Defense Spending Headed for a Big Boost

 

Happy Hump Day! Well, maybe not so happy for emperor penguins, which a new study finds are nearly all doomed for extinction by 2100. Here’s what else you need to know this evening.

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Defense Spending Headed for a Big Boost

The defense budget is on track for a big boost next year.

The Senate Armed Services Committee, evenly divided between Democrats and Republicans, last month voted 23-3 to advance a $740 billion National Defense Authorization Act, endorsing a $25 billion boost to the Pentagon budget compared to what President Joe Biden proposed and a $37 billion increase over the fiscal 2021 level.

Key Democrats now acknowledge that the defense budget will likely go up in order to smooth the path to a broader budget deal.

“People are looking ahead at the final budget resolution, and the Republicans have made it clear that they’re not satisfied with the defense number and they would require more,” Sen. Jack Reed (D-RI), chair of the Senate Armed Services Committee, said the other day, predicting that the additional $25 billion will be included in the Senate appropriations bill. And House Armed Services chair Adam Smith reportedly also said it’s likely that his panel’s version of the National Defense Authorization Act will provide more than Biden requested.

“The people who want to spend more than the Biden number have built a lot of support, and yes, I think that [$25 billion increase] is a potential bipartisan pathway,” Smith said, according to DefenseNews. “I don’t support it, I don’t think that’s where we should go, but at the end of the day, I have one vote.”

Key Republican looking for more: While Biden proposed a 16% hike in non-defense discretionary spending and a 1.6% boost on the defense side, some Republicans have demanded that the defense increase match that for non-defense, arguing that the Pentagon needs the funding to properly prepare for the threats from China and elsewhere. The $25 billion boost represents a 5% increase.

That “parity” likely isn’t in the cards, but Sen. Richard Shelby (R-AK), the top Republican on the Senate Appropriations Committee, said Tuesday that he wants an even bigger hike than the Senate Armed Services panel recommended.

“Shelby’s comments show how the Armed Services Committee’s overwhelming and bipartisan support for that bigger increase to the defense budget might have raised the floor for defense spending in behind-the-scenes negotiations — and Republicans certainly see it that way,” Roll Call’s John M. Donnelly and Jennifer Shutt say.

The bottom line: Democrats are divided over the defense budget, with progressives pushing back against increases while centrists are open to them. But it’s looking increasingly likely that lawmakers will approve the $25 billion boost, though a bitter partisan fight could still be ahead. “If a top-line boost is unavoidable,” DefenseNews’s Joe Gould wrote this week, “it looks like the next fight will be about how to spend it.”

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McConnell Sets GOP Demands for Government-Funding Deal

Facing a fast-approaching deadline to keep the government funded when the fiscal year ends on September 30, lawmakers jostled for position Wednesday ahead of what could be a difficult and contentious appropriations process this fall.

Senate Minority Leader Mitch McConnell (R-KY) warned his fellow lawmakers that he wants to reach a full-year spending agreement before working on specific appropriations bills.

“When it comes to floor consideration, we cannot and will not start planting individual trees before we have bipartisan consensus on the shape of the forest,” McConnell said during the Appropriation Committee’s first markup session of the year.

McConnell said he has two requirements for moving ahead with the appropriations process. First, Democrats must accept parity in defense and non-defense spending growth — honoring what he called a “long-standing bipartisan truce” on the issue — with the topline figure set at a “responsible” level acceptable to all parties. Second, McConnell warned against “poison pill” riders that introduce provisions that are clearly unacceptable to one of the parties.

Dems don’t necessarily agree: Appropriations Chair Patrick Leahy (D-VT) said he thinks work can begin even without a bipartisan, bicameral agreement on overall spending levels. “I am not going to put forward an allocation at this time,” Leahy said. “I believe that would only divide the Committee, and delay our typically bipartisan work.”

Leahy added that he expects to continue working on the topline spending level during the August break, and to hammer out the individual spending bills when the Senate returns in mid-September. That would leave the Senate with just 12 days to work out a deal.

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Number of the Day: $3.7 Billion

House appropriators included $3.7 billion in earmarks for projects in their states in fiscal 2022 spending bills, according to an analysis by Roll Call’s Jennifer Shutt, Ryan Kelly and Peter Cohn. The total represents less than 0.25% of the more than $1.5 trillion in discretionary spending being allocated for next year, far short of the 1% cap set by House Appropriations Chair Rosa DeLauro (D-CT), Roll Call notes.

Democrats requested $2.3 billion, or 62% of the total, but Roll Call points out that Republicans as a group “punched slightly above their weight in the final tally, considering the GOP makes up about one-third of members requesting projects in the 10 appropriations bills eligible for earmarks.”

Democratic Reps. Peter DeFazio of Oregon and James Clyburn of South Carolina topped the list of earmarkers by dollar amount, with both topping $40 million. But most of the top individual earmarkers are Republicans, Roll Call says, “despite the fact that not a single GOP member voted for any of the seven bills with earmarks that passed the House as a combined package last week.” Eighteen of the top 25 top earmarkers — and eight of the top 10 — are Republicans, led by Rep. Tony Gonzales of Texas ($38.9 million) and Mike Johnson of Louisiana ($36 million).

The Senate is just starting to mark up its own versions of the annual spending bills, and the fate of all those House earmarks will depend on an overall agreement on spending levels.
Read the full story and see the list of top earmarkers at Roll Call.

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Quote of the Day

“We’ve grown used to America as the world’s pre-eminent economic power. We aren’t destined to stay that way, but with these investments, I believe we will. We have a chance now to repair the broken foundations of our economy, and on top of it, to build something fairer and stronger than what came before.”

— Treasury Secretary Janet Yellen, in prepared remarks of a speech delivered in Atlanta Thursday. Yellen credited the economic recovery from the Covid-19 pandemic to the Biden administration’s “bold fiscal policy” and competent execution, and she laid out an argument in support of President Biden’s plan to spend roughly $4 trillion to solve long-running, deep-seated problems in the American economy.

“These destructive forces – the decline in labor force participation, the divergence in wages, the persistence of racial inequality, and the rise of climate change – are different economic challenges in some ways than the ones that came along with the pandemic,” Yellen said. “They’re longer term, slower moving. But they share something in common: Both are subject to our policy choices. Fiscal policy can help unwind them. Or the lack thereof can intensify them. And we know this because that’s exactly what’s happened over the past 40 years.”

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States Ending Unemployment Benefits Early Not Seeing Stronger Job Growth: Analysis

In a bid to force more people back into the workplace, a group of mostly Republican governors cut off federally enhanced unemployment benefits in their states in June, weeks before the program’s scheduled end in early September. Many economists expressed doubts about the effectiveness of that strategy, arguing that the situation in the labor market is extremely complex, with millions of workers remaining on the sidelines for a variety of reasons unrelated to unemployment benefits, including fear of infection from Covid-19 and ongoing problems with schools and childcare.

Although data is still coming in, the results so far suggest that the elimination of temporary enhanced unemployment benefits is not having the desired effect. According to a new report from Homebase, which manages payroll and other administrative tasks for small businesses, states that cut benefits actually saw a slight decrease (-0.9%) in employment from the middle of June to the middle of July, while states that did not end the federal program prematurely saw an increase in employment (+2.3%).

Some economists have argued that ending the benefits early could have a negative effect, with the loss of income for thousands of unemployed workers putting downward pressure on business activity. Though it’s too early to answer that question definitively, it does appear that eliminating the benefits is not helping employment. “The evidence -- both statistical and anecdotal -- continues to pile up that states which ended the UI expansion early didn't see any kind of employment boon from it,” Bloomberg’s Joe Wiesenthal tweeted.

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