Why Fiscal Responsibility at the Federal Level Is So Difficult


The United States faces many challenging problems but the biggest one of all is our national debt, right now 77% of GDP, the largest since right after WWII, and predicted by the Congressional Budget Office to keep getting steadily worse without major changes in current policy.
The only practical way to reduce the debt is to start shrinking our annual deficits, $680 billion for the current 2017, down to a much lower level, ideally close to zero, over a limited time period, perhaps ten years or so. This urgent need will, of course, be very difficult to accomplish.
For example:

  • Military spending. The military analyst, Mark Helprin, makes a cogent argument  that the most effective way to defuse the North Korean nuclear threat is for President Trump to ask Congress “for an emergency increase in funding to correct the longstanding degradation of American military power.” This would, among other things, provide for “a vigorous acceleration of every aspect of ballistic-missile defense.”

  • Omaha Rapid Bus Transit. Omaha NE (where I live) is spending $15 million in local funds for a $30 million bus system upgrade, subsidized by the Federal Transit Authority, which has an annual budget of $8.6 billion. The new ORBT will have sleek 60 foot-long buses as well as 27 individual modern bus stop shelters at a cost of $260,000 each. The system will be operational in 2018 and Mayor Jean Stothert says, “I’m looking forward to being one of the first riders.”

Conclusion. Who can argue with upgrading ballistic-missile defense at a time when we are threatened by a madman in North Korea?  And, it is nice for Omaha to have a sleek modern rapid  transit bus system on Dodge Street but should it be 50% subsidized by the federal government at a time when the U.S. is drowning in debt?  There will always be enormous pressure on Congress to increase funding for popular projects.
Who is going to stand up and say no?

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Is the U.S. Military Big Enough?


An Op Ed in the Wall Street Journal recently by former vice president Dick Cheney and his daughter Liz, “Congress and Obama Depleted the Military,” argues that the Trump budget request of $603 billion for Defense for the 2017 – 2018 FY is not nearly enough to build an adequate U.S. military force.  Furthermore, the Cheneys argue that the Budget Control Act of 2011, which set up the ten year sequestration plan for discretionary budget items, should be repealed.
According to the Cheneys, “Providing for the defense of America is the most sacred constitutional obligation of the U.S. Congress.  If Congress fails in this, no balanced budget, no health-care reform, no tax reform, no entitlement reform will matter.”

The Cheneys are correct that the defense of America is the highest priority of our federal government.  But fiscal responsibility is also a high priority, especially when our public debt (on which we pay interest) now stands at 77% of GDP, the largest it has been since the end of WWII, and rising.
So the real question is: how large should our defense budget be to provide for a secure defense of our national interests?  A recent article in the New York Times  points out that:

  • Our current defense budget of $596 billion is more than the total of the next seven highest defense budgets combined.
  • We have 1.3 million active duty troops with 200,000 deployed in more than 170 countries.
  • The U.S. has 2,200 fighter jets, 193 of which are fifth generation, F-35 Lightening II aircraft.
  • The U.S. Navy has 275 surface ships and submarines, including 11 aircraft carriers, far more than any other single country.

Conclusion. The current U.S. military force is large and diversified. In fact there is strong evidence that it could operate more efficiently.  It is more than adequate to defend our crucial national interests.

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Why the U.S. Strategic Defense Initiative Is So Important


North Korea recently launched another long-range rocket as reported by the New York Times, the Wall Street Journal, and the Washington Post The editorial boards of all three newspapers deplore this development but differ in suggesting how the U.S. should respond.

  • The NYT says that sanctions should be imposed to limit North Korea’s ability to finance warheads and missiles. Such sanctions would most acutely be felt by the Chinese companies doing business with North Korea.
  • The WP supports economic sanctions as well as deploying an advanced missile defense system in South Korea as quickly as possible.
  • The WSJ is concerned about the “rogue state” ICBM threat in general. North Korean missiles can now reach Los Angeles, Denver and Chicago. Iran recently conducted two ballistic missile launches in violation of the recent nuclear deal.

Ronald Reagan’s launch of the SDI in the 1980s helped win the cold war. The Bush Administration is responsible for the missile defenses which exist today, including long-range missile interceptors in Alaska and California and Aegis systems aboard Navy warships.  The Obama Administration has cut its missile defense budget request from $9.8 billion in 2016 to $9.1 billion for 2017.
Capture6Admiral Bill Gortney, Commander of the North American Aerospace Defense Command, says that “We’re ready 24 hours a day if he’s (Kim Jong Un) dumb enough to throw something at us.”  But any miss would be catastrophic and a 100% interception rate won’t happen without engineering advances and presidential leadership.
SDI should be a very high priority within the overall military budget.  Our national security depends on it!

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Needed: A New U.S. Foreign Policy


Wall Street Journal columnist Bret Stephens had a prescient article last November, “Yes, America Should Be the World’s Policeman” in which he said, “No great power can safely ignore chaos and disorder in key regions of the world. It is time for the U.S. to take a new approach – enforcing rules and standards but not trying to remake failed societies.”
CaptureAs illustrated in the photo just above from a recent soccer game, Germany is stepping forward and welcoming the masses of refugees now sweeping across Europe from the Middle East. But Germany’s generosity will just encourage yet many more refugees to attempt to escape from their failed societies.
The Hudson Institute’s Walter Russell Mead discusses “The Roots of the Migration Crisis” in yesterday’s WSJ. “The humanitarian question of refugees and asylum seekers cannot be separated from the bankruptcy of Western security policy in Syria and Libya, and the bankruptcy of Western security policy cannot be separated from the longstanding difficulties that many European states have in taking a responsible attitude toward questions of military security.”
“The utter failure of Western policy in both Libya and Syria has to be seen for what it is: not just a political blunder but a humanitarian crime.”
“It is impossible to have a humane and sustainable asylum policy without an active and engaged foreign policy that from time to time involves military action.”
“The dream of a liberal humanitarian peace that both the Obama administration and the EU share … certainly cannot be achieved with the kind of policies now in favor in capitals on both sides of the Atlantic.”
Or as Mr. Stephens said a year ago, “If the world’s leading liberal-democratic nation doesn’t assume its role as world policeman, the world’s rogues will try to fill the breach, often in league with one another.”
In other words, it is not just our own peaceful and prosperous way of life which is threatened by chaos in the Middle East, but our liberal-democratic values as well which are the foundation of progress for all of humanity.

A Strong Country Requires a Strong Economy


“Ukraine is a wake-up call for what a post-American world would look like” declares the foreign affairs expert Walter Russell Mead in an article “Putin Did Americans a Favor” (http://online.wsj.com/articles/walter-russell-mead-putin-did-americans-a-favor-1401662270) in yesterday’s Wall Street Journal.
“For those willing to see, the signs of what a post-American world would look like are easy to discern.  We can look at Bashar Assad’s murderous campaign in Syria to see how Iran thinks power should be used.  To see what Saudi Arabia thinks about human rights and liberal values, follow events in Egypt and Pakistan.  China would become more aggressive in a post American world, and the chances of Sino-Japanese conflict would increase. … In Europe, only power keeps or can keep Russia from rebuilding its old empire.”
“Those who think American decline is inevitable must face a tragic truth: The eclipse of American power will be a disaster for our economic interests, for the values we cherish and, in the end, for our security at home.  What stability, peace and legality now exist in the international system are there because the U.S., with important help from allies and partners, made great sacrifices to build and secure them.”
Capture2America’s decline is not inevitable but neither is our continued success.  As much as anything else, it depends on the strength of our economic system.  We need to give much more attention to making our economy grow faster.  This will create more jobs and better jobs and thereby boost national morale.  It will bring in more tax revenue for paying our bills.  In addition, projecting national power is very expensive.  We can and should continue to insist that our defense budget be lean and efficient.  But there is a limit as to how far we can go in this direction.  Ultimately defense spending will have to increase as a percentage of GNP.  This can only be accomplished with a robust economy.
As I have repeated many times in my blog posts, the best strategy for making the economy grow faster is to encourage more consumer spending by lowering individual tax rates and to encourage more entrepreneurial activity by reducing tax rates on small business.  Such tax changes can easily be paid for by closing loopholes and shrinking tax deductions for the wealthy.  But there has to be a political will to do this.
Can this be accomplished?  I don’t know but our future as a free and prosperous nation depends on it!