The Budget Deal: American Defense Goes Over A Cliff

It looks like the nation’s national security may soon take it in the shorts, in a repeat of the 1990’s but worse. Then, defense declined in real terms by a cumulative $300 billion 1993-2000. At the same time, the major procurement accounts were under-funded by fully 40% according to a senior defense department official in a speech Dec 2000.

It is true, defense budgets have roughly doubled since 2000. The cost of keeping a soldier has dramatically increased as health care, operations, maintenance and support costs have gone up. That is the cost of modern defense. And weapons systems have also increased, often in unit costs but also in maintenance. But each modern plane, missile or satellite does far more now than what it is replacing.

So why over the next half decade, must the nation’s security get pummeled while welfare recipients and government bureaucrats–at all levels–continue to get billions, even trillions?

For example, from FY09-16, the February budget of the administration calls for defense, veterans and Homeland Security–the so-called defense accounts to increase $50 billion collectively, compared to the FY09 baseline. That’s right–$50 billion, just a few billion more than some negotiators were pushing to increase just the Pell Grants.

But overall, spending from the fiscal year 09 baseline for everything else goes up $7 trillion cumulatively OVER the baseline of $3 trillion which this administration inherited.

For FY09-FY12 the spending overall goes up $2.5 trillion over the baseline inherited even if FY12 spending is $100B less than FY11 as projected in the PBR in February.

By FY2016, the administration will keep defense, homeland defense and veterans nearly flat, but overall government pending goes from $3 trillion to $4.467 trillion. Why then in deficit reduction should defense account for 50% of the reduction in spending even as deficits continue to soar?

Remember, the Democrats proposed $500 billion in Medicare cuts to hospitals and doctors and $400 billion more from defense (this was the administration’s budget redo in April). This was over then years.

Add to that interest saved and guess what? We get $1.2 trillion!! This is similar to the revenue sequestered under the “trigger” being considered by the debt limit bill should there be no deal after October 1 but before Thanksgiving.

So if the administration simply obstructs a deal, they could get the cuts they have been proposing. Our security goes off a cliff and doctors and hospitals go out of business. One caveat is in order: the House has been able to construct a firewall between security and non-security spending for 2012-13. The only way to prevent a catastrophic attack on our security is to change policy in 2013. That is, of course, what the election in 2012 will be all about. This agreement, whatever the details are, does not change that.

The debate is not over; it is actually just beginning. The Tea Party folks should be commended. They began this much needed conversation and debate.

But we will be romanced by the opponents of sound defense spending. We will be told in the post October 1 debate, “Yes everything is on the table but there has to be a “balanced” way out of this. Behind closed doors, they will put a gun to our heads and say we will kill the defense department if you do not agree to–guess what?–raise taxes AND of course defense will be cut anyway (they will adopt Bowles-Simpson and the Commissions proposed defense cuts of $886 billion). And perhaps cuts to Medicare providers will be included. That will be called entitlement reform!

The administration might get a bill on their desk that keeps the Bush tax rates just where they are. But what if they veto the bill? If sustained, they get somewhere around $1.8 trillion according to a bogus chart published by the Boston Globe (read New York Times). This is the number (over a decade) they assume will equal the revenue raised if all the Bush tax rate reductions are allowed to expire. No bad economic impacts will occur, of course.

Now, add this to the $2.5 trillion now agreed to, albeit in two steps, and presto, there is your magic $4 trillion.

They may have lost the argument for the first series of cuts that protect defense and taxpayers from getting fleeced. But the second part of the deal could be disastrous for the country and our nation’s national security–taxes go up by the trillions so the welfare state stays intact. Remember, while spending hits $4.5 trillion in FY16 if the administration’s projected February budget numbers are not changed, that number goes to $5.7 trillion four years after that.

Now the deal does limit defense cuts to no more than $350 billion out of the initial $900+ billion in cuts over ten years. Security spending such as homeland defense, veterans, and the nuclear portions of the energy department and foreign operation funding in the Department of State will take the rest of the cuts required. Fiscal year 2012 and 2013 cuts may not be as severe as they could be.

But even if defense is wrecked less than what otherwise might be a “worst case” scenario, the rating agencies will downgrade our debt anyway, causing us another half trillion or so A YEAR to pay our debt. And George Soros gets his wish: kill the “capitalist system” in the US, wipe out America’s defenses, cripple America’s power, and substitute a leftist banana republic, in full retreat and broke.