DEFENSE BUDGET CUTS
Trim spending; use savings on national security
BY LAWRENCE J. KORB| Miami Herald | Click here for full article.

In a development that could signal the faint beginning of an enlightened shift in federal government spending, the Republican-controlled Senate Appropriations Committee voted to transfer $9 billion from the Pentagon budget to education, health and law enforcement accounts.

Bush credited his signature tax cuts in 2001 and 2003 for an anticipated 30 percent drop in the deficit to $296 billion. Although some analysts agreed that tax cuts helped produce higher economic growth and tax revenue, they warned that Bush and the Republican-led Congress are spending the money very fast.

The revenue burst, while welcome, masks a dangerous longer-term picture, the analysts said.

"I think you should buy yourself a very small brownie, light a candle and blow it out," said former Congressional Budget Office Director Douglas Holz-Eakin. "This is tiny compared to the big problem, and it's on the wrong side of the budget. The big problem is on the spending side, and there is a question of just how permanent this will be."

If Republicans hope to calm their base over spending, they will find scant help from conservative budget analysts...

Democrats said $300 billion deficits are nothing to crow about.

"Despite the administration's spin, the truth is that the projected budget deficit is still the fourth largest in American history," said Rep. Mike Thompson, D-St. Helena. "A nearly $300 billion budget deficit two years before millions of Baby Boomers begin to retire is absolutely nothing to celebrate.''

With the giant Baby Boom generation now just 18 months from the start of its retirement, the federal government stands on the brink of a historic economic juncture. As the 76 million people born between 1946 and 1964 retire, they will stop paying taxes into Social Security and Medicare and start collecting benefits.

Pentagon Struggles With Cost Overruns and Delays

By LESLIE WAYNE | New York Times | July 11, 2006
Full article, click here.

...Cost overruns have long been a Pentagon staple. But what has alarmed government oversight agencies and Pentagon observers, and spurred Congress to act, is the magnitude of the spending increases. Projects are as much as 50 percent over budget and up to four years late in delivery.

“We have been living in a rich man’s world for the last five years,” said Jacques Gansler, Pentagon under secretary for acquisition from 1997 to 2001 and vice president for research at the University of Maryland. “The defense budget has been growing so rapidly that we are less likely to put in many cost-sensitive reforms.”

In recent Congressional hearings and reports from the Government Accountability Office, Congress’s investigative arm, the Pentagon has been portrayed as so mired in bureaucracy and so enamored of the latest high-tech gadgetry that multi-billion-dollar weapon systems are running years behind in development and are dangerously over budget...

“It’s a perfect storm,” said Lawrence J. Korb, a former Pentagon assistant secretary, who served in the Reagan administration and is now a senior fellow at the Center for American Progress. “You had this big buildup in military spending. That took a bubbling problem and made it worse. It made it more difficult to audit and keep track of what was going on. It’s always been bad, but I’ve never seen it this bad.” ...

Gregg Bill would make far-reaching changes in budget rules
Bill Would Aim Budget Knife at Domestic Programs While Shielding Tax Cuts from Fiscal Discipline | July 2006
by Robert Greenstein, James Horney, and Richard Kogan
Center on Budget and Policy Priorities | Click here.

Executive Summary
Sweeping legislation to radically alter federal budget procedures, designed by Senate Budget Committee chairman Judd Gregg and endorsed by Senate Majority Leader Bill Frist, was adopted by the Budget Committee on June 20. The bill may be brought to the Senate floor this summer (either as a single piece of legislation or as several separate bills). The legislation seeks to force dramatic changes in the budget. If enacted, it could have profound effects on American society.

In unveiling the bill earlier in June, Senator Gregg described it in moderate terms as offering “common-sense and fiscally responsible solutions” to problems like “duplicative and wasteful spending.” The legislation fails, however, to include common-sense budget reforms that have proved effective in the past, such as restoration of the Pay-As-You-Go rules on entitlement increases and tax cuts. Instead, the bill contains radical measures that could lead to massive cuts over time in Medicaid and Medicare and reductions in the vast majority of domestic programs, while shielding tax cuts from any fiscal discipline. The bill would do the following:

• Impose caps on funding for discretionary programs that would force substantial cuts in public services. The Gregg bill would lock in, for the next three years, the overall discretionary funding levels proposed in President Bush’s most recent budget. To hit those levels, the President’s budget proposes $66 billion in domestic discretionary cuts over the next three years. By 2009, the President’s cuts would hit every domestic discretionary program area in the budget, with the sole exception of space, science, and technology.
• Set fixed deficit targets, falling to 0.5 percent of GDP by 2012, enforced by automatic across-the-board cuts in all entitlement programs except Social Security.
• Establish new definitions of “solvency” for Medicare and Medicaid that are unrelated to how these programs are financed, have a marked ideological tilt, and could not be met without harsh changes.
• Establish a “fast-track” legislative mechanism that could allow a narrow partisan majority to ram through Congress terminations of (and major changes in) discretionary and entitlement programs.