Civilian Personnel: The Missing Piece in the Pentagon’s Budget Puzzle
While most news stories have accurately characterized the Obama administration’s proposed military spending cuts as “modest,” the Pentagon is planning significant reductions in the number of active-duty troops in the Army and Marine Corps. Both forces will be larger than they were in 2001, but the active-duty Army will fall from a post-9/11 high of 570,000 in 2010 to 490,000. The Marine Corps will go from 202,000 to 182,000.
The DoD should likewise reduce civilian personnel.
The reason the Pentagon’s plan places so much emphasis on personnel is stated clearly in the document (pdf):
Military personnel costs have doubled since 2001, or about 40% above inflation, while the number of full-time military personnel, including activated reserves, increased by only 8% during the same time period.
Ben Friedman and I have argued for an even smaller Army and Marine Corps, on the understanding that we should not permanently station U.S. troops in Europe and Asia. Such forward deployments are not essential to U.S. security and might ultimately undermine global security by encouraging other countries to defer spending for their own defense.
But the current proposal is clearly a step in the right direction, and it reflects the fact that Washington—and the American people—are not anxious to repeat the bitter experiences of the past decade. The costs of regime change followed by aggressive counterinsurgency are almost never outweighed by the benefits. We don’t have to build nations in order to destroy terrorists. The Army and Marine Corps grew to fight these types of wars, and they will now shrink back to nearly pre-war levels.
Other savings are possible, but not likely to be achieved in the near future. The president will ask Congress to authorize use of the Base Realignment and Closure (BRAC) process for changes in physical infrastructure. However, some members of Congress are already linking arms to prevent another round of base closings. Still, another BRAC (if it is ever convened) won’t generate significant savings in the next five years, and perhaps not in the next 10. Additionally, the proposal calls for Congress to empower “a commission with BRAC-like authority” to review the full range of costs associated with the military retirement system, with the added stipulation that any “reforms should only affect future recruits.” Thus, any potential savings will not materialize in the near term.
A Do-It-Yourself Guide to Cutting the Military Budget
The New York Times has posted a handy tool for calculating savings from the Pentagon’s budget over the next ten years. I went through the exercise, and my plan resulted in cuts of $1.144 trillion over ten years. Had I checked all of the boxes in the Times’s calculator, it would have generated savings of up to $1.4 trillion.
Though I support reform of the the military retirement system, I think some of these proposals go too far (they would have saved up to $86.5 billion). We should continue to spend money recruiting the very best force, comprised of the most-qualified men and women ($5 billion), and we might find it hard to do that if/when the economy improves. Tuition assistance is a key factor driving recruitment, and I wouldn’t scale that back ($5 billion). (Full disclosure: I attended college on an NROTC scholarship.) We need the best possible services for families, and I could foresee problems with closing elementary and secondary schools on bases ($10 billion). And I have no particular quarrel with military bands ($0.2 billion). My ideal military will be smaller and more elite, but likely better compensated than today’s force. And retirees would continue to receive many benefits not enjoyed by their fellows who never served, but we should experiment with ways to control costs. The key take-away, and the one stressed in the accompanying story by Elisabeth Bumiller and Thom Shanker, is that it is possible to reduce military spending, and the resulting force will still be larger and more capable than any conceivable combination of rivals.
A few additional observations:
1) The Times’s calculator cites my and Ben Friedman’s contribution to the Sustainable Defense Task Force report, “Debts, Deficits, and Defense,” but the main part of the report was the work of the entire task force, and they deserve proper credit. I am particularly grateful to Carl Conetta and Charles Knight of the Project for Defense Alternatives.
2) Ben and I published a stand-alone report a few months later with some numbers drawn from the SDTF report, and with some additional detail surrounding our proposals that were not endorsed by all SDTF members. Our savings were calculated against the baseline from fiscal year 2010, and these numbers are now a bit dated.
3) When I hit the submit button comparing my choices with others who participated in the exercise, I discovered 80 percent of respondents supported the plan to reduce forces in Europe and Asia. That sort of systematic restructuring is necessary to ensure that we don’t impose undue burdens on what will necessarily be a smaller force. As I have said repeatedly, if we are going to spend less, we must expect our troops to do less, and expect other countries to do more.
Truth in Budget Reporting
Newspaper articles on government budgets virtually never tell the reader the two most important facts: What was the budget last year, and what is it this year? Instead, the typical budget article trumpets “cuts” and “austerity,” and never actually mentions that the budget is going up by four percent, or six percent, or nine percent in the coming year. So two cheers to the Washington Post for its article on Virginia governor Robert McDonnell’s proposed budget, which does—eventually—give you most of that information. Still, the second paragraph (and second sentence) of the article says that McDonnell “proposed saving nearly $1 billion in a variety of ways.”
You have to wait for the seventh paragraph, on the jump page, before you find out that the proposed budget amounts to $85 billion over two years. And only in the 20th of 25 paragraphs do you find out that
The two-year budget, which begins July 2012, will be the largest spending plan in Virginia history, growing by about $7 billion.
So two cheers for giving the facts, even if the lead of the story might have led some readers to think that McDonnell was cutting $1 billion from the state’s budget. And three cheers for Steve Contorno of the Washington Examiner, who put the basic facts clearly in the third paragraph (and third sentence) of his article:
In an hour-long address to the General Assembly’s budget committees, McDonnell laid out an $85 billion spending plan through June 30, 2014, up from $79 billion in 2010-2012.
Please, reporters: when you write about a city, state, or federal budget, please tell us readers and taxpayers how much the budget actually is, and how much it will be next year. With that information, we can figure out for ourselves whether it involves cuts or not.
Thursday Links
- Few GOP presidential candidates have proposed specific budget cuts.
- “Peace is in the interest of Taiwan, China, and the U.S. … But the U.S. should view continuing arms sales to Taipei as perhaps the best means to maintain stability and peace across the Taiwan Strait.”
- Market liberalization has transformed newly independent states that formerly comprised Yugoslavia.
- President Obama is simply the new standard-bearer for the bipartisan contempt for constitutional limits on power.
- Cato chairman Robert A. Levy makes the libertarian case for marriage equality:
Tina Brown and the Economics of Recession
Talking about royal weddings on NPR, Tina Brown says that there’s high unemployment in Britain, as there was in 1981, because of Conservative governments’ budget cuts (transcript edited to match broadcast):
Of course, the wedding of Prince Charles and Diana occurred three decades ago, but Brown points out that there are plenty of similarities between the two eras. “2.5 million are out of work right now with the budget slashes and all the economic austerity that’s happening in England,” Brown says. “There were actually the same amount of people exactly out of work at the time of Charles and Diana, when Mrs. Thatcher came in and began her draconian moves.”
I know that Tina Brown is a journalist, not an economist, but surely she’s heard of the recessions of 1979 and 2009, both of which may have helped to usher in a new government pledged to economic reform. It isn’t budget cuts that have increased British unemployment, it’s the recession. The unemployment rate started rising in early 2008 and kept right on rising during the world financial crisis, which featured not budget cuts but massive spending by governments around the world.
$61 Billion in Cuts vs. Prior Spending Increases
Republicans and Democrats are currently battling over $61 billion, or less, in federal spending cuts for the remainder of the current fiscal year. The chart below puts that figure in perspective. It shows the annual increases in total federal outlays each year over the last decade.
The average annual increase in federal spending over the last decade was a huge $170 billion, which is almost three times larger than the proposed $61 billion cut. In 2009, federal spending leaped $384 billion in a single year, or six times more than this year’s relatively tiny cut.
(The data are from the CBO. I’ve taken TARP spending per CBO out of the figures for 2009-2011 because it distorts the actual spending path. In particular, 2009 outlays included $151 billion in TARP, but outlays in 2010 and 2011 reversed out $135 billion of that, because the program ended up costing much less than originally expected.)
Largest Spending Cut Ever?
The Washington Post said today that a plan to “cut $33 billion from the federal budget” would be “the largest one-time reduction in U.S. history.”
Really?
The $33 billion in Democratic-proposed cuts are less than 1 percent of this year’s total spending, so we are considering very small cuts here. However, it is also true that Congress has been far more interested in growing spending than in cutting in recent decades. Still, the Washington Post said “in U.S. history,” which is a long time.
This federal budget table shows total federal spending since 1901. Total spending fell in 22 years out of the last 110 years. In 19 of those 22 years, spending was cut by more than 1 percent, or more than this year’s proposed Democratic cuts of $33 billion.
Indeed, even with $33 billion in cuts, total federal spending will still rise by more than $200 billion this year due to rising “entitlement” costs. And even in raw nominal dollars, the Washington Post isn’t correct because total federal spending fell $37 billion in 1946 and $61 billion in 2010.
We can also consider the $33 billion in proposed cuts within the applicable budget category–nondefense discretionary (NDD) spending. And we can adjust for inflation in order to fairly compare cuts in different time periods.
A $33 billion cut would reduce NDD this year by about 7 percent in constant dollars. This budget table shows that President Reagan and Congress cut NDD by 13 percent in 1982 in constant dollars.
So here is what we have discovered: Congress has reduced overall spending numerous times in the past; total spending will rise substantially this year even with proposed cuts; and Reagan cut nondefense discretionary spending more than the current $33 billion proposal would.
One year of small budget cuts won’t solve our fiscal problems. The budget-cutting drives of the early 1980s and mid-1990s made a bit of progress because they were sustained over a number of years while the economy boomed. Thus, the real challenge for Republicans will be whether they can follow up this year’s small cuts with much bigger cuts next year and beyond.
A Dishonest Budget, as Told in One Graph
Yesterday, President Barack Obama released his proposed budget for fiscal year 2012. Many of my Cato colleagues have already discussed why the president should be embarrassed of this document. Chris Preble writes that the president offers “faux cuts” to military spending. Dan Mitchell says the president is “missing in action” on entitlement reform. Chris Edwards writes that “the Obama administration has completely chickened out on spending reforms in its new budget.”
They were too kind. This budget is thoroughly dishonest, too.
Back in 1997, Congress enacted automatic reductions in the price controls that Medicare uses to pay for physician services. Congress has delayed those cuts year after year, and everyone now agrees they are politically infeasible. We’re not talking about your the usual, Washington-DC definition of spending cuts here, which is just a reduction in spending growth. If the accumulated cuts were to take effect in 2012, as provided by current law, Medicare payments to physicians would fall by some 25 percent, and lots of seniors would find their doctor no longer accepts their Medicare coverage. The problem is, these cuts are still on the books and they grow larger every time Congress delays them. But no one wants to come up with the money needed to pay for a permanent “doc fix.”
Enter President Obama’s FY2012 budget submission. Rather than propose a permanent “doc fix,” the Obama administration proposes a temporary and dishonest one. As shown by the blue bars in the below graph, the administration proposes to delay these cuts until 2014 at a cost of $54 billion. As shown by the black line, the administration proposes to pay for this additional spending by reducing the rate of spending growth in other areas of Medicare by $62 billion over the next 10 years. Note that only 6 percent of these Medicare “cuts” will occur in 2012 and 2013. The other 94 percent of the “cuts” will come after the administration has spent the $54 billion it wants to spend. Note also that the vast majority of the “cuts” would take effect after Barack Obama is no longer president. Finally, the president offers no proposals to deal with the cuts in physician payments during the last eight years of the 10-year budget window (as shown by the purple bars). But he’s more than happy to use those implausibly low current-law spending levels to make his proposed budget appear more responsible than it is.
It’s the same old story: dessert today, spinach tomorrow. (Or, never.)
Both parties engage in such dishonesty all the time. Those cuts in physician payments were scheduled to take effect in 2011. To pay for delaying them until 2012, Congress and the president agreed on the ridiculous and dishonest strategy of trying to track down and recover excessive subsidies that the federal government will pay to people in ObamaCare‘s health insurance “exchanges,” beginning in 2014. (Call it the new “pay and chase.”)
A Budget Plan: Don’t Buy Stuff You Cannot Afford
Some 75 new Republican members of Congress got there by promising to stop the federal government’s massive overspending. And as Chris Edwards noted, there have been a number of lists of budget cuts proposed recently.
Saturday Night Live did a sketch back in 2007 that might be useful to Tea Partiers and new members of Congress. It’s about a self-help plan called “Don’t Buy Stuff You Cannot Afford.” Since the federal government is running deficits well over a trillion dollars a year, I’d say this plan would be good advice:
Hat tip to Jonathan Witt at the Acton Institute’s PowerBlog, who points out that if this were a perfect analogy, the book author would be more agitated because “the couple has been spending the author’s money using a credit card he had idiotically loaned them a few years before.”
British Military Cuts, Conservatives, and Neocons
Yesterday, Prime Minister David Cameron announced Britain’s biggest defense cuts since World War II. The cuts affect the British military across the board.
The Army will shed 7,000 troops; the Royal Navy and Royal Air Force will each lose 5,000 personnel; the total workforce in the Ministry of Defence, including civilians, will contract by 42,000. The Navy’s destroyer fleet will shrink from 23 to 19. Two aircraft carriers — already under construction — will be completed, but one of the two will be either mothballed or sold within a few years. Whether the one remaining flattop in the British fleet will actually deploy with an operational fixed-wing aircraft is an open question. They’ve decided to jettison their Harriers; a technological marvel when it was first introduced, it has a limited range and a poor safety record. In its place, the Brits still intend to purchase Joint Strike Fighters, but not the short take-off and vertical landing (STOVL) version.
And right on cue, Max Boot argues in today’s Wall Street Journal, following the Heritage Foundation’s James Carafano’s example, that fiscal conservatives should not use these cuts as an example of how to reign in deficits. According to Boot and Carafano, military spending is off-limits. Period.
But as I note at The Skeptics, most Americans do not buy into this argument:
In Boot’s telling, Cameron’s decision inevitably places a heavier burden on the shoulders of American taxpayers and American troops.
But why should Americans perform a function for other governments that they are obligated by tradition, law and reason to perform for themselves? Defense is, as Boot notes, “one of the core responsibilities of government.” I would go one better: defense is one of the only legitimate responsibilities for government. So why does Max Boot think that Americans should simply resign themselves to take on this burden, doing for others what they should do for themselves?
I suspect that he fears that most Americans are not comfortable with the role that he and his neoconservative allies have preached for nearly two decades, hence his preemptive shot across the bow of the incoming congressional class that will have been elected on a platform of reducing the burden of government. True, the public is easily swayed, and not inclined to vote on foreign policy matters, in general, but as I noted here on Monday, it seems unlikely that the same Tea Partiers who want the U.S. government to do less in the United States are anxious to do more everywhere else. And, indeed, such sentiments are not confined to conservatives and constitutionalists who are keenly aware of government’s inherent limitations. Recent surveys by the Chicago Council of on Global Affairs (.pdf) and the Pew Research Center (here) definitively demonstrate that the public writ large is anxious to shed the role of global policeman.
Click here to read the entire post.
Striking Findings from the New Chicago Council Public Opinion Survey
I was privileged last night to get an advance look at the Chicago Council on Global Affairs’ new study on public opinion. I was struck by several things.
First, the report reflects a strong desire to get our own house in order. Asked the question whether it “is more important at this time for the United States to fix problems at home or address challenges to the United States from abroad,” a stunning 91 percent selected the former, with only 9 percent pointing to the latter. (In 2008 the numbers were 82-17.)
That said, there is not as much appetite for cutting the defense budget as I would like to see:
When asked whether defense spending should be expanded, kept about the same, or cut back, 43 percent of Americans prefer to keep spending about the same as it is now, a steady position since 2004, with 30 percent saying expand and 27 percent saying cut back. At the same time, Americans do recognize the need for moderation if federal budget cuts are necessary to reduce the deficit. When asked whether the defense budget should be cut along with other programs in an effort to address the federal budget deficit, a majority (58%) favors at least some cuts—less than other programs (29%), about the same as other programs (20%), and greater than other programs (9%). A substantial number (41%), however, say defense should not be cut at all. Along with the 29% who say it should be cut less than other programs, there is a considerable majority that clearly sees defense spending as a high priority.
Second, the report does a good job of highlighting the fact that although a historically high number of Americans (49%) agree with the idea that America should “mind its own business internationally and let other countries get along the best they can on their own,” this is not, as it is frequently advertised, “isolationism.” One needs to define what “our own business” is before one can characterize such a belief.
But perhaps the most striking findings, to my mind, pertained to the U.S.-Israel relationship. On a general question regarding whether various other countries are “very important” to the United States, Israel fell 7 points from the 2008 figure (from 40 percent to 33 percent), but every country except China suffered a decline, except Iraq, South Korea, and Turkey, which stayed the same. But the report asked a number of specific questions pertaining to Israel–and U.S. policy toward Iran–that produced answers that were surprising to me:
Dishonest British Budgeting…Just Like We Do It in America
According to news coverage, United Kingdom Prime Minister Cameron is imposing deep and savage budget cuts. I was interviewed by the BBC recently, for instance, and asked whether 25 percent spending reductions were too harsh. And here’s an excerpt from a New York Times story that is very representative of the news coverage.
Like a shipwrecked sailor on a starvation diet, the new British coalition government is preparing to shrink down to its bare bones as it cuts expenditures by $130 billion over the next five years and drastically scales back its responsibilities. The result, said the Institute for Fiscal Studies, a research group, will be “the longest, deepest sustained period of cuts to public services spending” since World War II. …Public-sector unions are planning a series of strikes. Charities — which Mr. Cameron has said should take over some of the responsibilities now held by the state — say that they are at risk of collapse because they are so dependent on government money. And the chief executive of the Supreme Court, the country’s highest, said she did not know whether the court would be able to function at all if its budget were cut by 40 percent.
To be blunt, this type of analysis is completely false. There are no budget cuts in the United Kingdom, at least in terms of total government spending. Instead, the politicians are measuring cuts against some imaginary baseline, which is the same scam that happens in Washington. So if spending increases by 4 percent instead of 7 percent, that is characterized as a 3 percent budget reduction. The chart shows what is happening with overall government spending in the United Kingdom. Notwithstanding phony stories about budget cuts, spending in Prime Minister Cameron’s first year is climbing by more than 4 percent — twice as fast as needed to keep pace with inflation.
This doesn’t mean that Cameron isn’t doing anything right. There is a two-year pay freeze for bureaucrats, for instance, which is at least a small step in the right direction. But the Tory-Liberal Democrat coalition is not a good role model for those who want limited government and fiscal responsibility. There are promises of spending restraint in future years, but those belong in the I’ll-believe-it-when-I-see-it category. Spending is supposed to increase by less than 1 percent in next year’s budget, for instance, but politicians are very good with tough talk of fiscal discipline in future years. But if we judge them by what they’re doing today rather than what they’re claiming will happen in the future, Cameron’s policies leave much to be desired.
The tax side of the fiscal equation is even more depressing. There is small reduction in the corporate tax rate, but otherwise there is considerable bad news. The new government is leaving in place the new 50 percent top tax rate imposed by Gordon Brown as an election-year class-warfare gimmick. It is boosting the capital gains tax rate from 18 percent to 28 percent. And it increased the VAT rate from 17.5 percent to 20 percent.
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