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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: Karen Lawrence who wrote (39885)	8/25/2002 9:22:10 PM
From: Karen Lawrence	Respond to of 281500

OT. War, fiscally irresponsible...Paul Krugman says "My piece in Tuesday's Times has led to the usual wilful misreadings, accusations of siding with terrorists, etc.. Life is too short to address all the objections from my journalistic stalkers; let me go straight to the economics. "First, about the future of the budget. Right now we're running a deficit of about 1.5 percent of GDP; but since the economy is operating with a substantial output gap, maybe 4 percentage points, that's bigger than the "structural" deficit. Federal taxes are about 20 percent of GDP; the elasticity of tax revenues with respect to cyclical movements in GDP is substantially greater than 1, with 2 a good guess; so each point of output gap closed might reduce the deficit by around 0.4 percent of GDP. This suggests that a full cyclical recovery would lead to a roughly balanced budget, other things equal. (Although I seem to remember certain candidates promising to run a surplus of at least 1.5 percent of GDP, that is, not to dip into the Social Security surplus.) "But other things are not equal: the pieces of the tax cut that have not yet phased in - basically cuts for people in upper tax brackets and heirs to large estates - will eventually subtract close to 1 percent of GDP from revenue. And that's the core reason why we now face the prospect of deficits forever. "What about spending? Some people, bizarrely, think that I don't know that spending plays a role in the deficit. Well, duh. If you look at my book Fuzzy Math, p. 75, you'll see a table I took from Auerbach and Gale. It shows that if you replace the unrealistic assumption of zero growth in real discretionary spending with the more reasonable assumption of constant spending per capita, the projected 10-year surplus falls almost $500 billion. If you use the even more reasonable assumption that discretionary spending remains constant as a share of GDP, the projection falls more than $600 billion more. So going from zero real growth in discretionary spending to keeping such spending constant as a share of GDP - which is the implicit assumption in my back-of-the-envelope calculation above - subtracts more than $1.1 trillion from the budget projection. That's still well short of the $1.7 trillion in direct and indirect costs from the Bush tax cut (close to $2 trillion if you ignore the nonsense about expiring tax cuts in 2011), but it's substantial. "But what I said was that runaway spending is not the reason we're stuck in deficit. Is having discretionary spending grow, maybe even grow with GDP, "runaway"? "It's true that CBO is required, by rules imposed by a Republican Congress in the 1990s, to assume that absent changes in policy discretionary spending will remain unchanged in real terms. But this is nonsense, for reasons that have been obvious to lots of good people - CBPP, Auerbach and Gale, and yours truly - since the whole tax-cut debate began. A growing population and a growing economy place increasing demands on government services. Trying to keep real spending constant in the face of growth doesn't feel like no change in policy: it feels like painful austerity. Just look at what's happening: this administration has hardly begun to cut, yet it's already trying to avoid giving veterans health care and firefighters new radios. "And it's worth looking at the magnitudes. Defense spending is presumably off limits. Civilian discretionary spending is only a bit more than 3 percent of GDP. So to make room, not even for the whole Bush tax cut, but for the part that hasn't happened yet, you would have to slash that share by about 30 percent. We're talking savage austerity here. Indeed, CBPP's latest analysis shows that the administration's new budget calls for a 4.6 percent real cut in non-security discretionary spending just over the next year. "Maybe you favor that. Smaller government is a great catchphrase, until you actually start cutting things like mine safety and nutritional aid for poor children. Apparently some people even think that, as Martha Stewart would say, it's a good thing to trick veterans into not getting health care. But the most important point is that Bush did not run on a platform of severe austerity; his tax cut was sold on the pretense that there was plenty of money for everything. Remember the routine with the four dollar bills? "Now his administration is in a nasty pickle. It has no realistic prospect of returning to surpluses, ever. If it doesn't want to see most of the budget gains from economic recovery wiped out by growing tax cuts, it will have to keep hacking away at the budget, producing many scenes like the ones we saw last week. "Do I have to point out that this is exactly the outcome critics of the tax cut were predicting, more than a year ago? True, the budget picture is even worse than we expected. None of us foresaw Sept. 11, though we did notice that the administration's talk of re-arming America didn't seem to be matched by its military spending plans. None of us realized how much a bear market would cut into revenue, though I did warn, in Fuzzy Math, that the end of the bull market could reduce the 10-year surplus by as much as a trillion dollars. Still, it was obvious to those willing to see it that the Bush administration's claim that we could easily afford a large, long-term tax cut, remaining "compassionate" while using the whole Social Security surplus to pay down debt, was nonsense. And so it has turned out."

To: Karen Lawrence who wrote (39885)	8/25/2002 11:51:08 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 281500

"If [Russian President] Vladimir Putin will not intervene to change this pattern of policies, Russian-American close cooperation may be at an end." Oh, I'm not so sure about that yet... There are lots of "chips" that can be bargained with, and Georgia is only one of them. And I don't think the US is going to give up the investment we've already made in the oil pipeline there, especially when the quid pro quo was permitting the Russians to have a free hand with the Chechens. A quick briefing on Georgia and the proposed pipeline: ebrd.com And a news link for "all things Georgian".. Bottom line is that the Russians want to eliminate ALL Chechen bases operating in Georgia. The US wants to eliminate all Al-Qaeda elements operating in Georgia (and everywhere else). Georgia wants(needs) US protection in order to preserve its independence, as well as the expected windfall from the multi-billion pipeline to be built through its borders. This pipeline is needed to accomodate expected increases in oil production from the 'Stans over on the opposite side of the Caspian.. The Georgians also would like to see the development of a Caucasus common market in order to bind the small nations of the area together (Azerbijian, Armenia, and at one time, Chechnya) And the US wants access to Caspian oil, a buffer between Iran and Russia, and a base of operations from which to deploy forces should it be required to do so (which probably makes Russian power brokers (PBs) about as nervous as we would be if Russians were operating out of Mexico or Canada). But Russian PBs needs US markets for its products, namely oil, and access to US capital for its restructuring. Russia wants to restore control over the 'Stans and Caucasus oil reserves, despite the local opposition to such a plan (and thus, the likelihood that Russia will be forced to back down since it's presence is not "welcome" by these small nations). It will be interesting to see which side "blinks", or what kind of "deal" is struck to accomodate the interests of both powers. But I don't believe the US is going to back off its relationship with Georgia, who's government pretty much hates the Russian PBs and will fight any aggression against them. Hawk

To: Karen Lawrence who wrote (39885)	8/26/2002 3:29:41 AM
From: maceng2	Read Replies (4) \| Respond to of 281500

Georgian Troops Roll Into Pankisi themoscowtimes.com (There is another Gorge that also needs monitoring for Chechen rebels. The Kodori Gorge in the breakaway state of Abkhazia. See this April news item. russianobserver.com ..pb) By Nabi Abdullaev Staff Writer Georgia on Sunday sent hundreds of heavily armed Interior Ministry troops into its Pankisi Gorge, a crime-infested area where Moscow says Tbilisi has allowed Chechen rebels and foreign Islamic militants to set up bases. In a parallel operation, 1,500 army troops -- under the command of officers who have had U.S. anti-terrorism training -- began exercises in the Akhmeta district near the southern edge of the gorge. "The anti-criminal operation first and foremost is aimed at bringing order to the Pankisi Gorge and cleansing it of criminals and terrorists should they be there," Georgian President Eduard Shevardnadze said Sunday on Georgian national television, Interfax reported. The gorge, which borders Chechnya, has long been a focus of tension between Georgia and Russia. The tension soared Friday when Georgia accused Russian aircraft of crossing some 80 kilometers into Georgian territory that morning and bombing villages in the gorge, killing one person and wounding five. The Russian military denied bombing Georgian territory. But the Organization for Security and Cooperation in Europe, which maintains patrols on the border, said its staff saw the planes, The Associated Press reported. Washington also came down on Georgia's side, with U.S. President George W. Bush's spokesman issuing a strongly worded statement all but accusing Russia of lying. "The United States strongly supports Georgia's independence and territorial integrity, and has welcomed similar statements by the Russian Federation," White House spokesman Ari Fleischer said Saturday. "Yesterday's attacks and their denial by the Russian government, however, belie such Russian assurances." Georgian officials have not said how many Interior Ministry troops were sent into the Pankisi Gorge. But NTV showed footage of a convoy of tanks, armored personnel carriers and trucks filled with troops heading into the gorge, and said there were about 200 vehicles in all. By late afternoon Sunday, Georgian Interior Ministry troops had entered all settlements in the Pankisi Gorge, Interfax reported. Lasha Natsvlishvili, the deputy minister of state security, promised there would be no so-called zachistki, or sweeps, to round up criminals. This was a clear comparison to Chechnya, where federal troops have been accused of systemic abuses, from looting to torture and murder, in sweeping villages for suspected rebels. "Identifying and detaining criminals will be done according to existing intelligence information," Natsvlishvili was quoted as saying. At any moment, the 1,500 Georgian army troops deployed in the military exercises, dubbed Kakheti-2002, may join the police operation in the gorge if needed, Georgian Defense Minister David Tevzadze said on RTR television Sunday. Tevzadze had told Interfax earlier that soldiers would not enter villages in the gorge. The exercises, scheduled to last three weeks, are intended to test cooperation between the Defense Ministry, Interior Ministry and border guards in securing border areas, Tevzadze said. Russia has long pressured Georgia to allow it to conduct a military operation in the region or provide military support, but Georgia has refused. In the latest appeal for cooperation, the Russian Foreign Ministry on Saturday welcomed Tbilisi's intentions to bring order to the gorge but said it disagreed with Georgia's tactics of "peacefully pushing terrorists out" toward the Russian border. "Terrorists must be blockaded, disarmed and handed over to the Russian side," the ministry said in a statement quoted by Interfax. "Russia is prepared to give Georgia all the necessary cooperation it needs in solving this problem." The same day, a spokesman for Russia's border guards in the North Caucasus said a group of some 250 Chechen rebels headed by warlord Ruslan Gelayev was moving from the Pankisi Gorge toward Chechnya. A spokesman for the federal border guards in Moscow, reached by telephone Sunday, said that, according to their intelligence, Gelayev's detachment was near the Russian-Georgian border. He said investigators did not discount the possibility that Gelayev's men had killed eight Russian border guards who were found dead Saturday in Ingushetia near the Georgian border. Two more border guards from the same unit were still missing, he said. But Ingush Deputy Interior Minister Khamatkan Albakov said Sunday that the border guards may have been killed by their two missing colleagues, Itar-Tass reported. Meanwhile in Chechnya, fighting between troops and a large rebel band persisted for a third day Sunday near the village of Bamut in the western Achkoi-Martan district, The Associated Press reported.