Plus, another F-35 fail
By Yuval Rosenberg and Michael Rainey
Mulvaney: We Spend Too Much, but Itâs Not Trumpâs Fault
Mick Mulvaney, the acting White House chief of staff, has a reputation as a fierce conservative hawk on federal spending â or at least he did before he joined the Trump administration.
The Atlanticâs Elaina Plott and Peter Nicholas [report]( that Mulvaney is well aware âthat Donald Trumpâs administration doesnât always make good on conservative idealsâ:
âHe knows that theyâre âspending a bunch of money on stuff weâre not supposed to,â and that all the excess doesnât comport well with his own reputation as a fiscal hawk and Tea Party darling during his congressional days â¦â âBut the spending hasnât escaped his noticeânor that of his old conservative colleagues in the House. One of them had actually âaccused me of âlosing,ââ Mulvaney recalled, after the White House signed a massive spending package. The colleague, Mark Meadows, âsaid, âIt sounds like my friend Mick Mulvaney is not winning on some of the fiscal issues down at the White House.ââ But Mulvaney had a retort that underscores how heâs come to define success. âI told him, âYeah, but at least Iâm losing at the very highest levels.âââ
Mulvaney âwas quick to wave off any of the administrationâs perceived shortcomings,â Plott and Nicholas write, casting the blame for higher spending and debt on Congress:
âMulvaney insisted thatâs the Republican Partyâs fault, not the presidentâsâlawmakers, he said, are voting for bills that they themselves admit spend way too much money. âTell me how the president is supposed to be fiscally conservative against that backdrop,â Mulvaney said. âSo yeah, we spend too much money. But the president by himself canât change that.ââ
Mulvaney also said that âthe ball really is in Democratâs courtâ on whether they can, or are willing to, reach deals with Trump on his renegotiated trade deal with Mexico and Canada or infrastructure. If they fail to make progress on those priorities, Mulvaney said, âit could be a slow couple of years.â
[Read the full piece at The Atlantic](.
US Economy Grew at a 3.2% Rate to Start 2019, but Concerns Lurk
The U.S. economy grew at an unexpectedly strong 3.2% annual pace in the first three months of 2019, according to an [initial estimate]( released by the Commerce Department Friday. Economists surveyed by The Wall Street Journal had projected 2.5% growth for the quarter, while a Bloomberg survey had put that number at 2.3%.
Kevin Hassett, chair of the Council of Economic Advisers, said that the results show that President Trumpâs economic policies were paying off. âIt confirms our view that the momentum from last year was not a sugar high but a serious response to long-run policies that have made the U.S. a more attractive place for business,â Hassett [told]( The Wall Street Journal.
Paul Ashworth, chief U.S. economist at Capital Economics, said that the growth figure âwould seem to make a mockery of claims that the US economy is slowing as the fiscal stimulus fades.â However, dig into the details of the report and âthere are plenty of causes for concern,â Ashworth wrote in a note to clients.
A buildup of inventories contributed about 0.7 percentage points to the 3.2% growth figure, which is unlikely to repeat and will likely reverse itself in the current quarter. Net exports added another point, but that isnât likely to last either. âThe upshot,â Ashworth said, âis that, stripping out trade and inventories, final sales to domestic purchasers increased by only 1.4%, which is the smallest gain in more than three years.â
MarketWatchâs Rex Nutting said the details of the report were consistent with a slowing economy, despite the strong top line. âThe tax cut was supposed to supercharge the private-sector,â Nutting [wrote]( âand it did â for a few quarters.â
Dean Baker of the Center for Economic and Policy Research noted that capital investment was weak in the quarter, growing at a modest 2.7% annual rate. âThe performance on investment has been notably weak over the last year, growing at a modest single-digit rate,â Baker [wrote]( on CEPRâs blog. âThe administrationâs projections of the impact of its tax cut imply growth in the neighborhood of 30 percent. We clearly are not seeing anything like this.â
Quote of the Day
âNow weâre going for the rest.â
â [President Trump]( in a speech at the National Rifle Association convention on Friday, vowing once again to repeal the Affordable Care Act after touting the GOPâs success in essentially eliminating the lawâs individual mandate, which he called âthe absolute worst part of Obamacare.â
Chart of the Day: The Cost of Medicare for All
Writing at The Nation, Mike Konczal of the liberal Roosevelt Institute [says]( that supporters of Medicare for All need to answer a $5 trillion question: How will they wring out savings from doctors, hospitals and drug companies?
Reducing payments to health care service providers would provide about 70 percent of the savings provided by a switch to Medicare for All. Without those savings, the proposed universal system would end up costing more than the current system, though it would cover all of the population.
Why So Many F-35s Are Sitting on the Ground
The long-term cost of the Lockheed Martin F-35 stealth fighter continues to [rise]( according to a recent Pentagon assessment, with the lifetime cost of the program now projected to be $1.196 trillion. But higher spending levels donât appear to be producing better performance for the still-troubled weapon system.
According to a [report]( from the Government Accountability Office this week, the aircraft is âfalling short of warfighter requirementsâ due to serious problems with maintenance and availability.
During an eight-month period in 2018, only about half of F-35s in the U.S. fleet were âmission capableâ â defined as able to conduct at least one mission. Less than a third were âfull mission capable,â or able to conduct all missions.
A big part of the reason, GAO said, was the lack of spare parts and the difficulty of managing a supply chain that reaches across the globe. Spare part shortages alone were responsible for nearly 30% of the downtime.
Tracking parts is a serious issue, GAO said. The Pentagon âhas spent billions of dollars on F-35 spare parts but does not have records for all the parts it has purchased, where they are, or how much they cost.â
Mismatched parts are also a problem, with services struggling to keep up with modifications on the jets that render some spare parts obsolete. The three variations of the jet â different versions for the Air Force, the Navy and the Marines â contribute to the issue as well. As an example, the GAO said that â44 percent of purchased parts were incompatible with aircraft the Marine Corps took on a recent deployment.â
The GAO provided eight recommendations to the Department of Defense for fixing the problem, while warning that failure to successfully address the issue ârisks that its F-35 fleet may fall short of the capability needed to support its critical national defense missions in the future.â
Your Prize for Making It Through the Week
The wizards at Google have created a fun Easter egg tied to the release of "Avengers: Endgame." Read about it [here]( or try it yourself by clicking on the Infinity Gauntlet (that's the glove image on the right) [here](.
Have a great weekend! Send your tips and feedback to yrosenberg@thefiscaltimes.com, and connect with us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. As always, please tell your friends they can [sign up here]( for their own copy of this newsletter.
News
- [Trump Gets GDP Boost He Needs for 2020, Along with Growth Risks]( â Bloomberg
- [Pentagon Set to Expand Military Role Along Southern Border]( â Washington Post
- [Trump Denies He Paid North Korea $2 Million for Otto Warmbier]( â Politico
- [Top GOP Senator Working on Bipartisan Drug Price Bill for Mid-June]( â The Hill
- [Let the Fiscal 2020 Spending Games Begin]( â Roll Call
- [Biden to Face Pressure on Medicare for All]( â The Hill
- [The Health Care Industry Is Betting on Joe Biden in Its War against Medicare-for-All]( â Vox
- [New State Laws Highlight an Escalating Battle in the War Over Drug Pricing]( â Roll Call
- [US Considers Concessions on Drug Protections in China Talks, Sources Say]( â Bloomberg
- [2020 Democrats Have Embraced Seemingly Every Big Left-Wing Economic Idea â Except This One]( â Washington Post
- [The Profitable Prospects of Snitching for the IRS]( â Wall Street Journal (paywall)
- [Warren Unveils Plan to Address Substandard Military Housing]( â The Hill
- [U.S. Incarceration Rate Drops 10 Percent Over Decade to Hit Lowest Level in 20 Years]( â NBC News
- [Here Is All the Firepower the Pentagon Is Asking for in Its $718 Billion Budget]( â Business Insider
- [An Emperor Penguin Colony in Antarctica Vanishes]( â New York Times
Views and Analysis
- [Democratic Candidates Will Be Pushed to Provide Specific Plans on Reducing Income Inequality]( â James Hohmann, Washington Post
- [Most Americans Can't Save for Retirement. We Want to Fix That]( â Sens. Chris Coons and Amy Klobuchar, CNN
- [Warrenâs Free-College-and-Debt-Forgiveness Plan May Be Liberal, but It Isnât Progressive]( â Catherine Rampell, Washington Post
- [Warrenâs Education Plan? Coulda Been Worse]( â David Leonhardt, New York Times
- [The Real College Scandal]( â Richard D. Kahlenberg, New York Times
- [A Widely Cited Statistic That Supposedly Proved Student Debt Was a Rich Person Problem Was the Result of a Coding Error]( â Jordan Weissman, Slate
- [Armpits, White Ghettos and Contempt]( â Paul Krugman, New York Times
- [The GDP Report Contained a Worrisome Statistic]( â Karl W. Smith, Bloomberg
- [Thereâs a Better Way to Raise the Lowest Incomes]( â Bloomberg Editorial Board
- [Treasury Department Invites Abuse of Opportunity Zones]( â Bloomberg Editorial Board
- [Is There Evidence a 0.91 Percentage Point Increase in the Payroll Tax Would Hurt Growth?]( â Dean Baker, Center for Economic and Policy Research
- [The Opioid Epidemic Is No Mistake. It Is the Result of Complicity and Greed.]( â Robert Gebelhoff, Washington Post
- [The Federal Government Subsidized the Carbon Economy. Now It Should Subsidize a Greener One.]( â Ryan Driskell Tate, Washington Post
- [Obama Had a Green New Deal, and It Worked. Letâs Do That Again]( â Jonathan Chait, New York
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