Commentary:No Time To Be Cutting Defence

If America goes over the fiscal cliff,a massive 1.2 trillion dollar across the board spending cut will go into force on January 1,along with tax increases.The  Department of Defense will take a disproportionate hit of about 500 million dollars,on top of 478 million dollars in cuts it is already sustaining.That's almost a trillion dollars wrung out of the defence budget.
Considering all the threats in the world today,these huge reductions could not be more ill-timed.North Korea's launch of an intercontinental ballistic missile this week points this up.Eventually,this could become a nuclear warhead delivery system capable of reaching the Pacific Northwest.The technology may also be shared with Iran,which is developing its own nuclear programme.
An uncertain number of US troops will remain in Afghanistan following the official withdrawal of 2014.
In Africa and in Yemen on the Arabian Peninsula,al-Qaida militants are quite active,holding territory and staging attacks.
Both Iran and al-Qaida are active in Syria,currently wracked by civil war.
China is roiling the waters of the South China Sea with its territorial ambitions and remains a threat to Taiwan.The US has just begun repositioning its forces to be more present in the Pacific,but this new policy would be hindered by the looming budget cuts.
Thus one of the biggest threats to global security is the current inability of Congress and the President to reach a budgetary agreement.

The Fiscal Cliff:What We Need Now

If nothing is done by the President and Congress,big tax increases and spending cuts will take effect January 1-the fiscal cliff.It would be a crash course in fiscal reform that could cause another US recession and disrupt the global economy.
We need to do a down payment and make a bridge to the Grand Bargain,according to David Walker,former Comptroller General of the United States during the Clinton and Bush administrations.We do need to broaden the tax rate and lower the top marginal rate to 25%.
The Grand Bargain would include comprehensive tax reform and entitlements reform.
Here's what we need:to avoid the fiscal cliff with a down payment for credibility.Think about limiting deductions for the wealthy to charitable contributions alone if you really need to.The administration and Republicans are not gonna agree on a Grand Bargain.That cannot be done in a lame duck,hurried fashion.
I'm concerned that the wings are starting to mobilise,the far left and far right.Ultimately,we've got to get debt to GDP down to reasonable levels and keep it there.
David M. Walker,61, is a CPA and was US Comptroller General from 1998-2008.From 2008-10,he was head of the Peter G. Peterson Foundation.In 2010,he founded the Comeback America Initiative to promote fiscal responsibility.
A frequent chat show guest,Mr.Walker is author of the bestselling book "Comeback America:Turning the Country Around and Restoring Fiscal Responsibility."

Business in Brief:Tim Geithner;Best Business Schools

The majority of businessmen have learned to give and take,according to Morgan Stanley CEO John Mack.Treasury Secretary Tim Geithner had the world on his shoulders.He'll be respected.
He did an outstanding job with the Chinese executives that visited him.I thought he was superb in the way he handled that.He didn't preach.
I think there would be a position for him on Wall Street.
AT and T will invest 14 billion dollars in broadband networks.It is also raising its dividend.Tech is the best-positioned sector under President Barack Obama,BMO Capital Markets believes.
With regard to the fiscal cliff negotiations,Professor John Cochrane of the University of Chicago Booth School of Business said the chance of another one year extension seems high to me,given how far apart we are in the basics.It needs real political leadership.That's roughly what happened in the 1980s.
Let's hope they can do it,lowering tax rates while eliminating deductions.That is tremendously pro-growth.The whole trick is to get this chaos out of our tax code.To focus on starting a business rather than consulting a tax lawyer-that would be pro-growth.
The Booth School of Business is rated the best this year by Businessweek magazine.Harvard Business School came in second,while the University of Pennsylvania Wharton School of Business got third.
Morgan Stanley(MS),AT and T(T)

Asia This Day:Fiscal Cliff Troubles Australia;Tokyo Nuclear Protest

Tens of thousands clogged Tokyo Monday as they protested Japan's restarting of reactors in the wake of 2011's tsunami and nuclear disaster.Two of the country's fifty reactors are back on line at the Ohi plant.
Japan's GDP came in lower than expected at -3.5 versus the -3.4 estimate,on falling exports to a slowing China and Chinese protests against Japan's territorial claims.Consumer spending has also dropped,further shrinking the Japanese economy.The Nikkei was down 61.04 after the lunch break Monday.
The MSCI Asia Pacific index fell 0.30% in early Monday trading,while India's Nifty Fifty and Sensex indexes rose about 0.20%.A big wireless spectrum auction is being conducted by the Indian government.
Toyota  Motors will be doubling its capacity in Indonesia,building a new engine plant there.
Australian treasurer Wayne Swan has been warning about the results of the fiscal cliff,a combination of  US tax increases and spending cuts of some 800 billion dollars that will apply on January 1.Without action by Congress,there would be a severe blow to the fragile global economy.The world can't afford the continuation of this gridlock in Washington.Mr.Swan has met with US Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke to express his concern.
Gold is at a near three-week high on the fiscal cliff worry.
China's trade surplus came in at 32 billion dollars in October,a rise of 11.6%.Copper imports were down to their lowest level in 15 months,dropping 18%.Australian mining shares have declined because of the Chinese slowdown.

General Electric:Viewpoint Today

It just is today the most resilient economic system on earth,GE CEO Jeff Immelt said of the United States.The stakes are so darn high for the country and for all of us.Nervous laughter is a bad strategy.
We're asking for the same territorial system that our global competitors have.We're kind of like the last American company that competes in the fields that we're in.
Fed Chairman Ben Bernanke has been consistent to his word.It's not bad to have one person in power who's been more or less consistent since 2007.
If the fiscal cliff happens,that's a failure of governance-and it shouldn't happen,Mr.Immelt added.
Jeff Immelt,56,has been leading GE,the world's third largest company,since September 7,2001.He has been named to Barron's "World's Best CEOs" list three times.Mr.Immelt is also head of the President's Jobs Council.
General Electric(GE)

A Critical View:Does The Market Have It Right

The corporate bonds aren't telling us things are as as good as the market has been,according to Adam Parker,PhD,Chief US Equity Strategist and Managing Director at Morgan Stanley.Our house call is that there won't be any QE3 by the Fed until after the November election.People are more aggressive because of the pain train higher thing.
The year end view is a framework.You have to be tactical with the low and volatile growth and extreme ten year Treasurys.I haven't found somebody who's bearish on earnings yet.Deflation is a real risk.At some point,you'll run out of band-aids.
If the revised estimates are right,the earnings expectations are too high.About half of US companies get margin expansion on average;the analysts are saying 86%.
What matters is the fiscal cliff.I am more worried than the market.You still have very close to no economic growth next year.People could be in a different mindset in three months than they are now,Dr.Parker pointed out.
Adam Parker got his doctorate in Statistics from Boston University.He was named to Institutional Investor's All-American Team in Portfolio Strategy and Quantitative Research in 2009 and 2010.
QE3 would be the Federal Reserve's third asset purchasing program to buck the market up.
Morgan Stanley(MS)