Wednesday, May 24, 2017

The Biggest Fallacies of Washington's Budgets

The release of the proposed fiscal 2018 federal budget from the Trump Administration revealed, once again, why Washington's annual budgets are barely worth the paper that they are written on.  While the budget proclaims that it will help reduce the threat to American prosperity from the $20 trillion federal debt that was inherited from the Obama Administration, it makes broad economic assumptions that will be the undoing of this latest iteration of fiscal (mis)management from Washington.

Let's start by looking at the assumptions made in the budget from Table S-9 Economic Assumptions found on page 45:

You may not notice the weakness in these assumptions immediately, however, if you look at the line showing the year-over-year percent change in nominal GDP you will notice some very optimistic projections.  The budget assumes that nominal GDP will grow by between 4.3 percent and 5.1 percent between fiscal 2017 and fiscal 2027 and that real GDP will grow by between 2.3 percent and 3.0 percent over the same timeframe.

Let's look at the real world.  According to FRED, this is what has happened to nominal GDP growth rates since the end of the Great Recession:

Since the fourth quarter of 2009, nominal GDP has grown by an average of 3.4 percent over 30 quarters of economic expansion, well below the rates seen in prior expansions as shown here:

In addition, nominal GDP actually contracted by 3.1 percent and 3.2 percent on a year-over-year basis during the first and second quarters of 2009.
Here's what has happened to real GDP growth since the end of the Great Recession:

Since the first quarter of 2010, real GDP has grown by an average of 2.1 percent, again, well below the rates seen in prior expansions as shown here:

During the Great Recession, real GDP contracted by as much as 4.1 percent on a year-over-year basis during the first quarter of 2009.  

Not only is the assumption of economic growth rates used in the 2018 fiscal budget overly optimistic, there is one other assumption that is completely erroneous; the assumption that the economy will continue to expand without ceasing until fiscal 2027.  Let's look at a chart which shows the length of economic expansions (trough to peak) going back to the 1850s:

The longest trough to peak was 120 months during the expansion which began after the March 2001 to November 2001 recession. Over the period from 1854 to 2009, there were 33 economic cycles with an average trough to peak duration of 38.7 months.  As far as the latest economic cycle goes, we are now 95 months into the expansion and if the assumptions used in the fiscal 2018 budget hold, the economic expansion will be a whopping 222 months long, nearly double the longest expansion in the past century and a half.

While I'm sure that there are those who would love to blame this on yet another Trump Administration blunder, here is a screen capture from the fiscal 2017 final Obama Administration budget showing that they made similarly erroneous assumptions on Table S-12 (page 163):

You will notice that while the budget makes no allowance for any kind of economic contraction going out to fiscal 2026, it does make somewhat more realistic assumptions when it comes to both nominal and real economic growth rates.

When one reads through government budget documents, it is always key to closely examine the assumptions used.  If these assumptions do not transpire, the projections of future budgetary improvements like dropping deficit levels and improving debt accumulation rates are completely unattainable.  But then again, what did you really expect from politicians?  

Tuesday, May 23, 2017

Donald Trump and Mainstream Media Bias

Here's a quote from a U.S. President:

"Also, never forget.  The press is the enemy.  The press is the enemy.  The press is the enemy."

Donald Trump has successfully accomplished one thing since he took over the Oval Office in January 2017, he has dominated the 24 hour news cycle, particularly in the United States.  A report from Harvard Kennedy School's Shorenstein Center on Media, Politics and Public Policy has analyzed the news coverage of Donald Trump's first 100 days in office, and provides us with an analysis of the coverage and its level of positivity/negativity as well as a comparison to the coverage received by his predecessors.  The analysis is based on newscasts on CBS, NBC, CNN and Fox News, news reports in the print editions of The Washington Post, The New York Times and The Wall Street Journal and coverage in three European news outlets including BBC in the United Kingdom, ARD in Germany and Financial Times in the United Kingdom.  Let's look at some of the highlights of this report. 

In Donald Trump's first 100 days in the Oval Office, he was the topic of a record-breaking 41 percent of all news stories, three times the usual amount of coverage received by a U.S. President.  Donald Trump did most of the talking on his own behalf, appearing as the featured speaker in 65 percent of stories that covered him followed by 11 percent who were administration officials, 6 percent who were Democrats, 4 percent who were Republicans, 3 percent who were protestors, 1 percent who were the FBI and 10 percent who were "others".   All totalled, Republicans inside and outside the administration accounted for 80 percent of what newsmakers said about Donald Trump's presidency.

Here is a pie chart showing the topics covered by the American media when discussing the Trump presidency:

The print media focussed more on the immigration issue while television news focussed more on the health care issue.  Fox News was an outlier in that it gave less than half of the coverage of the Russia election interference story than its six U.S. media peers.

Here is a pie chart showing the topics covered by the European media when discussing the Trump presidency:

Not unexpectedly, Europe's media gave more coverage to international trade, military and foreign policy issues than their American counterparts.  Additionally, Europe's media was more likely to focus on the issue of Trump's fitness for office with the fitness issue garnering 20 percent of total Trump coverage for Germany's ARD, the nation's main pubic broadcaster in January 2017, dropping to 18 percent in February and 10 percent in March and April, well above the 3 percent coverage that the fitness issues received in the U.S. media.  Note that most of this "fitness for office" coverage was negative.

Let's look at the tone of the media coverage of Donald Trump's first 100 days in office.  Here is a graphic showing the tone (positive vs. negative) for the first 100 days in office for the past four U.S. presidents:

As you can clearly see, the coverage for Trump's first 100 days set a new standard for negativity.  In all of the weeks during the first 100 days, no week saw the negative coverage drop below 70 percent, hitting a high of 90 percent in March as you can see on this graphic which plots positive coverage (in green) vs. negative coverage (in red):

The least negative week (70 percent negative) took place when Donald Trump ordered a cruise missile strike against a Syrian airbase in retaliation for the alleged use of nerve gas on Syrian civilians and the most negative weeks took place when federal judges struck down his executive order banning Muslim immigrants from several nations and when the House of Representatives was unable to muster the votes needed to pass a repeal of Obamacare.

In closing, let's look at a graphic which shows the positive and negative bias of Trump news coverage for each of the American and European media outlets used in the study:

It is interesting to see that even Fox, the media bastion of American conservatism, had slightly more negative coverage than positive coverage (52 percent vs. 48 percent) of the Trump Administration's first months in office.  Fox was most positive on Trump's handling of the economy (57 percent vs. 44 percent for all other outlets), his fitness for office (67 percent vs. 15 percent for all other outlets), international  trade (80 percent vs. 12 percent for all other outlets) and the terrorist threat (81 percent vs. 25 percent for all other outlets).  

Even by the standards of today's presidentially critical press, Donald Trump has broken new ground.  What is particularly interesting is that the coverage of the Trump presidency is overwhelmingly negative even though he is talking on his own behalf nearly two-thirds of the time.  The level of negativity appears to lend credence to Trump's claim that the media are aiming to destroy his presidency before it has really taken hold and that much of the mainstream media is "fake news" as shown on this tweet from February 2017:

The analysis also shows one key problem with the media coverage of the early days of the Trump presidency; there is little news coverage of most of his executive orders with all executive orders other than the immigration orders receiving less than 1 percent of total Trump media coverage.  This tells us that the mainstream media has chosen to focus on a handful of issues while ignoring other important developments that may show the Trump presidency in a different light.

Here is a closing paragraph from the report:

"Journalists would also do well to spend less time in Washington and more time in places where policy intersects with people's lives.  If they had done so during the presidential campaign, they would not have missed the story that keyed Trump's victory - the fading of the American Dream for millions of ordinary people.  Nor do all such narratives have to be a tale of woe.  America at the moment is a divided society in some respects, but it's not a broken society and the divisions in Washington are deeper than those beyond the Beltway."

Apparently, despite the lessons taught by the Clinton loss in 2016, journalists are a slow-to-learn bunch.  As a group, they also seem to have forgotten that the opposition to the ruling party should not solely come from the press, rather, it should come from the government's elected political opponents, a group that received only 6 percent of the mainstream media's airtime.  This is most definitely not how a democracy should function.

By the way, while it may have sounded like a Trumpism, the opening anti-press quote was actually from President Richard Milhous Nixon.

Friday, May 19, 2017

Russia's Assessment of America's Political Theatre

All of the media time being devoted to the Trump-Putin-Russia connection over the past weeks makes for fascinating political theatre, however, we rarely hear how Russia's political leadership feels about the issue.  Thanks to RT and Russia Insider, we now have video showing Vladimir Putin's commentary on the issue on May 17th, 2017:

Note the 55 second mark where Foreign Secretary Lavrov, a career diplomat, chuckles at Vladimir Putin's comments that he would have to give him a "ticking off" for not sharing America's secrets with him or Russia's intelligence apparatus.

According to Putin's press conference, he is ready to provide a transcript of the meeting that took place between Donald Trump and Russia's Foreign Minister, Sergey Lavrov, where the U.S. media claims that American state secrets were leaked.

Here is a complete transcript of the pertinent section of the press conference with my highlights:   

"As for the results of Foreign Minister Lavrov’s visit  to the United States and his meeting with President Trump, we assess the results highly. This was the first visit, a return visit by our foreign minister, after we received US Secretary of State Tillerson here in Moscow.

This is normal and natural international practice.   At the same time, however, we see the growing political schizophrenia in the United States. There is no other way I can explain the accusations against the current president that he handed whichever secrets over to Lavrov

Incidentally, I spoke with him [Lavrov] today about this matter, and I will have to give him a ticking off for not sharing these secrets with me. Not with me, nor with our intelligence officials. This was really not good of him at all. 

What’s more, if the US administration has no objection, we are ready to provide a transcript of Lavrov’s conversation with Trump to the US Senate and Congress. Of course, we would do this only if the American administration so desires. 

Initially, when we watched the first developments in this internal political struggle, we were amused. But now, the spectacle is becoming quite simply sad, and it is causing us concern, because it is hard to imagine just how far people willing to think up this kind of nonsense and absurdity might go. All of this is ultimately about fanning anti-Russian sentiment. 

This does not surprise me. They are using anti-Russian slogans to destabilize the internal political situation in the United States, but they do not realise that they are harming their own country. If this is the case, then they are quite simply stupid. If they do understand what they are doing, then they are dangerous and unscrupulous people. In any event, this is the United States’ own affair and we have no intention of getting involved. 
As for assessments of President Trump’s actions so far in office, this too is not our affair. It is for the American people, American voters, to give their assessment. Of course, this will be possible only once he is fully allowed to work."

It is interesting to see that at least one major world leader has a sense of humour about his  country's relationship with the United States  and a clear understanding of America’s increasingly self-destructive political reality in these difficult and increasingly tense times.

Thursday, May 18, 2017

Maskirovka - Russia's Military Masquerade

I recently posted an article on Russia's new, relatively low-tech stealth weapon, the cleverly designed rail-based missile system, Barguzin, that uses rail cars with the same dimensions as normal rail cars to transport its RS-24 Yars ICBMs, a plan which makes tracking the missiles a near impossibility.  In another twist, Russia has developed an even more clever diversion as shown on this video (please pardon the accompanying music!):

A similar system of deception was used by Allied forces in the United Kingdom during the Second World War to fool the Germans into believing that the D-Day beach landings would take place at Calais rather than Normandy and that there was a massive buildup of Allied forces in Germany as shown on this video:

The company manufacturing the Russian decoys, Rusbal RPC states that their simulated military equipment "increases troop survivability" and that their decoys can fool both reconnaissance and weapon guidance systems using visible, infrared, thermal and radio technology.  

Rusbal RPC makes three types of decoys:

1.) pneumatic dummies - three dimensional, inflatable decoys that can be used to simulate a concentrated land force.  These decoys weigh no more than 100 kilograms, fit in up to two duffel bags and can be erected in 3 to 4 minutes.  Here are three examples their pneumatic product line:

The company even manufactures decoys of camouflaged aircraft as shown here:

2.) flat element dummies - two dimensional dummies - a cheaper alternative to the pneumatic dummies, both horizontal and vertical placement.  Here are two examples of their flat element product line with the second example showing a simulation of an air defense combat unit:

3.) radar simulators - intended for reproducing radar portraits similar to real radar equipment.

The company even supplies equipment that make false tank track patterns.

Russia has long used the concept of maskirovka (i.e. to mask/masquerade) during wartime, a program of deception, including camouflage, designed to confuse Western intelligence networks.  With the use of this tactic of ruses, Russia attempts to manipulate an adversary's picture of the real world situation, causing confusion and affecting the decision-making process which can easily be compromised during battlefield conditions.

While the United States spends hundreds of billions of dollars annually on its massive defense budget, it is interesting to see that Russia has taken a completely different approach to defending the Motherland with its limited defense budget allocations.  It is interesting to see what a little imagination and a lot of hot air can create. 

Wednesday, May 17, 2017

Russia's Fear of Nuclear War

Thanks to Paul Craig Roberts, a highly respected and honoured journalist, former Assistant Secretary of the Treasury for Economic Policy during the Reagan era, academic and Chairman of the Institute for Political Economy, we have a bit of a glimpse into the mindset of Russia during this period when the Cold War seems to be rewarming, particularly in the minds of America's mainstream media.

In late April 2017, there were a handful of frightening articles that appeared in what is now classified "the fake news media" and the "Kremlin-controlled media" .  The articles in question quoted comments made during a news briefing by Lt. General Viktor Poznihir, Deputy Chief of the Main Operations Directorate of the Russian Armed Forces at the annual Moscow International Security Conference (MCIS), Russia's answer to the Munich Security Conference which is held in Germany.  The MCIS has become a forum for Russia to present its agenda to the world and to deal with issues in world security.  Here is a link to the MCIS website which describes the focus of the conference as quoted here:

"The Conference will be focused on the most critical problems of global and regional security. The plenary sessions will look closely at the issues of combating international terrorism, security problems in Europe and Asia-Pacific region, role of defence agencies in enhancing security in different regions of the world.

Counterterrorism and counterradicalism in the Middle East, security of information space, BMD implications, and security in Central Asia will also be in the spotlight of separate discussion sessions of the Forum."

The countries participating in the sixth annual Moscow Conference included Austria, Albania, Azerbaijan, Algeria, Afghanistan, Bahrain, Belgium, the United Kingdom, Hungary, Brazil, Vietnam, Germany, Egypt, India, Israel, Iraq, Jordan, IrelandSpain, Italy, South Korea, China, Japan, Cuba, Canada, Norway, France, Saudi Arabia and, surprisingly, the United States.

With that background, let's look at how RT (Russian Television), oft-cited as a Kremlin-inspired and controlled  propaganda media outlet, reported on the conference:

 "The United States is pursuing global strategic domination through developing anti-ballistic missile systems capable of a sudden disarming strike against Russia and China, according to the deputy head of operations of the Russian General Staff.

There is an obvious link between Washington’s prompt global strike initiative, which seeks capability to engage “any targets anywhere in the world within one hour of the decision,” and the deployment of missile launch systems in Europe and aboard naval vessels across the globe, Lt. Gen. Viktor Poznikhir said at a news briefing on Wednesday.

“The presence of US missile defense bases in Europe, missile defense vessels in seas and oceans close to Russia creates a powerful covert strike component for conducting a sudden nuclear missile strike against the Russian Federation,” Poznikhir explained.

While the US keeps claiming that its missile defenses are seeking to mitigate threats from rogue states, the results of computer simulations confirm that the Pentagon’s installations are directed against Russia and China, according to Poznikhir.
American missile attack warning systems, he said, cover all possible trajectories of Russian ballistic missiles flying toward the United States, and are only expected to get more advanced as new low-orbit satellites complement the existing radar systems.
“Applying sudden disarming strikes targeting Russian or Chinese strategic nuclear forces significantly increases the efficiency of the US missile defense system,” Poznikhir added.  American ABM (anti-ballistic missile) systems are not only creating an “illusion” of safety from a retaliatory strike but can themselves be used to launch a sneak nuclear attack on Russia.

In a blatant breach of the Intermediate-Range Nuclear Forces Treaty, the standard land-based launching systems can be covertly rearmed with Tomahawk cruise missiles instead of interceptors – and the Pentagon’s denial of this fact, according to Poznikhir, is “at the very least unconvincing.”

Moreover, Washington’s unilateral withdrawal from the Anti-Ballistic Missile Treaty, signed in 1972 with the Soviet Union, allowed it to develop more advanced weapons that can now not only pose a threat to targets on the ground but in space as well.
“In February 2008, the Pentagon demonstrated the possibility of engaging spacecraft with its ABM capabilities,” Poznikhir said. “An American satellite at an altitude of about 250 km was destroyed by a Standard-3 missile, an earlier modification, launched from a US Navy destroyer.”

Given the global nature of the ABM ships’ deployment, the space operations of any state, including the Russian Federation and the People's Republic of China, are under threat.” (my  bolds)

What Lt. General Poznihir is quite eloquently stating is that the Operations Command of the Russian General Staff has concluded that the United States is preparing to launch a first strike nuclear attack against Russia and China.

These comments from a high-level Russian military leader are game-changing and, if it truly reflects the sentiments of Russia's military (and I can't imagine that it doesn't given the venue), should be cause for great concern.  It suggests that the Pentagon believes that it can garner an unconditional win a first-strike nuclear attack against Russia, an attack that Russia's military believes could occur at any time.  This possibility should have created great concern among America's politicians and mainstream media and should have been headline news on April 26th, 2017.

So, how much coverage did this story get?  Here's what Google turned up:

While Lt. General Poznihir's comments appeared on a handful of other sites, they were severely abbreviated, removing the impact of what he really said during his news briefing.  It also doesn't appear that these comments were addressed by any Member of Congress, the Oval Office or any politician anywhere in the Western world.

It is fascinating to see that the real media left this story totally untouched, likely because it doesn't fall into their narrative nor does it fit the narrative of the White House, Congress or the Deep State that they rely on for their "talking points". 

I'd like to close this posting with a link to the final scenes of the 1959 post-apocalyptic classic movie, On the Beach, from the novel by Nevil Shute.  I watched this movie recently and, as a Baby Boomer who lived through the coldest days of the Cold War Part One, its message is one that should be absorbed by all of those who can declare nuclear war on our behalf: