AS Debt Grows, So Does US Exposures to Attack

I came across this must read piece in the Christian Science Monitor.

Opinion


As debt grows, so does US exposure to attack

As President Obama and Republicans duke it out over the federal debt, they must bear this fact in mind: Growing federal debt threatens the long-term national security of the United States.

By Travis Sharp / April 14, 2011

Washington

On Wednesday, President Obama grabbed onto one of the most highly charged issues in American politics: deficit reduction. The president’s speech offered a sensible way forward, even if his proposal was light on specifics. Now that the cameras are off, however, the real political challenges begin. Whether pursued through changes to tax rates, Medicare, or military spending, deficit reduction presents limitless ways for politicians to lose their jobs. And yet the American people demand that their elected leaders accept these risks, and are right to make such demands, because they sense what many experts now know: Growing federal debt threatens the long-term national security of the United States.

“The single-biggest threat to our national security is our debt,” Admiral Michael Mullen, chairman of the Joint Chiefs of Staff, said last year. It was a powerful acknowledgment from the high-spending Pentagon. Over the last two years, US federal debt increased from $6.9 trillion to $9.7 trillion. In 10 years, it is projected to reach $18 trillion, equaling 77 percent of GDP, the largest debt-to-GDP ratio since 1950, when the US was still recovering from World War II-related costs. At that point, federal spending on net interest related to the debt will surpass spending on the US military.

Since US economic prowess has long fueled US global influence and military power, Americans must understand the threats this situation presents.

First, long-term federal debt could gradually crowd out investments in the US military, which protects American interests and promotes international stability and peace. A similar situation developed in Britain at the turn of the 20th century, when British leaders’ focus on national efficiency and other peripheral issues distracted them from making the changes required to improve economic performance, bolster military capability, and prepare the nation for an uncertain future.
While Britain had the United States to help bail it out during World War I, no such savior exists for the United States today

As President Obama and Republicans duke it out over the federal debt, they must bear this fact in mind: Growing federal debt threatens the long-term national security of the United States.

Second, increased federal debt could leave the US more vulnerable to economic coercion. Such coercion could take the form of another nation withholding valuable natural resources or militarily sensitive goods during a conflict over repayment, cutting back purposefully on its holdings of US dollars to inflict economic damage, or interfering directly or indirectly in US attempts to finance its debt.

Chinese leaders have publicly discussed such a strategy, a worrisome development considering that China owns a sizable and growing portion of US debt. Last year, Chinese Major General Luo Yuan told state-run media that in response to American arms sales to Taiwan, China could attack the United States “by oblique means and stealthy feints,” including “using economic means, such as dumping some US government bonds.” In 2009, the Pentagon conducted a war game to explore this scenario. According to reports, China emerged victorious after using financial weapons such as stocks, bonds, currencies, and gold reserves to damage the United States. While such a strategy also would hurt China because of our nations’ economic codependence, one cannot rule it out during a crisis.

Third, the cost of servicing US debt could harm the long-term health of the US economy and erode America’s global stature and soft power. Washington would become less able to exert influence in multilateral fora, less able to borrow at affordable rates, less able to head off financial crises, and less able to convince rising powers of the comparative merits of market-based capitalism. Shorn of its international influence, the United States would find itself struggling to guarantee the security of its citizens and allies.

The US serves as the linchpin of an interconnected alliance system of more than 60 nations that has gradually provided more prosperity, freedom, and security to people all over the world. Bolstering our preeminent position in this system depends on relieving federal indebtedness, which poses a real and growing threat to the economic foundations of American power. Our leaders must keep these higher stakes, not the political risks that are superficial in comparison, firmly in mind as they work on a deficit-reduction compromise that will put the United States on a more sound fiscal footing.

Travis Sharp is a research associate at the Center for a New American Security and author of the Center’s recent report, “The Sacrifice Ahead: The 2012 Defense Budget.”

A Game of Electoral Chicken

Evidence suggests that larger segments of the American electorate are profoundly dissatisfied with the political status quo. To start off with, 63% believe the country is headed in the wrong direction.  The approval rate for congress is only 20%, while the disapproval rate is a staggering 70%. The approval rate for Democrats is 35% and for for Republicans it's a paltry 29%.

At 47% (according to a CBS / New York Times poll) President Obama's approval rate is better, but still abysmal. And when asked about his performance on key issues like the economy and the budget deficit, his approval rating falls to 39% and 32%. Anecdotal evidence suggests that even among those who intend to vote for him, support has plummeted. Liberals who are disgusted by his continuation of GW Bush's neoconservative foreign policy and corporatist economic policies will continue to vote for him. Equally, very few conservatives have expressed enthusiasm for Mit Romney or other big government Republicans. This begs the question: if so many are so dissatisfied, why do so few change their voting patterns? Why are they so reserved about voting for alternative candidates or simply abstaining when neither candidate merits their vote? This is all the more interesting considering the convergence of the alternative right and left on several key issues. Both Ron Paul and Ralph Nader are avidly opposed to: hazardous military intervention, the war on drugs, corporate bailouts and open border policies that characterize the core of both parties.

The majority of people I have spoken with have expressed the sentiment that they are not voting for a candidate or party, they are voting against one. Disheartened liberals are voting against "crazy right wing republicans" and disenchanted conservatives are voting against a second term for the Obama Administration. A growing number of liberals, conservatives and even centrists dream of real change, but are unwilling to support alternative candidates and parties or to abstain from voting, because they fear the following scenario that resembles a Game of Chicken.

1. Relative to their (right or left wing) compatriots, fewer individuals on the other side will abandon support for the mainstream Republican or Democratic candidates.

2. This means that they will not be able to garnish sufficient support for the alternative candidate.

3. And in the end their efforts will only contribute to an electoral victory for the mainstream candidate or party that they find the most distasteful.

The concerns of those who pursue this voting strategy are quite legitimate, but this ensures the continuation of the worst elements of the status quo. There are no easy answers, but if we want real change we must stop voting for the "lesser of two evils." If this means losing a Game of Chicken, so be it, I for one will not be an accessory to policies that are deleterious to the welfare of future generations.

And Now I Take The Side of Muslims

Pictured Above: Deportation and Decimation of the Crimean Tatars.

In various writings, I document the historic and recent abuse of religious minorities in Muslim nations. But, in the name of balance, it's important to explore some serious and unambiguous episodes of abuses of Muslim populations. In such instances, I do take their side against western nations:

Starting in the 1800's, the Russian Empire began it's push into the Caucasus, displacing its indigenous Muslim populations. In the 1860's, over 1,000,000 Circassians were expelled, with 400,000 perishing from massacres, cold and hunger. Less dramatic, but also significant was the gradual exodus of nearly 500,000 Crimean Tatars. In the late 1870's the situation stabilized and the exodus of Muslims from the Russian Empire slowed, with some even returning. But, the onset of Communism proved to be disastrous. During the man made family of the early 1920's, 100,000 Crimean Tatars perished, with percentage wise may have been the highest rate of starvation among any group in the Soviet Union. This was only the beginning of the horrors that awaited them; in 1944 the entire population of Crimean Tatars was deported to Central Asia, in which 45% perished. And in the first few years of deportation and exile from their homeland, up to 50% of the Chechens perished. After the dissolution of the Soviet Union, Russia denied independence to the Chechens, sparking the first and second Chechen Wars. While it is certain that the Chechen leadership was corrupt and unstable, Russia has no demographic, historic or strategic claim to their land. And their very presence is encouraging the very Islamic radicalism and terrorism that they fear so much.

Reflections on the Greek And (Soon To Be) American Crisis

I came across an interesting interview in Der Spiegel with the Greek writer Petros Makaris, in which he discussed Greece's grave fiscal crisis.  Although we are not in as bad shape as Greece, there are quite a few parallels and there is quite a bit we can learn from their crisis. Why? Because, we are clearly on the same trajectory, that is, unless we enact drastic fiscal reform, we will go bankrupt.

The author's declaration that "if the country is to be reformed, the Greeks must suffer," equally holds true for the United States, but other than Dr. Ron Paul, no other politician is willing to publicly admit this. Instead most Republicans facetiously claim that the budget can be balanced without tax hikes and many Democrats present the bold faced lie that the crisis can be solved by "taxing the wealthy." In other words, both sides promise pain free solutions.

Makaris's most astute observation especially holds true for the United States, "The mentality in Greece needs to be radically reformed. I'm worried that only the symptoms of the crisis -- and not the causes -- will be cured now." As with Greece, our fiscal crisis will never be solved until we address its cultural roots; the insatiable spirit of entitlement and envy and the erosion of basic intellectual honesty and open discourse. The first and most difficult step is to cease blaming others and take responsibility for the state of our personal affairs and that of our nation. We chose the "crooked politicians" that are spending us into oblivion. We chose to accept loans from "greedy bankers," in order to live beyond our means. And while the Chinese and Koreans focused on education, saving and investing in the future, we took the path of instant gratification and unsustainable consumption. External forces may have been part of the problem, but they will not be the solution. Real "change we can believe in," must first come from within.

Interview with Greek Crime Writer Petros Markaris

'The Greeks Must Suffer'

03/04/2010


"Swindlers in the Euro Family": Many in Greece are boycotting German companies like consumer electronics chain MediaMarkt, pictured here, over the heavy-handed treatment their country has been given by the media in Germany.

Greek author Petros Markaris has translated Goethe into Greek and written a series of best-selling novels on crime and corruption in Athens. In an interview with SPIEGEL ONLINE, Markaris speaks about the "Balkan mentality," troubled German-Greek relations and why even respectable people are forced to pay bribes in everyday Greece.

SPIEGEL ONLINE: Mr. Markaris, Greece is deep in debt and workers are striking to protest strict austerity measures. What's going on with the Greeks?

Petros Markaris: Things aren't just going bad for the Greeks. They have been shaken to the core and terrified, and they don't know how to go forward from here. The government also deserves some of the blame for this because, for six months, it only discussed the issues and has only now announced its reform measures. This lack of action has had negative effects on the population and also kept the Greeks in the dark about just how bad things really were in the country. Another result is that there is now only a single way out of the crisis: If the country is going to be reformed, the Greeks must suffer.

SPIEGEL ONLINE: Between 2004 and 2008, the European Union gave tens of billions of euros to Greece. More than one-third of all Greek workers are government employees, and there are 14 public holidays, which is fairly generous. How is it that the Greeks were able to live beyond their means?

Markaris: Things haven't always been this way. I've lived in Athens since 1965. Until the end of the 1970s, Greece was a poor, though very respectable country. Then, in 1981, when Greek became part of the European Economic Community (EEC), it received a lot of money. The Greeks didn't know how to deal with it. People just didn't know what to do -- neither politicians nor ordinary people had a consciousness for it. From then on, various governments supported living on credit. Now we have reached a point where the population doesn't want to voluntarily do any belt-tightening and where the government can't manage its finances. I still doubt that the government seriously intends to implement the savings measures it has announced.

SPIEGEL ONLINE: Is Greece's population simply incapable of self-criticism?

Markaris: This isn't the first horrible crisis that Greece has gone through. But it is the most hopeless and, in any case, it marks the first time that the population, the media and politicians have spoken openly about the issues. There are no more illusions.

SPIEGEL ONLINE: German Foreign Minister Guido Westerwelle has called on the Greeks to do their homework, and German industry is worried that the crisis in Greece might spill over into their country. Is Germany handling the situation in Greece the right way?

Markaris: Just like most of the other EU member states, Germany is busy trying to convince Greece that it needs to change some things. This is the correct thing to do, because we urgently need these reprimands. Greeks have not been offended by the German government's behavior.

SPIEGEL ONLINE: Still, Greek newspapers are warning that there might be anti-German hysteria. After the German newsweekly Focus ran an image of the Venus de Milo statue on its cover making an obscene gesture with the headline "Swindlers in the Euro Family," a Greek consumer advocacy group called for a boycott on German goods. And Theodoros Pangalos, Greece's deputy prime minister, has said that the Germans took Greece's money and gold during their World War II occupation of the country but have refused to pay reparations.

Markaris: The whole flap is only directed at Focus, which was the sole cause of the big blowout. I also find the magazine's front-page image a bit unpleasant, but the reaction of Greek politicians has been wildly exaggerated. In the end, it really only has to do with a report in the media and not with something that a German politician said. I've always been amazed that Greeks are more sympathetic toward the Germans, who once occupied their country, than they are to their liberators, the Americans and British. But now that's changing. I'm afraid that German-Greek relations have been damaged, and it's something I regret very deeply. Whenever the Greeks are distressed -- like now -- they grab on to nationalism. Unfortunately, that's just the Balkan mentality.

SPIEGEL ONLINE: According to Transparency International, the average Greek pays over €1,000 each year in bribes for personal reasons. Over the last two years, these figures have jumped sharply. Greek crime fiction also features a lot of fakelakis, envelopes bulging with bribe money. What role does corruption play in everyday Greek life?

Markaris: Corruption permeates all of Greek society. If the only way to get swift treatment in a Greek hospital is to bribe someone, it is really a problem of the state. Even the respectable citizen has given up hope and believes that evading taxes is justifiable. As he sees it, that is the only way to get his money back. From this arises a society in which everyone shares in the guilt. The mentality in Greece needs to be radically reformed. I'm worried that only the symptoms of the crisis -- and not the causes -- will be cured now.

SPIEGEL ONLINE: What is there left for the Greeks to save?

Markaris: We need a completely new state apparatus, a well-functioning civil service and anti-corruption laws. The government's most recently announced reform measures do provide some cause for hope, but they need to be implemented in a strict fashion. Otherwise, we'll just have another crisis five years down the road.

SPIEGEL ONLINE: Where do things go from here?

Markaris: Greece is lucky that it still has a minority of active and productive people, who are to thank for the fact that the country didn't go broke earlier. But this minority is at the end of its rope. Either we are leaving, they say, or the EU must take drastic action and change something. The only way Greece is going to work its way out of the crisis is if the EU or the IMF succeed in rigorously monitoring it. In Greece, we need a drastic treatment.

Interview conducted by Anna Reimann

The Source of Corporate Welfare or Why Governor Quinn Stinks!

Pictured Above: Governor Quinn consulting with his economic advisor.

When Governor Quinn made Illinois even less attractive to businesses, by substantially raising taxes, predictably more employers started moving out. Rather than address this issue by making across the board tax and regulatory reform, that equally apply to all employers, Quinn offered $100 million in selective subsidies (i.e. corporate welfare) to Motorola and will presumably do so when other major firms threaten to leave. Even companies that do not intend on relocating will be able to leverage the state. Fundamentally, this means that the tax burden will be shifted towards companies and individuals who are not politically connected. Truly Governor Quinn you stink!

$100 million keeps Motorola Mobility in Illinois

Illinois boosts tax incentives in 10-year deal to keep smartphone company in Libertyville

May 06, 2011

By Kathy Bergen and Wailin Wong, Tribune reporters

Gov. Pat Quinn put up more than $100 million in financial incentives to persuade smartphone company Motorola Mobility to keep its corporate headquarters in Libertyville — the largest package he has offered a company to date and a signal of how badly the state wants to hold on to high-tech jobs

To persuade the maker of mobile devices and cable TV set-top boxes to stay, rather than move to California or Texas, state lawmakers sweetened terms of its tax-credit incentive program as it has for automakers, including Mitsubishi, and truck- and engine-manufacturers, including Navistar International Corp.

Navistar landed a $64.7 million package last year to keep its headquarters in Illinois, the second-largest deal during Quinn's tenure.

The Illinois packages are among a rash of retention deals cropping up nationwide as the economic malaise keeps unemployment at painful levels.

Motorola Mobility's tax-credit package comes in at $10 million annually over the next 10 years, assuming it meets job retention and investment goals. The company also will receive $1.25 million in job-training funds and a $3 million large-business development grant to assist with capital expenses.

The deal, announced Friday, breaks down to about $34,750 for each of the 3,000 jobs Motorola Mobility has agreed to retain, considerably more than the $15,000 to $20,000 per job that is more typical when the state awards tax credits to keep or attract businesses.

"These are higher skilled, higher paying jobs than most projects," said a spokeswoman for the state's Department of Commerce and Economic Opportunity.

Motorola Mobility, one of two companies that previously formed Motorola Inc., pledged to spend more than $500 million on research and development over the next three years, essentially what the company already had planned to spend.

But there is potential to grow that amount, some of which might have gone elsewhere if Motorola Mobility had relocated, Chief Executive Sanjay Jha said.
The company's decision was announced amid much fanfare at Motorola Mobility Holdings Inc.'s Libertyville offices. Employees and senior executives wore red T-shirts emblazoned with "Motorola Mobility Illinois" and packed an auditorium to see Quinn sign the legislation enhancing its tax-credit package.

"We don't want folks to leave," Quinn said. "We want them to stay and grow with great companies like Motorola."

The legislation Quinn signed also applies to some companies in the cable TV, wireless telecommunications and computing fields, as well as to makers of inner tubes and tires. The latter could indicate other deals may be in the works.

Laurence Msall, president of the Civic Federation, a tax policy group, called the deal a prudent investment for the fiscally struggling state. "The best way for the state to stabilize its finances is to grow its economic strength," he said.

As to the richness of the deal, economic development expert George Ranney said, "Yeah, it's a concern, but these are pretty good jobs." Ranney is president of Metropolis Strategies, a business-backed policy organization.

Other economic development experts took issue with the package.
Typically, the Economic Development for a Growing Economy, or EDGE, tax-credit program allows companies to use the credits against their state corporate income tax liability. But many companies pay no such taxes, partly due to difficult economic times and partly because an earlier revision in the tax structure slashed bills for multinational corporations.

Motorola Mobility's federal and state income tax liability represented less than 1 percent of its revenue in 2010, and it had no liability in 2009, according to estimates in company filings.

Under the legislation signed by Quinn on Friday, the company now has the option to use the credits against withheld employee income tax liability. In essence, the company can retain state employee income tax withholdings, said Warren Ribley, director of the Illinois Department of Commerce and Economic Opportunity.

Greg LeRoy, executive director of Good Jobs First, a nonprofit that researches economic development subsidies, called the diversion of personal income tax revenue "an insidious recent development." About a dozen states have some form of it, and a couple more are debating the issue, he said.It is "like companies grabbing into employees' pockets," said LeRoy, adding that it also represents a new encroachment into state revenue streams.

"Shame on Motorola and other companies for asking for such big subsidies when they know governments are strapped," he said.
wawong@tribune.com

Liberal Lunacy At Its Best!

Liberal lunacy at its best: the courts forced the fire department to hire 111 African-Americans because given the fact that only 11% achieved the required score on a standardized test, the majority of those who were hired were white. It's one thing to use diversity and quotas to drive hiring practices for bloated bureaucracies like the DMV, but when we are dealing with life and death services (police, paramedics and firemen) it's essential that we hire the best and brightest candidates.

Chicago Firefighters: City Must Hire 111 African Americans, Pay Millions To Others


By DON BABWIN

05/13/11 04:54 PM ET

CHICAGO -- A federal appeals court ruled on Friday that the Chicago Fire Department must hire 111 African Americans who passed a firefighters entrance exam 16 years ago and pay millions of dollars to thousands more who took and passed the same test.

The Seventh U.S. Circuit Court of Appeals ruling was the latest blow to the city, which has been on the losing end of court decisions regarding the 1995 test for years, including a 2005 ruling by a federal judge who said the test discriminated against black applicants and a U.S. Supreme Court ruling last year that the candidates did not wait too long to sue the city.

An attorney for the black firefighter candidates said that the 111 jobs would be filled from the applicants who passed the 1995 test and their pensions would be adjusted as if they'd been firefighters since 1995. And, said Joshua Karsh, 6,000 others who also passed the test will divide "tens of millions of dollars" that would have been paid 111 firefighters from 1995 until today.

A spokeswoman for the city's law department called the decision a "partial victory" for the city because it reduced the number of African Americans the fire department must hire from 132 to 111. "Reducing the number of plaintiffs who are eligible reduces the damages," said Jenny Hoyle.

Hoyle said that the city was still calculating the damages as result of dividing the back pay of 111 firefighters among the 6,000 applicants, but that officials estimate the payout will be about $30 million.

The ruling stems from a test given in 1995 that was intended to measure an aptitude for firefighting. After the test, anyone who scored 64 or below was deemed not qualified, but officials told those who scored above that number that while they passed, they would randomly hire the top 1,800 who scored 89 or better.

Because only 11 percent of the African Americans scored 89 or better, the overwhelming number of applicants hired from that test were white.

Karsh said the test was discriminatory because there was no evidence that the applicant who scored 89 or better would be any better firefighter than another who scored a 64, and in fact in 2005 a federal judge said the test discriminated against black candidates. In her ruling the judge said the city knew the cutoff point was meaningless and would disproportionately exclude blacks from the pool of candidates most likely to be hired.

"If the city of Chicago had selected firefighters at random from all the people who passed the test it would have gotten a pool of equally capable firefighters and the pool would have been more integrated," said Karsh said. He said he did not know when the hiring might begin, but said that he expected it to start soon.

After the judge's decision, the city, which hadn't given another test since 1995 because of ongoing court challenges, gave another test in 2006. But that test was given on a pass/fail basis and that all passing applicants, and not just the top ones, were processed randomly for additional tests such as physical agility and background checks

Dogma vs Data at Duke University

While reading up on the Duke University Lacrosse Case, in which several white students were (wrongly) accused of raping an African-American woman, I came across an interesting side story. Soon after the allegations were made, 88 Duke professors placed an ad in The Chronicle referring to the circumstances surrounding the allegations as a "social disaster" and quoting primarily anonymous individuals citing racism and sexism in the Duke community. The advertisement concluded, "We're turning up the volume [...] To the students speaking individually and to the protesters making collective noise, thank you for not waiting and for making yourselves heard," and "These are the students shouting and whispering about what happened to this young woman." 

What is most interesting is the distribution of support for this document among different departments. At one end of the spectrum, the majority of faculty in departments focused on race and gender signed the document and a significant portion of other liberal arts departments did so too. At the other end NO faculty member in engineering, chemistry and the hard sciences signed it. In fact, 17 members of the economics department signed a document expressing support for the students. I believe this speaks a great deal about the general approach towards social, political and economic life and knowledge itself of different departments. Not surprisingly, professors in fact and data driven fields would be very reserved about passing judgement against students until all the facts and data were on the table. And conversely, more ideological driven departments viewed this incident through their ideological lenses and passed judgement based on their guiding narratives (white oppressor vs minority victim), before they possessed all of the fact. Shame on them for abandoning the democratic principle of affirming the innocence of the accused until they are proven guilty.

"The department with the highest proportion of signatories was African and African-American Studies, with 80%. Just over 72% of the Women's Studies faculty signed the statement, Cultural Anthropology 60%, Romance studies 44.8%, Literature 41.7%, English 32.2%, Art & Art History 30.7%, and History 25%. No faculty members from the Pratt School of Engineering or full-time law professors signed the document. Departments that had no faculty members sign the document include Biological Anthropology and Anatomy, Biology, Chemistry, Computer Science, Economics, Genetics, Germanic Languages/Literature, Psychology and Neuroscience, Religion, and Slavic and Eurasian Studies."

"Seventeen faculty members of the economics department sent a letter showing support for the players on January 6, 2007, saying, "We regret that the Duke faculty is now seen as prejudiced against certain of its own students," and telling the players that they are more than welcome to enroll in their courses."