'Under President Obama, the nation's deficit has fallen for the past four years, the fastest pace of decline over a sustained period since World War II. It is now less than half of what it was when the president took office,' Treasury Secretary Jack Lew said. (MANDEL NGAN / AFP/Getty Images)
WASHINGTON — The US federal deficit is $409 billion smaller than one year ago and is projected to keep shrinking, and fiscal conservatives on a special congressional panel want to keep it that way.
The US Treasury Department announced Oct. 30 that the federal deficit has fallen to $680 billion, a downward path celebrated by deficit-obsessed Republicans and a legacy-minded Obama administration.
A special House-Senate budget conference committee began its work the same day toward its two-part charge — crafting a 2014 budget resolution that can pass both chambers, and a longer-term spending blueprint — with a highly scripted session that appeared to achieve little progress toward stated goals, such as trying to replace the remaining defense and domestic sequestration cuts.
Most Republicans and Democrats on the special panel agreed that the way they achieved $1.2 trillion in deficit reduction in August 2010 — by setting up the sequester cuts — is bad policy because agency officials have little control over what gets cut.
Members from both sides spent ample time calling on their political foes to accept cuts and other measures to which they are strongly opposed — while digging in on their own favored deficit-cutting ideas. Republicans still want deeper cuts and no tax hikes; Democrats still want new tax revenues and smaller entitlement program cuts.
Those ideological difference are not new. But the revised deficit numbers are. And the downward trajectory of the deficit could be bad news for the US defense sector. Here are three reasons:
■Ideology usually trumps deal-making. Republicans are digging in on their insistence that unless Democrats and the White House produce a sequester alternative that contains no budget gimmicks, the across-the-board cuts must remain.
Don’t think that includes only tea party House Republicans. This growing group also includes old-school Republicans — including Senate Armed Services Committee (SASC) members.
Some defense observers had speculated that the budget conference panel’s inclusion of a handful of SASC Republicans would allow them to join with anti-domestic sequester Democrats to forge a plan to replace all of the automatic cuts.
But that might not be so. SASC Republicans seemed split last week about how to — and whether to — address sequestration.
SASC member Sen. Jeff Sessions, R-Ala., uttered comments that underscored how tough it might be for the conference panel to come up with anything meaningful on which both parties might agree.
Sessions, as other GOP members did, suggested he would rather keep sequestration in place than accept a plan that produces less tangible deficit-reduction items.
“This is the tough year,” Sessions said of the first wave of across-the-board cuts to non-exempt accounts. Even if the sequestration remains, “there will be growth” in federal spending for the remaining years of sequestration, he said.
Another Republican SASC member, Sen. Roger Wicker of Mississippi, raised eyebrows when he said of sequestration, if a Democratic alternative fails to meet his standards: “I can live with it.”
■Conference hawks are split on sequester. In a twist, Sessions and Wicker appeared, at the start of the conference committee’s work, aligned with fiscal hawks like Sen. Chuck Grassley, R-Iowa, who sternly said he is “cautious about” any Democratic plan to replace the sequestration cuts with amorphous changes to domestic entitlement programs or blank promises of such moves to be filled in later.
They broke with other pro-military members of the budget conference panel who want to get rid of the defense sequester cuts.
Sen. Lindsey Graham, a GOP defense hawk from South Carolina, said sequestration, if left in place, will break the military. Graham also said any additional Defense Department cuts would be dangerous given the long list of threats America is facing, pointing to Iran’s nuclear program, al-Qaida and continuing instability in Syria.
Sen. Kelly Ayotte, R-N.H., told her budget conference colleagues that senior Army leaders tell her only two brigades are fully ready for combat. Replacing sequestration would help greatly to reverse that, she said.
In another twist, the SASC members’ statements made clear Graham and Ayotte are more aligned with Democrats on getting rid of the defense sequestration cuts.
To be sure, congressional Democrats desperately want to replace sequestration with other deficit-slashing measures — particularly to safeguard domestic programs. And they say sequestration already is an anchor on a struggling economy.
Rep. Jim Clyburn, D-S.C., for instance, said the cuts are killing jobs across the nation. And the House Budget Committee’s ranking member, Rep. Chris Van Hollen, D-Md., said the defense and domestic sequester cuts could take 800,000 jobs from a long-sputtering US economy.
But Republicans are skeptical about such claims. More to the point, Republicans are experiencing plummeting poll numbers after the government shutdown, and are collectively in need of an ideological and political win.
And as data compiled by analysts at USGovernmentSpending.com shows, after growing again briefly next year, the federal budget deficit is projected to shrink steadily for several more years.
Fiscal hawks in the Republican Party will fight to the death to keep that trend line headed south, even if they also find the across-the-board, non-prioritized nature of the cuts distasteful.
■The Obama administration is spiking the deficit-reduction football. President Barack Obama and many of his top lieutenants have repeatedly said he, like congressional Democrats, wants to find a way to replace the sequester cuts with other items. They often point to his 2014 budget plan as evidence.
“The president’s plan would replace the economically damaging sequester while achieving additional deficit reduction to put federal debt on a downward path as a share of the economy,” the Treasury Department said in its Oct. 30 statement.
But in the same statement, the administration took credit for the downward trajectory of the deficit.
“Under President Obama, the nation’s deficit has fallen for the past four years, the fastest pace of decline over a sustained period since World War II. It is now less than half of what it was when the president took office,” Treasury Secretary Jack Lew said in the statement.
Still, there were signs that a meaningful compromise plan will require something less than a miracle two-out, two-strike, bottom-of-the-ninth inning grand slam.
House GOP Deputy Whip Rep. Tom Cole of Oklahoma — who this month has endorsed keeping sequestration shy of a GOP-endorsed plan to replace it — offered the Democrats and GOP hawks some hope by saying the conferees should try to get rid of the “damaging and senseless” sequester cuts.
The chairwoman of the Senate Budget Committee, Sen. Patty Murray, D-Wash., said she is ready to “make some tough concessions to get a deal.”
Such comments led Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt, to express something that is rare these days in Washington: optimism.
“The Campaign to Fix the Debt is optimistic that the conferees will be able to forge an agreement that will put the federal budget on a sustainable track for fiscal year 2014 and beyond.
“Many of the conferees stated their openness to working towards both pro-growth tax reform and money-saving entitlement reform — the two areas of the budget that are driving our debt over future decades,” MacGuineas said. “Now it’s time for them to back up their words with action.” ■