Tag: defense spending

Buying Boomers

Trident LaunchTrident Launch

More hot defense news from InsideDefense – the Navy wants a bailout.

The Navy’s draft ship-building plan apparently warns of massive cuts in the size of its future fleet and consolidation of the ship-building industry unless Congress provides new funds for shipbuilding.  It wants $80 billion extra over the fourteen years starting in 2019 to cover the cost of buying twelve new boomers (SSBN or ballistic missile submarines) to replace the fourteen Trident SSBNs slated for retirement starting in 2029. Without the extra cash, the Navy says it will have to buy less of everything else, shrinking the fleet to roughly 237 ships rather than the planned 324. The bulk of cuts will come from large surface combatants; we will wind up with 53 rather than the planned 96. The number of amphibious ships and attack submarines will also decrease. With so few ships coming into the fleet, the document implies, we’ll have to close some shipyards.

As the four people who read my recent book chapter on naval politics know, that is not going to happen, and Navy knows it. Defense production facilities are like hungry children that politicians feed by extracting work from the Pentagon. The six major and several minor shipyards that sell to the government in this country are largely jobs programs. They offer far more production capacity than the Navy and Coast Guard need. Even though General Dynamics and Northrop Grumman now own all six major yards, the firms have no interest in achieving economies of scale by closing yards. Politicians protect work for the yards as long as they stay open. Maintaining extra yards means that the Navy pays a large overhead premium for its ships, but doing so widens its base of Congressional support.

The Navy has been is playing a bit of chicken with the Office of the Secretary of Defense, leaving the cost of boomers out of its last shipbuilding plan in the hope that OSD would find the money elsewhere. OSD may do so yet, but in the meantime the Navy is trying to bring around Congress, taking “hostages” that powerful congressmen will have to free. Big surface combatants are made in Bath, Maine by General Dynamics and Pascagoula, Mississippi by Northrop. Susan Collins (R-ME) and Roger Wicker (R-MS) are on the Senate Armed Services Committee. Gene Taylor (R-MS) chairs the House Armed Services subcommittee that oversees the Navy. Chellie Pingree (R-ME) sits on it. By targeting surface combatants, the Navy is pushing those members to go find some money for it to save local jobs.

The most likely outcome here is that the Navy shipbuilding account will get a slight planned boost but far from what the service requests. Meanwhile the fleet will continue to  shrink, because the ships’ complexity keeps their cost high. No shipyard will close, so each will get enough work to stay afloat, adding cost.

In a more austere and competitive budget environment, we would see more hard choices.  The other services would start asking the White House whether it is worth aiming for a three hundred ship Navy with no obvious enemy to justify it. The Navy might tell the White House that carriers do what the Air Force’s fighters do, so cut their budget. Congressional leaders looking for savings might ask why we still need to deliver nuclear weapons three ways, by submarine-launched ballistic missile, intercontinental ballistic missile and bomber. A monad with twelve boomers is all the survivable nuclear deterrent we need.

Defending Obama…Again

I caught a lot of flack from my Republican friends for my post blaming the FY2009 deficit on Bush instead of Obama. Well, I must be a glutton for punishment because I can’t resist jumping (albeit reluctantly) to Obama’s defense again. I’m venting my spleen for two reason. First, FoxNews.com posted a story headlined “Obama Shatters Spending Record for First-Year Presidents” and noted that:

President Obama has shattered the budget record for first-year presidents – spending nearly double what his predecessor did when he came into office and far exceeding the first-year tabs for any other U.S. president in history. In fiscal 2009 the federal government spent $3.52 trillion …That fiscal year covered the last three-and-a-half months of George W. Bush’s term and the first eight-and-a-half months of Obama’s.

This story was featured on the Drudge Report, so it has received a lot of attention. Second, Bush’s former Senior Adviser wrote a column for the Wall Street Journal eviscerating Obama for big budget deficits. Given Bush’s track record, this took considerable chutzpah, but what really nauseated me was this passage:

When Mr. Obama was sworn into office the federal deficit for this year stood at $422 billion. At the end of October, it stood at $1.42 trillion.

I’m a big fan of criticizing Obama’s profligacy, but it is inaccurate and/or dishonest to blame him for Bush’s mistakes. At the risk of repeating my earlier post, the 2009 fiscal year began on October 1, 2008, and the vast majority of the spending for that year was the result of Bush Administration policies. Yes, Obama did add to the waste with the so-called stimulus, the omnibus appropriation, the CHIP bill, and the cash-for-clunkers nonsense, but as the chart illustrates, these boondoggles only amounted to just a tiny percentage of the FY2009 total – about $140 billion out of a $3.5 trillion budget.

There are some subjective aspects to this estimate, to be sure. Supplemental defense spending could boost Obama’s share by another $25 billion, but Bush surely would have asked for at least that much extra spending, so I didn’t count that money but individual readers can adjust the number if they wish. Also, Obama used some bailout money for the car companies, but I did not count that as a net increase in spending since the bailout funds were approved under Bush and I strongly suspect the previous Administration also would have funneled money to GM and Chrysler. In any event, I did not give Obama credit for the substantial amount of TARP funds that were repaid after January 20, so the net effect of all the judgment calls certainly is not to Bush’s disadvantage.

Let’s use an analogy. Obama’s FY2009 performance is like a relief pitcher who enters a game in the fourth inning trailing 19-0 and allows another run to score. The extra run is nothing to cheer about, of course, but fans should be far more angry with the starting pitcher. That having been said, Obama since that point has been serving up meatballs to the special interests in Washington, so his earned run average may actually wind up being worse than his predecessor’s. He promised change, but it appears that Obama wants to be Bush on steroids.

The Week in Government Failure

The FY 2010 Defense Authorization

Yesterday Congress passed the $680 billion FY 2010Defense Authorization Bill, which authorizes the largest such budget since the end of World War II. If, as is all but certain, President Obama signs the legislation, he will have failed to halt the inexorable growth in military spending, and he will signal to American taxpayers that they should expect more of the same. What’s worse, most of this money is not geared to defending America. Rather, it encourages other countries to free-ride on the United States instead of taking prudent steps to defend themselves.

The defense bill represents only part of our military spending. The appropriations bill moving through Congress governing veterans affairs, military construction and other agencies totals $133 billion, while the massive Department of Homeland Security budget weighs in at $42.8 billion. This comprises the visible balance of what Americans spend on our national security, loosely defined. Then there is the approximately $16 billion tucked away in the Energy Department’s budget, money dedicated to the care and maintenance of the country’s huge nuclear arsenal.

All told, every man, woman and child in the United States will spend more than $2,700 on these programs and agencies next year. By way of comparison, the average Japanese spends less than $330; the average German about $520; China’s per capita spending is less than $100.

The massive imbalance between what Americans spend on our military, and what others spend, flows directly from our foreign policy. Several decades ago, Washington opted to be the world’s policeman, and has ever since discouraged other countries from spending more on their own defense. President Obama has tacitly questioned this approach in the past, and has called on other countries to step forward and do more. But his actions will drown out his words.

The president has defended his support for continued bloated military spending, with additional monies going especially to a larger conventional army, as a way to reduce the strains on our troops and their families. This is a noble impulse. But a far better way to relieve the burdens on our overstretched force is to rethink all of our global military commitments, and align our strategy to our means. A new grand strategy, predicated on self-reliance and restraint, would relieve the burdens from the backs of our troops and from taxpayers. That new strategy would compel other countries to finally assume their rightful responsibilities in defending themselves and their respective regions.  

The governing class in Washington has consistently resisted such a change. It is enamored of its ability to manage not just the rest of the country, but indeed the rest of the world, and sees no reason to change. Neither, it would seem, does President Obama. By embracing a military budget explicitly geared toward sustaining the status quo, the president virtually ensures that other countries will not share in the costs of keeping the world relatively prosperous and at peace.

When Stimulus Is No Stimulus

The Obama administration has been touting its wasteful “stimulus” package as the answer to the recession.  Now that Uncle Sam has started his spending binge, John Cogan, John Taylor, and Volker Wieland assess the result.  Their conclusion:  for all of the money spent, the effort wasn’t much of a stimulus.

They write in the Wall Street Journal:

Direct evidence of an impact by government spending can be found in 1.8 of the 5.4 percentage-point improvement from the first to second quarter of this year. However, more than half of this contribution was due to defense spending that was not part of the stimulus package. Of the entire $787 billion stimulus package, only $4.5 billion went to federal purchases and $17.7 billion to state and local purchases in the second quarter. The growth improvement in the second quarter must have been largely due to factors other than the stimulus package.

Incoming data will reveal more in coming months, but the data available so far tell us that the government transfers and rebates have not stimulated consumption at all, and that the resilience of the private sector following the fall 2008 panic not the fiscal stimulus program deserves the lion’s share of the credit for the impressive growth improvement from the first to the second quarter. As the economic recovery takes hold, it is important to continue assessing the role played by the stimulus package and other factors. These assessments can be a valuable guide to future policy makers in designing effective policy responses to economic downturns.

If policymakers really want to stimulate the economy, they will stop prodigiously wasting money, unfairly redistributing people’s earnings, making the tax system ever more complex, and imposing job-killing regulations.  In other words, politicians will stop being politicians.

Misinformation from Heritage

The Heritage Foundation has a chart up on its blog, showing defense spending as a percentage of gross domestic product and declaring that “Obama plan cuts defense spending to pre-9/11 levels.”

This is a standard rhetorical device for defense hawks (see the Wall Street Journal editorial page, Mitt Romney and lots of others) so it’s worth pointing out that it’s misleading. The unfortunate truth is that Obama is increasing non-war defense spending this year and seems likely to increase it at least by inflation in the near future.

It’s true that defense spending will probably decline as a percentage of GDP, assuming the economy recovers. But that’s because GDP grows. Ours is more than six times bigger than it was in 1950.  Meanwhile, we spend more on defense in real, inflation adjusted terms, than we did then, at the height of the Cold War. The denoninator has grown faster than the numerator. 

By saying that defense spending needs to grow with GDP to be “level,” you are arguing for an annual increase in defense spending without saying so directly. That’s the point, of course.

To be straight with readers, charts that show defense spending as a percentage of GDP should either show GDP growth over time or include a line that shows defense spending in real terms. Otherwise they fail to demonstrate that the decline in defense spending as a percentage of GDP is a consequence of growing GDP, not lower spending.

Here’s a chart from the Congressional Budget Office’s report, “The Long Term Implications of the Current Defense Plans,” that does this.

The assumption in analysis like Heritage’s is that defense spending should be a function of economic growth, not enemies and strategies for defending against them.  It’s easy to point out that this is strategically and fiscally foolish. And it’s worth noting, as I have on many occasions, that we face a benign threat environment and can cut defense spending massively as a result.

But there is something weirder going on here that warrants mention.  Arguing that wealth creation should drive defense spending is to attempt to divorce the military from its strategic rationale. That’s an implicit acknowledgement that defense spending is not for safety.  High military spending in this worldview is either an end in itself or a partisan or cultural tool.  That’s not much of a revelation, I guess.

O’Hanlon on Defense

Maybe you have wondered, is it possible to get an op-ed published in the Washington Post advocating increased US defense spending without any mention of the enemies the defense budget is meant to defend us against or the wars we might fight with them?  Yes! Michael O’Hanlon proves it.

He says: 1. The Pentagon needs two percent annual growth above inflation to maintain its current plans. 2. Therefore the zero percent real growth the Obama administration plans for the next five years is unwise and we need to add $150 billion over that period.

The first part is reasonable, but why should the Pentagon maintain all its current programs? O’Hanlon doesn’t say. What the article amounts to is an argument for higher defense spending because defense spending is expensive. That is not persuasive.

Also omitted is that fact that O’Hanlon is repeating the Secretary of Defense’s view. Here’s what Robert Gates said on April 7.

I don’t think that the department can sustain the programs that we have with flat growth. And therefore I believe that we need at least 2 percent real growth going forward.

Here’s O’Hanlon:

For the Defense Department to merely tread water, a good rule of thumb is that its inflation-adjusted budget must grow about 2 percent a year (roughly $10 billion annually, each and every year)…we need roughly 2 percent real growth per year, while Obama offers zero.

The zero percent real growth in defense spending figure that O’Hanlon takes issue with is from budget charts prepared by OMB. Time will tell whether that, Gates’ view, or something else becomes policy.  So it appears that O’Hanlon, knowingly, one hopes, is taking Gates’ view in an intramural Obama administration squabble. I’d say that’s worth knowing when you read this article.