The press is in a tizzy over the AIG mess, but the real story involves the new Geithner plan to deal with toxic assets. Of course, Paul Krugman hated it, but economist Brad DeLong explains why the plan makes sense.

News about the Obama administrations plans for cuts in weapons systems is starting to leak out.

Two defense officials who were not authorized to speak publicly said Gates will announce up to a half-dozen major weapons cancellations later this month. Candidates include a new Navy destroyer, the Air Force’s F-22 fighter jet, and Army ground-combat vehicles, the officials said.

More cuts are planned for later this year after a review that could lead to reductions in programs such as aircraft carriers and nuclear arms, the officials said.

As a former CIA director with strong Republican credentials, Gates is prepared to use his credibility to help Obama overcome the expected outcry from conservatives. And after a lifetime in the national security arena, working in eight administrations, the 65-year-old Gates is also ready to counter the defense companies and throngs of retired generals and other lobbyists who are gearing up to protect their pet projects.

“He has earned a great deal of credibility over the past two years, both inside and outside the Pentagon, and now he is prepared to use it to lead the department in a new direction and bring about the changes he believes are necessary to protect the nation’s security,” said Geoff Morrell, the Pentagon press secretary.

Gates is not the first secretary to try to change military priorities. His predecessor, Donald H. Rumsfeld, sought to retool the military but succeeded in cancelling only one major project, an Army artillery system.

Former vice president Dick Cheney’s efforts as defense chief under the first President Bush, meanwhile, are cited as a case study in the resistance of the military, defense industry, and Capitol Hill. Cheney canceled the Marine Corps’ troubled V-22 Osprey aircraft not once, but four times, only to see Congress reverse the decision.

The article highlights the difficulties Gates and Obama will face as they try to cancel these unnecessary and ridiculously expensive programs. This time we’re in the middle of a financial crisis, and Republicans have been howling about spending, so now Obama will be able to turn the tables on them.

Here’s more information on the F-22.

Gates’ first showdown looms with a $350 million–a–pop fighter jet. He has to decide by March 1 whether to add more F-22 Raptor fighters to the 183 purchased by the Bush Administration. For years, the Air Force has wanted to double the fleet, while Gates has made clear that he thinks 183 is sufficient. A month ago, some Air Force officials were saying privately that maybe 60 more F-22s would suffice. The Pentagon’s acquisition boss, John Young, recently detailed why more F-22s might be a poor investment. The F-22s that exist are ready to fly only 62% of the time and haven’t met most of their performance goals. “The airplane is proving very expensive to operate, not seeing the mission-capable rates we expected, and it’s complex to maintain,” Young said. Besides, he added, the Air Force plans on spending $8 billion to upgrade most of the F-22s it already has.

We can’t afford to spend more money here.

Gerardo brought you Jon Stewart’s skewering of the know-nothing know-it-alls over at CNBC. While most of the CNBC personalities wisely kept their mouths shut, Jim Cramer called foul, saying that Stewart’s claim that Cramer said to buy Bear Stearns stock days before it collapsed was false.

Okay, so Cramer didn’t give a “buy” recommendation in the original video, but five days later he basically gave it a “hold” recommendation and seven weeks before it collapsed he literally asked people to go out and buy Bear Stearns stock.

So then Cramer goes around to the NBC shows — “The Today Show,” “Morning Joe,” etc. — and badmouths Stewart…for what? Calling him out?

Jim, here’s some free advice: Don’t get into a war with Jon Stewart. You’re just going to lose. He’s funnier than you, has better researchers than you do, but mostly…he’s right. You are supposed to be one of the nation’s leading financial experts and you didn’t see this financial collapse coming. Anytime that someone suggested a market downturn, he was shouted down on CNBC and every other financial network out there.

So my advice to you is to take your lumps and move on. Starting a feud with Stewart is only going to give him more ammunition to roll clips of you making a horrible recommendation (or several horrible recommendations). Stock market bubbles start because guys like you create a false sense of urgency and security. But every single time the market has a steep rise, there is some sort of correction, and this one is/was worse than most.

I know your first instinct is to defend yourself. But you were wrong about Bear Stearns and countless other stocks over the past few months. Quit grousing about someone calling you out for not doing your job. Get over it.

I’ve been stunned by what I’ve been seeing on CNBC. After most of the clowns on this networks completely missed the financial crisis, we have them lecturing the Obama administration about its efforts to dig us out of this mess and address long-term problems like health care and energy.

Rick Santelli has received the most press with his idiotic rant, but Jim Cramer has pushed the envelope on irresponsible rhetoric, calling Obama “Lenin” and saying he wants to destroy capitalism. This over-the-top rhetoric is absurd, particularly when you watch the video below. Cramer has been so spectacularly wrong about the banks that he looks like a complete fool now.

Jon Stewart reminds us that CNBC just sucks.

While conservatives are having heart attacks over the prospect of the government helping sick people, Barack Obama is cleaning up the mess left over by President Bush and the Republicans.
The contracting process in Washington is a disgrace, wasting billions of dollars every year. The war-profiteering in Iraq was particularly bad, and the process for building weapons systems is completely out of control.

With that backdrop, Obama announced that the old ways of doing business in Washington are over.

President Barack Obama on Wednesday ordered an overhaul of the way the U.S. government awards contracts for private sector work, reversing a Bush administration policy that in some cases led to federal investigations of procurement practices and no-bid contracts.

Obama joined Republican Sen. John McCain, his presidential campaign rival, and other congressional figures to announce an executive memorandum that commits his administration to a new set of marching orders for awarding contracts. Obama said “the days of giving government contractors a blank check are over” and said changes could save up to $40 billion a year.

One area in particular that is targeted is no-bid contracts, which the administration is seeking to change so that there will be more competition for government-paid work.

“Even if these were the best of times, budget reform would be overdue in Washington,” Obama said.

Obama’s presidential memo changes government contracting procedures. It directs Peter Orszag, director of the White House Office of Management and Budget, to work with Cabinet and agency officials to draft new contracting rules by the end of September. Those new rules, White House aides say, will make it more difficult for contractors to bilk taxpayers and make some half-trillion dollars in federal contracts each year more accessible to independent contractors.

“We will stop outsourcing services that should be performed by the government and open up the contracting process to small businesses,” he said. “We will end unnecessary no-bid and cost-plus contracts that run up a bill that is paid by the American people. And we will strengthen oversight to maximize transparency and accountability.”

The new administration argued that its Republican predecessor’s contract spending had doubled to more than $500 billion over the last eight years.

Having McCain join Obama on this is huge. He and Obama don’t get along on many issues, and McCain recently scolded Obama over his unwillingness to take on earmarks. But McCain has been a tireless advocate of cleaning up the mess in government contracting. Hopefully this signals true bi-partisan cooperation. It is much easier to afford necessary government programs when we don’t waste money.

Expectations were justifiably pretty low for Treasury Secretary Timothy Geithner based on his prior performances, but I’ve been impressed with his testimony today as he explains the Obama administration’s budget in front of the House Ways and Means Committee. He has complete command of the issues, and he has been able to explain the strategy behind the plan.

The Obama administration needs effective surrogates to sell the President’s economic plan, and Geithner’s testimony today suggests he will be more effective than he was in the past.

More jobs and better health care.

President Barack Obama has been vague about details of his healthcare reform efforts, but he provided a hint on Monday of one direction he could take — community health centers.

As he announced the nominations of his two top health executives, Obama highlighted the allocation of $155 million to 126 community health centers as part of the $787 billion economic stimulus package.

“These health centers will expand access to care by helping people in need — many with no health insurance — obtain access to comprehensive primary and preventive health care services,” Obama told a news conference.

“That helps relieve the burden on emergency rooms across the country, which have become primary care clinics for too many who lack coverage — often at taxpayer expense.”

The Health and Human Services Department said the money would create 5,500 new jobs and help provide health care to an estimated 750,000 low-income Americans.

Gary Pickens, chief research officer for the Healthcare business of Thomson Reuters, a division of Thomson Reuters Corp, agreed the centers relieve overburdened hospitals.

“Hospitals currently have overcrowded emergency departments and would probably prefer to see care given in more appropriate settings for conditions that don’t require hospitalization,” Pickens said in a telephone interview.

This addresses one of the most pressing problems facing our health care system. Emergency rooms are overcrowded, as too many Americans without health insurance rely on them for care. Community health centers can help handle many of these cases, and they provide better care as they are organized to handle primary health services as opposed to emergencies.

More money is on the way.

“Over the next two years, a total of $2 billion in Recovery Act funding will be invested in Community Health Centers to support renovations and repairs, investments in health information technology, and critically needed health care services,” HHS said in a statement.

These are the types of “investments” that contribute to the common good. It attacks the inefficiencies in the current system while improving the quality of care.

We will be hearing many stories like this one over the next several years.

When Rita Bryer sees 300-foot-tall wind turbines sprouting up from the prairie near her home in western Oklahoma, she can’t help but wonder about the view from the top, where blades the size of semi-trucks spin.

“Out here, you can see the wind turbines from 10 miles away,” she said. “Think about how far you’ll be able to see when you’re at the top.”

So, partly out of curiosity, partly because she wants to be part of something new, the 51-year-old is leaving behind a career of odd jobs and oil-field work.

She’s going back to school to become a wind turbine mechanic — one who’ll have to scale the turbines to make repairs.

Across the country, people like Bryer are looking to the renewable energy sector in hopes its “green-collar jobs” will offer them stability in this shaky economy. Some are signing up for community college or apprenticeship programs that train students to be wind turbine mechanics, solar panel installers, fuel-cell engineers or energy efficiency experts. Video Watch how the green economy is growing in Pennsylvania »

Government support has rallied excitement for the prospect of a green jobs corps, as President Obama’s stimulus package puts about $20 billion into greening the economy, according to the White House.

n his recent speech to Congress, Obama said the U.S. will double its supply of renewable energy in three years. To do so, he’s calling on a new class of workers to be trained in environmental fields. Green jobs training programs will get $500 million from the stimulus.

The transformation of our energy industry to greener technologies will be critical for our economic recovery along with our national security. The idea is simple – having mechanics and technicians maintaining windmills and installing solar panels here in the United States is better for our economy than having workers working on Saudi oil rigs. The energy is cleaner, more Americans are employed, and American wealth isn’t shipped overseas.

It’s stunning to me that Republicans are ceding these arguments to Democrats.

Paul Krugman has been pretty tough on Barack Obama, but he’s very pleased with the budget.

Elections have consequences. President Obama’s new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.

The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration’s refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.

For this budget allocates $634 billion over the next decade for health reform. That’s not enough to pay for universal coverage, but it’s an impressive start. And Mr. Obama plans to pay for health reform, not just with higher taxes on the affluent, but by putting a halt to the creeping privatization of Medicare, eliminating overpayments to insurance companies.

On another front, it’s also heartening to see that the budget projects $645 billion in revenues from the sale of emission allowances. After years of denial and delay by its predecessor, the Obama administration is signaling that it’s ready to take on climate change.

And these new priorities are laid out in a document whose clarity and plausibility seem almost incredible to those of us who grew accustomed to reading Bush-era budgets, which insulted our intelligence on every page. This is budgeting we can believe in.

Krugman goes on to explain that cutting the deficit with this plan is definitely plausible. We’ll see how it plays out, but Obama seems to have support from the left.

When Barack Obama kept Robert Gates as Defense Secretary, most liberals were disappointed, and the news media focused on how this might impact Obama’s decisions regarding the wars in Iraq and Afghanistan.

While those issues are certainly important, Obama and Gates will be embarking on a mission to radically change the way the United States purchases military equipment.

But if you are a defense contractor who has enjoyed a decade of bottomless Pentagon funding, it was Gates’ comments about a struggle much closer to home that are keeping you up at night. “The spigot of defense spending that opened on 9/11 is closing,” he said. “With two major campaigns ongoing, the economic crisis and resulting budget pressures will force hard choices on this department.”

Gates, the U.S.’s 22nd Defense Secretary, has declared a low-key war against the military services and the way they develop and buy the weapons they use to defend the nation. Up until now, he has done that mostly by jawboning: The U.S. can’t “eliminate national-security risks through higher defense budgets, to do everything and buy everything,” Gates says in the latest issue of Foreign Affairs. That futile quest has led to weapons that “have grown ever more baroque, have become ever more costly, are taking longer to build and are being fielded in ever dwindling quantities.”

But his war of words is about to become very real. As he prepares a budget for next year, Gates must decide the fate of a number of fantastically expensive weapons programs the military services say they need. He can’t fund them all–and might be wise to take a knife to them all. In this, Gates has little choice: the military’s annual budget has finished growing, and the billions it once imagined it might spend on future weapons have evaporated. So cuts–and big ones–are coming, and Gates will be the man who makes them.

Though Gates was hired by George W. Bush to clean up the mismanaged wars in Iraq and Afghanistan, Gates’ greatest legacy may come in what he calls a “strategic reshaping” that better outfits the U.S. military to wage coming wars. Future weapons buys must “be driven more by the actual capabilities of potential adversaries,” Gates told Congress a few weeks ago, “and less by what is technologically feasible given unlimited time and resources.” Pentagon procurement, he said, is plagued by a “risk-averse culture, a litigious process, parochial interests, excessive and changing requirements, budget churn and instability and sometimes adversarial relationships within the Department of Defense.”

With the release today of Barack Obama’s budget outline, we’re seeing that Obama and Gates are serious about these changes. You’re also hearing Obama talk about how we can’t afford any more “Cold War” weapons systems.

The articles linked above is worth a read. It discusses specific weapons systems, and the stunning costs associated with systems that we no longer need and may be obsolete in a world where inexpensive drones can do the job of piloted planes.

This will not be an easy fight. The problem is that Congress often overrides the needs and requests of the military. Many conservative Senators will scream about wasteful spending, but then they will defend grossly expensive weapons systems if it affects jobs in their districts. Democrats do the same thing.

Based on the “Cold War” rhetoric, it looks like Obama is ready for a fight. He should bring along enough Democrats, especially if they have to choose between health care and these weapons systems.