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The Burden on Defense Hawks
As I said yesterday, the deal that passed through the House of Representatives last night stinks. Both parties continued to embrace this fiction arguing discretionary spending is that which ails our budget, and so programs for the poor as well as defense spending went to the chopping block while taxes remain at ridiculously low levels and entitlement programs remain untouched. Our collective refusal to realize we need to trim our entitlements is maddening, as is our collective refusal to raise taxes -- ever -- on even the wealthiest Americans, who can and in many cases are willing to pay more. (Count me among those willing to pay more, by the way, in the name of fiscal sanity, even if I am not in the top 2%.)
I thus have a degree of sympathy for the defense hawks in the House of Representatives, including my friends serving on and working in the House Armed Services Committee. Some representatives on the HASC voted "no" last night, which in my mind was an incredibly irresponsible thing to do that late in the game, but overall, the HASC gets high marks for both its commitment to transparency, for which it has been justly lauded, and its commitment to rebuilding our ground forces after the wars in Iraq and Afghanistan while at the same time funding the Dept. of Defense to prepare for future security challenges.
Most of us defense analysts, though, can agree that whatever happened last night and in the budget negotiations, cuts to the defense budget were inevitable and even make sense. As we draw down in Iraq and Afghanistan, it's a perfectly reasonable thing to wonder why we have as many ground troops as we do, and it's also a perfectly reasonable thing to wonder why retirement benefits in the military outpace those in the private sector or why health care premiums are so low for servicemen while they continue to rise for everyone else. So I have no problems with intelligent cuts to the defense budget, though I do have problems with blind swipes of the ax to the defense budget, and I worry we're going to see more of the latter than the former.
Here's the thing, though: if defense hawks want to prevent other law-makers from gutting the defense budget in a clumsy way, they should play offense instead of defense. The path of least resistance now will be to fight some valiant rear-guard action protecting this or that weapons system, but the smarter play will be to convince other law-makers and the public at large that it makes more sense to re-invest in our nation's exhausted military for the next few years than to continue to fund entitlement schemes that we are going to need to eventually cut anyway. And it might even make sense for someone to suggest we all pay an extra $20 "thank you tax" to our nation's Army and Marine Corps this year to replace some of the equipment those soldiers and Marines have used in Iraq and Afghanistan while most of the rest of us have sat on the couch eating Cheetos and worrying about the NFL lock-out. I think most Americans would be down with that -- if they were assured this extra $20 would go to our exhausted Army and Marine Corps.
Because if you want to fix the debt, you're going to have to eventually raise taxes and cut entitlements anyway. You might as well do so now in the name of national security rather than wait until the next crisis. The burden that falls on defense hawks is to convince other Americans that it makes sense today (paradoxically, considering we're winding down our involvement in two wars) to re-invest in the defense budget rather than continue to live in this blissful happy land where you can have both low taxes and cushy entitlements.
***
Now, I understand some of you want us to have a smaller defense budget so politicians will not be so tempted to use our military power in places like Iraq and Libya. I understand that. But I do not think that trying to shackle policy-makers by having a smaller military makes a lot of sense, even if smart people sometimes argue that. My brief experience in the U.S. military taught me that policy-makers, most of whom have no military experience, will usually throw the military into stupid situations (see: Iraq) whether or not it's prepared and that "clever" means* designed to shackle policy-makers from doing stupid things don't ultimately work. So all things being equal, I would rather have a capable, effective military ready to respond to whatever damn fool idea some president from Texas (LBJ, George W., ... Perry?) gets into his head. What constitutes a "capable, effective military" is then another discussion, and a fun one to have as we think about the military after Iraq and Afghanistan.
*Clever but ultimately misguided means include the way the service chiefs gamed the system after Vietnam and stuck a bunch of essential capabilities in the reserves, making a call-up of the reserves necessary in the event of war. Andrew Bacevich and others have correctly noted this was an attempt by the service chiefs to limit the options of their political masters, which really isn't cricket. Or Huntington, for that matter.
Great post - a dose of sanity
Great post - a dose of sanity in a otherwise insane couple weeks.
You said, "and it's also a
You said, "and it's also a perfectly reasonable thing to wonder why retirement benefits in the military outpace those in the private sector or why health care premiums are so low for servicemen while they continue to rise for everyone else."
My son is currently a buck sergeant. Even if he took the $900 per month housing allowance and lived off post, he would earn about $40,000 per year. He is employable (has a 4 year college from a good school) and not disabled (earned the CAB and ARCOM over two deployments).
Soldiers trade low wages for low cost benefits. It was true during my 6 years and it is true now. If you raise the cost of benefits, soldiers go from being merely poor to having to rely on their parents for uniforms and personal equipment. If you want to put military benefits on the bargaining table then you have to put pay rates and national security on the table with them.
You've griped often about an
You've griped often about an unwillingness to raise taxes on the wealthy. The tax burden on the wealthy has steadily increased almost every year, in terms of tax revenue collected and in terms of the overall debt burden. So what is it you're referring to?
In general I hate defense
In general I hate defense spending coming up in the context of budget fixes. In most sane models of what the military should be doing that I've seen, we could spend a lot less -- and God knows there's waste, fraud and abuse to be cut.
But it seems to me that a really long, thoughtful discussion of what our defense priorities shoul even be needs to be had, and ouyt the other end of that you come up with a force structure and posture that matches those priorites, and there you go. America is a rich enough country that it can fund whatever it legitimately decides its secuirty needs are.
But I don't think you can productively _have_ that long-overdue discussion in the presence of a budget debate: the fiscal bottom line ill end up squashing all other considerations. I think, you balance your budget and assume thew status quo for defense spending. Then you rejigger defense and in all probability that buys you, long-term, a whole lot of extra money. But the two things need to be as decoupled as you can make them.
"it's also a perfectly
"it's also a perfectly reasonable thing to wonder why retirement benefits in the military outpace those in the private sector or why health care premiums are so low for servicemen while they continue to rise for everyone else."
I'm not in the military, but seems to me that there ought to be a "got shot at" bonus for serving -- and thus retirement benefits should reflect this. How large that bonus should be is an open question -- but then I don't know how greatly those benefits currently outpace the private sector.
As for health care premiums, aren't they low because people in the military are, by and large, young and healthy?
Exum, interesting post.
Exum, interesting post. Think we are all frustrated.
Remember the line from the movie Air Force One, "What happens when you give a lemming a cookie?".
The reply is, "They will want another".
*One person I spoke to was living on Social Security. The local city keeps raising the taxes. Person lives a modest life style. There is no mechanism to freeze the tax rate on this person's self owned mortgaged apartment. Food prices are increasing. The person works as many hours as possible and is 75 years old.
*I know another person in the same boat. Still working at 85. That person got a real estate tax freeze, but has to pay the increased taxes in Illinois to support pension earners.
*In another case, a person purchased a home at the peak of the home prices. The home was accessed by the Democratic controlled taxing authority at the peak of the housing bubble. After three years of home assessment increases of not less than 5% in a low inflation environment, the home owner took the issue to the appeal board. After a year of going back and forth on the appeal issue (in that time frame the Democrat Governor Rod Blagovich moved the appeal board from the more Republican dominated State Capital to the Democrat dominated Chicago area ), the local tax assessor came back with three comparables to support the higher assessment rates. All the comparables had additional features than the home being appealed. The housing market in the area has been very slow, homes sit on the market. When the home owner pointed out the fact that the each of the three comparables generated by the assessor had features in excess of the home being appealed and were more contemporary the assessor replied, "Sue me, you live in a big home you pay more tax". The assessed value has increase at a 5% rate each year since. The home is 2000 sqft and was built in the 70's, it has not been remodeled. This person and his wife live on less than $30,000/yr before taxes. They had seen better times, but were impacted by globalization. Illinois just doubled their income tax rate. Illinois does not adjust income tax for for low wage earners. A mechanism exists to freeze the real estate tax rate, but that will only occur after many more assessor dictated 5% home value rate increase when the person reaches 65 year of age. You would think the taxing authority would have gotten the home value right when it was purchased in the peak of the housing boom. The local Democrat controlled county has a revenue surplus. More than half the revenue collected on real estate taxes goes to the school system to pay for pension, wages,a operating costs. The home owner never had children. The county recently placed a surcharge on sale taxes to support education in lieu of a larger real estate tax increase. The home owner has to pay sales tax on winter heating and transportation energy costs which is much larger because of the higher based value of the commodity. The state pension system that supports schools is under funded by $70 Billion dollars.
Exum, a little of this goes a long way. The rich pay a lot in taxes. Globalization is bitching up America.
Buy American Made Product.
The tax event stays home and you do not have to change the tax code. FICA gets paid. Every time you purchase a product made in China, you are letting the rich people that you want to tax more off-shore American jobs ! You are letting move their taxable event off-shore! You want the Dream Act, BUY AMERICAN and make jobs for these people.
The issue is we do not know what to do with 12 million illegals, the issue is not about immigration it is about who pays for the services used.
PS....Friend of mine after the Vietnam War worked his way across America doing farm hand work. He started the trip with $10,000 in his pocket. The line went, "you are only going to pay me this, when I went to war for you". He saw America and ended the trip with more than $10,000 on his return. He benefited from the GI bill. Worked for the government and now enjoys a government pension. Civil Service, jobs with the best benefits in America, still give preference to Veterans. In some states, Veterans get deductions for real estate taxes. In the early 60's there was a little known benefit for GI's that if paid into would cover health care for life, it was not TriCare. It was TriCare on steroids. My friend is still enjoying is "TriCare on steroids" and using his service in Vietnam service to hustle people. America gives a lot to veterans. We all contribute to the cause.
The 85 year old in the example above fought on the front lines in WW2. He never asked for special treatment.
Service to country is just that, service to county. I do not know why we are paying Congressmen $176,000 /yr and all the perks into retirement for what we get out of them.
Ex, Good post, but I disagree
Ex,
Good post, but I disagree on some of your points.
REVENUE - Increasing revenue sounds nice, but it's pretty darn complicated in reality. (1) The best thing we could do for revenue is get our economy growing again. While we haven't made any major tax policy changes in the last few years, revenue dropped from $2.6 trillion in FY2007 to $2.1-2.2 trillion last year and this year (all then year dollars). The concern on the conservative side is that increased taxes will actually be a disincentive to economic growth, thus not fixing one of the big problems on the revenue side. (2) The 40 year historical average on federal revenues is about 18% of GDP. It's currently below that (see above), but I think it is reasonable to ask whether we can drive revenue much higher than that. Tax reforms can change where that revenue is coming from, but per Laffer, there is probably a point at which increased tax rates does not produce increased tax revenue. Taxes change behaviors, so simply increasing tax rates does not equal a linear increase in revenues, and in a shaky economy increasing taxes arguably could do more harm than good. [Tax reform is a separate debate and I think everyone can agree we should do it, even if we can't agree on the results.] (3) Lastly, a $20 "thank you tax" sounds nice, but probably would not make a significant dent. If every man, woman and child in the U.S. paid $20, we're looking at about $6 billion (311M current pop. per Census.gov) and a quick search turned up that the Army asked for $21 billion in reset funds in FY2011. However, a quarter of our population is under 18, so probably wouldn't pay this tax. Beyond that, I don't think it's realistic to think that a "thank you tax" would be enacted without some carve out for low-income folks. So take 20% off the bottom of the adult population, and you're left with 60% of the population paying $20 and bringing in $3.7 billion. That's some real money, but at less than 1% of the DOD budget, I'm not sure it's worth the fight to get it.
SPENDING - What is driving our deficit spending? Primarily the growth in mandatory spending programs. In 2010, all entitlements/mandatory spending plus debt service equaled our federal revenue. All discretionary spending could be cut to zero, and we'd temporarily have a balanced budget. The trend line on mandatory spending is upward. So the core problem is not defense, but a dollar saved is a dollar saved. So, defense spending. I agree that there are smart ways to reduce defense spending in the out-years. Personally, I think reducing the size of the Army & Marine Corps in the future makes sense. I also think a redesign of military pay, benefits and retirement should probably be done, but it is about as difficult as reforming Medicare. What I'm concerned about is that the left seems to just want its pound of flesh from DOD regardless of strategy or needs. Maybe we can have a genuine debate about strategy and what our national defense should look like going forward, but it seems more likely that it's just going to be an axe. I think it would make sense to reduce our ground forces while maintaining or even strengthening some of our projection forces and SOF. But I don't think the Pentagon or the White House is willing to have that real strategy debate. Congress might try, but I'm not sure they can succeed without the administration's support.
"... the wealthiest
"... the wealthiest Americans, who can and in many cases are willing to pay more ..."
There are clearly not "many" enough to be willing to donate actual funds, and make a difference.
Since Mr. Exum has broken the
Since Mr. Exum has broken the seal on defense analysts taking blatantly political stands on this thread, I'll jump in the deep end with him.
Mr. Exum is coordially invited to render whatever additional tribute he feels necessary to the following address:
Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway, Room 622D
Hyattsville, MD 20782
No one is stopping him or these legions of others who Exum (and the President) continue to tell us are all fired up to part with more of their earnings. I am not among them.
We have a massive, massive spending problem, and the "deal" did nothing to solve it (Exum points this out well). We must get entitlement spending under control, as he also points out. But like a left of center nervous tic, he then heads directly for the "tax the rich" cry, believing of course, that there is nothing perverse in the top 1% paying 40% of the income taxes paid, or the top 5% paying as much as the bottom 90%. All this while somewhere nearing half of ALL wage earners pay ZERO income tax. Yes of course, they pay payroll taxes (like everyone else), but those taxes go to programs from which they will eventually derive direct, personal and palpable benefit. Not so much roads, parks, defense, etc, all which are paid out of the general treasury.
Why would Exum not apply some of the enlightened thinking he brings to defense matters to the subject of real tax reform? Perhaps a system based on consumption, rather than punishing work and savings? Is there NOTHING pernicious in a citizenry in which half the voters have no real financial stake in the policies advocated by poltiicians? Is there nothing destabilizing about the "soak the rich" talk so fashionable in DC salons these days? Inequality of wealth is a measure of ENVY, and nothing else.
There are seious problems to be fixed. We should be focusing on serious solutions.
The top 1% pay 40% of the
The top 1% pay 40% of the taxes, and own 80% of the wealth. I don't believe we should tax people...we should tax money. The entire tax code needs to be reformed.
In a tangentially related issue, we have a government completely unwilling to regulate business at any level, expecting responsibility will follow. It doesn't, as history as shown. We should not over-regulate, nor should we under-regulate. The challenge is hard because the line is blurry and it is constantly in flux.
And yes, everyone agrees that in the end, entitlement reform is the only way out of crushing deficits. But no one wants to tackle it. Poor kids don't vote, but middle-aged folks (and older) do.
I'd like to echo Bryan
I'd like to echo Bryan McGrath's comments. I don't want to pay more. I don't believe that I receive "value" for the tax dollars that I have to pay.
Another question: Some people are calling for others to pay "their fair share". What, specifically, is the value, in percent of gross income, for that "fair share"? Is it 10%? 20%? What?
Another question: What would the average tax rate be on that half (approximately) of the population that actually pays federal income tax? I have heard 70%, but would be shocked if it was actually this high.
"(Count me among those
"(Count me among those willing to pay more, by the way, in the name of fiscal sanity, even if I am not in the top 2%.)"
I'm all for cutting defense, Abu, but that aside, please don't hesitate to cut the IRS a check anytime you're feeling frisky. They won't turn it down
I read with some degree of
I read with some degree of agreement your ideas. Most specifically that the entitlements (the structural integrity of the programme's are untenable.) I just got finished reading Irving Fisher and was reflecting on his work, it was a re-read in the wake of today's debt deal.
http--fraser.stlouisfed.org-docs-meltzer-fisdeb33.pdf.url
To the point: without putting all the options on the table and addressing the entitlements which was the only "deferrable" point in spending that actually addressed the long-term debt issue, where if addressed the short term reserves would be adequate in lieu of growth accelerated obligations. (It was the only option) and political cowardice and demagoguery was the outcome.
I have two propposals: tell everyone who is 55 years or younger that they cannot retire until 70 and secondly set a list of standards and practices for geriatric care where aside from private insurance or grandfathered benefits where extended and advanced care is limited and pain management and hospice is not an option but policy.
The deal that was reached at last moment I feel was a failure on many fronts for many reasons but the most important being that the actual compromise did not address the real issue in a credible manner, sets the stage for a continuation of a debate that will erode confidence, and finally will exasberate debt-deflation.
JMHO, I think that the deal is a debacle and economists will marvel at it in the future.
* The Democrats seem to
* The Democrats seem to always point to the defense departments budget as the reason for soaring spending and as a target for massive cutbacks. However, when viewed historically this isn't the case. We are only spending around 4.7% of GDP compared to mid-6% in the 1980s and were fighting two wars. It is because of massive cuts to the Defense budget that we have had to rely on contractors to such a large degree in Iraq and Afghanistan to augment or shorthanded military (sure poor planning played a part as well). Either we have a large and robust military to meet our security challenges or we cut back and forced to rely on private military corporations more and more.
* In terms of military benefits, I agree there needs to be reform. I am completely for a soldier who fought in combat getting the health care he deserves HOWEVER many uniformed personnel never serve in combat or enter into harms way and yet receive benefits beyond the rest of us. America has entered into a military obsessed phase where instead of rewarding sacrifice they are simply rewarding the uniform. A firefighter, police officer, or teacher who are helping to make our country strong deserve equal well treatment as our men and women in uniform who never see the hells of war.
* Finally Abu has been getting a lot of flak for the revenue comment BUT the data doesn't lie,
http://www.thestreet.com/stock-market-news/11078128/us-gdp-vs-revenue-vs...
Revenue is lower and spending is higher BUT the majority of this is because of the recession. People need to remember that Obama and Bush had to spend in order to save the banking sector from collapsing and most economists agree had to spend to help ease the economy out of recession which had created the revenue problem. The problem isn't spending or revenue... "ITS THE ECONOMY STUPID"
"Clever but ultimately
"Clever but ultimately misguided means include the way the service chiefs gamed the system after Vietnam and stuck a bunch of essential capabilities in the reserves, making a call-up of the reserves necessary in the event of war. Andrew Bacevich and others have correctly noted this was an attempt by the service chiefs to limit the options of their political masters, which really isn't cricket."
Clemenceau observed during the First World War that war is too important to be left to generals. Maybe policy is too important to be left to elected officials.
I would say that AMs point
I would say that AMs point about elected officials biting off more than they can chew is borne out by the behavior of the British in Libya; the UK has cut its defense expenditures completely to the bone and yet they were the most gung-ho when it came time to supporting the rebels. All these operations seem to have accomplished is to show how impotent European militaries have become.
He does say 'tax the rich,'
He does say 'tax the rich,' but it is preceeded by:
" Our collective refusal to realize we need to trim our entitlements is maddening, as is our collective refusal to raise taxes -- ever..."
The general problem isn't the specific section of people on whom taxes will be raised. The problem is that revenue needs to increase, and the general raising of taxes is one of two or three options to get there.
The other problem is the debt has spiralled out of control fo so long, there is no quick and painless fix for it. Either entitlements get cut dramatically, taxes get raised, or we all come to some consensus about how to make jobs magically appear (which probably consists of somehow shifting the basis of the economy towards...something more based around techology? New energy research?)
I think Exum commented yesterday (or the day before) on the selfishness of generations prior - they take out much more than they put in. I think there can be a legitimate debate about what, exactly, they put in, but the point holds: the lack of accountability amongst the generation prior means that the arguement over 'fair share' is dumb - anyone who says "I don't recieve value for my tax dollar' misses out on the point that collectively, American society is going to have to sacrifice more than each person's 'fair share' to get America out of the mess we're in. It can't fall to just one segment, be it through higher taxes on them or reduced benefits.
Why do we need a bigger
Why do we need a bigger defense budget now than during the Cold War, when we actually had an enemy that could destroy us?
Many of us would be
Many of us would be interested in ABU MUQAWAMA'S views on what RATIONAL cuts in defense spending would look like. [Not that such cuts are ever made that way.]
For instance, there are several hundred military bases spread around the world, including Western Europe and Latin America. How many of them are ESSENTIAL to our national security? And then there are the weapons systems and planes, etc., that nobody save for military contractors and some members of Congress want. Do we really need to "train and equip" the military of dictatorships in Africa?
Such a discussion might lead to an equally useful, even more important, analysis of how we define our national security and what is necessary to keep us safe and our interests protected.
Is there is any such discussion by serious experts in print somewhere that one can have access to?
Some of the most cogent and
Some of the most cogent and interesting policy discussions I read are found on web pages like these. Unfortunately, although US federal spending on security generally is a major part of the US budget, most of the voting public has little or no knowledge of the issues facing those who keep the rest of us safe. I don't have a military background, but have sought out such information simply to be better informed.
A general statement I propose is that outside of the members of the security oversight committees in both the House and the Senate, few of those voting on these proposals have a better understanding of the issues than the vast majority of the American public.
Many Americans polled before the recent debt ceiling debate began in earnest said "don't raise it". Once they actually knew a little more about it and the potential harm they had a different perspective. When they actually witnessed the "sausage making" they were appalled.
My suggestion: those of you who analyze responsibly and write well need to find ways to get the message(s) beyond the think tank/military news pages and onto HuffingtonPost and other popular blog/news sites. It may be a little painful to try to write it so that the average reader can easily understand, but there is time between now and the 2012 elections to have better-informed VOTERS as well as CANDIDATES at all levels.
It seems worthwhile to attempt such an information campaign rather than wait until the next tragedy - the next decade's "9/11".
People who respond to
People who respond to analysts observing that taxes need to be raised by suggesting we write the government a check not only miss the obvious point that no one check written by one person can contribute to revenue in any significant way, but also usually ramble on about the need to cut our entitlement programs without ever volunteering to personally refuse their Social Security benefits.
If you want to cut government spending, I suggest you opt out of Medicare and pay for your own knee surgery. Thank you.
Is there NOTHING pernicious
Is there NOTHING pernicious in a citizenry in which half the voters have no real financial stake in the policies advocated by poltiicians?
The author does not appear to notice that he has contradicted himself. Everyone who has any income pays federal taxes; everyone has a stake.
Is there nothing destabilizing about the "soak the rich" talk so fashionable in DC salons these days? Inequality of wealth is a measure of ENVY, and nothing else.
No one envies you. Get over yourself. What is destabilizing is high levels of income and wealth inequality - macroeconomically destabilizing, politically destabilizing, and ultimately a frequent source of violent conflict. Latin America didn't stop being a basket case until they started soaking the rich, and successful East Asian tigers have among the lowest levels of economic inequality in the world.
Economies favoring excessive concentrations of wealth are both stagnant and volatile. Safety nets allowed human capital to be developed to the greatest extent possible, and you negate such nets when you tax the people who need them. The revenue comes out of those whose bonds are exactly now piling up uselessly in banks during this great contraction of economic activity.
"Our collective refusal to
"Our collective refusal to realize we need to trim our entitlements is maddening, as is our collective refusal to raise taxes -- ever -- on even the wealthiest Americans, who can and in many cases are willing to pay more."
Well I give you props for this...but you do realize that Boehner had a deal with the WH to close loopholes and broaden the revenue base = tax increases.
The top 1% pay 40% and the top 10% pay 60% and the top 49% (me) pay 100% of income tax...so....what other than the round number of 400 Billion were the details of the 400$ Billion.
POTUS's economic strategy makes Iraq Phase IV look like a masterpiece of planning with enough detail to drive the most pedantic mad.
wonderful post.Never knew
wonderful post.Never knew this, regards for letting me know.
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