Budget follies

It's hard not to despair about the irresponsibility of politicians in Congress, the White House, and the Pentagon (suited and uniformed) watching the FY2014 budget process unfold. The good news is that for the first time in four years, the Senate passed a budget; the bad news is that budget never brings our deficit spending under control, much less develops a plan for reducing our national debt. The president's budget likewise elides the major national security threat to our country, which is our own inability to bring spending into line with revenue. And the Pentagon continues to operate as though their preferred outcome is all that requires planning for, to enormous detriment for our military strength.

The president's budget contains only $174 billion in deficit reduction, and would actually increase our debt ratio to a dangerous 79 percent of GDP. Under the president's proposed budget, federal debt wouldn't return to its current level until 2023, and that is contingent on the timeless budget mirage of spending now and discipline later. Even Steven Rattner, the President's "czar" for the auto industry bail out, concludes that "we will need to make more tough choices - tougher choices than we are inclined to make today -- if we are to avoid burdening future generations with massive unfunded obligations."

There's simply no way that Republicans will vote for a budget that so fundamentally ignores the problem of our national debt. Which means sequestration will effectively be our federal budget until either Republicans lose the house or Democrats lose the Senate.

The Department of Defense has likewise abrogated budget responsibility, turning in a budget that wholly ignores the reality of sequestration. DoD's $527 billion baseline budget doesn't even contain an excursion considering sequestration's effects, either repairing those from current sequestration or anticipating continued sequestration in FY2014. But it does contain a White House mandated $150 billion reduction across ten years (weighted heavily to the out-years, like all other cuts in spending from the president's budget). 

Secretary Hagel is on the spot to defend a budget he didn't develop. His position will be made even more unenviable since the process of revising the strategy will lag by at least several months, and more likely a year. The chairman of the Joint Chiefs of Staff stated repeatedly that the strategy would be unexecutable if further cuts were made, and the budget Hagel submitted contains further cuts. Leading administration figures are insisting the pivot to the pacific continues and cuts have no effect on our ability to defend against North Korean provocation. Congress rightly wants to know what gives.

Hagel testified in contravention to his own budget, affirming to the Congress that sequestration will be taken into account. General Dempsey tried to square the circle, testifying yesterday that any further cuts would be Armageddon, but that the president's budget postpones any cuts for at least five years, so we can currently execute the strategy. Which might be true, if only sequestration hadn't already occurred and remains the likeliest budget outcome for FY2014, as well.

DoD will probably be given latitude to reprogram FY2013 money within the topline; if reports of a massive $41 billion reprogramming request are true, it will mean DoD is effectively operating without a budget. Congress will have allowed DoD to spend as it sees fit, provided it does not breach the sequestration topline. And that may be the best answer we can expect for the coming period of austerity.  

But the Pentagon is held in higher esteem than other departments of government because of its reputation for planning responsibly. It has damaged that reputation with its last two budgets. The Pentagon ought to be much more worried than it appears to be about the self-inflicted damage to its credibility for not managing this time of austerity well.  

T.J. Kirkpatrick/Getty Images

Shadow Government

Venezuela’s election offers little hope for the future

True to form, the Venezuelan government and its Cuban minders have spared no effort or expense to ensure the outcome of Sunday's snap election to elect the late Hugo Chávez's chosen successor. Challenger Henrique Capriles has been game (and his singular effort to revive the fortunes of the Venezuelan opposition commendable), but in the end his lot has been to be cast as a mere prop in Venezuela's version of "casino democracy," where the house always wins.

Ironically, Capriles should privately be relieved that Chávez's appointed successor, the dour and robotic Nicolas Maduro, and not he, will inherit the ticking economic time bomb that Chávez has bequeathed his country. Most sober observers of the Venezuelan scene give the country's economy 12 months at most before the wheels start coming off. As I have written before, some may remember Chávez for his embrace of the country's marginalized, but all Venezuelans are now poised to reap the whirlwind of the balance of his legacy: soaring inflation, a bloated public sector, a crippled private one, electricity blackouts, shortages of basic goods, and one of the highest homicide rates in the world.

Far from demonstrating any appreciation for the gravity of the economic situation, Maduro has indicated he only intends to dole out more of the same. In fact, even as the campaign has been taking place, the government has been pushing a new law in the rubber-stamp National Assembly that further undercuts the private sector and concentrates even more economic power in the state.

The so-called Law against Monopolies and Other Similar Practices is a capricious measure that empowers the government to confiscate any business that it deems not acting in the public interest. Yet the law would discard traditional metrics for the determination of monopolistic practices and instead leave it up to a politically appointed board to decide if a company has a "decisive domain" over the setting of prices or other market conditions. (State-owned enterprises would be exempt under the law, further tilting the playing field against the private sector.)

In other words, any successful company runs the risk of confiscation at any time by crossing the government's arbitrary line of being "too successful." And with the judicial sector also controlled by the government, private companies are left with no outlet to appeal adverse decisions.

The fall-out if such a law was to be implemented is not difficult to imagine: a further retraction of private sector activity, less production, and less opportunity for working Venezuelans. Just what the Venezuelan economy does not need at this critical juncture.

This is a far cry from the image of Nicolas Maduro that U.S. audiences were presented by the news media after he was named by Chávez as his successor. We were told the former bus driver was "pragmatic" and "likable." (Call it the Yuri Andropov Syndrome, after the soft-pedaling to the American public of the former KGB-head's supposed fondness for "Western jazz and scotch.")

Well, during this recent campaign, when the likable, moderate Maduro was not expelling additional U.S. personnel from the U.S. embassy in Caracas, accusing the United States of poisoning Hugo Chávez, or implicating former U.S. officials in attempts to assassinate either him or Capriles (depending on the day), he was making homophobic slurs about his opponent and characterizing the opposition as fascist coup-mongerers. And, at the same, planning further actions to destroy what is left of the private sector in Venezuela.

There will be those who will dismiss all this as just so much campaign bluster. They do so at risk to U.S. national interests. There is no evidence that Maduro is anything other than a deadly serious ideologue beholden to Cuba and to further pushing Hugo Chávez's destructive agenda.  Consider him Chávez without the charm -- and come hell or high water he is about to be with us for another six years beginning this Sunday.