Compared with a decade ago, the military is bigger, more closely connected to the CIA, more practiced at taking on terrorists and more respected by the American public. But its members also are growing weary from war, committing suicide at an alarming rate and training less for conventional warfare.

The partly gutted Pentagon was restored with remarkable speed after the hijacked American Airlines Boeing 757 slammed through its west side, setting the building ablaze and killing 184 people. But recovering from the strain of fighting in Iraq and Afghanistan will take far longer — possibly decades.

The Pentagon's leaders will have to adjust to a new era of austerity after a decade in which the defense budget doubled, to nearly $700 billion this year.

The Army and Marine Corps in particular — both still heavily engaged in Afghanistan — will struggle to retrain, rearm and reinvigorate their badly stretched forces even as budgets begin to shrink. And the troops themselves face an uncertain future; many are scarred by the mental strains of battle, and some face transition to civilian life at a time of economic turmoil and high unemployment. The cost of veterans' care will march higher.

As Robert Gates put it shortly before he stepped down as defense secretary this summer, peace will bring its own problems.

The problem was not peace on 9/11. At the time, the military was focused almost entirely on external threats. Air defenses kept watch for planes and missiles that might strike from afar; there was little attention to the possibility that terrorists might hijack domestic airliners and use them as missiles.

That changed with the creation of U.S. Northern Command in 2002, which now shares responsibility for defending U.S. territory with the Homeland Security Department.

Terrorism was not a new challenge in 2001, but the scale of the 9/11 attacks prompted a shift in the U.S. mindset from defense to offense.

The U.S. invaded Afghanistan on Oct. 7 in an unconventional military campaign that was coordinated with the CIA. That heralded one of the most profound effects of 9/11: a shift in the military's emphasis from fighting conventional army-on-army battles to executing more secretive, intelligence-driven hunts for shadowy terrorists. That shift was important, but it came gradually as the military services clung to their Cold War ways.

Still in debate is how the Taliban, which had shielded Osama bin Laden and other al-Qaida figures prior to the U.S. invasion and was driven from Kabul within weeks, managed to make a comeback in the years after the U.S. shifted its main focus to Iraq in 2003. That setback in Afghanistan, coupled with the longer-than-expected fight in Iraq, showed the limits of post-9/11 U.S. military power.

It also pointed up one of the other key lessons of the past decade of war: It takes more than military muscle to win the peace. It takes the State Department, with its small army of diplomats and development specialists, and other government agencies working in partnership with the Pentagon.

The military grew larger over the past decade, but the growth was uneven. The Army expanded from about 480,000 in 2001 to 572,000 this year, and the Marine Corps grew from 172,000 to 200,000, although both are to begin scaling back shortly. The Air Force and Navy, by contrast, got smaller. The Air Force lost about 20,000 slots since 2001 and the Navy lost about 50,000.

In percentage terms, the biggest growth in the military has been in the secretive, elite units known as special operations forces. They surged to the forefront of the U.S. military's counter-terror campaign almost immediately after the 9/11 attacks, helping rout the Taliban in late 2001 and culminating in May 2011 with the Navy SEAL team's raid on Osama bin Laden's compound in Pakistan. And even though al-Qaida's global reach has been diminished, the increased role of special operations forces is likely to continue.

"It's the most interesting and important change that's likely to endure," Michael O'Hanlon, a defense analyst at the Brookings Institution, said in an interview. "I haven't heard too many people suggest that we can scale back to where we used to be."

The Marines, who had never before fielded forces of this kind, now have 2,600 under U.S. Special Operations Command. The others include the SEALs, the Army Green Berets and Rangers and the Air Force special operators.

In all, those special operations forces grew from 45,600 in 2001 to 61,000 today, according to Special Operations Command.

A decade of war also has produced its military stars. Army Gen. David Petraeus served in command three times in Iraq and once in Afghanistan before accepting President Barack Obama's offer to succeed Leon Panetta as the next CIA director.

Former Iraq commander Army Gen. Raymond Odierno is about to become the Army's top general, and the current Army chief, Gen. Martin Dempsey, who served twice in command in Iraq, is due to replace Navy Adm. Mike Mullen as the next chairman of the Joint Chiefs of Staff.

The military as a whole is viewed more favorably by the American public. A Gallup poll in June found that the military is the most respected national institution, with 78 percent expressing great confidence in it. That is 11 points higher than its historical Gallup average dating to the early 1970s.

The new technological star is the drone aircraft, like the Predators that surveil the battlefield and fire missiles at discrete targets. Their popularity has spawned an effort to field unmanned aircraft to perform other missions, such as a long-range bomber and even heavy-lift helicopters.

Well, it's happened again.  I go on vacation, have free time, read a lot of newspapers from other parts of the country, and come back with more opinions.  Here goes...

• THE ECONOMY.  Retrain all of these middle-aged workers whose jobs have become obsolete. Finally improve the education of "The Dumbest Generation".  Put a sock on the anxious over-reaching of unions - local, State and Federal - who have nothing to offer than the slender reed of "seniority" and the delusion that - just because their fathers and grandfathers worked at those jobs - they have a right to continue in the same jobs.  And, in these unsettled times, DON'T SPEND, BUT RATHER SAVE, if you want a future.  Those who are promoting spending are only looking toward the next election. 
• TALK ABOUT ELECTONS.  Tim Pawlenty...what a WHUS.  He drops out after one dumb "straw poll" in a distant small part of the country.  Shame on you for wasting our time and attention. 
• Once again, WE MUST REVISE OUR ELECTION PROCEDURES BY MEANS OF A FEDERAL CONSTITUTIONAL CONVENTION AND AMENDMENT THAT APPLIES TERM LIMITS AND THAT ESPECIALLY ELIMINATES THE CURRENT SPECTACLE OF THE ABILITY LITERALLY TO BUY ELECTIONS...INCLUDING THE U.S. PRESIDENCY. 
• REGARDING PUBLIC EDUCATION IN THIS COUNTRY, de-certify every teachers' union in the country...and free good teachers finally to determine their own future and that of their students. 
• In Somalia, Iraq and Afghanistan, Jihadists andaal-Qaeda are alive and well.  What's wrong with that picture.  "Alive and well"...that's what's wrong.  And don't give me any crap about the Geneva Convention and the Rules of War...and especially about the worthless United Nations.   Self-defense is a basic human right...including pre-emptive self-defense.  
• Europe and its growing Muslim influx.  Beware.  If those people don't demand and accept integration...without loss of their heritage...the next Crusade will begin there.
• The European Union experiment.  I know the United States...and you're not the United States of Europe.  Whether you can ever be...I greatly doubt.
• Regarding the mentally ill, public safety and the need to take psychotropic medications, that should be a "no-brainer".  Those who are a threat to public safety must take their medications regularly or be incarcerated.  

THIS IS US!

Senior citizens are constantly being criticized for every conceivable deficiency of the modern world, real or imaginary. We know we take responsibility for all we have done and do not blame others.

HOWEVER, upon reflection, we would like to point out that it was NOT the senior citizens who took:

The melody out of music,
The pride out of appearance,
The courtesy out of driving,
The romance out of love,
The commitment out of marriage,
The responsibility out of parenthood,
The togetherness out of the family,
The learning out of education,
The service out of patriotism,
The Golden Rule from rulers,
The nativity scene out of cities,
The civility out of behavior,
The refinement out of language,
The dedication out of employment,
The prudence out of spending,
The ambition out of achievement or
God out of government and school.
And we certainly are NOT the ones who eliminated patience and tolerance from personal relationships and interactions with others!!

And, we do understand the meaning of patriotism,
and remember those who have fought and died for our country.

Just look at the Seniors with tears in their eyes and pride in their hearts as they stand at attention with their hand over their hearts!

YES, I'M A SENIOR CITIZEN!

I'm the life of the party....... even if it lasts until 8 p.m.

I'm very good at opening childproof caps.... with a hammer.

I'm awake many hours before my body allows me to get up.

I'm smiling all the time because I can't hear a thing you're saying.

I'm sure everything I can't find is in a safe secure place, somewhere.

I'm beginning to realize that aging is not for wimps.

Yes, I'm a SENIOR CITIZEN and I THINK I am having the time of my life!

Spread the laughter

Share the cheer

Let's be happy

THE WORLD HAS PROBLEMS.  YOU WANT SOLUTIONS?

• Afghanistan and Pakistan.  Already addressed: "Go...or get off the pot".
• China.  Paper Tiger. If we stop buying its products, it's a toothless tiger...and the Chinese know it.
• Syria.  If nothing else is working, supply the people with arms.  Make it a fair fight.  The Arabs should do this themselves. 
• The UN, in Syria, in Lybia, in Somalia and elsewhere, once again has proven itself to be worthless.  Admit it, and start over with a new world dialogue.
• The EU.  How do you expect to have a common currency without a common budget?
• Britain.  Get a grip!  Declare Martial Law.  Call in the military.  These rioters are not only criminals; they are anarchists.  Get them off the streets - in vertical or horizontal positions.
• The U.S. fiscal "crisis": a crisis and failure of leadership, not of the American people.  The short-term way out is for the "Super-Committee" to be believable and to declare that they will actually come up with the austerity solutions we all know are necessary. In the longer term, GET OUT AND VOTE FOR CHANGE YOU CAN BELIEVE IN...IN NOVEMBER, 2012.    

No Taxation without Representation
August 2, 2011

Bob Eisenbeis is Cumberland’s Chief Monetary Economist. Prior to joining Cumberland Advisors he was the Executive Vice President and Director of Research at the Federal Reserve Bank of Atlanta. Bob is presently a member of the U.S. Shadow Financial Regulatory Committee and the Financial Economist Roundtable. His bio is found at www.cumber.com.  He may be reached at Bob.Eisenbeis@cumber.com.

Now that I have your attention, despite the political euphoria that will likely accompany the deal to raise the debt limit, a more careful examination suggests that once again our elected officials have opted for policies dictated by their desire to ensure their reelection rather than caring for the needs of the country.  Before delving into those issues, however, I want to address some concerns that a few readers raised about my last commentary, which focused on the “fairness” issues surrounding the debt debate.

That piece generated a lot of comments, many of them passionate. While the vast majority of responses were favorable, some accused me of selectively citing data that might be interpreted as arguing that high-income people were bearing an “unfair” proportion of the tax burden, while ignoring data on the proportion of income earned and wealth distribution.  My point in that piece was that simply looking at the data on tax burdens doesn’t help one to judge what is or is not “fair.”  That is a value judgment and a political assessment and is not one that I tried to make.  The comments, however, did pique my curiosity and triggered a more in-depth look at the facts.

I must confess that my intuition wasn’t confirmed.  Let me just cite a few key figures.  In that piece, I noted that variations in revenues collected by the government were essentially unrelated to variations in the highest marginal tax rates.  In addition, the most recent data suggested that those in the top 5% of the income distribution paid 59% of the personal income tax collected and those in the top 1% paid 38%, while the bottom 50% paid 2.7%.  Looking at the distribution of income, comparable data from the IRS show that the top 1%, who paid 38% of the taxes, earned 20% of the income and the top 5%, who paid 59% of the taxes, earned 34% of the income.  In contrast, the bottom half earned 12.5% of the income but paid only 2.5% of the taxes.

The assumption of the critics was probably that the top income brackets earned a larger share of the income than they paid in taxes, but that is not borne out by the data.  I would also note as an aside that out of a population of over 300 million people, 1.4 million tax filers were in the top 1% of adjusted gross income.  Seven million returns were filed by those in the top 5% of adjusted gross income distribution while 70 million returns were filed by the bottom 50% of the income distribution.  Any way one cuts it, the few are carrying the many, and the fairness issue that is bothering some special interest groups is whether the few should assume even more of the burden.

Now what about the distribution of wealth?  Much has been made recently about the concentration of wealth in the hands of the few.  Again, the facts are informative.  From 1920 through 2007, the share of wealth held by the top 1% of the population peaked in 1929 at 44%.  That share then fell steadily to a low of 20% in 1976.    The share increased gradually and peaked at 39% in 1995 before falling off again to 35% in 2007.    While information is not readily available about what taxes the wealthy pay, it does seem that the wealthy are not in a significantly different position today than they were in the 1920s and in the mid-1960s.  Indeed, the distribution of wealth holdings has varied significantly over time but hasn’t steadily increased as some might have guessed.

The bottom line from this more in-depth exploration of the data shows that looking at either the wealth distribution or the distribution of income taxes paid relative to income earned doesn’t indicate that the wealthy are either significantly better off than they were a long time ago or that they are paying disproportionately less in taxes relative to income earned.  What this implies for the debt discussion is that focusing on the distributional dimensions of the revenue side of the deficit issue is a second-order problem.  It is a diversion of attention from the critical issues of establishing criteria for determining the appropriate size of government and bringing government spending down more in line with revenues received.

Against this backdrop, it is appropriate to take both Republicans and Democrats to task for their conduct in dealing with the current debt crises and how they have chosen to frame the issues.  The present debt extension agreement makes only token cuts and punts on the critical issue, which is the projected unconstrained growth in entitlement spending.  It leaves all the hard decisions for the future and makes a trivial dent in the yearly federal deficit, while continuing to add to outstanding public debt.

Keep in mind that the number being thrown around as the cut in the deficit represents only the incremental effects that the sum of the “promised” spending reductions (over the next 10 years) would have on the need to issue additional government debt.  The cuts hardly dents what the new debt issuance needs will be and they are far from eliminating the yearly deficits.  The numbers also don’t include the present value of those cuts and hence ignore the time value of money and the fact that a dollar of cuts today is worth more than a dollar of cuts in the future.  Furthermore, most of the so-called cuts are only “promises” (and those promises are dependent upon the ability to deliver future spending cuts).  Truth-in-government would say that the Congress should come clean and tell us what the estimated cumulative total of the remaining yearly deficits will be and what the likely need will be for increases in the debt ceiling in the future. The requests for  increases won’t be long in coming, and the ten-year horizon for addressing the key issues will arrive long after this and the next debt-ceiling crisis.  On net, both sides settled for an agreement that does little to address the key problems, though it may preserve some cover during the upcoming election season.  This is short-termism at its worst.

Having castigated Congress in general, let’s focus next on the Republicans.  Due to Tea Party influence, a line was drawn in the sand concerning cuts in spending and raising taxes as a way to partially address the mismatch between spending and revenues. This is all well and good, but they played Russian roulette with domestic and international financial markets.  In the end they took the easy way out by accepting small cuts in domestic spending, whereas the real problems lie with entitlements, namely Social Security and healthcare spending.  In short, the Republicans got relatively little of substance for the taxpayer, except for highly-valued political ammunition to use in the coming election when compared with the risks their actions posed for the country.

As for the Democrats, their objective was to grow the budget and fund its increase with more taxes, thus avoiding the need to address either the entitlements issues or the rationale for continuing other pet spending initiatives.  Theirs was a cake-and-eat-it approach.

But perhaps the group that deserves the most criticism is the recipients of entitlements, and in particular Medicare, Medicaid, and Social Security.  These are mainly the elderly and, to be totally transparent, that group includes me and some of my Cumberland colleagues.  To be sure, we relied upon payments promised to us by legislators long departed, who didn’t put in place the necessary funding to deliver on those promises.  We relied upon the promises and despite the many warnings we failed in many cases to provide sufficiently for our own retirement and healthcare needs.

Our predecessors created a Ponzi scheme that would make Bernie Madoff proud.  They pledged tax revenues to be collected from future generations under the assumption that the population would continue to grow and that more people would always be available to fund the programs.  This is just like assuming that housing prices will always go up, and we know what that is costing us.  Now, however, the pool of future taxpayers is smaller than the present one, and the burdens they must assume are proportionately greater.  In short, this is “taxation without representation.”

The current recipients claim they have paid into the plan, which they have.  But their payments were not contributions that prefunded their own retirements or their need for medical services.  Rather they were part of a pay-as-you-go scheme.  Their tax payments were given to those who already retired or had medical needs.  Now, the present generation of retirement age also refuses to recognize this problem, which is on track to absorb the whole of projected government revenues and then some.  Instead we seek to do what our parents did by passing on an even more burdensome set of obligations to our children and grandchildren.

If this isn’t “taxation without representation” then I don’t know what is.  We are making commitments today for those who will have to pay but who do not have a say in what those burdens are.  Not only does this go against the grain of the sentiments that helped to trigger the American Revolution, it is also naïve to think that future generations will continue to honor promises made by past generations.  What makes us believe they won’t simply decide to renege on the promises we have forced upon them when the choice might be whether or not to put food on the table for their own families?

We can’t continue to grow government and transfer payments forever, and the time to address those issues is now, while they are still manageable.  Nor can we avoid the problem by cutting only discretionary spending, as is the approach in the current deficit agreement.

Unfortunately, the course taken by the leaders of both parties and the administration fails on all counts. They have placed us on the risky path of financial fragility rather than stability.  A ratings downgrade might be the needed wake-up call for the country, our politicians and its senior citizens.

 Bob Eisenbeis, Chief Monetary Economist

“Wha Hoppen”…