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July 26, 2012


Simpson-Bowles provides fiscal fix
By William Cohen

Recently, television networks ran footage of a car speeding at 70 miles per hour down the wrong side of a divided highway. The man who captured the event on his camera could see that catastrophe was inevitable. The collision was horrific.

The crash is a perfect metaphor for what is taking place on Capitol Hill. Barring congressional action, the automatic spending cuts to both federal civil and defense programs known as sequestration will go into effect on Jan. 2, 2013. These cuts, according to the Congressional Budget Office, will eliminate approximately $111 billion from defense, domestic and Medicare accounts in fiscal 2013, and $984 billion over the next nine years.

Sequestration was part of the agreement that temporarily resolved the debate over raising the debt ceiling, a debate that almost forced the United States to default on its debt last fall and succeeded only in reducing our nation’s credit rating. Sequestration was originally intended to provide a doomsday scenario that would force Democrats and Republicans to come together to find $1.2 trillion in savings over 10 years. Ideological rigidity trumped the fear of failure.

As a result, our political leaders have sent our country hurtling down the wrong side of the highway, with predictable carnage ahead. Someone has to gain control of this driverless, out-of-control vehicle, or we are heading for a collision that will seriously affect our national security and the social safety net for millions of Americans.

Secretary of Defense Leon Panetta has called sequestration “catastrophic,” stating it will hollow out our military force and endanger our national security. This view was echoed by the leadership of the defense industry at a hearing before the House Armed Services Committee last week.

The defense budget is currently being reduced by $487 billion. If further defense reductions are needed, they should be to fortify our national-security strategies and validate requirements rather than undermine them with mindless, across-the-board cuts.

Many members of Congress have stated that a solution to avoid sequestration cannot be found until the administration provides more clarity on how federal agencies like the Department of Defense will go about implementing the automatic cuts.

At a hearing last week, Chairman of the House Armed Services Committee Buck McKeon (R-Calif.) stated that “this overdue guidance from the administration on how they intend to interpret the law and implement sequester mechanically is critical to employers, not to mention Congress.” He went on to say that guidance from the administration has been “piecemeal” and that when it does come, it will be too late.

OMB has provided limited guidance on certain issues, such as the treatment of Veterans Affairs and supplemental war funding, but with or without OMB guidance, the Budget Control Act of 2011 (BCA) already lays out the basics of how sequestration will be implemented. The BCA states that each “program, project and activity” (PPA) in an account would bear an equal percentage reduction. PPAs are defined in many appropriations bills as the lowest level of funding detail outlined in the budget. Surprisingly little flexibility is left to the administration.

While additional clarity as to how those cuts will be made within each program would be helpful for government program managers and the defense industrial base, Congress needs to stop waiting for OMB or Superman. Neither is coming. Congress must lead the way in avoiding an impending disaster, rather than asking for more clarity on how the disaster would be implemented.

Any deal that will achieve the $1.2 trillion in savings needed to avoid sequestration will come from some combination of tax increases, cuts to entitlements spending and cuts to discretionary spending, including defense. Both parties have refused to strike a compromise based on these elements, preferring to wait until after the election to see how the balance of power might shift. This gamesmanship is causing us to lose valuable time. Meanwhile, large government contractors might have to issue layoff notices this fall under the parameters of the WARN Act, and the consequences of sequestration will be upon us before the cuts even take place.

Politics is about compromise, but if the word compromise is unacceptable, let’s call it a “search for common ground” — which is precisely what is needed. As it currently stands, congressional common ground is required on three pieces of legislation: the Bush tax cuts, sequestration and the debt ceiling — the original problem that led us to this point.

Finally, we need to recognize that a $1.2 trillion cut in spending is but a small down payment on what needs to be done to rescue us from a foreseeable fiscal calamity. There is an exit sign that can take us to an off-ramp from the wrong side of the highway we’ve been racing along. It’s called Simpson-Bowles. Both President Obama and Congress have willfully ignored it for the past two years.

They need to take it. Now.

Cohen is a former senator from Maine and secretary of Defense under President Clinton. He is currently the chairman and CEO of The Cohen Group, an international business advisory firm.


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