http://market-ticker.org/akcs-www?post=217892
and.....
http://www.cnn.com/2013/02/22/opinion/hartung-military-spending-bloated/
http://hotair.com/archives/2013/02/23/woodward-why-is-obama-still-misleading-everyone-on-the-sequester/
http://www.businessinsider.com/republican-plan-sequester-2013-2
Senate aides confirmed Friday that Republicans are coalescing around an alternative to the sequester that would keep the lower spending levels in place, but give federal agencies greater flexibility to determine where the cuts are implemented.
and......
http://www.zerohedge.com/news/2013-02-22/sequester-front-loaded-pain-no-gain
Bottom Line: Why We Must Stop Deficits NOW
and.....
http://www.cnn.com/2013/02/22/opinion/hartung-military-spending-bloated/
There's plenty to cut at the Pentagon
updated 7:41 AM EST, Fri February 22, 2013
STORY HIGHLIGHTS
- Defense officials, Pentagon contractors warn budget cuts could decimate military
- William Hartung says the forced cuts aren't ideal but there's lot of fat at Pentagon
- He says weapons programs, military staffing levels are inflated
- Hartung: The Pentagon's accounting is a mess; hasn't passed an audit
Editor's note: William D. Hartung is the director of the Arms and Security Project at the Center for International Policy. Follow him on Twitter: @WilliamHartung
(CNN) -- Over the past few weeks we have been bombarded with tales of woe from Defense Secretary Leon Panetta, the Joint Chiefs of Staff and arms industry executives about what they have described as the potentially devastating impacts of cutting the Pentagon budget.
To hear them tell it, the most powerful military in the world will grind to a halt if it is required to cut its $500 billion-plus budget by about 8%.
There's no question that the sequester -- the automatic across-the-board spending cuts that will kick in if Congress and the president fail to agree on a balanced deficit reduction plan -- is not an ideal way to trim the budget.
It precludes one of the central tenets of good government: the ability to increase investments in programs that work while cutting or eliminating programs that don't. But we shouldn't confuse this management issue with an underlying truth. There is plenty to cut at the Pentagon without undermining our security.
Given this reality, it is astonishing that former Sen. Chuck Hagel, the Obama administration's nominee for secretary of defense, has been chastised for pointing out the obvious: The Pentagon's budget is bloated and ripe for reform.
Examples of egregious waste and misplaced spending priorities at the Pentagon abound. One need look no further than the department's largest weapons program, the F-35 combat aircraft.
Even before it has moved into full-scale production, the plane has already increased in price by 75%, and it has so far failed to meet basic performance standards.
By the Pentagon's own admission, building and operating three versions of the F-35 -- one for the Air Force, one for the Navy and one for the Marines -- will cost more than $1.4 trillion over its lifetime, making it the most expensive weapons program ever undertaken. And in an era in which aerial combat is of diminishing importance and upgraded versions of current generation U.S. aircraft can more than do the job, it is not at all clear that we need to purchase more than 2,400 of these planes. Cutting the two most expensive versions of the F-35 will save over $60 billion in the next decade.
As for the Navy, it is planning to invest $2.2 billion this year alone in the Littoral Combat Ship (LCS), a system that has suffered serious performance problems ranging from cracking hulls to failures of the shipwide power system. In addition, the service maintains its attachment to building costly and unneeded ballistic missile submarines at up to $8 billion per boat, even as possessing thousands of nuclear weapons is increasingly irrelevant to our security. Scaling back these programs would save at least $25 billion over the next 10 years.
Weapons spending isn't the only area in which smart savings are possible. Personnel costs are far too high.
For example, the Army put out a memo this week bemoaning the fact that budget cuts at the level called for under the sequester would cost up to 300,000 jobs nationwide. But the Army's plea for the status quo ignores two key facts: Our domestic basing structure is larger than it should be, and we have more troops than we need in a world in which we will no longer focus on fighting large, boots-on-the-ground conflicts like the wars in Iraq and Afghanistan. Cutting the Army by 100,000 troops beyond current plans would save $10 billion per year.
On the civilian side of the ledger, there has been far too little attention paid to the Pentagon's over-reliance on private contractors to do everything from tote guns to review budgets. The Department of Defense currently spends more on private contractors than on all of its civilian and military personnel combined, and many of them perform redundant tasks that could be done more cheaply by government employees.
Cutting the use of these contractors by 15%, as suggested by Taxpayers for Common Sense and the Project on Government Oversight, would save more than $350 billion over the next decade.
The most outrageous fact of all is that the Pentagon can't even figure out how much of our money it is wasting. The department has never passed an audit, making it nearly impossible to root out corruption and avoid duplication of effort. Whipping the Pentagon's accounting system into shape would save untold billions for years to come.
The budget cuts forced by sequestration may be a bad way to control spending, but there is no question that the Pentagon can reshape its budget to meet current challenges while saving hundreds of billions of dollars in taxpayer funds.
The Pentagon and the armed services should spend more time looking for ways to impose spending discipline and less time trying to prop up their budgets at levels we don't need and can't afford. And Congress should revise the law to give the military more freedom to spend funds where they are most needed.
http://hotair.com/archives/2013/02/23/woodward-why-is-obama-still-misleading-everyone-on-the-sequester/
Woodward: Why is Obama still misleading everyone on the sequester?
POSTED AT 10:01 AM ON FEBRUARY 23, 2013 BY ED MORRISSEY
Success may have a thousand fathers, and failure be an orphan, but don’t doubt the parentage of the sequester. After yet another week of White House denials of paternity and a new layer of hysteria over the nature of the cuts involved, Bob Woodward reminds us again who came up with the plan in the first place. As he reported in his book The Price of Politics more than a year ago from on-the-record interviews with the players involved, the sequester was proposed by then-Chief of Staff Jack Lew and personally approved by President Barack Obama, before Harry Reid presented it to Republicans as a take-it-or-leave-it option to end the summer 2011 budget standoff:
My extensive reporting for my book “The Price of Politics” shows that the automatic spending cuts were initiated by the White House and were the brainchild of Lew and White House congressional relations chief Rob Nabors — probably the foremost experts on budget issues in the senior ranks of the federal government.Obama personally approved of the plan for Lew and Nabors to propose the sequester to Senate Majority Leader Harry Reid (D-Nev.). They did so at 2:30 p.m. July 27, 2011, according to interviews with two senior White House aides who were directly involved.Nabors has told others that they checked with the president before going to see Reid. A mandatory sequester was the only action-forcing mechanism they could devise. Nabors has said, “We didn’t actually think it would be that hard to convince them” — Reid and the Republicans — to adopt the sequester. “It really was the only thing we had. There was not a lot of other options left on the table.”A majority of Republicans did vote for the Budget Control Act that summer, which included the sequester. Key Republican staffers said they didn’t even initially know what a sequester was — because the concept stemmed from the budget wars of the 1980s, when they were not in government.Why lie about this? Woodward explains that shifting blame is a necessary part of moving the goal posts the actual issue at hand in August 2011. By that point, the real problem for Obama was the debt ceiling, and the sequester put off the question of both spending cuts and tax increases. Republicans had agreed at that point to a deal that included a 1:1 ratio of new revenues (through tax reform rather than rate increases) and spending cuts, but then Obama came back and wanted more revenues, which scotched the deal. With the debt ceiling approaching a crisis point, both goals got pushed aside in exchange for a punt and the sequester as a lever to force a decision down the road:Lew testified during his confirmation hearing that the Republicans would not go along with new revenue in the portion of the deficit-reduction plan that became the sequester. Reinforcing Lew’s point, a senior White House official said Friday, “The sequester was an option we were forced to take because the Republicans would not do tax increases.”In fact, the final deal reached between Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) in 2011 included an agreement that there would be no tax increases in the sequester in exchange for what the president was insisting on: an agreement that the nation’s debt ceiling would be increased for 18 months, so Obama would not have to go through another such negotiation in 2012, when he was running for reelection.So when the president asks that a substitute for the sequester include not just spending cuts but also new revenue, he is moving the goal posts. His call for a balanced approach is reasonable, and he makes a strong case that those in the top income brackets could and should pay more. But that was not the deal he made.Besides, Republicans already compromised on the revenue side in January. Now it’s time to work on the spending cuts, but Obama clearly doesn’t want to cut anything from the budget. The nature of the cuts in the sequester and the disconnect from White House hysteria on them is so sharp as to dispel any doubt on that point. Bill Wilson at Forbes calls the sequester cuts “non-existent”:
According to Obama, the sequester would represent “a huge blow to middle-class families and our economy as a whole.” Obama’s White House has also referred to the sequester as “devastating,” saying its cuts would “imperil our economy, our national security (and) vital programs that middle class families depend on.”Sounds frightening – but is it true? Of course not. According to The Wall Street Journal ”federal domestic discretionary spending soared by 84 percent with some agencies doubling and tripling their budgets” during Barack Obama’s first two years in office. In fact the sequester would scale back just one of every six dollars in discretionary spending increases since 2008 – hardly a “huge blow.” Also, discretionary spending in 2008 was already tremendously inflated – having increased by more than 60 percent over the previous eight years.In other words this isn’t even really a cut – “devastating” or otherwise – it’s a modest growth rate reduction following years of unnecessary, embarrassing and unsustainable excesses.
Wilson notes that Obama doesn’t have a monopoly on hypocrisy:
U.S. Speaker John Boehner has repeatedly referenced “the president’s sequester” while decrying its “harmful cuts.”What hypocrisy. Obama and Boehner both supported the sequester as an excuse for yet another unsustainable run-up of our nation’s credit limit – which exhausted its latest $2.1 trillion increase last December (after less than seventeen months).“The debt ceiling deal in 2011 was agreed to by Republicans and Democrats, and regardless of who came up with the sequester, they all voted for it,” U.S. Rep. Justin Amash (R-Michigan) said recently. “So, you can’t vote for something and, with a straight face, go blame the other guy for its existence in law.”
As Bob Corker put it last week, the sequester amounts to $1.2 trillion in reductions in the trajectory of spending growth over the next ten years, in which we project to spend $45 trillion. It amounts to a 2.7% decrease in overall spending over the decade, hardly Draconian or savage or whatever hyperventilated appellation one chooses to use. If we can’t agree to cut even that much, there is no hope for a broader budget reform that brings us back to balanced budgets in the future, and there aren’t enough taxes in the country to make up the difference from the other direction without killing the economy and wiping out revenue altogether.
Update: Via Andrew Malcolm, Obama’s still misleading everyone on the sequester:
Hi, everybody. Our top priority as a country right now should be doing everything we can to grow our economy and create good, middle class jobs.And yet, less than one week from now, Congress is poised to allow a series of arbitrary, automatic budget cuts that will do the exact opposite. They will slow our economy. They will eliminate good jobs. They will leave many families who are already stretched to the limit scrambling to figure out what to do.But here’s the thing: these cuts don’t have to happen. Congress can turn them off anytime with just a little compromise. They can pass a balanced plan for deficit reduction. They can cut spending in a smart way, and close wasteful tax loopholes for the well-off and well-connected.Unfortunately, it appears that Republicans in Congress have decided that instead of compromising — instead of asking anything of the wealthiest Americans — they would rather let these cuts fall squarely on the middle class.
You know what might help? Having the Senate — controlled by Obama’s Democrats — pass an alternative. Have they done that yet? When that happens, be sure to let us know, Mr. President.
and.......http://www.businessinsider.com/republican-plan-sequester-2013-2
Republicans May Have Found A Brilliant Way To Win The Sequester
AP
The exact details of the Republican proposals are unclear. A GOP Senate aide told Business Insider that Republicans are considering a plan that would fund the government at the levels dictated by the sequestration — which amounts to about $85 billion in spending cuts for fiscal year 2013 — while giving the Obama administration the flexibility to reprogram the cuts at their discretion, provided that the balance remains between defense and non-defense discretionary spending cuts.
As TPM's Brian Beutler points out, the plan — which has gained traction among prominent conservative commentators, including the National Review editorial board and Karl Rove — is politically savvy for several reasons.
First, it deals with the biggest problem of the sequester, namely its meat-cleaver approach to spending cuts. This undercuts the White House's main argument against the sequester, which is that the cuts are arbitrary, and therefore threatening.
In reality, $85 billion is a relatively small number when it comes to the federal budget.
The Department of Transportation, for example, only needs to find $1 billion in cuts this year, or about 2 percent of its $55 billion budget. If the cuts are not applied uniformly to every program, it's hard to imagine that the DOT could not cut $1 billion from the department with marginal impact to its workforce and to everyday Americans.
The second benefit to the GOP plan is that it allows Republicans to avoid the political pitfalls of proposing their own budget cuts, and forces the Obama administration to determine — and take ownership — of the spending cuts.
The one problem with the GOP plan, however, is that it is unlikely to mitigate the effect of the spending cuts for the Defense Department, a key concern among Republicans.
"We prefer to have some more latitude, but at this stage in the game, the cuts are going to be painful no matter what," Lt. Col. Elizabeth Robbins, a spokesperson for the Pentagon, told Business Insider.
The budget cuts, Robbins explained, would apply to fiscal year 2013, but because the federal fiscal year begins in September, they would have to be condensed over just seven months.
The White House is likely to use this as political cover against the Senate Republicans' flexibility proposal. One Senate Democratic aide told Business Insider that Democrats are ready to reject the Republican plan, and will continue to insist that any sequester replacement include both spending cuts and new tax revenues. Moreover, House Republicans are also unlikely to provide much support for a plan that gives the Obama administration the authority to determine the spending cuts.
The more likely solution, according to administration officials and Senate aides, is that the White House will continue to fight the sequester battle, and use the upcoming fight over the Continuing Resolution to gain the additional flexibility in determining how to implement the cuts.
In the meantime, however, Republicans may have found a way to gain some ground in a debate they have been losing for months.
and......
http://www.zerohedge.com/news/2013-02-22/sequester-front-loaded-pain-no-gain
Sequester: Front-Loaded Pain, No Gain
Submitted by Tyler Durden on 02/22/2013 08:25 -0500
- Congressional Budget Office
- Debt Ceiling
- Fail
- Gross Domestic Product
- headlines
- President Obama
- Unemployment
The sequester was supposed to be such a bad outcome that it would force a compromise. The across-the-board cuts were so rigid and hurt so many favored programs, BofAML notes, the “Super Committee” was almost certain to come up with a more flexible alternative. And yet, not only did the Super Committee fail to even make a proposal, the negotiations have now devolved into a blame game – the two parties are trying to pin the blame, and the political cost, onto the other party. As we have expected for some time, the sequester will very likely hit on March 1. This well likely add further downward pressure to the economy in the second quarter, with job growth averaging less than 100,000 per month and GDP growth slowing to 1%.
Via BofAML,
The Sequester StraitjacketHow big?Federal budget accounting is incredibly opaque. There are two key complications. First, the sequester kicks in part way into a calendar year and about half way into a fiscal year, so figuring out the size of the shock requires first getting the timeframe correct. Second, it is important to distinguish between budget authority and actual spending; the latter depends on both past and present authority. The sequester cuts $1.2bn of budget authority over a nine-year period (2013-21).Netting out about $200bn in savings from lower interest payments, that works out to about $109bn in reduced budget authority per year. However, there are three complications in calculating the actual cuts in spending this year. First, under the fiscal cliff compromise the cuts for this fiscal year don’t start until March and they are “only” $85bn. However, there are only seven months left in the fiscal year, so on an annualized basis the cuts are equivalent to a $146bn drop in appropriations. Second, the actual cuts in spending will be less than $85bn because the sequester cuts budget authority, not spending. Programs can use leftover appropriations from past budgets to cushion the immediate cuts.The CBO estimates the actual spending cuts will be $42bn.
That doesn’t sound too bad. Unfortunately there is a third complication. Currently, defense spending is running higher than the current annual cap. This overshooting has to be made up in the remaining months of the fiscal year. Thus we would not be surprised if actual defense spending drops more than the CBO estimates. Our rough bottom-line: we expect $50bn in cuts over the remaining seven months of this fiscal year, equivalent to 0.54% of GDP over that period.
How messy?One of the most challenging things about the sequester is that it requires the cuts to be uniformly distributed at the “program, project, activity” (PPA) level. In other words, it doesn’t just cut spending, it freezes the way spending is allocated across projects. According to the Bipartisan Policy Center (BPC), this would have a dramatic impact on the allocation spending. For example, comparing Pentagon spending requests for 2013 to the sequester caps, it would cut spending on the overhaul of the USS Abraham Lincoln by 72%, but actually increase spending on the M-1 Abrams Tank by 442%. The cuts will be particularly damaging to longer term contracts. This creates a good deal of waste and expenses.
The cuts do not all hit on March 1; many will be phased in over a number of weeks. Many budget units are still triaging their spending cuts into “immediate, eventual and never.” The Defense Department is well advanced in its planning, but even they will phase in cuts over many weeks. For example, they plan to move about 80% of their 800,000 civilian employees to a four-day work week, but only starting in the last week of April.
Despite some implementation delays, we expect the bulk of the cuts for this year to be in place by the end of April. Every week that passes increases the cuts needed to meet the fiscal year target. Thus a department facing 10% cuts over the period from March to September will need to cut spending by 14% (=7/5 × 10%) if they wait two months to start.
How painful?
While the sequester makes a relatively small dent in the long-run deficit outlook, the cuts will be significant in the short run.The Federal government has about 2.2 million civilian workers with average salaries of about $75,000. There are also about 8 million contract workers, although most of these are presumably parttime. Some forecasters look for one to two million in job cuts. CBO expects about 800,000 in “full-time equivalent” employment cuts in response to the sequester by the end of 2014, and we are inclined to go with their numbers.We think more than half of those cuts will come from reduced hours rather than layoffs. If other agencies follow the Defense Department and put 80% of their employees on four-day furloughs, that would turn 1.8 million full time workers into part timers. If that started in late April, it would save about $11bn in budget outlays. These savings are equivalent to cutting about 400,000 jobs. Presumably some contract workers would also face reduced hours rather than unemployment. Over all, we would expect actual job losses of a few hundred thousand.
We would expect job cuts to start in March, particularly from the defense budget, as it faces the toughest cuts and has the most advanced plans. Then, if the sequester is not watered down, we would expect even bigger cuts in April. For now we are penciling in 50,000 in cuts for March, 100,000 in April, and 50,000 in May, with much smaller cuts thereafter. We will revisit these estimates over time.
The shock to GDP growth will be equally noticeable. The CBO estimates a -0.5% impact on 2013 GDP. Macroeconomic Advisors (MA) recently ran the cuts through their model and estimated that the sequester would cut growth over the four quarters of this year by 0.5%, 1.3%, 0.6% and 0.1%, respectively. This is very close to what we have been assuming all along. If anything, the near-term shock could be slightly bigger than the CBO and MA exercises because they do not include the extra cuts needed to offset overspending in the first half of the fiscal year. We expect a negative shock to GDP growth over this year of 0.4%, 1.5%, 0.7% and 0.2% respectively.
Will it stick?
As we have argued before, and as press stories now confirm, Republicans have been reassessing their tactics for extracting spending cuts. Deficit hawks can choose among three spending deadlines to extract further cuts: the March 1 sequester, the expiration of the continuing resolution on March 27 and debt ceiling in May.
The sequester could be the most politically palatable path, for several reasons.
- Both the debt ceiling and the continuing resolution are very blunt instruments for extracting concessions.Failure to extend these budget deadlines would result in a dramatic shutdown of large parts of the government. It is, in effect, throwing the budget baby out with the bath water.
- President Obama is now in a stronger position to “call that bluff.” He won a solid victory in the election. He does not have to run for re-election. His popularity rating is much higher than that of Congress. And the public has gotten tired of brinkmanship moments in Washington, tending to put more blame on Republicans than Democrats.
- Deficit reduction is painful, so better to get it over with now. The sequester will kick in more than a year and a half before the mid-term election. Moreover, the sequester requires no awkward negotiation.
At this stage we expect the full sequester to go through on March 1. We then expect a furious negotiation for the rest of the month, with three possible outcomes:
- Cut the sequester in half or more. The sequester is going to cause some ugly headlines, creating considerable pressure to scale it back. However, cutting it significantly would be a major capitulation for fiscal conservatives, particularly if they don’t want to make aggressive use of future brinkmanship moments. It would mean giving up on trying to “balance” the tax increases from earlier this year with spending cuts. We see a roughly 20% likelihood of a major watering down
- No revision. As we noted above, the sequester is not only a significant cut, it is very rigid. However, we would not rule out a breakdown in the negotiations to loosen the straitjacket. Congress does not like to surrender to the President power to reallocate funds, and reaching Congressional agreement on specific reallocations may prove impossible. We see a roughly 20% chance that the straitjacket remains.
- Minor cuts in spending and looser rules. The one thing the two parties will probably be able to agree on is that freezing individual line items in the budget is very inefficient and there should be some flexibility in shifting funds among related programs. We anticipate a roughly 60% likelihood that most or all of the sequester sticks, but with some funding flexibility.
Front-loaded painWe expect the sequester to add further downward pressure to the economy in the second quarter, with job growth averaging less than 100,000 per month and GDP growth slowing to 1%. Looking further ahead, however, we expect very little further fiscal tightening over the next two years as the two parties pull back and lick their wounds.
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