Category: Budget

I Don’t Think that the Pentagon Has Enough Bullets

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More on Hank Paulson’s bailing out my peeps program:

The swindle of American taxpayers is proceeding more or less in broad daylight, as the unwitting voters are preoccupied with the national election. Treasury Secretary Hank Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson’s transaction, the taxpayers were taken for a ride–a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public’s money was a straight-out gift to Wall Street, for which taxpayers got nothing in return.

Just lovely.

Can we throw him in jail, hopefully sooner rather than later.

RAND Gets Paid to Support Bloated Defense Budgets

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In looking at the Rand study, I neglected part of the bigger picture, that they are to a large degree paid by the Department of Defense to provide data supporting larger defense budgets.

Thus their study on the F-22 and F-35 showing that China would do them like a drunk sorority sister was part of a policy of pumping up the Chinese threat in order to justify larger budgets:

A new RAND study suggests U.S. air power in the Pacific would be inadequate to thwart a Chinese attack on Taiwan in 2020. The study, entitled “Air Combat Past, Present and Future,” by John Stillion and Scott Perdue, says China’s anti-access arms and strategy could deny the U.S. the “ability to operate efficiently from nearby bases or seas.”

I think that some of the problems, particularly with a defense procurement system that is as dysfunctional as the Bush family, are real, but the intended audience of this is Congressional appropriations committee.

It’s not a call for military reform, it’s a call for more of the same.

Bailout Plan Opinions

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Atrios

Deep Thought

Any member of Congress who looks at the plan to give Hank unchecked power to transfer $700 billion from the Treasury to his friends’ companies and has any reaction other than ‘You’ve got to be f%#@ing kidding me’ does not deserve to hold office.

Krugman opposes the plan, at least in the form presented by Henry Paulson, though he is more receptive to Chris Dodd’s version, which requires equity from the firms rescued for buying their part of the big sh$#pile.

Sebastian Mallaby, who normally favors economics for the benefit of rich folk, hates the Paulson plan too.

Brad DeLong is of a similar mind to Krugman.

In The Nation, William Greider calls the Paulson plan a, “historic swindle.”

Dean Baker, as is his wont, gets into some fairly specific proposals in some depth, which which I agree.

Robert Reich is less specific, but he does add one specific proposal: allowing primary mortgages to be modified by a bankruptcy judge, with which I also agree.

As for me, I will merely note that Henry Paulson holds hundreds of millions of dollars worth of shares on Goldman Sachs, and the idea that he get a blank check to work this is therefore nuts.

Boo Yah!!!!

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I was reading this article about the spate of aerial encounters between Russian bombers and NATO aircraft, and it appears that it gets pilots pumped up on both sides.

Regardless of the political fallout of the situation, pilots on both sides just love this stuff.

In any case, a commenter at this article, after noting that the Russian pilots get only about $800/month, said something very wise:

[R]ather than build JSF or Raptors, why not just take that money, and recruit Russian pilots away? We can move them into foreclosed condo’s down in So Beach, pay them twice what they make, and I think save the American Taxpayer a ton of money.

Very wise.

It’s Official, GSEs Nationalized

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Upper management has been replaced, and Fannie Mae and Freddie Mac are under US government control.

They are calling it a conservatorship, but its nationalization.

Here is the story that everyone is missing though:

At the same time, dividends on both common and preferred shares will be eliminated in an effort to conserve about $2 billion annually. All of the firms’ lobbying and political activities will be halted immediately and charitable activities reviewed.

The GSEs dropping dividends is not surprising, to do otherwise would political suicide, but terminating their lobbying and other political activities changes the environment under which they operate, because it is their lobbying and other political activities that has allowed them to have such a favorable legislative and regulatory regime.

They are done.

The Sad, Twisted Tale NASA’s Ares rockets

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Well, it appears that, much like the shuttle, NASA’s Ares rockets are proving difficult to develop.

Originally intended to rely heavily on existing equipment, largely based on the Shuttle, nothing is going that way:

Beyond the much publicised CLV solid-rocket motor oscillation problem, other issues for Ares I include pocket buckling in its upper-stage liquid hydrogen (LH2) tank, an immature first-stage forward skirt avionics box design, protection for parachutes against the interstage’s shaped linear charge separation system and first-stage thrust vector control (TVC) changes.

I expect this to be both behind schedule and over budget, again.

AAAV on Chopping Block?

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It’s now called the EFV, Expeditionary Fighting Vehicle, but when I worked on it,* it was called the AAAV, the Advanced Amphibious Assault Vehicle.

In any case, this program is yet another long term defense development program that is seriously screwed up.

The Marines just signed a, “$766.8 million cost-plus-incentive-fee contract,” for two prototypes under the, “system development and demonstration-2 phase”, which means that the original SDD did not work out so well.

The program has been delayed IOC in 2015 and full operational capability in 2025, which is a 35 year development track, and while the Senate is moving toward accelerating production, the House is looking at cutting funding.

Every single service has a jewel of acquisition programs, and they are all in trouble, with the EFV for the Marines, the DDG-1000 for the Navy, the FCS-MGV for the Army, and the F-22 (and to a lesser degree the F-35 and tanker) for the USAF.

Our defense procurement system is broken.

*Yes, I have worked everywhere. Maybe I can’t hold down a job, but more likely this has been my role as “technical hit man”, where you are parachuted in to take care of a specific need.

Municipal Bond Rates Skyrocketing

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One consequence of the credit crunch is that even with a Fed Funds rate of 2%, interest rates for everyone are going up.

Nowhere is this more obvious than in municipal bonds, where you also have the collapse of the monoliner insurers making getting a good rating more difficult.

The article gives an example, where the Bay Area Toll Authority refinanced $700 million in bonds at 5.33%, when last year it was 4%.

That’s an additional $9.31 million that they have to carry, and we are seeing this across the country, so new roads and bridges, and needed maintenance on existing infrastructure, are all being deferred.

I don’t see it getting any better for a while.

Because You Can Always Break Promises to the Little People

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So here we have an article where we see hand wringing because European governments are not being aggressive enough in reducing benefits for pensioners.

These generous pension deals were made as part of a very simple equation: The public accepted less generous wages in exchange for the pension benefits.

But now, its inconvenient for countries trying to emulate the US YOYO (You’re On Your Own) model, so they want to ignore their contract.

Shades of the big 2½ automakers, who cut the same deal in the 1960s, and now want to be releases.

It’s going to be expensive, but that was known when these deals were cut in the 1950s and 1960s.