Tag: federal budget

The Sequester May Not Be ‘Fair,’ but It’s Real and It Would Slow the Growth of Government

Much to the horror of various interest groups, it appears that there will be a “sequester” on March 1.

This means an automatic reduction in spending authority for selected programs (interest payments are exempt, as are most entitlement outlays).

Just about everybody in Washington is frantic about the sequester, which supposedly will mean “savage” and “draconian” budget cuts.

http://danieljmitchell.wordpress.com/2011/11/01/sequestration-is-a-small-step-in-right-direction-not-something-to-be-feared/If only. That would be like porn for libertarians.

In reality, the sequester merely means a reduction in the growth of federal spending. Even if we have the sequester, the burden of government spending will still be about $2 trillion higher in 10 years.

The other common argument against the sequester is that it represents an unthinking “meat-ax” approach to the federal budget.

But a former congressional staffer and White House appointee says this is much better than doing nothing.

Here’s some of what Professor Jeff Bergner wrote for today’s Wall Street Journal:

You know the cliché: America’s fiscal condition might be grim, but lawmakers should avoid the “meat ax” of across-the-board spending cuts and instead use the “scalpel” of targeted reductions. …Targeted reductions would be welcome, but the current federal budget didn’t drop from the sky. Every program in the budget—from defense to food stamps, agriculture, Medicare and beyond—is in place for a reason: It has advocates in Congress and a constituency in the country. These advocates won’t sit idly by while their programs are targeted, whether by a scalpel or any other instrument. That is why targeted spending cuts have historically been both rare and small.

Bergner explains that small across-the-board cuts are very reasonable:

The most likely way to achieve significant reductions in spending is by across-the-board cuts. Each reduction of 1% in the $3.6 trillion federal budget would yield roughly $36 billion the first year and would reduce the budget baseline in future years. Even with modest reductions, this is real money. …let’s give up the politically pointless effort to pick and choose among programs, accept the political reality of current allocations, and reduce everything proportionately. No one program would be very much disadvantaged. In many cases, a 1% or 3% reduction would scarcely be noticed. Are we really to believe that a government that spent $2.7 trillion five years ago couldn’t survive a 3% cut that would bring spending to “only” $3.5 trillion today? Every household, company and nonprofit organization across America can do this, as can state and local governments. So could Washington.

And he turns the fairness argument back on critics, explaining that it is a virtue to treat all programs similarly:

Across-the-board federal cuts would have to include all programs—no last-minute reprieves for alternative-energy programs, filmmakers or any other cause. All parties would know that they are being treated equally. Defense programs, food-stamp recipients, retired federal employees, the judiciary, Social-Security recipients, veterans and members of Congress—each would join to make a minor sacrifice. It would be a narrative of civic virtue.

It’s worth noting, however, that the sequester would not treat all programs equally. Defense spending is only about 20 percent of the budget, for instance, yet the Pentagon will absorb 50 percent of the savings (though defense spending still increases over the next 10 years).

http://danieljmitchell.wordpress.com/2011/10/10/will-republicans-choose-sequester-savings-or-a-supercommittee-surrenderAt the risk of oversimplifying, the sequester basically applies to so-called discretionary spending. So-called mandatory spending accounts for a majority of federal spending, but it is largely exempt, so entitlement reform will still be necessary if we want to address the nation’s long-run fiscal challenges.

‘Unthinkable, Draconian’ Spending Cuts

It’s my job to advocate for spending cuts. It’s a job I’ve been doing in one form or another for over a decade. If I’ve ever experienced a victory, it must have been a pretty small one, because I can’t recall any.

So why do I persist?

For one, I’m a naturally optimistic person. And fueling that optimism is the press. I’m constantly reading about the possibility of spending cuts, and those articles usually say that the cuts would be major … or massive … or severe … or even draconian! The possibility sends a thrill up my leg.

Alas, the “draconian” spending cuts invariably turn out to be not-so-draconian after all. In fact, it’s often the case that reporters are talking about smaller spending increases rather than real spending cuts. Other times, the cuts are likely to only be temporary or come after years and years of increases.

In today’s example, a National Journal article reports that the “unthinkable” could happen: the fiscal 2013 sequestration cuts–just reduced and postponed by the fiscal cliff deal–might actually go into effect March 1st as scheduled:

Republicans and Democrats in the Senate appear to be coming to the same conclusion on spending, namely that once unthinkable, draconian cuts designed to force a more reasonable compromise may be much harder to undo than anyone ever imagined.

How “draconian” would these “unthinkable” cuts be? About $85 billion. To put that in context, the federal government will spend around $3,500 billion ($3.5 trillion) this year. The deficit alone is likely to approach or exceed $1 trillion (the federal government has run a deficit in excess of $1 trillion for four straight years).

If that’s draconian, what would the press call cutting enough spending just to balance the budget?

As we’ve been trying to demonstrate at DownsizingGovernment.org, spending cuts would be good for the country. I encourage journalists who cover federal policy to check out the site to see what real spending cuts are all about. It might cause you to have to find new adjectives to use to describe what Republicans and Democrats are really doing, but your readers would be better served–especially the wild-eyed optimists like me.

Can Americans Handle Candor?

Today Politico Arena asks:

Is Paul Ryan’s budgetary candor harming GOP congressional candidates?

My response:

Today’s Arena question boils down to this: are Americans able to handle the truth—that we’re going broke, as Paul Ryan puts it, plainly. P.T. Barnum allegedly said, “There’s a sucker born every minute.” Unfortunately, voters too often prove him right.

As I implied in my post yesterday, Robin Hood Democrats, promising “free goods” provided by the rich, are betting that Americans are too stupid to see through their many scams. Their cynicism is as boundless as their politics of personal destruction. To take the simplest example, in June 2009, and often since, Obama assured us: “No matter how we reform health care, we will keep this promise: … If you like your healthcare plan, you will be able to keep your healthcare plan. Period. No one will take it away. No matter what.” As Professors Richard Epstein and David Hyman have shown, he’s already broken that promise in multiple ways.

But give the president his due: he makes Robin Hood look like a piker. His latest? In Iowa yesterday he announced that the federal government will purchase over $150 million in meat and fish to help ranchers survive the drought. “That food is going to be spent by folks over at the Pentagon and other places.” Never mind that you don’t “spend food,” this is simply shades of Solyndra—the flimflammery that runs through this feckless administration. But the main question is, will Americans fall for it again?

A Modest Victory for Transparency and Accountability in the DoD Budget

Earlier this week I wrote about the Obama administration’s proposal to shift $5.6 billion dollars out of the Pentagon’s base budget into the Overseas Contingency Operations (OCO) account. Because the OCO budget was exempted from last year’s Budget Control Act (BCA), this gimmick was clearly intended to allow the Pentagon to evade the BCA limits, and had attracted the attention of House Budget chair Paul Ryan (R-WI), Republican Study Committee chair Jim Jordan (R-OH), and a handful of budget watchers. I anticipated that one or more members would call attention to it during floor debate over the defense bill.

Sure enough, on Wednesday afternoon, Rep. Mick Mulvaney (R-SC) offered an amendment to undo the shift. Unfortunately, Mulvaney’s amendment was ruled out of order, ignoring the fact that the entire defense bill exceeded the BCA spending limits and thus also should have been ruled out of order. I thought the proposal to fix the dubious OCO shift would die there.

Not so. Undaunted, Mulvaney returned with a new amendment co-sponsored with Reps. Jordan and Peter Welch (D-VT) that did not actually transfer any funds—thus conforming to House rules—but that expressed the same goals articulated in the earlier amendment. As Mulvaney, Jordan, and Welch explained in a “dear colleague” letter:

Our amendment, similar to a Sense of the House resolution, supports the policy of moving $5.6 billion in non-war costs back to the Base Budget. It fully supports the resources our troops on the battlefield will need, but it does not actually transfer any funding. It simply highlights a non-partisan issue—accountability and transparency—by demonstrating support to move these non-war costs back to the Base Budget in the FY13 CR and future budget requests. (Emphasis in original)

The gambit worked: the resolution passed 238-178, with strong bipartisan support. House Armed Services Committee chairman Howard “Buck” McKeon (R-CA) voted no, as did Appropriations chair Harold “Hal” Rogers (R-KY) and the House Appropriations Committee-Defense Subcommittee chair C.W. Bill Young (R-FL). But 154 Republicans voted for the amendment, including Budget chairman Ryan, House whip Eric Cantor (R-VA), and Rules Committee chair David Dreier (R-CA).

It was a modest, and largely symbolic, victory for transparency and accountability. The next step is to end the war in Afghanistan and eliminate the OCO account entirely. That separate pot of money for the war(s) has served to obscure the enormous growth in the Pentagon’s base budget over the past decade.

A Few Questions for Paul Krugman

I am not a budget expert, but I saw Paul Krugman interviewed on the PBS Newshour program last evening and had a few questions.

Here’s an excerpt from that interview:

PAUL KRUGMAN:

I guess I don’t know how you can be honest about what is actually going on in this country without sounding partisan. That’s the old line, right? The facts have a well-known liberal bias, because, right now, we’re in a world where deficits are a good thing and a little bit more inflation would also be a good thing.

PAUL SOLMAN:

A proposal that’s put him at odds with the man who hired him at Princeton, Fed Chairman Ben Bernanke.

Tom Ashbrook asked him about it.

TOM ASHBROOK:

Ben Bernanke calls your proposal very reckless.

PAUL KRUGMAN:

Odd, because he made the same proposal himself 12 years ago for Japan.

(LAUGHTER)

PAUL KRUGMAN:

Those of us who have been calling for a bit more inflation are calling for 4 percent inflation, which is what we had back during the reign of Ronald Reagan in his second term. It didn’t seem that terrible to me at the time.

PAUL SOLMAN:

But we could be taking a big risk, right? You have no way of knowing whether or not the interest rate we’re going to have to offer to borrowers might change overnight, as it has often recently.

PAUL KRUGMAN:

Well, I am reasonably sure that isn’t going to happen until or unless the U.S. economy is really on the path to recovery. And that’s the point also when – by the way, when I will support the austerity. Once we no longer need that support to keep the economy afloat, that’s when you do want to start raising taxes and cutting spending, but not now.

A few questions for Mr. Krugman:

  1. I don’t know whether you agree with the proposition that we’re about $100 trillion in debt, but if we were, could we really afford to postpone (again) deep spending cuts? Wouldn’t  the time for cuts be … yesterday?
  2. You say that you would support spending cuts when the overall economy gathers more strength, but isn’t the record clear that the pols have neglected to reduce spending during previous periods of economic growth?
  3. What evidence leads you to believe the pols will act differently if economic growth were robust? Wouldn’t they seek to avoid the political pain of cuts and be seduced (again) by those who say the United States can “grow our way out of the debt problem”?

New Paper Argues for Immediate, Practical Cuts in Military Spending

A new report published today by the Project on Defense Alternatives  argues for $17-$20 billion in immediate savings to the Fiscal Year 2013 defense budget. I co-authored the report along with Benjamin Friedman of Cato, and PDA’s Carl Conetta, Charles Knight, and Ethan Rosenkranz. Those savings come from 18 line items—personnel, weapons systems, and programs—that could be implemented quickly. Adjustments to U.S. national security strategy are not a prerequisite for these options, which are relatively low-hanging fruit.

The 2013 defense authorization bill will move to the House floor this week. Many members are expected to offer amendments, some allowing savings in the defense budget. During the debates that are about to ensue„ it is important to keep in mind just how large the defense budget has become. As our paper notes, the national defense base budget constitutes 52 percent of discretionary spending, separate from the war account. Since 2000, it has risen by 90 percent in nominal terms and 42 percent in real terms. If Washington is serious about addressing the nation’s massive fiscal challenge, many programs will have to be cut or reformed. The Pentagon should not be expected to bear all of the costs; other departments and agencies will also have to contribute. But there has not yet been a significant decline in the Pentagon’s base budget, contrary to what some have claimed.

The Budget Control Act (BCA) of 2011 places an initial discretionary spending cap on National Defense for 2013 at $546 billion. Both President Obama’s request, and the House Republican’s budget exceed the BCA caps. In addition, the BCA requires $110 billion in spending cuts in January 2013 via sequestration, half of which need to come from DoD. Neither the White House nor Congress plans for that to occur; both sides hope to amend the law and achieve equal deficit reductions by other means. As it currently stands, though they disagree on how. Republicans want to cut other spending, Democrats to raise taxes. The options outlined in our paper could facilitate these negotiations, by revealing savings in the DoD budget that will not damage our national security.

The savings options in the report focus on reducing or curtailing:

  •  Assets and capabilities that mismatch or substantially exceed current and emerging military challenges;
  • Assets and capabilities for which more cost-effective alternatives exist;
  • Investments that are tied to the past, reflecting bureaucratic inertia or individual’s service interests, rather than current collective defense needs;
  • Acquisition programs that exhibit serious, persistent cost overruns, while failing to deliver  promised capability, and
  • Acquisition programs that are based on immature or unproven technologies.

Further savings are possible if we rethink our strategy, missions, and national security commitments. Ben Friedman and I have long argued this point. Until then, the options presented in “Defense Sense” are limited in scope in an effort to pave the way toward responsibly balancing national security ends, ways, and means.

Although I encourage everyone to look at the report, here are just five of the 18 cuts that policymakers should immediately consider:

  • Military personnel in Europe: Remove additional 10,000 military personnel by end of FY 2013; save $100 million in FY 2013 and $188 million per year once complete
  • Active-component military personnel: Reduce end-strength by an additional 10,000 personnel; save $400 million in FY 2013 and $860 million recurring annual savings once complete
  • Missile Defense: Focus on procurement and end-stage development on systems with proven, reliable, cost-effective capability (see report for details); save $2.5 billion in FY 2013
  • F-35 Joint Strike Fighter: Cancel USMC variant; buy equivalent numbers F/A-18 E/F; save $1.8 billion in FY 2013
  • Littoral Combat Ship (LCS): End procurement at 10 and seek alternative; save $2 billion in FY 2013

Cross-posted from the Skeptics at the National Interest.

Paul Ryan and His Catholic Critics

In today’s Washington Post, the paper’s Dana Milbank treats us to “A faith-based lesson for Paul Ryan.” He takes Ryan to task for his Georgetown University speech last Thursday defending the House Republican budget. Earlier, it seems, Ryan had told the Christian Broadcasting Network that his budget was crafted “using my Catholic faith” as inspiration. That was more than the reliably liberal U.S. Conference of Catholic Bishops could bear. Never shy about instructing Congress on the moral dimensions of the federal budget, the bishops wrote to Members, Milbank notes,

 saying that the Ryan budget, passed by the House, “fails to meet” the moral criteria of the Church, namely its view that any budget should help “the least of these” as the Christian Bible requires: the poor, the hungry, the homeless, the jobless. “A just spending bill cannot rely on disproportionate cuts in essential services to poor and vulnerable persons.”

“To their credit,” Milbank continues, “Catholic leaders were not about to let Ryan claim to be serving God when in fact he was serving mammon.” And he adds that a group of Jesuit scholars and other Georgetown faculty members had already written to Ryan to say that his budget “appears to reflect the values of your favorite philosopher, Ayn Rand, rather than the Gospel of Jesus Christ.”

No shrinking violet, Ryan met his critics head-on with a lengthy defense of his budget on both factual and moral grounds. As Milbank quotes him:

the faculty members would benefit from a “fact-based conversation” on the issue. “I suppose that there are some Catholics who for a long time thought they had a monopoly … on the social teaching of our church,” … but no more. “The work I do as a Catholic holding office conforms to the social doctrine as best I can make of it.”

Not so, says Milbank, but he never grapples with the pressing economic facts that Ryan set out, preferring instead to speak of the bishops’ “rebuke” to Ryan’s “fanaticism.” He quotes Ryan’s “challenge to the theologians’ theology”—“The holy father himself, Pope Benedict, has charged that governments, communities and individuals running up high debt levels are ‘living at the expense of future generations’”—but then rests content to conclude that “even Jesus said to render unto Caesar that which is Caesar’s,” omitting the pope’s final words: we are “living in untruth.”

The bishops, too, are living in untruth. Just as they failed to grasp that their promotion of Obama’s health care overhaul would entail intractable questions about abortion and contraceptive coverage, so too they fail here to grasp not only the economic implications of our burgeoning welfare state but the moral implications of the pope’s point—that just as it is wrong to live at the expense of future generations, so too is it wrong to live at the expense of our neighbors, which is the ultimate point toward which Ryan is driving. And no biblical story captures that point better than the parable of the Good Samaritan.

A year ago, when the new 111th Congress was first wrestling with these same issues, I wrote in the Wall Street Journal that people like Milbank and the bishops

 ask, implicitly, how “we” should spend “our” money, as though we were one big family quarreling over our collective assets. We’re not. We’re a constitutional republic, populated by discrete individuals, each with our own interests. Their question socializes us and our wherewithal. The Framers’ Constitution freed us to make our own individual choices.

The irony is that Jesus, properly understood, saw this clearly — both when he asked us to render unto Caesar what is Caesar’s and unto God what is God’s, and when he spoke of the Good Samaritan. [Milbank and the bishops] imagine that the Good Samaritan parable instructs us to attend to the afflicted through the coercive government programs of the modern welfare state. It does not. The Good Samaritan is virtuous not because he helps the fallen through the force of law but because he does so voluntarily, which he can do only if he has the right to freely choose the good, or not.

Americans are a generous people. They will help the less fortunate if left free to do so. What they resent is being forced to do good — and in ways that are not only inefficient but impose massive debts upon their children. That’s not the way free people help the young and less fortunate.

Far from “fanatical,” Ryan’s budget, respecting the bounds of the politically possible, is a responsible approach to addressing the bipartisan budgetary sins of the past. It rejects the path that “dissolves the common good of society, and dishonors the dignity of the human person,” Ryan told the Georgetown audience. And it offers a better path than we’ve been on, a path “consistent with the timeless principles of our nation’s founding and, frankly, consistent with how I understand my Catholic faith.” By returning power to individuals, families, and communities, he concluded, “we put our trust in people, not in government.”