Spending Daily | February 14, 2013

“Social Security Head: Program Fraying from Neglect”
The Associated Press reports, “Outgoing Social Security Commissioner Michael J. Astrue has some parting shots for Congress, the White House and advocates for seniors. They have all ‘really walked away from Social Security,’ he says, leaving the program ‘fraying because of inattention to its problems.’ Instead of making the hard choices to fix Social Security’s financial problems, policymakers ‘use it as a tool of political rhetoric,’ Astrue said. … The trustees who oversee Social Security say the program’s trust funds will run dry in 2033, leaving Social Security with only enough revenue to pay about 75 percent of benefits. Already the program is paying out more in benefits than it collects in payroll taxes.” Astrue went on to say, “‘I think it’s a shame that Washington cannot get its act together to look at Social Security in detail in isolation and say, What do we need to do?’”

Sequester Fix May Be Pushed Back to Late March
Roll Call reports, “Even as they blame one another for automatic spending cuts set to take effect March 1, key lawmakers on both sides believe the best chance for a bipartisan deal to restructure the sequester will come by the end of March. ‘The best time to redesign the automatic spending cuts will come with the [expiration of the] continuing resolution on March 27,’ said RepublicanRep. Kevin Brady of Texas, chairman of the Joint Economic Committee. ‘The cuts will occur on March 1. Then there will be a fight in the CR over the design.’ … The flexibility on timing of a compromise stands in contrast to the public narrative both parties are weaving on the sequester, which targets the March 1 trigger date for the onset of $85 billion in draconian spending cuts. Each side is blaming the other party for the impasse in negotiations to reshape the plan they both agreed to in the 2011 deal.”

Boehner: Sequester Likely, Waiting on Plan from Obama
The Associated Press reports, “House Speaker John Boehner said Wednesday it’s unlikely the Republican-controlled House and Democratic-led Senate will prevent a wave of automatic spending cuts from beginning to strike the economy in two weeks. … Boehner said he has no plans to resurrect legislation passed by Republicans last year to block this year’s sequester. The speaker said that until Obama puts forward a plan to avoid the sequester and Senate Democrats pass it, ‘we’re going to be stuck with it. It’s going to be a little bleak around here when this actually happens and people actually have to make decisions.’ House Speaker John Boehner said Wednesday it’s unlikely the Republican-controlled House and Democratic-led Senate will prevent a wave of automatic spending cuts from beginning to strike the economy in two weeks.”

Dems Pushing For More Tax Hikes In Sequester Plan
The Hill reports, “A large group of liberal Democrats are pushing back against Senate Majority Leader Harry Reid’s plan to replace the sequester with an even balance of spending cuts and tax revenues.  They want the package to raise substantially more through taxes and cut less in spending. Reid, a Democrat from Nevada, has sided with President Obama in supporting a 50-50 split of spending cuts and tax revenues to stop the $85 billion sequester due to take effect March 1.  However, a significant portion of Reid’s caucus argues the split should be 80-20, with tax increases making up the bulk of the package. They contend Reid and Obama are negotiating with themselves by agreeing upfront to a 1-1 ratio of tax increases and spending cuts. … Senate liberals say this outcome would be unfair because, by their calculation, Congress has already enacted $1.7 trillion in spending cuts compared to collecting only $700 billion in new taxes. The members claim the total amount of deficit reduction, including proposals passed in the last Congress, should raise a dollar in taxes for every dollar it cuts in spending.”

Stimulus Funded Workers’ Play at LG Chem Factory
The Wall Street Journal reports, “The Obama administration’s electric car efforts took another hit on Wednesday after a federal inspection found a South Korean advanced battery maker never scaled up U.S. production despite receiving $142 million in federal grants. A Holland, Mich., factory owned by LG Chem Ltdl, part of LG Corp., was half-funded by a government grant and estimated to add some 440 jobs building battery cells for General Motors Co.’s GM +1.33% Chevrolet Volt and other vehicles. When demand for the plant’s batteries didn’t meet expectations, the company filled orders with cells made at a factory in South Korea, leaving the Michigan plant largely idle … The inspector general said that to avoid layoffs at the factory LG Chem paid idle workers $1.6 million in the third quarter of last year, about half of which was covered by its U.S. grant, even though there was nothing for them to do. The workers played board games, watched movies, and volunteered at local animal shelters during regular work hours, Mr. Friedman said. LG Chem has since paid back the government’s share of those charges.”

Deficit Concerns Losing Traction In Washington
The Washington Post reports, “President Obama’s State of the Union address laid down the marker for a new, activist phase of his presidency — one in which he will not allow concerns about the deficit to dictate the major policy decisions that confront him. But congressional Republicans insisted Wednesday that the problem they consider the biggest long-term threat to the nation’s prosperity is still a long way from being solved, and that they will keep it front and center. … As he begins his second term, Obama is convinced that he has gained the upper hand on fiscal issues, in part because the latest projections show the deficit is coming down from its record levels. Obama also argued in his speech Tuesday night that continuing to focus so intensely on reducing red ink could hamper the country’s ability to create ‘a growing economy that creates good, middle-class jobs — that must be the North Star that guides our efforts.’”

SOTU Speech “short on tax-policy specifics”
The Wall Street Journal reports, “President Barack Obama’s State of the Union speech Tuesday night was short on tax-policy specifics, but a fact sheet the White House put out just after midnight suggests that the administration is largely returning to ideas it outlined in last year’s State of the Union. One big question now is whether the administration will take the next step and turn more of its concepts into concrete proposals in its upcoming budget. That could give a shot of momentum to the slow-moving tax-overhaul process in Congress. The administration wasn’t saying on Wednesday.”

“Learning To Love The Sequester”
John Makin of the American Enterprise Institute argues that Washington should learn to love the sequester, writing in The Wall Street Journal, “Cutting government spending by $110 billion per year would lower total federal spending, currently at about $3.6 trillion per year, by 3%. That is a modest reduction in spending, especially in view of the widely proclaimed need to cut the deficit. Congress, especially Republicans, should embrace the sequester. While it represents only a modest, 10-year spending cut of $1.1 trillion—just 2.5% of projected total federal spending over that period—it still amounts to $2 of spending cuts for every dollar of the president’s tax increases enacted on Jan. 2. … The sequester, along with the tax increases, would slow growth for a quarter or two, perhaps to 1%. But thereafter the slower growth in government debt levels and less uncertainty attached to fiscal policy would lead to greater private investment, increased economic growth and substantially reduced deficits.”

Sequestration Burden Will Fall Heavily On Veterans 
The Washington Post reports, “If the federal government is forced to furlough civilian employees in the event of sequestration, the burden will fall heavily on a population that Congress and the White House have vowed to support: veterans. More than two out of five of the approximately 800,000 Department of Defense employees facing furloughs are veterans,  Deputy Defense Secretary Ashton Carter said Wednesday. ‘Forty-four percent of them are veterans,’ Carter told the House Armed Services Committee during a hearing on the potential effect of sequestration on the military. ‘Very soon we’re going to have to furlough the great majority of them.’ The Pentagon expects to furlough its civilian employees for the maximum statutory length of 22 days between the beginning of April and the end of the year, Carter said. That will amount to 20 percent of their pay, he noted.”

“No debt crisis in Obama’s State of the Union”
The Washington Examiner editorializes, “From President Obama’s State of the Union address, one might have come away with the impression that the nation’s finances are hunky-dory. Obama suggested that most of the heavy lifting on deficit reduction is already done, and that the rest can be accomplished bymaking minor adjustments to spending and closing tax loopholes on wealthierAmericans. Obama said he’s already signed $2.5 trillion in deficit reduction over the last several years and argued that’s more than halfway to the $4 trillion needed to address the deficit problem. A Congressional Budget Office report released last week assumes that the automatic spending cuts under sequestration provide an additional $1.2 trillion in 10-year deficit reduction. In other words, the CBO already assumes deficit reduction roughly in line with what Obama claimed was the goal. … In other words, if Obama won’t go beyond light tinkering with entitlements, he’s going to need to acknowledge the need for large-scale tax hikes on the middle class — something he failed to do during his first term in office, and also in Tuesday night’s speech.”

White House Opposes Pay Freeze Extension, But Won’t Block It
The Hill reports, “A bill under consideration by the House Rules Committee would extend the federal pay freeze throughout the entire year. The White House said Wednesday that it opposed a House bill that would prevent federal employees from receiving the half-percentage point pay raise set to go into effect next month, but the administration stopped short of issuing a formal veto threat. … Federal pay was frozen in 2010 during the financial crisis, with the small raise set to kick in at the beginning of this year. But its implementation was delayed through March 27 as part of the ‘fiscal cliff’ deal, with federal workers set to earn their raise with the expiration of the current continuing resolution.”

“Obama Bid for Europe Trade Pact Stirs Hope on Both Sides”
The New York Times, “President Obama’s call for a free-trade agreement between the United States and the European Union has unleashed a wave of optimism on both sides that a breakthrough can be achieved that would lift trans-Atlantic fortunes, not just economically but politically. Experts cited tough economic times on both sides of the Atlantic and a perceived need among European leaders for a cause to unify their frayed union as major reasons that an agreement might be reached now, where past efforts have failed. But an even greater consideration, they said, was the growing economic might of China. … Proponents hope that a comprehensive trade agreement will not only raise economic growth, but also lower prices for European and American consumers and give new impetus to a relationship that has lacked forward momentum almost since the end of the cold war. Talks could begin in late May or early June.”