What’s
Wrong Today:

Time Magazine calls the chart below
the scariest
environmental fact in the world. That is hyperbole, but the combination of
China’s dependence on Coal and its lack of renewable water resources must be a nightmare for China’s
central planners.

Coal
Consumption in China:

Coal
consumption in China grew by 325 million
tons, or more than 9% in 2011, continuing its upward trend for the 12th
consecutive year. China’s coal use totaled
87% of the world’s 374 million ton increase in coal use. Of the 2.9
billion tons of global coal demand since 2000, China accounted for 82%.

China now
accounts for 47% of global coal consumption, almost as much as the entire rest
of the world combined. Add the two amounts to get total annual global
consumption:

Robust demand for coal in China is the result of a 200% increase in Chinese
electric power generation since 2000, which is fueled primarily by coal.
China’s coal demand has increased at 9% per year from 2000 to 2010, significantly higher than global growth
excluding China, which averaged only 1%. Platts, the premier provider
of energy-related information, reported that China
imported 289 million tons of coal in 2012, up 57.9% over the prior year.

China is
now burning almost as much coal as the rest of the world combined. And despite support from Beijing for
renewable energy and a dawning understanding about the dangers of air
pollution, coal use in China is poised to continue rising to support its
industrial growth and demand for electric power.

The reason
why coal is so popular in China is that it’s very, very cheap. And that’s why,
despite the danger coal poses to health and the environment, neither China nor
any other developing nation is likely to turn away from it.

Water
Consumption in China

CNN
reports that China contains only 7% of the world’s
potable water but must feed almost 20% of the world’s population.
Meanwhile, its people are living longer and eating more, especially more
water-intensive food,
such as meat and dairy.

Earlier
this year, Greenpeace released
a study implicating
China’s reliance on coal power for its water problems. Despite Greenpeace’s obvious
agenda, the reality is that Beijing plans to build 16 new coal-fired power
stations in four provinces by 2015; which will end up consuming billions more cubic
meters of water.
Shale gas also uses up copious amounts of water, and academics have
warned
that water shortages could hamper China’s shale gas production ambitions.

The
clearest message is that water shortages are a chief constraint on energy and
power. Cooling a coal power plant without water is not easy.

Look at
this chart taken from the IEA report, page 518, figure
17.9:

65% of
China’s water use is for irrigation, and 23% for industry, mostly in coal production/power
generation. Notice how much of China’s coal industry is in areas with water
troubles. You can’t mine the stuff or use it in a power plant without copious
amounts of water. You can’t recover shale gas as an alternative to coal without
water. So while China has the world’s biggest shale gas reserves at 36 trillion
cubic meters, much of it is in the Sichuan Basin, which the chart above shows
has stress or vulnerability to water scarcity.

Non-renewable
aquifers are being depleted throughout China. Under the latest five-year plan,
in north and eastern China, home to Beijing, Tianjin and Shanghai, water use
has outpaced supply, prompting the construction of the South-to-North Water
Diversion Project, which aims to transfer water from the wet south to the dry
north. However, the Guardian says the water along
the project’s path is contaminated by pollution and that it’s barely
usable, even after treatment.

Water may have
to be rationed more severely by price, as will electricity. That will be an
extra cost/tax, a loss of competitive advantage, and a drag on GDP growth.

Water-adjusted
GDP may become a new economic term.

So,
where is this heading?

Combining
the realities of the demographic pressures discussed yesterday and the clearly growing
inability to mine/use its coal resources, China has serious economic problems
just over the horizon that may be difficult to solve.

There are
many moving parts in their plan. They seem committed to continuing their
significant annual GDP growth. And in order to grow:

• They
  need to solve their looming worker shortage

• They
  need to bring more electrical power plants on line

• To
  fuel those plants, they need more coal and more water

• To
  feed their growing urban middle class, they need water to meet the demand for more
  meat and dairy

• They
  must enhance the safety net for the
  world’s largest elderly population which will reach 300 million (the
  size of the US) by 2025

How they
solve all of these simultaneous equations will determine what kind of society
they will become and what level of economic power they wield in the first half
of the 21st Century.

 

What’s
Wrong Today:

During the
dance on the Fiscal Cliff, our friends in Congress used the Fiscal Cliff bill
to provide corporate welfare breaks to their friends. These giveaways reduce money that in another universe would accrue
to the taxpayers. You can read the full text of the cliff bill here.
The individual tax extensions are in Title II while the corporate tax breaks
are in Title III.

Most of
these tax breaks were already in effect; Congress had been working to renew them
all last year. And they are now extended again for another year (or sometimes
two), at a total cost of roughly $63
billion.

Remember that the Fiscal Cliff law hiked
the payroll tax on working Americans by $125 billion, while simultaneously donating
over $60 billion to the Corporados.

Washington
says that we are in an endgame leading to the resolution of our revenue and
spending issues. But here they are, cheerfully working to distort our markets
for years to come by making these sweetheart deals for their buddies.

Review
the laundry list of taxation transgressions:

First, the
New York Times reported on how Amgen, the world’s largest biotechnology
firm, got lawmakers to insert a paragraph into the Fiscal Cliff bill that did
not mention the company by name but strongly favored one of its drugs.

The
language in the law delays Medicare price restraints on a class of drugs that
includes Sensipar, an Amgen pill used by kidney dialysis patients. The
provision gives Amgen an additional two years to sell Sensipar without Medicare
price controls. It is projected to cost Medicare up to $500 million over that
period.

Amgen,
which has 74 lobbyists in the capital, was the only company to
argue aggressively for the delay, according to several Congressional aides of
both parties.

Amgen’s
employees and political action committee have distributed nearly $5 million in
contributions to political candidates and committees since 2007, including $67,750 to Mr. Baucus, the
Finance Committee chairman, and $59,000 to Mr. Hatch, the
committee’s ranking Republican. They gave an additional $73,000 to Mr. McConnell,
some of it at a fund-raising event for him that it helped sponsor in December while the debate
over the fiscal legislation was under way.

More than
$141,000 has also gone from Amgen employees to President Obama’s campaigns.

Here
are nine more
beneficiaries of Corporate Welfare that were rolled into the so-called Taxpayer
Relief Act:

Tax Break
#1: Tax Breaks for Offshore Loans. This provision was first created in
1997. It allows manufacturers and banks to defer taxes when they engage in
special types of financial transactions called “Active financing”. In short, it rewards firms that lend
money to foreign instead of American companies.

It
permits big banks like Morgan Stanley to avoid the 35% corporate tax rate on
interest income from money lent overseas. Multinational companies with
financing arms, such as Ford and General Electric, also benefit from this
exception to lower their tax bills.

This break
now costs $9 billion per year, while critics claim it encourages job creation overseas.

Tax Break
#2: Tax Breaks for Offshoring Patents. The fiscal-cliff deal gives big
tax breaks to American companies that sell their products through overseas
affiliates.

Called
a “pass-through” exemption, this loophole allows American companies to set up a
new corporation in a tax haven, like the Cayman Islands, and to sell that new
offshore company US patents owned by the US-based parent company. Any overseas
royalties on overseas licensing of that patent are no longer subject to US taxes.

Tax Break #3:
Condos for Capitalists. Section 328 of the bill extends tax-exempt financing
for the area around the former World Trade Center for another year. Congress
created the Liberty Bond program in March 2002 with $8 billion in tax-exempt
funds.  This tax break was supposed to
help fund reconstruction after 9/11, but a recent Bloomberg investigation
found the bonds have mostly helped finance new luxury apartments and construction
of Goldman Sachs’ new headquarters.

The
new WTC received almost $3 billion through the Liberty Bond program. Goldman
financed construction of its headquarters at 200 West St. with about $1.5
billion in Liberty Bond financing. Bank of America’s tower across from Bryant Park
was financed with $650 million in Liberty Bonds.

Tax Break #4:
Free Money to Railroads. Section 306 of the fiscal-cliff bill gives a
tax credit to railroad companies to provide maintenance on their own lines.

This
credit costs about $331 million over the next two years.

Tax Break
#5: Hooray for Hollywood. The bill renews “special expensing rules for
certain film and television” productions.

This
credit costs $430 million over the next two years.

Tax Break
#6: Tax Breaks for Hedge funds and Private Equity. The mainstream media
has criticized the favorable tax treatment, called “carried interest” that hedge
fund and PE individuals enjoyed on their profits. They continue to be taxed
relatively lightly in the new fiscal cliff legislation.

The
profits from investing other people’s money, known as carried interest, will
continue to be taxed as long-term capital gains for hedge fund and
private-equity managers, not ordinary income as it would be for you.

Tax Break
#7: Wind Power. There is a big tax credit in the bill for the wind power
industry.

The
fiscal-cliff deal gives wind producers a 2.2-cent tax credit for every kilowatt
hour they generate in their first 10 years of operation. This credit is worth about $1 million for every large wind turbine.

Tax Break
#8: Rum Tax break. Congress approved an extension of a long-standing rum subsidy that dates back to 1917.

This
gives $222 million to
Puerto Rico and the US Virgin Islands that is passed on to their
rum
distillers

Tax Break
#9 NASCAR’s racetrack owners. The NASCAR loophole, in place since 2004,
allows anyone who builds a racetrack to receive a small tax benefit through
accelerated depreciation. It was extended for another year.

This
tax break cost roughly $43 million for the past two years.

These are a few of the very long list of tax
breaks for our corporate welfare queens.

You can
review the entire list here along with the Congressional
Joint Committee on Taxation’s report on each element of the Law.

Is this
a scandal or just business as usual?

Government
works this way: There are competing issues and constituencies and lawmakers horse-trade
to get what they want. That means you also get some of what you don’t want. Corporate lobbyists capture individual
politicians with cash and other non-financial support.

Then politicians
fight like hell to give the corporations what they want.  

Politicians
accept that bad will come with the good. The problem is how they define “the
good”. There is nothing wrong with most of these projects. Who isn’t for fixing
railroad lines? Or for drinking rum?

But why should
it be with taxpayer money?

Corporate
Welfare is a cancer on our economy; we must enforce zero tolerance for corporate
loopholes in the next round of tax reform.

Even if
that means higher prices at retail or fewer jobs.

Cartoon? Check.

Villains?
Check.

Threatening
to destroy America? Check.

From Daily
Kos:

It is often said that
demographics is destiny. One emerging demographic trend is that a growing
number of Americans are choosing to
remain single.

It turns out that this trend had a huge impact in the
2012 Presidential election. According to Hanna
Rosin at Slate, the most
significant division within the electorate happened around marriage:  As shown in this Washington Post interactive report about
2012 exit polls, (in the section labeled sex
by marital status), non married men and women were solidly for Mr. Obama
while married men and women were solidly for Mr. Romney.

Here are the numbers:

Singleness, the temporary or permanent postponement of marriage and parenting,
are factors that shrink the birth rate. Surprisingly, they are also the very best predictor of a person’s politics in the US, better
than income and education levels, so
says Ron Lesthaeghe, a Belgian demographer at University of Michigan. He
finds that larger family size correlates
with early marriage and childbirth, lower women’s employment, and
opposition to gay rights, all social factors that lead voters towards
conservative candidates. 

The
2011 US birth rate is at a record low. The marriage rate is tumbling and the
number of single Americans is now at a record high. The convergence of these
trends could have far-reaching implications not only for our politics but also
for the economy:  

• Singles
  account for 111 million eligible voters

• Overall, 40%
  of the people who voted in 2012 were single

• They
  are a part of the population have not been well studied demographically. We
  know how many men and women will be eligible to vote in 2030, but there is nothing to predict the number
  of singles we’ll have

A Nation of Singles – Implications
For the Future

The
Weekly Standard sponsored a post-election
demographic study. The ranks of unmarried women and men are now at historic
highs and continue to increase. This marriage gap and its implications for our
political and economic future are not well understood.  Here are some facts from that study:

• Between
  1910 and 1970, the percentage of people who marry at some point in their lives,
  was never below 92.8%. Beginning in 1970, that number began a
  gradual decline so that by 2000 it stood at only 88.6%. Today, 24% of men and 19% of women between the ages of 35 and 44 have
  never been married

• For
  people between 20 and 34, the prime-childbearing years, the numbers are 67% of
  men and 57% of women in this group have never been married

Geographically,
this group tends to live in cities. As urban density increases, marriage rates
(and childbearing rates) fall in nearly a straight line.

Of the 111 million eligible single
voters,
53 million are women and 58 million are men. Only 5.7 million of these women
are Hispanic and 9.7 million are African American. Nearly three-quarters of all
single women are white.

Returning
to the 2012 election results, Mr. Obama was +16% with single men and +36% with
single women. But the real news was
that their share of the total vote increased by a whopping 6 percentage points over 2008.

That
6 percentage point increase meant 7.6 million more single
voters than in 2008. They provided Obama with a margin of 2.9 million votes,
about two-thirds of his margin of victory. To put this in some perspective, the
wave of Hispanic voters we’ve heard so much about increased its share of the
total vote from 2008 to 2012 by only a single point to roughly 12.5 million
voters. 

Are
we creating a permanent class of singles?

We know
that women are increasingly are graduating from college and joining the
workforce, and postponing marriage. From
2000 to 2010, the number of unmarried women increased 18%, according to
census data.

In 1960, the average American woman married
at age 20. Now it’s 27. That is partly the cause of a boom in solo living, with nearly one-third of all US households
comprised of single people living alone, according to Eric Klinenberg, an
NYU sociologist and author of Going
Solo:The Extraordinary Rise and Surprising Appeal of Living Alone. In 1950,
it was 9%.

Single
men are largely younger than single women, who are more evenly spread across
all age groups. They are also more likely to be unemployed than are single
women.

What are the economic implications
of a larger and permanent singles class?

Currently,
singles make up 49% of the American population, and 28% of all households
consist of one person, the highest levels of singledom in American history.

Perhaps more
important, singletons are fueling the economy. The BLS estimates that consumption
by singles in the US contributes $1.9 trillion to the economy each year.

They spend
more discretionary dollars than their married counterparts. Their average per
capita annual expenditure was $34,471 in 2010, according to the federal
Consumer Expenditure survey, compared with $28,017 for married individuals
without kids and $23,179 per person in the highest-spending families with
children.

Singles
buy one-third of the homes in the US today. Unmarried men and women account for
10% and 21% of all buyers, respectively, according to the National Association
of Realtors.

But it isn’t
all wonderful to be a single person in America. A survey from Generation
Opportunity, a nonprofit dedicated to engaging young adults on economic
issues, shows that college graduates and 20-somethings are delaying important
life decisions like marriage and having children.

The post-great recession economy has brought a challenging job market, lower
earnings, and a greater chance of moving back home with parents for many recent
college graduates. As a result, many are consciously pushing off milestones
like marriage and family.

Generation
Opportunity executive vice president Amber Roseboom said in a statement that
young women’s “careers and dreams have been interrupted”.

So,
What’s Right, and What’s Wrong?

We
will see fewer children, smaller homes and apartments, fewer mini-vans, fewer
schools, fewer obstetricians, fewer toy manufacturers, fewer big box stores,
fewer Republicans.

And
more savings, more investing, more vacations, more self-actualization services,
more clothing manufacturers, more Democrats elected.

More soon about the other side of the
coin: Falling birthrates
and what they mean for our economy.

 

What’s
Wrong Today:

In his
twisted way, Supreme Court Associate Justice Antonin Scalia once again
pronounces on morals for your use:

At
a Princeton University seminar on Monday, the conservative justice compared homosexuality to
murder when asked by a gay student about a 2003 opinion in which Scalia
compared homosexuality to bestiality and incest.

The question
came less than a week after the Supreme Court announced it would hear two cases
regarding the legality of same-sex marriage, one regarding the Defense of
Marriage Act and the other regarding California’s Proposition 8. Scalia opines:

In
Scalia’s view, the government has the right to base laws on moral objections,
even if he did acknowledge that murder and gay sex are “moral crimes”
of a different magnitude. Despite the fact that gay sex is legal to partake in and to document on websites such as fucked gay in the same way that heterosexual intercourse is, many people such as Scalia are still archaic enough to consider it a moral crime.

It
is a view that he put forth in his dissent to the 2003 case Lawrence v. Texas, in
which the Supreme Court for the first time outlawed state anti-sodomy laws. He warned
that the majority’s “homosexual
agenda”
could invalidate a whole host of laws based on moral traditions:

It’s
hard to believe that less than 10 years ago a gay man could literally go to
jail for having sex, and Scalia’s
dissent has aged about as well as one might expect.

In
defending anti-sodomy laws, which he viewed to be a legitimate expression of
the popular will, he also wrote:

The Los
Angeles Times provides more
quotes,
including this:

Bless his heart.

Justice Scalia says he can equate homosexuality with murder on a moral
basis.

Message to Mr. Justice Scalia: Murder kills people. Gay marriage doesn’t
harm anyone. False equivalency doesn’t
make your case. It’s
obvious that using murder as X and homosexuality as Y is a reckless comparison.
While some feel homosexuality is not OK and those that do enjoy expressing their homosexuality and are ok with it sometimes go to websites similar to www.twinki.xxx, no reasonable individual believes it’s
OK to murder innocent individuals.

No surprise,
Scalia lets his fiercely held moral positions drive his logic.

So, why not just take this to its “logical” conclusion: He can insist
that homosexuals wear pink triangles so they can be better identified and for
their safety, they should be placed in protective custody.

But since they are no better than murderers, they should be disposed of
in as humane a way as possible, in order to protect the rest of us.

As a legal
originalist, Scalia spends a lot of time looking back to
American court cases and what the framers of the Constitution meant in order to
defend his legal positions. Maybe this should lead him to analyze German court
decisions from, say, 1933 to 1945. Or,
study the Nuremberg trials.

Justice
Scalia should recuse himself from hearing or ruling on ANY case concerning
same-sex marriage or anything having to do with civil rights for gay and
lesbian Americans.

Why?

His
moral code isn’t our legal foundation. Is it professional for a Supreme to go
around announcing in public venues his beliefs about the foundations of cases
he hasn’t even seen or heard yet?

Shut. Up.

As the
Wrongologist wrote after the
election, Mr. Obama’s election victory was the result of micro-targeting of undecideds and persuadable voters in the swing
states and then turning them out on election day.

The Obama
campaign used ‘microlistening” to make every vote
count. They parsed voters’ concerns in fine detail. These data were then
consolidated in the campaign’s Dreamcatcher database.

Then the data
was loaded into another campaign program, Narwhal, so that every fact gathered about a voter
was available to every arm of the campaign. This information-sharing
allowed the Obama For America (OFA) ground game to turn out people whom data-mining
had pinpointed as likely to be friendly to Mr. Obama’s views.

The election is
over, but Narwhal is alive and well, using the data and concepts developed in the campaign
to learn more about peoples’ opinions about
the Obama administration’s positions on the Fiscal Cliff negotiations and call
them to action.

So,
What’s Wrong?

They
should use Narwhal for two other purposes: First, to win a majority in the US
House of Representatives in 2014. Second, to make a conclusive case for
Obamacare.

Let’s start with the 2014
election: Mr. Obama’s legacy would be burnished by passing the remainder
of his legislative agenda, but that will require control of both houses of Congress.
Deploying Narwhal successfully could
be the key to doing that. This means a pick-up of 25 seats compared to
2012. Steve Israel,
head of Democratic Congressional Campaign Committee, will need Narwhal’s help to
pull that 25-seat rabbit out of the congressional hat.

But, as Politico
reports, history
is against Democrats getting a majority in the House in 2014. The party controlling the White
House during a president’s sixth year in office has lost seats in every midterm
election but one since 1918. The average loss in those elections was 30
seats.

Party
leaders say they are focusing on around 50 Republican seats in 2014,
particularly those in areas where Obama performed strongly in his two
elections. Israel has identified the four most vulnerable as Ohio Rep.-elect
David Joyce, Illinois Rep.-elect Rodney Davis, Florida Rep. Bill Young and
California Rep. Gary Miller. That
leaves 21 more for the Democrats to find.

Also according to Politico, there were 14 Democrats and 12
Republicans that won by razor-thin margins in 2012. The Wrongologist is only counting those
who won by less than 4.4% of the total vote. Given that most Congressional
Districts are relatively small; this translates into less than 3000 votes in
most cases. It is also very important for
Democrats to hold on to the 14 seats they won by 3000 votes or less, or
the job is much more daunting.

So, Narwhal for 2014!

Selling
Obamacare: Mr. Obama did not fare
particularly well with white working class voters, but they are going to be among the prime beneficiaries of Obamacare.
Recent polling shows the potential for tremendous gains for Democrats among
segments of the electorate who seem generally unaware of the value they stand to receive through Obamacare:

“78% of the uninsured
Americans who are likely to qualify for [medical insurance] subsidies were
unfamiliar with the new coverage options in a survey by Democratic polling firm
Lake Research Partners. That survey, [sponsored by the nonprofit Enroll America]
also found that 83% of those likely to qualify for the expansion of Medicaid,
which is expected to cover 12 million Americans, were unaware of the option.”

(Emphasis by the Wrongologist)

People know
about the Mandate in the ACA, which requires that people get health insurance. But people have no clue about how Obamacare makes health care insurance
affordable.

Enroll America, a nonpartisan 501(c)(3) organization
whose mission is to ensure that all Americans are enrolled in and retain health
coverage, ran
focus groups in Philadelphia in
mid-November, working exclusively with those who would probably qualify for
benefits. Looking to understand how
much public education will be needed, the researchers came back with a simple answer: a lot.

When asked about whether
they had heard about any ACA provisions that might make insurance more
affordable, not one of the 31 participants in the four groups answered yes.

It isn’t likely that people
in West Virginia or Arkansas are any more informed. Once they learn
the details, it may turn out that they
will like Obamacare despite hating the Mandate and/or the President.

Boone County, WV is 98.5% white and
22% of its residents live in poverty. The median household income in the county
is $25,669. In 2012, the Federal Poverty Level (FPL) is set
at $11,170 for a one-person household and rises by $3,960 for each additional
family member. So, the FPL for a
four-person family in 2012 is $23,050.  

It is
likely that that many families in Boone County are going to eligible for health
care subsidies in the highest range. Obamacare rules state that people and families earning up to 133% of
FPL will have to pay only 2% of their income toward the health insurance
premium.

This means that a family
of four who makes the median income of $25,669 will only have to pay 2% of their income ($513/annually) toward a $10,000 health insurance plan.  

While
Mr. Obama only received 33% of the vote in Boone County, the next Democratic presidential
candidate may have a great shot at
improving that number. This may
be true in white, rural counties all over America.

If a
poor family of four living in Appalachia can receive $9,500 a year to make sure they all have health insurance,
you have effectively
counter-programmed the pap they see on Fox News.

Narwhal could be a key to the
Democrat’s future in poor white America if it can solve this awareness problem. This challenge is in Narwhal’s
wheelhouse: You need people to enroll in Obamacare; they don’t know how or
don’t understand why they should enroll. You
locate them, contact them, figure out their motivation, explain to them, and
then they go and do it. 

That’s Narwhal. Narwhal got millions of folks to vote. Surely it
can be used to get millions of people who need health coverage to accept (mostly)
free health insurance.

At this moment when we are
desperately searching for a way to get things done in Congress, it is a necessity that Narwhal
is funded by Democrats.

We have over 23.7
million veterans in our nation. Of these, nearly 6 million use Department of
Veterans Affairs (VA) healthcare, over 3 million receive disability
compensation, and 800,000 utilize VA education benefits. Sadly, some 60,000 veterans are homeless and 900,000 are unemployed. Some find that using someone like these SC VA disability lawyers might be a good way to help them get compensation to help with any financial due to their inability to work.

On Friday,
the Bureau of Labor Statistics released Veteran unemployment data
for the month of October. The unemployment rate for all Veterans was 6.3 %,
below the national average of 7.9 %.  This is a turnaround from a year
ago.

While the
rates are headed in the right direction, there is more to do. Check out the
charts below:

Here is the
monthly unemployment rate for all Veterans since January 2010.  The trend
over nearly three years is clearly downward.

Iraq and
Afghanistan-era Veterans, (called Gulf
War II-era Veterans), are having a more difficult time: Their monthly
unemployment rate moved to 10 percent in October. However, the chart below
demonstrates the declining unemployment rate over time. 

While
the trend line is positive, the wind down of our Iraq and Afghanistan conflicts
causes a surge of men and women returning from overseas. They face a fiercely competitive job market, with about 3.4 unemployed
persons for each open position in the US.

Let’s work hard on just a few points:

• Give
  any company who hires and
  retains for a period of one year, an unemployed veteran (or any long-term
  unemployed American for that matter), a tax credit equal to 50% of the 1st
  year salary plus FICA

• Give free resume writing and interview
  training
  to these same two groups at our local community colleges

• Get
  the F1000 to offer 50 one year internships each to unemployed veterans. Give the
  company the 100% of the salary plus FICA for each intern. This might be the best use of $1.25 billion when we start to
  prioritize government expenses at the edge of the fiscal cliff

We
know that veterans have much to offer an employer: leadership, organizational
skills, specific technical skills, and commitment.

In
joining our military, these men and women received promises that we would care
for their needs.

Corporate
America should stand up and be counted: A job should be among the benefits veterans
have earned on the frontiers of freedom and on the battlefield.

What’s
Wrong Today:

The Wall
Street Journal published a letter signed by 80 CEOs, calling it a “Deficit Manifesto”, last Thursday.

The
letter, designed to pressure Congress to reduce the federal deficit, says in
part:

“Policy makers
should acknowledge that our growing debt is a serious threat to the economic
well-being and security of the United States. It is urgent and essential
that we put in place a plan to fix America’s debt. An effective plan must
stabilize the debt as a share of the economy, and put it on a downward path.”

(Emphasis by the
Wrongologist)

So,
What’s Wrong?

Who are these guys?
They are members of the “Fix
the Debt ”
coalition, who claim they know best
how to deal with our nation’s fiscal challenges. The group boasts a $60
million budget
just for the initial phase of a massive media and lobbying campaign to make sure
congress implements their view of the “correct” solution.

The Fix the Debt
coalition is using the over-reported
“fiscal cliff” as an opportunity to push their usual corporate agenda of more
tax breaks. If America’s CEOs really wanted to Fix the Debt, they would first commit to eliminating the loopholes
that have allowed large corporations to limit their taxes.

The irony is that these
coalition CEOs have been among the major contributors to the very national debt they now claim to know
how to fix. Their companies have
mastered every tax-dodging trick in the book. Who wrote America’s byzantine and crazy-quilt
tax code? Was it lefties calling for special rules for their pet political
causes? No, it was the large corporate
lawyers and lobbyists bribing the congress critters over many years.

Fix the Debt claims their agenda is not just about spending
cuts. But includes tax
reform as well: Their tax proposals use the slippery term “pro-growth reform”
to push for cuts in deductions that are likely to include credits for working
families and you guessed it, more corporate
tax breaks. Chief among these is a proposal to switch to a territorial
system under
which foreign sourced corporate earnings would
be permanently exempted (instead of being taxed when they are returned
to America).

This idea, also supported by the Bowles-Simpson
deficit commission that the Manifesto CEOs suggest as the starting
point, would make it even more
profitable for big corporations to use accounting tricks to disguise
U.S. profits as income earned in tax havens. Citizens for Tax Justice estimates that such tax haven abuse will cost the Treasury more than $1
trillion over the next decade.

All of their
plans to cut the Debt by lowering taxes for corporations and the rich to create
growth sounds like the quest for a perpetual
motion machine.

Money is
cheaper now than it has been in living memory: the debt markets are telling corporate America that they are more
than willing to fund investments at unbelievably low rates.

And yet
these CEOs continue to say “no thanks”, despite
the fact that the IRS
reports that US corporations held more than $3.1 TRILLION in offshore accounts
in 2009, the last year for which the IRS has final records.

This is a serious threat to the economic
well-being of the United States: US companies refusing to invest for the future, even when the markets (and
their country) are begging them to.

It is even worse than this: It isn’t just
that corporations aren’t investing now; they weren’t investing in the last
expansion. The corporate sector in aggregate
is disinvesting: Here is a chart from the St. Louis Federal Reserve showing Gross Private
Domestic Investment:

This
indicates that private investment has
been declining since the start of FY 2005. As you will remember, Mr.
Bush, a former CEO, was president then.

So, these Manifesto
CEOs are criticizing the size of the Federal debt, saying it stalls growth. Yet, if it wasn’t for the Federal
deficit, the economy would be a disaster. The Federal government is easing some
of that pain right now.

And this is what the Manifesto CEO dudes
are trying to derail, without any increased investment on their part.

And these big companies are the biggest
sinners.
Know why Mr. Obama and Mr. Romney fawn over small businesses? If you include all
less-than-500 employee firms as “small”, they have been the drivers of job
growth for the last decade, while the
biggest companies have shed workers.

In fact, since the 1980s, medium sized and smaller
companies have gained in share of assets, employment, and revenues
relative to the biggest companies.  

So big companies, like those in the Fix The
Debt coalition, have lost share relative to the rest of the corporate sector, yet they have the
temerity to preach to the rest of us as
if they speak from genuine accomplishment, as opposed to having been
lucky or politically savvy enough to assume the leadership of companies with
well established franchises.

Despite
whomever is elected next week, the economy remains mired in anemic growth and even
worse job growth. And Mr. Bernanke’s expansionary
monetary policy isn’t getting the job done. The problem is that the Republicans
have not allowed fiscal policy to be used by Mr. Obama

The really
huge, important and urgent issue facing the US right now is the problem of
unemployment, and specifically of long-term unemployment. That will only be fixed by
increased demand.

Cutting spending will further reduce demand and that is what will drive
the economy off of a cliff.
We have ample historical evidence to demonstrate that.

Ordinary
Americans have been sold on the false idea that deficit cuts are necessary and
salutary and this CEO “Manifesto” is more of the same.

Both the
global economy and the US economy are very fragile right now, and every central banker in the world is
begging for help from fiscal policymakers. That means higher deficits,
not lower ones.

The problem is that Pete Peterson and the
Fix The Debt cabal have been much more effective at corralling CEOs than Mr.
Obama or Mr. Bernanke are.

It is past time to get our priorities
adjudicated and a true fix underway.

What’s
Wrong Today:

The top
American commander of troops in Afghanistan showed signs of impatience about
the growing number of insider attacks, called green-on-blue, that have taken a
toll on U.S. troops this year. During
an interview on “60 Minutes” Sunday night, Gen. John Allen said:

“I’m mad as hell
about them [green-on-blue attacks], to be honest with you…We’re going to get
after this. It reverberates everywhere, across the United States. You know,
we’re willing to sacrifice a lot for this campaign. But we’re not willing to be
murdered for it.”

President Barack
Obama’s plan for withdrawal from Afghanistan calls for the US to train Afghan
security forces to defend their own country as most of the remaining 68,000
U.S. troops will return home in 2014.

Allen, who
said that the “vast majority” of Afghans and Afghan soldiers stood
with the US, warned that Americans should be prepared to see the deadly attacks
continue:

“The enemy
recognizes this is a vulnerability…You know, in Iraq, the signature weapon
system that we hadn’t seen before was the IED. We had to adjust to that. Here,
I think the signature attack that we’re beginning to see is going to be the
insider attack.”

The Wrongologist reported on
green-on-blue attacks in March, 2012 here, quoting Dr. Jeffery Bordin, a PhD working for the military.
Bordin reported on the reasons for green-on-blue attacks in “A Crisis of Trust and Cultural
Incompatibility”. He characterized the shootings of Americans by Afghan
troops as “a severe and rapidly metastasizing malignancy.”

Surprise! Here we are 6 months later,
questioning the plan.

So,
What’s Wrong?

It’s our
strategy that’s wrong.

Our original mission was to kill bin
Laden, to destroy al Qaeda and to remove the Taliban government that had
sheltered them. Our original strategy
was to use Special Forces to achieve those ends and we accomplished two out of three with special operations forces within
weeks, and again using Special Forces, bin Laden in 2011.

Advantage: USA.

Then, we
changed our strategy. We decided to hold territory. Our Generals said:
If we can’t hold territory, we can’t win the war in Afghanistan. That strategy had
failed by 2009. Advantage: Taliban.

Third, our strategy morphed to: We
need to suppress the Taliban and buy time so that they negotiate with us (and Karzai). We settled on combining a surge with implementing Gen.
Petraeus’ counter-insurgency strategy, (COIN). COIN means we root out
the Taliban while winning the hearts and minds of the Afghans. The COIN
doctrine invokes the imagery of an “ink blot”: Operations begin in a
small area then spread out to adjacent villages and districts, winning people
over and detaching them from the insurgents.

There was never much reason to
believe that COIN would succeed. See the Wrongologist’s prior posts, here, here, and here. But the military situation in Afghanistan
looked sufficiently dire in 2009 that a bipartisan consensus of Washington
policymakers believed that a surge was necessary. So, Gens. Petraeus and McChrystal said we should add
troops (surge), because it worked in Iraq. After intramurals about how many
troops to employ in the surge, Obama settled on 30,000, below the 40,000
McChrystal said he needed.

We have now withdrawn the surge troops. But the suppressive force provided by the surge did not even
tamp down insurgent activity to levels seen in 2009, much less defuse the
situation, or enable COIN. Here are some statistics:

• In
  August 2009, at the height of the Obama administration’s debate over a troop
  surge, insurgents attacked US troops using small-arms fire, homemade bombs, and
  mortars, approximately 2,700 times.
  In August 2012, they attacked just shy of 3,000
  times.

•  In
  August 2009, insurgents used just
  under 600 IED’s on NATO forces. They used just over 600 IED’s NATO forces in August 2012.

And there’s another number to consider: Its 988; the
number of US troops killed in action in Afghanistan or who died since the troop
surge. The Taliban is
not battered, they didn’t agree to negotiate and now, the New York Times reports that the negotiating effort is over.

At best, the Surge strategy was a
draw with the Taliban.

Our final strategy is to train the Afghans
to do it for us.
That allows us to declare victory and head for the exits. Preparing the
Afghan Army and police to fight without us is
the foundation of the Obama Administration’s 2010 strategy to withdraw most
American forces by the end of 2014.

What
happens if we can’t train the Afghans? We’re
about to find out, since two weeks ago, we decided to suspend joint
combat patrols because of the growing green-on-blue attacks. So far this year, more than fifty American and NATO
soldiers have been killed by Afghan soldiers or recruits: actually, its 56 (16+%) of the 340 who have died this
year.

Advantage Taliban.

As Dexter Filkins
wrote in The Atlantic:

“When I was in
Afghanistan in April and May [2012], it was clear that the entire thrust of the
American-led mission was to train Afghan forces as quickly as possible, so that
we could stay on our departure schedule. The principal means to that end, I was
told repeatedly by senior commanders, was carrying out operations together. (I
heard the phrase “shoulder to shoulder” so often I started repeating it in my
sleep.) The reason for this was simple: Afghan soldiers typically perform much
better when American soldiers are with them. The Afghans fight better, feel
better, and abuse each other, and Afghan civilians, less.”

The Washington Post is now reporting
that joint operations
with the Afghans have now resumed, although
not at the same level as before. Gen. Martin E. Dempsey, chairman of
the Joint Chiefs of Staff, made an unannounced trip to Afghanistan over the
weekend to meet with Gen. John R. Allen, the top U.S. and NATO commander, and
other officials. Dempsey said he wanted to:

“get a sense for whether our campaign
objectives were still valid, whether our campaign plan was still on track…The
Taliban is clearly trying to split us apart, but it won’t work…They’re working
to weaken the coalition, and that won’t work either.”

It is difficult to
overstate just how easily the Taliban have blunted our latest strategy.
Afghans (civilian and
insurgent alike) may be uneducated by our standards, but clearly, they’re not
stupid.

Our strategy? We decided
to hold territory, we started nation-building, we COIN’ed, we surged. The
Taliban strategy? Keep up their hit and run operations.

Here
is Obama’s (and our) dilemma: We have been in Afghanistan for eleven
years. We can’t remain much longer because we’ve overstayed our welcome, even
among our friends. But, if we leave, it means a Taliban takeover.

And
now, we can’t train the local troops to take over for us.

Time for a new strategy: We should leave,
but our leaders are afraid of the “They lost Afghanistan” narrative: We need
some sort of Graceful War Zone Exit
to make OUR LEADERS (not us) feel leaving is acceptable.

Here is the Wrongologist’s take: Our military has achieved
all of the tangible goals that can be expected of them in Afghanistan. The
thing no one in government can articulate for us is the real benefit to the US
of a peaceful Afghanistan: The argument
that Afghanistan is a base for terrorist activities is ridiculous,
since the terrorists exist in Yemen, Libya, Sudan, Somalia, or, even Pakistan,
where bin Laden lived for so many years.

Our
strategy is now self-defeating. We are locked into a situation where we are
committed to supporting the Karzai government, when our only true strategic interest is that we not be attacked
from there. Our national interest has absolutely nothing to do with
whatever regime rules Afghanistan and were it to be convulsed with civil war
and internecine bloodshed, it will not materially affect us.

We should withdraw from Afghanistan
and let Mr. Karzai see if he can govern without us. We should make it clear
that, while we cannot impose a government, our drones and cruise missiles can
make darned sure no Taliban regime will ever govern effectively.

This
is a strategy we can execute.

Don’t agree? Read what a 20-year old Afghan
soldier told The New York Times last
Wednesday:

“We
would have killed many of [the U.S. troops] already, but our commanders are
cowards and don’t let us.”

Game over! Time to go
home!

Part 1: Background and Accomplishments

Background:

Near the
end of President Bush’s term In December of 2008, the country’s economy was in
free fall. He was serving out the last days of a presidency weakened by his
failures to close the deal in Iraq and Afghanistan and out of the loop
domestically since all the important economic decisions were being made by
Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke.

On
January 9th, 2009, 11 days before President Obama’s inauguration, the Wall Street Journal reported that 524,000 jobs had been lost in December.

   It is instructive
to remember where the country was:

•   1.9 million jobs were lost in
the last four months of 2008.

•   For the entire year 2008, 2.6
million jobs had been lost.

•   The financial services sector
was in free fall.

•   Two thirds of the auto industry
  was bankrupt. The Dow   Jones Industrial average
  had fallen from the 14,000’s in October 2007 to the 8,000’s in December. By
  March, the Dow would be in the 6000’s, lower than at any time since 2000.

•   Iraq and Afghanistan were
draining the nation’s resources and its patience.

•   Foreclosures were at an all time high and
the wealth of the middle class was declining at a devastating pace.

What are Obama’s
Achievements? 

1. Stabilizing
the Economy: Signed the $787 billion Stimulus
Act in 2009 to spur economic growth amid the worst economic conditions since
the Great Depression. Twelve months later, the
private sector began producing more jobs than it was losing, and it has
continued to do so for twenty-three straight months, creating a total of nearly
4.5 million new private-sector jobs, of the 8.7 million jobs lost since
September 2008.

GDP grew from 0.4% in March 2011 to 3.0% in Q4 of that
year. It has fallen to 2.2% in Q1 and 1.7% in Q2 of this year. Given that the
global economy is trending downward and that the historical average for GDP is
3.8%, we are in a fragile, slow growth recovery.

2. Passed Health Care Reform: Signed the Affordable Care Act in 2010 after five
presidents tried and failed to create universal health insurance. It will cover
32 million uninsured Americans beginning in 2014 and mandates a suite of
experimental measures to cut health care cost growth, the number one cause of
America’s long-term fiscal problems.

3. Turned around U.S. Auto Industry: Injected $62 billion in federal money (on top of $13.4
billion in loans from the Bush administration) into ailing GM and Chrysler in
return for equity stakes and agreements for massive restructuring. Since
bottoming out in 2009, the auto industry has added more than 100,000 jobs. In
2011, the Big Three automakers all gained market share for the first time in
two decades. The government expects to lose $16 billion of its investment, less
if the price of the GM stock it still owns increases.

4. Passed Wall Street Reform: Signed
the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) to
re-regulate the financial sector after its practices caused the Great
Recession. The new law tightens capital requirements on large banks and other
financial institutions, requires derivatives to be sold on clearinghouses and
exchanges, mandates that large banks provide “living wills” to avoid chaotic
bankruptcies, limits their ability to trade with customers’ money for their own
profit, and creates the Consumer Financial Protection Bureau to crack down on
abusive lending products and companies.

5. Set and kept to timetables for bringing
our troops home from Iraq and Afghanistan;

·   Ended the War in Iraq: Ordered all U.S. military forces out of the country.
Last troops left on December 18,
2011.

·   Began Draw-down of War in Afghanistan: From a peak of 101,000 troops in June 2011, U.S.
forces are now down to about 68,000. According to Secretary of Defense Leon
Panetta, the combat mission there will end in 2013, although troops may remain
until 2014.

6. Eliminated Osama Bin Laden: Ordered
Special Forces in 2011 to raid the compound in Abbotabad, Pakistan, in which
the terrorist leader was killed and a trove of al-Qaeda documents were
discovered.

7. Began Asia “Pivot”: Announced new
American military and diplomatic priorities in 2011, shifting prime focus from
the Middle East and Europe to the Asian-Pacific region.

8. Increased Support for Veterans: Increased
the 2010 Department of Veterans Affairs budget by 16% and 2011 budget by
10% to help the many soldiers coming home from Iraq and Afghanistan with
serious physical and mental health problems who faced long waits for services.
Also signed new GI bill offering $78 billion in tuition assistance over a
decade, and provided multiple tax credits to encourage businesses to hire
veterans.

9. Protected Two Liberal Seats on the U.S.
Supreme Court: Nominated and obtained confirmation for Sonia Sotomayor,
the first Hispanic and third woman to serve, in 2009; and Elena Kagan, the
fourth woman to serve, in 2010. They replaced David Souter and John Paul
Stevens, respectively.

10.Negotiated
New START Treaty: Signed with Russia (2010) and won ratification in
Congress (2011) of a treaty that limits each country to 1,550 strategic
warheads (down from 2,200) and 700 launchers (down from more than 1,400), and
reestablished and strengthened a monitoring and transparency program that had
lapsed in 2009, through which each country monitors the other.

11.Repealed
“Don’t Ask, Don’t Tell”: Ended 1990s-era restriction and formalized new
policy allowing gays and lesbians to serve openly in the military for the first
time.

12.Brokered
Agreement for Compensation to Victims of Gulf Oil Spill: Used moral
authority of the presidency to convince BP to agree in 2010 to a $20 billion
fund to compensate victims of the Deepwater Horizon oil spill in the Gulf of
Mexico; $6.5 billion has been already paid out without lawsuits. By comparison,
it took nearly two decades for plaintiffs in the Exxon Valdez Alaska oil spill
case to receive $1.3 billion.

13.Kicked
Banks Out of Federal Student Loan Program: Signed, as part of the 2010
health care reform bill, a measure ending the wasteful decades-old practice of
subsidizing banks to provide college loans. Starting July 2010 students are getting
their federal student loans directly from the federal government. Treasury will
save $67 billion over ten years, $36 billion of which will go to expanding Pell
Grants to lower-income students.

14.Expanded
Health Coverage for Children: Signed 2009 Children’s Health Insurance
Authorization Act, which allows the Children’s Health Insurance Program (CHIP)
to cover health care for 4 million more children, paid for by a tax increase on
tobacco products.

Barack Obama has accomplished enough in his first term (stabilizing
the economy, health care reform, turning around Detroit, Bin Laden) to be considered
an effective president.

But most
Americans don’t see him that way and might not even be inclined to give him a
second term.

In the next column, The Wrongologist will analyze the
reasons why Obama is not viewed as an
effective leader.

He will also
make a Presidential recommendation for your consideration.