Archive for the ‘defense spending’ category

Promises Have Consequences

November 4, 2016

Donald Trump has promised “big time” tax cuts, the repeal and replacement of Obamacare, a get tough policy with China, renegotiation of major trade treaties, a massive investment in the infrastructure, new wall between Mexico and the US, and a return of previously outsourced jobs, including steel and coal jobs. There are many who like these positions and will vote for Trump thinking the Donald will produce. I wonder whether they ever thought “will he/she love me in the morning”?

My guess is that Trump really doesn’t worry about keeping these promises, even if he gets elected. He will simply make up some new promises while claiming he never promised anything in the first place. But what might happen if Trump actually tries to fulfill his campaign pledges?

Were Congress to pass a “big time” tax cut, Congress would be immediately confronted with an exploding deficit. The Federal Debt would have to expand to cover the tax shortfall. Trump is a businessman and no stranger to debt and even bankruptcy would remain relaxed.

The more fiscally conservative Republicans, however, would go apoplectic.

These conservative budget hawks would demand immediate budget cuts and target entitlements along with defense spending. Defense cuts, however, would put the fear of god into other Republicans especially the neoconservative crowd. These patriots would agree to entitlement cuts but cutting defense is a non-starter for them. So much for party unity.

But what about the infrastructure and all the new jobs it would bring, or the Mexican wall and all the immigrants it would keep out, and what about the buses, trains, and federal agents necessary to deport the 11 million undocumented aliens? These might have to wait.

About this time, Ford, General Motors, GE, and dozens of other companies will announce they are unable to bring back outsourced jobs for competitive reasons, even if President Trump does cut their corporate income tax. And by the way, in order to remain competitive, more jobs might be teed up to go overseas… for competitive reasons.

Oh, and repealing Obamacare will bring with it some significant political damage when most Americans find out that their insurance costs are not going to decrease. (Do you remember the US healthcare delivery program before Obamacare?  The previous program experienced annual increases two or more times the rate of inflation.  So why should we expect cost to suddenly decrease?)

Insurance companies will say “no, thank you” to picking up the extra cost for “pre-existing conditions” and “no limits on total payouts”. Insurance companies will balk at covering dependents under 26 years of age too. And when President Trump asks States to pick up more Medicaid costs, they will not so politely say no.

And, those “low cost” policies sold across State borders, we’ve heard so much about, will come more into focus. They will protect the insured for just what they are written to do and no more. These bargain policies will come with huge deductibles and co-pays or very narrow coverage, or both.  Those wanting broader coverage will need to get the check book out again.

By this time, Trump will realize it was so much easier running for office than actual being President. Who will he blame then?

Sequestration Again

August 3, 2015

As Congress returns to “work” (maybe session is a better word than work) , the Federal Budget and the Federal Debt issues will come front and center. For those who link the two and see the Federal Debt as driven by unbalanced budgets, this is the time to take a stand. The more “Tea Party-ish” the Congress member, the stronger the opposition to any unbalanced budget. And damn the consequences.

We have seen this irrational behavior before. Each time the GOP conservatives rise up and block passage of funding bills, the inevitable “shutting down” Government is presented as a viable option. While Congress members cloaked themselves in the flag, this attitude is arrogance at the extreme and incompetent at the least.

The Government shut downs actually save little money (since Government workers are always granted missed pay). The shutdowns also inconvenience average Americans (who have no part in this food fight) by closing functions like passport services, Federal Parks, and all sorts of Federal Benefits Offices. Polls have consistently indicated that voters shift their support from the GOP to Democrats each time this exercise is run.

The early 2015 “battle cry” is tied to “Sequestration”. This budgetary process was a bi-partisan compromise where mandatory cuts would be imposed, across the board, to maintain government spending at some specified level. This meant that if Federal spending was projected to increase 2% above this magic number, all Federal agencies with discretionary spending would need to cut by 2%. That meant both the Department of Education and the Defense Department would need to cut all programs by 2%.

Today neither party likes sequestration.  The main argument against sequestration has been that cuts should not be across the board. Opponents reasoned a Department head should be able to select which parts of its budget to cut providing these cuts were equivalent to 2% of the total budget. This year the argument is taking on a new twist.

Both Democrats and Republicans favor increasing the Defense Department budget. Hmmm.

The GOP wants to exempt Defense from sequestration (but keep sequestration for the rest of the budget). Hmmm.

President Obama has said he will have none of that. Unless there are increases also in aid to education and certain other favored programs, the President has promised to veto any budget proposal. No agreement, no budget, and hello government shutdown.

One would think that serious minded people would question why Defense needs to increase? The Defense Budget is close to $600 billion and one would think there must be “waste and fat” through out it. That same view could be held for the remainder of the Federal Budget too. Never the less, our elected representatives assure the public programs can not be cut.

Wouldn’t logic then convince voters to increase tax revenues to cover these absolutely necessary expenses? And, at this thought, our 535 Congress members come unglued.

There are many compromises easily at hand. The President and Congress could agree upon exemption which would allow increases in Defense and other Agencies’ budgets, and simply accept an increase in the Debt. They could also stick to sequestration and accept the cuts.

Until, however, there is a serious structural look that the Budget in which we thoughtfully question the cost drivers in Medicare, Medicaid, and Defense, there can be little hope of balancing the budget. Simply raising taxes is a mistake but it is the compromise of last resort.

Medicare creates a budget drain because payroll taxes are too low (what has been put into the fund) to cover current costs (what the medical industry is charging). Medicaid is more complex since it introduces the notion of whether healthcare should be available to everyone regardless of ability to pay. Simplistically, Medicaid is also a function of too little taxes and too high expenses “unless” you subscribe to the notion that healthcare is delivered only to those who can afford it.

Defense spending is the most complex. Inspection can quickly show us that Defense costs are murky and hide many programs deemed too classified to reveal. Spreading Defense spending around the 50 States makes for good politics but it is unlikely this practice leads to fiscal sensibility.

In the minds of our elected officials, keeping spending about where it is, with certain increases, makes the most sense. They prefer to hold their noses rather than undertake the hard work of real reform. Mix into these elected officials, some who see only a zero sum game, you have the makings of gridlock.

With the American public weary of war, selling Defense Budget increases will be tough (if the consequence is shut down). Shutting down the Government so close to the 2016 election could very well backfire even more than in the past.

With 17 GOP Presidential aspirants the budget should be red meat for the upcoming debates.