CapitolWire November 2011 by Bertelsmann Foundation

CapitolWire

Inspiring People. Shaping the Future.

The Brussels Connection to Capitol Hill

WASHINGTON, DC 1101 New York Avenue, NW Suite 901 Washington, DC 20005 USA Contact: Tyson Barker Contact: Tyson E-mail: tyson.barker@bertelsmanntyson.barker@bertelsmann- foundation.org Tel: (+1) 202.384.1993 Tel: www.bertelsmann-foundation.org

BRUSSELS Résidence Palace Rue de la Loi 155 1040 Brussels, Belgium Contact: Thomas Fischer Contact: Thomas E-mail: E-mail: thomas.fischer@bertelsmannthomas.fischer@bertelsmann- stiftung.de Tel: (+32 2) 280.2830 Tel: www.bertelsmann-stiftung.de/brussels www.bertelsmann-stiftung.de/brussels

CapitolWire is a joint publication of the Bertelsmann Foundation offices in Washington, DC and Brussels. It connects the European Parliament to Congressional policy and politics, and contributes to a common trans-Atlantic political culture. CapitolWire is an occasional publication that highlights issues, legislation and policymakers relevant to the European Parliament’s legislative cycle. This publication also looks at the Congress from the point of view of European Parliament staffers and offers timely operational analysis.

Austere Power: What does it mean for Europe? KEY POINTS • The failure of the US Congress’ “Super Committee” to submit a draft proposal for up to US$1.5 trillion in spending cuts over the next 10 years has triggered an automatic process of US$1.2 trillion across-the-board cuts. This process, called “sequestration”, includes significant reductions in defense and the social safety net beginning in 2013. • The State and Foreign Operations budget passed by the Republican-controlled House Appropriations Committee shows substantial budgetary constraints for US activities abroad. Though the process could be mitigated by the Democrat-controlled Senate, the 2012 international-affairs budget is estimated to decrease by between 7.3 percent and 17.8 percent compared to 2011. • Defense budgets seem to be holding steady in the near term at approximately US$520 billion, with most of Europe’s strategic interests unaffected. Still, the political rhetoric on a reduction of forces in Europe has risen precipitously, indicating possible future cuts. • Overall US foreign-affairs spending typically amounts to 1 percent of the total budget. Defense spending typically amounts to 20 percent of the total budget.

The momentum towards austerity is clear. But the divided Congress has created intractable gridlock in the annual appropriations process that also made it heavily politicized. This led to a near shutdown of the government in spring 2011. As a condition to secure passage of a bill to raise the debt ceiling, Republican and Democratic leaders appointed a so-called Super Committee with 12 members evenly

Members of the Super Committee SENATE

HOUSE

Patty Murray (D-WA) Max Baucus (D-MT) John Kerry (D-MA) Jon Kyl (R-AZ) Rob Portman (R-OH) Pat Toomey (R-PA)

Jeb Hensarling (R-TX) Fred Upton (R-MI) Dave Camp (R-MI) Xavier Becerra (D-CA) Jim Clyburn (D-SC) Chris Van Hollen (D-MD)

ABOUT THE BERTELSMANN FOUNDATION: The Bertelsmann Foundation is a private, nonpartisan operating foundation, working to promote and strengthen trans-Atlantic cooperation. Serving as a platform for open dialogue among key stakeholders, the Foundation develops practical policy recommendations on issues central to successful development of both sides of the ocean. ©Copyright 2011, Bertelsmann Foundation. All rights reserved.

NOVEMBER 2011

The federal budget has been the most contentious issue in Congress in 2011 and will likely remain so through the presidential election in November 2012. Buoyed by their victory in the 2010 elections and their subsequent control of the House of Representatives, Republicans have used a series of temporary continuing resolutions and the standoff around raising the debt ceiling to push an agenda of significant cuts in federal spending.

divided between the two parties and the two houses of Congress. The committee was tasked current debate gives a sense of US priorities with finding overarching savings across the federal budget over 10 years. The members, for its international role and Washington’s considered some of the most loyal party adherents, were unable to reach an agreement by engagement with Europe. Inspiring People. Shaping the Future. November 23. This will trigger cuts across the board, including to defense.

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At the same time, Congress continues to struggle with passage of a 2012 budget. Before the November 23 deadline, much of that debate hinged on the Super Committee’s resolutions although spending cuts are in any case not slated to begin until 2013. Senator John Kerry (D-MA), chairman of the Senate Foreign Relations Committee and one of three Senate The Brussels Connection to Capitol Hill Democrats on the Super Committee, is expected to be the guardian of the State and Foreign Operations budgets in the 2012 budget negotiations. BRUSSELS Résidence Palace Rue de la Loi 155 1040 Brussels, Belgium Contact: Thomas Fischer Contact: Tysonp Barker Senator John Kerry (D-MA) E-mail: tyson.barker@bertelsmann- E-mail: thomas.fischer@bertelsmannfoundation.org stiftung.de Tel: (+1) 202.384.1993 Tel: (+32 2) 280.2830 www.bertelsmann-foundation.org www.bertelsmann-stiftung.de/brussels WASHINGTON, DC

This CapitolWire explores the proposed cuts in the House and Senate 2012 budget 1101for New York Avenue, NW Suite 901 foreign operations (State Department/USAID and other funding, such as contributions Washington, DC 20005 USA to international organizations) and defense. While the process is not yet concluded, the

The Cost of Diplomacy

The 2012 budget process is expected to yield deep cuts in State Department/USAID budgets. This could have an impact on Europe, particularly on joint priorities worldwide. The international-affairs budgets are seen as an area ripe for reduction. Poll numbers demonstrate widespread public support for cuts in aid, and GOP presidential candidates from Rick Perry to Mitt Romney argue that everything should “start at zero”. A recent letter to Congress from all living former secretaries of state, however, urges Congress to hold the international-relations budgets at current levels. The House and Senate Appropriations Committees, responsible for the foreign-operations budget, have passed competing fiscal packages for State and Foreign Operations. But the truncated 2011 budget passed in April already slashed US$8 billion from the State Department and USAID, the largest percentage cut for any US government department.

Funding for State and Foreign Operations 2007-2012 Billions of Dollars

60 55

Senate Proposal

50 45

House Proposal

Approved Budgets

35 30

2007

2008

2009

2010

2011(est)

2012

Data Source: CRS http://www.fas.org/sgp/crs/row/R41228.pdf

At its height in 2010, the State and Foreign Operations annual budget reached US$55.1 billion. The Republican House Appropriations Committee’s 2012 foreign-operations budget provides US$39.6 billion. If the House budget were to pass into law, this would constitute a 28 percent decline in just two years. The Senate proposal reverses many of the cuts outlined in the House proposal and contains a number of “Overseas Contingency Operations” that offset many of the baseline cuts. The Senate proposal actually leads to an increase in the

foreign-operations budget, particularly for activities in Afghanistan, Iraq and Pakistan. While the House has already passed its foreign-operations budget, full debate on the State Department/USAID budget has, at the time of writing, indefinitely stalled on the Senate floor due to a dispute about Cuba policy. For Europe, the budget debate will likely translate into reduced State Department operations capacity on the continent. It will probably also lead to reduced funding for international organizations and policy areas on which the EU places importance, such as the Global Climate Change Initiative, non-proliferation, and the International Fisheries Commission. Funding for programs related to the Arab Spring is also under intense scrutiny. Discussion in Washington already reflects an expectation that EU member-states will be the primary sources of aid for reconstruction, stability operations and institution building in North Africa. On economic assistance for Europe itself, a CRS report noted that amounts to Europe were “low and consistent”, and mainly target Eastern Europe.

Selected Line-Item Cuts in the House and Senate State and Foreign Operations Budget Proposals REPUBLICAN HOUSE PROPOSAL COMPARED TO 2011 BUDGET

DEMOCRATIC SENATE PROPOSAL COMPARED TO 2011 BUDGET

State global diplomatic and consular services

- 35.6%

- 26.5%

USAID operating expenses

- 33.3%

- 7.2%

Economic assistance to allies and developing countries

- 31.7%

- 7.2%

US contributions to international organizations International peacekeeping operations Assistance to Europe, Eurasia and Central Asia

-15.0%

-0.1%

-10.4%

+1.2%

-10.1%

-6.4%

NOVEMBER 2011

Short-Term Stability in the Defense Budget

People. Shaping the Future. Preserving defense budgets has been a priority of the House and Senate, both ofInspiring which The rhetoric around continued US have expressed deep concern about the sequestration’s approximately US$600 billion in provisions for European defense continues automatic military spending cuts over 10 years. The House passed a discretionary defense to rise. Congress, the US administration and budget of US$530 billion, $17 billion more than in 2011. The Senate held the defense budget current GOP presidential candidates have at US$513 billion. aired frustration with European reluctance to hold defense budgets above the NATO target of two percent of GDP, and they The Brussels Connection to Capitol Hill Jan 2010 - Dec 2012 NATO Common-Funded Military Budget Contributions, have indicated a willingness to consider force redeployment in a manner that deBRUSSELS WASHINGTON, DC Belgium emphasizes US presence in Europe. More Other 2% Canada Résidence Palace 1101 New York Avenue, NW specifically, at a NATO meeting in Brussels 9% 5% Rue de la Loi 155 Suite 901 October 2011, 1040 Secretary of Defense France Brussels, Belgium Washington, DCin20005 USA 12% predecessor’s Contact:his Thomas Fischer Contact: Tyson Leon Barker Panetta reinforced concern about Congressional willingness to E-mail: tyson.barker@bertelsmannE-mail: thomas.fischer@bertelsmannfoundation.org continue to shoulder the stiftung.de financial burden Tel: (+1) 202.384.1993 Tel: (+32 2) 280.2830 of the alliance.

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www.bertelsmann-foundation.org

US 22%

www.bertelsmann-stiftung.de/brussels

Germany 16%

UK 12%

Italy 9% Netherlands Turkey Spain 3% 3% 5% Poland 2%

Data Source: NATO : http://www.nato.int/nato_static/assets/pdf/pdf_2010_01/20101102_NATO_common_funded_budgets_2010-2011.pdf

There are four areas that—over the long term—could directly impact interests in Europe: limitations on the Obama administration’s ability to implement the New START Treaty with Russia; the NATO operating budget, of which the US funds between 20 percent and 25 percent, and active resources for which the US contributes much more; base installations and active troop deployments on the continent; and missile defense. Over the past decade, reports from the George W. Bush administrations (2003 announcement, 2006 QDR) indicated an intended massive drawdown in Europe from four to two BCTs (brigade combat teams). Subsequent reviews led to an April 2011 plan to withdraw only one brigade beginning in 2015. In addition, the Senate bill defunds the SM-3 Block 2B missiles in Eastern Europe, a key component of President Obama’s European Phased Adaptive Approach (EPAA) missile defense program. Reports on base installations and personnel have indicated that US bases in Europe still serve valuable positioning, transport, logistics and medical purposes for active US troops and that investment in base infrastructure is a sunk cost. A re-positioning to out-of-Europe locations would require significant upfront investment that would not meet even the most basic cost-savings requirements fueling the current budget debate.

NOVEMBER 2011