Relevant and even prescient commentary on news, politics and the economy.

Losing The Other War

by Tom Bozzo

Not that I want to reinforce our doom-and-gloom reputation or anything, but the Bush administration is demonstrating its inability to walk and chew gum at the same time by losing in Afghanistan:

A recent Pentagon report about Afghanistan painted a stark picture of security conditions inside the country, a militant force that had “coalesced into a resilient insurgency” and a central government in Kabul that still could not extend its reach into the hinterlands. An American commander, Maj. Gen. Jeffrey J. Schloesser, has said that militant attacks on coalition troops increased by 40 percent from January to May compared with the same period last year.

The reason is that for the small fortune that’s been appropriated for that war, there aren’t enough resources there to keep the Taliban at bay:

General McNeill said the Afghanistan mission “needs more maneuver units, it needs more flying machines, it needs more intelligence, surveillance and reconnaissance units.”

The problem, as any student of the place would know, is that Afghanistan is the asymmetric warrior’s paradise, with a long history prior to the Soviet invasion of chewing up notionally superior forces. Incidentally, this is part of the reason why the partisan in me would be almost as happy to see Condoleezza Rice as McCain’s running mate as I would Mittens. Not only would I make a sizeable donation to anyone willing to run an ad featuring her recounting the title of the “Bin Laden Determined to Attack Inside the United States” memo, but also she must be either totally ineffectual and unprincipled [*] or the worst Sovietologist ever [**] not to have tried convincing the other Bushies to really win in Afghanistan first or to resign having tried but failed.

Comparing the candidates, Obama’s Iraq page notes the rivalry for resources, and the plan (pdf) calls for shifting some U.S. military resources freed from Iraq to Afghanistan; McCain keeps Afghanistan off his Iraq page and seems to promote the blunter and more expensive instrument of a larger standing military as the answer to resource limitations in fighting the GSAVE.

[*] The unprincipled part is is pretty much a given.

[**] Before you start debating me on worse Sovietologists, please note the “worst X ever” formulation.

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Infrastructure 2

Infrastructure – The Next Big Deal? #1

Reuters carries a report on an infrastrucutre concern:

The worst Midwest flooding since 1993 has generated images of swamped towns, cracked roads, washed-out bridges, overwhelmed dams, failed levees, broken sewage systems, stunted crops and water-logged refugees. The losses are in the billions of dollars and still mounting, as the costs of crop losses alone send shocks through the inflation-wracked world food system and threaten insurers.

The disaster has reminded policymakers of the decrepit state of U.S. infrastructure, stirring concerns similar to those following the deadly Minneapolis bridge collapse in 2007 and the flooding of New Orleans after Hurricane Katrina in 2005.

Even before the latest flooding, a group representing engineers said the United States needed to spend about $1 trillion more than it does now to bring infrastructure up to par with modern needs and standards.

“The patch-and-pray approach simply won’t succeed,” said David Mongan, head of the American Society of Civil Engineers.

But the group also said its five-year cost estimate was outdated and does not count the price of new roads, rails, and sewers required by a growing population, nor the cost to repair damage inflicted by the recent Midwest floods.

President George W. Bush has asked Congress for $1.8 billion to boost funds for flood recovery but it is unclear how much of that money will end up in infrastructure repair.

Presidential candidates vying to succeed him have each promised quick action in Congress and offered some ideas for the larger task of repairing infrastructure.

Democratic presidential candidate Barack Obama has proposed creating a $60 billion fund for infrastructure projects, funded by money saved by a promised withdrawal from the war in Iraq.

“This can be the moment when we make a generational commitment to rebuild our infrastructure,” Obama told business executives in Pittsburgh last week.

Everywhere You Look

Each need sounds dire: new wastewater treatment so sewage does not taint the same waterways that supply drinking water; repairs or replacements for thousands of corroded bridges; new and repaired dams and levees that will not fail; and upgrades to airports and air traffic control.

“We need profound changes,” said engineer Kumares Sinha of Purdue University. “We can’t live in a fool’s paradise.”

While rising economic powers China and India build highways and other large projects, U.S. infrastructure – once the envy of the world – has fallen into decline, Sinha said.

Two federal commissions since Katrina have tackled the issue and Congress is mulling proposals for a full-scale assessment of the nation’s infrastructure needs and an infrastructure “bank” to loan money for projects.

But Sinha and other experts said the analysis should go deeper to reflect an economy likely to face higher fuel prices for the foreseeable future. Policymakers need to consider new methods of reducing road congestion, for example, whether by charging more to use them or exacting fees for entering city centers, which will generate revenue for mass transit.

The nation also may have to reconsider its lukewarm commitment to passenger rail service, experts said.

Government funding for some infrastructure needs has declined, such as for wastewater plants. Municipalities hike taxes or fees to repair ancient pipes prone to bursting.

“Everybody is drinking somebody’s waste water,” said Susan Bruninga of the National Association of Clean Water Agencies.

The state of Illinois is weighing its first capital improvement project in a decade, hoping to back $31 billion in bonds by leasing the lottery and building a casino in Chicago.

Illinois will fund infrastructure through gambling monies?

(Another thought is how the floods have hit the corn and soybean market?)

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Does Jonah Goldberg Think Reagan Cut Government Spending?

If you were wise enough to skip Jonah Goldberg’s attack on Obama’s patriotism – save your time and just check out the takedown from Jed Report:

In his trademarked pseudo-intellectual style, Jonah launches a full-on smear against Barack Obama, claiming that Barack has a “patriotism problem.” To make his case, Jonah digs up a quote of Barack saying “I’m going to try to tell the American people what I believe will make this country great and, hopefully, that will be a testimony to my patriotism.” … So Barack Obama has a patriotism problem because…he wants to to make the country great. Obviously, it’s a stupid argument — only someone who hates America would not want to make it great, and only the world’s biggest idiot (which Jonah may well be) would suggest that America is right now as great as it has been in the past.

The world biggest idiot just had to respond with even more stupidity, which not only included how adding “again” makes all the difference but also this gem:

But the key difference is that invoking scripture, or similar language, in order to justify shrinking government at home and liberating mankind from collectivism abroad is quite different than invoking government to justify an enormous expansion of the state into people’s lives. Reagan did not believe that government was the instrument of salvation, he believed it was the obstacle to what is best in ourselves and in our nation.

Credit to Andrew Sullivan for this:

“An enormous expansion of the state into people’s lives”. What does Jonah think Bush has been doing these past eight years?

But maybe Jonah is referring to Kudlow’s claim that Reagan cut government spending. Of course, other conservatives blame the Reagan deficits on an explosion of government spending. Funny thing – Federal spending as a share of GDP neither rose nor fell during the Reagan years. So when Jonah says “shrinking government at home” – he displays his world class stupidity once again.

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10 best gloom and doom sites

Hat tip to Barry Ritholz at the Big Picture for this link listing the 10 best gloom and doom sites.

1. Daily Reckoning
2. Clusterfuck Nation
3. The Big Picture
4. DollarCollapse.Com
5. Angry Bear
6. Mish’s Global Economic Trend Analysis
7. Naked Capitalism
8. Peter Schiff
9. GREG MANKIW’S BLOG
10. The mess that greenspan made

Barry had a note about Greg Mankiw being gloomy. It became quite apparent in the descriptions that we need to re-write our blog description and make it available on site for such occasions. More than just “left of center etc.”.

Still, certainly in good company. Are we so gloomy folks?

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Surowiecki on Oil Prices

Andrew Sullivan finds the discussion of the oil market by James Surowiecki illuminating. I’m not so sure. Let me begin with this confusion:

Between 2000 and 2007, world demand for petroleum rose by nearly nine million barrels a day, but OPEC has been consistently unable, or unwilling, to significantly increase supply, and production by non-OPEC members has risen by just four million barrels a day.

But wait a second – doesn’t the quantity demanded equal the quantity supplied at the market clearing price? If Surowiecki is trying to say that the demand curve shifted outwards along a fairly inelastic supply curve – then maybe we have a pretty good explanation of the rise in oil prices. The Excel file from the Energy Information Administration has some useful information from 2003 to 2007 including total world demand and total world supply – which both grew by about 5 million barrels per day from 2003 to 2006. During this period, OPEC supply grew by almost 4 million barrels per day. Now from 2006 to 2007, world demand growth seems to have outstripped world supply growth with the difference being world demand and world supply being either reported draw downs of inventories or the “statistical discrepancy”. Given their data has most of this difference being the statistical discrepancy – it is hard to pin down precisely what their data is telling us.

Surowiecki argues against the usual suspects – market manipulation by greedy oil companies or speculative forces – and he’s likely correct. But then he argues:

But there’s also something else at work, which the oil guru Daniel Yergin calls a “shortage psychology.” The price of oil—more than that of many other commodities—isn’t based solely on current supply and demand. It’s also based on people’s expectations about future supply and demand, because those expectations determine whether it makes sense for oil producers to sell their oil now or leave it in the ground and sell it later. Currently, the market is assuming that oil will become scarcer, and that global demand will keep rising, especially in rapidly developing countries like China and India. As a result, producers are asking very high prices to pump their oil. Now, it could be that these assumptions are all wrong—that the supply of oil will not be constricted going forward, that concerns about the Middle East are exaggerated, and that higher prices will lead people to cut back on energy consumption, shrinking demand. In that case, oil would turn out to have been hugely overpriced. But that won’t be because of sinister speculators; it will be because oil producers and oil users collectively misread the future.

Why would anyone assume that the assumptions of rising world demand and shrinking supply be wrong? What if they are correct? Then couldn’t the current market price be a rational response to these rational expectations? Which might leave one to argue that allowing the market to work is the preferred policy to all the nonsense we are hearing from politicians such as John McCain.

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Firearms ready to use or simply owned and stored when on the move

PEER notes that:

On April 30, 2008, the U.S. Interior Department proposed to repeal nearly century-old national park rules requiring that firearms be unloaded and unavailable for ready use. In its place, the Bush administration would substitute the various laws governing “any state park, or any similar unit of state land, in which state the federal park, or that portion thereof, is located…”
….
The current National Park Service (NPS) regulation was re-written in 1983 under the Reagan administration and was intended to relax earlier strict prohibitions. As the NPS then explained: “[T]he Service has determined that it is not feasible to prohibit the possession of weapons in all situations, and a total prohibition would be unenforceable” (48 FR 30256). The current regulation (36 CFR 2.4) reads –

“…unloaded weapons may be possessed within a temporary lodging or mechanical mode of conveyance when such implements are rendered temporarily inoperable or are packed, cased or stored in a manner that will prevent their ready use.”

It is precisely these sort of rules that the majority opinion in the Supreme Court ruling in the District of Columbia v. Heller case appears to uphold when it denied that the decision would affect “laws forbidding the carrying of firearms in sensitive places such as schools and government buildings” (at 54).

Since its origin, the national park system has forbidden or severely restricted hunting, making carrying restrictions a key anti-poaching strategy.

While the US Supreme Court decision in District of Columbia vs. Heller ascribes an individual’s right to possess a firearm in the home for defense, the NRA has said it will challenge gun laws in many states based on the ruling.

Many in the NRA appear to believe in an absolute right to own guns, but would be reluctant to claim it since there are some obvious exceptions that seem pretty reasonable for individuals depending on age, mental capacity, danger to society, and such.

Would someone please explain to me the difference between being allowed to carry a loaded gun in a park versus one tucked away “not available for ready use”? I for one would not like people carrying firearms ready for use as we stroll looking at the deer, or walking up the Lincoln Memorial.

Update: STR and Mcwop say: “Most firearms owners only want common sense. Most of the time law enforcement officials show common sense, but sometimes not.”

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Top O’ The Bubble To You, England!

Felix Salmon found it quite odd, after weighing the roles of sellers holding out for peak prices and weird index (average) behavior, that the house price index for England and Wales managed to register a small increase — though considerably less than measured inflation — despite a dramatic collapse in sales volume.

England probably does enjoy more than the usual weird average behavior, thanks to the relative size of London. House price appreciation also happens to have pretty much come to an end essentially everywhere else:


Source: landregistry.gov.uk.

The fun thing is to compare the U.S. Here’s Calculated Risk‘s picture of U.S. existing home sales, seasonally adjusted and annualized. Here’s a picture Charles Calomiris posted at Vox EU back in November under a subhead “Reasons to be cheerful.” (!!1!) If you don’t want to click the links, the story is that the peak of existing home sales was in mid-2005, whereas the Case-Shiller indexes peaked a year later. And as of Calomiris’s writing, the OFHEO index was still at a point where Calomiris could write…

At the moment, it is not obvious that housing or other asset prices are collapsing, or that leverage is unsustainably large for most firms or consumers.

…and it arguably was a matter of geek warfare to point out that he was whistling in the graveyard. Heh, well, crazy as things got here, the English bubble has on its face been a lot worse. The average detached house in England and Wales is £275,000. Sure, the mean is not robust, but still, that’s pounds! To the extent the Fed is in a bind, things should be really fun these days over at the Bank of England.

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Going after efficiencies

The NYT has an article of interest on creating new efficiencies not often discussed as policy. I think a savings of 10% (20%?) or more is significant.

With the new refrigerators with the shelf in the door, these fit nice,” said April Buchanan, who was shopping at the Sam’s Club here. Others, even those who rue the day their tried-and-true jugs were replaced, praised the lower cost, from $2.18 to $2.58 a gallon. Sam’s Club said that was a savings of 10 to 20 cents a gallon compared with old jugs.

He spoke while standing in pools of the soapy run-off from milk crates that had just been washed. About 100,000 gallons of water a day are used at his dairy clean the crates, Mr. Soehnlen said.

But with the new jugs, the milk crates are gone. Instead, a machine stacks the jugs, with cardboard sheets between layers. Then the entire pallet, four layers high, is shrink-wrapped and moved with a forklift.

The company estimates this kind of shipping has cut labor by half and water use by 60to 70 percent. More gallons fit on a truck and in Sam’s Club coolers, and no empty crates need to be picked up, reducing trips to each Sam’s Club store to two a week, from five — a big fuel savings. Also, Sam’s Club can now store 224 gallons of milk in its coolers, in the same space that used to hold 80.

If I had wanted this post to be noticed, I should have labeled it “Alien jugs reaping benefits”.

Actually, I wonder what other designs in packaging could be significant, in addition to less use of material. I remember when items were in a jar, or hung on a hook. If stealing remained constant with old formats, what would savings be on the before and after side of the equation?

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