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THE BENGHAZI REPORT

The September 11, 2012 on the American consulate in Benghazi included the first murder of a U.S. ambassador since 1988. The incident raised serious questions, including:

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  • Why security was so lax for on-site personnel;
  • What was the reason for the attack;
  • Why American forces were not allowed to respond to the incident;
  • Why the White House repeatedly misinformed the public about the reasons for and nature of the assault.
The U.S. State Department convened an “Accountability Review Board”(ARB) in response.  The ARB consisted of members selected by the Secretary of State and one member selected by the Director of National Intelligence.  Ambassador Thomas Pickering served as Chair, and Admiral Michael Mullen served as Vice Chair.
Many of the key issues raised by the September 11, 2012 attack were not answered by the ARB report, and, as of the date of this NY Analysis edition, neither the White House nor Secretary of State Clinton has provided first-hand information vital to resolving the matter.  However, some information was disclosed, although the role of the two key figures–Secretary of State Clinton and President Obama–is not adequately reviewed.
However, the report does contain a rather serious indictment both of the White House and Secretary Clinton by finding that “communication, cooperation and coordination among Washington, Tripoli, and Benghazi functioned collegially at the working level but were constrained by a lack of transparency, responsiveness, and leadership at the senior levels.”
We summarize the key findings and recommendations here, quoting directly from the ARB report. It is particularly interesting to note that key findings of the report directly contradict much of what the White House has consistently stated, even after the facts were clearly known.  It also provides indications that directly contradict a key claim repeatedly made by the President that al Qaeda has been substantially diminished in its operational capabilities.
FINDINGS
“In examining the circumstances of these attacks, the Accountability Review Board for Beghazi determined that:
    1.   The attacks were security related, involving arson, small arms and machine gun fire, and the use of RPGs, grenades and mortars against U.S. personnel at two separate facilities-the SMC and the annex-and en route between them. Responsibility for the tragic loss of life, injuries and damage to U.S. facilities and property rests solely and completely with the terrorists who perpetuated the attacks.  The Board concluded that there was no portest prior to the attacks, which were unanticipated in their scale and intensity.
    2.    Systematic failures and leadership and management deficiencies at senior levels within two bureaus of the State Department (the ‘Department’) resulted in a Special Mission posture that was inadequate for Benghazi and grossly inadequate to deal with the attack that took place.
Security in Benghazi was not recognized and implemented as a ‘shared responsibility’ by the bureaus in Washington charged with supporting the post, resulting in stove-piped discussions and decisions on policy and security. That said, Embassy Tripoli did not demonstrate strong and sustained advocacy with Washington for increased security for Special Mission Benghazi
The short term, transitory nature of Special Mission Benghazi’s staffing, with talented and committed, but relatively inexperienced American personnel often on temporary assignements of 40 days or less, resulted in diminished institutional knowledge, continuity and mission capacity.
Overall, the number of Bureau of Diplomatic Security (DS)  Security staff in Benghazi on the day of the attack and in the months and weeks leading up to it was inadequate, despite repeated requests from Special Mission Benghazi and Embassy Tripoli for additional staffing.  Board members found a pervasive realization among personnel who served in Benghazi that the Special Mission was not a high priority for Washington when it came to security-related requests, especially relating to staffing.
The insufficient Special Mission security platform was at variance with the appropriate  Overseas Security Policy Board (OSPB) standards with respect to perimeter and interior security.  Benghazi was also severely under-resourced with regard to certain needed security equipment, although DS funded and installed in 2012 a number of physical and security upgrades.  These included heightening the outer perimeter wall, safety grills on safe area egess windows, concrete jersey barriers, a stell gate for the Villa C safe area, some locally manufactured steel doors, sandbag fortifications, security cameras, some additional security lighting, guard booths, and an Internal Defense Notification System.
Pecial Mission Benghazi’s uncertain future after 2012 and its “non-status” as a temporary, residential facility made allocation of resources for security and personnel more difficult, and left responsibility to meet security standards to the working-level in the field, with very limited resources.
In the weeks and months leading up to the attacks, the response from post, Embassy Tripoli, and Washington to a deteriorating security situation was inadequate.  At the same time, the SMC’s dependence on the armed but poorly skilled Libyan February 17 Martyrs’ Brigade militia members and unarmed, locally contracted Blue Mountain Libya (BML) guards for security support was misplaced.
Although the February 17 militia had proven effective in responding to improvised explosive devise (IED) attacks on the Special Mission in Aprl and June 2012, there was some troubling indicators of its reliability in the months and weeks preceding the September attacks.  At the time of Ambassador Stevens’ visit, February 17 militia members had stopped accompanying Special Mission vehicle movements in protest over salary and working hours.
Post and the Department were well aware of the anniversary of the September 11, 2001 terrorist attacks but at not time were there ever any specific, credible threats against the mission in Benghazi related to the September 11 anniversary.  Ambassador Stevens and Benghazi-based DS agents had taken the anniversary into account and decided to hold all meetings on-compound on September 11.
The Board found that Ambassador Stevens made the decision t travel to Benghazi independently of Washington per standard practice. Timing for his trip was driven in part by commitments in Tripoli as well as a staffing gp between principle offices in Benghazi.  Plans for the Ambassador’s trip provided for minimal close protection security support and were not shared thoroughly with the Embassy’s country team, who were not fully aware of planned movements off compound.  The Ambassador did not see a direct threat of an attack of this nature and scale on the U.S. mission in the overall negative trendline of security incidents from spring to summer 2012.  His status as the leading U.S. government advocate on Libya policy, and his expertise on Benghazi in particular, caused Washington to give unusual deference to his judgments.
Communication, cooperation and coordination among Washington, Tripoli and Benghazi functioned collegially at the working-level but were constrained by a lack of transparency, responsiveness, and leadership at the senior levels.  Among various Department bureaus and personnel in the field, there appeared to be very real confusion over who, ultimately, was responsible and empowered to make decisions based on both policy and security considerations.
   3.  Notwithstanding the proper implementation of security systems and procedures and remarkable heroism shown by American personnel, those systems and the Libyan response fell short in the face of a series of attacks that began with the sudden penetration of the Special Mission compound by dozens of armed attackers.
         The Board found the responses by both the BMI and February 17 guards to be inadequate.  The Board’s inquiry found little evidence that the armed February 17 guards offered any meaningful defense of the SMC, or succeeded in summoning a February 17 militia presence to assist expeditiously.
The Board found the Libyan government’s response to be profoundly lacking on the night of the attacks, reflecting both weak capacity and near absence of central government influence and control in Benghazi.  The Libyan government did facilitate assistance from a quasi-governmental militia that supported the evacuation of US government personnel to Benghazi airport.  The Libyan government also provided a military c-130 aircraft which was used to evacuate remaining U.S. personnel and the bodies of the deceased from Benghazi to Tripoli on September 12.
The Board determined that U.S. personnel on the ground in Benghazi performed with courage and readiness to risk their lives to protect their colleagues, in a near impossible situation.  The Board members believe every possible effort was made to rescue and recover Ambassador Stevens and Sean Smith.
The interagency response was timely and appropriate, but there simply was not enough time for armed U.S. military assets to have made a difference.
   4.     The Board found that intelligence provided no immediate, specific tactical warning of the September 11 attacks.  Known gaps existed in the intelligence community’s understanding of extremist militias in Libya, and the potential threat they posed to U.S. interests, although some threats were known to exist.
    5.    The Board found that certain senior State Department officials within two bureaus demonstrated a lack of proactive leadership and management ability in their responses to security concerns posed by Special Mission Benghazi, given the deteriorating threat environment and the lack of reliable host government protection.  However, the Board did not find reasonable cause to determine that any individual U.S. government employee breached his or her duty.”
The aftermath of the tragic incident raised serious questions about the White Houses’ repeated statements, to the American public in general, to the families of those killed, and to the United Nations that the assault was in response to a little-known video that allegedly angered local residents.
All indications have proven that this was not the case, as reported in last week’s NY ANALYSIS edition which contained the ARB’s findings. This week, we provide the ARB’s recommendations, quoting directly from the report.
KEY RECOMMENDATIONS
“With the lessons of the past and the challenges of the future in mind, the Board puts forward recommendations in six core areas:  Overarching Security Considerations; Staffing High Risk, High Threat Posts, Training and Awareness; Security and Fire Safety Equipment; Intelligence and Threat Analysis; and Personnel Accountability.
OVERARCHING SECURITY CONSIDERATIONS
1.       The Department must strengthen security for personnel and platforms beyond traditional reliance on host government security support in high risk, high threat posts.  The Department should urgently review the proper balance between acceptable risk and expected outcomes in high risk, high threat areas.  While the answer cannot be to refrain from operating in such environments, the Department must do so on the basis of 1) a defined, attainable, and prioritized mission; 2) a clear-eyed assessment of the risks and cost involved; 3) a commitment of sufficient resources to mitigate these costs and risks; 4) an explicit acceptance of those costs and risks that cannot be mitigated; and 5) constant attention to changes in the situation, including when to leave and perform the mission from a distance.  The United States must be self-reliant and enterprising in developing alternate security platforms, profiles and staffing footprints and address such realities.  Assessments must be made on a case-by-case basis and repeated as circumstances change.
2.        The Board recommends that the Department re-examine DS organization and management, with a particular emphasis on span of control for security policy planning for all overseas U.S. diplomatic facilities. In this context, the recent creation of a new Diplomatic Security Deputy Assistant Secretary for High Threat Posts could be a positive first step if integrated into a sound strategy for DS reorganization.
3.       As the President’s personal representative, the Chief of Mission bears ‘direct and full responsibility for the security of [his or her] mission and all the personnel for whom [he or she] is responsible,’ and thus for risk management in the country for which he or she is accredited.  In Washington, each regional Assistant Secretary has a corresponding responsibility to support the Chief of Mission in executing this duty.  Regional bureaus should have augmented support within the bureau on security matters, to include a senior DS officer to report to the regional Assistant Secretary.
4.        The Department should establish a panel of outside independent experts (military, security, humanitarian) with experience in high risk, high threat areas   to support DS, identify best practices (from other agencies and other countries) and regularly evaluate U.S. security platforms in high risk, high threat posts.
5.        The Department should develop minimum security standards for occupancy of temporary facilities in high risk, high threat environments, and seek greater flexibility for the use of Bureau of Overseas Buildings Operations (OBO) sources of funding so that they can be rapidly made available for security upgrades at such facilities.
6.        Before opening or re-opening critical threat or high risk, high threat posts, the Department should establish a multi-bureau support cell, residing in the regional bureau.  The support cell should work to expedite the approvl and funding for establishing and operating the post, implementing physical security measures, staffing of security and management personnel, and providing equipment continuing as the post requires.
7.        The Nairobi and Dar es Salaam ARB’s report of January 1999 called for collocation of newly constructed State Department and other government agencies facilities.  All State Department and other government agencies’ facilities should be collocated when they are in the same metropolitan area, unless a waiver has been approved.
8.        The Secretary should require an action plan from DS, OBO and other relevant offices on the use of fire as a weapon against diplomatic facilities, including immediate steps to deal with urgent issues.  The report should also include reviews of fire safety and crisis management training for all employees and dependents, safe haven standards and fire safety equipment, and recommendations to facilitate survival in smoke and fire situations.
9.       Tripwires are too often treated only as indicators of threat rather than an essential trigger mechanism for serious risk management decisions and actions.  The Department should revise its guidance to posts and require key offices to perform in-depth status checks of post tripwires.
  10. Recalling the recommendations of the Nairobi and Dar es Salaam ARBs, the State Department must work with Congress to restore the Capital Security Cost Sharing Program at its full capacity, adjusted for inflation to approximately $2.2 billion in fiscal year 2015, including an up to ten-year program  addressing that need, prioritizing for construction of new facilities in high-risk, high threat areas.  It should also work with Congress to expand utilization of Overseas Contingency Operations funding to respond to emerging security threats and vulnerabilities and operational requirements in high risk, high threat areas.

11.The Board supports the State Department’s initiative to request additional Marines and expand the Marine Security Guard (MSG) Program-as well as corresponding requirements for staffing and funding.  The Board also recommends that the State Department and DoD identify additional flexible MSG structures and request further resources for the Department and DoD to provide more capabilities and capacities at higher risk posts.”

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NORTH KOREA’S NEW THREAT

NORTH KOREA’S NEW THREAT

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he Associated Press has reported that North Korea successfully launched a long-range rocket, which is essentially an ICBM, last week.  Stages of the launch vehicle fell near the Philippines and west of the Korean Peninsula. The event was detected by a South Korean Aegis destroyer in the Yellow Sea. According to the BBC, Japan’s leadership has stated that the move was “highly regrettable.”
There are vital questions about North Korea’s launch of a multistage rocket that require fairly quick answers. The U.S. State Department, in its December 7 briefing before the launch, simply stated that the U.S. was “monitoring the situation closely.”
The mid-December launch is a highly unusual for a liquid fueled rocket from a cold climate, according to staff writers at Space War.
The rocket in question is the Unha-3, (in English, that means Galaxy-3,) a liquid fueled 3-stage vehicle standing about 105 feet high.  According to a Wall Street Journal report, it blasted off on a southward polar trajectory, taking it above Taiwan & the Philippines.  The missile is essentially a Taepo Dong 2 ICBM, a design being perfected by the North Koreans that will have the capability of striking the USA by 2015, according to the Heritage Foundation. Its current payload, according  to the North Korean news agency KCNA, is a 220 lb satellite weather observing satellite called Kwangmyhonsong (meaning “bright Star.)
It will be the 5th multistage rocket ever launched by North Korea.  Before this year, North Korea had previously fired long range rockets in August of 1998, July of 2006, and March of 2009.
Prior attempts to place a satellite in orbit have failed, most recently on April 9.
There are a number of unusual aspects to this launch that should raise eyebrows around the world. The first is the timing.  It marks the first time that North Korea has ever attempted two launched in the same year. It’s also unusual because prior launches have always taken place during the spring and summer, when the climate is far safer for a liquid fueled rocket.
The United Nations Security Council has condemned North Korea’s missile-related rocket program, claiming that they are a violation of Security Council resolutions 1718 of 2006 and resolution 1874 of 2009, mainly because the technology behind them is more akin to nuclear capable missiles than to civilian-oriented rocket technology.
The haste and the timing has diplomats and experts questioning the motives behind the timing and the date.
The Philippines, South Korea and the USA had urged North Korea to scrub the launch. The Washington Times reports that the American Navy has dispatched the guided missiles destroyers the USS John McCain, the USS Ben Fold, and the USS Fitzgerald, as well as the Guided Missile Cruiser USS Shiloh to monitor the launch.
The Prime Minister of Japan, Yoshihiko Noda, has called for international cooperation to address what he believes to be a national security crisis arising from the launch.  It’s his opinion that the launch is a thinly veiled ICBM test.  In the past, when a North Korean launch was scheduled to go over Japanese soil, orders have been given to shoot the vehicle down, as noted in the Straits Times.
China and Russia allege that they also oppose the launch, but took no significant diplomatic or other steps to stop it. China in particular has a great deal of leverage over the Pyongyang regime, but refuses to do anything.
An article in the Russian news service Pravda.ru  notes that ” The government of North Korea continues to defend its right to develop peaceful pace exploration before the international community. The [U.S.] Department of State officials do not believe such assurances.  North Korea is testing missiles than can fly to America, and all declarations about launching satellites into orbit are designed to disguise the true intentions of the North Korean military.”
There may be several reasons for the hasty launch plans.  The South Korean presidential election will take place on December 19–this may be an attempt to intimidate voters against supporting anyone who takes a hard line on relations with north. The North Koreans may also want to achieve the launch within approximately a year of the date when Kim jong-un took power.
But another, and perhaps more serious, timeline must be considered.  Iran will have a nuclear weapon ready in the next several months, and the Tehran regime needs a long-range rocket capable of deterring any potential Western attempts to forcibly eliminate that capability.
In fact, there is a significant amount of nuclear-related cooperation occurring between North Korea and Iran, as reported in The Daily Beast. Iran has stationed high-technology military personnel in North Korea, and is suspected of helping fund that nation’s advanced military research.
The Iranian Shehab-3 missile is derived from North Korea’s Nodong version.  The Shehab-5 and Shehab-6 reflect North Korea’s Taepo dong series.  Indeed, as Space War notes, the two nations have essentially maintained a “joint missile development program.”
Former President Bush coined the phrase, “axis of evil.”  It was probably never more appropriate than in this matter.  North Korea and Iran are two of the most belligerent-minded nations on earth.  They are ruled by paranoid regimes who repress freedom in their own countries. They deflect scarce resources from their needy populations to supply weapons programs aimed at foes who would have no cause for military concern were it not for those same weapons programs.
The NEW YORK ANALYSIS believes that there is a possibility that the North Korean-Iranian cooperation may be more than just a dollars-for-weapons technology deal, with the goal of fulfilling both nations’ desire for advanced weapons.  Under the Obama Administration’s philosophy of not having the U.S. prepared to fight two significant conflicts simultaneously, it is not inconceivable that, using missiles as “stand off” threats against America, simultaneous attacks by North Korea against South Korea and Iran against Israel or Saudi Arabia could paralyze Washington’s decision makers.
A significant question in all this is the role of China. The North Korean government would fall rather quickly without Beijing’s financial and diplomatic support.  It is, therefore, difficult to believe that any program as significant as major rocket and ICBM development, as well as Pyongyang’s deal with Iranians,  could occur without their approval.
Further, as noted by the Jamestown Foundation, while missile threats to the U.S. and its allies continue to grow, China has been stepping up its rhetoric against American missile defense development.  The Foundation notes that “A more specific Chinese concern is that U.S. BMD [Ballistic Missile Defense] systems threaten to weaken a core component of China’s defense capacity.  Over the past decade systems Beijing has increased its defense spending dramatically to build a technically sophisticated missile arsenal. These systems include short-range missiles to prevent Taiwans’s independence and threaten U.S. and other adversary militaries near China; medium-range missiles to consolidate China’s influence in East Asia; and long-range missiles to deter the United States from interfering in Chinese efforts to achieve these first two objectives.  In addition, China continues to export missile technology to Pakistan, Iran, North Korea and other states to gain money and diplomatic influence.”

China, which has vast energy requirements and a thirst for an enhanced presence in crucial international regions such as the Middle East, could gain from the North Korean/Iranian arrangement. Further, additional and multifaceted threats from third nations distract Washington and strain the resources of both the American military and U.S. intelligence agencies, a significant asset to China as Beijing’s belligerence, particularly in the Pacific, grows alongside its increasingly powerful navy.

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FALLING OFF THE FISCAL CLIFF

The federal debt, as this edition goes to press is $16,337,536,311,431.61,  according to the Brillig.comdebt clock. The Congressional Budget Office (CBO) says that in 2012 alone, Washington ran a $1.1 trillion deficit http://www.cbo.gov/publication/43656, the 4th year in a row with an over $1 trillion deficit.

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FEDERAL REVENUES
 The mammoth and growing federal debt is not the result of a lack of revenue.    In 2012, revenues were up by 6%.  According to usgovernmentrevenue.com, all government revenue in the U.S. has increased from 7% of GDP in 1902 to over 35% today. 
According to the Congressional Budget Office, (CBO) in fiscal year 2011, the federal government took in $2.3 trillion, but spent $3.6 trillion. That spending amount is a record high, even exceeding the maximum level during the World War II years (which was, in constant 2011 dollars, a comparatively puny $1.7 trillion, according to the Heritage Foundation.)
As the CATO institute notes, “[W]ithout reforms, rising federal spending will fundamentally reshape America’s economy…the long term debt problem…is caused by historic increases in spending, not shortages of revenue.”
The numbers ratify that point.  Federal spending rose from 18.2% of GDP under President Clinton to 24.1% this year, and projected increases point to a jump up to 33.9% in 2035.  CATO notes that by that time, “government will consume more than half of everything produced in the nation.” 
Former Vice Presidential candidate Paul Ryan noted that “the federal tax code as currently written will become a kind of ‘revenue machine,’ claiming ever-growing shares of individuals’ income and the economy’s resources.”
__________________________________________________________________________
BUDGET DEFICITS AS A PERCENTAGE OF GDP
UNDER RECENT US PRESIDENTS
Kennedy -1.0%;   Johnson -0.9%;   Nixon -1.6%;   Ford -3.5%;   Carter -2.4%; Reagan -4.3%; Bush (41) -4.3%;   Clinton -0.1%;  Bush (43) -3.2%;  Obama -8.3%. (source: Heritage Foundation)
_________________________________________________________________
FISCAL CLIFF IMPACT ON THE ECONOMY
Rather than address Washington’s excessive spending, the federal government is on the brink of complying with “sequestration” provisions that will significantly hike taxes on almost all Americans. On the spending side, the largest cut will come from defense, a direct hit on middle income jobs in manufacturing resulting in a negative economic impact and dangerously lowering the nation’s defenses.
The lack of progress on “fiscal cliff” negotiations designed to address America’s budget crisis brings to the forefront the potential impact of extraordinary tax and national security changes. Individual taxpayers will endure hardships from:
  • the end of payroll tax cuts that will result in a 2% tax increase for workers;
  • additional increases from the end of the “Bush Tax Cuts;”
  •  imposition of new taxes resulting from Obamacare, and
  • changes in the alternative minimum tax that will  result in higher tax liability.
The Tax Policy Center  notes that the looming fiscal cliff threatens to boost taxes over $500 billion on 90% of all Americans.
The end of some tax breaks for businesses will cause an already weakened economy to waiver further, and will also guarantee that historically high unemployment rates will continue and grow.  The CBO estimates that unemployment would rise to about 9.1%. 
According to the financial site about.com bonds, 
“If the current laws slated for 2013 go into effect, the impact on the economy could be dramatic.  While the combination of higher taxes and spending cuts would reduce the deficit by an estimated $560 billion, the CBO estimates that the policies set to go into effect would cut gross domestic product by four percentage points in 2013, sending the economy into a recession…At the same time, it predicts unemployment would rise by almost a full percentage point, with a loss of two million jobs.”
The report quotes statistics from other economic sources, including the Wall Street Journal, indicating that “$280 billion would be pulled out of the economy by the sunsetting of the Bush tax cuts, $125 billion from the expiration of the Obama payroll tax holiday; $40 billion from the expiration of emergency unemployment benefits; and $98 billion from Budget Act spending cuts.”
ARE TAX HIKES A SOLUTION?
Historically, increasing taxes have not been effective in reducing deficits, nor can they be realistically increased to a level that make a significant impact on the annual deficit.
 “The Third Way” organization  notes that it’s a myth “that taxes on the wealthy can come close to solving our long-term budget problem…Even if each major Democratic proposal to raise taxes on the wealthy becomes law, the national debt will double as a share of the economy by 2035, and the annual deficit in 2040 will exceed $4 trillion, in inflation-adjusted dollars.”  Even a 50% tax rate wouldn’t work. 
The Third Way study notes that the only way taxes could begin to address the deficit is if, in addition to “soaking the rich,” huge tax hikes are imposed on the middle class, increasing all tax rates on ordinary income by an additional 5  percentage points,  10 points on capital gains taxes, hiking the cap on the social security payroll tax to $170,000, increasing the payroll tax rate for Medicare by 1%, and even imposing a 10% national value added tax. “Even those extraordinary increases only contain deficits through 2022.  The study notes that “Relying on taxes alone to hold long-term deficits at 3% GDP would require phasing in a 60% tax increase on the median-income family, raising its annual tax burden by $6,200 in 2012 dollars.”
As Rep. Ryan has noted, these dramatic increases don’t even take into account the tremendous burden on the federal budget that will be imposed by Obamacare.  Indeed, all the proposed tax hikes would raise only about $170 billion in extra revenue–barely a fraction of what is needed to address what is added to the deficit each year, let alone reduce the standing debt already accumulated. “Under current-law projections by CBO, tax revenue is scheduled to approach an unprecedented one-fourth of GDP by mid-century.” 
The impact on the economy as we reach ever-higher levels of government spending are becoming evident.  The draining of resources from private individuals and private enterprise slows down the economy, increasing unemployment.  With less business activity and less income by individuals, federal revenue sources will begin to dry up, even as government spending increases.  The once-vaunted U.S. economy will descend into a death spiral, similar to what is currently occurring to several European nations. 
For decades, astute observers of the federal budget, including Richard Vedder, Lowell Gallaway, and Christopher Frense have theorized that tax increases actually lead to increased spending, thereby not providing a useful tool for lowering deficits.  Despite this, however, as noted by A. James Meigs in the Cato Journal, “legislators are heavily biased toward increasing spending on individual programs.”  That spending requires greater tax revenue.
There are just 21 days remaining for Washington to accept the intellectual sea-change necessary to rein in the skyrocketing deficit. One of the key roadblocks remains the White House’s ideological beliefs, which favor increased tax rates and significantly lower funding for the military.

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FEMA: IS IT SERVING ITS PURPOSE?

FEMA: IS IT SERVING ITS PURPOSE?

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Following two of the most devastating natural disasters to occur in recent years, including Hurricane Katrina and Hurricane Sandy, FEMA, the Federal Emergency Management Agency, came under intense criticism.  It even became an issue in the recent presidential campaign, when challenger Mitt Romney suggested that the agency should be considered for elimination. This multi-part report reviews the history of the federal government’s disaster response efforts, how FEMA came into being, how it works, and whether or not it is the most efficient way for Washington to respond to catastrophic incidents. This week, we examine FEMA’s background and the range of federal disaster assistance programs.
In 2011, according to FEMA Administrator W. Craig Fugate, “FEMA responded  to more disasters than any year in its history.  The variety and magnitude of each event tested our capabilities, as well as the capabilities of communities across the country.”  FEMA responded to 98 major disaster declarations, 26 emergency declarations, and 112 fire management assistance grant declarations.  These included incidents as diverse as Hurricane Irene on the east coast, devastating tornadoes in Missouri, and record flooding in North Dakota.
FEMA’s 2013 budget request for fy 2013  is $13, 559,716,000.   But has it accomplished the goals for which it was established? Has it performed effectively and efficiently?
BACKGROUND
Congress enacted over 128 individual laws in the period from 1803 to 1950,  providing some disaster assistance to the states. There was no comprehensive scheme to do so, requiring specific responses to each major disaster.
Congress eventually enacted the Federal Disaster Relief Act (Public Law 81-875) in 1950, which granted the president the authority to provide supplemental federal assistance when the president approved a request from the governor for help.
According to FEMA’S historical description, “A critical statement in the act established the philosophy of the nation’s disaster response and recovery program.  Federal disaster assistance would ‘supplement the efforts and available resources of the state and local governments.’ The act made it clear that the federal government would not function as the first line provider of emergency assistance in disaster response and recovery.  It would support state and local governments–not supplant them.  To further underline this philosophy, the act required that federal assistance be supplied when, and only when, state and local government had themselves committed ‘a reasonable amount of the funds’ needed.”
Eighteen years later, Washington enacted the National Flood Insurance Act. Again, local participation was key.
The process of presidential declarations was eventually codified in the Disaster Relief Act of 1974 (Public Law 93-288.) Several years later, President Jimmy Carter required the federal government to undertake an extensive evaluation of its participation of disaster response and recovery programs. The 1979 creation of the Federal Emergency Management Agency (FEMA) was the result of this review.  The new agency brought together the emergency management programs that previously existed under separate federal departments.
Again, almost another decade passed, and The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Public Law 100-707), was enacted in 1988. It provides the statutory authority for most Federal disaster response activities especially as they pertain to the Federal Emergency Management Agency (FEMA) and FEMA programs.
In 1992, the Federal Response Plan (FRP) was created.  The FRP outlines the manner in which the federal government mobilizes its resources and conducts its activities to help state and local governments when disaster strikes.  The abilities of 27 federal agencies and departments, combined with those of the American Red Cross, are coordinated to provide supplemental assistance under FEMA’s direction.
In 2002, FEMA, along with a number of other related executive branch components, were transferred to the jurisdiction of the Department of Homeland Security with the enactment of Public Law 107-296.  The Federal Response Plan was updated the following year to reflect the change.
According to FEMA, the agency has, since its inception, coordinated federal response and recovery efforts and supported state, local, tribal and territorial efforts in more than 1,800 incidents.
HOW THE PROCESS WORKS
Following a major disaster:
  • The Federal Emergency Response Team’s Advance Element provides the frame work for Washington’s initial response.
  • Along with the affected states, a joint preliminary damage assessment (PDA) is prepared.
  • The affected state’s governor reviews the PDA data, and requests a presidential declaration.
  • FEMA’s regional director makes a recommendation to the national FEMA leader.
  • The President, upon deciding to declare a disaster, appoints a Federal Coordinating Officer.
  • A disaster field office is jointly established by the federal and state coordinating officers.
  • A FEMA/State agreement is signed, followed by a federal/state meeting.
AVAILABLE TYPES OF 
FEDERAL DISASTER-RELATED ASSISTANCE
In the wake of a natural disaster, Washington has a variety of programs available for individuals, families, and private businesses including :
  • The Disaster Food Stamp Program
  • Disaster Housing Assistance
  • Disaster Loans for Individuals & Businesses
  • “Other Needs” Assistance (which can include household items, furnishings, and appliances; clothing; tools or specialized clothing and equipment needed by businesses; moving and storage of personal items to prevent further damage; privately owned vehicles; 3-year flood insurance
  • Public Transportation or other transportation needs
  • Medical, dental and funeral expenses
  • Miscellaneous needs such as generators, wet/dry vacuuming, etc.
  • Specialized help for farmers and ranchers
  • Disaster unemployment assistance
  • Assistance in IRS compliance
  • Legal services
  • Crisis counseling
  • “Cora Brown” assistance.  This includes needs specifically identified by FEMA staff for items such as home repair/rebuilding, health and safety measures, self-employment help, etc.
The federal government also provides various public assistance programs for community needs.  These include:
  • Emergency work, such as debris removal, search and rescue, demolition of damaged structures, etc.
  • Permanent restoration work to replace roads, bridges, water facilities, police stations, hospitals, schools, etc.
  • Utility replacement for water treatment, electrical power communications, sewerage, etc.
  • Public parks and recreational facilities
  • Health/sanitation needs
Some emergency work may be done by the Department of Defense.
The federal government contains a number of agencies  that respond to disaster situations.  While general assistance programs, including those administered by the Department of Health and Human Services, the Small Business Administration, the Department of Housing and Urban Development, and others, may be applied to singular incidents, it is Federal Emergency Management Agency (FEMA) that has prime responsibility. 
Last week, we reviewed the history of Washington’s reaction to disasters, and FEMA’s history.  This week, we examine FEMA’s performance in response to one of the greatest natural disasters to strike the United States.
HURRICANE KATRINA
Criticism of FEMA has intensified since Hurricane Katrina in 2005.  This event took in excess of 2,000 lives, and caused $90 billion of damage.  Government response–at the city, state, and federal levels–was clearly inadequate.
FEMA’s bureaucratic bungling was on an almost unimaginable scale. A George Mason University study described the nonuse of available resources:
“In the first week of relief activities alone, FEMA refused to ship trailers to Mississippi that could be used as temporary housing for disaster victims, turned away critical generators needed by hospitals and victims for power, turned away trucks with water demanded by many, prevented the Coast Guard from delivering fuel critical to facilitating recovery activities, and refused Amtrak’s offer to evacuate victims who desperately needed to get out of the disaster zone.  The last Amtrak train left New Orleans empty. FEMA clearly had no clue what was needed, or by whom.  Even the American Bus Association, representing Greyhound Bus Lines, offered to help FEMA evacuate the Superdome and Convention Center.  But, like so many others who offered their assistance, the American Bus Association’s offers fell on deaf ears, and they were never even able to get a reply or response from FEMA officials.
“FEMA moved a medical team of 30 people capable of treating hundreds of hurricane victims from Alabama to Mississippi, and then to Texas.  For 11 days, medical team members say their relief activities were reduced to treating one small cut.  And then FEMA moved them again–everywhere but where they were needed and could accomplish the most, which was New Orleans. ..A mobile communications unit…sat in Germany…for nine days.  1,000 firefighters…were sent to a hotel in Atlanta, forced to take days of sexual harassment courses…”
It was not only the aftermath that revealed FEMA’s flaws, according to the study.
“Although government agencies were aware the levee system had broken by 6:00 pm Monday, officials waited until the next day, at which point the city had been flooding for nearly 24 hours, before sounding the alarm.  Similarly, FEMA did not request military assistance for nearly 24 hours, before sounding the alarm.”
FEMA’s missteps were matched by those of the State of Louisiana and the City of New Orleans. FEMA, as noted previously, responds, (upon the direction of the President) only with the cooperation of state and local officials.
The Louisiana governor and the New Orleans mayor failed to respond adequately to the dire challenge facing them.  Numerous local residents were not evacuated, and endured extensive deprivations of food, water, and shelter.  A rising tide of crime created misery adding to that already presented by flooding.
The problems arising during Katrina had their genesis long before the wind and rain hit New Orleans.  Funds provided by the federal government for an evacuation plan had not been used for the purpose intended, thanks to the machinations of state and local officials.
When the hurricane did strike, Mayor Ray Nagin failed to timely implement an evacuation plan.  Residents were sent to last-minute shelters, including the Superdome, that were inadequately provisioned, had poor sanitation, and were rife with crime.  Buses that could have been employed for appropriate evacuations were unused, due to Nagin’s misplaced concerns about insurance liability and a lack of planning to provide a sufficient number of drivers.  According to the George Mason report, Nagin delayed taking vital steps for 15 hours after being informed by the National Hurricane Center Director, Max Mayfield, that an unprecedented natural disaster would hit his city to mandate an evacuation.
Louisiana Governor Kathleen Blanco’s response was slow and insufficient. Under her direction, Louisiana’s national guard troops failed to quell civic disorder. Further, she did not agree to Washington’s request to allow federal troops to take over law enforcement activities.
All that being said, FEMA’s performance was far less than commendable.  It took several days for the agency to truly begin functioning in an acceptable manner.
A 2006 study  by Russell S. Sobel and Peter T. Leeson notes that:
“[T]he real success story in the relief effort following Katrina …came from those who ignored FEMA, flouted the bureaucratic decision-making process, and took action without approval.  The U.S. Coast Guard, for example, began its helicopter rescue efforts without waiting for any other government agency’s approval or coordination…A Canadian search and rescue team from Vancouver, without waiting for FEMA permission, arrived in New Orleans days before any FEMA coordinated units.”
The Sobel/Leeson study uses a “Tale of two sheriffs” to illustrate the bureaucratic bungling that characterized the response to Katrina.
The study notes that one sheriff, Warren Evans of Wayne County, Michigan “ignored both FEMA ad his governor’s instructions to wait for FEMA approval and went to New Orleans with nine truckloads of supplies and 33 deputies to help.  Sheriff Randle, on the other hand, followed procedure, was buried under mounds of FEMA paperwork, and faced an un-navigable approval process.  He never made it to New Orleans.”
In the aftermath of the hurricane, numerous aspects of FEMA’s response were appropriately criticized.   A 2007 GAO report, for example, examined contracts for temporary housing in Mississippi needed for displaced Katrina victims, and  found that   “FEMA’s ineffective oversight resulted in an estimated $30 million in wasteful and improper or potentially fraudulent payments to…contractors…”
As NPR reported in 2006,
“In a written statement, [Senate Homeland Security] chairwoman Susan Collins says that she and ranking Democrat Joseph Lieberman have concluded that FEMA  is ‘in shambles and beyond repair.’ They’ve proposed instead that something called the National Preparedness and Response Authority be created within the Department of Homeland Security.  It would coordinate all of the preparedness and disaster response activities in the federal government.”
HURRICANE SANDY
The most recent FEMA activity came in response to Hurricane Sandy, a truly devastating weather event in late October of 2012 that provided significant harm to portions of the Northeast. According to a Forbes Magazine report, the damage to New York City alone is estimated to be $33 billion. The initial storm’s effects were made worse by a nor’easter that occurred just a few days later. New York City and New Jersey suffered particularly dire effects, leaving numerous residents homeless or without power and fuel for prolonged periods in inclement weather.
Affected residents have complained that FEMA did little to alleviate suffering. According to a Fox News Report,  residents in hard-hit sections, such as NYC’s Staten Island, complained that FEMA accomplished close to nothing in the aftermath.  They were particularly incensed when a FEMA office and related temporary shelters were closed “due to weather” at one point.  Administrator Craig Fugate denied the charges, and sent representatives to affected communities in a show of support.
According to former Mayor Guiliani, speaking during the crisis, FEMA “Right now is doing a terrible job of disaster relief in my city, but no one is talking about it…People don’t have water, they don’t have food, electricity and FEMA is no where to be found.
FEMA has not responded as hoped to major disasters, such as Hurricane Katrina.  The reason for its disappointing performance may rest with a number of factors, including:
  • Misuse of agency resources for lesser events that should have been handled solely at the local level; (The Wall Street Journal noted that annual FEMA disaster declarations “have multiplied … and have reached a yearly average of 153 under Obama” compared to 129.6 under President Bush, 89.5 under President Clinton, and 28 under President Reagan.)
  • An excessive overlay of bureaucracy (several senators have suggested that FEMA be removed from the Department of Homeland Security and made an independent organization;)
  • An altering of agency focus following its incorporation into the Department of Homeland Security;
  • An abuse of the agency for political purposes.
In this week’s report, we examine these and other factors affecting FEMA.
FEMA CRITICIZED
In the aftermath of Katrina, The Department of Homeland Security issued an extensive report criticizing FEMA’s performance, which was widely reported on in the media. While discussing the shortcomings of state and local government (and in the case of Katrina, there were many of these, and they were quite serious) it outlined extensive problems with FEMA’s response.
Among the most serious, the report noted:
  • That the agency failed to timely grasp the magnitude of the disaster;
  • A failure to mesh command and control functions with state and local authorities;
  • Failure to provide emergency housing;
  • Insufficient ability to conduct search and rescue operations;
  • Poor delivery of emergency supplies; and
  • Inadequate disaster drill training
INSPECTOR GENERAL REPORT
The Department of Homeland Security’s Office of the Inspector General (OIG) specifically criticized  FEMA’s Public Assistance Preliminary Damage Assessment Process (PDA.)  The PDA, established by the Code of Federal Regulations Title 44, Section 206, is a key part of the process in determining whether an incident becomes a federally declared disaster.  Interpreted too liberally, relatively localized incidents could be put under FEMA’s jurisdiction, taking resources away from truly momentous events.
The report found that:
“Since 1986, FEMA has used an outdated per capita amount as an indicator that a disaster might warrant federal assistance.  The agency selected the per capita amount of $1 based on the national per capita income; it did not adjust the amount annually for the changes in per capita income, but decided to adjust the amount for inflation in 1999.  If the agency had continuously updated the indicator for changes in economic conditions, many recent disasters would not have met the financial statewide per capita indicator for federal assistance.  In addition, there may be a better indicator based on a state’s need for assistance than the current financial statewide capita indicators, such as changes in per capita income or the Consumer Price Index.  Given the federal government’s current economic and budgetary constraints, we recommend that FEMA revise the Public Assistance Preliminary Damage Assessment process to estimate a disaster’s magnitude and economic impact more realistically. Furthermore, the agency should reassess the criteria used to measure a state’s capacity to respond to a disaster to better reflect changing economic conditions.  The agency also should determine whether other federal data measures would provide a better assessment of a state’s response capacity.”
FEMA did not react well to the findings, and mischaracterized it as an attempt to retroactively apply its financial findings, even though the OIG report never even discussed that topic.
Independent organizations have backed the OIG by urging FEMA to reform. The Heritage Foundation recommends that Congress mandate the suggested change in the PDA formula.
LONG STANDING CONCERNS
Although Hurricane Katrina occurred in 2005, concern about FEMA’s performance were discussed far earlier.
In 1996, James Lee Witt, who was then serving as FEMA’s director, testified to a Congressional committee that “As we are all aware, disasters are very political events.”
In their study, Sobel and Leeson note that “Each major U.S. disaster brings yet another tale of FEMA corruption and failure, and yet another Congressional investigation into the problems in FEMA.” They contrast government’s response to the tragedy with that of the private sector, which was comparatively swift and effective.  According to the authors,
“Companies like Wal-Mart, Home Depot, and State Farm Insurance made preparations for the impending disaster weeks before…and were willing to bring in resources to bear…days before government agencies could manage to do so….The widespread examples of successful private action in equivalent circumstances after Katrina clearly demonstrate that these government failures were not endemic to the situation-they were potentially avoidable under the right incentive structure.”
Sobel and Leeson stress that over-bureaucratization has essentially destroyed FEMA’s ability to timely respond to disasters.  Further, they criticize the trend towards what they describe as “glory seeking” by politicians, who have a vested interest in limiting the success of private groups so that their branch of government can get the lion’s share of credit.  Also, they stress, unlike the private sector, which must produce real results to remain profitable, government agencies concentrate on the appearance rather than the substance of success.  The authors are sharply critical of government at the federal, state and local level to properly maintain New Orlean’s levies, and suggest a larger role for the private sector.
The Garrett/Sobel Report, published in 2003 in Economic Inquiry, contends that political influences play major role in the allocation of FEMA resources.  They found that states “politically important” to the president, or where key Congressional elected officials represent, have a higher rate of disaster declarations than less well-connected jurisdictions.
PATH TO REFORM
The path to FEMA reform is clear.
  • Make the bureaucracy manageable.  Have a clear cut chain of command with as few decision makers as possible;
  • Establish practical and strictly enforced criteria for the use of FEMA resources, ending the abuse of the agency for political purposes;
  • Partner as extensively as possible with the private sector;
  • Make it clear to state and local governments that they are the prime  responders to any agency, large or small;
  • Re-establish FEMA’s role as a resource provider, not the exclusive manager of mitigation efforts.  The assistance of the private sector, volunteers from outside trained responders such as police, firefighters, trained medical and rescue personnel, etc. and the military should not have to undergo a FEMA clearance process.

Categories
NY Analysis

WELFARE & ENTITLEMENTS: A PRIMER

 The federal government spent $3.6 trillion in fiscal year 2011. Mandatory spending totaled about $2.0 trillion, or 56 percent of all federal outlays. That category includes spending for entitlement programs and certain other payments to people, businesses, nonprofit institutions, and state and local governments. For the most part, those programs are governed by statutory rules that specify eligibility criteria and benefit amount

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  –Congressional Budget Office
  
Welfare Now the Largest Portion of the Federal Budget
The Congressional Research Service (CRS) released a report, (Spending for Federal Benefits and Services for People with Low Income…) on October 16 revealing that welfare spending–a system of assistance which began in the Great Depression of the 1930’s– is now the largest portion of the federal budget.  Funding exceeds that provided for defense, Medicare, and Social Security. 
In FY 2008, the combined federal spending for health, cash aid, food assistance, education, housing & development, social services, employment and training, and energy assistance programs designed for low income recipients totaled $563 billion.  By FY 2010, the total had reached $733 billion.
The breakdown is as follows:  
(Nominal dollars in Billions)
 CATEGORY                            fy 2008                            fy 2010
      Health                                       248                                  335
       Cash Aid                                   130                                  141
     Food Assistance                       59                                    94
     Education                                   42                                     58
   Housing & Development         40                                   52
   Social Services                         36                                   40
   Employment & Training            6                                     8
Energy Assistance                   3                                    6
    TOTALS                                 563                                 733
Dramatic Increase in Welfare
The Heritage Foundation notes that “total means tested welfare spending (cash, food, housing, medical care and social services) has increased seventeen fold since the beginning of Lyndon Johnson’s Waron Poverty in 1964.”
A Wall Street Journal Report maintains that “the federal government has become an entitlements machine.  As a day-to-day operation, it devotes more attention and resources to the public transfer of money, goods and services to individual citizens than to any other objective, spending more than for all other ends combined…in 1960, U.S. government transfers to individuals totaled about $24 billion in current dollars, according to the Bureau of Economic Analysis.  By 2010 that total was almost 100 times as large.  Even after adjusting for inflation and population growth, entitlement transfers to individuals have grown 727% over the past half-century, rising at an average of about 4% a year.  In 2010 alone, government at all levels oversaw a transfer of over $2.2 trillion in money, goods and services…[in] 2010 [entitlements] accounted for just about two-thirds of all federal spending.”
Welfare and entitlement programs which began at a relatively modest scale during the Great Depression now represent an increasingly overwhelming share of an American economy that is falling ever deeper into a deficit hole from which it may not be able to escape.
Bill Heniff of the Congressional Research Service defines entitlements as “programs that require payments to persons, state or local governments, or other entities if specific eligibility criteria established in the authorizing law are met…[they are] legal obligations of the federal government…” 
A List of Federal Entitlements
A commonly accepted list of federal entitlements includes:
529;
Home Mortgage Interest Deduction;
Hope or Lifetime Learning Tax Credit;
Student Loans; Child and Dependent Care Tax Credit;
Earned Income Tax Credit;
Social Security-Retirement & Survivors;
Pell grants;
Unemployment Insurance;
Veterans Benefits;
G.I. Bill; Medicare;
Head Start;
Social Security/Disability;
Supplemental Security Income;
Medicaid;
Welfare/Public Assistance;
Government Subsidized Housing;
Food Stamps
 (Clearly, all programs are not equal.  Some, like Social Security, reflect payments over many years by workers for their own benefit.  Some reflect a solemn moral obligation, like those provided to current or retired members of the armed forces and their families.) 
 Combined Implications 
for the Federal Budget of Entitlements & Welfare
At a time when military threats from China, Russia, Iran and North Korea are increasing dramatically, President Obama’s long-term spending priorities, centered around welfare,  would make national defense the lowest budget priority, according to analyst Robert Bluey.
Jessamyn Conrad, author of “What You Should Know About Politics…But Don’t” notes that “Baby boomers, the huge generation of Americans born from 1946 to 1964, helped buoy the economy by creating a large, able workforce when they were young, but now that they are retiring, around 80 million of them will be eligible for benefits from Social Security and Medicare over the next twenty years, creating a drain on the nation’s coffers.”   
The Heritage Foundation echoes this sentiment.  “Decades ago, politicians promised baby boomers lavish health and retirement benefits but provided no way to pay for them.  Now we are faced with consequences of their neglect.  Our national debt held by the public equals nearly 70 percent of GDP and is growing rapidly.  Medicare and Social Security face almost $46 trillion in long-term unfunded obligations…”
In a 2011 study, the Congressional Budget Office’s study, “Reducing the Deficit: Spending and Revenue Options” noted that:
“If current laws remain unchanged, deficits will total $7 trillion over the next 10 years [adding to the already existing deficit of $16 trillion]…Beyond the coming decade, the aging of the U.S. population and rising health care costs will put increasing pressure on the budget. 
 If federal debt continues to expand faster than the economy–as it has since 2007–the growth of people’s income will slow, the share of federal spending devoted to paying interest on the debt will rise more quickly, and the risk of a fiscal cliff will increase.” 
The study noted that debt would become 109% of the economy in just over a decade from now. The CBO has predicted that by 2021, entitlements will account for 12% of America’s entire GDP, up from the current rate of 9.9%.  One major effect will be that by 2037, the U.S. debt will be almost twice the size of the entire American economy.  The CBO also notes that according to current trends, entitlement spending will nearly double by 2050. 
When President Obama took office, the debt stood at 40% of GDP; it will increase to 70% this year.
Pollsters Scott Rasmussen and Douglas Schoen noted that “During the stimulus negotiations, [the Obama Administration] undermined welfare reform–one of the great policy successes of the last generation–by creating a spending formula that rewarded states for having  more welfare dependents.”
Writing in the Daytona Beach News-Journal, columnist George Will calls this questionable fiscal path of increasing deficits “Mugging our descendants.”  “In 2010,” he writes, “Government at all levels transferred more than $2.2 trillion…to recipients…Before 1960, only in the Depression years of 1931 and 1935 did federal transfer payments exceed other federal expenditures.”  
The challenge to budget planners from entitlement programs has been described by Paul Johnson from Auburn University‘s Political Science Department:
“It is often very hard to predict in advance just how many individuals will meet the various entitlement criteria during any given year, so it is therefore difficult to predict what the total costs to the government will be at the time appropriation bills for the coming fiscal year are being drafted.  This makes it even harder for government to smooth out the business cycle or pursue other macroeconomic objectives through an active fiscal policy-because these objectives require careful pre-planning of the size of the budget deficit or surplus to be run.” 
The Congressional Research Service notes that “most entitlement spending bypasses the annual appropriations process altogether and is funded by permanent or multi-year appropriations in substantive law.  Such spending becomes available automatically each year, without legislative action by Congress.”
Implications for Social Security, Medicare and Medicaid
The rise in welfare and entitlement spending has substantially jeopardized the stability of Social Security, Medicare and Medicaid.
The Pew Research Center  found that Social Security, Medicare and Medicaid, despite widespread support from the public, are considered financially troubled. 
  
On October 13,  Seattle Times reporter Brian Rosenthal wrote that younger Americans are not counting on post-retirement government assistance. “Recent survey data” he reports “indicate that Americans ages 18-29, despite being overwhelmingly liberal, support some conservative ideas for changing the structure of entitlement programs.  Roughly 86 percent of them favor allowing workers to put their Social Security taxes into a private account, as some Republicans have proposed, according to a November 2011 survey…74% of millenials support allowing Medicare participants to ‘use benefits toward purchasing private insurance…”
Politicians Benefit Even When Programs are Ineffective
Spending on individual programs are key selling points for politicians eager to gain the support of block groups, even when those programs fail to achieve their objectives.  A prime example is government-sponsored job training programs.  To administer the programs, patronage jobs are established with managers appointed or “recommended” by elected officials, which strengthens their position.  To staff the programs, government union positions are needed, which pleases the unions who in turn strengthen their support of the same politicians.  Therefore, before a single constituent is provided with viable job training, key stakeholders are satisfied.  Whether the program achieves its stated objectives become, as a result, secondary.
Reform Efforts
All of the spending has not eliminated poverty.  According to the latest Census data, 46.2 million Americans fall below the poverty line.
Limited efforts towards welfare reform have proven effective.  ABrookings Institute study on never-married mothers reveals that the 1996 collaboration between Republicans in Congress and President Clinton requiring adults on welfare to work provided substantial improvements for those mothers. 
“According to Census Bureau data, between 1996 and 2000, the percentage of never-married mothers in jobs increased by about a third (to 66%) while the poverty rate for these mothers and their children declined by about a third (to 40%.) 
President Obama, however, has rejected the successful welfare reform law, and “has jettisoned the law’s work requirements, asserting that, in the future, no state will be required to follow them,” according to aWashington Post article  by Robert Rector, who helped draft the reform law.  The legislation required that a portion of able-bodied adults in the Temporary Assistance for Needy Families (TANF) program, work or prepare for work.  “Those work requirements were the heart of the reform’s success: welfare rolls dropped by half, and the poverty rate for black children reached its lowest level in history in the years following…the members of Congress closely involved in drafting this law have asserted that Obama’s action contradicts the letter and intent of the statute.”
The two parties have distinctly different views
Cornell University’s Suzanne Mettler writes: “President Barack Obama came into office with a social welfare policy that aimed to reconstitute what can be understood as the ‘submerged state”: a conglomeration of existing federal policies that incentivize and subsidized activities engaged in by private actors and individuals.  By attempting to restructure the political economy involved in taxation, higher education policy, and health care, Obama ventured into a policy terrain that presents immense obstacles to reform itself and to the public’s perception of its success.  Over time the submerged state has fostered the profitability of particular industries and induced them to increase their political capacity, which they have exercised in efforts to maintain the status quo.”
CNN Money notes that “Independent deficit hawks — as opposed to the political ones seeking votes — gave mixed reviews to President Obama’s 2013 budget proposal. They commended the president for offering measures that would start to move U.S. fiscal policy in a more sustainable direction. But they said his budget as a whole does not go far enough: It fails to really tackle costs for the big entitlement programs such as Medicare, which they say will be essential if lawmakers want to reduce the country’s long-term debt.”
On the other hand, Rep. Paul Ryan states:
“With few exceptions, government’s approach has been to spend lots of money on centralized, bureaucratic, top-down anti-poverty programs,” Ryan stated. “The mindset behind this approach is that a nation should measure compassion by the size of the federal government and how much it spends.” This has “created and perpetuated a debilitating culture of dependency, wrecking families and communities.”
The Republican Study Committee argues that several steps, in addition to repealing Obamacare, could be taken to address the problem of budget-busting welfare and entitlement spending.  They argue that the successful 1996 Welfare Reform model, which the Obama Administration has seemingly rejected, should be used as a model, and propose three specific legislative reforms:
1.    1.       The State Health Flexibility Act, dealing with Medicaid and CHIP, would provide states with maximum flexibility to innovate and tailor to the needs of their unique populations while shifting federal funding from an entitlement formula to a stable block grant at current spending levels.
2.    2.       The State Nutrition Assistance Flexibility Act, dealing with food stamps and 5 other food welfare programs in the Farm Bill.  The bill would combine the 6 programs into a single block grant at 2008 levels, with maximum flexibility for states to improve their food welfare efforts.  Programs under this block grant would be subject to strong work requirement for able-bodied adults.
3.    3.       The Welfare Reform Act would require the president to annually disclose the total welfare expenditure as a separate budget category.  Once unemployment falls below 6.5%, the legislation sets aggregate spending for this category at pre-recession levels, adjusted for inflation.
Conclusion

It is obvious that the entitlements and welfare programs have become unaffordable.  Common sense reforms must be both enacted an adhered to immediately.

Categories
NY Analysis

IRANIAN AMERICAN NUCLEAR NEGOTIATIONS

In this article, we discuss the alleged secret discussions between the White House and Iran on an agreement to end economic sanctions in return for a temporary cessation of activities related to nuclear weapons development.

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Clandestine Negotiations Reported
   On the October 20 WVOX New York Analysis-affiliated broadcast, “And Nothing But The truth”  Reza Kahlili (a pseudonym for a former CIA operative in Iran’s Revolutionary Guard and a member of the advisory board of the Foundation for Democracy in Iran) stated that in return for a temporary cessation of centrifuge activity enriching uranium for nuclear bomb development, the White House would end sanctions. According to Kahlili, on October 3, 2012, discussions were held with Iran’s leadership by a three-person delegation, led by a female representing President Obama. He bases his information on well-connected contacts linked to top Iranian officials.
   The White House has denied Kahlili’s reports, as has Tehran.
  The denials are in response to numerous accounts, first appearing in TheNew York Times that Washington and Tehran have reached an “agreement in principle” for one-on-one negotiations to reach a deal to lift the sanctions. The timing of the announcement shortly before the U.S. presidential elections and not long after President Obama refused to meet with the Israeli Prime Minister has raised suspicions about the motives behind the talks.
Iranian Sanctions Have A Long History
   International sanctions include both those imposed by the United States as well as those adopted by the United Nations Security Council, the European Union, and others. These measures have finally begun to seriously impact Iran’s economy.
   Sanctions against Iran have a long history. The United States first imposed sanctions in 1979, after the occupation of the American embassy.  In 1995, President Clinton barred U.S. companies from investing in Iranian energy, and forbade Americans from trading and investing with that nation.  That was followed by a Congressional mandate in 1996 sanctioning international firms investing over $20 million annually in Iranian energy.  From 2006 through the present, additional United Nations, European, and American sanctions were enacted as Iran, which essentially ignored international pressure, continued with its nuclear weapons program.
   The Congressional Research Service (CRS) notes that “Because so many major economic powers have imposed sanctions on Iran, the sanctions are, by all accounts, having a growing effect on Iran’s economy.” Reports on growing dissatisfaction by Iranians with the Tehran regime also provide an incentive for that nation’s leadership to seek an end to them.
   While Iran’s economy has suffered, there remains substantial disagreement about whether the sanctions have actually had any effect on Iranian nuclear weapons development. Adam Kredo, a Middle Eastern affairs researcher, recently wrote in the Washington Free Beacon that “Economic sanctions on Iran have failed in their ‘principal objective’ of preventing Tehran from obtaining nuclear weapons.”
   Internationally, Israel has increasingly called for more direct pressure on the Tehran regime, which has repeatedly emphasized its desire to wipe the Jewish state “off the face of the map.”
The Obama Administration & Sanctions
   The Obama Administration, reeling politically from revelations about its mishandling of security matters leading to the attacks on America’s Libyan embassy and the killing of its ambassador, and the subsequent cover-up of the reasons behind the attack, is seeking a Middle East “victory” to shore up its sinking voter support.
   There has been much speculation that top White House advisor Valerie Jarrett, who was born in Iran, speaks fluent Farsi, and reportedly has excellent contacts with the current Iranian regime, has strongly influenced President Obama’s views, and may have been the woman leading the alleged U.S. delegation in the talks.
   Kahlili has emphasized that the discussions involved only Washington and Tehran; no other nations or international organizations were involved.
   The White House’s National Security Council spokesman Tommy Vietor, while denying the existence of the reported talks, states that the Obama Administration “remains open to such one-on-one negotiations,” according to an article published in The Hill.   In the past, President Obama had promised to meet with Iranian leader Mahmoud Ahmadinejad “without preconditions.”
  The Obama Administration has been ambivalent about sanctions.  While tough measures have been reluctantly approved by the White House, vital exemptions have been granted.  Last June, both China and Singapore, Iran’s key trading partners, were given six months passes.  Jonathon Tobin, writing inCommentary  notes that “The dirty secret about the Western sanctions on Iran is that their leader advocate has never bothered to enforce them.  The weak sanctions were selectively enforced by the United States, with the Treasury Department granting exemptions to thousands of firms that allowed them to go on doing business there.” Tobin maintains that “the sanctions are riddled with loopholes…the Treasury Department has issued thousands of exemptions.”
   Turkey is also reportedly avoiding the sanctions by exchanging gold for crude oil, according to the Washington Free Beacon.  India has also been granted exemptions. According to a 2011 Congressional Research Servicereport by Middle Eastern affairs expert Kenneth Katzman, “The Obama Administration’s policy approach towards Iran has contrasted with the Bush Administration’s by attempting to couple the imposition of sanctions to a consistent, direct U.S. effort to negotiate with Iran on the nuclear issue…”
  When that approach failed, the Administration seemed to consent to additional sanctions.  In practice, however, it never fully backed the concept of taking a hard line on sanctions, and only reluctantly went along with Congressional attempts to deal strictly with Tehran.
  A prime example of this could be seen in the White House’s initial opposition to the Iranian sanctions provisions of the FY2012 national defense authorization bill (H.R. 1540.)  As noted in the CRS report, the measure:
* “Requires the President to prevent a foreign bank from opening an account in the United States-or impose strict limitations on existing U.S. accounts-if that bank processes payments through Iran’s Central Bank.
* The provision applies to non-oil related transactions with the Central Bank of
Iran 60 days after enactment (by February 29, 2012).
* The provision applies to a foreign central bank only if the transaction with Iran’s Central Bank is for oil purchases.
* Provides for a renewable waiver of 120 days duration if the President determines that doing so is in the national security interest.
* The provision applied to transactions with the Central Bank for oil purchases
only after 180 days (as of June 28, 2012).
* Sanctions on transactions for oil apply only if the President certifies to
Congress-90 days after enactment (by March 30, 2012), based on a report by
the Energy Information Administration to be completed 60 days after enactment (by February 29, 2012)-that the oil market is adequately supplied. The EIA report and Administration certification are required every 90 days thereafter.
* Foreign banks can be granted an exemption from sanctions (for any transactions with the Central Bank, not just for oil) if the President certifies that the parent country of the bank has significantly reduced its purchases of oil from Iran. That determination is to be reviewed every 180 days. For countries whose banks receive an exemption, the 180 day time frame begins from the time that parent country last received an exemption.”
  The CRS report notes that The Administration opposed the provision. However, “In the signing statement on the overall bill, President Obama indicated he would implement the provision so as not to damage U.S. relations with partner countries.”
Is It The Right Time For A Deal? 
   In an exclusive interview with The NY Analysis, Frank Gaffney, a former high ranking U.S. Defense Department official and head of the Center for Security Policy, stated that any deal between the U.S. and Iran at this point ending the sanctions would make it almost impossible to re-convince the international community to reassert them again.
   Any agreement to end sanctions for anything less than a permanent end of Iran’s nuclear weapons program, verified by the dismantling of its related facilities would be counterproductive.  Although the sanctions, despite the numerous loopholes, are finally beginning to take effect, Tehran appears on the verge of acquiring nuclear weapons.
  Reuel Marc Gerecht, a former CIA case office, and Mark Dubowitz, executive director of the  at the Foundation for Defense of Democracies, stressed in a Wall Street Journal article that “In all probability the [Iranian] regime is battening down the hatches, husbanding foreign exchange reserves, and preparing for the long ordeal. Given the progress that Tehran has already made with its nuclear plans-still hidden centrifuge manufacturing plants, enrichment facilities at Natanz and Fordow, a likely weaponization facility at Parchin, and an extensive ballistic-missile program-the regime faces a short, relatively inexpensive dash to the nuclear finish line.”

Allowing full international economic dealings with Iran with anything less than a complete and permanent elimination of its nuclear capability is clearly a mistake of the highest magnitude, and a clear and present danger to the safety and security of the international community.

Categories
NY Analysis

America’s Unemployment Crisis: A Survey of the Issues and Statistics

First of a muti-part series

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 The extraordinary impact of unemployment levels unprecedented since the Great Depression is arguably the most dire domestic crisis facing the American people. In this  edition, we begin a multi-week examination of a dilemma that has eluded all attempts at resolution by the current administration. We begin with a recitation of the statistics that reveal the extraordinary extent of the problem. 
The Statistics
   The current  unemployment rate is 8.1%. Factcheck.org notes that when public sector jobs are included in the total, America has experienced a net decrease of 316,000 jobs since President Obama’s inauguration.
   At the start of the Obama administration, unemployment was 7.8%.  Despite vast sums spent on President’s stimulus package, it has never been below 8% during his administration. This year, the rate reached 8.1% in April, but rose again to 8.3 before returning to 8.1 in August. Most analysts believe the only reason it dipped back to 8.1 from almost 8.3 was because the unemployed gave up looking.
  The percentage of Americans working or actively looking for work has descended to 63.5%, the worst number since 1981.
  According to the Washington Post, there are about 3.7 job seekers for every opening.
  The number of Americans working part time because they couldn’t find full time positions rose to 9.3 million from 8.8 million. This means the total underemployment rate, including both the unemployed, the forced part timers, and those who have given up, is to 16.5, an increase from 16.2% the prior month, according to a USA Today study.
  Most worrisome, the number of long term unemployed (those jobless for 27 weeks or more) is 5 million, or 40% of the unemployed.  Both the civilian labor force (154.6 million) and the labor force participation rate (63.9%) declined in August. the employment-population ratio is 58.3%.  There are 844,000 “discouraged workers”– those who have given up looking.
 Job growth has gotten worse in 2012, averaging 139,000 per month compared to  153,000 in 2011. Much of the very limited growth was in low paying jobs such as leisure and food.  Manufacturing edged down in August.  Average hourly earnings went down 0.1%, and “real average hourly earnings” fell 0.7% in August, according to the Bureau of Labor Statistics.   12.5 million workers remain idled, according to the National Conference of State Legislators.
  As this report went to press, the number of jobless claims held near two month highs and the 4 week moving average for new claims rose by 2,000 to 377,750, according to a CNBC study.  It was the fifth consecutive weekly increase.  The rate of growth in jobs went down in the latest report.  Altogether, numbers this bad haven’t been seen since the Great Depression.
 Well-paid manufacturing jobs declined 15,000, the first decline since September of last year, according to a Yahoo!finance report.
  Average weeks unemployed rose to 39.2 from 38.8.  The meager reduction in the unemployment rate “is not so much in jobs created, but instead people dropping out of the labor force” according to Hamilton Place Strategies.
The Economy
  Writing in the Wall Street journal, Mortimer Zuckerman notes that average wage increases have dropped to 1.6%, the lowest in the past 30 years.  He also expressed concerns that of the paltry number of private sector jobs available, 40% are in low paying categories. Zuckerman believes that we are experiencing a modern-day depression. California’s Democrat Rep. Henry Waxman, as quoted in Beltway Confidential, also calls the current economic climate a depression.  Josh Mitchell, also writing in WSJ, notes that the median annual household income fell in 18 states in 2011 from a year earlier after adjusting for inflation.
  The economy is not growing fast enough to produce adequate number of jobs.  From April-June, job creation rose only 1.7%, down from 2% in Jan.-March and way down from 4.1 in the final quarter of last year, according toHuffingtonpost.
   According to Sentier Reserch, the median household income in August fell 1.1% to $50,678.  “The August decline in real median annual household income is indicative of a struggling economy. Even though we are technically in an economic recovery, real median annual household income is having a difficult time maintaining its present level, much less “recovering.”
   While real income may have declined, costs went up. The CPI rose 0.6% in August, gas index rises 9.0%, according to the Bureau of Labor Statistics.
   The Associated Press reports that, home ownership has dropped to 64.6%, the worst level in over ten years. 14.9 million, or 13% of all American households, received food stamps-the highest level ever.  The official poverty rate is a record 15%, 46.2 million people.
  Despite an extraordinary $787 billion spent in “stimulus” spending, the economy has not only stagnated but actually gotten worse in many areas.
   According to William C. Dudley, President and Chief Executive Officer of the Federal reserve Bank of New York:
 “The performance of the U.S. economy since the end of the recession in 2009 has been disappointing.  Real GDP has grown at an annual rate of just over 2 % over this period, and it was even slower in the first half of 2012.  As a result…unemployment remains above 8 percent-an unacceptably high level-and participation in the jobs market remains depressed.  Moreover, about 5 million workers have been unemployed for six months or more.  This is important because long term unemployment can cause job skills to atrophy making it more difficult for such people to find jobs in the future.  While the good news is that the job-finding rates of the long-term unemployed have not deteriorated as many feared, we ought not to take this for granted going forward.”
   Over three years after the technical end of the recession, the share of Americans working continues at near-depression levels.
   The US Commerce Department reports that:
   New orders for manufactured durable goods in August 2012 decreased 13.2 percent to $198.5 billion.
   Excluding transportation, new orders fell 1.6 percent. Overall shipments fell 3.0 percent. Capital goods shipments declined 1.7 percent. Unfilled orders fell 1.7 percent. And inventories grew 0.6 percent in August. This is the largest decrease since January 2009.
   Excluding transportation, new orders decreased 1.6 percent.  Excluding defense, new orders decreased 12.4 percent.
    Shipments of manufactured durable goods in August, down two of the last three months, decreased $6.8 billion or 3.0 percent to $222.5 billion.  This was also the largest decrease since January 2009 and followed a 1.9 percent July increase.
  Transportation equipment, down two of the last three months, had the largest decrease, $5.5 billion or 7.9 percent to $63.9 billion. Unfilled orders for manufactured durable goods in August  decreased $16.9 billion or 1.7 percent to $978.7 billion.  This was the largest decrease since December 2009. Transportation equipment had the largest decrease, $12.0 billion or 2.1 percent to $568.6 billion.
  Non-defense new orders for capital goods in August decreased $18.5 billion or 24.3 percent to $57.7 billion.  Shipments decreased $1.2 billion or 1.7 percent to $69.5 billion.  Unfilled orders decreased $11.9 billion or 2.0 percent to $580.5 billion.  Inventories increased $1.5 billion or 0.9 percent to $171.9 billion.
  Defense new orders for capital goods in August decreased $4.1 billion or 40.1 percent to $6.1 billion.  Shipments decreased $0.1 billion or 1.7 percent to $8.1 billion.
Summary of the statistical overview
   The indications are clear.  The current state of the economy is too weak to support real job growth. Issues such as the failed stimulus program, uncontrolled deficit spending, excess regulations, the highest corporate taxes in the developed world, uncertainty over personal taxes, excess regulations, a partisan NLRB, international trade practices and defense spending reductions are all taking a serious toll on the American economy. We’ll review those issues as this series continues.

Categories
NY Analysis

AMERICA’S MANUFACTURING CHALLENGE

An Industry At Risk

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  “The nation’s historic leadership in manufacturing…is at risk.  Manufacturing as a share of national income has declined, as has manufacturing employment, and our leadership in producing and exporting manufactured goods is in question.”
The President’s Council of Advisors on Science and Technology’s June 2011 “Report to the President on Ensuring American Leadership in Advanced Manufacturing” (Leadership Report.) It has been largely ignored by the White House.
A SHRINKING QUARTER
   American manufacturing has shrunk for the third straight month, the worst contraction since July 2009.  Key indicators such as new orders, production, backlogged orders, and employment contracted, according to the Institute for Supply Management (ISM). The weakest production index (47.2, down from 51.3 in July) since May 2009, a weak new orders measure (47.1, down from 48 in July) and the lowest employment measure since November 2009 (51.6, down from 52 in July) have been reported.
  The only bright spots for this industry, (which accounts for about 11% of the U.S. GDP according to a Brookings Institute study, Why Does Manufacturing Matter) came from pent-up demands on items that consumers could no longer reasonably wait to replace, such as autos.
  The dilemma that this produces for the depressed U.S. economy is of extraordinary importance.  According to the Federal Council on Competitiveness December 2011 report, Make: An American Manufacturing Movement:
   “U.S. manufacturing is more important than ever, employing more than 11 million Americans directly, and creating close to 7 million additional jobs in related industries.  Manufacturers contributed $1.7 trillion to the U.S. economy in 2010.  Manufacturing also boasts the highest multiplier effect among economic sectors, pays higher wages and drives innovation.  Manufacturing accounts for nearly 60 percent of U.S. exports, and those export-related jobs pay even higher wages than non-export related jobs.”
  What happens when a factory closes? A Milken Institute review of American manufacturing reported in The American Prospect that “Close a manufacturing plant, and a supply chain of producers disappears with it.” It noted that for every computer manufacturing job in California, 15 jobs outside the factory are created.
   The Leadership Report, which has been largely ignored by the White House, notes that “As U.S. manufacturing leadership is waning, other nations are investing heavily in growing and revitalizing their manufacturing sectors, and are crafting policies to attract and retain production facilities and multinational companies within their borders.”
   The ISM Report concludes that “…our nation has surrendered important manufacturing sectors.  They were not all lost in the pursuit of cheaper labor or as a result of products becoming low margin commodities.  We have lost production of cutting-edge innovations developed in America because of tax, regulatory, skill, finance and infrastructure limitations that make production elsewhere more competitive.”
  The traditional American role of leading the world in manufacturing output ended in 2010, when China produced slightly more.  For the first time, U.S. output represented less than 20% of the total world figure-coming in at about 18.24%, according to Tom Hemphill and Mark Perry, writing in Business Economics.   
  The impact on the American economy of a depressed manufacturing center is substantial.  As noted in the Brookings study, it provides above-average wages, promotes innovation by accounting for a lion’s share of R&D spending, plays a key role in reducing the trade deficit, and contributes heavily to environmental sustainability.
 The NY Analysis examination of this issue indicates that American manufacturing is being detrimentally affected by a number of factors, including:
·   The highest corporate taxes among industrialized nations;
·   An increasingly burdensome regulatory regime;
·   A weak national and global economy
·   A downturn in federal support for cutting-edge R&D;
·   A slowdown in military procurement of major weapons systems;
·   The rise of China, with its cheaply paid labor force, and that nation’s unfair competitive practices, as well as intellectual property theft;
·   An increasingly poorly schooled workforce; and
·   High energy costs.
TAXES
   On April 1, 2012, the United States gained the unwanted distinction of having the worst combined federal/state tax rate, at 39.2%, on the planet. Japan, formerly in first place, now comes in second at 38%, followed by France, Italy, Germany, Canada, and the United Kingdom.
   The Competitive Enterprise Institute (CEI)  notes that “Our tax code is among the world’s least friendly toward manufacturing.”
  Numerous analysts and elected officials have recommended that Washington should reduce the corporate tax rate to 25%. Opponents to that concept maintain that existing loopholes allow at least some international business entities to pay less than the full rate, sometimes down to 29.2%, according to aCNNMoney study.
  Consistently, the development of internationally competitive corporate tax rates, and reducing corporate payroll and income tax burdens on manufacturers investing and hiring in America, ranks as a key priority to improving manufacturing prospects within the nation.
   The prospects for reform remain unclear.  Republican presidential candidate Mitt Romney advocates  a 25% rate.  President Obama has proposed a rate of 28% but wants it tied in to other tax increases and closing current breaks, which may eliminate the benefit of the lower rate. This places him at odds with the Council on Competiveness recommendation of replacing the current world-wide double taxation system.
An Industry At Risk
  “The nation’s historic leadership in manufacturing…is at risk.  Manufacturing as a share of national income has declined, as has manufacturing employment, and our leadership in producing and exporting manufactured goods is in question.”
The President’s Council of Advisors on Science and Technology’s June 2011 “Report to the President on Ensuring American Leadership in Advanced Manufacturing” (Leadership Report.) It has been largely ignored by the White House.
A SHRINKING QUARTER
   American manufacturing has shrunk for the third straight month, the worst contraction since July 2009.  Key indicators such as new orders, production, backlogged orders, and employment contracted, according to the Institute for Supply Management (ISM). The weakest production index (47.2, down from 51.3 in July) since May 2009, a weak new orders measure (47.1, down from 48 in July) and the lowest employment measure since November 2009 (51.6, down from 52 in July) have been reported.
  The only bright spots for this industry, (which accounts for about 11% of the U.S. GDP according to a Brookings Institute study, Why Does Manufacturing Matter) came from pent-up demands on items that consumers could no longer reasonably wait to replace, such as autos.
  The dilemma that this produces for the depressed U.S. economy is of extraordinary importance.  According to the Federal Council on Competitiveness December 2011 report, Make: An American Manufacturing Movement:
   “U.S. manufacturing is more important than ever, employing more than 11 million Americans directly, and creating close to 7 million additional jobs in related industries.  Manufacturers contributed $1.7 trillion to the U.S. economy in 2010.  Manufacturing also boasts the highest multiplier effect among economic sectors, pays higher wages and drives innovation.  Manufacturing accounts for nearly 60 percent of U.S. exports, and those export-related jobs pay even higher wages than non-export related jobs.”
  What happens when a factory closes? A Milken Institute review of American manufacturing reported in The American Prospect that “Close a manufacturing plant, and a supply chain of producers disappears with it.” It noted that for every computer manufacturing job in California, 15 jobs outside the factory are created.
   The Leadership Report, which has been largely ignored by the White House, notes that “As U.S. manufacturing leadership is waning, other nations are investing heavily in growing and revitalizing their manufacturing sectors, and are crafting policies to attract and retain production facilities and multinational companies within their borders.”
   The ISM Report concludes that “…our nation has surrendered important manufacturing sectors.  They were not all lost in the pursuit of cheaper labor or as a result of products becoming low margin commodities.  We have lost production of cutting-edge innovations developed in America because of tax, regulatory, skill, finance and infrastructure limitations that make production elsewhere more competitive.”
  The traditional American role of leading the world in manufacturing output ended in 2010, when China produced slightly more.  For the first time, U.S. output represented less than 20% of the total world figure-coming in at about 18.24%, according to Tom Hemphill and Mark Perry, writing in Business Economics.   
  The impact on the American economy of a depressed manufacturing center is substantial.  As noted in the Brookings study, it provides above-average wages, promotes innovation by accounting for a lion’s share of R&D spending, plays a key role in reducing the trade deficit, and contributes heavily to environmental sustainability.
 The NY Analysis examination of this issue indicates that American manufacturing is being detrimentally affected by a number of factors, including:
·   The highest corporate taxes among industrialized nations;
·   An increasingly burdensome regulatory regime;
·   A weak national and global economy
·   A downturn in federal support for cutting-edge R&D;
·   A slowdown in military procurement of major weapons systems;
·   The rise of China, with its cheaply paid labor force, and that nation’s unfair competitive practices, as well as intellectual property theft;
·   An increasingly poorly schooled workforce; and
·   High energy costs.
TAXES
   On April 1, 2012, the United States gained the unwanted distinction of having the worst combined federal/state tax rate, at 39.2%, on the planet. Japan, formerly in first place, now comes in second at 38%, followed by France, Italy, Germany, Canada, and the United Kingdom.
   The Competitive Enterprise Institute (CEI)  notes that “Our tax code is among the world’s least friendly toward manufacturing.”
  Numerous analysts and elected officials have recommended that Washington should reduce the corporate tax rate to 25%. Opponents to that concept maintain that existing loopholes allow at least some international business entities to pay less than the full rate, sometimes down to 29.2%, according to aCNNMoney study.
  Consistently, the development of internationally competitive corporate tax rates, and reducing corporate payroll and income tax burdens on manufacturers investing and hiring in America, ranks as a key priority to improving manufacturing prospects within the nation.
   The prospects for reform remain unclear.  Republican presidential candidate Mitt Romney advocates  a 25% rate.  President Obama has proposed a rate of 28% but wants it tied in to other tax increases and closing current breaks, which may eliminate the benefit of the lower rate. This places him at odds with the Council on Competiveness recommendation of replacing the current world-wide double taxation system.
 Second of a three part series    
 Part one of our review of the crisis facing America’s manufacturing sector outlined the decline in the industry, and the impact of an uncompetitive tax structure
The Impact of Regulations, High Energy Costs,
& 
Inadequate Education
   Regulations
   Regulatory burdens are a key factor depressing manufacturing in the United States.  Kevin Williamson recently wrote in National Review that the cost of regulatory compliance–which may be between one and two trillion dollars annually–is a bigger burden than taxes. He noted that, in addition to the cost, the regulatory burden is more infuriating because “you can boot out your representative if he votes for a tax hike, but you can’t vote out executive-branch bureaucrats.”  In many cases, the regulatory system is geared against the very type of ingenious, highly productive new firms the nation needs to rejuvenate its industrial base in favor of politically connected older companies with the capital to hire powerful lobbyists to influence politicians.
   While American manufacturing has been enduring difficult times for over a decade, the increasing burden of regulations over the past three years, particularly those relating to the environment, have contributed heavily to the acceleration of the crisis.
   Ben Lieberman, writing for the  Competitive Enterprise Institute, notes that “…the biggest recent change–and the most worrisome threat for American manufacturing–has been the accelerated pace of environmental regulation since the election of Barack Obama…Manufacturers worry about a storm of new regulations taking effect in the immediate future, any one of which would seriously harm them, and the cumulative effect of which would be the end of the United States as a major manufacturing nation.”
   The recent (ignored by the White House) presidential study by the Council on Competiveness recommends:
1. Congress should require agencies to begin reducing the costs and burdens of current and proposed regulations.
2. Congress should immediately reform section 404 of the Sarbanes-Oxley Act to increase entrepreneurs’ access to U.S. public capital markets and grow new companies.
3. Congress should reduce the costs of tort litigation from the current level of almost 2% of GDP -some $248 billion-down to 1% by 2020.
4. Congress and the Administration must take action on fiscal reform to achieve $4 billion in debt reductions by 2021.
   CEI notes that “The pace at which the Obama administration has issued new Clean Air Act regulations unrelated to carbon dioxide–most of them targeting manufacturers and the coal-fired power plants on which they (and many homes) depend for electricity–is without precedent in the statute’s 40 year history…”  Estimates of compliance costs are in the trillion dollar range–if compliance can be done at all.  Some of the demands call for the purchase and implementation of technology that is not yet available.
Legislation
   In response to the growing harm caused by the imposition of numerous regulations, and the anger engendered by the fact that many dramatic alterations to our economy have resulted not from legislation but by executive branch bureaucrats, the House of Representatives has passed H.R. 10: Regulations From the Executive in need of Scrutiny Act, better known as REINS. The bill is not expected to pass the Senate and would certainly be vetoed by President Obama if it ever did.  With only minor exceptions, the vote on the bill followed straight party lines, with Republicans favoring it and  all but four Democrats voting against it.
   The legislation, which is intended “to increase agency accountability for and transparency in the federal regulatory process” is a direct challenge to the White House’s excessive rulemaking activities.  It is also a specific rebuke to the Environmental Protection Agency’s overzealous and often poorly thought out rule making.
  REINS would give Congress the ability to have a say in “major” rule additions or changes, and would require an analysis of how enforcement would impact employment.  It would also allow a court to review whether an agency has completed the necessary requirements for a rule to take effect.
Energy
   The past three and one-half years have been difficult ones for domestic energy production and refinement, as the White House has blocked the Keystone pipeline, significantly stopped offshore drilling, kept ANWR off limits, and engaged in other activities limiting the use of American sources and the refining thereof.  The resulting cost of energy, both at the pump for motorists and in the factories for manufacturers, has been a drain on the economy in general and manufacturing in particular. These actions, combined with already burdensome regulatory issues, directly affects the viability of American manufacturing.
   CEI notes that “it takes energy to run a factory, and rising energy prices tend to reduce manufacturing output.  Disproportionately high energy prices in one country encourage the outsourcing of manufacturing to others.”
Education
   The U.S. Chamber of Commerce  reports that approximately 90% of jobs in the fastest growing occupations require some level of postsecondary education and training.  However, 80 to 90 million adults, about half the workforce, do not have the skills required to get or advance into “family-sustaining” wage jobs.
    But it’s not just the lack of a degree.  Our primary and high schools are turning out individuals who are deficient in the basic skills necessary for manufacturing or other employment.  The problems begins early, according to the Chamber, with 8th graders not proficient in the most basic subjects, reading and math.  30% of students fail to graduate high school in four years, and those that do eventually graduate lack the skills needed for employment
  Last of a three part series    
 Part one of our review of the crisis facing America’s manufacturing sector outlined the decline in the industry, and the impact of an uncompetitive tax structure.  Part Two reviewed the impact of excess regulation, inadequate education, and energy policy.
THE ROLE OF CHINA, 
ADVANCED TECHNOLOGY,
AND GOVERNMENT BIAS 
 China
   Richard McCormack, writing in the American Prospect, notes that “the U.S. manufacturing sector never emerged from the 2001 recession, which coincided with China’s entry into the World Trade Organization.” An article inForbes written by Professor Baizhu Chen notes that “The average manufacturing wage in 2010 [was] $2.00 in China and $34.75 in America.”
   The rise of China renders any obstacle to U.S. manufacturing growth even more counterproductive.  The  University of Chicago Law Schools notes that “Chinese exports were important in declining trends in the [US] manufacturing during the past 20 years.”
   In his testimony before the U.S. House Steel Caucus, Thomas Conway, International Vice President of the United Steel Union (USW) noted that “A greater and greater amount of manufactured goods is being imported and more and more U.S. companies are off-shore manufacturing.  The Economic Policy Institute estimates that our trade deficit with China alone from 2001-2008 caused the loss of 2.4 million manufacturing jobs here.”
According to the Alliance for American Manufacturing, “China’s blatant use of illegal government subsidies and a web of predatory trade practices on a massive scale are undercutting companies in the U.S.auto supply chain.”
   Costs may be going up in China, however, reports The Economist.”Costs are soaring, starting in the coastal provinces where factories have historically clustered.  Increases in land prices, environmental and safety regulations and taxes all play a part…labor costs have surged by 20% a year for the past four years.”
  Beijing’s intellectual property theft, and the propensity to demand technology transfer as a “cost of doing business” in China, renders the threat to American manufacturing, especially the crucial high technology sector, significant. NSA director Keith Alexander recently noted that China’s espionage efforts have resulted in the greatest transfer of wealth in history.  This year, for the first time in U.S. history, an economic espionage trial was conducted, convicting a Chinese-born naturalized American citizen, Dongfan Chung, of stealing $2 billion in trade secrets related to Space Shuttle technology from Boeing.
 Advanced Technology & Defense
  Manufacturing is a research and development-intensive industry.  According to the Brookings study, “Domestic company R&D spending is 3.6% of domestic manufacturing sales, compared to 2.4% of domestic non-manufacturing sales…According to the National Science Foundation‘s 2008 Business R&D and Innovation survey, 22% of manufacturing companies but only 8% of non-manufacturing companies introduced a new or significantly improved good or service between 2006 and 2008.”
  A drop in manufacturing eventually leads to a drop in R&D capability, which is crucial to America’s future in the realms of both economy and defense.
  Problems in American manufacturing can also be linked to the decline in two cutting edge areas: defense and aerospace technology.  The drop in American defense inventory has been nothing short of stunning: a navy that has lost over half its ships, an air force that has lost almost half of its combat wings, and an army that has been reduced from 18 divisions to 10.  The elimination of both the manned space program and the dwindling down of the robotic space program further eliminate the vital technology infrastructure and support so substantially needed for a healthy and advanced modern manufacturing industry.
  The national security crisis related to manufacturing is more than just the current weapons inventory, as terrible a threat as it is.  It also includes the capacity to grow our military might in times of crisis, the very capacity which allowed us to win World War II and the Cold War.
   The importance of this capacity has been recognized for over half a century, as noted by McCormack.  In 1948, Congress passed the National Industrial Reserve Act “based on the idea that the defense of the U.S. requires a national reserve of machine tools for the production of critical items of defense material.”  Almost forty years later, President Reagan, despite being a leading advocate for free trade, supported a Voluntary Restraint Agreement with Japan and Taiwan on imports of machine tools based on national security grounds.
   For reasons involving both cost and the lack of domestic capability, the Pentagon now looks overseas to supply some of its needs, including high technology items.  Dr. Joel Yudken’s report entitled “Manufacturing Insecurity” notes that “Ironically, the Pentagon and industry calls for greater reliance on foreign sourcing–often argued in efforts to weaken Buy America requirements in defense procurement–are a tacit recognition that the United States lacks the commercial manufacturing capacity to supply vital products needed by America’s defense industrial base.  The DoD has conceded that there are advanced technologies critical to military systems–armor plate steel, defense-specific integrated circuits, night vision goggles–for which domestic sources are inadequate.”
Bias Against Industry
   The importance of a strong manufacturing sector to the American economy, to reducing the federal debt, to our national security, and to the employment rolls is obvious.  Why have so many elected officials and bureaucrats acted in a manner that has clearly harmed this industry?
  The Washington Time’s Paul Driessen has called the Environmental Protection Agency “the biggest single job-killing agency in government.”  Kurt Bauer, writing in Wisconsin’s Journal Interactive, notes that just one of EPA’s new rules, Boiler MACT, would lead to the closing of 11 paper mills and the loss of 7,500 jobs in his state.  Similarly, Bauer notes the costly effects of the highly pro-union partisanship of the National Labor Relations Board.
  Some observers attribute these actions to an archaic mindset that manufacturing is an industry of polluting, grimy factories providing low-paying, low-skill jobs that constitute an increasingly obsolete way of making a living. A whole panoply of clichéd capitalist vs. workers and anti-environment stereotypes, none of which are true, misinforms the biased view of current Environmental Protection Agency and NLRB bureaucrats.
   Making the openly hostile attitude of the Environmental Protection Agency under the Obama administration towards manufacturing more ironic is the fact that, as noted by the Brookings study, “manufacturing makes a disproportionately large contribution to environmental sustainability…the clean economy is nearly three times as manufacturing-dependent as the overall economy.  Of the clean economy’s 2.7 million jobs, 26% are in manufacturing, compared to 9% of U.S. jobs overall.
   In great cities such as New York, this incorrect perspective has led to land use planning policies that have resulted in consistently high blue collar unemployment and an urban economy that is increasingly fragile.
  New York City’s Pratt Center for Community Development reports that “Even as the demand for goods in New York City remains strong, city government’s own policies are threatening manufacturers’ ability to do business here. When Mayor Bloomberg came into office in 2002, New York City had 12,542 acres of land where manufacturing businesses could legally operate. Today, thanks to zoning changes, it has fewer than 10,746, and another 1,800 acres would be converted to other uses under additional rezoning proposed by the Bloomberg administration.  If the planned rezoning goes through, New York City will have lost 20 percent of all its manufacturing space in the span of just a few years.  Of the 95 New York City rezonings from 2003 to 2008, one-quarter converted manufacturing districts into some other category of land use…not one added a single acre of new space for manufacturers.”
Conclusion

The combined impact of excess regulation, ill conceived environmental controls, the highest tax rate among industrialized nations,  foreign competition (fair and unfair), and a reduced emphasis on military and advanced technology spending constitute an unprecedented challenge to the survival of American manufacturing.

Categories
NY Analysis

THE NEW START TREATY

The New START treaty between Russia and the U.S., signed on April 8, 2010, does not add confidence to those hoping to limit Moscow’s nuclear drive.

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   A major flaw is the less stringent verification procedures.  As noted by the Congressional Research Service‘s February 14, 2012 report, The U.S. will no longer maintain a monitoring presence outside the Votinsk facility where Russia assembles its mobile ICBMs, which may weaken the U.S. ability to count these missiles as they enter Russia’s forces.  CRS also notes that the United States and Russia will no longer exchange telemetry data on all their ballistic missile flight tests, which, over time, could lessen the U.S. ability to understand and evaluate the capabilities of Russian ballistic missiles.
   New START also lacks some needed restrictions on mobile ICBMs, which only Russia fields.  At the same time, New START makes a major concession to Moscow in its statement on missile defense.  The CRS report outlines that the treaty “recognize[s] “the existence of the interrelationship between strategic offensive arms and strategic defensive arms, that this interrelationship will become more important as strategic nuclear arms are reduced, and that current strategic defensive arms do not undermine the viability and effectiveness of the strategic offensive arms of the parties.”
   Critics of New Start, including Senator Jim DeMint (R-SC) have pointed out that the treaty allows Russia to continue its 10 to 1 advantage in tactical nuclear weapons; reduces America’s ability to deploy missile defense, and allows Russia to modernize its nuclear weapons while the US remains idle.
The Administration’s extremely optimistic view of Russia’s nuclear ambitions was further evidenced by the August 14 report of the International Security Advisory Board (ISAB), a federal advisory committee established to guide the State Department.  It emphasizes President Obama’s goal to move towards “very low numbers” of nuclear weapons and the road to their total elimination.  Among the ISAB’s recommendations:
“Change U.S. doctrine and posture away from defining our nuclear posture based on perception of Russia as the primary threat, toward a doctrine of general deterrence, a posture in which attacks from any direction are discouraged without singling out a particular adversary or enemy (reciprocal action required.)”
The ISAB also recommends ending trade restrictions between the two nations, including those enacted under the Jackson-Vanik bill, which imposed restrictions based on the USSR’s policy of hampering Jewish immigration.  (The trend in Congress, however, may be in the opposite direction.  Under the proposed “Sergei Magnitsky Rule of Law Accountability Act,” Washington would both deny visas and freeze the assets of Russians who engage in human rights abuses such as that imposed on Magnitsky, who was imprisoned for exposing official corruption.  He was beaten to death while in jail in 2009.)
   Some of Putin’s actions seem difficult to justify even from a Russian nationalist perspective.  As disputes with Moslem nationalist groups from Chechnya, who have engaged in substantial terrorist acts (including airport and metro station bombings.  The Hudson Institute‘s David Satter, writing in Canada’s National Post, notes that “the number of terrorist incidents grew six-fold between 2000 and 2009, to 738 from 135, and Moscow remains the only European capital to be hit repeatedly by terrorists.”) within Russia continue, Putin provides aid to Iran’s nuclear program, running the risk of eventually arming Chechnyan groups with nuclear material.
   Some observers have taken to calling the Putin regime “a mafia state,” run for the enrichment of the leadership and not for the benefit of either the nation or its population.
AIR AND NAVAL FORCE ENHANCEMENTS
   Russia’s intensive drive to develop a navy that could pose a threat to the United States will be strengthened by President Putin’s pledge to spend $138 billion on his maritime force.  Former President Yeltsin had rejected the need for such a force,  according to the Jamestown Foundation. However, the Kremlin today has a different perspective, deeply reminiscent of the first cold war.  In addition to the building of new ships, it is purchasing two French built Mistral class amphibious assault helicopter carrier vessels with state of the art equipment.
  To accommodate the refurbished fleet, Moscow’s vice admiral Viktor Chirkov  is seeking additional bases outside of the former USSR around the world, in Cuba, Vietnam, and the Seychelles to add to its current base in Syria.  In addition, Eurasia Daily Monitor reports that Putin has promised to build new naval bases in the Arctic, and Security Council Secretary Nikolai Patrushev promises that naval infrastructure hubs will be developed along the Northern Sea route.
   Russia joined the 2012 RIMPAC international naval exercises near Hawaii, and the Voice of Russia publication recounted how Moscow’s marines practiced landing on a US warship.
   The $723 billion modernization program includes providing up to 1,700 new warplanes, according to RT news.   This year, the Russian Air Force will get Su-35 and Su-30 jet fighters and Mi and Ka-52 Alligator helicopters,  according to a Voice of Russia report. In 2013, new air defense missile batteries will be delivered–a real irony, given Moscow’s vehement objections to US ABMs.
  Igor Korotchenko, chief editor of Russia’s National Defense magazine recently noted in the Voice of Russia publication:
“New aviation training centers are being set up now, the one already operating in Voronezh, where Russia`s future aviation engineers are offered everything they could ever need to succeed in their profession. The federal arms-related program suggests adopting 1,200 helicopters and over 500 planes by the year 2020.”
   According to Voice of Russia, “Mr. Korotchenko stressed that the way the national aviation is developing now cannot even be compared to how it was in the 1990s. Since the early 2000s the Russian army has adopted 92 Su-34 bombers, 48 multi-purpose Su-35 jets and over 100 fifth generation jets.The Sukhoi T-50 5th generation jet fighter is what the future of the Russian aviation is about. This is a unique aircraft which performed a demonstration flight during the air show in Zhukovsky. The jet`s radar system can spot and identify targets at the distance up to 400 km. Experts believe that T-50 will surpass America`s the F – 22 Raptor fighter jet. It means that the Russian military aviation is growing even stronger.”
DOMESTIC REPRESSION AND CORRUPTION
   The environment for a return to a Soviet style brand of leadership includes repression at home.
   David Satter notes that “Twenty years after the fall of the Soviet Union, Russia is again in political crisis.” He describes a nation rife with corruption and lawlessness, its government ranked 154th out of 178 by Transparency International, “on a level with Cambodia and the Central African Republic.”
   Putin reclaimed the presidency in the May 7 election, which has been criticized as being rigged in his favor. His government has restricted public protests, prosecuted demonstrators, broken into the homes of opposition leaders, tightened controls on the internet and private organizations, and strong-armed the media.  Corruption has been extensive. A Jamestown Foundation study notes that “Putin’s presidential pool journalists never publicly ask the president unwanted or un-vetted questions.”
   A “Europe Online Magazine” report lists thirteen separate incidents since December 2011  in which Putin’s actions have prompted the ire of the Russian people, including irregularities in elections for parliament and the presidency.
   Most recently, a political trial involving the female rock group”Pussy Riot” sent the musical band to prison for two years.  Supporters of the musicians are said to be preparing an appeal to the European Court of Human Rights.  While awaiting the verdict outside the courtroom, Human Rights Foundation chairman and opposition political leader Garry Kasparov was severely beaten, apparently for nothing more than speaking with journalists about the case, as reported in the Wall Street Journal.
   Putin’s impulse to subjugate political opposition may extend even to Prime Minister Dmitry Medvedev, who was pressured to step aside from his former post as President to make way for Putin’s return. A Jamestown Foundation report notes that “After agreeing not to seek reelection for a second term as President and becoming Prime Minister last May, Medvedev has been visibly sidelined on the Moscow political scene and has been struggling to assert himself.”
CONCLUSION
   Putin’s determination to make Russia an unequaled nuclear power with an extraordinarily powerful conventional military has not been recognized or responded to by the United States, which continues to adhere to a mistaken belief that the Cold War is gone forever.

Categories
NY Analysis

The New Cold War

A clear review of the evidence indicates that Russia’s leadership has returned to a cold war posture.

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     An Examination of both worldwide and Russian sources indicates that Moscow has engaged in:
  • vigorous and greatly expanded armaments expenditures; (while the U.S. has  slowed its military budget, and may reduce it sharply starting in 2013)
  • adventurous military patrols across the globe;
  • seeking naval bases abroad;
  • support of belligerent anti-western regimes in Syria, Iran, and Venezuela;
  • a belligerent attitude towards other nations;
  • threats of a “pre-emptive strike” against American missile defense installations in Poland;
  • energy “blackmail” against Europe;
  • Joint wargame maneuvers with China;
  • Soviet-style repression of its own people; and
  • Soviet-style treatment of the former captive nations of Eastern Europe as well as former Soviet Republics.
     This month marks the fourth anniversary of Russia’s invasion of Georgia, one of the former Soviet republics known to the Kremlin as “the Near Abroad.”  Henry R. Nau, writing in National Review Online, stated that “Moscow seeks a sphere of privileged interests in the former Soviet zone and feels uncomfortable with democracy in Ukraine, Poland, and Russia itself.”
     Observers have noticed a sharp increase in Russia’s Cold War attitude following Vladimir Putin’s return to his nation’s highest office.
THE LATEST SPECIFIC INCIDENTS
     During this summer, two Russian Bear-class nuclear capable bombers buzzed the American west coast on July 4, and had to be chased away by U.S. interceptors.
   At the same time, to the apparent delight of Russian media sources (including the Voice of Russia, as quoted below) an Akula-class attack submarine capable of carrying long-range ballistic missiles patrolled the U.S. coast undetected for a month in the Gulf of Mexico.
“Vladimir Yevseyev, head of the Center of Social and Political studies, said:
 ‘This is a good lesson for the U.S., demonstrating that it should not pursue its foreign policy interests all over the world using force.  Other states also have some military potential…the U.S. should realize thatit is also vulnerable because the anti-missile system is not efficient enough when it comes to cruised missiles…this destroys the image of U.S. invincibility…”
     Defense expert Bill Gertz, writing in the Washington Free Beacon, quotes naval analyst and submarine warfare specialist Norman Polmar:
“The Akula was built for one reason and one reason only:  to kill U.S. navy ballistic missile submarines and their crews…sending a nuclear-propelled submarine into the Gulf of Mexico-Caribbean region is another manifestation of President Putin demonstrating that Russia is still  player on the world’s political-military stage.”
     Gertz described the extraordinary abilities of the Akulas, which include firing cruise missiles and torpedoes, anti-submarine missiles, and laying mines.
     The Akula incident, deeply reminiscent of cold war activities, enraged Senator John Cornyn (R-Texas) who stated:
“This submarine patrol, taken together with the air incursions, seems to represent a more aggressive and destabilizing Russian military stance that could pose risks to our national security.  This is especially troubling given the drastic defense cuts sought by President Obama, which include reductions in funding for antisubmarine defense systems.”
     A similar incident occurred earlier in the Obama administration when two Russian nuclear-powered attack submarines were reported patrolling off the East Coast of the United States.
ENHANCING MILITARY CAPABILITIES
   The similarities with the Soviet Union extend to Moscow’s renewed concentration on military prowess, accelerating a trend towards restoring the intimidation factor Russia possessed during the Cold War.
    The Heritage Foundation reports that the Kremlin as begun an extensive nuclear and strategic  force modernization program, while the U.S. equivalent suffers from increasing neglect.
     R.James Woolsey, writing in 2009 for the New Deterrent Working Group, noted that:
“The Kremlin is simultaneously engaging in more and more direct nuclear threats against our allies, eroding confidence in the United States’ extended deterrent.  And Moscow is irrefutably doing hydro-nuclear and hydrodynamic experiments at Novaya Zemlya, underground nuclear testing of a sort the United States claims is impermissible under the Comprehensive Test Ban Treaty and that it has, as a signatory (albeit not a state party to the treaty) forsworn.”
    In recent years, according to the New Deterrent Working Group, Russia has made numerous nuclear threats against American allies.  “These direct threats have been made from the level of senior generals all the way up to the Russian president…In addition to the numerous threats of direct targeting, Russia has also used the forward deployment of nuclear missiles, provocative “combat patrols” by its long range bombers and an aggressive nuclear buildup as instruments of foreign policy.  Russia has also announced the lowest nuclear weapons-use threshold in the world.”
    Adding to that threat, the U.S. Departments of Energy and Defense noted in 2008 that “Russia maintains a fully functional nuclear weapons design, development, test and manufacturing infrastructure capable of producing significant quantities of nuclear warheads per year.”  This contrast sharply with the U.S., which according to the New Deterrent Working Group “has effectively eliminated its nuclear weapons production capacity and allowed its infrastructure to atrophy.  We no longer produce successive generations of nuclear weapons and we have discontinued underground testing.”
    In 2011, while the American nuclear arsenal shrank, its Russian counterpart grew larger, according to the Heritage Foundation.  During that year, the U.S. reduced the number of warheads on deployed ICBMs and SLBMs, and nuclear warheads counted for deployed heavy bombers, by 0.6%.  In contrast, Russia’s similar arsenal increased by 1.9%.  In terms of total deployed ICBMs, SLBMs and heavy bombers, America reduced its numbers by a dramatic 6.8%, while Russia’s decreased by just 1.0%.  America reduced the number of launchers for ICBMs and SLBMs by 7.2%, while Moscow’s increased by 0.7%.
   President Obama is advocating unilateral and unprecedented cuts to the American nuclear arsenal.  His proposal would reduce  U.S. nuclear weapons by 80%, down to levels not seen since the 1950s, leaving America with only 300 warheads, compared to Russia’s 6,000. This is based on the President’s belief that he has “reset” Washington/Moscow relations.  His administration’s2010 Quadrennial Defense Review  makes no mention of Russia’s military resurgence, and instead claims that the two nations are making progress in reducing deployed strategic nuclear weapons since the two governments “share many interests-including countering proliferation and countering terrorism.”
THE NEW START TREATY
   The New START treaty between Russia and the U.S., signed on April 8, 2010, does not add confidence to those hoping to limit Moscow’s nuclear drive.
   A major flaw is the less stringent verification procedures.  As noted by theCongressional Research Service‘s February 14, 2012 report, The U.S. will no longer maintain a monitoring presence outside the Votinsk facility where Russia assembles its mobile ICBMs, which may weaken the U.S. ability to count these missiles as they enter Russia’s forces.  CRS also notes that the United States and Russia will no longer exchange telemetry data on all their ballistic missile flight tests, which, over time, could lessen the U.S. ability to understand and evaluate the capabilities of Russian ballistic missiles.
   New START also lacks some needed restrictions on mobile ICBMs, which only Russia fields.  At the same time, New START makes a major concession to Moscow in its statement on missile defense.  The CRS report outlines that the treaty “recognize[s] “the existence of the interrelationship between strategic offensive arms and strategic defensive arms, that this interrelationship will become more important as strategic nuclear arms are reduced, and that current strategic defensive arms do not undermine the viability and effectiveness of the strategic offensive arms of the parties.”
   Critics of New Start, including Senator Jim DeMint (R-SC) have pointed out that the treaty allows Russia to continue its 10 to 1 advantage in tactical nuclear weapons; reduces America’s ability to deploy missile defense, and allows Russia to modernize its nuclear weapons while the US remains idle.
The Administration’s extremely optimistic view of Russia’s nuclear ambitions was further evidenced by the August 14 report of the International Security Advisory Board (ISAB), a federal advisory committee established to guide the State Department.  It emphasizes President Obama’s goal to move towards “very low numbers” of nuclear weapons and the road to their total elimination.  Among the ISAB’s recommendations:
“Change U.S. doctrine and posture away from defining our nuclear posture based on perception of Russia as the primary threat, toward a doctrine of general deterrence, a posture in which attacks from any direction are discouraged without singling out a particular adversary or enemy (reciprocal action required.)”
The ISAB also recommends ending trade restrictions between the two nations, including those enacted under the Jackson-Vanik bill, which imposed restrictions based on the USSR’s policy of hampering Jewish immigration.  (The trend in Congress, however, may be in the opposite direction.  Under the proposed “Sergei Magnitsky Rule of Law Accountability Act,” Washington would both deny visas and freeze the assets of Russians who engage in human rights abuses such as that imposed on Magnitsky, who was imprisoned for exposing official corruption.  He was beaten to death while in jail in 2009.)
   Some of Putin’s actions seem difficult to justify even from a Russian nationalist perspective.  As disputes with Moslem nationalist groups from Chechnya, who have engaged in substantial terrorist acts (including airport and metro station bombings.  The Hudson Institute‘s David Satter, writing in Canada’s National Post, notes that “the number of terrorist incidents grew six-fold between 2000 and 2009, to 738 from 135, and Moscow remains the only European capital to be hit repeatedly by terrorists.”) within Russia continue, Putin provides aid to Iran’s nuclear program, running the risk of eventually arming Chechnyan groups with nuclear material.
   Some observers have taken to calling the Putin regime “a mafia state,” run for the enrichment of the leadership and not for the benefit of either the nation or its population.
AIR AND NAVAL FORCE ENHANCEMENTS
   Russia’s intensive drive to develop a navy that could pose a threat to the United States will be strengthened by President Putin’s pledge to spend $138 billion on his maritime force.  Former President Yeltsin had rejected the need for such a force,  according to the Jamestown Foundation. However, the Kremlin today has a different perspective, deeply reminiscent of the first cold war.  In addition to the building of new ships, it is purchasing two French built Mistral class amphibious assault helicopter carrier vessels with state of the art equipment.
  To accommodate the refurbished fleet, Moscow’s vice admiral Viktor Chirkov  is seeking additional bases outside of the former USSR around the world, in Cuba, Vietnam, and the Seychelles to add to its current base in Syria.  In addition, Eurasia Daily Monitor reports that Putin has promised to build new naval bases in the Arctic, and Security Council Secretary Nikolai Patrushev promises that naval infrastructure hubs will be developed along the Northern Sea route.
   Russia joined the 2012 RIMPAC international naval exercises near Hawaii, and the Voice of Russia publication recounted how Moscow’s marines practiced landing on a US warship.
   The $723 billion modernization program includes providing up to 1,700 new warplanes, according to RT news.   This year, the Russian Air Force will get Su-35 and Su-30 jet fighters and Mi and Ka-52 Alligator helicopters,  according to a Voice of Russia report. In 2013, new air defense missile batteries will be delivered–a real irony, given Moscow’s vehement objections to US ABMs.
  Igor Korotchenko, chief editor of Russia’s National Defense magazine recently noted in the Voice of Russia publication:
“New aviation training centers are being set up now, the one already operating in Voronezh, where Russia`s future aviation engineers are offered everything they could ever need to succeed in their profession. The federal arms-related program suggests adopting 1,200 helicopters and over 500 planes by the year 2020.”
   According to Voice of Russia, “Mr. Korotchenko stressed that the way the national aviation is developing now cannot even be compared to how it was in the 1990s. Since the early 2000s the Russian army has adopted 92 Su-34 bombers, 48 multi-purpose Su-35 jets and over 100 fifth generation jets.The Sukhoi T-50 5th generation jet fighter is what the future of the Russian aviation is about. This is a unique aircraft which performed a demonstration flight during the air show in Zhukovsky. The jet`s radar system can spot and identify targets at the distance up to 400 km. Experts believe that T-50 will surpass America`s the F – 22 Raptor fighter jet. It means that the Russian military aviation is growing even stronger.”
DOMESTIC REPRESSION AND CORRUPTION
   The environment for a return to a Soviet style brand of leadership includes repression at home.
   David Satter notes that “Twenty years after the fall of the Soviet Union, Russia is again in political crisis.” He describes a nation rife with corruption and lawlessness, its government ranked 154th out of 178 by Transparency International, “on a level with Cambodia and the Central African Republic.”
   Putin reclaimed the presidency in the May 7 election, which has been criticized as being rigged in his favor. His government has restricted public protests, prosecuted demonstrators, broken into the homes of opposition leaders, tightened controls on the internet and private organizations, and strong-armed the media.  Corruption has been extensive. A Jamestown Foundation study notes that “Putin’s presidential pool journalists never publicly ask the president unwanted or un-vetted questions.”
   A “Europe Online Magazine” report lists thirteen separate incidents since December 2011  in which Putin’s actions have prompted the ire of the Russian people, including irregularities in elections for parliament and the presidency.
   Most recently, a political trial involving the female rock group”Pussy Riot” sent the musical band to prison for two years.  Supporters of the musicians are said to be preparing an appeal to the European Court of Human Rights.  While awaiting the verdict outside the courtroom, Human Rights Foundation chairman and opposition political leader Garry Kasparov was severely beaten, apparently for nothing more than speaking with journalists about the case, as reported in the Wall Street Journal.
   Putin’s impulse to subjugate political opposition may extend even to Prime Minister Dmitry Medvedev, who was pressured to step aside from his former post as President to make way for Putin’s return. A Jamestown Foundation report notes that “After agreeing not to seek reelection for a second term as President and becoming Prime Minister last May, Medvedev has been visibly sidelined on the Moscow political scene and has been struggling to assert himself.”
CONCLUSION
   Putin’s determination to make Russia an unequaled nuclear power with an extraordinarily powerful conventional military has not been recognized or responded to by the United States, which continues to adhere to a mistaken belief that the Cold War is gone forever.