DHS Budget: White House Proposes Overall Cut, Biggest Surprise Loser? Coast Guard

So the White House's budget calls for overall cuts to DHS.  But will Congress stick with them?

By Keith Edmund White

Editor in Chief

Mickey McCarter does an excellent job rounding out the White House's budget--something I had hoped to do in more detail, but after two weeks I'm throwing in the towel.

But, keep in mind, that it was Congress that actually kept FY13 spending level at FY12 levels, shielding DHS from sequester.

And with the recent events in Boston, I will not be surprised if attempts to bolster homeland security spending don't find bipartisan support in Congress.  (Note:  Just look at the Massachusetts Democratic primary for John Kerry's former Senate seat.)

Yet, that makes a big assumption:  that Congress will actually pass a FY14 budget, and not punt through continuing resolutions--a move which may or may not affect current agency spending levels. 

Oh, and then there's sequestration.

From McCarter's article on the overall budget:

The White House Wednesday unveiled its fiscal year 2014 budget proposal for the Department of Homeland Security (DHS) and other federal agencies, calling for $39 billion in discretionary funds for DHS, a reduction in its overall budget.


In a separate proposal pursuant to the Budget Control Act of 2011, the Disaster Relief Fund would receive $5.6 billion.

The administration compared the overall proposed numbers to enacted levels in FY 2012 as it did not have final numbers for FY 2013, which only were decided on at the time of the signing of a FY 2013 consolidated spending bill on March 26. As compared to final FY 2012 levels, DHS discretionary spending would be down 2 percent in the budget proposal.

...

According to the Homeland Security 2014 Budget in Brief, most DHS agencies would experience budget cuts of five to eight percent, which is in addition to the sequester imposed on the department -- should the sequester continue.

And his article focusing on the tough decisions Napolitano is asking Congress to make:

The increase in spending at the DHS S&T Directorate would go toward fully funding the construction of the National Bio and Agro-Defense Facility (NBAF) in Manhattan, Kan., Napolitano said.

The facility is necessary to replace the failing Plum Island Animal Disease Center, which soon will not be able to support national requirements to defend against threats posed by biological agents, Napolitano said.

"This innovative federal-state partnership will support the first Bio Level 4 lab facility of its kind, a state-of-the-art bio-containment facility for the study of foreign animal and emerging zoonotic diseases that is central to the protection of the nation's food supply as well as our national and economic security," Napolitano said in her testimony.

The state of Kansas already has put up $320 million to build the center, Napolitano said. DHS must respond with its portion of the funding, totaling $714 million.

"At some point, we have to bite the bullet," Napolitano said of finishing NBAF construction.

The Buddy-less Study? Proposal to Study a Possible U.S. Border Fee Gets Another Opponent

Keith White on growing Congressional opposition to a White House proposal to study the impact of adding a new crossborder fee.

By Keith Edmund White

Editor-in-Chief

Bill Owens (D-NY) has pledged to "explore all legislative options" to prevent a proposed DHS study on the "feasibility and cost" of a new border fee at northern and southwestern U.S. border crossings.

Who thought a boilerplate study would generate such buzz?

But when the study relates to slapping a new fee on crossborder travel between the United States and Canada, pushback is to be expected.

A New Canada-U.S. Border Fee? Prospect of a New U.S. Fee Worries Both Sides of the Border

Will the United States slap travelers with a new fee when crossing the Canada-U.S. border?

The White House's proposed Department of Homeland Security (DHS) budget includes boilerplate directing DHS to study the "feasibility" of imposing a new Northern and Southwest cross border fee.

Beyond the Border Observer, a blog from the Woodrow Wilson Center's Canada Institute, provides some useful background and roundup of critical responses in Canada and the United States. 

WaPo Misses a Tree for the Forest: Is Canada the Biggest Sequester Winner?

By Keith Edmund White
Editor-in-Chief

WaPo misses the mark, and Canada may be the sequestration-avoidance winner.

Today the Washington Post (WaPo) reports on how one federal program 'beat' the sequester, highlighting Department of Agricultural's ability to snag meat inspectors funding. WaPo's take on the strategy: If one Agricultural program could win, so can others; ergo, sequester isn't playing out the way we want.

Well, the conclusion's sound: Sequestration isn't playing out the way some commentators said it would. But seeing as sequestration really starts today, it seems a little early to be writing sequester's post-script. And sequester 2.0, i.e. next year's cuts called for in the 10-year cost-cutting plan, still have to be played out.
But, less impressive, is WaPo's omission that the FY13 continuing resolution that enshrines sequester in the final six months of the current fiscal year (FY), which one Agr. program avoided, came along with four new FY13 appropriation packages.
So, really, Defense, Homeland Security (DHS), Commerce/Justice/State, Veterans Affairs/Military Construction all 'beat' sequestration to varying extents. In fact, DHS got roughly the same agency-wide funding as it did last budget cycle.
I doubt these agencies will be asking Agr. Secretary Tom Vislack for sequester advice any time soon.
To sum-up: WaPo mistakes a tree for the forest, and--in so doing--misses the gravity of sequestration's interesting FY13 implementation. And then WaPo gets tree myopia, and doesn't really illuminate sequestration's 10-year 'loop'.

But, perhaps more interesting to readers, is figuring out what country has benefited the most from FY13's unusual sequestration implementation.Given the extensive military acquisition, trade, and border security relationship between Canada and the United States, maybe WaPo should cast Canada as sequestration's Biggest Winner.

More on DHS's New FY13 Budget

By Keith Edmund White
Editor-in-Chief

More resources on just what DHS's budget, which became official yesterday when President Obama's signed the Fiscal Year (FY) 2013 Continuing Resolution appropriations bill.

(Note:  Author appreciates readers bringing the documents cited below to his attention.)

Readers will find three primary documents below outlining the DHS budget for the remaining 6 months of Fiscal Year (YR) 2013.

Former Co-Chair Talks RCC

The former co-chairmen of the Regulatory Cooperation Council offers a concise Bloomberg editorial extolling the virtues of regulatory alignment:

Over the last decade, businesses have been emphasising the need to increase international regulatory cooperation, thus harmonising requirements and eliminating "nontariff trade barriers". At its best, such cooperation opens markets and promotes exports. As a result, it contributes to economic growth and job creation, and it can save consumers a lot of money.

Canada's Illusory Fiscal Responsibility

Hey Americans, don't feel jealous of Canada's estimable federal finances.

Just look at their provinces, and you'll feel just fine.  

Admittedly, the U.S. has a State pension problem too.

But maybe we should rethink Canada's fiscal image.

Lesson:  Creative accounting exists everywhere, and federalism creates fascinating budgetary flavors.  

From Maclean's:

Harper's Northern Development Strategy: Too One-Sided for Success?

by Keith Edmund White

Is Harper's Northern Strategy sustainable?  CUSLINexus quickly recaps three articles that question whether the Harper government is jeopardizing Canadian sovereignty and long-term Arctic development to meet short-term cuts to government spending.

The HillTimes reports on the trade-offs Harper is making to develop Canada's Arctic. While pushing billions of dollars in energy development, other government funding is being cut. The National Post last week reported on delays in the construction of a Northern scientific facility and the Nanisivik port, not to mention the Post's May 2012 article reporting on the budget-busting price of of Radarsat satellites and plans for a dozen nuclear powered subsubmarines and the world's largest ice-breaker being scrubbed.

And now the HillTimes (a fantastic resource--and definitely worth, at least, signing up for a free trial) reports on another Harper cut to government services in the North. Mining Watch coordinator Ramsey Hart discusses the closure of the National Aboriginal Health Organization:

“I think a really big concern about the way that this government is treating resource development in the North is with its reliance on economic development as a way to deal with significant social issues that are found in the North,” Mr. Hart said.

He cited the elimination of the National Aboriginal Health Organization in the last budget as an example of an important federally funded program that could not be replaced by resource development. With an annual budget of $4.4-million, the NAHO produced health studies on aboriginal communities in the North. The organization ceased its operations at the end of June.

Mr. Hart said the NAHO was one of the few programs that focused on issues such as the impact of resource development on community health.

“To just assume that these projects will address social issues is really naive and runs the risk of further exacerbating some of the social issues in the North,” he said.

Taken together, these three articles suggest that concrete steps to Canada increasing its footprint to the North are falling behind ready-to-move mining operations.  While this approach is understandable, it may jeopardize attempts of Canada to assert sovereignty over the Arctic's emerging waterways and future Arctic economic development.

And does Canada need the Harper government's spending cuts?  Not according to the Canadian Centre for Policy Alternative--though, it seems unlikely that any major Canadian party would champion this group's progressive tax and government investment strategy.

Canada Shares In U.S. Economic Woes, But Is Canada's Response of Pushing Energy Development Going to Push Divisive Political Regionalism?

By Keith Edmund White 
Editor-in-Chief

The global economy slowing, and the United States economic motor slowing too.  One result:  Canada’s economic growth has stalled as well.  But is Canada, with its low-debt and resource-high economy, more able to respond to troubling economic times?  Perhaps.  But a year-long study by a environmental thinktank shows that Canada’s conservative government active support for resource-development comes at a cost—and could sharpen Canada's regional tensions.  Then, again, anything that gets Quebec and Ontario on the same side can't be all that bad...right?

The AP sums up the gloomy global economic picture well:

Already hobbled by Europe's debt crisis, the world now risks being hurt by slowdowns in its economic powerhouses. 

 The U.S. economy, the world's largest, had a third straight month of feeble job growth in May. High-flying economies in China, India and Brazil are slowing, too.

Naturally, news of the U.S. jobs data has dominated the news coverage.  But it also bears mentioning that Canada’s relatively well-performing economic has hit a snag too.  Canada's economic growth last quarter was a meager .9%, well below the government forecast of 2.5%.

The immediate result?  Canadian interest rates will not raise .  And while low rates can help spur growth, there is a price—taking money away from safe investments bonds and into the equity market to have investors achieve their desired rate of return.  And, as documented in the Globe and Mail, this has a particular impact on soon-to-be retirees:

It was just the latest sign that the new retirement would not be like the old: Defined benefit plans have given way to less generous defined contribution plans, stock market losses have pushed out many people’s retirement horizons, and the huge run-up in home prices that translated into a retirement bonanza for retirees will likely not be repeated – in fact it has meant bigger mortgages and less for retirement for follow-on generations.

But when it comes to responding the a possible double-dip, Canada does have one important advantage over the U.S.:

He said Canada, with its solid domestic economic fundamentals and its majority government, is "in a position to act" on the economy.

"Our fiscal situation is sound," he said, and Canada has fiscal "room to move," should a downturn encroach on Canada's relatively robust economy.

But will Canada's Conservative actually push a stimulus if the economic dips back into recession.  Sure they have the fiscal space to pursue such a strategy, but will a government that's pushing controversial cuts to government spending be willing to reverse course?

For right now, Conservative Prime Minister Stephen Harper does not see public spending as the way to spur growth in Canada.  Instead, Harper is pushing resource development—an understandable strategy, since it offers growth and minimal political blow back in the short-term.  (Note:  Environmental groups are up in arms, but it doesn't look like environmental concerns are going to sway Canada's national politics in the near-future.)

But will there be a steep economic and political price to Harper's energy push in the medium or long-term?  Yes, according to a recent study by the Pembina think tank, a Canadian energy think tank.  Thestar.com reports on the study that emphasizes the costs of quickly--if not hastily--turning Canada into a resource-heavy economy: 

The symptoms are an inflated dollar and provincial tensions caused by a national economy that is increasingly tilted toward supporting the resource boom in northern Alberta.

It is a grave condition, but it is treatable if the federal government acts soon, says the Pembina Institute, an environmental think tank.
 …

It also follows NDP leader Thomas Mulcair’s charge that Canada is suffering from “Dutch Disease” — a 1960s phenomenon in which the Netherlands invested heavily in offshore oil and suffered devastation in its manufacturing sector.

Similar problems are occurring in Canada’s manufacturing sector — particularly in Ontario and Quebec — but Mulcair’s simplistic diagnosis ignores the impacts of a weak economy in the United States and rise of China as a global manufacturing hub, the Pembina report says. 

 “It’s raised this issue to a level of both political and public prominence that is necessary. It has triggered a divisive debate that’s premised more upon rhetoric on both sides as opposed to really digging into the details of what’s happening and what can be done,” said Dan Woynillowicz, co-author of the report.

…

Coupled with the collapse of manufacturing jobs in Ontario and Quebec, the booming oilpatch, backed by a supportive federal government, threatens to cleave the country in two, Woynillowicz said.

It is not hard to envision a reverse of Alberta’s grievances of the 1980s over a National Energy Policy that subsidized western energy to support the needs of the rest of the country, he said. The western alienation phenomenon gave rise to a political protest movement that, years later, landed Prime Minister Stephen Harper in power.

“I actually think right now we’re potentially seeing that exact same dynamic setting up, but with the roles reversed — with the West being seen to be supported by the federal government in pursuing their interests at the expense of central and eastern Canada,” Woynillowicz said.

…

He said Wednesday that what he would like to see is a more sustainable development of Alberta’s bitumen, with a strategy that would bring jobs and money to other parts of the country rather than simply shipping the raw products to refineries in other countries.
Natural Resources Minister Joe Oliver said Mulcair’s “real agenda” is to introduce a carbon tax, stop development of the oilsands and put thousands of jobs in jeopardy.

The Pembina report makes what the authors described as modest recommendations, including eliminating subsidies for the oil and gas sector, studying the impact of the oilsands on the Canadian economy as well as the problem of regional competitiveness under a high Canadian dollar, creating a national energy strategy and using the corporate taxes collected from oilsands operators to ease the transition when the resource is used up.

I would  link to Pembina’s website for more information, but Pembina is participating in an internet blackout to protest against the proposed Conservative budget.  

Canada-U.S. Commentary Highlights

by Keith Edmund White, Editor-in-Chief

*Note an earlier version of this article incorrectly referred to James Coan as Joan Coan, and omitted to refer to other Woodrow Wilson materials related to deepwater drilling.

A wrap up some commentary from March and April I thought might be of interest. Topics include Canada's federal and Ontario's provincial budget, Canada's Asia pivot, offshore drilling, a chat with the Prime Minister, and some summit forecasting.

Canada’s Asia Push. Paul Wells blogs on Bank of Canada governor Mark Carney’s tying Canada’s “unsteady” recovering with Canada’s shrinking share of the world’s export since 2000. The cause: the high Canadian dollar and “a reflection of who we traded with than how effectively we did it.” And guess what “who” he’s talking about? The United States. The solution? “[R]efocus[ing] on commodities exports to Asia.”

Two Budgets, Four Commentaries Plus a Quick US Comparison. Last week, Canada’s Conservative federal government released its first majority budget; at the same time, Ontario Liberal government released its first budget as a minority government. Fleishman Hillard’s Anne Marie Quinn provides some context to the budget proposals. Even in these two different situations, American readers can glean the dramatic difference in Canada's budget politics. The Fraser Institute slams the Conservative government “no-cut” (but rather cost savings budget), arguing that the Conservatives should have used their new majority government to “enact a bold and aggressive plan to balance the budget more quickly through actual reductions in spending.” Finally, going back to Ontario, this Atlantic Market Institute for Market Studies sets forth broad guidelines of balancing Ontario’s budget through cuts, not new revenues. Best budget overview, though, goes to Michael Holden's blog post at the Canada West Foundation.

Assessing Summits—More Players, Less Substance? Chris Sands reads the past and future Summit dance-card, predicting which ones are worth watching—and which aren’t.

Woodrow Wilson Center Gets Two Shout-Outs:

Canada’s Offshore Drilling—Decentralized Better (Or Should We Be Looking at Other Variables)? Woodrow Wilson’s Canada Institute chats with two experts on the differences in the U.S. and Canadian offshore drilling political regimes. interviews Alexander MacDonald, managing partner of the St. John’s, Newfoundland and Labrador office of Cox & Palmer, an Atlantic Canadian law firm. Offers some nice (and thankfully well-edited) clips with Mr. MacDonald. Key insight: offshore drilling is a provincial-federal issue, not like America’s debate which is held hostile on the national stage. Joan James Coan, Energy Forum research associate at the James Baker III Institute for Public Policy then comes up and pushes back a bit: he notes that even if a (future Republican) U.S. president took the federal obstacles away, how many States would actually opt for drilling? While he might be right on western coast Florida and the Northwest, I’m not so sure about Virginia. 

Some omissions additional aspects of note: (1) discussion on the politics of Canada west coast offshore moratorium, and (2) the different model of offshore regulation Canada uses ("goal oriented") from the United States (criticized as overly "prescriptive"). Yes, a bit wonky--but critical to assessing whether any U.S. offshore expansion sticks (not to mention if Canada is sticking on its own Deep Water Horizon time bomb).

The Woodrow Wilson Center offers more of these topics in their publication The Risk and Regulation of Deepwater Offshore Drilling: American and Canadian Perspectives and the 14th edition of the Center's One Issue, Two Voices series with James Coan, Alexander MacDonald, and moderator David Longly Bernhardt on the topic of deepwater offshore drilling. This March 7, 2012 event is what led to the shorter interviews discussed above.

[Note: CUSLI-Nexus thanks the Woodrow Wilson Center for bringing the misnaming of Rice University Research Associate James Coan and its deepwater drilling materials to its attention]

Woodrow Wilson Snags PM Harper for hour-long chat in DC. Harper chats on Canada’s envious economic performance over the recession, among other topics. A “very solid system of financial regulation” – really? What about that murky, provincial system of securities regulation?) Harper notes Canada’s stimulus response (emphasizing “shovel-ready projects” like the U.S.), but emphasizes that Canada’s smaller debt as giving it greater flexibility. But let’s be fair: Canada had the nice buffers of a booming economy market and a property market that hasn’t crashed. And, perhaps, a less polarized political sphere? And what about simple differences in scale between the two stimulus approaches? But I would be interested in reading a comparison on Canada and America’s stimulus approaches. Harper also dishes on Keystone XL, foreign policy, health-care, Canada joining the Trans-Pacific Partnership, and other topics. Two additional topics worth noting here: Canada’s push for FTAs around the world, and Canada’s “profile challenge” when it comes to addressing tensions in the U.S.-Canadian relationship.

And Canada West Foundation Reports on Water in Stress Points. Could federal involvement in water policy be on its way? This March 2012 Report describes seven stress points in Canada’s water security. The culprits? Agricultural demand for water, shale gas development, oil sands development, uranium mining, urban growth in Canada’s west, the deteriorating health of Lake Winnipeg—which could pose become a thorn in the US-Canadian relationship. One important point brought up by the report: where do aboriginal rights fall into increasing Canada’s water security? Another point not really discussed: assuming the federal government wants to stretch its muscle in this provincial area, in light of the Canadian Supreme Court’s ruling on securities regulation, what shape should it/will it take? Final note: were getting a national water policy in Canada depend on the NDP leadership race?

And Yes, It Is All About Gas. Finally, Metanoodle cuts through some of the noise on what can and can not be solved when it comes to North American energy prices. Key points: (1) gotta think in oil districts and (2) the sexy topic of transfer capacity. And is four cents enough when it comes to the Keystone XL pipeline?