US Navy Falls Short

The U.S. Navy can’t meet its funding needs for surface warships and a new class of nuclear attack submarines from 2025 to 2034, according to the service’s latest 30-year shipbuilding plan.

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The congressionally required blueprint, submitted late last week and obtained by Bloomberg News, says the Navy’s plan “requires funding at an unsustainable level” unless spending on shipbuilding is increased.

The document outlines challenges facing the plan to increase the Navy fleet to 306 vessels from the current 289 while building 12 new Ohio-class submarines, part of the nation’s nuclear triad of air, land and sea weapons.

The Navy report provides one service’s challenges beyond the Pentagon’s current five-year funding plan in an era of declining defense spending. After 2019, the Defense Department will confront a confluence of expenses that includes the new submarines, planned full production of Lockheed Martin Corp. (LMT)’s F-35 fighter jet and a new Long-Range Strike bomber.

The average cost of the Navy plan during the period when the service will be spending the most on the new submarine is $19.7 billion a year, including more than $24 billion at the peak year of fiscal 2032, according to the report.

This budget “cannot be accommodated by the Navy from existing resources -- particularly if” the Pentagon remains under congressionally mandated automatic cuts known as sequestration, the report said.

The Navy’s historical shipbuilding budget has averaged about $13 billion a year, in fiscal 2014 dollars.

“Even if the Ohio-replacement program is removed” from the Navy plan, the average shipbuilding funding required beginning in fiscal 2020 is as much as $15 billion annually, the report found.

NOTE:

Federal spending has soared over the past decade and government debt has piled up. The budget situation has recently improved as the economy has strengthened, but federal deficits are expected to start rising again after 2015. Over the long term, official projections show endless rivers of red ink unless policymakers enact major budget reforms.

Policymakers should downsize every federal department by cutting or eliminating the most harmful programs. This essay proposes phasing in spending cuts that would reach almost $1 trillion annually by 2024. That would bring spending down from 20.4 percent of gross domestic product (GDP) today to 17.6 percent, which was the level the last time the budget was balanced in 2001.  Read more…

January 20, 1993 – January 20, 2001

Bill Clinton, Presidential term

Cutting Social Security

 

The economy created just 88,000 jobs in March, down from close to 200,000 in other recent moths, for one main reason: The January 2 budget deal and the March 1 sequester that hiked taxes on working people and cut public spending.

In the January deal, payroll taxes on working people were raised by some $120 billion. The more highly publicized tax hike on the top one percent raised less than $65 billion. The sequester added another $85 billion of budget cuts. The combined economic contraction will be about $270 billion this year, and according to the Congressional Budget Office the result will be to cut economic growth roughly in half.

But the deal that Obama is trying to coax the Republicans into accepting would cut the budget at this rate for an entire decade. The economics are just insane. There is no evidence that banks are waiting to lower interest rates (which are already rock bottom) or businesses waiting to invest, pending progress on a grand budget bargain. Businesses are hesitating to invest because customers don't have money in their pockets -- and a deflationary budget deal will only make the economy worse.

The politics are worse than the economics. President Obama, violating every rule of smart negotiating, has put his final proposal on the table -- cuts in Social Security and Medicare in exchange for the Republicans' (still imaginary) agreement to raise taxes -- before the Republicans have made a single concession.

The Republican habit is well-established -- take Obama's "final" offer as the new starting point and demand further concessions. With this strategy, our president has let them take him to the cleaners for more than four years now, and is still hoping that sweet reasonableness will produce compromise. It never has and never will.

If Democrats stand for anything, it is defense of Social Security and Medicare -- America's

two most broadly beneficial and most beloved government programs -- and the president just gave away this last bit of product differentiation. You have to wonder where he is getting his advice.

Social Security benefits should be increased, not cut. The share of workers with traditional pensions is down to about 15 percent. The rest either have no pensions or have 401k plans that are not pensions at all. 401k's, like IRAs and Keoghs, are tax-sheltered savings plans. More than half of people between 55 and 64 have no pension and no retirement plan at all other than Social Security.

What we need is an increase in core Social Security benefits, and a second tier of Social Security as a universal, fully portable pension. It could be funded by raising taxes on the rich, whose effective tax rates have been steadily cut for four decades, and who now command more of our national income than ever before.

A must read:  "Expanded Social Security,"

The Beltway pundits and supporters the view that the economy can deflate its way to prosperity love to take the president and the Republicans to task for "kicking the can down the road," meaning refusing to make a grand bargain that trades cuts in social insurance for increases in taxes. But that can looks pretty good compared to what's under discussion.

Every Democrat in Congress should be standing up to the White House and refusing to back a budget that cuts a nickel from Social Security or Medicare. Yes, we need to reform those programs, but not in the context of an ill-advised set of general budget cuts that will only sandbag the fragile recovery. In the case of Social Security, reform means increasing, not cutting the income support of the elderly. In the case of Medicare, reform is spelled National Health Insurance.