Associated Press & William Hartung / Huffington Post – 2012-08-04 01:23:26
Budget-and-tax Impasse Threatens Troops, Economy
WASHINGTON (August 1, 2012) — With the government heading toward a year-end “fiscal cliff,” House Republicans approved a full plate of Bush-era tax cuts Wednesday that they said could help shore up a still-frail national economy. At the same time, the Obama administration warned that threatened budget cuts could send some of America’s troops into battle with less training.
For all the action and talk, however, both taxes and spending were deeply enmeshed in campaign politics, with no resolution expected until after the elections.
Democrats are demanding that any compromise to avoid the $110 billion in budget cuts that are scheduled to kick in Jan. 2 include a tax increase on high-income earners. Republicans reject the idea of raising rates on anyone as the economy struggles to recover fully from recession.
“There are five months remaining for Congress to act,” acting White House Budget Director Jeff Zients told the House Armed Services Committee. “What is holding us up right now is the Republican refusal to have the top 2 percent pay their fair share.”
Deputy Defense Secretary Ashton Carter told the committee that if Congress fails to come up with a compromise, nearly all elements of the military will be affected by cuts mandated by last year’s deficit deal. Training would be scaled back and flying hours for Air Force pilots would be reduced. The Navy would buy fewer ships and the Air Force fewer aircraft.
“Some later-deploying units (including some deploying to Afghanistan) could receive less training, especially in the Army and Marine Corps,” Carter said. “Under some circumstances, this reduced training could impact their ability to respond to a new contingency, should one occur.” Military personnel would be exempt from job cuts, but furloughs might be issued and commissary hours reduced, he said.
Later, Republicans moved to renew the Bush tax cuts for every working American. The cuts will otherwise expire Dec. 31, part of a combination of effects along with major spending cuts that have been characterized as a “fiscal cliff” for the economy. The bill passed by a 256-171 vote. Nineteen Democrats joined with Republicans; retiring Rep. Timothy Johnson of Illinois was the sole Republican to break with his party.
President Barack Obama, in a written statement late Wednesday, said House Republicans had voted to “shower millionaires and billionaires with a $1 trillion tax cut that will inevitably be paid for by gutting investments in critical programs needed to create jobs and strengthen the economy.”
There is no expectation that the Democratic-led Senate will even consider the House measure, at least before the elections.
Democrats in the House countered with a plan backed by Obama to extend the tax cuts for all but the highest-earning Americans. Their plan would raise the marginal top tax rate on incomes over $200,000 for individuals and $250,000 for couples from 35 percent to 39.6 percent. It failed, 257-170, with 19 Democrats breaking with Obama.
The dueling votes were more about political messaging three months before the election than a genuine attempt to resolve longstanding differences that threaten to sock every taxpayer in the country with a tax increase if the deadlock isn’t broken in a postelection lame duck session. Democrats said Republicans were holding the middle class hostage by insisting on renewing tax cuts for that go to the top 2 percent of earners.
“Let’s extend these tax cuts we agree on and then debate what we don’t agree on,” said No. 2 House Democrat Steny Hoyer of Maryland.
The Bush tax cuts were renewed in their entirety with the support of Obama and many Democrats two years ago as part of a bargain in which Obama also won a Social Security payroll tax cut and an extension of unemployment benefits.
Now, the White House promises Obama will veto the extension if it includes the highest earners. Obama instead supports a plan that passed the Democratic-controlled Senate last week.
Republicans said that measure would hit 1 million small businesses — and more than half of small business income — with a tax increase.
“Two years ago, the president said that stopping the tax hike was the right thing to do for our economy,” said House Speaker John Boehner, R-Ohio. “Well, economic growth is worse now, but he’s out campaigning for a tax hike on small businesses.”
The vote came as gridlock and partisan disputes ensured that pressing issues remain unresolved.
For example, with half the country suffering from the worst drought in decade, it was uncertain whether Congress would pass a disaster relief program. A long-term farm bill was highly unlikely.
And the U.S. Postal Service was defaulting at midnight Wednesday on a $5.5 billion payment due to the Treasury for future postal retirees’ health benefits because of congressional inaction.
Legislation on trade, cybersecurity and defense policy weren’t getting finished either in the final week before Congress breaks for its five-week vacation.
The divisive politics and recriminations that marked last August’s fight over cutting the deficit and raising the nation’s budget authority was on full display in the typically bipartisan House Armed Services Committee hearing with Zients and a senior Pentagon official.
Obama and congressional Republicans agreed last summer to $1.2 trillion in spending cuts and tasked a bipartisan congressional panel with coming up with another round of reductions. If it failed, automatic cuts known as sequester would kick in.
All committee members and the two witnesses agreed that sequester was a destructive policy. But none could agree on a solution in a hearing that degenerated into finger-pointing over who was responsible — Obama or Congress — even though Republicans and Democrats voted for the bill and the president signed it.
In the run-up to this year’s election, Republicans are using the impending reductions in military spending as a political cudgel against Obama, arguing that the commander in chief is willing to risk the nation’s security as he uses the leverage in the budget showdown with Congress. Republican presidential candidate Mitt Romney has echoed GOP lawmakers’ criticism.
Democrats counter that Republicans who voted for the cuts are trying to wriggle out of last August’s deficit-cutting agreement and must consider tax increases as part of any congressional compromise to stave off spending reductions.
“Sequester defies rational planning. It was designed to be irrational,” Carter testified.
Zients outlined further impacts on domestic spending — cuts in the number of FBI agents, food inspectors and border patrol agents. The FAA would be affected and so would the National Weather Service, hampering its ability to forecast hurricanes and tornadoes. Some 16,000 teachers and aides would lose their jobs and 100,000 children would lose their places in Head Start.
Zients said the government, which has planned for contingencies such as shutdowns, would be ready.
But “the right course is not to spend time moving around rocks at the bottom of the cliff to make for a less painful landing. The right course is to avoid driving off the cliff altogether,” he said.
Copyright 2012 The Associated Press. All rights reserved.
McCain’s Road Trip to Nowhere on Pentagon Spending
William Hartung / Huffington Post
(July 30, 2012) â€“ There was a time when Sen. John McCain (R-AZ) was considered a maverick — admittedly a much overused term, but certainly a fair description of a number of his key positions. The old John McCain had an independent streak, bucking his party on issues like campaign finance reform and fighting Pentagon pork.
The old McCain fought against Congressional earmarks and exposed corrupt bargains like the rigged deal to force the U.S. government to lease overpriced aerial refueling tankers from Boeing. Two Boeing executives did jail time as a result of McCain’s investigation of the tanker deal.
Last but not least, the old John McCain played a leadership role in support of President Obama’s successful effort to end funding for the unworkable, unnecessary and unaffordable F-22 fighter plane program, citing President Eisenhower’s military-industrial-complex speech on the floor of the Senate in the process.
Unfortunately, the old John McCain is fading from view just when the country needs him most. Rather than going after wasteful weapons systems and a bloated Pentagon budget, McCain has joined hands with his Republican colleagues Sen. Kelly Ayotte (R-NH) and Sen. Lindsey Graham (R-SC) in embarking on a series of meetings entitled “Preserving America’s Strength.”
The meetings — to be held today in Virginia, North Carolina and Florida and tomorrow in New Hampshire — have more to do with politics and profits than they do with promoting more effective policies for defending the nation.
It is no accident that the three Senators are broadcasting the propaganda points long promoted by Pentagon contractors and their largest trade group, the Aerospace Industries Association. They have been working hand-in-glove for some time now.
McCain’s most recent connection to the weapons lobby is his hiring of former Lockheed Martin VP Ann Elise Sauer as a top Republican staffer on the Senate Armed Services Committee (SASC).
In 2011, prior to her hiring at SASC, Sauer received a parting gift in the form of a $1.6 million buyout by Lockheed Martin. She has also worked as a consultant to BAE Systems, which will host tomorrow’s “Town Hall meeting” in New Hampshire — a misnomer given that it is not open to the public, but only to BAE employees.
The closed nature of the meeting is another indicator that the tour by McCain and his colleagues has more to do with promoting the interests of Pentagon contractors than it does with educating the public about emerging defense policy issues.
And contrary to their desperate cries for help — in their calls for a continuation of high Pentagon budgets at a time of high deficits — Pentagon contractors like Lockheed Martin and BAE Systems are doing just fine. Lockheed Martin’s profits rose 4.4 percent in the most recent quarter, and they have quadrupled during the 2000s.
Lockheed Martin CEO Robert Stevens earned over $19 million in 2011. The company has a backlog of $81 billion, followed by its cohort the Boeing Corporation, which has a backlog of $46 billion.
As an analysis by PriceWaterhouseCoopers has noted, “Backlogs provide a significant cushion between demand and current production rates that could absorb any reasonably anticipated softening of demand.” To a substantial degree, employees of major Pentagon contractors are being used as pawns in a political game, with threats of mass layoffs far exceeding anything that would be called for by the companies’ current financial positions.
This brings us back to McCain and company’s road trip to nowhere. It is a font of misleading information, starting with its allegation that reductions from current Pentagon plans would “gut defense.” In fact, a freeze in Pentagon spending that would be more than adequate to implement automatic cuts that would be triggered under current law absent passage of a significant deficit reduction package – a process referred to as sequestration.
This approach would lock in the Pentagon budget at extremely generous levels by historical standards. Even the Republican-controlled House of Representatives has voted in favor of a one year freeze in Pentagon spending. As Gordon Adams, former director of the Office of Management and Budget for National Security Affairs, has noted, an adjustment along these lines would still leave the United States with far and away the most capable military force in the world.
As for the weapons industry’s claims of economic distress — an assertion fully embraced by Sen. McCain and his colleagues — they ignore the fact that Pentagon spending is only one element of the federal budget. Keeping the Pentagon budget at current levels would require deeper cuts in domestic investments in areas such as education, infrastructure, and scientific research — all building blocks of a forward-looking, reinvigorated economy.
Military spending is a particularly poor job creator, so if it is sustained at current levels at the expense of deeper cuts in other federal programs there could actually be a net loss of jobs nationwide — the exact opposite of the impact claimed by biased industry studies.
And a recent Senate study carried out at the request of Sen. Tom Harkin (D-IA) provides a profile of the impacts of domestic cuts on each of the 50 states. For example, in New Hampshire, implementation of the sequester would deprive over 30,000 individuals of basic health and nutrition services, with the majority coming as a result of cuts in child health programs.
This is just one element of the potential impacts on the state, which would include the elimination of the jobs of about 1,000 teachers and the curtailment of much needed job training programs. These cuts would go much deeper if the Pentagon were exempted from sequestration or otherwise spared its fare share of cuts as part of a budget deal.
As for national impacts, the Harkin report notes that even the most recent Aerospace Industries Association-funded report on this issue asserts that domestic cuts would have a greater negative impact on Gross Domestic Product than Pentagon cuts would.
If McCain were truly interested in educating the public on the budgetary choices we face he would take into account the full range of programs in the federal budget, and he would consider the impact of changes in revenue on the overall picture.
Thankfully, there is a small ray of hope suggesting that this could happen, given enough public pressure. On at least one major project — Lockheed Martin’s F-35 combat aircraft — McCain has described management of the program as “abysmal,” and suggested that the program may have to be cancelled if its ballooning costs are not brought under control.
Given that the F-35 program is currently slated to be the most expensive weapons programs in the history of Pentagon procurement, reining in the program could be one element of a broader strategy for making necessary cuts in Pentagon spending.
And, to his credit, McCain’s cohort Lindsey Graham has acknowledged that any budget deal will have to include some increases in revenue.
Most hopefully of all, a recent poll sponsored by the Stimson Center and the Center for Public Integrity found widespread support for sensible cuts in Pentagon spending — beyond what would be required by the sequester. This was true in red states and blue states, and even in states with heavy concentrations of Pentagon spending.
As noted by veteran Pentagon budget analyst Winslow Wheeler, It could well be that the industry’s scare campaign — aided and abetted by politicians like Sen. McCain — will increasingly be ignored as the public comes to understand the true nature of our current budget dilemma. It’s not too late for Sen. McCain and his colleagues to reverse course and join the fight for a responsible solution to the deficit crisis.
William D. Hartung is the director of the Arms and Security Project at the Center for International Policy and the author of ‘Prophets of War: Lockheed Martin and the Making of the Military-Industrial-Complex.’
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