The Scandalous US Defense Budget

Plus, budget deal or no budget deal?

Budget Deal or No Budget Deal? Pelosi Rejects White House Spending Cuts as Negotiations Continue

House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin have put a positive spin on negotiations over the two-year budget deal that would raise the debt ceiling, with the speaker earlier this week sketching a timeline in which the agreement was completed this week and voted on next week, just before the House begins its six-week August recess.

There are indications, however, that the negotiations still face serious hurdles.

Late Thursday, the Trump administration presented Democratic negotiators with a list of spending cuts worth roughly $1.1 trillion, as part of a White House effort to secure $150 billion in savings over 10 years. The list includes:

  • $516 billion in potential savings from freezing 2021 spending levels through 2023. This option is reportedly favored by the Republican Study Committee, a large block of conservatives in the House.
  • $574 billion in possible cuts spread across 30 different spending areas, with the largest being an administration proposal to overhaul drug pricing for savings of $115 billion.
  • No cuts to defense spending.
  • No revenue or tax increases.

A Democratic source told Politico that the proposed cuts are not being embraced on their side: “This is the White House’s starting point for negotiations on this aspect. They understand these levels are nonstarters for us. Talks will continue.”

About those cuts: The $150 billion in cuts are considerably larger than the $38 billion in net offsets agreed to in the 2018 budget deal, Roll Call’s Jennifer Shutt noted. But that agreement included $103 billion in total offsets, Shutt said, perhaps putting the administration’s demand in the ballpark, or at least close to it.

CNN’s Phil Mattingly said a more realistic goal for offsets is in the $40 billion to $60 billion range.

Budget hawks chime in: The Committee for a Responsible Federal Budget said the 2018 budget deal, which is still in effect, added $420 billion to the debt over 10 years, and if spending continues at those levels, that tally comes to $2 trillion.

Marc Goldwein of CRFB backed the White House’s proposed spending cuts. “$150 billion is 0.3 percent of the budget. If Congress cant [sic] cut or find revenue to pay for that much, were in big trouble,” he tweeted Friday.

Calling for any budget deal to be paid for, CRFB said earlier this week: “President Trump last year said in response to a $1.3 trillion omnibus bill that enacted the last spending increase: ‘I will never sign another bill like this again.’ He should enforce this mantra and insist Congress bring responsible budget process back to our nation’s finances, not more debt binging cloaked as bipartisanship that we can’t afford.”

A sacred thing? Despite Pelosi’s broad rejection of the White House proposal for spending cuts, Trump said Friday the negotiations were in “good shape.” Describing the debt ceiling as a “sacred element of our country,” Trump said, “I can’t imagine anybody ever even thinking of using the debt ceiling as a negotiating wedge.”

The Mulvaney factor: The proposed cuts reportedly reflect the views of acting White House chief of staff Mick Mulvaney, a fiscal hawk who used the debt ceiling as a political wedge during the Obama administration. The success of the negotiations may depend on how hard Mulvaney pushes his demands for substantial spending cuts.

"My worry here is if Mulvaney tries to be too hard on the offset side that we wouldn't be able to come to an agreement," Sen. Chuck Schumer (D-NY) told CNN Thursday. "I hope he will let Mnuchin and us come to the agreement and I think we can get it quite soon."

What’s next: CNN’s Phil Mattingly captured the tension in the talks Friday: “Negotiators are in the brink of a deal. Now comes the hard part.” A Trump administration official told Bloomberg News that negotiations are expected to continue over the weekend and into next week.

Column of the Day: The Scandalous US Defense Budget

Washington Post columnist Fareed Zakaria writes that “the real scandal” of our hyperpolarized political age is what Democrats and Republicans agree on. That statement reads like an overly casual, pox-on-both-their-houses dismissal of a long list of very real scandals over the last couple of years, but let's ignore that for the moment because Zakaria makes a compelling argument about what he describes as a “cancerous consensus” around the U.S. defense budget.

House Democrats want to provide $733 billion for defense next year, while President Trump and Republicans want $750 billion. “In other words, on the largest item of discretionary spending in the federal budget, accounting for more than half of the total, Democrats and Republicans are divided by 2.3 percent,” Zakaria says. “That is the cancerous consensus in Washington today."

More Zakaria:

“The United States’ defense budget is out of control, lacking strategic coherence, utterly mismanaged, ruinously wasteful and yet eternally expanding. Last year, after a quarter-century of resisting, the Pentagon finally subjected itself to an audit — which, in true Pentagon style, cost more than $400 million. Most of its agencies — Army, Navy, Air Force, Marine Corps — failed. …

“President Trump says he is a savvy businessman. Yet his attitude toward the Pentagon is that of an indulgent parent. ‘We love and need our Military and gave them everything — and more,’ he tweeted last year. Far from bringing rationality to defense spending, he has simply opened the piggy bank while trying to slash spending on almost every other government agency. The Pentagon is the most fiscally irresponsible government agency, but the Republicans’ response has been to simply give it more.

“The much deeper danger, however, is spotlighted by Jessica Tuchman Mathews in a superb essay in the New York Review of Books. Mathews points out that we tend to think about the defense budget as a percentage of the country’s gross domestic product, which is fundamentally erroneous. The defense budget should be related to the threats the country faces, not the size of its economy.”

Read Zakaria’s full column at The Washington Post.

Judge Upholds Trump Rule Expanding Non-Obamacare Plans

A federal judge ruled Friday that the Trump administration can proceed with its plan to expand the sale of health insurance plans that don’t meet Obamacare coverage standards.

U.S. District Judge Richard Leon in Washington rejected insurance companies’ effort to block the administration’s new rules

“Not only is any potential negative impact” from the rule “minimal, but its benefits are undeniable,” Leon wrote in a 40-page ruling on Friday, according to Bloomberg News. He added that there’s no evidence the rule “is having or will have the type of impact -- substantial exodus from the individual market exchanges -- that would threaten the ACA’s structural core.”

Under the regulation issued last year, short-term health insurance plans, originally intended to bridge temporary gaps in individual coverage, will be allowed to last up to 364 days instead of just three months, and they can be renewed for three years. Such plans don’t have to meet essential benefit requirements set by the Affordable Care Act, like covering maternity care and prescription drugs. They can also deny coverage to people with pre-existing medical conditions.

Health care experts and the insurers who brought the lawsuit have argued that those looser rules and wider availability of what some have derided as “junk” insurance plans could siphon off younger, healthier individuals from the Obamacare markets, resulting in higher premiums for the remaining population.

The Association for Community Affiliated Plans (ACAP), the plaintiff in the case, said that it would appeal the decision. "We remain firm in our contention that the Trump administration’s decision to expand dramatically the sale of junk insurance violates the Affordable Care Act and is arbitrary and capricious," ACAP CEO Margaret Murray said in a statement. “We are confident that the appellate court will see this differently.”

Quote of the Day

"The Trump tax cuts, lax regulation, and talking down the dollar are for the economy like drinking a lot of RedBull. You get a lot of frantic energy, a low attention span, a crash later, and an elevated though small risk of a heart attack."

– Adam Posen, president of the Peterson Institute for International Economics, in an Axios article titled “The cost of the bacchanalia” looking at the risks building in the economy

Your Prize for Making It Through the Week

This week marks the 50th anniversary of the first moon walk, with Apollo 11 astronaut Neil Armstrong stepping onto the lunar surface early on July 21, 1969, joined 18 minutes later by Buzz Aldrin.



The Atlantic has a nice collection of pieces on the subject, including photos of the preparation for the momentous event and the story behind the iconic photo of Aldrin descending to the lunar surface. The BBC rounded up a nice collection of photos, from launch to re-entry, and NPR takes a look at the project through the eyes of the astronauts.

Send your feedback to yrosenberg@thefiscaltimes.com. And please encourage your friends to sign up here for their own copy of this newsletter.

Have a great weekend!

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