Blank Rome Government Relations LLC


In Deficit Reduction Speech, President Obama Details Defense Cuts

In a speech Wednesday held at George Washington University, President Barack Obama urged the Department of Defense to lead a "fundamental review" of U.S. military missions and capabilities in a bid to cut $400 billion over 10 years. The goal will be to hold growth in the defense base budget below inflation, which would save $400 billion by 2023, according to the White House. This deficit reduction effort is in addition to the savings generated from ramping-down overseas contingency operations, the White House said. Obama’s announcement Wednesday amounts to an abrupt doubling in proposed spending cuts just two months after he proposed his fiscal 2012 budget, which has yet to be acted on by Congress.

 

"We need to not only eliminate waste and improve efficiency and effectiveness, but conduct a fundamental review of America's missions, capabilities and our role in a changing world," Obama announced late in the speech. White House and Pentagon officials later confirmed that Obama was proposing another $400 billion in cuts on top of the savings projected over the next decade in the administration’s fiscal 2012 budget.

 

The additional cuts are intended to stretch across all security-related agencies, including the departments of Homeland Security and Veterans Affairs, the Director of National Intelligence, the Central Intelligence Agency and some portions of the State and Energy departments. In a statement, Pentagon officials offered support for Obama’s review of defense programs. “The Department of Defense cannot be exempt from efforts to bring federal deficit spending under control. However, it is important that any reduction in funding be shaped by strategy and policy choices and not be a budget math exercise,” Pentagon Press Secretary Geoff Morrell said in a prepared statement on behalf of Defense Secretary Robert M. Gates.

 

House Armed Services Committee Chairman Howard “Buck” McKeon (R-CA) expressed concerns about the White House announcing a $400 billion cut to national security spending while troops are fighting in three different theaters, stating, “assigning a specific number to national security cuts prior to the completion of a comprehensive review of our military’s roles and missions seems to be putting the cart before the horse.”

 

House, Senate, and White House Negotiate FY11 Spending Package

 

In an eleventh hour deal to keep the government running through September 2011, President Obama, Senate Democrats, and Congressional Republicans agreed last week to the Fiscal Year 2011 Continuing Resolution, cutting between $38 billion and $39 billion from current discretionary and mandatory spending levels.

 

The defense section of this legislation provides $513 billion, $5 billion more than in Fiscal Year 2010. The bill also includes an additional $157.8 billion for overseas contingency operations. The measure includes $126.7 billion for military personnel, $165.6 billion for operations and maintenance, $102.1 billion for procurement, $75 billion for research and development, and $31.4 billion for defense health programs. This legislation eliminates all defense earmark account funding, a cut of $4.2 billion from last year’s level.

 

The House voted to pass the bill Thursday afternoon in a 260 to 167 vote. Despite concerns, most Republicans rallied behind House Speaker John Boehner, saying they were eager to move to bigger spending battles. In an 81-19 vote Thursday evening, the Senate voted to pass the bill, allowing Congress to head home for the Easter recess scheduled to take place from April 18-May 1.

 

House to Vote on FY 2012 Budget Resolution

 

Concurrent with the FY2011 spending package vote, the House is schedule to consider H Con Res 34, the GOP budget resolution for FY2012 on Thursday and Friday. As a result of the fiscal 2011 defense spending agreement, the fiscal 2012 proposal almost certainly will be reduced by Congress, despite repeated pleas from Defense Secretary Robert M. Gates that troop readiness and force modernization would be significantly affected. While the FY2012 budget resolution will pass the House, it is not expected to be taken up by the Senate. It is unclear when or if the Senate will move on its own FY2012 plan.

 

The resolution calls for total spending of $3.53 trillion in FY 2012, $179 billion (5%) less than requested by the Obama administration. The measure projects spending and revenue levels that would produce a deficit of $995 billion in FY 2012, which is $169 billion less than the deficit under the administration's request. The measure's total for non - emergency discretionary spending is $1.019 trillion, $102 billion less than requested by the administration. The measure sets out a special enforcement procedure for certain tax-cutting measures that would allow the Budget Committee to adjust certain budget authority allocations prior to floor consideration to avoid a point of order. These measures include extending the 2001 and 2003 tax cuts, adjusting the alternative minimum tax (AMT), extending the current estate tax rates, providing a 20% deduction to small business and authorizing trade agreements, among others.

 

Of the amount of non-emergency discretionary spending assumed in the resolution for FY 2012, $659 billion (65%) would be for defense and related security spending, $3 billion more than the administration request. The totals do not include funds for the wars in Iraq and Afghanistan, which are provided under a separate budget category and would not count toward the discretionary spending caps. The resolution assumes $118 billion in emergency funds in FY 2012 for the wars in Iraq and Afghanistan. Within the amount provided for security, $539 billion would be set aside for the Defense Department, $44 billion would be set aside for Homeland Security, $74 billion would be set aside for Military Construction and Veterans Affairs, and $2 billion would be set aside for other security spending.

 

Some of the biggest reductions included:

·         $9 billion across all operations and maintenance accounts “due to programmatic adjustments, historic under-execution and unsupported requests for civilian personnel increases;”

·         $672 million from the Joint Improvised Explosive Device Defeat Organization because of revised requirements;

·         $500 million from the Iraq security forces fund;

·         $473 million from the Army manned ground vehicle, resulting from pricing adjustments;

·         $457 million from the termination of the Non-Line of Sight Launch System; and

·         $272 million from an almost one-year delay in the contract award for the Theater High Altitude Area Defense weapon.

 

The bill does not include funds for the F-35 Joint Strike Fighter alternative engine program, which the president and Gates had ordered terminated.

 

The resolution expresses the sense of the House that debt is an immense security threat to the country, just as Adm. Mike Mullen, Chairman of the Joint Chiefs of Staff, has stated. It also notes that the bipartisan National Commission on Fiscal Responsibility and Reform and the bipartisan Rivlin-Domenici Debt Reduction Task Force were correct in concluding that all programs, including national security, should be "on the table" as part of a deficit-reduction plan. The resolution states that any budget plan serious about reducing the deficit must follow this precept to consider all programs, including national security programs, the largest segment of discretionary spending.

 

Quote of the Week

 

“As Commander-in-Chief, I have no greater responsibility than protecting our national security, and I will never accept cuts that compromise our ability to defend our homeland or America’s interests around the world. But as the Chairman of the Joint Chiefs, Admiral Mullen, has said, the greatest long-term threat to America’s national security is America’s debt.”

 

President Barack Obama, April 13, 2011

 

For more information, please contact:

Maj. Gen. Tony L. Corwin, USMC (Ret.) – Corwin@BlankRome.com

Stephen Peranich – Peranich@BlankRome.com

Pete Giambastiani – Giambastiani@BlankRome.com

Abby Goldstein – Goldstein@BlankRome.com
 


To opt in or opt out of any or all Blank Rome newsletters or similar mailings click here to access our online form or call 215-569-5500, ext. 4685. We can be reached at the following U.S. postal address: 600 New Hampshire Ave., Washington, DC 20037.

© 2011 Blank Rome Government Relations LLC. All rights reserved.

This message and any attachments may contain confidential or privileged information and are only for the use of the intended recipient of this message. If you are not the intended recipient, please notify the sender by return email, and delete or destroy this and all copies of this message and all attachments. Any unauthorized disclosure, use, distribution, or reproduction of this message or any attachments is prohibited and may be unlawful.

Any Federal tax advice contained herein is not intended or written to be used, and cannot be used by you or any other person, for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Code. This disclosure is made in accordance with the rules of Treasury Department Circular 230 governing standards of practice before the Internal Revenue Service. Any written statement contained herein relating to any Federal tax transaction or matter may not be used by any person without the express prior written permission in each instance of a partner of this firm to support the promotion or marketing of or to recommend any Federal tax transaction(s) or matter(s) addressed herein.