US Defense Spending Needs A Trim

by JT McGee

Too much excitement with Osama Bin Laden caught me off guard for today. At any rate, I wanted to publish this:


And then ask you quite plainly:

  • Do you think this amount of spending is sustainable?
  • Do you think we can afford to cut defense spending in the US?
  • Should we cut defense spending?
  • The 2010 budget deficit was just shy of $1.3 trillion. If we don’t cut in defense, then where should we cut?

Agree or disagree, I want to hear what you have to say.

P.S. I apologize in advance for pulling a Ross Perot on a Monday morning.

{ 29 comments… read them below or add one }

Tom May 2, 2011 at 08:59

I think we can cut back at least $300 billion from those charts. I used to support a lot of army spending but it just doesn’t make sense any more.

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JT McGee May 2, 2011 at 21:49

I’d be cool with $300 billion…this year. Then $300 the next, too. 😛

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Alex May 2, 2011 at 09:53

I don’t think we should cut defense right now. I’m proud our nation keeps us safe no matter how much it costs. We can cut in other places first.

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JT McGee May 2, 2011 at 21:49

Hmm, where?

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tom (not Tom) May 2, 2011 at 10:32

Full disclosure: I work in the defense industry

The defense industry is a very, very unique sector. There is a lot of waste and Secretary Gates has been doing a great job eliminating it. Over half of the defense bill is spent at home and investing in US companies (much of which goes to the employees and R&D) and military personnel. There you will truly see the trickle down effect.

Is it sustainable? Not in the long run, but we’ll save a significant amount of money as we withdraw from the wars.

Can we cut and should we cut defense spending? Yes and yes, but it has to be targeted and well thought out cuts, not just broad hatchet jobs. Do we really need all of those F-35s?

What else would we cut? I see two glaring opportunities in Medicare/aid and Social Security. Both have bigger budgets. Social Security cuts seem like a no-brainer to me. Increase the retirement age, eliminate SS payments for higher income earners, and move to personal SS accounts (not private, but your and your employer’s payments go to your account only).

I cannot speak intelligently about Medicare/aid, so I don’t have suggestions except that we need to target cost and the drivers behind them (why does aspirin cost $20 in the hospital?).

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JT McGee May 2, 2011 at 22:00

Half is spent at home? Does that include all salaries because if so, most of our military isn’t at home. Instead, it’s in the 130 some-odd countries we have bases in. Either way, let’s cut half, call it a deal.

I agree with the savings from ending the wars. As far as I see it, using our military aggressively then promoting its strength is the equivalent to driving a Mercedes 100,000 miles for the sole purpose of increasing its value. That just doesn’t make sense.

Medicare and Social Security can and should be cut, but probably only on those who are <35 years old or younger. Old people vote so cuts for the soon-to-retire aren't coming down the pipeline any time soon, though I wouldn't have a problem with raising the age.

Thanks for your viewpoint; it's nice to hear from someone close to the industry. Man, I really don't like calling war an industry. 😛

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tom (not Tom) May 2, 2011 at 22:43

Actually, most of our military is stationed here. Out of 1.5 million active duty personnel, only about 300,000 are abroad. These numbers do not include Iraq and Afghanistan as they contain Reserves (we have about 800,000 Reservists, most stationed at home).

PS… Defense =/= war. Huge difference.

As for SS… I completely agree, all of us <35 y/o should be taking responsibility for our own retirement.

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JT McGee May 3, 2011 at 11:14

Okay, that makes sense. Most of our military is here; if we cut half of the budget in blowing things up overseas, we could still pay for all the military salaries no problem. I agree that defense != war. If anything, defense is best left as a lack of war. In his book, Dying to Win, Robert Pape, a leading expert on suicide terrorism, shows a link between Western involvement in the middle east and rise in terrorism. To put it simply, we make more terrorists than we could ever kill.

High five on Social Security!

P.S. Is this your first time here? If so, welcome and I hope you stick around. If not, speak up more often–I like to hear what you have to say. 🙂

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tom (not Tom) May 3, 2011 at 11:48

Unfortunately, cutting the defense budget by half would have negative consequences on the US industrial base. There is a huge overlap between the defense industry and manufacturing as a whole. There are numerous companies who produce both defense and automotive/machine/etc. sub-components .

I caution you from advocating for broad cuts across the board. Defense cuts must be extremely precise as each defense function serves a very specific purpose. The wars in Iraq and Afghanistan both serve a purpose regardless of our viewpoints.

As for Pape’s book, his link between occupation/involvement and increase suicide terrorism was publicly put into question in the American Political Science Review, by a number of polisci professors from Princeton. Their main argument was a sampling error, which, essentially, skews the entire study to produce results favoring his argument. I haven’t read Pape’s book, but I have read the Princeton professors’ articles and I must give the point to the professors.

As for SS… high five for personal responsibility!

It isn’t my first time here, been around for maybe a month, but it is my first comment.

Ashley @ Money Talks May 2, 2011 at 11:53

All spending needs to come down. The Bin Laden situation doesn’t really change things, I don’t think we are any safer now. I’m sure money was spent on specifically catching him and that should not be a cost anymore. But either way, the cuts must come.

Another glaring category is Social Security and Medicaid.. 2/5 of our budget!! goodness.

3/5 of our budget is defense, social security, and medicaid. crazy. three fifths!

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JT McGee May 2, 2011 at 22:02

Yeah, it’s nuts. It really makes the fight over PBS/NPR/Planned Parenthood really pathetic from a fiscal perspective. Congress spent weeks arguing over what amounted to finding pennies in the couch cushions, and the reality is that we need to find whole Coinstar machines, not individual pennies.

The scary thing is that you could get rid of the military entirely, and also every dime of the discretionary budget and still run a deficit. I wish I could play around with the government’s trillions. LOL

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101 Centavos May 3, 2011 at 05:57

Seems that military spending, or the cutting thereof, has become one of the third rails (sixth rail?) of politics.

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JT McGee May 3, 2011 at 11:19

For good reason–it’s where the most money can be the most easily saved. Cut defense in half and you cut the deficit by 25%. Treasury issuance is reduced, and the American economy will experience some of a revival.

Eisenhower warned us of the growing business of war, labeling the companies that make billions from it the “Military Industrial Complex.” Eisenhower was one of the military’s most respected men, and I don’t think he’d give war/excessive military spending a bad name unless he really felt that it wasn’t in our interest.

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101 Centavos May 3, 2011 at 21:35

Don’t know about the “easy” part. Each slice of the federal pie has well-entrenched special interests that depend on it. Cutting it out is no easier than eliminating any number of alphabet-soup agencies.

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tom (not Tom) May 3, 2011 at 23:04

I wouldn’t consider cutting defense easy by any measure. As I mentioned above, defense spending, especially with procurement, is investing in the economy directly. When you buy an F/A-18 or a Destroyer, you are investing in all the people and materials that go into building one of those. Keep in mind, by law, very little can be outsourced. Unlike auto industry bailout $, defense contracts are spent here.

I argue that Social Security and Medicare cuts would be where most money can be easily saved. Cut those programs in half and you’re saving $750 billion a year, over half of the federal deficit.

I understand the point you were trying to make with the Eisenhower reference, but you are taking his quote out of context. He started by first saying “A vital element in keeping the peace is our military establishment. Our arms must be mighty, ready for instant action, so that no potential aggressor may be tempted to risk his own destruction…” His full quote was “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex”. In other words, we must have a very strong military to fight against anyone who threatens peace, but it’s the government’s responsibility to monitor the military and keep it in check. He was one of the biggest proponents of a big military. In fact, prior to WWI our military was fairly small. WWI and WWII saw a massive increase in our military’s size, an area Eisnhower had direct control over during and post WWII. My point here is that Eisnhower did not give military spending a bad name and he felt that it was in our best interest to have a big and powerful military.

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Robert @ The College Investor May 3, 2011 at 20:19

I agree there is a ton of waste in military spending – the government doesn’t know how to procure equipment if their lives depended on it (and the sad part is that lives do depend on it). My wife worked in defense contracting for several years and it was a joke. The military never wanted the cheapest or the best. They wanted what they wanted no matter what the cost and how dumb the idea was.

For example, on her last contract, the government was buying new servers for ships (makes sense, we all have to update our computers every now and then…). Well, the original contract value was about $1 billion. With all the fuss about the budget, her company tried to present a proposal that saved money, would come in at cost, and would include the costs of the life of the project to maintain. They proposed a system that would only cost $900 million. Well, before accepting or rejecting, the government then changed their minds about the types of servers. For no reason. The technical teams were telling the government that it was a bad move, and would cost more, and it wouldn’t even last as long (i.e. need more upgrades sooner). But the government said this is what their technicians wanted…(like the defense contractor doesn’t employee hundreds of smart ex-military anyway). Well, the new costs of the contract were $1.8 billion, and the government assigned at this price – which was double the initial estimate for a worse product in the end.

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Invest It Wisely May 4, 2011 at 11:15

Regardless of whether spending money on a destroyer or whatnot employs Americans or not, you gotta look at the unseen: What if the same money was spent on something else that would bring greater satisfaction? You could continue to pour billions and trillions into building more houses, too, but does it serve the greatest needs of consumers?

I’d rather more money go into things that people want and can help them rather than going into a bomb that blows up, even if it does make for some cool videos on Youtube.

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tom (not Tom) May 4, 2011 at 11:32

The idea we are debating here is cutting defense and not spending it elsewhere. In other words, cutting defense to cut the deficit.

So other than decreasing the deficit and debt, the money will not be going into anything that people want or that would bring greater satisfaction.

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Invest It Wisely May 4, 2011 at 11:41

If you’re not employing 100,000 and using 100,000 tons of iron to build bombs by using government spending, then those resources will be allocated by the market based on what the price system says they should be allocated on, which is ultimately determined by what people what and what brings them greater satisfaction. The resources don’t vanish into thin air.

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tom (not Tom) May 4, 2011 at 11:55

You are correct that the resources will not vanish.

The demand for those resources will vanish. Ultimately if demand decreases and supply remains the same, in this case it does, then price goes down and so does quantity sold.

Also, where will those 100,000 employees go? They don’t vanish, but certainly their jobs do.

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Invest It Wisely May 4, 2011 at 12:10

You need to run that thought process more than once. If the price goes down then that means everything else that uses that same resource becomes cheaper, putting more purchasing power in the hands of the consumer. Maybe now they can build two buildings for the price of one since iron is so much cheaper.

The employees will go to wherever they are most needed as indicated to them by wherever salaries are higher and working conditions are good. Instead of producing bombs they’ll produce cars, some will go into the service industry, some will go work in construction, and maybe some won’t find a new job. Overall though they’ll be doing whatever the consumer is paying for which is a higher value to them, because the consumer is voluntarily handing over their money for whatever they are getting in return. For the consumer, this is much higher value than seeing the money taken from them and watching it vanish in a literal puff of smoke and a bang. When transactions are voluntary and done freely by choice, everyone becomes the servant of the customer.

tom (not Tom) May 4, 2011 at 13:44

Yes, but the process plateaus at a demand/price point much lower than it was prior to the demand disappearing.

As for the employees… Look at the current market. Jobs disappeared and there is virtually nowhere for those former-employees to go. Even in a good market, if a large amount of jobs disappear, it creates a cascading effect, especially within manufacturing. Not only do you skilled labor jobs disappear, professional jobs are also eliminated, continue the domino effect within the supply base.

My point in all of this is that the market will not create jobs fast enough to absorb the losses created by a massive defense cut, in fact the domino effect may cause the recovery to take much, much longer. The money saved by the cuts will not be invested elsewhere.

I understand that cuts take years to develop and implement, so the impact on the economy and market would be laid out across many years, but JT and I were debating cutting the defense budget by half to close 25% of this year’s deficit, so I am still operating under that assumption.

JT McGee May 4, 2011 at 14:02

I can agree with both of you, tom (not Tom) and Kevin.

I understand that there are economic institutions at play, and I realize that toying with manufacturing isn’t as easy as toying with service sectors. You can trim a call center overnight, move locations, and call it done–it isn’t capital intensive. The same cannot be said of manufacturing. I get your point here, Tom.

That said, it doesn’t mean that hiring people for the sole purpose of destroying things of value is a necessarily good thing for the economy. Distortions from human-created economic institutions are one of the most dangerous outcomes of economic decision-making.

Don’t get stuck on an immediate 50% cut, either the size or the immediacy. The financial markets are fully capable to price future cuts into the debt and equity markets, and a cut 15 years from now can be realized today in the form of an improved economic picture. Likewise, a future reduction in government spending means less “crowding out effect” in the public debt markets, and lower borrowing costs for other industries. That’s pro-growth, to say the least.

I would seek to cut defense only in tandem with other cuts. I don’t want to make defense the only cut.

That said, we really don’t have to cut anything if we start growing. As a supply-sider, I see that we can GROW our way out of a fiscal problem just as we can cut our way out of a fiscal problem. To do that, though, means a complete overhaul of most Federal, State and Local regulations, as well as the tax code. The tax code, in my opinion, is one of man’s worst faults in the study of economics.

One of the economists I can appreciate, even if I don’t agree with him fully, is F A Hayek. One of his more well known quotes, which I included in my own post about Monopoly is appropriate here: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

We need systematic overhaul from top to bottom to remove government from distorting generally free markets. That isn’t to say that we need anarchy, but we do need a government that keeps business fair without playing favorites, and we need a tax code that does not hinder economic growth, but that encourages it.

Incentives still matter, they’ll always matter, and if we continue on a course of incentivizing industry which the free market cannot support on its own two feet, then we’re headed for failure. If the rest of the world can spend less than $100 billion per year on defense, than we should be able to, too.

I bet you’ll both agree with me that the reason the rest of the world spends so very little is because we spend so much money that they don’t have to.

JT McGee May 4, 2011 at 14:04

Also, a thank you to both of you for your viewpoints and casual discussion. I’m glad that there are people who have an opinion, and are willing to share it.

We learn through discussion and disagreement, and I encourage it. Also, thanks for keeping it civil. 🙂

Invest It Wisely May 4, 2011 at 16:13

I think your last comment could become a post on its own, JT. 😉

I do agree that even if we agree that a cut is beneficial and necessary, there are reasons to do it over a period of time instead of in one fell swoop, in order to ease the transition for everyone involved. Just so long as that doesn’t become a reason to never cut in the first place.

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JT McGee May 11, 2011 at 16:50

Ha, probably.

And to your second point, I couldn’t agree more.

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Jeffrey Trull May 10, 2011 at 11:35

Yes, I think defense spending should be cut, and, to me, like it should be an obvious target for reducing the federal deficit. I sometimes question what function have such large amounts devoted to defense spending really does. I know a lot of people will say that it protects us from terrorism and all that.

Unfortunately, there’s really nothing to prove that a smaller army and less spending would be just as effective as where we’re at now because we’ve spent so much for so long.

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JT McGee May 11, 2011 at 16:53

And we’ll probably keep spending well into the future.

The sad reality is that the voting public largely doesn’t bother to observe the raw data. Instead, we tend to get our information after it has passed through a number of people who are necessarily interested in twisting it.

I don’t spend 25% of my income on protecting myself, and neither should the government. At some point defense starts looking a lot like offense.

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Jon September 4, 2012 at 17:16

The CBO pie chart using the percentages is purposeful inaccurate. The actuality is that 60 to 70% percent of all discretionary federal expenditures are for military and security purposes. Political talking heads love to use this reference as it’s a gross misrepresentation of the percentages making security and defense spending seem relatively small.

In essence what you see displayed in this pie charge is a shell game of deceit to hide the real percentage of discretionary spend into military and security.

It’s the discretionary spending that’s killing us. Since 2001 defense spending has more than tripled and shows no signs of slowing.

Validation of the real military and security expenditures:

We have war budgets for both Afghanistan and Iraq that are separate from the DOD budget.
The US nuclear weapons arsenal all the research, development, technology refresh, maintenance and operational upkeep falls under the DOE.

The private security companies (Blackwater, renamed Xe Services, renamed Academi, KBR) and the like that are deployed alongside our military are paid out of the State Department’s budget. There are over 250,000 “general contractors” paid for by the State Department budget to wash soldier’s clothes, feed them, build barracks and fulfill as private mercenaries. Around 15,000 “general contractors” as the government calls them are still deployed in Iraq. A specific instance if which few know, hurricane Katrina 2005 Blackwater was contracted for $73 million in a no bid contract for security services. Or better stated to go take guns and shoot whoever.

The Coast Guard is under Department of Homeland Security’s budget as are: TSA, BATFE, ICE, CBP, SS, FEMA. DHS also provides grants to local domestic US municipalities to purchase, drones, armored vehicles, assault gear and other weapons systems.

The DOJ budget includes the FBI, BOP, FPD. The DOJ also provides federal grands to local and state law enforcement agencies.

The National Intelligence Program contains the budgets for the CIA and the NSA.

It’s a big shell game to hide the real spend on defense. Politicians have easily made us believe that we don’t spend that much on defense. Thus they continue to hide the propagation of the Military Industrial Complex. Most American’s at large don’t have a clue as to what’s going on with the government’s game of hiding defense spending nor could they really care.

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