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Posted by on Nov 15, 2010 in At TMV | 0 comments

Rethinking The Federal Budget Mess: Part 3, Defense Spending

Conservatives need to hearken back to our Eisenhower heritage, and develop a defense leadership that understands military power is fundamentally premised on the solvency of the American government and the vibrancy of the US economy.
Kori Schake, Hoover Institution Fellow and former McCain-Palin Foreign Policy Advisor

The Sustainable Defense Task Force (pdf) reports that since 2001, annual “discretionary” (voted on each year) spending by the U.S. government has increased by $583 billion to $1.25 trillion. In 2010, the Department of Defense, including war costs, accounted for 64.6 percent of that increase, a figure nearly triple the 2001 budget. Veteran’s Affairs: another 5.4 percent; Homeland Security: 4.7 percent. Combined, that’s 75 percent of the increase since 2001. For 2010, that totaled $789.79 billion or 63 percent of 2010 Congressional “discretionary” spending.

Congressional Budget Office numbers are considerably higher. In 2007, CBO estimated that the cost of Iraq and Afghanistan and other activities related to the war on terrorism would range between $1.2 trillion and $1.7 trillion through fiscal year 2017.

Where’s the money going? I’ll look at four parts.

*** 1 ***

Despite the fact that the Cold War ended decades ago, since 2001 military R&D has been the fastest growing expense category. In real dollars, the Pentagon’s $80 billion R&D budget is 33 percent greater than the peak during the Cold War. But today there is no Cold War equivalent to the Soviet Union (pdf).

The United States is the world’s largest arms dealer and holds the unique position of spending more on military than the next 14 countries combined. To put this in perspective (emphasis added):

In 1986, US military spending was only 60% as high as that of its adversaries (taken as a group). Today, America spends more than two and one-half times as much as does the group of potential adversary states, including Russia and China. This means that if the United States were to cut its spending in half today, it would still be spending more than its current and potential adversaries – and the balance would still be twice as favorable as during the Cold War (pdf).

We can cut our R&D spending and still “be safe,” we need to cut our “acquisitions” (new ships and planes) and we should stop dealing arms around the world.

*** 2 ***

We cannot afford the wars in Iraq and Afghanistan or thousands of military deployed around the world.

Years of effort in Iraq and Afghanistan, 5,500 American fatalities, and $1 trillion have not brought reliable peace or stability to either country, which together comprise less than 1% of the earth’s population. For most of the time that we have been fighting in Iraq and Afghanistan, the cost of sustaining the fight has exceeded the GDP of those two countries (pdf).

Just as we failed to comprehend the lessons of the French excursions into Vietnam, we turned our eyes from the lessons of Russia and Afghanistan and from our own complicity in that 10 year war. We can only hope that this consensus isn’t duplicated: “Most observers agree that the last war of the Soviet Union [Afghanistan] created or aggravated the internal dynamics that eventually culminated in the dissolution of the country itself.” Like the U.S. in 2004, in 1979 Russia advocated a Westernization of Afghanistan, one that relegated its Muslim heritage to second class citizenship. A reminder: the Reagan Administration funded the Islamic mujahidin in their fight against the Soviets, “ignor[ing] the threat of Islamism and [using] it as a bulwark against communism and revolution.” We reap what we sow.

Moreover, we don’t really know how much these wars have cost or the extent of long-term liabilities associated with military personnel who have been injured and killed. Harvard’s Linda Blimes told Congress in September (emphasis added):

The only hint of the full costs of providing for military veterans is in the US Treasury’s financial statements for 2009, in the little-read “statement of net costs” which uses accrual methods. According to this document, the US liability for burial and disability benefits for military veterans exceeds $1.3 trillion dollars. (Even this figure – although large – does not reflect the full liability, because it excludes medical care and other benefits). There is no provision anywhere in the budget for how this liability will be paid.

Blimes goes on to tell Congress that this estimate understates the long-term liability, just as her initial estimate of a $3 trillion war was “too low.”

Surely we have exhausted our need for “vengeance” by now. It’s past time for rational minds to prevail, for systematic cost-benefit analyses to influence decision making.

Rather than shift forces from Iraq to Afghanistan, as Obama is doing, we need to pull out of both countries. We need to pull out of Europe: the Soviet Union isn’t looming over its eastern border any more. We need to pull out of Southeast Asia: China is a more significant economic threat than military one. We have conventional forces scattered around the world in places where there is no conventional military threat. We can’t afford to be the world’s cop, especially when there’s no crime spree. And we have to figure out how we are going to pay our debt to those who have given more than years of their lives to these discretionary wars.

*** 3 ***

Uncovering fraud and waste should go hand-in-hand with any reforms. As a U.S. Senator, Harry Truman documented waste and fraud and headed the Senate Special Committee to Investigate the National Defense Program — the Truman committee, for short. The process saved American taxpayers as much as $15 billion in 1940s dollars – that’s $234 billion in 2010 dollars.

We have documented waste and fraud in Iraq and Afghanistan. We have a few high profile examples of defense-related political graft (eg, Randy Cunningham). And then we have today’s Pentagon, which is audit-exempt:

Today, DoD is one of only a few federal agencies that cannot pass the test of an independent auditor. This means that DoD cannot accurately track its assets – a condition that not only opens the door to waste and fraud, but also makes it difficult to gage progress in other areas of reform, including acquisition. DoD has been under obligation to get its books in order for 20 years, but has enjoyed the benefit of special dispensations and rolling deadlines: Most recently, a new deadline of September 2017 for audit readiness.

[…]

The DoD Inspector General has found that the weaknesses in DoD’s financial system “affect the safeguarding of assets, proper use of funds, and impair the prevention and identification of fraud, waste, and abuse.” The Acting Inspector General of the United States concurs, adding that these weaknesses “adversely affect the reliability of DOD’s financial data” as well as “the economy, efficiency, and effectiveness of its operations (pdf).”

No More Delays. Kick off a Truman style audit yesterday. Boeing, Lockheed et al … get ready.

*** 4 ***

Our all-volunteer army is expensive. Since 1999, military recruiting costs, today about $4 billion, have almost doubled (real dollars). The premiums for Tri-Care, the military health insurance program, have not risen since the program was founded more than a decade ago, and, according to Secretary Gates, “health-care costs are eating the Defense Department alive (pdf).”

Many working age military retirees who are earning full-time salaries on top of their full military pensions are opting for Tri-Care even though they could get health coverage through their employer… In recent years, the Department has attempted modest increases in premiums and co-pays to help bring costs under control, but has been met with a furious response from the Congress and veterans groups. The proposals routinely die an ignominious death on Capitol Hill (pdf).

Gates projects that Pentagon health-care costs will be 10 percent of the budget in 2015. We’re not talking about the disabled folks; we’re talking about health insurance. “The cost of a veteran insuring a family is just more than one-tenth of the cost a typical family pays for health care each year.” Let’s translate those percentages into dollars. Gates is saying that if a “typical” family spends $1,000 a year for health care, the vet’s family spends about $100.

Repeat after me: we can’t ask everyone else in the country to pay more for their health insurance and privilege vets (remember, it’s a volunteer force) like this.

***

But cost-cutting is not in the White House or Congressional mindsets because they fear being kicked out of office in 2012 by sound-bite politics driven by the conservative right. So, instead of sucking it up, Obama proposed $708 billion for the Pentagon in 2011. Oh, and millions for full-body scanners at airports (part of the “stimulus” package). Instead of mindlessly throwing more money at “defense” we need clear thinking — and debate — about the role of “defense” in our society.

And we need someone who has the balls to channel FDR: “the only thing we have to fear is fear itself.”

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