The Obama Administration says 275 troops are deploying to Iraq to protect the U.S. Embassy and other interests. We don’t yet know the full cost of any U.S. action in Iraq, but we can lift the curtain a bit on the economics behind military intervention, and what the Pentagon gets for its half trillion dollar baseline budget.
What’s included and what’s not?
Is the Bush covered in the defense budget?
“On any given day, we have about three aircraft carriers floating about the world in order to respond to crises,” says Janine Davidson, senior fellow for defense policy with the Council on Foreign Relations. “That money is already paid for. It’s the operational account for what we would call posturing our military forces abroad.”
Todd Harrison, a senior fellow with the Center for Strategic and Budgetary Assessments, says the U.S. routinely rotates carriers.
“But if you actually take it a step further,” he says, “and you start conducting things like air strikes, then that picks up the pace of operations of the aircraft operating off the aircraft carrier, which is an additional cost. And then you’ve got the cost of munitions that are expended – you know, bombs and missiles and the like.”
But here’s the thing about bombs and Tomahawk missiles: You don’t have to pay for them when you use them. Payment comes later, to replenish them. That provides flexibility.
Mackenzie Eaglen, resident fellow at the American Enterprise Institute, says President Obama would rather fund operations like no-fly zones by moving money around than asking Congress for more.
“That’s what we saw happen in Libya, when there was a multi-month no-fly zone which the US participated in and the Pentagon paid for that out of hide,” she says.
That operation cost about a billion dollars.
Todd Harrison says the costs of intelligence sharing, air support, and limited air strikes are probably small enough for the regular defense budget to absorb. He says the big potential cost for the Department of Defense is troops on the ground.
“So when you start putting in 10,000, 20,000 troops, that’s when DOD would need to request supplemental funding to pay for those operations,” he says.
Those are the kinds of numbers last seen from the US for the wars in Iraq and Afghanistan. So far, the force committed this time around is much, much smaller.
Many of Cliven Bundy's supporters are gone, but the rancher is as defiant as ever since an armed standoff with the U.S. government. For now, it feels like each side is waiting for the other to blink.
Australia has a long, dark history of racial discrimination against the Aborigines. A cooking and hospitality program tries to help youth discover their culture and build confidence and competence.
Huguette Clark secretly spent her last 20 years in a hospital, even though she wasn't ill — all while her three New York apartments were filled with valuable antiques.
Two twisters swept through the state's rural northeast, flattening one small town and causing serious damage in two others. One person was killed.
On Monday night, the U.S. soccer team accomplished a feat it failed to achieve in the past two World Cups: beat Ghana. With a 2-1 victory, the Americans position themselves well for the games to come.
U.S. captain Clint Dempsey scored just 29 seconds after the starting whistle, one of the fastest goals in World Cup history. The U.S. lost to the West African nation in the previous two World Cups.
As we know well, capitalism can be a perilous place.
The environmental group Greenpeace announced Monday that it had lost $5.2 million due, essentially, to a rogue trader.
They had a guy in their finance division who was working currency trades as a way to hedge against other investment fluctuations.
Two things happened:
One, he traded way more money than he was authorized to trade.
And two, he bet the Euro woud fall last year. It didn't.
$5 million is a boatful of money. The group's annual revenues, however, are somewhere near $400 million.
In a major victory for gun control groups, the justices upheld by a 5-4 vote a federal ban on one person buying a gun for another.
After Argentina defaulted on its sovereign debt back in 2001, it took an approach that many at the time described as hard line. It offered investors the choice of 30 percent of their money back, or none of their money back.
“They stepped on a lot of toes,” says Win Thin, Global head of Emerging Markets strategy for Brown Brothers Harriman.
Though many bondholders were upset, 92 percent agreed to the terms. A small group, primarily hedge funds, did not.
As Argentina began paying out diminutive returns to the creditors who agreed, the holdouts sued. They argued that as long as Argentina was paying some investors back, it was contractually obliged to pay the holdouts too – and to pay them the full amount of their debts.
Reading the relevant contracts narrowly, a lower U.S. court agreed, and in declining to hear the case the Supreme Court has allowed that ruling to stand. Argentina is now on the hook for more than a billion dollars and says it may now default. “If you look at the numbers they simply just can’t afford to pay this right now,” says Thin.
Argentina may negotiate with the holdouts, but after launching a campaign to vilify them as vultures, that may prove difficult. The next payment date for Argentina is June 30, and this represents the deadline for determining whether the country will default or reach some sort of agreement.
The situation is negative for Argentina’s economy, but unlikely to spread into some regional or global financial crisis, says Thin. Investors have generally stayed far away from Argentina since its default.
The global implications are still serious, according to many observers.
“The [International Monetary] Fund remains deeply concerned about the broad systemic implications that the lower court decision could have for the debt restructuring process in general,” said Gerry Rice, spokesman for the International Monetary Fund, in a briefing June 5.
Countries in distress have often used the same framework as did Argentina to extract themselves from default. Usually not quite as aggressively, but the principle is the same: obtain the consent of a majority or plurality of investors to take a haircut.
“The fear is when a country -- whether it’s Greece or Portugal or what have you -- is in a position where it can’t pay its debt, it’s rare that you ever get 100 percent of creditors accepting it,” says Peter Hakim, President Emeritus of the Inter-American Dialogue.
Requiring every defaulting country to obtain approval of all creditors could drag the process out or even dash it altogether, as creditors would now have an incentive to be the last holdout.
“You’re sort of messing with a system that’s working pretty well,” says Hakim. “The U.S. Treasury, although it didn’t formally join in the suit at all, has the same view, that this may interfere with the workings of the financial system.”
Others have more dire predictions.
“This case will impact debt restructuring all over the world, it’ll impact poor country access to credit,” says Eric LeCompte, Executive Director of Jubilee USA, a religiously backed organization that promotes global financial reform.
He says money earmarked for development is being diverted to pay creditors, to the detriment of vulnerable populations.
In one sense, the legal quarrel in Argentina’s case could have been avoided by a different type of contract, where new payment terms become binding for all investors if a certain proportion of them agrees to them.
However, for all the countries who have debt in the here and now, Argentina’s example is a warning that getting out of debt could is a lot harder than anyone thought.
A tiny fraction of America's 2 million farmers produces most of our food. They are the winners of a long-running competition for land and profits that has also drained the life out of small towns.
The 7th Circuit Court of Appeals says that the Justice Department can keep intelligence information secret in terrorism cases.
The Israeli military is searching the West Bank for three Israeli teens who were kidnapped last week.
A new Gallup survey finds key midterm election indicators at or approaching historic lows. Satisfaction with the direction of the country is also near rock bottom.
It might be time to change the message on STEM.
The latest recall is in addition to the 2.6 million cars the automaker has already recalled for a similar problem.
Russia says it has cut natural gas supplies to Ukraine after Kiev missed a deadline to pay part of its huge outstanding energy debt.
Logging is dangerous, arduous work, and fewer young people are pursuing it. Logging groups hope more outreach, and a bill that would lower the minimum logging age, will help keep the industry going.
Williston, North Dakota, has the nation’s highest rents. Thanks to the fracking boom, a basic apartment in Williston costs more than something similar in New York or San Francisco. And it comes with a lot fewer amenities.
For instance, shopping. If Walmart doesn’t have it, the nearest outlet is at least two hours away. Now, a Swiss investment firm has announced plans to build a $500 million development that will include a major shopping center.
There are good reasons retail has taken so long to catch up with the town’s exploding population.
About three years ago, California real-estate developer Jeff Lunnen and his partners went to Williston to check out the fracking boom’s business prospects.
It wasn’t an easy trip. “It was hard to get accommodations," he says. "Hard to get something to eat, and trucks going in every direction.” At the time, many of the workers crowding into Williston camped out in RVs—some in the Walmart parking lot, others on the street.
All of which, to Lunnen, signaled unlimited opportunity. “We went back in two weeks, and started buying real estate,” he says, “and it’s been very good for us.”
The town’s population has more than doubled, and the RVs have been replaced by “man camps”—basically company barracks—after a city crackdown.
Lunnen has focused on industrial projects, but some developers have started to create more-permanent housing, at those sky-high rents.
Retail, says Lunnen, presents special challenges. “It’s a little like building your retail project on the moon,” he says. “There’s some logistical issues.”
For instance: Who would work in the shops? Are they supposed to live in the man-camps? How could retail stores pay competitive wages, when oilfield companies pay unskilled 19 year-olds $80,000 a year?
Traditional lenders haven’t been quick to get involved in retail development. “We are looking to avoid what I would refer to as over-capacity,” says John Giese, who oversees business banking for Wells Fargo in North Dakota. In other words, when things level off, will there be more malls than even a built-up Williston needs?
No one knows for sure how many people live and work in Williston now. A study commissioned by the city planning department puts the range between 39,000 and 44,500.
Meanwhile, like Jeff Lunnen, Wells Fargo has plenty to do in a line that’s more of a sure thing: working with energy producers. “Supporting that industry—making equipment and construction loans and such—will have quicker payback,” he says.
A Swiss investment firm called Stropiq is behind the newly announced $500 million project, to include housing, hotels and 1.2 million square feet of retail.
Donn Fuller, a Jones Lang LaSalle executive who is managing the build-out and soliciting tenants, says the first phase will focus on what he calls commodities: “Grocery, pharmacy, theaters,” he says. “In that area we consider theaters a commodity. Which is a little different, but there’s not a lot of entertainment.”
Fuller hopes to have that phase—which may include department stores and women’s fashion—up and running in about three years. The project as a whole may take seven to ten.
“We’ve got a lot of work to do,” he says. “On the site plan, the financial model. All I can say is, we think it’s going to be profitable. How profitable remains to be seen.”
Fuller admits: He’s never done a project in a location like this before.