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Posted by Stan Collender

A story yesterday on the local Washington, D.C. all-news radio station indicated that the Pentagon has been running simulations -- war games -- on what a U.S. war with Iran would look like. 

But according to this excellent article by Gordon Adams, the real war the Pentagon is planning for right now is the 2010 military budget.

Adams, who has long been considered one of the best military budget analysts around, makes a number of key points.

First, while all civilian agencies have been told not to prepare a real budget for next year, the Pentagon (along with Homeland Security, State, and the Agency for international Development) is being allowed (or is it can't be stopped?) to come up with a formal 2010 spending plan that includes policy choices for the coming year.  The strategy is to make it difficult for the next president to come up with a budget that spends less because he will look like he's underfunding the military.

Posted by Stan Collender

Andrew, Pete...Here's another question for you on energy prices.

I was never a true believer in the common wisdom that seemed to take hold the past two years that the big increase in oil prices was simply the result of and could easily be explained by changes in supply and demand. 

It's not that I'm not a big believer in this most basic rule of economics.  It's just that the higher prices seemed to come so suddenly and the increase was so steep that it was hard to imagine that supplies had fallen and demand had increased that dramatically or unexpectedly.

(As an aside...it's hard to understand how, if it was just a question of supply and demand, the people in the Energy Department whose job it is to project supply and demand didn't see it coming.  Could it possibly have been that unexpected and unpredictable?  If they didn't see it coming, why are they still in their jobs?  Why isn't the secretary of Energy being asked to resign?  Did they see it coming but were told not to say anything?)

Does the recent very rapid drop in the price of oil put to rest the supply and demand common wisdom on oil prices?

Posted by Stan Collender

Economistmom has been taking on House Appropriations Committee Chairman Dave Obey (D-WI) over several things he said about deficit hawks and budgeteers in an August 2 National Journal interview.  The interview is good reading.

(Full disclosure: I used to write for nj.com and Troy Schneider, one of the other founders of CG&G, was one of NJ.com's founders and my editor.)

A little history might be helpful here.  Obey may be saying it more bluntly but he's not saying anything new: Appropriators have never really liked the budget committees, congressional budget process, or Congressional Budget Act. 

Posted by Stan Collender

I am happy to say that I know Dean Baker, read his blog Beat The Press almost daily, and constantly learn from and am amused by his posts about how the media misreports economic news.  If you haven''t already bookmarked Dean's blog, stop reading this now and get that done.

(Okay, enough sucking up.)

But Dean and many other economists missed something important last week when they insisted last week that the nominal all-time high fiscal 2009 deficit projected by the Bush administration in its midsession review was not important and dismissed out-of-hand the reporting of that as a record.

They're right, of course.  The deficit as a percent of GDP is the meaningful number in terms of its economic impact.

Posted by Stan Collender

President Kennedy used to tell aides that anything bad that happened would always be their fault but that he would always take the credit for anything good.

The Bush administration followed that same policy this when it released its midsession review of the budget.  In his remarks at the press conference when the midsession review was release on Monday, Office of Management and Budget Director Jim Nussle very carefully talked about the "bipartisan growth package" that increased the deficit so much this year and that "Democrats are lining up to bust through the President's budget...seeking to add billions in extra spending to the regular appropriations bills, which will drive up the deficit even further."  His statement shows clearly that the Bush administration is following the Kennedy plan with absolute precision: there is no indication that it feels any responsibility for the miserable fiscal situation it is leaving the country.



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