George Friedman from Stratfor has written very sobering assessment of the political realities in Iraq and how it affect our dealings with Iran. This will be a very thought provoking read. I'm currently working on a U.S debt and deficit blog post which should be up later this week. Take care talk you later,.
"The U.S. Withdrawal and Limited Options in Iraq is republished with permission of STRATFOR."
Read more: The U.S. Withdrawal and Limited Options in Iraq | STRATFOR
By George Friedman
It is August 2010, which is the month when the last U.S. combat troops are scheduled to leave Iraq. It is therefore time to take stock of the situation in Iraq, which has changed places with Afghanistan as the forgotten war. This is all the more important since 50,000 troops will remain in Iraq, and while they may not be considered combat troops, a great deal of combat power remains embedded with them. So we are far from the end of the war in Iraq. The question is whether the departure of the last combat units is a significant milestone and, if it is, what it signifies.
The United States invaded Iraq in 2003 with three goals: The first was the destruction of the Iraqi army, the second was the destruction of the Baathist regime and the third was the replacement of that regime with a stable, pro-American government in Baghdad. The first two goals were achieved within weeks. Seven years later, however, Iraq still does not yet have a stable government, let alone a pro-American government. The lack of that government is what puts the current strategy in jeopardy.
The fundamental flaw of the invasion of Iraq was not in its execution but in the political expectations that were put in place. As the Americans knew, the Shiite community was anti-Baathist but heavily influenced by Iranian intelligence. The decision to destroy the Baathists put the Sunnis, who were the backbone of Saddam’s regime, in a desperate position. Facing a hostile American army and an equally hostile Shiite community backed by Iran, the Sunnis faced disaster. Taking support from where they could get it — from the foreign jihadists that were entering Iraq — they launched an insurgency against both the Americans and the Shia.
The Sunnis simply had nothing to lose. In their view, they faced permanent subjugation at best and annihilation at worst. The United States had the option of creating a Shiite-based government but realized that this government would ultimately be under Iranian control. The political miscalculation placed the United States simultaneously into a war with the Sunnis and a near-war situation with many of the Shia, while the Shia and Sunnis waged a civil war among themselves and the Sunnis occasionally fought the Kurds as well. From late 2003 until 2007, the United States was not so much in a state of war in Iraq as it was in a state of chaos.
The new strategy of Gen. David Petraeus emerged from the realization that the United States could not pacify Iraq and be at war with everyone. After a 2006 defeat in the midterm elections, it was expected that U.S. President George W. Bush would order the withdrawal of forces from Iraq. Instead, he announced the surge. The surge was really not much of a surge, but it created psychological surprise — not only were the Americans not leaving, but more were on the way. Anyone who was calculating a position based on the assumption of a U.S. withdrawal had to recalculate.
The Americans understood that the key was reversing the position of the Sunni insurgents. So long as they remained at war with the Americans and Shia, there was no possibility of controlling the situation. Moreover, only the Sunnis could cut the legs out from under the foreign jihadists operating in the Sunni community. These jihadists were challenging the traditional leadership of the Sunni community, so turning this community against the jihadists was not difficult. The Sunnis also were terrified that the United States would withdraw, leaving them at the mercy of the Shia. These considerations, along with substantial sums of money given to Sunni tribal elders, caused the Sunnis to do an about-face. This put the Shia on the defensive, since the Sunni alignment with the Americans enabled the Americans to strike at the Shiite militias.
Petraeus stabilized the situation, but he did not win the war. The war could only be considered won when there was a stable government in Baghdad that actually had the ability to govern Iraq. A government could be formed with people sitting in meetings and talking, but that did not mean that their decisions would have any significance. For that there had to be an Iraqi army to enforce the will of the government and protect the country from its neighbors, particularly Iran (from the American point of view). There also had to be a police force to enforce whatever laws might be made. And from the American perspective, this government did not have to be pro-American (that had long ago disappeared as a viable goal), but it could not be dominated by Iran.
Iraq is not ready to deal with the enforcement of the will of the government because it has no government. Once it has a government, it will be a long time before its military and police forces will be able to enforce its will throughout the country. And it will be much longer before it can block Iranian power by itself. As it stands now, there is no government, so the rest doesn’t much matter.
The geopolitical problem the Americans face is that, with the United States gone, Iran would be the most powerful conventional power in the Persian Gulf. The historical balance of power had been between Iraq and Iran. The American invasion destroyed the Iraqi army and government, and the United States was unable to recreate either. Part of this had to do with the fact that the Iranians did not want the Americans to succeed.
For Iran, a strong Iraq is the geopolitical nightmare. Iran once fought a war with Iraq that cost Iran a million casualties (imagine the United States having more than 4 million casualties), and the foundation of Iranian national strategy is to prevent a repeat of that war by making certain that Iraq becomes a puppet to Iran or, failing that, that it remains weak and divided. At this point, the Iranians do not have the ability to impose a government on Iraq. However, they do have the ability to prevent the formation of a government or to destabilize one that is formed. Iranian intelligence has sufficient allies and resources in Iraq to guarantee the failure of any stabilization attempt that doesn’t please Tehran.
There are many who are baffled by Iranian confidence and defiance in the face of American pressure on the nuclear issue. This is the reason for that confidence: Should the United States attack Iran’s nuclear facilities, or even if the United States does not attack, Iran holds the key to the success of the American strategy in Iraq. Everything done since 2006 fails if the United States must maintain tens of thousands of troops in Iraq in perpetuity. Should the United States leave, Iran has the capability of forcing a new order not only on Iraq but also on the rest of the Persian Gulf. Should the United States stay, Iran has the ability to prevent the stabilization of Iraq, or even to escalate violence to the point that the Americans are drawn back into combat. The Iranians understand the weakness of America’s position in Iraq, and they are confident that they can use that to influence American policy elsewhere.
American and Iraqi officials have publicly said that the reason an Iraqi government has not been formed is Iranian interference. To put it more clearly, there are any number of Shiite politicians who are close to Tehran and, for a range of reasons, will take their orders from there. There are not enough of these politicians to create a government, but there are enough to block a government from being formed. Therefore, no government is being formed.
With 50,000 U.S. troops still in Iraq, the United States does not yet face a crisis. The current withdrawal milestone is not the measure of the success of the strategy. The threat of a crisis will arise if the United States continues its withdrawal to the point where the Shia feel free to launch a sustained and escalating attack on the Sunnis, possibly supported by Iranian forces, volunteers or covert advisers. At that point, the Iraqi government must be in place, be united and command sufficient forces to control the country and deter Iranian plans.
The problem is, as we have seen, that in order to achieve that government there must be Iranian concurrence, and Iran has no reason to want to allow that to happen. Iran has very little to lose by, and a great deal to gain from, continuing the stability the Petraeus strategy provided. The American problem is that a genuine withdrawal from Iraq requires a shift in Iranian policy, and the United States has little to offer Iran to change the policy.
From the Iranian point of view, they have the Americans in a difficult position. On the one hand, the Americans are trumpeting the success of the Petraeus plan in Iraq and trying to repeat the success in Afghanistan. On the other hand, the secret is that the Petraeus plan has not yet succeeded in Iraq. Certainly, it ended the major fighting involving the Americans and settled down Sunni-Shiite tensions. But it has not taken Iraq anywhere near the end state the original strategy envisioned. Iraq has neither a government nor a functional army — and what is blocking it is Tehran.
One impulse of the Americans is to settle with the Iranians militarily. However, Iran is a mountainous country of 70 million, and an invasion is simply not in the cards. Airstrikes are always possible, but as the United States learned over North Vietnam — or from the Battle of Britain or in the bombing of Germany and Japan before the use of nuclear weapons — air campaigns alone don’t usually force nations to capitulate or change their policies. Serbia did give up Kosovo after a three-month air campaign, but we suspect Iran would be a tougher case. In any event, the United States has no appetite for another war while the wars in Iraq and Afghanistan are still under way, let alone a war against Iran in order to extricate itself from Iraq. The impulse to use force against Iran was resisted by President Bush and is now being resisted by President Barack Obama. And even if the Israelis attacked Iran’s nuclear facilities, Iran could still wreak havoc in Iraq.
Two strategies follow from this. The first is that the United States will reduce U.S. forces in Iraq somewhat but will not complete the withdrawal until a more distant date (the current Status of Forces Agreement requires all American troops to be withdrawn by the end of 2011). The problems with this strategy are that Iran is not going anywhere, destabilizing Iraq is not costing it much and protecting itself from an Iraqi resurgence is Iran’s highest foreign policy priority. That means that the decision really isn’t whether the United States will delay its withdrawal but whether the United States will permanently base forces in Iraq — and how vulnerable those forces might be to an upsurge in violence, which is an option that Iran retains.
Another choice for the United States, as we have discussed previously, is to enter into negotiations with Iran. This is a distasteful choice from the American point of view, but surely not more distasteful than negotiating with Stalin or Mao. At the same time, the Iranians’ price would be high. At the very least, they would want the “Finlandization” of Iraq, similar to the situation where the Soviets had a degree of control over Finland’s government. And it is far from clear that such a situation in Iraq would be sufficient for the Iranians.
The United States cannot withdraw completely without some arrangement, because that would leave Iran in an extremely powerful position in the region. The Iranian strategy seems to be to make the United States sufficiently uncomfortable to see withdrawal as attractive but not to be so threatening as to deter the withdrawal. As clever as that strategy is, however, it does not hide the fact that Iran would dominate the Persian Gulf region after the withdrawal. Thus, the United States has nothing but unpleasant choices in Iraq. It can stay in perpetuity and remain vulnerable to violence. It can withdraw and hand the region over to Iran. It can go to war with yet another Islamic country. Or it can negotiate with a government that it despises — and which despises it right back.
Given all that has been said about the success of the Petraeus strategy, it must be observed that while it broke the cycle of violence and carved out a fragile stability in Iraq, it has not achieved, nor can it alone achieve, the political solution that would end the war. Nor has it precluded a return of violence at some point. The Petraeus strategy has not solved the fundamental reality that has always been the shadow over Iraq: Iran. But that was beyond Petraeus’ task and, for now, beyond American capabilities. That is why the Iranians can afford to be so confident.
Wednesday, August 18, 2010
Wednesday, August 4, 2010
My take on illegal immigration and border security
One of the hottest political issues this year is the Arizona illegal immigration bill. Some of the biggest issues raised are whether the bill racially profiles or whether Arizona has overstepped it bounds trying to supersede the feds on immigration issues. I posted the law below and you can come to your own conclusions. I will say this the issue of whether Arizona law conflicts with federal immigration law is being debated in court and most likely will go all the way to the Supreme Court to be settled.
In this blog post we will look at the angles three angles of immigration; the economic cost of illegal immigrations versus its gains, border security issues, and politics behind the law and Immigration in general.
Economic Cost vs. Benefits of illegal Immigration
Before any public policy is enacted a cost-benefit analysis has to be done. If the benefits out weighs the cost you go forward with the policy if the inverse is true you don’t. Now there hasn’t been an ostensible support of illegal immigration by policy makers but the lack of significant action to stop it, tell me illegal immigration has had tacit support for years. Why? The cheap labor from illegal aliens helps American business men by lowering the cost of labor which helps the bottom line. Plus many illegal aliens do the dirty, dull, and dangerous jobs (the three D’s) that many American will not do. Mexico has also benefited from the United States lax enforcement of immigration law. Remittances from illegal aliens sent to relatives in Mexico helps their economy and money from the drug trade is a boon to their economy (more on that later).
As far as economic cost of illegal immigration; illegal immigrants obtain wages below market prices and put downward pressure on the wages of legal working Americans doing the same work. Additionally illegal aliens want social services (welfare for the poor, schooling for children, healthcare etc). This cost wouldn’t have occurred if the illegal immigrants weren’t there in the first place. The federal government basically lived with the idea of businessmen benefiting from the labor and state/local governments and low wage low skill worker bearing the cost of this policy. However these realties have changed big time.
According to a department of Homeland security report illegal immigration in Arizona has increased form 330,00 in 2000 to 560,000 in 2008.(2) A 70 percent increase. This increase in illegal aliens is causing a huge increase in their social cost. Also, the benefits of illegal immigration have been diminished because the state of Arizona has begun to crackdown on the hiring of illegal immigrants. So the cost of illegal immigration is going up while the benefits are going down; forcing policy makers to adjust to this new reality.
Border Security and the Drug Trade
There is a drug war going on US-Mexican border. Drug organizations have a with ton of money (thanks to U.S consumption illicit drugs) and fire power(thanks to the black markets and shipments from many countries) are fighting each other and the Mexican Government for turf and shipment routes to the United States and unfortunately they are winning. Countless police chief and politicians have been killed and the Associated Press report stated that Mexican President Felipe Calderon says 28,000 people have been killed since 2006; the year the Mexican government under his leadership began to crackdown on drug organizations. (3)To get a better grasp of the drug trade check out the map below of the movement of drug to and through Mexico.
This map is from Stratfor a private intelligence company in which I’m a member (had to throw that in) notice the routes that go through Arizona. (4). One quick example of how drug moves across our southern border between July 29th and August 4, 2010 the US Border Patrol seized 8794 pounds of marijuana, 8 criminal aliens and 8 gang member.(5) The United states has to provided more technology, more manpower and more funds toward the securing of the southern border. I don’t intend to leave out the northern which need secure too but the difference between the two borders is Canada not in danger of becoming a failed state due to drug organization running the country. Canadian are not fleeing to America for a better life over burden Northern states. Plus we don’t have a history of hostility with Canada like we had with Mexico during the 19th century. Our political boundaries and cultural boundary are clear unlike the political and cultural boundaries with Mexico. Dr. George Friedman CEO and founder from Stratfor go in greater detail on this issue in his latest weekly Geopolitical report (6)
The Politics of Immigration in America
Immigration in general and the Arizona illegal immigration law in particular has become heated issue. Opponents of the law call supporters racist and xenophobic while supporters of the law call opponents ill-informed of the letter of the law and the dire situation on the border. I think one of the impetuses behind the law is the murder of a rancher named Rob Krentz back in March. He was prominent rancher and was allegedly murdered by an illegal alien in Cochise County (7); a county in southeast Arizona directly on the border with Mexico.
His murder set of a political fire storm in which the in Arizona voters demanded elected officials in the state and in Washington get the border and illegal immigration under control. Subsequently, the Arizona illegal immigration bill was crafted by the Arizona house and senate and signed by Governor Jan Brewer.
The conventional wisdom in the immigration debate particularly when dealing with Latinos is that Democrats like the huge wave of Latinos to America because when they become legal the majority vote democratic; while Republicans like illegal immigrants for the cheap labor they provided. Republicans across America especially in Arizona have shifted against illegal immigration becoming more concerned about the social cost and security issues than the economic benefits that illegal immigrant’s cheap labor could bring. An interesting shift I must say.
If the federal government put the resources and manpower on the borders first I think you could get broad support for immigration reform. I don’t think it practical to deport tens of millions of people as some on the right basically advocate when they say no “amnesty” but people on the political left got it wrong when they don’t see anything wrong with people who broke the law paying no price and jumping in front of other people who want to lawfully enter the country and become citizens seems like a moral hazard to me. We need serious people to come together and address this immigration issue head on. I think the creation of the Arizona law was understandable, certainly not a panacea; but a call for the federal government to do their job and stop dithering on this important issue. One of the stumbling blocks to the immigration issue and particularly illegal immigration from Mexico is the drug trade and unless we face the problem of American consumption of illicit drugs well be fighting an uphill batte to secure the southern border.
Endnotes
1) Arizona Senate. “Arizona new immigration law-SB 1070 as amended by HB 2162” azgovernor.gov. 23 Apr 2010. 04 Aug 2010. < http://www.azleg.gov/alispdfs/council/SB1070-HB2162.PDF>.
2) Michael Hoeffer, Nancy Rytina, and Bryan C. Baker. “Estimates of the unauthorized immigrant population residing in the United States: January 2008.” dhs.gov. Feb 2009. 04 Aug 2010. < http://www.dhs.gov/xlibrary/assets/statistics/publications/ois_ill_pe_2008.pdf>.
3) “Mexico: 28,000 killed in drug violence since 2006”. news.yahoo.com. 04 Aug 2010. 04 Aug 2010.
4) “Drug Routes” Stratfor.com 17 May 2010. 04 Aug 2010.
5) “USBP Weekly Blotter:July 29th- Aug 4th”. CBP.gov 04 Aug 2010. 04 Aug 2010..
6) George Friedman.” Arizona,Borderlands and U.S-Mexican relation”. Stratfor.com 03 Aug 2010. 04 Aug 2010..
7) Leo W Banks. “The Krentz Bonfire” tusconweekly.com. 29 April 2010. 04 Aug 2010..
In this blog post we will look at the angles three angles of immigration; the economic cost of illegal immigrations versus its gains, border security issues, and politics behind the law and Immigration in general.
Economic Cost vs. Benefits of illegal Immigration
Before any public policy is enacted a cost-benefit analysis has to be done. If the benefits out weighs the cost you go forward with the policy if the inverse is true you don’t. Now there hasn’t been an ostensible support of illegal immigration by policy makers but the lack of significant action to stop it, tell me illegal immigration has had tacit support for years. Why? The cheap labor from illegal aliens helps American business men by lowering the cost of labor which helps the bottom line. Plus many illegal aliens do the dirty, dull, and dangerous jobs (the three D’s) that many American will not do. Mexico has also benefited from the United States lax enforcement of immigration law. Remittances from illegal aliens sent to relatives in Mexico helps their economy and money from the drug trade is a boon to their economy (more on that later).
As far as economic cost of illegal immigration; illegal immigrants obtain wages below market prices and put downward pressure on the wages of legal working Americans doing the same work. Additionally illegal aliens want social services (welfare for the poor, schooling for children, healthcare etc). This cost wouldn’t have occurred if the illegal immigrants weren’t there in the first place. The federal government basically lived with the idea of businessmen benefiting from the labor and state/local governments and low wage low skill worker bearing the cost of this policy. However these realties have changed big time.
According to a department of Homeland security report illegal immigration in Arizona has increased form 330,00 in 2000 to 560,000 in 2008.(2) A 70 percent increase. This increase in illegal aliens is causing a huge increase in their social cost. Also, the benefits of illegal immigration have been diminished because the state of Arizona has begun to crackdown on the hiring of illegal immigrants. So the cost of illegal immigration is going up while the benefits are going down; forcing policy makers to adjust to this new reality.
Border Security and the Drug Trade
There is a drug war going on US-Mexican border. Drug organizations have a with ton of money (thanks to U.S consumption illicit drugs) and fire power(thanks to the black markets and shipments from many countries) are fighting each other and the Mexican Government for turf and shipment routes to the United States and unfortunately they are winning. Countless police chief and politicians have been killed and the Associated Press report stated that Mexican President Felipe Calderon says 28,000 people have been killed since 2006; the year the Mexican government under his leadership began to crackdown on drug organizations. (3)To get a better grasp of the drug trade check out the map below of the movement of drug to and through Mexico.
This map is from Stratfor a private intelligence company in which I’m a member (had to throw that in) notice the routes that go through Arizona. (4). One quick example of how drug moves across our southern border between July 29th and August 4, 2010 the US Border Patrol seized 8794 pounds of marijuana, 8 criminal aliens and 8 gang member.(5) The United states has to provided more technology, more manpower and more funds toward the securing of the southern border. I don’t intend to leave out the northern which need secure too but the difference between the two borders is Canada not in danger of becoming a failed state due to drug organization running the country. Canadian are not fleeing to America for a better life over burden Northern states. Plus we don’t have a history of hostility with Canada like we had with Mexico during the 19th century. Our political boundaries and cultural boundary are clear unlike the political and cultural boundaries with Mexico. Dr. George Friedman CEO and founder from Stratfor go in greater detail on this issue in his latest weekly Geopolitical report (6)
The Politics of Immigration in America
Immigration in general and the Arizona illegal immigration law in particular has become heated issue. Opponents of the law call supporters racist and xenophobic while supporters of the law call opponents ill-informed of the letter of the law and the dire situation on the border. I think one of the impetuses behind the law is the murder of a rancher named Rob Krentz back in March. He was prominent rancher and was allegedly murdered by an illegal alien in Cochise County (7); a county in southeast Arizona directly on the border with Mexico.
His murder set of a political fire storm in which the in Arizona voters demanded elected officials in the state and in Washington get the border and illegal immigration under control. Subsequently, the Arizona illegal immigration bill was crafted by the Arizona house and senate and signed by Governor Jan Brewer.
The conventional wisdom in the immigration debate particularly when dealing with Latinos is that Democrats like the huge wave of Latinos to America because when they become legal the majority vote democratic; while Republicans like illegal immigrants for the cheap labor they provided. Republicans across America especially in Arizona have shifted against illegal immigration becoming more concerned about the social cost and security issues than the economic benefits that illegal immigrant’s cheap labor could bring. An interesting shift I must say.
If the federal government put the resources and manpower on the borders first I think you could get broad support for immigration reform. I don’t think it practical to deport tens of millions of people as some on the right basically advocate when they say no “amnesty” but people on the political left got it wrong when they don’t see anything wrong with people who broke the law paying no price and jumping in front of other people who want to lawfully enter the country and become citizens seems like a moral hazard to me. We need serious people to come together and address this immigration issue head on. I think the creation of the Arizona law was understandable, certainly not a panacea; but a call for the federal government to do their job and stop dithering on this important issue. One of the stumbling blocks to the immigration issue and particularly illegal immigration from Mexico is the drug trade and unless we face the problem of American consumption of illicit drugs well be fighting an uphill batte to secure the southern border.
Endnotes
1) Arizona Senate. “Arizona new immigration law-SB 1070 as amended by HB 2162” azgovernor.gov. 23 Apr 2010. 04 Aug 2010. < http://www.azleg.gov/alispdfs/council/SB1070-HB2162.PDF>.
2) Michael Hoeffer, Nancy Rytina, and Bryan C. Baker. “Estimates of the unauthorized immigrant population residing in the United States: January 2008.” dhs.gov. Feb 2009. 04 Aug 2010. < http://www.dhs.gov/xlibrary/assets/statistics/publications/ois_ill_pe_2008.pdf>.
3) “Mexico: 28,000 killed in drug violence since 2006”. news.yahoo.com. 04 Aug 2010. 04 Aug 2010.
4) “Drug Routes” Stratfor.com 17 May 2010. 04 Aug 2010.
5) “USBP Weekly Blotter:July 29th- Aug 4th”. CBP.gov 04 Aug 2010. 04 Aug 2010.
6) George Friedman.” Arizona,Borderlands and U.S-Mexican relation”. Stratfor.com 03 Aug 2010. 04 Aug 2010.
7) Leo W Banks. “The Krentz Bonfire” tusconweekly.com. 29 April 2010. 04 Aug 2010.
Friday, July 16, 2010
Economic Malaise :My view on the current economic climate
A Panic, an oil shock, and an election
We had a panic in 2008. Banks stop lending to businesses, individuals and to each other. Financial institutions had to write down huge amounts of loans and take on heavy losses and then bailouts ensued. Also we had an oil shock just before the panic. Remember $147 crude oil and $4 gas? This entire economic calamity occurred during a presidential election between an unknown young gifted speaker (Barack Obama) and an old experience war hero (John McCain). John McCain had a slim chance to win the election, all Barack Obama had to say was “John McCain is republican, Bush was a republican (I know your tired of Bush?), republicans drove the economy into a ditch. Vote for me because I’m not him”.
It didn’t help that the McCain ran a terrible campaign that was completely unfocused but at the end of the day Barack Obama had good cards and he played them well. Barack Obama won the presidency but, I had concerns about his views on the economy. I knew he never ran a business, never worked outside of politics in the private sector or had any background in economics or finance. It seemed to me, that he held the outdated economic views of the 1970’s i.e. high taxes, high federal spending, trade restriction and command/ control regulation. This world has passed away and it flat out doesn’t work. In today’s world capital flows quick and easy and it goes where it’s treated best. 1970’s economics doesn’t attract capital; it scares the hell out of it.
A Really Ugly Job Market
Everyone knew Barack Obama was going to be elected during an economic maelstrom, but political pundits these days asked us to have sympathy for the tough situation he’s in. I think that is nonsense. He volunteered for this job and thought high enough of himself (too high if you ask me) that he can do the job. I don’t feel sorry for him. I feel sorry for those who are unemployed. The unemployment rate currently sits at 9.5% (Bureau of Labor Statistics) but we had one of the longest stretches of high unemployment in decades. Unemployment has been over 9% for 14 months the longest stretch of unemployment at this high a rate since March of 1982- September 83 (19 months). Additionally there are 14.6 million people who are out of work, 45% of them have been unemployed for 27 weeks or longer.
We also have underemployment rates at 16%(under employment is total unemployed plus those marginally attached to the labor force, plus those who have part time jobs for economic reasons i.e. over skilled worker in a low skill jobs) High Unemployment of this length and high under employment leads to the eroding and outdating of these workers skills. Furthermore, the civilian labor force (all Americans eligible to work who are at least 16 years, who are not institutionalized or in the military) has decreased the last two months by 322k in May and by 682k in June after having an upward trend since January. People have stopped looking for work, a very troubling sign.
Cash is King and Uncertainty is the word around town
Many businesses especially publicly traded companies are sitting on cash. Rich Karlgaard publisher of Forbes Magazine says companies are sitting on 1.2 trillion dollars. (http://www.forbes.com/forbes/2010/0719/opinions-rich-karlgaard-digital-rules-america-dead-wealth-problem.html). I’ve heard numbers as high as 2 trillion dollars. Why? Many companies are uncertain about the future of America economy. Taxes are slated to go up in 2011. Federal taxes on income, capital gains, and dividends are slated to go up. The health care bill and financial reform bill gives unprecedented powers to regulators and bureaucrats. This doesn’t instill confidence in markets or the business community when don’t know what these folk endowed with new powers are actually going to do. I think these bills will raise the cost of labor and raise the cost of regulatory compliance and raise the cost of financing expansion. People invest when there reasonable certainty about regulation, taxes and the cost of money. This is not the case today.
Economic Malaise
Back in the day President Jimmy Carter told the Nation that we suffered from a “crisis of confidence” its fair to say after the “panic of 2008” and the “Great Recession” we are now have a “crisis of confidence act 2” According to the June WSJ/NBC poll President Obama came into office with an approval rating on the economy of 56% and a disapproval rating of 31%, a net 25% approval. As of June 23 the same poll has his approval on the economy at 46% and disapproval at 50%, a net of -4% disapproval rating. This is a significant drop showing that investor class, business community and regular folks are losing confidence in this administration on economic issues.
Policy Prescriptions
The Stimulus package was a failure. Transfer payments (money to individuals through federal programs i.e. welfare, food stamps, etc), money sent to states (whose budgets are busted mainly by huge expenditures to public sector workers through high salaries generous health benefits, unfunded pension plans and Medicaid) and weak tax credits doesn’t lead to job creation. We need to get private investment and job creation going, so here are some ideas I’d advocate. I’d like to see the corporate tax rate cut. America has the second highest corporate tax rate in the industrialized world at 35%. Many business leaders including FedEx CEO Fred Smith site this high tax rate as a killer of job creation in America. I think a reduction in payroll taxes with a commensurate increase in the gasoline tax is appropriate. It would encourage more work, allow people to keep more of their own money, to save, invest or get their finances in order and the gas tax would disincentive gas consumption and it wont raise the deficit.
I would support extending unemployment benefits. These benefits don’t produce jobs. However, people are having a tough time, so on humanitarian grounds not economic grounds I’d like to see it extended until employment picks up. Full expensing on capital expenditures, streaming of regulations on business would spur private investment and lower regulatory compliance cost and signing trade treaties with Panama, South Korea, and Columbia would open American businesses to new markets. Some of these policy proposal would raise the deficit but not in a crazy way. The return we’d get on these proposals in terms of investment and real job creation would be worth it both in the short and long term. Mr. President it is time for some free enterprise policies to get our ailing economy going.
We had a panic in 2008. Banks stop lending to businesses, individuals and to each other. Financial institutions had to write down huge amounts of loans and take on heavy losses and then bailouts ensued. Also we had an oil shock just before the panic. Remember $147 crude oil and $4 gas? This entire economic calamity occurred during a presidential election between an unknown young gifted speaker (Barack Obama) and an old experience war hero (John McCain). John McCain had a slim chance to win the election, all Barack Obama had to say was “John McCain is republican, Bush was a republican (I know your tired of Bush?), republicans drove the economy into a ditch. Vote for me because I’m not him”.
It didn’t help that the McCain ran a terrible campaign that was completely unfocused but at the end of the day Barack Obama had good cards and he played them well. Barack Obama won the presidency but, I had concerns about his views on the economy. I knew he never ran a business, never worked outside of politics in the private sector or had any background in economics or finance. It seemed to me, that he held the outdated economic views of the 1970’s i.e. high taxes, high federal spending, trade restriction and command/ control regulation. This world has passed away and it flat out doesn’t work. In today’s world capital flows quick and easy and it goes where it’s treated best. 1970’s economics doesn’t attract capital; it scares the hell out of it.
A Really Ugly Job Market
Everyone knew Barack Obama was going to be elected during an economic maelstrom, but political pundits these days asked us to have sympathy for the tough situation he’s in. I think that is nonsense. He volunteered for this job and thought high enough of himself (too high if you ask me) that he can do the job. I don’t feel sorry for him. I feel sorry for those who are unemployed. The unemployment rate currently sits at 9.5% (Bureau of Labor Statistics) but we had one of the longest stretches of high unemployment in decades. Unemployment has been over 9% for 14 months the longest stretch of unemployment at this high a rate since March of 1982- September 83 (19 months). Additionally there are 14.6 million people who are out of work, 45% of them have been unemployed for 27 weeks or longer.
We also have underemployment rates at 16%(under employment is total unemployed plus those marginally attached to the labor force, plus those who have part time jobs for economic reasons i.e. over skilled worker in a low skill jobs) High Unemployment of this length and high under employment leads to the eroding and outdating of these workers skills. Furthermore, the civilian labor force (all Americans eligible to work who are at least 16 years, who are not institutionalized or in the military) has decreased the last two months by 322k in May and by 682k in June after having an upward trend since January. People have stopped looking for work, a very troubling sign.
Cash is King and Uncertainty is the word around town
Many businesses especially publicly traded companies are sitting on cash. Rich Karlgaard publisher of Forbes Magazine says companies are sitting on 1.2 trillion dollars. (http://www.forbes.com/forbes/2010/0719/opinions-rich-karlgaard-digital-rules-america-dead-wealth-problem.html). I’ve heard numbers as high as 2 trillion dollars. Why? Many companies are uncertain about the future of America economy. Taxes are slated to go up in 2011. Federal taxes on income, capital gains, and dividends are slated to go up. The health care bill and financial reform bill gives unprecedented powers to regulators and bureaucrats. This doesn’t instill confidence in markets or the business community when don’t know what these folk endowed with new powers are actually going to do. I think these bills will raise the cost of labor and raise the cost of regulatory compliance and raise the cost of financing expansion. People invest when there reasonable certainty about regulation, taxes and the cost of money. This is not the case today.
Economic Malaise
Back in the day President Jimmy Carter told the Nation that we suffered from a “crisis of confidence” its fair to say after the “panic of 2008” and the “Great Recession” we are now have a “crisis of confidence act 2” According to the June WSJ/NBC poll President Obama came into office with an approval rating on the economy of 56% and a disapproval rating of 31%, a net 25% approval. As of June 23 the same poll has his approval on the economy at 46% and disapproval at 50%, a net of -4% disapproval rating. This is a significant drop showing that investor class, business community and regular folks are losing confidence in this administration on economic issues.
Policy Prescriptions
The Stimulus package was a failure. Transfer payments (money to individuals through federal programs i.e. welfare, food stamps, etc), money sent to states (whose budgets are busted mainly by huge expenditures to public sector workers through high salaries generous health benefits, unfunded pension plans and Medicaid) and weak tax credits doesn’t lead to job creation. We need to get private investment and job creation going, so here are some ideas I’d advocate. I’d like to see the corporate tax rate cut. America has the second highest corporate tax rate in the industrialized world at 35%. Many business leaders including FedEx CEO Fred Smith site this high tax rate as a killer of job creation in America. I think a reduction in payroll taxes with a commensurate increase in the gasoline tax is appropriate. It would encourage more work, allow people to keep more of their own money, to save, invest or get their finances in order and the gas tax would disincentive gas consumption and it wont raise the deficit.
I would support extending unemployment benefits. These benefits don’t produce jobs. However, people are having a tough time, so on humanitarian grounds not economic grounds I’d like to see it extended until employment picks up. Full expensing on capital expenditures, streaming of regulations on business would spur private investment and lower regulatory compliance cost and signing trade treaties with Panama, South Korea, and Columbia would open American businesses to new markets. Some of these policy proposal would raise the deficit but not in a crazy way. The return we’d get on these proposals in terms of investment and real job creation would be worth it both in the short and long term. Mr. President it is time for some free enterprise policies to get our ailing economy going.
Tuesday, July 13, 2010
The Great Free Agency of 2010
The story of this NBA off-season is playoff teams in Eastern Conference have strengthened (Miami Chicago, Milwaukee) contrary to Western Conference playoff teams who are standing pat and getting old at the same time (Spurs, Dallas, Denver) or have lost a major cog to their offense and are scrambling to restructure the team on the fly (Phoenix and Utah).
A Shift in Power Eastward
Rising Powers:
Miami has layed the foundation for a dynasty. The teaming up of three all star players Dwayne Wade Lebron James and Chris Bosh (including two nba-first team players (Wade and James) in the prime of their careers is flat out scary for the rest of the league. A compilation of this level of talent is not unprecedented. (The 58-59 Celtics had 3 first-team all NBA players (Bob Cousy, Bill Sharman and Bill Russell plus Tom Heinsohn got 18.8ppg and 9.7 rbg). That said this level of talent on the same team hasn’t occurred for at least a quarter century.
Chicago Bulls have a franchise player at point guard in Derrick Rose who almost unguardable the addition of Carlos Boozer give them a top notch front court scorer for the first time since Elton Brand played in the red and white. Also the addition of head coach Tom Thibodeau who’s a great defensive mind, was at the helm of Boston vaunted defense since 2007. The Bulls will play with a focus and intensity to match their talent.
Established Greatness
Boston: This team field three hall of famers(Ray Allen,Paul Pierce and Kevin Garnett) and all-star point guard(Rajon Rondo_ plus one of the best head coaches in the league in Doc Rivers.they will be a factor next year barring injury.
Orlando: They are well coached by Stan Van Gundy. Orlando plays great defense anchored by Dwight Howard. No team shoots more and makes more treys than the Magic.
The Dark Horse
The Milwaukee Bucks may be the dark horse team in the NBA this season. They play great defense and play with heart and intensity under the coaching of Scott Skiles. Additionally they got sneaky talent. Brandon Jennings maybe the quickness guard in the NBA (he dropped a double nickel on golden state last year). John Salmons is a good two guard who can score and defend well and Andrew Bogut is arguably the best all around center in basketball. He can pass, block, rebound, and score proficiently in the low post. The addition of Corey Maggette and Drew Gooden will add scoring and rebounding to their front court. This is a good team that under the radar.
The West is still good
The Lakers will not have a cake walk in the west as some commentators have hinted. The Oklahoma Thunder will mature as a team and they are young, athletic, play great defense and have two dynamic players in Kevin Durant and Russell Westbrook. Houston is a team that didn’t make the playoffs however they will be a factor next year for one reason: the return of Yao Ming. If anyone looks at that roster they won’t see many holes they have scorers and defenders and now they have size in the front court. Look Out.
I’d be remiss if I didn't mention the Spurs who still have champions on that rosters and a hall of fame coach. Don’t sleep of those guys. Dallas should be good though they are long in the tooth. Portland won’t be a slouch Brandon Roy and Lamarcus Aldrige is a good combo plus they have a group of savvy veterans. Phoenix: even though they lost Amare Stoudamire the team will still score a bunch of points and possess a very versatile roster. So their demise might be pre mature.
What a difference a month makes.
On June 17th the Lakers finished held off the old warriors of Boston in seven games to win back to back championships. Folks have been talking about a possible three-peat. Let be real a three peat is an extremely difficult task; it has only been done 5 five times in NBA history. I would argue this three peat attempt will be every bit as hard as Bulls successful attempts at three peats against the Jazz and Suns and may be harder than the 61-62 Celtics who had to defeat the Los Angeles Lakers led by hall of famers Jerry West and Elgin Baylor in 7 games.
Even though history and a strengthened Eastern conference are against them, I still think the Lakers should be favorites to win the title next year. No team plays better defense, No team rebounds the ball better and no team has a player like Kobe Bryant the best guard in the history of the league not named Jordan. He will be healthier next year and even more motivated(if that’s possible) to silence his doubters and haters once again. The 64,000k dollar question is whether the “The Great Free Agency of 2010” means the undoing of the Lakers Three peat aspirations. Hard to tell now, that's why they play the games. I can’t wait.
A Shift in Power Eastward
Rising Powers:
Miami has layed the foundation for a dynasty. The teaming up of three all star players Dwayne Wade Lebron James and Chris Bosh (including two nba-first team players (Wade and James) in the prime of their careers is flat out scary for the rest of the league. A compilation of this level of talent is not unprecedented. (The 58-59 Celtics had 3 first-team all NBA players (Bob Cousy, Bill Sharman and Bill Russell plus Tom Heinsohn got 18.8ppg and 9.7 rbg). That said this level of talent on the same team hasn’t occurred for at least a quarter century.
Chicago Bulls have a franchise player at point guard in Derrick Rose who almost unguardable the addition of Carlos Boozer give them a top notch front court scorer for the first time since Elton Brand played in the red and white. Also the addition of head coach Tom Thibodeau who’s a great defensive mind, was at the helm of Boston vaunted defense since 2007. The Bulls will play with a focus and intensity to match their talent.
Established Greatness
Boston: This team field three hall of famers(Ray Allen,Paul Pierce and Kevin Garnett) and all-star point guard(Rajon Rondo_ plus one of the best head coaches in the league in Doc Rivers.they will be a factor next year barring injury.
Orlando: They are well coached by Stan Van Gundy. Orlando plays great defense anchored by Dwight Howard. No team shoots more and makes more treys than the Magic.
The Dark Horse
The Milwaukee Bucks may be the dark horse team in the NBA this season. They play great defense and play with heart and intensity under the coaching of Scott Skiles. Additionally they got sneaky talent. Brandon Jennings maybe the quickness guard in the NBA (he dropped a double nickel on golden state last year). John Salmons is a good two guard who can score and defend well and Andrew Bogut is arguably the best all around center in basketball. He can pass, block, rebound, and score proficiently in the low post. The addition of Corey Maggette and Drew Gooden will add scoring and rebounding to their front court. This is a good team that under the radar.
The West is still good
The Lakers will not have a cake walk in the west as some commentators have hinted. The Oklahoma Thunder will mature as a team and they are young, athletic, play great defense and have two dynamic players in Kevin Durant and Russell Westbrook. Houston is a team that didn’t make the playoffs however they will be a factor next year for one reason: the return of Yao Ming. If anyone looks at that roster they won’t see many holes they have scorers and defenders and now they have size in the front court. Look Out.
I’d be remiss if I didn't mention the Spurs who still have champions on that rosters and a hall of fame coach. Don’t sleep of those guys. Dallas should be good though they are long in the tooth. Portland won’t be a slouch Brandon Roy and Lamarcus Aldrige is a good combo plus they have a group of savvy veterans. Phoenix: even though they lost Amare Stoudamire the team will still score a bunch of points and possess a very versatile roster. So their demise might be pre mature.
What a difference a month makes.
On June 17th the Lakers finished held off the old warriors of Boston in seven games to win back to back championships. Folks have been talking about a possible three-peat. Let be real a three peat is an extremely difficult task; it has only been done 5 five times in NBA history. I would argue this three peat attempt will be every bit as hard as Bulls successful attempts at three peats against the Jazz and Suns and may be harder than the 61-62 Celtics who had to defeat the Los Angeles Lakers led by hall of famers Jerry West and Elgin Baylor in 7 games.
Even though history and a strengthened Eastern conference are against them, I still think the Lakers should be favorites to win the title next year. No team plays better defense, No team rebounds the ball better and no team has a player like Kobe Bryant the best guard in the history of the league not named Jordan. He will be healthier next year and even more motivated(if that’s possible) to silence his doubters and haters once again. The 64,000k dollar question is whether the “The Great Free Agency of 2010” means the undoing of the Lakers Three peat aspirations. Hard to tell now, that's why they play the games. I can’t wait.
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