Archive for August, 2011

The Defense Cuts That Never Were

On August 2nd Congress passed a deficit reduction deal that would also allow the debt ceiling to be raised.  It was a real street fight between Republicans and Democrats.  Both parties dug their heels into their philosophical positions.  In the end, the bill didn’t accomplish much.

The deficit reduction is a two-part deal:

  • Part one calls for a reduction of about $1 trillion over ten years.
  • Part two calls for Congress to find another $1.5 trillion by Thanksgiving.
  • If Congress can’t/won’t do it, across-the-board cuts of $1.2 trillion, half from defense, and half from non-defense (with exceptions for Social Security, Medicare, and Medicaid) will automatically happen.

The part one reductions are particularly interesting in that there’s some sleight of hand going on.

For example, of the $1 trillion in cuts, about $400 billion hit the defense budget.  But there are no REAL cuts there:

  • The Defense Department budget had been slated to increase by roughly $400 billion over the next ten years.
  • The deficit reduction deal simply eliminates those future planned increases.
  • In other words, there are no cuts, only an absence of increases.

This is explained by Jack Lew, Director of OMB, in his blog.

Now Leon Panetta, Defense Secretary, has spoken out about how the second series of cuts would be drastic.  If Congress can’t agree on further deficit reduction by Thanksgiving, $600 billion will be cut from defense over ten years.

Well, by my arithmetic, that averages out to $60 billion in decreased revenue spending for each of the next ten years.  This is real; this is not just the withheld increases we were talking about.

But could $60 billion less in annual defense spending really be that bad?  Take a look at defense spending for the past 6 years (source).

2011 – $964.8 billion – increase by $116 billion
2010 – $847.2 billion – increase by $53 billion
2009 – $794.0 billion – increase by $64 billion
2008 – $729.6 billion – increase by $77 billion
2007 – $652.6 billion – increase by $31 billion
2006 – $621.2 billion

The defense budget has increased by an average of $68 billion each year for the past five years.  If it were returned to 2010 levels, we’d save $116 billion/year.  That alone would save over $1 trillion in the next ten years.  Given that the Iraq and Afghanistan wars are winding down, that seems like a reasonable goal.

Maybe my analysis here is too simple.  But it all seems perfectly reasonable.  If there’s anything alarming in these figures, it’s the increase in defense spending over the past five years.

Assuming the above data and assumptions are correct, I think we’ve been deceived by the politicians in Congress.  In the initial deficit cut agreement they agreed to no real defense cuts.  And in crafting part two, initial impressions are that they will be unwilling to cut $60 billion in additional annual expenditures from a totally out-of-control defense budget.

It even gets worse.  After all the haggling and finger-pointing in Washington during the debt ceiling ordeal, both Democrats and Republicans agreed to a watered-down deal that left all the difficult decisions still remaining to be addressed.  In then end, it was largely a bunch of misdirection, sleight of hand, noise, and politics, and achieved very little.


August 17, 2011 at 2:26 pm Leave a comment

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August 2011
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