Gates Seeks Military Budget Reform ... But It Is Enough?
NYT: "Defense Secretary Robert M. Gates announced a major reshaping of the Pentagon budget on Monday, with deep cuts in many traditional weapons systems but new billions of dollars for others, along with more troops and new technology to fight the insurgencies in Iraq and Afghanistan ... the first broad rethinking of American military strategy under the Obama administration, which plans to shift more money to counterterrorism in Iraq and Afghanistan while spending less on preparations for conventional warfare against large nations like China and Russia."
W. Post: "highlights Gates's long-stated desire to increase spending on surveillance systems and other relatively low-tech weapons that are best suited for guerrilla or irregular war, which has traditionally been an industry backwater."
Wonk Room's Matt Duss gives qualified approval: "I don’t think it’s overstating things to say that Defense Secretary Gates’ announcement of his 2010 defense budget recommendations represents an appreciable shift in the way that the United States approaches the issue of military acquisitions. Applying lessons learned in the wars in Afghanistan and Iraq, as well as signifying a recognition that the continuing economic crisis places real constraints on defense spending, Gates’ recommendations are an important — but by no means comprehensive — move toward a responsible re-balancing of America’s defense spending priorities."
Democracy Arsenal's Max Bergmann gives strong approval: "This budget actually goes through and makes the hard choices and trade offs that needed to be made."
OurFuture.org's Armand Biroonak withholds the applause: "Secretary Gates has stated the defense funding 'spigot' is closing. Adding that the Pentagon will have to reform, make tough spending choices, and expand accountability. That is a good warning, but without the pressure from funding cuts, the Pentagon’s record of self-imposed reform is dismal. Take DOD’s latest efforts to improve its major weapons acquisitions process. The GAO again this March found their efforts insufficient due to the absence of proper oversight. The system is plagued with nearly $300 billion in cost overruns, numerous scheduling delays and inadequate testing…Secretary Gates’ recent announcement eliminates some major programs, such as the F-22 Raptor jet, but stops well short of cutting the numerous weapons systems costing tens of billions."
Politico on Senate pushback against missile defense cuts: "[Sen. Mark Begich (D-Alaska)] and five other senators weighed in with a joint letter to Gates opposing deep cuts in missile defense, saying the programs 'are critically important to protecting our homeland and our allies against the growing threat of ballistic missiles.'" ALSO Politico rounds up different congressional camps on military spending.
WH Prepares For Congressional Slog
Politico on WH expectations for major legislation: "here’s the administration’s dream timetable: By the August recess, House and Senate committees will have sent health care bills to the floor and Waxman’s House committee will have reported out a comprehensive energy bill."
Single-Payer Congresspeople Get Behind Public Plan Option
AFL-CIO blog assesses the significance of Congressional Progressive Caucus drawing line in sand over public health plan option: "The CPC long has backed a single-payer approach for health care reform. But last week, the group said that is not a line in the sand that could not be crossed to win its backing of health care reform legislation. In a letter to congressional leaders, the CPC said its 77 members could support a public insurance plan option within a reformed health care system that maintained private insurance. But, the group also stressed that it’s the 'minimum' needed to win their support for reform legislation."
NYT editorial board says give public plan option a shot: "A new public plan is neither the cornerstone of health care reform nor the death knell of private insurance. It should be tried as one element of comprehensive reform. If, over time, a vast majority decides the government plan is superior, so be it."
Politico on the status of health care in budget negotiations: "When Congress returns from its two-week Easter recess, Democratic leaders will decide whether to include instructions in the final budget bill to allow health care to move through a streamlined legislative process known as reconciliation, which requires 51 votes for passage in the Senate rather than a filibuster-proof 60 votes. There were signs in the past week that Democrats were warming to the idea ... Congressional Democrats say they expect a final budget soon after the recess ends April 20, but don’t be surprised if House-Senate negotiators take a little longer.
Ezra Klein takes on charge of longer waiting lines in the LA Times: "Long lines come up frequently in the American healthcare discussion, the symbol of all that is to be feared about a government-run system. And it's true that in Canada and Britain, the two countries most often cited in discussions of what nationalized healthcare might mean, some patients report having to wait months for some elective treatments. Sometimes. But we've got waiting lines too -- along with 50 million uninsured and a system that costs more than twice as much per person as that of any other country. We've just managed to hide our lines through clever statistical gimmickry …Moreover, surveys conducted by the Organization for Economic Cooperation and Development have found that most countries don't have waiting lines or the uninsured. Not Germany or France or Japan or Sweden, all of which have more of a mix of public and private options"
Lincoln Comes Out Against EFCA ... Then Steps Back
HuffPost's Sam Stein notes despite yesterday's headlines, Sen. Lincoln is still open to compromise : "Senator Blanche Lincoln on Monday announced that she would vote against the Employee Free Choice Act. But later she elaborated, leaving the door open for her to eventually get on board a revised version of the union-backed legislation."
Tapped's Tim Fernolz notes compromise does not appear imminent: "Both Specter and Lincoln made sure to emphasize the 'current form' dodge, which means that the bill could attract their support in a different format, but neither labor nor major business leaders have yet shown any interest in looking for a satisfactory compromise.
The Plum Line: "...she’s citing the economy as justification for her opposition. The nightmare scenario for labor is that Dems — as Lincoln has done here — use the economy as cover for opposing the measure for other reasons."
Mother Jones busts compromise proponents Whole Foods and Starbucks for "union-busting tactics:" "That Whole Foods stands accused of union busting comes at an inconvenient time for the company, which late last month unveiled the Committee for a Level Playing Field for Union Elections, a partnership with Starbucks and Costco that aims to rewrite the Employee Free Choice Act … the reality is that both [Whole Food and Starbucks] have repeatedly resorted to tough union-busting tactics—often breaking the law along the way. In recent years they fired union organizers or packed worker rolls with anti-union employees in efforts to prevent workers from forming unions or winning union contracts, government records show."
Wind Power Could Completely Replace Coal
Interior Sec promotes offshore wind at public hearing. AP: "Windmills off the East Coast could generate enough electricity to replace most, if not all, of the coal-fired power plants in the United States, Interior Secretary Ken Salazar said Monday.
WSJ on coastal drilling prospects: "[Salazar] said the Obama administration hasn't decided whether to allow additional drilling in the areas of the outer continental shelf that have traditionally been off limits, saying only that the waters in question would be part of a 'comprehensive energy program' that includes renewable energy sources such as wind, in addition to fossil fuels.
Grist's David Roberts defends House clean energy/climate protection bill from enviro critics:
Some of the flaws in the carbon part, many necessary concessions to political reality, are compensated in part by other parts ... the silence on permit allocations and the high number (some two billion tons) of offsets allowed to meet targets….
...The worry with allowing too many offsets is that short-term action can be delayed. But that’s precisely what the energy and grid portions of the bill are designed to avoid. They are designed to create an immediate market driver for renewables, and to put together the infrastructure to enable them.
The worry with giving away permits is that energy prices will rise and hurt vulnerable families. But that’s exactly what the efficiency portion of the bill is designed to avoid—efficiency lowers energy bills even as energy costs rise.
Breakthrough Institute's Teryn Norris and Jesse Jenkins advocate rhetorical emphasis on clean energy investment over climate: "So how can Democrats win? They must quickly follow President Obama's lead by shifting the focus of climate legislation from pollution regulation to bold government investment in the clean energy economy. Obama has consistently placed clean energy investment at the center of his economic agenda, from his signature campaign proposal for a $150 billion clean energy project, to his advocacy for energy investments throughout the economic stimulus debate. The result was clear: 78% of voters expressed strong support for clean energy investment, according to a post-election poll, and the stimulus package was a success."
TNR's Brad Plumer on the meaning of Antarctica melting: "it's the same story in Antarctica as you see pretty much anywhere else—the changes are happening more quickly than most scientists had expected. (See, for example, this Reuters write-up of two new studies showing faster-than-projected melting at both poles.) Turns out the skeptics were right. The models and forecasts were mistaken. They were just off in the wrong direction..."
Politico reviews different House proposals on how companies should pay for carbon pollution:
The draft bill was purposely vague on the issue, but the sponsors — House Energy and Commerce Committee Chairman Henry A. Waxman (D-Calif.) and Energy and Environment Subcommittee Chairman Ed Markey (D-Mass.) — support giving away some free allowances to industries that are most vulnerable to international competition, such as steel, glass and paper. “There are trade-sensitive, energy-intensive industries that need assistance during the transition,” said Markey.
Rep. Jay Inslee (D-Wash.), a member of the Energy and Commerce Committee, has proposed setting aside about 15 percent of the potential revenue as free allowances for those industries. That type of approach is favored by lawmakers from manufacturing states, who fear that costly compliance with a cap-and-trade system could force fossil-fuel burning industries to buy overseas from cheaper, less-regulated countries like China and India...
...But members of the House Ways and Means Committee, which has jurisdiction over all revenue provisions, have voiced support for the “cap and dividend” approach to tackling carbon emissions and climate change. Cap and dividend, popularized by California entrepreneur Peter Barnes, regulates the first sellers of fossil fuels, such as the producers of coal, crude oil and natural gas. That’s a shift from cap and trade, which targets electrical utilities, factories and other “downstream” consumers.
Last week, Ways and Means Committee member Chris Van Hollen (D-Md.) introduced a cap-and-dividend bill that proposed selling all of the allowances at auction — reserving no free permits for trade-sensitive industries — and giving all the proceeds back to consumers as a “monthly consumer dividend” to offset any possible increase in energy prices.
“We are going to be putting a price on carbon-intensive fuels to create an incentive to purchase clean energy, but we’re also going to be minimizing the hit on consumer pocketbooks in the process,” he said.
GM Update
Bloomberg: "General Motors Corp. is speeding up preparations for a possible bankruptcy filing even as directors scout for deeper savings this week to avoid that outcome, people familiar with the plans said. GM would focus on forming a new company from its best assets if court protection is needed, said the people, who asked not to be named because the details aren’t public. The efforts to set a new cost-cut goal center on how to go beyond a proposal to slash debt by 46 percent and shed 47,000 jobs in 2009, and will include talks with Treasury officials, the people said."
GM Says Volt Will Stick Around Even if it Loses Money reports Treehugger
Banking Roundup
Jeff Sachs in HuffPost calls toxic assets plan "disastrous": "Insiders can easily game the system created by Geithner and Summers to cost up to a trillion dollars or more to the taxpayers." TNR's Noam Scheiber defends: "there may be moral objections to such an arrangement ... But that's different from arguing that it can't work." Anonymous Liberal responds: "I think Scheiber is missing the point pretty badly here. Even if your plan is to do a good bank/bad bank model and have the government buy up all the bad assets, you still don't want the goverment to be paying the banks near face value for assets that are worth pennies on the dollar."
Study Finds Toxic Assets Truly Worthless, Geithner’s Plan ‘Will Simply Transfer Wealth’ To Banks, reports Wonk Room
McClatchy raises questions about AIG bailout:
The Federal Reserve Bank of New York in November chose not to pursue tough negotiations with large foreign and domestic banks and instead allowed them to receive 100 cents on the dollar in government funds to settle tens of billions of dollars of exotic financial bets guaranteed by American International Group.
At the time, Timothy Geithner, now Treasury Secretary, headed the powerful New York Fed. On his watch, the decision was made to forgo a reduced payout — called a "haircut" in industry parlance — to creditors of AIG to prevent financial chaos around the world, the officials told McClatchy. Had the Fed negotiated a reduction of just 10 cents to 15 cents on the dollar, it could've saved between $2 billion and $3 billion.
The revelation sheds new light on last month's disclosure by AIG that it used loans from the New York Fed to pay more than $17 billion to foreign creditors such as France's Societe Generale and Credit Agricole, and Germany's Deutsche Bank. U.S. investment banks, including Goldman Sachs and Merrill Lynch, also were paid $10 billion in what amounted to a back-door bailout of the troubled institutions that had financed the insurer's risky investments.
NYT's Sorkin questions feasibility and legality of FDIC role in toxic assets plan: "It’s going to be insuring 85 percent of the debt, provided by the Treasury, that private investors will use to subsidize their acquisitions of toxic assets. The program, extraordinary in its size and scope, is the equivalent of TARP 2.0. Only this time, Congress didn’t get a chance to vote."
ePluribus Media's Chris White rips lack of transparency at Federal Reserve: " Bernanke has been pursuing an unparalled restructuring of US finance without interference from anyone, no questions asked,on a far larger scale than even he and Paulson asked for in their original 3-page enabling legislation draft, which was rejected by Congress. Doing it through the Fed has kept Congress out of the loop."
Salon explores different camps of economist views on root problem of the crisis:
...the first doctor is the equivalent of those who treat the credit crisis caused by subprime mortgages as the problem, rather than as a symptom of an underlying disorder …
...ll that is fine as far as it goes, says Economy Doctor No. 2. But it does not go far enough. It does not address the patient's underlying problem (the patient's "pneumonia"). It neglects the connection between the financial crisis and global trade imbalances, and how those imbalances were created by American binging and Asian abstemiousness...
...Doctor 3. Yes, she says, the regulatory system was broken -- and yes, the underlying problem was the global savings glut and the interaction of Asian mercantilism with American consumerism. But, says the third doctor, there is an underlying problem underlying the underlying problem of unbalanced global trade (try saying that three times). The bubble-blowing system of unbalanced trade never would have arisen in the first place, had employers on both sides of the Pacific shared more of the gains from productivity growth with their workers.
NY Times throws cold water on G-20's main accomplishment: "It is an extraordinary number for extraordinary times: $1.1 trillion in aid, to be pumped into the world’s financial bloodstream. [But] the $1 trillion figure looks as wishful as the soaring words in the communiqué issued by the Group of 20. Some of the money has yet to be pledged, some is double-counted and some would be counted in a 'synthetic currency' that is not actually real money."
But also offers silver lining: "the credit markets, where the financial crisis began, are also showing signs of a spring awakening."
CBS/NYT Poll Chock Full Of Paradoxes
* 66% approve of Obama's job performance
* 63% trust Obama more than "Republicans in Congress" on the economy, 61% on national security
* 48% support "smaller government providing fewer services" versus only 41% for more services
* 55% says Obama is "trying to accomplish about the right amount" and not "too much"
* 65% say "middle and lower income people should pay less in taxes than they do now and upper income people pay more"
* 56% say "big business" has "too much influence" over the Democratic Party
* 71% say Obama "cares more" about "ordinary people" than "large corporations"
* 33% support "the Obama Administration's proposals to provide financial aid to the banking industry"
* 47% say "the Obama administration's proposals to help the banking system will benefit all Americans by addressing a broad economic problem" (versus 40% who say it will only help bankers.)
* 71% say "The government should increase regulations on [financial] institutions"
* 64% say "in order to receive federal funds, companies should have to accept instructions from the government on how to run their business"
* 57% are "willing to pay higher taxes so that all Americans have health insurance"
* 37% think it would "hurt the economy" to "guarantee health insurance for all Americans" (50% say it would help or have no effect).
* 63% are "very concerned" that "increasing the national debt will create hardships for future generations of Americans"
* Statistical tie between "stimulate the national economy, even if it means increasing the budget deficit" and "[don't] spend money to stimulate the national economy and ... instead on reducing the budget deficit"
* 56% say Obama's budget "has the right priorities"
* 66% say "trade with other countries" is "good for the U.S. economy"
* 60% support "trade restrictions" over "free trade"
Breakfast Sides
Right-leaning Dem Senators tell Politico the fact that their coalition fell apart on the budget means pressure on them was ineffective.
Dean Baker jousts with USA Today editorial board on Social Security: "...the cutters are proposing that the government default on the bonds held by the Social Security trust fund: U.S. government bonds that were purchased with money raised through the designated Social Security tax. It is truly incredible, and unbelievably galling, that anyone in a position of responsibility would suggest defaulting on the government bonds held by the Social Security trust fund at the precise moment that the government is honoring trillions of dollars of bonds issued by private banks."
