Budget

The Sequester: Now What?

flickr/Penn State news
flickr/Penn State news President Obama gambled that the threat of the automatic sequester of $85 billion in domestic and defense cuts would force the Republicans to accept major tax increases, and so far he is losing the wager. The Republican leadership, which was badly divided over the New Year’s deal that delayed the fiscal cliff, is now re-united around the proposition that Republicans will accept no further tax increases. So the president is left to court individual Republican House members to support loophole closures in exchange for the restoration of some popular domestic and military spending. But for the moment, Republicans got what they wanted—big spending cuts, party unity around no tax increases, and a weakening of a newly re-elected president. For Obama and the Democrats, there are three big risks going forward. First, the sequester slows down economic growth—cutting it in half this year from about 3 percent to 1.5 percent according to the Congressional Budget Office...

The Once and Future Gov

AP Photo/Eric Risberg
AP Photo/Eric Risberg A merica’s most futuristic governor seems borne back ceaselessly into the past these days. As he shows me around his office on a crisp winter morning, California Governor Jerry Brown points out not just the desk that his father, Edmund “Pat” Brown, used during his own term as governor from 1959 to 1967 but also photos of his grandparents and his great-grandfather, who came to California in the gold rush years. “He knew John Sutter,” Brown says. The only two governors in the past half-century who were native Californians, he points out, were he and his father. At 74, Brown has lost little of the intensity that impressed and occasionally discomfited voters during his first tenure as governor nearly 40 years ago. His outfit—an open-collar shirt under a white pullover sweater, blue jeans—may be West Coast casual, his shaved head may call to mind the Zen monks with whom he’s studied, but Brown’s emotional repertoire does not include laid-back, except when he’s talking...

Sequestration Nation and Remembering Robert Kennedy

Flickr/Kemon01
With the sequester now beginning, I find myself thinking about Robert F. Kennedy—and 46 years ago when I was an intern in his Senate office. 1967 was a difficult time for the nation. America was deeply split over civil rights and the Vietnam War. Many of our cities were burning. The war was escalating. But RFK was upbeat. He was also busy and intense—drafting legislation, lining up votes, speaking to the poor, inspiring the young. I was awed by his energy and optimism, and his overriding passion for social justice and the public good. (Within a few months he’d declare his intention to run for president. Within a year he’d be dead.) The nation is once again polarized, but I don’t hear our politicians talking about social justice or the public good. They’re talking instead about the budget deficit and sequestration. At bottom, though, the issue is still social justice. The austerity economics on which we’ve embarked is a cruel hoax—cruel because it hurts those who are already hurt the...

The U.S. Budget, By the Numbers

AP Photo/Ed Andrieski
AP Photo/Ron Edmonds I n the argument over the "sequester," the across-the-board cuts to both domestic and military programs that are about to take effect, everyone in official Washington seems to agree that the government's budget is bloated. Despite the economists telling us that this is still a terrible time for austerity (just look how well it has worked out for Europe), the argument between Republicans and Democrats seems to be whether we need to just slash the budget mercilessly, or slash the budget somewhat less and raise some taxes. But is the federal budget really so big? Let's take a look at some graphs. If you look just at raw dollars, it's true that the size of government has increased steadily in recent decades (there are a lot of reasons why that's the case). It's also true that spending went up at the beginning of the Obama administration, but it's important to understand why and how. The answer to why is simple: the Great Recession. When a recession hits, government...

The Five Most Terrifying Things about the Sequester

AP Photo/J. Scott Applewhite
The latest fiscal showdown concerns the “sequester”—across the board cuts to (almost entirely) discretionary spending that will total just over $1 trillion in the next decade, and which are set to take effect on March 1. What should those who have better things to do with their life than follow fiscal policy debates know about the sequester? 1. The sequester will hurt job-growth As we pointed out during the debates raging in the run-up to the “fiscal cliff," the sequester was the second-most damaging component of the austerity bundle set to take effect on January 1, 2013. The worst component was the non-renewal of the payroll tax cut, which is already dragging substantially on the economy . All told, if the sequester kicks in the economy will likely end the year with roughly 500-600,000 fewer jobs than if it were repealed. These are jobs the economy desperately needs . To be clear, the sequester alone won’t drive the U.S. economy back into outright recession, but it surely will make...

Lockheed, Stock, and Barrel

Do we truly need brand new aircraft carriers? Nope, but try telling the Pentagon and their many contractor friends.

AP Photo/Northwest Florida Daily News, Devon Ravine
AP Photo/Eric Talmadge This is the third in a three-part Prospect series on what an ideal military budget might look like. Read Part One on the military's current responsibilities here . Read Part Two on the real threats that our military should be protecting our country from here . W hat stops the United States from crafting a military budget that makes sense? As this series has shown, to defend Americans and to protect American economic interests—even if broadly defined—the military would need vastly less resources than it currently enjoys. Sure, people in our defense establishment will complain about "bloat" and "waste" and "inefficiency," but when it comes to actual cuts, they just aren't done. "Now's not the time," they say, and considering the harm that sequestration cuts will likely do to many people's jobs and possibly to our economic recovery, there might be something to it—but they always say that. So, why do conversations about possible—and advisable—cuts always end up a...

Trading The Blame Game for The Bully Pulpit

Flickr/Neon Tommy
The White House apparently believes the best way to strengthen its hand in the upcoming “sequester” showdown with Republicans is to tell Americans how awful the spending cuts will be and blame Republicans for them. It won’t work. These tactical messages are getting in the way of the larger truth, which the president must hammer home: The Republicans’ austerity and trickle-down economics are dangerous, bald-faced lies. Yes, the pending spending cuts will hurt. But even if some Americans begin to feel the pain when the cuts go into effect Friday, most won’t feel it for weeks or months, if ever. Half are cuts in the military, which will have a huge impact on jobs (the military is America’s only major jobs program), but the cuts will be felt mainly in states with large numbers of military contractors, and then only as those contractors shed employees. The other half are cuts in domestic discretionary spending, which will largely affect lower-income Americans. There will be sharp...

Threat versus "Threat"

The second entry in our series on how to fix the Pentagon budget

flickr/zennie62
AP Photo This is the second in a three-part Prospect series on what an ideal military budget might look like. Read Part One here . Read Part Three on what's keeping us from a more perfect military budget here. A bout a year ago, Army General Martin Dempsey went to Capitol Hill trying to defend $55 billion in annual budget cuts by sequestration. With a straight face, the Joint Chiefs of Staff chairman testified to a panel of the House Appropriations Committee: “In my personal military judgment, formed over 38 years, we are living in the most dangerous time in my lifetime right now ." It's the kind of thing that makes a person alternately question the judgment and the honesty of our military leaders. It's obvious nonsense , just another ludicrous statement in the campaign mounted by the military, industry, and Congress in their effort to fight sequestration. That said, Dempsey raises a good question: Do we live in a dangerous world? Are there threats out there that might be the sort of...

Protecting the Homeland? So Last Century

What exactly does our military do these days?

Robert F. Bukaty
AP Photo This is the first in a three-part series on how to fix the military's budget. Read Part Two on the real threats that our military should be protecting our country from here . Read Part Three on what's keeping us from a more perfect military budget here. A s March 1 inches closer and the rhetoric about sequestration gets hotter, now seems like the time to ask what an ideal Pentagon budget would look like. The ever-so-scary talking points about how defense sequestration will be "devastating" and will "hollow out" our forces are patently ridiculous on their own terms, but in their hyperbole they highlight how little effort is made to justify spending hikes or maintaining the enormous status quo—and the efforts that do get made aren't very credible. Sequestration would cut $55 billion per year from the Pentagon's annual trough, which is more than any country but five (China, Russia, the UK, France, and Japan) spend on their militaries, yet it's only about 7 percent of our...

Still More BS

AP Photo/Alex Brandon
We all do things that we regret. President Obama must surely regret that he ever listened to the extreme deficit hawks back in early 2010, when he appointed the Bowles-Simpson Commission, the fiscal zombie that just won’t die. The commission is long defunct. The recommendations of its majority report never became law (because that required a super-majority). But the dreams and schemes of B-S have become the gold standard of deflationists everywhere. The test of budgetary soundness is: does it meet the recommendations of Bowles and Simpson? On Tuesday, the depressive duo were at it again, calling for additional deficit reductions of $2.4 trillion over a decade. This is almost a trillion dollars beyond what President Obama and Congress are considering. This clarion call was issued under the aegis of the corporate group, “Fix the Debt,” a bunch of millionaires and billionaires urging regular people to tighten their belts for the greater good. Quite apart from the impact of particular...

Sequester Stupidity

President Obama arguing against the sequester cuts.
Next week, the "sequester," a package of severe cuts to government spending, will take effect. Although the consequences won't all be felt the first day, they will come fairly quickly, and they'll be painful. Not only to people on an individual basis—say if you're one of the thousands of government employees being furloughed, or when you're waiting in longer lines at the airport—but to the broader economy as all these effects begin to ripple outward. And so, the administration and Congress are engaging in what surely looks to most Americans like a spectacularly idiotic argument about whose fault it is. But before we start blaming both sides equally for indulging in a battle over blame, we have to be clear on who's to blame for all the blaming. The truth is that while both sides are trying to spin things their way, there's a difference in how each is talking about the sequester. President Obama's principal argument is this: The sequester is a really bad thing, so Congress needs to stop...

Homeless, Hungry, Hung Out to Dry

USDA/Bob Nichols
USDA/Bob Nichols Students at Washington-Lee High School, in Arlington, Virginia. More than 31 million students from low-income families benefit from the the National School Lunch Program, a federally assisted meal program administered by the United States Department of Agriculture. T he sequester—a set of deep, across-the-board cuts to discretionary spending set to take effect if lawmakers cannot agree to a longterm budget deal—was never supposed to happen. But as the deadline for reaching an agreement ticks ever closer, Congress appears hopelessly deadlocked to avoid it. Under the original agreement, sequestration would have triggered $100 billion in cuts to both defense and non-defense discretionary spending on January 1—an 8.2 percent reduction in non-defense expenditures. The “fiscal-cliff” deal reached in December reduced that amount to $85.3 billion and pushed the deadline back to March. Under the new deal, non-defense discretionary spending would be cut by $42.7 billion each...

Pretty Words, Dismal Economics

AP Photo/ Evan Vucci
AP Photo/ Evan Vucci President Barack Obama at a pre-kindergarten classroom at College Heights Early Childhood Learning Center in Decatur, Georgia last week. The president is traveling to promote his economic and educational plan that he highlighted in his State of the Union address. B arack Obama’s State of the Union address last week—which called for, among other things, universal pre-K and raising the minimum wage—offered a bold program for rebuilding the middle class. But the president’s continuing commitment to budgetary austerity makes these commitments hollow, if not cynical. And just as Obama and the Democrats paid the price in the 2010 midterm election for excess caution and conciliation, the results of tokenism are not likely to be pretty in the midterms of 2014. Obama's plans for rebuilding the middle class will cost money. Universal pre-K alone would require upwards of $20 billion a year. Unless the president cynically imagines token “demonstration” programs, job training...

The Return of the Balanced Budget Amendment

Flickr/Gage Skidmore
S enate minority leader Mitch McConnell says Senate Republicans will unanimously support a balanced-budget amendment, to be unveiled Wednesday as the core of the GOP’s fiscal agenda. There’s no chance of passage so why are Republicans pushing it now? “Just because something may not pass doesn’t mean that the American people don’t expect us to stand up and be counted for the things that we believe in,” says McConnnell. The more honest explanation is that a fight over a balanced-budget amendment could get the GOP back on the same page—reuniting Republican government-haters with the Party’s fiscal conservatives. And it could change the subject away from social issues—women’s reproductive rights, immigration, gay marriage—that have split the Party and cost it many votes. It also gives the Party something to be for , in contrast to the upcoming fights in which its members will be voting against compromises to avoid the next fiscal cliff, continue funding the government, and raising the...

The President's Dream State

AP Photo/Charles Dharapak
AP Photo/Charles Dharapak President Obama at last night's State of the Union address B y any measure, President Obama’s first term was consequential. In four years, he signed an $800 billion stimulus program into law, laid the foundation for universal health insurance, secured new regulations governing the financial sector, repealed "don't ask, don't tell," and put the United States on the path back to economic recovery. For his second term, he has an agenda that’s just as ambitious and—reflecting the coalition that re-elected him—unambiguously progressive. Other than a de rigeur nod to deficit reduction—he mentioned “the deficit” ten times—the speech ticked off a litany of liberal policies: Universal pre-school, a cap-and-trade system to limit carbon emissions, a higher federal minimum wage (set at 9$ an hour, the highest it’s been since 1981), and billions more in new infrastructure spending to repair roads and bridges. That’s to say nothing of comprehensive immigration reform (with...

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