Republicans Must Give On Defense, To Get the Budget In Order

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Congress and President Obama have bought a little time to reach a deal on the budget for the fiscal year that started on October 1, passing a continuing resolution that lasts until January 15, 2014, and on the debt ceiling, which has been waived until February 7, 2014. Over the next two months, the Senate and the House are supposed to reach a budget agreement with the details and level of spending much in dispute. If Republicans try to undo the Affordable Care Act again, the negotiations will be difficult.

Is there a way to find a compromise in this disagreement? Who should stand firm and who should give ground? The data is on the Republicans' side on spending cuts, and public opinion seems to be with them on delaying or defunding ObamaCare, as well. However, Democrats control the Senate and President Obama can veto anything he doesn't like. So, is there a path to a solution?

President Obama and the Democrats in Congress want to protect ObamaCare more than anything, including government spending on other programs. While I agree with the Republicans that we would be better off if it was repealed, the Senate is not going to pass any such bill and President Obama is not going to sign it. The Affordable Care Act is the only thing President Obama can point to as a legacy; he is not about to let it be repealed. Republicans would be wiser at the moment to leave that subject alone and let the media continue to discover how poorly the program rollout is going.

Perhaps, if the Republicans agree to let President Obama blame President Bush for the spending problem, he and the Democrats will agree to more spending cuts to start the government on a path back toward a balanced budget. Even better, the Republicans should suggest spending cuts that Democrats are likely to agree with: defense spending cuts.

Why defense spending cuts? Reviewing the data on spending shows defense is a fair target for budget cuts.

To begin, let's trace the historical changes in the budget over the past twelve years. The vast majority of the blame for the enormous federal deficit is spending, but it is not all President Obama's fault. In fact, most of the spending increase occurred under President Bush.

The budget was balanced under President Clinton. During President Bush's eight years federal spending increased by 34 percent above inflation. That is an average of 3.7 percent per year, a rate of spending growth that was consistent across President Bush's two terms. In dollar terms, this spending increase amounts to $887 billion in extra spending in today's dollars. This is not more spending due to inflation, because I corrected for that; we are talking about almost $900 billion more per year in spending above increases for inflation.

Federal government spending under President Obama increased 10 percent above inflation in his first term, an average of 2.4 percent per year. These spending increases mean that we are now spending $344 billion per year more than at the end of Bush's second term after correcting for inflation.

Clearly, these data imply spending grew faster under President Bush than under President Obama. This is not, however, due to any desire to restrain spending on President Obama's part. In this first two years, when Democrats controlled Congress, spending grew at 7 percent per year above inflation. That is nearly twice the rate it grew at under President Bush.

President Obama and his defenders will point out that the spending increase in his first two years is mostly due to the stimulus package. That is true, but the stimulus package was not needed, nor was it successful at stimulating the economy. Plus, it was passed at President Obama's specific request, so pretending it was not his fault makes no sense.

The stimulus was just more spending because Democrats wanted more government spending. The stimulus package focused spending on Democrats' favored groups and priorities, not on items that might have most benefited the economy.

Once the Republicans gained control of the House in 2010, the rapid spending increases stopped. In fact, spending has increased by less than inflation since the Republicans became the House majority. After adjusting for inflation, spending under the Republican House actually has dropped by about 4 percent. While Republicans don't deserve credit for much in recent history, they do deserve credit for forcing spending restraint on the federal government over the past three years, much against the wishes of the Democrats.

Thus, overall spending increased under both Presidents Bush and Obama at well above the rate of inflation. Spending grew the fastest when Democrats controlled both the presidency and Congress, and the slowest when the Republican House was blocking President Obama. Looking at the data, both parties deserve blame for spending getting out of control.

While a good bit of the blame belongs to President Bush and the Congress at that time, President Obama is the president now so it falls to him to participate in fixing the problem.

If we hope to address this spending problem, we need to delve into the details a little more and see where the spending increases came from.

Some of the spending increase is due to safety net spending that rose due to the recession. This accounts for $207 billion. Social security spending growth accounts for $247 billion of the increase, due to the aging of the population and Baby Boomers retiring. Increases in health spending (Medicare and Medicaid mostly) have added $367 billion to annual spending. Together, these three hard-to-control items account for $821 billion of the $1,231 billion in inflation-adjusted spending increases, leaving $410 billion of spending growth that came in other categories.

Of that remaining $410 billion, $258 billion is the increase in defense spending. In other words, about 63 percent of the discretionary spending increase has gone to the defense budget. Increased spending on veterans benefits accounts for another $80 billion of the spending increase. That leaves only $72 billion of spending increases, which is spread across a variety of budget categories.

Thus, while I am sure that most people could find things to cut within that $72 billion, and spending cuts are probably also possible within the entitlement programs listed first, defense spending looks like a simple and obvious place to start cutting.

The U.S. defense budget amounts to 39 percent of total worldwide military spending. Over these twelve years, U.S. defense spending has grown by 63 percent above inflation. I certainly agree that the world is a dangerous place, but surely there are cuts to be found in the defense budget. For example, we could stop maintaining bases around the world that mostly serve to subsidize the defense of other countries.

Beyond that, Congress should put the defense budget under serious scrutiny and make the Pentagon justify why what they do costs so much. A single soldier in Afghanistan or Iraq for a year has been reported to cost $1 million. Exactly how does it cost that much? Where is that money going?

If politicians do not want to continually argue over the debt ceiling and if people do not want to be responsible for an ever increasing national debt than we need to move toward a balanced budget. Given the enormous increase in spending since the end of President Clinton's second term, cutting spending is the best first step toward a balanced budget. If Republicans can be convinced, defense spending cuts could start the country back toward fiscal responsibility.


Jeffrey Dorfman is a professor of economics at the University of Georgia, and the author of the e-book, Ending the Era of the Free Lunch

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