• Lieutenant General Joseph (Joe) E. Martz
  
  • Military Deputy for Budget, United States Army
• Admiral Jonathan W. Greenert
  
  • Chief of Naval Operations
• Senator John McCain, (R-AZ)
  
  • Senate Armed Services Committee; Senate Committee on Foreign Relations
• Lieutenant General Christopher C. Bogdan
  
  • Program Executive Officer for the F-35 Lightning II Joint Program Office
• Frank Kendall
  
  • Under Secretary of Defense for Acquisition, Technology, and Logistics
• Robert F. Hale
  
  • Under Secretary of Defense (Comptroller) and Chief Financial Officer
• Congressman Jim Moran (D-VA)
  
  • Senior Member, House Appropriations Subcommittee on Defense
• Dr. Ashton B. Carter
  • Deputy Secretary of Defense
• Major General Thomas Spoehr
  • Director, Program Analysis and Evaluation, Army G-8
• Congressman Michael Turner (R-OH)
  • Chairman, House Armed Services, Tactical Air and Land Forces Subcommittee
• Lieutenant General Charles R. Davis
  • Military Deputy, Office of the Assistant Secretary of the Air Force (Acquisition)
• Congressman J. Randy Forbes (R-VA)
  • Chairman, House Armed Services, Seapower and Projection Forces Subcommittee
• Heidi Shyu
  • Assistant Secretary of the Army (Acquisition, Logistics, Technology)
• Christine H. Fox
  • Director, Cost Assessment Program Evaluation

Key Themes expected:

1.      President Obama is cautiously-optimistic that March-May Sequester-compromise can be achieved; (but ratio of Spending-cuts to new Tax Reforms must give at least partial-credit to Republicans, for latest $620B Tax-increases in ATRA.) [Be alert to expected Senate companion-bill, proposing 10-month Sequester delay; with ≈$55B in new Tax Reforms, ≈$55B in Spending-cuts, and remainder in Interest-savings].

2.      Sec. Panetta and Gen. Dempsey gave SASC Preview of 2013 Sequester last week in Benghazi Hearing; explaining why Sequester-cuts collapse O&M/Readiness, with reduced 2013 Modernization impact.

3.      Gen. Dempsey explains why Sequester primarily-hits O&M/Readiness, rather than 2013 Procurement/Investment, en route to OEF.

4.      White House is now-sensitive to GDP-impact from Sequester; and is separately-raising profile on Civilian Agency Sequester, before SAC Hearing this Thursday. [New SAC Chairwoman Mikulski]

5.      DepSecDef Carter shifts from “hopeful & optimistic”, to probability that Sequester will now occur.

6.      Panetta & Dempsey preview FY2014 Budget, warning of new USAF Force Structure cuts; $30B “Efficiencies” over 2014-2018; new BRAC; and smaller Milper-raises.

7.      Navy is targeting 2013 CR & Sequester cuts to Aircraft Depot Maintenance, Ship Depot Maintenance, CVN-79 & DDG-51 Procurement; with stand-down of several Carrier Strike Groups under Sequester.

8.      Army is fighting $5B-$7B unexpected 2013 OCO/OEF Costs, $6B CR shortfall, and $5.3B Sequester [$16B-$18B total]; targeting Brigade Training, Depot Maintenance, FSRM, and Base Operations Support.

9.      USAF is targeting 2013 FSRM, Flying-Hours, Weapon Systems Sustainment, modest F-35 CTOL quantities, and KC-46A Schedule.

Jim McAleese

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1.      President Obama is cautiously-optimistic that March-May Sequester-compromise can be achieved; (but ratio of Spending-cuts to new Tax Reforms must give at least partial-credit to Republicans, for latest $620B Tax-increases in ATRA.) [Be alert to expected Senate companion-bill, proposing 10-month Sequester delay; with ≈$55B in new Tax Reforms, ≈$55B in Spending-cuts, and remainder in Interest-savings]. (White House Press Conference, February 5, 2013).

• “[O]ver the past few years, Democrats and Republicans have still been able to come together and cut the deficit by more than $2.5 trillion [2012-2022] through a mix of spending cuts and higher rates on taxes for the wealthy.”
• “That's more than halfway towards the $4 trillion in deficit reduction that economists and elected officials from both parties believe is required to stabilize our debt.”
• “The proposals that I put forward during the ‘fiscal cliff’ negotiations in discussions with Speaker Boehner and others are still very much on the table. I just want to repeat: The deals that I put forward, the balanced approach of spending cuts and entitlement reform and tax reform that I put forward are still on the table. I've offered sensible reforms to Medicare and other entitlements…”
• “[T]hese modest reforms in our social insurance programs have to go hand-in-hand with a process of tax reform, so that the wealthiest individuals and corporations can't take advantage of loopholes and deductions that aren't available to most Americans.” [In December, there had been informal agreement-in-principle to $1.2T Tax-increases/Tax Reforms, in exchange for $1.2T Spending-cuts; but agreement collapsed over whether to count $300B “Interest-savings” as part of $1.2T Spending-cuts].
• “[I]f they can't get a bigger package done by the time the sequester is scheduled to go into effect, then I believe that they should at least pass a smaller package of spending cuts and tax reforms that would delay the economically damaging effects of the sequester for a few more months…”

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2.      Sec. Panetta and Gen. Dempsey gave SASC Preview of 2013 Sequester last week in Benghazi Hearing; explaining why Sequester-cuts collapse O&M/Readiness, with reduced 2013 Modernization impact. (February 7, 2013).

·        “If Congress fails to act and sequestration is triggered, and if we must operate under a year-long continuing resolution … we would face a $35 billion shortfall in operating funds alone for our active forces, with only a few months remaining in the fiscal year.” [Sec. Panetta]

·        “[M]y preference…is that the Congress would do the big deal, get it done, get this behind us, de-trigger sequester, stop this constant uncertainty, this month-to-month situation where we don't know what the hell we're going to get.” [Sec. Panetta]

·        “[W]e're going to have to turn to the one area that we have in order to gain the funds necessary, and that's readiness. It's maintenance.” [Sec. Panetta]

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3.      Gen. Dempsey explains why Sequester primarily-hits O&M/Readiness, rather than Procurement/Investment, en route to OEF. (Bloomberg, February 9^th, 2013).

·         “‘Some of the stuff in these big procurement accounts are already locked in for this calendar year and you just can’t touch them,’ Army General Martin Dempsey...”

·        “‘We’re just going to have to sweep up every bit of money that is not otherwise locked down,’ said Dempsey... ‘Most of the money you can get at, on such a short timeline, happens to reside in the readiness accounts.’”

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4.      White House is now-sensitive to GDP-impact from Sequester; and is separately-raising profile on Civilian Agency Sequester, before SAC Hearing this Thursday. (White House Press Briefing by OMB Federal Controller, Dan Werfel, and National Economic Council Principal Deputy Director, Jason Furman; February 8, 2013).

·        “[Sequester] cuts must be achieved over only a seven-month period … effective [monthly] percentage reductions will be approximately 9 percent for nondefense programs and 13 percent for defense programs.” [Werfel]

·        “[S]equester would also have broader and very negative consequences for the economy… [W]e got a tiny bit of a preview … in the fourth quarter GDP numbers, where GDP contracted because of a large contraction in defense spending … due just to fears about the sequester...” [Furman]

·        “[T]he impacts on our domestic priorities as a nation would be just as severe [as impacts on Defense].”

§  “Six hundred thousand women and children would lose vital nutrition assistance…” [Werfel]

§  “Approximately 70,000 children would lose Head Start and Early Head Start services.” [Werfel]

§  “The Food and Drug Administration and the Department of Agriculture would have to cut back on food inspections...  The FBI would have to reduce its law enforcement capacity.  FEMA would have to eliminate funding for firefighters and other emergency personnel.  And the Justice Department would have to furlough hundreds of federal prosecutors.” [Werfel]

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5.      DepSecDef Carter shifts from “hopeful & optimistic”, to probability that Sequester will now occur. (Deputy Defense Secretary, Ash Carter, at Munich Security Conference, Germany; February 2, 2013).

·        “So it [Sequester] can be avoided, and it can be reversed.  …I used to be hopeful and optimistic, and now I'm just hopeful.”

·        “A lot of people think that Pentagon civilians are people who sit in offices in Washington, but 86 percent of them aren't even in the Washington area.  They are people who repair ships, repair aircraft, they're all over the country.”

·        “We're reducing temporary term employees, deferring maintenance contracts…”

·        “And the result…very quickly, would be a readiness crisis.”

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6.      Panetta & Dempsey preview FY2014 Budget, warning of new USAF Force Structure cuts; $30B “Efficiencies” over 2014-2018; new BRAC; and smaller Milper-raises. (American Forces Press Service, February 6, 2013).

·        “The fiscal year 2014 budget proposal also requests a military pay raise of 1 percent.” [down from plan of 1.7%] [Sec. Panetta]

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·        “‘We have identified $30 billion in new initiatives over the next five years to eliminate overhead and duplication,’ he said...” [Sec. Panetta]

·        “In the budget, the secretary proposes another round of base closures and realignments. ‘We will have to because … you can’t have a huge infrastructure supporting a reduced force,’ he said.” [Sec. Panetta]

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·        “The department will propose some additional cuts to the Air Force and ‘we will resubmit some of our proposed cuts to the Navy,’ Panetta said. These are proposals that Congress rejected last year.” [Sec. Panetta]

·        “The department will continue to push for growth in special operations capability and cyber warfare experts.” [Sec. Panetta]

·        “[T]he budget continues the push for tactical fighters, aerial refueling capabilities, ballistic-missile subs and bombers, Panetta said. New capabilities include sea-based unmanned aerial vehicles, cyber tools and space systems.” [Sec. Panetta]

[2014 OCO Request is expected to be submitted at a later date, than notional March 25^th FY2014 DoD Budget Request]

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7.      Navy is targeting CR & Sequester cuts to Aircraft Depot Maintenance, Ship Depot Maintenance, CVN-79 & DDG-51 Procurement; with stand-down of several Carrier Strike Groups under Sequester. (Navy Charts to Congressional Committees).

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8.      Army is fighting $5B-$7B unexpected OCO/OEF Costs, $6B CR shortfall, and $5.3B Sequester [$16B-$18B total]; targeting Brigade Training, Depot Maintenance, FSRM, and Base Operations Support. (Army Charts to Congressional Committees).

§  “~$5-7B Emerging OCO”

·        “Increased transportation cost delay return of $20B in equipment from Afghanistan”

·        “Increased in-theater force protection and intelligence systems maintenance”

·        “Increased demand and transportation costs for food supply for civilian workforce in Afghanistan”

§  “~$6B CR Shortfall”

·        “Cancels 4 of 6 brigade combat team training center rotations”

·        “Reduces maintenance for non-deploying units”

·        “Reduces depot maintenance workload”

·   “5,000 employees released; economic impact exceeds $2B”

·   “Stops post war repair of 1,300 vehicles; 14,000 radios; and 17,000 weapons”

·        “Reduces unit flying hours; non-deployers will not maintain air crew proficiency”

·        “Creates training backlog for aviation and intelligence occupational specialties”

§  “~$5.3B Sequestration”

·        “Reduces readiness of >78% of non-deploying brigade combat teams”

·        “Defers post-combat equipment repair in Active and Reserve units 3-4 years following redeployment”

·        “Potentially furlough up to 251,000 Army civilians”

§  “Current & Future Readiness ($34B): Near-term Actions to Reduce Spending:”

·        “Releases 1,300 temporary and term employees; implements hiring freeze”

·        “Reduces base operations up to 30%”

·        “Reduces facility sustainment from 90% to 37%; reduces restoration and maintenance of facilities to 0%”

·        “Cancels 3^rd/4^th quarter Air and Ground Depot Maintenance”

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9.      USAF is targeting FSRM, Flying-Hours, Weapon Systems Sustainment, modest F-35 CTOL quantities, and KC-46A Delay. (USAF Charts to Congressional Committees).

Read more...

Key Themes:

·        President clearly anticipates need for additional $1T-$1.2T 2013 Debt-ceiling increase in late February.

·        President is claiming ≈$2.5T in immediate Deficit-reduction-commitment over past-two years; comprised of ≈$1.4T Discretionary Spending-cuts over 2012-2021; plus additional $620B Tax-increases (2013-2022); plus additional Interest-savings from those Spending-cuts/Tax-increases.

·        President has resurrected initial $4T “Grand Bargain” Deficit-reduction goal; which would now only require final $1.5T in new 2013-2022 Deficit-reduction.

·        President is proposing to achieve that final $1.5T 2013-2022 Deficit-reduction, through ≈$600B Tax Reforms, (closing loopholes for wealthy), plus ≈$600B modest Spending-cuts. (Assumes additional ≈$300B in Interest-savings).

·        President appears genuinely-concerned that House Republicans could demand up to ≈$2.4T Spending-cuts (2013-2022), in exchange for additional $1T-$1.2T 2013 US Borrowing-authority; (by including the previous $1.2T Sequester as part of those new Spending-cuts).

·        President also appears genuinely-concerned that House Republicans could cause US Government to default on current Obligation/Outlays (40% borrowed), unless White House commits to one-dollar in Spending-cuts for every-dollar of Debt-ceiling increase. (White House wants final Deficit-reduction Tranche to be limited to $1.5T, comprised of ≈$600B Tax Reforms, ≈$600B Spending-cuts, and ≈$300B Interest-savings; rather than $2.4T additional Deficit-reduction, regardless of composition).

·        President is clearly-attempting to mobilize Public Opinion, using combination of: (1) concern from current Entitlement Beneficiaries (Social Security/Medicare/Medicaid/Veterans); plus Investor/CEO concerns over potential damage to “full-faith-&-credit” of US Government.

·        President is seeking bifurcated-process of immediate Congressional $1T-$1.2T Debt-ceiling increase; followed by separate $1.5T negotiation through Fall 2013 on dollar-for-dollar Tax Reforms/Spending-cuts; (which will be limited to $1.2T current Sequester-penalty, and not include the additional $1.2T 2013 US Borrowing-Authority). [Inference is that requirement for Debt-ceiling Spending-cuts will have been superseded, by stabilization of Deficit/Debt under combined $4T “Grand Bargain” amount].

·        Expect:

1.      At least short-term Debt-ceiling increase in late February/early March;

2.      Short-term OMB delayed-release of formal FY2014 Budget Request, to incorporate expected Sequester/Debt-ceiling compromise;

3.      Current “Best-case” outcome for 2013 DoD Base funding would be -$10B (-2%), from $525B 2013 Base Request. [Assumes $1.2T Deficit-reduction package];

4.      Current “Most-likely” outcome for 2013 DoD Base funding would be -$15B-$20B (3%-4% cut), from $525B 2013 Base Request. [Assumes $1.2T Deficit-reduction package];

5.      Current “Worst-case” outcome for 2013 DoD Base funding would be -$23B (-4%), since full-year 2013 DoD Sequester-penalty has now been reduced to $45B, (but $6B DoD cuts more in 2013-2014) . [Assumes $1.2T Deficit-reduction package].

·        Final White House/House agreement on total Deficit-reduction package ($1.2T versus $2.4T) is critical, because it directly-drives both amount, and speed, of likely Defense funding-cuts as part of any eventual compromise. Compromise cuts to 2013-2014 Defense Base appear achievable under $1.2T-$1.5T Deficit-reduction package, (cut of $10B-$23B/year). But potential cuts to 2013-2014 Defense Base would likely be significantly-larger, under maximum $2.4T Deficit-reduction plan; potentially-endangering DoD’s “Rebalance-to-Pacific”, and requiring significant Program “Kills”/Curtailments/Delays.

·        Final outcome is obviously TBD. However, this structural issue has potential for critical-impact on 2013 Defense Appropriations Bill; final 2014 POM/Budget; and outyear 2015-2022 DoD Resourcing. I will obviously keep you informed in real-time of additional developments.

Key McAleese conclusions:

·        Diminished-size of $620B 2013-2022 increased Taxes on “Wealthy”, reinforces why White House previously-targeted all Households over $250K/year. This -$680B shortfall from President’s final $1.3T Tax-increase Offer, is clearly why President demanded large “Tax Reforms” in last night’s 11:30 PM Speech. Expect larger 2013 Tax Reforms, and Spending-cuts (Entitlements/Domestic/Defense), as direct result.

While final Tax Deal passed by 89:8 vote in Senate (+89%/-8%), ≈two-thirds of House Republicans voted-against because of lack of appreciable Spending-cuts.  Ultimately, 85 House Republicans (35%) voted-for the Bill, but 151 House Republicans (63%) voted-against the Bill.  This will make House Republicans particularly-aggressive in February Debt-ceiling increase, both in demanding Spending-cuts, and in minimizing proportionate-size of eventual Tax Reform Package.

·        President Obama originally-proposed $1.6T Tax increases, 2013-2022.

·        President proposed $1.3T Tax-increase in Final Offer to House Speaker Boehner on December 17^th.

·        Final agreement yesterday will yield only $620B Tax increase, 2013-2022.

·        This leaves President’s Fiscal Strategy short by -$680B (-52%) increased-Revenues, (both Tax-increases/Tax Reform), from 2013-2022.

o   President’s Final Offer was $2.4T total Deficit-reduction, on December 17^th:

§  $1.3T Tax increases;

§  $725B Social Security/Medicare/Medicaid/Mandatory cuts;

§  $200B Discretionary cuts; [≈$100B Defense, or ≈$10B/year]

§  $300B Interest savings.

·        President warns that there will be no Entitlement-cuts without additional Revenue (Tax Reform); and demands that Debt-ceiling be approved separately. [Final “Deal” only collects $620B Tax Revenues on “Wealthy”; which would require additional $680B (+52%) of new “Tax Reforms”, to achieve $1.3T Revenues in President’s final December 17^th Offer to Speaker Boehner].

·        House Speaker Boehner will clearly demand major Entitlement-cuts as part of imminent Debt-ceiling increase: even if it means shutting-down the Government.  Senate Minority Leader McConnell is clearly targeting additional Spending-cuts of ≈2X-3X any additional Tax Reform Revenue in 2013.

·        President took pride in Middle-income Tax-cuts; Unemployment Benefits; and Medicare “Doc-Fix”. 

·        Resolving imminent Sequestration of Defense in March, is the driving-concern of McCain, Inhofe, and McKeon.

·        CBO projects US Government will collect $3.6T fewer Taxes during 2013-2022, plus incur additional $330B in new Spending; for total $4T additional 2013-2022 Deficit spending.

·        Key structural components of H.R. 8; “American Taxpayer Relief Act of 2012”.

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I.  President warns that there will be no Entitlement-cuts without additional Revenue (Tax Reform); and demands that Debt-ceiling be approved separately. [Statement by the President at 11:20 PM, January 1, 2013] [Final “Deal” only collects $620B Tax Revenues on “Wealthy”; which would require additional $680B (+52%) of new “Tax Reforms”, to achieve $1.3T Revenues in President’s final December 17^th Offer to Speaker Boehner].

·        “I will sign a law that raises taxes on the wealthiest 2 percent of Americans while preventing a middle-class tax hike that could have sent the economy back into recession…”

·        “The fact is the deficit is still too high, and we're still investing too little in the things that we need for the economy to grow as fast as it should.”

·        “Last year I signed into law $1.7 trillion in deficit reduction. Tonight’s agreement further reduces the deficit by raising $620 billion in revenue from the wealthiest households in America. And there will be more deficit reduction as Congress decides what to do about the automatic spending cuts that we have now delayed for two months.”

·        “I want to make this point:…I am very open to compromise. I agree with Democrats and Republicans that the aging population and the rising cost of health care makes Medicare the biggest contributor to our deficit.”

·        “But we can't simply cut our way to prosperity. Cutting spending has to go hand-in-hand with further reforms to our tax code so that the wealthiest corporations and individuals can't take advantage of loopholes and deductions that aren't available to most Americans.” 

·        “While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed. Let me repeat: We can't not pay bills that we've already incurred.”

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II.  House Speaker Boehner will clearly demand major Entitlement-cuts as part of imminent Debt-ceiling increase: even if it means shutting-down the Government.  Senate Minority Leader McConnell is clearly targeting additional Spending-cuts of ≈2X-3X any additional Tax Reform Revenue in 2013. [January 1, 2013]

1)                Boehner:  “The federal government has a spending problem that has led to a $16 trillion national debt that threatens our country’s future.”

“Now the focus turns to spending.  The American people re-elected a Republican majority in the House, and we will use it in 2013 to hold the president accountable for the ‘balanced’ approach he promised, meaning significant spending cuts and reforms to the entitlement programs that are driving our country deeper and deeper into debt.” 

“Without meaningful reform of entitlements, real spending controls, and a fairer, cleaner tax code, our debt will continue to grow, and our economy will continue to stumble.”

2)                McConnell:  “The President wanted tax increases, but thanks to this imperfect agreement, 99% of my constituents won’t be hit by those hikes.”

“We’ve taken care of the revenue side of this debate.”

“Now it’s time to get serious about reducing Washington’s out-of-control spending. That’s a debate the American people want. It’s the debate we’ll have next. And it’s a debate Republicans are ready for.”

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III. President took pride in Middle-income Tax-cuts; Unemployment Benefits; and Medicare “Doc-Fix”.  [White House Fact Sheet Messages; January 1, 2013]

·        “Permanent extension of the middle class tax cuts: This will provide certainty for 114 million households… prevent the typical family of four from seeing a $2,200 tax increase next year.”

·        “By raising income tax rates on the wealthiest and keeping taxes low for the middle class, the agreement will ensure we have the most progressive income tax code in decades.”

·        “Extension of Emergency Unemployment Insurance benefits for 2 million people.”

·        “Extension of tax cuts for 25 million working families and students: The deal extends President Obama’s expansions of the Child Tax Credit, Earned Income Tax Credit, and the President’s new American Opportunity Tax Credit, which helps families pay for college.”

·        “Fixes the SGR (doc fix) with no cuts to the Affordable Care Act or to beneficiaries: The agreement avoids a 27 percent cut to reimbursements for doctors seeing Medicare patients for 2013…”

·        “Postpones the sequester for two months, paid for with $1 of revenue for every $1 of spending…The agreement saves $24 billion, half in revenue and half from spending cuts which are divided equally between defense and nondefense, in order to delay the sequester for two months.” [March 1^st Sequester]

·        “Restores the 39.6 percent rate for high-income households, as in the 1990s: The top rate would return to 39.6 percent for…married couples with incomes above $450,000.” 

·        “Capital gains rates for high-income households return to Clinton-era levels: The capital gains rate would return to what it was under President Clinton, 20 percent. Counting the 3.8 percent surcharge from the Affordable Care Act, dividends and capital gains would be taxed at a rate of 23.8 percent for high-income households. These tax rates would apply to…couples above $450,000.” 

·        “Reduced tax benefits [Deductions] for households making over…$300,000 (for couples): The agreement reinstates the Clinton-era limits on high-income tax benefits, the phaseout of itemized deductions (“Pease”) and the Personal Exemption Phaseout (“PEP”), for couples with incomes over $300,000…”

·        “The agreement raises the tax rate on the wealthiest estates – worth upwards of $5 million per person – from 35 percent to 40 percent…”

·        “The agreement’s $620 billion in revenue is 85 percent of the amount raised by the Senate-passed bill, if that bill had been enacted and made permanent.”

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IV.  Resolving imminent Sequestration of Defense in March, is the driving-concern of McCain, Inhofe, and McKeon. [January 1, 2013]

1)                McCain:  “Critical issues remain to be resolved, particularly the $500 billion in defense budget cuts looming over our nation's military. I hope that President Obama will make good on his pledge that defense sequestration ‘will not happen,’ particularly since our Secretary of Defense and the Chairman of the Joint Chiefs of Staff have made clear that these cuts will be ‘devastating’ to our armed forces and America's national security.”

2)                Inhofe:  "One of my greatest concerns about the fiscal cliff has been the devastating cuts that would happen to our military due to defense sequestration.  This deal avoids those cuts for two months to allow for a better solution. While I would like to have sequestration addressed, I am hopeful the deal’s two-month delay will help us better prioritize deep spending cuts while protecting our military and national security.”

"I do not agree with the deal’s extension of unemployment benefits for another year or that it only achieves a small deficit reduction.  I look forward to negotiating more spending cuts when we deal with the debt limit increase.”  

“After four years of Obama running up $5.3 trillion in deficit spending, any deal to raise the debt ceiling must be contingent upon making significant cuts to get our fiscal house in order.”

3)                McKeon:  "I support this proposal with important reservations. Our troops have shouldered an unfairly large share of budget cuts to date, in addition to the strains of combat…This deal leaves the force vulnerable to sequestration's devastating and arbitrary cuts and it leaves Congress and the President with much work to do to end the crisis.”

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V.  CBO projects US Government will collect $3.6T fewer Taxes during 2013-2022, plus incur additional $330B in new Spending; for total $4T additional 2013-2022 Deficit spending.

Diminished-size of $620B 2013-2022 increased Taxes on “Wealthy”, reinforces why White House previously-targeted all Households over $250K/year. This -$680B shortfall from President’s final $1.3T Tax-increase Offer, is clearly why President staunchly-demanded large “Tax Reforms” in last night’s 11:30 PM Speech. Expect larger 2013 Tax reforms and Spending-cuts (Entitlements/Domestic/Defense), as direct result.

While final Tax Deal passed by 89:8 vote in Senate (+89%/-8%), ≈two-thirds of House Republicans voted-against because of lack of appreciable Spending-cuts.  Ultimately, 85 House Republicans (35%) voted-for the Bill, but 151 House Republicans (63%) voted-against the Bill.  This will make House Republicans particularly-aggressive in February Debt-ceiling increase, both in demanding Spending-cuts, and in minimizing proportionate-size of eventual Tax Reform Package.

·        President Obama originally-proposed $1.6T Tax increases, 2013-2022.

·        President proposed $1.3T Tax-increase in Final Offer to House Speaker Boehner on December 17^th.

·        Final agreement yesterday will yield only $620B Tax increase, 2013-2022.

·        This leaves President’s Fiscal Strategy short of -$680B (-52%) increased Revenues (both Tax-increases/Tax Reform) from 2013-2022.

o   President’s Final Offer was $2.4T total deficit-reduction, on December 17^th:

§  $1.3T Tax increases;

§  $725B Social Security/Medicare/Medicaid/Mandatory cuts;

§  $200B Discretionary cuts; [≈$100B Defense, or ≈$10B/year]

§  $300B Interest savings.