Tag: defense spending

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.

Cooper vs. the Services

Congressman Jim Cooper (D-Tenn.) has a fairly radical proposal for reforming defense acquisition in Politico.

Cooper wants to put the military services’ acquisition staffs under the direct control of the Secretary of Defense. The idea is to liberate the staffs from the parochial perspectives that cause various pathologies in acquisition programs.

The oped implicitly blames large and consistent cost overruns in weapons programs on the services’ interests, which manifest in excessive requirements for platforms. For example, the Air Force’s religious attachment to the over-designed and thus wildly expensive F-22 has its origin in a peculiar self-image, one that sees the establishment of air superiority for strategic bombing as the Air Force’s main mission. You can tell a similar story about another contender in the Pentagon’s biggest white elephant sweepstakes: the Marine’s amphibious Expeditionary Fighting Vehicle.

Cooper is rejecting the more popular view that the trouble in acquisition is the lack of independent cost estimates and other failures in the contracting process. That technocratic view underlies the acquisition bill that just became law. Cooper is saying that the trouble is more what we want than how we buy it, and what we want is a consequence of the services’ power. To deal with that, you must either change the services’ conception of their interests (and note that such efforts are arguably underway, especially in the Air Force) or take power from them. He’s pushing for the latter.

The weakness in the oped is a failure to explain how moving the military’s acquisition personnel to OSD would change the incentives that cause officers to do their service’s bidding. They would still work for a service, after all, and face its promotion board. A more radical proposal would be to hand more power over acquisition to the civilians in OSD and remove redundant positions from the services.

Cooper also takes (another) shot at constant service shares – the tradition, dating to the Kennedy Administration, where the Army, Navy and Air Force all get consistent shares of the budget each year. That tradition stifles interservice competition and therefore innovation. Giving the lion’s share of defense spending to the ground forces would be a sensible outgrowth of our current defense strategy, which is manpower-intensive. The Navy and Air Force might then be forced to scramble for relevance, causing them to initiate many of the reforms to their procurement programs that Secretary Gates has proposed. (An even better tact would be to cut the defense budget massively but give more of it to the Navy, given that our current strategy encourages dumb wars).

Note that the suggestion to enhance service competition relies on decentralized institutions competing, whereas the main suggestion of the oped is to heighten the centralized authority of the Secretary. Whether these are contradictory ideas is academic, for now, because at least one is not going to happen soon. The service’s would go the mattresses to protect their control of their acquisition programs, and there is a no sign of a political constituency willing to pick that fight.

The GOP Is Not Serious about Cutting Down Spending

A month ago, President Obama issued a list of proposed spending cuts that I dismissed as “unserious” due to the fact that they were trivial when compared to his proposed spending and debt increases.  Today, the House Republican leadership released a list of proposed spending cuts.

I’d love to say I’m impressed, but I can’t.

Both proposals indicate that neither side of the aisle grasps the severity of the country’s ugly fiscal situation, or at least has the guts to do anything concrete about it.

The GOP proposal claims savings of more than $375 billion over five years, the bulk of which ($317 billion) would come from holding non-defense discretionary spending increases to no more than inflation over the next five years.

First, it should be cut – period.  Second, non-defense discretionary spending only amounts to about 17% of all the money the federal government spends in a year, so singling out this pot of money misses the bigger picture.  At least, defense spending, which is almost entirely discretionary, should be included in any cap.  But it has become an article of faith in the Republican Party that reining in defense spending is tantamount to putting a white flag in the Statue of Liberty’s hand.

The second biggest chunk of savings would come from directing $45 billion in repaid TARP funds to deficit reduction instead of allowing the money to be used for further bailing out.  That’s a sound idea as far it goes, but I can’t help but point out that the signatories to the document, House Republican Leader John Boehner and Minority Whip Eric Cantor, voted for the original $700 billion TARP bailout. Proposing to rescind the Treasury’s power to release the remaining funds, about $300 billion I believe, should have been included.

According to the proposal, the rest of the cuts and savings comes out to around $25 billion over five years.  Like the specific cuts in the president’s proposal, they’re all good cuts.  But the president detailed $17 billion in cuts for one year and I generously called it “measly.”  What am I to call the House Republican leadership specifying $5 billion a year in cuts?

Take for example, proposed cuts to the Department of Housing and Urban Development (HUD), which is likely to spend around $65 billion this year.  Having recently spent a couple months analyzing HUD’s past and present, I can state unequivocally that it’s one of the sorriest bureaucracies the world has ever seen.  Yet, the House Republican leadership comes up with only one proposed elimination: a $300,000 a year program that gives “$25,000 stipends for 12 students completing their doctoral dissertation on issues related to housing and urban development.”  The only other proposed cut to HUD would be $1.7 billion over five years to the Community Development Block Grant (CDBG) program.  This notoriously wasteful program is projected to spend over $8 billion this year alone.  Eliminate it!

The spending cuts the country needs must be substantial, serious, and put forward in the spirit of recognizing that the federal government’s role in our lives must be downsized.  Half-measures are not enough, and from the Republican House leadership, wholly insufficient for winning back the support of limited-government voters who have come to associate the GOP with runaway spending and debt.  For a more substantive guide to cutting federal spending, policymakers should start with Cato’s Handbook chapter on the subject.