As we have discussed in earlier papers, Congressman Paul Ryan exercised significant courage in proposing a Budget dramatic in its contrast to the Budget proposed by the Obama Administration. The Proposal is the first real attempt to deal with our massive $14.3 debt level and our $1.4 Billion budget deficit. No attempts at dealing realistically with our debt and budget deficit will come without controversy and significant pain. The Ryan proposal deals with a number of budget items. Nonetheless, there are many areas which could be addressed in the Budget which have been left out. First, nothing should be exempt from potential cuts, including defense. The Ryan Proposal is very similar to the Obama Proposal in avoiding cuts in defense spending. This a mistake. Second, we must put emphasis on the efforts of the House Ways and Means Committee to undertake serious reform of the tax code. Third, we need to look at alternative ways of reforming Medicare, reforms that are intended to accomplish the same goals but in a less controversial fashion.
Let’s look at Defense. While there are massive amount of defense funding that can be saved. This will not be easy. Often the programs that are pursued as Defense programs, did not begin at Defense. Former Secretary Donald Rumsfeld has pointed out that “$18 Billion in earmarks are shoved down the Pentagon’s throat every year. Congress wanted it, we didn’t want it. It didn’t have anything to do with defense capabilities.” How does this happen? Defense contractor gave $26 Million to congressional candidates in the last election and spend $150 Million annually on lobbying. They are already complaining about the potential of thousand of layoffs as well as other catastrophes that will befall the nation in the event of Defense cuts. They are not going to roll over and play dead.
What are some of the examples of serious cuts in funding? For a number of years, Members of Congress and defense contractors sought to sell the F-35 to each of the Services as a multi-purpose fighter. The Services did not want the plane but it proceeded anyway. Finally, the House, but not the Senate, responded to the claims of waste and voted to kill the alternative engine that was to be built in Speaker Boehner’s District. The Department of Defense has stopped the funding for the engine. They should go further. They should kill the F-35. Instead, they have cut the orders for the F-22, currently in operation and the most capable fighter in the world. Clearly, the F-35 is not designed as a replacement for the F-22 and, with only one engine, is not really a replacement for anything. Interestingly, General Electric seems to feel that even this de-funding decision will ultimately be reversed and, as a consequence, they are continuing to “self-fund the project through this crisis”. GE has been here before. Perhaps, they know something we do not.
How about the C-17 cargo plane which costs $300 Million for each plane and is not even wanted by the Air Force? This does not make sense. It would appear that there is no reason for keeping 80,000 military personnel in Europe. Clearly, there is no threat from Russia in terms of an invasion of Europe. Some 60 years after World War II, our presence in Europe is completely obsolete. Even our allies in Europe are cutting or considering cutting their defense budgets in recognition of the fiscal issues facing Europe. Our allies will not be pleased by cuts in our presence in Europe. These cuts will place greater pressure on their fiscal positions. In the end, however, we must watch out for ourselves.
The Debt Commission, appointed by President Obama, made a series of proposals for cuts in Defense spending. Congressman Ryan was a prominent member of this Commission. The Commission proposed $100 Billion in costs by 2015. Part of this was reducing our overseas bases by 1/3rd, saving $8.5 Billion. Why not 2/3rd of the bases for a $17 Billion saving in Defense spending?
The total Defense Budget is $700 Billion or 20% of the Federal Budget. Currently, $160 Billion is allocated for the wars in Iraq and Afghanistan. Another $50 Billion pays for the pensions and health care benefits of our military. The rest of the Budget goes for new equipment and foreign military assistance, including $5.4 Billion for foreign military financing. If it can be shown that the financing is for defense purchases from American companies and we ultimately have the financing returned by foreign countries, this could be a reasonable program. Also part of the Budget is the cost of overseas bases and non-core military operations.
These and other potential cuts in Defense spending are in addition to the savings that could be made in reducing fraud and mismanagement. Maybe, at some point, the Defense Department will be able to actually conduct an audit on their programs. In the meantime, we need to find savings wherever they are. Everything should be on the table.
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