Earlier this week when Rep. Nancy Pelosi suggested Speaker John Boehner would be called ‘the weakest … in history’ if he were a woman.
White House spokesman Jay Carney denounced the IRS’ actions, noting the IRS does not take its marching orders from the president.
“Democrats ask: What debt crisis?”
POLITICO reports, “Call them the debt crisis dissenters. The two parties are miles apart on how to cut the deficit and national debt: Republicans want to slash spending even more. Democrats want to raise revenue. And then there are the other Democrats — the ones who reject the entire premise of the current high-stakes fiscal fight. There’s no short-term deficit problem, they say, and there isn’t even an urgent debt crisis that requires immediate attention. This group could make it even harder for President Barack Obama to strike a grand bargain because they increasingly see no immediate need for either new spending cuts or significantly more revenue, both of which they say could further slow the economy.”
“The Democrats Have Lost On Sequestration”
The Washington Post reports, “That’s the simple reality of Friday’s vote to ease the pain for the Federal Aviation Administration. By assenting to it, Democrats have agreed to sequestration for the foreseeable future. Recall the Democrats’ original theory of the case: Sequestration was supposed to be so threatening that Republicans would agree to a budget deal that included tax increases rather than permit it to happen. That theory was wrong. The follow-up theory was that the actual pain caused by sequestration would be so great that it would, in a matter of months, push the two sides to agree to a deal. Democrats just proved that theory wrong, too. In effect, what Democrats said Friday was that in any case where the political pain caused by sequestration becomes unbearable, they will agree to cancel that particular piece of the bill while leaving the rest of the law untouched. The result is that sequestration is no longer particularly politically threatening, but it’s even more unbalanced: Cuts to programs used by the politically powerful will be addressed, but cuts to programs that affects the politically powerless will persist. It’s worth saying this clearly: The pain of sequestration will be concentrated on those who lack political power.”
Sequester: Another Agency Able to Make Smarter Cuts, Avoid Furloughs
Bloomberg reports, “The automatic federal spending cuts known as sequestration won’t force the State Department to furlough any employees this year. The State Department is notifying its staff today that new projections show ‘furloughs are not required’ during the year that ends Sept. 30 ‘due to cost-cutting measures implemented early in the fiscal year and a reduction in the sequester cut’ identified by the Office of Management and Budget, the department said today in response to an inquiry.”
FAA Flexibility Shows Administration’s Push For Tax Increases Has Failed
The Hill reports, “Opponents of sequestration are losing hope that the across-the-board cuts to federal spending will be reversed this year. The defense industry, health and education advocates and federal worker unions say that the ‘piecemeal’ approach that Congress adopted this week to ease furloughs at the Federal Aviation Administration (FAA) does not bode well for their cause. ‘All of this is rearranging the deck chairs. I’m not overly hopeful,’ said Joel Packer of the Committee for Education Funding. ‘We are really putting our concentration on fiscal 2014 and beyond.’ … Conservatives said Obama’s decision to accept the FAA fix — which transfers money from airport improvements to pay for air traffic controllers — shows his attempt to pressure Republicans into accepting tax increases has failed.”
“Experts: Debt-ceiling increase might not be needed until October”
The Hill reports, “Congress could have until as late as mid-October to haggle over raising the debt limit, according to new expert analysis. The Bipartisan Policy Center (BPC), which has been closely tracking the flow of the nation’s finances as policymakers prepare to spar over its $16.4 trillion borrowing cap, now believes the government could avoid a default on its obligations as late as mid-October once its borrowing cap is reinstated in May. In January, the BPC said it believed Washington would have to hike the limit to avoid default most likely in August, but there was a ‘realistic chance’ it could be later. Now, with fresh information about the nation’s fiscal picture, the BPC believes the deadline for a debt-limit deal will be roughly a month later, and possibly more. … They caution, however, that there is still ‘substantial uncertainty’ in the debt-limit timeline. The BPC believes the debt-limit deadline could come anytime between mid-August and mid-October.”
Congress Exempt from Obamacare?
The Wall Street Journal editorializes, “The Politico website broke the story Thursday morning that Congressional leaders were in hush-hush talks to exempt themselves and their staff from the wonders of ObamaCare. The story succeeded in blowing up the talks, but there’s a bigger story here about Congressional intentions that is worth telling. House Speaker John Boehner quickly took to Twitter after the Politico story appeared, saying that he’s not ‘sneaking any language into bills to solve’ a problem for Democrats. He added that full repeal of the law is ‘the solution to this & other ObamaCare nightmares.’ We’re told that Senate Majority Leader Harry Reid and House Minority Whip Steny Hoyer initiated the discussions. Mr. Reid now says he’s not trying to exempt anyone from the law. Mr. Hoyer’s spokesman says only that the Maryland Democrat wants the law to be ‘workable for everyone.’”
“Editorial: Driving toward bankruptcy”
The Washington Times editorializes, “There aren’t many winners in the current economic climate. Most companies are struggling against the burdens of higher taxes, red tape and uncertainty, and there’s no opportunity to expand and prosper. Some companies, however, have found a shortcut through deep political connections to the Obama administration. This became apparent last week at a hearing by the House Oversight and Government Reform Committee examining the collapse of Fisker Automotive. The Energy Department gave hundreds of millions of dollars to this maker of electric luxury automobiles designed to appeal to liberals who can pay $100,000 for a car. Fisker was backed by the investment firm Kleiner Perkins (where Al Gore is a partner) and actor Leonardo DiCaprio, who scouts for left-wing causes.”
Stimulus-Funded EPA Project Violated Mandate to Purchase U.S.-Made Products
The Washington Guardian reports, “While helping to clean up America, the Environmental Protection Agency didn’t always buy American. Investigators for the EPA inspector general found foreign-made steel pipes in a stimulus-funded project in President Obama’s home state of Illinois that violated federal regulations, and now they want taxpayers’ money back. But the agency is resisting demanding a refund. … Money handed out under the American Recovery and Reinvestment Act of 2009, also known as the stimulus, comes with a provision requiring projects to purchase U.S.-made items, another step designed to help bolster the economy.”
Senate GOP Grills Labor Department on Labor Union Payments
Fox News reports, “Senate Republicans say the Labor Department appears to be spending millions in taxpayer dollars to establish labor unions and promote collective bargaining in foreign countries and are asking top Obama administration officials for a full audit. The request was sent by Utah Sen. Orrin Hatch, the leading Republican on the Senate Finance Committee, and Tennessee Sen. Lamar Alexander, the top Republican on the Health, Education, Labor and Pensions Committee. ‘At a time when our federal budget is deteriorating rapidly … it is troubling to us that the department appears to be spending millions of dollars of taxpayer funds to establish labor unions and promote collective bargaining in foreign countries,’ they said in a letter to acting Labor Secretary Seth Harris. The purported activities were conducted by the agency’s Bureau of International Labor Affairs.”
Republicans Divided on Internet Sales Tax
The New York Times reports, “Legislation that would force Internet retailers to collect sales taxes from their customers has put antitax and small-government activists like Grover Norquist’s Americans for Tax Reform and the Heritage Foundation in an unusual position: they’re losing. For years, conservative Republican lawmakers have been influenced heavily by the antitax activists in Washington, who have dictated outcomes and become the arbiters of what is and is not a tax increase. But on the question of Internet taxation, their voices have begun to be drowned out by the pleas of struggling retailers back home who complain that their online competitors enjoy an unfair price advantage. … The Heritage Foundation and its more overt political arm, Heritage Action, have made no such equivocations. It is making a yes vote a black mark for a lawmaker on Heritage’s conservative scorecard, urging its members to call their representatives and senators, ‘pretty much everything we can,’ said Dan Holler, a spokesman for Heritage Action. Many Republicans have just shrugged. Supporters of the bill include Tea Party conservatives like Senator Ron Johnson, Republican of Wisconsin, and Republican leaders like Senator John Thune of South Dakota.”
Obama’s Social Security Pledge At Risk
The Associated Press reports, “As the population gets older, Social Security, Medicare and Medicaid are eating up more and more of the federal budget, squeezing the ability of the government to pay for other programs. Today, the three massive benefit programs account for 44 percent of federal spending. Left unchanged, they will account for more than 60 percent in 25 years, according to the Congressional Budget Office. Unless Congress acts, the trust fund that supports Social Security is projected to run out of money in 2033. At that point, the retirement and disability program would collect only enough in payroll taxes to pay about 75 percent of benefits. … In 2008, Obama said he wanted to strengthen Social Security by increasing payroll taxes on workers who make more than $250,000 a year in wages. He also laid down this marker, in a Sept. 6, 2008, speech to AARP: ‘John McCain’s campaign has suggested that the best answer for the growing pressures on Social Security might be to cut cost-of-living adjustments or raise the retirement age. Let me be clear: I will not do either.’ … Obama has already offered to break part of his 2008 pledge on Social Security. Twice in negotiations with GOP leaders, he agreed to adopt a new measure of inflation that would result in smaller cost-of-living adjustments, or COLAs, for Social Security recipients. Both deals fell apart. But now Obama has put forward the idea in his own proposed federal budget. If adopted, it would gradually trim benefit increases in Social Security, Medicare and other programs while raising taxes.”
“Army: Thanks But No Tanks”
POLITICO reports, “Built to dominate the enemy in combat, the Army’s hulking Abrams tank is proving equally hard to beat in a budget battle. Lawmakers from both parties have devoted nearly half a billion dollars in taxpayer money over the past two years to build improved versions of the 70-ton Abrams. But senior Army officials have said repeatedly, ‘No thanks.’ It’s the inverse of the federal budget world these days, in which automatic spending cuts are leaving sought-after pet programs struggling or unpaid altogether. Republicans and Democrats for years have fought so bitterly that lawmaking in Washington ground to a near-halt. Yet in the case of the Abrams tank, there’s a bipartisan push to spend an extra $436 million on a weapon the experts explicitly say is not needed.”
Boston Globe Endorses Ed Markey Over Stephen Lynch In Massachusetts Senate Race
Kerry pushes Turkey-Israel rapprochement
Kerry: Partly there delivering justice for Boston
“Obama budget likely to play same old song”
Former Congressional Budget Office director and American Action Forum President Douglas Holtz-Eakin editorializes in POLITICO, “Exciting as watching paint dry — that’s the usual assessment of a budget document. And Wednesday’s release of President Barack Obama’s budget promises to be as underwhelming as it is overdue. Will there be anything of interest at all? Not likely. However, if you believe in long shots — think of drawing three cards for a royal, straight flush while watching a 2013 Pirates World Series game seated next to Donald Trump, who does not use the word ‘I’ for nine innings — there is the following. The U.S. has huge budget challenges. And for the first time in years, we will have three budget proposals to carefully consider — instead of speeches and talking points. Thus, the House, the Senate and the White House will all have plans on paper from which one could hope a serious grand bargain on the debt might emerge. For that to happen, the president’s budget will have to be chock-full of detailed and serious entitlement reform proposals, tax reform specifics and mechanisms to enforce an agreement to keep the debt on a declining trajectory. Unfortunately, the administration’s pre-release spin notwithstanding, that is too far a break from history to bet on. Instead, look for a spending-heavy, gimmick-laden budget proposal that never balances and refuses to get to the heart of our debt crisis.”
Obama’s Budget Falling Into “Yawning Political Void”
The Washington Post reports, “President Obama will unveil his 2014 spending plan Wednesday, 65 days late and several trillion dollars short, by Republican standards, of effectively reining in the national debt. But the more relevant fact about the White House budget may be the yawning political void into which it is about to fall on Capitol Hill. Administration officials say their plan offers a path to compromise, a centrist course that avoids the extreme spending cuts of the House Republican budget as well as the $1 trillion tax hike endorsed last month by Senate Democrats. The president’s proposal contains the same set of policies that Republicans rejected just a few months ago during the “fiscal cliff” negotiations. Putting that plan into writing has failed to change many GOP minds, but it allows Obama to argue that he has met their demands to cut Social Security and Medicare. And it sets him up to blame Republican intransigence over taxes if a deal fails to materialize before Congress faces another showdown over the federal debt limit this summer. An actual deal remains elusive, however. It is not even clear who will do the negotiating.”
“Two months late, Obama’s budget proposal irks both sides”
CBS News reports, “President Obama’s budget arrives two months late, faces skeptical Republicans, irate Democratic activists and carries the burden of trying to erase $1.2 trillion in spending cuts under sequestration the White House dislikes but has failed to persuade Congress to reverse or amend. … House Republicans consider Mr. Obama’s document a tardy irrelevance. Democrats in the Senate are focused on fights over gun control legislation and the drafting of a sweeping immigration reform bill. Democrats will welcome Mr. Obama’s budget politely but pay it little respect. In fact, Senate Democrats ignored the biggest and most combustible idea in Mr. Obama’s budget: $230 billion in 10-year savings derived from a new formula for calculating annual cost-of-living adjustments for Social Security and other federal benefits. The adjustments are designed to help retirees on fixed incomes keep pace with inflation.”
Obama Sends Congress His $3.77 Trillion Dollar Blue Print for Spending
The Associated Press reports, “President Barack Obama is sending Congress a $3.77 trillion spending blueprint that seeks to achieve an elusive ‘grand bargain’ to tame runaway deficits by raising taxes further on the wealthy and trimming popular benefit programs such as Social Security. The president’s proposal being unveiled Wednesday includes an additional $1.8 trillion in deficit reduction over the next decade, bringing total deficit savings to $4.3 trillion, based on the administration’s calculations. It projects that the deficit for the 2014 budget year, which begins Oct. 1, would fall to $744 billion. That would be the lowest gap between spending and revenue since 2008. … Obama’s plan is not all about budget cuts. It also includes an additional $50 billion to fund infrastructure investments, including $40 billion in a “Fix It First” effort to provide immediate investments to repair highways, bridges, transit systems and airports nationwide. Obama’s budget would also provide $1 billion to launch a network of 15 manufacturing innovation institutes across the country, and it earmarks funding to support high-speed rail projects.”
Obama Proposing Revenue-Neutral Corporate Tax Reform
POLITICO reports, “President Barack Obama is expected to use his budget proposal to call on Congress to overhaul the corporate tax system in a way that doesn’t generate additional revenue, a move that is sure to anger liberal Democrats in the Senate. The White House didn’t respond to requests for comment on the expected language, which several sources said would be included in the fiscal 2014 budget proposal that will be unveiled Wednesday. Beyond calling for revenue-neutrality, it’s not clear how deeply the president’s budget will wade into the choppy waters of corporate tax reform.”
Liberals Furious Over Potential Cuts to Entitlements
Dana Milbank editorializes in The Washington Post, “Sen. Bernie Sanders of Vermont, red in the face, took off his jacket and rolled up a shirt sleeve — but there was no relief from the discomfort of his affliction. The poor guy is suffering from triangulation. The man triangulating him, President Obama, has proposed cuts to Social Security and Medicare as part of an attempt to find a middle ground in the budget debate. For Sanders (I), a liberal member of the Senate Democratic caucus, the betrayal stung so badly that he literally took to the streets, joining left-wing activists for a protest Tuesday afternoon outside the White House. … [T]he progressives’ street protest did Obama a favor. He needs to have the likes of Bernie Sanders against him. It strengthens his hand and helps him negotiate a better deal with Republican leaders, who can now see that liberal backbenchers and interest groups can sometimes be as intransigent as conservatives. At a Republican presidential debate in 2011, all eight candidates on the stage said they would reject a budget deal that raised taxes even if it had $10 of spending cuts for every dollar of tax increases. At Tuesday’s protest, I put the reverse question to participants: Could they accept a dollar of cuts in Medicare and Social Security benefits for every $10 of increased taxes on corporations and the wealthy? All those I asked said they would decline.”
Fed Pension Program Expected to Be Exhausted in 15 Years
The Washington Guardian reports, “The federal program that protects workers in multiemployer pension plans expects to be exhausted in 10 to 15 years, and the financial hit will most likely land on retirees, a new report said this week. The Government Accountability Office said the Pension Benefit Guaranty Corporation will be overwhelmed because so many multiemployer plans are so seriously underfunded that they will soon be unable to meet their obligations to retirees. The plans have suffered from various factors, including losses in the stock market, the impact of the recession on the companies that sponsor the plans, and the growth in the ranks of the retired. … Beneficiaries are certain to feel the impact. Many plans, struggling to stay solvent, have already reduced benefits and increased employer contributions – which, in turn, reduced the amount of money employers could devote to pay raises or other benefit programs. When a multiemployer plan becomes insolvent, PBGC sends it money to keep benefits flowing to retirees and to fund the plan’s administrative operation. The aid is nominally a loan, although the money is almost never repaid, the report said.”
“New defense budget means more financial uncertainty for Pentagon”
Reuters reports, “The Obama administration is poised to roll out a 2014 defense budget that is billions of dollars higher than legally mandated spending caps, setting the stage for another year of financial uncertainty and turmoil at the Pentagon, defense analysts say. The White House will propose a $526.6 billion defense budget on Wednesday when it unveils its spending plan for the fiscal year beginning October 1, U.S. officials say. That is $51 billion above the spending caps set by a 2011 law aimed at controlling government deficits. The White House budget plan proposes spending reductions and revenue increases that officials say would make defense cuts under a process known as sequestration unnecessary. But a deal on taxes and spending with the Congress seems unlikely, given that President Barack Obama, a Democrat, and the Republican-controlled House of Representatives have been trying for two years to achieve one. As a result, the Pentagon appears to be headed toward another round of forced budget cuts in October with no plan in place for absorbing the reductions, even as it struggles to implement a $41 billion budget cut for which it was ill-prepared.”
Majority of Americans Have Unfavorable View of Tax Code
The Washington Post reports, “A clear majority of Americans have an unfavorable view of the federal income tax system, according to new Washington Post-ABCNews polling. But, in a somewhat remarkable finding, a majority of Democrats view the tax system in a positive light while Republicans and Independents carry the exact opposite view. Fifty-three percent of self-identified Democrats in the Post-ABC survey view the income tax system favorably while 43 percent see it unfavorably. That’s a stark contrast to the 66 percent of Republicans and 62 percent of independents who have an unfavorable opinion of the tax system. … Whatever the reason, the data is intriguing given that President Obama will release his budget proposal today even as the two parties continue to circle one another in the seemingly endless dance of how to solve (or at least address) the nation’s debt problems. Reforming the tax code has long been a priority for Republicans who insist it could reduce the deficit while averting a tax rate increase. But, at least according to these Post-ABC numbers, Democrats don’t see the tax system as broken and may well put up a fight if and when their GOP rivals push tax reform over tax increases as a solution to the country’s fiscal problems.”
Obama’s Budget Eyes Millionaires and Sequester Cuts
Reuters reports, “The White House on Wednesday proposed a budget that sharply trims the U.S. deficit over three years by forcing millionaires to pay more in taxes and enacting spending cuts that replace the ‘sequester’ reductions that went into place last month. President Barack Obama’s fiscal 2014 budget blueprint ensures that those making $1 million a year or more would have to pay at least 30 percent of their income, after gifts to charity, in taxes, officials said. That increase, along with spending cuts and a 28 percent cap on tax deductions for high earners, would bring the U.S. budget deficit down to 2.8 percent of GDP by 2016, senior administration officials told reporters. The nonpartisan Congressional Budget Office in February projected the U.S. deficit to be 5.3 pct of GDP this year. … Obama’s budget proposal would replace those cuts with his original deficit reduction proposal from December. That offer included $930 billion in spending reductions and some $580 billion in tax revenues. The president’s budget includes spending on policy priorities such as infrastructure and early childhood education. He would pay for those programs with additional new taxes and the elimination of some tax breaks for the well-off.”
President’s Nominee to Run Entitlements Vows to Run Them Like A Business
Reuters reports, “President Barack Obama’s nominee to lead the huge agency that runs Medicare and Medicaid got rare bipartisan praise on Tuesday, but faced tough questions about healthcare reform and a recent controversial decision on Medicare Advantage payment rates. Testifying before the Senate Finance Committee, which will decide whether to advance her nomination, Marilyn Tavenner said her role would be to run the Centers for Medicare and Medicaid Services as a business, and as a partner with many healthcare entities for the benefit of all. … ‘We have an $820 billion dollar business to run that a large amount of this country has a stake in, from beneficiaries to providers to hospitals to insurance companies to Congress to the administration to our CMS employees and contractors,’ Tavenner said. ‘We need to operate CMS as a business and act like business partners.’ In a sign of her bipartisan appeal, she was introduced by one of the nation’s most prominent conservative lawmakers and a longtime foe of Obama’s Affordable Care Act, fellow Virginian and House Majority Leader Eric Cantor, who worked with Tavenner when she ran the state’s Medicaid program.”
Spending Daily | March 22, 2013
Airlines Trade Group to FAA: Budget Cuts Can Be Made “Without Major Furloughs”
The Wall Street Journal reports, “Planned furloughs of air-traffic controllers that could cause major disruptions in air travel are sparking a dispute between the Federal Aviation Administration and airlines over how much discretion the agency has in making its sequester cuts. The FAA, which employs virtually all of the country’s civilian air-traffic controllers, says the furloughs are unavoidable under mandatory federal budget cuts, and it predicts flights could be delayed by up to 90 minutes at busy airports as a result. The airline industry’s leading trade group, Airlines for America, has sent a legal memo to federal officials arguing that the FAA can make the cuts without major furloughs. Representatives of several major airlines said they back the trade group’s position, but declined to comment further. Two airline officials, who wouldn’t be named, said in interviews they think the FAA is making fliers political pawns, as the Obama administration looks to use public backlash over flight delays to force Republicans into a budget deal.”
Senate Set to Pass First Budget in Four Years
The Hill reports, “The Democrat-controlled Senate appears set to approve its first budget resolution in four years. Votes on amendments to the budget began Thursday night, with a final vote set for late Friday or early Saturday. In a sign of caucus unity, only one Democrat broke ranks to support a key GOP motion on Thursday night. The motion simply called for Democrats to rewrite their budget so that it balanced within ten years.”
Senate Dems Oppose GOP Request to Rewrite Budget That Balances
According to The Hill, “Senate Democrats stuck together on Thursday night to oppose a GOP floor motion that would have required them to rewrite their budget to make it balance. The motion was defeated on a 46 to 53 vote. Sen. Joe Manchin (D-W.Va.) joined with the united Republican conference to support it. … The Senate Democratic budget does not project a balance, despite raising $975 billion in taxes and cutting an equal amount of spending using a baseline favored by Democrats.”
“’Vote-a-rama’: The Senate Budget Votes That Tell The Tale”
POLITICO reports, “A big chunk of the upcoming Senate budget vote-a-rama will be a waste of time — like votes on senators’ pet causes or generic partisan issues. But there’s some good news buried in the dozens of amendments that are coming across the Senate floor between now and Friday: A handful of them will matter. None of them will actually become law, but some will test support for important bills to come later this year or beyond. Others could define possible 2016 candidates. And others still could tell President Barack Obama whether he’s got a shot at a grand bargain.” Read more…
Ryan Budget Voted Down in Senate
The Hill reports, “The Senate rejected House Budget Committee Chairman Paul Ryan’s (R-Wis.) budget Thursday night. Senate Budget Committee Chairwoman Patty Murray (D-Wash.) forced Senate Republicans to vote on Paul’s plan through an amendment she offered, which failed on a 40-59 vote. … ‘Enough is enough. Republicans received a vote on their extreme proposal; now that it has failed once more, it’s time for Republicans to work with Democrats to enact a budget that reflects our values of fairness and opportunity for all,’ House Minority Leader Nancy Pelosi (D-Calif.) said after the vote. … Murray’s budget includes $100 billion in stimulus funding that she says would help boost economic growth and workforce training. Her plan has come under heavy fire from Republicans who say it over-estimates the extent to which it would reduce the deficit, and it raises nearly $1 trillion in new taxes. Democrats say their budget cuts thedeficit by $1.85 trillion over ten years through an equal amount of spending cuts and new revenue, but the GOP has said that because it assumes the sequester will not happen, the amount of deficit reduction is closer to $700 billion.”
Lawmakers Cancelling Recess Trips in Light of Cuts
The New York Times reports, “Official travel abroad by members of Congress — trips known universally on Capitol Hill by the shorthand term ‘codels’ — has always been something of a sensitive topic. Critics deride the Congressional delegations as high-flying, taxpayer-financed junkets, while members and their staffs vigorously defend them as critical fact-finding and research trips. Now, the long jet-setting tradition of Congressional recesses just got grounded by the same $85 billion across-the-board budget cuts, which have also canceledWhite House tours and lengthened airport lines and have some federal employees receiving furlough notices.. Normally, Congress’s coming two-week break would be the perfect time for dozens of lawmakers to scurry overseas. But in this time of heightened fiscal discipline, an increasing number of members are eschewing such trips and returning home, to spend the time in their districts with their families and constituents.
Defense Furloughs Delayed
The Associated Press reports, “The Defense Department will delay furlough notices for its civilian employees for about two weeks while officials analyze the impact of a new spending bill on planned budget cuts, the Pentagon said Thursday. The delay comes as defense officials continue to wrangle over how many civilians should be exempt from the unpaid leave requirement, including how much of the U.S. intelligence community should be excluded. A senior defense official said Thursday that as much as 10 percent of the department’s 800,000 civilian workers overall could be exempt from the furloughs. The official said the exact numbers were still being worked out.”
Defense Analysts Warn Pentagon to Start Planning Cuts
Reuters reports, “The Pentagon needs to stop stalling and start figuring out how to cut its budget by $50 billion annually for the foreseeable future in a way thatpreserves national security, defense analysts from across the political spectrum said on Thursday. Warning that the department appeared to be clinging to the hope that Congress and the White House would eventually reverse the cuts, the analysts said the Pentagon needed to focus on factors that drive long-term cost growth, including overhead, compensation and acquisition. … The Pentagon is scrambling to reduce spending by $46 billion this fiscal year after a law requiring $500 billion in defense spending cuts over the next decade took effect on March 1. The cuts came as the department was implementing a $487 billion cut over the same period that went into force last year. … Congress alleviated some of those issues on Thursday when it approved funding for the government for the rest of the year.”
“Pentagon handed out $419 million in improper travel reimbursements last year”
According to The Washington Guardian, “During the recent sequester debate, the Pentagon was among the most vocal federal agencies in describing the potential impact of the automatic spending cuts that took effect March 1. It has not been as vocal, however, about another priority: complying with a law Congress passed three years ago to trim wasteful government spending. While making improvements in some spending areas, the Defense Department was singled out this week for failing to trim unnecessary travel reimbursements. In fact, the Pentagon’s internal watchdog concluded that wasteful travel spending actually grew last year to a total of $419.3 million, accounting for roughly five percent of the Pentagon’s mammoth $8.4 billion travel budget.”
Tax Reform Tied Up in Senate Amid Deficit Debate
The Hill reported, “Prospects for tax reform in Congress are in limbo because of a fight over whether the effort should raise revenue to reduce the deficit. The dispute has held action by the Senate Finance Committee, which has not begun preliminary work on overhauling the tax code. Senate Majority Leader Harry Reid (D-Nev.) is undecided whether it should proceed if Republicans do not agree up front on how much revenue should go to deficit reduction. … A Senate Democratic aide noted that while members of the Finance panel are well-versed on policy options, other members of the caucus need in-depth briefings. The Senate Finance Committee held its first issue meeting on tax reform Thursday, in which members discussed papers laying out policy options. The panel plans to hold these meetings regularly on Thursdays. … The biggest obstacle to tax reform is that both parties are at a stalemate on the question of what to do with new revenues.”
Insurance Companies Warn of Sharp Increase in Premiums
The Wall Street Journal reports, “Health insurers are privately warning brokers that premiums for many individuals and small businesses could increase sharply next year because of the health-care overhaul law, with the nation’s biggest firm projecting that rates could more than double for some consumers buyingtheir own plans. The projections, made in sessions with brokers and agents,provide some of the most concrete evidence yet of how much insurance companies might increase prices when major provisions of the law kick in next year—a subject of rigorous debate. … The gulf between the pricing talk from some insurers and the government projections suggests how complicated the law’s effects will be. Carriers will be filing proposed prices with regulators over the next few months. Part of the murkiness stems from the role of government subsidies. Federal subsidies under the health law will help lower-income consumers defray costs, but they are generally not included in insurers’ premium projections. Many consumerswill be getting more generous plans because of new requirements in the law.
Cyprus Given Monday Deadline for Bailout Deal
The Washington Post reports, “The euro currency union, a centerpiece of Europe’s efforts to knit its far-flung nations into a coherent whole, edged toward a rupture Thursday when the region’s central bank said it was ready to pull the plug on Cyprus.The stark ultimatum came in a terse statement Thursday from the European Central Bank’s governing board, which said that on Monday it would cut off the flow of euros to Cyprus’s struggling banks unless the country’s leaders reach agreement with the International Monetary Fund and other European nations on the terms of a $20.5 billion bailout to save their country from financial disaster. The deadline sent Cypriot leaders scrambling to find fixes, and by Thursday night they were discussing restructuring the nation’s worst-off bank and imposing capital controls that would sharply restrict depositors’ ability to withdraw money, an effort to prevent bank runs. Because Cyprus is small and its banks aren’t so wired into the international system, a failure isn’t likely to trigger the kinds of global problems feared if Greece or another euro nation were to leave the currency union.”
“Senate calls for an end to medical device tax”
The Hill reports, “The Senate on Thursday approved a bipartisan budget amendment calling for the end of a medical device tax enacted as part of President Obama’s healthcare reform bill. … The 2.3 percent tax has proven unpopular since passed in 2010, but was key to ensuring that the Obama health law did not add to the deficit. The budget resolution is not binding, so even if the Senate resolution is reconciled with a competing House version, the device tax would still be in effect.”
The former secretary of State is the latest in a series of political figures to back gay marriage in the last year.
Spending Daily | March 11, 2013
Some Convinced Entitlement Reform Now Obama’s #1 Priority
The Washington Examiner reports, “President Obama, hoping to make debt reduction part of his legacy, appears focused on striking a grand bargain with Republicans to reform Medicare this year. Medicare’s growing share of the budget and its increasing toll on the expanding debt were the main topic of conversation at an unprecedented dinner meeting last week between Obama andSenate Republicans, who came away convinced that entitlement reform is now the president’s No. 1 priority. And he wants the job done by this summer. … Medicare is the biggest driver of the nation’s debt, Obama told the group, and it’s costing far more than American workers are pumping into the system through paycheck deductions. ‘They all think that Medicare is their money, and to a certain extent it is,’ Obama said, according to Sen. Ron Johnson, R-Wis., who attended the event. ‘But for every dollar they put in, they get three back. The American people don’t understand that.’
Dems to Obama: Don’t Touch Entitlements
POLITICO reports, “President Barack Obama may be thinking about a ‘grand bargain’ to address spending and the federal deficit, but there’s a key constituency he has to persuade to come along. Democrats. The talk of any deal with congressional Republicans — and for now, it’s just that: talk — has liberals worried the White House will give in to changes to safety net programs including Medicare, Medicaid and Social Security. … One hundred and seven of the 200 House Democrats signed a letter to Obama threatening to vote ‘against any and every cut to Medicare, Medicaid or Social Security benefits — including raising the retirement age or cutting the cost of living adjustments that our constituents earned and need.’”
Senate Dems Struggle to Pass Budget by Easter
The Hill reports, “Senate Democrats say they will soon pass their first budget in four years, but it is proving a test. Disputes over tax cuts, spending reductions and entitlement reform all present challenges to Budget Committee Chairwoman Patty Murray (D-Wash.) and Majority Leader Harry Reid (D-Nev.). The Democrats’ narrow 12-10 majority on the panel means one defection would mean failure, if Republicans stick together as expected. There is more leeway on the Senate floor because budget resolutions cannot be filibustered and Democrats control 55 seats. Still, the party can afford to lose only five votes before Vice President Biden’s deciding ballot would likely become necessary. … They have signaled that their budget will do more to raise revenue than to cut spending and that it will not end deficits. In a memo, Murray adumbrated the justification for this by noting that Congress has already approved $1.8 trillion in spending cuts since 2010 but only $600 billion in new taxes.”
“Pump Up the Fraud”
The Washington Free Beacon reports, “A politically connected engineering company that received massive stimulus contracts has admitted that workers committed widespread fraud under the encouragement of its executives while working on a major taxpayer-funded nuclear cleanup effort. Employees of CH2M Hill routinely inflated hours worked on the cleanup effort at the Hanford nuclear waste site in Washington state between 1999 and 2008. Company executives sanctioned those violations in order to obtain bonuses that required certain performance benchmarks, according to an agreement between the company and the Justice Department filed in federal court on Friday.”
“Too Much Talk of Taxing”
Judd Gregg editorializes in The Hill, “Many who march in the army of the president say that all they want is to return to the good old days when Bill Clinton rode the range and richpeople paid their fair share of taxes. … In 2000, the top tax rate was 39.6 percent and there was a 2.9 percent Medicare tax on top of that. Therefore, the stated tax burden on high income Americans and small businesses was 42.5 percent. After the ’fiscal cliff’ tax increase, the top rate is now 39.6 percent and on top of that there is a new 3.8 percent Medicare tax rate forpeople with incomes over $200,000. This means that the top stated rate for taxes is now 43.4 percent — a rate that is higher than that paid in Clintonian times. … The capital gains rate on small businesses and high-income people is also now higher than in the Clinton years. It is 23.6 percent today as compared with 20 percent in Clinton’s last years. Even if you look at the effective rate, high-income people are paying more today than in the last decade of the last century. The effective rate is 27.6 percent today as compared with 26.4 percent back then. There should be happiness in Obama-land. But, alas, there is not. The president and his minions in Congress continue to call for the rich, also known as small business-owners, to pay more. What is the goal here? Obviously, it is not to return to the tax policies of the Clinton years regarding wealthy Americans and small businesses, since we have already done so.”
Are Senate Leaders Road Blocking Deficit Talks?
The Hill reports, “Sen. Tom Coburn (R-Okla.) accused Democratic and Republican Senate leaders of standing in the way of a bipartisan deficit-reduction deal. ‘The Senate’s not nearly as dysfunctional as it’s made out to be, because there’s great relationships in the Senate,’ said Coburn, who is at the center of deficit talks. ‘Our problem in the Senate is the leadership in the Senate, not the members in the Senate.’ He said President Obama, who has tried tocircumvent Republican leaders by reaching out to rank-and-file members in recent days, has a good chance at striking a grand bargain despite widespread skepticism. … Coburn said many lawmakers on both sides of the aisle are eager to forge a compromise and blamed the Democratic and Republican leadership in Congress for impeding their efforts. He said he came away from last week’s meeting hopeful that Obama would begin talking to the public about the need to reform entitlement programs, the biggest drivers of the federal deficit. Coburn said a deal would need to be struck before the start of the 2014 campaign season and indicated his willingness to reduce the deficit by raising new revenues through tax reform in exchange for entitlement reform, a concession Obama has demanded.”
Ryan Claims Budget Will Balance Books in 10 Years
Bloomberg reports, “House Budget Committee Chairman Paul Ryan is planning to unveil a 2014 budget plan this week that would balance the government’s books in 10 years by limiting the annual growth of spending to 3.4 percent. The budget proposal assumes that Congress would repeal President Barack Obama’s health-care law set to be implemented next year, Ryan said yesterday on ‘Fox News Sunday.’ That assumption depends on the unlikely possibility that the Democrat in the White House and those who control the Senate agree to repeal the president’s signature domestic policy achievement. Ryan, a Wisconsin Republican, said his budget would save $5 trillion over 10 years, the same amount his two previous budget plans had proposed saving by 2040. His party’s vice presidential nominee in 2012, Ryan said new tax revenue of more than $600 billion that Congress and the president agreed to in January will help achieve a balanced budget in 10 years. … ‘Instead of growing spending at 4.9 percent’ annually, ‘we grow spending 3.4 percent’ so ‘the result is a $5 trillion’ cut in the increase of spending over 10 years, he said.”
“Cuts Give Obama Path to Create Leaner Military”
The New York Times reports, “At a time when $46 billion in mandatory budget cuts are causing anxiety at the Pentagon, administration officials see one potential benefit: there may be an opening to argue for deep reductions in programs long in President Obama’s sights, and long resisted by Congress. On the list are not only base closings but also an additional reduction in deployed nuclear weapons and stockpiles and a restructuring of the military medical insurance program that costs more than America spends on all of its diplomacy and foreign aid around the world. Also being considered is yet another scaling back in next-generation warplanes, starting with the F-35, the most expensive weapons program in United States history. None of those programs would go away. But inside the Pentagon, even some senior officers are saying that the reductions, if done smartly, could easily exceed those mandated by sequestration, as the cuts are called, and leave room for the areas where the administration believes more money will be required. These include building drones, developing offensive and defensive cyberweapons and focusing on Special Operations forces.”
Let’s see, there’s the Iranians, the sequester, the Federal Budget that defies reduction, but none of those are going to have impact that is going to roll across the nation with the coming massacre in state and municipal financing.
The big blue states and cities are teetering on the cliff and it’s doubtful that a good outcome is in sight.
States and cities have much bigger problems running deficits than does the federal government because they can’t print money. They have to raise taxes, cut spending – as in real dollar cuts – or borrow money.
In 2008 Vallejo, CA filed a chapter 9 bankruptcy because their tax base fell apart reducing revenues and their cost of employee wages and pensions were killing them. From Governing comes this assessment:
Many fiscal observers point to Vallejo as Exhibit A of why municipal bankruptcies are a bad idea. The city’s credit rating plummeted, all but killing its borrowing ability. Cuts to services and public safety led to increased crime and prostitution. Even now, the city faces a looming collective bargaining battle with labor unions, and its 2013 budget draws several million dollars from rainy day reserves.
Now that may not be a good result, but welcome to the real world.
For the past four decades, public employee unions and elected Democrats have engaged in theater that has given Democrats access to taxpayers pocket books in an unprecedented way. Democrats who head big blue states and cities “negotiated” with PE unions giving them large pay increases and unchecked pensions. The unions then got an automatic payroll deduction for dues, collected before the members ever saw their checks and before the money even got warm in their accounts, the unions wrote checks to help elect more Democrats. Rinse and repeat.
That little should-be-a-RICO-violation is coming to an end and it’s not going to be pretty.
That was until Central Falls, R.I., declared bankruptcy. The finance-strapped town of 20,000 people, located on the northern outskirts of Providence, had been trying to renegotiate its pension contracts for months with no success. When it filed for bankruptcy protection in August 2011, the slate was essentially wiped clean. The city immediately moved to change its labor and retiree agreements. The new deal hammered out by Central Falls and the unions was essentially what the city had wanted all along, says Ted Orson, the attorney for the city’s receiver. The final agreement slashed pensions by 55 percent…
There are two large cities in California fighting the same battle, San Bernardino and Stockton, and then there’s Detroit which will be taken over in about 30 days by a state manager with essentially the same powers as a bankruptcy judge. Union contracts, including retirees’ benefits are being rewritten unilaterally. In the case of Stockton, they are petitioning the court to allow them to haircut bond holders principal. If that happens, it will be the first time in history that bond holders of municipal bonds have actually lost principal.
The bottom line here is that the stigma of a city filing bankruptcy is gone, the recalcitrant unions are going to get slammed and potentially, bond holders may well discover that muni bonds aren’t the safe haven they’ve been for a hundred years.
The world is going to change dramatically. Blue state governors and blue city mayors are being forced to stand up to unions. The public has had it with tax increases – at least at the local level – and are not siding with unions. Bond holders are going to be looking for substantially higher interest rates and real security to do deals in the future.
If you’re a “progressive” at the local level, you’ve just run out of other people’s money. The end of the world!
The Examiner – Well that was fast. Less than a month after Senate Democrats passed a debt limit hike that included a provision delaying their pay if they failed to pass a budget this year, Senate Democrats are already signaling that no budget should be expected.
“Senator Murray is working on a budget right now and we hope we can get that done,” Sen. Jack Reed, D-R.I., told CNN yesterday. “But we need time. So the sequestration will prevent — preempt us from getting a budget done and other factors.”