism or outrage.  Imagine as well that the White House and a majority of the politicians in Washington, no matter the party, acquiesced in the arrangement.  In fact, the annual quest to boost Pentagon spending into the stratosphere regularly follows that very scenario, assisted by predictions of imminent doom from industry-funded hawks with a vested interest in increased military outlays.

    Most Americans are probably aware that the Pentagon spends a lot of money, but it’s unlikely they grasp just how huge those sums really are.  All too often, astonishingly lavish military budgets are treated as if they were part of the natural order, like death or taxes.

    The figures contained in the recent budget deal that kept Congress open, as well as in President Trump’s budget proposal for 2019, are a case in point: $700 billion for the Pentagon and related programs in 2018 and $716 billion the following year.  Remarkably, such numbers far exceeded even the Pentagon’s own expansive expectations.  According to Donald Trump, admittedly not the most reliable source in all cases, Secretary of Defense Jim Mattis reportedly said, “Wow, I can’t believe we got everything we wanted” — a rare admission from the head of an organization whose only response to virtually any budget proposal is to ask for more.

    The public reaction to such staggering Pentagon budget hikes was muted, to put it mildly. Unlike last year’s tax giveaway to the rich, throwing near-record amounts of tax dollars at the Department of Defense generated no visible public outrage.  Yet those tax cuts and Pentagon increases are closely related.  The Trump administration’s pairing of the two mimics the failed approach of President Ronald Reagan in the 1980s — only more so.  It’s a phenomenon I’ve termed “Reaganomics on steroids.”  Reagan’s approach yielded oceans of red ink and a severe weakening of the social safety net.  It also provoked such a strong pushback that he later backtracked by raising taxes and set the stage for sharp reductions in nuclear weapons. 

    Donald Trump’s retrograde policies on immigration, women’s rights, racial justice, LGBT rights, and economic inequality have spawned an impressive and growing resistance.  It remains to be seen whether his generous treatment of the Pentagon at the expense of basic human needs will spur a similar backlash.

    Of course, it’s hard to even get a bead on what’s being lavished on the Pentagon when much of the media coverage failed to drive home just how enormous these sums actually are. A rare exception was an Associated Press story headlined “Congress, Trump Give the Pentagon a Budget the Likes of Which It Has Never Seen.” This was certainly far closer to the truth than claims like that of Mackenzie Eaglen of the conservative American Enterprise Institute, which over the years has housed such uber-hawks as Dick Cheney and John Bolton.  She described the new budget as a “modest year-on-year increase.” If that’s the case, one shudders to think what an immodest increase might look like.

    The Pentagon Wins Big

    So let’s look at the money. 

    Though the Pentagon’s budget was already through the roof, it will get an extra $165 billion over the next two years, thanks to the congressional budget deal reached earlier this month.  To put that figure in context, it was tens of billions of dollars more than Donald Trump had asked for last spring to  “rebuild” the U.S. military (as he put it).  It even exceeded the figures, already higher than Trump’s, Congress had agreed to last December.  It brings total spending on the Pentagon and related programs for nuclear weapons to levels higher than those reached during the Korean and Vietnam wars in the 1950s and 1960s, or even at the height of Ronald Reagan’s vaunted military buildup of the 1980s. Only in two years of Barack Obama’s presidency, when there were roughly 150,000 U.S. troops in Iraq and Afghanistan, or about seven times current levels of personnel deployed there, was spending higher.

    Ben Freeman of the Center for International Policy put the new Pentagon budget numbers in perspective when he pointed out that just the approximately $80 billion annual increase in the department’s top line between 2017 and 2019 will be double the current budget of the State Department; higher than the gross domestic products of more than 100 countries; and larger than the entire military budget of any country in the world, except China’s.

    Democrats signed on to that congressional budget as part of a deal to blunt some of the most egregious Trump administration cuts proposed last spring.  The administration, for example, kept the State Department’s budget from being radically slashed and it reauthorized the imperiled Children’s Health Insurance Program (CHIP) for another 10 years.  In the process, however, the Democrats also threw millions of young immigrants under the bus by dropping an insistence that any new budget protect the Deferred Action for Childhood Arrivals, or “Dreamers,” program.  Meanwhile, the majority of Republican fiscal conservatives were thrilled to sign off on a Pentagon increase that, combined with the Trump tax cut for the rich, funds ballooning deficits as far as the eye can see — a total of $7.7 trillion worth of them over the next decade.

    While domestic spending fared better in the recent congressional budget deal than it would have if Trump’s draconian plan for 2018 had been enacted, it still lags far behind what Congress is investing in the Pentagon.  And calculations by the National Priorities Project indicate that the Department of Defense is slated to be an even bigger winner in Trump’s 2019 budget blueprint. Its share of the discretionary budget, which includes virtually everything the government does other than programs like Medicare and Social Security, will mushroom to a once-unimaginable 61 cents on the dollar, a hefty boost from the already startling 54 cents on the dollar in the final year of the Obama administration.

    The skewed priorities in Trump’s latest budget proposal are fueled in part by the administration’s decision to embrace the Pentagon increases Congress agreed to last month, while tossing that body’s latest decisions on non-military spending out the window.  Although Congress is likely to rein in the administration’s most extreme proposals, the figures are stark indeed — a proposed cut of $120 billion in the domestic spending levels both parties agreed to. The biggest reductions include a 41% cut in funding for diplomacy and foreign aid; a 36% cut in funding for energy and the environment; and a 35% cut in housing and community development.  And that’s just the beginning.  The Trump administration is also preparing to launch full-scale assaults on food stamps, Medicaid, and Medicare.  It’s war on everything except the U.S. military. 

    Corporate Welfare

    The recent budget plans have brought joy to the hearts of one group of needy Americans: the top executives of major weapons contractors like Lockheed Martin, Boeing, Northrop Grumman, Raytheon, and General Dynamics. They expect a bonanza from the skyrocketing Pentagon expenditures. Don’t be surprised if the CEOs of these five firms give themselves nice salary boosts, something to truly justify their work, rather than the paltry $96 million they drew as a group in 2016 (the most recent year for which full statistics are available).  

    And keep in mind that, like all other U.S.-based corporations, those military-industrial behemoths will benefit richly from the Trump administration’s slashing of the corporate tax rate.  According to one respected industry analyst, a good portion of this windfall will go towards bonuses and increased dividends for company shareholders rather than investments in new and better ways to defend the United States.  In short, in the Trump era, Lockheed Martin and its cohorts are guaranteed to make money coming and going.

    Items that snagged billions in new funding in Trump’s proposed 2019 budget included Lockheed Martin’s overpriced, underperforming F-35 aircraft, at $10.6 billion; Boeing’s F-18 “Super Hornet,” which was in the process of being phased out by the Obama administration but is now written in for $2.4 billion; Northrop Grumman’s B-21 nuclear bomber at $2.3 billion; General Dynamics’ Ohio-class ballistic missile submarine at $3.9 billion; and $12 billion for an array of missile-defense programs that will redound to the benefit of… you guessed it: Lockheed Martin, Raytheon, and Boeing, among other companies.  These are just a few of the dozens of weapons programs that will be feeding the bottom lines of such companies in the next two years and beyond.  For programs still in their early stages, like that new bomber and the new ballistic missile submarine, their banner budgetary years are yet to come.

    In explaining the flood of funding that enables a company like Lockheed Martin to reap $35 billion per year in government dollars, defense analyst Richard Aboulafia of the Teal Group noted that “diplomacy is out; air strikes are in… In this sort of environment, it’s tough to keep a lid on costs. If demand goes up, prices don’t generally come down. And, of course, it’s virtually impossible to kill stuff. You don’t have to make any kind of tough choices when there’s such a rising tide.” 

    Pentagon Pork Versus Human Security

    Loren Thompson is a consultant to many of those weapons contractors.  His think tank, the Lexington Institute, also gets contributions from the arms industry.  He caught the spirit of the moment when he praised the administration’s puffed-up Pentagon proposal for using the Defense Department budget as a jobs creator in key states, including the crucial swing state of Ohio, which helped propel Donald Trump to victory in 2016.  Thompson was particularly pleased with a plan to ramp up General Dynamics’s production of M-1 tanks in Lima, Ohio, in a factory whose production line the Army had tried to put on hold just a few years ago because it was already drowning in tanks and had no conceivable use for more of them. 

    Thompson argues that the new tanks are needed to keep up with Russia’s production of armored vehicles, a dubious assertion with a decidedly Cold War flavor to it.  His claim is backed up, of course, by the administration’s new National Security Strategy, which targets Russia and China as the most formidable threats to the United States.  Never mind that the likely challenges posed by these two powers — cyberattacks in the Russian case and economic expansion in the Chinese one — have nothing to do with how many tanks the U.S. Army possesses.

    Trump wants to create jobs, jobs, jobs he can point to, and pumping up the military-industrial complex must seem like the path of least resistance to that end in present-day Washington.  Under the circumstances, what does it matter that virtually any other form of spending would create more jobs and not saddle Americans with weaponry we don’t need?

    If past performance offers any indication, none of the new money slated to pour into the Pentagon will make anyone safer.  As Todd Harrison of the Center for Strategic and International Studies has noted, there is a danger that the Pentagon will just get “fatter not stronger” as its worst spending habits are reinforced by a new gusher of dollars that relieves its planners of making any reasonably hard choices at all.

    The list of wasteful expenditures is already staggeringly long and early projections are that bureaucratic waste at the Pentagon will amount to $125 billion over the next five years.  Among other things, the Defense Department already employs a shadow work force of more than 600,000 private contractors whose responsibilities overlap significantly with work already being done by government employees.  Meanwhile, sloppy buying practices regularly result in stories like the recent ones on the Pentagon’s Defense Logistics Agency losing track of how it spent $800 million and how two American commands were unable to account for $500 million meant for the war on drugs in the Greater Middle East and Africa.

    Add to this the $1.5 trillion slated to be spent on F-35s that the nonpartisan Project on Government Oversight has noted may never be ready for combat and the unnecessary “modernization” of the U.S. nuclear arsenal, including a new generation of nuclear-armed bombers, submarines, and missiles at a minimum cost of $1.2 trillion over the next three decades.  In other words, a large part of the Pentagon’s new funding will do much to fuel good times in the military-industrial complex but little to help the troops or defend the country.

    Most important of all, this flood of new funding, which could crush a generation of Americans under a mountain of debt, will make it easier to sustain the seemingly endless seven wars that the United States is fighting in Afghanistan, Pakistan, Syria, Iraq, Libya, Somalia, and Yemen.  So call this one of the worst investments in history, ensuring as it does failed wars to the horizon. 

    It would be a welcome change in twenty-first-century America if the reckless decision to throw yet more unbelievable sums of money at a Pentagon already vastly overfunded sparked a serious discussion about America’s hyper-militarized foreign policy.  A national debate about such matters in the run-up to the 2018 and 2020 elections could determine whether it continues to be business-as-usual at the Pentagon or whether the largest agency in the federal government is finally reined in and relegated to an appropriately defensive posture.

  • The South Side Is Turning Against Obama

    In one of “The Dark Knight”‘s most memorable scenes, disgraced Gotham City district attorney Harvey Dent proclaims that “you either die a hero, or live long enough to see yourself become the villain.”

    Former President Barack Obama can probably empathize with those words right about now. As Politico Magazine reports, Obama’s building of his presidential library and community center has elicited a backlash from activists in Woodlawn – the South Side neighborhood where the project is being built, and where Obama once worked as a community organizer.

    That’s because neighborhood residents, who are worried about the center’s potential to attract a wave of gentrifiers to their poor, predominantly black neighborhood, are pushing the non-profit responsible for building the center to agree to more assurances that the project will bring adequate economic benefits to the region to offset the potential negative impact of gentrification.

    Obama

    Of course, Obama has already agreed to staff the center with residents from the neighborhood, but activists are pushing for an arrangement called a “community benefit agreement”, which would force cash-strapped Chicago to freeze property taxes, and would also provide guarantees of low-income housing to stop residents from being pushed out by newcomers. 

    Politico leads its piece with a colorful anecdote about a confrontation between Jeanette Taylor, a community activist, and Obama, who attended a community meeting via video link.

    As she entered the hotel ballroom, Taylor expected to interrogate a member of the foundation’s staff. Instead, she found herself face to face with Obama himself, appearing by video conference from Washington.

    “The library is a great idea, but what about a community benefits agreement?” Taylor asked, referring to a contract between a developer and community organizations that requires investments in, or hiring from, a neighborhood where a project is built. “The first time investment comes to black communities, the first to get kicked out is low-income and working-class people. Why wouldn’t you sign a CBA to protect us?”

    Measured as always, Obama began by telling Taylor, “I was a community organizer.” Then he said, “I know the neighborhood. I know that the minute you start saying, ‘Well, we’re thinking about signing something that will determine who’s getting jobs and contracts and this and that’ … next thing I know, I’ve got 20 organizations coming out of the woodwork.”

    The answer infuriated Taylor, who pays $1,000 a month for the Woodlawn apartment she shares with her mother and two children, and is worried that the Obama Center’s cachet will drive up neighborhood rents. Months later, she is still furious at the former president.

    “He got a lot of nerve saying that,” Taylor told me. “He forgotten who he is. He forgot the community got him where he is.”

    As the piece explains, a coalition of more than a dozen local groups have attracted considerable support for their campaign to force the Obama library to offer assurances that will protect locals from the negative impacts of gentrification, which are inevitably borne by a community’s poorest and most vulnerable citizens.

    Since 2016, more than a dozen local groups – neighborhood organizations, labor unions and tenants’ rights activists – have come together to form the Obama Library South Side Community Benefits Coalition, which is pushing the library to account for local needs. At the University of Chicago, where Obama once taught at the law school, more than 100 faculty members signed a letter in January supporting the demands of local organizers. “There are concerns that the Obama Center as currently planned will not provide the promised development or economic benefits to the neighborhoods,” the letter reads. “It looks to many neighbors that the only new jobs created will be as staff to the Obama Center.”

    The CBA being sought by the activists would go a long way toward protecting the community from an economic invasion.

    The contract that community organizers are demanding—the “community benefits agreement”—would require the city to freeze property taxes within a 2-mile radius of the Obama Center and guarantee “a significant guaranteed set-aside of new housing for low-income housing in the area surrounding” the center. It would also require the foundation to establish a trust fund for nearby public schools and small businesses, and mandate that 80 percent of library construction jobs go to South Side residents.

    According to several experts quoted by Politico, asking the project to come with a CBA isn’t an altogether unreasonable or unprecedented request.

    Developers frequently sign CBAs to build neighborhood goodwill that in turn helps them win permits from local governments, says Virginia Parks, a CBA expert who teaches urban planning at the University of California-Irvine and formerly taught at the University of Chicago. Some well-known examples include the Staples Center in Los Angeles, which devoted $1 million to parks and agreed to pay a living wage for 70 percent of its jobs; and Columbia University, which built a $30 million public school and $20 million in affordable housing in exchange for expanding into West Harlem.

    “[CBAs] evolved initially because communities couldn’t get traction within the public arena,” Parks said. “The organizing effort put pressure on the city. Elected officials would say, ‘If I’m going to approve this, I’m going to need you to work out some agreement with these people, who are my voters.’

    For what it’s worth, Obama and the foundation responsible for overseeing construction of the center say they’ve addressed local organizers’ concerns. The center will include a 235-foot tower, a Chicago Public Library branch and a campus on 19.3 acres of parkland. In short, it is a “community benefit” in and of itself.

    David Simas, the foundation’s CEO and Obama’s former political director in the White House, pointed out in an interview that “this is not a private project. The model doesn’t fit.” Negotiating with community organizations, foundation officials argue, will just slow down construction of a project that will only benefit the south side economically.

    Furthermore, an economic impact study commissioned by the foundation projected that the center would create 5,000 construction jobs and 2,500 permanent jobs on the campus and in the surrounding area after it opens in 2022. Some community activists agree, saying the Lakeside Alliance contract adequately addresses activists’ concerns about minority hiring.

    Meanwhile, activists have begun lobbying Chicago aldermen to pass an ordinance that would mandate a CBA for the project. Several of the activists who spoke with Politico agreed that their campaign to hold Obama’s foundation accountable is exactly the kind of project Obama himself would’ve worked on 30 years ago when he was still a community organizer.

    But that was then.

    “Of course, he would have,” Taylor said. “But now he’s part of the establishment.”

  • Our Fragmented Labor Markets Defy Outdated Conventions

    Authored by Charles Hugh Smith via OfTwoMinds blog,

    There are hundreds of extraordinarily diverse labor markets in the U.S. economy, and it takes a much more granulated approach to make any sense of this highly fragmented and dynamic marketplace.

    Conventional economists/media pundits typically view the labor market as monolithic, i.e. as one unified market. The reality is the labor market is highly fragmented. Thus it’s little wonder that conventional measures are giving mixed signals on employment, wage inflation, etc.

    Here is a typical chart of the labor market: the annual rate of change in hourly earnings, going back to the late 1960s. I’ve annotated the chart to show that hourly earning rose sharply in the inflationary 1970s, but since then have only popped higher in asset bubbles–the dot-com era and the housing bubble:

    Gneralized measures that lump all wage earners together give us a snapshot of trends, but they fail to describe the realities of today’s labor markets. The reality is much more complex, and thus beyond the outdated conventions that divide the labor force into broad sectors:

    1. While most workers are receiving little in the way of wage increases, employers’ total compensation costs are soaring due to skyrocketing healthcare premiums and other labor-overhead costs such as workers compensation.

    Economists puzzled by the lack of wage inflation in an era of “full employment” should look at total compensation costs instead of wages: the inflation is in the labor-overhead costs, not employee compensation.

    2. Regions dominated by a handful of employers do not offer many opportunities for employees to jump to other employers for higher pay. This lack of competition enables dominant employers to suppress wage growth.

    3. Scarcities of skills and experience that drive wages higher tend to be sector-specific and are often localized. Across the broad spectrum of basic skills and experience (for example, white-collar work performed by employees with non-technical college diplomas), there are few scarcities that could push wages higher.

    4. Regardless of labor availability/scarcity, many small-business employers can’t afford to pay higher wages, given their soaring labor-overhead expenses. If wages rise, their options include selling out, closing down, or doing more of the work themselves. Paying higher wages will simply guarantee monthly losses. If you’re losing money operating an enterprise, why be in business?

    5. Employers demand a great deal now of lower-wage service sector employees. Fast-food jobs (for example) require high levels of productivity in a rigidly structured factory setting. There are few “easy” jobs left in the U.S. economy that require little training and pay for low productivity.

    As a result, a great many people do not have the ability or willingness to take these grueling jobs. Reasons include physical limitations, pride (“I’m not wearing that dumb uniform”), a black market income that’s much easier than available conventional jobs, inability to pass mandatory drug tests, etc.

    6. The opioid epidemic and other drug addictions have removed millions of people from the work force. Disability is now the option of choice for those who qualify.

    7. These factors turn the conventional wisdom on its head: rather than there being a surplus of lower-wage, lower skilled workers and a shortage of college-educated workers, there are shortages of lower-wage, lower skilled workers and a surplus of college-educated workers.

    8. The cultural and educational bias in favor of “clean work” and high-visibility finance and entertainment has generated scarcities of skilled welders, pipefitters, etc., (“dirty physical work”) and an astounding over-abundance of people who expect to earn a living as musicians, entertainers, writers, pro athletes, smart-phone app entrepreneurs, restaurateurs, hedge fund managers, etc., fields in which a relative handful of people earn most of the income.

    The reality is these are winner take most fields of endeavor, and the vast majority of hopefuls will earn a tiny piece of the long-tail of income distribution.

    In tandem with the general erosion in real-world skills (i.e. preference for watching cooking shows over actually cooking 95% of your own meals, inability to change the oil in one’s vehicle, grow food, prune fruit trees, repair rotted stairs, fix appliances, repair a leaky faucet, install a solar panel, and so on), this cultural and educational bias in favor of narrow service skills and extreme specialization has left the work force poorly adapted on multiple fronts.

    Skills such as welding and plumbing don’t change much; once mastered, the skills can be applied for decades with little retraining being required. But the sort of “clean work” service jobs people favor are the ones most easily disrupted by automation, software and AI.

    As for over-specialization, as often noted here, issuing 100,000 new graduate-level STEM diplomas (science, technology, engineering, math) does not magically create 100,000 high-paying secure jobs for the graduates.

    Instead, we have a system of higher education that implicitly over-promises the rewards of law degrees, masters degrees in social sciences, MBA diplomas, STEM PhDs, etc., an institutional bias that has created a structural over-supply of over-educated, under-skilled specialists, a labor pool that doesn’t align with the actual needs of real-world employers.

    Averages and medians tell us very little about real-world labor markets. There are hundreds of extraordinarily diverse labor markets in the U.S. economy, and it takes a much more granulated approach to make any sense of this highly fragmented and dynamic marketplace.

    Of related interest:

    Career Advice to 20-Somethings: Create Value as a Mobile Creative

    *  *  *

    My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

  • "They're Finally Accepting Reality" – Manhattan Landlords Are Slashing Rents To Fill Vacant Storefronts

    Owners of Manhattan’s commercial real-estate might soon begin to regret their decision to hike rents to absurdly high levels in the hope of attracting the next Chase, Bank of America or Duane Reade capable of paying their extortionate prices.

    As Bloomberg reports, owners of prime retail storefronts in the heart of Soho – a trendy shopping district in downtown Manhattan – are struggling to find and retain tenants willing to pay the record rents being demanded by landlords.

    BBG

    The Bloomberg story begins by recounting the story of one boutique clothing shop that threatened to vacate its space six years early and just eat its security deposit unless the landlord agreed to a lower rate.

    The Kooples, a French clothing seller, is threatening to vacate its space six years ahead of schedule if it can’t get landlord Thor Equities to cut the rent. With brick-and-mortar stores suffering from a retail industry shakeout, the company says it isn’t making enough money at the property and wants to focus on the web.

    The scene unfolding on the cobblestones of one of New York’s trendiest shopping areas shows the increasingly fraught negotiations between tenants and landlords as vacancies soar and retail rents plunge. Similar scenarios are playing out along Madison Avenue to the north and along other thoroughfares in the city that have long been a draw for those shopping for designer clothing and other luxury goods. Property owners are confronting demands once unheard of in Manhattan, from rent reductions to short-term leases.

    Again and again, we’ve pointed to the stagnant deals and rents in some of Manhattan’s wealthiest and most expensive areas as a sign that the New York real-estate market is heading for a downturn after years of torrid growth in the valuations of residential and commercial real-estate.

    Manhattan

    According to Bloomberg, after a lull in leasings, landlords are beginning to accept their new reality, according to Patrick Smith, a vice chairman of the retail brokerage at Jones Lang LaSalle Inc. It no longer makes sense to keep rents so high in the hopes of landing one of the few corporate clients willing to pay.

    Indeed, “landlords are adjusting the way they do business to market conditions,” Smith said. “It’s healthy. It certainly has stimulated activity.”

    Of course, outside of Manhattan, many landlords are struggling with an even more ominous problem: As more brick and mortar retailers close, malls and other commercial storefronts are struggling to find somebody – anybody – who would be willing to fill their vacant spaces.

    CHart

    As a result, American malls are being forced to close, or suffer the indignity that accompanies having so many vacant storefronts.

    In Manhattan, home to some of the most valuable retail real estate in the world, a sharp rise in rents following the recession exacerbated the problem, with property owners clinging to unrealistic income expectations. Today, the glut of empty space is taking a toll, pushing landlords to make concessions to plug holes.

    Some are signing shorter-term leases to draw tenants that may be reluctant to make long-term commitments. In Soho, Hermes is negotiating a deal at 63 Greene St. that gives the retailer the option to leave after one year, while a few blocks over at 375 West Broadway, Gucci signed a lease that allows it to vacate the space if sales don’t meet expectations after two years, according to people familiar with the deals, who asked not to be identified because terms are private.

    Historically, a typical lease term in New York was between 10 and 15 years.

    Representatives for Gucci and Hermes didn’t respond to emails seeking comment.

    “Landlords, more today than in the past, are coming around to the retailer’s mentality,” said Steve Soutendijk, an executive director at Cushman. Both sides are making calculations on store sales “and how much can they pay in rent. If a store is unprofitable for them, it doesn’t make sense to keep it open.”

    To be sure, these issues aren’t confined to downtown – it’s a problem that’s beginning to manifest throughout Manhattan and even in some trendy outer-borough neighborhoods.

    Downtown landlords aren’t the only ones caving. On a tony corridor of Madison Avenue on the Upper East Side, an 18,000-square-foot (1,670-square meter) stretch of luxury retail is facing vacancies. Landlord Vornado Realty Trust doesn’t expect tenants including Gucci and Cartier to sign long-term renewals to leases that expire in September given market conditions, according to mortgage documents tied to the property. It’s offering short-term agreements at lower rates to keep the space occupied, the documents show. As of last month, no deals had been struck.

    Vornado, which recently paid off its mortgage at the property, declined to comment.

    “Landlords have to be open-minded,” said Robert Cohen, a vice chairman at retail brokerage RKF.

    In Soho, retail rents in the area have since plunged, dropping 17 percent in the past year to an average of $440 a square foot, the largest decline in all of Manhattan, according to the latest data from Cushman. But across the city, the number of new leases is falling and landlords in both retail and commercial are offering more rent concessions than they have in years.

    This might soon translate to a crash in the number of real-estate deals, mirroring a dire situation that’s playing out across the country, as high prices and a paucity of supply caused pending home sales to crash the most since 2010 in January.

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