Marine Corps Times 7/16/10 (“Senate panel votes to cut $8B from defense”, http://www.marinecorpstimes.com/news/2010/07/military_defense_budgetcut_071610w/)
A key Senate committee decided Thursday to show some fiscal discipline, cutting $14 billion from the Obama administration’s 2011 budget — including $8 billion from the Defense Department. The 17-12 vote in the Senate Appropriations Committee came on a procedural motion that divided up money among the 12 subcommittees responsible for discretionary funding of federal programs. This was a party-line vote, with Democrats voting for it and Republicans opposing the reduction. Initially, Sen. Daniel Inouye, D-Hawaii, the committee chairman, talked about cutting only defense, without the cuts in other federal spending. Singling out defense for cuts did not sit well with some committee members, so additional reductions were added. The cut leaves the 2011 federal budget for discretionary, non-emergency, non-entitlement programs at $1.1 trillion. Inouye said the budget he proposes is “austere” but “will allow the federal government to invest in the programs critical to sustaining this economic recovery, provide essential services to the American people and safeguard our national security.” The defense subcommittee receives $522.8 billion under the allocation, $8.1 billion less than the administration’s request. It is too soon so say how the committee will shave that much money off the 2011 defense budget, but it will not necessarily cause a lot of pain. The committee has made similar, although smaller, reductions in the defense budget in the past, but then made up for most of the reduction by shifting expenses into the off-budget war supplemental, where it doesn’t count against spending caps.
Cuts coming now
AP 7/16/10 (“Senate Democrats propose $14 billion budget cut”, http://www.google.com/hostednews/ap/article/ALeqM5gFdIlaWtlL7WSKSP-4uliTtBu-lwD9GVOCU81)
WASHINGTON — President Barack Obama's allies in the Senate stepped forward with a plan Thursday to cut $14 billion from his budget for the upcoming fiscal year. That's double the $7 billion cut sought by House Democrats. But Republicans on the Appropriations Committee said the cuts didn't go far enough and opposed the idea — along with three appropriations bills for the budget year that begins in October. The panel approved the Democratic proposal on a party-line vote. The differences between the parties are tiny when compared to the $1.14 trillion overall pot available to lawmakers writing the Cabinet agency budgets passed each year by Congress. But Republicans had staked out a position earlier this week demanding an additional $6 billion cut — a difference between the parties of just one half of 1 percent. The GOP-proposed cuts are drawn from a bipartisan proposal by Sens. Jeff Sessions, R-Ala., and Claire McCaskill, D-Mo., that has attracted as many as 59 votes in the Senate this year. Democrats supported the cap when voting on the budget last year.
Global Issues 7/7/10 (“World Military Spending”, http://www.globalissues.org/article/75/world-military-spending#USMilitarySpending)
With the change in presidency from George Bush to Barack Obama, the US has signaled a desire to reform future spending and already indicated significant changes for the FY 2010 defense budget. For example, the US has indicated that it will cut some high-tech weapons that are deemed as unnecessary or wasteful, and spend more on troops and reform contracting practices and improve support for personnel, families and veterans. There is predictable opposition from some quarters arguing it will threaten jobs and weaken national security, even though spending has been far more than necessary for over a decade. The Friends Committee on National Legislation argues that the job loss argument is weak: “It is true that discontinuing weapons systems will cause job loss in the short term, but unnecessary weapons manufacturing should not be considered a jobs program (that would be like spending billions of dollars digging holes), and research shows that these jobs can be successfully transferred to other sectors.” In other words, this is unnecessary and wasted labor (as well as wasted capital and wasted resources).
Oil prices high
Highest oil prices in 2 months are a result of increase in demand
CNN 7/14/10 (“Oil hits 2-month high as stocks finish with little change”, http://news.blogs.cnn.com/2010/07/14/oil-hits-2-month-high-as-stocks-finish-with-little-change/)
Oil prices hit highest level in 2 months, near $80. Oil prices continue to swing in the mid- to upper-$70s this week as investors digest the first wave of quarterly corporate results, and mixed economic and supply data. A strong outlook for global crude demand pushed prices up three percent Tuesday, and oil continued to climb slightly higher Wednesday following a better-than-expected weekly government inventory report. Prices have been trading between $70 and $80 a barrel since May. Last week, they posted their biggest weekly gain since May, jumping 5.5 percent to hit $76.09. But on Monday prices retreated ahead of the start of earnings season and the release of a slew of economic reports. However, prices spiked again on Tuesday and Wednesday, pushing them back to two-month highs.
Oil is overpriced
Business Week 7/16/10 (“Oil May Fall on Signs of Slowing Economic Growth, Survey Shows”, http://www.businessweek.com/news/2010-07-16/oil-may-fall-on-signs-of-slowing-economic-growth-survey-shows.html)
Thirteen of 33 analysts, or 39 percent, forecast crude oil will decline through July 23. Twelve respondents, or 36 percent, predicted that futures will be little changed and eight saw an increase. Last week 53 percent of analysts forecast a rise. The Federal Reserve said yesterday that U.S. factory output fell 0.4 percent in June, the biggest decline in a year. Other reports showed factories pulled back in the New York and Philadelphia regions in July. “There’s nothing good in today’s economic reports that you can point to,” Michael Fitzpatrick, vice president of energy at MF Global in New York, said yesterday. “Oil is overpriced given where the economy is.” The Federal Reserve Bank of New York reported that its general economic index fell to 5.1 in July from 19.6 the prior month. The Federal Reserve Bank of Philadelphia’s general economic index declined to 5.1 this month, the lowest level since August 2009, from 8 in June. Crude oil for August delivery has increased 53 cents, or 0.7 percent, to $76.62 a barrel so far this week on the New York Mercantile Exchange. Prices are up 25 percent from a year ago.