Bankrupting America’s Spending Daily

| April 8 2013

Spending Daily | April 8, 2013

“Mr. Hagel’s Budget Challenge”

The Washington Post editorializes, “When he was asked in 2011 about the possible impact of the sequestration on defense, Chuck Hagel breezily replied that the Pentagon was ‘bloated’ and ‘needs to be pared down.’ In his first major speech as defense secretary on Wednesday, Mr. Hagel’s assessment was considerably more sober. The $41 billion cut the department is taking this year, he said, ‘is already having a disruptive and potentially damaging impact on the readiness of the force.’ He added that he would not ‘assume or tacitly accept’ that ‘these cuts can be accommodated without a significant reduction in military capabilities.’… There is plenty of waste in the Pentagon budget. But if Mr. Hagel is to push through the kind of change he is talking about, he will need far more cooperation from the Pentagon bureaucracy and Congress than President Obama’s first two defense secretaries enjoyed. We wouldn’t bet on it. … The danger here is not merely that Mr. Hagel will fail to accomplish far-reaching reform. It’s that, having failed to do so, he will bring down spending with cuts that are more easily accomplished but far more damaging to national security.”

Orszag: Chained CPI May Yield “Diminishing” Returns

Former Obama Administration OMB Director Peter Orszag writes in Bloomberg, “News that the White House will propose a new cost-of-living index in the budget it releases this week has brought joy to deficit scolds and consternation to defenders of Social Security. The measure, called the chained consumer price index, would lower the annual payment increases for Social Security beneficiaries, saving the government money as it lowers the future monthly income of retirees and disabled Americans. The change would also raise revenue over time because it would cause more taxpayers to wind up in higher marginal brackets. What neither side seems to have noticed, however, is that the difference between the chained CPI and the standard CPI has been diminishing. That means the impact of switching indexes may not be as great as many assume. The change may still be a good idea, but it probably won’t matter as much as expected.”

Defense Dept Ramps Up Spending Despite Looming Cuts

Bloomberg reports, “The Defense Department announced contracts valued at as much as $39.4 billion in March, 71 percent more than the prior month, even as automatic federal budget cuts started taking effect. … March’s award total continued an increase in defense contracts in 2013. The Pentagon announced $23.1 billion in awards in February and $12.1 billion in January. The $39.4 billion in contracts announced last month was 15 percent less than the $46.1 billion disclosed in March 2012. Even with the budget cuts under sequestration, the Pentagon will spend at least $300 billion on contracts in the fiscal year ending Sept. 30, more than the amount spent in 2006, when the United States was supporting troops deployed to Iraq and Afghanistan, according to federal data.”

Pentagon Struggles With Rising Health Care Cost

The Associated Press reports, “The loud, insistent calls in Washington to rein in the rising costs of Social Security and Medicare ignore a major and expensive entitlement program — the military’s health care system. Despite dire warnings from three defense secretaries about the uncontrollable cost, Congress has repeatedly rebuffed Pentagon efforts to establish higher out-of-pocket fees and enrollment costs for military family and retiree health care as an initial step in addressing a harsh fiscal reality. The cost of military health care has almost tripled since 2001, from $19 billion to $53billion in 2012, and stands at 10 percent of the entire defense budget. Even more daunting, the Congressional Budget Office estimates that military health care costs could reach $65 billion by 2017 and $95 billion by 2030. … Defense Secretary Chuck Hagel insisted this past week that the military has no choice as it faces a $487 billion reduction in projected spending over the next decade and possibly tens of billions more as tea partyers and other fiscal conservatives embrace automatic spending cuts as the best means to reduce the government’s trillion-dollar deficit.”

No Free Lunch: IRS May Begin Taxing Free Food At Office Meetings

The Wall Street Journal reports, “When outsiders visit Silicon Valley, the first thing they often notice is the food: Cafeterias brimming with free gourmet meals and snacks offered to employees of Google Inc., Facebook Inc. and other technology firms. But not all is as it seems in the buffet line. There is growing controversy among tax experts about how to treat these coveted freebies. The Internal Revenue Service also has been focusing on the topic, according to attorneys who practice in the area, examining whether the free food is a fringe benefit on which employees should pay additional tax. Tax rules around fringe benefits are complex, but in general they categorize meals regularly provided by an employer as a taxable perk, similar to personal use of a company car. That leads several tax experts to wonder if some companies providing free food may be skirting the rules. …Tax rules around fringe benefits are complex, but in general they categorize meals regularly provided by an employer as a taxable perk, similar to personal use of a company car. That leads several tax experts to wonder if some companies providing free food may be skirting the rules.”

Lew To Europe: Spend Like Us

The New York Times reports, “Jacob J. Lew began his first trip to Europe as Treasury secretary on Sunday, a four-city tour in which he is expected to try to persuade finance ministers to pursue a little more growth and a little less austerity to improve the economic fortunes of the Continent and the world. Growth is again at the top of the Obama administration’s agenda as Mr. Lew meets over a 48-hour period with high-ranking leaders representing the European Union, Germany and France. Europe’s sovereign debt crisis continues to simmer for its fourth year, most recently in Portugal over the weekend, and European unemployment rates are still rising. The euro zone economy shrank in the fourth quarter of 2012, with the large economies of Germany, France, Spain and Italy all contracting. ‘Our European partners need to safeguard the stability they have achieved so far,’ a senior Treasury official said, noting that euro zone problems reduced global growth by three-tenths of a percentage point last year.”

Americans Crowding Disability Progress Hurt Economic Progress

The Wall Street Journal reports, “The unexpectedly large number of American workers who piled into the Social Security Administration’s disability program during the recession and its aftermath threatens to cost the economy tens of billions a year in lost wages and diminished tax revenues. Signs of the problem surfaced Friday, in a dismal jobs report that showed U.S. labor force participation rates falling last month to the lowest levels since 1979, the wrong direction for an economy that instead needs new legions of working men and women to drive growth and sustain a baby boomer generation headed to retirement. Michael Feroli, chief U.S. economist for J.P. Morgan, estimates that since the recession, the worker flight to the Social Security Disability Insurance program accounts for as much as a quarter of the puzzling drop in participation rates, a labor exodus with far-reaching economic consequences. The unemployment rate in Friday’s report fell to a four-year low of 7.6%, which most times signals job growth. This time it reflected workers leaving the workforce, a problem that could persist: Economists say relatively few people are likely to trade their disability checks for paychecks, in part because the program doesn’t give much incentive to leave.”

Two Key Arguments For ACA Flawed

Bloomberg reports, “President Barack Obama and his fellow Democrats sold many Americans on the Affordable Care Act largely by emphasizing two arguments: The law would help to reduce overall health-care costs, and it would provide health insurance to those who, for financial or health reasons, cannot get it now. Unfortunately, both of these arguments are flawed. The law creates market distortions that will significantly raise premiums and costs for many Americans — including some middle- income families. And there are less costly, less distortionary and less intrusive ways to address the problem of the uninsured. Two recent independent and nonpartisan studies help to explain how the law fails in its mission.”  Click here to read more.

Obama’s Plan to Rein in Social Security Draws Criticism

According to The Wall Street Journal, “President Barack Obama’s budget plan to alter federal cost-of-living adjustments marks a significant overture to Republicans, but risks widening a rift within his own Democratic Party. Switching to the so-called chain-weighted consumer-price index would reduce the growth of future benefits from Social Security and other federal programs. The proposal, expected in Mr. Obama’s budget due to be released Wednesday, is likely to solidify Democratic support in Congress for making the switch, particularly among party leaders. Many moderate Democrats and even some liberals support the idea, arguing it could help stave off bigger cuts to government programs in the future. But many other Democrats, as well as some powerful interest groups, oppose the change. Rank-and-file lawmakers said it could stir opposition among theparty’s base.”

Obama’s Entitlement Compromise Could Fail

National Journal reports, “When President Obama releases his budget next week, it’s widely expected to include a key compromise: a change to how cost-of-living adjustments for Social Security benefits are calculated. But a new poll highlights just how hard it may be to get lawmakers on board. The proposal is simple: Tie benefit increases and other changes to a slower and arguably more accurate measure of price inflation, known as “chained CPI.” Anonymous White House officials speaking to The New York Times and The Washington Post were careful to portray it as a key Republican demand. But seniors, a group with a disproportionately high voter turnout, are, unsurprisingly, opposed to the idea, according to a new poll from the giant seniors lobby AARP.”

 

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