Defense Spending is a Hostage in Partisan Standoff Over List of Fiscal Cliff Issues

Sen. Jack Reed, D-R.I., told Defense News on Sunday that every proposal to delay or void pending Pentagon cuts is

Senate Republican and Democratic leaders — at least publicly — agree turning off pending across-the-board cuts to planned Pentagon spending should be included in a final fiscal cliff package. But the two political parties seem miles apart on how to find the funds needed to cancel or delay them.

Republican and Democratic senators emerged from separate party caucus meetings Sunday and revealed to reporters that Democratic leaders had proposed delaying by two years pending deep cuts to planned defense and domestic spending. Finding a way to keep the former from kicking in likely is needed to get enough GOP votes to pass a fiscal cliff-avoiding deal; the same is true for the latter is true of attracting ample Democratic support.

Lawmakers said Democrats proposed delaying the sequester cuts by two years and paying for that move with $600 billion in new tax revenue, which is a non-starter for GOP senators.

That Republicans, typically more supportive of big Pentagon budgets, are blocking proposals that would shield the Defense Department from budget cuts shows the uphill fight congressional leaders and Obama administration officials face in last-ditch efforts to pass a fiscal cliff-avoidance bill by 11:59 p.m. Monday evening.

Republicans want to turn off the defense cuts, but are holding firm that doing so requires more federal spending cuts from domestic entitlement programs.

Democratic leaders are willing to cancel the defense cuts, but are holding firm that doing so requires raising tax rates on more high-earning Americans than is supported by congressional Republicans.

As more and more Senate Republicans and Democrats spoke to reporters following their caucus meetings, it became clear that defense spending is now one of the biggest hostages in a years-long fight over tax rates and domestic entitlement spending. But so, too, are domestic entitlement programs.

So far, Republican and Democratic members are willing to sacrifice the hostages to prevent the other side from getting the most perceived benefit from a final deal.

Senate Armed Services Committee Ranking Member John McCain, R-Ariz., told Defense News the defense sequestration matter is “one of the biggest problems because, obviously, some of us that cannot vote for anything that does not address sequester because of national security.”

The No. 2 Senate Democrat, Dick Durbin of Illinois, indicated the two parties have yet to agree on changes to the so-called “Estate Tax.” Sen. Jack Reed, D-R.I., told reporters there has been little progress on reaching agreement on setting a level of annual income at which those individual earners above it would have their federal tax rates increased.

And a debate set off Sunday by President Obama’s comments about something called “chain CPI” showed the parties remain divided over domestic spending reforms.

“One of the proposals we made was something called chain CPI, which sounds real technical, but basically makes an adjustment in terms of how inflation is calculated for Social Security,” Obama said during an interview that aired Sunday on NBC’s “Meet the Press.”

It is “highly unpopular among Democrats, not something supported by AARP, but in pursuit of strengthening Social Security for the long-term, I’m willing to make those decisions,” Obama said.

That prompted Senate Minority Leader Mitch McConnell, R-Kent., to inject the idea into his talks with Senate Majority Leader Harry Reid, D-Nev. Reid balked, briefly exiting the talks before appearing to re-engage hours later.

As the defense cuts loom, there appear to be some differences within each party caucus. For instance, as GOP members emerged from their closed-door meeting, they criticized McConnell for pouncing on the president’s CPI comment.

“We need to take the CPI off the table. That’s not a part of the negotiations,” McCain said. “We cannot win an argument that has Social Security for senior citizens versus taxes for the rich.”

Sen. Olympia Snowe, R-Maine, also said the CPI proposal was a bad move. GOP senators told McConnell in the meeting “we have to move off that,” she said.

Incoming Senate Appropriations Committee Chairwoman Barbara Mikulski, D-Md., urged her colleagues on each side to give enough ground to strike a deal. She called the CPI flap an unnecessary “obstacle.”

The next 31 hours, Mikulski said around 5 p.m. EST Sunday, “cannot be obstacles du jour.”

Still, even as some lawmakers slammed the other side for a resistance to compromise even as the economic cliff and defense cuts approach, they dug in their heels on their own preferred contents of a final fiscal deal.

“We cannot put a moratorium on the sequestration and get to the heart of the problem,” Sen Kay Bailey Hutchinson, R-Texas, told reporters. “And that is spending.”

And Reed said bluntly that Republican-pitched changes to Social Security “fails on so many different points.”

Several senators told Defense News a best-case scenario might be a deal that could pass both the House and Senate on Monday that extends tax cuts for most Americans while leaving the sequestration cuts and other issues to be dealt with in January by a new Congress.

Even then, doing so will require finding a way to pay for such a move. And even with that two-step path, the same issues likely will keep cropping up. That’s because, as Reed said while disappearing down a Capitol staircase: “Everything is tied to taxes.”

John T. Bennett

John T. Bennett

Bennett is the Editor of Defense News' CongressWatch channel. He has a Masters degree in Global Security Studies from Johns Hopkins University.
John T. Bennett