Category: Budget

Another Navy Ship Building Program Has its Cost Soar

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The CBO looks SSBN(X), the successor to the Trident boats, and estimates that the cost will increase from $7.2 billion to $8.2 each:

The Congressional Budget Office is out with a new estimate of the Navy’s latest 30-year shipbuilding plan, issued in February. While that new plan reduces the total number of ships purchased between 2011 and 2040, and thus shipbuilding costs, CBO says the annual price tag is still much higher than the total shipbuilding funds the Navy has received in recent years.

The Navy’s new plan calls for buying 276 ships between now and 2040; the previous 30 year plan called for 296 new ships. Still, with the annual shipbuilding budget at around $15 billion (the average for the past three decades), the Navy can’t afford to buy all of those ships, CBO said.

We need to start with cost targets as the most important driving requirement for defense procurement programs, followed by schedule, and any other issues must be secondary, or this sort of cost creep will continue ad infinitum.

Dutch Hammer First Nail in JSF Coffin

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The Dutch Parliament has voted to cancel its procurement of the F-35 Lightning II JSF (also here):

Proposal 1 (SP):
The government not be permitted to contract any new obligations with the JSF program

Proposal 2 (Labour)
Cancelling the contract for the First LRIP3 test aircraft and get the money back from the US for the long lead items. Not buying/ signing contract for the Second LRIP4 test aircraft. Cancelling the participation in the MOU-IOT&E (Initial Operational Test and Evaluation)

Proposal 3 (Green Left)
Because the Evaluations of the F16 replacement in 2002 and in 2008 were based on wrong estimates and unreliable data, there needs to be a new evaluation done with new RFPs (Requests for Proposal).

All three proposals were approved by the Netherlands Parliament.

The Dutch were perhaps the heavily involved nation after the British on this program, and the fact that these motions passed, at least passed a 1st reading is telling.

This happened because the MPs believe that they program is late and over budget to such a degree that any program of offsets or technology transfer does not matter because the cost and schedule issues puts them in a situation with a hollow force that they cannot afford to actually operate the aircraft, or, for that matter, their military.

They understand the budget requirements of the Euro zone, and they realize that they are not willing to cut their social safety net, among the most generous in Europe, to support mindless wasteful military spending.

It Looks Like the Hedge Fund Tax Loophole May Be Gone Soon

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As some of you are aware, the bulk of hedge fund managers’ income is taxed at the capital gains rate of 15%, rather than the 35% on amounts in the 6+ figure range that mere mortals pay.

Basically, they get a slice of the increase in price of their assets, even though they never put a dime of their own money in. It’s called “Carried Interest.”

Well, it appears that both Max Baucus (DINO-MT), who slowed down healthcare refiorm waiting for non-existent republicans to come on board, and Barack Obama’s Director of the Office of Management and Budget, Peter Orzag, have decided that it would be a good think to put a stake through the heart of this loophole in the interest of deficit reduction.

The money quote is this:

Hedge fund managers make hundreds of millions of dollars (and often billions) annually. Does anyone really think they will suddenly slam on the brakes if they have to pay the same tax rate as the janitors who clean their offices?

This makes this both good policy and good politics………For the win.

Your JSF Update

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Carrier Drop test h/t Graham Warwick

First and Foremost, I think that we need to start with the cost escalation of the F-35, with the unit cost estimates having escalated from $113.6 million to 136.2 million over just the past few weeks, which has triggered an official notification of a Nunn-McCurdy breach to Congress, which means that the price has escalated by more than 50%.

In the interest of fairness, Lockheed-Martin is rejecting the Pentagon numbers, and claiming that they will hit, or at least come closer to the original numbers, based on ……… I’m not entirely sure what, possibly reading chicken entrails.

Meanwhile, on the other side of the pond, both Italy and the Netherlands are making noises about scaling back their purchases/commitment to the program, (paid subscription required)with the Italians demanding a larger workshare, and the Dutch wondering if the entire thing is simply too dam expensive.

Note that the Dutch are supposed to participate in the Initial Operational Test & Evaluation (IOT&E), purchasing 2 aircraft, but they have only contracted for one, and they can sell the aircraft instead of participating in IOT&E.

It all hinges on the upcoming elections.

On the brighter side for the program the first F-35 with a full sensor suite has flown, sort of:

The mission system installed for the initial flight includes the APG-81 active electronically scanned array radar, EW system, integrated CNI, integrated core processor and the pilot’s helmet-mounted display. The electro-optical targeting sensor and 360-deg EO distributed aperture system will be added later.

(emphasis mine)

So the most low observable sensor, and the sensor that is supposed to allow the aircraft to compete against more maneuverable aircraft by giving the pilot a 360° field of view around his aircraft are not yet flying.

Finally, we have an analysis showing that the F-16 in 1998 out-ranges the F-35. Basically a 1998 PowerPoint slide for the F-16 gives a 630 NM radius with conformal fuel tanks on a strike mission on a hi-lo-lo-hi profile with the final 50 NM in and out on the deck, as versus a 728 NM radius for the F-35, which only pops below 5000 feet once.

Additionally, the F-16 carries 2 GBU-10 2000 lb bombs + 2 Sidewanders + 2 AMRAAM, while the F-35 carries 2 AMRAAM + 2 GBU-12 500 lb bombs.

If the F-16 is just carrying 2 AMRAAM + 2 GBU-12, and conducts its operations above at 5000 feet or above, it out-ranges the F-35, and that’s without considering that the F-16 numbers include the drag of an external jamming pod, and modern F-16s have internal jammers.

Finally, for your viewing pleasure, some the Jim Lerher’s News Hour has a segment on the F-35 that appears to cover all the bases.

Nate Silver Can be Annoying,* But

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He knows his math, as shown by his take-down of the study by Veronique de Rugy of George Mason University and the National Review† claiming to show that stimulus went disproportionately to Democratic districts.

You see, much of the aid under the stimulus package was direct aid to the states, which, of course, was sent to state capitals, like Sacramento, and Albany, and then disbursed from there to the rest of the state.

It turns out that state capitals, with their generally urban character, and having a large, and usually significantly unionized workforce, tend to be more liberal than the state as a whole, but what is more significant, is that the money that goes to these state capitals does not generally end up there; it is allocated by the governors or legislatures all over the states:

That de Rugy has testified before Congress on the basis of her evidence, and never paused to consider why the top five congressional districts on her list overlap with Sacramento, Albany, Austin, Tallahassee and Harrisburg, is mind-boggling. The presence of a state capital is the overwhelmingly dominant factor it predicting the dispensation of stimulus funds. This could have been discerned in literally five minutes if she had bothered to look at the apparent outliers in her dataset and considered whether they had anything in common — a practice that should be among the first things that any researcher does when evaluating any dataset.

Once you read his analysis, it’s pretty simple to see the flaw, but it is one that is hard to spot in the first place.

Basically, if you make any sorts of block grants to the states, they go to the capitals, and are then disbursed all around the states, so if you only go 1 or 2 levels down, you make it look like the stimulus program is a Democratic pork project.

The reality is far different.

*I tend to find his political analysis largely directed at either cock-punching DFH’s,‡ or mindlessly contrarian, kind like a mini-Michael Kinsley.
†2 strikes against her credibility there to start.
‡Dirty F%$#ing Hippies.

Death Spiral, JSF Edition, Chapter 3 of Many

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A while ago, I wrote about the F-35’s exhaust being so hot that it required modifications to carrier and LPD decks.

Well, as Ron Popeil says, “but wait, there’s more/”

It is now likely that the exhaust will be hot enough so that the aircraft will be unable to operate from austere fields in STOVL mode, and by, “Austere,” we mean, “just about any non-military airfield in the world,” as well as a lot of the military ones:

But a Navy report issued in January says that the F-35B, in fact, won’t be able to use such forward bases. Indeed, unless it ditches its short take-off, vertical landing capability and touches down like a conventional fighter, it won’t be able to use land bases at all without some major construction efforts.

The newly released document, hosted on a government building-design resource site, outlines what base-construction engineers need to do to ensure that the F-35B’s exhaust does not turn the surface it lands on into an area-denial weapon. And it’s not trivial. Vertical-landing “pads will be exposed to 1700 deg. F and high velocity (Mach 1) exhaust,” the report says. The exhaust will melt asphalt and “is likely to spall the surface of standard airfield concrete pavements on the first VL.” (The report leaves to the imagination what jagged chunks of spalled concrete will do in a supersonic blast field.)

What’s more, if you make an appropriate landing area, it has to be in one slab, without joints, because there are current no existing sealers that can take the heat, and if the aircraft is waiting for clearance with its APU (the Integrated Power Pack or IPP) running, that can burn holes in the runway too.

Bill Sweetman is correct when he notes, “Worst case or not, there is a very big difference between a solid slab of high-grade concrete and the kind of surface you are apt to find anywhere ending in -stan.”

And then there is cost, where the JSF unit cost is up 50% from its 2002 number, shattering the Nunn-McCurdy barrier, and that is assuming that the purchase numbers remain the same, something is about as likely as Obama pursuing war crimes prosecutions against Dick Cheney.

So Obama’s Magical Deficit Reduction Commission is a Go

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And former Clinton White House Chief of Staff Erskine Bowles and former Republican Sen. Alan Simpson will be the co-chairman.

I think that it’s a bad idea in the first place, and that it’s a way to create political cover for weakening Social Security and Medicare, and what’s more, as former Clinton Treasury official Brad Delong notes, putting Simpson in charge of deficit reduction is like naming an, “Arsonist to Co-Run the Fire Department,” with history of supporting every half-assed tax cut for the rich plan out there, supporting Reagan’s disastrous 1981 cuts, and opposing Clinton’s tax increases, which produced the first surpluses in a generation.

What really worries me is that we have a whole bunch of Beltway Boyz who are thinking that the huge problem is Social Security and Medicare, and are looking for a way to gut them.

Yeah, Change We Can Believe In

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So, here’s another one that Barack Obama and His Clueless Minions™ are allowing to slip through their fingers.

This time, it’s student loan reform, which would have taken the private loan companies out of the game, saved the tax payer money, saved the students money, and eliminated a lot of fraud and waste:

Four months ago, it appeared all but certain that the White House and Democrats in Congress would succeed in overhauling the student loan business and ending government subsidies to private lenders.

President Obama called the idea a “no-brainer” last fall, predicting it would take billions of dollars from the profits of private lenders and give it directly to students, and many colleges were already moving to get loans directly from the federal government in anticipation of the next move by Congress.

But an aggressive lobbying campaign by the nation’s biggest student lenders has now put one of the White House’s signature plans in peril, with lenders using sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case and stay in business.

Yes, we have reports that the administration has, “recognized the threat and was beginning to push back in an effort to get the plan approved,” as evidenced by the recent criticism of the lobbying and the progress of the bill by Education Secretary Arne Duncan, but it is indeed weak tea.

It appears that they dropped the ball on this because they were working on healthcare reform, which might be marginally excusable, only, of course, the administration pretty much screwed the pooch on that one too, handing it off to Congress and allow ratf^%$s like Nelson and Lieberman to screw that up.

Seriously, the problem here is that the FIRE (Finance, Insurance, Real Estate) sector has captured our government to an astonishing degree, and eventually the parasitic rent taking that they extract from society needs to be reined in.

Please Check My Math

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James Kwak in discussing Barack Obama’s putative deficit reduction panel, which is supposed to seat people from both sides of the aisle to address the deficit, asks the following question, “What if they put Mankiw and Krugman on this commission?”

Well, let us assume that both Greg Mankiw and Paul Krugman mass 75 kg.

It’s fair to characterize them as the economic equivalents of anti-matter and matter, so:

  • e=mc2
  • M=75+75=150 kg
  • e=1.35×1019joules
  • According to the wiki, a megaton is 4.184×1015 joules
  • This gives 1.35×1019 joules/4.184×1015 joules/megaton = 3226.5 megatons of energy released.

I think that this places the idea of placing both of them on the same panel as “imprudent”.

Economics Update

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Mortgage applications fell last week, with home purchases leading the way relative to refinancing on the way down.

Even so, housing starts rose sharply, though as Calculated Risk notes, a lot of this is likely from home builders trying to complete houses in time before the latest round of housing tax credits expire at the end of April.

In the world of actually making stuff, US industrial output rose more than expected in January.

In the “looming train wrecks” category, the newly released minutes from the Fed’s January meeting show increasing confidence in the economy, it appears that there are some strong voices for the Federal Reserve to significantly shrinking their balance sheet, would would likely result in a significant, probably in excess of 50 basis points (½%), increases in mortgage rates, which would make an already shaky real estate market even more problematic.

In any case, the news on housing starts and industrial output drove both oil and the dollar is higher.

Senator Kirsten Gillibrand Proposing Budget Prohibition on Enforcing DADT

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Moving to prohibit the military from spending money to enforce DADT is a good idea.

Among other things, it is a non-filibusterable measure, and when the usual crowd of Republicans start screaming, it’s an opportunity to show them up as hypocrites, since they are now ignoring the military leadership and the budget and HR needs of the military.

It also raises a question about Senator Gillibrand (D-BY).

She was, when she was the Congresswoman from New York’s 20th district a very conservative lawmaker, but now, that she’s in the Senate, far more liberal in her record.

The 20th is a conservative district, R+2 according to the Wiki, and it is understandable how a politician might find it in their best interest to represent the needs and wants of their district.

On the other hand, since being appointed by Governor Paterson to replace Hillary Clinton, she has also faced the prospect of viable primary challengers from the liberal wing of the party,* and her positioning may simply be an attempt to forestall any challengers, much in the same way that Arlen Spector is doing in Pennsylvania.

There is nothing wrong with her attempting to represent the views of her constituency, and her constituency has changed, and become significantly more liberal with the change in office.

Unfortunately, there is no way to know if this is driven by a constituent considerations, or if it is driven by primary election considerations.

If it’s the former, she should be a decent Senator. If it’s the latter, then come November, we’ll have another wanker in the Senate, at least for the next year or so, until she positions herself for the regularly scheduled election for that Senate seat.

*We’ll ignore the Harold Ford, corporatist DLC puke “candidacy” right now, because I’m not sure if it’s a serious candidacy, an attempt at extortion, or an exercise in masturbatory ego stroking.

I Have Neglected the Ukraine

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They had elections for President, and in the first round, current President Viktor Yushchenko was completely blown out, and the top vote getters, Russian friend Viktor Yanukovych, and current Prime Minister Yulia Timoshenko went to a runoff.

Well, Yanukovych won the election, though Timoshenko is still contesting the election.

As a result, investors are avoiding a Ukrainian debt issue like the plague as a result, because:

  • Investors don’t like an unstable government, and because they prospect of Timoshenko remaining in government unsettles them because:
  • She has a reputation for obstructionism that makes John Boehner look like Doctor Ruth The cabinet that she has nominally been in in charge of has been unable to agree on budget cuts that the bond investors are demanding.

It’s a mess.

Economics Update (a Day Late)

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Well, yesterday was, as Atrios says, jobless Thursday, and unemployment claims fell more than forecast, falling to just 440,000, which is still not enough for an increase in non-farm employment.

The White House is predicting about 95,000 new jobs a month being created in 2010, but based on some quick numbers, a 1.1% annual labor force growth times 155,200,000 people in the US labor force divided by 12 months, there need to be about 142,000 jobs created each month just to accommodate natural growth, so things aren’t getting better, they are just getting worse more slowly.

On the other hand, the news out of California, that tax receipts are well in excess of predictions, is legitimately good news.

Finally, in a discovery of the blatantly obvious, a the TARP’s Congressional Oversight Panel has determined that commercial real estate is imploding, and this threatens the viability of many small and mid sized bank. …………Hoocoodanode?

Death Spiral, JSF Edition, Chapter 2 of Many

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Well, this week, SecDef Robert Gates has just fired the program manager for the JSF program, Major General David Heinz, and is withholding millions of dollars in performance fees to the prime contractor, Lockheed-Martin, because of schedule and budget slips, citing a “troubling performance record.” (see also here, here, and here)

Lockheed-Martin’s response has been nothing short of delusional, at least as described by Steve O’Bryan, L-M VP for “business development and customer engagement” for the JSF, “:

Gates’ actions, in O’Bryan’s view, “reflected the commitment of the U.S. government to the F-35… the program is fully funded, with more development funding and more robust leadership.” The decision shows that the aircraft is “relevant today, and that the customer wants the jet right now.”

I’m beginning to think that part of the reason that this program is over budget and behind schedule is that Lockheed Martin has, and so the tax payer is paying for, a, “vice president for business development and customer engagement on the JSF program”.

It seems to me that this is a rather high falutin, and likely highly paid, position for what amounts to a PR flack with heavy duty knee pads.

Misapplication of resources may be a part of the problem, and Mr. O’Bryan’s continued employment does not seem to me to be an example of “spending smart.”

Of course, the USAF chief of staff is similarly sanguine, suggesting that the delays in the pro will only raise unit cost in the immediate term, because, like no other program before it, the delays will increast the cost only, “for a period,” and he does not see a Nunn-McCurdy breach in the costs.

It makes me want to quote that Samuel L. Jackson speech from Pulp Fiction again, because it’s clear that they want to f%$# the taxpayer like a bitch.

There are people who recognize the truth, like the Director Of Operational Test & Evaluation (DOT&E), who says that even with a flawless program, there will be a slippage of at least 18 months on the program, but that a flawless program is extremely unlikely, since things like the idea that modeling and simulation can reduce testing are unlikely to succeed.

Of note in the DOT&E report:

  • LRIP configuration is not yet defined.
  • Clutch heating on the STOVL variant
  • Increases in weight and landing speeds means that tires are running into their thermal limits for the carrier (F-35C) version.
  • Software instability
  • They aircraft is pulling out many of its survivability features, fuel check valves in the engine nozzle and fire extinguishers, to reach the specified weight.

Additionally, it now appears that the F-35C fuselage is under-strength:

Lockheed Martin Corp. is fixing a structural weakness in the Navy version of the F-35 Joint Strike Fighter that limits the jet’s ability to launch from aircraft carriers, according to a company spokesman.

Engineers in July discovered a “strength shortfall” in an aluminum structure in the aircraft’s center fuselage that helps absorb stresses during a catapult takeoff, Lockheed spokesman John Kent said today in an e-mailed statement.

Additionally, it appears that the carrier model may be too hot, literally for carrier decks:

The Pentagon’s Gilmore said in his report that the engine and power-systems’ exhaust on the Navy and Marine versions is powerful enough to pose a threat to carrier personnel. The blasts also may damage shields used to deflect heat on the deck, including on the CVN-21 carrier, the Navy’s most expensive warship.

“Early analyses of findings indicate that integration of the F-35 into the CVN-21 will result in damage to the carrier deck environment and will adversely affect hangar deck operations,” Gilmore wrote.

<snark>Actually, it’s not a worry, since their new electromagnetic catapults don’t work anyway. </snark>

Death Spiral, JSF Edition

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It appears that the UK’s order of JSF’s may be reduced by as much as 50% because of cost and schedule issues:

The Ministry of Defence may be forced to halve its order for the Joint Strike Fighter (JSF) at the next Strategic Defence Review, according to a report in the Guardian.

The UK had ordered 140 of the aircraft for use by the RAF and on the Royal Navy’s proposed new carriers, but the newspaper reports that “a consensus has emerged” that the number of fighters ordered is unsustainable. Delays and cost increases on the JSF programme are said to mean the MoD could be looking to order just 70 of the fighters.

Harrier and Tornado squadrons may also suffer further cuts, the report says, identifying a “huge shift” in spending that is being considered for the Strategic Defence Review following the next general election.

It’s really not surprising.

Given today’s fiscal environment, and the enormous cost of the JSF, it comes down to a choice of between buying the JSF for a military that lacks the resources to do anything with them, or cutting back and allowing the funds to go to things like ground forces.

Oh, For Pete’s Sake!!!!

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Well, I’m listening to Olbermann, and Barack Hoover, or maybe it’s Herbert Obama, I’m not sure which, is suggesting his latest bold initiative: A domestic spending freeze, which means that, with inflation, it’s a domestic spending cut.

So, is actually trying to screw up the economy and get a Republican House, Senate and White House in 2012?

Unemployment is still rising, and he’s so eager to pander to Republicans, who would hate him even if he were white, that he’s determined to play Herbert Hoover, and cut the budget in the middle of a recession.

I’m beginning to think that he’s actually Mitch McConnell’s evil twin.

[on edit]


Original Courtesy of Quentin Tarantino, with typography by mdaisey

This has been confirmed by the Washington Post, and Maddow had White House advisor Jared Bernstein on, he said that they won’t freez/cut everything, just the bad and wasteful stuff ………… During a recession……… With unemployment still climbing ……………

And they are going to be able to separate the wheat from the chaff because it works so f%$#ing well in Congress today.

Seriously, I have to evoke Samuel Jackson from pulp fiction again, because the idea that they will “only” cut the wasteful stuff projects the idea that they are trying to f%$# me like a bitch because they think that I am stupid.

Hell, it’s an insult to the intelligence of Sarah Palin.

A Good Start

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He’ll have to pay a fee.


He won’t

The proposal recently mooted by the Obama Administration, to levy a fee on financial institutions in order to recover TARP funds (see also here) seems like a good start.

But between Mssrs. Summers and Geithner, along with the DINO back-bencher pukes on the House Banking Committee, you can be sure that it will be so full of loopholes that the only banks that might have to pay anything will be the mom-and-pop banks who’ve done all the right thing.

Note also that this makes no mention of recouping the facilities that the Federal Reserve has offered, which have gone largely to the very large banks, and banks that have former Federal Reserve board members working for them.

The problem is that people are either:

  1. Bought and paid for, or
  2. Deluded enough to think that the big bankers are essential to the functioning of the American economy.

What really needs to be done is:

  1. These folks, and the industry needs to be convinced to leave the country.
  2. Predator drones armed with Hellfire missiles are used to take them out like other terrorists.

Now there’s a recruiting slogan for the USAF: Join up and blow up a banker.

Some Sanity in Tax Abatement Russian Roulette

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After years of offering capital improvements and tax abatements to big businesses to lure them to town, some cities are now going after those business for their taxes when the companies do not fulfill their end of the bargain:

Cash-strapped communities have a message for corporations that promised jobs in return for tax breaks: A deal’s a deal.

As the recession drags on, municipalities struggling to fix roads, fund schools and pay bills increasingly are rescinding tax abatements to companies that don’t hire enough workers, lay them off or close up shop. At the same time, they’re sharpening new incentive deals, leaving no doubt what is expected of companies and what will happen if they don’t deliver.

The example they give is a $600K tax bill in DeKalb, Il, when they did not meet the mandated job level (500) in their distribution center.

My suggestion, and it’s one that would involve lots of tax lawyers, is not that the taxes be waived in such a deal, but that the amount of the taxes be a loan, so that when a company violates the terms, you can claw back all the money, plus interest.

Franken Rape Amendment Becomes Law

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The 2010 Defense Authorization Bill was signed into law by Barack Obama about 2 weeks ago, and the bill included Al Franken’s prohibition on defense contractors using binding arbitration to keep things like the rape of their employees by their employees out of court.

Since it’s attached to an appropriations bill, it only runs for a year, so I would suggest a stand alone bill, timed to hit the floor in the June-July time frame to permanently close the loophole.

We’ll see how many ‘Phants want to vote pro-rape a few months prior to elections, particularly given the outrage over the pro-rape Republicans over Franken Amendment in the first place.