Friday, October 19, 2012

10/18/12 RD Bulletin: Romney Adviser Walks Back 4% of GDP Proposal

 
Highlights
 
News: Freshman Senator Chris Coons (D-DE) is proposing cutting approximately $75 billion in federal spending as a “down-payment” in order to delay sequestration by six months.  Coons has shared his idea with the head of the Gang of Eight, Senator Mark Warner (D-VA), who is leading deficit reduction talks in the Senate. 
 
News: The chairman of the conservative Republican Study Committee, Representative Jim Jordan of Ohio, said that the only thing he considers worse than reductions in national security spending would be a complete nullification of sequestration without replacing it with commensurate cuts elsewhere in the federal budget.  “I would say the only thing that’s worse than cutting national defense is not having any scheduled cuts at all take place,” Jordan recently told C-SPAN viewers. 
 
Reports: Senator Tom Coburn (R-OK) has released a new “Wastebook” that lists one hundred government programs that are duplicative and wasteful and could be eliminated for approximately $18 billion in savings.  Amongst his recommendations, Coburn proposes cancelling one variant of the Littoral Combat Ship (of which there are two) and slowing concurrency development of the Ground-based Midcourse Defense (GMD) system.
State of Play
 
Executive: Defense News reports that senior Pentagon officials, including deputy secretary Ashton Carter and Chairman of the Joint Chiefs of Staff Martin Dempsey, met with current and former defense industry executives at a meeting coordinated by Business Executives for National Security to discuss impending sequestration cuts to defense.  Unlike past meetings, however, this event focused on how to manage a likely defense builddown – which historic precedent suggests could be as deep as thirty percent from 2010-peak spending levels.  The Stimson Center’s Gordon Adams commented on the meeting, saying, “Nothing focuses the attention of the department faster than watching their budget come down.” 
 
During the vice-presidential debate between current Vice President Joe Biden and Representative Paul Ryan (R-WI), Biden accused Ryan of exacerbating the federal budget deficit by proposing to increase defense spending to four percent of GDP, which defense analysts project would cost approximately $2 trillion.  Ryan responded to the question by clarifying that a Romney administration would in fact undo approximately $500 billion in defense reductions (from previously planned spending levels) mandated by the Budget Control Act – leaving unanswered the question of whether the GOP candidates would increase defense spending above the current baseline. 
 
Dov Zakheim, a senior advisor to the Romney-Ryan camp and a former defense comptroller, further clarified that a Romney presidency would not necessarily increase defense spending to four percent of GDP within its first term, but rather would increase it as the economy begins to recover and GDP growth strengthens.  Dov Zakheim's son, Roger, also admitted that Romney likely misspoke recently, when he indicated his interest in restarting the F-22 production line, which, according to the Lexington Institute’s Loren Thompson, would likely cost at least $900 million to reopen.  Zakheim said that the candidate meant to say that he would purchase additional F-35 Joint Strike Fighters, of which the Pentagon plans on procuring 2,443 aircraft.   The total cost of purchasing and maintaining the F-35 over its 55-year lifetime is estimated at $1.5 trillion, while the cost of procuring the aircraft alone has risen from its original cost estimate of $177 billion to $331 billion.
 
On his blog this week, Thomas Ricks voiced support for paying for U.S. wars abroad through the levying of a special “war tax” or through the issuance of wartime bonds.  PDA co-director Charles Knight and the Cato Institute’s Benjamin Friedman expounded on the idea in commentary published on National Interest, where the two argued against the Obama administration’s proposed “war cap,” which they asserted was doomed to legislative failure.  Because war funding is technically considered emergency spending and is not capped by the Budget Control Act’s statutory spending limits, the temptation to move extraneous funding into the OCO account is palpable.  Instead of limiting war funding through a cap, Knight and Friedman argue in favor of a war bond or war tax, saying, “A war tax, which Congress traditionally used to fund wars, would concentrate the cost of wars and serve as a disincentive to use the military recklessly. Like natural disasters, wars are hard to predict, but they are the sort of thing citizens should readily finance. This could be done through an income surtax, a device that is particularly appropriate when spending caps are in place to contain government spending. A surtax for emergency spending outside of the caps keeps it from adding to the deficit.” 
 
The Coast Guard is set to launch its largest procurement effort to date, developing and purchasing 25 medium-sized cutters for a total estimated cost of $8.1 billion.  The Coast Guard is years behind its goal of replacing its current fleet of medium-sized cutters, some of which are more than 45 years old.  In its Fiscal Year 2013 budget, the Department of Homeland Security proposed cutting two of the Coast Guard’s larger National Security Cutters, which some analysts see as a potential replacement for the Littoral Combat Ship, should the latter program fall under the budget ax. 
 
And the Navy continues to respond to blistering criticism of the Littoral Combat Ship, most recently manifested in an article by John Sayen, in which the author accused the Navy of “breathtaking incompetence” in developing the new class of vessel.  Rear Admiral John Kirby responded to Sayen’s piece on the Navy’s official blog, where he goes line-for-line through Sayen's criticisms and makes counter-arguments or labels Sayen’s data as “rooted in old, misconstrued or simply bad information.”  Kirby welcomes discussion and transparency, he says, but insists “I do expect the criticism to be based on facts — current, relevant facts.”
 
Legislative: Senator Tom Coburn (R-OK) has released a new “Wastebook” that lists one hundred government programs that are duplicative and wasteful and could be eliminated for approximately $18 billion in savings.  In 2011, Coburn released his “Back in Black” report which recommended trimming defense spending by $1 trillion over ten years through the elimination of several high profile weapons systems.  However, in the more recent Wastebook, Coburn only recommends curtailing two defense acquisition programs: he recommends cancelling one variant of the Littoral Combat Ship (of which there are two) and slowing concurrency development of the Ground-based Midcourse Defense (GMD) system. 
 
Coburn is a member of the so-called Gang of Eight, a group of bipartisan senators who are working on a “grand bargain” deficit reduction package that could replace sequestration.  He told Roll Call this week that he remains optimistic that Congress will be able to cut a deal to avoid sequestration during the approaching lame-duck session, saying, “Politicians tend to do the hard things when not doing them is more painful, and so I think you’re going to see a resolution in the fall to the cliff one way or the other because the pain of not doing it is so great… What that will be, I can’t tell, but I can tell you I think it will get resolved.” 
 
Meanwhile, government experts have been consulting with members of Congress over how to mitigate the impact of sequestration should no action be taken to ward off the cuts by January 2013.  These experts told CQ Today, that the White House could theoretically delay sequestration until later in calendar year 2013 through a process known as “apportionment.”  However, if Congress and the White House failed to reach a deal to ultimately nullify sequestration, the impact of the cuts would be greater the longer they are delayed by apportionment. 
 
The chairs of the Fiscal Commission, former senator Alan Simpson and Erskine Bowles met with the Gang of Eight last week to share their thoughts on developing a grand bargain.  The eight senators met three times last week in the Washington area to continue to their efforts, although no official announcement of agreement or progress was announced at the conclusion of the week’s meetings.  Bowles and Simpson say they will continue to meet with the Gang of Eight as it develops a rough outline of a compromise deficit reduction agreement. 
 
Freshman Senator Chris Coons (D-DE) believes that Congress should delay sequestration by six months while simultaneously cutting approximately $75 billion in federal spending as a “down-payment” on deficit reduction.  Coons says he’s shared his idea with the leader of the Gang of Eight, Senator Mark Warner (D-VA), whom declined to comment on Coons’ proposal.   
 
Project on Defense Alternatives Perspective
 
An under-reported aspect of this presidential campaign is that Gov. Romney’s running mate Rep. Ryan is much closer to President Obama’s position on defense spending than he is to Mr. Romney's.   This reflects a split in the Republican party on defense spending between the now traditional Reagan/Bush center of the party  represented currently by Mitt Romney and the more radical right flank represented by Paul Ryan.   The Romney wing favors stimulating the economy with tax cuts and military spending.  Rhetoric aside, their concern with deficits is secondary.  The Ryan wing is fiscally conservative, draws a line against tax increases, but is willing to sacrifice tax cuts and some military spending to the goal of reducing deficit spending.  This position was reinforced last week when Rep. Jim Jordan (R-OH), chair of the right-flank Republican Study Committee in Congress, indicated his preference for keeping some defense cuts in the mix instead of nullifying sequestration without replacing it with commensurate spending cuts. 
 
As a service to those legions of fact checkers following the presidential campaign debates, PDA has calculated the ten year defense spending projections for Obama, Romney, and Ryan together with a baseline of a “soft freeze” at the 2012 level adjusted for inflation.  These numbers are for National Defense (050) including both discretionary and mandatory accounts.  A 2012 level soft freeze will cost $6.18 trillion over ten years.  President Obama’s plan will cost $6.11 trillion, the $70 billion difference representing the true ten year defense spending reduction in his plan.  Mr. Ryan’s plan would cost $6.31 trillion, an increase in ten year defense spending of $130 billion ($200 billion more than President Obama’s plan.)  Mr. Romney’s plan would cost $8.17 trillion, an increase in ten year defense spending of $1.99 trillion ($2.06 trillion more than President Obama’s plan.)  It is noteworthy that Mr. Ryan’s plan is ten times closer to President Obama’s plan than it is to his running mate's plan. 
 
Of course, if elected Mr. Romney gets to be commander-in-chief and will set his administration’s defense policy.  But the difference within his own party on the preference for continued defense spending growth suggests his spending priorities will get lukewarm support in Congress.
 
Polling
 
The Pew Research Center for the People & the Press recently conducted a survey asking respondents how they would cut the federal deficit.  56 percent of those polled opposed cutting military spending as a means of reducing the deficit, while only 40 percent of respondents supported the idea.  Interestingly, when those polled are separated by whom they plan on voting for president during the upcoming elections, 58 percent of Obama supporters would cut military spending, while only 16 percent of Romney supporters selected that option.  Overall, only two options to reduce the deficit received majority support: raising income tax rates for people earning above $250,000 per year and limiting tax deductions for large corporations.  The survey was conducted from October 4 through 7.  Click here for the complete report.
 
 
News and Commentary
 
“The U.S. Navy approved an Alliant Techsystems Inc. anti-radar missile for full production valued at as much as $1.1 billion, even though the Pentagon's chief tester says the weapon's performance flaws ‘largely negate’ its ‘ability to accomplish its mission.’  While the missile ‘has the potential to eventually provide some improved combat capability against enemy air defenses, the weapon as tested has multiple deficiencies,’ Michael Gilmore, the Pentagon's director of operational testing, said in an emailed statement.”  (10/17/12)
 
Foreign Policy: The Fiscal Slide
Gordon Adams writes, “We are in the middle of a political and rhetorical donnybrook about the threat that falling off the fiscal cliff poses for our national security (to say nothing of what it would do to domestic discretionary spending)… But does this mean the end of our national security (and domestic well-being), as the political debate suggests? A little careful noodling about the impact of a sequester on the Defense Department suggests it might not be the end of the world. In fact, it might be exactly the fiscal discipline DOD needs.”  (10/17/12)
 
“Paul Ryan insisted in the Oct. 11 debate that Mitt Romney will not increase defense spending. Joe Biden interrupted Ryan twice to say Romney will increase it by $2 trillion. Who’s right? The answer depends on another question: compared with what?” (10/16/12)
 
Via Ben Freeman, “The ongoing debate about Pentagon spending and sequestration is a glaring example of how special interests with deep pockets can convince policymakers that even their most absurd claims are true.  After slashing tens of thousands of jobs during years of record profits, the defense industry finances 'studies' professing their ability to create jobs. While threatening to layoff off even more workers to save for their corporations’ money, big Pentagon contractor CEO’s enjoy lavish compensation packages worth more than $20 million. To put that into perspective, the Pentagon could pay more than 300 soldiers with the compensation of just one of these CEO’s.”  (10/16/12)
 
By David Axe, “In 2010, an Air Force CV-22 Osprey tiltrotor — a hybrid warplane that takes off like a helicopter and cruises like an airplane — crashed in southern Afghanistan, killing four people on board. When Brig. Gen. Don Harvel, the lead accident investigator, concluded that engine failure might have been to blame for the Osprey’s loss, he was overruled by a superior officer who Harvel says was eager to protect the military’s $36 billion investment in the controversial V-22.”  (10/15/12)
 
The fiscal cliff is increasingly becoming regarded as a gradual, but inevitable consequence of Congressional gridlock. According to CBO projections, however, if the combination of $600 billion in tax hikes and spending cuts take effect, the economic fallout could be another recession. CBO predicts an annual growth drop to 2.9 percent as well as seeing unemployment rise to 9.1 percent. Democrats have generally found themselves less concerned about the cliff, and as a consequence have decided to wait and leverage their bargaining power to help shield Medicare and Social Security. But there is a chance this debt squabbling and delay could actually save the economy from sliding back into recession: Ideally by the time an austerity package takes effect, as late as next spring, unemployment will have dropped more and the cuts will be less dramatic. (10/13/12)
 
Foreign Policy: Not All That It Can Be
Via Winslow Wheeler, “The empty rhetoric that U.S. armed forces are the best masks serious problems that have been festering for decades. Obama tolerates the problems; candidate Romney would make them even worse. All of it will continue until leaders emerge who understand that more money has meant more decay, and less money can mean the start of reform.”  (10/11/12)
 
Reports
 
 
Center of Strategic and International Studies: Asian Defense Spending, 2000–2011 (10/15/12)
 
 
The Executive Office of the President: Presidential Policy Directive 19 (10/10/12)
 
Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics: Department of Defense Management of Unobligated Funds; Obligation Rate Tenets (9/10/12)
 
Department of Defense Science Board: Task Force Report: Predicting Violent Behavior (August, 2012)
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