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February 19, 2009

Comments

"The Air Force today agreed that the F-22 is a gigantic waste of money."

Wait, wrong thread.

In the long run, it is because of such expedients and short-term fixes that American casualties may increase and, sooner or later, battles or wars may be lost.

Chalmers misses the point here, which is that the relevant actors in this drama really don't give a sh!t.

Right. Which is why we have to become relevant and active.

I've had the opportunity to hear Chalmers Johnson talk on several occasions and the guy is really interesting. I expect that some will suggest that his evolution from hawk to critic of American imperialism undercuts his commentary, (I think that I've given some links to his stuff that some have pooh-poohed) but I personally think it underlines his point.

great post.

Eisenhower shrugs.

While acknowledging that obviously there is a lot of mismanagement of the military's budget, I have to point out that this critique of the F-22 is a good example of lapsing into the common error of preparing for the previous war. The fact that we're currently engaged in "fourth generation" conflicts with adversaries such as the Taliban doesn't preclude a need to be prepared for the possiblity of hostilities with first-world nations. In addition, the F-22 was developed as a replacement for the aging 1970's era F-15 fighter fleet, of whom I believe only the air-to-ground F-15E's are expected to be kept in service for many years longer.

I'm an aficionado of the A-10 and am glad to see it receive well deserved praise. But seeing praised in the context of critiquing military spending programs, I can't help but recall all the criticism the CV-22 program has received as allegedly wasteful, despite the facts that its stability issues were corrected long ago and that it was designed to be optimal for "fourth-generation" warfare. Sometimes it seems like a case of damned if you do and damned if you don't.

Several decades ago, a couple of Eric's forefathers argued in a book named America Can Win (or some such)that the F-5 was a perfectly satisfactory jet and the grossly expensive, etc F-15 should be shelved. Similar arguments were made about the M-1 tank, every carrier built after 1980, the F-17, the B-2, etc. Critics of big-ticket weapons systems turn out to be wrong far more often than they are right--primarily because their motivation is ideological rather than functional. Most high-end systems come in smaller numbers because they have significant force-multiplier capability, which allows for a smaller but better trained and equipped defense profile.

What is most amusing, though, is how--for some strange reason--defense spending, i.e. the Keynesian stimulus that turned the economy around WWII, no long provides a Keynesian stimulus, but food stamps do. Just a couple of threads ago, Eric and Hilzoy argued 'any' government spending is stimulus. Any, apparently, except national defense, and especially a weapons system that gives the US clear superiority over any adversary.

What is most amusing, though, is how--for some strange reason--defense spending, i.e. the Keynesian stimulus that turned the economy around WWII, no long provides a Keynesian stimulus, but food stamps do.

is that military spending in the early 40's was, as a percentage of GDP, roughly ten times what we're spending now.

what would be really amusing is if you had argued that the DOD needed six trillion dollars per year, instead of the mere $600B it gets now.

(strike that first "is that", of course.)

While acknowledging that obviously there is a lot of mismanagement of the military's budget, I have to point out that this critique of the F-22 is a good example of lapsing into the common error of preparing for the previous war.

The real thrust of the critique is that it is unnecessary at the given price tag for the current war, or any future war given the fact that the fighter that it was designed to best was never even produced. It's features are superfluous, while it crowds out spending on other needs.

Several decades ago, a couple of Eric's forefathers argued in a book named America Can Win (or some such)that the F-5 was a perfectly satisfactory jet and the grossly expensive, etc F-15 should be shelved. Similar arguments were made about the M-1 tank, every carrier built after 1980, the F-17, the B-2, etc.

Several decades ago, Mckinneytexas' forefathers made strawmen arguments against their peers because they lacked the courage to argue directly with them.

Most high-end systems come in smaller numbers because they have significant force-multiplier capability, which allows for a smaller but better trained and equipped defense profile.

This has nothing to do with the fact that when the eventual cost is realized, we can't afford to actually purchase the number initially requested. See, ie, the F-22.

Also, not better trained. The requisite training is a casualty of, again, that increased cost.

What is most amusing, though, is how--for some strange reason--defense spending, i.e. the Keynesian stimulus that turned the economy around WWII, no long provides a Keynesian stimulus, but food stamps do. Just a couple of threads ago, Eric and Hilzoy argued 'any' government spending is stimulus. Any, apparently, except national defense, and especially a weapons system that gives the US clear superiority over any adversary.

No, wrong!

Defense spending would provide a stimulus too, I never said otherwise. I never implied otherwise. Again, like your forefathers, a strawman argument.

But there are more pressing needs than the F-22 or F-35. If we need to spend stimulus dollars, there are better ways that we can spend them. Infrastructure, alternative energies, safety net fortification, etc. Building new weapons systems that are unnecessary as we already have clrea superiority over any adversary is misguided at this time.

Our economy, long term and short term, would be better served with more alternative energy development and high speed rail.

Our defense budget is already more than the rest of the world combined, practically. It's not small. Relatively small. Moderate. Medium. Large. Extra Large. It's enormous by a factor of many.

Put another way on the Keynsian argument: We need to realign our government spending to more efficient, productive uses.

Other westernized, prosperous nations are spending money to improve their infrastructures, transfer to green technologies, widen and deepen their safety nets, provide health care and college tuition to their populations, etc.

We, on the other hand, are neglecting those areas while spending more on defense than all of those nations combined.

Our priorities are skewed.

For example, Northrop-Grumman's much touted B-2 stealth bomber has proven to be almost totally worthless. It is too delicate to deploy to harsh climates without special hangars first being built to protect it at ridiculous expense; it cannot fulfill any combat missions that older designs were not fully adequate to perform; and -- at a total cost of $44.75 billion for only 21 bombers -- it wastes resources needed for real combat situations.

Do any of these concerns apply the F-22? It costs 1/6 what the B-2 costs, it doesn't require climate-controlled hangers, and it does have considerable performance advantages over current aircraft.

By the time the prototype F-22 had its roll-out on May 11, 1997, the Cold War was nearly a decade in its grave, and it was perfectly apparent that the Soviet aircraft it was intended to match would never be built.

That is technically true, but regardless of the fate of one proposed Soviet design, fighter aircraft development did not grind to a global halt; Russia and China (and India?) have fifth-generation fighter jets in the pipeline that will deployed fairly soon.

The F-22 has several strikingly expensive characteristics which actually limit its usefulness. It is allegedly a stealth fighter -- that is, an airplane with a shape that reduces its visibility on radar -- but there is no such thing as an airplane completely invisible to all radar.

No, there is no such thing as an airplane that is completely invisible to all radar. Is that a fair metric though? The F-22 is vastly less visible that existing fightings including the F-35.

In any case, once it turns on its own fire-control radar, which it must do in combat, it becomes fully visible to an enemy.

I'm not that familiar with avionics but isn't that an overstatement? The F-22 does use active radar but I believe it disguises its broadcast pretty effectively.

The F-22 is able to maneuver at very high altitudes, but this is of limited value since there are no other airplanes in service anywhere that can engage in combat at such heights.

I'm not 100% sure about this, but tactically isn't it considered advantageous to attack from above in air combat? Something about being able to fire missiles sooner, maybe?

It can cruise at twice the speed of sound in level flight without the use of its afterburners (which consume fuel at an accelerated rate), but there are no potential adversaries for which these capabilities are relevant.

Speed isn't important for an interceptor? Maybe it's a non-factor in actual combat, but it seems to me speed would be pretty important in the intercepting part.

The plane is obviously blindingly irrelevant to "fourth-generation wars" like that with the Taliban in Afghanistan

Obviously true, but what is the guarantee that all future conflict will be against insurgencies? I hope that's the case but I don't see why it's necessarily true.

But there are more pressing needs than the F-22 or F-35. If we need to spend stimulus dollars, there are better ways that we can spend them.

Maybe. But government spending is not a zero-sum game - where is the guarantee that money cut from the F-22 program would transfer to some worthy non-military use? It seems more likely it would just not be spent, especially since the stimulus has already passed.

In my mind, what needs to change is the procurement process. We need to stop taking proposals from the pentagon and having companies bid with no prototype to prove the technology. The DOD should put out an RFP that lays out the capabilities that it wants, companies should build a fully capable prototype based upon that RFP, and the DOD should buy whichever system best meets the need and the budget.

And don't tell me companies can't take that risk, companies take such risks ALL THE TIME! Boeing sunk hundreds of millions of dollars into the development of the 787 before the first plane was even ordered. That was money spent without any promise of a return. The 787 could flop and no one will buy it, thus making it impossible to recoup losses. Military systems should be developed and sold the same way. Companies try to fill a need, and militaries choose the best system that meets that need.

Do any of these concerns apply the F-22? It costs 1/6 what the B-2 costs, it doesn't require climate-controlled hangers, and it does have considerable performance advantages over current aircraft.

How many F-22s have been deployed to Iraq or Afghanistan? How do these performance advantages materially improve our ability to conduct missions in Iraq and Afghanistan?

That is technically true, but regardless of the fate of one proposed Soviet design, fighter aircraft development did not grind to a global halt; Russia and China (and India?) have fifth-generation fighter jets in the pipeline that will deployed fairly soon.

China and India have achieved a level of economic integration with the US that makes combat unthinkable. So why exactly would we enter a shooting war with them? Doing so would ruin our economy and theirs, regardless of what kind of fighter hardware we deploy. As for Russia, we're not fighting some vast ideological struggle with them, so under what circumstances do you think we would engage in combat with them? I'm having trouble envisioning a scenario where the largest nuclear powers enter into a hot war over...what exactly? Russia's neighbors don't seem overly concerned in that they spend vastly less on defense than we do and they've got a lot more skin in the game.

No, there is no such thing as an airplane that is completely invisible to all radar. Is that a fair metric though? The F-22 is vastly less visible that existing fightings including the F-35.

See, I don't know that this is true. There is no independent testing for me to rely on. I have to trust the DOD, and given how much the DOD has tried to deceive us regarding the F-22, I don't see why I should trust them. Actions have consequences and a long history of lying about defense acquisitions undermines credibility. That might not be fair in this case, but I'm not the one who consistently lies about defense acquisitions.

I'm not that familiar with avionics but isn't that an overstatement? The F-22 does use active radar but I believe it disguises its broadcast pretty effectively.

It does in fact make use of some nifty technology, but I don't know if that technology is actually effective against adversaries.

I'm not 100% sure about this, but tactically isn't it considered advantageous to attack from above in air combat? Something about being able to fire missiles sooner, maybe?

I don't believe this is the case. In the past, there was a benefit to flying lower than your adversary since their radar might have difficulty picking you out from the ground scatter, but I don't think this is a modern concern.

Obviously true, but what is the guarantee that all future conflict will be against insurgencies? I hope that's the case but I don't see why it's necessarily true.

There are no guarantees, but we do know that peer competitors tend to be allies or nations that are tightly economically integrated with the US. The fact that you're asking for guarantees demonstrates how bizarre our defense priorities have gotten: people in the UK don't talk about how they can't guarantee that the US won't invade their country and thus they need to spend enough on defense to outmatch the US military. There is no perfect security, so we make tradeoffs.

Maybe. But government spending is not a zero-sum game - where is the guarantee that money cut from the F-22 program would transfer to some worthy non-military use? It seems more likely it would just not be spent, especially since the stimulus has already passed.

One problem the US government does not have is finding ways to spend money. There are plenty of expensive bills coming down the pike, including the housing bill, a new energy bill, extra spending for actual war fighting, national healthcare, and maybe a second stimulus bill.

That is technically true, but regardless of the fate of one proposed Soviet design, fighter aircraft development did not grind to a global halt; Russia and China (and India?) have fifth-generation fighter jets in the pipeline that will deployed fairly soon.

Actually, I've read about a great deal of skepticism on the imminence of any of those deployments, and of the quality of the planes in question regardless.

China and India have achieved a level of economic integration with the US that makes combat unthinkable. So why exactly would we enter a shooting war with them? Doing so would ruin our economy and theirs, regardless of what kind of fighter hardware we deploy. As for Russia, we're not fighting some vast ideological struggle with them, so under what circumstances do you think we would engage in combat with them?

Well, I can envision scenarios in which China moves on Taiwan or Russia on a democratic former client. I don't think those are at all likely, but for how many previous shooting wars were the direct causes clear 5-10 years before they started? The world is very dynamic and we simply don't know what the future holds. I will say that I think any sort of "total war" is exceedingly unlikely. But limited conflicts can never, I think, be ruled out.

See, I don't know that this is true. There is no independent testing for me to rely on... It does in fact make use of some nifty technology, but I don't know if that technology is actually effective against adversaries.

Well, the F-22 was devastatingly effective at the Northern Edge exercise, which seems like a pretty solid endorsement of the technology.

The fact that you're asking for guarantees demonstrates how bizarre our defense priorities have gotten

Good point; guarantee was too strong of a request. But throughout our history we've had fairly major armed conflicts on a pretty regular basis. I don't think enough has changed in the world that we should not expect more.

One problem the US government does not have is finding ways to spend money.

True. But with everyone gung-ho to spend on so many channels, I don't really get the spending-hawkishness about the F-22. If it was a crap plane, I would agree; I don't think it is though.

Actually, I've read about a great deal of skepticism on the imminence of any of those deployments, and of the quality of the planes in question regardless.

Do you have any sources handy? Not skeptical, just interested - most of what I've heard casually is that the programs are fairly secretive.

part of the reason that President Obama chose to stay with Gates at Secretary of Defense is due to Gates' appreciation of this situation

Nonsense. Obama chose Gates because they both love torture (currently defined as keeping fasting prisoners alive so we can decide what to do with them). Just ask any PUMA you happen to see (I think we all know who the PUMAs on ObWi are).

MikeF,

I forgot where I read the meat of that, but there's some nibbles (and links) here:

http://lefarkins.blogspot.com/2009/02/better-journalism-please.html

And here:

http://warisboring.com/?p=1667#comment-803353

(see last comment from David Axe aka Warisboring)

In specific terms I agree with you Turb (and Eric and others) that the F-22 is under present circumstances a waste of money, but this:


China and India have achieved a level of economic integration with the US that makes combat unthinkable. So why exactly would we enter a shooting war with them? Doing so would ruin our economy and theirs, regardless of what kind of fighter hardware we deploy.

is not a very good argument. The exact same arguments were made 100 years ago that a general European war was unthinkable. I thought that the events of August 1914 and beyond had put an end to the notion that economic interdependence between rivals can deter or prevent military conflict. Do we have to copy all of the mistakes of our emminent Edwardian predecessors, made during the fin-de-siècle of the last era of globalization, or can we skip a few of them?

I don't think those are at all likely, but for how many previous shooting wars were the direct causes clear 5-10 years before they started?

Most of them. Civil War? Check. World War One? Check. World War Two? Check. Vietnam? Check. Iraq War? Check.

The exceptions I can come up with are Korea, Gulf War, and Afghan War. All were against technologically inadequate opponents, where more advanced equipment wouldn't have been a major help.

Well, the F-22 was devastatingly effective at the Northern Edge exercise, which seems like a pretty solid endorsement of the technology.

How does this address the argument that there is no independent testing, outside of the untrustworthy DoD?

Well, I can envision scenarios in which China moves on Taiwan or Russia on a democratic former client.

Why should we care if Russia decides to take out a bite of a former client? Seriously, where did we sign up to be the world's policeman and how much are we getting paid?

I don't think those are at all likely, but for how many previous shooting wars were the direct causes clear 5-10 years before they started?

If you think we need to defend against possibilities that are not at all likely, then we've already lost. There is an infinite number of such possibilities and we can't defend against them all. We need to make tradeoffs and that process usually begins by blowing off those scenarios that are "not at all likely".

I think your question about how many shooting wars were forseeable is a good one, but it obscures an important issue: America tends to enter into wars of its choosing. If the US had never entered the Vietnam war, would we be worse off now? If we had never started the Iraq war, would we be worse off? Heck, if we never invaded Afghanistan, we might have made better progress on capturing Osama.

The world is very dynamic and we simply don't know what the future holds. I will say that I think any sort of "total war" is exceedingly unlikely. But limited conflicts can never, I think, be ruled out.

But this can justify literally anything. Maybe I should quit my job and become a mountain hermit because society might collapse any day now. After all, the world is very dynamic and most people don't see massive social collapses coming, right?

Well, the F-22 was devastatingly effective at the Northern Edge exercise, which seems like a pretty solid endorsement of the technology.

Let me see if I got this straight. The F-22 performed well in an exercise where both sides were taking direct orders from the DOD, in which scoring and model parameters were set by the DOD. The same DOD that is desperately trying to push the purchase of more F-22s. Is that right? Look, the Air Force is an interested party. It has an agenda. That means that it is not independent.

Good point; guarantee was too strong of a request. But throughout our history we've had fairly major armed conflicts on a pretty regular basis. I don't think enough has changed in the world that we should not expect more.

First, I think many of these conflicts have been of our own choosing and not terribly important. Secondly, direct conflicts between great powers have dramatically reduced in frequency over the last few decades. Whether you want to chalk that up to nukes or economic integration or whatever, the fact remains.

True. But with everyone gung-ho to spend on so many channels, I don't really get the spending-hawkishness about the F-22. If it was a crap plane, I would agree; I don't think it is though.

We need to spend, but we don't have infinite amounts of money to spend. Spending cash on weapons that don't address serious threats means there is less cash for defense spending that does address those threats.

Thanks for the links, Eric, insteresting stuff (I like that warisboring site; hadn't heard of it before).

The problem I have with this whole thread is that the Defense Hawks use a completely different standard for their spending than for any other government spending. For example, asking for a "guarantee", or even an assurance that something exhorbitantly expensive won't be needed,(re: F-22) when applied to education, health care, infrastructure, or any other expenditure would be derided as obscene by the reduce government crowd. Only DOD gets the Cadillac it MIGHT use. Everyone else has to beg for better bus routes and to pre-prove their usefulness.

MikeF,

But throughout our history we've had fairly major armed conflicts on a pretty regular basis. I don't think enough has changed in the world that we should not expect more.

Nuclear weapons have fundamentally changed the nature of relations between the major powers and mutually assured destruction provides the strongest possible guarantee against any future direct conflict. It also means we have to learn to accept that we live in a multipolar world where the great powers have essentially unchecked controls over there respective spheres of influence.

is not a very good argument. The exact same arguments were made 100 years ago that a general European war was unthinkable.

Things change. Arguments that were wrong 100 years ago need not be wrong now.

I thought that the events of August 1914 and beyond had put an end to the notion that economic interdependence between rivals can deter or prevent military conflict.

Other things have changed besides economic integration (assuming that levels of economic integration really are comparable over the last century). For starters, nuclear weapons.

Also: the economic integration has both deepened and increased in terms of points of contact/overlap.

I think it also bears mentioning that, in terms of Keynesian multipliers, building planes and tanks is the equivalent of paying people to dig holes. Highways, railways, and schools will all pay future dividends where planes and tanks only hold the possibility of recapturing some tiny fraction of their initial cost when they are decommissioned and sold for scrap.

planes and tanks only hold the possibility of recapturing some tiny fraction of their initial cost when they are decommissioned and sold for scrap.

But don't you get it? They keeps us safe from the Koreans Vietnamese Cambodians Lebanese Grenadians Libyans Panamanians Iraqis Somalis Bosnians*
Afghanis & Iraqis Part Deux!

*I'm sure I've missed some other existential menace to survival of the United States that merited the use of U.S. force abroad since WWII.

Grenada?


Other things have changed besides economic integration (assuming that levels of economic integration really are comparable over the last century). For starters, nuclear weapons.

IMHO it is foolish to think that nukes can deter a coventional great power war. For starters, that idea is contrary to NATO doctrine regarding the use of nukes. Seems more likely to me that nukes can deter a war in which the survival or vital national interests of nuclear armed states are at stake.

This still leaves more limited wars (e.g. resource competition wars) and proxy wars, as well as unplanned escalations from the latter into broader conflicts. Perhaps you trust the capacity of today's leaders to practice statecraft in a way which eliminates such armed conflict, but I'm not so optimistic. Seems to me that the plausibility of say a conflict over oil in Central Asia resulting in US and Chinese conventional forces facing off against each other within that theater is non-trivial. It would be a stupid thing to do, but could still happen, and the strategic arsenals of both sides would not be much of a factor one way or the other, except in deterring either side from directly attacking the other's civilian population and industrial base within their home territory.

In other words nukes may be effective at deterring the sort of large scale wars which involved mobilizing the entire civilian population and economy of late-19th and 20th Cen. nation states in pursuit of unconditional victory (and thus also inviting attack against those same civilians), but those aren't the only sort of wars we can have between great powers. Much more limited wars (in terms of both means and objectives) were highly characteristic of the 18th Cen. for example, and long service professional armies like the one we have today are actually much closer in character to the armies of that era than they are to the mass conscript armies of the early 20th Cen.

The lesson I derive from reading about several centuries worth of military history is that when the technological and/or social basis of warfare changed in fundamental ways in the past, states didn't stop having wars, they just adapted to have different sorts of wars. I have yet to encounter any convincing evidence that nukes have altered this dynamic.

Grenada?

They were on the list.

Some omitted from the list: Haitians and Laotians.

Early 80's, saving American medical students from imminent capture by communist forces.


Also: the economic integration has both deepened and increased in terms of points of contact/overlap.

Eric,

Not sure I agree with this point. The speed of integration may be faster now, but late 19th Cen. Europe was extraordinarily integrated both economically and culturally, especially amonst the upper classes. For rural folks and the urban lower classes perhaps not so much, but the differences between then and now are not I think as striking as you think, especially considering that many of the major geopolitical rivals today are geographically seperated from each other by either broad oceans or the world's largest mtn. range in the case of India and China., a luxury of distance which the Europeans did not enjoy.

I couldn't have said it better than Oyster Tea. The federal government has just taken who knows how much value-added from us and our children for who knows how many years into the future. And for what? To buy houses for people who cannot afford to pay for them themselves. To keep auto execs and unions living the way they are accustomed but instead of earning their way they now just have to stick out their hand. Same for bankers. I would be much more inclined to support Eric if he would go after the imbeciles at the Fed or the Treasury or the now bankrupt GSE's. These are the people wasting our money or using it to pick who they think should survive or be so-called winners in what may be left of the country when they get finished. At least DoD has a properly defined function within our federal system and their performance generally has been successful. I cannot say the same for the Federal government's indulgences in the housing, education, and healthcare arenas.

The A-10 is now out of production because the Air Force establishment favors extremely fast aircraft that fly in straight lines at high altitudes rather than aircraft that are useful in battle.

It's worth pointing out, here, that the A-10 fleet is currently being modernized to make it a more effective antiarmor platform. You didn't say anything counter to that, but neither did you note it.

Let me see if I got this straight. The F-22 performed well in an exercise where both sides were taking direct orders from the DOD, in which scoring and model parameters were set by the DOD. The same DOD that is desperately trying to push the purchase of more F-22s. Is that right? Look, the Air Force is an interested party. It has an agenda. That means that it is not independent.

Do you have any viable alternatives, Turbulence? Who is better qualified to test Dod aircraft than DoD pilots?

Plus, I'd want to have poked around enough to ensure that there's not an independent evaluation team in existence before making these sweeping statements. The absence of such evaluators seems to be a given.


And for what? To buy houses for people who cannot afford to pay for them themselves.

I'm not in favor of doing this either, but to characterize the housing initiative announced yesterday as doing only this, or primarily this is just ignorant.

Here's a decent summary of the program, courtesy of the WSJ.

Here's calcrisk's commentary on same.

Note that he (CR) doesn't like the plan, but points out that section 3 is no big deal with regard to the GSEs one way or the other, and few people will qualify for section 1. So the big giveaway that has everybody up in arms is all in section 2.

So let's take a little tour of section 2 to see if it is an atrocious giveaway. What does it really do?

For starters, lenders (not the govt.) are responsible for cramming down the mortgage payments to 38 percent of the borrower's income. After that, the lender and the govt. split the cost of bringing it the rest of the way down to 31 of income. So who is carrying the main fiscal burden here, the lender, or the govt.? Hmmm... if only there were some way we could allow housing prices to fall and pry some money lose from the banks at the same time...

So what happens if, instead of suckling on the teat of the US taxpayer, the evil borrowers who can't afford to make their mortgage payments any more get their just deserts and are tossed out of the overpriced home they never should have gotten into? Well, the house has to be foreclosed, and then sold into a declining market. How long does that take - probably at least 6 months, maybe longer. Assuming the former occupants are physically removed (rather than say living rent free in a house which they could have been making payments for under the Obama plan, but noooo.., that wouldn't be right), the house then sits vacant, exposed to vandalism, squatters, and whatever the weather has to dish out (too bad about those pipes that froze, or that leaky roof which nobody fixed because the house is empty).

How much damage does that do to the house? How much value is permanently lost for no good reason as a result? What happens to property values of other properties in the same neighborhood, whose occupants were prudent and thrifty and are keeping up with their payments? Hm... Too bad there isn't some way we could maintain the physical condition of these homes, and support those innocent neighbors. Perhaps it would be worth it to pay somebody a modest amount to occupy that house so as to prevent..naah.

And then quelle surprise! months or maybe a year later the empty and possibly deteriorating house actually sells to a deserving buyer - somebody who isn't being greedy. How much does it sell for? Oh, I don't know, probably something like what somebody making the median income for that area can afford to pay if they spend 31 percent of their income, less closing fees, etc., on the mortgage. Hmm..that sounds vaguely familiar...

So after deducting the direct and indirect cost of the foreclosure process (including deterioration of the housing stock), months or years later we end up in the exact same spot fiscally. It might even be the exact same people who were formerly occupying said house. But at least this time they aren't being greedy.

Boy, that sure was worth it, wasn't it? Punishing "greedy" people may be a bit expensive, but it sure feels good. Money well spent, I say. At least it doesn't cost as much an F-22.

ThatLeftTurnInABQ,

This still leaves more limited wars (e.g. resource competition wars) and proxy wars, as well as unplanned escalations from the latter into broader conflicts.

I agree with you as regards proxy wars but I think the Cold War era provides pretty persuasive evidence that nuclear weapons make any direct conflict between the great powers, even those of a limited nature conducted in third party theaters, extremely unlikely. The likelihood of escalation makes the costs too high. No matter how costly Vietnam got we never retaliated against the Soviets or the Chinese. Same goes for Soviets with regards to us in Afghanistan.

As for our preparedness to fight future proxy wars, our existing conventional capabilities have proven more than capable of rolling back any non-nuclear nation to a pre-industrial state, on the condition that we can attain air supremacy. The development of UAV technology seems to me to be the most promising (and cheapest) route to maintaining this capability into the future.

Seems to me that the plausibility of say a conflict over oil in Central Asia resulting in US and Chinese conventional forces facing off against each other within that theater is non-trivial.

I would suggest that rather than buying 198 more F-22s, our security interests would be much better served by spending that money on reducing our demand for petroleum.

TLTIABQ,

You still feel that you can make a distinction between lenders and the gov't?

The house should be sold at a price that will bring a buyer. The occupant could remain while doing a short sell. Lenders are not smart if they allow a house to deteriorate or be vandalized while they sit on an unrealistic price.

The government is still showing signs that it is unwilling to allow the price of housing to get to its natural market level as quickly as possible. In the meantime, all of the various professionals, craftsmen, and laborers who could be working doing what they know will remain idle because housing inventory will not be cleared.

You know, there is nothing to prevent the gov't (lenders), sorry, I can't tell the difference, from renting these houses back to the occupants (who don't own anything, anyway).

I'm not as interested in the breakdown of the subsidies as much as the disruption of the government hand in the middle of everything it can touch. We are looking for a recovery from this economic downturn and everything the federal government does increases uncertainty which is the bane of the entrepreneur.

And we all know that it was the federal government that got us here to begin with so why should anyone trust it to save us?

And we all know that it was the federal government that got us here to begin with so why should anyone trust it to save us?

No, the federal government did not create mortgage backed securities, to the tune of $600 trillion. Nor did it slice up bad mortgage securities into multiple new tranches. Nor did it assign them AAA ratings.

Nor did it force the lenders to make bad loans.

To the extent that we can blame the federal government, it was in its failure to regulate PRIVATE markets. But it was the private markets, and the bankers and ratings agencies operating within them, that got us here.

TLT,
while I am sympathetic to your point about repeating the mistakes of the pre WWI world, isn't the larger mistake more fighting than previous war than what technology is used? Just as the WWI generals failed to understand how technology made their vision of the battlefield obsolete, people pushing the F-22 are likewise missing the point. Viewed in this way, the F-22 is more a symptom of a problematic mindset. Over at Lawyers, Guns and Money (in the sidebar) Robert Farley has a number of great posts about the problematic mindset of the Air Force, and the fighter pilot mentality that leads them to reject drones, favor fighters over planes like the A-10, and battle for a plane like the F-22.

The federal government has just taken who knows how much value-added from us and our children for who knows how many years into the future.

Ah, the old "deficits don't matter", until there's a Democrat in the Oval Office. Considering the source of the quote, you can literally go Cheney yourself.

But it was the Federal Reserve that put interest rates to a level that created a lending frenzy that fostered the behaviors that ignored risks. I know you like government regulation so I don't expect you to see this the way I do. I see negative effects every place the government touches. And the government had a big role in the original creation of mortgage-backed securities. This goes back to the 1970's when the government policy was to promote home ownership and the pathway for that was to create a secondary mortgage market through the GSE's.

Here's another fascinating point related to public perception. This week all the talk has been about nationalization of banks. But when Treasury took FNMA and FHLMC into conservatorship last fall, not much noise. I guess all thought it was just OK for the feds to basically take over those private entities. Actually, the long-standing perception that these GSE's were government entities allowed them to borrow at below commercial market rates and thus subsidize the US mortgage market for decades

This goes back to the 1970's when the government policy was to promote home ownership and the pathway for that was to create a secondary mortgage market through the GSE's.

Yet, interestingly, it was only during the last eight years that such GSEs proliferated at the scale we've seen. Odd that.

Actually, the long-standing perception that these GSE's were government entities allowed them to borrow at below commercial market rates and thus subsidize the US mortgage market for decades

Yet, interestingly, FNMA and FHLMC only contributed a tiny fraction of the oustanding mortgages and related securities.

Look, I know you don't like to deal with actual numbers because they undermine your narrative, but the numbers are still there. And they still undermine your storyline.

But it was the Federal Reserve that put interest rates to a level that created a lending frenzy that fostered the behaviors that ignored risks.

Interests rates had nothing to do with the fact that the banking sector discovered a loophole to bucket-shop regulations and proceeded to exploit it to the tune of hundreds of trillions of dollars.


I see negative effects every place the government touches.

Ah yes. The government was too stringent in its oversight of these securities. The government was too slow to exempt them from bucket-shop rules.

If the government had taken its hands off sooner...none of this would have happened?

Heh.

GOB: We tried American capitalism sans regulations. We allowed business to do almost anything and everything. Didn't turn out that well. You might recall the several deep recessions of the 19th century, culminating in the near cataclysmic Great Depression.

Hint: It wasn't interest rates or government interference that made those waves of speculators, monopolists and colluders do their thing. Nor now.

But it was the Federal Reserve that put interest rates to a level that created a lending frenzy that fostered the behaviors that ignored risks

AH. Not their fault. It's the bad ol' government's fault. Not my responsibility, even though they're taking care of other people's money.

Gotcha.

And the government had a big role in the original creation of mortgage-backed securities. This goes back to the 1970's when the government policy was to promote home ownership and the pathway for that was to create a secondary mortgage market through the GSE's.

FNMA was created in 1938, not the 1970's. It was originally created as a government agency, and thus was completely regulated. In 1968, not the 1970's, it was changed to a GSE - a privately owned company - although it was still highly regulated over the loans it could buy. This was done to get the agency's financial dealings off the federal government's balance sheet.

Along with the other GSEs, this created the most successful mortgage system in the world, and it worked fine for 70 years.

In the years immediately preceding and during the housing boom, the government (including both Democrats and the even worse political party) took steps to loosen regulations on FNMA. They allowed the organization to take on riskier types of loans, among other things. They also failed to intervene aggressively enough when accounting irregularities became known with FNMA. Conservatorship was the end result.

So, when regulated, FNMA did what it was designed to do for decades. Then the ideology of small government and the ideology of deregulation combined to make it necessary for the government to step back in and do, again, what it had previously done to create the secondary mortgage market in the first place.

You're a conservative. We understand that - you don't want to pay your taxes. But making factually incorrect statements and arguments that are completely opposite from reality is not going to be effective in convincing people of anything.

v=And the government had a big role in the original creation of mortgage-backed securities. This goes back to the 1970's when the government policy was to promote home ownership and the pathway for that was to create a secondary mortgage market through the GSE's.

By the way. A ) You're being innumerate here. and B) A is not leading to B.

And we all know that it was the federal government that got us here to begin with so why should anyone trust it to save us?

I'd say that, yes, there is a sense in which the federal government is culpable in the current crisis. Their culpability is in completely failing in their regulatory function.

I imagine this is about 180 degrees from what you intend in your statement.

I say this with respect because I think you're a thoughtful and intelligent person. I think what you're saying, you're saying in good faith.

But you and I are living in different worlds. I just don't hear anything I recognize as reality in what you're saying.

now_what,

You got me. On a technicality. FNMA was created in 1938. In 1968, FNMA was chartered as a GSE for the purpose of facilitating a secondary mortgage market. FHLMC was created in 1970 for the same purpose. This is when mortgage backed bonds came into existence. There are also many truly 'private' participants in this same market and they compete with Fannie and Freddie but not on a level playing field.

Fannie and Freddie are exempt from capital requirements applied to other regulated financial institutions

Fannie is exempt from taxes

Both have had interest rate borrowing advantages due to their perceived government status

A little digging will probably turn up some more advantages. It's hard to determine a numerical value of the competitive advantage that accrued to them over the decades, but it is clear that the rates at which they were able to borrow did not reflect the risks in their investments.

A little digging will probably turn up some more advantages. It's hard to determine a numerical value of the competitive advantage that accrued to them over the decades, but it is clear that the rates at which they were able to borrow did not reflect the risks in their investments.

This is NOT clear. Over the last few years, default rates, even for subprime loans, were at a lower rate than in the general population. I don't think that's coming from the government backing, I think this needs to be explicated better .

Finance, economics and loans are all numbers based. If you can't determine a numerical advantage, then I have to doubt that it exists or has that much of an effect.

'Over the last few years, default rates, even for subprime loans,
were at a lower rate than in the general population'

I've read this sentence several times and I still cannot figure out what it says.

In any event, the point I was trying to make is that if you take two entities competing in the same market for the same business, and you give one a number of advantages denied to the second, its likely to make a difference. Or are there some new laws governing the economics of competition that I don't know about?

No, the federal government did not create mortgage backed securities, to the tune of $600 trillion.

Aggh. JMN pet peeve number one. There is nothing like $600 trillion in anything. There sure as hell aren't $600 trillion in mortgage backed securities. Two problems:

1) 85-90% of the $600 trillion figure is interest rate swaps. Not really securities of any sort;
2) That figure is for notional value. Notional value has approximately nothing to do with the amount of money at risk. It's a completely useless figure.

Just as the WWI generals failed to understand how technology made their vision of the battlefield obsolete, people pushing the F-22 are likewise missing the point.

JMN pet peeve number two. The World War One generals understood exactly what technology had done to the battlefield. Many of them knew it even before the war started. The problem wasn't that they didn't understand. The problem was that they didn't have the tools to solve what technology had done to the battlefield until late in the war.

Both the German and British generals put a lot of work into coming up with solutions. Far from being donkeys, the British generals were actually quite creative in approaching the problems. They completely overhauled small unit tactics. They completely changed the armament mix among the infantry squads, emphasizing Lewis guns and grenades. They created mass artillery tactics from scratch, producing all sorts of things, including rolling barrages, sound and flash ranging, and the use of aerial spotting. They integrated tanks into the mix. They came up with some pretty amazing ways to use gas.

The perception of them as butchers really comes down to three things.

1) As I said, they had to develop all the tools needed during the war;

2) This really was a trial-by-error process. Figuring out how to make them work took time and fighting, and there was no way to do it without casualties along the way. Hell, they knew what the problems were on June 30, 1916. The next day was so bloody because they didn't grasp the scope. They mustered a vastly heavier array of artillery than had ever been seen before, and it proved to be about an order of magnitude less than was required.

3) Douglas Haig, who mostly gets unfairly treated, made a ghastly decision during the summer of 1917. British attacks during Third Ypres should have been halted whenever it started raining. When it was dry, they were very effective, but everything came apart when it was wet.

(Jumping on the jumping on GOB errors bandwagon)

"The house should be sold at a price that will bring a buyer. The occupant could remain while doing a short sell. Lenders are not smart if they allow a house to deteriorate or be vandalized while they sit on an unrealistic price."

Speaking from personal experience, on a house that went to foreclosure after 20 months on the market. We tried--from an appraised value of $470K, tried to sell from $440K down to $280K, and only got one half-hearted nibble. $320 was the amount owed, and neither the primary or the equity loan bank would approve a short sale, or even consider until well into the foreclosure process.

And as the kicker, the house was vandalized--by the bank, who paid a service to break in via a window to winterize the house in August, damaging the lawn, window, and entry door, as well as losing keys to the door in the process.

"The government is still showing signs that it is unwilling to allow the price of housing to get to its natural market level as quickly as possible."

Yup, they also allowed it to exceed its natural market level fairly quickly.

"In the meantime, all of the various professionals, craftsmen, and laborers who could be working doing what they know will remain idle because housing inventory will not be cleared."

What? There just aren't enough buyers--even with the 10+ months inventory I last saw touted, in our area I personally know of at least as many houses as on the market on the sidelines because people do not want to sell into this market until absolutely necessary. A lot of the construction industry is not going to get back into the game for a long time, as there was too much heat in the industry.

"You know, there is nothing to prevent the gov't (lenders), sorry, I can't tell the difference, from renting these houses back to the occupants (who don't own anything, anyway)."

I saw this option as an idea from Dean Baker weeks ago. Not a horrible idea, if dispiriting to live and rent the home you no longer own. Maybe if you could trade with another foreclosed family to avoid that bummer.

"I'm not as interested in the breakdown of the subsidies as much as the disruption of the government hand in the middle of everything it can touch. "

Since a lot of the current problems were due to the lack of the government/regulatory hand in the middle of everything....

"We are looking for a recovery from this economic downturn and everything the federal government does increases uncertainty which is the bane of the entrepreneur."

What is actually worse is what the government isn't doing. If the FDIC et al would just shut down the zombie top 4 banks (Wells, Chase, Citi, BofA) and clean out the deadwood out in the banking system, no matter how large the damage, then all the market actors are unsure who is still a legitimate party to their activity, and are hesitant going forward.

"And we all know that it was the Republican government that got us here to begin with so why should anyone trust it to save us?

Fixed that for you.

You got me. On a technicality. FNMA was created in 1938. In 1968, FNMA was chartered as a GSE for the purpose of facilitating a secondary mortgage market. FHLMC was created in 1970 for the same purpose. This is when mortgage backed bonds came into existence.

No, it isn't. There was a secondary mortgage market even before 1938, but it was thinly traded, sporadic, and regional. FNMA was chartered, in 1938, to create a stable national secondary mortgage market. They bought mortgages, they kept some for their own portfolio, they sold some to private investors, AKA "mortgage backed securities". The same as they still do today.

Both have had interest rate borrowing advantages due to their perceived government status

That was their whole point. If you don't like to pay your taxes and would instead like to go back to the days where you needed a 40% down payment to get a mortgage, and when the loan would have a relatively high interest rate and be a 10 year loan with either high payments or a balloon payment due at the end of the term, fine, make that argument.

If you want 30 year loans with "only" 20% down and low interest rates and want them available even during economic downturns, you need to turn to the government, because historically only government backing has been able to provide that.

Argue either choice, but stick to the facts of the matter.

In any event, the point I was trying to make is that if you take two entities competing in the same market for the same business, and you give one a number of advantages denied to the second, its likely to make a difference. Or are there some new laws governing the economics of competition that I don't know about?

It helps to QUANTIFY. If it's an advantage that affects one out of every one million transactions, then we can safely ignore it. If it affects one out of every three transactions, than we should deal with it.

Given that we're dealing with numbers, I would think that it's not an unreasonable thing to think or inquire about.

Lenders are not smart if they allow a house to deteriorate or be vandalized while they sit on an unrealistic price.

In fact, the lenders may be rational, in the short term, even if they allow their property detoriorate. Remember, all the banks in the US are close to bankruptcy. They need to keep their asset values high. If they own the house, they may value it in their books at about any price, even while it is detoriorating. IF the bank sells the house short, the loss is realized, though.

Also, exactly because of the macroeconomic situation, the government is the lender. It might not hold the title to the house, but it is propping up the lenders anyway. It is up to the government to prevent the inefficient use of resources, when the market has failed.

The World War One generals understood exactly what technology had done to the battlefield. Many of them knew it even before the war started. The problem wasn't that they didn't understand. The problem was that they didn't have the tools to solve what technology had done to the battlefield until late in the war.

While I might have overstated the point, I think you are going too far in the other direction. I didn't specify Haig in particular, but one can either take the line that Haig was a butcher, or that the subordinates under him and the culture around him should mitigate blame seems to undercut your point. Haig not only had cavalry reserves ready to exploit the anticipated breakthrough at the Somme, he utilized the same strategy at Passchendaele, and the other name for the battle, the Third Battle of Ypres, doesn't seem to indicate the sort of experimentation that you argue for. While comparisons of generals of different eras is problematic, comparing Haig's education (Somme, Passchendaele) with U.S. Grant, who, after Cold Harbor, never used frontal assaults, is another point I would raise.

But that is a bit far afield, so I will leave it there.

Fannie and Freddie are exempt from capital requirements applied to other regulated financial institutions

Fannie is exempt from taxes

:::sigh::: We have another budding Bellmore in the house.

Here's is Fannie's Income Statement for the last four quarters. Can you please tell me what the sixth line under "Operating Income or Loss" says?

To be clear, the only taxes Fannie doesn't pay are state and local income taxes. Per their own site:

Does Fannie Mae pay taxes?

Fannie Mae pays federal income taxes, as well as all applicable federal and state employment taxes. The company also pays applicable taxes on any real property owned. Fannie Mae's Charter Act exempts the corporation from state and local income taxation.

The difference between this and "Fannie is exempt from taxes" is so broad as to make the latter utterly irrelevant.

Much of this seems to me to miss three critical points:

1) The search for indefinite superiority does not produce superiority; it produces a race. And races in military technology tend to produce the kind of uncertainty that showed up in World War I and World War II; that uncertainty produces bloodshed.

2) The uncertainty today has more to do with the "leakage" of military technology than with the possibility of a major war. Terrorists could never have done the research on advanced explosives and explosively formed projectiles that made IEDs deadly in Iraq, but they certainly exploited those technologies. The F-22, or more importantly the efforts to develop counter-measures to it, have the potential to spawn all kinds of technologies that we can't predict. Therefore, the first argument against the further development, production, and large scale deployment of the raptor comes in the form of a syllogism: deploying new military technology provokes further military research by competitors; research results "leak" to sub-national groups such as terrorists; therefore, the unnecessary deployment of a highly superior military technology leads to dangerously unpredictable results.

3) Military developments signal intentions. Intentions affect civil policies. Right now, the US needs international financial cooperation to dig out of this recession. Expanded production and deployment of the raptor would signal to many nations that cooperating in the economic recovery of the United States means building up the economy of a nation that intends to maintain military dominance over them indefinitely. Such deployment and development thus undermines the incentive for international financial and civil cooperation. It does not make sense to promote competition in an area that bears directly on national survival, especially if you badly need cooperation in other areas.

"China and India have achieved a level of economic integration with the US that makes combat unthinkable."

This was the argument made all the time at the turn of the 19th into the 20th century, as to why war in Europe was now impossible. Everyone knew it was true.

Sorry, I see that my point was well-covered subsequently.


While comparisons of generals of different eras is problematic, comparing Haig's education (Somme, Passchendaele) with U.S. Grant, who, after Cold Harbor, never used frontal assaults, is another point I would raise.

But that is a bit far afield, so I will leave it there.

An interesting debate. I'd like to throw in a couple more points of comparison: the Eastern Front in WW1 also saw mass casualties despite different commanders and more mobile tactical conditions. This suggests to me that static trench warfare and specific Allied command blunders were not the sole or even primary reason for mass casualties on the Western Front. If the tactical conditions or Allied leadership had been different, there might still have been mass casualties, albeit under changed circumstances.

A second and larger observation is that WW1 is often compared with WW2. Both were extended half-decade or longer attritional wars involving the full mobilization of the warring state's civilian economies in support of the war effort. They also were both of them contests which pitted a side with early tactical advantages against a side with greater strategic resources, these respective advantages more or less cancelling each other out thus leading to a prolonged struggle. The American Civil War was very similar in this respect.

Although the two world wars are frequently contrasted with each other in terms of tactical mobility of the combatant forces, I think the more significant difference between them was the shift from killing combatants in WW1 to killing civilians in WW2. IIRC combatants were 75 percent of casualties in WW1, but only 10 percent in WW2. That is an enormous shift. It looks like the lesson which warmakers learned from WW1 is that in a total war casualties at the front line are in the end simply the cutting edge of the process of grinding down the enemy's civilian resources (population and economic output) until the weaker side collapses. They made this process more efficient (and safer for the combatants, since it is less risky to attack unarmed people) by attacking civilians more directly in the second war.

Since most war memoirs are written by combatants, this contrast made WW2 appear to be more of a "good war" than WW1 from the point of view of the average soldier (at least if you ignore the more static battles like Stalingrad or Monte Cassino or Okinawa, in which more static WW1 like conditions and tactics were repeated), but from a civilian standpoint, not so much.

This is a fascinating topic which is perhaps beyond the scope of this particular thread. Since we seem to have more than a few military history buffs present, I suggest that perhaps JMN might want to consider putting a WW1 history post up on his home blog at some point in the near future and we can continue the discussion there.

1) The search for indefinite superiority does not produce superiority; it produces a race.

I wholeheartedly endorse all three of John Spragge's points made in an excellent comment at 7:15am. Our policymakers need to do a better job of seeing military power as a means to an end (security, which is always limited and relative) and only one of several different such means, rather than as an end in and of itself. Failing to do so undermines our security.

I seem to recall that we very self-righteously told the Russians just exactly that after the Soviet Union collapsed - that security is never absolute, and their top heavy military establishment had made them less secure rather than more secure. We need to take a dose of our own medicine.

I suggest that perhaps JMN might want to consider putting a WW1 history post up on his home blog at some point in the near future and we can continue the discussion there.

Or, if he would prefer, a guest post at Taking it Outside. If he (or anyone else) is interested, drop me a line at libjpn (at) gmail

Okay. I have actually been considering a series of posts on my (long) list of pet peeves concerning the two world wars. The major focus is that I think that German military genius is vastly overrated, but discussing World War One is one of them. This provides some impetus for doing so. If folks want to show up to my blog, that would be great.

JMN: Why don't you either publicize it here, or shoot me an email and I'll shout it out.

The first two posts are up. One is on defense in general, the other is on British generalship in particular. They're both kind of sloppily written on the fly, and the second is really long. If I were going to do anything but a blog post with them, I'd put a lot more craft into them. Still, they're up.

"Since we seem to have more than a few military history buffs present"

Me, me! [waves hand in air]

Well, history in general, but military history as part of that.

"I seem to recall that we very self-righteously told the Russians just exactly that after the Soviet Union collapsed - that security is never absolute, and their top heavy military establishment had made them less secure rather than more secure."

Speaking of that, this excerpt by James Mann from his forthcoming The Rebellion of Ronald Reagan, about Reagan's interactions with Gorbachev, has some previously undisclosed details, including about back-channel messages, and Reagan's secret meeting with Nixon. (Note: Reagan got Gorbachev's potential right, and Nixon, and the other Committee On The Present Danger types got it all wrong.)

The Falklands war came up without much warning, the dispute was old but the Argentine resort to force was unexpected. The Argentines had a fairly large and modern air force using Skyhawks, Canberras Mirage IIIs and Daggers (Israeli built copies of the Mirage 5). Having a fighter aircraft (in this case the superb Sea Harrier) capable of taking on the aircraft of your allies can be useful when you find yourself at war with their customers.

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