Monthly Archives: March 2017

DOD issues latest freedom of navigation report Inside Defense (subscription) The Defense Department has released a summary of its fiscal year 2016 "Freedom of Navigation" report, which lists "excessive maritime claims" by 22 foreign countries -- friendly and not-so-friendly -- that DOD challenged during FY-16. "The DOD FON ... DoD Releases FY-2016 Freedom of Navigation ReportEIN News (press release) all 2 news articles »

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DOD issues latest freedom of navigation report - Inside Defense (subscription)

[Ed. Note: To see exactly what this former Reagan insider has to say about Trump and the fiscal threats of the debt ceiling, David Stockman is sending out a copy of his book Trumped! A Nation on the Brink of Ruin And How to Bring It Backto any American willing to listen before it is too late. To learn how to get your free copy CLICK HERE.]

David Stockman joined CNBCto offer a stark warning for investors that continue to follow Wall Street on a path of misreading Trumps policies while Washington is headed toward a fiscal bloodbath.

Stockman started out his fiscal warning saying, I think that Wall Street is totally misreading Washington. It is pricing in a fantasy about a Trump stimulus that simply is not going to happen. There will be no big tax cut, there will be no $15 or $20 a share reduction in the corporate rate. Infrastructure stimulus [isnt going to happen].

The host then prompted how Stockman knew this to which he pushed, we are heading into a debt ceiling trap that will grind the whole system to a halt by June or July. People are forgetting that weve been on a debt ceiling holiday. That holiday ends on March 15.

David Stockman is the former Budget Director under President Ronald Reagan. He also served in Congress where he was a two-term Congressman representing Michigan. Following his service in the U.S government, Stockman went on to work on Wall Street. Currently he is the bestselling author of Trumped! A Nation on the Brink And How to Bring It Back learn how to get your FREE copy CLICK HERE.

The CNBC host then posed that this was not a new scenario to Donald Trump. David Stockman then took the point to task noting that, This is totally new to Donald Trump. He tweeted last weekend that he had reduced the national debt by $12 billion. It is actually up $187 billion in the first 35 days that he has been in office. The cash on the Treasurys balance sheet, and this is the key point, was $382 billion the day he was sworn in as of last Friday it hit $178 billion and has bled $200 billion in cash.

Thats one fifth of a trillion while he didnt even have his economic team in place. When they get to March 15 and the debt ceiling freezes at $20 trillion, theyll have maybe $200 billion of cash. That is being run out at a rate of $3-5 billion a day. By June it will be gone. There is no pathway to a majority in the House or Senate to pass a debt ceiling increase in the trillions in order to make any of this stuff possible.

When asked about whether Trumps negotiation tactic, The Art of the Deal, is presenting a different way of running the system than before Stockman did not hold back. He pushed, [Trump might be doing that] But that makes it even more dangerous and reckless. This isnt an Atlantic City Casino and the junk bond markets of 1991. This is the big time this is $20 trillion of debt. This is an environment with a House, Republican majority that doesnt exist. Thats a delusion. This is an environment of a gang of factions. Theyre already beginning to splinter and fracture as a result of the Obamacare plan of repeal and replace.

They wont even get to tax reform before the debt crisis hits. We will have a government shutdown. It is totally unexpected, unpriced in, as they say by Wall Street. It will spook everybody. Trump is so reckless that this could go on for days, weeks or months in a way that weve never seen before. The 2011 with Obama will be a Sunday school picnic compared to what is likely coming down the pike.

Following the Presidents speech to Congress the Dow Jones along with the S&P 500 jumped in a bullish tone following the Trump policy agenda. Stockman took the speech through an entirely different approach. He noted, The Joint Session of Congress speech from last Tuesday night was irrelevant. It was the most fiscally irresponsible speech given by a President since LBJ talked about guns and butter. How can he possibly raise defense by $50 billion, more for Veterans, a trillion dollar or more for infrastructure, medical credits and all of the rest while cutting taxes by $3-5 trillion? This is complete madness.

When asked by the CNBC host about whether it was good policy for Donald Trump to continue to take credit for the rise in the stock market Stockman took the Presidents mistake to task. I think hell rue the day he took credit. You should never predicate what youre trying to do for the long-run, as well as intended as he might be, for what the robo-machines are doing on Wall Street. The robo-machines can read words and when Trump speaks, they hit the buy key. They cant read the tea leaves in Washington because it is far more complex and opaque than the stimulus the machines are used to.

He was then asked about the 2012-2013 and the fiscal cliff worries and how they managed to raise the debt ceiling but why a now Republican lead Congress and White House will not be able to be solve the debt dilemma? Stockman doubled down on his claim noting, We now have a Republican president and a Republican Congress that is not about to start a bipartisan negotiation, like Obama did with former Speaker of the House Boehner. The reason that the Freedom Caucus exists today, and that the Tea Party is still half of the back bench, is because they believe they were sold out time after time. That is how they passed the debt ceiling.

Now Trump has declared war on the Democrats, the border, immigrants. The Democrats are not going to deliver any votes, in my view, for a debt ceiling increase unless he throws in the towel on Obamacare and border control. The politics today are three times more fragile than they were in any of the years mentioned with the fiscal cliff.

When asked on his belief that the markets would much lower and to what extent he responded, There is a massive fantasy built in that an economy 92 months into an expansion, almost the longest in history, can suddenly get up on its hind-legs and start growing again. Profits are still down. In the last 12 months theyre still about 10-12% below the peak in September 2014. I see nothing to reaccelerate the economy or profits and I see a huge bloodbath or a fiscal stalemate that will remove any of the stimulus that traders are expecting.

To listen in on the full interview with David Stockman on the fiscal bloodbath he believes is headed to Washington featured on CNBC, CLICK HERE. If you want to explore David Stockmans prescription for exactly what Trump and Washington most do to bring America back from the fiscal brink get your FREE copy of his bestselling book TRUMPED! CLICK HERE.

Regards,

Craig Wilson, @craig_wilson7 for the Daily Reckoning

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Stockman: Wall St is Misreading Trump - Fiscal Crisis Ahead - Daily Reckoning

As Republicans struggle to repeal and replace Obamacare, they can find useful ideas in unexpected places: countries that have adopted socialized medicine. While the U.K.s National Health Service and other health bureaucracies may seem to be the wrong place to seek guidance for a private-market plan, they offer approaches to cost-effectiveness that Republicans will need to embrace if they hope to implement a new health care reform without getting hammered in 2018.

The core problem for Republicans is that progressives have won the philosophical debate by persuading the public that health care is a right. Polls show that an overwhelming majority of Americans believe the government should ensure universal access to health care. Although conservatives and libertarians make the point that so-called positive rights, like a right to health care, can only be provided through some form of compulsion, this argument no longer resonates. A system that fails to guarantee access to essential care regardless of ability to pay is no longer politically feasible.

Related: Why Trump Wont Touch Entitlement ReformYet

Once we recognize that Americans have bought into a fundamentally socialistic idea, the fiscally responsible approach is to fund universal service in the most cost-effective way. Relative to other advanced nations, the United Kingdom offers an especially inexpensive model for providing health care. In 2015, health care spending in the U.K. was only $4,003 per person, less than half the $9,451 per person we spend in the U.S. Despite its sharply lower spending, the U.K. enjoys higher life expectancy at birth than the U.S. 81.4 years versus 78.8 years here. While violent crime, accidents, poor nutrition and lack of exercise contribute to relatively low life expectancy in the U.S., it is hard to believe that we would significantly outperform the U.K. even if these factors were somehow equalized.

To understand why the U.K. gets better results (at least in terms of longevity), we need to take a brief detour into budgeting theory. Governments use two methods to spend money: appropriations and entitlements. In the U.S., most federal agencies are funded through appropriations, meaning Congress assigns them a fixed budget each fiscal year. Agency leaders must then manage within their budgets, implementing cost-saving measures during the year if they are at risk of running out of money. But most medical care is funded through entitlements. Under Medicare and Medicaid, health providers can be reimbursed for whatever services they provide, with no predetermined limit (although there are some exceptions). Because entitlements are unmanaged, they are more subject to escalating costs. As reimbursement rules change, providers find ways to maximize their revenue, while program administrators have no incentive to push back.

Related: New Report Warns Millions Could Lose Health Care Under GOP Plan

In the U.K., most medical care is provided by the National Health Service through appropriations. Due to budgetary pressure, health authorities make trade-offs that are now unthinkable in America, but that dont greatly impact broadly measured health outcomes. Mammograms are generally not available to women under 50 because the benefits of earlier testing usually do not justify the risks of undergoing the procedure. The NHS also does not offer routine colonoscopies, and provides far fewer circumcisions for newborn boys.

The NHS and other large health care bureaucracies engage in a practice economists call non-price rationing: doling out a scarce resource through government mandate rather than by a market process. While this approach is normally maligned by free-market economists, it is preferable to the alternative we have here in the U.S., which is basically no rationing whatsoever.

Perhaps the worst manifestation of U.K. rationing is the long waits for surgical procedures. Although the NHS officially limits waiting times for elective surgery to 18 weeks, patients often must wait far longer. That said, the U.K. does provide a couple of mechanisms that limit this problem. First, the media and opposition political figures have the freedom and the incentive to embarrass the government into improving patient outcomes. Patients suffering or dying due to long waits can become the focus of news stories and at Prime Ministers Questions in Parliament.

Related: How 3 GOP Senators Could Stop Obamacare Repeal in its Tracks

Also, Britain has a robust private health care system that can take some of the weight off of the NHS. About 10 percent of U.K. residents have private health insurance paid directly or through an employer that provides access to consultations and procedures over and above what they can get through the NHS. Although progressives might complain that allowing a private market results in a two-tier system, they should realize that total health care equality is a pipe dream.

Non-price rationing produces some bad outcomes, but it has little impact on the U.K.s overall results because a lot of the medical procedures are unnecessary. Research shows that, beyond a certain basic level, additional care provides little or no benefit. Indeed, research on doctor strikes show that death rates either remain the same or fall when physicians deny access to their services.

Tight NHS budgeting is also associated with lower drug prices, more modest salaries for doctors and more deliveries of babies at home by midwives. By contrast, the combination of pervasive third-party payment arrangements and limited cost controls in the U.S. enriches health providers and encourages waste. TV commercials encourage patients to demand brand-name prescription drugs for conditions that could be treated by generic or over-the-counter medications if they require pharmaceutical intervention at all.

Related: The Medical Technology That Could Save the US Billions Each Year

Twenty years ago, a case of heartburn might have been handled by rest or a few Tums; now, its diagnosed as Gastroesophageal Reflux Disease and treated with prescription Nexium. While a one-month supply of Nexium retails for $250, a similar quantity of generic Omeprazole can be had for $17 and over-the-counter Prilosec costs only $18. The main reason doctors prescribe and patients demand the branded prescription drug is that third-party payers cover most of the bill often with government subsidies.

Hospitals also benefit from generous third-party payments. Sutter Health, a not-for-profit hospital chain in Northern California, paid its CEO $7.5 million in 2015. Eighteen other executives received compensation in excess of $1 million each, yet Sutter still reported net income of $81 million. About 60 percent of the organizations revenue came from state and federal sources. In other words, California and U.S. taxpayers helped the hospital chain and its executives make millions.

Congress can fund universal care without breaking the federal budget by squeezing drug companies, hospitals and other health care providers. House Speaker Paul Ryans plan to introduce block grants for Medicaid, which will effectively oblige states to implement non-price rationing, may be the first step in this direction.

Related: Trumps Lofty Vision of Renewal Comes with a Huge Price Tag

The block grant approach could be extended to individuals now receiving large subsidies on Obamacare exchanges and those with costly-to-insure pre-existing conditions. States could respond by giving hospitals fixed annual grants for attending to patients not carrying private insurance, thereby compelling these providers to economize. States could also negotiate lower prices with drug providers and/or migrate patients to generic and over-the-counter remedies. While lobbyists make it difficult for legislators to implement such policies, transitioning away from the entitlement model to one based on appropriations is the way forward.

Excerpt from:

Obamacare Replacement: What Republicans Can Learn From Socialized Medicine - The Fiscal Times

ALBANY The lobby association for New York's newspapers is urginglawmakers to reject parts of Gov. Andrew Cuomo's proposed $152 billion statebudget.

It contends the package would make some state contracts lesstransparent and would give the administration "virtually unconstrainedauthority" over public-works projects.

'WOULD BYPASS REVIEW'

A memo released in late January by the New York News Publishers Association to its members argues that the bundle of budget bills framed by the Cuomoadministration would harm government transparency in New York.

Specifically, the association, in the memo authored by Director DianeKennedy, states that it would allow the governor's administration to bypassthe review authority of the State Comptroller's Office the state's fiscalwatchdog with proposed contracts for some public construction projects.

The proposed process being advanced by the Cuomo administration could resultin newspapers and local contractors being kept unaware of public-worksprojects being planned for their communities, Kennedy warned.

"The governor's proposal would make this new public-works method permanentand expand its provisions to all state agencies, authorities, localgovernments outside New York City, the State University and City Universityof New York, as well as their affiliates and subsidiaries," Kennedy said inthe memo.

"It would apply to all projects expected to cost more than $1.2million."

ON-TIME TOOLS

In response, a spokesman for Cuomo's Division of the Budget, FreemanKlopott, said the measures being advanced by the governor would equip thestate "with tools that will keep public-works projects on time and reducetaxpayer costs through a transparent, public bidding process."

Klopott noted that two major design and construction projects, thereplacements of the Tappan Zee and Kosciuszko bridges, are proceedingsmoothly and "remain on budget."

Kennedy said in an interview that the publishers "are not objecting tobest-value contracting, and we're not opposed to doing public works ininnovative ways.

"We just want to make sure the public is adequatelyinformed."

NYNPA's members in New York include the Press-Republican, which has also editorialized against the governor's proposal.

OVERSIGHT PUSH

Kennedy's contention that the public's ability to access state informationwould be weakened echoes concerns that good-government groups have beenmaking regarding what they contend is the need for greater transparency inpublic-works contracts.

The push for independent oversight over state spending has been led byComptroller Tom DiNapoli.

Cuomo and DiNapoli are Democrats, though theirrelationship has been rocky.

Lawmakers and Cuomo must be in accord on final budget bills by March 31 forthe spending plan to be in place when the new state fiscal year begins April1.

The Senate and Assembly are expected to draft their own budget plans this month, after which negotiations aimed at achieving compromise will commence.

FINAL RUSH

In an interview, DiNapoli said that he shares the concern that "theadditional steps being proposed would certainly reduce some of theaccountability that comes with oversight."

Of particular concern, he said, is a Cuomo push for "a very significantexpansion of executive power without any real check on it.

"I think that iswhy the legislature is taking a close look at it, as well they should."

While it remains unclear whether lawmakers will accept Cuomo's proposals orrevise them, DiNapoli said he hopes the final rush of horse-trading toproduce a spending blueprint doesn't occur "at the expense of transparencyand accountability."

ETHICS REFORM

Cuomo's administration was rocked last year by federal corruption chargesagainst the governor's former top aide Joseph Percoco, SUNY PolytechnicInstitute leader Alain Kaloyeros, lobbyist Todd Howe and six upstatedevelopment executives on charges stemming from a probe into bid-rigging andbribery.

In January, the governor highlighted the need for ethics reforms, including a10-point plan in one of State of the State speeches, calling for limits onthe outside income of lawmakers, term limits for elected officialsand an expansion of Freedom of Information Law requirements for the legislature.

RIDE-HAILING FIRMS

Kennedy's memo also called attention to the fact that the budget proposalswould exempt records of complaints filed with the state against ride-hailingcompanies from being accessed with Freedom of Information Law requests.

Cuomo and many lawmakers are calling for authorization for such companies asUber and Lyft to offer their services in upstate communities.

Suchcomplaints are now public record in New York City, where the companiesalready operate

Email Joe Mahoney:

jmahoney@cnhi.com

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NY Publishers: Cuomo budget bills a danger to transparency - Plattsburgh Press Republican

The U.S. military conducted freedom-of-navigation operations to challenge the territorial claims of 22 countries in fiscal year 2016, according to a report released Monday.

The most publicized of those operations took place in the South China Sea, where the Navy challenged China's claims to manmade islands in the body of water, and where other countries also claim territory.

"I know a lot of people when they talk about freedom-of-navigation operations, immediately jump to China. This is not about China, this is about the entire world and preserving freedom of navigation with a set standard of international law for the entire global commons," Navy Capt. Jeff Davis said Monday. "You will see names on this report of friends and allies, Brazil, Japan, Malaysia, the Philippines, South Korea, Thailand are among the countries that have excessive claims that we have challenged."

A freedom-of-navigation operation occurs when the U.S. operates in an area that another nation claims as its own, but is viewed as no one's territorial waters under international law.

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While the U.S. Navy did conduct multiple operations against China, it also did exercises against 21 other countries to challenge excessive maritime claims, including U.S. allies such as South Korea, which requires prior notification for foreign military or government vessels to enter the territorial sea.

Other countries whose claims were challenged are Albania, Brazil, Cambodia, Croatia, India, Indonesia, Iran, Italy, Japan, Malaysia, Maldives, Malta, Oman, Pakistan, Philippines, Taiwan, Thailand, Tunisia, Venezuela and Vietnam. In Italy, for example, the U.S. challenged its claim of the Gulf of Taranto as a historic bay. The U.S. also challenged Japan for having excessive straight baselines, meaning the country draws its territorial lines around islands or a ragged coastline in a way that claims more territory than acceptable.

India, another U.S. ally, requires prior consent for other countries to conduct military exercises in its exclusive economic zone.

Most of those countries saw multiple challenges during the period from Oct. 1, 2015, to Sept. 30, 2016.

Also from the Washington Examiner

Rod Rosenstein will face bipartisan questioning Tuesday at his confirmation hearing.

03/06/17 3:25 PM

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Not just China: US Navy ships challenged territorial claims of 21 other countries last year - Washington Examiner