The Budget Deal: Bad for Workers, Bonanza for the 1% and the Military Complex

The Budget Deal of December 2013:
The 1%, Pentagon & Military Complex Win; Workers, Unemployed, Retirees, Veterans, and Consumers Lose

On December 10, the U.S. House of Representatives voted 332–94 in favor of changes to the federal budget for 2014. The House vote in effect adopted the proposals of the “Joint Congressional Committee,” co-chaired by Republican Tea Party House leader Paul Ryan and Senate Democrat Patty Murray. The measure excludes extending benefits for the 1.3 million long-term unemployed. 169 Republicans and 163 Democrats in the House voted for it.

What happened to the Democrats, who promote themselves as representing workers’ interests? 163 House Democrats in effect voted to exclude the long-term unemployed from receiving extended benefits. Only 32 voted against the deal.

On December 18, the Senate voted 64–36 in favor of the Ryan/Murphy plan. All 54 Democrats voted “yes” along with the independent (Bernie Sanders). So the cruel and callous exclusion of benefits for the 1.3 million long-term unemployed is now law. The benefit will expire on December 28 for these workers.

Yes, there are promises by the politicians that the issue will be taken up when Congress reconvenes in January. But it faces an uncertain future as the Republicans will make every effort to extract their pound of flesh in order to approve extending unemployment compensation for the long-term unemployed. First, they will demand an “offset” for the $25 billion cost of the program for one year, meaning the probability of cutting other social programs to pay for it. Second, they are likely to make qualifying for the benefit more difficult and onerous. Third, they may well attempt to reduce the amount of the payments. Of course, if the Democrats had been steadfast on behalf of the affected workers during the negotiations that led to final enactment of the budget, there would have been no need for uncertainty on any of these scores, at least in the near term.

So whom else does this new budget deal benefit and whom else does it hurt?

The Road Ahead

The measure will now be taken up by the Congressional appropriations committee in time for meeting the mid-January 2014 deadline date agreed to last October for adoption of a resolution to provide funding so that the government can continue to function.

The dysfunctionality of the government may have ended temporarily for the corporations, investors, and wealthy Americans—the 1%—but it hasn’t for the remainder of households, as the details of the recent deal clearly illustrate. Last week’s Ryan-Murray “compromise” unambiguously promotes the interests of military corporations and the wealthy at the direct expense of millions of U.S. government workers, millions of unemployed workers, veterans, retirees, tens of millions of Americans on food stamps, and middle-class households in general.

Restoring the Sequester Military Cuts

In 2011 House Republicans and the Obama administration agreed to cut $1 trillion in discretionary social spending programs, mostly education, plus another $1.2 trillion in discretionary cuts deferred until 2013. This is called the “sequester,” about half of which represented military spending cuts.

Beginning on March 1, 2013, the $1.2 trillion sequester spending cuts were allowed to take full effect for non-military spending, while Pentagon spending cuts called for in the sequester were shielded and offset in various ways by the Obama administration, with the concurrence of Congress. Pentagon spending this past year continued at the $518 billion level (not counting another $100 billion or so for “overseas contingency operations”—i.e., direct war spending).

That both the Republican-controlled House and the Democratic-controlled Senate had every intention throughout the past year to restore the military spending cuts called for in the sequester was evident in the House and Senate Budget proposals, both of which called for increasing Pentagon spending to $552 billion in 2014, according to a front-page New York Times article (December 11, 2013).

The just concluded Ryan-Murray budget deal is also primarily about addressing (and reversing) those military spending cuts and continuing to shield the Pentagon from current and future spending reductions. Were the sequester military spending cuts allowed to go into effect in 2014, Pentagon spending would have declined from current $518 billion in 2013 to $498 billion in 2014. The Ryan-Murray budget arrangement sets Pentagon spending for the coming year at $520.5 billion.

The Washington Post indicated in a lead article on December 12 that with the recent budget deal the House has temporarily retreated from deficit cutting in favor of Republican concerns about the Pentagon budget, with the Wall Street Journal adding on December 13 that the budget deal is “nearly erasing the impact of sequestration on the military.”

Further evidence that the budget deal is primarily about restoring military cuts is that the House, on the same day the budget was passed, immediately voted to pass the National Defense Authorization Act (NDAA), locking in the restoration of Pentagon spending in 2014 at a level above 2013.

Domestic Non-Military Spending: Smoke & Mirrors

While the proposed sequester Pentagon cuts have been essentially restored for 2014–15 and effectively removed from further deficit spending cuts in the future (as had tax hikes on the rich with last year’s fiscal cliff deal), the cuts to discretionary spending programs have not fared as well.

The budget deal calls for restoring $63 billion in total scheduled sequester cuts for the two years, 2014–15. Non-military program spending restoration is reportedly $31 billion of that. It thus appears that a $31 billion increase in non-military spending is part of the deal. But domestic spending the past two years, 2011–2013, has declined from a total of $514 billion to $469 billion, or by $45 billion. The budget deal raises that to $492 billion.

What Congress and Obama appear to give with one hand they are taking away—plus more—with the other. This is being done in two ways: first by raising $26 billion in fees (de facto taxes) on consumers and by taking money from federal workers and veterans’ pensions; second, by taking $25 billion from the unemployed plus billions of dollars more from food stamp recipients.

The budget deal directly includes increasing “fees” by $26 billion. Six billion of that comes in the form of raising federal employees’ pension contributions and another $6 billion by cutting military cost-of-living increases for military pensions. Another $12.6 billion comes from raising government taxes on airline travel. Thus retirees, government workers, and middle-class households will pay $26 billion more as part of the budget deal. But that’s not all.

The budget deal does not include the $25 billion in cuts to unemployment benefits in its calculation of spending $31 billion more in domestic spending. When deducted from the $31 billion, it’s only a net $6 billion cut in domestic spending. And when the $26 billion in fees (taxes) are added in, that’s a total of –$20 billion in domestic spending.

Another way of looking at it is that $25 billion in cuts to unemployment benefits is just about the same amount of restored military spending cuts. In other words, the unemployed are effectively paying for the military corporations’ continued super-profits.

As pointed out above, 1.3 million workers will immediately lose their unemployment benefits on December 28, 2013. An estimated 4.9 million jobless workers could lose out on emergency unemployment benefits over the next 12 months. Emergency benefits, which up to now included extended benefits from 40 to 73 weeks, will now revert back to only 26 weeks. This occurs at a time when 4.1 million workers are considered long-term unemployed, jobless for more than 26 weeks. Knocking millions from the benefits rolls will likely result in 2014 in even more millions of workers leaving the labor force, which will technically also reduce the unemployment rate. That’s one way to manipulate statistics to formally reduce unemployment, but it’s not a true reduction of unemployment by actual jobs creation, the latter of which has been a problem for the U. S. economy for more than a decade now.

The failure of the budget deal to extend unemployment benefits is a truer indication of its continuing austerity focus. Raising fees and cutting pension benefits are another. Together, that’s more than a $50 billion net in further spending reduction. Removing the reduction of cuts to unemployment benefits from the budget deal calculations and reporting is an exercise in misrepresentation at best, and an illustration of the degree of the politicians’ cynicism and disregard for workers. And there is more.

Another “off track” discretionary spending cut in progress involves proposals to cut food stamps for millions of recipients. This will occur by February 2014 unless prevented by a massive social movement demanding “reduce hunger! Don’t cut food stamp funding!

Today one in eight households receives food stamps, the result of the steep decline in jobs since 2008, the failure to create jobs at a normal rate since then, and the fact that jobs that have been created since 2008 typically pay low wages. The cost of the food stamp program, SNAP, has doubled to $80 billion during the so-called Obama economic recovery and the abysmal record of job creation the past five years. Both the Democrats and Republicans are concurrently proposing cuts to SNAP, ranging from the $4.1 billion cuts for food stamps over a 10-year period passed by the Senate to the $39 billion approved by the House for the same period.

An increase in food stamps that had previously been paid to the 47 million recipients was allowed to expire on November 1, resulting in a 7 percent cut. Further reductions are being negotiated that are supposed to conclude by February 2014 that threaten to reduce food stamp spending by a reported $8.6 billion over the ten-year period. As in the case of the $25 billion in cuts to unemployment benefits, the projected $8.6 billion more in food stamps spending cuts is conveniently ignored in the budget deal calculations.

The real budget deal thus amounts to $31 billion in domestic spending cuts restored from the sequester—offset by $26 billion paid for by government workers, retirees and veterans, by another $25 billion paid for by the unemployed, and another estimated $8.6 billion by the poor and working poor in food stamp cuts. What the budget deal gives (+$31 billion) with one hand, it takes away double (–$59 billion) with the other. Meanwhile, the Pentagon and military corporations get off free.

Since the Senate has now approved the Ryan-Murray budget proposal by a vote of 64–36, the next rounds in the battle against the austerity campaign directed against the 99% will come in the early part of next year over the fight to pass a Farm Bill that does not cut food stamp funding, a resolution to fund the government’s continuing operations, and preventing punitive anti-workers’ actions on the issues of reducing the deficit and increasing the debt.

Labor and its community allies need to act without delay to prevent further defeats, such as the one incurred on the budget, and beat back the continuing assaults on the living standards of the working class majority. First and foremost is winning restoration—on an emergency basis—of the extension of benefits for the long-term unemployed. That is a struggle that can, should, and must be won. And it will be won if labor and its allies go all-out in solidarity with our jobless brothers and sisters who are fighting for their survival.


About elnwebmaster

This is the discussion blog of the Labor Fightback Network, an auxiliary to the website. It is designed to facilitate discussion among labor activists concerning the critical issues facing working people in the current economic crisis. Readers’ comments are welcome, but flaming is not. Any comments which are racist, sexist/homophobic, or disrespectful on a personal level will not get past moderation.
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