Across-the-Board Cuts Are the Only Road to Budget Reduction

by , April 19, 2011

Defense analysts and military personnel are trained to analyze the U.S. defense posture in a certain way. But even analysts who are trying to be restrained in their assessment of threats and force and equipment requirements are politically naïve about the way the real world of defense budgeting works. A different approach is needed to successfully cut the defense budget.

Defense analysts, military people, and retired military officers have essentially opted for a rational approach to assessing the U.S. defense posture. The problem is that the rationality of defense analysis runs up against the entirely different rationality of budgeting. I have used this logical approach to defense analysis myself. I even wrote an entire book, Putting “Defense” Back into U.S. Defense Policy, which assessed U.S. vital interests, threats to those vital interests, the best national military strategy for countering those threats, the best structure of forces to carry out that strategy (for example, how many fighter air wings, mechanized divisions, lighter infantry divisions, Special Forces units, Marine amphibious groups, and aircraft carrier battle groups are needed), the weapons required to implement the strategy, and the ideal defense budget needed to pay for all of the above. This is a very useful way to approach the problem of defending the nation, because it gives you an ideal force structure and defense budget. However, at the Pentagon and the consulting firms that work for it, the process can be “gamed” to expand U.S. vital interests, the threats to them, and the strategy needed to counter them (for example, adopting a “preventive” strategy versus a more restrained approach). Expanding interests, threats, and strategy then leads to a ballooning of the force structure, weapons requirements, and defense budgets.

Yet, if the process is used responsibly and with some restraint, it is still valuable in coming up with the ideal defense posture. But one must keep in mind that this process bears no resemblance to the way the force structure, weapons requirements, and defense budget are arrived at in the real world.

In reality, the Department of Defense (DoD), despite being shielded by “patriotic fervor,” works much like any other government agency or operation—according to the public choice model. As the conflicts in Afghanistan and Iraq have shown, the kinds of forces and weapons on hand were not the ones needed for best prosecuting the wars. DoD often purchases weapons that only dimly comport with the threats, strategy, or force structure (for example, the F-22 fighter plane, which had originally been designed to fight Soviet fighters that were never built because the East bloc collapsed, were purchased long after the Cold War ended). Weapons purchases are often welfare projects doled out to congressional districts and states with political clout. In fact, unlike in the commercial market, defense contractors don’t give subcontracts to the best subcontractors but spread them around the country to build political support, so that it is very difficult to kill weapons programs. Such welfare programs provide many jobs in the states and districts, thus ensuring congressional support for continuing unnecessary or white-elephant weapon procurement. The same difficulty arises when it comes to closing excess military bases.

The “iron triangle” of a government agency, its contractors and subcontractors, and Congress is not unique to defense, but applies to all government programs, which are all heavily politicized. These iron triangles are always in the shadows, but they surface to nix budget cuts. The recent squabble between Democrats and Republicans over the “record” cut of $38.5 billion from the 2011 budget starkly illustrates the problem. The neutral Congressional Budget Office, in which I used to work, discovered that after all the hoopla, the $38.5 billion figure was fraudulent. Out of that amount, a measly $350 million (it sounds like a lot, but when the annual federal deficit is more than $1 trillion, it’s chicken feed) would be cut in 2011. The CBO uncovered that $13 billion to $18 billion of the cuts involved money that existed only on paper and unlikely would have been spent during the next decade (for example, money not needed for the 2010 census or earmarks that were never used). Much of the other spending didn’t spend out until future years. Budget insiders know that most future budget projections are… well… just projections, because politics and legislation can change in future years; the only number that really matters is what is cut in the here and now (this year’s budget).

Budget gimmicks and fraud are commonly used to fool citizens into thinking Washington is being fiscally responsible in order to mask the shoveling of welfare to constituencies not based on merit, but on political power. In Washington, a budget cut is rarely a real budget reduction.

The Republicans, under the leadership of Paul Ryan (R-Wisc.), chairman of the House Budget Committee, were heralded as bringing forth a courageous long-term budget plan that finally cut some of the large entitlement programs (for example, Medicare and Medicaid). Unfortunately, Ryan’s plan slashed spending by $4.3 trillion during the next decade but failed to cut defense and reduced taxes over the same period by $4.2 billion. Thus, Ryan would allow the monstrous federal deficit to go on much too long. Ordinarily I couldn’t argue with tax cuts, but much of the Republican Party’s recent electoral success (from Reagan on) has been based on fake tax cuts. If we go down Ryan’s road, what will likely occur—as happened under Reagan, George H.W. Bush, and George W. Bush—is that taxes will be reduced, but the politically more difficult spending cuts will not be made. A tax cut is fake if spending is not cut, because taxes will have to be raised in the future, interest rates will have to be raised, or money will have to be printed. Credit counselors say the first thing to do is pay down your debt. Thus, no tax cuts should be on the horizon until the tough medicine of substantial spending cuts has been taken.

President Obama then put out a budget plan that was even more irresponsible. He put forth only modest cuts in defense, left the big entitlements alone, and proposed tax increases on the wealthy. But the Republicans have fallen into his electoral trap for 2012, because he can portray them as trying to do away with Medicare while cutting taxes for the rich.

So what can be done? To defeat the intense lobbying of powerful interest groups (including DoD and its contractors) and accompanying partisan conflict over budget cuts, which was illustrated by the uproar over the modest $38.5 billion (I mean $350 million) cut for 2011, a simple decision rule of across-the-board spending cuts is the only road to travel. We have to reject cutting defense and every other program on the basis of rational analysis. Fiscal times are too grim for that, and politics just won’t permit it. If every program in the budget had to take a substantial and equal percentage cut, the plan could be sold with the simple and honest phrase: “In this dire time of record budget deficits, endangering the creditworthiness of the United States, everyone must sacrifice equally.” Across-the-board cuts are the only way to slice through interest group politics and the concomitant partisan bickering to restore sanity in public finances.

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