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Archive for January, 2012

The failure of the congressional “super committee” to forge a deficit reduction deal in November will result in $1.2 billion of automatic spending cuts over 10 years to be applied to all federal spending, including defense. About half of the total cuts are to come from defense, so this seems to be a good time for a Diogenene examination of what we spend for our military.

The numbers that emerge for defense spending vary slightly based on how the question is asked. Budget numbers may or may not include the Iraq and Afghanistan war funding, foreign military aid, and black (secret) operations. In addition, intelligence services and the Department of Homeland Security are not included in most defense spending totals. The U.S. Department of Defense had a 2011 budget allocation of about $707 billion (excluding veterans affairs), roughly 20% of all federal expenditures. The next largest military budget in the world was China’s, but the U.S. spent six times as much, as the following chart from 2008 shows. Why do we constitute such a large percentage of the world’s military spending?

Most of what the Pentagon buys is “Made in America” at what are probably the highest prices in the world. As with consumer goods, we could probably buy most things cheaper at Wal-Mart because they would be made in China, but security concerns require American suppliers for most items large and small. Also, it is cheaper to copy existing products than to develop your own. Our weapons philosophy is to create military superiority instead of just capability. China has recently developed its first aircraft carrier, its first stealth fighter, and is deploying its own GPS system to be able to use “smart bombs”, all of which seek to achieve parity with U.S. weapons systems.

The procurement process is subject to multiple review layers. New project contracts are awarded on a cost plus profit system, so the profit risk for defense contractors isn’t whether they will make money on a project, but whether they are allowed to work on it. There is disincentive for them to limit costs when their company profit is tacked on to total expenses. Some of these companies are quite large, and view themselves more as “partners” than suppliers of the military. In his farewell address in 1961, President Eisenhower warned us of the “military industrial complex” which has long since intertwined itself with Congress and has made defense spending somewhat akin to public works projects.  When the Defense Secretary Rumsfeld proposed shutting down about 180 bases and facilities in the US in 2005, it prompted uproars from every Congressman whose constituency was affected. Base closings represent a high-stakes political fight, because they affect jobs in congressional districts. When a U.S. military installation shuts down, its officers and their families are uprooted and relocated to facilities elsewhere, leaving holes in customer bases of local businesses. We also have many massive systems like the F-22 Raptor (at $150 million each) which feature marvelous stealth technology but are so costly that in the last 3 wars the fighters have been deemed too sophisticated to risk losing any (of the 187 built)  in actual combat operations.

On a recent Republican Presidential Debate, Ron Paul stated that we have over 900 foreign military bases in over 130 countries. Diogenes verified that the statement is true, or even understated, depending on how one defines a US Military base. Many are neither owned nor leased to the US, but are maintained either by contractors or the host government and therefore are not technically in the total. There are also an unknown number of “black” bases. Although the foreign bases are expensive, they allow the US to project military power across the globe by providing the following benefits:

  • allow the stationing of US troops overseas
  • serve as launch platforms for military maneuvers
  • provide forward storage for supplies and munitions, including nuclear arms
  • provide training grounds, weapons testing and target range facilities, including for nuclear weapons

21st Century America projects its power not with colonies, but with military bases. We are hosted by foreign governments, and we keep soldiers in every corner of the world in order to be able to fight two wars at a time. (The two current threats considered most likely to occur are a land war with North Korea and action against Iran in the Strait of Hormuz.) In some countries such as Egypt, where the US provides $1.3 billion/year to essentially fund the entire military, we use such “soft power” to maintain our influence. Does this sound like imperialism or defense to you? Imperialism, as defined by Dictionary of Human Geography, is “the creation and/or maintenance of an unequal economic, cultural, and territorial relationship, usually between states and often in the form of an empire based on domination and subordination.” The projection of American military power since WWII has generally ensured global peace and prosperity. Because no other country does what we do, would the end of a “Pax Americana” result in a more unsafe and unstable world?

America has 75,000 troops in Germany, 40,000 in South Korea, 40,000 in Japan, and another 41,000 in the rest of Europe (mostly Italy). So essentially, the US keeps huge permanent garrisons wherever we have won previous wars. Thank goodness we really didn’t “win” in Iraq or Afghanistan, or we would have to support 100,000 troops there for another 70 years! One cannot help but question the need for a large troop deployment in Europe. Do we expect Russia to invade the West, and if so, why don’t the Europeans defend themselves?

A new staffing plan to be presented next month calls for army troop reductions of 80,000 soldiers even as the number of Unmanned Aerial Vehicles (UAVs, drones) will be increased. It foresees the deployment of more special ops teams from small “lily pad” bases around the world, and floating drone bases that could yield a a more lethal, though smaller military. Defense Secretary Panetta has previewed a new $525 billion 2013 budget plan that would cut $487 billion from defense spending over the next decade. Diogenes examined the growth of defense spending since the 9/11 attacks and compared the data to growth of all other spending and to the CPI, and learned that military spending has gown much faster than either inflation or all other spending, including entitlements.

Sources: USGovernmentspending.com & USInflationcalculator.com

In asking Congress to declare war against Germany in April 1917, Woodrow Wilson stated that his goal was to “make the world safe for democracy.” But what level of defense spending is appropriate for making the world safe for our democracy, and what level of spending is really imperialism? Is imperialism de facto a bad thing? Does our projection of military power decrease the safety of Americans by presenting the belligerent face of of an angry cop to the rest of the world and thus make our citizens targets of their hatred? Should we maintain the current doctrine of being sufficiently manned and equipped to be capable of fighting two wars simultaneously? Do we need to have nation building capacity? It doesn’t seem to have worked out for us in Iraq or Afghanistan. But it did work in Germany, Japan and Korea. What do you think?

What is luck? Is it good fortune, advantage or success attributed to random chance? If luck is distributed randomly, can  we attribute good luck to the intervention of a higher power? Alternatively, it might be ascribed to some talisman of a deity imbued with good fortune, such as a rabbit’s foot. Lacking a belief in supernatural forces one must inevitably conclude that luck simply doesn’t exist or doesn’t matter. Luck then is merely a name we give to events after they occur which we find to be fortuitous.

Is luck an escape from personal responsibility for one’s actions?  Is a blessing a desire or prayer for divine intervention, or luck? Some argue that you make your own luck by working hard. There are some consistent elements to the “creation” of good luck. Generally, this means one is open to good fortune by remaining positive (the glass is half full), finding the good in whatever happens (make lemonade if life deals you lemons), and in general, expecting good fortune. In 2009 researchers at the University of Pittsburgh reported that optimists lived longer and healthier lives than pessimists. The research showed a strong link but failed to prove causality, so perhaps the pessimists were right to expect the worst.

Expecting to be able to make one’s own luck is itself the product of random fortune. We in the developed world, especially in the United States, are fond of believing that we have the opportunity to do almost anything, be almost anything, and make our own fortune. But what if we had been born into the grinding poverty that is the fate of most of the Third World? Anyone who has traveled extensively in India or Africa can easily understand how exceptional and unlikely it is to escape those circumstances. So if we in the Western World are by definition all part of the lucky sperm club, do we in fact all have equal opportunities to have further good fortune and wealth?

In America, we like to believe that we have an equality of opportunity and a difference in results. If I am smarter than you, and I work harder than you, shouldn’t I be allowed to make, and keep more money than you? Of course, it can reasonably be argued that we can try to give equal opportunity to all, but this is impossible to achieve in practice. The single working mother can’t possibly spend as much time reading and enriching her children’s lives as the well to do housewife with a father providing support.

The median household income in the US is about $50,000. Assuming that making 50% more in household income than the median and a college education defines at least some measure of success, or luck, religion is a strong predictor of economic success, as shown in the chart below.


Once again, there seems to be strong linkage, but causality is not proven. At the end of the day, one’s individual luck could always be much better, or worse, than the ethnic, religious or national group to which one is born into. But it sure does seem to be important. What do you think?


As we approach the first major tournament of the year next week, I wanted to test my predictive skills to pick the winner.

My top choice is Andy Murray. A thinking man’s player, he has both power and guile, and can win from any or all parts of the court. To date he has lost in three slam finals without taking a set, which many pundits say indicates a huge capacity to choke. His overall record in finals appearances is 22-9,  and the lack of a major title has made him hungrier than any of the other contenders. Murray is still determined to improve, and he has made an inspired new coaching choice in Ivan Lendl, a former player who lost in his first four slam final appearances but then went on to win eight major titles by taking his mental and physical conditioning to another level. He also took equipment specification to a new level, becoming the first player on tour to change to a freshly strung racquet on every change of balls. Lendl won his first major at age 24, the same as age as Murray is now. Andy is poised and ready to win.  Diogenes Odds 8:3

My number two choice is the world #1 and defending champion, Novak Djokovic. An amazing player who believes he should win every match he plays, he had a phenomenal 2011, which is why he is #1. It’s hard to bet against him, but Murray is an old friend who is not intimidated by him in the way some other players (notably Nadal) are. While he certainly can’t be discounted, the commercial odds makers have him as a prohibitive favorite (see chart below) at nearly even money. Diogenes Odds 3:1

Source: betting-directory.com

Diogenes pick number three is Juan Martin Del Potro. His return to form was impressive in the second half of last year. DelPo hits huge shots from both sides, but more importantly, has the mental toughness to believe that he can, and will beat the best. And the Argentine already has the critical first major monkey off his back, so he’s playing with house money.  Diogenes Odds: 9:2

My number four choice is Jo-Wilfried Tsonga. The Frenchman plays with incredible flair from all parts of the court. He can hit with power from the baseline with anyone, but has exquisite touch at the net, and is not shy about getting up there. He plays well in the heat of Australia, and was a finalist in 2008. Jo-Willy has become far more consistent, and consistently healthy in 2011, and it would not be a huge surprise to himself or anyone else if he broke through here and won.  Diogenes Odds: 6:1

There are two notable players whom I do not see winning this tournament, although they may go deep into the draw. The first is Roger Federer, who may well be the greatest player of all time. While still a stunningly beautiful player to watch, he is just a fraction off from the peak of his powers, and that’s just enough to make him vulnerable. He won a lot of matches at the end of last year and the start of this year, but then he defaulted a semifinal match in Doha, Qatar last week with a bad back after having to go three sets in his quarter final match. It was only his second ever tour retirement. He is 30 now, and father time is never kind, though he remains the Diogenes sentimental favorite.  Diogenes Odds: 7:1

Rafa Nadal is also not one of my favorites for this event. Not only has he been completely psyched out by Novak Djokovic, losing to him five straight times in 2011, including twice on clay, but he simply is not in good form, and hasn’t been playing well since the end of last year. His serve is now slower and more predictable than it was a year ago. I am not sure if Rafa is injured, mentally exhausted, or is just suffering from a loss of confidence, but he is not good enough at the moment to beat the best over seven rounds in Oz.  Diogenes Odds: 10:1

The Australian Open usually has some incredibly hot and debilitating days of play. The players are settling in to new coaching arrangements or still tweaking new equipment after the off season. Mentally it’s a new year and a new campaign. As a result, the tournament usually sees the emergence of one or two players who are not yet well known to the general public. They go deep into the draw and are seen as real contenders for a slam for the first time. Two players who I do not foresee winning the tournament this year fill that bill. The first is Milos Raonic, a huge Canadian with a serve and forehand to match his frame. The other is Alexandr Dolgopolov, Jr., a slight Ukrainian with an Aussie coach who is a sweet striker of the ball and plays with reckless abandon. Both of these youngsters will be in the top 10 at the end of 2012 if they can stay healthy, and I believe slam wins could be in both of their futures.

So what do you think? Want to place some bets?

On the CBS show “60 Minutes” a few weeks ago, Mr. Obama stated

“I would put our legislative and foreign policy accomplishments in our first two years against any president — with the possible exceptions of Johnson, F.D.R., and Lincoln,  …. just in terms of what we’ve gotten done in modern history.”

He is 44th on the chronological list of all presidents. Unlike most college professors, Diogenes grades on a bell curve with 5% achieving the true excellence of an A grade. Obama thinks he is 4th best, which would imply a B+ self grade. Is this braggadocio, or is he is a victim of Overconfidence Phenomenon? Approaching the 2012 presidential election year, lets examine what the first term of our incumbent has brought, across a range of issues.

  • Medical Care: Patient Affordable Care Act (Obama-Care)   The President gets credit for trying to find a way to provide all Americans with health care. However, he enlarged Washington’s role at the expense of the states, trampled on individual rights, ignored better ways to improve health care delivery, avoided entitlement reform, and failed to bend the cost curve downward. DIOGENES GRADE: D-
  • Economic Reform: The Simpson Bowles Plan   America needs tax reform of a fundamental nature to deal with spending, fairness and incentives. The Bi-Partisan Commission convened at the President’s behest made proposals that upset both Republicans and Democrats. Sending those proposals to Congress would have given the President political cover to make changes this country desperately requires. It would have been imperfect reform, but would have broken the gridlock and moved us forward in a positive way. Mr. Obama instead failed to submit a credible budget to Congress and resorted to class warfare. DIOGENES GRADE: D-
  • Housing Policy   See my post on “Fixing the Housing Finance Market.” Mr. Obama didn’t cause this problem, by he has done nothing positive to fix it either.  DIOGENES GRADE: C-
  • Environmental Protection & Energy   The Gulf Coast drilling moratorium and the failure to approve the Keystone XL Pipeline extension threaten American jobs and energy security under the guise of environmental protection. The new 1,117 page EPA mercury utility rules (Utility MACT) will necessitate closure of a significant portion of our fleet of coal fired plants which currently supply about 50% of electrical power. These new regulations will cost about $10 billion per year in compliance. While EPA claims benefits to health of $53-140 billion, critics point out that eliminating all the double counting yields total net savings about $6 millionDIOGENES GRADE: D-
  • Stem Cell Research   Mr. Obama signed an executive order to allow NIH funding of the Stem Cell Research Enhancement Act that had passed Congress but been vetoed by President Bush. DIOGENES GRADE: A-
  • Unemployment Benefits & Payroll Tax Cuts   The extension of unemployment benefits from 26 to 99 weeks demonstrates compassion. Too bad that it results in longer and higher rates of unemployment. Temporary payroll tax cuts are about the same. They fail to accomplish the goal of job creation and weaken Social Security.  DIOGENES GRADE: C-
  • Financial Crisis Reforms: Dodd Frank & the Consumer Finance Protection Bureau   This bill, and the new agency created, were supposed to prevent “too big to fail” banks and other institutions from causing new crises. But did anyone in Congress even read the 2300+ page bill? Does anyone think we have limited the dangers these big banks pose to our economic system? Does anyone other than the extreme left think a new agency with no voter accountability will better protect consumers? DIOGENES GRADE: D-
  • Gays Rights    “Don’t Ask; Don’t Tell” is repealed for the military, but then Mr. Obama fails to push for Gay Marriage Rights. DIOGENES GRADE: B-
  • Foreign Policy   Mr. Obama curiously failed to back the legal democratic forces in Honduras during the coup. No movement on Cuba. He antagonizes Israel and abandons dictators in the Middle East while failing to influence the Arab Spring. All while apologizing for American exceptionalism. DIOGENES GRADE: D-
  • Military Policy   Mr. Obama has extricated Americans from both Iraq and Afghanistan, after surprising us with the surge. Given the rising violence immediately after the troops began to leave, one has to wonder what has been achieved of lasting value there that merited continuing to squander our national blood and treasure since he inherited these wars from Mr. Bush? Thankfully, Mr. Obama reconsidered earlier pledges and Guantanamo Bay is still open. He “led from behind” in Libya, has done precious little with North Korea, and looks to be a paper tiger on Iran, even as he failed to aid the Green Revolution uprising.  DIOGENES GRADE: C
  • Leadership & Post Partisanship  Mr. Obama campaigned pledging bipartisan solutions, and “change you can believe in.” He claimed he would be the post partisan president, but this has been one of the most partisan administrations in history. Many people personally like this president even as they dislike his policies. Despite a charming family and uplifting personal story, he seems too arrogant to listen to and incorporate differing opinions into his policies. Many moderately successful citizens are tired of being both lectured to and accused of being “fat cats”. They wish he would follow the advice of some apologetic Democrats and step aside for Hillary, who seems to be more competent than her boss. DIOGENES GRADE: F

So let’s summarize our president’s report card. On the 14 issues discussed above, Mr. Obama earns a DIOGENES GPA of 1.4, or a solid D+. According to H.L. Mencken “people deserve the government they get, and they deserve to get it good and hard.” On the other hand, Diogenes believes that the American people are capable of getting better for themselves than another term of such decidedly mediocre leadership. Perhaps you think Diogenes is being overly critical? Or not tough enough? How would you grade this list? Are there other more important issues to consider?