MuniLand

America’s military is “lender of last resort”

America is slowly awakening from its long debt-induced slumber. It has conducted two major wars, a bailout of banks and a major stimulus program without raising taxes to pay for them. Because the Federal Reserve kept interest rates low, it was easy for politicians to continue to raise the debt ceiling and spend without making reductions in other areas of the budget. But those days have ended, the punch bowl has been removed and a new sobriety has rolled into our national capital.

Even with its massive deficit problems, America has been providing security for its global allies for decades at no cost to them. This resulted in spending 4.8 percent of GDP on U.S. military in 2010, which was ramped up from 3.0 percent in 2001, according to the Stockholm International Peace Research Institute. In contrast, you can see that European countries spent 1.73 percent of total GDP on military in 2010, which declined slightly from 1.99 percent in 2001.

America has been subsidizing European military needs largely due to its role in the NATO alliance. The Council on Foreign Relations explains the new problems with this arrangement:

In 2011, then Secretary of Defense Robert Gates warned that ‘there will be dwindling appetite and patience in the U.S. . . . to expend increasingly precious funds on behalf of nations that are apparently unwilling to devote the necessary resources to be serious and capable partners in their own defense.’ France in Mali is now a case in point; the Obama administration is providing only grudging assistance to an under-resourced French intervention.

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French military spending…has since 2001 exhibited a marked constancy—one which is inconsistent with the country’s newfound passion for military engagement.  (Libya in March 2011 was another example of the French, as well as British, military biting off more than it could chew).  It also highlights the need for the Obama administration to address Gates’ prescient concern and to develop a clearer policy foundation for America’s global military ‘lender of last resort’ role.

Republicans’ jobs plan: The war machine

Although Republicans have been insisting on cuts to federal spending, they are fighting to keep the defense budget off limits. They agreed to make cuts to military spending as part of last year’s sequester agreement, but there is a full-court press in progress to derail the cuts as the date on which they are set to take effect nears. This well organized campaign involves members of Congress, governors, mayors and military contractors. Here is what is involved, according to the House Armed Services Committee:

If sequestration takes effect in January, the defense budget would be cut an additional $55 billion per year from the levels established in Budget Control Act. That would mean an additional $492 billion in cuts on top of the $487 billion already being implemented [over ten years]. In total, over $1 trillion would be cut over the next ten years with disastrous consequences for soldiers, veterans, national security, and the economy.

This amounts to a reduction of around 14 percent to the defense budget. Even with the cuts, the U.S. will remain the biggest military spender in the world by far. In its pitch to put off the cuts, the House Armed Services Committee invoked the threat of job losses:

Will the Affordable Care Act be starved for funds?

Millions of uninsured Americans will now have access to healthcare as a result of the Supreme Court’s decision last Thursday to uphold the Affordable Care Act. This is a big step forward for the nation, but it raises questions about funding. The nation is already starved for revenue and is supposed to cut $1.2 trillion from the federal budget over the next eight years through the sequestration process.

Under sequestration, one or more of the three major areas of the budget – defense spending, Medicare or Medicaid – need to be cut. Congress is now trying to have President Obama show where these cuts will be made. But the Daily Caller is reporting that the president doesn’t intend to implement sequestration for the military:

President Barack Obama’s White House has told at least one defense contractor not to worry – sequestration isn’t really going to happen.

The impact of defense cuts

Reductions to our outsize military budget are scheduled to take effect in 2013. Congressional Republicans have vowed to reverse these mandated reductions, but so far organized resistance in Congress has not appeared. President Obama has vowed to veto any legislation that would overturn the cuts.

I previously described the size of the annual reductions:

President Obama proposed spending approximately $924 billion on defense, veterans care and international affairs for 2012. This represents about 24.7 percent of the $3.729 trillion federal budget. The automatic cuts to these areas required by the Budget Control Act of 2011 will equal about $75 billion per year over eight years. This would be on top of already enacted Defense Department reductions of $45 billion per year over 10 years. The combined $120 billion of annual spending cuts will equal about 12.9 percent of the joint budget for defense and intelligence. It’s a big cut, but it would barely dent the capabilities of the biggest military force on earth.

Annual reductions of 13 percent are substantial, but the nation will still spend significantly more than any other on earth. And it’s important to remember we will be spending 25 percent of our federal budget on the military even though, it is hoped, we will not be fighting a war. It’s not clear that the U.S. would have the “fiscal space” to ramp up spending to fight another big war and care for Social Security, Medicare and Medicaid beneficiaries.

Drum circle of the war hawks

The war hawks, desperate to avoid huge impending cuts to the defense budget, have formed a drum circle to stall the reductions and are beginning to pound out a rhythm. Seung Min Kim of Politico reports:

Congressional Republicans are still full throttle in their efforts to dismantle the automatic spending cuts that would be particularly painful to the Pentagon.

A quartet of Senate defense hawks [Republican Senators Lindsey Graham of South Carolina, John McCain of Arizona, Kelly Ayotte of New Hampshire, and Jon Kyl of Arizona] announced on Wednesday they’ll introduce legislation to undo hundreds of billions of dollars in defense cuts by replacing it with budget savings elsewhere. Those across-the-board cuts were mandated by the supercommittee’s inability to strike a deal slashing the nation’s deficit by at least $1.2 trillion over the next decade.

Don’t let the hawks win

The Supercommittee has failed. Their mandate to cut $1.5 trillion from the federal budget over 10 years was too great a hurdle for its members to climb. Now the automatic provisions of the Budget Control Act of 2011 will kick in. These require half of the $1.2 trillion in spending reductions to come from the Departments of Defense, Homeland Security, and Veterans Affairs; the National Nuclear Security Administration; some management functions of the intelligence community; and the international affairs budget from the State Department.

Already the fight over these required cuts is on. The war hawks in Congress are starting to circle in an effort to kill the automatic cuts to the military that are included in Budget Control Act. Reuters reports:

[T]he defense industry turns to lawmakers to undo the automatic cuts known as “sequestration.”

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