Posts Tagged CNNMoney.com
How Congress is hurting jobs
By Jeanne Sahadi @CNNMoney June 15, 2012
Lawmakers are expected to take their time deciding how to replace the sequester of automatic cuts scheduled for next year. Experts say prolonging the uncertainty will hurt hiring this fall.
NEW YORK (CNNMoney) — Everyone in Congress says they want to help create jobs and economic growth.
But federal agencies and government contractors in the private sector, which actually hire people, may find that ironic. They are still in the dark about future funding levels because lawmakers have not said whether they will replace heavy-handed automatic spending cuts set to take effect next year.
The so-called sequester – which no one in Congress likes but can’t agree on how to replace — would total about $110 billion next year alone. Half the cuts would come from defense and the other half from nondefense spending on domestic programs.
Most don’t expect lawmakers will reach a decision until the lame-duck session of Congress after Election Day, and possibly not until early 2013.
The problem is that prolonging the uncertainty is likely to cause serious hiring slowdowns and possible layoffs, experts and businesses said.
“If the deleterious consequences … are to be averted it must be done before the lame duck. Indeed, since most elected officials will spend most of the fall campaigning, the [cuts] must be dealt with by September,” according to a recent report from the Bipartisan Policy Center.
Businesses and agencies need to plan for the year ahead, and they simply can’t because they don’t know how many contracts will be funded and how many programs they’ll need to cut back on.
The point is not lost on Democrat Carl Levin, who chairs the Senate Armed Services Committee.
“[T]hat uncertainty which is created by … the specter of sequestration … is a real threat to this economy. So not only must we avoid sequestration … we must do it in time to avoid a severe weakening to this economy,” he said at a National Press luncheon.
Those in the defense industry say the sequester is already having a chilling effect.
“In the past we’d add head count [in summer] to prepare for new work. This year, we’ll clearly take a more conservative approach until we see what’s going to shake out,” said Samuel Strickland, CFO of defense contractor Booz Allen Hamilton (BAH, Fortune 500) during a recent investor call.
At Lockheed Martin (LMT, Fortune 500), the largest U.S. defense contractor, the story is similar. “We are already taking action by not hiringand training new workers, not investing in new plants and equipment and not investing in new R&D,” said company chairman and CEO Robert Stevens during a Senate caucus lunch in March.
But Stevens also warned that if he doesn’t get clarity soon, he may be forced to issue notice this fall of possible layoffs in 2013. The federal WARN Act requires businesses with more than 100 employees to notify workers at least 60 days in advance of a mass layoff or plant closing.
Boehner’s ‘line in the sand’ on debt
Since the sequester takes effect Jan. 2, 2013, the WARN Act requirement could mean layoff notices come out a few days before the Nov. 6 election.
But layoff notices are likely to be a measure of last resort for both federal agencies and private sector contractors, said government contracts expert Dan Gordon, who used to run the White House Office of Procurement.
Instead, he said he is expecting “a dramatic slowdown in hiring” this fall.
“It’s very slow and expensive to cut back on the government’s commitment under an existing contract. For both [federal agencies and private contractors] it’s always easier to stop hiring than to lay off existing employees,” Gordon noted.
He also expects federal agencies over the next seven months to be very reluctant to enter into new commitments with contractors, even though government has become more heavily reliant on contractors to do everything from guarding office buildings to running IT departments.
“Why make a commitment that might end up being costly to you?” said Joseph Minarik, senior vice president of the Committee for Economic Development.
Like Gordon, he believes hiring freezes are the greatest risk on the jobs front this fall.
But more than anything, Minarik said, for everyone in the public and the private sector “all the time being spent on planning for this situation is pure economic waste.”
- How Congress is hurting jobs (money.cnn.com)
- How Congress is hurting jobs (politicalticker.blogs.cnn.com)
- Layoff threats put Congress on notice – Politico (politico.com)
- Additional Defense Cuts Could impact war funding (fox2now.com)
- Defense budget sequester has Huntsville holding its breath (al.com)
- Additional defense cuts could impact war funding (security.blogs.cnn.com)
- Debt ceiling in play again (money.cnn.com)
- The Caucus: Boehner Seeks ‘Grand Bargain’ on Debt Ahead of Election (thecaucus.blogs.nytimes.com)
- Democrats return fire after John Boehner’s opening debt-ceiling salvo (csmonitor.com)
- Join 1,000+ Orgs; Urge Congress to Stop Across-the-Board Cuts (pattidudek.typepad.com)
Defense spending to spike $2.1 trillion under Romney
By Charles Riley @CNNMoney May 10, 2012
Mitt Romney wants to spend more on ships, planes and troops.
NEW YORK (CNNMoney) — Mitt Romney is campaigning on a platform that emphasizes less spending, smaller deficits and renewed fiscal responsibility.
But in one budget area, Romney is running the opposite direction. The former Massachusetts governor wants to increase defense spending by leaps and bounds. By one estimate, additional spending would exceed $2 trillion over the next decade.
Romney’s plan calls for linking the Pentagon’s base budget to Gross Domestic Product, and allowing the military to spend at least $4 dollars out of every $100 the American economy produces.
With the Pentagon’s base budget — which does not include war costs — forecast to hit 3.5% of GDP in 2013, a jump to 4% would mean an increase of around $100 billion dollars in defense spending in 2013.
The additional spending really piles up in future years.
Compared to the Pentagon’s current budget, Romney’s plan would lead to $2.1 trillion in additional spending over the next ten years, according to an analysis conducted for CNNMoney by Travis Sharp, a budget expert at the Center for a New American Security.
And that number assumes a gradual increase to 4% of GDP. The additional spending would hit $2.3 trillion over a decade if the Pentagon’s budget were to immediately jump to 4% of GDP.
Sharp said the United States could certainly ramp up spending to meet Romney’s target. But the bigger question, he said, is whether the investment would be worth the cost.
“Romney’s plan might reduce military risk in some areas,” Sharp said. “But you can never eliminate all the risk — no matter how much you spend.”
Romney appears willing to foot the bill. “This will not be a cost-free process,” his campaign website says. “We cannot rebuild our military strength without paying for it.”
The fiscal picture
Romney’s plan to spend more at the Pentagon adds yet another layer of complexity to a set of proposals that would remake the fiscal landscape.
Romney has proposed a slew of tax cuts, and plans to cap federal spending at 20% of GDP. But in both cases, the Romney campaign hasn’t fully explained how those provisions will be paid for.
The lack of detail means that Romney’s claim of moving toward a balanced budget requires a great deal of trust.
“Romney has listed a few specific cuts he would make in discretionary spending, but they are a fraction of the extra defense spending he proposes,” said Jeffrey Vanke, a senior policy analyst at the Committee for a Responsible Federal Budget.
Other budget experts expressed similar concerns about Romney’s proposal, including Peter Singer, a senior fellow at the Brookings Institution, who said the plan for additional spending does not “reflect fiscal reality.”
4% for Freedom
The 4% idea is not a new one. Former Secretary of Defense Robert Gates and Admiral Mike Mullen have endorsed the idea. And conservatives have occasionally used the slogan “4% for Freedom.”
But some analysts questioned the wisdom of tying military spending to economic production.
“GDP rises and falls. Do you really want your defense budget falling in a recession?” said Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments.
“Spending should be determined by the security environment — not the size of your economy,” he suggested.
Asked if the military needs to spend 4% of GDP, Lawrence Korb, a senior fellow at the Center for American Progress who advocates for lower military spending, said “of course not.”
“These artificial ways to decide the defense budget make no sense,” Korb said. “And if you pursue this, how are you going to balance the budget?”
Politics of defense budgeting
On the campaign trail, Romney frequently says that the Navy has fewer ships now than in 1917, and that the Air Force is smaller than any time since 1947. The additional funding would provide funds to bolster the fleets, Romney says.
The anecdote is largely dismissed by military experts as irrelevant, since today’s Navy and Air Force are the most advanced and versatile on the planet. Non-partisan fact checkers have looked on the claim, and its associated insinuations, with scorn.
But Romney is not alone in his desire to spend more on the military. In Congress, the Republican nominee is likely to find many allies, especially conservative lawmakers from districts with military installations.
But with the wars in Iraq and Afghanistan winding down, there is an emerging coalition of liberal Democrats and Tea Party Republicans who have other priorities.
A Romney campaign official told CNNMoney that “reversing Obama-era defense cuts” is the “first step toward the 4 percent GDP benchmark.”
It’s true that Obama policies have slowed the rate of growth at the Pentagon. But spending on defense is still projected to grow over the next half decade.
“The Pentagon is in no danger of losing its pre-eminence under the current budget plan,” Sharp said. “Romney’s plan would make the military even more pre-eminent, but you can never eliminate all the risk no matter how much you spend.”
- Crunching the numbers on Romney’s defense spending plan (shortformblog.com)
- Romney Will Increase Military Spending By $2.1 Trillion With No Plan To Pay For It (thinkprogress.org)
- Survey shows public wants deep cuts in Pentagon spending. Mitt Romney would add $2.1 trillion (dailykos.com)
- Poll: Americans Support Cuts To Military Spending (thinkprogress.org)
- Opening Up: South America and Defense Spending (msamba.wordpress.com)
- Mitt Romney: A Major Mistake | breezespeaks (mbcalyn.com)
- Tim Pawlenty discusses Romney campaign’s Afghanistan strategy; U.S. defense spending (cnnpressroom.blogs.cnn.com)
- Public overwhelmingly supports large defense spending cuts (huffingtonpost.com)
- Americans overwhelmingly favor big defense cuts – Democratic Underground (aboriginalpress.wordpress.com)
- Mitt Romney’s proposal for Pentagon spending is a ridiculous joke (dailykos.com)
Why Verizon Doesn’t Want You to Buy an iPhone
Verizon Needs LTE Subscribers
You Can’t Move an iPhone Customer to 4G
- Verizon reps tout 4G Android phones over iPhone (intomobile.com)
- Verizon iPhone Release Soon to Come! (epicagear.com)
- Pusher Man: Verizon Reps Will Push Android Over iPhone? Not So Fast (techcrunch.com)
- Apple iPhone on Verizon network coming this February but what does the market think today? (optionsanimal.com)
- Is the iPhone coming to verizon? (christianpf.com)
- Verizon reps push 4G Android over iPhone – CNN (money.cnn.com)
- This week: Skype killing Windows Phone; VZW: don’t buy iPhone; Design by lawyer – ZDNet (blog) (zdnet.com)
- Did Verizon’s CTO just confirm LTE for the next iPhone? (idownloadblog.com)
- Carriers ponder Apple iPhone subsidy uprising: Will it work? (zdnet.com)
Why your mailman could be retiring
@CNNMoney March 27, 2012: 2:53 PM ET
U.S. Postal Service intends to offer incentive packages to woo eligible postal workers to retire.
WASHINGTON (CNNMoney) — Postmaster General Patrick Donahoe said Tuesday that incentives will be offered to woo some of the 150,000 eligible employees to retire.
“We’re going to offer incentives as we move from six to five day delivery,” Donahoe told a House hearing on Tuesday. “It’s critical to move the head count down.”
Mass retirement is key to U.S. Postal Service plans to stem its financial bleeding. As the service moves forward on plans to close 223 postal plants, which could mean the loss of 35,000 jobs, it hopes to ease the pain with retirement packages to those who qualify.
More than one out of every four career employees is now able to retire, Donahoe said, and another 100,000 reach retirement eligibility in the next five years.
Donahoe said at the hearing he’d like to winnow down the number of career employees to about 400,000 from a headcount that numbers 551,570, according to the agency.
The recession, declining volume in the type of mail that most Americans use and a congressional mandate to prefund retirement health care benefits have put the service in a bind. The service reported a $5.1 billion loss for the year ended Sept. 30.
The U.S. Postal Service is, by law, an “independent establishment” of the executive branch. The agency doesn’t normally use tax dollars for operations, but it has a $12.1 billion loan from Treasury, as of Jan. 31.
U.S. Postal Service officials have not said how generous the retirement packages would be.
A Senate bill to save the Postal Service would tap an overpayment in the Federal Employees Retirement System to fund some $1 to $2 billion in retirement incentives. The Senate was supposed to start debating the bill this week.
In the bill, the Postal Service could offer buyouts of up to $25,000 or, if an employee is nearing the 30-year threshold for full retirement benefits, as much as two years of service.
House Republicans on the Oversight and Government Reform subcommittee urged Donahoe to “right size” the Postal Service’s work force more quickly.
“The U.S. Postal Service continues to inadequately respond to Americans’ transition to digital communication and the related decline in first-class mail volume, in large part due to an over-sized workforce whose labor costs account for approximately 80% of the Postal Service’s operating expenses,” said Rep. Dennis Ross, a Florida Republican who heads the panel, in his opening statement.
But Democrats on the panel praised the Postal Service for working with unions, urging it to focus on attrition and avoid layoffs.
Donahoe also talked about the Postal Service plan to move employees off the federal health care plan by offering a new company plan. He said the Postal Service would contract with an insurer such as Blue Cross Blue Shield or UnitedHealth (UNH, Fortune 500) to provide health care.
Donahoe said officials have “tested” the idea, and believe they can provide employee health care at a cost that’s $7 billion cheaper a year than the federal government charges.
- The Takeaway: Florida Retirees Protest Demise of U.S. Postal Service (aarp.org)
- Keys postal carrier accused of delivering 10 pounds of pot (southmiamipi.com)
- 35000 Postal Service jobs on the chopping block – CNN (money.cnn.com)
- 35,000 Postal Service jobs on the chopping block (money.cnn.com)
- U.S. Postal Service Releases Plan to Reverse Losses (ibtimes.com)
- U.S. Postal Service Rescue Plan: End Saturday Mail, Tap Pensions (ibtimes.com)
- How to Fix the Postal Service (usnews.com)
- U.S. Postal Service says it will close Everett processing facility, lay off 97 workers (heraldnet.com)
- We’re number one, says U.S. Postal Service (money.cnn.com)
- List of U.S. Postal Service Closings, 35,000 Postal Workers to Lose Jobs (askthemoneycoach.com)