Tag Archives: national debt

U.S. Debt Now Exceeds $23 Trillion – Bomb or Overblown?

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Visit the Clock Live at:  Official U.S. Nation Debt

“GEOPOLITICAL MONITOR”

“This report from the Congressional Budget Office (CBO) is enough to curdle the blood of any fiscal conservative.

The country’s darkening fiscal outlook is sure to resonate in future elections in the United States, but there’s a crucial international dimension here as well.”


Source: Congressional Budget Office (CBO), public domain

“According to the report, US federal debt held by the public relative to GDP currently stands at 78 percent (debt issued in Treasury securities). If current trends hold, that number will reach 100 percent of GDP by the end of the decade, and 152 percent of GDP by 2048. Broadly speaking, the expansion is being fueled by outlays for Social Security and Medicare and increasingly burdensome interest payments on preexisting debt.

BACKGROUND

Spending growth will contribute to widening deficits over the next 30 years.

Source: CBO; public domain

The CBO predicts that Social Security spending will grow from 4.9 percent of GDP in 2018 to 6.3 percent in 2048; health care programs (including Medicare and Medicaid among others) will rise from 5.2 percent to 8.7 percent, mostly on the back of an aging population and high healthcare costs per person; and interest payments will balloon from 1.6 percent to 5.3 percent.

Annual deficits are projected to rise from 3.9 percent in 2018 to 8.4 percent in 2048.

Discretionary spending relative to GDP over the same period is expected to fall, if nothing because the budgetary math increasingly won’t allow for it. Discretionary spending was 6.3 percent of GDP in 2018; the CBO expects that number to fall to 5.5 percent by 2048.

Revenues are expected to remain flat for the next few years and then jump in 2026, when income tax cuts from this year’s tax act are set to expire. Revenues would then grow in-step with the economy, but they would still fail to keep pace with spending growth.

IMPACT

The CBO projections are grim enough as-is, but the reality could turn out even worse. The CBO makes various assumptions when calculating its estimates – assumptions on growth, interest rates, productivity, and labor participation. And while there is some room on the upside for better-than-expected overall results (for example, if the political will materialized in Washington to address the debt problem sooner rather than later), there’s considerable downside risks as well.

Interest rates

One such risk stems from unforeseen fluctuations in interest rates. The post-2009 era has seen unprecedentedly low rates, which have produced a favorable borrowing environment for the US government. The CBO foresees the yield on 10-year Treasuries rising to 3.7 percent by 2028 and then 4.8 percent in 2048. The average yield from the period of 1990-2007 was 5.8 percent.

Bond yields are a product of supply and demand. There has been ample supply as US governments over the past two decades have sought outside funding to fill their deficit gaps. But what about demand?

The United States government has always benefitted from crisp foreign demand for US Treasuries, which are seen as a safe-haven asset denominated in a global and relatively stable currency (critically, nearly all global oil sales are settled in USD). Countries like Japan and China have amassed huge reserves of US government debt, holding some $1.030 trillion and $1.179 trillion in Treasuries respectively as of early 2018. Their purchases of US debt serve to depress yields, which in turn makes it cheaper for the US government to borrow and finance its agenda at home and abroad.

There’s reason to believe that US Treasuries will be less appealing for foreign governments over the short-to-medium term. One consistent drag will stem from the United States’ growing debt pile; not insofar that it represents a risk of default per se, but rather a risk of currency devaluation in order to make the debt easier to pay off at some point in the future. If the US dollar tanks, it makes foreign Treasury holdings less valuable relative to the local currency in question.

There’s also the fact that, as states move further along the development curve, maintaining large holdings of foreign exchange becomes less crucial to their economic stability. We’re already seeing signs of this as Japanese and Chinese investors start to divest from Treasuries. Such divestment is sure to proceed slowly so as not to cause a panic and impact the value of a country’s remaining holdings. China in particular has been especially circumspect over the past year, presumably because it doesn’t want to give the impression it’s triggering the ‘nuclear option’ in its ongoing trade war with the United States. That nuclear option would be a liquidation of its USD-denominated reserves – a move that would cause US Treasury yields to surge, but severely undercut the value of China’s remaining holdings in the process.

USD-denominated assets have been the global the benchmark for foreign reserves since the gold standard was abandoned in the 20th century. This may not always be the case, but for now USD primacy is definitely bolstered by a lack of credible alternatives. The euro is held in the reserve portfolio of various governments, but the spectre of Greece and perennial risks to the long-term stability of the euro zone continue to relegate the currency to a secondary position behind the USD. The renminbi is another possible alternative, but it remains illiquid as a global currency barring a wave of new reforms in China.

The situation could well change in the 30 years considered by these CBO projections, especially if the expected debt accumulation actually comes to pass. In other words, just like the gold standard that preceded it, the US dollar may not always be viewed as the standard-bearer of global finance. And if a reckoning does eventually occur, it will surely have been expedited by the precarious fiscal outlook of the US government.

Growth shocks

Another realistic contingency that the CBO outlook ignores is a systemic shock like the 2008-2009 Great Recession. Tough to predict, these events can scuttle even the most exacting economic projections.

In 2007, the US debt stood at just 35 percent of GDP, nearly half of its current level. Post-2009 simulative policy responses were spend-heavy, impacting the government’s bottom line in ways that still resonate to this day. One 2012 estimate from the US Treasury put the total exposure for US taxpayers at $24 trillion in response to the Great Recession – and that’s just on the spending side of the equation. In terms of revenues, systemic economic shocks can wipe out trillions of household wealth, hollow out the employment market for several years, and undercut the government’s tax base. (Though in some respects, US taxpayers actually gained when distressed assets and Treasuries were eventually sold off).

The CBO projections use a baseline of 1.9 percent annual growth for the next 30 years. The rate is lower than the historical average of 2.8 percent owing in large part to tepid growth of the US labor pool.

FORECAST

We’re still well within the bounds of normalcy here.

Washington is ignoring the long-term track of government finances, and the global financial system is still dominated by Wall Street (notwithstanding a few early signs of dissent, such as calls in the EU for an alternative system for the Continent and the proliferation of bilateral deals to settle trade accounts in local currencies). US debt levels also remain within elevated-but-acceptable limits at 78 percent GDP, with a deficit of just under 4 percent.

But it’s from here on out where the normalcy potentially dissipates, at least if the CBO projections prove correct. The borrowing binge of the past decade was aided by record-low yield rates thanks to QE and the uncertain fate of the euro zone. Now yields are normalizing, and so too is the long-term fiscal impact of the government deficit, which in turn drives upward pressure on borrowing rates as demand for Treasuries dries up.

In other words, US finances are now entering a dangerous cycle of debt begetting more debt.

It will take rare political will to right the country’s fiscal ship, and the sooner it arrives, the less pain there will be over the long run. However, should Washington politicians continue to ignore the problem, we could be looking at a very different global financial system by the time the CBO projections’ end-date of 2048 finally rolls around.”

https://www.geopoliticalmonitor.com/us-debt-bomb-or-overblown/

Military Victory is Dead

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“MODERN WAR INSTITUTE AT WEST POINT”

“Victory’s been defeated; it’s time we recognized that and moved on to what we actually can accomplish.

We’ve reached the end of victory’s road, and at this juncture it’s time to embrace other terms, a less-loaded lexicon, like “strategic advantage,” “relative gain,” and “sustainable marginalization.”

A few weeks back, Colombian President Juan Manuel Santos and Harvard Professor Steven Pinker triumphantly announced the peace deal between the government of Columbia and the Revolutionary Armed Forces of Columbia (FARC). While positive, this declaration rings hollow as the exception that proves the rule – a tentative treaty, however, at the end, roughly 7,000 guerrillas held a country of 50 million hostage over 50 years at a cost of some 220,000 lives. Churchill would be aghast: Never in the history of human conflict were so many so threatened by so few.

One reason this occasion merited a more somber statement: military victory is dead. And it was killed by a bunch of cheap stuff.

The term “victory” is loaded, so let’s stipulate it means unambiguous, unchallenged, and unquestioned strategic success – something more than a “win,” because, while one might “eke out a win,” no one “ekes out a victory.” Wins are represented by a mere letter (“w”); victory is a tickertape with tanks.

Which is something I’ll never see in my military career; I should explain. When a government has a political goal that cannot be obtained other than by force, the military gets involved and selects some objective designed to obtain said goal. Those military objectives can be classified broadly, as Prussian military theorist Carl von Clausewitz did, into either a limited aim (i.e. “occupy some…frontier-districts” to use “for bargaining”), or a larger aim to completely disarm the enemy, “render[ing] him politically helpless or military impotent.” Lo, we’ve arrived at the problem: War has become so inexpensive that anyone can afford the traditional military means of strategic significance – so we can never fully disarm the enemy. And a perpetually armed enemy means no more parades (particularly in Nice).

Never in the history of human conflict were so many so threatened by so few.

It’s a buyer’s market in war, and the baseline capabilities (shoot, move, and communicate) are at snake-belly prices. Tactical weaponry, like AK-47s are plentiful, rented, and shipped from battlefield to battlefield, and the most lethal weapon U.S. forces encountered at the height of the Iraq War, the improvised explosive device, could be had for as little as $265. Moving is cost-effective too in the “pickup truck era of warfare,” and reports on foreign fighters in Syria remind us that cheap, global travel makes it possible for nearly anyone on the planet to rapidly arrive in an active war zone with money to spare. Also, while the terror group Lashkar-e-Taiba shut down the megacity Mumbai in 2008 for less than what many traveling youth soccer teams spend in a season, using unprotected social media networks, communication has gotten even easier for the emerging warrior with today’s widely available unhackable phones and apps. These low and no-cost commo systems are the glue that binds single wolves into coordinated wolf-packs with guns, exponentially greater than the sum of their parts. The good news: Ukraine can crowdfund aerial surveillance against Russian incursions. The less-good news: strikes, like 9/11, cost less than three seconds of a single Super Bowl ad. With prices so low, why would anyone ever give up their fire, maneuver, and control platforms?

All of which explains why military victory has gone away. Consider the Middle East, and the recent comment by a Hezbollah leader, “This can go on for a hundred years,” and his comrade’s complementary analysis, that “as long as we are there, nobody will win.” With such a modestly priced war stock on offer, it’s no wonder Anthony Cordesman of the Center for Strategic and International Studies agrees with the insurgents, recently concluding, of the four wars currently burning across the region, the U.S. has “no prospect” of strategic victory in any. Or that Modern War Institute scholar Andrew Bacevich assesses bluntly, “If winning implies achieving stated political objectives, U.S. forces don’t win.” This is what happens when David’s slingshot is always full.

The guerrillas know what many don’t: It’s the era, stupid. This is the nature of the age, as Joshua Cooper Ramos describes, “a nightmare reality in which we must fight adaptive microthreats and ideas, both of which appear to be impossible to destroy even with the most expensive weapons.” Largely correct, one point merits minor amendment – it’s meaningless to destroy when it’s so cheap to get back in the game, a hallmark of a time in which Wolverine-like regeneration is regular.

This theme even extends to more civilized conflicts. Take the Gawker case: begrudged hedge fund giant Peter Thiel funded former wrestler Hulk Hogan’s lawsuit against the journalistic insurrectionists at Gawker Media, which forced the website’s writers to lay down their keyboards. However, as author Malcolm Gladwell has pointed out – Gawker’s leader, Nick Denton, can literally walk across the street, with a few dollars, and start right over. Another journalist opined, “Mr. Thiel’s victory was a hollow one – you might even say he lost. While he may have killed Gawker, its sensibility and influence on the rest of the news business survive.” Perhaps Thiel should have waited 50 more years, as Columbia had to, to write his “victory” op-ed? He may come to regret the essay as his own “Mission Accomplished” moment.

True with websites, so it goes with warfare. We live in the cheap war era, where the attacker has the advantage and the violent veto is always possible. Political leaders can speak and say tough stuff, promise ruthless revenge – it doesn’t matter, ultimately, because if you can’t disarm the enemy, you can’t parade the tanks.”

Military Victory is Dead

 

The 8 Major Forces Shaping the Future of the Global Economy

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“STRATFOR WORLDVIEW” By Jeff Desjardins for Visual Capitalist

“With billions of people hyper-connected to each other in an unprecedented global network, it allows for an almost instantaneous and frictionless spread of new ideas and innovations.

Combine this connectedness with rapidly changing demographics, shifting values and attitudes, growing political uncertainty, and exponential advances in technology, and it’s clear the next decade is setting up to be one of historic transformation.”


“But where do all of these big picture trends intersect, and how can we make sense of a world engulfed in complexity and nuance? Furthermore, how do we set our sails to take advantage of the opportunities presented by this sea of change?

1. The Tech Invasion

For most of the history of business, the world’s leading companies have been industrially-focused.

Pioneers like Henry Ford and Thomas Edison innovated in the physical realm using atoms — they came up with novel ways to re-organize these atoms to create things like the assembly line and the incandescent lightbulb. Then, companies invested massive amounts of capital to build physical factories, pay thousands of workers, and build these things.

The majority of the great blue-chip companies were built this way: IBM, U.S. Steel, General Electric, Walmart and Ford are just some examples.

But today’s business reality is very different. We live in a world of bytes — and for the first time, technology and commerce have collided in a way that makes data far more valuable than physical, tangible objects.

The best place to see this is in how the market values businesses.

A graphic showing the top 5 publicly traded companies (by market cap)
(Visual Capitalist)

As you can see above, companies like Apple, Amazon and Microsoft have supplanted traditional blue-chip companies that build physical things.

The tech invasion is leveraging connectivity, network effects, artificial intelligence and unprecedented scale to create global platforms that are almost impossible to compete with. The tech invasion has already taken over retail and advertising — and now invading forces have their eyes set on health care, finance, manufacturing and education.

Will atoms ever be more valuable than bytes again?

2. The Evolution of Money

Money is arguably one of humanity’s most important inventions. From beaver pelts to gold bars, the form and function of money has constantly fluctuated throughout history.

In the modern world, the definition of money is blurrier than ever. Central banks have opted to create trillions of dollars of currency out of thin air since the financial crisis — and on the flip side, you can actually use blockchain technology to create your own competing cryptocurrency in just a few clicks.

Regardless of what is money and what is not, people are borrowing record amounts of it.

The world has now amassed $247 trillion in debt, including $63 trillion borrowed by central governments.

In today’s unusual monetary circumstances, massive debt loads are just one anomaly.

Here are other examples that illustrate the evolution of money: Venezuela has hyperinflated away almost all of its currency’s value, the “war on cash” is raging on around the world, central banks are lending out money at negative interest rates (Sweden, Japan, Switzerland, etc.), and cryptocurrencies like Bitcoin are collectively worth over $200 billion.

How we view money — and how that perception evolves over time — is an underlying factor that influences our future.

3. The Wealth Landscape

Wealth is not stagnant — and so for those looking to make the most out of global opportunities, it’s imperative to get a sense of how the wealth landscape is changing.

The modern view is either extremely healthy or bubbly, depending on how you look at it: Amazon and Apple are worth over $1 trillion, Jeff Bezos has a $100+ billion fortune, and the current bull market is the longest in modern history at 10 years.

Will this growth continue, and where will it come from?

Here’s one look based on projections from the World Bank:

A graphic showing the percentage of estimated global growth (2017-2019) in real GDP.
(Visual Capitalist)

Despite these estimates, there is a laundry list of items that the ultra-wealthy are concerned about — everything from the expected comeback of inflation to a world where geopolitical black swans seem to be growing more common.

Here’s why those building and protecting wealth are rightly concerned about such events:

A graphic showing how unexpected world events -- so-called black swans -- can trigger big losses in the markets.
(Visual Capitalist)

But the wealth landscape is not all just about billionaires and massive companies — it is changing in other interesting ways as well. For example, the definition of wealth itself is taking on a new meaning, with millennials leading a charge toward sustainable investing rather than being entirely focused on monetary return.

How will the wealth landscape look a decade from now?

4. Eastern Promises

The economic rise of China has been a compelling story for decades.

Up until recently, we’ve only been able to get a preview of what the Eastern superpower is capable of — and in the coming years, these promises will come to fruition at a scale that will still be baffling to many.

Understandably, the scope of China’s population and economy can still be quite difficult to put into perspective.

The following map may help, as it combines both elements together to show that China has countless cities each with a higher economic productivity than entire countries.

A graphic showing the GDP of Chinese cities compared with countries.
(Visual Capitalist)

In fact, China has over 100 cities with more than 1 million inhabitants. These cities, many of which fly below the radar on the global stage, each have impressive economies — whether they are built upon factories, natural resource production or the information economy.

As one impressive example, the Yangtze River Delta — a single region which contains Shanghai, Suzhou, Hangzhou, Wuxi, Nantong, Ningbo, Nanjing and Changzhou — has a GDP (PPP) of $2.6 trillion, which is more than Italy.

5. Accelerating Technological Progress

As we’ve already seen, there are many facets of change that will impact our shared future.

But here’s the kicker: When it comes to technological progress, the rate of change itself is actually getting faster and faster. Each year brings more technological advancements than the last, and once the exponential “hockey stick” kicks into overdrive, innovations could happen at a blindsiding pace.

A chart illustrating the deceptive nature of exponential change.
(Visual Capitalist)

This could be described as a function of Moore’s Law, and the law of accelerating returns is also something that futurists like Ray Kurzweil have talked about for decades.

Interestingly, there is another offshoot of accelerating change that applies more to the business and economic world. Not only is the speed of change getting faster, but for various reasons, markets are able to adopt new technologies faster:

A chart showing technology adoption by households in the United States.
(Visual Capitalist)

New products can achieve millions of users in just months, and the game Pokémon Go serves as an interesting case study of this potential. The game amassed 50 million users in just 19 days, which is a blink of an eye in comparison to automobiles (62 years), the telephone (50 years) or credit cards (28 years).

As new technologies are created at a faster and faster pace — and as they are adopted at record speeds by markets — it’s fair to say that future could be coming at a breakneck speed.

6. The Green Revolution

It’s no secret that our civilization is in the middle of a seismic shift to more sustainable energy sources.

But to fully appreciate the significance of this change, you need to look at the big picture of energy over time. Below is a chart of U.S. energy consumption from 1776 until today, showing that the energy we use to power development is not permanent or static throughout history.

A chart showing the share of U.S. energy consumption by major sources, 1776-2016.
(Visual Capitalist)

And with the speed at which technology now moves, expect our energy infrastructure and delivery systems to evolve at an even more blistering pace than we’ve experienced before.

7. Shifting Human Geography

Global demographics are always shifting, but the population tidal wave in the coming decades will completely reshape the global economy.

In Western countries and China, populations will stabilize due to fertility rates and demographic makeups. Meanwhile, on the African continent and across the rest of Asia, booming populations combined with rapid urbanization will translate into the growth of megacities, holding upwards of 50 million people.

By the end of the 21st century, this animation shows that Africa alone could contain at least 13 megacities that are bigger than New York:

A gif showing top 20 global cities by population, 2010-2100.
(Visual Capitalist)

By this time, it’s projected that North America, Europe, South America and China will combine to hold zero of the world’s 20 most populous cities. What other game-changing shifts to human geography will occur during this stretch?

8. The Trade Paradox

By definition, a consensual and rational trade between two parties is one that makes both parties better off.

Based on this microeconomic principle, and also on the consensus by economists that free trade is ultimately beneficial, countries around the world have consistently been working to remove trade barriers since World War II with great success.

But nothing is ever straightforward, and these long-held truths are now being challenged in both societal and political contexts. We now seem to be trapped in a trade paradox in which politicians give lip service to free trade, but they often take action in the opposite direction.

To get a sense of how important trade can be between two nations, we previously documented the ongoing relationship between the U.S. and Canada, in which each country is the best customer of the other:

A graphic showing trade between the United States and Canada.
(Visual Capitalist)

With the recent United States-Mexico-Canada Agreement, the two countries seem to have sorted their differences for now — but the trade paradox will continue to be an ongoing theme in economics and investing at a global level for many years to come, especially as the trade war against China rages on.”

https://worldview.stratfor.com/article/8-major-forces-shaping-future-global-economy?utm_campaign=B2C%20%7C%20Newsletter%20%7C%20060818&utm_source=hs_email&utm_medium=email&utm_content=66848402&_hsenc=p2ANqtz–VT7yHL5sGjNsnoF7KDufCcHeEzGppywWe94p26CmhHApJQgTad7hbuDJqTocxzt4rPHh1b9mMHl8PWyhbZMT77IPaoQ&_hsmi=66849710

 

2017 Federal Government “Fumbles Report” – $473.6 Billion in Wasteful And Inefficient Spending

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“FEDERAL NEWS RADIO”

 

“Expired body armor, a $1 billion trolley, Shakespearean sheep — the third volume of Sen. James Lankford’s (R-Okla.)  “Federal Fumbles” runs the gamut of waste and inefficiency.

The report highlights 100 examples of the government’s wasteful spending, lack of oversight, needed structural changes, and wasted effort, the Oklahoma Republican said during a Monday press conference on Capitol Hill.”


“This book is designed to be a reminder that we still have an issue with debt and deficit in America,” Lankford said. “For some reason, the conversation has slowed on the issue of debt and deficit; it should not, this should be an ongoing part of our conversation.”

The current debt is $20.49 trillion, and the fiscal 2017 deficit is $666 billion. Lankford’s report represents $473.6 billion in waste and inefficient spending.

“We released this resource again as a set of ideas to say if we are going to get control of our spending, if we’re going to manage our economy and our spending better, then there are specific ways to do it,” Lankford said. “There are essential things that we need to be able to spend money on: transportation, national defense, disaster relief, things that are essential for us to be able to do. For us to be able to afford to do those things, we’ve got to be able to pay better attention to other things.”

This year’s report includes everything from offbeat arts grants that are worth less than $40,000, to more serious big budget items like the $400 billion production delay of the F-35 Joint Strike Fighter.

The reason for the range of examples, Lankford said, is to illustrate a set of larger issues and the need to address them with straightforward solutions, starting with the budget and appropriations process, as well as the grant process.

“Over the years there’s been a lot of attention paid to contracting and how we’re actually putting checks out for individual contracts,” Lankford said. “That same attention has not been paid to the grant process. Because of that, it’s the easiest way to be able to actually get dollars out the door. More and more agencies are spending more and more on grants. Those grants have little to no oversight, so the grants need additional oversight in the process and we need to be able to fix that.”

Among those grants was a $30,000 National Endowment for the Arts grant to support a production called “Doggie Hamlet.”

The production, according to the report, “actually includes humans yelling and running toward very confused sheep and dogs. The production, which does not include any lines from ‘Hamlet,’ is conducted outdoors in a 30-by-50-foot field in New Hampshire.”

Lankford said he’d seen clips of the performance, and while it’s fine if the local community wants to fund it, “I’m just confused why the people of Oklahoma, they’re paying for the production of ‘Doggie Hamlet’ in New Hampshire.”

Similarly, the Transportation Department gave $1 billion to San Diego to expand its trolley service by about 11 miles. That means federal taxpayers in Oklahoma — and across the country — are also paying $100 million per mile for a trolley they won’t use, Lankford said.

While those grants are examples of lack of oversight, a $40,000 study by the National Science Foundation to learn how refugees are handling their move to Iceland, is an example of wasteful spending.

An example of needed structural change is the delay of a biometric entry and exit visa program for immigration. Another is the 450-day time frame it takes to hire one border patrol officer.

“These issues sound simplistic to solve, but they are real structural problems both with hiring and how things actually operate in these different agencies,” Lankford said. “These need to be addressed.”

Lankford said the ways to improve upon these problems include fixing Senate rules and streamlining the budget process.

“I think we should do appropriations every two years rather than every year,” Lankford said. “That gives us more time with the committees to not have to worry about putting things together for this year.”

Lankford said Senate rules also prevent debate and solving some of the harder issues. If lawmakers can’t debate the issues and discuss how to solve them, they won’t be fixed.

“Some of these things come up every single year and everyone says why is it not addressed again,” Lankford said. “Some of it is a structural problem in the United States Senate, where we cannot get to the issues and be able to address those. My hope is that we can actually get to the point that we can fix the structural problems here in the Senate and actually be able to do the real work.”

First downs, touchdowns

Along with fumbles, the report also highlights improvements.

Some of these “touchdowns” include the Environmental Protection Agency’s decision to repeal a rule about governing small rivers and bodies of water, an Agriculture Department decision to loosen requirements around public school lunches and the Trump administration’s “one in, two out” practice.

“In just the first half of 2017, federal agencies withdrew or rolled back 469 agency actions that had been announced in the fall of 2016 and cut in half the number of planned regulations that will have an impact of more than $100 million a year on our economy,” the report stated.

Areas that didn’t make it to the end zone but still made up yards include more oversight and accountability for a council that coordinates transportation for low income people to medical appointments. Another area is improving communication to avoid duplicative grants or programs, like requiring agencies to submit a report to Congress if it wants to award a grant that is identical to an existing program.

“Our focus is that this is the to-do list for this next year and as we work through this to-do list, our staff is assigned to say ‘where can we find places to be able to address this; in appropriations language, with the authorizing committees, working with the administration, where can we help find this,’” Lankford said. “And we help try to identify some that we’ve already seen in the past year in this as well as some of the things that are ongoing and current appropriations language this year to try to address it.”

https://federalnewsradio.com/management/2017/11/federal-fumbles-report-a-to-do-list-reminder-to-keep-debt-and-deficit-in-conversation/

 

Army To Discard $6 Billion (WIN-T) Network Investment And Start Over Without A Plan

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Army Network $6B

 “DEFENSE NEWS”

“House lawmakers roasted Army officials for abruptly scrapping its acquisition strategy months after submitting its 2018 budget without a well-defined alternative. 

Whether the U.S. Army may shift a half-billion dollars from its ailing network programs and chart a new course will be up for debate as lawmakers reconcile rival House and Senate defense policy bills this month.”


“But several key lawmakers said they are not ready to let the Army reboot from a $6 billion investment without explaining what’s next.

Army officials argue the service lacks the survivable, mobile and hardened tactical network it would need on a modern battlefield. They are asking Congress to end the Mid-Tier Networking Vehicular Radio, the Command Post of the Future and the Warfighter Information Network-Tactical (WIN-T) Increment 2 at the end of fiscal year 2018 to free up money budgeted for the three.

And although at least two key lawmakers said they were supportive — chairmen of the House and Senate armed services committees — they want more information.

“I support them being willing to examine themselves and reverse course if that’s what’s appropriate,” HASC Chairman Mac Thornberry, R-Texas, said of the Army on Oct. 5. “It’s going to be up to them to prove to us that now we are on a better path, that we have learned the lessons.”

Thornberry said Army officials spoke with him in September about making the change.

“They’ll have to lay out their plans to us, but if we can have a path forward in ’18, there’s no reason to wait until ’19.”

The House-passed 2018 National Defense Authorization Act calls for WIN-T to be accelerated, and the Senate-passed version zeroes out the president’s request for WIN-T funding. The White House has defended WIN-T and some other programs the Senate NDAA would cut.

SASC Chairman John McCain, R-Ariz., and Sen. Tom Cotton, R-Ark., grilled Gen. Mark Milley, the Army chief of staff, at a May hearing and accused the Army of wasting $6 billion on WIN-T. That stance actually aids Milley’s aim to reboot Army network plans.

On Sept. 9, McCain met with Milley on Capitol Hill and asked him how he proposes the WIN-T funding be redistributed.

“We told them to send us what they want to do with it, and we will examine it, but we had to act to cut it off,” McCain said of the meeting.

McCain said his support for the Army’s next move “depends on what they want to use it for. WIN-T has been a total failure.”

Proposed changes could be handled as an Army request to reprogram the 2018 funding or as part of the NDAA depending on the timing, McCain said.

The Army envisions scenarios in which it fights a near-peer enemy in contested environments that require small units, operating independently and moving constantly to avoid defeat.

Yet the first increment of WIN-T, while fielded, can only function — transmitting voice, video and data — when a unit is stopped. The WIN-T’s second increment is meant to provide an on-the-move capability, but it has struggled.

The latest annual report from the Pentagon’s office of developmental test and evaluation faults WIN-T’s technical performance, usability and vulnerability to enemy jamming.

At a hearing of the HASC Tactical Air and Land Forces Subcommittee on Sept. 28 to question Army officials over its new plans, Chairman Michael Turner, R-Ohio, expressed deep skepticism the Army would get it right this time.

In a subsequent interview with Defense News, Turner said the goal is to provide new troops technology at least as advanced as what they were had in high school, and not to be eclipsed by adversaries who “have modernized and put at risk our ability to operate.”

“The question is what are we going to do, not just what are we not going to do,” Turner said.

Turner pushed back at the idea WIN-T had been a failure, noting it had been delivered, tested and fielded.

“The issue is not that it’s not working; the issue is: What are our goals and objectives, what are our technology needs, and how do you achieve those?” Turner said, “And the Army’s going to need to have an answer at least in scoping and in implementation, while they explain the nearly $6 billion that’s already been spent.”

https://www.defensenews.com/2017/10/05/lawmakers-if-us-army-ends-6b-in-network-programs-whats-next/

Military’s Health Records Maze

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“MILITARY TIMES”

“More than $1 billion has been invested in medical record interoperability in recent years but with mixed results.

Veterans Affairs Secretary David Shulkin said he is open to adopting the new military electronic health record system for his department but stopped short of promising that will happen this summer.

“We’re exploring all options,” Shulkin told members of the House Appropriations Committee on Wednesday. “It’s a highly complex issue … if there was an easy solution here, it would have been made already.”

The comments came in response to criticism from lawmakers related to the ongoing health records saga, a point of tension for the departments for decades.

“We’ve been giving you all a lot of money, and it’s not fixed,” said Rep. Tom Rooney, R-Fla. “You could be the best VA secretary of all time if you solved this one problem.”

At issue is the seamless medical transition of active-duty troops and reservists to VA care. Veterans have long lamented missing records, repeated exams and frustrating inefficiencies with the dueling department systems.

Last year, defense and VA officials certified that their Joint Legacy Viewer now allows physicians in both departments to share and read those critical health records, eliminating many of those problems.

But the separate back-end systems still prevent VA doctors from editing or updating veterans’ old military records, and vice versa. Shulkin acknowledged that “it is not the complete interoperability we would hope for.”

Earlier this year, officials with the Military Health System announced plans to shift to the new GENESIS system for all personal military health records, allowing easier access for both patients and doctors.

Shulkin said he hopes to settle on a similar new system for VA this summer. He said a number of factors will go into that decision, including long-term viability of the new system, ease of transferability from old systems and interoperability with defense records.

But VA officials have long been resistant to simply adopting the same IT systems as the military because of specific agency needs. Lawmakers pushed Shulkin to break that trend, but he would not commit to any system at the hearing.

He did say that “VA needs to get out of the software development business” and will be looking for more private sector “off-the-shelf” options for health record systems, to minimize the workload of maintaining any future health records systems.

“It’s not an easy project in a single hospital, much less a whole system the size of VA,” he said.

Shulkin’ appearance before the committee was billed as a conversation about next year’s budget request, but so far only a few details of that plan have been released publicly. A full budget is expected to be released by White House officials later this month.

The department would see a 6 percent boost in programming funds under the “skinny budget” outlined by President Trump, one of only a few federal agencies looking at a funding boost under his plan.

Committee members told Shulkin to expect many more questions about the health records issue after the fiscal 2018 specifics are released”

http://www.militarytimes.com/articles/va-dod-health-records-2017-search

 

 

Fed Year-End Spending Spree Needs to Change

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EDITOR’S NOTE:  We have often discussed the inefficient one year budget cycle of the US Government and recommend changes.   The One Year Budget Cycle Must Go.  Robert F. Hale  was comptroller and chief financial officer at the Defense Department from 2009 until 2014. As you will see in his opinion below, he heartily agrees.

Robert Hale

Robert Hale


“BREAKING DEFENSE”

“WHY DOD’s YEAR-END SPENDING NEEDS TO CHANGE”

“As the end of the fiscal year approaches at the Department of Defense (DoD), organizations are working hard to spend all the funds which are available for use only during the current fiscal year.

The pithy rationale for these actions: “Use it or lose it.”

We need to find practical ways to apply the brakes to year-end spending so that DoD funds only its highest-priority needs.

DoD spending spikes sharply during the final week of the fiscal year.  (To be technically correct, by “spending” I am referring to entering into contracts or otherwise obligating funds.) In a 2010 report researchers from Harvard and Stanford Universities showed that, based on data for the years 2004 to 2009, final-week spending at DoD was more than four times higher than the average weekly spending during the rest of the year.  Similar trends occurred at other federal agencies.

The spike doesn’t necessarily mean that year-end funds are wasted.  Many year-end funds buy construction-related goods and services, office equipment, and IT equipment and services. These items are needed, but they do not directly support the most critical DoD mission needs, such as training and military readiness.  Moreover, research on federal IT spending suggests that final-week purchases are of lower quality than those made during the rest of the year, and I suspect the same finding applies to other categories of spending.  The surge in spending may also lead overworked contracting officers to push out lower-quality contracts.

Making operating funds available only for one year works against good resource allocation in another way. Resource managers must estimate forthcoming bills for services in the final month of the fiscal year (for example, final bills for electricity and water) and obligate the funds before year’s end. They have to estimate on the high side because, if their estimate is low, they risk violating the federal anti-deficiency laws. High estimates for routine services leave fewer funds available for mission-critical activities such as training and readiness.

Year-end spending worries federal employees, and it should worry taxpayers too.  For several years the Obama Administration conducted a SAVE campaign (Securing Americans’ Value and Efficiency), which asked federal employees to suggest ways to make government more efficient. In my role as DoD comptroller, I reviewed suggestions related to DoD. I was struck by how many employees urged that year-end spending be reduced. A 2007 survey of DoD financial management and contracting professionals showed the same result. Almost all respondents expressed concerns about year-end spending.

The law already has some provisions designed to avoid year-end spending spikes.  For example, only 20 percent of major operating budgets are supposed to be spent during the final two months of the fiscal year. But this provision still leaves room for final-week spikes.

Congress could help by passing DoD appropriations on time – that is, by October 1.  Late appropriations push even more spending toward the end of the year and may exacerbate year-end spending. Unfortunately, Congress has not provided DoD with an on-time appropriation during any of the Obama years, and it will apparently not do so again this year.

But Congress can help by permitting DoD to carry over a small percentage of its operating budgets (perhaps 5 percent) into the next fiscal year. This flexibility would not increase the total funds available to DoD. However, for funds eligible for carry over, managers could decide whether to buy that office furniture for the headquarters at the end of the year or wait and let other needs compete for the funds next year. There is some evidence that carry-over authority helps. Our Harvard and Stanford researchers found that, at one federal agency that had such authority (the Department of Justice), final-week spending spikes were much smaller.

While serving as DoD’s comptroller, I tried to persuade Congress to permit the Department to carry over small amounts of its operating funding into the next fiscal year.  I made a few converts, but not enough to make it happen.

The next administration should try again to secure carry-over authority.”

Why DoD’s Year-End Spending Needs to Change

 

 

 

A Different Path to War

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“WAR ON THE ROCKS”

“Americans today enjoy a measure of safety that our ancestors would envy and that our contemporaries do envy.

We generally do not need to wage war to keep it that way.

On the contrary, some recent wars have degraded the U.S. military and undermined our security. Policymakers should therefore be extremely reluctant to risk American lives abroad.

The U.S. military is the finest fighting force in the world; it comprises dedicated professionals who are willing and able to fight almost anywhere, practically on a moment’s notice. Any military large enough to defend our vital national security interests will always be capable of intervening in distant disputes. But that does not mean that it should. Policymakers have an obligation to carefully weigh the most momentous decision that they are ever asked to make. These criteria can help.

Any nation with vast power will be tempted to use it. In this respect, the United States is exceptional because its power is so immense. Small, weak countries avoid fighting in distant disputes; the risk that troops, ships, or planes sent elsewhere will be unavailable for defense of the homeland generally keeps these nations focused on more proximate dangers. The U.S. government, by contrast, doesn’t have to worry that deploying U.S. forces abroad might leave America vulnerable to attack by powerful adversaries.

There is another factor that explains the United States’ propensity to go abroad in search of monsters to destroy: Americans are a generous people, and we like helping others. We have often responded favorably when others appeal to us for assistance. Many Americans look back proudly on the moments in the middle and latter half of the 20th century when the U.S. military provided the crucial margin of victory over Nazi Germany, Imperial Japan, and the Soviet Union.

But, in recent years, Americans have grown more reluctant to send U.S. troops hither and yon. There is a growing appreciation of the fact that Washington’s willingness to intervene abroad – from Somalia and the Balkans in the 1990s, to Iraq and Afghanistan in the 2000s, to Libya and Yemen in the present decades – has often undermined U.S. security. We have become embroiled in disputes that we don’t understand and rarely can control. Thus, public anxiety about becoming sucked into another Middle Eastern civil war effectively blocked overt U.S. intervention in Syria in 2013, notwithstanding President Obama’s ill-considered red line warning to Bashar al Assad.

But while the American people are unenthusiastic about armed intervention, especially when it might involve U.S. ground troops, most Washington-based policy elites retain their activist instincts. They believe that U.S. military intervention generally advances global security and that the absence of U.S. leadership invites chaos. The essays in this series, “Course Correction,” have documented the many reasons why these assumptions might not be true. The authors have urged policymakers to consider other ways for the United States to remain engaged globally – ways that do not obligate the American people to bear all the costs and that do not obligate U.S. troops to bear all the risks.

But the authors do not presume that the United States must never wage war. There are indeed times when it should. Policymakers should, however, keep five specific guidelines in mind before supporting military intervention, especially the use of ground troops. Doing so would discipline our choices, would clearly signal when the U.S. military is likely to be deployed abroad, and could empower others to act when the United States does not.

Vital U.S. National Security Interest at Stake

The United States should not send U.S. troops into harm’s way unless a vital U.S. national security interest is at stake. Unfortunately, the consensus in Washington defines U.S. national security interests too broadly. Protecting the physical security of the territory of the United States and ensuring the safety of its people are vital national security interests. Advancing U.S. prosperity is an important goal, but it is best achieved by peaceful means, most importantly through trade and other forms of voluntary exchange. Similarly, the U.S. military should generally not be used to spread U.S. values, such as liberal democracy and human rights. It should be focused on defending this country from physical threats. The military should be poised to deter attacks and to fight and win the nation’s wars if deterrence fails.

The criterion offered here is more stringent, for example, than the Weinberger-Powell Doctrine, which held that U.S. troops should not be sent overseas “unless the particular engagement or occasion is deemed vital to our national interest or that of our allies.” By effectively equating U.S. national interests with those of our allies, it allowed for a range of interventions that would not be considered automatically valid under the guidelines spelled out here.  Policymakers should not risk the lives of U.S. troops to protect others’ interests as though those interests were our own.

Clear National Consensus

The American people must understand why they are being asked to risk blood and treasure and, crucially, they must have a say in whether to do so. The U.S. military should not be engaged in combat operations overseas unless there is a clear national consensus behind the mission.

Although modern technology allows constituents to communicate their policy preferences easily, traditional methods are just as effective in ascertaining whether the American people support the use of force. We should rely on the tool written into the Constitution: the stipulation that Congress alone, not the president, possesses the power to take the country to war.

As Gene Healy notes in this series, Congress has regularly evaded its obligations. Although the U.S. military has been in a continuous state of war over the past 15 years, few in Congress have ever weighed in publicly on the wisdom or folly of any particular foreign conflict. Some now interpret Article 5 of the North Atlantic Treaty or United Nations Security Council resolutions as obligating the United States to wage war without explicit authorization from Congress. This is unacceptable. The president may repel attacks against the United States, but the authority to deploy U.S. forces abroad, and to engage in preemptive or preventative wars of choice, resides with Congress — and by extension the people — of the United States.

Understanding of the Costs—and How to Pay Them

We must also understand the costs of war and know how we will pay them before we choose to go down that path. We cannot accurately gauge popular support for a given military intervention overseas if the case for war is built on unrealistic expectations and best-case scenarios. There is no such thing as a free lunch, and there is certainly no such thing as a free war.

Deficit spending allows the federal government to pretend otherwise. Politicians make promises, with bills coming due long after they’ve left office. But we should expect more when it comes to the use of force. Advocates for a military intervention should be forced to frame their solution in relation to costs and benefits. The debit side of the ledger includes the long-term costs of care for the veterans of the conflict. Hawks must also explain what government expenditures should be cut – or taxes increased – to pay for their war. The American people should have the final say in choosing whether additional military spending to prosecute minor, distant conflicts is worth the cost, including the opportunity costs: the crucial domestic priorities that must be forgone or future taxes paid.

Clear and Obtainable Military Objectives

We cannot compare the costs or wisdom of going to war if we do not know what our troops will be asked to do. The U.S. military should never be sent into harm’s way without a set of clear and obtainable military objectives.

Such considerations do not apply when a country’s survival is at stake. But wars of choice — the types of wars that the United States has fought in Iraq, Afghanistan, Libya, and elsewhere — are different. Advocates for such wars must demonstrate not only that the fight is necessary to secure vital U.S. interests, that it has public support, and that it has funding, but also that the military’s mission is defined and attainable.

Military victory is rarely sufficient, however, as our recent wars and interventions demonstrate. In the case of regime-change wars, ensuring that a successful transition to a stable, friendly government occurs can take a considerable amount of time and resources. Whatever replaces the defeated forces must represent a marked improvement in order for the war to advance U.S. vital interests. U.S. leaders, therefore, must not only define the military objective, but also detail what the resultant peace will look like, and how we will know the mission is complete.

It is easy for Washington to start wars, but we cannot leave U.S. troops on the hook for ending them. Policymakers must account for the tendency of war to drag on for years or more, and they must plan for an acceptable exit strategy before committing troops.

Use of Force as a Last Resort

The four criteria above are not enough to establish a war’s legitimacy, or the wisdom of waging it. After all, modern nation-states have the ability to wreak unimaginable horror on a massive scale. That obviously doesn’t imply that they should. Thus, the fifth and final rule concerning military intervention is force should be used only as a last resort, after we have exhausted other means for resolving a foreign policy challenge that threatens vital U.S. national security interests.

This point is informed by centuries-old concepts of justice. Civilized societies abhor war, even those waged for the right reasons while adhering to widely respected norms, such as proportionality and reasonable protections for noncombatants. War, given its uncertainty and destructiveness, should never be entered into lightly or for trivial reasons.

America has an exceptional capacity for waging war. U.S. policymakers therefore have a particular obligation to remember that war is a last resort. Precisely because no one else is likely to constrain them, they must constrain themselves.

Conclusion

U.S. foreign policy should contain a built-in presumption against the use of force. That does not mean that war is never the answer, but rather that it is rarely the best answer. Americans today enjoy a measure of safety that our ancestors would envy and that our contemporaries do envy. We generally do not need to wage war to keep it that way. On the contrary, some recent wars have degraded the U.S. military and undermined our security. Policymakers should therefore be extremely reluctant to risk American lives abroad.

The U.S. military is the finest fighting force in the world; it comprises dedicated professionals who are willing and able to fight almost anywhere, practically on a moment’s notice. Any military large enough to defend our vital national security interests will always be capable of intervening in distant disputes. But that does not mean that it should.”

New Rules for U.S. Military Intervention

Corruption Lessons from US Experience in Afghanistan

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Image:  Politifact.com

“POGO”

“The Special Inspector General for Afghanistan Reconstruction (SIGAR) released the first in a series of reports imparting lessons from the 15-year, $115 billion Afghanistan reconstruction effort.

The core lesson:  establish an anti-corruption strategy before plunging into nation-rebuilding.

The report, Corruption in Conflict: Lessons from the U.S. Experience in Afghanistan, is a review of how effectively the US government—primarily the Departments of Defense (DoD), State, Treasury, and Justice, and the US Agency for International Development—responded to corruption in Afghanistan reconstruction spending. SIGAR identifies six key lessons that will hopefully inform future contingency operations, and makes recommendations for executive and legislative action.

The report defines corruption as “the abuse of entrusted authority for private gain,” as exemplified by such acts as bribery, embezzlement, extortion, fraud, and nepotism. It asserts that, while certain forms of corruption have been a part of Afghan culture for centuries, the problem grew to epic proportions after 2001. SIGAR faults the US-led reconstruction effort in three respects: by rapidly injecting billions of dollars into the Afghan economy without adequate oversight, by failing to recognize the scope and severity of corruption, and by subordinating anticorruption efforts to short-term security and political goals.

The recommendation that seems most sensible (to provide the most bang for the buck, if you will) is for the agencies to establish a “joint vendor vetting unit” to more carefully screen contingency operation contractors and grantees. For reconstruction missions to succeed, international aid money must be kept out of the hands of what SIGAR calls “malign powerbrokers”—those who thrive off corruption, such as local warlords, crooked government officials, and insurgents. Robust screening of recipients will also help ensure reconstruction funds aren’t lost to fraud, waste, and abuse.

The United States will remain engaged in Afghanistan for several more years, and it will likely embark on relief efforts in other war-torn countries as well. It is therefore critical that the government heed the lessons collected over the years by its watchdogs: the Commission on Wartime Contracting, which ceased operations in September 2011, the Special Inspector General for Iraq Reconstruction, which closed its doors in October 2013, and SIGAR, which will carry on until appropriated funding for the reconstruction drops below $250 million.”

http://www.pogo.org/blog/2016/09/government-watchdog-identifies-lessons-from-afghanistan-reconstruction.html

 

Military Aid To Israel $38 Billion Over 10 Years

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Image:  “Accuracy in Media.Org”

“THE WASHINGTON POST”

“Israel and the United States have reached an agreement that will provide Israel an unprecedented amount of military aid over a decade.

U.S. officials declined to comment on the specifics of the agreement.

The State Department said the agreement, known as a memo of understanding, will be signed Wednesday afternoon. Jacob Nagel, Israel’s acting national security adviser, arrived in Washington on Tuesday morning to sign on behalf of his country.

The agreement is expected to give Israel as much as $3.8 billion a year over 10 years, more aid than the United States has ever provided to any country. That represents a significant increase over the $3.1 billion the United States gives annually now, a figure that increases to about $3.5 billion a year with aid supplements approved by Congress. That is also much lower than the $4 billion to $5 billion a year that Israeli Prime Minister Benjamin Netanyahu sought.

Netanyahu appears to have agreed to some other major concessions. The newspaper Haaretz reported that he agreed to limit Israel’s ability to lobby Congress for more aid, unless it is at war. The Israeli leader also agreed that Israel will not ask Congress for more aid to develop missile defense systems.

In another concession that was controversial in Israel’s ­defense industry, Netanyahu agreed to phase out a special arrangement that for decades has allowed Israel to spend 26 percent of U.S. aid on defense research, development and procurement. No other country receiving U.S. funding is allowed to do so. But Israel was granted that exception in the 1980s so it could build up its nascent defense infrastructure. With Israel’s defense industry now thriving, the Obama administration wanted U.S. aid directed to American companies providing goods and services.

Negotiations for the aid package have been underway since November to replace a memo of understanding that will end in 2018. The new agreement will run from 2019 through 2028.

Salai Meridor, who was Israel’s ambassador when the last agreement was signed, welcomed the deal, despite some reservations.

“I don’t measure this relationship by the dollar number and whatever the exact number is. It is a reflection of the great relationship between the state of Israel and America,” he said.

But Meridor called it disappointing to have limitations on Israel requesting more aid from Congress in the future.

“Many of the important initiatives that have cemented the relationship have been the result of Congress’s initiative,” he said. “I think this is an element of the agreement we might all regret in the future.”

The talks have been complicated by substantive, political and personal differences. Netanyahu and President Obama have had a famously contentious relationship that reached a boiling point in 2015 when the Israeli leader appeared before Congress to lobby against the Iran nuclear deal.

The Obama administration wanted the increased military aid package completed before the end of his term to demonstrate the United States’ commitment to Israeli security after the agreement with Iran.

“It’s a good deal for Israel and a good deal for the United States,” said Ilan Goldenberg, a fellow at the Center for a New American Security. “It sends a signal to those in the region that the U.S.-Israel relationship is a bedrock in the Middle East. Whatever difficult relationship exists between the president and the prime minister, at a strategic level, the relationship is better than that. Even if Obama and Netanyahu don’t like each other very much, Israel and the United States are willing to make a commitment to Israel’s security.”

The agreement has political advantages for both leaders. Netanyahu has been criticized for his aggressive tactics on the Iran nuclear deal, with critics saying he has poisoned relations with Israel’s greatest ally. Obama has insisted that the United States remains Israel’s biggest protector, despite any personal and political differences with the prime minister.

“In financial terms, Israel maybe could have gotten more in the summer of 2015 than the summer of 2016,” said David Makovsky, a fellow with the Washington Institute for Near East Policy. “But it’s still an increase. What seems to have driven the idea of coming to closure on this now is that both sides would like to get this done before the election.”

Israel remains concerned about the threat posed by Iran, particularly now that its isolation has been eroded with the Iran nuclear deal.

“We do not want this to be interpreted as being compensated for a deal we did not consent to,” said Eran Lerman, a former deputy national security adviser to the prime minister.

“We know Israel was not alone in the region of feeling worried about the consequences,” he added.

It remains to be seen whether the $3.8 billion a year represents a ceiling or a floor. The agreement appears to rein in Israel’s ability to ask for more money. But members of Congress, particularly those involved in appropriations, have expressed a reluctance to give up their ability to allocate money based on their sense of priorities.”

https://www.washingtonpost.com/world/national-security/agreement-on-military-aid-for-israel-expected-within-days/2016/09/13/50847ad8-79c1-11e6-bd86-b7bbd53d2b5d_story.html