Military, Entitlement Spending Shackled by Fiscal Straitjacket

Posted July 15, 2008 at 2:07pm

Earlier this week, the Center for U.S. Global Engagement (disclosure: I am on its board) released a poll of 606 commissioned military officers on the occasion of its superb Impact ’08 conference on American security. The poll, which surveyed a representative sample of our military leadership, showed, in the words of pollsters Geoff Garin and Bill McInturff, that:

[IMGCAP(1)]• Today’s military officers believe we face very different security challenges than we did during the Cold War and must use different tools and strategies to address those challenges.

• A significant majority of officers embrace a new paradigm in which strengthened diplomacy and development assistance are important companions to traditional military tools for achieving America’s national security goals.

• A majority of officers serving in the post-9/11 era have seen the benefit of nonmilitary tools such as development assistance and diplomacy firsthand, particularly those deployed in Iraq or Afghanistan.

Military power is necessary in a dangerous world — but it is not sufficient to deal with the considerable threat we have from terrorism and fundamentalist extremism. We have to counter via every avenue. We have to do more to engage with the rest of the world, through stronger diplomatic efforts, more assertive promotion of America’s viewpoints and interests, and more development assistance (all right, call it foreign aid if you must). Some of these things can be done by simple changes in policy and with more adroit leadership with a different mindset. Others will take more money.

This would be money well-spent, to protect America’s safety and enhance our standing in the world. It is one of many pressing needs to protect America, enhance its standing in the global economy, rebuild its crumbling infrastructure and solve other major problems at home. All will cost money. We don’t have it.

And that brings us to the big topic of the day: our fiscal straitjacket. Here’s the grim reality.

The deficit we expect to have next year greeting our new president is projected to be more than $400 billion. That is based on robust assumptions of revenue that are apt to be lower given our sagging economy. And it does not take into account the costs we are likely to incur to bail out financial institutions and forgo foreclosures, or the strong possibility of another major stimulus package if the economy continues to show signs of distress. And of course, it continues the dishonest practice of hiding many of the costs of Iraq and Afghanistan.

The fiscal picture is terrible in the short run, and worse in the long run. The burgeoning cost of programs for our seniors, including Medicare, Medicaid and Social Security, are on track to double from their current 8 percent of our gross domestic product by 2030, reaching 20 percent or more a decade later — meaning that these three programs alone will take up as much of our national income as we are spending now on all of government.

Lots of people have noticed these dilemmas and devoted their time, attention and resources to shouting from the rooftops that if we are not careful, the sky will fall. The latest big effort is from Pete Peterson’s new foundation, headed by former Comptroller General David Walker, both of whom have been leading the charge for a dose of fiscal reality for a long time. This time, a billion dollars from Peterson may make a bigger difference, especially in the context of a presidential campaign.

Of course, we need to control spending, something on which Congress has a miserable record. To the credit of the majority Democrats, they started this Congress with a pledge to bring back PAYGO, a form of pay-as-you-go budgeting that at least required offsetting tax cuts and additional spending in many areas with compensating revenue or spending cuts. They actually made a good-faith effort last year to make it work, with no help from the minority. But PAYGO was abandoned even before the economic sag, with the tugging and hauling over spending in Iraq, and it is hard to see it coming back soon. Congress also did cut earmarks significantly, in number and dollar amount, although we still lack serious discipline or basic priority-setting and trade-offs in many areas.

But PAYGO, even when it worked, did not touch the looming towers of Social Security, Medicare and Medicaid, and each will need serious, bipartisan efforts to reduce their growth path over coming decades. At the same time, we need to be realistic about where spending cutbacks can actually occur without doing damage to our social fabric, standing in the world and economic prospects — and we need to be realistic about what revenue levels are necessary to pay for the government Americans both want and need.

That is why it is so frustrating and dismaying that our presidential candidates are at best tiptoeing around these issues, and at worst obfuscating even more than we usually see in a campaign. I don’t expect candidates to propose solutions to entitlement problems that will become political grenades thrown back in their faces — but I would hope they would not make it more difficult to find the compromises that will be necessary, and I would hope they would lay out a road map for getting there. Medicare is a much tougher problem to solve than Social Security — and what we see on Social Security, with Sen. John McCain (R-Ariz.) pledging not to touch the revenue side, and Sen. Barack Obama (D-Ill.) offering only a payroll tax increase for the wealthy, is not very helpful. We see basically nothing on Medicare or Medicaid.

Then comes McCain’s promise to balance the budget in four years — while simultaneously pledging to make permanent the Bush tax cuts and offering a slew of new tax cuts besides. At the same time, McCain would freeze domestic discretionary spending for a year — as if Congress would go along with that, and as if it would be good policy, given the many unmet needs — and would hold overall spending increases to 2.4 percent, less than half of the average growth of 6 percent in the past five years under all-GOP rule. Anybody wanna make a bet on the prospects for that happening?

Obama at least does not pledge to balance the budget in four or even eight years. But he also has ambitious domestic plans — including on health care and energy, that will cost far more than the revenues gained by tax revenues from the over-$250,000 group — has pledged tax cuts for most other Americans, and is not talking much about the tough choices we face in Medicare and Medicaid. And neither is raising the fact that we simply need more revenue, period, to pay for the government they are envisioning.

I am a realist when it comes to campaigns; I don’t expect much. But I wish we were getting more straight talk than we are right now.

Norman Ornstein is a resident scholar at the American Enterprise Institute.