Let’s take a minute and look at some simple math about the Federal Budget. Just as a mental exercise to keep some things in mind as we approach the fiscal cliff.
The 2012 Federal budget—a word I use very advisedly, since there wasn’t an actual, you know, budget—as enacted, spent a total of $3.59 trillion. Of that amount, total mandatory spending was $2.252 trillion. Discretionary spending, i.e., those things in the federal budget that can be arbitrarily changed without changing federal law, was $1.338 trillion. So, 63% of expenditures is mandatory spending which can’t be touched without changing Federal law.
On the revenue side, when you tote up all the taxes, excises, fees, etc., the Federal government collected $2.469 trillion. So, in 2012, once mandatory entitlements were covered, there was a grand total of $217 billion to fund the entirety of the remaining Federal government. The result was a deficit of $1.1 trillion.
So, to boil it down to the simplest terms, our current revenue is just enough to cover our mandatory spending, and about 1/3 of the defense budget. Everything else is funded solely through deficit spending.
When the Bush-era tax rates are raised in January, we will finally stick it to those rich SOBs and get the money they owe us. That will provide a massive influx of tax revenue in the amount of…uh…$42 billion in 2013. By the Democrats’ estimate. Which means the deficit will be slashed from $1.1 trillion to $1.058 trillion.
Every little bit helps, I guess.
Assuming the economy grows, and revenue keeps pace with the increases in mandatory spending. Which I’m not sure I’d bet a lot of money on.
It is becoming clearer and clearer that Barack Obama has no real intention of tackling the government spending programs that pose the greatest risk to our future financial security. And, if he has his way, he’ll certainly agree to some cuts in spending, to at least give himself some political cover and the ability to claim he’s engaged. But if there are going to be any spending cuts, I think we all know where they’ll be if he gets his way:
“I think what’s absolutely true is that core commitments that we make to the most vulnerable have to be maintained,” [President Barack] Obama said. “A lot of the spending cuts that we’re making should be around areas like defense spending as opposed to food stamps.”
That’s not the first time recently he’s voiced that theme:
During his first-ever Twitter town hall meeting Wednesday, Obama said the Defense budget is so large that even modest cuts to it would free up dollars for other federal programs.
So it isn’t conjecture to say that his target is defense and his plan is to spend what is ‘saved’, not pay down the debt. I also think it is quite clear that he plans to drastically reduce defense spending in a time we’re involved in three wars (how’s that “weeks, not months” war going? 5 months, counting and no end in sight), and defense commitments globally.
Of course you can always rely on the left to support such an idea. Ezra Klein tries to be “objective” about it, but it is clear what the intent of his “the US military in two charts” post is about at the Washington Post. Klein has taken the charts from The Economist. Let’s take a look. Chart one shows military spending as a percentage of all military spending in the world:
Another way to break it down is US 43%, rest of the world 57%. Or there’s a whole lot of military spending going on in the world, and we do a lot of it.
But we’ve known that for decades. What the chart doesn’t tell you, for instance, is how much China’s spending has increased. China’s defense budget for the past few years has seen double digit jumps, with the only year in single digits being 2010 when it only increased the budget by 7.5%. This year, it’s back in double digits at 12.7%. So that wedge you see in this static chart is a rapidly growing wedge. As China’s economy has heated up over the years, so has China’s military spending.
Russia too is increasing its spending on defense. It plans on spending $650 billion on its armed forces over the next 10 years.
France, on the other hand, has been cutting its level of military spending consistently over the years since 1988. But a country that isn’t cutting its spending and which now spends more of its GDP on the military than does France, is Iran.
The point, of course, is that while it is evident that we spend an inordinately larger amount than any other country on defense, we’ve done that because we’ve assumed an international role that others can’t fill or we don’t want them to fill.
And that’s an important point. One reason that we’ve generally seen a peaceful 50 or so years (with most wars being of the regional, not world wide, type) is because we’ve been the country which has shouldered the burden of keeping the peace. Peace through strength.
Obviously there is certainly an argument that can be made that we shouldn’t have to shoulder that burden and it’s time we gave it up. But as soon as you say something like that, you have to ask, “but who will fill the role”?
Certainly not the Third World Debating society known as the UN. They’re inept, corrupt and incompetent. And certainly not NATO – as Libya has proven, they can’t get out of their own way.
So who keeps Russia in its place and stands up to China as that country flexes its newly developed muscle? What about Iran? Or North Korea?
That’s the problem with being about the only country standing of any size after a world war.
So we have to ask ourselves, is it in our best interest to back out of our pretty dominant role and cut back drastically in our spending in that area? If we answer yes, we have to ask who we trust to pick up that slack. I know my answer to that – no one. But rest assured that power vacuum will indeed be filled. A dilemma for sure.
We lead the world in spending but do not have the largest military – not by a long shot. In fact, our entire military is just a bit smaller than the Chinese Army alone. Looking at that, and considering the spending chart, what would it tell you?
It would tell me we spend the majority of our money on technology. It costs money – and a lot of it – to maintain our level of superiority. We spend it on things like 5th generation fighters, state-of-the-art naval vessels, and the like. Programs that are designed not only to give us the technological edge on the battlefield, but also to deter would-be enemies from even trying, given their inability to match our capabilities. It is obviously an intangible – we can’t really measure how much this has saved us from brutal and even more costly wars – but with the budget battles and the fiscal crisis, we’re in a position where we certainly have to clearly state our priorities. Obama has stated his.
Is there room in our defense spending to make some cuts. Yes, of course there is.
But let’s be clear, to quote Obama. Defense spending is 4.7% of GDP and it is approximately 20% of the federal budget. But it is time for a third chart:
Entitlements (i.e. “mandatory spending”) total 56% of our budget – and growing. And we’ve so overspent that we’re spending 6% on interest alone. So 62% of the budget – as designed by those brilliant legislators we’ve elected decade after decade – is untouchable by law. That leaves 39% that these yahoos want to “balance the budget” on. The elephant in the room is ignored to go after the dog. And only part of the dog. We have a president who prefers the other end of the dog to the part that has teeth.
All of that to get to this question – Obama talks about core commitments in his first statement above: Is it a core commitment of the government of the United States to protect and defend the citizens of the country as outlined in the Constitution of the United States, or is it a core commitment to take other people’s money and redistribute it?
Because that’s the choice we’re talking about here. Make the commitment to national security and, within reason, the cost that entails, or, as Barack Obama seems comfortable with doing, throw it under the bus in favor of redistribution of income instead. While serving what he calls the “most vulnerable” he’ll make us all vulnerable.
More on this subject later, but that’s a pretty good start to the discussion.