Ideological Struggle Frustrates Practical Investments

By Larry Kiern 2013-10-15 09:31:00

Speaker of the House John Boehner (R-OH) has promised “a whale of a fight” this fall. As the imperatives of raising the national debt limit and continuing the operation of the federal government approach in October, Congress and the President are preparing for another round in the fiscal fight they have waged since 2011. The outcome will directly impact the nation’s economy, national security, and key maritime programs that depend on federal government support for survival. 

Why “A Whale of a Fight”?    

While media reports highlight gridlock in Washington, D.C. between Republicans and Democrats over fiscal matters, the real culprit blocking compromise remains the deep ideological divide within the Republican Party. Tea party darling Senator Ted Cruz (R-TX) has whipped up a frenzy in the party’s right wing to make a political last stand, reminiscent of the Alamo, against President Obama’s signature legislative achievement, the Affordable Care Act or “Obamacare.” 

The intense passion of this wing of the Republican Party cannot be denied, nor can its influence over the party’s congressional leadership. The failure of the House Republican Leadership to advance both the farm and transportation bills is an ominous indicator of the intensity of the divide. Senate Minority Leader Mitch McConnell (R-KY) fears a primary challenge from the right in his home state. Speaker Boehner remains vigilant of the threat posed by his tea party members, who are likewise more concerned about a challenge from the right in their solidly conservative, gerrymandered districts. And the opportunity some Republican Members of Congress have seized to galvanize their positions on the resolution to authorize the use of military force against Syria illustrates the abiding intensity of passions that separate the disparate foreign policy wings, libertarian versus internationalist, within the party. 

Amid this rightward-leaning dynamic, Speaker Boehner, who signaled his support for the Syria resolution, moved to protect his right flank by proposing more budget cuts in the fall face-off over the debt limit, the budget, and sequestration. While prominent political commentators bemoan this poisonous political dynamic, it manifests the reelection imperative by which Members live or die. Speaker Boehner burnished his conservative bona fides by demanding more budget cuts, but without provoking a foolhardy confrontation with President Obama over the Affordable Care Act that would risk the full faith and credit of the United States, the nation’s economic recovery, and his party’s national viability.

Political Ideology Overshadows Policy  

 Because the real passion of the tea party-allied congressional Republicans appears to be focused on undoing the Affordable Care Act by defunding it, Speaker Boehner’s demand for another trillion dollars in budget cuts in return for agreeing to raise the debt limit should be understood for what it is: a face-saving alternative bearing little relation to the practical reality of governing. 

At this point it is apparent to anyone grounded in the facts that Congress and the President successfully enacted real restraints to increased federal spending that, combined with economic growth, have materially improved the nation’s fiscal posture. Adjusted for inflation, federal discretionary spending has been cut 14 percent since 2010, producing an overall cut in federal spending of five percent. Since 2011, the federal employment has dropped by 170,000. At the depth of the Great Recession in 2009, federal outlays reached a post-World War II high of 25.2 percent of GDP. Today, that has shrunk to 21.5 percent. Furthermore, the federal deficit as a share of GDP has shrunk from nine percent in 2010 to four percent today and is projected to drop below three percent. There is simply no pressing fiscal crisis in the U.S.

Therefore Speaker Boehner’s demand for another trillion dollars in cuts to raise the national debt limit derives solely from the need to protect his right flank. While he hinted at deeper entitlement cuts, he did not specify any, and it appears that House Republicans will have a difficult time voting to cut Social Security and Medicare benefits as the election approaches. Indeed, Stephen Moore, a prominent Wall Street Journal conservative commentator, recently warned congressional Republicans not to overreach but rather to accept their achievements to date. He opined approvingly that “spending caps and sequestration are squashing . . . progressive dreams” and that Republicans should just “enforce the budget laws that Mr. Obama has already agreed to.”

Sequestration Cripples Key Maritime Programs

But sequestration squashes more than “progressive dreams.” It cripples nationally important maritime programs that have long provided greater military and economic security. No progressive, House Appropriations Committee Chairman Hal Rogers (R-KY) has called for an end to sequestration. Former Secretary of Defense Leon Panetta warned again that sequestration weakens our defense readiness and ability to respond to crisis. The Chief of Naval Operations, Admiral Jonathan Greenert, recently explained that sequestration cut the U.S. Navy’s budget by $10.7 billion this fiscal year, resulting in reduced and cancelled naval operations, maintenance, deployments, training, research, and shipbuilding and housing construction.  

Looking ahead to fiscal 2014, which commences on October 1, 2013, the Navy faces another round of sequestration cuts. This portends civilian reductions in force and involuntary separations for active duty personnel. The Maritime Administration has acknowledged that sequestration will cut the Maritime Security Program, and it is preparing to drop 20 ships, one-third of the fleet, from the program, which will eliminate critically important U.S. merchant mariner jobs. Likewise, the U.S. Coast Guard, which cut operations by about 25 percent this fiscal year, must cut deeper next fiscal year, including into its acquisition programs for ships and aircraft. These cuts will further cripple the Coast Guard’s capital modernization plan and further erode operational capability. The sounds we will soon hear are the echoes of hollow forces.      

To sustain operational capability, the Department of Defense (DOD) clamors for more flexibility and discretion in administering the cuts, e.g., trimming personnel and health care benefits, but Congress has proven unwilling to cede discretion to the Administration for fear of a backlash by constituents. In these circumstances, DOD, the Coast Guard, and other national security agencies must cut operational capability and capital investments. There is simply no avoiding this consequence of sequestration cuts.

Likewise, other important maritime programs that spur our nation’s economy will face deeper cuts in fiscal 2014 due to sequestration. These include the cargo preference program that provides critically important jobs for U.S. merchant mariners, transportation infrastructure programs that modernize our nation’s freight transportation system, and inland waterways and port infrastructure development programs that spur economic development through improved efficiency.  Although the Senate showed promising signs of being able to work through bipartisan solutions to key maritime policy and appropriations issues, this progress will likely be sacrificed on the altar of ideological fratricide within House Republicans. 

The Wrong Prescription for What Ails Us  

What is particularly striking about this ideological sideshow within the Republican Party is how quaint it remains, considering the policy prescription the American people really need: In the absence of a deficit crisis, the nation should be leveraging historically low interest rates and its enormously strong borrowing capacity to spur investments in infrastructure, research, development, and employment. These kinds of value-added investments, including to our maritime transportation system, should be undertaken when interest rates that the U.S. can command in the financial markets are at historic lows. 

For example, the Maritime Administration recently reported on the powerfully stimulating impact of America’s shipbuilding industry. Nationally, the industry supported over 400,000 jobs and accounted for $36 billion in GDP. And there is a great unmet need for transportation infrastructure projects. The Department of Transportation recently announced that it was only able to fund about half a billion dollars in TIGER grants, for which it had received applications totaling over $9 billion. 

There is a bipartisan consensus that our nation’s unemployment rate has remained too high for too long. Millions of Americans looking for work simply can’t find it. Another year of sequestration cuts will only worsen the problem by reducing GDP growth by another 0.7 percent.  Indeed, the Congressional Budget Office (CBO) has reported that cancelling sequestration alone could add 1.6 million jobs to our economy in the next fiscal year. Current projections show that, because the economy has improved so much more than expected when sequestration was adopted in August 2011, cancelling the sequester this year would actually improve our fiscal deficit reduction performance over what the sequester was originally predicted to achieve.

In these changed circumstances, it would appear that the interests of America’s maritime industry would be best served by urging Republican Members of Congress to put aside their ideological differences for the moment and cancel sequestration from now through the end of 2014. They can then revisit the wisdom of what was agreed at the outset was a misguided policy.