Monday, January 9, 2012

Military Spending Cuts

I want a strong military, just like the rest of us.

It is a liberal idea that by working together we can create something great.

In the case of the military; I believe that by our 50 states working together we do create something great.

Right now, we are talking about Obama cutting military spending.

Issue 1: If you look at the Republican response, they are up in arms.  However, that seems to be a trend.  They have been against all spending cuts, or revenue increases.  They are against the level of deficit and debt, but also against anything that would fix it.  The military was up-sized for two wars and the way we are fighting has been changing.  We don't need the same form of military.

Issue 2:  When I watched the Republicans blocking every job creating measure... and doing things aimed at creating uncertainty while Obama was President - so that they in Mitch McConnel's words could make him, "A one term President," I knew they Republicans were voting against America for a period of four years.

During those four years, every dollar of economic growth missed because jobs measures were not passed, was going to be a future cut because we would not rebuild the base of government revenue by kick-starting the economy.
(Search youtube for Romeny praising stimulus.  He liked what Obama was doing... until he realized he was running against Obama later.)

The military and government is a reflection of the strength of our economy.  Strong economy and we can afford big guns.  Big recession, tax revenue falls off a cliff and it looks like someone has been spending like crazy... but, nobody has been depositing in his bank!

So, watching Republicans block jobs measures, so they could keep unemployment high, and then regain congress and the White House, I said, "This is going to hit our military," and here it is.

Massive cuts are being locked in right now.

But, I'm not entirely against this.

Here is why.

1) When we have it we are more prone to use it.
2) Nobody has the guts to trim it back.  May as well trim it back some while Leon Penetta and Obama looking at budget numbers see that it is necessary.
3) Trimming the military creates a, "peace dividend," that helped Clinton balance the budget.  I think it works here.  I've also probably seen enough war this decade.
4) Under whose leadership do we need a military capable of carrying out two simultaneous wars in different countries?

I will go into this one further.

Obama used US force in Libya, but no boots on the ground.  The French and others had their boots on the ground and we used some air power.

Look, the assumption that we need all this power is based on the idea that we'd have to fight two wars alone.  Well... Iran is the only place aggressively posturing right now.  We aren't sure about North Korea since Kim Jong Il died... And as in the example above, it seems under Obama we have allies who will work with us.

What do I see already that gives hints for the future?

Well, we've gotten the foot in the door with the other nations.  They are making commitments to work with us on Iran and share the efforts.  It has begun with the sanctions.

China, Japan, Russia, Turkey, Europe... all trimming back oil purchases and other economic activity with Iran.  Saudi Arabia is turning up the nozzle of oil production to meet any demand that used to be covered by Iran.

First, if you agree with my premise that the strength of the military is only as good as the economy that builds it... that amount of economic force is about to demolish the military of Iran.

It is only a matter of time before they can't sustain much of anything.

Second, this is a military tactic that varies from the Bush administration.  They wanted, "shock and awe," and "annihilation" of the enemy.  They dropped a gazillion bombs on Iraqi people's heads, scared the piss out of them, and wondered why Iraqi's didn't like us.  Then they tried to kill everybody.  And we went in there almost entirely alone and lost allies we had along the way.

The tactic is attrition.  The depletion of the resource base that a military rests on.
In world war two, in Germany, we didn't necessarily go after all the German Air Union's airplanes in the sky.  We did a great job of bombing airplane factories.  We did a great job of bombing supply rail lines.  And the German war machine... well, it was powerful, but they literally ran out of gas.  Add to that, any plane we destroyed in the air was not being replaced after we blew up their factories.

Consider the specific case of Iran.  Iran exports crude oil, but imports refined oil.
They actually do not have strong refining capacity within their country.

How does that effect the equation?
For one, it supports the logic that Iran wants to move to nuclear power because they don't want to burn their chief export.
Number two, if we target their oil trade and have all these other countries on board, very shortly their economy will go into a free-fall greater than what happened in America under the financial crisis.  I mean a serious, serious free-fall.

I would not be surprised to see Iran come to the table sooner rather than later... after probably trying to show all sorts of signs at how powerful they are... which will occur on the cusp of them feeling the weakest.

A general once described to me.  We are either at peace, or conflict with a nation.  There is a spectrum of conflict, escalation of conflict, but if we are not at peace we are in conflict.

We are in conflict with Iran.  All options are on the table.

But, I ask you to consider this idea.

If we have a smaller military... and the world wants to take out the government of Iran... and they cannot say, "Oh the US will just take care of it..." do you think they are more likely to contribute to a cause they believe in?

By touting how we have the largest military in the world, we set the discourse globally that we don't need help.

With a smaller military, if produced right, we can be more effective than we are today.

With the impact on allies and how our leadership has contributed to cooperation with those we are at conflict with... we don't need the massive military.

With the war of attrition taking place first, prior to any war of annihilation of the enemy... given enough time... we might see the Iranian army crippled to the weakness of a balloon full of hot air.  (Loudest right as it pops.)

In the global system we exist in today, diplomacy, and our economic power can actually be far stronger than our military.

And if for example, by cutting military spending now, we can have less cuts on education... maybe we have a smarter populace, stronger economy because of that, and investments we make here give us the capacity for an even larger military in the future.

Lets consider the global context.

Russia is our greatest partner in outer space right now.  We can't demonize the Russians via propaganda.  Three of the six astronauts on the space station, working in great partnership with us, on a mission of shared national pride, are Russian.  We worked with 72 nations to build that.

More democracies are forming.  In the history of democracies, not one democracy has gone to war with another.

Democracies also move slower and need public opinion behind them and this lowers the frequency of war.

Saudi Arabia is a strong ally and instead of us building up a massive military in the middle east, we just completed a contract of a massive arms deal with them.  They bought all the equipment from us.  And their guns will be aimed at Iran.  There are other nations in that boat.

The straight of hormuz is heavily heavily defended by us, the French navy and others.  And if Iran blocked it, their economy would shut down entirely.  Most of Iran's products move through there.

Iraq's oil production is growing rapidly, so that source of tension may be weakened.  The US oil production has grown and higher efficiency and less driving during the recession means we are exporting oil... so... energy shock not so likely...

We've been providing liquidity to the European financial system so they don't crash...

China isn't going to attack us.  Look how many dollars they would loose.  They like our money, but they also like our products.  We are positioning the US military so that if China were to hit Hong Kong, or a smaller neighbor that they would like to own... we'll have bases there and they know they would be starting a larger conflict they wouldn't want to deal with.  (This is part of Obama's military restructuring plan to make less forces in Europe, more in Asian areas.)

On another note.  Romney's language towards China is a bit militant considering the context.
China has allowed it's currency to appreciate by about 30% based on our negotiations.

Each year it is either 4%, 8%... or 12% that it appreciates, but we can't force it.

And the only thing that separated this Great Recession from an all out depression was 1) Action to stop the free fall and 2) During the great depression the leaders created trade wars, which made things worse.

Romney's approach might create a trade war in a context where China has been moving in the direction they want us to showing that they are working with us.

[One more note of context.  China has to look out for it's people.  Chinese people are savers.  So any change in the value of their currency effects the dollars they have.  Allowing he Chinese currency to appreciate too quickly makes the value of all the money those people have saved worth nothing.  Inflation devalues the buying power of a currency in a place where everyone has saved and has actual dollars in the bank.

China is growing the economy now by creating infrastructure and pointing production towards internal markets.  Aka.  Selling more to Chinese people than to outside than before.  This is a weaning process that allows China to slowly appreciate the value of it's currency.  We force them to go too fast, we actually stop what is developing our markets over there.

So we want to allow things to flow as they are with regards to China.  Obama formed a trade block of all the Asian countries.  And we all setup lucrative deals that will benefit all of us.  I noticed that he met with the Chinese premier the day before at the White House, but that China was not invited to the Asian trade block.  So, Obama says... alright... right now we aren't happy with you so... we'll find some other partners.  We'll still trade with you, but we won't be expanding it until you play by the rules.

The Asian trade block action was also a hedge against possible crisis in Europe.  Europe is one of our biggest trading partners and their economy is in trouble.  So, Obama did the trade agreements to accelerate our trade with Asian nations as a counter balance.  Another wave of alliances are strengthened.

That is the context with regards to our largest future potential adversary]  

The global context has changed.  Before we went to war in Iraq, Saddam Hussein was firing surface to air missiles at our jets that were enforcing our no fly zone.  We were in active conflict there.

But, who after that?  Who after Iran?

Syria?  Sure... the next door neighbor.

Already, Hezbollah is having major problems because Syria and Iran can't fund them with all the internal turmoil.

North Korea?  My sense is, they may want another 15 years to groom their new leader before they set him free on anything big.   Kim Jong Un might flex his muscles a bit with some action... but, so far... radio silence.  And after what happened to the leader of Iraq, Egypt, and maybe soon Iran and Syria... North Korea might just be in a mood to save their necks.

So, we invested in the wars in Iraq and Afghanistan.
We invested diplomatically around the globe.

Should we get a return on investment?

My belief... the best one would be the ability to have a smaller military.

Well, under the current realities of the government bank account... I think that is the only choice we have.

When you hear Republicans taking to the streets about Obama's military cuts.  I want you to notice one thing.  They have been against all cuts.  And all revenue increases.  Including, allowing the tax cuts for billionaires to expire a year after they were supposed to, so taxes return to normal levels.

So, no spending cuts, no tax increases - and Republicans are furious with this out of control spending and deficits... well... without spending cuts or revenue increases... there is no solution.  And they are just the party trying to assure that Obama is not elected.

In fact, if you search google for a chart of monthly government job losses, you will see that under Obama he has been shrinking the employment rolls of the public sector heavily since taking office.  So much for, "big government."  The data speaks for itself.

So - military spending cuts may take a dead-weight off the US government budget.
And part two, in none of the savings from health care reform have we factored in cost savings from 35 million people, or more, in the country that may now have better health care and overall might have better health in a decade or so.  That can save massive amounts of money.  Health care is 17% of the GDP of the country.

So... I am seeing a formula where over time... with increased revenue due to a growing economy... decreased spending... and (pppsssst on more scary thing) inflation... we'll be ok.

Eek - I just introduced inflation!

Well, year 2013, 2014... at some point soon I expect it.  Buy your large assets now.  Your dollar will go further now.  And if you pay $1400 on a mortgage now, you will when there are more dollars available and the costs of houses go up and everyone else is paying $2000.  Get your main assets now.

But, one more detail.  Yeah... we have a huge debt.  Sure.

But, we've gotten incredibly low interest rates on it.  We are paying almost nothing to people who invest in treasuries and our government got free money.  (Most of the debt we take on is from Americans, not China.  And a lot of it is IOU's from the social security trust fund because social security creates a surplus every year.)

And - what did I saw about China? Inflation would devalue the currency people held in their bank accounts.  Hmm... Inflation here would devalue the relative cost of the debt.  More dollars will be flying around all over the place, which causes market prices to go up (that's how inflation works), and our debt just doesn't bite that much anymore.

So, in the larger context here.  With the military cuts and overall approach to the balance sheet.  I think we are headed in the right direction.  The change won't happen over night, but it will be dramatic.

And if Romney is elected, he will get credit for the budget numbers you see described above.
And in about 2016 I will be pointing you to a little blog post where I said, "hey, the US budget is going to be just fine in a few years... and whomever we elect as President will get the credit for Obama putting us in the right direction."

Well, watch and see.  I have a knack for predicting the future.

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