(CNN)President Donald Trump signed a major budget deal into law early Friday morning, hours after Congress voted to end a brief government shutdown overnight.
The House of Representatives voted 240-186. The GOP-controlled chamber needed help from House Democrats to clear the bill, and 73 Democratic members gave it. Sixty-seven House Republicans voted against the plan.
The colossal bill, which lawmakers have been negotiating for months, is a game-changing piece of legislation, clearing the decks for Congress in dealing with major spending issues as well as doling out disaster relief money and hiking the debt ceiling which was set to be reached next month.
The Senate approved the measure earlier on Friday morning. The federal government briefly shuttered for the second time in less than a month overnight, after Kentucky Republican Sen. Rand Paul prevented the deal from passing Thursday.
Just how many Democrats would come on board was a key question up until the final moments, as liberals were unhappy about the bill not addressing immigration and conservatives oppose the increased spending.
After the vote succeeded in the Senate, Senate Majority Leader Mitch McConnell kept his word to move to open an immigration debate next week. The majority leader moved to call a vote Monday to proceed to an unrelated House bill that will serve as a vehicle for a process unlike the Senate has seen in recent memory, where senators will be able to offer a number of amendments on competing immigration proposals to see which ones will secure the 60 votes needed to advance. But that will only happen if the House passes the continuing resolution later Friday morning.
The overall deal also does not address immigration, a key sticking point for many Democrats, but it does increase spending caps by $300 billion for the Pentagon and domestic priorities, a crucial incentive for getting enough votes from both parties.
Leading up to the vote, House Minority Leader Nancy Pelosi urged her members to vote against the bill but also urged them to hold their votes back, forcing Republicans to show their strength.
That strategy provided several minutes of heightened drama on the House floor, as Republicans looked nervously up at a board that displays votes by member's name and the yes votes hung around 150.
But then a few Democrats began to signal their caucus to put their votes in with time ticking down, and the chamber grew quiet as the no votes and yes votes began pouring in.
It remained unclear Friday morning whether that effort would be enough, however, to placate an angry base about the Deferred Action for Childhood Arrivals policy being left out of the deal after months of pressing to have it included.
Illinois Rep. Luis Gutierrez, a key Democratic voice for immigrants and immigration reform, acknowledged to reporters shortly before the vote that there remained little to no venues for Democrats to use their leverage on DACA after this deal, though members would not give up.
After the vote, Pelosi vowed that the fight to protect undocumented immigrants brought to the United States as children from deportation was not over.
"I'm greatly disappointed that the Speaker does not have the courage to lift the shadow of fear from the lives of these inspiring young people," Pelosi said in a statement, referring to House Speaker Paul Ryan. "When we protect the Dreamers, we honor the highest ideals of America. Their patriotism, their perseverance, their optimism are an inspiration that stirs the conscience of our entire nation."
What's in the bill?
The massive two-year budget deal proposed by Senate leaders Wednesday raises budget caps by $300 billion in the next two years, increases the debt ceiling and offer up nearly $90 billion in disaster relief for hurricane-ravaged Texas, Florida and Puerto Rico.
About $165 billion would go to the Pentagon and $131 billion to non-defense programs.
"Our members who are focused on the military are very happy where we landed with that," Ryan told Hewitt on his radio show in reference to the defense spending caps.
The debt ceiling will be raised by the appropriate amount until March 2019.
Exact spending would be left to the appropriations committees, but included in the funding is $10 billion to invest in infrastructure, $2.9 billion for child care and $3 billion to combat opioid and substance abuse.
The bill also keeps the government running until late March.
Paul amendment holds up Senate vote
Paul took to the Senate floor many times Thursday refusing to agree to move up the time for a vote in the chamber on the bill, which requires unanimous consent from all 100 senators. In doing so, Paul forced the vote procedurally to occur after 1 a.m. ET on Friday, after government funding expired.
Paul slammed his colleagues for "hypocrisy" and lack of fiscal restraint, as well as a lack of a fair and open process.
"There is probably a lot of blame to go around for the Republicans who are advocating for this debt," Paul said to CNN's Erin Burnett OutFront. "But I would say, really, primarily, this is coming from Congress. Leadership in Congress in both the House and Senate has decided to move forward. But the funny thing is you know so often in the media we hear 'we want you to work together.' They are are working together but working together to spend a ton of money."
Republican leaders say Paul wanted a vote on an amendment that is critical of the overall agreement but leaders couldn't give him that vote even if they wanted to, because it requires consent from all senators.
The Senate's Majority whip sounded a bit frustrated by the holdup. Sen. John Cornyn, a Texas Republican, said he didn't know how long it would take to resolve the issue and said there are other procedural steps Paul could take to get a vote that leaders were talking to him about.
"Sen. Paul has some concerns he wants to be able to voice," Cornyn told reporters. "We're trying to work with him to help get that done."
Cornyn pointed out, "It takes unanimous consent to get an amendment."
"If we get one amendment up, you can imagine other people are going to have amendments," he said. "You can essentially accomplish the same thing by a point-of-order and get a vote. He doesn't need consent to do that. So that's an alternative we're going to suggest to him and work with him on."
Sen. Lindsey Graham, a South Carolina Republican, criticized Paul on Twitter.
"It appears 'General' @RandPaul is at it again. He just called for the immediate withdrawal of all forces from Afghanistan as a way to give the US military a pay raise," Graham tweeted. "Fortunately, only 'General' Paul -- and the Taliban - think that's a good idea." This story has been updated and will continue to be updated with additional developments.
CNN's Ted Barrett, Kristin Wilson, Daniella Diaz, Abby Phillip, Ashley Killough, Jim Acosta, Rene Marsh, Veronica Stracqualursi and Eli Watkins contributed to this report.
The budget request that President Trump is releasing Monday will propose more than $23 billion for border security and immigration enforcement - including funds for a wall along the U.S.-Mexico border, the White House said Sunday.
The request on border security comes as the Senate is about to start a free-wheeling debate on immigration.
Congress has until March 5 to provide a legislative solution that helps people who came to the U.S. illegally when they were children and have benefited from the Obama administration's Deferred Action for Childhood Arrivals (DACA) program.
Trump has offered a framework that would provide a path to citizenship for about 1.8 million immigrants, but also called for border-wall funding and changes to family-based immigration and the diversity visa lottery. The framework is backed by some Republicans but has been widely criticized by Democrats.
Congress last week approved legislation to increase budget caps by about $300 billion for fiscal 2018 and 2019. In light of this budget deal, the administration is proposing an investment of $18 billion in that time period to construct a border wall, the White House said.
The White House also said it will request $782 million to hire 2,750 additional law-enforcement officers and agents at the U.S. Customs and Border Protection and Immigration and Customs Enforcement. The administration is also requesting $2.7 billion to pay for ICE to have an average of 52,000 illegal aliens a day in detention - the highest-ever level for the agency.
The deal to raise spending caps is expected to contribute to higher deficits. While Trump's budget is going to account for the higher caps, the White House said its proposal will also call for spending reforms that would cut deficits by $3 trillion over a decade and also reduce the debt as a percentage of gross domestic product.
"Just because this deal was signed, does not mean the future is written in stone," Office of Management and Budget Director Mick Mulvaney said on "Fox News Sunday." "We do have a chance still to change this [debt] trajectory."
He added that the budget will still include some proposed spending cuts at the State Department and the Environmental Protection Agency, which the administration also proposed cuts to last year.
The White House plans to further its efforts to cut regulatory burdens in its budget - including as part of its infrastructure plan. The plan is designed to spur $1.5 trillion in infrastructure spending but only includes $200 in federal funding.
The White House also said that it's requesting $85.5 billion for veterans' medical care and other programs designed to improve veterans' quality of life. And the administration is asking for almost $17-billion for fiscal 2019 to fight the opioid crisis.
In big reversal, new Trump budget will give up on longtime Republican goal of eliminating deficit
The Washington Post
3 hrs ago
President Trump on Monday will offer a budget plan that falls far short of eliminating the government’s deficit over 10 years, conceding that huge tax cuts and new spending increases make this goal unattainable, three people familiar with the proposal said.
Eliminating the budget deficit over 10 years has been a North Star for the Republican Party for several decades, and GOP lawmakers took the government to the brink of default in 2011 when they demanded a vote on a amendment to the Constitution that would prohibit the federal government from spending more than it takes in.
House Speaker Paul Ryan (R-Wisc.), when he used to chair the House Budget Committee, routinely proposed tax and spending outlines that would eliminate the deficit over 10 years, even though critics said his changes would lead to a severe curtailment in government programs.
In 2013, Ryan proposed $4.6 trillion in cuts over 10 years, an amount he said was sufficient to eliminate the deficit. Those changes were not adopted by Congress or supported by the Obama administration.
The White House and GOP leaders have largely jettisoned goals like this since Trump took office last year. Trump’s budget plan will call for a range of spending cuts that reduces the growth of the deficit by $3 trillion over 10 years, but it would not eliminate the deficit entirely, said the people familiar with the proposal, who spoke on the condition of anonymity to discuss the plans before they’re publicly unveiled.
GOP leaders have prioritized the tax-cut plan and a major increase to military spending over their past calls for eliminating the deficit. A vocal minority of GOP lawmakers have complained about this shift, but they proved no match for the bulk of the party last week when spending levels for the next two years were expanded.
Still, when Trump proposes a budget that falls far short of eliminating the deficit, it could heighten complaints from conservatives who have said the Republican party has strayed too far.
In 2017, Trump’s budget proposal sought to eliminate the deficit over 10 years, though his budget writers were ridiculed for what some alleged was a $2 trillion math error.
The U.S. government spends more money than it brings in through revenue, a gap known as the budget deficit. The government ran a deficit of $666 billion in 2017. The deficit in 2019 is expected to eclipse $1.1 trillion, in part because of measures put in place since Trump took office.
In June, the Congressional Budget Office projected the U.S. government would run deficits of roughly $10 trillion over the next decade. Since that report, Congress passed a tax-cut law that is projected to add at least $1 trillion to the debt over 10 years, and last week, Congress agreed on roughly $500 billion in new spending measures over the next two years.
It could not be learned how large the White House projects the deficit will be after 10 years. Even after accounting for the $3 trillion in cuts they will offer, the White House is expected to project the economy will grow at a much stronger clip than many economists believe will occur. The faster the economy grows, the more tax revenue will increase, helping offset spending.
Policymakers typically try to contract the deficit when the economy is strong and let it expand when the economy is weak. But the White House and Congress have in recent months sought to take a different approach, expanding the deficit when the unemployment rate is very low and the economy is growing at a stronger rate.
The U.S. government already has roughly $20 trillion in debt, according to some measures. Rising interest rates will make this debt more expensive for taxpayers, a phenomenon budget watchers believe could make it harder for the U.S. government to respond to an economic crisis.
In a brief synopsis of the budget released by the White House Sunday evening, it said it “imposes a fiscal discipline on Washington spending that many in today’s political climate reject, yet which remains more important than ever.”
The budget is expected to target spending cuts at social welfare programs such as Medicaid and the Supplemental Nutrition Assistance Program, large segments of government spending that have long been eyed by Republicans for cuts. The White House is looking at ways to curb these programs by expanding work requirements for beneficiaries, but it is unclear how much money changes like this would save or whether it would find enough political support.
The White House on Sunday evening revealed several parts of the budget that called for spending increases but didn’t detail a single area it planned to propose cutting.
For example, it called for $200 billion in federal funds for Trump’s infrastructure plan, $23 billion for border security and immigration enforcement, $85.5 billion for veterans programs and $13 billion over the next two years to combat the opioid epidemic.
Trump’s big infrastructure plan has a lot of detail on everything but how to pay for it
The Washington Post
John Wagner, Heather Long
3 hrs ago
President Trump is poised to unveil a long-awaited plan Monday that aims to stimulate $1.5 trillion in new spending on the country’s ailing infrastructure over the coming decade, but many lawmakers in both parties say the president isn’t providing a viable way to pay for his initiative.
A year in the making, the proposal is an attempt to fulfill a marquee campaign promise and would rely heavily on states, localities and the private sector to cover the costs of new roads, bridges, waterways and other public works projects.
The plan calls for investing $200 billion in federal money over the coming decade to entice other levels of government and the private sector to raise their spending on infrastructure by more than $1 trillion to hit the administration’s goal of $1.5 trillion in new funding over 10 years. It also seeks to dramatically reduce the time required to obtain environmental permits for such projects.
White House aides say Trump is open to a new source of funding to cover the federal share — such as raising the federal gas tax for the first time since 1993 — but Congress will have to make such decisions.
For now, the White House is suggesting that lawmakers cut money from elsewhere in the budget, including some existing infrastructure programs. That prospect seems unlikely given that Congress just last week reached a bipartisan deal to spend significantly more funds over the coming two years.
“I think it’s just dead on arrival. . . . It’s not a plan that will really work,” said Rep. Daniel Lipinski (D-Ill.), a member of the House Problem Solvers Caucus that works on bipartisan solutions. “Are Republicans going to embrace any kind of funding plan besides stealing from Peter to pay Paul within the federal government?”
In a statement Sunday, Rep. Bill Shuster (R-Pa.), chair of the House Committee on Transportation and Infrastructure, said legislation “needs to be bipartisan, fiscally responsible and make real long-term investments in our nation.”
He has repeatedly called for a sustainable source of funding. At the recent GOP retreat in West Virginia, he floated the idea of raising the gas tax. It’s “the elephant in the room,” Shuster said.
In a briefing over the weekend for reporters, senior White House aides stressed that Trump’s plan is intended to be an opening bid on legislation that will require bipartisan cooperation to pass.
“This in no way, shape or form should be considered a take-it-or-leave-it proposal,” said one senior official, who requested anonymity to provide a preview of the president’s plan. “This is the start of a negotiation — bicameral, bipartisan negotiation — to find the best solution for infrastructure in the U.S.”
As crafted, the plan faces obstacles in both parties.
Democrats have long championed public works projects as a way to create jobs and stimulate the economy, but they are calling for a far larger federal investment than Trump will propose. Just last week, House Democrats unveiled an alternative plan, dubbed “A Better Deal to Rebuild America,” that envisioned $1 trillion in direct federal spending — five times what Trump will propose.
Many Republicans, meanwhile, are leery of any new spending, particularly in the wake of passage last year of a $1.5 trillion tax cut plan and last week’s budget agreement that will pump more than $500 billion in additional money into domestic agencies and the Pentagon over two years, the biggest increase in spending in almost a decade.
Trump, who is trying to turn the page after a week of turmoil surrounding allegations of spousal abuse against two male aides, plans to tout his infrastructure plan on Monday morning at a White House event with state and local officials.
Aides say in coming weeks he will travel around the country to highlight both the need for new infrastructure projects and instances where states and localities have crafted the kind of projects that his administration is trying to stimulate more broadly.
Many in Washington have wondered whether Trump should have led with an infrastructure proposal as a means to build support for his unorthodox presidency.
Instead, coming a year into his tumultuous tenure, the initiative is being pushed in a toxic partisan environment, following bruising battles over health care and taxes and amid bitter tensions over the Russia probe into election meddling.
Of the proposed $200 billion in federal spending over the coming decade, half of it would be used to create an incentives program to reward states and localities that invest more in infrastructure projects. The money would be doled out on a competitive basis, with awards that amount to up to 20 percent of a project’s cost, aides said.
To qualify, states and localities would have to be willing to raise new revenue for their projects. White House aides offered several examples, including increases in property taxes or sales taxes or an increase in tolls or other user fees.
Another $50 billion would be directed to rural infrastructure programs, distributed to governors through block grants. That’s in keeping with what White House aides say is a broader philosophical shift to give states and localities a greater say in their infrastructure priorities than the federal government.
Another $20 billion would be spent on “transformative” projects, such as plans to build tunnels for high-speed trains.
The remaining $30 billion would be used to significantly expand loan programs, for private activity bonds and for a capital financing fund. Those provisions are likely to draw more support.
Lawmakers in both parties agree that the low-cost government loan programs for highways and rail projects that began in the late 1990s are working well and should be expanded.
While Trump’s push to streamline permitting has been panned by environmentalists, that provision is also likely to garner significant support.
“We’ve had projects that seem to take forever,” said Mick Cornett, the mayor of Oklahoma City who is a Republican candidate for governor. “Here’s an example: I used to be a journalist and I covered a city council meeting in 1998 where they chose a new route for Interstate 40 through Oklahoma City. I ended up cutting the ribbon on that route in 2012.”
Taken as a whole, Trump’s proposal is more of a “financing plan” than a “funding plan,” said Mike Friedberg, a former staff director of a subcommittee of the House Transportation and Infrastructure Committee. Friedberg said while Democrats prefer the latter, he sees “a little momentum” on Capitol Hill for some sort of deal. “I don’t think it’s dead,” he said.
Others are skeptical, particularly of legislation emerging from Congress that closely tracks Trump’s plan.
The idea that $200 billion in federal money will leverage more than $1 trillion in overall infrastructure investment is “just a prayer and hope,” said Martin Klepper, who served most of last year as executive director of the Department of Transportation’s Build America Bureau.
“Who is going to come up with all that extra money? The states are broke,” said Klepper, who joined the Transportation Department in early January 2017 and resigned in November. He had hoped to help shape an infrastructure plan along the lines of what Trump promised during the campaign. However, he said, he found “a real gap between the president’s articulation and the meat of this proposal.”
Klepper said the federal government has provided at least half of the financing for major projects like the new Tappan Zee Bridge in New York and the expansion of light rail in San Diego. He said the White House is “misleading” people when it claims that the federal government can fund 20 percent or less and still see the kind of massive transportation upgrades that the American public expects.
In addition to his infrastructure proposal, Trump also plans to release his budget blueprint for the coming fiscal year on Monday. Aides would not describe it in detail on Sunday, but did say that it contains cuts to transit funding and to an Obama-era program that offered transportation grant funding to states and localities on a competitive basis.
An analysis of Trump’s first budget released by Senate Minority Leader Charles E. Schumer (D-N.Y.) cited $206 billion in proposed cuts to existing infrastructure programs, leading Democrats and advocates to question whether Trump was merely moving money around.
“Funding infrastructure by cutting infrastructure is not a serious proposal,” said Beth Osborne, senior policy adviser for the advocacy group Transportation for America and former senior official in President Obama’s Department of Transportation.
In private meetings, Trump has mused about raising the gas tax as a means to generate more revenue for infrastructure projects.
The gas tax has been the same — 18.4 cents a gallon — since 1993. Many think tanks and expert studies have recommended raising it to fund road and bridge repairs.
Last month, the U.S. Chamber of Commerce called for a 25-cent-per-gallon increase, which it said would raise more than $375 billion over the coming decade.
“Raising the gas tax would be a terrific way to finance additional infrastructure spending,” said Douglas Elmendorf, dean of the Harvard Kennedy School and a former economist in the Clinton administration. “A lot of people on both sides of the aisle have recognized that the time for the gas tax has come.”
Trump’s infrastructure plan was initially advertised as a priority for his first 100 days in office. As it failed to materialize, many in Congress began feeling that the whole effort was a “boy-who-cried-wolf” scenario.
The White House designated the first full week in June as “Infrastructure Week,” but it quickly imploded after former FBI director James B. Comey’s explosive testimony before Congress about his firing and interactions with Trump. The White House attempted another infrastructure week in mid-August, the week that white supremacists rallied in Charlottesville and Trump blamed “both sides” for the violence.
Top aides then said a plan would be coming in January, only to see that derailed by Trump’s comments that America didn’t need more immigrants from Haiti, El Salvador and Africa, places he described as terrible ones to live. His remark drew swift rebukes from around the world.
U.S. President Donald Trump speaks while touring the pre-commissioned U.S. Navy aircraft carrier Gerald R. Ford at Huntington Ingalls Newport News Shipbuilding facilities in Newport News, Virginia, U.S. March 2, 2017. REUTERS/Jonathan Ernst
By Tony Capaccio (Bloomberg) — President Donald Trump’s $686 billion defense request for the coming fiscal year would propel the Navy toward a new goal of 355 ships, restore major funding for a Boeing Co. fighter jet favored by the president and boost missile defense spending to counter threats from North Korea and Iran.
On its voyage to a 355-ship Navy, the budget plan envisions building the fleet to 299 vessels by the end of fiscal 2019, which begins Oct. 1, and 326 by 2023. The Navy has 280 ships today, but some are nearing the end of their useful life.
Missile defense spending, spurred by Trump and supported by lawmakers over fears of North Korea’s accelerated ballistic missile and nuclear programs, would increase about 25 percent over the Obama administration’s last projected numbers for fiscal 2019 — to $9.92 billion, or $1.91 billion more than previously planned. It would bankroll 20 new interceptor missiles and silos, a new “homeland defense radar” in Hawaii and, for the first time, a “salvo” test to fire two interceptors at once at an incoming target.
Defense contractors advanced early Monday as the budget called for military spending increases. Lockheed Martin Corp., Raytheon Co. and Northrop Grumman Corp. each rose at least 1.5 percent at 2:52 p.m. in New York. Tank-maker General Dynamics Corp., which announced a $6.8 billion deal to buy CSRA Inc. earlier in the day, fell slightly.
“We’re increasing arsenals of virtually every weapon,” Trump said Monday. Emphasizing especially plans to modernize the U.S. nuclear arsenal, Trump said of adversaries, “If they’re not going to stop, we’re going to be so far ahead of anybody else in nuclear like you’ve never seen before.”
Trump has praised Boeing’s Super Hornet, which former President Barack Obama’s administration sought to phase out. By contrast, Trump has at times criticized the costs of Lockheed’s F-35, the most expensive U.S. weapons system.
The Trump plan calls for adding 24 Boeing Co. F/A-18E/F Super Hornet jets in fiscal 2019, and 110 jets through 2023, as previously reported by Bloomberg News. The Obama administration had proposed ending purchases of the plane this year.
Previous story: Trump to Seek 24 Boeing Super Hornet, Reversing Obama
The Pentagon is requesting funding for 77 F-35s for fiscal 2019, three fewer than projected in the the last Obama plan. The Trump plan projects 84 of the fighters for fiscal 2020, the same as the last Obama plan, and 98 in 2021, or one fewer.
In addition, the Air Force plans $16.8 billion in funding through 2023 for the new B-21 bomber being built by Northrop Grumman, including $2.3 billion next year for continued research.
The $686 billion for includes $617 billion in base defense funding — the most ever if enacted — plus $69 billion in a war-fighting account. A book of budget highlights, distributed Monday but printed before Congress agreed last week to increased defense spending, had projected a greater reliance on the war-fighting account.
The combined total falls short of the Obama administration’s post-Cold War peak of $691 billion in fiscal 2010, which included $163 billion in war spending. Trump’s overall national security package — which includes Energy Department nuclear weapons programs and defense-related activities at the FBI and smaller agencies — would total $716 billion.
“The risk with such a large increase in the defense budget is that policy makers will be reluctant to make hard choices,” Todd Harrison, a defense analyst with the Center for Strategic and International Studies, said in an email. “DoD is still in desperate need of reform in many areas. It has 19 percent excess capacity in U.S. bases, a personnel system stuck in the 1950s, and scores of legacy weapons that need to be retired. If reforms aren’t made in these areas, the military will just get fatter, not stronger.”
Even as the Pentagon unveils the administration’s proposed defense budget, Congress has yet to complete a funding bill for the current fiscal year. Last week’s budget agreement removed spending caps in the 2011 Budget Control Act for this year and fiscal 2019, only to have them return in fiscal 2020 and 2021 unless another deal is reached. Last week’s relief marked the fourth such agreement since the Budget Control Act was passed.
“The real story” of the fiscal 2019 defense request is “the growth trajectory from” the 2017 defense bill that was enacted “as opposed to 2019 in isolation,” Mackenzie Eaglen, a budget analyst for the conservative American Enterprise Institute, said in an email.
Not counting war spending, the base defense budget will have increased 17.4 percent in nominal terms from 2017 to 2019, she said. Including the war spending, the budget plan approved by Congress provides for an increase of 2.9 percent from fiscal 2018 to 2019, she said.
Fred Bartels, the Heritage Foundation’s defense budget analyst, said in an email that “this budget deal is going to provide a relief for the 18 months between March 24 and September 30, 2019. But as soon as it expires we are back at the same place.”
The new National Defense Strategy “calls for a sustained, predictable and increased budget to be able to execute the strategy,” he said, so “being able to make the defense budget sustained and predictable will be dependent on future Congresses.”
The budget requests $6.5 billion for what’s now being called the “European Deterrence Initiative,” up from $4.7 billion requested last year, to increase the U.S. military presence in Europe, conduct more exercises with NATO partners and preposition equipment. It was previously called the “European Reassurance Initiative.”
The Pentagon is also seeking almost $9 billion to boost its cyberoperations. It calls for setting up more than 100 teams with missions including countering evolving threats against the U.S., protecting Defense Department networks against attacks and supporting commanders in combat.
The Navy’s five-year ship building plan calls for 111 vessels through 2023, going from 18 next year to 25 by 2023. The plan includes six new, better-armed frigates instead of the lightly armored Littoral Combat Ship; the first frigate would be bought in 2020.
The Navy’s $58.5 billion fiscal 2019 procurement plan would benefit shipbuilders General Dynamics Corp., Huntington Ingalls Industries Inc. and combat system suppliers Raytheon, Lockheed and BAE Systems Plc. It calls for buying:
* 18 combat and auxiliary vessels, including continuing purchase of two Virginia-class submarines, three DDG-51 destroyers, one Littoral Combat Ship — that’s likely to be the last — and five ship-to-shore connectors designed to move weapons systems, equipment and personnel to shore in support of an assault. Altogether, $21 .9 billion is earmarked for ship construction, which includes 10 new warships.
* 29 F-35C and B model F-35 jets, 24 Advanced E-2D Hawkeye surveillance aircraft, 19 P-8 Maritime surveillance planes, 23 KC-130J refueling tankers, eight CH-53K heavy lift helicopters and three Triton surveillance drones. The Navy plans to buy 198 F-35s through 2023. Also, the Marine Corps plans to buy 69 CH-53K choppers made by Lockheed’s Sikorsky helicopter unit.
* 90 Small Diameter Bomb-II models made by Raytheon that can hit stationary and moving targets, toward a total of 3,750 through 2023, and 125 of Raytheon’s Standard missile-6 multi-mission weapon toward a total of 625 through 2023.
* 112 Raytheon Tomahawk missiles would be upgraded, toward a total of 1,046 through 2023.
* 25 Lockheed long-range anti-ship missiles, and 75 through 2023.
The top contractors that would benefit from the proposed increase in missile-defense spending are Boeing, Raytheon, Orbital ATK Inc., Northrop Grumman, Lockheed and Aerojet Rocketdyne Holdings Inc.
The Missile Defense Agency’s five-year plan projects $46.7 billion through 2023, $13.7 billion more than the last Obama plan that covered the five years through 2022.
For fiscal 2019 the MDA request is:
* $6.8 billion for research, or about $1 billion more than previously planned, including programs to defend against hypersonic weapons under development by China and Russia.
* $2.4 billion, or $855 million more than planned, for procurement including 20 additional interceptors from Orbital ATK, 42 more Standard Missiles from Raytheon, a redesigned hit-to-kill warhead to deploy by 2021 and additional silo construction at Fort Greely in Alaska.
Air Force Stable
The Air Force would maintain stable budgeting for its planned major aircraft, including purchases, upgrades and maintenance:
* $7.2 billion to buy 48 F-35 jets next year, the initial installment of $40 billion for 258 F-35s through 2023. The Air Force, the F-35’s biggest customer, plans to buy another 48 fighters in 2020 and 54 each through fiscal 2021-2023; Air Force officials have said they needed 60 a year.
* $3.6 billion for continued Boeing KC-46 tanker procurement for 15 aircraft toward a goal of $20 billion and 75 aircraft through 2023.
* $2.75 billion for continued operations and support and upgrades of Lockheed’s F-22 stealth fighters.
* $2.3 billion for continued B-21 development, up from $2 billion this year, or $16.8 billion through 2023; Northrop Grumman would see the first procurement dollars in fiscal 2022.
* $964 million for continued upkeep of the aging A-10 “Warthog” close air support attack plane. The Air Force wanted to retire it but Congress refused. The service budgets $4.3 billion through 2023.
* $1.1 billion to purchase 43,594 GPS-guided tail-kits from Boeing for the Jdam smart bomb, up from $834 million and 34,529 requested for this year.
Whoops. What a difference a couple of months make. The early returns are in and tax cuts are an unqualified success. Hundreds of major American companies, which collectively employ millions of Americans, have directed part of their tax savings to significantly raising worker pay.
Walmart, the nation’s biggest employer with 1.4 million U.S. employees, raised its minimum wage to $11 and gave up to $1,000 bonuses to its employees. It turns out tax cuts have done more for entry-level employees than the “Fight for $15” ever has. Paychecks this month are also bigger due to new IRS tax withholding tables taking effect.
According to the Tax Policy Center, the average earner will receive about $135 more a month, and more if they have kids. At the household budget level, this means cable, smartphone, or utility bills can be taken care of. For the broader economy, this means more than 100 million American workers keeping more of their money at home where it’s needed and sending less off to Washington, D.C., where it doesn’t stimulate local communities and Main Streets.
The latest jobs report suggests tax cuts have contributed to the current tight labor market that is generating the fastest average wage growth in nearly a decade. Some economists, like those at the Atlanta Federal Reserve, are predicting 4 percent economic growth, levels mainstream economists, like Austan Goolsbee and Larry Summers, scoffed at mere months ago.
The best may be yet to come. Small businesses, which create two-thirds of all new jobs, are arguably the biggest winners of tax cuts, receiving a new 20 percent tax deduction. But they have not yet felt the full effects. Yes, many small businesses have made tax cut-induced pay increases and investments like their big business brethren. Joseph’s Lite Cookies in Florida is giving $3,000 raises to half its workforce. West Virginia Eye Consultants is hiring and expanding.
I hear from small businesses nearly every day making similar commitments. But since small businesses generally don’t have the accounting departments necessary to forecast their tax savings, many won’t notice them until they file their first quarter taxes in a couple of months. Expect another big spate of pay raises and investment at this time.
Don’t take my word for it. A new nationwide poll of small business owners conducted by the Job Creators Network finds that small businesses favor the tax cuts by a 10 to one margin. Yet a sizeable one in four respondents still don’t know how tax cuts will affect them, a testament to Democratic and media misinformation. As the muddied tax waters clear, expect small business support to grow even further.
Have Democrats apologized for their misguided tax cuts fear-mongering? No. In fact, they’ve doubled down on it, promising to repeal them, which would raise taxes on millions of ordinary Americans, if they retake Congress this fall. Are Democrats in moderate states, including Sens. Claire McCaskill (D-Mo.), Joe Manchin (D-W.Va.), and Joe Donnelly (D-Ind.), on board with this strategy?
Led by Pelosi, they are characterizing the tax cut-induced wage increases as “pathetic” and “crumbs.” They may be crumbs to Pelosi, a San Francisco millionaire, and her coastal compatriots, but for ordinary Americans — two-thirds of whom cannot cover an unexpected $400 expense, according to the Federal Reserve — they amount to long-overdue relief.
“I’ve heard time and again that the middle class is getting crumbs, but I’ll take it!” said Wayne Love from Florida about his $200 paycheck boost.
Rather, coastal Democrats are desperately trying to game the system to lower taxes for their rich investment banker and trial lawyer constituents and donors who must now finally pay their fair share of federal taxes because the tax bill limited the state and local tax deduction loophole. Even the left-wing Institute on Taxation and Economic Policy finds that working around the state and local tax deduction limit would overwhelmingly benefit the richest one percent of households.
For years, the media narrative has been that Democrats are the party of ordinary Americans while Republicans are the party of the rich. Tax cuts are the wedge that illuminates the reality is just the opposite.
Trump Unveils Infrastructure Plan, But Critics Call It Fantasy VOA News
Published on Feb 13, 2018
U.S. President Donald Trump on Monday unveiled his plan to update American roads, bridges, ports and airports. He wants the congress to authorize $200 billion over the next 10 years for infrastructure renovation, and says individual states and private sector will stimulate another $1.5 to $1.7 trillion in investments. Critics say his plan is unrealistic. VOA's Zlatica Hoke reports.
Originally published at - https://www.voanews.com/a/4251196.html
"Controlled by ultra wealthy, old white people" - - does that sound familiar?
Wakey wakey, my friend - - there's no difference at all between the Demopublicans and the Republocrats. One big incestuous group who's primary intention is to pillage the peasants and enrich themselves.
U.S. Public Debt Surges By $175 Billion In One Day
-- Published: Wednesday, 14 February 2018
By Steve St. Angelo
After the U.S. Government passed the new budget and debt increase, with the President’s signature and blessing, happy days are here again. Or are they? As long as the U.S. Government can add debt, then the Global Financial and Economic Ponzi Scheme can continue a bit longer. However, the days of adding one Dollar of debt to increase the GDP by two-three Dollars are gone forever. Now, we are adding three-four Dollars of debt to create an additional Dollar in GDP. This monetary hocus-pocus isn’t sustainable.
Well, it didn’t take long for the U.S. Government to increase the total debt once the debt ceiling limit was lifted. As we can see in the table below from the treasurydirect.gov site, the U.S. public debt increased by a whopping $175 billion in just one day:
I gather it’s true that Americans like to do everything… BIG. In the highlighted yellow part of the table, it shows that the total U.S. public debt outstanding increased from $20.49 trillion on Feb 8th to $20.69 trillion on Feb 9th. Again, that was a cool $175 billion increase in one day. Not bad. If the U.S. Government took that $175 billion and purchased the average median home price of roughly $250,000, they could have purchased nearly three-quarter of a million homes. Yes, in just one day. The actual figure would be 700,000 homes.
Regardless, we are now off to the races when it comes to adding GOBS of DEBT to continue a Ponzi Scheme that would make Bernie Madoff jealous.
There is so much that I want to write about and put into videos, but there is only so much time in the day. I saw Andy Hoffman’s newest video where he let his followers know that he sold the rest of his Gold and was totally out of precious metals and fully invested in Bitcoin and Cryptos. Good for Andy. Unfortunately for Andy, like many who rely on SUPERFICIAL ANALYSIS forgets there is this thing called “ENERGY” that makes everything work. Without energy, the entire SYSTEM comes crashing down. And the most fragile part of the system is HIGH-TECH and especially Bitcoin that consumes a disgusting amount of energy to provide no real productive use. More on that later.
However, if you haven’t watched my newest video on the Huge Market Correction Update & Silver Price Trend, I suggest that you do:
The idea that precious metals are a Barbarous Relic and are no longer useful because High-Tech Cryptos will be the new currency, totally disregards the dire energy predicament we are facing. Andy Hoffman got out of gold and silver and into Cryptos because he, like many, are guilty of SUPERFICIAL THINKING & ANALYSIS. I don’t mean to be harsh here, but when Andy mentions in his video that when the OLD FARTS who believe in precious metals finally die off, then the younger folks will have totally forgotten about gold and silver, get’s my creative juices flowing.
If you do not incorporate the ENERGY DYNAMIC into your analysis or forecasts, you will be totally unprepared for what is coming.
Thus, the BLIND continues to lead the BLIND. So be it.
Anyhow… I will be putting out more work on how the Falling EROI of Energy is destroying everything in its path. Individuals who don’t think the $175 billion increase in U.S. Public Debt has anything to do with the Falling EROI of energy, makes perfect sense why they would follow someone like Andy Hoffman or the other Crypto Aficionados into an even Greater Bubble & Ponzi Scheme than the Fiat Monetary System.
President Trump presented his infrastructure plan last week. If you’re keen on the idea of out-of-control privatized utilities gouging customers and manipulating energy markets, or consortia building overpriced, expensive toll roads (until they go bust), then you’ll love the president’s proposals. His mooted public-private partnerships are another variant of socialism for the rich and free market discipline for the rest of us. PPPs are like a religion that offers its adherents the promise of capitalist heaven via tax breaks, subsidized funding, and guaranteed returns, minus the discipline of private bank credit arrangements or potential bankruptcy, the costs of which are invariably borne by a public already experiencing the hell of significantly more restricted access (think toll roads and bridges), higher user fees or “slower lane” traffic (think the end of net neutrality), and the costs of bailouts if and when the venture goes bust.
There is no question that Trump is tapping into a big need for the country when he calls for more public infrastructure investment, but as usual with this president the devil is (literally) in the details. The American Society of Civil Engineers (ASCE) estimates that there are $4.6 trillion worth of needed investments to maintain and upgrade infrastructure throughout the U.S. But the president’s proposed plan offers up a mere $200 billion in direct federal funding over the next 10 years. This is to be complemented with another $1.3 trillion in spending from cities, states, and private investors for a total of $1.5 trillion, which is still massively insufficient relative to the needs outlined in the latest ASCE report card (which currently grades U.S. infrastructure at D+).
So why bother to offer a mere $200 billion figleaf? The paucity of direct federal government funding tells you that this is certainly not going to be a New Deal 2.0. In theory, the involvement of the private sector allows the public sector to transfer the risk associated with delivery, obtain ‘value for money,’ and allows an increased quality of public infrastructure compared to traditional ‘inefficient’ public sector provision, where under-investment is the norm. The PPP literature maintains that access to services and utilities remains equitable and that positive benefits associated with the asset continue to flow onto society. In practice, however, the experience with these types of joint ventures is very different: There are major deficiencies in accountability as public goods are converted into private rents, the transition to which substantially increases personal costs and undermines economic efficiency. Value is extracted from the underlying asset in the form of big salaries to CEOs and board directors, dividend payments to private shareholders, while the promised investment is seldom delivered in full. No private market discipline is enforced on management because in most cases they are given control of what was once a public monopoly, which is simply converted into a private one. It’s rentier capitalism, plain and simple.
“But it’s not like labor, land, and capital, because the role of public infrastructure is not to make a profit. Its role is to provide public services that are basic for the economy’s living standards and capacity to produce, and to provide these at a subsidized rate. That’s how America got rich and came to dominate the world industrial economy: by publicly subsidizing its basic costs: Low-cost roads, and low-cost other infrastructure.”
A good infrastructure enables the economy to maximize productivity (just think of how much is lost today via endless subway delays or traffic jams on the way to work, as a small example). Historically, Hudson continues, “the government… [has borne] these costs so that public infrastructure would subsidize the economy to lower the cost of doing business,” thereby increasing overall prosperity for society as a whole, rather than using the infrastructure to guarantee a profit stream to a limited number of private entrepreneurs or bankers.
Consistent with this goal, government-funded public works projects have long had broad bipartisan respectability from the days of Alexander Hamilton and Abraham Lincoln to those of Franklin D. Roosevelt and John F. Kennedy. If Democrats can brag about the proud heritage of the Works Progress Administration and the Public Works Administration from the era of the Great Depression (under which 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and 1,000 airfields were constructed), there are still a few Republicans who remember the Golden Age of interstate highway construction that commenced in the 1950s with President Dwight D. Eisenhower. The resultant quantum rise in living standards and economic well-being puts paid to the idea that these were wasteful government boondoggles.
In comparison, Trump’s promise “to spur the biggest and boldest infrastructure investment in American history” is modest in terms of funding provision and financially problematic in terms of funding structures. Very much like his own private real estate interests, the president proposes using minimal “equity” (via direct public funding), instead deploying “leverage” to get most of that $1.5 trillion spent (largely by the private sector). That will inevitably drive up the cost as hedge funds, private equity players and bank credit will add interest charges and incur capital gains charges, management fees and other overhead charges (such as exorbitant salaries for CEOs of these ventures). All these costs would be factored into the prices that the new infrastructure would be required to charge its users with a host of tax breaks, all so as to guarantee a fixed equity return that is pledged to induce the private sector to invest. You can see where this is going: Higher costs are ultimately borne by the public, for whose benefits the infrastructure/services were provided in the first place. In many instances, public entities are outright sold to private groups (or the asset is leased for a long period of time, thereby in theory reducing the cost of funding, but in practice enabling the private groups to backload it, while extracting as much value from the quasi-monopoly in the interim).
Surprisingly, for a country that likes to think of itself as a bastion of free-market capitalism, the U.S. has been (thankfully) slow to embrace PPPs, relative to countries such the United Kingdom. So it’s worthwhile considering the experience of the UK to get a sense of what’s in store should Trump’s plan be implemented as he has outlined. Research by the British group Corporate Watch published in 2014 concluded that:
Households across the UK would have saved £250 each on their electricity, gas and water bills and train fares had the services remained publicly owned and financed.
Private electricity, gas, water and rail companies were paying out £12bn a year to investors and shareholders in interest and dividends.
Had these operations remained totally in the public sector, cheaper government borrowing rates would have saved the UK public £6.5bn: £4.2bn on energy, £2bn on water and £352m on rail.
Corporate Watch also noted that on all metrics—reliability, punctuality, attention to complaints, etc.—services deteriorated across the PPPs, even as costs continued to escalate:
“To satisfy investor expectations, the bills and fares charged by the privatized companies continually outstrip inflation. Between 2007 and 2013, household gas and electricity bills rose in real terms by 41% and 20% respectively. In real terms, water bills have increased by 50% since privatisation, while rail fares are 23% higher than they were in 1995.”
All the while, the promises held out by the proponents of private sector participation in these ventures, in the form of better services, more public patronage, higher efficiency and revenue, and lower public outlays, failed to materialize. Thanks to the government’s promise to maintain ongoing public subsidies, the funding structures allowed private investors to lay off risk to the public sector, while maximizing value extraction from the assets themselves. Governments, meanwhile, effectively assumed the operating risk, covering operating deficits and supplying investment funds, all the while maintaining guaranteed profit margins for the private firms that assumed operation of these services.
There are the other problems that are particularly germane to the U.S.: First, the communities with the greatest needs (e.g., Flint, Michigan, and its lead water crisis) are largely those that are poor and minority-dense. And they will likely get nothing because the profits to help these communities is likely to be inadequate to attract sufficient private sector participation. Second, in more affluent communities, local and state governments are often controlled by developers, and the manner in which these PPPs are adjudicated and allocated is rife with cronyism, as the experience of Indiana’s toll road under then-Governor Mike Pence illustrated. In fact, the vice president is leading the charge on Trump’s infrastructure proposals, even as the much-vaunted privatized toll road that he aggressively promoted as governor subsequently filed for a ‘pre-packaged’ Chapter 11 bankruptcy.
We should also recall, as further warnings of what likely lies in store, the experience of recently deregulated electric utilities (recall Enron, which deliberately aggravated California’s crippling 2001 blackouts with the aim of raising prices), as well as the prospects of more pay-through-the-nose broadband charges (the elimination of net neutrality is almost certainly likely to exacerbate this problem, as variable charges are affixed to slow and faster broadband ‘lanes’). Ultimately, the combination of private funding costs, and ever-rising bills used to sustain the PPPs profits, will have the effect of destroying America’s competitiveness instead of contributing to it. The global experience shows that public-private partnerships vastly raise the day-to-day cost of living as public goods morph to private economic ‘rents’—returns in excess of what investments would yield in a competitive economy, where fat margins are quickly whittled away by competition.
Of course, this does not extend to the private firms involved directly. They do very well—enjoying the best of both worlds—a captive monopoly infrastructure, which enables them to gouge consumers via excessive fees, charges, or fares, with no real need to keep the quality of service up to acceptable standards, amid sustained public subsidies and tax breaks. And if that is insufficient, and the operating firms go bust, the government is usually left to pick up the tab and clean up the resultant mess.
In essence, these public-private partnerships are one of the sick jokes that the neoliberal era visited on all of us in the name of economic efficiency and responsible government—a ‘joke’ because the beneficiaries of all this public largesse have been laughing all the way to the bank as stupid public officials continue to fall prey to their lobbying as they joyfully hand over the keys to the public purse. Trump is simply perpetuating the trend of allowing governments to continue to abrogate their true responsibilities to pursue and safeguard public purpose. Governments should never have become agents of private profit. But under PPPs of the sort proposed in Trump’s infrastructure deal, public purpose disappears and governments simply become underwriters of private profit, while assuming any contingent losses. Society gets more expensive toll roads, toll bridges, more sprawl, more cars, more rake-offs and in the end, more financial trouble and more bail-outs. The fact that governments have become active facilitators of this process gives another reason why our huge global economic and social crisis shows no end of respite.
Posted on February 22, 2018 by Yves Smith
The Trump Treasury has proposed changing Dodd Frank rules, supposedly to make resolving Too Big to Fail banks easier.
The Treasury yesterday proposed replacing the resolution scheme under Dodd Frank, called the Orderly Liquidation Authority, confusingly also called Title II liquidations, with a new type of bankruptcy, Chapter 14. While there was a lot not to like about the OLA, Chapter 14 is no better and in key respects, markedly worse.
The costly fallacy underlying Chapter 14 is the idea that big banks can be wound up without a taxpayer backstop. And despite Treasury’s chest thumping that taxpayer monies won’t be at risk, in fact, government funding is still available if needed.
And like it or not, that makes sense. The reality is that banks provide critical infrastructure for commerce, known as a payment system. Recall that in the crisis, the authorities had to guarantee money market mutual funds up to $250,000 because the Lehman implosion brought down the Reserve Fund, precipitating a run on mutual funds. Mutual funds are big participants in the repo market, which is critical for financing the trading of banks and large investors.
We’ve embedded the Treasury proposal at the end of this post. Note that some measures could be implemented by regulators directly, but the Chapter 14 scheme requires Congressional approval.
Chapter 14 is not a new idea. It was originally proposed by the Hoover Institute and made it as far as a Senate bill which was not passed in 2013.
At a high level, under Chapter 14, the assets of a failed bank would be transferred to a new entity. Shareholders and unsecured creditors would be left behind. Solvent subsidiaries, “such as broker-dealers, insured depository institutions, and overseas subsidiaries” would continue to operate as normal. The proposal discusses giving banks less support during the resolution process to the new entity by relying on private lenders as much as possible for the bridge bank (bankruptcy “debtor in possession” lenders) and using guarantees in place of loans whenever possible.
Observers gave the proposal mixed grades. It does allow for a bit longer suspension of termination rights by derivative holders than the OLA did, which would facilitate the sale of swaps books to new owners. But it restricts the flexibility of the FDIC in dealing with creditor. And it also gives the failed banks more rights in court. As the Financial Times noted:
“The FDIC needs discretion to restructure a company. You can’t say in advance that the FDIC has to follow a completely pre-written rule book,” Mr [Marcus] Stanley [of Americans for Financial Reform] said….
[Former Treasury official] Mr [Aaron] Klein expressed concern over a Treasury proposal to give financial institutions more power to challenge liquidation decisions in the courts. “One thing the financial crisis made clear is there are plenty of financial companies that care more about trying to preserve their value than preserving the entire system,” he said.
My question is over the treatment of depositors. The report makes very little mention of them. It appears to assume that they won’t come up as a resolution issue because deposits will sit in depositary subsidiaries that will be solvent.
However, regulators have allowed large derivatives players to finance their derivatives positions using deposits. If a Too Big to Fail bank collapsed in part because it was sitting derivatives bets gone sour, that means the depositary could be insolvent. The depositors’ fallback would then be the FDIC. Recall that the FDIC was at risk of running out of funds during the crisis. It was understood then that the FDIC would get an injection from the Federal government if it needed one. Presumably, even an ideologically-oriented Republican administration would do so. But that would not be consistent with the spirit of this Dodd Frank revamp.
In addition, recall that depositors with over $250,000 at a single institution are at risk. You might say it’s silly to have that much at one bank, but small business owners with decent-sized payrolls can’t avoid that. They need to have sufficient funds around payroll time at a minimum, and they also need cash in the till to pay for orders or other supplies. It is not operationally viable for a business with meaningful cash in and outflows to have a large number of small checking accounts. But the exposure is real, even if the odds of losing are small. Recall that when IndyMac collapsed, deposits over the FDIC insured limits took ~90% hits.
Finally, the proposal presents the picture that there will be enough debtor-in-possession financing to support the bridge bank, and at worst guarantees will do the trick. However, it keeps in place the ability for the Feds to provide the needed support. And there’s good reason why. From Steve Lubben at the New York Times on the 2013 incarnation of the Chapter 14 plan:
….the Chapter 14 proposal has what can only be called a ridiculous financing mechanism. I have previously noted the dubious assumption in Chapter 14 that private debtor-in-possession financing will be available in times of financial distress, especially in the size a large financial institution would need.
Lubben was also irate that the version of Chapter 14 he commented on contained perverse incentives. There weren’t enough details in the the Treasury scheme to be certain those ideas weren’t part of the plan, but enough verbiage was spend on inducing private lenders to step up that it appears not.
So despite all the handwaving about taxpayers not being the hook, they most assuredly are:
Treasury recommends, however, that Title II remain as an emergency tool for use in extraordinary circumstances. Bankruptcy should be the resolution tool of first resort, but even the improved Chapter 14 bankruptcy process may not be feasible in some cases for large, complex, cross-border financial institutions. If sufficient private financing is unavailable, OLA may prove necessary to avoid financial contagion while at the same time allocating losses to shareholders and creditors based on a clear, predictable hierarchy of claims.
Treasury contends that it will minimize risk by lending only against “sound” collateral and/or by charging a premium interest rate.
As we have argued repeatedly, banks enjoy such extensive subsidies from government that they should not be treated as private entities but should be regulated as utilities.
An additional problem that no one wants to admit to is that absent creating an supra-national authority and legal regime for world-straddling banks, there is no tidy, surgical way to put down a failing bank with major international operations. Any US laws will cover only US activities. In the Lehman collapse, there were conflicting US and UK court rulings. Legal observers contended that Judge Peck, who was overseeing the US bankruptcy, overstepped his powers and that his lack of deference to foreign courts did not go unnoticed. They expect foreign regulators and judges to be much more aggressive in protecting their interests in the event of another US megabank failure.
The one bit of good news here is that this proposal does not seem likely to get done. Jeb Hensarling, the influential head of the House Financial Services Committee, doesn’t like it because it still allows for taxpayer funding. Fed chair Jerome Powell is opposed to getting rid of taxpayer support. With key players at odds, it’s likely that the flawed OLA remains in place.
It would therefore be nice to see the authorities be more serious about leashing and collaring banks, since they are not in a much better position than they were pre-Lehman about managing a big bank collapse. And recall that Lehman, at a mere $660 billion in assets, was deemed only to be “mid sized”. But DC remains in thrall to the financial services industry. It will take another crisis to have a shot at real financial reform.
Yves here. While this article unfortunately falls for the “OMG, deficits/debt!” trope, the sorry fact is that until more people understand that real resources, and not arbitrary budget figures, are what constrain Federal spending, cancerous military spending will eat into every other use of Federal revenues. Moreover, as I am sure many readers recognize, the official budget is only a portion of our total military expenditures. There are various black budget items. And despite the formalities of having a budget, the reality is the Pentagon is not constrained in its spending. As one Beltway wag put it, “No one ever went to Congress to get another billion dollars for another bombing run in Iraq.”
Imagine for a moment a scheme in which American taxpayers were taken to the cleaners to the tune of hundreds of billions of dollars and there was barely a hint of criticism or outrage. Imagine as well that the White House and a majority of the politicians in Washington, no matter the party, acquiesced in the arrangement. In fact, the annual quest to boost Pentagon spending into the stratosphere regularly follows that very scenario, assisted by predictions of imminent doom from industry-funded hawks with a vested interest in increased military outlays.
Most Americans are probably aware that the Pentagon spends a lot of money, but it’s unlikely they grasp just how huge those sums really are. All too often, astonishingly lavish military budgets are treated as if they were part of the natural order, like death or taxes.
The figures contained in the recent budget deal that kept Congress open, as well as in President Trump’s budget proposal for 2019, are a case in point: $700 billion for the Pentagon and related programs in 2018 and $716 billion the following year. Remarkably, such numbers far exceeded even the Pentagon’s own expansive expectations. According to Donald Trump, admittedly not the most reliable source in all cases, Secretary of Defense Jim Mattis reportedly said, “Wow, I can’t believe we got everything we wanted” — a rare admission from the head of an organization whose only response to virtually any budget proposal is to ask for more.
The public reaction to such staggering Pentagon budget hikes was muted, to put it mildly. Unlike last year’s tax giveaway to the rich, throwing near-record amounts of tax dollars at the Department of Defense generated no visible public outrage. Yet those tax cuts and Pentagon increases are closely related. The Trump administration’s pairing of the two mimics the failed approach of President Ronald Reagan in the 1980s — only more so. It’s a phenomenon I’ve termed “Reaganomics on steroids.” Reagan’s approach yielded oceans of red ink and a severe weakening of the social safety net. It also provoked such a strong pushback that he later backtracked by raising taxes and set the stage for sharp reductions in nuclear weapons.
Donald Trump’s retrograde policies on immigration, women’s rights, racial justice, LGBT rights, and economic inequality have spawned an impressive and growing resistance. It remains to be seen whether his generous treatment of the Pentagon at the expense of basic human needs will spur a similar backlash.
Of course, it’s hard to even get a bead on what’s being lavished on the Pentagon when much of the media coverage failed to drive home just how enormous these sums actually are. A rare exception was an Associated Press story headlined “Congress, Trump Give the Pentagon a Budget the Likes of Which It Has Never Seen.” This was certainly far closer to the truth than claims like that of Mackenzie Eaglen of the conservative American Enterprise Institute, which over the years has housed such uber-hawks as Dick Cheney and John Bolton. She described the new budget as a “modest year-on-year increase.” If that’s the case, one shudders to think what an immodest increase might look like.
The Pentagon Wins Big
So let’s look at the money.
Though the Pentagon’s budget was already through the roof, it will get an extra $165 billion over the next two years, thanks to the congressional budget deal reached earlier this month. To put that figure in context, it was tens of billions of dollars more than Donald Trump had asked for last spring to “rebuild” the U.S. military (as he put it). It even exceeded the figures, already higher than Trump’s, Congress had agreed to last December. It brings total spending on the Pentagon and related programs for nuclear weapons to levels higher than those reached during the Korean and Vietnam wars in the 1950s and 1960s, or even at the height of Ronald Reagan’s vaunted military buildup of the 1980s. Only in two years of Barack Obama’s presidency, when there were roughly 150,000 U.S. troops in Iraq and Afghanistan, or about seven times current levels of personnel deployed there, was spending higher.
Ben Freeman of the Center for International Policy put the new Pentagon budget numbers in perspective when he pointed out that just the approximately $80 billion annual increase in the department’s top line between 2017 and 2019 will be double the current budget of the State Department; higher than the gross domestic products of more than 100 countries; and larger than the entire military budget of any country in the world, except China’s.
Democrats signed on to that congressional budget as part of a deal to blunt some of the most egregious Trump administration cuts proposed last spring. The administration, for example, kept the State Department’s budget from being radically slashed and it reauthorized the imperiled Children’s Health Insurance Program (CHIP) for another 10 years. In the process, however, the Democrats also threw millions of young immigrants under the bus by dropping an insistence that any new budget protect the Deferred Action for Childhood Arrivals, or “Dreamers,” program. Meanwhile, the majority of Republican fiscal conservatives were thrilled to sign off on a Pentagon increase that, combined with the Trump tax cut for the rich, funds ballooning deficits as far as the eye can see — a total of $7.7 trillion worth of them over the next decade.
While domestic spending fared better in the recent congressional budget deal than it would have if Trump’s draconian plan for 2018 had been enacted, it still lags far behind what Congress is investing in the Pentagon. And calculations by the National Priorities Project indicate that the Department of Defense is slated to be an even bigger winner in Trump’s 2019 budget blueprint. Its share of the discretionary budget, which includes virtually everything the government does other than programs like Medicare and Social Security, will mushroom to a once-unimaginable 61 cents on the dollar, a hefty boost from the already startling 54 cents on the dollar in the final year of the Obama administration.
The skewed priorities in Trump’s latest budget proposal are fueled in part by the administration’s decision to embrace the Pentagon increases Congress agreed to last month, while tossing that body’s latest decisions on non-military spending out the window. Although Congress is likely to rein in the administration’s most extreme proposals, the figures are stark indeed — a proposed cut of $120 billion in the domestic spending levels both parties agreed to. The biggest reductions include a 41% cut in funding for diplomacy and foreign aid; a 36% cut in funding for energy and the environment; and a 35% cut in housing and community development. And that’s just the beginning. The Trump administration is also preparing to launch full-scale assaults on food stamps, Medicaid, and Medicare. It’s war on everything except the U.S. military.
The recent budget plans have brought joy to the hearts of one group of needy Americans: the top executives of major weapons contractors like Lockheed Martin, Boeing, Northrop Grumman, Raytheon, and General Dynamics. They expect a bonanza from the skyrocketing Pentagon expenditures. Don’t be surprised if the CEOs of these five firms give themselves nice salary boosts, something to truly justify their work, rather than the paltry $96 million they drew as a group in 2016 (the most recent year for which full statistics are available).
And keep in mind that, like all other U.S.-based corporations, those military-industrial behemoths will benefit richly from the Trump administration’s slashing of the corporate tax rate. According to one respected industry analyst, a good portion of this windfall will go towards bonuses and increased dividends for company shareholders rather than investments in new and better ways to defend the United States. In short, in the Trump era, Lockheed Martin and its cohorts are guaranteed to make money coming and going.
Items that snagged billions in new funding in Trump’s proposed 2019 budget included Lockheed Martin’s overpriced, underperforming F-35 aircraft, at $10.6 billion; Boeing’s F-18 “Super Hornet,” which was in the process of being phased out by the Obama administration but is now written in for $2.4 billion; Northrop Grumman’s B-21 nuclear bomber at $2.3 billion; General Dynamics’ Ohio-class ballistic missile submarine at $3.9 billion; and $12 billion for an array of missile-defense programs that will redound to the benefit of… you guessed it: Lockheed Martin, Raytheon, and Boeing, among other companies. These are just a few of the dozens of weapons programs that will be feeding the bottom lines of such companies in the next two years and beyond. For programs still in their early stages, like that new bomber and the new ballistic missile submarine, their banner budgetary years are yet to come.
In explaining the flood of funding that enables a company like Lockheed Martin to reap $35 billion per year in government dollars, defense analyst Richard Aboulafia of the Teal Group noted that “diplomacy is out; air strikes are in… In this sort of environment, it’s tough to keep a lid on costs. If demand goes up, prices don’t generally come down. And, of course, it’s virtually impossible to kill stuff. You don’t have to make any kind of tough choices when there’s such a rising tide.”
Pentagon Pork Versus Human Security
Loren Thompson is a consultant to many of those weapons contractors. His think tank, the Lexington Institute, also gets contributions from the arms industry. He caught the spirit of the moment when he praised the administration’s puffed-up Pentagon proposal for using the Defense Department budget as a jobs creator in key states, including the crucial swing state of Ohio, which helped propel Donald Trump to victory in 2016. Thompson was particularly pleased with a plan to ramp up General Dynamics’s production of M-1 tanks in Lima, Ohio, in a factory whose production line the Army had tried to put on hold just a few years ago because it was already drowning in tanks and had no conceivable use for more of them.
Thompson argues that the new tanks are needed to keep up with Russia’s production of armored vehicles, a dubious assertion with a decidedly Cold War flavor to it. His claim is backed up, of course, by the administration’s new National Security Strategy, which targets Russia and China as the most formidable threats to the United States. Never mind that the likely challenges posed by these two powers — cyberattacks in the Russian case and economic expansion in the Chinese one — have nothing to do with how many tanks the U.S. Army possesses.
Trump wants to create jobs, jobs, jobs he can point to, and pumping up the military-industrial complex must seem like the path of least resistance to that end in present-day Washington. Under the circumstances, what does it matter that virtually any other form of spending would create more jobs and not saddle Americans with weaponry we don’t need?
If past performance offers any indication, none of the new money slated to pour into the Pentagon will make anyone safer. As Todd Harrison of the Center for Strategic and International Studies has noted, there is a danger that the Pentagon will just get “fatter not stronger” as its worst spending habits are reinforced by a new gusher of dollars that relieves its planners of making any reasonably hard choices at all.
The list of wasteful expenditures is already staggeringly long and early projections are that bureaucratic waste at the Pentagon will amount to $125 billion over the next five years. Among other things, the Defense Department already employs a shadow work force of more than 600,000 private contractors whose responsibilities overlap significantly with work already being done by government employees. Meanwhile, sloppy buying practices regularly result in stories like the recent ones on the Pentagon’s Defense Logistics Agency losing track of how it spent $800 million and how two American commands were unable to account for $500 million meant for the war on drugs in the Greater Middle East and Africa.
Add to this the $1.5 trillion slated to be spent on F-35s that the nonpartisan Project on Government Oversight has noted may never be ready for combat and the unnecessary “modernization” of the U.S. nuclear arsenal, including a new generation of nuclear-armed bombers, submarines, and missiles at a minimum cost of $1.2 trillion over the next three decades. In other words, a large part of the Pentagon’s new funding will do much to fuel good times in the military-industrial complex but little to help the troops or defend the country.
Most important of all, this flood of new funding, which could crush a generation of Americans under a mountain of debt, will make it easier to sustain the seemingly endless seven wars that the United States is fighting in Afghanistan, Pakistan, Syria, Iraq, Libya, Somalia, and Yemen. So call this one of the worst investments in history, ensuring as it does failed wars to the horizon.
It would be a welcome change in twenty-first-century America if the reckless decision to throw yet more unbelievable sums of money at a Pentagon already vastly overfunded sparked a serious discussion about America’s hyper-militarized foreign policy. A national debate about such matters in the run-up to the 2018 and 2020 elections could determine whether it continues to be business-as-usual at the Pentagon or whether the largest agency in the federal government is finally reined in and relegated to an appropriately defensive posture.
After GOP leaders announced that they would hold a House vote on their $1.3 trillion omnibus spending bill on Monday, before postponing it to Tuesday (and then postponing it against to Thursday), Bloomberg is reporting that lawmakers remain deadlocked on several major issues that they'd hoped to resolve with what would be the first long-term spending bill of the Trump era.
However, one encouraging breakthrough was reported early Wednesday morning when a source close to the leadership told CNBC that Democrats and Republicans had reached an agreement on several key issues, including $1.6 billion in border security spending, as well as funding for opioid abuse treatment, a tunnel under the Hudson River connecting New York City and New Jersey, and nearly $400 million for electronic voting security measures.
While aides said a deal is near, the two parties have reached tentative "agreements" in the past, only to see them unravel, sometimes in the middle of a vote.
Lawmakers are still fighting over DACA, provisions reinstating federal cost-sharing payments to insurance companies and other key issues. It's also unclear whether the President supports the border security package and funding for the NYC tunnel, something he vehemently opposes.
A continuing resolution passed in February (the fifth of the Trump era) expires at the end of the day Friday. And given the delays, it's looking like the vote won't happen until late Friday evening, at the earliest - giving the Senate little time to react.
Given that Congressional leaders of both parties have swatted away questions about another shutdown, it's possible that lawmakers would agree on another bare-bones stopgap bill if a breakthrough on the omnibus bill remains elusive.
Lawmakers may be required to work through the weekend to prevent federal agencies from shutting down in earnest when offices reopen on Monday - meaning they may need to delay the beginning of a two-week break.
"We’re going to do it this week," Senate Majority Leader Mitch McConnell said Tuesday. "And as long as that takes, that’s the time we’ll put in to get there."
During the most recent budget debate, the government technically shut down at 12:01 am Eastern Time on Saturday - the second shutdown in three weeks. After that, Congressional leaders struck a deal to fund the government through March 23, while also setting up an agreement in principle for a two-year budget.
Lawmakers are already hinting that this budget battle will also end in a stalemate.
"What will it take to get this done? Exhaustion," said Pennsylvania Republican Charlie Dent, a member of the House Appropriations Committee.
CNBC points out that a Nor'easter headed up the East Coast could complicate negotiations as roads and government services shut down. The National Weather Service has issued a winter storm watch for the Washington region until Wednesday night. Already, federal offices have closed due to the weather.
Mark Meadows, the leader of the conservative Freedom Caucus, told reporters that the time-line budget items had already been agreed to - something he described as "the hard part."
"I'm not in favor of those numbers, because it grows the size of government by 13 percent," he said. "But those numbers have been agreed to."
A deal over preserving DACA, a top Democratic priority, remains elusive. President Trump recently tweeted again that Democrats "do not want to help DACA."
The omnibus bill, if passed and signed into law, would fund the federal government through the beginning of the next fiscal year.
White House signals support for massive $1.3 TRILLION omnibus bill that provides just $641 million for Trump's border wall – with government set to run out of funds at midnight Friday if it doesn't get enacted by then
Lawmakers in both chambers were close to agreement on a final 'omnibus' spending bill to fund the government through the end of September
House Speaker Paul Ryan says Trump 'is supportive of the bill' and met to discuss 'wins delivered' for him
$1.6 billion for 'physical barriers and technology' but most of it isn't for the wall
Final talks on adding gun background check legislation
The bill doesn't de-fund 'sanctuary cities' It doesn't earmark funding for a 'Gateway tunnel' between New York and New Jersey, but boosts funding to programs that could fund it
Changes to background checks for gun buyers expected Government funding is set to run out at midnight on Friday
President Trump had a discussion with GOP leaders McConnell and Ryan about 'shared priorities' for the massive bill, the White House said
Trump Sets China Tariff Plan, Edges Away from Global Trade War
March 22, 2018 by Mike Schuler
U.S. President Donald Trump, flanked by Lockheed Martin CEO Marillyn Hewson (L), Commerce Secretary Wilbur Ross (2nd R) and U.S. Trade Representative Robert Lighthizer (R), delivers remarks before signing a memorandum on intellectual property tariffs on high-tech goods from China, at the White House in Washington, U.S. March 22, 2018. REUTERS/Jonathan Ernst
By Lesley Wroughton WASHINGTON, March 22 (Reuters) – U.S. President Donald Trump signed a presidential memorandum on Thursday that could impose tariffs on up to $60 billion of imports from China, although his action was far removed from threats that could have ignited a global trade war.
Under the terms of the memorandum, Trump will target the Chinese imports only after a consultation period, a measure that will give industry lobbyists and legislators a chance to water down a proposed target list which runs to 1,300 products.
China will also have space to respond to Trump’s actions, reducing the risk of immediate dramatic retaliation from Beijing, and Trump struck an emollient tone as he started speaking, saying “I view them as a friend.”
“We have spoken to China and we are in the middle of negotiations,” Trump said, adding that loss of American jobs from unfair trade was one of the main reasons he had been elected in 2016.
The United States runs a $375 billion goods trade deficit with China.
Washington will also pursue alleged breaches of intellectual property law by China through the World Trade Organization, a body that has repeatedly drawn the ire of the administration but which could provide a resolution that avoids a trade war.
Global stocks had sold off on Thursday on the expectation of tough action from Trump, with U.S. markets down as much as 2 percent, but recovered somewhat after the announcement.
Following Trump’s announcement on Thursday, the U.S. Trade Representative’s office will present a list of products that could be targeted, primarily from the high-tech sector. There will then be a 60-day consultation period before definitive action will be put into force.
White House officials told a briefing ahead of the trade announcement that the administration was eyeing tariffs on $50 billion in Chinese goods. They said the figure was based on a calculation of the impact on the profits of U.S. companies that had been forced to hand over their intellectual property as the price of doing business in China.
There was no explanation of the difference between the numbers provided by White House officials in the briefing and Trump’s $60 billion.
“Many of these areas are those where China has sought to acquire advantage through the unfair acquisition and forced technology transfer from U.S. companies … establishing its own competitive advantage in an unfair manner,” Everett Eissenstat, deputy director of the National Economic Council, told reporters.
In addition, Trump will also direct the U.S. Treasury to propose measures that could restrict Chinese investments in the United States, Eissenstat said.
The tariffs and investment restrictions will be imposed under the U.S. Trade Representative’s “Section 301” investigation into alleged misappropriation of U.S. intellectual property by China.
Eissenstat said the investigation clearly demonstrates unfair practices by China, which forces U.S. investors to turn over key technologies to Chinese firms.
(Additional reporting by Steve Holland, David Chance, David Lawder and Susan Heavey Editing by Doina Chiacu and Paul Simao)
Trump gives six close US allies including the EU and Canada a reprieve on metal tariffs but plans to impose trade penalties on China of up to 25 percent for 'flooding the world with cheap steel and aluminum'
EU, Australia, Brazil. South Korea, Canada and Mexico are temporarily exempt
Trump plans to impose tariffs of 25% on imported steel and 10% aluminum
This plan targets China, which floods the world with cheap steal and aluminum
Certain countries are in talks with the US to 'pause' the tariffs for the time being
After unleashing the first shots in the global trade war, and facing some retaliation from China tonight, President Trump has decided to exclude multiple nations (and The EU) from steel and aluminum tariffs through May 1st.
This action confirms what Ambassador Lighthizer suggested earlier in the evening, which perhaps explains the negligible response to this modest retreat in the trade war.
Full White House Statement:
President Trump Approves Section 232 Tariff Modifications
WASHINGTON – Today, based on ongoing dialogues, President Donald J. Trump authorized the modification of the Section 232 tariffs on steel and aluminum imports to suspend the tariffs for certain countries before they take effect. These suspensions are based on factors including ongoing discussions regarding measures to reduce global excess capacity in steel and aluminum production by addressing its root causes.
The tariffs on steel and aluminum imports from the following countries are suspended until May 1, 2018, pending discussions of satisfactory long-term alternative means to address the threatened impairment to U.S. national security:
the member countries of the European Union; and
By May 1, 2018, the President will decide whether to continue to exempt these countries from the tariffs, based on the status of the discussions. The European Union will negotiate on behalf of its member countries.
The President retains broad authority to further modify the tariffs, including by removing the suspensions or suspending additional countries. Any country not currently suspended remains welcome to discuss a possible suspension with the United States based on a shared commitment to addressing global excess steel and aluminum capacity and production.
The Administration will closely monitor imports of steel and aluminum imports from exempted countries, and the United States Trade Representative, in consultation with the Secretary of Commerce and the Director of the National Economic Council, may advise the President to impose quotas as appropriate. Further action by the President would be needed to implement any quota the President might decide to adopt.
The tariffs proclaimed in Presidential Proclamations 9704 and 9705 will go into effect on 12:01 a.m. on Friday, March 23, 2018.
The process for directly affected parties to apply for an exclusion for specific steel or aluminum products that they need remains in place, as announced in the two Presidential Proclamations and subsequent Federal Register notices by the U.S. Department of Commerce. Secretary Ross, in consultation with other Administration officials, will evaluate exclusion requests for products, taking into account national security considerations. In that evaluation, the Secretary will consider whether a product is produced in the United States of a satisfactory quality or in a sufficient and reasonably available amount.
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While few would have expected any China exemption - that's the whole point - it was perhaps notable that Japan was not exempted.