Photograph by J. Scott Applewhite/AP Photo

Senate Armed Services Committee members, from left, Sen. John McCain, Sen. Kelly Ayotte, Sen. Deb Fischer, and Sen. Lindsey Graham gather on Capitol Hill in Washington, Feb. 12, 2013, prior to the committee’s hearing on the looming cuts to the defense budget that could be part of the sequestration.

From Bloomberg Government’s Congress Tracker blog

Arizona Republican John McCain is attempting to torpedo a sequester proposal by his successor as the ranking member of the Senate Armed Services Committee.

McCain said in an interview that he is working with New Hampshire’s Kelly Ayotte and Lindsey Graham of South Carolina on a plan to replace the $85 billion in scheduled cuts with reductions in federal workers and other changes.

The plan is aimed at supplanting a competing proposal by Oklahoma’s James Inhofe — who succeeded McCain this year as the top Republican on Armed Services — that would give the Defense Department more power to move money around within its budget so it could live more easily with the coming sequester.

McCain said that would amount to giving up the power of the purse, which the administration could use to undermine the fiscal 2013 defense authorization bill that President Barack Obama signed last month. “In the name of moving funds around, you can make policy decisions which would be directly counter to the National Defense Authorization Act,” he said. “I’m not prepared to give over to the executive branch all the responsibilities of the legislative branch.”

Majority Leader Harry Reid said lawmakers will consider this week two competing sequester proposals — one from each party. Democrats want to replace the cuts with a combination of tax increases on the wealthy and cuts in farm subsidies and defense spending. Republicans haven’t settled on a single proposal.

“What is permitted to come up for a vote, and when, is not yet fully finalized,”said Inhofe spokeswoman Donelle Harder.

Original post is It’s McCain Versus Inhofe Over Budget Cuts by Political Capital.

Photograph by Derick E. Hingle/Bloomberg

The USS Arlington, front, and USS San Diego, rear, both U.S. Navy amphibious transport dock ships, sit at the dock at Ingalls Shipbuilding yard, a division of Huntington Ingalls Industries Inc.

President Barack Obama will tell workers at a Huntington Ingalls shipbuilding facility in Newport News, Virginia, today that their jobs may depend on his ability to work out a compromise with Republicans in Congress over sequestration. Huntington CEO Michael Petters speaks on Bloomberg TV ahead of Obama’s speech.

Look for the introduction of competing Senate Democratic and Republican bills
that would replace the $85 billion in automatic spending cuts that start Friday.
Democrats want to replace the cuts with a combination of tax increases on
the wealthy and cuts in farm subsidies and defense spending. Republicans haven’t settled on their plan. A House Appropriations panel hears from Army Chief of Staff Raymond Odierno and leaders of Navy, Marine Corps and National Guard on the impact of the cuts.

Fed Chairman Ben S. Bernanke gives his semi-annual testimony on central bank monetary policy before the Senate Banking Committee. His efforts to rescue the economy could result in more than a half trillion dollars of paper losses on the Fed’s books if interest rates rise abruptly, Bloomberg News reported. Speaking of the economy  the Senate Finance Committee hears from Congressional Budget Office Director Doug Elmendorf on the economic outlook for the next decade.

Federal Deposit Insurance Corporation Chairman Martin Gruenberg reports on bank and thrift earnings for the fourth quarter and updates his list of problem lenders at heightened risk of failure.

Consumer Financial Protection Bureau’s Richard Cordray and Comptroller of the Currency Thomas Curry speak on enforcing consumer protection laws at a National Association of Attorneys General conference.

The Commodity Futures Trading Commission and the International Organization of Securities Commissioners hold a public meeting on ways to overhaul scandal-plagued benchmarks such as the London Interbank Offered Rate, or Libor. CFTC Chairman Gary Gensler has questioned the viability of Libor after three banks paid more than $2.5 billion in fines to settle rate rigging charges.

On Capitol Hill, House Speaker John Boehner delivers remarks at Credit Union National Association Conference. House Financial Services Chairman Jeb Hensarling and Rep. Debbie Wasserman Schultz also speak.

Senate Democrats scheduled a cloture vote on Chuck Hagel as defense secretary today after some Republicans said they’ll drop opposition, while the Senate Finance Committee meets to consider Jack Lew’s nomination to be Treasury secretary.

And the Supreme Court hears arguments on whether states are violating the Constitution by collecting DNA samples from people when they are arrested in effort to link them to unsolved crimes.

Original post is Washington Daybook: Sequestration Countdown by Political Capital.

Photograph by Matt Nager/Bloomberg

Law enforcement capture marijuana being smuggled into the United States from Mexico in Tucson, Arizona, in this file photo.

This is the art, in Washington, of cutting an agency that doesn’t exist:

In all the warnings of the consequences of looming budget cuts, the White House budget office  has noted one program targeted for cuts — an office that already is history.

The Office of Management and Budget, in a September 2012 report to Congress required by law, laid out “an estimate of the funding reductions that would be required across non-exempt accounts.” Included was an estimated 8.2 percent reduction to the $20 million budget of the National Drug Intelligence Center, a Justice Department agency based in Johnstown, Pennsylvania.

The NDIC was created to provide strategic drug-related intelligence and training assistance “in order to reduce the adverse effects of drug trafficking, drug abuse, and other drug-related criminal activity,” according to an archived Justice Department Web-site — archived because Justice shuttered the drug intelligence center in June 2012.

The magazine “Reason” first reported the closed agency’s inclusion in the report.

And there’s a reason, of course:

As required by law, an administration official says, the Sequestration Transparency Act report assumes that discretionary appropriations are funded at the level that would be provided under a continuing resolution (CR) at the same rate of operations as in fiscal year 2012. The president’s 2013 fiscal year budget did not request funding for the National Drug Intelligence Center, however, since the STA report assumes the government is operating under a CR, the STA report included the Center in its calculations.

Consider that $20 million already saved.

Original post is White House Budget-Cutting Lesson: Try Cutting 8.2 Percent from Zero by Political Capital.

Photograph by Daniel Acker/Bloomberg

Pedestrians walk in front of the Capitol building.

That’s the percentage of Americans who want to delay automatic spending cuts set to take effect beginning this week, according to a Bloomberg National Poll.

That majority said Congress should “delay steep cuts to give the economy a chance to continue recovering, which would help reduce the deficit,” according to the survey by Selzer & Co.

That compares to 40 percent who said it would be better for Congress to “act now to make steep cuts to reduce the deficit before it gets out of control.”

Without an agreement between President Barack Obama and Republicans in Congress, the $1.2 trillion in spending cuts over nine years would start going into effect on March 1.

Bloomberg’s Julie Hirschfeld Davis has more here.

Original post is Bloomberg by the Numbers: 54 by Political Capital.

Photograph by USAF

The Pentagon in Arlington, Virginia.

With just a week to go before the scheduled start of automatic budget cuts, the Pentagon is worried about not having enough cash.

What’s the biggest federal agency to do? Tell the folks in accounts payable to slow down.

The Defense Department yesterday revoked a policy to provide faster payments to contractors in a move that’s expected to shore up “several” billion dollars, Maureen Schumann, a Pentagon spokesperson, said in an e-mail.

The change comes in preparation for the possible March 1 start of across-the-board budget cuts known as sequestration, said Larry Allen, president of Allen Federal Business Partners, a consulting firm in McLean, Virginia. The military “needs to stretch out its money as long as it can if they know it’s going to be tight,” he said in an e-mail.

Companies aren’t pleased. The policy was designed to help small businesses, which don’t generally have the finances to support a major government project for a month or longer, according to Molly Brogan, a National Small Business Association spokesperson.

“This memo is exactly the problem with sequestration and Congress’s failure to do anything about it to this point,” she said in an e-mail.

Original post is Pentagon to Accounts Payable: Slow Down by Political Capital.

Photograph by Alex Wong/Getty Images

President Barack Obama urged the Congress to take action to avoid sequester cuts with a short term budget fix today.

President Barack Obama called on Congress today to approve another round of short-term budget cuts and also changes in the tax code to eliminate some “loopholes” and avert the next deadline for automatic spending cuts.

“If we’re serious about paying down the deficit,” he said in an appearance in the briefing room of the White House this afternoon, savings from the elimination of tax loopholes can help.

The president’s pitch follows an announcement by the Congressional Budget Office today that the federal budget deficit will fall below $1 trillion this year, for the first time in five years.

The projected annual deficit: $845 billion.

Nevertheless, the accrued deficits projected over the next decade, at least $7 trillion, will push the nation’s publicly held debt to $20 trillion by 2023, according to the independent CBO.

Obama’s appeal for a temporary spending cut comes ahead of a delayed budget sequestration, with about $85 billion in automatic spending cuts  due to begin March 1. Congress acted at year’s end to delay a scheduled Jan. 1 round of automatic cuts for two months. The latest congressional debt-limit increase which Obama has signed this week lapses May 19.

“The threat of massive automatic cuts already have threatened business decisions,” Obama said today. “We can’t just cut our way to prosperity.”

“The good news is, this doesn’t have to happen,” the president said.

Already, he said, $2.5 trillion in deficit reduction has been achieved by a balance of cuts and revenue increases.

“I still believe that we can finish the job with a balanced mix” of spending cuts and revenue “reform,”’ he said today. In order to achieve a full $4 trillion in deficit reduction, he said, tax “loopholes” also must be eliminated.

Having said that, he said, the White House may not be ready with its own budget proposal for fiscal year 2013 until March 1.

Original post is Obama Seeks Short-Term Cuts, Taxes by Political Capital.

Photograph by Christopher Powers/Bloomberg

Mike Petters, president and CEO of Huntington Ingalls Industries Inc.

The chief executive officer of Huntington Ingalls Industries Inc. says he doesn’t think it would serve the company’s purposes to issue mass-dismissal warnings to workers even if U.S. spending cuts occur later this year.

“We are much more of a long-term business,” said Mike Petters, CEO of  Newport News, Virginia-based Huntington, the U.S. Navy’s sole builder of  aircraft carriers.

The exception might be if the U.S. government makes changes to existing  contracts, Petters said today at a roundtable discussion with reporters in  Washington.

Defense contractors face automatic Pentagon cuts totaling about $45 billion this year unless the White House and lawmakers agree by March 1 to an alternate deficit reduction plan.

The U.S. Worker Adjustment and Retraining Notification Act, known as the WARN Act, requires most employers with 100 or more workers to give 60 days’ notice of plant closings or “mass layoffs.”

Huntington, spun off from Falls Church, Virginia-based Northrop Grumman Corp. in 2011, is winding down naval operations at its Avondale shipyard in Louisiana, Petters said. He suggested the facility may be redeployed for commercial use.

He mentioned construction work related to refineries and gas plants as a  possible alternative to shipbuilding at the facility.

“There’s a lot of opportunity for those plants to be modularly-constructed,”  he said. “We have a pretty good sense of how to do that, both from an  engineering standpoint and from a construction standpoint.”

Petters said he couldn’t provide a timeline or say what kind of investment would be necessary to shift gears. He said he was “under no illusions” about the challenges.

“I am very aware that shipyards have struggled when they’ve gotten away from
shipbuilding,” he said.

Original post is Huntington CEO Doesn’t See Need for You-May-Be-Fired Notices by Political Capital.

Photograph by John Tlumacki/The Boston Globe via Getty Images

Demonstrators protest proposed cuts to social security, medicare and medicaid in Boston.

In the federal contracting world it’s “frustration all around” as the government careens toward yet another deadline for automatic cuts known as sequestration, according to the head of the National Contract Management Association.

“Some things have been resolved, but nothing in terms of government contracting,” Michael Fischetti, the organization’s executive director, said in an interview with Bloomberg reporters and editors. “The latest legislation — it just kind of kicks the can in terms of uncertainty.”

A last-minute deal signed by President Barack Obama raised tax rates on top earners but didn’t resolve the other half of the so-called fiscal cliff — across-the-board federal spending cuts that both parties have said they want to avoid.

Contractors face a March 1 deadline when cuts totaling about $85 billion in 2013 are due to begin hitting national security and domestic programs. A divided Congress has less than two months to pass an alternate deficit reduction scheme that averts the indiscriminate cuts.

Frustration among contract managers has reached “probably the highest level that I can recall,” Fischetti said.

Original post is Sequestration Frustration Peaks Among Contract Managers by Political Capital.

Spokesmen for two federal agencies declined to discuss what their offices do and who they help once learning a Bloomberg News story would address the reductions, known as sequestration.

The reductions would affect all agencies except the Department of Veterans Affairs, which is exempt. Veterans programs in other departments aren’t immune to the reductions poised to begin next month, according to the story published today.  

When asked about the Small Business Administration’s programs assisting veterans, Michael Stamler, an SBA spokesmen, suggested reaching out to another spokesman “in, say, late January.”

The Substance Abuse and Mental Health Services Administration, part of the Department of Health and Human Services, also wasn’t interested in bragging about its work helping veterans.

Susan Anderson, a spokeswoman for the department office, said in an e-mail that she let her supervisors know “we would stay away from sequestration 100 percent and simply give an overview of our programs.”

“But they still won’t allow the interview due to the reporter’s ultimate angle,” she said.

Original post is Agencies Help Vets; Don’t Ask How by Political Capital.

Photograph by Ramin Talaie/Bloomberg

Elon Musk, chief executive officer of Space Exploration Technologies Corp. (SpaceX) and Tesla Motors Inc.

The president of Space Exploration Technologies Corp., known as SpaceX and headed by billionaire Elon Musk, said next year will be “huge” for the company
despite the threat of the so-called fiscal cliff.

Gwynne Shotwell said she doesn’t see a resolution in sight to the automatic U.S. budget cuts known as sequestration. The reductions are set to begin Jan. 2.

“I don’t know what’s going to happen,” she said during a Washington Space Business Roundtable luncheon held at the University Club in Washington.

Maybe not much to her company.

SpaceX, based in Hawthorne, California, in 2013 plans to complete two more cargo missions to the International Space Station, Shotwell said. It also wants to launch a handful of communications satellites for commercial customers, and to fly its Falcon Heavy for the first time, according to Shotwell. The rocket is second in size only to the Apollo-era Saturn V.

“We have a huge year in front of us,” she said.

Original post is SpaceX President Sees No Immediate Budget Resolution by Political Capital.