We just spent an agonizing few months in which the prospect of a government shut down was averted for five more months by a “deal” to cut roughly $38 Billion Dollars from Discretionary Spending. As you well know (those of you that have been paying attention) last December, when Democrats still controlled the Congress, the Bush Tax Cuts (and more besides!) were extended. The cost this year of maintaining those tax subsidies? Roughly $85.8 BILLION per year.
Well, we know the vast majority deficit hawks vultures are hypocrites.
What many keep forgetting however is the true third rail of American politics, the one item that remains now that Social Security, Medicaid and Medicare are back on the menu for for the Deficit vultures. And what might that be? US Defense Spending.
The Problem of Expanding Defense Budgets:
Let’s begin shall we with the overall costs of the US military budget, shall we?
Since 1998, the military spending by the Federal Government has increased from a little over $350 Billion to present non-war related defense expenditures for 2011 of $698 Billion. Here’s a little chart that shows non-war Defense Spending from 1998 through 2008:
Since 2001, of course war operations in Afghanistan/Pakistan and Iraq make up a significant component of that amount. Indeed, as of 2010, those costs represented 1.15 Trillion Dollars. Yet the base budget for the Defense department is still significantly high than the war related expenses. In 2011, President Obama proposed a military base budget (i.e., not including Iraq, Afghanistan or other war related supplemental spending) of $533 Billion and for 2011 a base budget of $549 Billion.
So even without war spending, the Defense Department has increased its operational costs from $350 Billion (which included enforcing the No Fly Zone over much of Iraq) to half a Trillion Dollars this year. Here’s another little chart that compares our current levels of defense spending (adjusted for inflation) to those since 1945, the last year of WWII:
As you can see from the chart, our core, non-war defense spending these last few years is the equivalent of total defense spending for 1953, the last year of the Korean War, 1968, at the height of the Vietnam War, and 1989, in the midst of the Reagan/Bush 1 military buildup. When you add in the cost of the war expenditures, only total defense costs 1945 exceed our current outlays for military spending.
Of course, in the 1950’s Eisenhower raised the tax rate on the wealthiest American to 91%, in large part to pay for the cost of those wars. Those tax rates remained as high as 70% under Nixon and even 50% under Ronald Reagan. In the past decade, however, taxes on the wealthiest Americans were reduced to below the 39.6% rate under Bill Clinton’s years in office even as Defense spending increased dramatically. Another little chart demonstrates these facts:
So what caused the rise in the federal deficit on which the Deficit Vultures so love to harp, and blame the costs of our social safety net, essential government agencies 9IRS, SEC, FTC, EPA, FDA, etc.) and modest funding for groups such as Planned Parenthood and PBS? Two things in my view:
- Tax subsidies that overwhelmingly favored the wealthiest Americans and Corporations
- Increased Defense Spending (including the utterly unnecessary War in Iraq)
Well, we know that the Deficit Vultures, especially those in the Cracked Teapot wing of the Republican Party will never agree to raise taxes to pay for all this increased military spending. Indeed, their leading Deficit Vulture, Paul Ryan, has proposed a plan that eliminates Medicare, slashes Social Security, etc., all while lowering the tax rate on the upper 1% of Americans to 25%. Ryan would also eliminate the estate tax and the corporate income tax. In their place he would impose a federal value added tax or VAT (he calls it a business consumption tax but it’s really just a VAT) of 8.5%. This tax would disproportionately effect people in the middle and lower classes according to an analysis of Ryan’s proposals by Citizens for Tax justice:
Congressman Ryan would repeal the federal estate tax, which affects only the very largest estates (less than one percent of estates, in recent years). He would also repeal the corporate income tax and replace it with an 8.5 percent “business consumption tax,” the same thing as a value-added tax (VAT).
Retail businesses would collect the full VAT from consumers, so it would have the same regressive effects as a sales tax. Low- and middle-income families spend most or all of their income on consumption, since they have little or no money left to save after paying for basic necessities. High-income families are able to save much more of their income. This means that if Congress enacts a tax that applies only to consumption (like a VAT or national sales tax), it would eat up a much larger percentage of total income for poor and middle-class families than for wealthy families.
… [T]he 8.5 percent VAT is (almost) the entire reason why the bottom 90 percent of taxpayers would pay more under Congressman Ryan’s plan than under President Obama’s plan.
Oh and Ryan also plans to eliminate popular tax deductions for the middle class such as the mortgage tax deduction, the charitable deduction and the home residence property tax deduction.
My Plan, or how to solve the so-called “deficit problem.”
If the Deficit Vultures really want to get serious about reducing the Federal deficit they can either raise taxes, or find ways to cut a bloated US military that is fraught with fraud and waste, and the expense of fighting three (and counting) wars in the Middle East.
First, begin with government fraud and waste in defense contracting.
The GAO filed a report in 2009 that listed the reasons why the current system of procurement is designed to increase the costs of our military spending without actually getting much value for that upon which we spend our precious tax dollars:
The GAO study of defense weapons acquisitions finds that the Department of Defense “commits to more programs than resources can support.”
Translation: It doesn’t say “no” often enough.
What’s more, the report notes that the DOD “fails to balance the competing needs of the services with those of the joint warfighter.”
Translation: The services do not coordinate their needs, so they often duplicate systems and run up costs.
There is a body—with the fantastically bureaucratic name of Joint Capabilities and Integration Development System—that is supposed to prevent such duplication, but it reportedly approves nearly all of the proposals it receives from the services rather than prioritizing them. The services are supposed to coordinate with each other, but, according to the GAO, nearly 70 percent of the time they don’t.
The study, released today, points to the Pentagon’s “acceptance of unreliable cost estimates based on overly optimistic assumptions.”
Translation: Defense officials wink at unrealistic price tags for complex weapons systems, leaving their successors—and taxpayers—to pay the full costs sometime in the future.
Moreover, the study adds, “DOD officials are rarely held accountable for poor decisions or poor program outcomes.” […]
The GAO report raised a case in point: Last year alone, the DOD’s portfolio of weapons programs went $295 billion over original cost estimates. What’s more, the programs were running, on average, 21 months behind schedule. And when they were completed, they provided less than they promised.
In GAO parlance, the final products “delivered fewer quantities and capabilities to the warfighter than originally planned.”
Jacques Gansler, the chairman of the Defense Science Board’s Task Force on Industrial Structure for Transformation, testified that the Defense Department needs more acquisition officials who are qualified to review defense contracts. Currently, he said, they are short-staffed and their importance to the Pentagon’s workforce is undervalued.
This, Gansler added, introduces opportunities for fraud, waste, and abuse. He testified that there are currently 90 acquisition fraud cases under review from the war zones.
In fact, a panel of respected civilian and military experts, the Department of Defense Panel on Contracting Integrity, has already issued a report on how to cut waste and fraud in our military budget. You can find a copy of their 171 page report, including their recommendations and conclusions at to eliminate Defense contracting waste and fraud, this link. The report is entitled the “Panel on Contracting Integrity’s 2009 Report to Congress.”
I’m not going to list all their recommendations and conclusions here. That would make this diary far too lengthy. However if you are interested I suggest you peruse the report. Most of what they recommend is simple common sense, the same sorts of procedures and policies that any major business would employ to eliminate waste and prevent fraud and abuse in their procurement processes. Recommendations such as these:
- Hire more procurement officials nad train them better to recognize signs of fraud, waste and abuse.
- Reduce Conflicts of Interest by requiring more disclosure of contacts and prior relationships between the defense contractors and the officials in charge of the contracting process
- Increase Penalties and Fines for fraud and streamline the process of enforcement of existing laws.
- Allow DOD to retain funds recovered from fraud actions rather than permitting the Treasury to receive and retain such monies. As the panel stated:
Currently, DoD must “pay” twice for the value of goods or services lost through fraud. Though it has no appropriated funds for paying liabilities properly chargeable to cancelled accounts, DoD is required to pay such liabilities from current appropriations. Accounts for lost funds recovered by the government under the False Claims Act have usually expired, thus the funds generally go to the Treasury Department rather than the defrauded agency.
The law currently requires funds for expired accounts to be deposited as miscellaneous receipts under the control of the Treasury Department. This opportunity cost is a considerable disincentive for agency personnel to expend time and effort assisting with fraud investigations. The subcommittee believes individuals would be more willing to participate in fraud investigations if their organizations retained some of the recovered funds.
- Create a DOD Ethics Program for all procurement employees
- Better documentation of contracts regarding potential conflicts of interest, reasonableness of prices, better assessment of contractors’ ability to satisfy production requirements in a timely manner, and more market research by reliable to inform decisions on the need for the item in question and which companies have a better track record and should be awarded contracts.
- Fewer No-Bid Contracts.
Second, end the wars in Iraq and Afghanistan which are costing us $171 Billion this year alone. Even reducing our war efforts in th e Middle East by one half would reduce the deficit by $85 Billion. Add that number to reduced waste, fraud and abuse in defense contracting and pretty soon we are talking about real savings, not just superficial yet painful cuts that harm many many Americans for the sole benefit of politicians who can perform their Kabuki dance to proclaim how “serious” they all are on cutting the deficit.
Yes, I know the Deficit Vultures won’t do anything to reduce Defense Spending.
The Deficit Vultures aren’t going to discuss eliminating tax subsidies for the richest Americans either, but that does not mean we, liberals, progressives and especially Democrats should not be advocating in every public forum we can that if people want serious deficit reduction through spending cuts the place to find it is where the most waste and unnecessary spending is occurring: The US Military and our endless wars that do little to reduce the risk of terrorism but do much to promote the interests of Big Oil and defense contractors (i.e,., war profiteers).
If the Cracked Teapot Republicans want to put the programs that have best served ordinary Americans on the Chopping Block (unemployment insurance, disability benefits, Medicare,Social Security and agencies that insure are food, drugs, water and air are safe and that our financial markets are not merely casinos where Massive Financial Institutions rake in all the profits while forcing the rest of us to bear all the risks they take), than we need to put their sacred Cows up on that same block.
And the way to begin is to do what The Cracked Teapot Republicans like Paul Ryan have done. In other words we need someone in the Democratic Party to boldly assert a plan that proposes major Defense cuts and the elimination of tax subsidies for the rich.
Ryan has shown us the way. He wants to cut programs that most Americans depend upon and support. We should be willing to advocate for the elimination of War Spending (already very unpopular among most Americans) and wasteful and fraudulent Military Spending (an easy sell to make in my mind). After all, who supports fraud, abuse and wasteful military spending that delivers inferior weapons and services and does little to help our troops do their job when it is necessary for them to do so.
We should also be talking up a plan to eliminate special tax favors for corporations and the “one percenters,” as well, but that’s the subject for another day and another diary.
