Daily News Summary – September 28, 2011 House Republicans release bleak report on impact of further Defense cuts
A new House Republican study concludes additional Pentagon cuts would force a draft, gut the military and make “defending our freedom harder” — but other Defense Department watchers say such warnings are far-fetched.
The report, prepared by the Republican staff on the House Armed Services Committee, concludes that if Congress enacts cuts beyond $350 billion over a decade, which were already agreed to, the military services would shrink to pre-9/11 levels and most of their big-ticket weapon programs would be “at risk.” The GOP staff goes so far as to warn that more Defense Department budget cuts “could force America to return to the draft.” The report also says much of the planned F-35 fighter fleet would be terminated, while the Navy would retire around 40 ships — including two aircraft carriers — and Army vehicle programs could be terminated.
Those predictions are based on a special congressional panel failing to find at least $1.2 trillion in cuts, which would trigger an automatic $600 billion in cuts over a decade for the Pentagon and other national security agencies. The chairman of the committee, Rep. Buck McKeon (R-Calif.), has said the Pentagon likely would take half of that reduction.
“We believe potential cuts to the military pose a serious threat that would break the back of our armed forces while slowing our economic recovery and doing little to resolve our debt crisis,” the GOP staff wrote. “These cuts would destroy jobs and stall the economy, they could force America to return to the draft, and we would incur more casualties as we defend our freedom.”
The report says 200,000 military personnel and “hundreds of thousands” of DOD civilian personnel would be “out of work” if the $600 billion trigger is enacted.
The GOP report paints a bleak picture: Shipyards and other military manufacturing facilities would be shuttered. The U.S. fighter aircraft fleet would shrink by a third and the bomber plane fleet by a quarter. The Marine Corps would “be broken — unable to be the expeditionary force in ready.” Cuts to personnel programs would mean “breaking the promises Americans have made to those who have fought so hard for so long.”
But Gordon Adams, who ran national security budgeting for the Clinton administration, panned the report, saying, “This is not a responsible analytical product.”
“It appears the [GOP] staff started by asking, ‘What can I do by picking my targets to make this look like the end of Western civilization?’” Adams said Monday. “It’s designed to scare people.”
House Armed Services Committee ranking member Adam Smith (D-Wash.) said in a statement he, too, is “concerned that further large and indiscriminate cuts to the defense budget could have a substantially negative impact on our military.”
Smith questioned how hawkish Republicans can issue “dire warnings about the potential impacts of additional defense budget cuts while also refusing “to consider raising any additional revenue.”
“In order to avoid drastic cuts to our military and other important programs, revenue must be on the table,” Smith said. “We must develop a comprehensive national security strategy that takes into account current and future funding and rationally appropriates our resources to best meet our challenges.”
McKeon and other hawkish Republicans have also called for strategic needs to drive any military funding reductions.
But the study shows “it’s not going to be done that way,” a HASC Republican aide told The Hill on Monday. If the $600 billion trigger is kicked, the cuts will be too deep, “and [Pentagon officials] just won’t be able to do it that way, especially for 2013,” the aide said. Congressional aides from both chambers say they have asked the Office of Management and Budget (OMB) for guidance on how much in 2012 and 2013 should be cut from the DOD budget to begin implementing the $350 billion in cuts. The office has yet to respond to those inquiries, the aides say.
Adams noted the $350 billion in cuts over a decade set in motion by the August debt deal would be an 8 percent reduction from planned spending. “That’s peanuts,” Adams said.
A chart in the HASC Republican study shows an expected Pentagon budget drop to $491 billion in 2013. The House’s stopgap 2012 spending measure calls for $527 billion in Pentagon spending, while a more recent Senate version of defense appropriations legislation would give the department $14 billion less.
The same chart shows modest annual growth for the Pentagon budget, rising to $535 billion in 2017 before hitting $589 billion in 2021.
“The defense cuts under consideration won’t necessarily hollow out the U.S. military if policymakers are willing to size our forces according to the resources available,” said Travis Sharp, a defense analyst at the Center for a New American Security, which was founded by two current Obama administration officials. “A smaller, highly trained and well-equipped force is preferable to a bigger force that lacks the necessary training and equipment.”
Sharp also said the GOP staff’s conclusion that a military draft would return is “not grounded in any analysis that I have seen.” (Source: The Hill)
You can now go to our festival website above and purchase the All Venue pass for this year's festival for the low priced of $50 before Oct 12. The price then jumps to $60. This pass will get you into all locations on all days, including the "Sephira" concert at the 7th St Theatre on Thursday night.
You can buy just the Sephira concert tickets for $20 if you choose.
The website also has the complete schedule of musicians & list of motels you can stay at and get the complimentary shuttle service.
This year's festival will be all three days(Fri thru Sun) at the Ocean Shores convention center, Galway Bay & the 8th St Ale House. Check it out and see you there!
1 God is our refuge and strength, a very present help in trouble. 2 Therefore will not we fear , though the earth be removed , and though the mountains be carried into the midst of the sea; 3 Though the waters thereof roar and be troubled , though the mountains shake with the swelling thereof. Selah. 4 There is a river, the streams whereof shall make glad the city of God, the holy place of the tabernacles of the most High. 5 God is in the midst of her; she shall not be moved : God shall help her, and that right early. 6 The heathen raged , the kingdoms were moved : he uttered his voice, the earth melted . 7 The LORD of hosts is with us; the God of Jacob is our refuge. Selah. 8 Come , behold the works of the LORD, what desolations he hath made in the earth. 9 He maketh wars to cease unto the end of the earth; he breaketh the bow, and cutteth the spear in sunder ; he burneth the chariot in the fire. 10 Be still , and know that I am God: I will be exalted among the heathen, I will be exalted in the earth. 11 The LORD of hosts is with us; the God of Jacob is our refuge. Selah.
The Daily Crux
customerservice@stansberryresearch.com
Dear Daily Crux reader,
Of all the investment "gurus" featured in The Daily Crux, none is more popular or more respected than Jim Rogers.
Rogers is best known for co-founding the Quantum Fund with billionaire George Soros – which famously returned over 4,200% in just 10 years.
He’s also well-known for "calling" the huge bull markets in commodities.
Raised in rural Demopolis, Alabama, Rogers had his first job at age five. He went on to attend Yale and Oxford University before making a name for himself on Wall Street during the terrible bear market of the 1970s. He retired at age 37 to travel the world, and has since authored five fantastic books on investing and success.
Longtime readers are familiar with Jim's thoughts on commodities and the insane policies of our government, so this interview is a little different...
Like our colleague Porter Stansberry, Rogers believes the U.S. is headed for a serious crisis. We sat down with him to learn his advice for succeeding in the turmoil ahead.
You don't want to miss this one.
Justin Brill
Managing Editor, The Daily Crux
www.thedailycrux.com ––––––––––––––––––––––––––––––––––––––––––
The Daily Crux Sunday Interview
Jim Rogers' advice for the "End of America"
The Daily Crux: It's no secret that you're super-popular among Crux readers. Articles and videos featuring your insights are consistently among the most "clicked-on" we publish.
Most of your recent interviews and commentary have focused on precious metals, commodities, and the foolishness coming out of Washington from the likes of President Obama, Treasury Secretary Tim Geithner, and Fed Chairman Ben Bernanke... So today, I'd like to talk about something a little different... some of the ideas from your latest book, A Gift To My Children: A Father's Lessons for Life and Investing.
One of the many lessons you pass along to your daughters in the book is the idea that the 21st century will belong to China. Most readers know you're a longtime bull on China... But are you bullish at all about the future of the United States? Are America's best days behind it?
Rogers: Well, in 1918, the U.K. was the richest, most powerful country in the world. If you looked at a map of the world, it was all red – the British Empire was everywhere.
But there was a lot of corrosion underneath. And within three generations, the U.K. was bankrupt. The U.K. could not sell government bonds. It had to be bailed out by the IMF.
Now, it certainly had some rallies along the way. Sometimes things got better... or looked better. But the trend was always down.
Starting in 1979, the U.K. had a revival when the North Sea oil started flowing. Over the next 20 years or so, the U.K. had a huge boom in oil production, which made things much better in the U.K... And of course, there was the stock market bull market, which made the City of London more exciting and prosperous.
But now, the North Sea oil is declining and the city of London is going into decline, just like Wall Street and financial centers all over the world.
As unlikely as it appears, these things happen... And they're happening in the U.S. right now. So I keep looking for what could happen to cause a revival in the U.S.
We have agriculture, but even our agriculture is facing problems. Conceivably, we have a lot of shale gas. If that technology is ever perfected, that would help the U.S.
But these things are not enough to turn the U.S. around permanently, just as the North Sea was not enough to turn the U.K. around permanently.
So, no... Right now, I'm not bullish on the future... And I would urge everyone to learn about investing outside of the U.S.
Crux: Is there any way this decline can be stopped at this point?
---------- Advertisement ----------
If you are age 55 or above, you need to watch this new video footage
Congress recently passed a new law with dangerous retirement provisions
that could slash your retirement income and medical benefits.
We have just put together new camera footage about this situation. If you are
retired or planning for retirement, you need to watch this now.
Rogers: Well, yes... If Americans suddenly decided to withdraw troops from 120 or 130 countries around the world, cut spending with a chainsaw, and lower taxes with a totally new taxation system while cutting litigation and improving education – sure, it's possible.
The problem is what it takes would cause so much pain, no politician could get elected on that kind of platform. And if he did, he would either be assassinated or kicked out of office pretty quickly, because it's just too much.
We've had 50 years of overindulgence in the U.S... and you don't just wake up one day after 50 years of going crazy suddenly to say, "Oh well, OK. Everything's all right now. Let's move on to something else."
No. You've got to pay the price. And unfortunately, the price is going to be very expensive.
Crux: In the book, you also talk about some of your most important investment lessons. In light of the crisis you see coming, can you give us your advice on what readers can do to protect themselves... both those in or near retirement and those who are younger?
Rogers: As you know, I think everyone should learn about real assets. We're entering a period of shortages which are going to get worse.
And even if they don't get worse, the governments are going to print money if the economies don't get better.
So the best place for most people's money is in real assets. It's like the 1970s again. Stock markets and economies around the world were very bad in those 15 years or so. And yet commodities had one of the greatest bull markets of all time. You didn't make much money in stocks unless you were in very selective stocks.
Likewise with currencies... There are huge imbalances in the world now. The largest creditor nations in the world are China, Korea, Taiwan, Japan, Hong Kong, and Singapore. And the largest debtors... you know who they are and where they are.
These imbalances get worked out in the currency markets, among other places. It used to be the gold market, but we're not on the gold standard anymore. So people need to learn about having some of their money outside their own country – whether their country is Australia, Germany, or the U.S. – because we're going to be in a period of more turmoil... maybe even chaos. You're already seeing governments fail, even countries fail.
There's going to be much more social unrest, including in the U.S.
Everyone has a fire insurance policy or medical insurance policy. They hope they never use these policies, but they have them. If you begin to look at your life and investments and finances in the same way, you see having some of your assets outside your own country – no matter which country that is – is a smart insurance policy, and perhaps a way to make a lot of money.
I would also urge everyone to learn how to sell short. If you don't want to do that, at least learn about currencies. You don't want to keep all your money in cash in difficult times.
A lot of people put all their money into Icelandic krona and thought they were fine. Of course, we know Iceland went bankrupt and the krona collapsed. So be sure you learn something about currencies, because keeping all your money in cash could be a disaster.
For younger readers, I would suggest you work to learn foreign languages, preferably Chinese or at least an Asian language.
I see finance as continuing to go into decline... It's going to be a very, very depressed area of the world economy for years to come. All those people thinking about getting an MBA – unless they're truly passionate about finance – should look at some of the other area, of the world economy where they're going to have much better outlooks.
But even then – as I make clear in my book – they shouldn't go into something unless they really love it.
Crux: If you were starting over again today, would you still go into finance and investing? Do you think you would be as successful?
Rogers: Actually, Wall Street was a disaster the years I was there. And I did OK. I know Roy Neuberger who started Neuberger Berman went to Wall Street in 1929 – it couldn't have been a worse time – and yet he became wildly successful in finance.
So of course it can be done. But the numbers of people who do it are going to be very few and far between going forward. You'll need to be very passionate about it, because the wind is going to be in your face.
In 1958, America had 5,000 MBAs every year and the rest of the world had none. Now, America has a couple hundred thousand every year and the rest of the world has tens of thousands. So there's huge competition in finance.
By the way, an MBA won't teach you about commodities or raw materials. It will teach you mainly about stocks, bonds, and options.
But now there's huge competition at a time when there's staggering debt in the financial world, and politicians all over the world are coming down hard against banks, brokers, and financial institutions. Taxes, regulations, requirements.
So, finance is going to be a horrible place to be, just as it was in the '50s, '60s, and '70s. I mean, almost no one went to Wall Street in the '50s, '60s, and '70s. The city of London was a wasteland in those days. And then we had the big bull market and that all changed. But now, we're going back to a period where the producers of the real goods are the ones in charge, making the money and the excitement.
This has happened repeatedly throughout history. We've had long periods when the financial types were the kingpins, and we've had long periods when the producers of real goods were the kingpins. It's reversing again now, and we're just going back to what's always happened.
Crux: So fields like agriculture and engineering would be preferable?
Rogers: Very much so, if you like it. There are more graduates who study physical education or public relations than agriculture or mining in America... So there's going to be huge shortages in those fields.
The average age of farmers in America is 58. In 10 years, if they're still alive, they'll be 68. In Japan, the average age of farmers is already 66. So there are magnificent opportunities in areas like agriculture, engineering, and mining for people who love it. Producing real goods... That's where the next fortunes are going to be made.
Crux: Great advice... Finally, your book is full of some wonderful life-lessons you've learned over your career and travels. Could you leave us with a couple of your favorites?
Rogers: Sure... Be skeptical... Be curious... Don't believe anything you read until you've done your own research, your own thinking. This idea is responsible for some of my biggest successes.
Be persistent. The people who are successful are not the smartest or the most gifted or the most talented... The people who are successful are the ones who are persistent, persevere, and follow their own passions.
And as I told my daughters, beware of the boys.
Crux: Thanks so much for talking with us today.
Jim Rogers: My pleasure. Thanks for having me.
Editor's Note: You can learn more about Jim Rogers' books – including A Gift to My Children, Adventure Capitalist, and Hot Commodities – by clicking here. We consider them "required reading" here at the Crux.
Listen to an Obama impersonator and what the future of America might hold by clicking here!
In My Opinion,
Traveling the world for 30 years I feel has given me a good perspective on the new world order. The horrible news events that we see daily on our TV sets are a constant reminder of the state of mankind. Nevertheless, we've been given life by our creator in which to enjoy, share and be involved in the affairs of our families and our community. Together we can make a difference and lets share the life that is truly worth living.
Good Day,
Philip
Posts
