April 24, 2014

Washington Budget Report: Jan. 10, 2012

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Obama Presents Leaner Defense Strategy

President Obama joined Defense Secretary Leon Panetta and Joint Chiefs of Staff Chairman Gen. Martin Dempsey last Thursday to outline the administration’s vision for a leaner, more affordable military. The plan shifts from the capacity to fight two large ground wars simultaneously to fighting one such war while at least deterring aggression and denying victory to an opponent in a second conflict.

The plan, presented at the Pentagon, also emphasizes targeted operations and maintaining a strong strong naval presence in the Pacific, with less attention focused on Europe than in the past.

The plan calls for at least $489 billion in cuts to projected spending over the next decade. In presenting it, Obama noted that last year’s legislation to raise the debt limit requires substantial cuts in spending, including defense, to “put our fiscal house in order.”

In addition, defense could face about $500 billion in “automatic cuts” -- the Pentagon’s estimated share of the $1.2 trillion in reductions that are supposed to begin in 2013 because of the congressional super committee’s recent failure to produce a deficit-reduction plan.

Though many specific numbers won’t be released until next month as part of the President’s budget, he said there would be significant reductions in military personnel and some big weapons programs.

The administration also plans to establish a commission to explore ways to reduce the military’s personnel costs, including health care and retirement programs. These personnel costs exceeded $150 billion in Fiscal Year 2010 and have been growing at a rapid clip.

Obama said Pentagon spending would continue to grow but not as rapidly as in the past. He argued that the U.S. military would remain strong with a defense budget “that continues to be larger than roughly the next 10 countries combined.”

Some Republicans in Congress, however, criticized Obama’s plan. House Armed Services Committee Chairman Buck McKeon of California called the plan a “lead-from-behind strategy for a left-behind America.”

Meanwhile, Sen. John McCain of Arizona, ranking Republican on the Senate Armed Services Committee, said that although he understood the need for cuts, “we must also address the broader cultural problem plaguing our defense establishment: the waste, inefficiency and ineffective programs that result from an overly consolidated military-industrial-congressional complex.”

Any credible approach to deficit-reduction must include all facets of the federal budget, including defense. The administration, Congress and military leaders should work together to establish priorities that will ensure that dollars allocated to national defense are spent as effectively as possible.

U.S. Financial Report: Depressingly Familiar News

December 23, 2011 was supposed to be a day of high drama in Washington as Congress voted on a deficit reduction plan produced by the congressional super committee. Things didn’t work out that way because the super committee never agreed on a plan.

There was, however, some budget news on Dec. 23, although it came with little drama. In fact, it was depressingly familiar. So familiar that it went largely unnoticed. Once again, Americans were given official notice that the nation is on an unsustainable fiscal path.

According to the 2011 Financial Report of the U.S. Government, released that day by the Treasury Department, even with enactment of last year’s Budget Control Act, “the debt-to-GDP ratio is projected to increase over the next 75 years and beyond if current policies are kept in place, which means that current policies are not sustainable.”

Not only was this conclusion unsurprising but so was the central cause: a growing mismatch between social insurance obligations (primarily for Social Security, Medicare and Medicaid) and dedicated resources.

The present value of the 75-year projected excess expenditures for these three programs over dedicated resources jumped to nearly $34 trillion, an increase of about $3 trillion from the previous year’s report. And an alternative scenario that many experts believe is more likely puts that total at $46 trillion.

“The Nation must bring social insurance expenses and resources into balance before the deficit and debt reach unprecedented heights,” the report warns. “Delays will only increase the magnitude of the reforms needed and will place more of the burden on future generations.”

This, of course, was precisely the problem that the failed super committee was supposed to address.

OMB Director to Become White House Chief of Staff

President Obama announced yesterday that Jacob J. Lew, his budget director, would replace William Daley as the White House chief of staff. Obama said he valued Lew’s advice because of his “mastery of the numbers” in the federal budget as well as “the values behind those numbers.”

Lew, who had previously served as director of the Office of Management and Budget (OMB) in the Clinton administration, accepted the same job under Obama in 2010. He also served as deputy to Secretary of State Hillary Clinton and previously held several other positions in government and the private sector.

Daley, who has sometimes antagonized congressional Democrats in the year since he became Obama’s chief of staff, reportedly surprised the President by submitting a letter of resignation several days ago.  

Yesterday Obama said Lew was taking “one of the most difficult jobs in Washington” but added that the budget director’s job was “one of the other most difficult jobs in Washington.” Obama is the third president in a row to ask a White House budget director to become chief of staff.

Obama did not immediately name a new OMB director.

Politicians Should Aim Higher

Although Congress reached agreement last month on a temporary extension of the payroll tax cut, more partisan logjams are widely anticipated in the months ahead – even though compromise and bipartisan cooperation will be needed to make the big policy changes that could put the country on a better fiscal and economic path.

In a recent op-ed in the Christian Science Monitor, Concord Coalition Chief Economist Diane Lim Rogers says that many of the arguments in Washington’s budget battles seem to have “more to do with the fictional scripts inside politicians’ minds than the actual opinions of voters.”

Questioning a Republican talking point, Rogers notes that an NPR reporter had recently looked for millionaires “who would stop hiring because of higher taxes, and she couldn't locate anyone willing to support that theory – not even when she went to the Republican politicians who are most vocal on that claim.”

Some Democrats, meanwhile, have joined with the AARP in trying to keep Social Security reform off the negotiating table. Yet AARP’s campaign on this has been misleading, and many older Americans – concerned about their children and grandchildren -- have shown they have a better understanding of the need for a balanced approach to deficit reduction that would include responsible changes in the entitlement programs.

Rogers recalls the words of the late Paul Tsongas as he helped start The Concord Coalition two decades ago: "We are better than what we are being asked to be by our leaders."

Read more with In Budget Battle, Voters are the “Adults in the Room”

Moral Issues Behind the Budget Numbers

With presidential primary voting today in New Hampshire, it remains important for the candidates to clearly spell out their plans for fiscal reform.

As The Concord Coalition’s Sara Imhof wrote in a recent op-ed: “All Americans benefit from government in various ways, so the burdens of deficit reduction should be borne by all. We need elected officials who understand that, and who are willing to set responsible budget priorities and find equitable ways to pay for them.”

Beyond all the federal budget numbers, she notes, are fundamental moral issues: “Fairly distributing the burdens of society, helping those who are truly in need, paying for what we want, and protecting future generations from heavy debts they had no say in creating.”

Presidential hopefuls should explain, for example, how they would ensure the solvency of critical safety net and retirement programs without leaving even more unpaid bills to our children and future generations.

“If a candidate takes a dim view of raising additional revenues, it is particularly important that he or she provide detailed explanations of the government services and benefits they would be willing to give up,” writes Imhof, Concord’s Midwest regional director. “Vague promises to ‘cut waste’ are insufficient.”

Other questions she suggests that voters ask themselves as well as the candidates:  “Are we acting as good fiscal and civil stewards? Are we contributing our fair share to society? Are we demanding only those government benefits and services that we are willing to pay for?”

Read more with Press Candidates on Fiscal Responsibility