Wednesday, November 18, 2015

National Security Threats vs. Defense Cuts - Peter Huessy



by Peter Huessy

  • The nation's media, who seem to assume that Americans are weary of war, rather than that they are desperately frustrated at being infantilized and lied to, rarely discuss what defense programs need more investment. If anything, they discuss what defense programs should be killed.
  • Defense spending grew from $265 billion in 1996 to $300 billion in 2000, a 13% increase, equivalent to a $76 billion annual increase today. And the plan to balance the budget reached its goal in 1997. Why can America not do that again? Reform tax policy. Restore a sound defense budget plan.
  • "You think defending this nation is expensive; try not defending it." — Senator Ted Cruz, Nov. 10, 2015.

Especially as ISIS, Iran and others openly threaten the United States, it seems increasingly urgent for this administration and the next to determine the level of defense spending America should support.

A new study by the American Enterprise Institute, (AEI), authored primarily by defense experts Tom Donnelly and Mackenzie Eaglen initially supports using as a minimum baseline the defense five year plan proposed in 2012, by then Secretary of Defense Robert M. Gates.

Unfortunately, too often in Washington a discussion of defense spending frequently defaults into arguments over whether major tax rate increases must be part of the bargain. This failure is in part due to policy proposals to increase defense spending often being linked to with other proposals -- to cut tax rates, reform entitlements and balance the budget. Combined, these proposals are often described as unworkable and radical, and are thus easily dismissed.

A debate over how much to "tax the rich" lends itself to easy demagoguery. And that attracts politicians and their supporters to call for the redistribution of income. In short, if everything in the drive-by media newsroom can default to the progressive, Marxist narrative, it will.

In addition, the nation's media, who seem to assume that Americans are weary of war, rather than that they are desperately frustrated at being infantilized and lied to, rarely discuss what defense programs need more investment. If anything, they discuss what defense programs should be reduced or killed. For example, Keith Payne, the President of the National Institute of Public Policy in Fairfax, Virginia and a former top DOD official, told a conference on September 17, 2015 that during the past few years, media stories advocating cutting nuclear deterrent programs outnumbered those pushing for modernization by more than 200 to 1.

Retired Air Force Lieutenant General David Deptula, Dean of the Air Force Association's (AFA) Mitchell Institute and formerly the first Deputy Chief of Staff for Intelligence, Surveillance and Reconnaissance, explained at an AFA conference on bomber policy on November 10, that the U.S. needs to have a discussion of "first principals" -- asking what defense of the country one should have, to accomplish what ends. Then one can determine what it would cost.[1] The first task in the Constitution is "to provide for the common defense."

To be sure, it is also necessary to have an intelligent discussion on how to pay for such a defense.

That raises the further question of how best to generate the economic growth and jobs needed to raise the revenues needed to pay for these defense bills. If the U.S. is serious about balancing the federal budget in the next decade, as the new Speaker of the House, Paul D. Ryan, supports, that debate should be held soon. The debate should be about what smart tax, regulatory and spending policies would yield highest levels of revenue.

But does the U.S. really need to increase tax rates more on "the rich," to meet its defense obligations?

Already, the current tax system is extraordinarily progressive. For example, while the top 1% earned 18.9% of national income they paid an astounding 37.4% of all federal taxes, while the top 5% earned 33.8% of national income but paid 59.1% of all federal taxes. By contrast, the bottom half of Americans received 11.7% of national income yet paid only 2.4% of federal taxes.

Few Americans, however, seem to know that every year -- with no change in Federal tax rates -- the U.S. government dramatically increases its "tax take" from the U.S. economy.

Despite the current economic recovery being the slowest in the post World War II era, revenue collected by the U.S. in 2014-2015 was still $230 billion higher than the year before.[2]

Obviously, a strong economy at near full employment would generate record levels of revenue, even when tax rates are lower (such as a 35% top tax rate) than in other years.[3]

The media and political discussion should include what to do with annual revenue increases that, even now in a slow-growth economy, are climbing each year by nearly a quarter of a trillion dollars.

For defense, if one accepts the recommendation of AEI that a $611 billion defense budget for FY2016 be adopted, as proposed by former Defense Secretary Robert Gates in 2012, it would boost the current administration's February 2015 defense request of $585 billion by $26 billion.

It appears, in fact, that Congress and the administration have finally agreed on a new defense spending level of $607 billion, which does bring the U.S. significantly closer to the initial goal of $611 billion proposed by AEI's Donnelly and Eaglen. This new annual increase in defense spending of about $60 billion above the previous budget caps is welcome, but amounts to the appropriation for more defense spending of only about 25% of the annual increase in federal revenue.

In short, it does not appear "radical" at all to devote some of those resources for U.S. national security, especially at this time.

It also does not seem "radical" to question the debates about taxing the rich, which are usually accompanied by arguments about who pays what share of federal revenue, and whether "the rich" make "too much" money.

Recent history has some lessons for the U.S. In 1996, the U.S. cut capital gains tax rates; lowered taxes on inheritances; expanded individual retirement accounts and increased the child tax credit. Domestic non-defense spending was curtailed. Nevertheless, defense spending grew from $265 billion in 1996 to $300 billion in 2000, a 13% increase, equivalent to a $76 billion annual increase today. And the plan to balance the budget reached its goal in 1997.

Why can America not do that again? Reform tax policy. Take people from welfare to work. Restore a sound defense budget plan. And balance the budget.

As said by U.S. presidential candidate Senator Ted Cruz, "You think defending this nation is expensive; try not defending it." How radical is that?


[1] Lt Gen David Deptula, remarks at the AFA November 10, 2015 "What's Next for the Long-Range Strike Bomber?"
[2] The budget, tax and GDP numbers are from Christopher Chantrill's website. This site provides current and historical budget, tax and GDP data far superior in format and detail than any other source, government or private. You can also find the revenue numbers from the Treasury tables posted on the White House website.
[3] These revenue figures are for taxes collected from all tax rate levels. The top tax rates are for reference purposes and illustrate the key to greater revenue is greater economic growth.



Peter Huessy

Source: http://www.gatestoneinstitute.org/6895/defense-cuts-security-threats

Copyright - Original materials copyright (c) by the authors.

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