Amid debates over immigration reform and expanding gun regulations, budget talks are taking center stage as the government once again faces severe budget cuts come March.
On the first of the year, the president and House Republicans had agreed to put off automatic spending cuts, punting budget decisions until next month. Now the president is looking for yet more time, asking for another delay on negotiations. Meanwhile Republicans are asking the president to come up with a budget himself.
Host Carmen Russell-Sluchansky spoke with Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, to discuss the story.
Regardless of even if we do engage in this, if we do have these cuts taken out, the deficit is still going to increase.
Yes, it is. First, in defense, we’ve heard how the cuts were savage and how they were going to dissonate our ability to defend the country but if you look at new CBO report that came out yesterday, looking at the impact on sequestration on defense spending, it shows starting in 2014 defense spending will be growing every single year after that and it shows that basically even adjusted for inflation, the defense budget is probably going to remain flat in real terms. So, that means that the defense department purchasing power is going stay the same. That is after the budget of the Defense Department has actually really grown dramatically in last 10 years.
That is particularly interesting as I think you probably know, the Secretary of Defense, the outgoing Secretary of Defense Leon Panetta had a conference today in which he said this could be devastating to the military and also hurt the safety and security of the country. But what you are saying, if we do go and enact these cuts, the spending power is not going to be heavily diminished.
Yes, what will be diminished is their aspirations to do even more on top of what they were going to do. Let me also say that sequestration is actually a very inefficient and poor way of resizing the size of government because what they are is they are very blunt cuts across the board and that is not allowed for instance for Department of Defense to set priorities over what should be cut or what should be preserved, right? That being said, because, as I said, the cuts are roughly in the worst-case scenario for one year only 10% and then they continue to grow. What it really does, it says, the plans that you had in the future to spend more money on this or more money on that is not going to happen, at least, the increased spending is not going to be assessed as you thought. The other thing is personnel is being exempted by the president from the cut. So, when you hear that it is wrong to be cutting money for soldiers, actually this is not happening. The other thing is current contracts with contractors are not going to be in jeopardy because of sequestration but it is true that future contracts may not be signed at the level people were expecting or for instance instead of ordering 4 helicopters we’ll spend three.
So, a part of what you are saying there is this blunt instrument that is going to cut a certain percentage off of the top of the budget there exempting, like you said, soldiers in current contracts, that type of thing. That leaves only a certain number of things such as new weaponry, and if the Department of Defense can’t, say, start thinking about a contract for new fighter jet or something like that, I could see why Leon Panetta might be a little annoyed.
No, but here is the thing. Another problem with sequestration is that it doesn’t impose that the agencies that cut budget start rethinking the way they spend money. So for instance, if you just cut 10% across the board, that makes things exactly the way they were without rethinking for instance in the case of defense. What are the threats that we need to be addressed? What are the old threats that we don’t need to be spending on? If we don’t start reshaping and reorganizing and rethinking the way that Defense Department spends money, then it is going to be very inefficient because it doesn’t allow you to actually change the way the defense runs its department. The problem with this, if I understand correctly, is that right now the Department of Defense runs its business based on the act that was actually drawn and designed in 1947 at a time where the threats the US faced and its position in the world were quite different that it is today. There is a lot of rethinking that needs to happen and the problem is that if you just cut without actually changing the way you spend, then you are going to face the same problem over and over again and you may not in fact, even if you are spending less money, have a more efficient army.
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