Chalk up another victory for House Republicans. They struck a tentative deal on raising the debt limit that focuses only on spending cuts, includes Medicare in programs vulnerable to sequestration and requires an up or down vote on the balanced budget amendment. They got all this while giving up nothing additional with respect to defense.
While the details of the proposed legislation have yet to be worked out, it is clear that the framework is essentially the House-passed bill. Under that legislation, the defense budget for FY 2012 and 2013 would be in a range of plus-or-minus three percent from the prior year’s level. In addition, the definition of defense spending now includes all security-related activities including the Intelligence Community, Homeland Security and the State Department. The framework does away with Majority Leader Harry Reid’s ridiculous proposal to include as savings the expenditures on Iraq and Afghanistan post withdrawal from those countries (2011 and 2014, respectively). The reason this last point is important is that the base defense budget would have been asked to pick up those expected “savings” when it became obvious to the CBO and everyone else that they were phantom.
The main remaining issue is the way the framework treats the sequestrations that would be triggered by a failure of a joint congressional commission to come up with at least $1.2 trillion in budget reductions required in order to trigger the second round of increases in the national debt. If the commission fails to reach agreement or the amount it cuts is less than the target figure, sequestration would automatically occur. Half of all cuts would come from defense spending, defined broadly, and half would come from non-defense spending, including Medicare as well as all other discretionary spending.
This approach actually protects defense spending from the draconian reductions of up to $1 trillion proposed by a variety of outside groups and individuals from the Simpson-Bowles commission to Senator Coburn. The maximum theoretical reduction in defense spending would be $600 billion over nine years with the reduction in the Pentagon’s budget being something less than this. This level of cuts would only be reached if the commission failed to agree on any budget cuts. The commission can propose any combination of reductions it sees fit. This means that defense could actually be subjected to a smaller reduction than planned.
Moreover, the Pentagon has been pursuing a strategic review directed by former Secretary of Defense Robert Gates based on the assumption that it would need to find some $400 billion in savings over the period FY 2012-2021. So, the first $400 billion in non-defense discretionary reductions is already “paid for” in current defense budget plans. The challenge is for the commission to come up with at least $400 billion in non-defense discretionary/Medicare cuts to match those made to the defense accounts.
Finally, the proposed reductions would begin only after the next election cycle. The political landscape in Washington could be quite different after November 2012. Of the possible outcomes of the elections there are few that would strengthen the hand of those who want deep cuts in defense spending.
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