American sequestration: what's new
In the media, there is a lot of speculation about the imminent collapse of the dollar (or, at a minimum, its noticeable depreciation), the fall of the state finances into the abyss, the transition of the world economy to gold, rubles or yuan, and the final American decay. After Barack Obama and a number of senators - mostly aggressive Republicans - instead of condolences to the people of Venezuela, spoke disagreeably about the premature death of Hugo Chávez, we also wanted to make some unpleasant statements - why wasn’t a default? But it is possible to act in another way: not to take an example from the congressmen and the congresswoman, eager to arrange in Venezuela — and not only there — another “democracy”. Let's try to consider impartially: is the sequestration of the American budget really as terrible as it is painted?
The US debt crisis scenario, developed by Frederick Mishkin, a professor at Columbia Business School, was not at all as gloomy as some analysts and their readers might have thought.
According to professors, if American politicians fail to reduce the budget deficit, by 2018, the States will fall into a crisis of the Greek type. In this case, the Fed will have nothing to do but to bring down the dollar: with the help of high inflation a “hidden default” will be held. Mishkin and his staff, who conducted scientific research, do not believe in the imminent collapse of the economy of their homeland. The United States can get into a crisis (like the Greek one) only in the 2018 year, and even then, if politicians fail to urgently reduce the budget deficit.
The growth of US government debt, according to the study, can be stopped by reducing the budget deficit to 1,8% of GDP from last year’s 7,8%. That is, even the shortage in the coming years is acceptable. True, the debt will still grow. The Congressional Budget Office predicts that it will grow to 107% of GDP in 2014. From here will go up and the cost of its maintenance.
The US may overtake a budget crisis, says Professor Mishkin. In the long term 25, the US national debt will grow to 176% of GDP. The Congressional Budget Office makes a smaller growth forecast: up to 159%.
But note that we are talking about a quarter of a century! And, as is well known, extrapolations of current processes very often ended up with zilch for the most intelligent scenarios. The world is changing too quickly. In 2007, the world did not suspect the crisis of 2008. At the beginning of the century, many lost on the shares of IT-companies - in the same America. And even with the calculation of shale energy reserves in the United States recently made a big mistake: they started talking about "Saudi America", which the United States will become by 2017, when it suddenly turned out that the reserves are almost half the estimated. Nobody knows how things will turn out if Obama and the hawks-Republicans from Congress unleash a war in the Middle East. MIC will begin to work at full capacity, there will be new jobs. On the other hand, the war in Syria can be very costly, not to mention Iran. But the fact that the plans to attack these two countries in Washington are not hatched, only naive will believe. The White House has invested a lot in the anti-Syrian campaign, and will sometime wish to put an end to it. And there is possible the Israeli-Israeli attack of Iran. We will come back to this topic, but for now let's continue the conversation about “scenarios”.
At the "BO" it was already reported that Jacob Lew had become the new US Treasury Secretary. The main task of the minister will be just to find a compromise to reduce the strength of the economic blow in the amount of 85 billion. $ - the US national budget will be exactly “cut off”. Compromise, as previously suggested, must be found no later than 1 March. However, the country did not fall from the "financial cliff". The fact is that funds for most government operations end on March 27. Lew is the man (that’s probably what the president thinks), who is able not only to take the lead in difficult negotiations with the Congress on cutting the budget deficit, but also to find the right compromise. Negotiator and financier, he is really very experienced.
So, it’s not necessary to bury the US budget and the key currency ahead of time. But March 27 ...
As for the more distant prospects, the aforementioned prof. Mishkin is inclined to think about the upcoming “monetization” of the US debt: the dollar depreciating through inflation caused by the usual printing of money (for which the Fed is a great craftswoman). The reason for this “monetization” of debt may just be the constant deficit of the federal budget - provided that politicians are not ready to develop a plan for reducing it.
If Mr. Lew, while in his high office, makes a proper compromise, and an agreement is reached, the dollar will not collapse.
The new Minister of Finance himself is very optimistic. In all the photos he smiles. Despite the sequestration, he promised to put pressure on the second largest economy in the world - the Chinese. Lew and Obama do not like that China weakens its currency, which allows it to benefit from foreign trade. Meanwhile, the artificially low value of the yuan causes damage to US companies.
Its US foreign policy will continue. It seems that neither Obama, nor Lew, nor the Republicans and Democrats among the senators attach great importance to sequestration.
But because of this very sequestration, the Pentagon alone will have to cut off the costs of 30 billion dollars by the end of the current fiscal year (46 of September). Former Secretary of Defense Leon Panetta saidThat cuts will make of America a secondary military power.
The cuts will affect many military contractors. For example, the economic losses of Texas will be expressed here in the amount of 2,4 billion dollars. A whole army of civil servants - 30 thousand people - will remain without work. Their financial losses in earnings will be 180 million. $.
As for maintenance, those states where large warehouses are located will suffer: they will be closed in the coming months due to budget cuts. Pennsylvania, for example, has two main maintenance depots, where modernization of complex weapons systems, including Patriot complexes, is underway. Texas and Alabama will be seriously affected. Closing the depot here will stop the repair of weapons, communication devices and vehicles. Reducing the flow of orders will affect 3.000 companies. More 1.100 companies will face bankruptcy.
Analysts of the American center "Stratfor" have spread The report entitled “US: what a sequestration will do with the army”, which gives a forecast about the consequences of cuts in state funding for the Armed Forces.
The authors believe that the interim plan for financing government spending that was in place before 27 in March has already affected the Armed Forces. A further cut in funding will cause even more damage to the US military.
Destructive is not the volume of reductions as such (500 billion dollars over 10 years), but how this will be done. The mere threat of long-term budget cuts has affected combat readiness. For example, the marines canceled the dispatch of a second aircraft carrier to the Persian Gulf, departing from the usual standard, according to which two aircraft carriers should be deployed in each region. Instead, the second aircraft carrier will serve as a rapid reaction unit in the near future.
Pending budget cuts, maintenance costs were also cut or suspended. But any military platform, from the Stryker armored vehicle to the aircraft carrier, requires large expenditures to maintain their readiness for use at any time and in full. But if there is no more money, then there is no other option than to reduce the level of readiness.
And modernization? It is a constant cycle, the interruption of which is fraught with far-reaching consequences. US Navy announced the withdrawal from combat duty of four aviation links of nine and four aircraft carriers at various stages of operation. This means that for many years to come, the country will have one aircraft carrier in combat service and one more ready if necessary.
Moreover, it is likely that the contingent located in the region of the Pacific Ocean, the very region that occupies a central position in the new US strategy, will suffer the greatest damage.
Experts, however, do not claim that American troops are degrading immediately. The effectiveness of the armed forces is measured against potential adversaries, and over the past decades the United States has stepped forward. But if the army does not develop, then its relative power decreases. This means, analysts write, that after the introduction of sequestration or the extension of the current financing plan, the US Army will still be the most powerful in the coming years, but it cannot be considered as such in relation to other forces, as it was before.
Similar thoughts expresses military expert David Arutyunov. He believes that in the short and medium term, a sequestration cannot cause a sharp lag of the “Power No. XXUM” behind its closest competitors — China, Russia, and the European Union.
Of course, of course. And not so much “outside”, as “inside”.
In the army and on navy The United States will fall under the sequestration of almost half a million people. Mike Amato, spokeswoman for the House Committee on Armed Forces, is already saidthat we are talking about serious consequences that will affect both national defense and the country's economic well-being.
All this is not a joke. Obama's rating can be greatly shaken.
However, the president will do everything to put pressure on Republicans in Congress in order to avoid the above cuts. He is going to initiate a plan that includes cuts in other expenses and which changes tax policy, which ultimately should bring additional revenue.
The president publicly expresses his concern that people may lose jobs. This, he says, "is not an abstraction."
However, words are words, but people are already being fired. General Raymond Odierno, army chief of staff, told the senators a week and a half ago that the Pentagon’s temporary 3100 employees had been fired. Hiring new employees is frozen. The newly trained soldiers did not depart for Afghanistan and South Korea. All of them will be "reduced."
However, its costly US foreign policy continues.
The US Secretary of State, in the framework of his tour, recently visited Rome, where he kindly spoke with the Friends of Syria and сообщилthat the United States will provide them with additional assistance in the amount of sixty million dollars, and at the same time for the first time will provide "non-lethal funds". Yes, despite the sequestration. In the US, people are left without work and wages, and Kerry distributes money and expensive equipment to some dubious bearded men.
This is not all. The Pentagon has just concluded negotiations between the Ministers of Defense of the USA and Israel, Chuck Hagel and Ehud Barak. The ministers discussed, among other things, support for the development of the Israeli missile defense system.
Well-known pacifist Charles Hagel assured his Israeli counterpart that the United States would continue to provide financial and technical assistance to the development of the Israeli missile defense system - despite the difficult economic situation in America. Will be supported: “The Iron Dome”, “The Magic Wand” (“The Story of David”) and “Hetz 3”. The head of the Pentagon stressed that his department "will work with members of Congress" to ensure the continuity of funding for these programs.
And this was declared by a man who is considered an “anti-Semite” among senators and once called himself “an American, not an Israeli senator”!
Also, the US Secretary of Defense (as if Panetta is still in his place) confirmed Washington’s desire to maintain the status quo in the Middle East region: when the Israeli army has a military-technical advantage over the Arab and Iranian armies.
Then, turning to a discussion of the Iranian problem, the ministers declared a unified approach, thereby again giving the international community to understand that the option of a forceful solution is not excluded.
Finally, Mr. Hagel expressed his readiness to visit Israel.
Greater unity of souls is hard to imagine.
It seems that the sequester of the development of US foreign policy programs is not a hindrance. Analysts are sure: Republicans and Democrats have a chance to agree on a balanced budget. Fund experts Nouriel Roubini doubtthat the expenditure budget will be reduced in the specified amount (85 billion dollars). The most likely scenario is that Obama voiced: making a deal between Republicans and Democrats to lower the sequestration ceiling and create a joint commission to cut costs.
There will be nothing unexpected either for the USA or for the world economy as a result of a sequestration, says PhD in Economics, Sergey Pyatenko:
But the White House itself “suffered” from sequestration: the excursions to the residence of the US President were stopped. "Tours are stopped from Saturday to the special notice due to the reduction in the number of staff serving the White House," сообщили there to reporters.
As far as we know, the presidential administration will not be concerned with the reduction of jobs. Barack Obama, his speechwriter K. Keenan, Secretary of State John Kerry, Secretary of Defense Chuck Hagel, Secretary of the Treasury Jacob Liu and other useful people in the country will remain in office. At the same time, in the US, 750.000 people will lose their jobs, of which 400.000 is in the power departments. Over 10 years, budget spending will be reduced by 1,2 trillion dollars.
The US debt crisis scenario, developed by Frederick Mishkin, a professor at Columbia Business School, was not at all as gloomy as some analysts and their readers might have thought.
According to professors, if American politicians fail to reduce the budget deficit, by 2018, the States will fall into a crisis of the Greek type. In this case, the Fed will have nothing to do but to bring down the dollar: with the help of high inflation a “hidden default” will be held. Mishkin and his staff, who conducted scientific research, do not believe in the imminent collapse of the economy of their homeland. The United States can get into a crisis (like the Greek one) only in the 2018 year, and even then, if politicians fail to urgently reduce the budget deficit.
The growth of US government debt, according to the study, can be stopped by reducing the budget deficit to 1,8% of GDP from last year’s 7,8%. That is, even the shortage in the coming years is acceptable. True, the debt will still grow. The Congressional Budget Office predicts that it will grow to 107% of GDP in 2014. From here will go up and the cost of its maintenance.
The US may overtake a budget crisis, says Professor Mishkin. In the long term 25, the US national debt will grow to 176% of GDP. The Congressional Budget Office makes a smaller growth forecast: up to 159%.
But note that we are talking about a quarter of a century! And, as is well known, extrapolations of current processes very often ended up with zilch for the most intelligent scenarios. The world is changing too quickly. In 2007, the world did not suspect the crisis of 2008. At the beginning of the century, many lost on the shares of IT-companies - in the same America. And even with the calculation of shale energy reserves in the United States recently made a big mistake: they started talking about "Saudi America", which the United States will become by 2017, when it suddenly turned out that the reserves are almost half the estimated. Nobody knows how things will turn out if Obama and the hawks-Republicans from Congress unleash a war in the Middle East. MIC will begin to work at full capacity, there will be new jobs. On the other hand, the war in Syria can be very costly, not to mention Iran. But the fact that the plans to attack these two countries in Washington are not hatched, only naive will believe. The White House has invested a lot in the anti-Syrian campaign, and will sometime wish to put an end to it. And there is possible the Israeli-Israeli attack of Iran. We will come back to this topic, but for now let's continue the conversation about “scenarios”.
At the "BO" it was already reported that Jacob Lew had become the new US Treasury Secretary. The main task of the minister will be just to find a compromise to reduce the strength of the economic blow in the amount of 85 billion. $ - the US national budget will be exactly “cut off”. Compromise, as previously suggested, must be found no later than 1 March. However, the country did not fall from the "financial cliff". The fact is that funds for most government operations end on March 27. Lew is the man (that’s probably what the president thinks), who is able not only to take the lead in difficult negotiations with the Congress on cutting the budget deficit, but also to find the right compromise. Negotiator and financier, he is really very experienced.
So, it’s not necessary to bury the US budget and the key currency ahead of time. But March 27 ...
As for the more distant prospects, the aforementioned prof. Mishkin is inclined to think about the upcoming “monetization” of the US debt: the dollar depreciating through inflation caused by the usual printing of money (for which the Fed is a great craftswoman). The reason for this “monetization” of debt may just be the constant deficit of the federal budget - provided that politicians are not ready to develop a plan for reducing it.
If Mr. Lew, while in his high office, makes a proper compromise, and an agreement is reached, the dollar will not collapse.
The new Minister of Finance himself is very optimistic. In all the photos he smiles. Despite the sequestration, he promised to put pressure on the second largest economy in the world - the Chinese. Lew and Obama do not like that China weakens its currency, which allows it to benefit from foreign trade. Meanwhile, the artificially low value of the yuan causes damage to US companies.
Its US foreign policy will continue. It seems that neither Obama, nor Lew, nor the Republicans and Democrats among the senators attach great importance to sequestration.
But because of this very sequestration, the Pentagon alone will have to cut off the costs of 30 billion dollars by the end of the current fiscal year (46 of September). Former Secretary of Defense Leon Panetta saidThat cuts will make of America a secondary military power.
The cuts will affect many military contractors. For example, the economic losses of Texas will be expressed here in the amount of 2,4 billion dollars. A whole army of civil servants - 30 thousand people - will remain without work. Their financial losses in earnings will be 180 million. $.
As for maintenance, those states where large warehouses are located will suffer: they will be closed in the coming months due to budget cuts. Pennsylvania, for example, has two main maintenance depots, where modernization of complex weapons systems, including Patriot complexes, is underway. Texas and Alabama will be seriously affected. Closing the depot here will stop the repair of weapons, communication devices and vehicles. Reducing the flow of orders will affect 3.000 companies. More 1.100 companies will face bankruptcy.
Analysts of the American center "Stratfor" have spread The report entitled “US: what a sequestration will do with the army”, which gives a forecast about the consequences of cuts in state funding for the Armed Forces.
The authors believe that the interim plan for financing government spending that was in place before 27 in March has already affected the Armed Forces. A further cut in funding will cause even more damage to the US military.
Destructive is not the volume of reductions as such (500 billion dollars over 10 years), but how this will be done. The mere threat of long-term budget cuts has affected combat readiness. For example, the marines canceled the dispatch of a second aircraft carrier to the Persian Gulf, departing from the usual standard, according to which two aircraft carriers should be deployed in each region. Instead, the second aircraft carrier will serve as a rapid reaction unit in the near future.
Pending budget cuts, maintenance costs were also cut or suspended. But any military platform, from the Stryker armored vehicle to the aircraft carrier, requires large expenditures to maintain their readiness for use at any time and in full. But if there is no more money, then there is no other option than to reduce the level of readiness.
And modernization? It is a constant cycle, the interruption of which is fraught with far-reaching consequences. US Navy announced the withdrawal from combat duty of four aviation links of nine and four aircraft carriers at various stages of operation. This means that for many years to come, the country will have one aircraft carrier in combat service and one more ready if necessary.
Moreover, it is likely that the contingent located in the region of the Pacific Ocean, the very region that occupies a central position in the new US strategy, will suffer the greatest damage.
Experts, however, do not claim that American troops are degrading immediately. The effectiveness of the armed forces is measured against potential adversaries, and over the past decades the United States has stepped forward. But if the army does not develop, then its relative power decreases. This means, analysts write, that after the introduction of sequestration or the extension of the current financing plan, the US Army will still be the most powerful in the coming years, but it cannot be considered as such in relation to other forces, as it was before.
Similar thoughts expresses military expert David Arutyunov. He believes that in the short and medium term, a sequestration cannot cause a sharp lag of the “Power No. XXUM” behind its closest competitors — China, Russia, and the European Union.
“First of all, all these players are inferior to the United States in terms of power projection in different parts of the world. However, over the next couple of decades, the United States may have competitors capable of projecting power at the regional level. Of course, they will not be able to resist the US Armed Forces, but in any case, this is significant. "
Of course, of course. And not so much “outside”, as “inside”.
In the army and on navy The United States will fall under the sequestration of almost half a million people. Mike Amato, spokeswoman for the House Committee on Armed Forces, is already saidthat we are talking about serious consequences that will affect both national defense and the country's economic well-being.
All this is not a joke. Obama's rating can be greatly shaken.
However, the president will do everything to put pressure on Republicans in Congress in order to avoid the above cuts. He is going to initiate a plan that includes cuts in other expenses and which changes tax policy, which ultimately should bring additional revenue.
The president publicly expresses his concern that people may lose jobs. This, he says, "is not an abstraction."
However, words are words, but people are already being fired. General Raymond Odierno, army chief of staff, told the senators a week and a half ago that the Pentagon’s temporary 3100 employees had been fired. Hiring new employees is frozen. The newly trained soldiers did not depart for Afghanistan and South Korea. All of them will be "reduced."
However, its costly US foreign policy continues.
The US Secretary of State, in the framework of his tour, recently visited Rome, where he kindly spoke with the Friends of Syria and сообщилthat the United States will provide them with additional assistance in the amount of sixty million dollars, and at the same time for the first time will provide "non-lethal funds". Yes, despite the sequestration. In the US, people are left without work and wages, and Kerry distributes money and expensive equipment to some dubious bearded men.
This is not all. The Pentagon has just concluded negotiations between the Ministers of Defense of the USA and Israel, Chuck Hagel and Ehud Barak. The ministers discussed, among other things, support for the development of the Israeli missile defense system.
Well-known pacifist Charles Hagel assured his Israeli counterpart that the United States would continue to provide financial and technical assistance to the development of the Israeli missile defense system - despite the difficult economic situation in America. Will be supported: “The Iron Dome”, “The Magic Wand” (“The Story of David”) and “Hetz 3”. The head of the Pentagon stressed that his department "will work with members of Congress" to ensure the continuity of funding for these programs.
And this was declared by a man who is considered an “anti-Semite” among senators and once called himself “an American, not an Israeli senator”!
Also, the US Secretary of Defense (as if Panetta is still in his place) confirmed Washington’s desire to maintain the status quo in the Middle East region: when the Israeli army has a military-technical advantage over the Arab and Iranian armies.
Then, turning to a discussion of the Iranian problem, the ministers declared a unified approach, thereby again giving the international community to understand that the option of a forceful solution is not excluded.
Finally, Mr. Hagel expressed his readiness to visit Israel.
Greater unity of souls is hard to imagine.
It seems that the sequester of the development of US foreign policy programs is not a hindrance. Analysts are sure: Republicans and Democrats have a chance to agree on a balanced budget. Fund experts Nouriel Roubini doubtthat the expenditure budget will be reduced in the specified amount (85 billion dollars). The most likely scenario is that Obama voiced: making a deal between Republicans and Democrats to lower the sequestration ceiling and create a joint commission to cut costs.
There will be nothing unexpected either for the USA or for the world economy as a result of a sequestration, says PhD in Economics, Sergey Pyatenko:
“In general, all this is not really an event. It is no accident, say, the stock markets around the world, and the US, do not notice this event at all. Of course, any stock market uses any reason to twitch, but here that is typical: the markets behave absolutely calmly and therefore this is such a wort in a glass of water. As a certain ritual: some should criticize, others should change something in detail, therefore it will not have any significant impact on the world economy. In two months, an agreement will be reached with Congress, and this money will be returned. Therefore, it is such a ritual-bureaucratic move. At least a dozen times this has already happened. ”
But the White House itself “suffered” from sequestration: the excursions to the residence of the US President were stopped. "Tours are stopped from Saturday to the special notice due to the reduction in the number of staff serving the White House," сообщили there to reporters.
As far as we know, the presidential administration will not be concerned with the reduction of jobs. Barack Obama, his speechwriter K. Keenan, Secretary of State John Kerry, Secretary of Defense Chuck Hagel, Secretary of the Treasury Jacob Liu and other useful people in the country will remain in office. At the same time, in the US, 750.000 people will lose their jobs, of which 400.000 is in the power departments. Over 10 years, budget spending will be reduced by 1,2 trillion dollars.
Observed and translated by Oleg Chuvakin
- especially for topwar.ru
- especially for topwar.ru
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