War savings and debt reduction: Take two
By Lori Montgomery,
The congressional “supercommittee” is looking to count as budget savings as much as $700 billion that the nation no longer plans to spend on the wars in Iraq and Afghanistan over the next decade, an accounting gimmick that has drawn fire from both Democrats and Republicans.
In deference to that criticism, aides from both parties said the panel would not count war savings toward its primary debt-reduction goal of at least $1.2 trillion. Instead, they are considering using the savings to “pay for” other priorities, such as extending emergency unemployment benefits and a temporary payroll tax cut currently enjoyed by every American worker.
Both measures are scheduled to expire at the end of this year, potentially damaging the fragile recovery — an outcome that President Obama and other Democrats are eager to avoid. Unless their cost is offset by other savings, however, extending them through 2012 would add billions to next year’s budget deficit — an outcome Republicans oppose.
Budget analysts were appalled by the idea. Robert Bixby of the bipartisan Concord Coalition called war savings “the mother of all budget gimmicks.” But aides in both parties said an agreement to use war savings to offset the cost of urgent expenses could help build support for a broader accord on the debt, which is likely to require lawmakers to support politically painful spending cuts and tax increases.
“There is around $917 billion to be saved over the next 10 years from the overseas contingency account. And we ought to count that,” Rep. James E. Clyburn (D-S.C.), a supercommittee member, said on “Fox News Sunday.” “We ought to use that savings . . . to plow it into job-creation programs that would get people back to work, and paying taxes, and off of food stamps and off of unemployment.”
With a Thanksgiving deadline fast approaching, supercommittee members are still struggling toward a compromise on the broader package. Talks through the weekend focused on the issue of taxes, with Democrats pressing Republicans to up their offer to generate about $300 billion in new tax revenue over the next decade through a rewrite of the tax code that would lower rates but eliminate expensive deductions.
Republicans indicated a willingness to do so, aides said, but only in exchange for additional reductions to soaring Social Security and Medicare costs.
Rumors buzzed through the Capitol late Monday that Democrats were poised to deliver a new offer, and aides said Senate Majority Leader Harry M. Reid (D-Nev.) was seeking to schedule a meeting with House Speaker John A. Boehner (R-Ohio). That meeting was never set, however, and by Monday evening Democrats had yet to plot their next steps.
The war savings issue also remained unresolved. While both sides seemed inclined to count the savings, Democratic aides said Republicans want to reserve a good chunk of it to pay for other expiring provisions, including a legislative patch that prevents Medicare doctors from absorbing a huge scheduled pay cut and another legal fix that protects millions of households from the alternative minimum tax.
The concept of war savings is a budget quirk that rose to prominence in 2009, when Obama took office on a promise to end both wars. Budget analysts estimated that doing so would save vast sums compared with an alternative policy path that would have allowed the wars to grind on indefinitely at surge levels.
In his budget requests to Congress, Obama has regularly taken credit for more than $1 trillion in 10-year savings from ending the wars. This summer, Reid tried to count war savings as part of a deal to raise the federal debt ceiling. And Senate Democrats this fall considered holding hearings to urge the supercommittee to count war savings by soliciting testimony about all the military bases that would be closed, all the armaments that would no longer need to be replenished and all the war-zone salaries that would no longer have to be paid.
At first, Republicans balked. Boehner has dismissed the idea of counting war savings, saying the reductions are “already going to happen.” And House Majority Leader Eric Cantor (R-Va.) has criticized war savings as “gimmicks and accounting tricks.”
But in recent weeks, the idea has grown more palatable to the GOP, promoted by some defense hawks as a replacement for automatic cuts to the Pentagon that will hit in 2013 if the supercommittee fails to draft its own debt-reduction blueprint.