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.
Where will these cuts come from, and who will be affected? Politicians, credit-rating agencies and defense contractors have been poring over the bits and pieces of information coming out of the Pentagon. Today the Department of Defense released the following:
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.
The U.S. government faces massive deficits as far as the eye can see. We’ve been very fortunate to fund these deficits with borrowing at historically low rates as global investors sought the safety of U.S. Treasuries. But our fiscal imbalances, like those of many European nations, are unsustainable in the long run. We cannot continue to spend more than we take in. We must shrink every part of the federal budget and get more efficiency from what we do spend. The arguments of fiscal expansionists that stimulus spending is necessary to jumpstart the economy have proven unpopular. Government spending must shrink, and a major component of that is defense spending. The war hawks defend military spending with the patriotism mantle, but that’s a worn-out cliche that can’t pass scrutiny.
While the United States is in a serious financial problem with huge government and trade deficits I fear that deep cuts into the US military will lead to a seriously weakened force. The article I just read and am commenting on states that the US far outspends other nations in the military sector with China a far second place. The other nations listed I am not concerned about as they are US allies but China is actively modernizing and expanding their military and they can do this for far less capital than the US because China can do so with little profit in the equation. We must remember that most industry in China is run by it’s military. Couple this with low labor costs and it’s acquisition of western technology through US corporations that have moved production to China, entered into required agreements for licensed and joint production of high technology systems such as aircraft, communication, computing systems and others and China can produce high technology military systems for far less than the US.
The days of the Pentagon being a ‘cash cow’ for US defense companies is coming to an end. US defense contractors must reduce huge overhead such as high salaries for multiple executives by thinning out the upper ranks and concentrating on producing products for the military with a sense of nationalism such as China’s military suppliers. US defense contractors have always viewed military systems as high profit ventures and this mentality must change. Profit should be in the equation but realistic. The term COTS (commercial off-the-shelf) is becoming more common in use by the Pentagon in incorporating technologies in future weapons systems in dealing with funding cuts but the same is available for China to use. The US must maintain a strong, technologically advanced and sizable force as China continues to gain strength economically and militarily and has demonstrated that it is engaged in gaining power through control of the world’s dwindling natural resources and increasingly becoming bolder in international matters such as territorial rights and the issue of Taiwan. China is on a mission to replace the US as the world’s superpower and the US must be in a position to counter China as it becomes more vocal and forceful in it’s intentions.
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.”
Top Republicans, including Senator John McCain, have already said they will pursue legislation to do just that, although President Barack Obama has said he would not support such a move
Republican Senator Jeff Sessions of Alabama, the ranking member of the Senate Budget Committee, says in the Bloomberg video above that across-the-board cuts would not apply to Social Security, Medicaid, Medicare beneficiaries, civil and military employee pay, or veterans. He says these areas need to equally share in budget cuts. There are certainly reductions that can be made in every area of the gargantuan federal budget. But I think we really need to dig deep when members of Congress fight to protect the U.S. military on grounds of global insecurity. In the case of Senator Sessions it’s useful to know a little about the dominance of military spending in his state. Bloomberg did a brilliant article last week that explained:
Overall defense spending in Madison County, [Alabama] jumped 76 percent over a decade to $15,889 a person, the sixth-highest in the country, based on data compiled by Bloomberg. In the six years since the nationwide base realignment, military contracts in the area have swelled 48 percent to $32 billion, bringing in 4,650 new government jobs.
The United States spent approximately $700 billion, or 4.7 percent of GDP in 2010, on the military. China, a much bigger nation, spent $114B, or 2.2 percent of their GDP.
-
Resident Muniland expert
-
